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Kotak Mahindra Bank Ltd.

BSE: 500247 Sector: Financials
BSE 00:00 | 27 Nov 1901.65 11.85






NSE 00:00 | 27 Nov 1907.10 18.00






OPEN 1892.20
VOLUME 371767
52-Week high 1947.70
52-Week low 1000.35
P/E 59.84
Mkt Cap.(Rs cr) 376,485
Buy Price 1901.65
Buy Qty 6670.00
Sell Price 1887.00
Sell Qty 200.00
OPEN 1892.20
CLOSE 1889.80
VOLUME 371767
52-Week high 1947.70
52-Week low 1000.35
P/E 59.84
Mkt Cap.(Rs cr) 376,485
Buy Price 1901.65
Buy Qty 6670.00
Sell Price 1887.00
Sell Qty 200.00

Kotak Mahindra Bank Ltd. (KOTAKBANK) - Director Report

Company director report

To the Members of


The Directors present their Thirty-fifth Annual Report together with the auditedaccounts of your Bank for the year ended 31st March 2020.


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

31st March 2020 31st March 2019
Rs in crore Rs in crore
Total income 50365.74 45979.11
Total expenditure excluding provisions and contingencies 36385.84 34358.03
Operating Profit 13979.90 11621.08
Provisions and contingencies excluding provision for tax 2558.10 1045.36
Profit before tax 11421.80 10575.72
Provision for taxes 2814.72 3456.02
Profit after tax 8607.08 7119.70
Add: Share in profit of Associates (13.72) 84.43
Consolidated profit for the Group 8593.36 7204.13
Earnings per Equity Share:
Basic (' 44.73 37.61
Diluted (' 44.68 37.57

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

31st March 2020 31st March 2019
Rs in crore Rs in crore
Total Income 32301.72 28547.24
Total expenditure excluding provisions and contingencies 22280.89 20199.06
Operating Profit 10020.83 8348.18
Provisions and contingencies excluding tax provisions 2216.16 962.39
Profit before tax 7804.67 7385.79
Provision for taxes 1857.49 2520.46
Profit after tax 5947.18 4865.33
Add: Surplus brought forward from the previous year 16919.29 13604.60
Amount available for appropriation 22866.47 18469.93
Statutory Reserve under Section 17 of the Banking Regulation Act 1949 1486.80 1216.34
Transfer to Investment Reserve Account (31.06) 31.06
Transfer to Capital Reserve 114.84 6.99
Transfer to Special Reserve 80.00 40.00
Transfer to Investment Fluctuation Reserve Account 483.13 70.89
Transfer to Fraud Provision (1.40) 1.40
Dividend Paid ** 193.26 160.28
Corporate Dividend Tax 29.09 23.68
Surplus carried to Balance Sheet 20511.81 16919.29

* The financial results of the subsidiaries (excluding insurance companies) andassociates used for preparation of the consolidated financial results are in accordancewith Generally Accepted Accounting Principles in India ('GAAP') specified under Section133 and relevant provision of Companies Act 2013. The financial statements of such Indiansubsidiaries and associates are prepared as per Indian Accounting Standards in accordancewith the Companies (Indian Accounting Standards) Rules 2015.

** The Bank has paid a dividend at rate of Rs 0.80 per equity share for the year ended31st March 2019 (previous year: 0.70 per equity share for the year ended 31stMarch 2018) and has paid interim dividend at rate of Re.0.405 per share on preferenceshares for year ended 31st March 2020 (previous year: interim dividend at rateof 8.10% (on pro-rata basis)) to all shareholders whose names appear on the Register ofmembers / beneficial holders list on the book closure date. As per the requirements ofrevised AS 4 - 'Contingencies and Events Occurring After the Balance Sheet Date' thispayout (including dividend distribution tax) has been appropriated from amount availablefor appropriation in the year of pay-out.


Reserve Bank of India vide its circular No. DOR.BP.BC.No.64/21.02.067/2019-20 datedApril 17 2020 has directed all banks to not make any further dividend payouts fromprofits pertaining to the financial year ending March 31 2020 until further instructions.

In March 2020 your Directors declared an interim dividend on Perpetual Non-CumulativePreference Shares of face value of Rs 5 each issued by the Bank carrying a dividend rateof 8.10% in respect of the financial year 2019-20 as per the terms of issuance. Thisentailed a payout of Rs 40.50 crore (previous year Rs 26.86 crore) excluding dividenddistribution tax.

Pursuant to Regulation 43A of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 the Board of Directors of theBank have adopted a Dividend Distribution Policy which is in line with the parametersprescribed by SEBI for distribution of dividend. The Policy is available on the Bank'swebsite viz. URL: policies.html


During the year your Bank allotted 4283511 equity shares arising out of the exerciseof Employees Stock Options granted to the whole time director and employees of your Bankand its subsidiaries.

Post allotment of equity shares as aforesaid the issued subscribed and paid-up sharecapital of the Bank as at 31st March 2020 stood at Rs 14565191690comprising of 1913038338 equity shares of Rs 5 each and 1000000000 preference sharesof Rs 5 each.

Your Bank has a Capital Adequacy Ratio ('CAR') under Basel III as at 31stMarch 2020 of 17.89% with Tier I being 17.27%.

During the year your Bank has not issued any capital under Tier II. As on 31stMarch 2020 outstanding Unsecured Redeemable NonConvertible Subordinated Debt Bondswere Rs 456 crore.

Pursuant to the approval of the Board of Directors on 22nd April 2020 andapproval of the shareholders by way of postal ballot on 25th May 2020 yourBank undertook a Qualified Institutions Placement. The object of the issuance is toaugment the Bank's capital base and to strengthen its balance sheet which would assistthe Bank in dealing with contingencies or financing business opportunities (which mayeither be organic or inorganic) or both which may arise pursuant to the economic eventsdriven by the outbreak of COVID-19 (which has been declared a pandemic by the World HealthOrganization) or otherwise. On 30th May 2020 your Bank allotted 65000000equity shares of face value of Rs 5 each at an issue price of Rs 1145 per equity sharethereby raising Rs 74425000000.


We organize our principal banking business activities into the following businessunits: consumer banking commercial banking corporate banking treasury and otherfinancial services. The consumer commercial and corporate banking businesses correspondto the key customer segments of our Bank. The treasury offers specialized products andservices to these customer segments and also undertakes asset liability management as wellas proprietary trading for the Bank.

In addition to our banking activities our Group offers a significant array of otherfinancial products and services as well which we operate through our subsidiaries. Theseproducts and services include banking financing through NBFCs asset managementinsurance broking investment banking wealth management and asset reconstruction.

Consumer Banking

The Consumer Bank services a customer base in excess of 19 million customers covering awide spectrum across domestic individuals and households non-residents small and mediumbusiness segments for a range of products from basic savings & current accounts toterm deposits credit cards unsecured and secured loans working capital and investmentadvisory.

Your Bank continued its strategy of calibrated expansion of its branch network. As of31st March 2020 your Bank had 1600 branches and 2637 ATMs covering 779locations. Of the 100 new branches commissioned this year 50 were in metro 18 were inurban 3 semi urban & 29 rural branches. Aided partly by 811 your Bank saw fast-pacedcustomer acquisition across all core banking products including savings and currentaccounts term deposits overdrafts and non-resident accounts. Your Bank has also set up82 e-lobbies and relocated 20 branches across metro and semi urban locations to giveeasier access and higher convenience to its customers.

Your Bank rolled out several initiatives aimed at offering a superior anddifferentiated customer experience. Your Bank's investment in the phone based remoteengagement through VRM (Virtual Relationship Model) yielded good results and your Bank hasexpanded this model to now serve over 0.8 million customers (across 10 languages) andprovide them services across banking deposit lending and investment needs.

Your Bank has continued to take significant steps in the area of digital initiatives.

Your Bank continued to ramp up 811 acquisition numbers this year. Your Bank alsoincreased its focus on cross selling to these customers using newer digital channel likeWhatsapp & Web Notifications while also driving Digital channel adoption &transactions to better engage with existing 811 customers.

Additionally after the new regulations on Aadhaar-based account opening in October2019 your Bank has quickly enabled its officers to acquire new customers usingAadhaar-based biometric acquisition. Now on a monthly basis 30% of the customers (non811) are acquired digitally using Biometric authentication.

In order to ensure that banking relationships are also at the start of assetrelationships your Bank has implemented a biometric process to open accounts for consumerdurable finance customers.

The National Pension System (NPS) has started offering Your Bank's customers withonline and paperless journey with e-signature for account opening. We have integrated withthe NSDL website for this seamless journey.

Your Bank has also successfully enabled Applications Supported by Blocked Amount (ASBA)Application through United Payments Interface (UPI) mode both as an Issuer Bank and as aSponsor Bank thereby reducing the physical movement of Broker ASBA Applications.

Your Bank is taking aggressive steps to grow its presence in several large customersegments:

Your Bank's exclusive women-oriented Silk program entered into an alliances withSheroes (a women-only social networking platform with over 14 million users) to extendbanking services to their customer base. Your Bank holds live chats for the Sheroesfraternity where women from various walks of life can ask questions and clarify theirfinancial concerns.

Your Bank in the last quarter of Financial Year 2020 launched an exclusive SalaryAccount offering for PSU and Government bodies. This offering comes with exclusivefeatures like Permanent & Partial Disability Cover and Education benefit. With thisoffering your Bank intends to foray into this large salaried segment to increase its markon salary business.

For its premium Salary offering your Bank tied up with vHealth by Aetna (Indian HealthOrganization) and offered Family Health Care Benefits like free Health Check-upunlimited Tele-consultation with doctors and discounts on various Health care benefits.

In line with your Bank's overall strategy the Non-Resident Indian Business has focusedon enhancing customer experience through use of technology across our banking productsand platforms. As part of this endeavour your Bank has gone live with 5 partners onRipple a distributed ledger based payment network facilitating seamless cross-bordertransactions. Additionally your Bank on-boarded 11 new MSB (Money-transfer ServiceBusiness) relationships in the Financial Year 2019-20 to increase coverage across US UKEurope and Middle East.

Your Bank integrated its services with the Ministry of Corporate Affairs (MCA) and hasenabled customers coming to MCA portal for registration of their companies to select andopen a Current Account with the Bank online from the MCA portal.

In the Retail Institutional Business your Bank introduced a collection solution-basedUPI & Quick Response (QR) code so as to digitise payments for traditionallycash-based segments like religious institutions. This solution solves collection-relatedrequirement of clients and shall help your Bank to acquire new customers in this segment.

Your Bank has actively taken part in various Financial Inclusion initiatives. Your Bankhas partnered with multiple Corporate Business Correspondents and operates with more than300 customer service points across Chhattisgarh Karnataka Tamil Nadu Andhra Pradesh& Telangana offering banking services and Mahatma Gandhi National Rural EmploymentGuarantee Act (MGNREGA) payments to Beneficiaries. To enhance its reach and to buildcustomer convenience your Bank has successfully set up 145 Aadhaar Enrolment Centres inits branch premises and surpassed the transaction volume mandated by Unique IdentificationAuthority of India (UIDAI). As a result of these efforts your Bank has been recognized byUIDAI as the Best Performing Private Bank for conducting highest average dailytransactions. Your Bank has been awarded twice by the Pension Fund Regulatory Authorityof India (PFRDA) as the Best Performing Private Sector Bank for highest persistency ofAtal Pension Yojana (APY) subscribers.

Commercial Banking

Your Bank's Commercial Banking business focuses on meeting the banking and financialneeds of various customer segments with deeper coverage that goes beyond metro and urbancenters through an expanding network of branches and associates. The business hasspecialized units which offer financial solutions in the areas of Commercial VehiclesConstruction Equipment Tractor and Agriculture business. It services the priority sectorby providing finance for Tractor Crop loans Small Enterprises and Allied agriculturalactivities thereby helping your Bank meet its financial inclusion goal. In line withgrowing rural incomes our Bank's Commercial Bank branches have experienced robust growthacross product lines on savings as well as lending side.

The Tractor Finance businesses reported significant growth and gained market sharewhile the Commercial Vehicle (CV) and Construction Equipment Business witnessed a sharpdrop in disbursements due to excess load carrying norms proposed change to BS-VI norms& a reduction in infrastructure spending by the Government. Asset quality alsodeteriorated.

Your Bank's Agriculture Financing business continued its focus on the agriculture valuechain funding for various agro processing activities. It has registered good growthdespite volatility and uncertainty in the commodities market. A Good monsoon andexpectations of a bumper Rabi output supported the robust growth. MicrofinanceInstitutions (MFI) segment growth remains robust and asset quality remains good.

Branches in semi-urban and rural areas come under the umbrella of the Commercial Bank.This network plays a crucial role in meeting your Bank's financial inclusion goals and thecredit demand of 'Bharat'. The Commercial Bank's Branch network has expanded and theLiabilities book has grown at a healthy pace.

Corporate Banking

Your Bank's Corporate Banking business caters to a wide range of corporate customersegments including major Indian corporates conglomerates financial institutions publicsector undertakings multinational companies small and medium enterprises and realtybusinesses.

This business offers a comprehensive portfolio of products and services to thesecustomers including working capital finance medium term finance trade finance foreignexchange services other transaction banking services custody services debt capitalmarkets and treasury services. The core focus of this business has been to acquire deepenexisting relationships and acquire new quality customers on a consistent basis deliveringcustomized solutions through efficient technology platforms backed by high qualityservice. Your Bank also aims to secure value addition through the cross-selling of variedproducts and services.

Corporate Banking was subjected to a number of headwinds through the year includingfrom a slowdown in the economy that was particularly visible in certain key segments suchas auto & auto-ancillaries telecom and real estate. Your Bank has a higher proportionof working capital and short term assets and these were impacted due to the slowdown. Theslowdown was compounded by elevated risks in the industry due to high leverage acrosssectors. In the face of this uncertainty your Bank was cautious in increasing itsexposures and concentration risks. The result has been a muted growth in Assets for theyear.

Your Bank has continued to focus on maintaining the health and profitability of thebusiness. There is far more focus on ensuring right risk- return metrics and this has ledto continued improvement in Asset spreads during the year. There has also been greaterfocus on increasing the liability side of our business and other non-risk income streams.Improved customer service and product innovations have helped us increase cross-sell andwallet share in non-credit businesses. Corporate deposits including Current Account andSavings Account (CASA) grew strongly further reducing our cost of funds and improving ourspreads. Income from other non-credit income streams including from Forex Cash Managementand other Transaction Banking products has also grown at a healthy rate. We have alsofocused on converting opportunities for syndication of loans. This year we ramped up ourincome from debt syndication significantly including from high yield opportunities.

Robust risk management practices are in place and your Bank has achieved growth overthe years without compromising the health of the book. This year too despite increasedstress in the industry your Bank has been able to navigate the credit challenges withoutsignificantly increasing credit costs. Non Performing Assets (NPAs) have been reasonablycontrolled though recoveries were muted given the slowdown in the economy.

Across corporate segments your Bank has been proactive in rebalancing its portfoliosto reflect economic situations and reducing exposure to situations with heightened risk.Your Bank's focus on risk management has helped the business reduce its Risk WeightedAssets (RWA) as a percentage of assets over the past few years. The use of Risk AdjustedReturn on Capital (RaRoC) pricing models has become ingrained in the way the CorporateBanking division conducts its business and has helped to optimize pricing better utilizecapital and improve return on equity. Economic Value Add (EVA) measurement tools have beenimplemented that help your Bank monitor the true risk adjusted value being derived fromeach client. These initiatives ensure greater focus on improving income mix in favour ofnon-capital intensive income streams.

Improved credit spreads higher non-credit income streams and controlled credit costshave ensured that your Bank has been able to grow the profitability of the CorporateBanking business at a strong rate and maintain a healthy Return on Equity (RoE).

Your Bank continues to focus on strengthening its organization platform that positionsthe Corporate Bank in a strong position to capture opportunities in the market.

Your Bank has an integrated Corporate and Investment Banking (CIB) approach towardscertain top conglomerates and large corporates. The CIB model has ramped up well and yourBank was awarded the 'Best Corporate & Investment Bank in India' by Asiamoney for thecalendar year 2019 an award that the Bank has won for the third time in the last fouryears as a testimony to its capabilities.

The Custody business continues to grow both in terms of Assets under Custody (AUC) aswell as new clients added during the year. Your bank continues to be one of India'slargest local Custodians despite the volatility in listed markets in the last 6-12 months.We on-boarded a number of marquee Foreign Portfolio Investment (FPIs) AlternativeInvestment Fund (AIFs) and Portfolio Management Services (PMS) Clients during the year whostarted using our Custody Clearing and Fund Accounting solutions. Your Bank alsoimplemented a new Fund Accounting software during the year with minimal disruption toclients and we expect this to be a good driver of new business as we go forward.

Your Bank's dedicated Service Solutions vertical has helped ensure faster customerresponse and improve customer experience. This vertical is the single point of contact forall service related and documentation issues with personnel present across the country.While your Bank has been successful in significantly reducing Turn-Around-Time acrossvarious processes it has also smoothly transitioned into its Business Continuity Planning(BCP) processes in the Covid-19 scenario and ensured business continuity. Additionally toaddress challenges in this Covid-19 climate the Bank has accelerated a number of itsdigital initiatives on e-signatures and e-stamping to enhance customer options and isfocused on gradually moving the entire customer lifecycle to the electronic platform.

Your Bank continues to target productivity and efficiency improvements. There isgreater focus on measuring and improving employee productivity including of its salesforce through use of technology and digital tools. Given high focus in this area costshave been kept well in control further improving profitability of the business.

Your Bank continues on its Digital journey to provide the best in class solutions andenhance its customers' experiences. During the year we have updated our Core TradePlatform which has laid the foundation for an integrated trade portal have built acomprehensive Quickcheck platform to automate all types of recurring payments througherror-free real time mandate registration have built an Application Program Interface(API) based instant and end to end automated e-collections solution have implemented theUnited Payments Interface (UPI) 2.0 recurring mandate solution and have partnered withFinTechs to provide API and Digital payment solutions. During this digital journey yourBank has become the leading bank in Bharat Bill Payments System (BBPS) has built the Bestin class Corporate Mobility Portal for providing on the go approvals and has beenrecognized as the Best Cash Management Bank by Asia Money and The Asian Banker. As part ofour digital journey we are also upgrading our Cash Management Services (CMS) platform toenhance efficiency and experience focusing on API based solutions and its use across ourpartners and customers and building a Loan Management and an Escrow Management solution todigitize the entire transaction process including the documentation process. Furthermorewe have also provided Best in Class Structured solutions to various state and centralgovernments including our all in one and modular electronic fund flow application forNational Health Mission Rajasthan.

Wealth Management

Wealth Management your Bank's private banking arm caters to a number of distinguishedIndian families and is one of the oldest and the most respected Indian wealth managementfirms managing wealth for 50% of India's top 100 families (Source: Forbes India Rich List2019) with customers range from entrepreneurs to business families and professionals.

Your Bank provides an open architecture proposition to its customers offering bothproprietary and external wealth products. This business has a strong distributioncapability for private clients through distribution/referral model across equities fixedincome & alternates across High Networth Individual (HNI) investors. In addition tocomprehensive financial solutions the family office service provides a strategicconsolidated view on the client's overall portfolio across multiple advisors in additionto comprehensive financial solutions that go beyond investments. These include value addedservices such as assistance with investment structuring banking and credit consolidatedreporting referral for philanthropy services and concierge services. The trusteeshipservices offers estate planning services helping clients with succession planningactivities through creation of private trusts. With an in-depth understanding of clientrequirements and expertise across various asset classes this business offers the widestrange of financial solutions through transaction-based investment approach. As per theReserve Bank of India guidelines advisory activities that were being offered out of yourBank are now offered out of Kotak Investment Advisors Limited a subsidiary of your Bankwith effect from 20th April 2019.

In addition your Bank has also built a large Priority Banking business assisting massaffluent customers with products and solutions developed to meet their financialrequirements. The total relationship value across your Bank's Wealth & Priorityofferings is INR 306k crore (as of December 2019) across 4400 families.

In 2019 Kotak Wealth Management has been consistently featured as the Best PrivateBank India across multiple Global and Domestic Surveys. Some of the recent accoladesinclude:

• Best Private Bank India by Euromoney Private Banking and Wealth ManagementSurvey- 2019 and 2018

• Best Private Bank Domestic by Asian Private Banker 2018

• Best Wealth Management Firm India by Asian Private Banker's Indian 2018 AUMLeague table

• Best Performing Private Bank by The PWM Global Private Banking Awards 2018

International Business

• GIFT City Branch:

The GIFT City Branch an International Financial Services Centre Banking Unit of yourBank facilitates your Bank's participation in syndication of overseas loans lending toclients in international markets and providing External Commercial Borrowing to eligibleIndian corporates. Your Bank also undertakes client forex and derivative transactions tohelp offshore clients with management of interest rate and currency risks in addition toinvestments in offshore bonds.

• DIFC Branch:

Your Bank successfully obtained license approvals from the Dubai Financial ServicesAuthority [DFSA] and inaugurated its first overseas branch at Dubai InternationalFinancial Centre [DIFC] Dubai in October 2019. With this the Bank complemented itsability to advise and arrange global investment products provide loans and acceptdeposits from its overseas wealth & private banking customers that qualify under theProfessional client criteria of the DFSA.

Asset Reconstruction

The Resolutions of several large accounts got seriously impacted due to slow down inthe economy even before the Covid 19 crisis. It further exacerbated by the largeunresolved piling of cases in various judicial forums like Debt Recovery Tribunals(DRT's) Debt Recovery Appellate Tribunal (DRAT) High Courts including National CompanyLaw Tribunal (NCLT) proceedings under Insolvency and Bankruptcy Code (IBC).

Crucial recoveries expected in the month of March has been delayed because of thelockdown due to spread of Corona Virus.

The situation looks grim at the moment. The Reserve Bank of India has offered sixmonths moratorium to all the standard borrowers which will give some breather to theborrowers to handle the financial crisis.

Your Bank will however monitor the resolution impact of Covid situation very closelyand diligently spare no efforts to resolve the stress and bad accounts with empathy andcompassion.

We expect a lot of opportunities to present in the acquisition side of the stressedloans which your Bank will look at very closely and if the prices offered are reasonableand attractive we shall be open to acquire several of them.


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

• Balance Sheet Management: The Balance Sheet Management Unit (BMU) ensuresmaintenance of regulatory reserves and adequate liquidity buffers and requisiteinvestments. The BMU also manages Interest Rate & Liquidity risk within the overallrisk appetite of the Bank.

• Proprietary Trading: The proprietary trading desks actively trade in productssuch as Fixed Income Money Markets Derivatives Foreign Exchange and Equity. The PrimaryDealer Desk - a part of the proprietary Trading desk actively participates in primaryauctions of government securities makes market in government securities and engages inretailing of government securities.

• Customer Transactions: The Customer-facing desks at the Treasury assist andmanage customer transactions across Foreign Exchange Derivatives and Bullion products.

• Forex & Derivatives: Facilitating customer access to foreign currencymarkets through cash & derivatives products for remittances trade transactions andfor managing foreign exchange and interest rate risks.

• Bullion: The Bullion desk provides efficient working capital solutions todomestic Jewellery manufacturers as per the prescribed rules of Reserve Bank of India.Under License from the Reserve Bank of India your Bank also imports gold and silver tomeet the needs of customers.

Further details of the principle business units of your Bank and their performance areavailable in the Management's Discussion and Analysis


Response to Covid

The outbreak of COVID-19 has had and continues to have a material impact on the globaland Indian economy the financial services sector and our business. We summarise below thesignificant areas where we have seen an impact of COVID-19 on our business and your Bank'sapproach on these areas going forward:

Operations and business continuity: Your Bank has taken a number of stepsat various levels to enable supervision and support of its employees who are working fromhome. IT and HR teams of your Bank have worked to move many employee systems tointernet-first and mobile-first platforms ensuring seamless access from home in severalareas of operations. While the focus so far had been to protect the health and ensure thesafety of employees while ensuring minimum disruption to regular banking operations yourBank will continue to improve productivity monitoring as an ongoing process as 'work fromhome' continues. To enhance the quality of customer interactions and to enable increasedpersonalization your Bank has upgraded to a new customer relationship management toolwhich has enabled the relationship teams to reach out and service clients in the currentsituation thus facilitating banking from home.

The moratorium: Until April 30 2020 at the account level 26.2% byvalue of borrowers of your Bank (as of March 1 2020 i.e. the reference date forapplicability of the moratorium) had availed the moratorium prescribed by the RBI. Theaccounts which benefit from the moratorium period are not classified as NPAs if theaccounts have any instalments/ interest that fall overdue during the moratorium period.However lenders are required to make general provisions in respect of accounts which werein default on March 1 2020 and the benefit of the Moratorium Period has been availed. Forfiscal year 2020 your Bank recognised a general provision for COVID-19 deferment casesamounting to Rs 6500 million which is higher than the minimum levels required by theRBI. If your Bank had not considered the standstill clause on accounts granted moratoriumGross Non Performing Assets (GNPA) of your Bank as of March 31 2020 would have beenhigher by approximately Rs 6600 million. Further on May 22 2020 the RBI has furtherpermitted the extension of the moratorium period by another three months to August 312020. The impact of this circular is difficult to ascertain as your Bank may permit morecustomers to avail the moratorium beyond May 312020 which may require your Bank to makehigher provisions and impact overall profitability and growth. Your Bank may be requiredto recognise higher loan loss provisions in future periods on account of the uncertaintyin the external environment due to COVID-19 which may adversely impact asset quality andprofitability of your Bank in future periods.

Collections: The lockdown and social distancing measures have restrainedthe ability of collections team of your Bank to go out in the field which may impactrecovery of dues. However your Bank is calling its customers using traditionaltele-calling setups. Further with the focus on customer convenience your Bank hasactivated additional digital channels for payments and are sending payment links tocustomers with pre-filled data making it convenient for the customers to make payment.Your Bank continues to have 'awareness calls' with its customers to inform them of theterms of the moratorium. Post the completion of the moratorium period your Bank aims toproactively focus on collections.

Cost reduction measures and investments in technology: Your Bank hasimplemented and is looking to implement cost reduction measures such as reduction inemployee pay and re-negotiation of branch rentals. Going forward as working from homeflexible hours and flexible location become commonplace there will be a requirement tomake upfront investment in infrastructure and technology but at the same time there willbe an opportunity to achieve savings in rental and travel costs.

Advances and credit policy: Your Bank has tightened credit policy acrosscustomer segments. Some of the key elements of revised credit policy of your Bank are asfollows:

Corporates: Your Bank is continuously reviewing exposures disbursementssanctions given and not yet availed on a case-by-case basis. Further for fresh sanctionsyour Bank expects to focus on corporates with high credit rating low leverage low fixedcost and industries where the impact of COVID-19 is not likely to be as severe.

SME customers: For many of these companies your Bank is the sole bankand we aim to continue to support such companies subject to acceptable levels of risk.Further in terms of new SME customers your Bank will look at customers that have no/lowleverage low fixed cost operating models and can provide good collateral.

Retail customers: For secured customers your Bank may provide additionalfunding to its existing customers subject to acceptable levels of risk. Further as thesituation is evolving your Bank is working on alternative risk models for differentproducts and location. For unsecured customers your Bank plans to continue to increaseits sourcing from internal customers and customers employed by leading corporates.

Stress testing: Your Bank has carried out specific stress testing to gauge theimpact of COVID-19 in various stress scenarios. Your Bank is actively monitoring economicdevelopments by performing sensitivity analysis on its loan portfolio and will takeprecautionary actions accordingly such as exposure management and proactiverestructuring.

Your Bank has made a provision towards advances of Rs 650 crore at the standalone banklevel and Rs 714 crore at the group level on account of COVID-19.

In the middle of the unprecedented lockdown due to the Covid-19 situation your Bankhelped its Corporates customers to open salary accounts for their new joinees usingDigital 811accounts. This helped new joinees across corporates to open their accounts andget their salary credited without delays.

In order to support the country during the ongoing pandemic your Bank has enabledonline donations to the "PM Cares fund" and State Chief Ministers' funds throughClick2Remit online remittance platform.

Human Resources

The past financial year saw the HR department of your bank implement variousinitiatives to transform the HR Processes and various employee touchpoints. From makinggreat strides in engaging with employees numerous health and wellness drives tocentralizing various HR Processes for bringing in aligning employee experience drivingmore and more processes through employee and manager self-service there have been a quietfew measures taken to enhance the experience of employees.

Key HR Initiatives

Engagement is key for employee retention and growth. Which is why your bank remainsheavily invested in manager-led programs and theme- based regional initiatives likeLeadership Connect/Town Hall Webcast Meet 5 for building manager connect and skip leveland also strengthen the platform for top down communication at the same time createlistening opportunity for voice of employees. As they say it takes 21 days to build ahabit your bank had rolled out the plan for manager led engagement through#21DayChallenge.

Employees are the greatest assets and their well-being directly translates to yourBank's well-being. Keeping this in mind your Bank has championed Health and Wellnessdrives with the initiative #HumFitKotakHit. This initiative has been pivotal in ensuringyour Bank remains a positive and healthy workspace at all times. Various health andwellness related initiatives were launch through online and onsite interactions.

Building diverse & inclusive culture has been a focus for your Bank over few years.To honor the peerless efforts of the women your Bank revisited its D&I journey byrenewing its format. Your Bank has formed the council that consists of leaders fromvarious segments of the Bank and Shanti Ekambaram - Group President - Consumer Bank leadsit. Council has been instrumental in launching short term and long-term plan for buildinggender diverse workforce at various levels of the Bank.

Your Bank values digitization automation and self-service for employees and managersabove all else. Especially during times when working from outside the workspace is theonly option your Bank continues to drive more and more employee and manager self-serviceto enhance accessibility of key functions for employees and managers like push formobile/cloud based solutions for all employee touch points. Your Bank has also enhanced.To increase efficiency automation and centralisation your Bank has transitioned HRoperations and many more processes to shared service. Your Bank has also started thejourney through Robotics process automation / Robot for HR Processes.

Talent identification and building leadership pipeline has been one of the key focus ofyour Bank during the year. The talent management framework has been revamped and arigorous talent review process has been implemented at the senior level to ensure talentclassification and succession planning.

Your Bank focused on strengthening the capabilities in digital machine learninganalytics and new age technology. While focus on talent acquisition had been on frontlineroles and building capabilities for internal talent movement continued to be key agendafor your Bank.

Learning is key for growth. Keeping this in mind at all times your Bank hasspearheaded clearing Digital Blur various People-Manager programs for functional andbehavioural skill building at all levels. Increased focus on e-learning for deliveringprograms at various stages of employee lifecycle has been the focus of your Bank.

The end of the financial year witnessed the COVID-19 outbreak. Your Bank pulled out allthe stops and bulked up preparedness for the BCP by rolling out plans for moving teams towork from home ensuring essential staff and essential services operational in branch andback offices creating awareness communicating DOs and DON'Ts to the employees.

Technology & Digitization

Digital strategy of your Bank focuses on (i) acquiring customers (ii) enhancingcustomer experience (iii) making internal business operations more efficient and (iv)enhancing cyber security and data protection framework. The strategy is supported by corepillars which include ease of use scalability cost effectiveness and increased agility.

Your Bank has effectively leveraged technology this year to deliver enhanced customerexperience business efficiency business collaborations and cybersecurity.

Our mobile banking app continues to be one of the highest both on iOS (Apple Appstore)apps (rating of 4.8 / 5) and Android (4.3 / 5). Your Bank has made a number ofimprovements to the customer experience of the app making it more user friendly. We haveadded new sections including Billpay Loan & Insurance as well as new features likeForex cards Premature withdrawal of Fixed Deposit Payday loan Fastag Insurance OlaUPI 2.0 Image credit card etc. Your Bank also launched innovative features like 'SIRI'and "Google Assistant" option for fetching account balance using voice commands.

Your Bank scaled newer channels including the Keya Chatbot and WhatsApp Banking tostart making business impact and become mainstream digital channels by handling moreproducts and services.

Keya Chatbot uses a conversational banking approach and Natural Language Processing(NLP) to interact with customers and is enabled on all digital channels viz. Mobile Appwebsite ( and Net Banking. Keya Chatbot is able to handle queries about avariety of products like Credit Card Debit Card Accounts Fund Transfer Bill PaymentNPS Fixed Deposits Home Loan and Personal Loan. It handles customer requests such asonline tracking of packages switching cards on and off and paying credit card bills andalso allows customer to explore and apply for new products such as credit card personalloan debit card.

WhatsApp has become an important channel for your Bank to communicate with customers onmatters like welcome kits. Your Bank is building more such journeys for customers toreceive important information as well as to perform additional service requests. Your Bankhas been one of the first Indian banks to offer banking services on WhatsApp which allowscustomers access banking services without installing any app or visiting any webpages.

Your Bank enhanced its Net Banking experience with features such as Deliverablestracking using Keya Chatbot Re-KYC update for low risk customers and option toauthenticate using Kotak Mobile Banking App instead of OTP (One Time Password) whilelogging into Net Banking.

Your Bank is the first Bank in the entire ecosystem to launch the new National PaymentsCorporation of India (NPCI) eMandate API method as part of the Electronic NationalAutomated Clearing House (eNACH) product as both a Destination Bank as well as a SponsorBank. This allows for both consumers and corporates associated with Kotak to have aseamless experience in creating and approving recurring payment collection requests viathe NPCI eMandate platform.

Your Bank is also the leading Bank on the Bharat Bill Payment System to acquire Billersonto the platform as a Biller Operating Unit. On the digital consumer payments your Bankcontinues to serve customers with seamless in-channel payment experiences via FundTransfers and Bill Payments/Recharges which are the primary transacting channels for mostBank consumers.

Your Bank introduced new digital payment methods including UPI 2.0 allowing customersto create one-time mandates and apply for IPOs via the new UPI product enhancement fromNPCI.

Within KayMall (In-app commerce platform) your Bank is one of the first Banks tolaunch a direct integration with OLA Cabs allowing Bank customers to seamlessly booktravel via Cabs in addition to Trains Flights and Buses.

For the third consecutive year your Bank has overachieved targets set by Ministry ofElectronics & Information Technology (MeitY) for FY 201920 on Digital Paymentstransactions with approximately 107% of target achievement.

Your Bank has also started collaboration with large external digital platforms todevelop a new channel for instant loan disbursals for its existing customers. One suchcollaboration has been done with Google i.e Google Pay where customers can availpre-approved Personal loans by using the Google Pay platform. These loans are instantlycredited to customers' Kotak Bank accounts.

In order to serve salaried customer segment of the Bank your Bank launched a newproduct: "Kotak PayDay Loans" which offer short-term single instalment loansto customers. Customers can avail loans instantly during the month by using digitalchannels. Repayment of the loan is basis the date on which customers receive their salary.

Your Bank suspended biometric-based savings account opening following the APEX courtruling last year. However after revision of UIDAI guidelines for biometric savingsaccount in August 2019 your Bank reintroduced biometric-based account opening for Savingsand Corporate Salary accounts.

Revised Prevention of Money Laundering Act (PMLA) guidelines required your Bank tochange its account opening journey in November 2019. Besides the branch and saleschannels other sales units of the bank like the Group Relation (GR) team ConsumerDurable group Housing Loan and Personal Loan users were enabled for this mode ofsourcing. Your Bank plans to introduce self on-boarding for corporate salary customerssoon.

Your Bank relaunched a number of its digital initiatives this year basis the revisedguidelines on Aadhaar. Project Velocity which aimed at servicing through biometric meanswas a hit with customers and branches with a high Net Promoter Score (NPS) of 86+ tillMarch. It was awarded at the CII DX Summit & Awards for Best Practice in CustomerExperience. In addition your Bank has enabled debit card cheque book PINS tracking onKeya chatbot with a massive 4 lakh requests monthly average. Robotics Process Automationhas helped process 4 lakh+ service requests in FY 2019-20.

Your Bank's Kotak Innovation Lab based out of Bangalore has been awarded BestInnovation Centre by The Asian Banker.

Your Bank's Open Banking platform has enabled 100+ partnership across different lendingand payments product since its incubation. The Kotak Mahindra API Store has been declaredas a RUNNER-UP in Infosys Finacle Client Innovation Awards for 2019.

Apart from above your Bank's technology direction has been formulated to address sixareas of strategic importance viz. Platform Building Modernization and Refresh of LegacyAnalytics and Reporting Cyber Security & Regulatory Technology Operations Automationand Adoption of Emerging Technologies.

Your Bank has initiated specific initiatives in each of the areas to ensure thatproductivity efficiency and customer experience improve significantly and in an ongoingmanner. Your Bank has invested in leveraging Cloud DevOps Big Data Face Recognitionetc. and in modernizing its Core Banking Credit Card Platform Retail Assets andTreasury systems.

Cyber Security and Fraud Detection is a continuous evolving space. Your Bank investssignificantly in technologies to be at the forefront to prevent detect and act insituations arising from it.


As at 31st March 2020 your Bank has nineteen (19) subsidiaries as listedbelow:

Domestic Subsidiaries

Kotak Mahindra Prime Limited

Kotak Mahindra Investments Limited

Kotak Securities Limited

Kotak Mahindra Capital Company Limited

Kotak Mahindra Life Insurance Company Limited

Kotak Mahindra General Insurance Company Limited

Kotak Mahindra Asset Management Company Limited

Kotak Mahindra Trustee Company Limited

Kotak Mahindra Pension Fund Limited

Kotak Investment Advisors Limited

Kotak Mahindra Trusteeship Services Limited

Kotak Infrastructure Debt Fund Limited

IVY Product Intermediaries Limited

BSS Microfinance Limited

International Subsidiaries

Kotak Mahindra (UK) Limited

Kotak Mahindra (International) Limited

Kotak Mahindra Inc.

Kotak Mahindra Financial Services Limited

Kotak Mahindra Asset Management (Singapore) Pte. Limited

The key business segments where the subsidiaries operate include investment bankingstock broking vehicle finance advisory services asset management life insurance andgeneral insurance.

Kotak Mahindra Life Insurance Company Limited (KLI) has recorded a growth of 28.4% onthe gross written premium mainly coming from Individual renewal premium and Groupbusiness. KLI has solvency ratio of 2.90 against a regulatory requirement of 1.50.

In FY 2020 the Indian Equity Capital Markets witnessed a revival in primary marketactivity from the previous fiscal year. The uptick in activity in the market during FY2020 could largely be attributed to a number of factors including deals in the stressedasset situations increasing investment activity by financial investors including privateequity. Accordingly Kotak Securities Limited and Kotak Mahindra Capital Company Limitedreported higher profits compared to previous year.

The growth in the mutual funds industry continued during the year. The industryregistered a growth of 10.4% YOY in Q4FY20 over Q4FY19 with the Quarterly Average Assetsunder Management (QAAUM) for Q4FY20 at Rs 27.0 lakh crore. During the same period on thebasis of percentage growth in QAAUM Kotak Mahindra Asset Management Company Limited(KMAMC) was amongst the fourth fastest growing Mutual Fund House. KMAMC is now the 6thlargest Fund House in the country in terms of QAAUM as on 31st March 2020 andits market Share in QAAUM has grown to 6.9% in Q4FY20 from 6.1% in Q4FY19 and 5.0% 3years back.

The key regulatory changes for Asset Management Company (AMC) business during the yearwas the rationalization of the scheme Total Expense Ratio's (TER's). Also with effect fromOctober 2018 all scheme related expenses had to be paid from schemes and not from AMCwhich was to be factored in pricing of direct plans. Further no upfront commissions couldbe paid.

The passenger car market in India degrew by 17.4% for FY 2020 compared to 2.8% growthin FY 2019. Further due to the change in regulations there was a decrease in the loanbook of our NBFC subsidiaries. In accordance with RBI guidelines Kotak Mahindra PrimeLimited and Kotak Mahindra Investments Limited made a general provision of Rs 50 crore andRs 14 crore respectively relating to COVID-19 in FY2020. The above factors have impactedthe profits of these companies.

The Bank and most of its subsidiaries have elected to exercise the option permittedunder section 115BAA of the Income-tax Act 1961 introduced by the Taxation Laws(Amendment) Act 2019 during the fiscal year 2020 resulting in lower tax expense duringFY 2020.

The Group has reduced its stake in ECA Trading Services Limited an Associate companyfrom 40% to 20% on 18th March 2020.

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

The Bank's Policy for determining material subsidiaries is available on the Bank'swebsite viz. URL: governance/policies.html inline with the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.KLI is a material subsidiary of the Bank.

As at 31st March 2020 your Bank has the following three (3) Associatecompanies:

Infina Finance Private Limited

Phoenix ARC Private Limited

ECA Trading Services Limited

(previously known as ACE Derivatives & Commodity Exchange Limited

The Annual Report consists of the financial statements of your Bank on standalone basisas well as consolidated financial statements of the group for the year ended 31stMarch 2020 Report of Board of Directors Auditor's report or other documents required tobe attached therewith. The financial statements of the subsidiaries used for consolidationof the Bank's consolidated financial results are special purpose financial statementsprepared in accordance with Generally Accepted Accounting Principles in India ('GAAP')specified under Section 133 of the Companies Act 2013 read with relevant notifications.In accordance with the General Circular No. 20/2020 dated 5th May 2020 issuedby Ministry of Corporate Affairs (MCA) and Circular No. SEBI/HO/CFD/ CMD1/CIR/P/2020/79dated 12th May 2020 issued by the Securities and Exchange Board of India(SEBI) in view of the prevailing situation owing to the difficulties involved indispatching of physical copies of the Annual Report and the Notice convening the AnnualGeneral Meeting (AGM) the weblink of the same is being sent in electronic mode only toMembers whose e-mail address is registered with the Bank or the Depository Participant(s).Those Members whose email address is not registered with the Bank or with theirrespective Depository Participant(s) and who wish to receive the Notice of the AGM andthe Annual Report for the year ended 31st March 2020 can get their emailaddress registered by following the steps as detailed in the Notice convening the AGM. Thefull Annual Report (including the Annual Reports of all the subsidiaries) will beavailable on your Bank's website viz. URL:


The stock options and the stock appreciation rights granted to the employees of theBank and its subsidiaries currently operate under the following Schemes:

• Kotak Mahindra Equity Option Scheme 2015

• Kotak Mahindra Stock Appreciation Rights Scheme 2015

The disclosures requirements under the Securities and Exchange Board of India (ShareBased Employee Benefits) Regulations 2014 for the aforesaid ESOP & SARs Schemes inrespect of the year ended 31st March 2020 are disclosed on the Bank's websiteviz. URL:


In August 2018 your Bank completed an issuance of Perpetual Non-Convertible PreferenceShares (PNCPS) resulting in dilution of promoter stake to 19.70% of the paid-up capital ofthe Bank. However the Reserve Bank of India (RBI) communicated to the Bank that the PNCPSissuance did not meet their promoter dilution requirement. The Bank filed a writ petitionbefore the Hon'ble Bombay High Court to validate its position.

In January 2020 basis a proposal submitted by the Bank and accepted by the RBI theRBI conveyed its in-principle approval of the following revised terms in relation to thedilution of promoter shareholding:

1. Promoters' voting rights in the Bank to be capped to 20% of paid-up voting equityshare capital (PUVESC) until March 31 2020.

2. Promoters' voting rights in the Bank to be capped to 15% of PUVESC from April 12020.

3. Promoters' shareholding in the Bank to be reduced to 26% of PUVESC of the Bankwithin 6 months from the date of final approval of


4. Promoters will not thereafter purchase any further paid up voting equity shares ofthe Bank till the percentage of promoters' shareholding reaches 15% of PUVESC of the Bankor such higher percentage as may be permitted by RBI from time to time.

5. Promoters' will be entitled to purchase paid up voting equity shares of the Bank upto 15% of the PUVESC of the Bank or such higher percentage as may be permitted in thefuture and exercise voting rights on such shares.

On this basis the writ petition filed by the Bank was withdrawn and thereafter onFebruary 18 2020 the RBI accorded its final approval to the above. Post the QualifiedInstitutions Placement in May 2020 and subsequent sale of shares by promoters in secondarymarket the shareholding of the promoters in the Bank has reduced. The requirement of 26%of PUVESC will be achieved within the time period stipulated by the RBI.


Pursuant to Regulation 27 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (SEBI LODR Regulations) a separate section entitled 'Report onCorporate Governance' has been included in this Annual Report. The Report of CorporateGovernance also contains certain disclosures required under the Companies Act 2013including the details of the board meetings held during the year ended 31stMarch 2020. A Business Responsibility Report containing the requisite details underRegulation 34 of the SEBI LODR Regulations is disclosed on the Bank's website viz. URL:


Directors retiring by rotation

Mr. Dipak Gupta (DIN 00004771) retires by rotation at the Thirty Fifth Annual GeneralMeeting (AGM) of the Bank and is eligible for reappointment subject to approval of theReserve Bank of India.

Appointment/Re-appointment of Directors

The Board of Directors of the Bank had recommended appointment of Mr. K.VS. Manian (DIN00031794) & Mr. Gaurang Shah (DIN 00016660) as Whole-time Directors of the Bank for aperiod of three years with effect from the date of approval of the Reserve Bank of Indiaand subject to necessary approval from the shareholders. Subsequently the shareholders atthe Annual General Meeting held on 22nd July 2019 had also approved the same.Further Reserve Bank of India has granted its approval for appointment of Mr. K.VS.Manian and Mr. Gaurang Shah as Whole-time Directors of the Bank for a period of threeyears. Accordingly Mr. Manian and Mr. Shah took charge as Whole-time Directors of theBank with effect from 1st November 2019.

Further the Board of Directors of the Bank at its meeting held on 13th May2020 based on the recommendation of the Nomination and Remuneration Committee (NRC) andperformance evaluation as applicable have approved the following subject to theapproval of the shareholders and the Reserve Bank of India:

1. Re-appointment of Mr. Uday Kotak as the Managing Director & CEO for the periodfrom 1st January 2021 to 31st December 2023.

2. Re-appointment of Mr. Dipak Gupta as Whole-time Director of the Bank designated asJoint Managing Director for the period from 1st January 2021 to 31stDecember 2023.

3. Re-appointment of Mr. Prakash Apte as the part-time Chairman of the Bank for theperiod from 1st January 2021 to 31st December 2023.

The approval of the shareholders in this regard is being sought at the ensuing AGM ofthe Bank. The details of the Directors being re-appointed are set out in the Notice of theensuing AGM of the Bank.

Declaration from Independent Directors

The Board has received declarations from the Independent Directors as per therequirement of Section 149(7) of the Companies Act 2013 and the Board is satisfied thatthe Independent Directors meet the criteria of independence and fulfil the conditions asmentioned in Section 149(6) of the Companies Act 2013 and are independent of themanagement. All the Independent Directors of the Bank have complied with the provisions ofsub rule (1) and (2) of rule 6 of the Companies (Appointment and Qualification ofDirectors) Rules 2014.

Board Evaluation

The Nomination and Remuneration Committee (NRC) of the Bank's Board has formulated thecriteria for performance evaluation of the Directors and the Board as a whole whichbroadly covers the Board role Board/Committee membership practice & procedure andcollaboration & style. The performance of the Committees of the Board is evaluated onthe criteria viz. composition & quality process & procedure and the terms ofreference.

The NRC of the Bank's Board engaged an external professional services firm tofacilitate the self-evaluation process of the Board its committees Chairman andindividual directors.

A Board effectiveness assessment questionnaire designed for the performance evaluationof the Board its Committees Chairman and individual directors (including Independentdirectors) in accordance with the criteria set and covering various aspects of performanceincluding structure of the board meetings of the board functions of the board role andresponsibilities of the board governance and compliance evaluation of risks grievanceredressal for investors conflict of interest stakeholder value and responsibilityrelationship among directors director competency board procedures processesfunctioning and effectiveness was circulated to all the directors of the Bank for theannual performance evaluation.

Based on the assessment of the responses received to the questionnaire from thedirectors on the annual evaluation of the Board its Committees the Chairman and theindividual directors the Board Evaluation Report was placed before the meeting of theIndependent Directors for consideration. Similarly the Board at its meeting assessed theperformance of the Independent Directors. The Directors noted that the results of theperformance evaluation of the Board & its Committees Chairman and individualdirectors indicated a high degree of satisfaction amongst the directors. Some of thesuggestions this year for improving the performance of the Board & Committees weremapping of potential impact of changes in macroeconomic factors product development withcustomer centric lens and improvement in area of customer service.

Key Managerial Personnel (KMPs)

The following officials of the Bank are the "Key Managerial Personnel"pursuant to the provisions of Section 203 of the Companies Act 2013:

• Mr. Uday Kotak Managing Director & CEO

• Mr. Dipak Gupta Joint Managing Director

• Mr. K.VS. Manian Whole-time Director (with effect from 1st November2020)

• Mr. Gaurang Shah Whole-time Director (with effect from 1st November2020)

• Mr. Jaimin Bhatt President & Group Chief Financial Officer

• Ms. Bina Chandarana Company Secretary

Appointment & Remuneration of Directors & KMPs

The appointment and remuneration of Directors of the Bank is governed by the provisionsof Section 35B of the Banking Regulation Act 1949. The Nomination & RemunerationCommittee (NRC) of the Bank's Board has formulated criteria for appointment of SeniorManagement personnel and the Directors. Based on the criteria set it recommends to theBoard the appointment of Directors and Senior Management personnel.

The NRC reviews the range of skills experience and expertise on the Board and identifyits needs. After a detailed search a master list of candidates is prepared. The NRC thenshortlists the candidates from the master list based on the selection criteria viz.qualifications knowledge experience skills expertise fit & proper statuspositive attributes as per the suitability of the role independent status and variousregulatory/ statutory requirements as may be required of the candidate. After detaileddiscussions and deliberations NRC recommends the candidate to the Board.

The Reserve Bank of India ('RBI') vide its circular no.DBOD.No.BC.72/29.67.001/2011-12dated 13th January 2012 has issued the Guidelines on Compensation of Whole TimeDirectors / Chief Executive Officers / Other Risk Takers of Private Sector Banks onCompensation Policy which inter alia cover the following:

• Proper balance between fixed pay and variable pay;

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

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

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

• Applicable to all employees of the Bank. Employees classified into 3 groups: oWhole-time Directors/Chief Executive Officer

• Risk Control and Compliance Staff

• Other categories of Staff

• Compensation structure broadly divided into Fixed Variable and ESOPs

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

• Variable Pay - Linked to assessment of performance and potential based onBalanced Key Result Areas (KRAs) Standards of Performance and achievement of targets withoverall linkage to Bank budgets and business objectives. The main form of incentivecompensation includes

- Cash Deferred Cash/Incentive Plan and Stock Appreciation Rights.

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

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

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

• Malus and Clawback clauses applicable on Deferred Variable Pay.

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

The details of the remuneration paid to the Non-Executive Chairman Executive andNon-Executive Directors of the Bank for the year ended 31st March 2020 isprovided in the Corporate Governance Report annexed to this Report.

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

RBI vide its circular no. DBR.No.BC.97/29.67.001/2014-15 dated June 1 2015 has issuedguidelines on payment of compensation to the Non-Executive Directors (NEDs) of privatesector banks which inter-alia specifies the following:

• The Board of Directors of the Bank (in consultation with the NRC) needs toformulate and adopt a comprehensive compensation policy for NEDs (other than part-timenon-executive Chairman).

• Maximum amount of profit related commission not to exceed Rs 10 lakh per annumfor each director of the Bank.

Accordingly in line with the aforesaid RBI circular and pursuant to the relevantprovisions of the Companies Act 2013 the Board of the Bank has adopted a compensationpolicy for the NEDs (excluding the part-time Non-Executive Chairman). The salient featuresof the Compensation Policy are as follows:

• Compensation structure broadly divided into:

• Sitting fees

• Re-imbursement of expenses

• Commission (profit based)

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

• Overall cap on commission for each director Rs 10 lakh per annum.

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

Remuneration paid to the KMPs is in line with the Compensation Policy of the Bank whichis based on the RBI Guidelines.

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

1. Ratio of the remuneration of each director to the median remuneration of theemployees for the financial year:

Directors Title Ratio
Mr. Prakash Apte Non-Executive Chairman 4.02x
Mr. Uday Kotak Managing Director & CEO 42.68x
Mr. Dipak Gupta Joint Managing Director 42.53x
Mr. K.V.S. Manian* Whole-time Director 44.63x
Mr. Gaurang Shah* Whole-time Director 44.79x

* Refer Note 3

2. Percentage increase in remuneration of each director Chief Financial Officer ChiefExecutive Officer Company Secretary or Manager if any in the financial year:

Directors/KMP Title % increase in remuneration % increase in remuneration excluding SARs
Mr. Prakash Apte Non-Executive Chairman - -
Mr. Uday Kotak# Managing Director & CEO -18.26 -18.26
Mr. Dipak Gupta# Joint Managing Director -18.31 -18.31
Mr. K.VS. Manian* Whole-time Director 5.70 4.85
Mr. Gaurang Shah* Whole-time Director 9.66 4.80
Mr. Jaimin Bhatt Group CFO 7.51 8.69
Ms. Bina Chandarana Company Secretary 6.83 8.80

* Refer Note 3

# Refer Note 5

3. Percentage increase in the median remuneration of employees in the financial year:

For employees other than managerial personnel who were in employment for the whole ofFY 2018-19 and FY 2019-20 increase in the median remuneration is 11.97%.

4. Number of permanent employees on the rolls of Bank at the end of the year: 50034

5. Average percentile increase already made in the salaries of employees other than themanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:

For employees other than managerial personnel who were in employment for the whole ofFY 2018-19 and FY 2019-20 the average increase is 11.97% and 11.70% excluding SARs.

Average increase for managerial personnel is 0.34% and -2.31% excluding SARs.

6. Affirmation that the remuneration is as per the remuneration policy of the Bank:

The Bank is in compliance with its Compensation Policy.


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

2) Stock Appreciation Rights (SARs) are awarded as variable pay. These are settled incash and are linked to the average market price/closing market price of the Bank's stockon specified value dates. Cash paid out during the year is included for the purposes ofremuneration.

3) Pursuant to the approval of the Reserve Bank of India Mr. Manian and Mr. Shah tookcharge as Whole-time Directors of the Bank with effect from 1st November 2019.

4) The Non-Executive Directors of the Bank other than the Non-Executive Chairmanreceive remuneration in the form of sitting fees for attending the Board/ Committeemeetings and in the form of an annual profit based commission. The Non-Executive Chairmangets sitting fees for attending meetings and gets a remuneration approved by theshareholders and the Reserve Bank of India.

5) Remuneration for Mr. Uday Kotak and Mr. Dipak Gupta does not include variable payfor the year ended 31st March 2019 which is pending approval of the ReserveBank of India.


Pursuant to Section 204 of the Companies Act 2013 ('Act') your Bank has appointedParikh & Associates Company Secretaries as its Secretarial Auditor. The SecretarialAudit Report for the financial year ended 31st March 2020 as required underSection 204 of the Act and Regulation 24A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is annexed to this Report. Your Bank is in compliance withthe applicable Secretarial Standards issued by The Institute of Company Secretaries ofIndia and approved by the Central Government under Section 118(10) of the Companies Act2013 for FY 2019-2020.

Kotak Mahindra Life Insurance Company Limited ('KLI') the Bank's material unlistedsubsidiary has got its secretarial audit done and there are no reservations or adverseremarks or disclaimers made in the Secretarial Audit Report for the financial year ended31st March 2020. The Secretarial Audit Report of KLI is annexed to thisReport.


Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act 2013 read withRule 12(1) of the Companies (Management and Administration) Rules 2014 the Annual Returnof the Bank as on 31st March 2020 once prepared shall be disclosed on theBank's website viz. URL:

An extract of the Annual Return as on 31st March 2020 in Form MGT-9 isannexed to this Report.


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


In terms of Section 139 of the Companies Act 2013 Messrs Walker Chandiok & Co.LLP Chartered Accountants (Registration No. 001076N/ N500013) were appointed asstatutory auditors of your Bank from the conclusion of the Thirty Fourth Annual GeneralMeeting until the conclusion of the Thirty Sixth Annual General Meeting of the Banksubject to the annual approval of the Reserve Bank of India (RBI). The Bank has receivedthe approval of RBI for Messrs Walker Chandiok & Co. LLP Chartered Accountants to actas auditors for the year 2020- 2021.


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


The Ministry of Finance Government of India has vide its press release dated 18thJanuary 2016 outlined the roadmap for implementation of International Financial ReportingStandards (IFRS) converged Indian Accounting Standards (Ind AS) for Scheduled commercialbank (excluding RRBs) Non-banking Financial Companies and Insurance companies. ReserveBank of India (RBI) had advised Banks vide circular no. RBI/2015- 16/315DBR.BP.BC.No.76/21.07.001/2015-16 to follow Ind AS from 1st April 2018 as notified underthe Companies (Indian Accounting Standards) Rules 2015 subject to any guideline/directionissued in this regard. Subsequently RBI through its first monetary policy statement forFY 2018-19 on 5th April 2018 deferred Ind AS implementation for the Scheduledcommercial bank (excluding RRBs) by one year i.e. the implementation of Ind AS to beginfrom 1st April 2019 onwards. Further RBI vide circular no.DBR.BPBC.No.29/21.07.001/2018-19 dated 22nd March 2019 deferred theimplementation of Ind AS for scheduled commercial banks till further notice. The RBI hasnot issued any further notification on implementation of Ind AS for scheduled commercialbanks.

As per RBI directions your Bank has taken following steps so far:

• Submitted Standalone Proforma Ind AS financial statements to RBI on a quarterlybasis effective FY 2018-19 as required.

• Formed Steering Committee for Ind AS implementation. The Steering Committeecomprises of representatives from Finance Risk Operations and Treasury. The Committeeoversees the progress of Ind AS implementation in the Bank and provides guidance oncritical aspects of the implementation such as Ind AS technical requirements systems andprocesses business impact people and project management. The Committee closely review'sprogress of Ind AS implementation.

• The Bank has identified gaps in IT Systems and the changes required to automateInd AS. The Bank is in advanced stages for Ind AS implementation.

The Bank will continue to liaise with RBI and industry bodies on various aspectspertaining to Ind AS implementation.


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

Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules2014 there are no Related Party Transactions to be reported under Section 188(1) of theCompanies Act 2013 in form AOC-2.

All Related Party Transactions are placed before the Audit Committee for its review andapproved on a quarterly basis. An omnibus approval of the Audit Committee is obtained forthe Related Party Transactions which are repetitive in nature. Further all Related PartyTransactions are reviewed by the statutory auditors of the Bank. Also during the yearthe Bank had engaged the services of an external auditor for verification of the RelatedParty Transactions its disclosure and validation of the process followed by the Bank.

All Related Party Transactions as required under Accounting Standards AS-18 arereported in Note 23 of Schedule 17 - Notes to Accounts of the Consolidated financialstatements and Note 7 of Schedule 18B - Notes to Accounts of the Standalone financialstatements of your Bank.

The Bank's Policy on dealing with Related Party Transactions is available on the Bank'swebsite viz. URL: relations/governance/policies.html


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


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

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

A vigil mechanism has been implemented through the adoption of Whistleblower Policywith an objective to enable any employee or director or vendor raise genuine concern orreport evidence of activity by the Bank or its employee or director or vendor that mayconstitute: Instances of corporate fraud; unethical business conduct; a violation ofCentral or State laws rules regulations and/or any other regulatory or judicialdirectives; any unlawful act whether criminal or civil; malpractice; seriousirregularities; impropriety abuse or wrong doing; deliberate breaches and non-compliancewith the Bank's policies; questionable accounting/audit matters/financial malpractice. Theconcerns can be reported online on the website viz. URL: whichis managed by independent third party.

Safeguards to avoid discrimination retaliation or harassment and confidentialityhave been incorporated in the policy. All employees and directors have access to theChairman of the Audit Committee in appropriate and exceptional circumstances. Further theChairman of the Audit Committee has access rights to the whistle blower portal.

The Policy has been uploaded on the Bank's intranet as well as website viz. URL: policies.html and regularcommunication is made for sustained awareness.


Kotak Mahindra Bank Ltd. further referred to as your Bank has constituted a BoardCorporate Social Responsibility Committee (CSR Committee) and consists of the followingDirectors:

1) Mr. C. Jayaram

2) Prof. S. Mahendra Dev

3) Mr. Dipak Gupta

Your Bank's CSR Committee is responsible to monitor review and approve CSR initiativesand expenditure. It also makes recommendations to the Board on CSR Policy and relatedmatters. It is the CSR Committee's role to oversee the implementation of all the CSRactivities of the Bank.

The CSR approach of your Bank is charted out in its Board approved CSR policy. Thispolicy sets out your Bank's vision mission governance and CSR focus areas to fulfillits inclusive growth agenda in India. It also demonstrates your Bank's contributiontowards the economic environmental and social growth of the nation and is also committedto contribute towards United Nation's (UN) Sustainable Development Goals (SDGs). It is theconstant endeavour of the Bank to enhance its CSR capabilities by adopting a purposedriven CSR approach focusing on sustainable and scalable programmes spreading in focusedgeographies and aligning to SDGs and the national narrative.

The Bank's CSR Policy is available on the Bank's website:

The CSR policy interventions programmes and the CSR expenditure are all compliantwith the CSR mandate as specified under section 134 section 135 read with schedule VII ofthe Companies Act 2013 along with the Companies (Corporate Social Responsibility Policy)Rules 2014 as amended from time to time and in line with the Government of India'snotifications issued from time-to-time.

The average net profit U/S 198 of the Companies Act 2013 for Bank for the last threefinancial years preceding 31st March 2020 is Rs 6211.52 crore.

The prescribed CSR expenditure required U/S 135 of the Act for FY 2019-20 is Rs 124.23crore.

The CSR Expenditure incurred for the period 1st April 2019 to 31stMarch 2020 U/S 135 of Companies Act 2013 amounts to Rs 85.20 crore as against Rs 36.55crore CSR spend in the financial year 2018-19. The unutilised CSR Expenditure from theprescribed CSR expenditure amount U/S 135 of the Companies Act 2013 is Rs 39.03 crore.

CSR Expenditure of Rs 85.20 crore in FY 2019-20 as a percentage of average net profitU/S 198 of the Companies Act 2013 for the last three financial years preceding 31stMarch 2020 at Rs 6211.52 crore is 1.37%. Further your Bank's CSR Expenditure at Rs85.20 crore in FY 2019-20 was 133% higher than the CSR expenditure of Rs 36.55 crore inFY 2018-19 which in turn was 38.45% higher than our CSR expenditure of Rs 26.40 crore inFY 2017-18.

To support the government's effort in combating COVID-19 your Bank has contributed Rs25.00 crore to the Prime Minister's Citizen Assistance and Relief in Emergency SituationsFund (PM Cares Fund) and donated Rs 10.00 crore to the Chief Minister's Relief Fund -COVID 19 in Maharashtra in FY 2019-20. Even in FY 2020-21 your Bank has been continuouslysupporting various constituencies including the urban & rural poor tribalcommunities doctors nurses and policemen on COVID-19 duty via various means such ascontributing food packets ration kit masks face shields sanitisers PersonalProtective Equipment Kits (PPE Kits) and the like.

The implementation of the CSR projects and programmes is done directly and /or throughselected partner who may be either governmental agencies NGOs and/or other institutionhaving a proven track record of implementing cost and process efficient CSR projectsand/or programmes that are scalable sustainable and have measurable social outcomes andimpact. Also the implementation is done through employee volunteering. The Bank's CSRfootprint has been consistently increasing over the years. The Bank is committed tostepping-up its CSR programmes and expenditure in the years ahead.

Foremost reason for underspend of Bank CSR expenditure in FY 2019-20 is the NGOs'inability to utilise large CSR expenditure allocated under the Bank's CSR Programmes. Forthe Bank's CSR Programme Education & Livelihood ' 5.56 crore were unutilised by theBank's NGO partners in CSR Programme on Healthcare Rs 0.75 crore were unutilised by theBank's NGO partners and in CSR Programme on Sports Rs 0.25 crore were unutilised by theNGO partners in FY2019-20. The NGOs have assured that they will utilise these unutilisedCSR funds towards the Bank's Programmes in FY2020-21.

Your Bank does not consider "administrative overheads" as part of its CSRExpenditure.

The CSR Committee of the Board confirms that the implementation and monitoring of CSRPolicy is in compliance with CSR objectives and Policy of the Bank.

The details of CSR activities and spends under Section 135 of the Companies Act 2013for FY 2019-20 are annexed to this report.


Your Bank has a Group Enterprise wide Risk Management (ERM) framework supported byappropriate policies and processes for management of Credit Risk Market Risk LiquidityRisk Operational Risk and various other Risks. Details of identification assessmentmitigations monitoring and the management of these Risks are mentioned in the ManagementDiscussion and Analysis section appended to this Report.


The provisions of Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 are not applicable to your Bank.


The employee strength of your Bank standalone was 50034 and along with itssubsidiaries was over 71000 as of 31st March 2020.

135 employees employed throughout the year were in receipt of remuneration of Rs 102lakh or more per annum and 74 employees employed for part of the year were in receipt ofremuneration of Rs 8.5 lakh or more per month.

Prevention of Sexual Harassment (POSH): Bank continues with the belief on zerotolerance towards sexual harassment at workplace and continues to uphold and maintainitself as a safe and non discriminatory organization. To achieve the same Kotak reinforcesthe understanding and awareness of Prevention of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. Bank has formulated Internal ComplaintsCommittee (ICC) at three regions for reporting any untoward instance. Any complaintspertaining to sexual harassment are diligently reviewed and investigated and treated withgreat sensitivity. The ICC members have been trained in handling and resolving complaintsand have also designed an online e-learning POSH Awareness module which covers the largeremployee base.

Following is a summary of sexual harassment complaints received and disposed off duringthe year 2019-20:

• No. of complaints received : 27

• No. of complaints disposed off * : 26

* In respect of one pending case enquiries were in progress at the close of the yearand as on the date of this report the same has been closed. One case pertaining to theprevious year which was pending at the beginning has been closed.

As Bank enters in its next phase of growth and expansion of footprint across urban andrural India Bank and its subsidiaries continued to carry out several initiatives toattract and retain a pool of highly skilled and motivated employees who are aligned to thefirm's vision of becoming the most trusted financial services provider.

In accordance with the provisions of Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the names and other particulars of theemployees are set out in the annexure to the Directors' Report. In terms of the proviso toSection 136(1) of the Companies Act 2013 the Directors' Report is being sent to allshareholders excluding the aforesaid annexure. The annexure is available for inspection toany shareholder on request. Any shareholder interested in obtaining a copy of the saidannexure may write an email to the Company Secretary at


The Directors based on the representations received from the operational managementconfirm in pursuance of Section 134(5) of the

Companies Act 2013 that:

(i) your Bank has in the preparation of the annual accounts for the year ended 31stMarch 2020 followed the applicable accounting standards along with proper explanationsrelating to material departures if any;

(ii) they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of your Bank as at 31st March 2020 and of theprofit of your Bank for the financial year ended 31st March 2020;

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

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

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

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


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

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

• Secretarial Audit Report pursuant to Section 204 of the Companies Act 2013 andRegulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015.

• Details of CSR activities and spends under Section 135 of the Companies Act2013.

• Certificate from the auditors regarding compliance of conditions of corporategovernance as stipulated in para E of Schedule V of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015.


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

For and on behalf of the Board of Directors

Prakash Apte Place: Pune
Chairman Date: 30th June 2020