Placement Document
Not for circulation
Serial Number [Š]
Axis Bank Limited
(Axis Bank Limited (the “Bank”) was incorporated on December 3, 1993 in the Republic of India with limited liability under the Companies
Act, 1956, as amended (the “Companies Act”) with corporate identification number L65110GJ1993PLC020769)
The Bank is issuing 34,000,000 equity shares of face value of Rs.10 each (the “Equity Shares”) at a price of Rs.1,390 per Equity Share
(the “Issue Price”), including a premium of Rs.1,380 per Equity Share aggregating to Rs.47,260 million (the “Issue”).
ISSUE IN RELIANCE UPON CHAPTER VIII OF THE SECURITIES AND EXCHANGE BOARD OF INDIA
(ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, AS AMENDED
(THE “SEBI REGULATIONS”)
THE DISTRIBUTION OF THIS PLACEMENT DOCUMENT (“PLACEMENT DOCUMENT”) IS BEING MADE IN
RELIANCE UPON CHAPTER VIII OF THE SEBI REGULATIONS. THIS PLACEMENT DOCUMENT IS PERSONAL TO
EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN
OFFER TO THE PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA OTHER
THAN TO QUALIFIED INSTITUTIONAL BUYERS (“QIBS”), AS DEFINED IN THE SEBI REGULATIONS.
YOU ARE NOT AUTHORIZED TO AND MAY NOT (1) DELIVER THIS PLACEMENT DOCUMENT TO ANY OTHER
PERSON; OR (2) REPRODUCE THIS PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER. ANY DISTRIBUTION
OR REPRODUCTION OF THIS PLACEMENT DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO
COMPLY WITH THIS INSTRUCTION MAY RESULT IN VIOLATION OF THE SEBI REGULATIONS OR OTHER
APPLICABLE LAWS OF INDIA AND OTHER JURISDICTIONS.
INVESTMENTS IN EQUITY SHARES INVOLVE A DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT
INVEST IN THIS ISSUE UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR
INVESTMENT. PROSPECTIVE INVESTORS ARE ADVISED TO CAREFULLY READ “RISK FACTORS” ON PAGE 18
BEFORE MAKING AN INVESTMENT DECISION RELATING TO THIS ISSUE. EACH PROSPECTIVE INVESTOR IS
ADVISED TO CONSULT ITS OWN ADVISORS ABOUT THE PARTICULAR CONSEQUENCES OF AN INVESTMENT IN
THE EQUITY SHARES BEING ISSUED PURSUANT TO THIS PLACEMENT DOCUMENT.
Invitations, offers and sales of the Equity Shares shall only be made pursuant to this Placement Document together with the respective
Application Form (defined hereinafter) and the Confirmation of Allocation Note (defined hereinafter). The distribution of this Placement
Document or the disclosure of its contents without the prior consent of the Bank to any person, other than QIBs and persons retained by QIBs
to advise them with respect to their purchase of the Equity Shares, is unauthorized and prohibited. Each prospective investor, by accepting
delivery of this Placement Document, agrees to observe the foregoing restrictions and make no copies of this Placement Document or any
documents referred to in this Placement Document. See “Issue Procedure”.
The Equity Shares are listed on the BSE Limited (the “BSE”) and the National Stock Exchange of India Limited (the “NSE”, together
with the BSE, the “Stock Exchanges”). In-principle approvals under Clause 24(a) of the Equity Listing Agreements (as defined hereinafter)
for listing of the Equity Shares have been received from the BSE and the NSE on January 28, 2013. Applications will be made for obtaining
listing and trading approvals of the Equity Shares offered through the Issue to the Stock Exchanges. The Stock Exchanges assume no
responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Equity Shares to
trading on the Stock Exchanges should not be taken as an indication of the merits of the business of the Bank or the Equity Shares.
A copy of the Preliminary Placement Document has been delivered to the Stock Exchanges. A copy of this Placement Document has
been filed with the Stock Exchanges. The Preliminary Placement Document and this Placement Document have not been reviewed by the
Securities and Exchange Board of India (“SEBI”), the Reserve Bank of India (the “RBI”), the Stock Exchanges or any other regulatory or
listing authority and is intended for use by QIBs only. This Placement Document has not been and will not be registered as a prospectus with
the Registrar of Companies in India, will not be circulated or distributed to the public in India or any other jurisdiction and will not constitute
a public offer in India or any other jurisdiction.
The information on the website of the Bank or any website directly or indirectly linked to the website of the Bank does not form part of
this Placement Document and prospective investors should not rely on such information contained in, or available through, any such website.
This Placement Document has been prepared by the Bank solely for providing information in connection with the Issue.
The Equity Shares offered hereby have not been and will not be registered under the Securities Act and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S) except pursuant to an exemption from, or in
a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the Equity
Shares are being offered and sold (a) in the United States only to persons reasonably believed to be Qualified Institutional Buyers (as defined
in Rule 144A under the Securities Act) pursuant to Section 4(a)(2) under the Securities Act, and (b) outside the United States to non-U.S.
persons in offshore transactions in reliance on Regulation S under the Securities Act. For a description of certain restrictions on transfer of the
Equity Shares, see “Transfer Restrictions”.
This Placement Document is dated January 31, 2013.
BOOK RUNNING LEAD MANAGERS (in alphabetical order)
Axis Capital Limited*
Axis House
1st Floor, C-2
Wadia International Center
P. B. Marg, Worli
Mumbai 400 025
Citigroup Global Markets India
Private Limited
12th Floor
Bakhtawar
Nariman Point
Mumbai 400 021
* Axis Capital Limited shall be involved only in marketing of the Issue
J. P. Morgan India Private Limited
J. P. Morgan Tower
Off C. S. T. Road, Kalina
Santacruz (East)
Mumbai 400 098
TABLE OF CONTENTS
NOTICE TO INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRESENTATION OF FINANCIAL AND OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDUSTRY AND MARKET DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ENFORCEMENT OF CIVIL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXCHANGE RATE INFORMATION AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DEFINITIONS AND ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY OF THE ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MARKET PRICE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CAPITALIZATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELECTED STATISTICAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BOARD OF DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ISSUE PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELLING RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE SECURITIES MARKET OF INDIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF THE EQUITY SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. FEDERAL INCOME TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY OF SIGNIFICANT DIFFERENCES AMONG INDIAN GAAP AND
U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DECLARATION
i
ii
viii
ix
ix
x
x
1
2
11
14
16
18
35
38
39
40
41
68
70
87
97
134
140
154
156
164
165
168
171
174
177
185
190
191
192
193
F-1
NOTICE TO INVESTORS
The Bank has furnished and accepts full responsibility for all of the information contained in this Placement
Document and confirms that to its best knowledge and belief, having made all reasonable enquiries, this
Placement Document contains all information with respect to the Bank and the Equity Shares which is material
in the context of the Issue. The statements contained in this Placement Document relating to the Bank and the
Equity Shares are, in every material respect, true and accurate and not misleading. The opinions and intentions
expressed in this Placement Document with regard to the Bank and the Equity Shares are honestly held, have
been reached after considering all relevant circumstances, are based on information presently available to the
Bank and based on reasonable assumptions. There are no other facts in relation to the Bank and the Equity
Shares, the omission of which would, in the context of the Issue, make any statement in this Placement
Document misleading in any material respect. Further, all reasonable enquiries have been made by the Bank to
ascertain such facts and to verify the accuracy of all such information and statements.
The Book Running Lead Managers have not separately verified the information contained in this Placement
Document (financial, legal or otherwise). Accordingly, neither the Book Running Lead Managers nor any of their
respective shareholders (except the Bank (to the extent stated above) as a shareholder of Axis Capital Limited
which is one of the Book Running Lead Managers to the Issue), employees, counsel, officers, directors,
representatives, agents or affiliates make any express or implied representation, warranty or undertaking, and no
responsibility or liability is accepted by any of the Book Running Lead Managers as to the accuracy or
completeness of the information contained in this Placement Document or any other information supplied in
connection with the Equity Shares. Each person receiving this Placement Document acknowledges that such
person has not relied on any of the Book Running Lead Managers or on any of their respective shareholders,
employees, counsel, officers, directors, representatives, agents or affiliates in connection with its investigation of
the accuracy of such information or its investment decision, and each such person must rely on its own
examination of the Bank and the merits and risks involved in investing in the Equity Shares pursuant to the Issue.
No person is authorized to give any information or to make any representation not contained in this
Placement Document and any information or representation not so contained must not be relied upon as having
been authorized by or on behalf of the Bank or by or on behalf of the Book Running Lead Managers. The
delivery of this Placement Document at any time does not imply that the information contained in it is correct as
of any time subsequent to its date.
The Equity Shares issued pursuant to the Issue have not been approved, disapproved or
recommended by the U.S. Securities and Exchange Commission, any other federal or state authorities in
the U.S. or the securities authorities of any non-U.S. jurisdiction or any other U.S. or non-U.S. regulatory
authority. No authority has passed on or endorsed the merits of the Issue or the accuracy or adequacy of
this Placement Document. Any representation to the contrary is a criminal offense in the U.S. and may be
a criminal offense in other jurisdictions.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as
amended (the “Securities Act”), and may not be offered or sold within the United States except pursuant to
an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws.
Within the United States, this Placement Document is being provided only to persons who are “qualified
institutional buyers” as defined in Rule 144A. Distribution of this Placement Document to any person other than
the offeree specified by the Book Running Lead Managers or their representatives, and those persons, if any,
retained to advise such offeree with respect thereto, is unauthorized and any disclosure of its contents, without
the prior written consent of the Bank, is prohibited. Any reproduction or distribution of this Placement Document
in the United States, in whole or in part, and any disclosure of its contents to any other person is prohibited.
The distribution of this Placement Document and the issue of the Equity Shares may be restricted in certain
jurisdictions by law. As such, this Placement Document does not constitute, and may not be used for or in
connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not
authorized or to any person to whom it is unlawful to make such offer or solicitation. In particular, no action has
been taken by the Bank and the Book Running Lead Managers which would permit an offering of the Equity
Shares or distribution of this Placement Document in any jurisdiction, other than India, where action for that
purpose is required. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither
this Placement Document nor any offering material in connection with the Equity Shares may be distributed or
published in or from any country or jurisdiction, except under circumstances that will result in compliance with
any applicable rules and regulations of any such country or jurisdiction.
ii
In making an investment decision, investors must rely on their own examination of the Bank and the terms
of the Issue, including the merits and risks involved. Investors should not construe the contents of this Placement
Document as legal, tax, accounting or investment advice. Investors should consult their own counsel and advisors
as to business, legal, tax, accounting and related matters concerning the Issue. In addition, neither the Bank nor
the Book Running Lead Managers are making any representation to any offeree or purchaser of the Equity Shares
regarding the legality of an investment in the Equity Shares by such offeree or purchaser under applicable legal,
investment or similar laws or regulations.
Each purchaser of the Equity Shares in the Issue is deemed to have acknowledged, represented and agreed
that it is eligible to invest in India and in the Bank under Indian law, including Chapter VIII of the SEBI
Regulations, and that it is not prohibited by SEBI or any other statutory authority from buying, selling or dealing
in securities including the Equity Shares.
This Placement Document contains summaries of certain terms of certain documents, which summaries are
qualified in their entirety by the terms and conditions of such document.
The information on the Bank’s website, www.axisbank.com, any website directly or indirectly linked to the
Bank’s website, or on the websites of the Book Running Lead Managers, does not constitute nor form part of this
Placement Document. Prospective investors should not rely on the information contained in, or available through
such websites.
All references herein to “you” or “your” is to the prospective investors in the Issue.
CERTAIN U.S. MATTERS
THE EQUITY SHARES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN
REGULATION S) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS. ACCORDINGLY, THE EQUITY SHARES ARE BEING OFFERED AND
SOLD (A) IN THE UNITED STATES ONLY TO PERSONS REASONABLY BELIEVED TO BE
QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
PURSUANT TO SECTION 4(a)(2) UNDER THE SECURITIES ACT, AND (B) OUTSIDE THE UNITED
STATES TO NON-U.S. PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S
UNDER THE SECURITIES ACT. FOR A DESCRIPTION OF CERTAIN RESTRICTIONS ON TRANSFER
OF THE EQUITY SHARES, SEE “TRANSFER RESTRICTIONS”.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH, OR APPROVED OR
DISAPPROVED BY, THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE “SEC”)
OR ANY STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER UNITED
STATES REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
PASSED ON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY
OF THIS PLACEMENT DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE IN THE UNITED STATES.
NOTICE TO HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE, NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE, CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE
THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT
MISLEADING. NEITHER ANY SUCH FACT, NOR THE FACT THAT AN EXEMPTION OR
EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION, MEANS THAT THE
SECRETARY OF STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS
OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER, OR
CLIENT, ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
iii
NOTICE TO INVESTORS IN CERTAIN OTHER COUNTRIES
For information to investors in certain other countries, see “Selling Restrictions” and “Transfer
Restrictions”.
REPRESENTATIONS BY INVESTORS
By subscribing to any Equity Shares in the Issue, you are deemed to have represented, warranted,
acknowledged and agreed to the Bank and the Book Running Lead Managers, as follows:
• You are a “QIB” as defined in Regulation 2(1)(zd) of the SEBI Regulations and not excluded pursuant to
Regulation 86 of the SEBI Regulations, having a valid and existing registration under applicable laws and
regulations of India, and undertake to acquire, hold, manage or dispose of any Equity Shares that are
Allocated (as defined hereinafter) to you in accordance with Chapter VIII of the SEBI Regulations;
• If you are Allotted (as defined hereinafter) Equity Shares, you shall not, for a period of one year from the
date of Allotment (as defined hereinafter), sell the Equity Shares so acquired except on the floor of the
Stock Exchanges (additional restrictions apply if you are within the United States, see “Transfer
Restrictions”);
• You have made, or been deemed to have made, as applicable, the representations and warranties as set
forth under the sections titled “Selling Restrictions” and “Transfer Restrictions”;
• You are aware that the Equity Shares have not been and will not be registered under the Companies Act,
the SEBI Regulations or under any other law in force in India. The Placement Document has not been
reviewed or affirmed by SEBI, RBI, the Stock Exchanges or any other regulatory or listing authority, and
will not be filed with the RoC, and is intended only for use by QIBs. This Placement Document has been
filed with the Stock Exchanges and will be displayed on the websites of the Bank and the Stock
Exchanges;
• You are entitled to subscribe for and acquire the Equity Shares under the laws of all relevant jurisdictions
that apply to you and that you have fully observed such laws and you have necessary capacity, have
obtained all necessary consents, governmental or otherwise, and authorizations and complied with all
necessary formalities, to enable you to commit to participation in the Issue and to perform your
obligations in relation thereto (including, without limitation, in the case of any person on whose behalf
you are acting, all necessary consents and authorizations to agree to the terms set out or referred to in this
Placement Document), and will honor such obligations;
• Neither the Bank nor any of the Book Running Lead Managers or any of their respective shareholders,
directors, officers, employees, counsel, representatives, agents or affiliates are making any
recommendations to you or advising you regarding the suitability of any transactions it may enter into in
connection with the Issue and your participation in the Issue is on the basis that you are not, and will not,
up to the Allotment, be a client of any of the Book Running Lead Managers. Neither the Book Running
Lead Managers nor any of their respective shareholders, directors, officers, employees, counsel,
representatives, agents or affiliates have any duties or responsibilities to you for providing the protection
afforded to their clients or customers or for providing advice in relation to the Issue and are not in any
way acting in any fiduciary capacity;
• All statements other than statements of historical fact included in this Placement Document, including
those regarding the Bank’s financial position, business strategy, plans and objectives of management for
future operations (including development plans and objectives relating to the Bank’s business), are
forward-looking statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause actual results to be materially different from
future results, performance or achievements expressed or implied by such forward-looking statements.
Such forward-looking statements are based on numerous assumptions regarding the Bank’s present and
future business strategies and environment in which the Bank will operate in the future. You should not
place undue reliance on forward-looking statements, which speak only as of the date of this Placement
Document. The Bank assumes no responsibility to update any forward-looking statements contained in
this Placement Document;
• You are aware of and understand that the Equity Shares are being offered only to QIBs and are not being
offered to the general public and the Allotment shall be on a discretionary basis;
iv
• You are aware that if you are Allotted more than 5% of the Equity Shares in the Issue, the Bank shall be
required to disclose your name and the number of the Equity Shares Allotted to you to the Stock
Exchanges and the Stock Exchanges will make the same available on their website and you consent to
such disclosures;
• You have been provided a serially numbered copy of this Placement Document, and you have read it in
its entirety, including in particular, the section titled “Risk Factors”;
• In making your investment decision, you have (i) relied on your own examination of the Bank and the
terms of the Issue, including the merits and risks involved, (ii) made your own assessment of the Bank,
the Equity Shares and the terms of the Issue based solely on the information contained in the Placement
Document and no other disclosure or representation by the Bank or any other party, (iii) consulted your
own independent counsel and advisors or otherwise have satisfied yourself concerning, without
limitation, the effects of local laws, (iv) received all information that you believe is necessary or
appropriate in order to make an investment decision in respect of the Bank and the Equity Shares, and
(v) relied upon your own investigation and resources in deciding to invest in the Issue;
• Neither the Book Running Lead Managers nor any of their respective shareholders, directors, officers,
employees, counsel, representatives, agents or affiliates, have provided you with any tax advice or
otherwise made any representations regarding the tax consequences of purchase, ownership and disposal
of the Equity Shares (including the Issue and the use of proceeds from the Equity Shares). You will obtain
your own independent tax advice from a reputable service provider and will not rely on any of the Book
Running Lead Managers or any of their respective shareholders, directors, officers, employees, counsel,
representatives, agents or affiliates, when evaluating the tax consequences in relation to the Equity Shares
(including, in relation to the Issue and the use of proceeds from the Equity Shares). You waive, and agree
not to assert any claim against the Bank or any of the Book Running Lead Managers or any of their
respective shareholders, directors, officers, employees, counsel, representatives, agents or affiliates, with
respect to the tax aspects of the Equity Shares or as a result of any tax audits by tax authorities, wherever
situated;
• You are a sophisticated investor and have such knowledge and experience in financial, business and
investments as to be capable of evaluating the merits and risks of the investment in the Equity
Shares. You are experienced in investing in private placement transactions of securities of companies in a
similar nature of business, similar stage of development and in similar jurisdictions. You and any
accounts for which you are subscribing to the Equity Shares (i) are each able to bear the economic risk of
the investment in the Equity Shares, (ii) will not look to the Bank and/or any of the Book Running Lead
Managers or any of their respective shareholders, directors, officers, employees, counsel, representatives,
agents or affiliates for all or part of any such loss or losses that may be suffered in connection with the
Issue, including losses arising out of non-performance by the Bank of any of its respective obligations or
any breach of any representations and warranties by the Bank, whether to you or otherwise, (iii) are able
to sustain a complete loss on the investment in the Equity Shares, (iv) have no need for liquidity with
respect to the investment in the Equity Shares, and (v) have no reason to anticipate any change in your or
their circumstances, financial or otherwise, which may cause or require any sale or distribution by you or
them of all or any part of the Equity Shares. You acknowledge that an investment in the Equity Shares
involves a high degree of risk and that the Equity Shares are, therefore, a speculative investment. You are
seeking to subscribe to the Equity Shares in the Issue for your own investment and not with a view to
resale or distribution;
• You confirm that either (i) you have not participated in or attended any investor meetings or presentations
by the Bank or its agents with regard to the Bank or the Issue (“Bank Presentations”); or (ii) if you have
participated in or attended any Bank Presentations, (a) you understand and acknowledge that the Book
Running Lead Managers may not have the knowledge of the statements that the Bank or its agents may
have made at such Bank Presentations and are therefore unable to determine whether the information
provided to you at such Bank Presentation may have included any material misstatements or omissions,
and, accordingly you acknowledge that the Book Running Lead Managers have advised you not to rely in
any way on any such information that was provided to you at such Bank Presentations, and (b) confirm
that, to the best of your knowledge, you have not been provided any material information that was not
publicly available;
• If you are acquiring the Equity Shares pursuant to the Issue, for one or more managed accounts, you
represent and warrant that you are authorized in writing, by each such managed account to acquire the
Equity Shares for each managed account and make the representations, warranties, acknowledgements
v
and agreements herein for and on behalf of each such account, reading the reference to ‘you’ to include
such accounts;
• You are not a Promoter (as defined under the SEBI Regulations) of the Bank and are not a person related
to the Promoters, either directly or indirectly and your Bid (as defined hereinafter) does not directly or
indirectly represent the Promoter or promoter group (as defined under the SEBI Regulations) of the Bank;
• You have no rights under a shareholders’ agreement or voting agreement with the Promoter(s) or persons
related to the Promoter(s), no veto rights or right to appoint any nominee director on the board of
directors of the Bank (the “Board”), other than the rights, if any, acquired in the capacity of a lender not
holding any Equity Shares, which shall not be deemed to be a person related to the Promoter;
• You have no right to withdraw your Bid after the Bid/Issue Closing Date (as defined hereinafter);
• You are eligible to apply and hold the Equity Shares Allotted to you together with any Equity Shares held
by you prior to the Issue. Further, you confirm that your aggregate holding after the Allotment of the
Equity Shares shall not exceed the level permissible as per any applicable regulation;
• The Bid submitted by you would not result in triggering a tender offer under the Securities and Exchange
Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the “Takeover
Code”);
• To the best of your knowledge and belief, your aggregate holding, together with other QIBs in the Issue
that belong to the same group or are under common control as you, pursuant to the Allotment under the
Issue shall not exceed 50% of the Issue. For the purposes of this representation:
a. The expression ‘belong to the same group’ shall derive meaning from the concept of ‘companies
under the same group’ as provided in sub-section (11) of Section 372 of the Companies Act; and
b. ‘Control’ shall have the same meaning as is assigned to it by Regulation 2(1)(e) of the Takeover
Code;
• You shall not undertake any trade in the Equity Shares credited to your beneficiary account until such
time that the final listing and trading approvals for the Equity Shares are issued by the Stock Exchanges
as applicable;
• You acknowledge, represent and agree that your total interest in the paid-up share capital of the Bank,
whether direct or indirect, beneficial or otherwise (any such interest, your “Holding”), when aggregated
together with any existing Holding and/or Holding of any of your “relatives” or “associated enterprises”
(as defined under Section 92A of the Indian Income Tax Act, 1961), does not exceed 5% of the total
paid-up share capital of the Bank, unless you are an existing shareholder who already holds 5% or more
of the underlying paid up share capital of the Bank pursuant to the acknowledgment of the RBI, provided
that your Holding does not, without the further acknowledgment of the RBI, exceed your existing
Holding after Allotment;
• You are aware that after the completion of the allotment process, the Bank shall apply for a post facto
approval from the RBI in respect of this Issue and that in the event that RBI does not grant the post facto
approval in respect of Allotment of Equity Shares to you, you shall be required to comply with the
instructions received from the RBI in this regard;
• You are aware that (i) applications for in-principle approval, in terms of clause 24(a) of the Equity Listing
Agreements, for listing and admission of the Equity Shares and for trading on the Stock Exchanges, were
made and approval has been received from each of the Stock Exchanges, and (ii) the application for the
final listing and trading approval will be made only after Allotment. There can be no assurance that the
final approvals for listing of the Equity Shares will be obtained in time or at all. The Bank shall not be
responsible for any delay or non-receipt of such final approvals or any loss arising from such delay or
non-receipt;
• You are aware and understand that the Book Running Lead Managers have entered into a placement
agreement with the Bank, whereby the Book Running Lead Managers have, subject to the satisfaction of
certain conditions set out therein, agreed to manage the Issue and use their best efforts to procure
subscription for the Equity Shares on the terms and conditions set forth therein;
• You understand that the contents of this Placement Document are exclusively the responsibility of the
Bank and that neither the Book Running Lead Managers nor any person acting on their behalf has or shall
have any liability for any information, representation or statement contained in this Placement Document
or any information previously published by or on behalf of the Bank and will not be liable for your
vi
decision to participate in the Issue based on any information, representation or statement contained in this
Placement Document or otherwise. By participating in the Issue, you agree to the same and confirm that
the only information you are entitled to rely on, and on which you have relied in committing yourself to
acquire the Equity Shares is contained in this Placement Document, such information being all that you
deem necessary to make an investment decision in respect of the Equity Shares, you have neither received
nor relied on any other information, representation, warranty or statement made by, or on behalf of, the
Book Running Lead Managers or the Bank or any of their respective affiliates or any other person and
neither the Book Running Lead Managers nor the Bank nor any other person will be liable for your
decision to participate in the Issue based on any other information, representation, warranty or statement
that you may have obtained or received;
• You understand that none of the Book Running Lead Managers has any obligation to purchase or acquire
all or any part of the Equity Shares purchased by you in the Issue;
• You are eligible to invest in India under applicable law, including the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended, and
any notifications, circulars or clarifications issued thereunder, and have not been prohibited by SEBI or
any other regulatory authority, from buying, selling or dealing in securities;
• You understand that the Equity Shares have not been and will not be registered under the Securities Act
or with any securities regulatory authority of any state of the United States and accordingly, may not be
offered or sold within the United States, except in reliance on an exemption from the registration
requirements of the Securities Act;
• If you are within the United States, you are a “qualified institutional buyer” as defined in Rule 144A
under the Securities Act, are acquiring the Equity Shares for your own account or for the account of an
institutional investor who also meets the requirements of a “qualified institutional buyer”, for investment
purposes only, and not with a view to, or for resale in connection with, the distribution (within the
meaning of any United States securities laws) thereof, in whole or in part;
• You agree that any dispute arising in connection with the Issue will be governed by and construed in
accordance with the laws of Republic of India, and the courts in Mumbai, India shall have exclusive
jurisdiction to settle any disputes which may arise out of or in connection with this Placement Document;
• You agree to indemnify and hold the Bank and the Book Running Lead Managers harmless from any and
all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in
connection with any breach of the foregoing representations, warranties, acknowledgements and
undertakings made by you in this Placement Document. You agree that the indemnity set forth in this
paragraph shall survive the resale of the Equity Shares by, or on behalf of, the managed accounts;
• The Bank, the Book Running Lead Managers, their respective affiliates and others will rely on the truth
and accuracy of the foregoing representations, warranties, acknowledgements and undertakings, which
are given to the Book Running Lead Managers on their own behalf and on behalf of the Bank, and are
irrevocable; and
• Each of the representations, warranties, acknowledgements and agreements set out above shall continue
to be true and accurate at all times up to and including the Allotment, listing and trading of the Equity
Shares in the Issue.
OFFSHORE DERIVATIVE INSTRUMENTS
Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms
of Regulation 15A(1) of the Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995, as amended, (“FII Regulations”) an FII, including affiliates of the Book Running Lead
Managers, may issue or otherwise deal in offshore derivative instruments such as participatory notes, equitylinked notes or any other similar instruments against underlying securities, listed or proposed to be listed on any
stock exchange in India, such as the Equity Shares in the Issue (all such offshore derivative instruments are
referred to herein as “P-Notes”), for which they may receive compensation from the purchasers of such
instruments. P-Notes may be issued only in favor of those entities which are regulated by any appropriate foreign
regulatory authorities subject to compliance of ‘know your client’ requirements. An FII shall also ensure that no
further issue or transfer of any instrument referred to above is made to any person other than such entities
regulated by appropriate foreign regulatory authorities. P-Notes have not been and are not being offered or sold
vii
pursuant to this Placement Document. This Placement Document does not contain any information concerning PNotes or the issuer(s) of any P-notes, including any information regarding any risk factors relating thereto. No
sub-account of an FII is permitted directly or indirectly to issue P-Notes.
Any P-Notes that may be issued are not securities of the Bank and do not constitute any obligation of,
claims on or interests in the Bank. The Bank has not participated in any offer of any P-Notes, or in the
establishment of the terms of any P-Notes, or in the preparation of any disclosure related to any P-Notes. Any
P-Notes that may be offered are issued by, and are the sole obligations of, third parties that are unrelated to the
Bank. The Bank and the Book Running Lead Managers do not make any recommendation as to any investment
in P-Notes and do not accept any responsibility whatsoever in connection with any P-Notes. Any P-Notes that
may be issued are not securities of the Book Running Lead Managers and do not constitute any obligations of or
claims on the Book Running Lead Managers. Affiliates of the Book Running Lead Managers that are registered
as FIIs may purchase, to the extent permissible under law, the Equity Shares in the Issue, and may issue P-Notes
in respect thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosures as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the
issuer(s) of such P-Notes. Neither SEBI nor any other regulatory authority has reviewed or approved any
P-Notes or any disclosure related thereto. Prospective investors are urged to consult their own financial,
legal, accounting and tax advisors regarding any contemplated investment in P-Notes, including whether
P-Notes are issued in compliance with applicable laws and regulations.
DISCLAIMER CLAUSE OF THE STOCK EXCHANGES
As required, a copy of this Placement Document has been submitted to each of the Stock Exchanges. The
Stock Exchanges do not in any manner:
(1) Warrant, certify or endorse the correctness or completeness of the contents of the Placement
Document;
(2) Warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges;
or
(3) Take any responsibility for the financial or other soundness of the Bank, its Promoters, its
management or any scheme or project of the Bank,
and it should not for any reason be deemed or construed to mean that the Placement Document has been cleared
or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquire any Equity
Shares may do so pursuant to an independent inquiry, investigation and analysis and shall not have any claim
against the Stock Exchanges whatsoever, by reason of any loss which may be suffered by such person
consequent to or in connection with, such subscription/acquisition, whether by reason of anything stated or
omitted to be stated herein, or for any other reason whatsoever.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
In this Placement Document, unless otherwise specified or the context otherwise indicates or implies,
references to ‘you’, ‘your’, ‘offeree’, ‘purchaser’, ‘subscriber’, ‘recipient’, ‘investors’, ‘prospective investors’
and ‘potential investor’ are to the prospective investors in the Issue, references to the ‘Bank’, ‘our Bank’, ‘we’,
‘us’, ‘our’ or the ‘Issuer’ are to Axis Bank Limited on a non-consolidated basis. All references to the “Group” are
to Axis Bank Limited and its subsidiaries.
In this Placement Document, references to ‘U.S. $’ and ‘U.S. dollars’ are to the legal currency of the United
States of America, and references to ‘INR’, ‘Rs.’, ‘Indian Rupees’ and ‘Rupees’ are to the legal currency of
India. All references herein to the ‘U.S.’ or the ‘United States’ are to the United States of America and its
territories and possessions. References to the singular also refers to the plural and one gender also refers to any
other gender, wherever applicable. The Bank has presented certain numerical information in the Placement
Document in “million” units. One million represents 1,000,000 and one billion represents 1,000,000,000. All
references herein to “India” are to the Republic of India and its territories and possessions and the ‘Government’
or the ‘Central Government’ or the ‘State Government’ are to the Government of India, central or state, as
applicable.
The Bank publishes its financial statements in Rupees. The consolidated and non-consolidated financial
statements of the Bank as of and for the years ended March 31, 2010, 2011 and 2012 (as audited) and the nonconsolidated interim financial results of the Bank as at and for the half year ended September 30, 2012 and for
viii
the nine months ended December 31, 2012 (as reviewed) included in this Placement Document (collectively, the
“Financial Statements”), have been prepared in accordance with accounting principles generally accepted in
India, or Indian GAAP as applicable to banks. The Financial Statements have been presented in Indian Rupees.
Indian GAAP differs in certain significant respects from generally accepted accounting principles in the United
States (“U.S. GAAP”) and other accounting principles and auditing standards with which prospective investors
may be familiar with in other countries. We have not attempted to quantify the impact of U.S. GAAP on the
financial data included in this Placement Document, nor do we provide a reconciliation of our financial
statements to those of U.S. GAAP. However, a narrative summary of the principal differences between Indian
GAAP and U.S. GAAP relevant to the Bank is provided in this Placement Document. For a description of the
principal differences between Indian GAAP and U.S. GAAP see “Summary of Significant Differences among
Indian GAAP and U.S. GAAP”. Accordingly, the degree to which the financial statements prepared in
accordance with Indian GAAP included in this Placement Document will provide meaningful information is
entirely dependent on the reader’s level of familiarity with the respective accounting practices. Any reliance by
persons not familiar with Indian accounting practices on the financial disclosures presented in this Placement
Document should accordingly be limited. See “Risk Factors — Indian accounting principles differ from
those which prospective investors may be familiar with in other countries”.
In this Placement Document, certain monetary thresholds have been subjected to rounding adjustments;
accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which
precede them.
The fiscal year of the Bank commences on April 1 of each calendar year and ends on March 31 of the
succeeding calendar year, so, unless otherwise specified or if the context requires otherwise, all references to a
particular ‘fiscal year’ or ‘fiscal’ or ‘FY’ are to the twelve month period ended on March 31 of that year. Unless
otherwise stated, all financial data contained herein relating to the Bank is stated on a non consolidated basis.
INDUSTRY AND MARKET DATA
Information regarding market position, growth rates, other industry data and certain industry forecasts
pertaining to the businesses of the Bank contained in this Placement Document consists of estimates based on
data reports compiled by government bodies, data from other external sources and knowledge of the markets in
which the Bank competes. Unless stated otherwise, the statistical information included in this Placement
Document relating to the industry in which the Bank operates has been reproduced from various trade, industry
and government publications and websites.
This data is subject to change and cannot be verified with certainty due to limits on the availability and
reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. Neither the
Bank nor any of the Book Running Lead Managers have independently verified this data and do not make any
representation regarding accuracy or completeness of such data. The Bank takes responsibility for accurately
reproducing such information but accept no further responsibility in respect of such information and data. In
many cases, there is no readily available external information (whether from trade or industry associations,
government bodies or other organizations) to validate market-related analysis and estimates, so the Bank has
relied on internally developed estimates. Similarly, while the Bank believes its internal estimates to be
reasonable, such estimates have not been verified by any independent sources and neither the Bank nor any of the
Book Running Lead Managers can assure potential investors as to their accuracy.
AVAILABLE INFORMATION
For so long as any Equity Shares are “restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, and the Bank is neither subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of
1934, as amended, nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the Bank will furnish to
any holder or beneficial owner of such restricted securities or to any prospective purchaser of such restricted
securities designated by such holder or beneficial owner, upon the request of such holder, beneficial owner or
prospective purchaser, the information required to be provided by Rule 144A(d)(4) under the Securities Act.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Placement Document that are not statements of historical fact constitute
‘forward-looking statements’. Investors can generally identify forward-looking statements by terminology such
as ‘aim’, ‘anticipate’, ‘believe’, ‘continue’, ‘can’, ‘could’, ‘estimate’, ‘expect’, ‘intend’, ‘may’, ‘objective’,
ix
‘plan’, ‘potential’, ‘project’, ‘pursue’, ‘shall’, ‘should’, ‘will’, ‘would’, or other words or phrases of similar
import. Similarly, statements that describe the strategies, objectives, plans or goals of the Bank are also forwardlooking statements. However, these are not the exclusive means of identifying forward-looking statements.
All statements regarding the Bank’s expected financial conditions, results of operations, business plans and
prospects are forward-looking statements. These forward-looking statements include statements as to the Bank’s
business strategy, planned projects, revenue and profitability (including, without limitation, any financial or
operating projections or forecasts), new business and other matters discussed in this Placement Document that
are not historical facts.
Actual results may differ materially from those suggested by the forward-looking statements due to certain
known or unknown risks or uncertainties associated with management’s expectations with respect to, but not
limited to, the actual growth in demand for banking and other financial products and services, the management’s
ability to successfully implement its strategy, future levels of impaired loans, the Bank’s growth and expansion,
the adequacy of the Bank’s allowance for credit and investment losses, technological changes, investment
income, the Bank’s ability to market new products, cash flow projections, the outcome of any legal or regulatory
proceedings the Bank is or may become a party to, the future impact of new accounting standards, management’s
ability to implement its dividend policy, the impact of Indian banking regulations on it, the Bank’s ability to roll
over its short-term funding sources, the Bank’s exposure to market risks and the market acceptance of and
demand for internet banking services. By their nature, certain of the market risk disclosures are only estimates
and could be materially different from what actually occurs in the future. As a result, actual future gains, losses
or impact on net interest income and net income could materially differ from those that have been estimated.
Factors that could cause actual results, performance or achievements of the Bank to differ materially
include, but are not limited to, those discussed under the sections titled “Risk Factors”, “Industry Overview”,
“Business” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations”.
The forward-looking statements contained in this Placement Document are based on the beliefs of
management, as well as the assumptions made by, and information currently available to, management of the
Bank. Although the Bank believes that the expectations reflected in such forward-looking statements are
reasonable at this time, it cannot assure investors that such expectations will prove to be correct. Given these
uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. In any
event, these statements speak only as of the date of this Placement Document or the respective dates indicated in
this Placement Document, and the Bank undertakes no obligation to update or revise any of them, whether as a
result of new information, future events or otherwise. If any of these risks and uncertainties materialize, or if any
of the Bank’s underlying assumptions prove to be incorrect, the actual results of operations or financial condition
of the Bank could differ materially from that described herein as anticipated, believed, estimated or expected. All
subsequent forward-looking statements attributable to the Bank are expressly qualified in their entirety by
reference to these cautionary statements.
ENFORCEMENT OF CIVIL LIABILITIES
The Bank is a limited liability company incorporated under the laws of India. Substantially all directors and
executive officers of the Bank and some of the experts named herein are residents of India and a substantial
portion of the assets of such persons are located in India. As a result, it may be difficult for investors to effect
service of process upon the Bank or such persons outside India or to enforce judgments obtained against such
parties in courts outside of India.
Recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the
Indian Code of Civil Procedure, 1908 (the “Code”) on a statutory basis. Section 13 of the Code provides that a
foreign judgment shall be conclusive regarding any matter directly adjudicated upon except: (i) where the
judgment has not been pronounced by a court of competent jurisdiction, (ii) where the judgment has not been
given on the merits of the case, (iii) where it appears on the face of the proceedings that the judgment is founded
on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is
applicable, (iv) where the proceedings in which the judgment was obtained were opposed to natural justice,
(v) where the judgment has been obtained by fraud, and (vi) where the judgment sustains a claim founded on a
breach of any law in force in India.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign
judgments. However, Section 44A of the Code provides that where a foreign judgment has been rendered by a
superior court within the meaning of that section in any country or territory outside India which the Government
x
has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in
execution as if the judgment had been rendered by the relevant court in India. However, Section 44A of the Code
is applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other
charges of a like nature or in respect of a fine or other penalty and does not include arbitration awards.
The United Kingdom has been declared by the Government to be a reciprocating territory but the United
States has not been so declared. A judgment of a court in a jurisdiction which is not a reciprocating territory may
be enforced only by a fresh suit upon the judgment and not by proceedings in execution. The suit must be
brought in India within three years from the date of the judgment in the same manner as any other suit filed to
enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a
foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce
foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian practice
or public policy. A party seeking to enforce a foreign judgment in India is required to obtain approval from RBI
to repatriate outside India any amount recovered pursuant to the execution of such judgment and any such
amount may be subject to income tax in accordance with applicable laws.
xi
EXCHANGE RATE INFORMATION AND REGULATIONS
The Indian rupee appreciated in fiscal 2005 and 2006 but marginally declined in fiscal 2007. In fiscal 2008,
Indian rupee appreciated compared to fiscal 2007 and in fiscal 2009, it depreciated over fiscal 2008. In fiscal
2010 and fiscal 2011, Indian rupee appreciated followed by a decline in fiscal 2012. The Indian rupee’s recent
depreciation has been attributed to the current account deficit and weak capital inflows, along with the
strengthening of the U.S. dollar against major currencies.
The following table sets forth, for the periods indicated, information concerning the exchange rates between
Indian rupees and U.S. dollars based on the noon buying rate in New York City for cable transfers of Indian
rupees as certified for customs purposes by the Federal Reserve Bank of New York:
Fiscal Year
2005
2006
2007
2008
2009
2010
2011
2012
......................................................
......................................................
......................................................
......................................................
......................................................
......................................................
......................................................
......................................................
Period End
Average(1)(2)
High
Low
43.62
44.48
43.10
40.02
50.87
44.95
44.54
50.89
44.86
44.17
45.12
40.13
45.84
47.39
45.49
47.81
46.45
46.26
46.83
43.05
51.96
50.48
47.49
53.71
43.27
43.05
42.78
38.48
39.73
44.94
43.90
44.00
The following table sets forth the high and low exchange rate for the Indian rupee for each of the previous
nine months.
Month
April 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period End
Average(1)(2)
High
Low
52.65
56.38
55.57
55.55
55.52
52.92
53.80
54.26
54.86
51.69
54.33
55.94
55.42
55.49
54.35
53.10
54.78
54.65
52.65
56.38
57.13
56.22
55.84
55.88
54.10
55.70
55.06
50.64
52.50
54.91
54.31
55.06
52.92
51.74
53.75
54.23
(1) The noon buying rate at each period end and the average rate for each period may have differed from the exchange rates
used in the preparation of the Bank’s Financial Statements.
(2) Represents the average of the noon buying rate for all days during the period.
Although the Bank has translated selected Indian rupee amounts in this Placement Document into
U.S. dollars for convenience, this does not mean that the Indian rupee amounts referred to could have been, or
could be, converted to U.S. dollars at any particular rate, the rates stated above, or at all. There are certain
restrictions on the conversion of Indian rupees into U.S. dollars. The exchange rate on January 18, 2013 was
Rs.53.82 per U.S.$1.00.
1
DEFINITIONS AND ABBREVIATIONS
This Placement Document uses the definitions and abbreviations set forth below which you should consider
when reading the information contained herein. References to any legislation, act or regulation shall be to such
term as amended from time to time.
Bank related terms
Term
Description
ALCO
The Asset Liability Management Committee of the Bank
Articles of Association or
Articles
The articles of association of the Bank, as amended from time to time
Audit Committee
The audit committee of the Board of Directors
Auditors
Deloitte Haskins and Sells, Chartered Accountants, statutory auditors of the
Bank since fiscal 2011. S. R. Batliboi & Co., Chartered Accountants, were
the statutory auditors of the Bank for fiscal 2010
Axis AMC
Axis Asset Management Company Limited
Axis PE
Axis Private Equity Limited
Axis TS
Axis Trustee Services Limited
the “Bank”, the “Issuer” “our
Bank”, “we”, “us” or “our”
Axis Bank Limited, having its registered office at “TRISHUL”, 3rd Floor,
Opposite Samartheshwar Temple, Near Law Garden, Ellisbridge,
Ahmedabad 380 006, India
Board or Board of Directors
The board of directors of the Bank including any duly constituted
committees thereof
CBO
Corporate banking operations
CCPH
Centralized Collection and Payment Hub
CCOH
Centralized Credit Operations Hub
CPU
Central Processing Unit
Directors
The directors of the Bank
Equity Shares
The equity shares of a face value of Rs.10 each of the Bank
Financial Statements
The consolidated and non-consolidated financial statements of the Bank as at
and for the years ended March 31, 2012, March 31, 2011 and March 31,
2010 (as audited) and the non-consolidated interim financial results of the
Bank as at and for the half year ended September 30, 2012 and the
nine months ended December 31, 2012 (as reviewed) prepared in accordance
with Indian GAAP as applicable to banks
GIC
General Insurance Corporation of India
LIC
Life Insurance Corporation of India
MD & CEO
Managing Director and Chief Executive Officer
ME
Merchant Establishments
Memorandum of Association or
Memorandum
The memorandum of association of the Bank, as amended from time to time
MIS
The Bank’s customized management information system
ORM
Operational risk management
ORMC
Operational risk management committee of the Bank
PMC
Product Management Committee
President
A senior manager of the Bank who has attained the grade of President within
the Bank
2
Term
Description
Promoters
The promoters of the Bank namely, SUUTI; LIC; GIC; The New India
Assurance Company Limited; National Insurance Company Limited; United
India Insurance Company Limited; and The Oriental Insurance Company
Limited
RBO
Retail Banking Operations
Registered Office
The registered office of the Bank, located at “TRISHUL”, 3rd Floor, Opposite
Samartheshwar Temple, Near Law Garden, Ellisbridge, Ahmedabad
380 006, India
Registrar of Companies
Registrar of Companies, Gujarat, Dadra and Nagar Haveli, located at
Ahmedabad
Retail deposits
Include savings bank deposits, deposits of NRIs and all term deposits in
value not exceeding Rs.50 million
Retail loans
Include home loans, personal loans, auto loans, consumer loans, education
loans as well as security-backed loans of various types
SBUs
Strategic business units
SUUTI
Specified Undertaking of the Unit Trust of India
Issue related terms
Term
Description
Allocation/Allocated
The allocation of the Equity Shares following the determination of the Issue
Price to QIBs on the basis of the Application Form submitted by them, by the
Bank in consultation with the Book Running Lead Managers and in
compliance with Chapter VIII of the SEBI Regulations
Allot/Allotment /Allotted
Unless the context otherwise requires, the issue and allotment of the Equity
Shares pursuant to the Issue
Allottees
QIBs to whom Equity Shares are issued and Allotted pursuant to the Issue
Application Form
The form (including any revisions thereof) pursuant to which a QIB shall
submit a Bid for the Equity Shares in the Issue
Bid(s)
Indication of interest of a QIB, including all revisions and modifications
thereto, as provided in the Application Form, to subscribe for the Equity
Shares in the Issue
Bid/Issue Closing Date
January 31, 2013 which is the last date up to which the Application Forms
shall be accepted
Bid/Issue Opening Date
January 28, 2013
Bid/Issue Period
The period between the Bid/Issue Opening Date and the Bid/Issue Closing
Date inclusive of both dates, during which the QIBs can submit their Bids
Book Running Lead Managers
Axis Capital Limited, Citigroup Global Markets India Private Limited and
J. P. Morgan India Private Limited
CAN/Confirmation of Allocation
Note
The note, advice or intimation to not more than 49 QIBs, confirming the
Allocation of Equity Shares to such QIBs after determination of the Issue
Price, requiring such QIBs to pay the entire applicable Issue Price for the
Equity Shares Allocated to such QIBs
Closing Date
The date on which Allotment of Equity Shares pursuant to the Issue shall be
made, i.e. on or about February 4, 2013
Designated Date
The date of credit of the Equity Shares to the QIB’s demat account, as
applicable to the respective QIBs
Escrow Bank
Axis Bank Limited, Fort branch
Escrow Agreement
Agreement dated January 28, 2013 amongst the Bank, the Book Running
Lead Managers and the Escrow Bank in relation to the Issue
3
Term
Description
Escrow Bank Account
The account entitled Axis Bank Limited — QIP Escrow Account with regard
to any money received towards the subscription of the Equity Shares, opened
with the Escrow Bank, subject to the terms of the Escrow Agreement
Floor Price
The floor price is Rs.1,398.56 for issue of the Equity Shares, which has been
calculated in accordance with Chapter VIII of the SEBI Regulations. The
committee of the Board approved discount of Rs.8.56 to the Floor Price of
Rs.1,398.56 in accordance with the approval of the shareholders accorded on
January 28, 2013 and Regulation 85(1) of the SEBI Regulations
Issue Price
Rs.1,390 per Equity Share
Issue Size
The issue of 34,000,000 Equity Shares aggregating to Rs.47,260 million
Mutual Fund
A mutual fund registered with SEBI under the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996
Mutual Fund Portion
10% of the Equity Shares proposed to be Allotted in the Issue, which is
available for Allocation to Mutual Funds
OCBs
Overseas corporate bodies
Pay-in Date
The last date specified in the CAN for payment of application monies by the
QIBs
Placement Agreement
Agreement dated January 28, 2013, among the Bank and the Book Running
Lead Managers
Placement Document
This placement document dated January 31, 2013 issued by the Bank in
accordance with Chapter VIII of the SEBI Regulations
Preliminary Placement
Document
The preliminary placement document dated January 28, 2013, issued by the
Bank in accordance with Chapter VIII of the SEBI Regulations
QIB/ Qualified Institutional
Buyer
A qualified institutional buyer, as defined under Regulation 2(1)(zd) of the
SEBI Regulations
QIP
Qualified institutions placement under Chapter VIII of the SEBI Regulations
Relevant Date
January 28, 2013 which is the date of the meeting of the Board deciding to
open the Issue
Conventional and general terms
Term
Description
ABLE
Association of Biotech Led Enterprises
AFS
“Available for sale”, the category of all securities other than those held for
trading and held to maturity
AGM
Annual General Meeting
Agriculture Loans
Loans to the agriculture sector or for agricultural purposes
AIF(s)
Alternative investment funds, as defined and registered with SEBI under the
Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012
ALM
Asset and liability management
AMFI
Association of Mutual Funds in India
AP
Andhra Pradesh
ARC
Asset reconstruction companies
4
Term
Description
AS
Accounting Standards
ASBA
Application supported by blocked amount
ATMs
Automated Teller Machines
B. A.
Bachelor of Arts
Banking Regulation Act
Banking Regulation Act, 1949
Basel-II
Revised framework on “International Convergence of Capital Measurement
and Capital Standards” by Bank for International Settlements
Basel-III
A global regulatory framework for more resilient banks and banking systems
(December 2010 (rev. June 2011)) published by the Bank for International
Settlements
RBI issued guidelines on the implementation of Basel-III capital regulations
in India on May 2, 2012
B. Sc.
Bachelor of Science
BCSBI
Banking Codes and Standards Board of India
BPLR
The benchmark prime lending rate, based on cost of funds, cost of business
operations, provisions and yield curve expectations
BSE
BSE Limited
B. Tech
Bachelor of Technology
CAGR
Compounded Annual Growth Rate
CAIIB
Certified Associate of the Indian Institute of Bankers
Calendar Year
Year ending on December 31
CAR
Capital adequacy ratio
CBI
Central Bureau of Investigation
CBLO
Collateralized borrowing and lending obligations
CCI
Competition Commission of India
CD
Certificates of Deposit
CDR
Corporate debt restructuring
CDR system
A joint forum of banks and financial institutions in India established in 2001
as an institutional mechanism for corporate debt restructuring
CDSL
Central Depository Services (India) Limited
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CII
Confederation of Indian Industry
Circle
A circle is an administrative unit that controls a cluster of branches
Circle RBO
A circle incorporating the RBO structure to enable better oversight of branch
operations
CLN
Credit linked note
Code
Code of Civil Procedure, 1908
Companies Act
Companies Act, 1956
5
Term
Description
Competition Act
The Competition Act, 2002
CPs
Commercial Papers
CRAR
Capital to risk asset ratio
CRR
Cash reserve ratio
CVaR
Conditional value at risk
Delisting Regulations
Securities and Exchange Board of India (Delisting of Equity Shares)
Regulations, 2009
Depositories Act
Depositories Act, 1996
Depository
A depository registered with the SEBI under the Securities and Exchange
Board of India (Depositories and Participant) Regulations, 1996
Depository Participant
A depository participant as defined under the Depositories Act
DFSA
Dubai Financial Services Authority
DIFC
Dubai International Financial Centre
DSA
Direct selling agent
EBITDA
Earnings before interest, tax and depreciation and amortization
ECB
External Commercial Borrowings
ECS
Electronic Clearing Service
EDC
Electronic data capturing
EGM
Extraordinary General Meeting
EPS
Earnings Per Share
Equity Listing Agreements
The equity listing agreements entered by the Bank with each of the Stock
Exchanges
ESPL
Enam Securities Private Limited
ETL
Expected tail loss
FCNR (B)
Foreign Currency Non Resident (Bank)
FDI
Foreign Direct Investment
FDI Policy
Consolidated FDI Policy effective from April 10, 2012
FEDAI
Foreign Exchange Dealers’ Association of India
FEMA
Foreign Exchange Management Act, 1999, together with rules and
regulations thereunder
FII
Foreign Institutional Investor (as defined under the Securities and Exchange
Board of India (Foreign Institutional Investors) Regulations, 1995) registered
with SEBI
FIMMDA
Fixed Income Money Market and Derivatives Association of India
Financial Year or Fiscal
Period of twelve months ended March 31 of that particular year
FIPB
Foreign Investment Promotion Board of Ministry of Finance, Government of
India
FRA/IRS
Forward Rate Agreements/Interest Rate Swaps
6
Term
Description
FSA
The United Kingdom Financial Services Authority
FVCI
Foreign venture capital investors (as defined and registered with SEBI under
the Securities and Exchange Board of India (Foreign Venture Capital
Investors) Regulations, 2000)
GAAP
Generally Accepted Accounting Principles
GAAR
General Anti-Avoidance Rules
GCC
Gulf co-operation council
GDP
Gross Domestic Product
GDR
Global Depository Receipts
GoI/ Government
Government of India, unless otherwise specified
GST
Goods and Services Tax; a proposed reform to Indian tax laws relating to
indirect taxes on goods and services
HFCs
Housing finance companies
HFT
“Held for Trading”; the category of securities that are held principally for
resale within a short period
Home loans
Mortgage backed loans to individuals
HTM
“Held to Maturity”; the category of investments not exceeding 25% of a
bank’s total investments which it intends to hold to maturity
HR
Human Resources
ICAI
Institute of Chartered Accountants of India
IFR
Investment Fluctuation Reserve
IFRS
International Financial Reporting Standards
IIM
Indian Institute of Management
IIT
Indian Institute of Technology
IND-AS
Indian accounting standards converged with IFRS, which has been proposed
for implementation by the ICAI
Indian GAAP
Generally Accepted Accounting Principles in India
Interest bearing liabilities
Primarily include deposits, borrowings, subordinated debt and hybrid capital
Interest earning assets
Primarily include advances, investments, balances with banks in deposit
accounts, money at call and short notice
IPO
Initial Public Offering
IRB
Internal rating based
ISO
International Standards Organization
IT
Information Technology
IT Act
Income Tax Act, 1961
JAAIB
Junior Associate of Indian Institute of Banking
JV
Joint Venture
7
Term
Description
KYC
Know Your Customer guidelines
LAF
Liquidity Adjustment Facility
LC
Letter of credit
LER
Loan Equivalent Risk
LIBOR
London InterBank Offered Rate
MAT
Minimum Alternate Tax
MBA
Master in Business Administration
MoU
Memorandum of Understanding
MSE
Micro and small enterprises
MSME
Micro small and medium enterprises (as defined by the RBI)
MSME Loans
Loans to MSMEs engaged in the manufacturing and services sector
Mutual Fund or MF
A mutual fund registered with SEBI under the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996
NABARD
National Bank for Agriculture and Rural Development
Narasimham Committee-I
The Committee on the Financial System
Narasimham Committee-II
The Second Committee on the Financial System
NASSCOM
National Association of Software and Services Companies
NBFCs
Non-Banking Financial Companies registered with the RBI
NDTL
Net demand and time liabilities
NEFT
National electronic fund transfer
NGOs
Non-government organizations
Non-SLR
Non-statutory liquidity ratio
NPA
Non-performing assets
NRE
Non-Resident (External)
NRI
Non-resident Indian
NRO
Ordinary Non-Resident
NSDL
National Securities Depository Limited
NSE
National Stock Exchange of India Limited
PAN
Permanent account number allotted under the I.T. Act
PDAI
Primary Dealers Association of India
PFRDA
Pension Fund Regulatory and Development Authority
PGDBM
Post Graduate Diploma in Business Management
PGDM
Post Graduate Diploma in Management
PML Act
Prevention of Money Laundering Act, 2002
POS
Point of sale
PTC
Pass through certificate
PVBP
Price value of a basis point
RBI
Reserve Bank of India
RBI Act
The Reserve Bank of India Act, 1934
8
Term
Description
Regulation S
Regulation S under the Securities Act
Repo rate
The annual rate at which the RBI lends to other banks in India
Retail deposits
Include savings bank deposits, deposits of NRIs and all term deposits in
value not exceeding Rs.50 million
Retail loans
Include home loans, personal loans, auto loans, consumer loans, education
loans as well as security-backed loans of various types
Reverse repo rate
The rate at which the RBI borrows money from banks in India
RRBs
Regional rural banks
“Rs.”, “INR”, “Rupees”
Indian Rupees
RTGS
Real time gross settlement
RTGS system
Real time gross settlement system developed by the RBI
Rule 144 A
Rule 144 A under the Securities Act
SARFAESI Act
The Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002
SCBs
Scheduled commercial banks
SCR (SECC) Rules
Securities Contracts (Regulation) (Stock Exchanges
Corporations) Regulations, 2012, notified by the SEBI
SCRA
Securities Contracts (Regulation) Act, 1956
SCRR
Securities Contracts (Regulation) Rules, 1957
SEBI
Securities and Exchange Board of India established under the SEBI Act
SEBI Act
Securities and Exchange Board of India Act, 1992
SEBI FII Regulations
Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995
SEBI Insider Trading
Regulations
Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992
SEBI Regulations
Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009
SEC
United States Securities and Exchange Commission
Securities Act
The U.S. Securities Act of 1933
SENSEX
Index of 30 stocks traded on BSE representing a sample of large and liquid
listed companies
SIP
Systematic investment plan of mutual funds
SLR
Statutory Liquidity Ratio requirement imposed on the Bank by the RBI
SLR Securities
Securities held towards satisfying the SLR requirement of the RBI
SME
Small and Medium Enterprises
SMS
Short message service
Stock Exchanges
The NSE and the BSE
STT
Securities Transaction Tax
SWIFT
Society for Worldwide Interbank Financial Telecommunication
Takeover Code
Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeover) Regulations, 2011
9
and
Clearing
Term
Description
Tarapore Committee
Committee on Capital Account Convertibility
TUFS
Technology Upgradation Fund Scheme of the Ministry of Textiles of India
UAE
United Arab Emirates
U.K.
United Kingdom
USA or U.S.
The United States of America
U.S. GAAP
Generally Accepted Accounting Principles in the United States of America
U.S. $, U.S. dollar
United States Dollar, the legal currency of the United States of America
UTI
Unit Trust of India
VaR
Value at risk
VCF
Venture Capital Fund as defined in and registered with SEBI under the SEBI
(Venture Capital Fund) Regulations, 1996
WOS
Wholly-owned banking subsidiary
WTO
World Trade Organization
YTM
Yield to Maturity
10
SUMMARY OF BUSINESS
Overview
The Bank is a leading private sector bank and financial services company in India offering a wide range of
products and services to corporate and retail customers through a variety of delivery channels. The Bank
commenced operations in April 1994, and over the last 18 years, the Bank has grown both in terms of the size of
its asset base and its physical network of branches, extension counters and ATMs. The Bank has experienced
significant growth while maintaining stable asset quality and enhancing its low-cost funding structure.
As at September 30, 2012, the Bank was the third largest private sector bank in India in terms of total assets
based on public filings of private sector banks. The Bank’s total assets as at September 30, 2012 were
Rs.3,026.81 billion as compared to Rs.2,856.28 billion as at March 31, 2012. The Bank’s net profit has grown
from Rs.33.88 billion in the year ended March 31, 2011 to Rs.42.42 billion in the year ended March 31, 2012,
representing an increase of 25.19% The Bank’s net profit has increased by 22.25% from Rs.18.63 billion in the
half year ended September 30, 2011 to Rs.22.77 billion in the half year ended September 30, 2012. As at
September 30, 2012, the Bank’s net loans and net deposits amounted to Rs.1,721.32 billion and
Rs.2,356.19 billion, respectively. As at September 30, 2012, the Bank had a network of 1,741 branches and
extension counters and 10,297 ATMs spread over 1,113 centers in India. In addition to the Bank’s growing
branch and ATM networks, the Bank also offers telephone banking in various cities, as well as internet banking
and mobile telephone banking. These and other resources give the Bank the capability to deliver a broad range of
banking products through multiple delivery channels that enhance convenience for customers. As at
September 30, 2012, the Bank also had seven overseas offices with branches in Singapore, Hong Kong, the
DIFC, Colombo and representative offices in Shanghai, DIFC and Abu Dhabi. The Bank’s foreign branches
primarily offer corporate banking, trade finance and treasury and risk management services.
The Bank’s core income stream comprises interest income earned on its large and mid-corporate, SME and
agriculture and retail loan portfolios, as well as its money-market operations and investment portfolio. The Bank
also earns fee and commission income from the processing of loans, documentary credits, bank guarantees,
placements and syndication, service charges, cash management services, advisory services, depository services,
capital market services, ATM interchange and cards, remittance, wealth management and sale of third party
products. Additionally, the Bank earns trading profit from proprietary trading in investments, foreign exchange
and derivatives. The Bank’s expenses consist of interest and non-interest expenses. The Bank’s major
non-interest expenses include staff cost, occupancy cost (including rent for office premises, repair and
maintenance), depreciation and other administrative costs.
The Bank obtained its certificate of incorporation on December 3, 1993 and its certificate of commencement
of business on December 14, 1993. The Bank began operations by opening its first branch in Ahmedabad on
April 2, 1994 and was one of the first private sector banks established under guidelines issued in 1993 by the RBI
in line with the Government’s policy to reform India’s financial sector. The Bank was renamed from “UTI Bank
Limited” to “Axis Bank Limited”, and the certificate of incorporation on change of name was obtained on
July 30, 2007.
Since the year ended March 31, 2011, the Bank has experienced significant growth in its customer and
geographical base, which expanded from 17.96 million retail customer accounts in 921 locations as at March 31,
2011 to 19.53 million retail customer accounts in over 1,050 locations as at March 31, 2012. As at September 30,
2012, the Bank had 20.46 million retail customer accounts in 1,113 locations. The Bank’s total assets have
increased from Rs.2,427.13 billion as at March 31, 2011 to Rs.2,856.28 billion as at March 31, 2012, with the
retail loan portfolio increasing from Rs.277.59 billion as at March 31, 2011 to Rs.375.70 billion as at March 31,
2012. As at September 30, 2012, the total assets of the Bank was Rs.3,026.81 billion, of which retail loans
accounted for Rs.442.86 billion. Further, total deposits of the Bank grew from Rs.1,892.38 billion as at
March 31, 2011 to Rs.2,201.04 billion as at March 31, 2012, with low-cost deposits (savings bank and current
account) increasing by Rs.136.55 billion over the same period. As at September 30, 2012, total deposits were
Rs.2,356.19 billion, of which low-cost deposits accounted for Rs.955.38 billion. The Bank’s ATM network
increased from 6,270 ATMs as at March 31, 2011 to 9,924 ATMs as at March 31, 2012. The number of ATMs as
at September 30, 2012 was 10,297.
The Bank’s principal business activities are divided into two segments, Banking Operations and Treasury.
11
Banking Operations
The Bank’s operations include products and services in the following areas:
• Large and Mid-Corporate Banking offers various loan and fee-based products and services to large and
mid-corporate clients. These products and services include cash credit facilities, demand and short-term
loans, project finance, export credit, factoring, channel financing, structured products, discounting of
bills, documentary credits, guarantees, foreign exchange and derivative products, cash management
services, warrant payment services, cross-border trade and correspondent banking services and tax
collections on behalf of the central Government and various state governments in India. Liability products
including current accounts, certificates of deposit and time deposits are also offered to large and
mid-corporate clients. Loans under the large and mid-corporate banking segment amounted to
Rs.910,534 million and constituted 53.64% of the Bank’s total loan portfolio as at March 31, 2012. The
loans to large and mid-corporate clients as at September 30, 2012 amounted to Rs.920,647 million and
constituted 53.49% of the total loan portfolio.
• SME and Agriculture comprises 32 dedicated SME centers to provide decentralized loan origination,
cross-selling and monitoring functions, as well as 90 specialized clusters for agricultural clients to
coordinate appraisals and provide lending services. Loans under the SME and agriculture segment
amounted to Rs.411,358 million as at March 31, 2012 and constituted 24.23% of the Bank’s total loan
portfolio as at March 31, 2012. The loans to these segments as at September 30, 2012 amounted to
Rs.357,807 million and constituted 20.79% of the Bank’s total loan portfolio
• Retail Banking offers a variety of liability and asset products and services to retail customers. Retail
liability products include savings accounts, time deposits and customized products for certain target
groups such as high-net worth individuals, senior citizens, working mothers, armed forces personnel,
students and salaried employees. Retail asset products include home loans, personal loans, auto loans,
consumer loans, loans against gold and educational loans as well as secured loans of various types. The
Bank also offers other products and services such as debit and travel currency cards, financial advisory
services, bill payment services and wealth management services. The Bank had 19.53 million and
20.46 million retail customer accounts as at March 31, 2012 and September 30, 2012, respectively, The
Bank also markets third party products such as mutual funds and Government savings bonds. A wide
range of liability and asset products and services are also offered to non-resident Indians (“NRIs”).
• Business Banking offers transaction banking services, as well as current accounts for businesses and
central Government and state government agencies. As at March 31, 2012, the Bank had 1,066,485
current accounts relationships under its business banking segment. The current accounts relationships had
grown to 1,211,407 as at September 30, 2012.
Treasury
The Treasury manages the funding position of the Bank and also manages and maintains its regulatory
reserve requirements. The Treasury invests in sovereign and corporate debt instruments, and undertakes
proprietary trading in equity and fixed income securities, foreign exchange, currency futures and options. The
Treasury invests in commercial paper, mutual funds and floating rate instruments as part of the management of
short-term surplus liquidity. In addition to proprietary trading and liquidity management, the Treasury also offers
a wide range of treasury products and services to corporate customers, including derivative instruments such as
forward contracts, interest rate swaps, currency swaps and foreign currency options, as well as services such as
loan syndication and placement.
Competitive Strengths
The key features of the Bank’s growth are:
• Sustained growth in net interest and fee income, reflecting the strength and diversity of the Bank’s core
earning streams
• Strong presence in the Indian retail banking market through a nationwide distribution network, the growth
of the Bank’s product and customer base and the provision of high-quality customer service
• Access to low-cost funds
• Continued focus on improvement in asset quality with low NPA levels through disciplined credit risk
management
12
• Strong financial position
• Advanced use of technology for cost efficiency and effective delivery of products and services to the
Bank’s customers
• Experienced management team
Strategies
The key elements of the Bank’s business strategy going forward are:
• Broadening the Bank’s low-cost deposit base
• Improve profitability by reducing costs and focusing on core income streams such as net interest income
and fee-based income
• Increase the Bank’s retail asset portfolio
• Focusing on SME and Agriculture lending
• Rural banking initiatives
• Sustain focus on improving loan and investment portfolio quality
• Focus on cross-selling and expand fee income through diverse sources
13
SUMMARY OF THE ISSUE
The following is a general summary of the terms of the Issue. This summary should be read in conjunction
with, and is qualified in its entirety by, the more detailed information appearing elsewhere in this Placement
Document, including the sections titled “Risk Factors”, “Use of Proceeds”, “Placement”, “Issue Procedure”
and “Description of the Equity Shares”.
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . Axis Bank Limited
Face Value . . . . . . . . . . . . . . . . . . . . . . . Rs.10 each
Issue Size . . . . . . . . . . . . . . . . . . . . . . . . 34,000,000 Equity Shares aggregating to Rs.47,260 million
Floor Price . . . . . . . . . . . . . . . . . . . . . . . Rs.1,398.56 per Equity Share. The committee of the Board approved
discount of Rs.8.56 to the Floor Price of Rs.1,398.56 in accordance
with the approval of the shareholders accorded on January 28, 2013
and Regulation 85(1) of the SEBI Regulations
Issue Price . . . . . . . . . . . . . . . . . . . . . . . Rs.1,390 per Equity Share
Eligible Investors . . . . . . . . . . . . . . . . . . A QIB as defined in Regulation 2(1)(zd) of the SEBI Regulations and
not excluded pursuant to Regulation 86(1)(b) of the SEBI Regulations
who is either (i) outside of the United States acquiring the Equity
Shares in an offshore transaction under Regulation S; or (ii) an
institutional investor in the United States or that is a “qualified
institutional buyer” as defined in Rule 144A; or such other person as
may be permitted under applicable laws to acquire the Equity Shares
pursuant to this Issue; to whom this Placement Document and the
Application Form will be circulated and who are eligible to Bid and
participate in this Issue. The list of QIBs to whom this Placement
Document and Application Form is delivered shall be determined by
the Bank and the Book Running Lead Managers, in their sole and
absolute discretion. Also see “Issue Procedure — Qualified
Institutional Buyers”
Preferential Allotment . . . . . . . . . . .
The shareholders of the Bank in a resolution dated January 28, 2013
approved a preferential allotment of up to 6,057,444 Equity Shares to
certain promoters of the Bank. The Bank is making a preferential
allotment of up to 5,837,945 Equity Shares to certain promoters of the
Bank at a price of Rs.1,390 per Equity Share (the “Preferential
Allotment”) which is equivalent to the Issue Price
Equity Shares issued and
outstanding immediately prior to
the Issue (without consideration of
the Preferential Allotment) . . . . . . . .
427,155,633 Equity Shares
Equity Shares issued and
outstanding immediately after the
Issue (without consideration of the
Preferential Allotment) . . . . . . . . . . .
461,155,633 Equity Shares
Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . The Bank has obtained in-principle approvals in terms of
Clause 24(a) of the Equity Listing Agreements, for listing of the
Equity Shares issued pursuant to the Issue from the Stock Exchanges.
The Bank will make applications to each of the Stock Exchanges after
Allotment to obtain final listing and trading approval for the Equity
Shares
Lock-up . . . . . . . . . . . . . . . . . . . . . . . . . Please see “Placement — Lock-up”
14
Transferability Restrictions . . . . . . . . . The Equity Shares being Allotted pursuant to the Issue shall not be
sold for a period of one year from the date of Allotment except on the
floor of the Stock Exchanges. For further restrictions on transfer see
“Transfer Restrictions”
Use of Proceeds . . . . . . . . . . . . . . . . . . . After deducting the Issue expenses of approximately Rs.472 million,
the net proceeds of the Issue will be approximately Rs.46,788 million.
See “Use of Proceeds”
Risk Factors . . . . . . . . . . . . . . . . . . . . . . See “Risk Factors” for a discussion of risks you should consider
before deciding whether to subscribe for the Equity Shares
Pay-In Date . . . . . . . . . . . . . . . . . . . . . . Last date specified in the CAN sent to the QIBs for payment of
application money
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . The Allotment of the Equity Shares offered pursuant to the Issue is
expected to be made on or about February 4, 2013 (the “Closing
Date”)
Ranking . . . . . . . . . . . . . . . . . . . . . . . . . The Equity Shares being issued shall be subject to the provisions of
our Memorandum and Articles and shall rank pari passu in all
respects with the existing Equity Shares, including rights in respect of
dividends
The shareholders of the Bank will be entitled to participate in
dividends and other corporate benefits, if any, declared by the Bank
after the Closing Date, in compliance with the Companies Act, the
Equity Listing Agreements and other applicable laws and regulations.
Shareholders may attend and vote in shareholders’ meetings on the
basis of one vote for every Equity Share held. See “Description of
the Equity Shares”
Security Codes for the Equity
Shares . . . . . . . . . . . . . . . . . . . . . . . . .
ISIN:
INE 238A01026
BSE Scrip Code:
532215
NSE Symbol:
AXISBANK
15
SELECTED FINANCIAL INFORMATION
The following tables set forth the Bank’s selected financial information and should be read together with
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Bank’s
Financial Statements and the related notes included elsewhere in this Placement Document. The Bank’s audited
financial statements as at and for the years ended March 31, 2010, 2011 and 2012 and the unaudited and
non-consolidated interim financial results as at and for the half year ended September 30, 2012 have been
prepared in accordance with Indian GAAP as applicable to banks. The Financial Statements reflect applicable
statutory requirements, regulatory guidelines and accounting practices in India; these requirements, guidelines
and practices change from time to time. In accordance with Indian GAAP, adjustments to reflect such changes
are made on a prospective basis, and financial statements for earlier periods are not restated. Indian GAAP
differs in certain significant respects from U.S. GAAP. For a narrative description of the significant differences
between Indian GAAP and U.S. GAAP relevant to the Bank, see “Summary of Significant Differences Among
Indian GAAP and U.S. GAAP”. For the convenience of the reader, the selected financial information as at and
for the half year ended September 30, 2012 has been translated into U.S. dollars at the U.S. Federal Reserve’s
noon buying rate of U.S.$1.00 = Rs.52.92 on September 28, 2012. Footnotes appear at the end of each related
section of tables.
Year ended March 31,
2010
2011
2012
(Rupees in millions)
Half year ended September 30,
2011
2012
2012
(Rupees in millions)
(U.S.$ in
millions)
Selected Income Statement Data
Interest Income(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,380
66,336
151,548
85,918
219,946
139,769
101,574
64,260
131,701
86,633
2,489
1,637
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . .
Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . .
50,044
39,458
65,630
46,321
80,177
54,202
37,314
24,028
45,068
29,286
852
553
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . .
89,502
37,097
111,951
47,794
134,379
60,070
61,342
28,000
74,354
32,935
1,405
622
Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions and Contingencies . . . . . . . . . . . . . . . .
52,405
27,260
64,157
30,272
74,309
31,887
33,342
14,715
41,419
18,648
783
353
Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,145
33,885
42,422
18,627
22,771
430
2010
Selected Balance Sheet Data
Cash and cash equivalents . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . .
As at March 31,
2011
2012
(Rupees in millions)
As at September 30,
2011
2012
2012
(Rupees in millions)
(U.S.$ in
millions)
152,039
559,748
1,043,410
12,224
39,058
214,087
719,916
1,424,078
22,732
46,321
139,339
931,921
1,697,595
22,593
64,830
175,521
850,156
1,400,893
22,537
57,005
199,605
996,909
1,721,316
22,750
86,227
3,772
18,838
32,527
430
1,629
Total assets . . . . . . . . . . . . . . . . . . . . . . . 1,806,479
2,427,134
2,856,278
2,506,112
3,026,807
57,196
160,445
189,988
228,085
209,895
252,339
4,768
2
1,413,002
171,695
61,335
—
1,892,378
262,679
82,089
—
2,201,043
340,717
86,433
—
1,944,550
267,710
83,957
—
2,356,191
328,320
89,957
—
44,524
6,204
1,700
Total liabilities and Shareholders’
funds . . . . . . . . . . . . . . . . . . . . . . . . . . 1,806,479
2,427,134
2,856,278
2,506,112
3,026,807
57,196
Shareholders’ funds . . . . . . . . . . . . . . . . .
Employees’ stock options outstanding
(net) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . .
16
Year ended March 31,
2010
2011
2012
(Rupees)
Per Equity Share Data
Earnings per equity share, basic (annualized) . . . . . . . .
Earnings per equity share, diluted (annualized). . . . . . .
Dividends per equity share(2) . . . . . . . . . . . . . . . . . . . . .
Book value per equity share(3) . . . . . . . . . . . . . . . . . . . .
Basic weighted average number of equity shares
(in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted average number of equity shares
(in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Half year ended September 30,
2011
2012
2012
(Rupees)
(U.S.$)
65.78
64.31
12.00
395.99
82.95
81.61
14.00
462.77
102.94
102.20
16.00
551.99
90.51
89.62
—
509.05
109.68
109.17
—
608.74
2.07
2.06
—
11.50
382.27
408.47
412.11
411.60
414.08
7.82
390.98
415.20
415.10
415.69
416.04
7.86
As at or for the year ended March 31,
2010
2011
2012
(in percentages)
Profitability Ratios
Return on average total assets(4) . . . . . . . . . . . . . . . . . . . . . .
Return on average net worth(5) . . . . . . . . . . . . . . . . . . . . . . .
Dividend pay-out ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest margin(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost income ratio(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Adequacy(9)
Total capital adequacy ratio(10) . . . . . . . . . . . . . . . . . . . . . . .
Tier I capital adequacy ratio(10) . . . . . . . . . . . . . . . . . . . . . . .
Tier II capital adequacy ratio . . . . . . . . . . . . . . . . . . . . . . . .
Asset Quality
Gross non-performing assets as a percentage of gross
loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross non-performing assets as a percentage of gross
customer assets(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net non-performing assets as a percentage of net loans . . . .
Net non-performing assets as a percentage of net customer
assets(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As at or for the half
year ended
September 30,
2011
2012
1.67
19.89
19.35
3.75
41.45
1.68
20.13
17.02
3.65
42.69
1.68
21.22
15.62
3.59
44.70
1.57
19.47
—
3.53
45.65
1.56
19.77
—
3.42
44.29
15.80
11.18
4.62
12.65
9.41
3.24
13.66
9.45
4.21
11.35
8.48
2.87
12.99
8.99
4.00
1.25
1.11
1.06
1.23
1.26
1.13
0.40
1.01
0.29
0.94
0.27
1.08
0.39
1.10
0.38
0.36
0.26
0.25
0.34
0.33
(1) Interest income includes dividends earned on equity and preference shares and units of mutual funds.
(2) Represents the rate of dividend paid divided by face value of share.
(3) Represents the shareholders’ funds divided by the number of total equity shares outstanding at the end of each reporting
period.
(4) Net profit divided by average month-end assets for the year/period. Half yearly ratios are annualized.
(5) Net profit divided by the sum of the daily weighted average of share capital, share premium and year/period-end average
of other reserves and surplus as reduced by the year/period-end average of deferred tax assets.
(6) Represents the ratio of total dividends payable on equity shares relating to each fiscal year, excluding the dividend
distribution tax, as a percentage of net profit of that year. Dividends of each fiscal year are typically paid in the following
fiscal year.
(7) Represents the ratio of net interest income to daily average interest earning assets.
(8) Represents the ratio of non-interest expense to the sum of net interest income and non-interest income.
(9) Capital adequacy ratios as at September 30, 2011 and September 30, 2012 are calculated without accounting for the
unaudited half yearly profits, as the half yearly financial results are not subject to an audit. This is in accordance with
RBI guidelines.
(10) If the net profit for the half year ended September 30, 2012 is included, the total capital adequacy ratio and Tier 1 ratio as
at September 30, 2012 would have been 13.92% and 9.92%, respectively. If the net profit for the half year ended
September 30, 2011 is included, the total capital adequacy ratio and Tier 1 ratio as at September 30, 2011 would have
been 12.20% and 9.33%, respectively.
(11) Gross customer assets include advances and credit substitutes before provisions.
(12) Net customer assets include advances and credit substitutes after deductions of provisions.
17
RISK FACTORS
This Placement Document contains forward-looking statements that involve risks and uncertainties.
Prospective investors should carefully consider the following risk factors as well as other information included in
this Placement Document prior to making any decision as to whether or not to invest in the Equity Shares. The
risks described below, which constitute all known material risks concerning the Bank and this Issue, and any
additional risks and uncertainties not presently known to the Bank or that currently are deemed immaterial could
adversely affect the Bank’s business, financial condition, liquidity or results of operations. As a result, the trading
price of the Equity Shares could decline and investors may lose part or all of their investment.
Risks Relating to the Business of the Bank
The Bank’s business is vulnerable to interest rate risk and volatility in interest rates could adversely affect
the Bank’s net interest margin, the value of its fixed income portfolio, its income from treasury operations,
the quality of its loan portfolio and its financial performance.
Net interest income constituted 59.66% of the Bank’s operating revenue for the financial year ended
March 31, 2012, and 58.62% for the financial year ended March 31, 2011. For the half year ended September 30,
2012, net interest income was 60.61% of the Bank’s operating revenue. Interest rates are sensitive to many
factors beyond the Bank’s control, including the RBI’s monetary policy, deregulation of the financial sector in
India, domestic and international economic and political conditions and other factors. An increase in interest
rates applicable to the Bank’s liabilities, without a corresponding increase in interest rates applicable to its assets,
will result in a decline in net interest income. Furthermore, in the event of rising interest rates, the Bank’s
borrowers may not be willing to pay correspondingly higher interest rates on their borrowings and may choose to
repay their loans with the Bank, particularly if they are able to switch to more competitively priced loans offered
by other banks. Any inability of the Bank to retain customers as a result of rising interest rates may adversely
impact the Bank’s earnings in future periods. Similarly, in the event of falling interest rates, the Bank may face
more challenges in retaining its customers if it is unable to offer competitive rates as compared to other banks in
the market.
In addition, as a result of RBI-mandated reserve requirements, the Bank is also more structurally exposed to
interest rate risks than banks in many other countries. Under RBI regulations, the Bank’s liabilities are subject to
the statutory liquidity ratio (“SLR”) requirement such that a minimum specified percentage, currently 23%, of a
bank’s NDTL, be invested in Government securities and other approved securities. These securities generally
carry fixed coupons and, in an environment of rising interest rates, the value of Government securities and other
fixed income securities decline. Fixed rate bonds formed 97.84% of the Bank’s SLR portfolio as at
September 30, 2012. The volatility in interest rates is reflected in the movement of the semi-annual yield on the
ten-year Government bond, which was 7.98% on March 31, 2011 and 8.57% on March 31, 2012. Ten year G-sec
yield was 8.15% on September 30, 2012 as compared to 8.44% as at September 30, 2011. The Bank’s large
portfolio of Government securities may limit its ability to deploy funds into higher yielding investments.
Furthermore, a decline in the valuation of the Bank’s trading book as a result of rising interest rates may
adversely impact the Bank’s future financial performance and the market price of the Equity Shares.
The Bank had a debenture and bond portfolio (including pass-through certificates (“PTCs”)) of
Rs.257.88 billion as at September 30, 2012, of which 98.06% of the bonds in the portfolio are fixed rate bonds.
In the event of a rise in interest rates, the portfolio will be exposed to an adverse impact on the valuation of such
bonds. Any rise in interest rates or fall in the market value of the securities in the Bank’s proprietary portfolio
may adversely affect the Bank’s future performance and the market price of the Equity Shares.
For fiscal years 2010, 2011 and 2012, the Bank recorded an income of Rs.7.14 billion, Rs.3.42 billion,
Rs.3.75 billion, respectively, from treasury operations. For the half year ended September 30, 2012, the Bank
earned an income of Rs.1.88 billion as compared to Rs.1.45 billion for the half year ended September 30, 2011.
The Bank’s income from treasury operations is subject to substantial volatility due to, among other things,
changes in interest rates and foreign currency exchange rates as well as other market fluctuations. For example,
an increase in interest rates may have a substantial impact on the value of certain of the Bank’s investments. Any
significant or sustained decline in income generated from treasury operations resulting from market volatility
may adversely impact the Bank’s financial performance and the market price of the Equity Shares.
The Bank may not be successful in implementing its growth strategies or penetrating new markets.
One of the Bank’s principal business strategies is to expand into new business and financial services product
offerings. This strategy exposes the Bank to a number of risks and challenges, including, the possible failure to
18
identify appropriate opportunities and offer attractive new products, failure to comply with new market and
regulatory standards, and the need for hiring and retaining skilled personnel, among others, each of which would
have a potential adverse impact on the Bank’s profitability. In the event that the Bank fails to develop and launch
new products or services successfully, it may lose any or all of the investments that it has made in promoting
them, and the Bank’s reputation with its customers would be harmed. In addition, if the Bank’s competitors are
better able to anticipate the needs of those individuals in its target market, the Bank’s market share could
decrease and its business could be adversely affected.
In addition, the Bank’s growth strategy in the future may involve strategic acquisitions and restructurings,
partnerships, joint ventures and strategic business arrangements with other parties. Such arrangements may not
necessarily contribute to business growth and the Bank’s profitability or may be unsuccessful. Furthermore, the
Bank could experience difficulty in assimilating personnel, integrating operations and cultures and may not
realize the anticipated synergies or efficiencies from such transactions. These difficulties could disrupt the
Bank’s ongoing business, distract its management and employees and increase its expenses.
The Bank’s retail assets portfolio has experienced significant growth in recent years. If the Bank is unable
to address credit risk in its retail asset portfolio the Bank’s financial performance may be adversely
affected.
The Bank’s retail assets portfolio has grown 35.34% from Rs.277.59 billion as at March 31, 2011 to
Rs.375.70 billion as at March 31, 2012, and 51.00%. from Rs.293.28 billion as at September 30, 2011 to
Rs.442.86 billion as at September 30, 2012. As part of the Bank’s business and growth strategy, it will continue
to focus on further growth in its retail banking business. The competition in the retail segment is intense and the
Bank’s ability to effectively compete in this segment will depend, in part, on its ability to offer a diverse product
mix and expand its distribution capabilities. At present, availability of comprehensive credit history reports for
new first-time borrowers is limited in India. If the Bank’s screening process proves to be inadequate, it may
experience an increase in impaired loans and it may be required to increase its provision for defaulted loans.
There could be an increase in the Bank’s non-performing assets (“NPAs”) as it continues to expand its retail loan
operations. This may impact the Bank’s future financial performance and the market price of the Equity Shares.
The Bank’s failure to manage growth effectively may adversely impact the Bank’s business.
In the past, the Bank has witnessed rapid growth in both its infrastructure and its business. The number of
branches and extension counters of the Bank grew from 983 as at March 31, 2010 to 1,622 as at March 31, 2012
and 1,741 as at September 30, 2012. Between March 31, 2010 and March 31, 2012, the Bank’s retail
relationships grew from 14.84 million to 19.53 million, the number of employees grew from 21,640 to 31,738
and the Bank’s total assets grew from Rs.1,806.48 billion to Rs.2,856.28 billion. As at September 30, 2012, the
Bank’s number of retail relationships was 20.46 million, the number of employees was 35,819 and the Bank’s
total assets were Rs.3,026.81 billion. Such growth puts pressure on the Bank’s ability to effectively manage and
control historical and newly emerging risks. The Bank’s ability to sustain growth depends primarily upon its
ability to manage key issues such as selecting and retaining skilled manpower, maintaining an effective
technology platform that can be continually upgraded, developing a knowledge base to implement the Bank’s
strategies, and ensuring a high standard of customer service. The inability of the Bank to effectively manage any
of these issues may adversely affect the Bank’s business growth and, as a result, impact future financial
performance and the market price of the Equity Shares.
In addition, given the increasing share of retail products and services and transaction banking services in the
Bank’s overall business, the importance of systems technology to the Bank’s business has increased significantly.
Any failure in the Bank’s systems, particularly for retail products and services and transaction banking, could
significantly affect the Bank’s operations and the quality of its customer service and could result in business and
financial losses and adversely affect the trading price of the Equity Shares.
An increase in the Bank’s portfolio of NPAs and RBI-mandated provisioning requirements may adversely
affect its business.
As at March 31, 2012, the Bank’s gross NPAs represented 0.94% of gross customer assets (including gross
advances and credit substitutes) and the Bank’s NPAs net of provisions represented 0.25% of net customer
assets. As at March 31, 2012, the Bank provided for 80.91% of its total NPAs (including prudential write-offs)
pursuant to applicable regulatory guidelines and the quality of security available to the Bank. As at
September 30, 2012, the Bank’s gross NPAs represented 1.10% of gross customer assets and the Bank’s NPAs
net of provisions represented 0.33% of net customer assets. As at September 30, 2012, the Bank provided for
79.84% of its total NPAs (including prudential write-offs). If there is any deterioration in the quality of the
Bank’s security or further aging of the assets after being classified as non-performing, an increase in provisions
19
will be required. This increase in provisions may adversely impact the Bank’s financial performance and the
market price of the Equity Shares.
There can be no assurance that the percentage of NPAs that the Bank will be able to recover will be similar
to the Bank’s past experience of recoveries of NPAs. The Bank’s retail loan portfolio has grown significantly in
recent years, but there are limited data on historical loss ratios in retail loans, especially in the event of an
economic slowdown. Furthermore, the recent global economic slowdown and the impact of global and Indian
economic conditions on equity and debt markets may also lead to an increase in the level of NPAs in the Bank’s
corporate loan portfolio. Any deterioration or increase in the Bank’s NPA portfolio would adversely affect the
Bank’s financial performance and the market price of the Equity Shares. See “Supervision and Regulation —
Prudential norms on income recognition, asset classification and provisioning pertaining to advances”.
The Bank’s gross restructured assets as a proportion of gross customer assets as at March 31, 2012 and
September 30, 2012 was 1.58% and 2.04%, respectively. The Bank restructures assets based upon a borrower’s
potential to restore its financial health. However, certain assets classified as restructured may subsequently be
classified as delinquent or non-performing in the event a borrower fails to restore its financial viability and honor
its loan servicing commitments to the Bank. There can be no assurance that the debt restructuring criteria
approved by the Bank will be adequate or successful and that borrowers will be able to meet their obligations
under restructured loans. Any resulting increase in delinquency levels may adversely impact the Bank’s financial
performance and the market price of the Equity Shares.
The Bank is subject to capital adequacy requirements as stipulated by the by RBI for domestic banks. The
Bank’s inability to maintain adequate capital due to changes in regulations, a lack of access to capital
markets, or otherwise may impact its ability to grow and support its business.
The RBI requires Indian banks to maintain a minimum risk-weighted capital adequacy ratio (“CAR”) of
9.00% Effective from March 31, 2008, the Bank implemented the Revised Framework of the International
Convergence of Capital Measurement and Capital Standards (“Basel II”). The Bank’s CAR was 13.66% and
12.99% as at March 31, 2012 and September 30, 2012, respectively, without considering the unaudited profits of
the half year ended September 30, 2012. If the net profit for the half year ended September 30, 2012 were
included, the total CAR and Tier 1 ratio as at September 30, 2012 would have been 13.92% and 9.92%,
respectively. On May 2, 2012, the RBI published its final guidelines on Basel III capital regulations, which was
proposed to be implemented from January 2013 in a phased manner wherein banks are required to improve the
quality, consistency and transparency of their capital base, enhance risk coverage and supplement the risk-based
capital requirement with a leverage ratio. The RBI, through a press release dated December 28, 2012, has
rescheduled the start date for the implementation of Basel III from January 1, 2013 to April 1, 2013. The
implementation of Basel III or other capital adequacy requirements imposed by the RBI, may result in incurrence
of substantial compliance and monitoring costs and there can be no assurance that the Bank will be able to
comply with such requirements or that any breach of applicable laws and regulations will not adversely affect the
reputation of the Bank or its business, operations and financial conditions. The Bank is exposed to the risk of RBI
increasing the applicable risk weight for different asset classes from time to time. Any incremental capital
requirement may adversely impact the Bank’s ability to grow its business and may even require the Bank to
withdraw from or curtail some of its current business operations. There can also be no assurance that the Bank
will be able to raise adequate additional capital in the future at all or on terms favorable to it.
The Bank’s inability to foreclose on collateral in the event of a default or a decrease in the value of the
collateral may result in failure to recover the expected value of the collateral.
The Bank’s loans to corporate customers for working capital credit facilities are typically secured by
charges on inventories, receivables and other current assets. In certain cases, the Bank obtains security by way of
a first or second charge on fixed assets, a pledge of marketable securities, bank guarantees, government
guarantees, corporate guarantees and personal guarantees. In addition, project loans or long-term loans to
corporate customers are secured by a charge on fixed assets and other collateral security. Loans to retail
customers are either unsecured or secured by the assets financed, largely property and vehicles. As at
September 30, 2012, the Bank’s unsecured advances represented 12.35% of its total advances.
In India, foreclosure on collateral generally requires a written petition to a court or tribunal. Such
application may be subject to delays and administrative requirements that may result, or be accompanied by, a
decrease in the value of the collateral. The Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (the “SARFAESI Act”), the Debt-Recovery Tribunal Act, 1993 and
the RBI’s corporate debt restructuring have strengthened the ability of lenders to recover NPAs by granting them
greater rights to enforce security and recover amounts owed from secured borrowers. However, there can be no
assurance that these legislations will have a favorable impact on the Bank’s efforts to recover NPAs as the full
20
effect of such legislation has yet to be determined in practice. Any failure to recover the expected value of the
collateral would expose the Bank to potential loss.
In addition, pursuant to RBI prudential guidelines on restructuring of advances by banks, the Bank may not
be allowed to initiate recovery proceedings against a corporate borrower where the borrower’s aggregate total
debt is Rs.100 million or more and 60.00% of the lenders by number and holding at least 75.00% or more of the
borrower’s debt by value decide to restructure their loans. In such a situation, the Bank is restricted to a
restructuring process only as approved by the majority lenders.
The Bank may not be able to realize the full value of its collateral as a result of, among other factors:
• delays in bankruptcy and foreclosure proceedings;
• defects or deficiencies in the perfection of collateral (including due to inability to obtain approvals that
may be required from third parties);
• fraud by borrowers;
• depreciation in value of the collateral, illiquid market for disposal of and volatility in the market prices for
the collateral; and
• current legislative provisions or changes thereto and past or future judicial pronouncements.
The Bank is exposed to large loan concentrations with a few borrowers and default by any one of them
would adversely affect the Bank’s business.
As at March 31, 2012, aggregate exposure to the Bank’s ten largest borrowers (fund based) amounted to
Rs.260.50 billion, representing 82.32% of the Bank’s total capital of Rs.316.45 billion comprising
Rs.218.66 billion Tier I and Rs.97.59 billion Tier II capital. The Bank’s single largest borrower (fund based) on
such date had an exposure of Rs.40.27 billion, representing 12.73% of the Bank’s capital. As at September 30,
2012, aggregate exposure to the Bank’s ten largest borrowers (fund based) amounted to Rs.272.92 billion,
representing 86.20% of the Bank’s total capital of Rs.316.62 billion comprising Rs.219.06 billion Tier I and
Rs.97.56 billion Tier II capital. The Bank’s single largest borrower on September 30, 2012 had an exposure of
Rs.54.27 billion, representing 17.15% of the Bank’s capital. Any deterioration in the credit quality of these assets
could have a significant adverse effect on the Bank’s future financial performance and the market price of the
Equity Shares.
The Bank is exposed to various industry sectors. A deterioration in the performance of any of these industry
sectors where the Bank has significant exposure may adversely impact the Bank’s business.
The Bank’s credit exposure to corporate borrowers is dispersed throughout various industry sectors, the
most significant of which are financial companies, infrastructure, power generation and distribution, metal and
metal products and food processing, which represented 12.73%, 5.80%, 4.66%, 4.27% and 4.13%, respectively,
of the Bank’s outstanding fund based non-retail advances as at March 31, 2012. As at September 30, 2012, the
top five industry sectors for fund based non-retail advances were infrastructure (7.79%), financial companies
(7.01%), metal and metal products (5.07%), power generation and distribution (4.96%) and food processing
(4.27%). The Bank therefore risks overexposure to particular industry sectors and any significant deterioration in
the performance of a particular sector, driven by events not within the Bank’s control, such as regulatory action
or policy announcements by Government or state government authorities, would adversely impact the ability of
borrowers in that industry to service their debt obligations to the Bank. As a result, the Bank would experience
increased delinquency risk, which may adversely impact the Bank’s financial performance and the market price
of the Equity Shares.
A substantial portion of the Bank’s loans have a tenor exceeding one year, exposing the Bank to risks
associated with economic cycles. If the Bank fails to attract deposits, the Bank could face asset-liability
maturity mismatches and in turn, its business may be adversely affected.
The Bank meets its funding requirements primarily through short and long-term deposits from retail and
large corporate depositors. However, a significant portion of the Bank’s assets have long-term maturities
resulting in maturity mismatches between assets and liabilities. If depositors do not renew their deposits or the
Bank is unable to raise new deposits, the Bank may be required to pay higher rates of interest to attract deposits,
which could adversely affect the Bank’s future financial performance and the market price of the Equity Shares.
As at March 31, 2012, loans with a tenor exceeding one year (based on the RBI’s asset-liability management
guidelines) constituted 77.36% of the Bank’s total loans. As at September 30, 2012, loans with a tenor exceeding
one year (based on the RBI’s asset-liability management guidelines) constituted 80.36% of the Bank’s total
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loans. The long tenor of these loans may expose the Bank to risks arising out of economic cycles. In addition,
some of these loans are project finance loans. There can be no assurance that these projects will perform as
anticipated or that such projects will be able to generate cash flows to service commitments under the loans. The
Bank is also exposed to infrastructure projects which are still under development and are open to risks arising out
of delay in execution, failure of borrowers to execute projects on time, delay in getting approvals from necessary
authorities and breach of contractual obligations by counterparties, all of which may adversely impact the
projected cash flows. There can be no assurance that these projects will perform as anticipated. Risks arising out
of a recession in the economy or a delay in project implementation or commissioning could lead to a rise in
delinquency rates and in turn, adversely impact the Bank’s future financial performance and the market price of
the Equity Shares. For further information, see “Selected Statistical Information — Asset Liability Gap and
Interest Sensitivity Data”.
Consolidation in the banking sector in India may adversely affect the Bank.
Mergers among public sector banks may result in enhanced competitive strengths in pricing and delivery
channels for merged entities. If there is liberalization of the rules for foreign investment in private sector banks,
this could result in consolidation in the banking sector. The Bank may face greater competition from larger banks
as a result of such consolidation, which may adversely affect the Bank’s future financial performance and the
market price of the Equity Shares.
If the Bank fails to maintain desired levels of customer deposits or loans, its business operations may be
materially and adversely affected.
Customer deposits are the Bank’s primary source of funding. However, many factors affect the growth of
deposits, some of which are beyond the Bank’s control, such as economic and political conditions, availability of
investment alternatives and retail customers’ changing perceptions toward savings. A slowdown in the Bank’s
deposit growth in the years following the financial crisis in 2008 was due to a combination of factors, including a
slowdown of capital flows and high inflation which adversely impacted domestic savings. Year-on-year deposit
growth in 2007 to 2008 of 49.06% slowed to 33.95% from 2008 to 2009 and again to 20.38% from 2009 to 2010.
However, the slowdown was temporary and the subsequent improved economic conditions resulted in an
increase in the deposit growth rate between 2010 and 2011 to 33.93%. In addition, retail customers may reduce
their deposits and increase their investment in securities for a higher return, while micro, small and medium
enterprise (“SME”) and mid-corporate customers may reduce their deposits in order to fund projects in a
favorable economic environment. If the Bank fails to maintain its desired level of deposits, the Bank’s liquidity
position, financial condition and results of operations may be materially and adversely affected. In such event,
the Bank may need to seek more expensive sources of funding, and it is uncertain whether the Bank will be able
to obtain additional funding on commercially reasonable terms as and when required, or at all. The Bank’s ability
to raise additional funds may be impaired by factors over which it has little or no control, such as deteriorating
market conditions or severe disruptions in the financial markets.
Regulations in India requiring the Bank to extend a minimum level of loans to certain sectors, including
the agricultural sector in India, may subject the Bank to higher delinquency rates.
The lending norms of the RBI require every scheduled commercial bank to extend at least 40.0% of its net
bank credit to certain eligible sectors, such as agriculture, small-scale industries and individual housing finance
up to Rs.2.5 million (which are categorized as “priority sectors”). As at March 31, 2012, the Bank’s lending to
priority sectors accounted for 39.51% of adjusted net bank credit, with 13.85% of net credit going to the
agricultural sector. As at September 30, 2012, the Bank’s lending to priority sectors accounted for 26.71% of
adjusted net bank credit, with 8.63% of net credit going to the agricultural sector. Economic difficulties, such as
poor harvests in the agricultural sector due to drought, are likely to affect those borrowers in priority sectors
more severely. The Bank believes there is presently limited ability to expand the Bank’s direct agricultural loan
portfolio through corporate borrowers due to the limited involvement of corporate entities in agricultural
activities in India. As a result, the Bank targets individual farmers. There is inadequate historical data of
delinquent loans to farmers which increases the risk of such exposures. Additionally, the Bank plans to open
more branches in the rural and semi-urban centers under its agricultural lending programmes and to progressively
increase its exposure to agricultural lending. Moreover, if the Bank does not achieve its priority sector targets, the
RBI can require compulsory investment in the Rural Infrastructure Development Fund established with the
National Bank for Agriculture and Rural Development (“NABARD”) or funds with other financial institutions,
which could provide lower yields to the Bank. Any change in the RBI’s regulations may require the Bank to
increase its lending to relatively riskier segments, which may result in an increase in NPAs in the directed
lending portfolio. As the Bank increases its direct lending to certain sectors, the Bank increases its exposure to
22
the risks inherent with such sectors, which could materially and adversely impact the Bank’s business, financial
performance and the market price of the Equity Shares. See “Supervision and Regulation — Priority Sector
Lending”.
The Bank is exposed to fluctuations in foreign exchange rates.
As a financial intermediary, the Bank is exposed to exchange rate risk. The Bank complies with regulatory
limits on its unhedged foreign currency exposure. As at March 31, 2012 and September 30, 2012, contingent
liabilities on account of outstanding forward exchange contracts was Rs.2,009.26 billion and Rs.2,773.93 billion,
respectively. However, the Bank is exposed to fluctuations in foreign currency rates for its unhedged exposure.
Adverse movements in foreign exchange rates may also impact the Bank’s borrowers negatively which may in
turn impact the quality of the Bank’s exposure to these borrowers. Volatility in foreign exchange rates could
adversely affect the Bank’s future financial performance and the market price of the Equity Shares. For further
information on historical exchange rate movements, see “Exchange Rate Information and Regulations”.
The Bank faces greater credit risks than banks in more developed countries.
Although India has a credit bureau industry, adequate information regarding loan servicing histories,
particularly in respect of individuals and small businesses, is limited. As a result, the Bank’s credit risk exposure
is higher compared to banks operating in advanced markets. Because the Bank’s lending operations to the
aforesaid categories are limited to India, the Bank may be exposed to a greater potential for loss compared to
banks with lending operations in more developed countries. The Bank is subject to credit risk that the borrowers
may not pay the Bank in a timely fashion or at all.
The Bank operates in a very competitive environment and the Bank’s ability to grow depends on its ability
to compete effectively.
The Indian banking industry is very competitive. The Bank competes directly with public sector banks,
private sector banks and foreign banks with branches in India. As at March 31, 2012, there were 169 scheduled
commercial banks in India, including 26 public sector banks, 20 private sector banks (including the Bank) and
41 foreign banks with branches in India, according to RBI Report on Trend & Progress of Banking in India,
2011-12. The public sector banks which generally have much larger customer and deposit bases, larger branch
networks and government support for capital augmentation pose strong competition to the Bank. The Bank also
faces competition from foreign banks that have established branches in India and have aggressively pursued a
share of business in the market. The Bank also faces competition from private sector banks in India, some of
which have larger customer bases and greater financial resources than the Bank. The RBI has issued draft
guidelines for licensing of new banks in the private sector. Increased competitive pressure may have an adverse
impact on the Bank’s earnings, its future financial performance and the market price of the Equity Shares.
In addition, since the Bank raises funds from market sources and individual depositors, it faces increasing
competition for mobilizing such funds. For example, recent deregulation of interest rates on savings deposits has
resulted in certain banks increasing such interest rates, leading to increased competition. The Bank’s ability to
raise fresh deposits and grow its deposit base also depends, in part, on its ability to expand its network of
branches, which requires the approval of the RBI. There can be no assurance that the Bank will be able to obtain
the RBI’s authorizations to meet the Bank’s requirements for branch expansion to achieve the desired growth in
its deposit base. Due to competitive pressures, the Bank may be unable to successfully execute its growth
strategy and offer products and services at reasonable returns and this may adversely affect its business and
operations.
The Bank’s risk management policies and procedures may leave the Bank exposed to unidentified or
unanticipated risks, which could negatively affect its business or result in losses.
The Bank’s hedging strategies and other risk management techniques may not be fully effective in
mitigating its risk exposure in all market environments or against all types of risk, including risks that are
unidentified or unanticipated. Some methods of managing risk are based upon observed historical market
behavior. As a result, these methods may not predict future risk exposures, which could be greater than the
historical measures indicated. Other risk management methods depend upon an evaluation of information
regarding markets, clients or other matters. This information may not in all cases be accurate, complete, up to
date or properly evaluated. Management of operational, legal or regulatory risk requires, among other things,
policies and procedures to properly record and verify a large number of transactions and events. Although the
Bank has established these policies and procedures, they may not be fully effective.
23
The Bank may not be able to detect money-laundering and other illegal or improper activities fully or on a
timely basis, which could expose it to additional liability and harm its business or reputation.
The Bank is required to comply with applicable anti-money-laundering and anti-terrorism laws and other
regulations in India and in other jurisdictions where it has operations. These laws and regulations require the
Bank, among other things, to adopt and enforce “Know Your Customer” (“KYC”) policies and procedures and to
report suspicious and large transactions to the applicable regulatory authorities in different jurisdictions. While
the Bank has adopted policies and procedures aimed at detecting and preventing the use of its banking networks
for money-laundering activities and by terrorists and terrorist-related organizations and individuals generally,
such policies and procedures may not completely eliminate instances where the Bank may be used by other
parties to engage in money-laundering and other illegal or improper activities due to, in part, the short history of
these policies and procedures. To the extent the Bank fails to fully comply with applicable laws and regulations,
the relevant government agencies to whom the Bank reports have the power and authority to impose fines and
other penalties. In addition, the Bank’s business and reputation could suffer if customers use the Bank for
money-laundering or illegal or improper purposes. Although the Bank does not believe that it is in violation of
any applicable sanctions, there can be no assurance that the Bank will be able to fully monitor all of its
transactions for any potential violation.
The Bank’s business depends on the continuity of its management team, skilled personnel and the Bank’s
ability to retain and attract talented personnel.
The Bank is highly dependent on the services of its management team and other key personnel. The Bank’s
ability to meet future business challenges depends, among other things, on their continued employment and the
Bank’s ability to attract and recruit talented and skilled personnel. There can be no assurance that the Bank will
be able to retain such key personnel. Competition for skilled and professional personnel in the banking industry
is intense. The loss of key personnel or an inability to manage attrition levels across the Bank may have a
material adverse impact on the Bank’s business, its ability to grow and its control over various business
functions.
The business of the Bank is highly dependent on information technology, therefore if the Bank is unable to
adapt to rapid technological changes, its business could suffer.
The Bank’s future success will depend in part on its ability to respond to technological advances and to
emerging banking industry standards and practices on a cost-effective and timely basis. The development and
implementation of such technology entail significant technical and business risks. There can be no assurance that
the Bank will successfully implement new technologies effectively or adapt its transaction processing systems to
meet customer requirements or emerging industry standards. If the Bank is unable, for technical, legal, financial
or other reasons, to adapt in a timely manner to changing market conditions, customer requirements or
technological changes, its financial performance and the trading prices of the Equity Shares could be adversely
affected.
Further any technical failures associated with the Bank’s information technology systems or network
infrastructure, including those caused by power failures and breaches in security caused by computer viruses and
other unauthorized tampering, may cause interruptions or delays in the Bank’s ability to provide services to its
customers on a timely basis or at all, and may also result in costs for information retrieval and verification.
Banking is a heavily regulated industry and material changes in the regulations which govern the Bank
could cause its business to suffer.
Banks in India are subject to detailed regulation and supervision by the RBI. In addition, banks are generally
subject to changes in Indian law, as well as to changes in regulations, government policies and accounting
principles. The RBI also sets guidelines on the cash reserve ratio (“CRR”), SLR, priority sector lending, export
credit, agricultural loans, loans to sectors deemed to be weak by the RBI, market risk, CAR and branch licensing,
among others. The Bank is also subject to regular financial inspection by the RBI. In the event that the Bank is
unable to meet or adhere to the guidance or requirements of the RBI, the RBI may impose strict enforcement of
its observations on the Bank, which may have an adverse effect on its business, financial condition, cash flows or
results of operations. The laws and regulations governing the banking sector, including those governing the
products and services that the Bank provides or proposes to provide, such as its life insurance or asset
management business, or derivatives and hedging products and services, could change in the future. Any such
24
changes may adversely affect the Bank’s business, future financial performance and the price of the Equity
Shares by, for example, requiring a restructuring of the Bank’s activities or increasing its operating costs. See
“Supervision and Regulation”.
In November 2012, the RBI issued guidelines on liquidity risk management in accordance with the Basel
Committee on Banking Supervision’s Principles for Sound Liquidity Risk Management and Supervision. These
guidelines prescribe certain stringent ratios to measure liquidity risk and are designed to measure, inter alia, the
extent to which volatile money supports the bank’s basic earning assets, the extent to which assets are funded
through a stable deposit base, the degree of illiquidity embedded in the balance sheet and the extent of available
liquid assets. Banks are also required to adhere to certain prescribed limits to reduce the extent of concentration
of their liabilities. Compliance with such new liquidity risk management guidelines may result in the incurrence
of substantial compliance and monitoring costs.
Regulatory changes in India or other jurisdictions in which the Bank operates could adversely affect its
business.
The laws and regulations or the regulatory or enforcement environment in any of those jurisdictions in
which the Bank operates may change at any time and may have an adverse effect on the products or services the
Bank offers, the value of its assets or its business in general.
In fiscal year 2012, the RBI enacted gradual changes in the annualized interest rate the RBI charges banks
for RBI loans (the “repo rate”), increasing it from 6.75% on March 31, 2011 to a peak of 8.50% with effect from
October 25, 2011. However, it reduced the repo rate to 8.00% effective April 17, 2012 in line with its monetary
policy announced for fiscal year 2013. The RBI decreased the CRR, the required percentage of net demand and
time liabilities that banks must carry as reserves, from 6.00% effective April 24, 2010 to 5.50% effective
January 28, 2012 and further to 4.75% effective March 10, 2012 in order to increase liquidity. During fiscal
2013, the RBI further reduced CRR to 4.50% effective September 17, 2012 and to 4.25% effective November 3,
2012. See “Industry Overview — Monetary and Credit Policy Measures”.
Regulatory or legislative changes as a result of litigation involving the RBI and other Government bodies
with respect to derivatives could affect the Bank’s derivative business, as the Bank may be unable to continue to
enter into certain types of income earning transactions or may incur increased administrative costs. Future
changes in the stance of the RBI could have an adverse impact on the Bank’s capital adequacy and profitability.
Any change by the RBI to the directed lending norms may result in the Bank being unable to meet the priority
sector lending requirements, as well as requiring the Bank to increase its lending to relatively riskier segments
which could result in an increase in NPAs in the Bank’s directed lending portfolio. Consequently, the Bank’s
levels of yield-generating assets may be reduced or the Bank may be forced to recognize accounting losses,
which could materially adversely affect its recognized profits, financial condition and results of operations. The
RBI may also direct banks to increase the total provisioning coverage ratio on credit portfolio which may
adversely affect the Bank’s financial condition and results of operations.
The Bank’s ability to pay dividends in the future will depend upon its future earnings, financial condition,
cash flows, working capital requirements and capital expenditures.
The Bank’s future ability to pay dividends will depend on the earnings, financial condition and capital
requirements of the Bank. Dividends distributed by the Bank will attract dividend distribution tax at rates
applicable from time to time. The Bank cannot assure you that it will generate sufficient income to cover its
operating expenses and pay dividends to its shareholders, or at all. In addition, dividends that the Bank has paid
in the past may not be reflective of the dividends that it may pay in a future period. The Bank’s future dividend
policy will depend on its capital requirements, financing arrangements, results of operations, cash flows and
financial condition. See “Dividends”.
The Bank’s remuneration scheme may not be as attractive as that of other banks with which it competes
and may hurt the Bank’s ability to attract and maintain a skilled and committed workforce.
If the general banking industry increasingly moves toward incentive-based pay schemes, the Bank may not
be as competitive as other banks. This may increase the possibility that the Bank’s skilled personnel may go
elsewhere for more attractive employment packages. In addition, while none of the Bank’s employees are
currently unionized, there can be no assurance that the Bank’s employees will not unionize in the future.
It is uncertain whether certain significant shareholders of the Bank will continue to maintain their current
shareholdings.
As at December 31, 2012, the Government, through the Administrator of the Specified Undertaking of Unit
Trust of India (“SUUTI”), held 22.76% of the outstanding Equity Shares. Other Government-controlled entities
25
such as Life Insurance Corporation of India (“LIC”), General Insurance Corporation of India (“GIC”) and
certain linked entities collectively held 12.77% of the Equity Shares. Under the Bank’s Memorandum and
Articles of Association (the “Articles”), SUUTI has the right to nominate the chairman and three directors,
whereas LIC has no such right. As a matter of practice, since the inception of the Bank, SUUTI has nominated
the chairman and two directors and LIC has nominated one director.
The Government is reported to be evaluating proposals for the sale of investments held by SUUTI. Any
such disposal of the Bank’s equity held by SUUTI could have a material impact on the Bank’s ownership and
management which could adversely affect the market price of the Equity Shares. Furthermore, such divestment
may be required by RBI guidelines. See “— RBI guidelines relating to ownership of private sector banks
require the Bank’s significant shareholders to sell their Equity Shares, which may have an adverse impact
on the Bank’s business and the market price of the Equity Shares”.
Actions of the Government, as the Bank’s controlling shareholder through SUUTI and other Governmentrelated entities, could conflict with the interests of other shareholders.
Through its indirect holdings, the Government holds a major portion of the issued Equity Shares. As at
December 31, 2012, the Government indirectly held approximately 36.91% (SUUTI — 22.76%, LIC — 8.87%,
GIC and four public sector insurance companies — 3.90%, other Government-controlled institutions,
corporations and banks — 1.38%) of the Equity Shares. The Chairman and two of the Bank’s directors are
appointed by SUUTI and one of the Bank’s directors is appointed by LIC. As long as the Government continues
to hold a majority of the Bank’s voting shares, the Government, through its membership on the Bank’s Board of
Directors, may influence the policies of the Bank in a manner that could conflict with the interests of other
shareholders.
RBI guidelines relating to ownership of private sector banks require the Bank’s significant shareholders to
sell their Equity Shares, which may have an adverse impact on the Bank’s business and the market price of
the Equity Shares.
RBI guidelines prescribe a policy framework for the ownership and governance of private sector banks. The
objective of the RBI is to ensure that no single entity or group of entities has a shareholding or control, directly or
indirectly, in any bank in excess of 10%, with acquisitions of over 5% requiring prior RBI acknowledgment. The
Banking Regulation Act, as amended, requires any person to seek prior approval of the RBI, to acquire or agree
to acquire, shares or voting rights of a bank, by himself or with persons acting in concert, wherein such
acquisition (taken together with shares or voting rights held by him or his relative or associate enterprise or
persons acting in concert with him) results in aggregate shareholding of such person to be 5% or more of paid up
capital of a bank or entitles him to exercise 5% or more of the voting rights in a bank. Further, the RBI may, by
passing an order, restrict any person holding more than 5% of the total voting rights of a bank from exercising
voting rights in excess of 5%, if such person is deemed to be not fit and proper by the RBI. The recent RBI
guidelines also provide that any existing shareholding of any individual entity or group of related entities in
excess of 10% be reduced to 10% in a phased manner in consultation with the RBI.
The Bank’s major shareholder SUUTI has a shareholding in excess of 10% and any directive by the RBI to
SUUTI to comply with RBI guidelines will materially alter the ownership of the Bank. Any future sale of shares
by SUUTI could adversely affect the market price of the Equity Shares.
If ownership restrictions on private sector banks are relaxed, a single investor may acquire a controlling
stake in the Bank.
If the current restrictions are further liberalized to allow not only increased investment by Indian entities but
also greater foreign ownership, a single entity or group of investors acting in unison may acquire Equity Shares
to the extent that would allow it to control or strongly influence the Bank. Such an entity would, subject to
restrictions in the Articles, be able to determine, or would have a disproportionate influence compared to other
shareholders in, the election of the Board of Directors, management policies and the outcome of corporate
transactions submitted to shareholders for approval. There can be no assurance that any future controlling
shareholder will have the same interests as any minority shareholder or will pursue the same strategies as the
current management.
Major fraud, lapses of control, system failures or calamities could adversely impact the Bank’s business.
The Bank is vulnerable to risk arising from the failure of employees to adhere to approved procedures,
system controls, fraud, system failures, information system disruptions, communication systems failure and data
interception during transmission through external communication channels and networks. There can be no
26
assurance that the Bank’s use of encrypted password-based protections and firewalls are adequate to prevent
fraud or the invasion or breach of the network by an intruder. Failure to protect against fraud or breaches in
security may adversely affect the Bank’s operations and future financial performance. The Bank’s reputation
could be adversely affected by significant fraud committed by its employees, agents, customers or third parties.
Given the increasing share of retail products and services and transaction banking services in the Bank’s
overall business, the importance of systems technology to the Bank’s business has increased significantly. The
Bank’s principal delivery channels include automated teller machines (“ATMs”), internet banking, mobile
banking and call centers (telephone banking). Any failure in the Bank’s systems, particularly for retail products
and services and transaction banking, could significantly affect the Bank’s operations and the quality of its
customer service and could result in business and financial losses and adversely affect the trading price of the
Equity Shares. For example, the Bank’s customer service operations have been affected to some extent in the past
during the migration of the Bank’s core banking software to an updated version, as the application took time to
stabilize.
The Bank maintains a disaster recovery center at Bangalore in the event that the Bank’s main computer
center at Mumbai shuts down for any reason. The system in Bangalore is configured to come into operation if the
Mumbai system is no longer operational. See “Business — Information Technology”. However, if for any
reason the switch over to the backup system does not take place or if a calamity occurs in both Mumbai and
Bangalore such that the Bank’s business is compromised in both centers, the Bank’s operations would be
adversely affected.
Significant security breaches could adversely impact the Bank’s business.
The Bank seeks to protect its branch network infrastructure and computer systems from security breaches
and other disruptive problems caused by the Bank’s increased use of the internet. Computer break-ins and power
disruptions could affect the security of information stored in and transmitted through these computer systems and
network infrastructure. There may be areas in the system that have not been properly protected from security
breaches and other attacks. The Bank employs security systems, including firewalls and password encryption,
designed to minimize the risk of security breaches. Although the Bank intends to continue to implement security
technology and establish operational procedures to prevent break-ins, damage and failures, there can be no
assurance that these security measures will be adequate or successful. Failed security measures could have a
material adverse effect on the Bank’s business, its future financial performance and the trading price of the
Equity Shares.
Risks Relating to India
Financial instability in other countries may cause increased volatility in Indian financial markets.
The Indian market and the Indian economy are influenced by economic and market conditions in other
countries, particularly emerging market countries in Asia. Financial turmoil in Asia, Russia and elsewhere in the
world in recent years has affected the Indian economy. Although economic conditions are different in each
country, investors’ reactions to developments in one country can have adverse effects on the securities of
companies in other countries, including India. A loss of investor confidence in the financial systems of other
emerging markets may cause increased volatility in Indian financial markets and, indirectly, in the Indian
economy in general. Any worldwide financial instability could also have a negative impact on the Indian
economy. Financial disruptions may occur again and could harm the Bank’s business, its future financial
performance and the prices of the Equity Shares.
The global credit and equity markets have experienced substantial dislocations, liquidity disruptions and
market corrections in recent years. In particular, sub-prime mortgage loans in the United States have experienced
increased rates of delinquency, foreclosure and loss. Since September 2008, liquidity and credit concerns and
volatility in the global credit and financial markets increased significantly with the bankruptcy or acquisition of,
and government assistance extended to, several major U.S. financial institutions. The United States continues to
face adverse economic scenarios and should a further downgrade of the sovereign credit ratings of the U.S.
government occur, it is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured
or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government could also be
correspondingly affected by any such downgrade, which may have an adverse affect on the economic outlook
across the world.
Recent developments in the Eurozone have exacerbated the ongoing global economic crisis. Large budget
deficits and rising public debts in Europe have triggered sovereign debt finance crises that resulted in the bailouts
of European economies and elevated the risk of government debt defaults, forcing governments to undertake
27
aggressive budget cuts and austerity measures, in turn underscoring the risk of global economic and financial
market volatility. Moreover, in 2012, the sovereign rating of various European Union countries was downgraded.
Financial markets and the supply of credit are therefore likely to continue to be negatively impacted by ongoing
concerns surrounding the sovereign debts and/or fiscal deficits of several countries in Europe (primarily Greece,
Ireland, Italy, Portugal and Spain), the possibility of further downgrades of, or defaults on, sovereign debt,
concerns about a slowdown in growth in certain economies and uncertainties regarding the stability and overall
standing of the European Monetary Union. These and other related events have had a significant impact on the
global credit and financial markets as a whole, including reduced liquidity, greater volatility, widening of credit
spreads and a lack of price transparency in the United States, Europe and global credit and financial markets.
In response to such developments, legislators and financial regulators in the United States, Europe and other
jurisdictions, including India, have implemented several policy measures designed to add stability to the financial
markets. However, the overall impact of these and other legislative and regulatory efforts on the global financial
markets is uncertain, and they may not have the intended stabilizing effects. In the event that the current difficult
conditions in the global credit markets continue or if there are any significant financial disruption, this could have
an adverse effect on the Bank’s business, future financial performance and the trading price of the Equity Shares.
A slowdown in economic growth in India could cause the Bank’s business to suffer.
Any slowdown in economic growth in India could adversely affect the Bank’s borrowers and contractual
counterparties. Further, in light of the increasing linkage of the Indian economy to other developed and emerging
economies, the Indian economy is increasingly influenced by economic and market conditions in other countries
and, as a result, a slowdown in the economic growth of the United States and other countries in the developed
and emerging global economy could have an adverse impact on economic growth in India. The current uncertain
economic situation, in India and globally, could result in a further slowdown in economic growth, investment and
consumption. A further slowdown in the rate of growth in the Indian economy could result in lower demand for
credit and other financial products and services and higher defaults among corporate, retail and rural borrowers.
With the importance of retail loans to the Bank’s business, any slowdown in the growth or negative growth of
sectors such as housing and automobiles could adversely impact the Bank’s performance. Any such slowdown
could adversely affect the Bank’s business, including its ability to grow, the quality of its assets, its financial
performance and the trading price of the Equity Shares.
Increased volatility or inflation of commodity prices in India could adversely affect the Bank’s business.
In recent months, consumer and wholesale prices in India, despite exhibiting a softening in inflationary
trends, is persisting at a relatively higher level. The Government’s Wholesale Price Index inflation was 7.24% for
the month of November 2012 and the Consumer Price Index inflation was 9.90% for the month of November
2012. Any increased volatility or rate of inflation of global commodity prices, in particular oil and steel prices,
could adversely affect the Bank’s borrowers and contractual counterparties. Although the RBI has enacted certain
policy measures designed to curb inflation, these policies may not be successful. Because of the importance of its
commercial banking operations for retail customers and the importance of its agricultural loan portfolio to its
business, any slowdown in the growth of the housing, automobile or agricultural sectors could adversely impact
the Bank’s business, financial condition and results of operations.
Natural calamities and health epidemics could have a negative impact on the Indian economy and harm the
Bank’s business.
India has experienced natural calamities such as earthquakes, floods, drought and a tsunami in recent years,
including the tsunami that struck the southern coast of India and other Asian countries in December 2004, the
severe flooding in Mumbai in July 2005 and the earthquake that struck India and other Asian countries in
October 2005. Natural calamities could have an adverse impact on the Indian economy, which could adversely
affect the Bank’s business and the price of the Equity Shares.
Since April 2009, there have been outbreaks of swine flu, caused by the H1N1 virus, in certain regions of
the world, including India. Any future outbreak of health epidemics may restrict the level of business activity in
affected areas, which may, in turn, adversely affect the Bank’s business.
Trade deficits could have a negative effect on the Bank’s business and the trading price of the Equity
Shares.
India’s trade relationships with other countries can influence Indian economic conditions. In fiscal year
2012, the merchandise trade deficit was U.S.$185.0 billion compared to U.S.$130.6 billion in fiscal year 2011
and U.S.$118.2 billion in fiscal year 2010. This large merchandise trade deficit neutralizes the surpluses in
28
India’s invisibles, which are comprised of international trade in services, income from financial assets, labor and
property and cross border transfers of mainly workers’ remittances in the current account, resulting in a current
account deficit. If India’s trade deficits increase or become unmanageable, the Indian economy, and therefore the
Bank’s business, future financial performance and the trading price of the Equity Shares could be adversely
affected.
Any down-grading of India’s debt rating by an international rating agency could have a negative impact on
the Bank’s business and the trading price of the Equity Shares.
On April 25, 2012, Standard & Poor’s revised the outlook on the long-term ratings on India from “stable” to
“negative”, citing the slow down in India’s investment and economic growth and the widened current account
deficit, resulting in weaker medium term credit. The Standard & Poor’s press release of April 25, 2012 also
stated that the revised outlook reflects at least a one-in-three likelihood of a downgrade within the next
24 months if external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms
remain slow.
On June 8, 2012, Standard & Poor’s announced in a research report that it may lower India’s credit rating
below investment-grade, citing slowing gross domestic product (“GDP”) growth, setbacks or reversals in India’s
economic policy and increasing spreads of credit default swaps on India’s banks. On June 18, 2012, global rating
agency Fitch scaled down India’s sovereign credit rating outlook from “stable” to “negative,” citing structural
challenges such as corruption, inadequate economic reforms, and slow economic growth combined with elevated
inflation.
On October 10, 2012, Standard & Poor’s reiterated its negative outlook, citing that a downgrade is likely if
the country’s economic growth prospects dim, its external position deteriorates, its political climate worsens, or
fiscal reforms slow. However, they also cited that they may revise their outlook to stable if the government
implements initiatives to reduce structural fiscal deficits, improves its investment climate and increases growth
prospects.
On January 8, 2013, Fitch Ratings warned of a possible rating downgrade for India in the next 12 to
24 months due to the country’s widening fiscal deficit.
There can be no assurance that these ratings will not be further revised, suspended or withdrawn by
Standard and Poor’s or Fitch or that any other global rating agency will also not downgrade India’s credit ratings.
Any adverse revisions to India’s credit ratings for domestic and international debt by international rating
agencies may adversely affect the terms on which the Bank is able to finance future capital expenditure or
refinance any existing indebtedness business, its future financial performance and the trading price of the Equity
Shares.
Investors may have difficulty enforcing foreign judgments in India against the Bank or its management.
The Bank was constituted under the Companies Act. Substantially all of the Bank’s Directors and executive
officers and some of the experts named herein are residents of India and a substantial portion of the assets of the
Bank and such persons are located in India. As a result, it may not be possible for investors to effect service of
process on the Bank or such persons in jurisdictions outside of India, or to enforce against them judgments
obtained in courts outside of India predicated upon civil liabilities of the Bank or such directors and executive
officers under laws other than Indian Law.
In addition, India is not a party to any international treaty in relation to the recognition or enforcement of
foreign judgments. Recognition and enforcement of foreign judgments is provided for under section 13 and
section 44A of the Code. Section 44A of the Code provides that where a foreign judgment has been rendered by a
superior court in any country or territory outside India which the Government has by notification declared to be a
reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been
rendered by the relevant court in India. However, section 44A of the Code is applicable only to monetary decrees
not being in the nature of any amounts payable in respect of taxes or other charges of a like nature or in respect
of a fine or other penalty and is not applicable to arbitration awards.
The United States has not been declared by the Government to be a reciprocating territory for the purposes
of section 44A of the Code. However, the United Kingdom has been declared by the Government to be a
reciprocating territory and the High Courts in England as the relevant superior courts. Accordingly, a judgment
of a court in the United States may be enforced only by a fresh suit upon the judgment and not by proceedings in
execution. A judgment of a court in a jurisdiction which is not a reciprocating territory may be enforced only by
a new suit upon the judgment and not by proceedings in execution. Section 13 of the Code provides that a foreign
29
judgment shall be conclusive as to any matter thereby directly adjudicated upon except: (i) where it has not been
pronounced by a court of competent jurisdiction; (ii) where it has not been given on the merits of the case;
(iii) where it appears on the face of the proceedings to be founded on an incorrect view of international law or a
refusal to recognize the law of India in cases where such law is applicable; (iv) where the proceedings in which
the judgment was obtained were opposed to natural justice; (v) where it has been obtained by fraud; or (vi) where
it sustains a claim founded on a breach of any law in force in India. The suit must be brought in India within
three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in
India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is
brought in India. Furthermore, it is unlikely that an Indian court would enforce a foreign judgment if it viewed
the amount of damages awarded as excessive or inconsistent with Indian practice. A party seeking to enforce a
foreign judgment in India is required to obtain approval from the RBI to repatriate outside India any amount
recovered pursuant to execution. Any judgment in a foreign currency would be converted into Indian Rupees on
the date of the judgment and not on the date of the payment. The Bank cannot predict whether a suit brought in
an Indian court will be disposed of in a timely manner or be subject to considerable delays.
Terrorist attacks, civil disturbances and regional conflicts in South Asia and elsewhere may have a material
adverse effect on the Bank’s business and on the market for securities in India.
India has from time to time experienced instances of social, religious and civil unrest and hostilities between
neighboring countries. Military activity or terrorist attacks in the future could influence the Indian economy by
disrupting communications and making travel more difficult and such political tensions could create a greater
perception that investments in Indian companies involve higher degrees of risk. Events of this nature in the
future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy and
could have a material adverse effect on the market for securities of Indian companies, including the Equity
Shares.
There may be less company information available in Indian securities markets than in securities markets in
other more developed countries.
Equity Shares are listed on the Stock Exchanges. While the SEBI has issued regulations on disclosure
requirements, insider trading and other matters, there may be less publicly available information about Indian
entities than is regularly made available by public entities in many other countries. As a result, you may have
access to less information about the Bank’s business, result of operations and financial condition, and those of
the Bank’s competitors listed on Indian stock exchanges, on an ongoing basis, than entities subject to the
reporting requirements of other countries.
Financial difficulty and other problems in certain long-term lending institutions and investment institutions
in India could have a negative impact on the Bank’s business and the trading price of the Equity Shares
could decrease.
The Bank is exposed to the risks of the Indian financial system which in turn may be affected by financial
difficulties and other problems faced by certain Indian financial institutions. See “Industry Overview”. As an
emerging market economy, the Indian financial system faces risks not typically faced in developing countries,
including the risk of deposit runs, notwithstanding the existence of a national deposit insurance scheme. Certain
Indian financial institutions have experienced difficulties during recent years. Some cooperative banks have also
faced serious financial and liquidity crises. The problems faced by individual Indian financial institutions and any
instability in or difficulties faced by the Indian financial system generally could create adverse market perception
about Indian financial institutions and banks. This in turn could adversely affect the Bank’s business, future
financial performance and the price of the Equity Shares.
A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian economy,
which could have an adverse impact on the Bank. A rapid decrease in reserves would also create a risk of
higher interest rates and a consequent slowdown in growth.
According to a weekly statistical supplement released by RBI, India’s foreign exchange reserves totaled
over U.S.$296,538.8 million as at December 21, 2012. Flows to foreign exchange reserves can be volatile, and
past declines may have adversely affected the valuation of the Rupee. Further declines in foreign exchange
reserves, as well as other factors, could adversely affect the valuation of the Rupee and could result in reduced
liquidity and higher interest rates that could adversely affect the future financial performance of the Bank and the
market price of the Equity Shares.
30
Indian accounting principles differ from those which prospective investors may be familiar with in other
countries.
The Bank’s financial statements are in conformity with Indian GAAP (so far as it is applicable to banks),
consistently applied during the periods stated, except as provided in such report, and no attempt has been made to
reconcile any of the information given in this Placement Document to any other principles or to base it on any
other standards. Indian GAAP differs from accounting principles with which prospective investors may be
familiar in other countries, including the United States and the United Kingdom. In addition, there may be less
publicly available information about Indian public companies, such as the Bank, than is regularly made available
by public companies in such other countries. See “Summary of Significant Differences Among Indian GAAP
and U.S. GAAP”.
The effects of the planned convergence with IFRS and the adoption of "Indian accounting standards
converged with IFRS" (“IND-AS”) are uncertain.
The Institute of Chartered Accountants of India, the accounting body that regulates the accounting firms in
India, has announced a road map for the adoption of, and convergence with IFRS. The convergence of certain
Indian accounting standards with IFRS was notified by the Ministry of Affairs in February 2011. The date of
implementation of such standards has not yet been notified by the Ministry of Company Affairs. Because many
details of the convergence with IFRS are yet to be finalized, there is a significant lack of clarity regarding the
convergence process. Because there is a significant lack of clarity on the implementation of IND-AS and there is
not yet a significant body of established practice on which to draw in forming judgments regarding its
implementation and application, the Bank has not determined with any degree of certainty the impact that such
adoption will have on its financial reporting. Therefore, there can be no assurance that the Bank’s financial
condition, results of operations, cash flows or changes in shareholders’ equity will not appear materially worse
under IND-AS than under current Indian GAAP. In the Bank’s transition to IND-AS reporting, the Bank may
encounter difficulties in the ongoing process of implementing and enhancing its management information
systems. Moreover, there is increasing competition for the small number of experienced accounting personnel
familiar with IFRS accounting standards as more Indian companies begin to prepare IND-AS financial
statements.
The proposed new taxation system could adversely affect the Bank’s business and the trading price of the
Equity Shares.
The Government has proposed three major reforms in Indian tax laws, namely the Goods and Services Tax
(“GST”), the Direct Taxes Code and provisions relating to General Anti-Avoidance Rules (“GAAR”). While
GST is in relation to indirect taxes on goods and services, the Direct Taxes Code (which proposes to replace
certain direct tax laws) and GAAR pertain to direct taxes.
As the taxation system in India is intended to undergo a significant overhaul, the consequential effects on
the Bank cannot be determined as of the date of this Placement Document and there can be no assurance that
such effects would not adversely affect the Bank’s business, future financial performance and the trading price of
the Equity Shares.
The risks to financial stability have worsened and could adversely affect the Bank’s business.
As reported by the RBI in its financial stability report dated June 28, 2012, risks to financial stability of
India have worsened since December 2011, primarily due to global risks and domestic macroeconomic
conditions. The risks to domestic growth are accentuated by fiscal and external sector imbalances. It was also
observed that funding strains coupled with sovereign risks have led to fears of a precipitous deleveraging process
that could hurt global financial markets and the wider economy via asset sales and contractions in credit. Whilst
the direct impact of such deleveraging is not expected to be significant on domestic credit availability in India,
specialized types of financing like structured long term finance, project finance and trade finance could be
impacted. While the Bank may make use of such financings from time to time, Bank has little or no control over
any of these risks or trends and may be unable to anticipate changes in economic conditions. Adverse effects on
the Indian banking system could impact the Bank’s funding and adversely affect the Bank’s business, operations
and financial condition and the market price of the Equity Shares.
The Bank’s business may be adversely affected by changes in competition laws in India.
The Competition Act, 2002, as amended (the “Competition Act”), was enacted for the purpose of
preventing practices having an adverse effect on competition in India, and has mandated the Competition
Commission of India to regulate such practices. Under the Competition Act, any arrangement, understanding or
31
action, whether formal or informal, which causes or is likely to cause an appreciable adverse effect on
competition in India is void and may result in substantial penalties. Any agreement among competitors which
directly or indirectly determines purchase or sale prices; directly or indirectly results in bid rigging or collusive
bidding; limits or controls production, supply, markets, technical development, investment or the provision of
services; or shares the market or source of production or provision of services by way of allocation of
geographical area or types of goods or services or number of customers in the relevant market or any other
similar way, is presumed to have an appreciable adverse effect on competition in the relevant market in India and
shall be void. Further, the Competition Act prohibits the abuse of dominant position by any enterprise. If it is
proved that the contravention committed by a company took place with the consent or connivance or is
attributable to any neglect on the part of, any director, manager, secretary or other officer of such company, that
person shall be guilty of the contravention and may be punished. If the Bank or any of its employees is penalized
under the Competition Act, the Bank’s business may be adversely affected.
The effect of the Competition Act, which is a recent legislation, on the business environment in India is
unclear. If the Bank is affected, directly or indirectly, by the application or interpretation of any provision of the
Competition Act or any enforcement proceedings initiated by the Competition Commission of India or any other
relevant authority under the Competition Act or any claim by any party under the Competition Act or any
adverse publicity that may be generated due to scrutiny or prosecution by the Competition Commission of India,
the Bank’s business and financial performance may be materially and adversely affected.
Risks Relating to the Equity Shares and this Issue
There may not be an active or liquid market for the Bank’s Equity Shares, which may cause the price of the
Equity Shares to fall and may limit your ability to sell the Equity Shares.
The price at which the Equity Shares will trade after this Issue will be determined by the marketplace and
may be influenced by many factors, including:
• our financial results and the financial results of the companies in the businesses the Bank operates in;
• the history of, and the prospects for, the Bank’s business and the sectors and industries in which it
competes;
• the valuation of publicly traded companies that are engaged in business activities similar to the Bank’s;
• significant developments in India’s economic liberalization and deregulation policies.
In addition, the Indian stock market has from time to time experienced significant price and volume
fluctuations that have affected the market prices for the securities of Indian companies. As a result, investors in
the Equity Shares may experience a decrease in the value of the Equity Shares regardless of the Bank’s operating
performance or prospects.
Conditions in the Indian securities market may affect the price or liquidity of the Equity Shares.
Securities markets in India are smaller and more volatile than securities markets in more developed
economies. The Indian stock exchanges have in the past experienced substantial fluctuations in the prices of
listed securities. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed
restrictions on trading in certain securities, limitations on price movements and margin requirements. Although
the price of the Bank’s stock has been as volatile as the markets generally, future fluctuations could have a
material adverse effect on the price of the Bank’s Equity Shares.
The Equity Shares are subject to transfer restrictions.
The Equity Shares are being offered in transactions not required to be registered under the Securities Act.
Therefore, the Equity Shares may be transferred or resold only in a transaction registered under or exempted
from the registration requirements of the Securities Act and in compliance with any other applicable securities
laws.
Pursuant to the SEBI Regulations, for a period of 12 months from the date of the issue of the Equity Shares
in the Issue, QIBs purchasing Equity Shares in the Issue may only sell their Equity Shares on the NSE or the BSE
and may not enter into any off-market trading in respect of these Equity Shares. Allotments made to FVCIs,
VCFs and AIFs in the Issue are subject to the rules and regulations that are applicable to them, including in
relation to lock-in requirements. This may affect the liquidity of the Equity Shares purchased by you and it is
uncertain whether these restrictions will adversely impact the market price of the Equity Shares purchased by
you.
32
You may be subject to Indian taxes arising out of capital gains.
Under current Indian tax laws and regulations, capital gains arising from the sale of shares in an Indian
company are generally taxable in India. Any gain realized on the sale of listed equity shares on a stock exchange
held for more than 12 months will not be subject to capital gains tax in India if Securities Transaction Tax
(“STT”) has been paid on the transaction. STT will be levied on and collected by a domestic stock exchange on
which the equity shares are sold. Any gain realized on the sale of equity shares in an Indian company held for
more than 12 months which are sold other than on a recognized stock exchange and on which no STT has been
paid, will be subject to long term capital gains tax in India. Any gain realized on the sale of listed equity shares
held for a period of 12 months or less will be subject to short term capital gains tax in India. Further, Indian tax
on capital gains may be relieved under certain tax treaties. For further information, refer to the section
“Taxation”.
Any trading closures at the BSE and the NSE may adversely affect the trading price of the Bank’s Equity
Shares.
The regulation and monitoring of Indian securities markets and the activities of investors, brokers and other
participants differ, in some cases significantly, from those in Europe and the U.S. A closure of, or trading
stoppage on, either of the BSE and the NSE could adversely affect the trading price of the Equity Shares.
Historical trading prices, therefore, may not be indicative of the prices at which the Equity Shares will trade in
the future.
There are foreign investment restrictions under Indian law that limit the Bank’s ability to attract foreign
investors, which may adversely impact the market price of the Bank’s Equity Shares.
Under current Indian regulations and practice, the approval of the RBI is required for the sale of equity
shares by a NRI to a resident of India and for repatriation of the proceeds thereof, unless the sale is made through
a stock exchange in India. Under currency exchange controls that are in effect in India, any approval granted by
RBI for a transfer of shares by a NRI to a resident of India will require the equity shares to be transferred at a
price based on a specified formula, and a higher price per share may not be permitted. Further, prior to the
repatriation of sale proceeds, a no objection/tax clearance certificate from the income tax authority or the
provision of an undertaking in the prescribed format along with a certificate from an accountant would be
required. There can be no assurance that any required approval from the RBI or any other Government agency
can be obtained on any particular terms or at all.
You may be restricted in your ability to exercise pre-emptive rights under Indian law and may be diluted in
your ownership position.
Under the Companies Act a company incorporated in India must offer its holders of equity shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership
percentages before the issuance of any new equity shares, unless the pre-emptive rights have been waived by
adoption of a special resolution by holders of three-fourths of the shares which are voted on the resolution or
unless the Bank has obtained Government approval to issue shares without such rights. Moreover, if the law of
the jurisdiction you are in does not permit you to exercise your pre-emptive rights without the Bank filing an
offering document or registration statement with the applicable authority of such jurisdiction, you will be unable
to exercise your pre-emptive rights unless the Bank makes such a filing. To the extent that you are unable to
exercise pre-emptive rights granted in respect of the Equity Shares, your proportional interest in the Bank may be
reduced.
The Bank may be classified as a passive foreign investment company, which could result in adverse United
States federal income tax consequences to United States investors.
Based in part on certain proposed Treasury regulations with respect to banks, which are not yet finalized,
although not free from doubt, the Bank does not expect to be treated as a passive foreign investment company
(“PFIC”) for its current taxable year ending March 31, 2013 for United States federal income tax purposes.
However, the application of the PFIC rules is subject to ambiguity in several respects and the determination of
whether the Bank is a PFIC is a factual determination made annually after the end of each taxable year, thus it is
possible that the Bank may be treated as a PFIC in any taxable year. If the Bank is treated as a PFIC for any
taxable year during which a United States investor holds an Equity Share, certain adverse United States federal
income tax consequences could apply to the United States investor. See “U.S. Federal Income Taxation —
U.S. Federal Income Tax Considerations”.
33
Foreign Account Tax Compliance withholding may affect payments on the Equity Shares.
The U.S. “Foreign Account Tax Compliance Act” (or “FATCA”) imposes a new reporting regime and,
potentially, a 30% withholding tax with respect to (i) certain payments from sources within the United States,
(ii) “foreign passthru payments” made to certain non-U.S. financial institutions that do not comply with this new
reporting regime, and (iii) payments to certain investors that do not provide identification information with
respect to interests issued by a participating non-U.S. financial institution. The Bank is classified as a financial
institution for these purposes. If a withholding tax in respect of FATCA were to be deducted or withheld from
any payments, neither the Bank nor any other person will pay additional amounts as a result of the deduction or
withholding. Prospective investors should refer to the section “U.S. Federal Income Taxation — U.S. Federal
Income Tax Considerations — Foreign Account Tax Compliance Act.”
34
MARKET PRICE INFORMATION
As at December 31, 2012, 427,155,633 Equity Shares were issued and outstanding. The Equity Shares are
listed and actively traded on the NSE and BSE. The Equity Shares were first listed on the NSE, the BSE and the
Ahmedabad Stock Exchange in November 1998. In August 2009, the Bank voluntarily delisted its shares from
the Ahmedabad Stock Exchange.
The tables set forth below indicate the high and low prices of the Equity Shares and the volume of trading
activity for the specified periods. As the Equity Shares are actively traded on the NSE and the BSE, the stock
market data has been given separately for each of these Stock Exchanges. The closing prices of the Equity Shares
on the NSE and the BSE on December 31, 2012 were Rs.1,356.55 and Rs.1,356.50 per Equity Share,
respectively.
A. Market price information during the last three years:
The following tables set forth the reported high, low and average market prices and the trading volumes of
the Equity Shares on the Stock Exchanges on the dates on which such high and low prices were recorded and the
total trading volumes for the years 2012, 2011 and 2010:
NSE
Total
Total
No. of Volume
No. of Volume
Equity of Equity
Equity of Equity
Shares Shares
Shares Shares Average Total volume of
traded traded
traded traded
price
Equity Shares
on date on date
on date on date for the
traded in the
Calendar Year
High Date of High of high of high Low Date of Low of low
of low
year
Fiscal years
(Rs.)(1)
(Rs. in (Rs.)(1)
(Rs. in (Rs.)(1)
In
(Rs. in
million)
million)
number million)
2012 . . . . . . . . . . . . . . 1,379.00 December 6, 1,480,568 1,992 784.00 January 2,
1,945,453 1,549 1,107.62 544,487,741 595,918
2012
2012
2011 . . . . . . . . . . . . . . 1,460.45 April 8, 2011 1,565,244 2,266 803.30 December 30, 2,032,545 1,658 1,192.69 460,942,444 537,619
2011
2010 . . . . . . . . . . . . . . 1,608.50 October 14, 1,901,910 3,019 965.15 January 27, 2,425,515 2,382 1,282.18 390,313,748 493,142
2010
2010
(1) High based on maximum of intra-day high prices, Low based on minimum of intra-day low prices and average based on the daily closing
prices for the relevant period.
Calendar Year
No. of
Equity
Shares
traded
on date
High Date of High of high
(Rs.)(1)
2012 . . . . . . . . . . . . . . 1,377.00 December 6, 208,510
2012
2011 . . . . . . . . . . . . . . 1,460.55 April 8,
204,085
2011
2010 . . . . . . . . . . . . . . 1,608.00 October 14, 327,181
2010
BSE
Total
Volume
of Equity
Shares
traded
on date
of high Low Date of Low
(Rs. in (Rs.)(1)
million)
281
784.50 January 2,
2012
295
803.00 December 30,
2011
520
967.15 January 27,
2010
Total
No. of Volume
Equity of Equity
Shares Shares Average Total volume of
traded traded
price
Equity Shares
on date on date for the
traded in the
of low
of low
year
Fiscal years
(Rs. in (Rs.)(1)
In
(Rs. in
million)
number million)
315,580
251
1,107.42 92,121,064 97,483
341,025
278
1,192.57 53,664,502 61,994
246,310
242
1,281.74 53,687,600 67,238
(1) High based on maximum of intra-day high prices, Low based on minimum of intra-day low prices and average based on the daily closing
prices for the relevant period.
Notes:
In case of two days with the same high or low price price, the date with the higher volume has been considered.
(Source: www.nseindia.com and www.bseindia.com, the websites of the NSE and the BSE, respectively)
35
B. Market Price Information during the last six months:
The following tables set forth, the reported high, low and average market prices and the trading volumes of
the Equity Shares of the Bank on the Stock Exchanges on the dates on which such high and low prices were
recorded and the total trading volumes during each of the last six months:
NSE
Total
Total
No. of Volume
No. of Volume
Equity of Equity
Equity of Equity
Shares Shares
Shares Shares Average Total volume of
traded traded
traded traded
price
Equity Shares
on date on date
on date on date for the
traded in the
Month
High Date of High of high of high Low Date of Low of low
of low month
month
(Rs.)(1)
(Rs. in (Rs.)(1)
(Rs. in (Rs.)(1)
In
(Rs. in
million)
million)
number million)
July 2012 . . . . . . . . . 1,081.40 July 11,
1,902,935 2,038
991.70 July 27,
2,463,639 2,505 1,038.38 46,379,825 48,225
2012
2012
August 2012 . . . . . . . 1,122.00 August 16,
2,047,213 2,282
988.55 August 31, 2,735,770 2,735 1,068.35 39,094,923 41,590
2012
2012
September 2012 . . . . 1,174.50 September 24, 4,289,343 4,930
927.25 September 5, 5,304,880 4,982 1,026.82 63,866,260 66,130
2012
2012
October 2012 . . . . . . 1,246.15 October 26, 1,738,537 2,146 1,008.50 October 5, 2,657,566 3,017 1,165.51 47,692,597 55,439
2012
2012
November 2012 . . . . 1,324.60 November 30, 1,793,912 2,355 1,177.00 November 1, 1,354,503 1,623 1,240.18 29,157,853 36,239
2012
2012
December 2012 . . . . . 1,379.00 December 6, 1,480,568 1,992 1,304.50 December 3, 1,363,466 1,794 1,339.33 28,511,116 38,153
2012
2012
(1) High based on maximum of intra-day high prices, low based on minimum of intra-day low prices and average based on the daily closing
prices for the relevant period.
Month
High
(Rs.)(1)
No. of
Equity
Shares
traded
on date
Date of High of high
July 2012 . . . . . . . . . 1,081.80 July, 11,
2012
August 2012 . . . . . . . 1,121.90 August 16,
2012
September 2012 . . . . 1,175.00 September 24,
2012
October 2012 . . . . . . 1,246.40 October 26,
2012
November 2012 . . . . 1,324.00 November 30,
2012
December 2012 . . . . . 1,377.00 December 6,
2012
225,996
207,065
526,910
181,798
150,771
208,510
BSE
Total
Volume
of Equity
Shares
traded
on date
of high Low Date of Low
(Rs. in (Rs.)(1)
million)
242
993.10 July 27,
2012
231
990.00 August 31,
2012
606
926.90 September 5,
2012
224 1,080.00 October 11,
2012
198 1,176.95 November 1,
2012
281 1,303.20 December 3,
2012
Total
No. of Volume
Equity of Equity
Shares Shares Average Total volume of
traded traded
price
Equity Shares
on date on date for the
traded in the
of low
of low month
month
(Rs. in (Rs.)(1)
In
(Rs. in
million)
number million)
328,518
334
1,038.20 5,423,402 5,643
300,969
301
1,068.73 3,969,157
4,233
677,406
638
1,026.43 7,260,766
7,486
258,761
289
1,165.02 5,419,132
6,323
163,379
196
1,239.66 3,199,163
3,973
145,690
192
1,339.20 4,714,099
6,306
(1) High based on maximum of intra-day high prices, low based on minimum of intra-day low prices and average based on the daily closing
prices for the relevant period.
Notes:
In case of two days with the same high or low price, the date with higher volume has been considered.
(Source: www.nseindia.com and www.bseindia.com, the websites of the NSE and the BSE, respectively)
36
C. Market price on December 18, 2012, the first working day following the Board meeting held on
December 17, 2012 approving the Issue:
Open
(Rs.)
High
(Rs.)
NSE
Low
(Rs.)
Close
(Rs.)
Volume(1)
1,358.10
1,363.30
1,320.20
1,353.95
1,771,672
Open
(Rs.)
High
(Rs.)
BSE
Low
(Rs.)
Close
(Rs.)
Volume(1)
1,359.00
1,362.35
1,320.00
1,350.85
187,636
(1) Number of Equity Shares.
(Source: www.nseindia.com and www.bseindia.com, the websites of the NSE and the BSE, respectively)
37
USE OF PROCEEDS
The total initial proceeds of the Issue will be Rs.47,260 million. After deducting the Issue expenses of
approximately Rs.472 million, the net initial proceeds of the Issue will be approximately Rs.46,788 million (“Net
Proceeds”).
Subject to compliance with applicable laws and regulations, the Bank intends to use the Net Proceeds to
enhance its capital adequacy and for general corporate purposes, in accordance with applicable law.
38
CAPITALIZATION STATEMENT
The following table sets forth the Bank’s capitalization and indebtedness as at December 31, 2012 which
has been extracted from the Bank’s reviewed but unaudited non-consolidated interim financial results which
were prepared in accordance with Indian GAAP as applicable to banks and shows the effect of adjusting for the
Issue.
This capitalization table should be read together with “Selected Financial Information”, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”, “Selected Statistical
Information” and the Financial Statements and related notes included elsewhere in this Placement Document.
As at December 31,
2012
Rs.
U.S.$(1)
(In millions)
As Adjusted(6)
Rs.
U.S.$(1)
(In millions)
Indebtedness(2)
— Deposits(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— Perpetual debt and Upper Tier II instruments . . . . . . . . . . . . . . . . .
2,445,014
262,100
106,293
19,283
44,568
4,778
1,938
351
2,445,014
262,100
106,293
19,283
44,568
4,778
1,938
351
Total Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,832,690
51,635
2,832,690
51,635
Shareholders’ Funds
— Share Capital(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— Reserves and Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,272
265,995
78
4,849
4,612
312,915
84
5,704
Total Shareholders’ Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
270,267
4,926
317,527
5,788
Total Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,102,957
56,561
3,150,217
57,423
(1) U.S. dollar translations have been made using the exchange rate of U.S.$1.00 = Rs.54.86 as at December 31, 2012, based
on the U.S. Federal Reserve’s noon buying rate at that date.
(2) Includes short-term and long-term.
(3) Deposits include both demand and time deposits.
(4) As at December 31, 2012, there were 427,155,633 Equity Shares at Rs.10 face value outstanding.
(5) Contingent liabilities as at December 31, 2012 amounted to Rs.6,284,998 million.
(6) As adjusted to show the number of Equity Shares issued in the Issue. This does not include the effects of any take-up by
the Promoters of any of the Equity Shares in the Bank offered in the Preferential Allotment.
(7) Simultaneously with the Issue, the Bank is making a Preferential Allotment of up to 5,837,945 Equity Shares to certain
Promoters at a price of Rs.1,390 per Equity Share which is equivalent to the Issue Price.
(8) There has been no other material change in the capitalization and indebtedness or contingent liabilities of the Bank since
December 31, 2012.
39
DIVIDENDS
The Bank generally declares and pays dividends in the fiscal year following the year to which they relate.
The following table sets out, for the periods indicated, the dividends paid by the Bank.
Dividend Per
Equity Share
Rs.
U.S.$(3)
Fiscal Year
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.00
14.00
16.00
0.27
0.31
0.31
Total Amount
of Dividend
Paid(1)(2)
Rs.
U.S.$ (3)
(In millions)
4,862
5,748
6,611
108.16
129.05
129.91
(1) Dividends paid exclude dividend distribution tax.
(2) Dividends paid exclude dividends paid on employee stock options exercised subsequent to year-end but before the record
date for declaration of dividend.
(3) The exchange rates used for conversion were Rs.44.95 = U.S.$1.00 for 2010, Rs.44.54 = U.S.$1.00 for 2011 and
Rs.50.89 = U.S.$1.00 for 2012.
For a summary of certain Indian and United States federal tax consequences of dividend distributions to
shareholders, see “Taxation” and “U.S. Federal Income Taxation”.
Future dividends will depend on the Bank’s revenues, cash flows, financial condition (including capital
position) and other factors. For a description of regulation of dividends, see “Supervision and
Regulation — Restrictions on Payment of Dividends”.
40
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the Bank’s financial condition is based on the Bank’s audited
non-consolidated financial statements as at and for the years ended March 31, 2010, March 31, 2011 and
March 31, 2012 and unaudited and non-consolidated interim financial results as at and for the half year ended
September 30, 2012, unless the context requires otherwise. This discussion should be read together with
“Selected Financial Information”, “Selected Statistical Information” and the Financial Statements and related
notes included elsewhere in this Placement Document. The Bank prepares its non-consolidated Financial
Statements in accordance with Indian GAAP as applicable to banks, which differs in some respects from U.S.
GAAP. See “Summary of Significant Differences Among Indian GAAP and U.S. GAAP”. The Financial
Statements reflect applicable statutory requirements, regulatory guidelines and accounting practices in India;
these requirements, guidelines and practices change from time to time. In accordance with Indian GAAP,
adjustments to reflect such changes are made on a prospective basis, and financial statements for earlier periods
are not restated. All information in this section regarding cost, yield and average balances is based on daily
average balances outstanding during the relevant period.
This discussion contains forward-looking statements and reflects the current views of the Bank with respect
to future events and financial performance. Actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, such as those set forth under “Risk Factors” and
elsewhere in this Placement Document.
Overview
The Bank is a leading private sector bank and financial services company in India offering a wide range of
products and services to corporate and retail customers through a variety of delivery channels. The Bank
commenced operations in April 1994, and over the last 18 years, the Bank has grown both in terms of the size of
its asset base and its physical network of branches, extension counters and automated teller machines (ATMs).
The Bank has experienced significant growth while maintaining stable asset quality and enhancing its low-cost
funding structure.
As at September 30, 2012, the Bank was the third largest private sector bank in India in terms of total assets.
The Bank’s total assets as at September 30, 2012 were Rs.3,026.81 billion as compared to Rs.2,856.28 billion as
at March 31, 2012. The Bank’s net profit has grown from Rs.33.88 billion in the year ended March 31, 2011 to
Rs.42.42 billion in the year ended March 31, 2012, representing an increase of 25.19%. The Bank’s net profit has
increased by 22.25% from Rs.18.63 billion in the half year ended September 30, 2011 to Rs.22.77 billion in the
half year ended September 30, 2012. As at September 30, 2012, the Bank’s net loans and net deposits amounted
to Rs.1,721.32 billion and Rs.2,356.19 billion, respectively. As at September 30, 2012, the Bank had a network
of 1,741 branches and extension counters and 10,297 ATMs spread over 1,113 centers in India. In addition to the
Bank’s growing branch and ATM networks, the Bank also offers telephone banking in various cities, as well as
internet banking and mobile telephone banking. These and other resources give the Bank the capability to deliver
a broad range of banking products through multiple delivery channels that enhance convenience for customers.
As at September 30, 2012, the Bank also had seven overseas offices with branches in Singapore, Hong Kong and
Colombo and representative offices in Shanghai, the Dubai International Financial Centre (“DIFC”) and Abu
Dhabi. The Bank’s foreign branches primarily offer corporate banking, trade finance and treasury and risk
management services.
The Bank’s core income stream comprises interest income earned on its large and mid-corporate, SME and
agriculture and retail loan portfolio, as well as its money-market operations and investment portfolio. The Bank
also earns fee and commission income from the processing of loans, documentary credits, bank guarantees,
placements and syndication, cash management services, advisory services, depository services, capital market
services, ATM interchange and cards, remittance, wealth management and sale of third party products.
Additionally, the Bank earns trading profit from proprietary trading in investments, foreign exchange and
derivatives. The Bank’s expenses consist of interest and non-interest expenses. The Bank’s major non-interest
expenses include staff cost, occupancy cost (including rent for office premises, repair and maintenance),
depreciation and other administrative costs.
41
Factors Affecting Results of Operations and Financial Condition
The Bank’s asset portfolio, financial condition and results of operations have been, and are expected to be,
influenced by numerous factors, including but not limited to those described below.
Macroeconomic Environment
As a bank with the vast majority of its operations in India, the Bank’s financial position and results of
operations have been and will continue to be significantly affected by overall economic growth patterns in India.
With a population of 1.21 billion as at March 2011, India currently ranks as the world’s second most populous
country, and in 2011 the Indian economy was the ninth largest in the world, with a nominal GDP of
U.S.$1,897 billion measured in U.S. dollars at market exchange rates (and the third largest economy in
purchasing power parity terms). India’s Central Statistical Organization estimated India’s GDP growth at 8.4%
during the fiscal year 2010, 8.4% in fiscal year 2011 and 6.5% in fiscal year 2012. Over the past few years, India
has become increasingly integrated with the global economy, both through trade and finance. The loss of export
markets is consequently likely to affect domestic output and employment, particularly as many export segments
are also employment intensive. High growth in India until fiscal year 2011 was partly facilitated by a 40%
increase in merchandise exports in fiscal year 2011. Availability of foreign funds helped maintain Indian
investment rate in excess of its domestic savings rate, for example large foreign institutional (portfolio)
investment flows of over U.S.$30 billion in both fiscal year 2010 and fiscal year 2011.
Fiscal and monetary policy in India
In 2009 and 2010, both the Government and the RBI have taken fiscal and monetary policy measures to
address the global slowdown. The RBI reduced its policy rates (liquidity adjustment facility (“LAF”) repo rates)
by 425 basis points in the period from September 2008 to April 2009 and injected significant liquidity into the
markets. However, a faster than expected recovery and rising inflation led the RBI to start exiting the
accommodative monetary policy stance in the last quarter of fiscal 2010. The RBI’s CRR was raised by 75 basis
points in February 2010 and by another 25 basis points in the April 2010 monetary policy review. In response to
increased inflation, in fiscal years 2011 and 2012, the RBI followed a tight monetary policy with gradual
increases in the repo rate from 5.00% on March 31, 2010 to a peak of 8.50% with effect from October 25, 2011.
The monetary policy easing cycle started with the RBI reducing the CRR 50 basis points from 6.0% to 5.5% at
its January 2012 monetary policy review, another 75 bps in March 2012, followed by a 50 bps reduction in the
repo rate to 8.0% effective April 17, 2012, as part of an overall effort to stimulate the economy. The CRR was
reduced by another 50 bps to 4.25% in the latter half of 2012 (25 bps each at the September and October
monetary policy review meetings). In the first three quarters of fiscal year 2013, the RBI retained the repo rate at
8.00%, reduced the CRR by 50 bps to 4.25% (25 bps each at the September and October monetary policy review
meetings) and resorted to Open Market Operation sales to inject liquidity into the market.
In fiscal years 2009 and 2010, the central Government’s fiscal deficit rose to 6.0% and 6.4% of GDP,
respectively. As a part of fiscal consolidation, the central Government reduced its deficit to 4.9% in fiscal year
2011, but this increased to 5.9% in fiscal 2012 on account of increased expenditure. The Central Government in
the mid-year economic analysis for fiscal year 2013 has announced a fiscal consolidation road map that aimed to
contain the fiscal deficit to 5.3% of GDP for the current fiscal year and further reducing it to 4.8% in the fiscal
year 2014.
Health of the Indian banking sector
Banking system credit growth, after remaining subdued during fiscal year 2010, subsequently recovered,
growing at a rate of 22.9% in fiscal year 2011 and 18.1% in fiscal year 2012. Non-food credit growth was 17.1%
as at March 26, 2010 on a year-on-year basis, up to 21.3% as at March 25, 2011 and down to 16.8% as at
March 23, 2012. However, deposit growth lagged behind credit growth in the financial system with total deposits
growth coming down from 18.3% in fiscal year 2011 to 14.9% in fiscal year 2012. While demand deposits
declined by 1.8% in fiscal year 2012 compared to an increase of 12.3% reported the previous year, savings
deposits grew by only 13.1% as compared to an increase of 21.8% recorded in the previous year.
Non-food credit grew by 16% year-on-year on December 14, 2012 as against 16.1% at June 29, 2012,
16.8% at December 16, 2011 and 19.5% at July 1, 2011. Total deposits recorded a growth of 13.4% at
December 14, 2012 on a year-on-year basis as compared to 13.5% at June 29, 2012, 18% at December 16, 2011
and 18.4% at July 1, 2011.
The recent changes in deposits and credit is a result of the RBI’s response to liquidity shortages during the
fiscal years 2011 and 2012, and a variety of factors such as the Government’s 3G telecom spectrum auction,
resulting in high borrowing in the telecom sector in June 2010 and lower than anticipated government spending.
42
Liquidity continued to remain tight in the later part of fiscal year 2012. During the latter part of fiscal year 2011,
the RBI initiated several measures to ease systemic liquidity including decreasing the SLR by 100 basis points
from 25.0% to 24.0% in December 2010, providing additional liquidity support under the LAF window,
operating a second LAF on a daily basis and open market operations for the purchase of government securities
worth Rs.1.34 trillion. Through fiscal year 2012, banks remained net borrowers from the RBI’s LAF with
average borrowings of approximately Rs.829.4 billion on a daily basis in fiscal year 2012. In response to tight
systemic liquidity and the rising interest rate environment, scheduled commercial banks increased their deposit
rates for various maturities by 25 to 100 basis points during fiscal year 2012. The impact of the rising cost of
funds for banks was also reflected in lending rates, with banks increasing their base rates by about 125 basis
points during fiscal year 2012. Credit from scheduled commercial banks started moderating from early June
2011.
RBI Financial Stability Reports have pointed out that the health of the Indian banking sector is subject to
economic forces. The report noted that Indian banks have negligible exposures to the most affected European
countries and that direct effects from uncertainty related to the Eurozone debt crisis are expected to remain
muted. However, funding constraints in international financial markets could impact both the availability and
cost of foreign funding for banks and corporates. Further, India’s economic growth has been affected through the
trade and finance channels. Domestic demand and domestic corporate growth have recently begun to slow, while
Indian interest rates have risen and inflationary pressures have increased.
The Indian banking sector has maintained its CRAR above the regulatory requirement of 9.0%. The banking
system’s CRAR marginally improved from 14.2% as at March 31, 2011 to 14.3% as at March 31, 2012.
Leverage ratio has improved slightly to 6.5%, and remains well above the Basel III required minimum of 4.5%.
However, financial conditions in India have put pressure on the asset quality of Indian banks. The gross NPA
ratio for Indian Banks increased from 2.5% to 3.1% between March 2011 and March 2012. As a result, loan loss
provisions are increasing across the sector. However, fiscal year 2012 saw diverging trends in gross NPA ratios.
While public sector banks witnessed a sharp jump in gross NPA ratios from 2.4% to 3.3%, private sector banks
reduced their gross NPA ratios from 2.5% to 2.1%.
Interest Rates
A majority of the Bank’s corporate and commercial loans are priced at a floating rate, subject to a published
minimum base rate. Beginning July 2010, the RBI implemented a new base rate mechanism designed to move
Indian banks closer to a market-based interest rate regime, with each bank in India to publicly disclose its own
minimum rate, or “base rate”, for all new and existing loans and advances which are due for re-pricing, subject to
certain limited exceptions. Under this new Base Rate system, banks must review and revise their base rates at
least once per quarter. This Base Rate system replaced the benchmark prime lending rate (“BPLR”) system
whereby a bank established interest rates based upon its prime lending rate, which could be higher than actual
interest rates provided to certain borrowers.
Provisioning Policies
The Bank’s profit is affected by the amount of its provisions against loans. For fiscal year 2011 and fiscal
year 2012, total provisions against NPAs increased due to an increase in gross NPAs as well as the
implementation of more conservative RBI guidelines on provisioning for aging substandard and doubtful NPAs.
In December 2009 the RBI directed the banks to ensure that their total provisioning coverage ratio, including
floating provisions, is not less than 70.0%. Banks were required to achieve this norm by the end of September
2010. In its circular dated April 21, 2011, the RBI had advised banks that:
• the provisioning coverage ratio of 70.0% may be with reference to the gross NPA position of the banks as
at September 30, 2010;
• the surplus of the provision under provisioning coverage ratio vis-à-vis as required by prudential norms
should be segregated into an account styled as “countercyclical provisioning buffer,” computation of
which may be undertaken as per the directions of the RBI; and
• this buffer will be allowed to be used by banks for making specific provisions for NPAs during periods of
system wide downturn, with the prior approval of RBI.
Banks are required to disclose provisioning coverage ratios in the notes to accounts on their balance sheet.
As indicated in the Monetary Policy Statement of April 2012, a working group of the RBI has reviewed the
existing prudential guidelines on restructuring of advances by banks/financial institutions and will issue draft
guidelines by end-January 2013. As an immediate measure, the provision for restructured standard accounts has
been increased from the existing 2.0% to 2.75% in September 2012.
43
See “Risk Factors — Risks Relating to the Business of the Bank — An increase in the Bank’s portfolio
of NPAs and RBI-mandated provisioning requirements may adversely affect its business”.
Government Policies and Regulations in Relation to the Indian Banking System
The Indian banking industry is regulated by the RBI and operates within a framework that provides
guidelines on capital adequacy, corporate governance, management, banking operations, anti-money laundering
and provisioning for NPAs. The framework also stipulates required levels of lending to “priority sectors,” such as
agriculture, which may expose the Bank to higher levels of risk than it otherwise might face. The RBI can alter
any of these policies at any time and can introduce new regulations to control any particular line of business. See
“Supervision and Regulation.” For example, on January 31, 2012, the RBI declared that all private sector banks
would be eligible to handle Government and state government business and would be considered on an equal
basis with public sector banks. Prior to this declaration by the RBI, only public sector banks and three designated
private banks could conduct Government business. Such policy alterations may result in increased competition or
an increase in capital requirements, which will in turn have an impact on the Bank’s results of operations. In
addition to having gradually established more stringent capital adequacy requirements, the RBI has prescribed
CRR requirements for Indian banks and has suspended interest payments on CRR balances. Any further
increases in the CRR could have a negative impact on the Bank’s results of operations. Any other changes in the
regulatory environment as pertaining to the Indian banking industry could have a material impact on the Bank’s
operations and financial condition. See “Risk Factor — Risks Relating to the Business of the Bank —
Banking is a heavily regulated industry and material changes in the regulations which govern the Bank
could cause its business to suffer.”
Critical Accounting Policies
The Financial Statements are prepared in accordance with Indian GAAP as applicable to banks. The
preparation of the Financial Statements requires the Bank to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent liabilities.
The notes to the Bank’s Financial Statements contain a summary of its significant accounting policies. Certain of
these policies are critical to the portrayal of the Bank’s financial condition, since they require management to
make subjective judgments, some of which may relate to matters that are inherently uncertain. Below is a
discussion of these critical accounting policies. The Bank bases its estimates and judgments on historical
experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. As a result of changes in applicable statutory
requirements, regulatory guidelines and accounting practices in India, the accounting policies of the Bank have
undergone changes during the periods covered by this discussion. Accordingly, this discussion should be read in
conjunction with the Financial Statements and notes as applicable during the respective fiscal year.
Set forth below are the Bank’s critical accounting policies under Indian GAAP for fiscal 2012.
Investments
Classification
In accordance with the RBI guidelines, investments are classified at the date of purchase as:
• Held for Trading (“HFT”);
• Available for Sale (“AFS”); and
• Held to Maturity (“HTM”).
Investments that are held principally for sale within a short period are classified as HFT securities. As per
the RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS
securities as on that date.
Investments that the Bank intends to hold until maturity are classified under the HTM category.
All other investments are classified as AFS securities.
However, for disclosure in the balance sheet, investments in India are classified under six
categories: government securities, other approved securities, shares, debentures and bonds, investment in
subsidiaries/joint ventures and others.
Investments made outside India are classified under three categories: government securities, subsidiaries
and/or joint ventures abroad and others.
44
Transfer of Security Between Categories
Transfer of security between categories of investments is accounted as per the RBI guidelines.
Acquisition Cost
Costs including brokerage commissions pertaining to investments, paid at the time of acquisition, are
charged to the profit and loss account. Broken period interest is charged to the profit and loss account. Cost of
investments is computed based on the weighted average cost method.
Valuation
Investments classified under the HTM category are carried at acquisition cost unless it is more than the face
value, in which case the premium is amortized over the period remaining to maturity. In terms of RBI guidelines,
discounts on securities held under the HTM category are not accrued and such securities are held at the
acquisition cost till maturity.
Investments classified under the AFS and HFT categories are marked to market. The market/fair value of
quoted investments included in the AFS and HFT categories is the market price of the scrip as available from the
trades/quotes on the stock exchanges or prices declared by Primary Dealers Association of India (“PDAI”)
jointly with the Fixed Income Money Market and Derivatives Association of India (“FIMMDA”), periodically.
Net depreciation, if any, within each category of each investment classification is recognized in the profit and
loss account. The net appreciation, if any, under each category of investment classification is ignored. The book
value of individual securities is not changed consequent to the periodic valuation of investments.
Treasury bills, exchange funded bills, commercial paper and certificate of deposits, being discounted
instruments, are valued at carrying cost.
Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund.
Market value of investments where current quotations are not available is determined as per the norms
prescribed by the RBI described below:
• for unquoted bonds, debentures and preference shares where interest/dividend is received regularly (i.e.
not overdue beyond 90 days), the market price is derived based on the yield to maturity (“YTM”) rate for
Government securities as notified by FIMMDA jointly with the PDAI at periodic internals and suitably
marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk
mark-up for each category and credit rating along with residual maturity issued by FIMMDA is adopted
for this purpose;
• for bonds and debentures (including PTCs) where interest is not received regularly (i.e. overdue beyond
90 days), valuation is in accordance with prudential norms for provisioning as prescribed by the RBI;
• equity shares for which current quotations are not available or where the shares are not quoted on a stock
exchange are valued at break-up value (without consideration of revaluation reserves, if any) which is
ascertained from the company’s latest balance sheet. If the latest balance sheet is not available, the shares
are valued at Rs.1.00 per company;
• units of venture capital funds (“VCFs”) classified as AFS for which current quotations are not available
are marked to market based on the net asset value of the VCF as per the latest audited financials of the
fund. If audited financials are not available for a period beyond 18 months, the investments are valued at
Rs.1.00 per VCF unit. Investment in unquoted VCF after August 23, 2006 are categorized as HTM for the
initial period of three years and valued at cost as per RBI guidelines;
• investments in credit linked notes (“CLNs”) are valued based on current quotations when available. In the
absence of price quotations, CLNs are valued based on internal valuation methodology using appropriate
mark-up and other estimates, such as the price of the underlying foreign currency convertible bond and
the rating category of the CLN; and
• investments in security receipts are valued at the net asset value announced periodically by the issuing
asset reconstruction company or securitization company based on the valuation of the underlying assets.
Investments in subsidiaries and joint ventures are categorized as HTM and assessed for impairment, if any,
to determine permanent diminution in accordance with the RBI guidelines.
Realized gains on investments under the HTM category are recognized in the profit and loss account and
subsequently appropriated to the capital reserve account in accordance with the RBI guidelines. Losses are
recognized in the profit and loss account.
45
All investments are accounted for on settlement date except investments in equity shares, which are
accounted for on the trade date, as the corporate action is effected in equity on the trade date.
Repurchase and Reverse Repurchase Transactions
Repurchase and reverse repurchase transactions (excluding those conducted under the LAF with the RBI)
are accounted as collateralized borrowing and lending, respectively. Repurchase and reverse repurchase
transactions performed under LAF are accounted as outright sales and outright purchases, respectively. However,
depreciation in their value, if any, compared to their original cost, is recognized in the profit and loss account.
Advances
Advances are classified into performing and non-performing advances as per the RBI guidelines and are
stated net of specific provisions made towards NPAs and floating provisions. Further, NPAs are classified into
sub-standard, doubtful and loss assets based on the criteria stipulated by the RBI. Provisions for NPAs are made
for sub-standard and doubtful assets at rates as prescribed by the RBI, with the exception of agriculture advances
and schematic retail advances. In respect of schematic retail advances, provisions are made in terms of a bucketwise policy upon reaching specified stages of delinquency (90 days or more of delinquency) under each type of
loan, which satisfies the RBI prudential norms on provisioning. Provisions in respect of agriculture advances
classified into substandard and doubtful assets are made at rates which are higher than those prescribed by the
RBI.
Loss assets and the unsecured portion of doubtful assets are provided or written off as per the existing RBI
guidelines. NPAs are identified by periodic appraisals of the loan portfolio by the management.
Amounts recovered against debts written off are recognized in the profit and loss account.
For restructured and rescheduled assets, provision is made in accordance with the guidelines issued by the
RBI, which requires that the diminution in the fair value of the assets be provided at the time of restructuring.
A general provision of 0.25% for direct advances to the SME and agriculture sectors, 1.00% in respect of
advances classified as commercial real estate, 2.00% in respect of housing loans at “teaser” rates and certain
classes of restructured assets and 0.40% for all other advances is made pursuant to RBI guidelines.
Revenue Recognition
Interest income is recognized on an accrual basis, except interest income on NPAs, which is recognized on
receipt in accordance with AS-9, Revenue Recognition, as notified under the Companies (Accounting Standards)
Rules, 2006 and the RBI guidelines.
Fees and commission income is recognized when due, except for guarantee commission, which is
recognized pro-rata over the period of the guarantee.
Dividend is accounted on an accrual basis when the right to receive the dividend is established.
Gain or loss on sell down of loans and advances through direct assignment is recognized at the time of sale.
Gain or loss on sale of NPAs is accounted as per the RBI guidelines, which require provisions to be made
for any deficit (where sale price is lower than the net book value), while surplus (where sale price is higher than
the net book value) is ignored.
Arrangership/syndication fee is accounted for on completion of the agreed service and when the right to
receive is established.
Results for the Half Year Ended September 30, 2012 Compared to the Half Year Ended September 30,
2011
Summary of Performance
Half year ended September 30,
2011
2012
% change
(Rupees in millions, except
percentages)
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
37,314
24,028
28,000
14,715
18,627
45,068
29,286
32,934
18,649
22,771
20.78%
21.88%
17.62%
26.73%
22.25%
Net interest income increased by 20.78% from Rs.37.31 billion in the half year ended September 30, 2011 to
Rs.45.07 billion in the half year ended September 30, 2012. The increase was primarily due to an increase in
average interest earning assets on a daily average basis by 24.39%, from Rs.2,114.97 billion in the half year
ended September 30, 2011 to Rs.2,630.82 billion in the half year ended September 30, 2012.
Non-interest income increased by 21.88% from Rs.24.03 billion in the half year ended September 30, 2011
to Rs.29.29 billion in the half year ended September 30, 2012. The increase was primarily due to an increase in
commission, exchange and brokerage income by 14.15% from Rs.20.03 billion in the half year ended
September 30, 2011 to Rs.22.86 billion in the half year ended September 30, 2012 and due to increase in profit
on sale of investments from Rs.0.07 billion in the half year ended September 30, 2011 to Rs.2.68 billion in the
half year ended September 30, 2012.
Non-interest expense increased by 17.62% from Rs.28.00 billion in the half year ended September 30, 2011
to Rs.32.93 billion in the half year ended September 30, 2012. The increase was primarily due to an increase in
employee expense, administrative and occupancy cost and other expenditures.
Provisions and contingencies increased by 26.73% from Rs.14.72 billion in the half year ended
September 30, 2011 to Rs.18.65 billion in the half year ended September 30, 2012. The increase is primarily due
to higher provisions for loan losses.
As a result of the above, the Bank’s net profit increased by 22.25% from Rs.18.63 billion in the half year
ended September 30, 2011 to Rs.22.77 billion in the half year ended September 30, 2012.
Net Interest Income
Net interest income increased by 20.78% from Rs.37.31 billion in the half year ended September 30, 2011 to
Rs.45.07 billion in the half year ended September 30, 2012. The following table sets forth the components of net
interest income.
Half year ended September 30,
2011
2012
% change
(Rupees in millions, except
percentages)
Interest on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71,579
28,815
1,180
93,608
37,029
1,064
30.78%
28.51%
(9.83)%
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101,574
131,701
29.66%
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56,948
7,312
73,932
12,701
29.82%
73.70%
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,260
86,633
34.82%
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,314
45,068
20.78%
The increase in net interest income was primarily due to an increase in average interest earning assets on a
daily average basis by 24.39%, from Rs.2,114.97 billion in the half year ended September 30, 2011 to
Rs.2,630.82 billion in the half year ended September 30, 2012.
Interest Income
The total interest income increased by 29.66% from Rs.101.57 billion in the half year ended September 30,
2011 to Rs.131.70 billion in the half year ended September 30, 2012.
Interest income on loans increased by 30.78%, from Rs.71.58 billion in the half year ended September 30,
2011 to Rs.93.61 billion in the half year ended September 30, 2012. The increase in interest income on loans was
due to the following:
• an increase in the average loans by 26.95% from Rs.1,341.32 billion in the half year ended September 30,
2011 to Rs.1,702.84 billion in the half year ended September 30, 2012; and
• an increase in the yield on loans from 10.54% in the half year ended September 30, 2011 to 10.73% in the
half year ended September 30, 2012.
Interest income on investments increased by 28.51%, from Rs.28.81 billion in the half year ended
September 30, 2011 to Rs.37.03 billion in the half year ended September 30, 2012. The increase in investments
during the half year ended September 30, 2012 was primarily due to an increase in the value of securities held to
meet SLR requirements imposed by the RBI and investments in corporate debt securities.
47
Other interest income decreased by 9.83%, from Rs.1.18 billion in the half year ended September 30, 2011
to Rs.1.06 billion in the half year ended September 30, 2012. The decrease was primarily due to a decrease in the
average volume of lending.
Interest Expense
Total interest expense increased by 34.82% from Rs.64.26 billion in the half year ended September 30, 2011
to Rs.86.63 billion in the half year ended September 30, 2012. The increase in interest expense was primarily due
to the following:
• an increase in average interest-bearing liabilities, including term deposits, from Rs.2,042.78 billion in the
half year ended September 30, 2011 to Rs.2,518.13 billion in the half year ended September 30, 2012;
• an increase in overall cost of funds (interest expense divided by average interest bearing liabilities) by 46
basis points from 6.16% in the half year ended September 30, 2011 to 6.62% in the half year ended
September 30, 2012. The increase in cost of funds is mainly attributable to:
• a decrease in the ratio of current and savings deposits (low cost deposits) to total deposits on an
average basis from 37.56% in the half year ended September 30, 2011 to 35.93% in the half year ended
September 30, 2012;
• an increase in average cost of total deposits from 6.35% in the half year ended September 30, 2011 to
6.79% in the half year ended September 30, 2012. This is attributable to an increase in the cost of term
deposits from 8.72% to 9.16% Further, average cost of savings deposits also grew from 3.90% to
3.98% over the same period on account of a change in the interest rate from 3.50% to 4.00% beginning
May 3, 2011, as mandated by the RBI;
• an increase in other interest expense of 73.70% from Rs.7.31 billion in the half year ended September 30,
2011 to Rs.12.70 billion in the half year ended September 30, 2012. The increase was primarily due to an
increase in average borrowings from subordinated debts from Rs.53.27 billion in the half year ended
September 30, 2011 to Rs.85.27 billion in the half year ended September 30, 2012 and an increase in
average borrowings relating to interbank from the overseas market, borrowings under the Bank’s MTN
programme and borrowings through U.S. commercial paper from Rs.127.29 billion in the half year ended
September 30, 2011 to Rs.174.00 billion in the half year ended September 30, 2012.
Non-interest Income
Non-interest income increased by 21.88% from Rs.24.03 billion in the half year ended September 30, 2011
to Rs.29.29 billion in the half year ended September 30, 2012. The following table sets forth the components of
non-interest income.
Half year ended September 30,
2011
2012
% change
(Rupees in millions, except
percentages)
Commission, exchange and brokerage . . . . . . . . . . . . . . . . . . . . . . . . .
Profit on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit on exchange transactions/derivative transactions . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,027
70
2,658
1,273
22,860
2,675
3,017
734
Total Non-interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,028
29,286
14.15%
3,721.43%
13.51%
(42.34)%
21.88%
Non-interest income increased by 21.88% from Rs.24.03 billion in the half year ended September 30, 2011
to Rs.29.29 billion in the half year ended September 30, 2012. The increase was primarily due to the following:
• growth in processing fees and service charges from credit activities due to a higher volume of overall
business;
• an increase in fee income from retail banking activities and business banking activities such as service
charges relating to various types of customer accounts and debit and credit card transactions, an increase
in fee income from third party products such as insurance, mutual funds etc;
• an increase in profit on sale of investments mainly on account of profit on the sale of a 25% stake in two
wholly-owned subsidiaries of the Bank, namely Axis Asset Management Company Limited (“Axis
AMC”) and Axis Mutual Fund Trustee Limited (“Axis MFT”);
48
• an increase in profit on foreign exchange and derivative transactions of 13.51% from Rs.2.66 billion in
the half year ended September 30, 2011 to Rs.3.02 billion in the half year ended September 30, 2012;
• other non-interest income decreasing by 42.34% primarily due to lower recoveries in accounts written off
in earlier periods.
Non-interest Expense
The following table sets forth the principal components of non-interest expense.
Half year ended September 30,
2011
2012
% change
(Rupees in millions, except
percentages)
Employee expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,086
5,822
1,595
10,497
11,605
6,462
1,733
13,134
15.06%
10.99%
8.65%
25.12%
Total Non-interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,000
32,934
17.62%
Non-interest expense increased by 17.62% from Rs.28.00 billion in the half year ended September 30, 2011
to Rs.32.93 billion in the half year ended September 30, 2012.
Employee expense includes salaries, allowances and other staff benefits. Employee expense increased by
15.06% from Rs.10.09 billion in the half year ended September 30, 2011 to Rs.11.61 billion in the half year
ended September 30, 2012. The increase was primarily due to the rise in average employee headcount from
28,132 in the half year ended September 30, 2011 to 34,178 in the half year ended September 30, 2012 to support
the Bank’s growth and also as a result of an increase in average salary levels over the period.
Occupancy cost, including expenses for office premises and repairs and maintenance, increased by 10.99%
from Rs.5.82 billion in the half year ended September 30, 2011 to Rs.6.46 billion in the half year ended
September 30, 2012. The increase was primarily due to the growth in the Bank’s distribution network by 20.40%
from 1,446 branches and extension counters as at September 30, 2011 to 1,741 branches and extension counters
as at September 30, 2012 and by 35.59% growth in the number of ATMs from 7,594 to 10,297 during the same
period, and also due to general escalation in lease rentals.
Depreciation increased by 8.65% from Rs.1.60 billion in the half year ended September 30, 2011 to
Rs.1.73 billion in the half year ended September 30, 2012. The increase was primarily due to network expansion
and an increase in general business volume.
Other operating expenses increased by 25.12% from Rs.10.50 billion in the half year ended September 30,
2011 to Rs.13.13 billion in the half year ended September 30, 2012. The increase was primarily due to an
increase in balance enquiry and cash withdrawal charges, professional fees, direct selling agent commissions,
sales commissions, insurance expenses, postage and telephone expenses and also due to network expansion and
increase in general business volume.
Provisions and Contingencies
The following table sets forth certain information regarding provisions and contingencies.
Half year ended September 30,
2011
2012
% change
(Rupees in millions, except
percentages)
Provision for income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for depreciation on investments . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Provisions and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . .
8,900
4,667
1,171
(23)
14,715
10,966
9,103
(1,337)
(83)
23.21%
95.05%
—
—
18,649
26.73%
Provision for Income Tax
The Bank’s provision for income tax increased by 23.21% from Rs.8.90 billion in the half year ended
September 30, 2011 to Rs.10.97 billion in the half year ended September 30, 2012 primarily due to an increase in
profit before tax of 22.56%, from Rs.27.53 billion in the half year ended September 30, 2011 to Rs.33.74 billion
in the half year ended September 30, 2012.
49
Provision for Loan Losses
The Bank’s provision for loan losses, including general provisions, restructuring provisions and contingent
provision, increased from Rs.4.67 billion in the half year ended September 30, 2011 to Rs.9.10 billion in the half
year ended September 30, 2012. This was primarily due to a following:
• creation of contingent provision for advances and other exposures of Rs.1.15 billion in the half year
ended September 30, 2012;
• higher net addition to NPAs during the half year ended September 30, 2012 as compared to half year
ended September 30, 2011. Gross NPAs was Rs.21.91 billion as at September 30, 2012 as against
Rs.18.06 billion as at March 31, 2012 and Rs.17.44 billion as at September 30, 2011.
Provision for Depreciation on Investments
The Bank’s provision for depreciation on investments decreased primarily due to favorable market
conditions.
Net Profit
As a result of the foregoing factors, the Bank’s net profit increased by 22.25% from Rs.18.63 billion in the
half year ended September 30, 2011 to Rs.22.77 billion in the half year ended September 30, 2012.
Financial Condition
Assets
The following table sets forth the principal components of the Bank’s assets as at September 30, 2011 and
September 30, 2012.
As at September 30,
2011
2012
% change
(Rupees in millions, except
percentages)
Cash and balances with RBI . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance with banks and money at call and short notice . . . . . . .
158,137
17,384
169,317
30,288
7.07%
74.23%
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
175,521
199,605
13.72%
Government securities (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
540,183
309,973
626,438
370,471
15.97%
19.52%
Total investments (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
850,156
996,909
17.26%
Corporate loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,107,615
293,278
1,278,454
442,862
15.42%
51.00%
Total loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,400,893
1,721,316
22.87%
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,537
57,005
22,750
86,227
0.95%
51.26%
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,506,112
3,026,807
20.78%
The Bank’s total assets increased by 20.78% from Rs.2,506.11 billion as at September 30, 2011 to
Rs.3,026.81 billion as at September 30, 2012, primarily due to an increase in the size of the Bank’s loan and
investments portfolio.
Total cash and cash equivalents increased by 13.72% from Rs.175.52 billion as at September 30, 2011 to
Rs.199.61 billion as at September 30, 2012.
The Bank’s total investments increased by 17.26% from Rs.850.16 billion as at September 30, 2011 to
Rs.996.91 billion as at September 30, 2012. The Bank’s investments in Government securities (including
investments held to meet SLR requirements) increased by 15.97% from Rs.540.18 billion as at September 30,
2011 to Rs.626.44 billion as at September 30, 2012. The Bank’s investments in other securities increased by
19.52% from Rs.309.97 billion as at September 30, 2011 to Rs.370.47 billion as at September 30, 2012.
The Bank’s total loans increased by 22.87% from Rs.1400.89 billion as at September 30, 2011 to
Rs.1,721.32 billion as at September 30, 2012. The Bank’s corporate loans grew by 15.42% from Rs.1,107.62
billion as at September 30, 2011 to Rs.1,278.45 billion as at September 30, 2012. The growth in corporate loans
was led by lending to the infrastructure segment, which increased by 33.70% from Rs.171.30 billion as at
50
September 30, 2011 to Rs.229.02 billion as at September 30, 2012. The Bank’s retail loans also increased by
51.00% from Rs.293.28 billion as at September 30, 2011 to Rs.442.86 billion as at September 30, 2012 primarily
due to home loans and auto loans, which increased by 48.12% from Rs.261.09 billion as at September 30, 2011
to Rs.386.73 billion as at September 30, 2012.
The Bank’s net fixed assets increased by 0.95% from Rs.22.54 billion as at September 30, 2011 to Rs.22.75
billion as at September 30, 2012.
Other assets increased by 51.26% from Rs.57.01 billion as at September 30, 2011 to Rs.86.23 billion as at
September 30, 2012. The increase was primarily due to an increase in application money paid for investments
and an increase in general business volume.
Liabilities and Shareholders’ Funds
The following table sets forth the principal components of the Bank’s liabilities and shareholders’ funds as
at September 30, 2011 and September 30, 2012.
As at September 30,
2011
2012
% change
(Rupees in millions, except
percentages)
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves and surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,123
205,772
4,145
248,194
0.53%
20.62%
Total shareholders’ funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
209,895
252,339
20.22%
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,944,550
2,356,191
21.17%
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities and provisions . . . . . . . . . . . . . . . . . . . . . . . . . .
267,710
83,957
328,320
89,957
22.64%
7.15%
Total liabilities and shareholders’ funds . . . . . . . . . . . . . . . . .
2,506,112
3,026,807
20.78%
The Bank’s total liabilities and shareholders’ funds increased by 20.78% from Rs.2,506.11 billion as at
September 30, 2011 to Rs.3,026.81 billion as at September 30, 2012.
Deposits increased by 21.17% from Rs.1,944.55 billion as at September 30, 2011 to Rs.2,356.19 billion as
at September 30, 2012. This growth in deposits was the result of an increased focus on retail and corporate
customers and the Bank’s success in leveraging its growing network of branches, extension counters and ATMs.
Term deposits increased by 24.72% from Rs.1,123.15 billion as at September 30, 2011 to Rs.1,400.81 billion as
at September 30, 2012. Low cost and non-interest bearing deposits (savings and current account deposits)
increased by 16.31% from Rs.821.40 billion as at September 30, 2011 to Rs.955.38 billion as at September 30,
2012. Low cost deposits as a percentage of total deposits decreased from 42.24% as at September 30, 2011 to
40.55% as at September 30, 2012.
Borrowings increased by 22.64% from Rs.267.71 billion as at September 30, 2011 to Rs.328.32 billion as at
September 30, 2012. Subordinated debt, perpetual debt and Upper Tier II instruments increased by 40.89% from
Rs.71.00 billion as at September 30, 2011 to Rs.100.03 billion as at September 30, 2012, primarily due to the
raising of fresh subordinated debt eligible for capital amounting to Rs.34.25 billion in the second half of fiscal
2012.
Other liabilities and provisions increased by 7.15% from Rs.83.96 billion as at September 30, 2011 to
Rs.89.96 billion as at September 30, 2012.
Shareholders’ funds increased by 20.22% from Rs.209.90 billion as at September 30, 2011 to
Rs.252.34 billion as at September 30, 2012.
Results for the Fiscal Year Ended March 31, 2012 Compared to the Fiscal Year Ended March 31, 2011
Summary of Performance
Year ended March 31,
2011
2012
% change
(Rupees in millions, except
percentages)
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
65,630
46,321
47,794
30,272
33,885
80,177
54,202
60,070
31,887
42,422
22.17%
17.01%
25.69%
5.33%
25.19%
Net interest income increased by 22.17% from Rs.65.63 billion in fiscal 2011 to Rs.80.18 billion in fiscal
2012. The increase was primarily due to an increase in average interest earning assets on a daily average basis by
24.30%, from Rs.1,795.73 billion in fiscal 2011 to Rs.2,232.06 billion in fiscal 2012.
Non-interest income increased by 17.01% from Rs.46.32 billion in fiscal 2011 to Rs.54.20 billion in fiscal
2012. The increase was primarily due to an increase in commission, exchange and brokerage income by 29.32%
from Rs.33.57 billion in fiscal 2011 to Rs.43.42 billion in fiscal 2012.
Non-interest expense increased by 25.69% from Rs.47.79 billion in fiscal 2011 to Rs.60.07 billion in fiscal
2012. The increase was primarily due to an increase in employee expense and administrative and occupancy cost
and advertisement expenses.
Provisions and contingencies increased by 5.33% from Rs.30.27 billion in fiscal 2011 to Rs.31.89 billion in
fiscal 2012.
As a result of the above, the Bank’s net profit increased by 25.19% from Rs.33.89 billion in fiscal 2011 to
Rs.42.42 billion in fiscal 2012.
Net Interest Income
Net interest income increased by 22.17% from Rs.65.63 billion in fiscal 2011 to Rs.80.18 billion in fiscal
2012. The following table sets forth the components of net interest income.
Year ended March 31,
2011
2012
% change
(Rupees in millions, except
percentages)
Interest on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104,031
44,387
3,130
153,793
63,943
2,210
47.83%
44.06%
(29.39)%
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151,548
219,946
45.13%
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74,985
10,933
121,836
17,933
62.48%
64.03%
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85,918
139,769
62.68%
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,630
80,177
22.17%
The increase in net interest income was due to the following:
• an increase in average interest earning assets on a daily average basis by 24.30% from Rs.1,795.73 billion
in fiscal 2011 to Rs.2,232.06 billion in fiscal 2012; and
• an increase in yield on advances from 9.24% in fiscal 2011 to 10.70% in fiscal 2012 consequent to an
increase in the base rate and the BPLR by 125 basis points over the year, partially offset by an increase in
cost of deposits from 4.96% in fiscal 2011 to 6.47% in fiscal 2012.
Interest Income
The total interest income increased by 45.13% from Rs.151.55 billion in fiscal 2011 to Rs.219.95 billion in
fiscal 2012. The increase in interest income was due to the following:
• an increase in the average loans by 25.80% from Rs.1,125.49 billion in fiscal 2011 to Rs.1,415.90 billion
in fiscal 2012; and
• an increase in the average investments by 27.84% from Rs.615.90 billion in fiscal 2011 to Rs.787.37
billion in fiscal 2012.
Interest income on investments increased by 44.06%, from Rs.44.39 billion in fiscal 2011 to Rs.63.94
billion in fiscal 2012. The increase in investments during fiscal 2012 was primarily due to an increase in the
value of securities held to meet SLR requirements and investments in corporate debt securities.
Other interest income decreased by 29.39%, from Rs.3.13 billion in fiscal 2011 to Rs.2.21 billion in fiscal
2012. The decrease was primarily due to a decline in the volume of average term lending, which was reduced
from Rs.54.34 billion in fiscal 2011 to Rs.28.79 billion in fiscal 2012.
52
Interest Expense
Total interest expense increased by 62.68% from Rs.85.92 billion in fiscal 2011 to Rs.139.77 billion in
fiscal 2012. The increase in interest expense was primarily due to the following:
• an increase in average interest-bearing liabilities, including term deposits, from Rs.1,723.16 billion in
fiscal 2011 to Rs.2,155.74 in fiscal 2012;
• an increase in overall cost of funds (interest expense divided by average interest bearing liabilities) by
132 basis points from 4.96% in fiscal 2011 to 6.28% in fiscal 2012;
• an increase in cost of funds, mainly attributable to a decrease in the ratio of current and savings deposits
(low cost deposits) to total deposits on an average basis from 39.40% in fiscal 2011 to 37.65% in fiscal
2012;
• an increase in average cost of term deposits from 6.81% in fiscal 2011 to 8.92% in fiscal 2012. Further,
average cost of savings deposits grew from 3.49% to 3.95% over the same period on account of change in
the interest rate from 3.50% to 4.00% beginning May 3, 2011, as mandated by the RBI; and
• an increase in other interest expense in fiscal 2011 of 64.03% from Rs.10.93 billion in fiscal 2011 to
Rs.17.93 billion in fiscal 2012. The increase was primarily due to the increase in average borrowings
relating to interbank from the overseas market, borrowings under the Bank’s MTN programme and
borrowings through U.S. commercial paper from Rs.120.25 billion in fiscal 2011 to Rs.171.54 billion in
fiscal 2012.
Non-interest Income
Non-interest income increased by 17.01% from Rs.46.32 billion in fiscal 2011 to Rs.54.20 billion in fiscal
2012. The following table sets forth the components of non-interest income.
Year ended March 31,
2011
2012
% change
(Rupees in millions, except
percentages)
Commission, exchange and brokerage . . . . . . . . . . . . . . . . . . . . . . . . .
Profit on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit on exchange transactions/derivative transactions . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,574
3,663
5,636
3,448
43,417
728
6,740
3,317
29.32%
(80.13)%
19.59%
(3.80)%
Total Non-interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,321
54,202
17.01%
Non-interest income increased by 17.01% from Rs.46.32 billion in fiscal 2011 to Rs.54.20 billion in fiscal
2012. The increase was primarily due to the following:
• growth in processing fees and service charges from credit activities;
• an increase in fee income from retail banking activities and business banking activities such as service
charges relating to various types of customer accounts and debit and credit card transactions;
• an increase in profit on foreign exchange and derivative transactions of 19.59% from Rs.5.64 billion in
fiscal 2011 to Rs.6.74 billion in fiscal 2012. The increase was mainly due to derivative profit of Rs.3.02
billion in fiscal 2012 as against a loss of Rs.0.22 billion; and
• a decrease in profit on sale of investments from Rs.3.66 billion in fiscal 2011 to Rs.0.73 billion in fiscal
2012. This was mainly due to lower profit on sale of bonds and debentures portfolio and losses from
trading in shares
Non-interest Expense
The following table sets forth the principal components of non-interest expense.
Year ended March 31,
2011
2012
% change
(Rupees in millions, except
percentages)
Employee expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,139
10,637
2,896
18,122
20,802
11,859
3,422
23,987
28.89%
11.49%
18.16%
32.36%
Total Non-interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,794
60,070
25.69%
53
Non-interest expense increased by 25.69% from Rs.47.79 billion in fiscal 2011 to Rs.60.07 billion in fiscal
2012. The increase in non-interest expense was primarily due to the growth of the Bank’s network and
distribution channels and the accompanying increase in business volume.
Employee expense includes salaries, allowances and other staff benefits. Employee expense increased by
28.89% from Rs.16.14 billion in fiscal 2011 to Rs.20.80 billion in fiscal 2012. The increase was primarily due to
the rise in average employee headcount from 23,613 in fiscal 2011 to 29,593 in fiscal 2012 to support the Bank’s
growth and also as a result of an increase in average salary levels over the period.
Occupancy cost, including expenses for office premises and repairs and maintenance, increased by 11.49%
from Rs.10.64 billion in fiscal 2011 to Rs.11.86 billion in fiscal 2012. The increase was primarily due to the
growth in the Bank’s distribution network by 16.69% from 1,390 branches and extension counters as at
March 31, 2011 to 1,622 branches and extension counters as at March 31, 2012 and by 58.28% growth in the
number of ATMs from 6,270 to 9,924 during the same period, and also due to general escalation in lease rentals.
Depreciation increased by 18.16% from Rs.2.90 billion in fiscal 2011 to Rs.3.42 billion in fiscal 2012. The
increase was primarily due to network expansion and an increase in general business volume.
Other operating expenses increased by 32.36% from Rs.18.12 billion in fiscal 2011 to Rs.23.99 billion in
fiscal 2012. The increase was primarily due to an increase in balance enquiry and cash withdrawal charges, direct
selling agent commissions, sales commissions and travel expenses, insurance expenses, cash management
services and business mandate expenses and also due to network expansion and increase in general business
volume.
Provisions and Contingencies
The following table sets forth certain information regarding provisions and contingencies.
Year ended March 31,
2011
2012
% change
(Rupees in millions, except
percentages)
Provision for income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for depreciation on investments . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,472
11,363
993
444
20,456
10,996
581
(146)
17.08%
(3.23)%
(41.49)%
—
Total Provisions and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . .
30,272
31,887
5.33%
Provision for Income Tax
The Bank’s provision for income tax increased by 17.08% from Rs.17.47 billion in fiscal 2011 to Rs.20.46
billion in fiscal 2012, primarily due to an increase in profit before tax of 22.43%, from Rs.51.36 billion in fiscal
2011 to Rs.62.88 billion in fiscal 2012.
Provision for Loan Losses
The Bank’s provision for loan losses, including general provisions and restructuring provisions, decreased
from Rs.11.36 billion in fiscal 2011 to Rs.11.00 billion in fiscal 2012. This was primarily due to a lower net
addition to NPAs during fiscal 2012 as compared to fiscal 2011.
Provision for Depreciation on Investments
The Bank’s provision for depreciation on investments decreased from Rs.993 million in fiscal 2011 to
Rs.581 million in fiscal 2012. The decrease in provision was primarily due to favorable market conditions.
Net Profit
As a result of the foregoing factors, the Bank’s net profit increased by 25.19% from Rs.33.89 billion in
fiscal 2011 to Rs.42.42 billion in fiscal 2012.
54
Financial Condition
Assets
The following table sets forth the principal components of the Bank’s assets as at March 31, 2011 and
March 31, 2012.
As at March 31,
2011
2012
% change
(Rupees in millions, except percentages)
Cash and balances with RBI . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance with banks and money at call and short notice . . . . . .
138,862
75,225
107,029
32,310
(22.92)%
(57.05)%
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . .
214,087
139,339
(34.91)%
Government securities (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
441,980
277,936
585,332
346,589
32.43%
24.70%
Total investments (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
719,916
931,921
29.45%
Corporate loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,146,486
277,592
1,321,892
375,703
15.30%
35.34%
Total loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,424,078
1,697,595
19.21%
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,732
46,321
22,593
64,830
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,427,134
2,856,278
(0.61)%
39.96%
17.68%
The Bank’s total assets increased by 17.68% from Rs.2,427.13 billion as at March 31, 2011 to
Rs.2,856.28 billion as at March 31, 2012, primarily due to an increase in the size of the Bank’s loan and
investments portfolio.
Total cash and cash equivalents decreased by 34.91% from Rs.214.09 billion as at March 31, 2011 to
Rs.139.34 billion as at March 31, 2012.
The Bank’s total investments increased by 29.45% from Rs.719.92 billion as at March 31, 2011 to
Rs.931.92 billion as at March 31, 2012. The Bank’s investments in Government securities (including investments
held to meet SLR requirements) increased by 32.43% from Rs.441.98 billion as at March 31, 2011 to
Rs.585.33 billion as at March 31, 2012. The Bank’s investments in other securities increased by 24.70% from
Rs.277.94 billion as at March 31, 2011 to Rs.346.59 billion as at March 31, 2012.
The Bank’s total loans increased by 19.21% from Rs.1,424.08 billion as at March 31, 2011 to
Rs.1,697.60 billion as at March 31, 2012. The Bank’s corporate loans grew by 15.30% from Rs.1,146.49 billion
as at March 31, 2011 to Rs.1,321.89 billion as at March 31, 2012. The growth in corporate loans was led by
lending to the infrastructure segment, which increased by 22.89% from Rs.157.23 billion as at March 31, 2011 to
Rs.193.21 billion as at March 31, 2012. The Bank’s retail loans also increased by 35.34% from Rs.277.59 billion
as at March 31, 2011 to Rs.375.70 billion as at March 31, 2012 primarily due to home loans and auto loans,
which increased by 51.14% from Rs.219.93 billion as at March 31, 2011 to Rs.332.39 billion as at March 31,
2012.
The Bank’s net fixed assets decreased by 0.61% from Rs.22.73 billion as at March 31, 2011 to
Rs.22.59 billion as at March 31, 2012.
Other assets increased by 39.96% from Rs.46.32 billion as at March 31, 2011 to Rs.64.83 billion as at
March 31, 2012. The increase was primarily due to an increase in application money paid for investments,
security and other deposits, deferred tax assets and increases in general business volume.
55
Liabilities and Shareholders’ Funds
The following table sets forth the principal components of the Bank’s liabilities and shareholders’ funds as
at March 31, 2011 and March 31, 2012.
As at March 31,
2011
2012
% change
(Rupees in millions, except percentages)
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves and surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,105
185,883
4,132
223,953
0.66%
20.48%
Total shareholders’ funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
189,988
228,085
20.05%
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities and provisions . . . . . . . . . . . . . . . . . . . . . . . . . .
1,892,378
262,679
82,089
2,201,043
340,717
86,433
16.31%
29.71%
5.29%
Total liabilities and shareholders’ funds . . . . . . . . . . . . . . . . .
2,427,134
2,856,278
17.68%
The Bank’s total liabilities and shareholders’ funds increased by 17.68% from Rs.2,427.13 billion as at
March 31, 2011 to Rs.2,856.28 billion as at March 31, 2012.
Deposits increased by 16.31% from Rs.1,892.38 billion as at March 31, 2011 to Rs.2,201.04 billion as at
March 31, 2012. This growth in deposits was the result of an increased focus on retail and corporate customers
and the Bank’s success in leveraging its growing network of branches, extension counters and ATMs. Term
deposits increased by 15.44% from Rs.1,114.70 billion as at March 31, 2011 to Rs.1,286.82 billion as at
March 31, 2012. Low cost and non-interest bearing deposits (savings and current account deposits) increased by
17.56% from Rs.777.67 billion as at March 31, 2011 to Rs.914.22 billion as at March 31, 2012. Low cost
deposits as a percentage of total deposits increased from 41.10% as at March 31, 2011 to 41.54% as at March 31,
2012.
Borrowings increased by 29.71% from Rs.262.68 billion as at March 31, 2011 to Rs.340.72 billion as at
March 31, 2012. Subordinated debt, perpetual debt and Upper Tier II instruments increased by 51.20% from
Rs.69.93 billion as at March 31, 2011 to Rs.105.74 billion as at March 31, 2012 primarily due to the raising of
fresh subordinated debt eligible for capital amounting to Rs.34.25 billion in fiscal 2012.
Other liabilities and provisions increased by 5.29% from Rs.82.09 billion as at March 31, 2011 to
Rs.86.43 billion as at March 31, 2012.
Shareholders’ funds increased by 20.05% from Rs.189.99 billion as at March 31, 2011 to Rs.228.09 billion
as at March 31, 2012.
Results for the Fiscal Year Ended March 31, 2011 Compared to the Fiscal Year Ended March 31, 2010
Summary of Performance
Year ended March 31,
2010
2011
% change
(Rupees in millions, except
percentages)
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,044
39,458
37,097
27,260
25,145
65,630
46,321
47,794
30,272
33,885
31.14%
17.39%
28.84%
11.05%
34.76%
Net interest income increased by 31.14% from Rs.50.04 billion in fiscal 2010 to Rs.65.63 billion in fiscal
2011. The increase was primarily due to an increase in average interest earning assets on a daily average basis by
34.70%, from Rs.1,333.09 billion in fiscal 2010 to Rs.1,795.73 billion in fiscal 2011.
Non-interest income increased by 17.39% from Rs.39.46 billion in fiscal 2010 to Rs.46.32 billion in fiscal
2011. The increase was primarily due to an increase in commission, exchange and brokerage, by 30.88% from
Rs.25.65 billion in fiscal 2010 to Rs.33.57 billion in fiscal 2011.
Non-interest expense increased by 28.84% from Rs.37.10 billion in fiscal 2010 to Rs.47.79 billion in fiscal
2011. The increase was primarily due to an increase in employee expense and administrative and occupancy cost.
Provisions and contingencies increased by 11.05% from Rs.27.26 billion in fiscal 2010 to Rs.30.27 billion
in fiscal 2011 primarily due to an increase in provision for income tax.
56
As a result of the above, the Bank’s net profit increased by 34.76% from Rs.25.15 billion in fiscal 2010 to
Rs.33.88 billion in fiscal 2011.
Net Interest Income
Net interest income increased by 31.14% from Rs.50.04 billion in fiscal 2010 to Rs.65.63 billion in fiscal
2011. The following table sets forth the components of net interest income.
Year ended March 31,
2010
2011
% change
(Rupees in millions, except
percentages)
Interest on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79,866
34,283
2,231
104,031
44,387
3,130
30.26%
29.47%
40.30%
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,380
151,548
30.22%
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57,145
9,191
74,985
10,933
31.22%
18.95%
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,336
85,918
29.52%
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,044
65,630
31.14%
The increase in net interest income was due to an increase in average interest earning assets on a daily
average basis by 34.70% from Rs.1,333.09 billion in fiscal 2010 to Rs.1,795.73 billion in fiscal 2011.
Interest Income
The total interest income increased by 30.22% from Rs.116.38 billion in fiscal 2010 to Rs.151.55 billion in
fiscal 2011. The increase in interest income was due to the following:
• an increase in the average loans by 40.26% from Rs.802.41 billion in fiscal 2010 to Rs.1,125.49 billion in
fiscal 2011; and
• an increase in the average SLR investments by 35.97% from Rs.280.53 billion in fiscal 2010 to Rs.381.44
billion in fiscal 2011.
Interest income on investments increased by 29.47% from Rs.34.28 billion in fiscal 2010 to Rs.44.39 billion
in fiscal 2011. The increase in investments during fiscal 2011 was primarily due to an increase in the value of
securities held to meet SLR requirements. The Bank’s average investments increased by 25.67% from Rs.490.11
billion in fiscal 2010 to Rs.615.90 billion in fiscal 2011.
Other interest income increased by 40.30%, from Rs.2.23 billion in fiscal 2010 to Rs.3.13 billion in fiscal
2011. The increase was primarily due to an increase in term lending rates. The Bank’s average lending
(comprising call, term, collateralized borrowing and lending obligations (“CBLO”), repo and foreign exchange
lending) increased by 33.94% from Rs.40.57 billion in fiscal 2010 to Rs.54.34 billion in fiscal 2011.
Interest Expense
Total interest expense increased by 29.52% from Rs.66.34 billion in fiscal 2010 to Rs.85.92 billion in fiscal
2011. The increase in interest expense was primarily due to the following:
• a rise in average term deposits by 38.43% from Rs.661.76 billion in fiscal 2010 to Rs.916.07 billion in
fiscal 2011;
• a rise in cost of savings deposits by 72 basis points from 2.77% in fiscal 2010 to 3.49% in fiscal 2011.
From April 1, 2010, banks were required by the RBI to calculate interest on savings accounts on a daily
product basis (as opposed to the earlier method of calculating on the minimum balance to the credit of the
deposit account during the period from the 10th to the last day of each calendar month); and
• a rise in other interest expense in fiscal 2011 of 18.95% from Rs.9.19 billion in fiscal 2010 to Rs.10.93
billion in fiscal 2011. The increase was primarily due to an increase in borrowings (excluding
subordinated debt, perpetual debt and Upper Tier II instruments). Average other borrowings of the Bank
increased by 46.67% from Rs.96.22 billion in fiscal 2010 to Rs.141.13 billion in fiscal 2011.
57
Non-interest Income
Non-interest income increased by 17.39% from Rs.39.46 billion in fiscal 2010 to Rs.46.32 billion in fiscal
2011. The following table sets forth the components of non-interest income.
Year ended March 31,
2010
2011
% change
(Rupees in millions, except
percentages)
Commission, exchange and brokerage . . . . . . . . . . . . . . . . . . . . . . . . .
Profit on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit on exchange transactions/derivative transactions . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Non-interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,652
7,362
4,460
1,984
39,458
33,574
3,663
5,636
3,448
46,321
30.88%
(50.24)%
26.37%
73.79%
17.39%
Commission, exchange and brokerage income increased by 30.88% from Rs.25.65 billion in fiscal 2010 to
Rs.33.57 billion in fiscal 2011. The increase was primarily due to the following:
• growth in processing fees and service charges from credit activities; and
• an increase in fee income from retail banking activities such as service charges relating to debit and credit
card transactions, ATM interchange fees and an increase in fee income from third party products such as
insurance, mutual funds etc.
Profit on the sale of investments decreased from Rs.7.36 billion in fiscal 2010 to Rs.3.66 billion in fiscal
2011. The decrease was primarily due to adverse market conditions, both in the Government securities and equity
markets.
Profit on foreign exchange and derivative transactions increased by 26.37% from Rs.4.46 billion in fiscal
2010 to Rs.5.64 billion in fiscal 2011. The increase is due to an increase in the volume of foreign exchange
transactions.
Other non-interest income increased mainly on account of higher recoveries in non-performing accounts
written off in earlier years.
Non-interest Expense
The following table sets forth the principal components of non-interest expense.
Year ended March 31,
2010
2011
% change
(Rupees in millions, except
percentages)
Employee expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Non-interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,558
7,984
2,343
14,212
37,097
16,139
10,637
2,896
18,122
47,794
28.52%
33.23%
23.60%
27.51%
28.84%
Non-interest expense increased by 28.84% from Rs.37.10 billion in fiscal 2010 to Rs.47.79 billion in fiscal
2011. The increase in non-interest expense was primarily due to the growth of the Bank’s network and
distribution channels and the accompanying increase in business volume.
Employee expense includes salaries, allowances and other staff benefits. Employee expense increased by
28.52% from Rs.12.56 billion in fiscal 2010 to Rs.16.14 billion in fiscal 2011. The increase was primarily due to
the rise in average employee headcount from 21,613 in fiscal 2010 to 23,613 in fiscal 2011 to support the Bank’s
growth and also as a result of an increase in average salary levels over the period.
Occupancy cost, including expenses for office premises and repairs and maintenance, increased by 33.23%
from Rs.7.98 billion in fiscal 2010 to Rs.10.64 billion in fiscal 2011. The increase was primarily due to the
growth in the Bank’s distribution network by 41.40% from 983 branches and extension counters (excluding
service branches and CPCs) as at March 31, 2010 to 1,390 branches and extension counters as at March 31, 2011
and by 46.05% growth in the number of ATMs from 4,293 to 6,270 during the same period, and also due to
general escalation in lease rentals.
Depreciation increased by 23.60% from Rs.2.34 billion in fiscal 2010 to Rs.2.90 billion in fiscal 2011. The
increase was primarily due to network expansion and an increase in general business volume.
Other operating expenses increased by 27.51% from Rs.14.21 billion in fiscal 2010 to Rs.18.12 billion in
fiscal 2011. The increase was primarily due to an increase in advertisement and publicity expenses, printing and
58
stationary expenses, balance enquiry and cash withdrawal charges, arrangement fees on borrowings, cash
management services expenses and also due to network expansion and an increase in general business volume.
Provisions and Contingencies
The following table sets forth certain information regarding provisions and contingencies.
Year ended March 31,
2010
2011
% change
(Rupees in millions, except
percentages)
Provision for income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for depreciation on investments . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,368
14,125
(222)
(11)
17,472
11,363
993
444
30.70%
(19.55)%
—
—
Total Provisions and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . .
27,260
30,272
11.05%
Provision for Income Tax
The Bank’s provision for income tax increased by 30.70% from Rs.13.37 billion in fiscal 2010 to Rs.17.47
billion in fiscal 2011 primarily due to an increase in profit before tax of 33.35%, from Rs.38.51 billion in fiscal
2010 to Rs.51.36 billion in fiscal 2011.
Provision for Loan Losses
The Bank’s provision for loan losses, including general provisions and restructuring provisions, decreased
from Rs.14.13 billion in fiscal 2010 to Rs.11.36 billion in fiscal 2011. This was primarily due to the following:
• lower additions to gross NPAs during fiscal 2011 of Rs.14.48 billion as compared to additions to gross
NPAs of Rs.18.01 billion during fiscal 2010; and
• lower restructuring of loans during fiscal 2011, totaling Rs.4.04 billion, as compared to Rs.16.33 billion
of loans restructured during fiscal 2010;
Provision for Depreciation on Investments
The Bank’s provision for depreciation on investments increased from a reversal of Rs.222 million in fiscal
2010 to Rs.993 million in fiscal 2011. The increase in provision was primarily due to adverse market conditions.
Net Profit
As a result of the foregoing factors, the Bank’s net profit increased by 34.76% from Rs.25.15 billion in
fiscal 2010 to Rs.33.88 billion in fiscal 2011.
Financial Condition
Assets
The following table sets forth the principal components of the Bank’s assets as at March 31, 2010 and
March 31, 2011.
As at March 31,
2010
2011
% change
(Rupees in millions, except percentages)
Cash and balances with RBI . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance with banks and money at call and short notice . . . . . . .
94,820
57,219
138,862
75,225
46.45%
31.47%
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
152,039
214,087
40.81%
Government securities (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
341,959
217,789
441,980
277,936
29.25%
27.62%
Total investments (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
559,748
719,916
28.61%
Corporate loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
835,202
208,208
1,146,486
277,592
37.27%
33.32%
Total loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,043,410
1,424,078
36.48%
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,224
39,058
22,732
46,321
85.96%
18.60%
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,806,479
2,427,134
34.36%
59
The Bank’s total assets increased by 34.36% from Rs.1,806.48 billion as at March 31, 2010 to
Rs.2,427.13 billion as at March 31, 2011, primarily due to an increase in the size of the Bank’s loan and
investments portfolio.
Cash and balances with the RBI increased by 46.45% from Rs.94.82 billion as at March 31, 2010 to
Rs.138.86 billion as at March 31, 2011.
The Bank’s total investments increased by 28.61% from Rs.559.75 billion as at March 31, 2010 to
Rs.719.92 billion as at March 31, 2011. The Bank’s investments in Government securities (including investments
held to meet SLR requirements) increased by 29.25% from Rs.341.96 billion as at March 31, 2010 to
Rs.441.98 billion as at March 31, 2011. The Bank’s investments in other securities increased by 27.62% from
Rs.217.79 billion as at March 31, 2010 to Rs.277.94 billion as at March 31, 2011. The increase is due to the Bank
investing significantly in certificates of deposit, mutual funds and deposits in the NABARD.
The Bank’s total loans increased by 36.48% from Rs.1,043.41 billion as at March 31, 2010 to
Rs.1,424.08 billion as at March 31, 2011. The Bank’s corporate loans grew by 37.27% from Rs.835.20 billion as
at March 31, 2010 to Rs.1,146.49 billion as at March 31, 2011. The growth in corporate loans was primarily from
the large and mid-corporate segment and infrastructure sector, as well as from growth in the retail agricultural
lending business.
During fiscal 2011, lending to the large, mid-corporate and infrastructure segments grew by 44.60% to
Rs.759.22 billion, the total agricultural advances grew by 35.87% to Rs.173.20 billion. The Bank’s retail loans
also increased by 33.32% from Rs.208.21 billion as at March 31, 2010 to Rs.277.59 billion as at March 31, 2011
primarily due to home loans, which increased by 28.46% from Rs.147.19 billion as at March 31, 2010 to
Rs.189.08 billion as at March 31, 2011.
The Bank’s net fixed assets increased by 85.96% from Rs.12.22 billion as at March 31, 2010 to
Rs.22.73 billion as at March 31, 2011. The increase was primarily due to acquisition of corporate office premises
and an increase in the Bank’s distribution network of branches and extension counters by 41.40% from
983 branches and extension counters as at March 31, 2010 to 1,390 branches and extension counters as at
March 31, 2011. The number of ATMs increased by 46.05% from 4,293 as at March 31, 2010 to 6,270 as at
March 31, 2011.
Other assets increased by 18.60% from Rs.39.06 billion as at March 31, 2010 to Rs.46.32 billion as at
March 31, 2011. The increase was primarily due to an increase in interest accrued, deferred tax assets and
increase in general business volume.
Liabilities and Shareholders’ Funds
The following table sets forth the principal components of the Bank’s liabilities and shareholders’ funds as
at March 31, 2010 and March 31, 2011.
As at March 31,
2010
2011
% change
(Rupees in millions, except percentages)
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves and surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,052
156,393
4,105
185,883
1.31%
18.86%
Total shareholders’ funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
160,445
189,988
18.41%
Employees’ stock options outstanding (net) . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities and provisions . . . . . . . . . . . . . . . . . . . . . . . . . .
2
1,413,002
171,695
61,335
—
1,892,378
262,679
82,089
—
33.93%
52.99%
33.84%
Total liabilities and shareholders’ funds . . . . . . . . . . . . . . . . .
1,806,479
2,427,134
34.36%
The Bank’s total liabilities and shareholders’ funds increased by 34.36% from Rs.1,806.48 billion as at
March 31, 2010 to Rs.2,427.13 billion as at March 31, 2011.
Deposits increased by 33.93% from Rs.1,413.00 billion as at March 31, 2010 to Rs.1,892.38 billion as at
March 31, 2011. This growth in deposits was the result of an increased focus on retail and corporate customers
and the Bank’s success in leveraging its growing network of branches, extension counters and ATMs. Term
deposits increased by 48.09% from Rs.752.71 billion as at March 31, 2010 to Rs.1,114.70 billion as at March 31,
2011. Low cost and non-interest bearing deposits (savings and current account deposits) increased by 17.78%
from Rs.660.30 billion as at March 31, 2010 to Rs.777.67 billion as at March 31, 2011. Low cost deposits as a
percentage of total deposits decreased from 46.73% as at March 31, 2010 to 41.10% as at March 31, 2011.
60
Borrowings increased by 52.99% from Rs.171.70 billion as at March 31, 2010 to Rs.262.68 billion as at
March 31, 2011. Subordinated debt, perpetual debt and Upper Tier II instruments decreased by 2.27% from
Rs.71.56 billion as at March 31, 2010 to Rs.69.93 billion as at March 31, 2011 primarily due to the repayment of
subordinated debt eligible for capital in fiscal 2011.
Other liabilities and provisions increased by 33.84% from Rs.61.34 billion as at March 31, 2010 to
Rs.82.09 billion as at March 31, 2011.
Shareholders’ funds increased by 18.41% from Rs.160.44 billion as at March 31, 2010 to Rs.189.99 billion
as at March 31, 2011, primarily due to retention of current year earnings.
Liquidity and Capital Resources
The Bank’s growth over the years has been financed by a combination of cash generated from operations,
increases in customer deposits, borrowings and new issuances of equity capital. The following table sets forth the
Bank’s cash flows from operating activities, investing activities and financing activities for the half years ended
September 30, 2011 and September 30, 2012.
Half year ended September 30,
2011
2012
(Rupees in millions)
Cash flow from operating activities
Net profit before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:
Depreciation on fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premium on Held to Maturity investments . . . . . . . . . . . . . . . . . . . . .
Provision for non-performing assets (including bad debts) . . . . . . . . . . . . . . . . . . . . .
Provision on standard assets (including retail assets) . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for wealth tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss/(profit) on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for country risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent provision against derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for restructured assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for other contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent provision for advances/other exposures . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net profit before taxes after adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:
(Increase)/Decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)/Decrease in advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/(Decrease) in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)/Decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/(Decrease) in other liabilities & provisions . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow from investing activities
Purchase of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)/Decrease in Held to Maturity Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,527
33,737
1,595
1,171
323
3,997
222
3
(266)
(48)
92
356
22
—
34,992
1,733
(1,337)
329
7,089
706
3
22
(96)
19
138
10
1,150
43,503
(80,487)
18,942
52,172
(8,943)
8,195
(10,645)
14,227
1,547
(31,028)
155,148
(19,600)
9,513
(12,778)
146,305
(1,875)
(51,291)
741
(52,425)
(1,925)
(65,532)
13
(67,444)
Cash flow from financing activities
Proceeds from issue of subordinated debt, perpetual debt & Upper Tier II
instruments (net of repayment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/(Decrease) in borrowings (excluding subordinated debt, perpetual debt and
Upper Tier II instruments) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issue of Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from Share Premium (net of share issue expenses) . . . . . . . . . . . . . . . . . . . .
Payment of Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash generated from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,071
(5,712)
3,960
18
872
(6,698)
(777)
(6,684)
13
707
(7,702)
(19,378)
Effect of exchange fluctuation on translation reserve . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase/(decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents as at the beginning of the year . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents as at the end of the year . . . . . . . . . . . . . . . . . . . . . . . .
408
(38,566)
214,087
175,521
61
783
60,266
139,339
199,605
Cash Flows from Operating Activities
The Bank’s operations generated net cash flow of Rs.146.31 billion during the half year ended
September 30, 2012 as against net cash flow generated of Rs.14.23 billion in the half year ended September 30,
2011. This was primarily due to cash inflow on account of increase in deposits. The detailed components of cash
flow from operating activities for the half year ended September 30, 2011 and 2012 is set forth below.
Net cash from operations in the half year ended September 30, 2012 resulted primarily from net profit
before taxes of Rs.33.74 billion, a net increase in deposits of Rs.155.15 billion, depreciation on fixed assets and
amortization of premium on securities under the HTM category totaling Rs.2.06 billion, and provision for loan
losses, including general provisions and contingent provision for advances and other exposures of
Rs.9.10 billion. These items were offset by an increase in advances of Rs.31.03 billion and direct taxes paid by
the Bank of Rs.12.78 billion.
Net cash from operations in the half year ended September 30, 2011 resulted primarily from net profit
before taxes of Rs.27.53 billion, a net increase in deposits of Rs.52.17 billion, depreciation on fixed assets,
amortization of premium on securities under the HTM category and depreciation on investments totaling Rs.3.09
billion, and provision for loan losses, including general provisions, of Rs.4.67 billion. These items were offset by
a net increase in the investment portfolio by Rs.80.49 billion and direct taxes paid by the Bank of Rs.10.65
billion.
Cash Flows Used in Investing Activities
Net cash used in investing activities was Rs.67.44 billion and Rs.52.43 billion in the half year ended
September 30, 2012 and 2011, respectively. The Bank’s investing activities principally consist of making
investments for its own account and for capital expenditures for the Bank’s branch network, technology and
infrastructure.
Of the Rs.67.44 billion net cash used in investing activities in the half year ended September 30, 2012,
Rs.1.91 billion was primarily used for net capital expenditure and Rs.65.53 billion was used to increase the net
investment portfolio under the HTM category. Of the Rs.52.43 billion used in investing activities in the half year
ended September 30, 2011, Rs.1.13 billion was used for net capital expenditure and Rs.51.29 billion was used to
increase the net investment portfolio under the HTM category.
Cash Flows from Financing Activities
Net cash used in financing activities was Rs.19.38 billion and Rs.0.78 billion in the half year ended
September 30, 2012 and 2011, respectively. The Bank’s financing sources primarily comprised proceeds from
the Bank’s issue of subordinated debt, other borrowings and its issuance of share capital, which were offset by
payment of dividends and repayment of subordinated debt.
Net cash used in financing activities in the half year ended September 30, 2012 was Rs.19.38 billion, which
resulted primarily from the Bank’s repayment of subordinated debt of Rs.6.22 billion, net decrease in other
borrowings of Rs.6.68 billion and dividend payment of Rs.7.70 billion. This was partly offset by issuance of
Equity Shares (including premium) of Rs.0.72 billion. Net cash generated from financing activities in the half
year ended September 30, 2011 of Rs.0.78 billion resulted primarily from the Bank’s raising of other borrowings
of Rs.3.96 billion and issuance of Equity Shares (including premium) of Rs.0.89 billion from exercise of
employee stock options, which was offset by a dividend payment of Rs.6.70 billion.
62
The following table sets forth the Bank’s cash flows from operating activities, investing activities and
financing activities for fiscal 2010, 2011 and 2012.
Year ended March 31,
2010
2011
2012
(Rupees in millions)
Cash flow from operating activities
Net profit before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:
Depreciation on fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premium on Held to Maturity investments . . . . . . . . . . . . . . . .
Provision for non-performing assets (including bad debts) . . . . . . . . . . . . . . . . .
Provision on standard assets (including retail assets) . . . . . . . . . . . . . . . . . . . . .
Provision for wealth tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for interest tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss/(profit) on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for country risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for restructured assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for other contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,513
51,357
2,343
(222)
830
13,570
(9)
3
—
39
(15)
565
—
2,896
993
605
9,551
1,662
5
3
70
24
150
412
62,878
3,422
581
628
8,604
1,503
4
—
(203)
48
889
(198)
Net profit before taxes after adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55,617
67,728
78,156
Adjustments for:
(Increase)/Decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(49,860) (35,372) (165,599)
(Increase)/Decrease in advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (241,787) (390,403) (282,226)
Increase/(Decrease) in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239,261 479,376 308,665
(Increase)/Decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
169
(5,451) (15,673)
Increase/(Decrease) in other liabilities & provisions . . . . . . . . . . . . . . . . . . . . . .
13,728
17,665
1,757
Direct taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(15,147) (19,292) (23,350)
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,981
114,251
(98,270)
Cash flow from investing activities
Purchase of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)/Decrease in Held to Maturity Investments . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,066) (13,603)
(47,353) (126,380)
189
130
(3,843)
(48,105)
762
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(51,230) (139,853)
(51,186)
Cash flow from financing activities
Proceeds from issue of Subordinated debt, Perpetual debt & Upper Tier II
instruments (net of repayment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/(Decrease) in borrowings (excluding subordinated debt, perpetual
debt and Upper Tier II instruments) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issue of Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from Share Premium (net of share issue expenses) . . . . . . . . . . . . . . .
Payment of Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,214
(1,626)
35,808
(1,717)
462
38,570
(4,205)
92,610
53
2,354
(5,694)
42,230
27
1,337
(6,698)
Net cash generated from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
51,324
87,697
72,704
Effect of exchange fluctuation on translation reserve . . . . . . . . . . . . . . . . . . . . .
Net increase/(decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents as at the beginning of the year . . . . . . . . . . . . . . . . .
(205)
1,870
150,169
(47)
62,048
152,039
2,004
(74,748)
214,087
Cash and cash equivalents as at the end of the year . . . . . . . . . . . . . . . . . . . .
152,039
214,087
139,339
Cash Flows from Operating Activities
The Bank’s operations used a net cash flow of Rs.98.27 billion during fiscal 2012, as compared to net cash
flow from operating activities of Rs.114.25 billion and Rs.1.98 billion in fiscal 2011 and 2010, respectively. The
decrease in net cash flow from fiscal 2011 to fiscal 2012 was primarily due to cash outflow on account of
investment in securities.
Net cash used in operating activities in fiscal 2012 resulted primarily from increase in investments, advances
and direct taxes paid of Rs.165.60 billion, Rs.282.23 billion and Rs.23.35 billion, respectively. This was partially
offset by net cash inflow on account of profit before taxes of Rs.62.88 billion, depreciation on fixed assets,
amortization of premium on securities under the HTM category and depreciation on investments totaling
63
Rs.4.63 billion, and provision for loan losses, including general provisions, of Rs.11.00 billion, as well as an
increase in deposits of Rs.308.67 billion.
Net cash from operations in fiscal 2011 resulted primarily from net profit before taxes of Rs.51.36 billion, a
net increase in deposits of Rs.479.38 billion, depreciation on fixed assets, amortization of premium on securities
under the HTM category and depreciation on investments totaling Rs.4.49 billion, and provision for loan losses,
including general provisions, of Rs.11.36 billion. These items were partially offset by an increase in advances of
Rs.390.40 billion, a net increase in the investment portfolio by Rs.35.37 billion and direct taxes paid by the Bank
of Rs.19.29 billion.
Net cash from operations in fiscal 2010 resulted primarily from net profit before taxes of Rs.38.51 billion, a
net increase in deposits of Rs.239.26 billion, depreciation on fixed assets, amortization of premium on securities
under the HTM category and depreciation on investments totaling Rs.2.95 billion, and provision for loan losses,
including general provisions, of Rs.14.13 billion. These items were partially offset by an increase in advances of
Rs.241.79 billion, a net increase in the investment portfolio by Rs.49.86 billion and direct taxes paid by the Bank
of Rs.15.15 billion.
Cash Flows Used in Investing Activities
Net cash used in investing activities was Rs.51.19 billion, Rs.139.85 billion and Rs.51.23 billion in fiscal
2012, 2011 and 2010, respectively. The Bank’s investing activities principally consist of making investments for
its own account and for capital expenditures for the Bank’s branch network, technology and infrastructure.
Of the Rs.51.19 billion net cash used in investing activities in fiscal 2012, Rs.3.08 billion was used
primarily for net capital expenditure and Rs.48.11 billion was used to increase the net investment portfolio under
the HTM category. Of the Rs.139.85 billion used in investing activities in fiscal 2011, Rs.13.47 billion was used
primarily for net capital expenditure and Rs.126.38 billion was used to increase the net investment portfolio
under the HTM category. Of the Rs.51.23 billion used in investing activities in fiscal 2010, Rs.3.88 billion was
used for net capital expenditure and Rs.47.35 billion was used to increase the net investment portfolio under the
HTM category.
Cash Flows from Financing Activities
Net cash generated from financing activities was Rs.72.70 billion, Rs.87.70 billion and Rs.51.32 billion in
fiscal 2012, 2011 and 2010, respectively. The Bank’s financing sources primarily comprised proceeds from the
Bank’s issue of subordinated debt, its issuances of perpetual and Upper Tier II instruments, other borrowings and
its issuance of share capital, which were partly offset by payment of dividends.
Net cash generated from financing activities in fiscal 2012 of Rs.72.70 billion resulted primarily from the
Bank’s raising of other borrowings of Rs.42.20 billion, proceeds from issue of subordinate debt, perpetual debt
and upper Tier II instruments (net of repayment) of Rs.35.81 billion and issuance of Equity Shares (including
premium) of Rs.1.36 billion from exercise of employee stock options, which was partly offset by a dividend
payment of Rs.6.70 billion. Net cash generated from financing activities in fiscal 2011 of Rs.87.70 billion
resulted primarily from the Bank’s raising of other borrowings of Rs.92.61 billion and issuance of Equity Shares
(including premium) of Rs.2.41 billion from exercise of employee stock options, which was partly offset by a
dividend payment of Rs.5.70 billion and net repayment of subordinated debt, perpetual debt and upper Tier II
instruments (net of repayment) of Rs.1.63 billion. Net cash generated from financing activities in fiscal 2010 of
Rs.51.32 billion resulted primarily from the Bank’s issuance of Equity Shares (including premium) of
Rs.38.16 billion from its GDR programme, QIP placement and preferential allotment to promoters and issue of
subordinated debt of Rs.20 billion which was partly offset by a dividend payment of Rs.4.21 billion and net
decrease in other borrowings by Rs.1.72 billion.
Capital Resources
The Bank is subject to the capital adequacy guidelines stipulated by the RBI, which are based on the
framework of the Basel Committee on Banking Supervision. The Bank implemented Basel II in 2008. As per
Basel II guidelines, the Bank is required to maintain a minimum capital to risk-weighted assets ratio (“CRAR”)
of 9.0%, with a minimum Tier I capital ratio of 6.0%. In terms of regulatory guidelines on Basel II, the Bank has
computed capital charge for operational risk under the Basic Indicator Approach and the capital charge for credit
risk has been estimated under the Standardized Approach.
For a description of the RBI’s capital adequacy guidelines, see “Supervision and Regulation — Capital
Adequacy Requirements”.
64
The following table sets forth the risk-based capital, risk-weighted assets and risk-based CAR computed in
accordance with the applicable RBI guidelines.
2010
As at March 31,
As at September 30,
2011
2012
2011
2012
(Rupees in millions, except percentages)
Tier I Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which
— Innovative Perpetual debt instruments . . . . . .
Tier II Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which
— Subordinated debt . . . . . . . . . . . . . . . . . . . . . .
— Upper Tier II instruments . . . . . . . . . . . . . . . .
157,894
185,035
218,861
184,868*
219,067*
4,205
65,185
4,191
63,669
4,480
97,588
4,393
62,668
4,571
97,557
48,427
12,490
45,876
12,428
77,375
13,747
43,965
13,348
76,207
14,164
Total Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
223,079
248,704
316,449
247,536
316,624
Total risk weighted assets and contingents . . . . . . .
1,411,698
1,965,626
2,317,114
2,181,754
2,437,874
Capital adequacy ratios:
Tier I capital adequacy ratio . . . . . . . . . . . . . . . . . .
Tier II capital adequacy ratio . . . . . . . . . . . . . . . . .
Total capital adequacy ratio . . . . . . . . . . . . . . . . . .
Minimum capital adequacy ratios required by
the RBI:
Tier I capital adequacy ratio . . . . . . . . . . . . . . . . . .
Total capital adequacy ratio . . . . . . . . . . . . . . . . . .
11.18%
4.62%
15.80%
9.41%
3.24%
12.65%
9.45%
4.21%
13.66%
8.48%*
2.87%
11.35%*
8.99%*
4.00%
12.99%*
6.00%
9.00%
6.00%
9.00%
6.00%
9.00%
6.00%
9.00%
6.00%
9.00%
Note: * The profit for the half year ended September 30, 2012 and September 30, 2011 has not been reckoned for
computation of Tier I and total capital adequacy ratio, as stipulated by the RBI.
As shown above, the Bank’s Tier I capital adequacy ratio increased to 9.45%, Tier II capital adequacy ratio
increased to 4.21% and the CAR increased to 13.66% as at March 31, 2012 as compared to March 31, 2011.
The CAR of the Bank was 12.99% as at September 30, 2012, compared to 11.35% as at September 30,
2011. Tier I capital adequacy ratio was 8.99%, compared to 8.48% as at September 30, 2011. If the net profit for
the half year ended September 30, 2012 were included, the total CAR and Tier I ratio as at September 30, 2012
would have been 13.92% and 9.92%, respectively. If the net profit for the half year ended September 30, 2011
were included, the total CAR and Tier I ratio as at September 30, 2011 would have been 12.20% and 9.33%,
respectively.
Capital Expenditures
The Bank’s capital expenditures consist principally of branch network expansion as well as investments in
technology and communication infrastructure. The Bank incurred aggregate capital expenditures (on additions to
fixed assets including capital work in progress) of Rs.4.07 billion, Rs.13.60 billion and Rs.3.84 billion during
fiscal 2010, 2011 and 2012, respectively. During fiscal 2013, the Bank plans to incur capital expenditures of
approximately Rs.6.02 billion, which is expected to be funded internally. Of this amount, Rs.4.93 billion is
expected to be used for technology infrastructure. The Bank has not made any commitments for the remainder of
the funds allocated to capital expenditure, and the amount and purpose of these expenditures may change in
accordance with its business requirements.
The following table sets forth, as at the dates indicated, the written down value of various fixed assets:
As at
As at March 31,
September 30,
2010
2011
2012
2011
2012
(Rupees in millions)
Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other fixed assets (including furniture and fixtures) . . . . . . . . . . . .
Capital work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
729
10,923
572
8,919
13,586
227
8,740
13,146
707
8,716
13,282
539
8,705
13,423
622
Total written down value of fixed assets . . . . . . . . . . . . . . . . . . .
12,224
22,732
22,593
22,537
22,750
The Bank’s written down value of fixed assets decreased to Rs.22.59 billion as at March 31, 2012 from
Rs.22.73 billion as at March 31, 2011. The written down value of fixed assets was Rs.22.75 billion as at
September 30, 2012.
65
Financial Instruments and Off-Balance Sheet Arrangements
Foreign Exchange and Derivative Contracts
The Bank enters into foreign exchange and derivative transactions for customers and for its own account.
Foreign exchange products offered include forward exchange contracts, currency swaps, options and futures. The
derivative products offered by the Bank include interest rate swaps, forward rate agreements, interest rate futures
and cross-currency derivatives primarily for corporate customers. The Bank also trades in interest rate swaps for
its own account and enters into foreign exchange contracts to cover its exposure. The Bank earns profit on
customer transactions by way of margin as a mark-up over the inter-bank exchange rate. The Bank earns profit
on inter-bank transactions based on the spread between the purchase rate and the sale rate. These profits are
booked as income from foreign exchange and derivative transactions.
The following table sets forth the notional principal amounts of the Bank’s outstanding foreign and
derivative contracts as at the dates indicated:
As at March 31,
2011
2012
(Rupees in millions)
2010
Forward contracts . . . . . . . . . . . . .
Interest rate swaps, currency
swaps, currency futures,
forward rate agreement and
interest rate futures . . . . . . . . . .
Foreign currency options . . . . . . . .
Total foreign exchange
derivative products . . . . . . . . .
As at September 30,
2011
2012
1,265,355
1,854,438
2,009,255
2,634,785
2,773,929
1,317,575
56,163
1,647,016
141,259
1,752,491
130,543
1,751,490
220,638
2,204,683
107,282
2,639,093
3,642,713
3,892,289
4,606,913
5,085,894
As part of its corporate banking activities, the Bank issues guarantees and documentary credits. Guarantees
are generally issued to enhance the credit standing of the Bank’s customers and represent irrevocable assurances
that the Bank will make the payments in the event that the customer fails to fulfill its financial or performance
obligations. Documentary credits are provided to customers to meet their working capital requirements as well as
for capital equipment purchases.
The following table sets forth, as at dates indicated, the values of outstanding guarantees and documentary
credits:
2010
As at March 31,
As at September 30,
2011
2012
2011
2012
(Rupees in millions)
Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . .
Documentary credits . . . . . . . . . . . . . . . . . .
374,083
164,634
540,611
249,277
566,119
302,613
646,615
300,244
596,873
268,971
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
538,717
789,888
868,732
946,859
865,844
Guarantees and documentary credits outstanding decreased to Rs.865.84 billion as at September 30, 2012
from Rs.946.86 billion as at September 30, 2011 and Rs.868.73 billion as at March 31, 2012.
Contractual Obligations
The following table sets forth the Bank’s contractual obligations in respect of subordinated debt and Upper
Tier II instruments as at September 30, 2012:
Payments due by period, as at September 30, 2012
Less than
Total
1 year
1-3 years
3-5 years
After 5 years
(Rupees in millions)
Subordinated debt . . . . . . . . . . . . . . . . . . . .
Upper Tier II instruments . . . . . . . . . . . . . .
81,293
14,164
2,285
—
500
—
7,258
—
71,250
14,164
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95,457
2,285
500
7,258
85,414
66
Operating leases comprise leases of office premises/ATMs, staff quarters, electronic data capturing
machines and information technology (IT) equipment. The following table sets forth certain information in
respect of future rentals payable on the Bank’s operating leases.
2010
As at March 31,
As at September 30,
2011
2012
2011
2012
(Rupees in millions)
Future rentals payable
Not later than one year . . . . . . . . . . . . . . . . . . . . . .
Later than one year and not later than five
years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later than five years . . . . . . . . . . . . . . . . . . . . . . . .
4,060
4,354
4,652
4,464
4,871
11,644
7,189
12,221
6,711
16,167
4,775
14,993
4,429
14,674
7,483
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,893
23,286
25,594
23,886
27,028
Restrictions on the Payment of Dividends
As part of certain of its financing arrangements, the Bank is restricted from declaring or paying any
dividend during any financial year unless it has paid (or made provision for) all the dues till such date to the
debenture-holders under such arrangement, without the consent of the trustee.
67
RECENT DEVELOPMENTS
The First Nine Months of Fiscal 2013 Performance Highlights
Net Interest Income
The Bank’s net interest income in the first nine months of fiscal 2013 was Rs.70.02 billion, an increase of
19.24% as compared to Rs.58.72 billion in the first nine months of fiscal 2012. Growth in average levels of
advances and investments contributed to the growth in net interest income.
Net Interest Margin
The net interest margin for the first nine months of fiscal 2013 decreased to 3.47% as compared to 3.61%
for the first nine months of fiscal 2012. The daily average cost of funds increased in the first nine months of
fiscal 2013 to 6.59% as compared to 6.22% in the first nine months of fiscal 2012.
Non-Interest Income
Non-interest income registered growth of 18.55%, increasing to Rs.45.44 billion for the first nine months of
fiscal 2013 as compared to Rs.38.33 billion for the first nine months of fiscal 2012.
Non-Performing Assets (“NPA”) Management
Net NPAs as a proportion of net customer assets was 0.33% as at December 31, 2012 as compared to 0.39%
as at December 31, 2011, an increase from 0.25% as at March 31, 2012. Gross NPAs as a proportion of gross
customer assets were at 1.10% as at December 31, 2012 as compared to 1.10% as at December 31, 2011, an
increase from 0.94% as at March 31, 2012.
Capital and Net Worth
The net worth of the Bank increased to Rs.259,372 million as at December 31, 2012 as compared to
Rs.217,811 million as at March 31, 2012. The capital adequacy ratio for the Bank was 13.73% as at
December 31, 2012 as compared to 13.66% as at March 31, 2012. The Tier I ratio decreased to 8.83% as at
December 31, 2012 as compared to 9.45% as at March 31, 2012.
The nine month profit for fiscal 2013 is not included in the computation of Tier I capital, as stipulated by the
RBI. If the net profit of Rs.36.24 billion for the nine months ended December 31, 2012 is included, the total
capital adequacy ratio and Tier I capital adequacy ratio as at December 31, 2012 would be 15.17% and 10.27%,
respectively.
Assets
Cash and balances with the RBI and balances with banks and money at call and short notice amounted to
Rs.291,647 million as at December 31, 2012, an increase of 109.31% from Rs.139,339 million as at March 31,
2012. The increase is primarily attributable to an increase in balances with the RBI from Rs.71,072 million as at
March 31, 2012 to Rs.202,872 million as at December 31, 2012.
Investments amounted to Rs.1,009,124 million as at December 31, 2012, an increase of 8.28% from
Rs.931,921 million as at March 31, 2012. The increase is primarily attributable to the Bank’s increased
investments in government securities to comply with the RBI mandated SLR requirements and investments in
bonds and debentures.
Advances amounted to Rs.1,795,042 million as at December 31, 2012, an increase of 5.74% from
Rs.1,697,595 million as at March 31, 2012. The increase is primarily attributable to the expansion in the Bank’s
business during the period.
Fixed assets amounted to Rs.22,659 million as at December 31, 2012, a slight increase of 0.29% from
Rs.22,593 million as at March 31, 2012.
Other assets amounted to Rs.70,946 million as at December 31, 2012, an increase of 9.43% from
Rs.64,830 million as at March 31, 2012. The increase is primarily attributable to the general business volume
during the period.
For the reasons stated above, total assets increased by 11.66% from Rs.2,856,278 million as at March 31,
2012 to Rs.3,189,418 million as at December 31, 2012.
68
Capital and Liabilities
Capital amounted to Rs.4,272 million as at December 31, 2012, an increase of 3.39% from Rs.4,132 million
as at March 31, 2012, due to the issuance of shares to shareholder of Enam Securities Private Limited (“ESPL”)
in respect of a demerger of the financial services businesses from ESPL and the exercise of employee stock
options. For further details on the ESPL acquisition, please see “— Acquisition of Enam Securities Private
Limited”.
Reserves and surplus amounted to Rs.265,995 million as at December 31, 2012, an increase of 18.77% from
Rs.223,953 million as at March 31, 2012. The increase is primarily attributable to profits of Rs.36,243 million for
the nine months ended December 31, 2012 and Rs.2,621 million being the difference between the value of the net
assets acquired from ESPL (subsequently transferred to Axis Capital Limited) and the shares issued has been
transferred to the capital reserve. For further details on the ESPL acquisition, please see “— Acquisition of
Enam Securities Private Limited”.
Deposits amounted to Rs.2,445,014 million as at December 31, 2012, an increase of 11.08% from
Rs.2,201,043 million as at March 31, 2012. The increase is primarily attributable to the increase in savings bank
deposits and term deposits during the period.
Borrowings amounted to Rs.387,676 million as at December 31, 2012, an increase of 13.78% from
Rs.340,717 million as at March 31, 2012. The increase is primarily attributable to an issue of lower Tier II
subordinated debt amounting to Rs.25,000 million with a maturity date of December 31, 2022 and increase in
other interbank borrowings during the period.
Other liabilities and provisions amounted to Rs.86,461 million as at December 31, 2012, a slight increase of
0.03% from Rs.86,433 million as at March 31, 2012.
For the reasons stated above, total capital and liabilities increased 11.66% from Rs.2,856,278 million as at
March 31, 2012 to Rs.3,189,418 million as at December 31, 2012.
Acquisition of Enam Securities Private Limited
On November 17, 2010, the Board of Directors approved the acquisition of certain financial services
businesses undertaken by ESPL, directly and through ESPL’s wholly owned subsidiaries, by Axis Securities and
Sales Limited (now renamed as Axis Capital Limited, or “ACL”), a wholly owned subsidiary of the Bank by way
of a demerger. However, pursuant to conditions prescribed by the RBI, certain modifications had been carried out
to the demerger structure in terms of a revised Scheme of Arrangement (the “Scheme”) under Sections 391-394
and other relevant provisions of the Companies Act. On March 30, 2012, the RBI conveyed its no objection to
the Scheme.
Further, on April 27, 2012, the Board of Directors of the Bank approved the reassessment of the valuation of
the ESPL business at Rs.13.96 billion. Accordingly, the acquisition consisted of (a) a demerger of the financial
services businesses from ESPL to the Bank, in consideration for five Equity Shares (aggregating to 12,090,000
Equity Shares) with a face value of Rs.10 each for every one Equity Share (aggregating 2,418,000 Equity Shares)
of Rs.10 each held by the shareholders of ESPL, and (b) immediately upon completion of the demerger under the
Scheme, a simultaneous sale of the financial services businesses from the Bank to ACL for a cash consideration
of Rs.2.74 billion, with both the aforesaid steps occurring simultaneously. The equity shareholders and unsecured
creditors of the Bank at their meetings held on June 23, 2012, approved the revised Scheme of Arrangement.
The demerger of the financial services businesses from ESPL to the Bank and a simultaneous sale of such
businesses to ACL, a wholly-owned subsidiary of the Bank, was concluded on October 20, 2012, pursuant to the
orders passed by the High Court of Gujarat at Ahmedabad and the High Court of Bombay.
As a percentage of the Bank’s total assets and total revenue as of and for the fiscal year ended March 31,
2012, the acquired entity represents 0.13% and 0.75%, respectively.
69
SELECTED STATISTICAL INFORMATION
The following unaudited information should be read together with the Bank’s Financial Statements included
in this Placement Document as well as “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”. Footnotes appear at the end of each related section of tables.
Average Balance Sheet
The table below presents the average balances for interest-earning assets and interest-bearing liabilities
together with the related interest revenue and expense amounts, resulting in the presentation of the average yields
and cost for each period. The average balance is the average of quarterly balances outstanding. The average yield
on average interest-earning assets is the ratio of interest revenue to average interest-earning assets. The average
cost on average interest-bearing liabilities is the ratio of interest expense to average interest-bearing liabilities.
The average balances of loans include NPAs and are net of allowance for credit losses. The Bank has not
recalculated tax exempt income on a tax equivalent basis. As the yield and cost in the table below has been
computed on the basis of quarterly average balances, these will not match with the ratios contained in the
“Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Selected
Financial Information” and “Business” sections which have been calculated on the basis of daily average
balances, except as otherwise stated.
Average
Balance
Interest-earning assets:
Advances . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . .
2012
Interest Average
Income/
Yield/
Expense Cost (%)
79,866
34,283
2,231
9.29
6.86
5.36
1,178,995 104,031
614,143 44,387
56,025
3,130
8.82
7.23
5.59
1,465,791 153,793
831,540 63,943
36,484
2,210
10.49
7.69
6.06
Total interest-earning
assets . . . . . . . . . . . . . . . . 1,401,249 116,380
8.31
1,849,163 151,548
8.20
2,333,815 219,946
9.42
Non-interest earning
assets:
Fixed assets . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . .
859,633
499,959
41,657
Year Ended March 31,
2010
2011
Interest Average
Interest Average
Average Income/
Average
Income/
Yield/
Yield/
Expense Cost (%) Balance Expense Cost (%) Balance
(Rupees in millions, except percentages)
11,662
130,452
—
—
—
—
Total assets . . . . . . . . . . . . . 1,543,363 116,380
—
18,303
171,252
—
—
—
—
2,038,718 151,548
22,604
206,388
—
—
—
—
—
2,562,807 219,946
—
Interest-bearing liabilities:
Deposits . . . . . . . . . . . . . . . . 1,196,766
Saving deposits . . . . . . . . . .
285,036
Other demand deposits. . . . .
239,406
Term deposits . . . . . . . . . . .
672,324
Borrowings . . . . . . . . . . . . .
160,696
57,145
7,351
—
49,794
9,191
4.78
2.58
—
7.41
5.72
1,581,430
372,719
295,607
913,104
215,388
74,985
12,575
—
62,410
10,933
4.74
3.37
—
6.83
5.08
1,992,174 121,836
459,000 17,171
365,998
—
1,167,176 104,665
280,395 17,933
6.12
3.74
—
8.97
6.40
Total interest-bearing
liabilities . . . . . . . . . . . . . 1,357,462
66,336
4.89
1,796,818
85,918
4.78
2,272,569 139,769
6.15
Non-interest bearing
liabilities:
Capital and reserves . . . . . . .
Other liabilities . . . . . . . . . .
135,852
50,049
—
—
—
—
176,474
65,426
—
—
—
—
209,896
80,342
—
—
—
—
Total non-interest bearing
liabilities: . . . . . . . . . . . .
185,901
—
—
241,900
—
—
290,238
—
—
Total liabilities . . . . . . . . . . 1,543,363
66,336
—
2,038,718
85,918
—
2,562,807 139,769
—
70
Average
Balance
Half Year Ended September 30,
2011
2012
Interest
Average
Interest
Income/
Yield/
Average
Income/
Expense
Cost (%)
Balance
Expense
(Rupees in millions, except percentages)
Average
Yield/
Cost (%)
Interest-earning assets:
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,381,322
774,382
38,546
71,579
28,815
1,180
10.36
7.44
6.12
1,710,123
936,229
36,251
93,608
37,029
1,064
10.92
7.89
5.85
Total interest-earning assets . . . . . . . . . . . . .
2,194,250
101,574
9.26
2,682,603
131,701
9.79
Non-interest earning assets:
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,627
204,675
—
—
—
—
22,701
220,300
—
—
—
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,421,552
101,574
—
2,925,604
131,701
—
Interest-bearing liabilities:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Saving deposits . . . . . . . . . . . . . . . . . . . . . . . . .
Other demand deposits . . . . . . . . . . . . . . . . . . .
Term deposits . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,890,966
435,118
345,953
1,109,895
251,198
56,948
8,080
—
48,868
7,312
6.02
3.72
—
8.80
5.82
2,261,181
535,444
377,562
1,348,175
336,572
73,932
10,021
—
63,911
12,701
6.52
3.73
—
9.46
7.53
Total interest-bearing liabilities . . . . . . . . . .
2,142,164
64,260
6.00
2,597,753
86,633
6.65
Non-interest bearing liabilities:
Capital and reserves . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
200,016
79,372
—
—
—
—
240,985
86,866
—
—
—
—
Total non-interest bearing liabilities: . . . . . .
279,388
—
—
327,851
—
—
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . .
2,421,552
64,260
—
2,925,604
86,633
—
Analysis of Changes in Interest Revenue and Interest Expense By Volume and Rate
The following tables set forth, for the periods indicated, the allocation of the changes in the Bank’s interest
revenue and interest expense between average volume and changes in average rates.
Half Year Ended September 30,
2012 vs. Half Year Ended
Fiscal 2011 vs. Fiscal 2010
Fiscal 2012 vs. Fiscal 2011
September 30, 2011
Increase (Decrease)(1) Due to
Increase (Decrease)(1) Due to
Increase (Decrease)(1) Due to
Change in Change in
Change in Change in
Change in Change in
Net
Average
Average
Net
Average
Average
Net
Average
Average
Change Volume
Rate
Change Volume
Rate
Change Volume
Rate
Interest revenue
Advances . . . . . . . . . . . . . .
Investments . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . .
Total interest-earning
assets . . . . . . . . . . . . . . .
Interest expenses
Saving deposits . . . . . . . . .
Other demand deposits . . .
Term deposits . . . . . . . . . .
Borrowings . . . . . . . . . . . .
Total interest-bearing
liabilities . . . . . . . . . . . .
Net interest revenue . . . .
24,165 29,671
10,104 7,830
899
770
(5,506) 49,762 25,306
2,274 19,556 15,712
129
(920) (1,092)
24,456 22,029 17,998
3,844 8,214 6,401
172
(116)
(67)
4,031
1,813
(49)
35,168 38,271
(3,103) 68,398 39,926
28,472 30,127 24,332
5,795
5,224 2,261
—
—
12,616 17,833
1,742 3,128
2,963
4,596 2,911
—
—
—
(5,217) 42,255 17,366
(1,386) 7,000 3,300
1,685 1,941 1,878
—
—
—
24,889 15,043 11,296
3,700 5,389 3,222
63
—
3,747
2,167
19,582 23,222
15,586 15,049
(3,640) 53,851 23,577
537 14,547 16,349
30,274 22,373 16,396
(1,802) 7,754 7,936
5,977
(182)
(1) The changes in net interest revenue between periods have been reflected as attributed either to volume or rate changes.
71
Yields, Spreads and Margins
The following table sets forth, for the periods indicated, the yields, spreads and interest margins on the
Bank’s interest-earning assets.
Half Year Ended
Year Ended March 31,
September 30,
2010
2011
2012
2011
2012
(Rupees in million except percentages)
Interest income . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . .
Average interest-earning assets . . .
Average interest-bearing
liabilities . . . . . . . . . . . . . . . . . .
Average total assets . . . . . . . . . . . .
Average interest-earning assets as
a % of average total assets . . . .
Average interest-bearing liabilities
as a % of average total assets . .
Average interest-earning assets as
a % of average interest bearing
liabilities . . . . . . . . . . . . . . . . . .
Yield (%)(3) . . . . . . . . . . . . . . . . . .
Cost of Funds (%)(3) . . . . . . . . . . .
Spread (%)(1)(3) . . . . . . . . . . . . . . . .
Net interest margin (%)(2)(3) . . . . . .
116,380
66,336
1,401,249
151,548
85,918
1,849,163
219,946
139,769
2,333,815
101,574
64,260
2,194,250
131,701
86,633
2,682,603
1,357,462
1,543,363
1,796,818
2,038,718
2,272,569
2,562,807
2,142,164
2,421,552
2,597,753
2,925,604
90.79
90.70
91.06
90.61
91.69
87.95
88.13
88.67
88.46
88.79
103.23
8.31
4.89
3.42
3.57
102.91
8.2
4.78
3.42
3.55
102.70
9.42
6.15
3.27
3.44
102.43
9.26
6.00
3.26
3.40
103.27
9.79
6.65
3.14
3.35
(1) Spread is the difference between yield on average interest-earning assets and cost of average interest-bearing liabilities.
Yield on average interest-earning assets is the ratio of interest income to average interest-earning assets. Cost of average
interest-bearing liabilities is the ratio of interest expense to average interest-bearing liabilities.
(2) Net interest margin is the ratio of net interest income to average interest-earning assets. The difference in net interest
margin and spread arises due to the difference in amount of average interest-earning assets and average interest-bearing
liabilities. If average interest-earning assets exceed average interest-bearing liabilities, net interest margin is greater than
spread and if average interest-bearing liabilities exceed average interest-earning assets, net interest margin is less than
spread.
(3) Half yearly ratios are annualised.
Return on Equity and Assets
The following table presents selected financial ratios for the periods indicated.
Half Year Ended
Year Ended March 31,
September 30,
2010
2011
2012
2011
2012
(Rupees in million except percentages)
Return on Equity and Assets
Net profit . . . . . . . . . . . . . . . . . . . .
Average total assets(1) . . . . . . . . . .
Average shareholders’ equity . . . .
Net profit as a percentage of
average total assets(2) . . . . . . . . .
Net profit as a percentage of
average shareholders’
equity(3) . . . . . . . . . . . . . . . . . . .
Average shareholders’ equity as a
percentage of average total
assets . . . . . . . . . . . . . . . . . . . . .
25,145
1,504,919
126,403
33,885
2,022,593
168,325
42,422
2,525,431
199,913
18,627
2,379,393
191,350
22,771
2,919,772
229,712
1.67%
1.68%
1.68%
1.57%
1.56%
19.89%
20.13%
21.22%
19.47%
19.77%
8.40%
8.32%
7.92%
8.04%
7.87%
(1) Average total assets represent monthly average balances of total assets as reported to RBI in Form X under section 27 of
the Banking Regulation Act.
(2) Net profit divided by average month-end assets for the period.
(3) Net profit divided by the daily weighted average of share capital, share premium and period end average of other
reserves and surplus.
72
Investment Portfolio (Gross)
Available for Sale (“AFS”) Investments
The following tables set forth, as at the dates indicated, information related to the Bank’s AFS investments.
As at March 31, 2010
Market Unrealized Unrealized
Value
Gain
Loss
Book
Value
As at March 31, 2011
Market Unrealized Unrealized
Value
Gain
Loss
Book
Value
Book
Value
As at March 31, 2012
Market Unrealized Unrealized
Value
Gain
Loss
(Rupees in millions)
Government
securities . . . . 60,411 60,347
Other debt
securities . . . . 139,915 145,833
Total debt
securities . . . . 200,326 206,180
Non-debt
securities . . . .
6,744
5,941
Total . . . . . . . . . 207,070 212,121
44
47,755
25
(550) 106,329 105,612
122
(839)
7,212
(1,294) 193,843 196,030
4,267
(2,080) 251,424 256,118
6,376
(1,682)
7,256
(1,402) 242,123 243,785
4,292
(2,630) 357,753 361,730
6,498
(2,521)
7,576
746
(3,243)
(4,920) 367,826 369,306
7,244
(5,764)
228
7,484
(108)
48,280
(1,031)
8,727
7,138
701
(2,433) 250,850 250,923
4,993
(2,290)
10,073
Government securities . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . .
62,215
230,715
As at September 30, 2011
Market Unrealized Unrealized
Book
Value
Gain
Loss
Value
(Rupees in millions)
61,353
29
(891)
103,871
234,288
6,053
(2,480)
255,010
Total debt securities . . . . . . . . . . . . . .
Non-debt securities . . . . . . . . . . . . . . .
292,930
9,248
295,641
6,955
6,082
526
(3,371)
(2,819)
358,881
8,896
367,107
6,991
8,924
713
(698)
(2,618)
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
302,178
302,596
6,608
(6,190)
367,777
374,098
9,637
(3,316)
Book
Value
As at September 30, 2012
Market Unrealized Unrealized
Value
Gain
Loss
103,856
263,251
109
8,815
(124)
(574)
Held to Maturity (“HTM”) Investments
The following tables set forth, as at the dates indicated, information related to the Bank’s HTM investments.
Book
Value
As at March 31, 2010
Market Unrealized Unrealized
Value
Gain
Loss
As at March 31, 2011
Market Unrealized Unrealized
Value
Gain
Loss
Book
Value
Book
Value
As at March 31, 2012
Market Unrealized Unrealized
Value
Gain
Loss
(Rupees in millions)
Government
securities . . . 277,467 273,209
Other debt
securities . . . 30,745 30,760
Total debt
securities . . . 308,212 303,969
Non-debt
securities . . .
3,148
3,148
Total . . . . . . . . 311,360 307,117
464
(4,723)
23
(8)
487
(4,731)
—
391,698 382,967
250
(8,981)
41,097
9
(7)
432,793 424,064
259
(8,988)
41,095
—
487
(4,731)
4,342
4,342
—
437,135 428,406
259
429,155 415,706
53
(13,502)
51,364
9
(5)
480,515 467,070
62
(13,507)
4,093
—
(3)
484,611 471,163
62
(13,510)
51,360
—
(8,988)
4,096
Government securities . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . .
441,147
43,310
As at September 30, 2011
As at September 30, 2012
Market Unrealized Unrealized
Book
Market Unrealized Unrealized
Value
Gain
Loss
Value
Value
Gain
Loss
(Rupees in millions)
425,434
7
(15,720)
489,067 480,977
805
(8,895)
43,313
10
(7)
57,152
57,157
8
(3)
Total debt securities . . . . . . . . . . . . . .
Non-debt securities . . . . . . . . . . . . . . .
484,457
3,647
468,747
3,636
17
—
(15,727)
(11)
546,219
3,595
538,134
3,593
813
—
(8,898)
(2)
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
488,104
472,383
17
(15,738)
549,814
541,727
813
(8,900)
Book
Value
Held for Trading (“HFT”) Investments
The following tables set forth, as at the dates indicated, information related to the Bank’s HFT investments.
Book
Value
As at March 31, 2010
Market Unrealized Unrealized
Value
Gain
Loss
As at March 31, 2011
Market Unrealized Unrealized
Value
Gain
Loss
Book
Value
Book
Value
As at March 31, 2012
Market Unrealized Unrealized
Value
Gain
Loss
(Rupees in millions)
Government
securities . . . . . . . 4,183 4,180
Other debt
securities . . . . . . . 36,248 36,241
Total debt
securities . . . . . . . 40,431 40,421
Non-debt
securities . . . . . . . 2,751 2,757
Total . . . . . . . . . . . . 43,182 43,178
—
(3)
—
—
2,525
—
(2)
49,396 49,399
7
(4)
(7)
32,012 32,013
1
—
33,754 33,774
27
(7)
(10)
34,539 34,538
1
(2)
83,150 83,173
34
(11)
190
—
(21)
34,750 34,728
1
(23)
7
(1)
7
(11)
2,527
211
73
248
7
(4)
83,395 83,421
245
41
(15)
Government securities . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . .
37,221
26,090
As at September 30, 2011
Market Unrealized Unrealized
Book
Value
Gain
Loss
Value
(Rupees in millions)
37,213
2
(10)
33,516
26,108
30
(12)
48,254
Total debt securities . . . . . . . . . . . . . . . .
Non-debt securities . . . . . . . . . . . . . . . . .
63,311
581
63,321
511
32
—
(22)
(70)
81,770
18
81,827
22
59
4
(2)
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63,892
63,832
32
(92)
81,788
81,849
63
(2)
Book
Value
As at September 30, 2012
Market Unrealized Unrealized
Value
Gain
Loss
33,517
48,310
3
56
(2)
—
Residual Maturity Profile
The following table sets forth, as at the date indicated, an analysis of the residual maturity profile of the
Bank’s investments in government and corporate debt securities classified as AFS securities and their weighted
average market yields.
35,862
55,087
As at September 30, 2012
One to
Five to
More than
Five Year
Ten Years
Ten Years
Amount Yield Amount Yield Amount Yield
(Rupees in millions)
7.64%
7,346
7.75% 33,207
8.20% 27,440
8.28%
8.16% 126,706
8.27% 57,600
8.74% 23,858
9.31%
Total debt securities market value . . . . . . . . . . . . . . . . . . . .
90,949
7.95% 134,052
Gross book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,238
127,522
Up to
One Year
Amount Yield
Government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.25%
90,807
8.54%
90,356
51,298
8.76%
50,765
The following table sets forth, as at the date indicated, an analysis of the residual maturity profile of the
Bank’s investments in government and corporate debt securities classified as HTM securities and their weighted
average market yields.
Government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,306
6,187
As at September 30, 2012
One to
Five to
More than
Five Year
Ten Years
Ten Years
Amount Yield Amount Yield Amount Yield
(Rupees in millions)
7.66% 174,530
7.53% 149,991
8.16% 127,149
8.41%
5.02% 34,879
5.32% 16,091
5.40%
—
—
Total debt securities market value . . . . . . . . . . . . . . . . . . . .
35,493
7.20% 209,409
7.16% 166,082
7.90% 127,149
Gross book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,767
212,596
168,013
129,843
Up to
One Year
Amount Yield
8.41%
The following table sets forth, as at the date indicated, an analysis of the residual maturity profile of the
Bank’s investments in government and corporate debt securities classified as HFT securities and their weighted
average market yields.
1,154
44,917
As at September 30, 2012
One to
Five to
More than
Five Year
Ten Years
Ten Years
Amount Yield Amount Yield Amount Yield
(Rupees in millions)
7.56% 1,444
8.10% 19,601
8.77% 11,318
8.19%
8.90% 2,850
7.91%
543
5.43%
—
—
Total debt securities market value . . . . . . . . . . . . . . . . . . . .
46,071
8.86%
Gross book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,071
Up to
One Year
Amount Yield
Government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,294
4,258
7.97%
20,144
20,125
8.68%
11,318
8.19%
11,316
Funding
The Bank’s funding operations are designed to ensure stability, low cost of funding and effective liquidity
management. The primary source of funding is deposits raised from wholesale banking customers (term deposits
of more than Rs.50 million and current account deposits), which represented 54.78% and 52.22% of total
deposits as at March 31, 2012 and September 30, 2012, respectively. Retail banking deposits (term deposits of up
to Rs.50 million and savings account deposits) represented 45.22% and 47.78% of total deposits as at March 31,
2012 and September 30, 2012, respectively.
74
Total Deposits
The following table sets forth, for the periods indicated, the Bank’s average outstanding deposits on a
quarterly average basis and the percentage composition for each category of deposits. The average cost (interest
expense divided by the average of daily balance for the relevant period) of savings deposits was 2.77% in fiscal
2010, 3.49% in fiscal 2011 and 3.95% in fiscal 2012. The average annualized cost of savings deposits was 3.90%
in the half year ended September 30, 2011 and 3.98% in the half year ended September 30, 2012. The average
cost of time deposits was 7.52% in fiscal 2010, 6.81% in fiscal 2011 and 8.92% in fiscal 2012. The average
annualized cost of time deposits was 8.72% in the half year ended September 30, 2011 and 9.16% in the half year
ended September 30, 2012. The average deposits on a quarterly average basis for the periods set forth are as
follows:
Year Ended March 31,
2010
2011
2012
(Rupees in millions, except percentages)
% of
% of
% of
total
total
total
Amount
deposits
Amount
deposits
Amount
deposits
Current deposits(1) . . .
Savings deposits . . . .
Time deposits . . . . . .
239,406
285,036
672,324
20.00
23.82
56.18
295,607
372,719
913,104
18.69 365,998
23.57 459,000
57.74 1,167,176
Half Year Ended
September 30,
2012
% of
total
deposits
Amount
18.37 377,562
23.04 535,444
58.59 1,348,175
16.70
23.68
59.62
Total . . . . . . . . . . . . . 1,196,766 100.00 1,581,430 100.00 1,992,174 100.00 2,261,181 100.00
(1) Includes current accounts and cash floats from transactional services.
As at September 30, 2012, individual term deposits with the Bank in excess of U.S.$100,000 (approximately
Rs.5.29 million) had balance to maturity profiles as set out below.
Up to 3
Months
Balance to maturity for deposits exceeding
Rs.5.29 million each . . . . . . . . . . . . . . .
285,180
As at September 30, 2012
3 to 6
6 to 9
9 to 12
Months
Months
Months
(Rupees in million)
300,568
148,434
166,074
More Than
1 Year
125,310
Short-term Borrowings
The following table sets forth, for the periods indicated, information related to the Bank’s short-term rupee
borrowings, which are comprised primarily of money-market borrowings (call borrowing and CBLO borrowing).
Short-term rupee borrowings exclude deposits and securities sold under repurchase agreements.
Half Year Ended
Year Ended March 31,
September 30,
2010
2011
2012
2012
(Rupees in millions, except percentages)
Year end balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average balance during the year(1) . . . . . . . . . . . . . . .
Maximum outstanding . . . . . . . . . . . . . . . . . . . . . . . .
Average interest rate during the year(2) . . . . . . . . . . . .
Average interest rate at year end(3) . . . . . . . . . . . . . . .
—
—
—
9,394
3,256
6,181
42,085
29,590
56,941
3.23%
5.83%
7.89%
—
—
—
4,000
5,876
38,014
8.18%
8.10%
(1) Average of daily balances outstanding.
(2) Represents the ratio of interest expense on short-term borrowings to the average of daily balances of short-term
borrowings.
(3) Represents the weighted average rate of short-term borrowings outstanding as at March 31, 2010, March 31, 2011,
March 31, 2012 and September 30, 2012, respectively.
Subordinated Debt
The Bank obtains funds from the issuance of unsecured non-convertible subordinated debt securities, which
qualify as Tier II risk-based capital under the RBI’s guidelines for assessing capital adequacy. The Bank issued
20 tranches of subordinated debt securities, of which nine were outstanding as at September 30, 2012. These nine
tranches were issued during the fiscals 2004, 2006, 2007, 2009, 2010 and 2012 at coupon rates of 7.0% to 6.5%,
8.75% to 8.32%, 10.10% to 8.95%, 11.75% to 9.95%, 9.15%, and 9.73% to 9.30%, respectively.
75
The fiscal 2004 tranches are repayable in fiscal 2014. The fiscal 2006 tranches are repayable in fiscal 2014
and 2016. The fiscal 2007 tranches are repayable in fiscal 2017. The fiscal 2009 tranches are repayable in fiscal
2019. The fiscal 2010 tranche is repayable in fiscal 2020. The fiscal 2012 tranches are repayable in fiscal 2022.
As at September 30, 2012, the Bank had Rs.81.29 billion aggregate principal amount of subordinated debt
outstanding, of which Rs.76.21 billion qualified as Tier II capital
The following table sets forth, as at September 30, 2012, the details of unsecured non-convertible
subordinate debt securities issued by the Bank.
As at September 30, 2012
Date of Allotment
July 26, 2003
January 15, 2004
March 22, 2006
March 22, 2006
March 22, 2006
March 22, 2006
June 28, 2006
June 28, 2006
March 30, 2007
November 7, 2008
March 28, 2009
June 16, 2009
December 1, 2011
March 20, 2012
No. of
Debentures
Rate of Interest
Date of Redemption
Amount
(Rupees in
millions)
1,300
500
1,250
50
3,600
100
335
1,049
2,509
15,000
2,000
20,000
15,000
19,250
7.00%
6.50%
8.50%
8.32%
8.75%
8.56%
8.95%
9.10%
10.10%
11.75%
9.95%
9.15%
9.73%
9.30%
April 26, 2013
October 15, 2013
June 22, 2013
June 22, 2013
March 22, 2016
March 22, 2016
September 28, 2013
June 28, 2016
March 30, 2017
November 7, 2018
March 28, 2019
June 16, 2019
December 1, 2021
March 20, 2022
650
500
1,250
50
3,600
100
335
1,049
2,509
15,000
2,000
20,000
15,000
19,250
81,293
Perpetual Debt and Upper Tier II Instruments
The Bank issued perpetual debt and Upper Tier II instruments qualifying for Tier I and Tier II capital
respectively in fiscal 2007 to increase its CAR and fund its growing overseas and Indian operations. The Bank
has issued two tranches of perpetual debt instruments at coupon rates of 10.05% and 7.17% and four tranches of
Upper Tier II instruments at coupon rates of 7.25%, 9.35%, 9.50% and 7.13%. The first three tranches of Upper
Tier II instruments will mature in fiscal 2022 and the last tranche will mature in fiscal 2023.
Date of Allotment
Perpetual Debt Instrument
September 30, 2006
November 15, 2006
No. of Debentures
Rate of Interest
2,140
460
10.05%
7.17%
Date of Redemption
—
—
Amount
(in millions)
2,140
2,431
4,571
Upper Tier II Instrument
August 11, 2006
November 24, 2006
February 6, 2007
June 28, 2007
1,500
2,000
1,075
600
7.25%
9.35%
9.50%
7.13%
August 11, 2021
November 24, 2021
February 6, 2022
June 28, 2022
7,923
2,000
1,075
3,166
14,164
76
Asset Liability Gap and Interest Sensitivity Data
The following table sets forth the Bank’s asset-liability gap position as at September 30, 2012:
1-28
Days
29-90
Days
As at September 30, 2012(1)(2)(3)
3-6
6-12
1-3
3-5
Months
Months
Years
Years
(Rupees in millions, except percentages)
Over 5
Years
124,808
72,994
152,736
—
49,529
8,968
77,494
69,567
—
—
11,352
97,976
113,784
—
4,342
14,634
89,675
141,217
—
5,030
8,533
397,023
168,815
—
1,503
7,612
248,417
81,435
—
—
23,698
199,605
737,737 1,721,316
269,355
996,909
22,750
22,750
25,823
86,227
Total assets . . . . . . . . . . . . . . . . . 400,067 156,029
227,454
250,556
575,874
337,464 1,079,363 3,026,807
Capital and Reserves . . . . . . . . . .
—
—
Deposits . . . . . . . . . . . . . . . . . . . . 207,305 226,880
Borrowings . . . . . . . . . . . . . . . . . . 27,234 12,124
Other liabilities . . . . . . . . . . . . . . . 36,919
4,504
—
400,909
37,322
—
—
440,191
28,064
—
—
219,198
46,373
39,968
—
153,911
96,149
—
Total liabilities . . . . . . . . . . . . . . . 271,458 243,508
438,231
468,255
305,539
250,060 1,049,756 3,026,807
Cash and bank balances . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
Total
252,339
252,339
707,797 2,356,191
81,054
328,320
8,566
89,957
Liquidity gap . . . . . . . . . . . . . . . . . 128,609 (87,479) (210,777) (217,699) 270,335
87,404
29,607
Cumulative liquidity gap . . . . . . . 128,609 41,130 (169,647) (387,346) (117,011) (29,607)
—
Cumulative liabilities . . . . . . . . . . 271,458 514,966 953,197 1,421,452 1,726,991 1,977,051 3,026,807
Cumulative liquidity gap as a %
of cumulative liabilities . . . . . . 47.38%
7.99% (17.80%) (27.25%)
(6.78%)
(1.50%)
(1) Classification methodologies are based on the Asset Liability Management Guidelines issued by the RBI.
(2) Assets and liabilities are classified into categories as per residual maturity.
(3) Assets and liabilities that do not mature or have ambiguous maturities are classified as per historical behavioral analysis
or management judgment.
Loan Portfolio and Credit Substitutes
As at September 30, 2012, the Bank’s gross loan portfolio was Rs.1,738.04 billion. As at that date, the
Bank’s gross credit substitutes (representing investments in bonds and debentures through primary market and
investments in PTCs) outstanding were Rs.224.91 billion. Primarily, all of the Bank’s gross loans and credit
substitutes are to borrowers in India and over 82% of gross loans are denominated in Indian rupees. For a
description of the Bank’s corporate and retail loan products, see “Business — Large and Mid-Corporate
Banking” and “Business — Retail Banking” in this Placement Document.
The following table sets forth, for the periods indicated, the Bank’s gross loan portfolio classified by
product groups.
2010
As at March 31,
2011
2012
(Rupees in millions)
Half year ended
September 30,
2012
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate loans . . . . . . . . . . . . . . . . . . . . . . .
Gross loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit substitutes . . . . . . . . . . . . . . . . . . . . . .
210,940
842,400
1,053,340
113,143
281,024
1,155,950
1,436,974
131,656
378,271
1,333,800
1,712,071
183,700
445,555
1,292,484
1,738,039
224,912
Gross loans plus credit substitutes . . . . . . . . .
1,166,483
1,568,630
1,895,771
1,962,951
Concentration of Loans and Credit Substitutes
The Bank follows a policy of portfolio diversification and evaluates its total financing exposure in a
particular industry in light of the Bank’s growth and profitability forecasts for that industry. The Bank’s Risk
Department monitors all major sectors of the economy and specifically follows industries in which the Bank has
credit exposure. The Bank actively manages its loan portfolio by responding to economic weaknesses in an
industry segment by restricting new credits to that industry segment and by increasing new credits to growing
industry segments. In order to avoid concentration, the Bank has set internal ceilings on portfolio exposures to
different industry sectors, with the maximum being 16% of the total fund-based and non-fund-based exposures,
subject to prudential exposure norms stipulated by the RBI.
77
The following table sets forth, at the dates indicated, the Bank’s gross fund-based loans outstanding and
credit substitutes categorized by borrower industry or economic activity.
As at March 31,
2011
2012
(Rupees in million, except percentages)
2010
Telecommunication services . . .
Chemical and chemical
products . . . . . . . . . . . . . . . . .
Drugs and pharmaceuticals . . . .
Agriculture . . . . . . . . . . . . . . . .
Textiles . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . .
Transportation & Logistics . . . .
Cement . . . . . . . . . . . . . . . . . . .
Trading . . . . . . . . . . . . . . . . . . .
Engineering . . . . . . . . . . . . . . . .
Food Processing . . . . . . . . . . . .
Power . . . . . . . . . . . . . . . . . . . . .
Petrochemicals & petroleum
products . . . . . . . . . . . . . . . . .
Financial intermediaries —
Housing Fin Companies . . . .
Entertainment & Media . . . . . . .
Metal & Metal Products . . . . . .
Infrastructure . . . . . . . . . . . . . . .
Paper and paper products . . . . .
Financial intermediaries —
others . . . . . . . . . . . . . . . . . . .
Gems and jewelery . . . . . . . . . .
Sugar . . . . . . . . . . . . . . . . . . . . .
IT & ITES . . . . . . . . . . . . . . . . .
Auto ancillaries . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . .
21,953
23,222
15,137
116,954
36,305
51,972
31,999
20,944
51,575
24,957
50,713
59,872
1.88%
54,982
1.99% 36,451
1.30% 19,981
10.03% 166,249
3.11% 45,429
4.46% 68,147
2.74% 36,048
1.80% 20,943
4.42% 49,885
2.14% 41,513
4.35% 45,611
5.13% 74,976
3.51%
29,844
2.32% 30,875
1.27% 22,252
10.60% 177,612
2.90% 47,086
4.34% 80,949
2.30% 46,921
1.34% 21,271
3.18% 55,486
2.65% 59,396
2.91% 70,767
4.78% 100,785
26,981
2.31%
25,774
1.64%
21,933
33,444
11,841
53,965
68,301
16,618
2.87%
1.02%
4.63%
5.86%
1.42%
68,298
14,785
83,482
92,131
9,501
4.35% 84,291
0.94% 17,021
5.32% 85,737
5.87% 138,046
0.61% 10,678
1.57%
As at September 30,
2012
26,754
1.36%
1.63% 27,738
1.17% 21,968
9.37% 126,641
2.48% 47,437
4.27% 78,878
2.48% 46,474
1.12% 20,436
2.93% 51,913
3.13% 79,440
3.73% 74,272
5.32% 108,552
1.41%
1.12%
6.45%
2.42%
4.02%
2.37%
1.04%
2.64%
4.05%
3.78%
5.53%
1.16%
18,358
0.94%
4.45% 63,737
0.90% 15,084
4.52% 117,159
7.28% 166,345
0.56%
9,332
3.25%
0.77%
5.97%
8.47%
0.48%
92,305
7.91% 125,082
7.97% 189,103
9.98% 123,945
6.31%
16,391
1.41% 37,328
2.38% 24,758
1.31% 25,816
1.32%
6,686
0.57% 10,078
0.64% 15,576
0.82% 11,810
0.60%
19,150
1.64% 19,660
1.25% 25,802
1.36% 27,860
1.42%
23,496
2.01% 35,483
2.26% 53,304
2.81% 55,541
2.83%
210,940 18.08% 281,024 17.92% 378,271 19.95% 445,555 22.70%
80,762
6.92% 105,789
6.74% 108,007
5.70% 171,906
8.75%
Gross loans and credit
substitutes . . . . . . . . . . . . . . . 1,166,483 100.00%1,568,630 100.00%1,895,771 100.00%1,962,951 100.00%
As at September 30, 2012, the aggregate exposure to the Bank’s ten largest borrowers (fund-based)
amounted to Rs.272.92 billion representing 86.20% of the Bank’s total capital of Rs.316.62 billion, comprising
Rs.219.06 billion Tier I capital and Rs.97.56 billion Tier II capital. The Bank’s single largest borrower
(fund-based) on such date had an outstanding balance of Rs.54.27 billion, representing 17.14% of the Bank’s
capital.
78
Maturity and Interest Rate Sensitivity of Loans and Credit Substitutes
The following tables set forth, as at September 30, 2012, the interest rate sensitivity of the Bank’s loans and
credit substitutes:
Due in
One
Year or
Less
As at September 30, 2012
One
Year to
Due after
Five
Five
Years
Years
(Rupees in millions)
Total
Interest rate classification of loans by maturity:
Variable rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
272,947
65,191
587,954
57,487
742,617
11,843
1,603,518
134,521
Gross Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
338,138
645,441
754,460
1,738,039
Interest rate classification of credit substitutes by
maturity:
Variable rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,027
40,297
1,964
99,818
1,550
79,257
5,541
219,371
Gross Credit Substitutes . . . . . . . . . . . . . . . . . . . . . .
42,324
101,782
80,807
224,912
Interest rate classification of loans and credit
substitutes by maturity:
Variable rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
274,974
105,488
589,918
157,305
744,167
91,100
1,609,059
353,892
Gross loans and credit substitutes . . . . . . . . . . . . . .
380,462
747,223
835,267
1,962,951
Directed Lending
The RBI has linked the priority sector lending targets to adjusted net bank credit since April 2007 (net bank
credit plus investments made by banks in non-statutory liquidity bonds included in the held-to-maturity category
and excluding recapitalization bonds floated by the Government) or credit equivalent amount of off-balance sheet
exposure, whichever is higher. Commercial banks required to lend a certain percentage of their adjusted net bank
credit to specific sectors (the priority sectors), such as agriculture, micro and small enterprises, retail trade and
housing finance. Total priority sector advances should be 40% of adjusted net bank credit with agricultural
advances required to be 18% of adjusted net bank credit and advances to weaker sections required to be 10% of
adjusted net bank credit, and 1% of the previous year’s net bank credit required to be lent under the Differential
Rate of Interest scheme. Under the revised guidelines loans up to Rs.2.5 million per borrower under housing
finance to be treated as priority sector. The guidelines have capped eligible direct agriculture finance to
non-individuals (i.e. partnership firms, corporates and institutions) at Rs.10 million per borrower. One-third of
loans in excess of Rs.10 million per borrower would also be considered as direct finance while the remaining
two-thirds would constitute indirect finance.
Any shortfall in the amount required to be lent to the priority sectors may be required to be allocated to the
Rural Infrastructure Development Fund established with the NABARD or other funds with the financial
institutions specified by the RBI. These deposits have a maturity of up to seven years and carry interest rates
lower than market rates.
A breakdown of the Bank’s priority sector lending position as at the last reporting Friday over the last three
years is as follows:
As at the last reporting Friday in
March
2010
2011
2012
(Rupees in millions)
Agricultural advances (direct & indirect) . . . . . . . . . . . . . . . . . . . . .
Small-scale industry and services(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Other priority sector lending(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
105,367
72,987
119,368
141,489
113,582
157,930
177,115
151,308
172,096
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
297,722
413,001
500,519
(1) Pertains to SME business of the Bank.
(2) Includes indirect finance to agriculture sector in excess of 4.50% of net bank credit.
Recently, the RBI, through its circulars RPCD CO Plan BC 13/04.09.01/2012-13 dated July 20, 2012 and
RPCD CO Plan BC 37 /04.09.01/ 2012-13 dated October 17, 2012, has revised guidelines applicable to priority
79
sector lending. In accordance with this circular, the priority sector for all scheduled banks include (i) agriculture,
(ii) micro and small enterprises (“MSE”), (iii) education and (iv) housing. While export credit is no longer a
separate category under this circular, export credit for eligible activities under agriculture and MSE will be
reckoned for priority sector lending under respective categories. Under the RBI guidelines, the priority sector
lending targets are linked to adjusted net bank credit (net bank credit plus investments made by banks in
non-statutory liquidity bonds included in the held to maturity category and not taking in account the
recapitalization bonds floated by the Government) or credit equivalent amount of off-balance sheet exposure,
whichever is higher, as on March 31 of the previous year.
As at September 30, 2012, the Bank had a portfolio of Rs.390.73 billion in priority sector lending and the
Bank is endeavoring to achieve the RBI stipulated norm by the end of the current fiscal year.
Non-Performing Assets
The Bank has absorbed the losses arising on account of impairment of loans as some borrowers were
impacted by negative trends in the global market place, recessionary conditions in the domestic economy,
increased competition arising out of economic liberalization in India and volatility in industrial growth and
commodity prices.
Several measures have since been adopted by the Bank to refine its credit selection processes and appraisal
capabilities. These include creation of an independent Risk Department which scrutinizes all credit proposals of
Rs.10 million and above, introduction of a rigorous credit rating model, rolling out a credit monitoring tool to
evaluate the performance of accounts at certain intervals and putting in place a credit audit mechanism. As a
result of these actions, the incidence of slippage into the impaired category has been substantially reduced. As at
September 30, 2012, the gross NPAs as a proportion of gross customer assets were 1.10% and net NPAs as a
proportion of net customer assets were 0.33% The Bank held a provision coverage (as a proportion of gross
NPAs, including prudential write-offs) of 79.84% as at September 30, 2012.
The following table sets forth, for the periods indicated, information about the Bank’s NPA portfolio.
As at
As at March 31,
September 30,
2010
2011
2012
2012
(Rupees in millions, except percentages)
Non-Performing Assets
Corporate credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,027
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,927
Capital markets (including application money) . . . . . . . . . . . .
226
Gross NPAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,180
Specific provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,990
NPA net of provisions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,190
Gross customer assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,166,505
Net customer assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,156,291
Gross NPAs/gross customer assets (%) . . . . . . . . . . . . . . . . . .
1.13
Net NPAs/net customer assets (%) . . . . . . . . . . . . . . . . . . . . .
0.36
Specific provision as a percentage of gross NPAs . . . . . . . . .
68.21
Total provisions (specific and floating) as a percentage of
gross NPAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68.21
Provision cover (including prudential write-offs) . . . . . . . . . .
72.38
11,691
4,179
124
15,994
11,867
4,104
1,586,630
1,573,483
1.01
0.26
74.20
13,992
3,210
861
18,063
13,239
4,726
1,930,571
1,915,076
0.94
0.25
73.29
17,545
3,609
756
21,910
15,256
6,542
1,997,201
1,979,539
1.10
0.33
69.63
74.20
80.90
73.29
80.91
69.63
79.84
Note(1) Balance in sundries account (Interest capitalization — Restructured account) in respect of NPAs amounting to Rs.112
million and Rs.98 million as at September 30, 2012 and March 31, 2012, respectively, have been netted off from Net
NPA.
Recognition of Non-Performing Assets
As a commercial bank operating in India, the Bank recognizes NPAs strictly on the basis of the RBI’s
current guidelines. The current guidelines require banks in India to classify their NPAs into the following three
categories based on the period for which the loan has remained non-performing and the estimated realization of
dues.
• Substandard assets
• Doubtful assets
• Loss assets
80
Substandard Assets
An account becomes non-performing if the interest and/or installment of principal remains overdue for more
than 90 days (an exception to this rule is advances to agricultural borrowers which will be classified as
non-performing only if the advance/loan remains overdue for more than two crop seasons in the case of short
duration crops and one crop season for long duration crops). A substandard asset is one which has remained
non-performing for a period of up to 12 months.
Doubtful Assets
A doubtful asset is one which has remained an NPA for a period greater than 12 months. Doubtful assets are
classified into Doubtful-I, Doubtful-II and Doubtful-III depending on the age of the NPAs as set out below:
(a) If the asset has remained in the doubtful category for a period of up to one year it is classified as a
Doubtful-I asset.
(b) If the asset has remained in the doubtful category for a period of more than one year but less than
three years it is classified as a Doubtful-II asset.
(c) If the asset has remained in the doubtful category for a period of more than three years it is
classified as a Doubtful-III asset.
Loss Assets
A loss asset is one considered irrecoverable with little or no salvage value.
An NPA need not go through the various stages of classification in cases of serious credit impairment and
such assets should be immediately classified as doubtful or as a loss asset, as appropriate. Erosion in the value of
security can be reckoned as significant when the realizable value of the security is less than 50% of the value
assessed by the Bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be
immediately classified as a Doubtful Asset.
If the realizable value of the security, as assessed by the Bank, an approved appraiser or the RBI, is less than
10% of the borrower’s outstanding accounts, the existence of security is ignored and the asset is immediately
classified as a loss that may be either written-off or fully provided for by the Bank.
Non-Accrual Policy
When an asset is classified as non-performing, interest accrual is stopped and the unrealized interest is
reversed by debit to the profit and loss account. In accordance with RBI guidelines, interest realized on NPAs
may be added to the income account provided the credits in the accounts towards interest are not out of
additional credit facilities sanctioned to the borrower. The RBI has also stipulated that in the absence of a clear
agreement between the Bank and the borrower for the purpose of appropriating recoveries in NPAs (i.e. towards
principal or interest due), banks should adopt an accounting principle and exercise the right of appropriation of
recoveries in a uniform and consistent manner. In the case of NPAs where recoveries are effected as a result of a
settlement or otherwise, the Bank’s policy is to first appropriate the same against principal amount due from the
borrower as application of interest would have ceased in such accounts. In NPA accounts where transactions
have virtually ceased, recoveries will be appropriated towards the principal amount. Only in cases where the
nature of continuing transactions allows the Bank to conclude that recovery of the principal is not in jeopardy,
are recoveries appropriated against interest.
Policy for making Non-Performing Assets Provisions
Corporate Credit
The Bank’s policy for making provisions for NPAs in corporate credit is in accordance with RBI regulations
(with effect from May 18, 2011) as set forth below.
Substandard assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
15% of the fund-based outstanding (25% of the
fund based outstanding if the facilities are
ab-initio unsecured).
Doubtful-I — 100% of the unsecured portion
plus 25% of the secured portion.
Doubtful-II — 100% of the unsecured portion
plus 40% of the secured portion.
Doubtful-III — 100% of the outstanding.
100% to be provided or written-off.
Retail and Agricultural Advances
In the case of retail advances, the Bank makes provisions when the retail advances reach specified stages of
delinquency (90 days or more of delinquency), which is a more conservative approach than RBI prudential
norms. The provisions for different stages of delinquency range from 15% to 100% of the value of delinquent
loans depending on the duration of delinquency. Provisions in respect of agriculture advances classified into
sub-standard and doubtful assets are made at rates which are higher than those prescribed by the RBI.
Floating Provisions
In June 2006, the RBI issued prudential norms on creation and utilization of floating provisions (i.e.,
provisions which are not made in respect of specific NPAs or are made in excess of regulatory requirements for
provisions for standard assets). The norms state that floating provisions can be used only for contingencies under
extraordinary circumstances for making specific provisions in impaired accounts after obtaining approval from
the Board of Directors and with the prior permission of the RBI. Floating provisions for advances and
investments would be held separately and cannot be reversed by credit to the profit and loss account. Until
utilization of such provisions, they can be netted out from gross NPAs to arrive at disclosure of net NPAs.
Alternatively, floating provisions can be treated as part of Tier II capital within the overall ceiling of 1.25% of
total risk-weighted assets.
Floating provisions do not include specific voluntary provisions made by banks for advances which are
higher than the minimum provision stipulated by RBI guidelines. For the half year ended September 30, 2012
floating provisions amounting to Rs.33 million have not been netted off from gross NPAs to arrive at net NPAs
since they have been considered part of the Tier II capital of the Bank.
82
Analysis of Non-Performing Loans by Industry Sector
The following table sets forth, for the periods indicated, the Bank’s non-performing loans, by borrowers’
industry or economic activity and as a percentage of the Bank’s loans in the respective industry or economic
activities sector. These figures do not include credit substitutes.
As at March 31, 2010
% of
Gross
NPA in
Loan
NPA industry
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Telecommunication
services . . . . . . . .
21,953
Chemical and
chemical
products . . . . . . . .
22,222
Drugs and
pharmaceuticals . .
14,928
Agriculture . . . . . 116,954
Textiles . . . . . . . .
35,123
Real estate . . . . . .
42,527
Transportation &
logistics . . . . . . . .
30,333
Cement . . . . . . . .
18,166
Trading . . . . . . . .
51,575
Engineering . . . . .
23,157
Food
Processing . . . . . .
50,713
Power . . . . . . . . .
40,514
Petrochemicals &
petroleum
products . . . . . . . .
21,465
Financial
intermediaries —
Housing Fin
Companies . . . . . .
33,194
Entertainment &
Media . . . . . . . . . .
11,058
Metal & metal
products . . . . . . . .
47,220
Infrastructure . . . .
55,689
Paper and paper
products . . . . . . . .
11,968
Financial
intermediaries —
others . . . . . . . . . .
53,378
Gems and
jewelery . . . . . . . .
16,391
Sugar . . . . . . . . . .
6,686
IT & ITES . . . . . .
19,150
Auto
ancillaries . . . . . .
20,799
Retail loans . . . . . 210,940
Others . . . . . . . . .
77,237
Total . . . . . . . . . . 1,053,340
As at March 31, 2011
As at March 31, 2012
% of
% of
Gross
NPA in
Gross
NPA in
Loan
NPA industry
Loan
NPA industry
(Rupees in millions, except percentages)
As at September 30, 2012
% of
Gross
NPA in
Loan
NPA
industry
194
0.88%
54,982
—
—
29,844
—
—
26,754
19
0.07%
241
1.08%
36,451
72
0.20%
30,875
—
—
27,525
—
—
—
19,372
419
2.25% 166,249 3,944
0.08% 41,616
962
0.33% 49,721
20
2.16%
2.37%
2.31%
0.04%
190
—
962
429
0.63%
—
1.87%
1.85%
34,325
18,415
49,885
40,963
4
306
492
76
0.01%
1.66%
0.99%
0.19%
46,768
18,820
55,486
57,437
1,960
185
639
43
4.19%
0.98%
1.15%
0.07%
46,474
19,115
49,413
60,353
1,986
195
576
511
4.27%
1.02%
1.17%
0.85%
271
—
0.53%
—
45,611
62,348
208
—
0.46%
—
70,714
79,794
99
23
0.14%
0.03%
74,272
86,244
117
23
0.16%
0.03%
35
0.16%
23,157
142
0.61%
14,669
7
0.05%
8,408
6
0.07%
—
—
68,298
—
—
73,354
360
0.49%
50,846
—
—
138
1.25%
10,285
32
0.31%
16,646
—
—
15,084
4,093
27.13%
215
1,227
0.46%
2.20%
81,061
80,765
18
983
0.02%
1.22%
73,138
99,377
2
90
—
0.09%
88,129
135,385
35
96
0.04%
0.07%
428
3.58%
9,376
282
3.01%
10,678
280
2.62%
9,332
260
2.79%
—
—
90,376
—
—
144,535
—
—
70,964
1,008
1.42%
372
—
—
2.27%
—
—
36,828
10,078
19,660
176
—
117
0.48%
—
0.60%
24,258
15,576
25,769
604
—
10
2.49%
—
0.04%
25,316
10,811
27,860
291
—
46
1.15%
—
0.17%
0.01%
44,002
5
0.85% 445,555 3,609
4.02% 158,407 1,124
1.00% 1,738,039 21,154
0.01%
0.81%
0.71%
1.22%
—
2,628
29
141
319
3,927
1,208
12,954
1.53% 25,815
332
1.86% 281,024 4,179
1.56% 80,313 3,106
1.23%1,436,974 15,870
20,690
377
177,612 4,835
44,126
799
68,014
26
1.29%
44,733
3
1.49% 378,271 3,210
3.87%
90,887 3,650
1.10% 1,712,071 17,202
1.82%
2.72%
1.81%
0.04%
20,668
890
126,641 5,449
44,538
815
65,943
—
4.31%
4.30%
1.83%
—
Top 10 Non-Performing Corporate Loans
As at September 30, 2012 the top ten non-performing corporate loans represented 52.11% of the Bank’s
gross non-performing corporate loans, 52.50% of the Bank’s net non-performing corporate loans and 0.71% of
the Bank’s gross corporate loan portfolio.
83
The following table sets forth, for the period indicated, information regarding the Bank’s ten largest
non-performing corporate loans as well as the value of the collateral securing the loan (the collateral valuations
are based on the audited financial statements of the borrower or independently arrived at by outside agencies).
However, the net realizable value of such collateral may be substantially less, if anything.
As at September 30, 2012
Borrowers
1
2
3
4
5
6
7
8
9
10
Industry
Entertainment & Media
Transportation & logistics
Financial intermediaries —
others
Drugs and pharmaceuticals
Hotels
Engineering
Textile
Gems and Jewelery
Drugs and pharmaceuticals
Paper and Paper Products
Type of
Banking
Arrangement
Gross
Principal
Outstanding
Multiple
Multiple
Multiple
Consortium
Consortium
Consortium
Multiple
Consortium
Consortium
Consortium
Total
Principal
Outstanding
Net of
Provisions
for Credit
Provisions
Losses
(Rupees in millions)
Security
Currently
Servicing
All
Interest
Payments
4,093
1,941
4,093
291
—
1,650
6,215
913
No
No
657
513
431
413
350
291
237
217
562
77
65
62
350
291
237
188
95
436
366
351
—
—
—
29
127
818
1,256
520
430
49
424
140
No
No
No
No
No
No
No
No
9,143
6,216
2,927
10,892
Interest foregone
Interest foregone is the interest due on non-performing loans that has not been accrued in the Bank’s books
of accounts. The following table sets forth the outstanding amount of interest foregone on existing
non-performing loans as at the respective dates.
Year/Period
Interest Foregone
(Rupees in millions)
March 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,452.72
2,625.98
2,099.30
2,559.27
Restructured Assets
The RBI has issued separate set of prudential guidelines on restructuring of advances by banks.
The guidelines essentially deal with the norms/conditions — the fulfillment of which are required to
maintain the category of the restructured account as a “standard asset”.
The following categories of advances are not eligible for being classified as a standard asset, upon
restructuring: (a) consumer and personal advances; (b) advances classified as capital market exposure and
(c) advances classified as commercial real estate exposures.
As a one-time measure/relaxation, the RBI had in December 2008 permitted restructuring of commercial
real estate exposures to be classified as standard assets. The said relaxation was available up to June 30, 2009.
The criteria to be fulfilled for the restructured advance to be treated as a standard asset includes viability of
the business, infusion of promoters’ contribution, full security coverage, cap on maximum tenor of repayment
etc.
The economic loss, if any, arising as a result of restructuring needs to be provided for in the books of the
Bank. The provision is computed as the difference between the fair value of the account before and after
restructuring.
If there is a failure to meet the payment terms of a restructured standard asset for more than 90 days, it is no
longer classified as a restructured loan and is reclassified as an NPA.
84
Corporate Debt Restructuring Mechanism
The institutional mechanism for restructuring was set up through the establishment of the corporate debt
restructuring system (“CDR system”) in 2002. The CDR system is a joint forum of all banks and financial
institutions and operates as a non-judicial body. The CDR system operates on the principle of super-majority
amongst the participating banks/financial institutions for a particular advance.
The Bank has signed the Inter-se Agreement (amongst the banks and financial institutions) and is
accordingly a member of the CDR system.
The prudential guidelines as mentioned above equally apply to the accounts restructured under the CDR
forum.
The Bank restructures debts where the borrower is genuinely unable to effect repayments vis-à-vis its
contractual obligations and the Bank is satisfied about the viability of the unit and that a restructuring is the best
means of maximizing realization of the loan.
The Bank’s gross restructured loans as a proportion of gross customer assets (the aggregate of gross
advances, credit substitutes including leased assets), for the period ended September 30, 2012 is 2.04%.
Restructured accounts that were fully liquidated in subsequent years were not considered in computing the gross
restructured loans
NPA Strategy
The Bank’s Stressed Assets Department is entrusted with the task of initiating proactive steps for arresting
the incidence of incremental impairment as well as for recovery from existing impaired accounts. A watch list
(called Special Mention Assets) is prepared using early warning signals in weak accounts which if left
unattended might result in the accounts migrating to NPA status. An illustrative list of such warning signals are:
• delay in submission of stock statement/other control statements/financial statements;
• frequent return of cheques issued by borrowers;
• devolvement of deferred payment guarantee installments and payment not being made within reasonable
period;
• frequent devolvement of LCs and payment not being made within a reasonable period;
• frequent invocation of bank guarantees and repayment not being made within a reasonable period;
• return of bills/cheques discounted;
• non-payment of bills discounted or under collection;
• poor financial performance in terms of declining sales and profits, cash losses, net losses, erosion of net
worth, etc.; and
• incomplete documentation in terms of creation, registration of charge/mortgage etc.
These accounts are closely followed in coordination with the officials of the business departments to reduce
incidences of slippage. Timely identification of weaknesses in assets provides an opportunity for the Bank to exit
from such exposure or at least reduce its exposure level. The Bank identifies exit accounts at half-yearly intervals
based on, among other things, early warning signals emanating from the accounts, downgrades in credit rating to
BB and below, persistent and serious irregularities being reported in Credit Audit Reports, perceived
deterioration in the quality of management, market developments or regulatory pronouncements which may
severely affect the viability of the Bank’s exposure.
The Stressed Assets Department works closely with other banks and financial institutions and uses outside
experts and agencies for due diligence, valuation, enforcement of securities etc. and liaises with the Law
Department to ensure quick resolution of legal cases. The Stressed Assets Department focuses on recovery and
settlement of impaired loans by employing the following broad strategies:
• rescheduling and restructuring of accounts strictly on merits and as per RBI guidelines;
• encouraging compromise settlements rather than going through a drawn-out legal process; and
• initiating legal action (including enforcement of securities through the SARFAESI Act) and effective
follow up.
85
Provisions for NPAs
The following table sets forth, for the periods indicated, movements in the Bank’s provisions against NPAs.
Year Ended March 31,
2010
2011
2012
(Rs. In millions)
Particulars
Half Year
Ended
September 30,
2012
Specific provisions at the beginning of the period:
Corporate credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,793
2,808
73
6,095
2,733
162
8,311
3,432
124
9,981
2,568
690
Total specific provisions at the beginning of the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,674
8,990
11,867
13,239
Provisions made during the period . . . . . . . . . . . . . . . .
Reductions during the period . . . . . . . . . . . . . . . . . . . .
13,732
(10,416)
9,952
(7,075)
8,261
(6,889)
7,101
(5,084)
Specific provisions at the end of the period . . . . . . .
8,990
11,867
13,239
15,256
Floating provisions:
Floating provisions at the beginning of the period . . . .
Additions during the period . . . . . . . . . . . . . . . . . . . . . .
Utilizations during the period . . . . . . . . . . . . . . . . . . . .
33
—
—
33
—
—
33
—
—
33
—
—
Floating provisions at the end of the period . . . . . . . . .
33
33
33
33
Total specific and floating provisions at the end of
the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,023
11,900
13,272
15,289
The following table sets forth, for the periods indicated, the allocation of the total provisions held by the
Bank.
As at March 31,
2010
2011
2012
(Rs. In millions)
Particulars
As at
September 30,
2012
Corporate credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,095
2,733
162
8,311
3,432
124
9,981
2,568
690
11,970
2,689
597
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,990
11,867
13,239
15,256
Floating provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
33
33
33
Total provisions including floating provisions . . . . . . .
9,023
11,900
13,272
15,289
86
INDUSTRY OVERVIEW
The information in this section has been extracted from publicly available documents including officially
prepared materials from the Government and its various ministries and the RBI and its publications, the IRDA,
Association of Mutual Funds in India, trade, industry or general publications and other third party sources as
cited in this section below. Industry websites and publications generally state that the information contained
therein has been obtained from sources believed to be reliable but their accuracy and completeness are not
guaranteed and their reliability cannot be assured. The industry, market and other data used in this document
has not been independently verified by the Bank, the Lead Managers or any of their affiliates or advisers.
Introduction
The RBI, the central banking and monetary authority of India, is the central regulatory and supervisory
authority for the Indian financial system. A variety of financial intermediaries in the public and private sectors
participate in India’s financial sector, including the following:
• commercial banks;
• long-term lending institutions;
• regional rural banks, co-operative banks;
• NBFCs, including housing finance companies;
• other specialized financial institutions, and state-level financial institutions;
• insurance companies; and
• mutual funds.
In 1969, 14 private banks were nationalized followed by six private banks in 1980. (Source:
http://www.rbi.org.in/scripts/chro_1968.aspx.) Since 1991, many financial reforms have been introduced,
substantially transforming the banking industry in India. Until the early 1990s, the Indian financial system was
strictly controlled. Interest rates were administered, formal and informal parameters governed asset allocation,
and strict controls limited entry into and expansion within the financial sector. The Government’s economic
reform program, which began in 1991, focused on the financial sector. The first phase of the reform process
began with the implementation of the recommendations of the Committee on the Financial System (the
“Narasimham Committee I”). The second phase of the reform process began in 1999. See “Banking Sector
Reform — Committee on Banking Sector Reform (Narasimham Committee II)”.
The Reserve Bank of India
The RBI was established in 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934
(the “RBI Act”), is the central banking and monetary authority in India. The RBI manages India’s money supply
and foreign exchange, and also serves as a bank for the Government and for India’s commercial banks. In
addition to these traditional central banking roles, the RBI undertakes certain developmental and promotional
roles.
The RBI issues guidelines on various areas including exposure standards, income recognition, asset
classification, provisioning for non-performing and restructured assets, investment valuation and capital
adequacy standards for commercial banks, long-term lending institutions and NBFCs. The RBI requires these
institutions to furnish information relating to their businesses to the RBI on a regular basis. For further discussion
regarding the RBI’s role as the regulatory and supervisory authority of India’s financial system and its impact on
the Bank, see “Supervision and Regulation”.
Commercial Banks
Commercial banks in India have traditionally focused only on meeting the short-term financial needs of
industry, trade and agriculture. As at March 31, 2012, there were 169 scheduled commercial banks in India
having 36,391 banked centers. (Source: RBI, Quarterly Statistics on Credits and Deposits, March 2012.)
Scheduled commercial banks are banks that are listed in the second schedule to the RBI Act, 1934, and are
further categorized as public sector banks, private sector banks and foreign banks. As at March 31, 2012, the
aggregate deposit of all the scheduled commercial banks in India was Rs.61.74 trillion and the gross bank credit
of all the scheduled commercial banks in India was Rs.48.22 trillion. (Source: RBI Quarterly Statistics on
Credits & Deposits, March 2012.)
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Public Sector Banks
Public sector banks make up the largest category in the Indian banking system. As at March 31, 2012, public
sector banks had 70,314 branches. (Source: RBI Statistical Tables Relating to Banks in India 2011-2012.) As at
March 31, 2012, public sector banks had Rs.46.16 trillion of aggregate deposits and the gross bank credit of all
the public sector banks in India was Rs.35.91 trillion. (Source: RBI Quarterly Statistics on Credits & Deposits,
March 2012.)
Private Sector Banks
In January 1993, as part of the banking reform process and as a measure to induce competition in the
banking sector, the RBI permitted entry by the private sector into the banking system. This resulted in the
introduction of nine private sector banks. These banks are collectively known as the “new” private sector banks.
(Source: RBI Guidelines on Entry of New Private Sector Banks dated January 22, 1993 http://www.rbi.org.in/
scripts/BS_PressReleaseDisplay.aspx?prid=22965.) The entry of new private sector banks has increased the
industry competitiveness, enhanced customer service orientation, product innovation and technological
advancement. As at March 31, 2012, private sector banks had Rs.11.02 trillion of aggregate deposits and the
gross bank credit of all the private sector banks in India was Rs.8.82 trillion. (Source: RBI Quarterly Statistics on
Credits & Deposits, March 2012.)
Foreign Banks
As at March 31, 2012, foreign banks had 324 branches operating in India. (Source: Statistical Tables
Relating to Banks in India 2011-2012.) As at March 31, 2012, foreign banks had Rs.2.73 trillion in aggregate
deposits and the gross bank credit of all foreign banks in India was Rs.2.32 trillion. (Source: RBI Quarterly
Statistics on Credits & Deposits, March 2012.) As part of the liberalization process, the RBI has permitted
foreign banks to operate more freely, subject to requirements largely similar to those imposed on domestic banks.
The primary activity of most foreign banks in India has been in the corporate segment. However, in recent years,
some of the larger foreign banks have started to make consumer financing a larger part of their portfolios based
on the growth opportunities in this area in India. These banks offer products such as automobile finance, home
loans, credit cards and household consumer finance. Foreign banks operate in India through branches of the
parent bank. Certain foreign banks also have wholly-owned NBFC subsidiaries for both corporate and retail
lending. In a circular dated July 6, 2004, the RBI stipulated that banks, including foreign banks with a branch
presence in India, should not acquire any fresh stake in a bank’s equity shares, if by such acquisition, the
investing bank’s holding exceeded 5.00% of the investee bank’s equity capital. This also applies to holdings of
foreign banks with a presence in India, in Indian banks.
In February 2005, the Government and the RBI released the “Roadmap for Presence of Foreign Banks in
India” laying out a two-part gradual approach aimed at increasing the efficiency and stability of the banking
sector in India. The first part addressed the consolidation of the domestic banking system, both in the private and
public sectors and the second part addressed the gradual enhancement of the presence of foreign banks in India in
a synchronized manner. The roadmap was divided into two phases, with the first phase covering the period from
March 2005 to March 2009 and the second phase initially intended to start in April 2009 (after a review of the
implementation and results of the first phase). (Source: RBI Roadmap for presence of foreign banks in India
dated February 28, 2005 http://www.rbi.org.in/upload/content/images/RoadMap.html.) As a result of the recent
turmoil in global financial markets, uncertainties are surrounding the financial strength of banks around the
world, due to which the RBI has decided to delay the implementation of the second phase. Regulatory and
supervisory policies at national and international levels are also under review. As such, the RBI aims to continue
with its review of the policy and procedures governing the presence of foreign banks in India for the time being
and will recommence the next phase after due consultation once there is greater clarity regarding stability and the
recovery of the global financial system.
Cooperative Banks
Cooperative banks cater to the financing needs of agriculture, small industry and self-employed
businessmen in urban and semi-urban areas of India. The state land development banks and the primary land
development banks provide long-term credit for agriculture. Presently, the RBI is responsible for supervision and
regulation of urban cooperative societies, and the NABARD for State Co-operative Banks and District Central
Co-operative Banks. The Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 has
replaced the Banking Regulation (Amendment) and Miscellaneous Provisions Ordinance, 2004, promulgated on
September 24, 2004 to enable RBI to issue licenses to multi-state cooperative societies to carry on banking
business.
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Long-Term Lending Institutions
The long-term lending institutions were established to provide medium-term and long-term financial
assistance to various industries for setting up new projects and for the expansion and modernization of existing
facilities. These institutions provide fund-based and non-fund-based assistance to industry in the form of loans,
underwriting, direct subscription to shares, debentures and guarantees. The primary long-term lending
institutions include Industrial Development Bank of India, Industrial Finance Corporation of India Limited and
Industrial Investment Bank of India.
The long-term lending institutions were expected to play a critical role in Indian industrial growth and,
accordingly, had access to concessional Government funding. However, in recent years, the operating
environment of the long-term lending institutions has changed substantially. Although the initial role of these
institutions was largely limited to providing a channel for Government funding to industry, the reform process
required them to expand the scope of their business activities. Their new activities included:
• fee-based activities such as investment banking and advisory services; and
• short-term lending activity including issuing corporate finance and working capital loans.
Non-Banking Financial Companies (“NBFCs”)
There were approximately 12,385 NBFCs in India registered with the RBI as at June 30, 2012. (Source: RBI
Report on Trend and Progress of Banking in India 2011-12.) All NBFCs are required to register with the RBI.
The NBFCs may be categorized into entities which take public deposits and those which do not.
The primary activities of the NBFCs are consumer credit, including automobile finance, home finance and
consumer durable products finance, wholesale finance products such as bill discounting for SMEs, and fee-based
services such as investment banking and underwriting. The RBI has implemented a set of directions to regulate
the activities of the NBFCs under its jurisdiction. (Source: http://www.rbi.org.in/scripts/
BS_ViewNBFCNotification.aspx.) The directions are aimed at controlling the deposit acceptance activities of the
NBFCs. The NBFCs that accept public deposits are subject to strict supervision and the capital adequacy
requirements of the RBI. (Source: Notification as amended upto June 30, 2012 — “Non-Banking Financial
Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998” http://www.rbi.org.in/scripts/
BS_ViewMasCirculardetails.aspx?id=7403.)
Housing Finance Companies
Housing finance companies form a distinct sub-group of the NBFCs. As a result of the various incentives
given by the Government for investing in the housing sector in recent years, the scope of this business has grown
substantially. Until recently, Housing Development Finance Corporation Limited was the premier institution
providing housing finance in India. In recent years, several other types of entities including banks have entered
the housing finance industry. The National Housing Bank and the Housing and Urban Development Corporation
Limited are the two Government-controlled financial institutions created to improve the availability of housing
finance in India. The National Housing Bank Act, 1987 provides for refinancing and securitization of housing
loans, foreclosure of mortgages and setting up of the Mortgage Credit Guarantee Scheme. Subject to certain
limits prescribed by the RBI, housing loans qualify as priority sector lending under the RBI’s directed lending
rules.
Other Financial Institutions
Specialized Financial Institutions
In addition to the long-term lending institutions, there are various specialized financial institutions which
cater to the specific needs of different sectors by offering technical and financial assistance. They include the
National Bank for Agricultural and Rural Development, Export Import Bank of India, Small Industries
Development Bank of India, Risk Capital and Technology Finance Corporation Limited, Tourism Finance
Corporation of India Limited, National Housing Bank, Power Finance Corporation Limited and the Infrastructure
Development Finance Corporation Limited.
State-Level Financial Institutions
State-level financial institutions broadly consist of state financial corporations and state industrial
development corporations. State financial corporations operate at the state level and form an integral part of the
institutional financing system. State financial corporations were set up to finance and promote SMEs. The state
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financial corporations are expected to achieve balanced regional socio-economic growth by generating
employment opportunities and widening the ownership base of industry. At the state level, there are also state
industrial development corporations, which provide finance primarily to medium and large-sized industrial
projects.
Insurance Companies
As at September 30, 2012, there were 52 insurance companies in India, of which 24 were life insurance
companies, 27 were non-life insurers and one was a reinsurance company. As at September 30, 2012, of the
24 life insurance companies, 23 were in the private sector and one was in the public sector. As at
September 30, 2012, among the general insurance companies, 21 were in the private sector and six were in the
public sector. For the financial year 2012, the first-year premiums underwritten by life insurance companies and
the total premiums underwritten by life insurance companies were Rs.1,139.4 billion and Rs.2,870.7 billion,
respectively. For the financial year 2012, total premiums underwritten by general insurance companies were
Rs.528.8 billion. (Source: Insurance Regulatory and Development Authority, Annual Report 2011-2012.)
Mutual Funds
There were 44 mutual funds in India with total average assets under management of Rs.7,473.3 billion for
the quarter ending September 30, 2012. (Source: Association of Mutual Funds in India, Quarterly Update
September 2012.) From 1963 to 1987, Unit Trust of India was the only mutual fund operating in the country. It
was set up in 1963 at the initiative of the Government and the RBI. From 1987 onwards, several other public
sector mutual funds entered this sector. These mutual funds were established by public sector banks, LIC and
GIC. The mutual funds industry was opened up to the private sector in 1993. The industry is regulated by the
SEBI (Mutual Funds) Regulations, 1996, as amended. (Source: http://www.amfiindia.com/
showhtml.aspx?page=mfindustry.)
Impact of Liberalization on the Indian Financial Sector
Until 1991, the financial sector in India was heavily controlled and commercial banks and long-term lending
institutions, the two dominant financial intermediaries, had mutually exclusive roles and objectives and operated
in a largely stable environment, with little or no competition. Long-term lending institutions were focused on the
achievement of the Government’s various socioeconomic objectives, including balanced industrial growth and
employment creation, especially in areas requiring development. Long-term lending institutions were extended
access to long-term funds at subsidized rates through loans and equity from the Government and from funds
guaranteed by the Government originating from commercial banks in India and foreign currency resources
originating from multilateral and bilateral agencies.
The focus of the commercial banks was primarily to mobilize household savings through demand and time
deposits and to use these deposits to meet the short-term financial needs of borrowers in industry, trade and
agriculture. In addition, the commercial banks provided a range of banking services to individuals and business
entities.
However, since 1991, there have been comprehensive changes in the Indian financial system. Various
financial sector reforms have transformed the operating environment of the banks and long-term lending
institutions. In particular, the deregulation of interest rates, emergence of a liberalized domestic capital market,
and entry of new private sector banks, along with the broadening of long-term lending institutions’ product
portfolios, have progressively intensified the competition between banks and long-term lending institutions. The
RBI has permitted the transformation of long-term lending institutions into banks subject to compliance with the
prudential standards applicable to banks. (Source: RBI Circular on Approach to Universal Banking dated
April 28, 2001 http://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=368#anx1.)
Banking Sector Reform
Most large banks in India were nationalized in 1969 and thereafter were subject to a high degree of control
until reform began in 1991. In addition to controlling interest rates and entry into the banking sector, these
regulations also channeled lending into priority sectors as identified by the Government. Banks were required to
fund the public sector through the mandatory acquisition of low interest-bearing Government securities or SLR
bonds to fulfill statutory liquidity requirements.
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Committee on the Financial System (Narasimham Committee I)
The Narasimham Committee I was set up in August 1991 to recommend measures for reforming the
financial sector. Many of the recommendations made by the committee, which addressed organizational issues,
accounting practices and operating procedures, were implemented by the Government. The major
recommendations that were implemented included the following:
• with fiscal stabilization and the Government increasingly resorting to market borrowing to raise
financing, the SLR or the proportion of the banks’ NDTL that were required to be invested in
Government securities was reduced from 38.5% in the pre-reform period to 25.0% in October 1997; as at
July 31, 2012, the SLR was 24.0%; further, the SLR of scheduled commercial banks has been reduced
from 24% to 23%, with effect from the fortnight beginning August 11, 2012;
• the CRR, or the proportion of the Bank’s NDTL that were required to be deposited with the RBI, was
reduced from 15.0% in the pre-reform period to 4.5%; as at December 31, 2012, the CRR was 4.25%;
• special tribunals were created and a special legislation enacted to resolve bad debt problems;
• most of the restrictions on interest rates for deposits were removed; commercial banks were allowed to set
their own level of interest rates for all deposits except saving deposits; and
• substantial capital infusion to several state-owned banks was approved in order to bring their capital
adequacy closer to internationally accepted standards; by the end of the financial year 2002, aggregate
recapitalization amounted to Rs.217.5 billion; some of the stronger public sector banks were given
permission to issue equity to further increase capital.
Committee on Banking Sector Reform (Narasimham Committee II)
The Second Committee on Banking Sector Reform (the “Narasimham Committee II”) submitted its report
in April 1998. The major recommendations of the committee were in respect of capital adequacy requirements,
asset classification and provisioning, risk management and merger policies. The RBI accepted and began
implementing many of these recommendations in October 1998.
Committee on Capital Account Convertibility (Tarapore Committee)
In 1997, the Committee on Capital Account Convertibility (the “Tarapore Committee”), constituted by the
RBI, set out the conditions for capital account convertibility. The three main preconditions determined by the
Tarapore Committee were (i) fiscal consolidation, (ii) a mandated inflation target and (iii) the strengthening of
the financial system. The RBI set an objective of achieving these preconditions within three years from the date
upon which the Tarapore Committee was constituted. (Source: Tarapore Committee Report http://
rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/14029.pdf.)
The Tarapore Committee also recommended changes in the legislative framework governing foreign
exchange transactions. Accordingly, with effect from June 2000, the Foreign Exchange Regulation Act 1973,
which formed the statutory basis for exchange control in India, was repealed and replaced by the Foreign
Exchange Management Act, 1999 (the “Foreign Exchange Management Act”).
The RBI appointed a committee under the chairmanship of Mr. S. S. Tarapore in March 2006 to suggest a
roadmap to increase capital account convertibility and the committee submitted its report to the RBI titled “Fuller
Capital Account Convertibility”, dated July 31, 2006. The recommendations of this committee detailed a
three-phase strategy over a five-year time frame — Phase I (2006-07); Phase II (2007-08 to 2008-09); and
Phase III (2009-10 to 2010-11) for moving towards fuller capital account convertibility.
Recent Structural Reforms and Initiatives
Corporate Debt Restructuring Forum
To put in place an institutional mechanism for the restructuring of corporate debt, the RBI has devised a
CDR system, on which RBI issued detailed guidelines through its circular dated August 23, 2001. The objective
of this framework is to ensure a timely and transparent mechanism for the restructuring of corporate debts of
viable entities facing problems, outside the purview of the Government’s Board for Industrial and Financial
Reconstruction, debt recovery tribunals and other legal proceedings. In particular, this framework aims to
preserve viable corporates that are affected by certain internal and external factors and minimize the losses to the
creditors and other stakeholders through an orderly and coordinated restructuring program. The CDR system is a
non-statutory mechanism and a voluntary system based on debtor-creditor and inter-creditor agreements.
Universal Banking Guidelines
Universal banking in the Indian context means the transformation of long-term lending institutions into
banks. The RBI constituted the Khan Working Group under Mr. S.H. Khan on December 8, 1997 to reach a
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better understanding of the role of banks and financial institutions for greater harmonization of facilities and
obligations. The Khan Working Group submitted its report on April 24, 1998. Pursuant to the recommendations
of the Narasimham Committee II and the Khan Working Group on Harmonizing the Role and Operations of the
Development of Financial Institutions, the RBI, in its mid-term review of monetary and credit policy for the
financial year 2000, announced that long-term lending institutions would have the option of transforming
themselves into banks subject to compliance with specified cash reserve and SLRs, the prudential standards as
applicable to banks and the cessation of any activity not permissible for a bank under Section 6(1) of the Banking
Regulation Act. If a long-term lending institution chose to exercise the option available to it and formally decided
to convert itself into a universal bank, it could formulate a plan for the transition path and a strategy for smooth
conversion into a universal bank over a specified time frame. In April 2001, the RBI issued guidelines on several
operational and regulatory issues which were required to be addressed in evolving the path for transition of a
long-term lending institution into a universal bank. (Source: RBI Circular on Approach to Universal Banking
dated April 28, 2001 http://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=368#anx1.)
Pension Reforms
Currently, there are three categories of pension schemes in India: pension schemes for Government
employees, pension schemes for employees in the organized sector and voluntary pension schemes. In the case of
pension schemes for Government employees, the Government pays its employees a defined periodic benefit upon
their retirement. Further, the contribution towards the pension scheme is funded solely by the Government and
not matched by a contribution from the employees. The Employees Provident Fund, established in 1952, is a
mandatory program for employees of certain establishments. It is a contributory program that provides for
periodic contributions of 10.00% to 12.00% of the basic salary by both the employer and the employees. The
contribution is invested in prescribed securities and the accumulated balance in the fund (including the accretion
thereto) is paid to the employee as a lump sum on retirement. Besides these, there are voluntary pension schemes
administered by the Government (the Public Provident Fund to which contribution may be made up to a
maximum of Rs.100,000 per annum) or offered by insurance companies, where the contribution may be made on
a voluntary basis. Such voluntary contributions are often driven by tax benefits offered under the scheme.
In December 2003, the Government announced that the new pension scheme would be applicable to all new
recruits to Indian Government service (excluding defense personnel) from January 1, 2004. (Source:
www.pfrda.org.in.) Further, on December 30, 2004, the Government promulgated an ordinance establishing the
statutory regulatory body, Pension Fund Regulatory and Development Authority, to undertake promotional,
developmental and regulatory functions with respect to the pension sector. In March 2005, the Government
tabled the Pension Fund and Development Authority Bill in Parliament. With effect from May 1, 2009, the
Government extended the new pension system to all Indian citizens on a voluntary basis. (Source:
http://pfrda.org.in/writereaddata/linkimages/Press%20release%2030_04_09815593664.pdf.)
Private
sector
participation in managing pension assets was permitted for the first time in the financial year 2009.
Base Rate System
The BPLR system, introduced in 2003, fell short of its original objective of bringing transparency to lending
rates. Under the BPLR system, banks could lend below the prevailing BPLR. For the same reason, it was also
difficult to assess the transmission of policy rates of the RBI to lending rates of banks. The Base Rate system is
aimed at enhancing transparency in lending rates of banks and enabling better assessment of transmission of
monetary policy. Accordingly, the following guidelines were issued for implementation by banks.
The Base Rate system replaced the BPLR system with effect from July 1, 2010. Base Rate shall include all
those elements of the lending rates that are common across all categories of borrowers. Banks may choose any
benchmark to arrive at the Base Rate for a specific tenor that may be disclosed transparently. Banks are free to
use any other methodology, as considered appropriate, provided it is consistent and is made available for
supervisory review and scrutiny, as and when required.
Banks may determine their actual lending rates on loans and advances with reference to the Base Rate and
by including such other customer specific charges as considered appropriate. The actual lending rates charged are
required to be transparent and consistent and be made available for supervisory review and scrutiny, as and when
required.
Applicability of Base Rate
All categories of loans should be priced only with reference to the Base Rate. However, the following
categories of loans could be priced without reference to the Base Rate: (a) differential rate of interest advances,
(b) loans to banks’ own employees and (c) loans to banks’ depositors against their own deposits.
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The Base Rate could also serve as the reference benchmark rate for floating rate loan products, apart from
external market benchmark rates. The floating interest rate based on external benchmarks should, however, be
equal to or above the Base Rate at the time of sanction or renewal.
Changes in the Base Rate shall be applicable in respect of all existing loans linked to the Base Rate in a
transparent and non-discriminatory manner. Because the Base Rate will be the minimum rate for all loans, banks
are not permitted to resort to any lending below the Base Rate. Accordingly, the current stipulation of BPLR as
the ceiling rate for loans up to Rs.200,000.00 was withdrawn. It is expected that the above deregulation of
lending rate will increase the credit flow to small borrowers at reasonable rate and direct bank finance will
provide effective competition to other forms of high cost credit. The RBI will separately announce the stipulation
for export credit.
Review of Base Rate
Banks are required to review the Base Rate at least once per quarter with the approval of their boards of
directors or their asset liability management committees in accordance with the banks’ practice. Because
transparency in the pricing of lending products has been a key objective of the RBI, banks are required to exhibit
the information on their Base Rate at all branches and also on their websites. Changes in the Base Rate should
also be conveyed to the general public from time to time through appropriate channels. Banks are required to
provide information on the actual minimum and maximum lending rates to the RBI on a quarterly basis.
Transitional Issues
The Base Rate system would be applicable for all new loans and for old loans that come up for renewal.
Existing loans based on the BPLR system may run until their maturity. Where existing borrowers want to switch
to the new system before the expiry of the existing contracts, an option may be given to them, on mutually agreed
terms. Banks, however, should not charge any fee for such switch-over. (Source: RBI Guidelines on the Base
Rate http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=5579&Mode=0.)
Monetary and Credit Policy Measures
As part of its effort to continue bank reform, the RBI has announced a series of measures in its monetary
and credit policy statements aimed at deregulating and strengthening the financial system. The RBI issues an
annual policy statement setting out its monetary policy stance and announcing various regulatory measures. It
issues a review of monetary policy on a quarterly basis.
Annual Policy Statement for the Year 2012-13
In its Annual Policy Statement for the Year 2012-13 (source: http://rbi.org.in/scripts/Notification
User.aspx?Id=7136&Mode=0), the RBI announced the following measures:
• a reduction of the repo rate under the LAF from 8.5% to 8.0%;
• an adjustment of the reverse repo rate under the LAF, determined with a spread of 100 basis points below
the repo rate, to 7.0%;
• an increase of the borrowing limit of scheduled commercial banks under the marginal standing facility
from 1.0% to 2.0% of their NDTL outstanding at the end of the second preceding two-week period.
• the institution of a policy allowing banks to continue to access the marginal standing facility even if they
have excess SLR holdings;
• an adjustment of the marginal standing facility rate, determined with a spread of 100 basis points above
the repo rate, to 9.0%;
• an adjustment of the bank rate to 9.0%; and
• a retention of the CRR of scheduled banks at 4.75% of their NDTL.
RBI First Quarter Review of Monetary Policy 2012-13
In its First Quarter Review of Monetary Policy 2012-13 (source: http://www.rbi.org.in/Scripts/Notification
User.aspx?Id=7479&Mode=0), the RBI announced the following measures:
• a retention of the repo rate under the LAF at 8.0%;
• a retention of the reverse repo rate under the LAF, determined with a spread of 100 basis points below the
repo rate, at 7.0%;
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• a retention of the marginal standing facility rate, determined with a spread of 100 basis points above the
repo rate, at 9.0%;
• a retention of the bank rate at 9.0%;
• a retention of the CRR of scheduled banks at 4.75% of their NDTL; and
• a reduction of the SLR of scheduled commercial banks from 24.0% to 23.0% of their NDTL with effect
from August 11, 2012.
RBI Second Quarter Review of Monetary Policy 2012-13
In its Second Quarter Review of Monetary Policy 2012-13 (source: http://www.rbi.org.in/Scripts/
NotificationUser.aspx?Id=7647&Mode=03), the RBI announced the following measures:
• a retention of the repo rate under the LAF at 8.0%;
• a retention of the reverse repo rate under the LAF, determined with a spread of 100 basis points below the
repo rate, at 7.0%;
• a retention of the marginal standing facility rate, determined with a spread of 100 basis points above the
repo rate, at 9.0%;
• a retention of the bank rate at 9.0%;
• a reduction in the CRR of scheduled banks to 4.25% of their NDTL; and
• a retention of the SLR of scheduled commercial banks at 23% of their NDTL.
RBI Mid Quarter Review of Monetary Policy: December 2012
In its Mid Quarter Review of Monetary Policy in December 2012 (source: http://www.rbi.org.in/Scripts/
BS_Press ReleaseDisplay.aspx?prid=27783), the RBI announced the following measures:
• a retention of the repo rate under the LAF at 8.0%;
• a retention of the reverse repo rate under the LAF, determined with a spread of 100 basis points below the
repo rate, at 7.0%;
• a retention of the marginal standing facility rate, determined with a spread of 100 basis points above the
repo rate, at 9.0%;
• a retention of the bank rate at 9.0%;
• a retention of the CRR of scheduled banks at 4.25% of their NDTL; and
• a retention of the SLR of scheduled commercial banks at 23% of their NDTL.
Other Initiatives in the Banking Sector
WTO Compliant Roadmap for Foreign Banks in India
In February 2005, the RBI released a roadmap for foreign banks in India articulating a liberalized policy
consistent with the World Trade Organization (“WTO”) commitments undertaken by India. The roadmap is
divided into two phases. During the first phase (March 2005 to March 2009) foreign banks intending to establish
a presence in India for the first time could either choose to operate through branches or set up wholly-owned
subsidiaries, following the one-mode presence criteria. In addition, foreign banks would be allowed to acquire a
controlling stake in a phased manner in private sector banks identified by the RBI for restructuring. Under the
existing WTO commitments undertaken by India, 12 new branch licenses shall be given to foreign banks every
year, including new and existing foreign banks. The RBI has been going beyond such WTO commitment by
allowing foreign banks to open more branches. The second phase was scheduled to commence in April 2009
after a review of the implementation of the first phase and after due consultation with all the stakeholders in the
banking sector. In this phase, three interconnected issues are to be considered. First, rules for the removal of
limitations on the operations of the wholly-owned subsidiaries of foreign banks operating in India and treating
them on an equal basis with domestic banks, to the extent appropriate, would be designed and implemented.
Second, such wholly-owned subsidiaries may be allowed to list and dilute their stake on the stock exchanges in
India on completion of a minimum prescribed period of operation. This would be consistent with paragraph 1(b)
of Press Note 2 (2004 Series), which requires that at least 26.00% of the paid-up capital of such subsidiaries be
held by resident Indians at all times. Dilution may take the form of an initial public offer or an offer for sale.
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Third, foreign banks may be permitted to enter into merger and acquisition transactions with any private sector
bank in India during this phase, subject to the overall investment limit of 74.00%. (Source: RBI Roadmap for
presence of foreign banks in India dated February 28, 2005 http://www.rbi.org.in/upload/content/images/
RoadMap.html.)
Implementation of the RTGS system in India
With the commencement of operations of the Real Time Gross Settlement system (“RTGS system”) on
March 26, 2004, India reached a major milestone in the development of payment systems and complied with the
core principles set out by the Bank for International Settlements. As at September 29, 2011, RTGS connectivity
was available in more than 78,000 bank branches. (Source: RBI website, http://www.rbi.org.in/scripts/
FAQView.aspx?Id=65.) The main features of the RTGS system are as follows:
• payments are settled transaction-by-transaction for high-value and retail payments;
• settlement of funds is final and irrevocable;
• settlement is done on a real time basis and the funds settled can be used immediately;
• it is a fully secured system which uses digital signatures and public key infrastructure based inscription
for safe and secured message transmission;
• there is provision for intra-day collateralized liquidity support for member banks to smoothen the
temporary mismatch of fund flows; and
• it provides for transfer of funds relating to inter-bank settlements as well as customer related fund
transfers.
The RBI has been promoting the initiative to migrate from paper-based payment to electronic payment
systems by creating appropriate technological infrastructure, while attempting to adopt international best
practices. The RBI has played an instrumental role in the implementation of the RTGS system. All new
innovations, whether, RTGS or CTS (as defined below), may only proceed with the approval and often, the
support of the RBI. In most cases, it is the RBI that formulates the plan for implementation of new plans and new
technologies.
Cheque Truncation
The Cheque Truncation System (“CTS”), which aims at enhancing efficiency in the retail cheque clearing
sector, was implemented on a pilot basis in the National Capital Region and Chennai with effect from
February 1, 2008 and September 24, 2011, respectively. After migration of the entire cheque volume from the
Magnetic Ink Character Recognition (the “MICR”) system to CTS, the traditional MICR-based cheque
processing has been discontinued in these two locations. (Source: RBI website, http://www.rbi.org.in/scripts/
FAQView.aspx?Id=63.)
Technology
Technology is emerging as a key-driver of business in the banking and financial services industry. Banks are
developing alternative channels of delivery such as ATMs, telebanking, remote access and internet banking.
Indian banks have been making significant investments in technology. In addition to computerization of
front-office operations, Indian banks have moved towards back-office centralization. They are also implementing
“Core Banking” or “Centralized Banking”, which provides connectivity between branches and allows the
offering of a variety of value-added products, benefiting a larger number of customers. The use of ATMs has
been growing rapidly and this has helped to optimize the investments made by Indian banks in infrastructure.
The payment and settlement system is also being modernized. The RBI is actively pursuing the objective of
establishing a RTGS system of comparable standard with that of other developed economies.
Corporate Governance
Implementation of good corporate governance practices is becoming an area of focus for banks and
regulators in India. It is becoming increasingly common that the board of directors of Indian banks comprises an
audit committee entrusted with the task of overseeing the organization, operations and quality control of the
internal audit function, reviewing financial accounts and following-up with the external auditors of the bank as
well as examinations by regulators. Disclosure levels in banks’ balance sheets have been enhanced and measures
have been initiated to strengthen corporate governance in banks.
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Consolidation
With the increased recognition by Indian banks of the importance of size, the Government has expressed its
views of favoring consolidation in the Indian banking sector. Mergers and acquisitions are considered by Indian
banks as a means of achieving inorganic growth in size and attaining economies of scale and scope.
Notwithstanding its stakeholding in public sector banks, the Government has indicated that it would not impede
the mergers of public sector banks, provided the board of directors of the banks comes up with a proposal of
merger based on synergies and potential for improved operational efficiency. The Government has also provided
favorable tax treatments aimed at promoting mergers and acquisitions. For example, Section 72(A) of the Income
Tax Act makes the benefit of “carry forward and set-off of accumulated losses and unabsorbed depreciation”
available to the acquiring entity (which could be a company, a corresponding new bank, a banking company or a
specified bank), if the Government, on the recommendation of the relevant authority, is satisfied that the
specified conditions are being fulfilled and makes a declaration to such effect allowing such benefits to the
acquiring entity as provided thereunder.
Further, under the Finance Act, 2005 a new Section 72AA has been incorporated into the Income Tax Act
pursuant to which, during the amalgamation of a banking company with any other banking institution under a
scheme sanctioned and brought into force by the Government under Section 45 (7) of the Banking Regulation
Act, the accumulated loss and the unabsorbed depreciation of such banking company shall be deemed to be the
loss or, as the case may be, allowance for depreciation of such banking institution for the previous year in which
the scheme of amalgamation was brought into force and other provisions of the Income Tax Act relating to setoff and the carry forward of loss, and allowance, for depreciation shall apply accordingly.
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BUSINESS
Overview
The Bank is a leading private sector bank and financial services company in India offering a wide range of
products and services to corporate and retail customers through a variety of delivery channels. The Bank
commenced operations in April 1994, and over the last 18 years, the Bank has grown both in terms of the size of
its asset base and its physical network of branches, extension counters and ATMs. The Bank has experienced
significant growth while maintaining stable asset quality and enhancing its low-cost funding structure.
As at September 30, 2012, the Bank was the third largest private sector bank in India in terms of total assets
based on public filings of private sector banks. The Bank’s total assets as at September 30, 2012 were
Rs.3,026.81 billion as compared to Rs.2,856.28 billion as at March 31, 2012. The Bank’s net profit has grown
from Rs.33.88 billion in the year ended March 31, 2011 to Rs.42.42 billion in the year ended March 31, 2012,
representing an increase of 25.19% The Bank’s net profit has increased by 22.25% from Rs.18.63 billion in the
half year ended September 30, 2011 to Rs.22.77 billion in the half year ended September 30, 2012. As at
September 30, 2012, the Bank’s net loans and net deposits amounted to Rs.1,721.32 billion and
Rs.2,356.19 billion, respectively. As at September 30, 2012, the Bank had a network of 1,741 branches and
extension counters and 10,297 ATMs spread over 1,113 centers in India. In addition to the Bank’s growing
branch and ATM networks, the Bank also offers telephone banking in various cities, as well as internet banking
and mobile telephone banking. These and other resources give the Bank the capability to deliver a broad range of
banking products through multiple delivery channels that enhance convenience for customers. As at
September 30, 2012, the Bank also had seven overseas offices with branches in Singapore, Hong Kong, the
DIFC, Colombo and representative offices in Shanghai, DIFC and Abu Dhabi. The Bank’s foreign branches
primarily offer corporate banking, trade finance and treasury and risk management services.
The Bank’s core income stream comprises interest income earned on its large and mid-corporate, SME and
agriculture and retail loan portfolios, as well as its money-market operations and investment portfolio. The Bank
also earns fee and commission income from the processing of loans, documentary credits, bank guarantees,
placements and syndication, service charges, cash management services, advisory services, depository services,
capital market services, ATM interchange and cards, remittance, wealth management and sale of third party
products. Additionally, the Bank earns trading profit from proprietary trading in investments, foreign exchange
and derivatives. The Bank’s expenses consist of interest and non-interest expenses. The Bank’s major
non-interest expenses include staff cost, occupancy cost (including rent for office premises, repair and
maintenance), depreciation and other administrative costs.
The Bank obtained its certificate of incorporation on December 3, 1993 and its certificate of commencement
of business on December 14, 1993. The Bank began operations by opening its first branch in Ahmedabad on
April 2, 1994 and was one of the first private sector banks established under guidelines issued in 1993 by the RBI
in line with the Government’s policy to reform India’s financial sector. The Bank was renamed from “UTI Bank
Limited” to “Axis Bank Limited”, and the certificate of incorporation on change of name was obtained on
July 30, 2007.
Since the year ended March 31, 2011, the Bank has experienced significant growth in its customer and
geographical base, which expanded from 17.96 million retail customer accounts in 921 locations as at March 31,
2011 to 19.53 million retail customer accounts in over 1,050 locations as at March 31, 2012. As at September 30,
2012, the Bank had 20.46 million retail customer accounts in 1,113 locations. The Bank’s total assets have
increased from Rs.2,427.13 billion as at March 31, 2011 to Rs.2,856.28 billion as at March 31, 2012, with the
retail loan portfolio increasing from Rs.277.59 billion as at March 31, 2011 to Rs.375.70 billion as at March 31,
2012. As at September 30, 2012, the total assets of the Bank was Rs.3,026.81 billion, of which retail loans
accounted for Rs.442.86 billion. Further, total deposits of the Bank grew from Rs.1,892.38 billion as at
March 31, 2011 to Rs.2,201.04 billion as at March 31, 2012, with low-cost deposits (savings bank and current
account) increasing by Rs.136.55 billion over the same period. As at September 30, 2012, total deposits were
Rs.2,356.19 billion, of which low-cost deposits accounted for Rs.955.38 billion. The Bank’s ATM network
increased from 6,270 ATMs as at March 31, 2011 to 9,924 ATMs as at March 31, 2012. The number of ATMs as
at September 30, 2012 was 10,297.
The Bank’s principal business activities are divided into two segments, Banking Operations and Treasury.
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Banking Operations
The Bank’s operations include products and services in the following areas:
• Large and Mid-Corporate Banking offers various loan and fee-based products and services to large and
mid-corporate clients. These products and services include cash credit facilities, demand and short-term
loans, project finance, export credit, factoring, channel financing, structured products, discounting of
bills, documentary credits, guarantees, foreign exchange and derivative products, cash management
services, warrant payment services, cross-border trade and correspondent banking services and tax
collections on behalf of the central Government and various state governments in India. Liability products
including current accounts, certificates of deposit and time deposits are also offered to large and
mid-corporate clients. Loans under the large and mid-corporate banking segment amounted to
Rs.910,534 million and constituted 53.64% of the Bank’s total loan portfolio as at March 31, 2012. The
loans to large and mid-corporate clients as at September 30, 2012 amounted to Rs.920,647 million and
constituted 53.49% of the total loan portfolio.
• SME and Agriculture comprises 32 dedicated SME centers to provide decentralized loan origination,
cross-selling and monitoring functions, as well as 90 specialized clusters for agricultural clients to
coordinate appraisals and provide lending services. Loans under the SME and agriculture segment
amounted to Rs.411,358 million as at March 31, 2012 and constituted 24.23% of the Bank’s total loan
portfolio as at March 31, 2012. The loans to these segments as at September 30, 2012 amounted to
Rs.357,807 million and constituted 20.79% of the Bank’s total loan portfolio
• Retail Banking offers a variety of liability and asset products and services to retail customers. Retail
liability products include savings accounts, time deposits and customized products for certain target
groups such as high-net worth individuals, senior citizens, working mothers, armed forces personnel,
students and salaried employees. Retail asset products include home loans, personal loans, auto loans,
consumer loans, loans against gold and educational loans as well as secured loans of various types. The
Bank also offers other products and services such as debit and travel currency cards, financial advisory
services, bill payment services and wealth management services. The Bank had 19.53 million and
20.46 million retail customer accounts as at March 31, 2012 and September 30, 2012, respectively, The
Bank also markets third party products such as mutual funds and Government savings bonds. A wide
range of liability and asset products and services are also offered to non-resident Indians (“NRIs”).
• Business Banking offers transaction banking services, as well as current accounts for businesses and
central Government and state government agencies. As at March 31, 2012, the Bank had 1,066,485
current accounts relationships under its business banking segment. The current accounts relationships had
grown to 1,211,407 as at September 30, 2012.
Treasury
The Treasury manages the funding position of the Bank and also manages and maintains its regulatory
reserve requirements. The Treasury invests in sovereign and corporate debt instruments, and undertakes
proprietary trading in equity and fixed income securities, foreign exchange, currency futures and options. The
Treasury invests in commercial paper, mutual funds and floating rate instruments as part of the management of
short-term surplus liquidity. In addition to proprietary trading and liquidity management, the Treasury also offers
a wide range of treasury products and services to corporate customers, including derivative instruments such as
forward contracts, interest rate swaps, currency swaps and foreign currency options, as well as services such as
loan syndication and placement.
Competitive Strengths
The key features of the Bank’s growth are:
Sustained growth in net interest and fee income, reflecting the strength and diversity of the Bank’s core
earning streams
The Bank offers a wide range of products that generate interest and fee income, both of which have
sustained rapid growth. In the years ended March 31, 2011 and 2012, the Bank had net interest income growth of
31.14% and 22.17%, respectively, and fee income growth of 29.59% and 24.71%, respectively. For the half year
ended September 30, 2012, the Bank’s net interest income and fee income was Rs.45.07 billion and Rs.24.98
billion, respectively. The Bank believes that its combination of diverse product offerings and a customer-focused
approach has enabled it to structure solutions as per customers’ needs, resulting in sustained revenue generation,
even in recent difficult market conditions.
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Strong presence in the Indian retail banking market through a nationwide distribution network, the growth
of the Bank’s product and customer base and the provision of high-quality customer service
The Bank has a nationwide distribution network with one of the largest numbers of branch outlets among
private sector banks. As at March 31, 2012, the Bank had a network of 1,622 branches and extension counters
and 9,924 ATMs spread over 1,050 cities and towns in India. As at September 30, 2012, the Bank had a network
of 1,741 branches and extension counters and 10,297 ATMs spread over 1,113 centers in India. Since
commencing operations in April 1994, the Bank has grown in terms of its physical network of branches,
extension counters and ATMs. This extensive nationwide branch outlet network provides the Bank with a strong
sales platform, which enables the Bank to cross-sell its products and to deliver high-quality and convenient
services.
The Bank offers a wide array of traditional asset and liability products and services to its customers and is
continually working to offer additional products that are specially tailored to meet the needs of the Bank’s
diverse customers. The Bank provides internet and mobile banking services that offer 24-hour access to customer
accounts and the ability to conduct routine banking transactions, such as online bill payment and application for
lines of credit, remotely. In addition, high-quality customer service has always been a top priority for the Bank.
To improve the customer experience, the Bank provides regular staff training in customer service and engages
third-party consultants to assess the quality of service the Bank provides its customers.
The Bank believes the convenient locations and services it offers, as well as the Bank’s high-quality
customer service, provide incentives for the Bank’s customers to open and maintain accounts with the Bank.
Access to low-cost funds
The Bank enjoys a low-cost deposit base achieved through targeted branch network expansion and
customized product offerings. The Bank’s target depositor base consists of retail depositors and SMEs who the
Bank believes choose the network because of the convenience of its branch locations, access to ATMs and
remote banking services as well as diverse product offerings. As at March 31, 2012 the Bank had 9,924 ATMs,
representing the second largest ATM network in India according to the Bankwise ATM/point-of-sale (“POS”)
card statistics published by the RBI. In addition, as at March 31, 2012, the Bank had low-cost deposits (savings
and current account deposits) totaling Rs.914.22 billion. As at September 30, 2012, the number of ATMs was
10,297 and low-cost deposits grew to Rs.955.38 billion. The Bank’s broad-based distribution network, which
includes the Bank’s branch network and alternative delivery channels, provides the Bank with access to these
depositors, which in turn allows the Bank to maintain low-cost funding through customer deposits.
Continued focus on improvement in asset quality with low NPA levels through disciplined credit risk
management
As at March 31, 2012 and September 30, 2012, gross NPAs was Rs.18.06 billion and Rs.21.91 billion,
respectively, while net NPAs was Rs.4.73 billion and Rs.6.54 billion, respectively. The Bank strengthens its risk
management and internal control capabilities on an ongoing basis by improving its policies and procedures and
introducing sophisticated risk management tools. The independent risk management system seeks to identify and
manage risks at the Bank’s business group level, using technology to allow each business group to manage its
risks effectively and within the Bank’s policies. The Bank is in full compliance with Basel II and has
implemented new credit risk assessment models, independent validation of internal ratings and plans for
increased use of IT to improve the quality of loan data. The bank also conducts regular stress tests based on a
number of economic scenarios and assesses the likely impact on capital. The results of these tests are periodically
presented to the Risk Management Committee under the Board of Directors. See “— Risk Management”.
Strong financial position
The Bank’s results reveal a strong set of performance ratios for the year ended March 31, 2012. For the year
ended March 31, 2012, the Bank reported a cost-to-income ratio of 44.70% and a net interest margin of 3.59%.
For the six months ended September 30, 2012, the Bank reported cost-to-income ratio of 44.29% and a net
interest margin of 3.42%. As at March 31, 2012, the Bank’s CAR was 13.66%, well above the 9% minimum
required by the RBI. As at September 30, 2012, the Bank’s CAR, when not accounting for the unaudited profits
for the half year, as per RBI guidelines, was 12.99%. If the unaudited profits for the half year were included, the
Bank’s CAR as at September 30, 2012 would have been 13.92%. The Bank’s capital position, as measured by its
overall and Tier I capital adequacy ratios, allows the Bank to take advantage of significant growth opportunities
in the market.
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Advanced use of technology for cost efficiency and effective delivery of products and services to the Bank’s
customers
The Bank’s IT strategy has supported business initiatives by continuously updating technology and process
platforms. By establishing an IT system which effectively integrates customer service channels, internet banking,
customer service systems, telephone banking and information platforms, the Bank is able to provide its
management team with relevant financial and operational data on a real-time basis and better serve the Bank’s
customers in an efficient and effective manner.
Experienced management team
The Bank has an experienced management team staffed with career banking professionals. The Bank’s top
management has wide-ranging experience in the banking and financial sector. The rest of the senior management
team has strengths in key areas, including retail, corporate and international banking. The management team’s
extensive and diverse expertise provides the Bank with a broad perspective from which it can make strategic
management and operational decisions. As a private sector bank, the Bank has been able to adopt a management
culture that allows the Bank to adapt quickly to changing market conditions and changing customer
requirements. The Bank believes that its management team has defined a clear, strategic direction for the Bank
which will allow it to expand and maintain its position as a leading private sector bank in India.
Strategies
The key elements of the Bank’s business strategy going forward are:
Broadening the Bank’s low-cost deposit base
Retail depositors in India are an important source of low-cost funding for the Bank and the Bank believes
that the Indian retail financial services market will continue to experience growth. The Bank therefore plans to
continue expanding its retail banking business by expanding its distribution network, growing its customer base,
diversifying its banking product mix, providing banking convenience to customers and offering differentiated
products and solutions to meet the specific needs of particular customer demographics. The Bank believes that
such customer-specific orientation will result in an increase in retail deposits to the Bank, which will expand the
Bank’s pool of low-cost funding.
Improve profitability by reducing costs and focusing on core income streams such as net interest income
and fee-based income
The Bank intends to implement a number of measures that it believes will both increase revenue derived
from its existing businesses and reduce existing costs. Such measures may include, for example, reducing deposit
rates to decrease maintenance costs on retail accounts, increasing low-cost current account and savings account
deposits, increasing fee-based income from the Bank’s corporate and consumer banking businesses and
broadening the Bank’s skill base and expertise in financial product development. In addition, the Bank believes it
can streamline its operations and processes and minimize costs through measures such as reducing occupancy
costs by identifying branches with underutilized floor space and moving such branches to more suitable locations
with optimal space and lower occupancy costs.
Increase the Bank’s retail asset portfolio
The Bank aims to focus on increasing its share of retail loans in total advances by leveraging its branch
network for sourcing retail loans, expanding the distribution network for retail assets and diversifying its retail
loan product portfolio. The Bank continues to invest in building risk management and analytical capabilities to
mitigate risks and drive cross-selling opportunities and profitability of its retail loan products.
Focusing on SME and Agriculture lending
The Bank aims to have a continued focus on the SME segment by offering a wide suite of products and
services. Agriculture lending is also a key focus area in order to position the Bank for capitalizing on the
emerging rural opportunities in India as well as to achieve the sizeable priority sector commitment as mandated
by the RBI.
Rural banking initiatives
The Bank aims to deepen its rural distribution through branches as well as business correspondents, thereby
providing deposit, remittance and loan products (Agri input financing, farming and processing activities) to rural
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customers. The Bank also believes there is a potentially large business opportunity from unbanked segments in
rural India that it plans to tap by offering simple products customized to suit the needs of this previously
unbanked segment.
Sustain focus on improving loan and investment portfolio quality
The Bank believes that conservative credit risk management policies and controls are critical for long-term,
sustainable growth in its business. The Bank’s goal is to continually improve its credit risk management
procedures, credit evaluation, rating methodology, monitoring and control mechanisms to maintain the quality of
the Bank’s loan and investment portfolios.
Focus on cross-selling and expand fee income through diverse sources
The Bank has developed a large number of corporate relationships throughout its years of operations. The
Bank now plans to leverage these relationships by selling to the corporate segment products offered by other
business segments such as the savings bank and investment products. The Bank intends to diversify revenue
sources and increase overall revenue by expanding its product and service offerings; particularly fee- and
commission-based offerings, which will enable the Bank to advise and cross-sell third-party products, such as
insurance and online trading, to high-net worth customers, as well as strengthening its international remittance
business through tapping high-volume remittance corridors.
Banking Operations
Banking operations include products and services in the following areas:
• Large and mid-corporate banking;
• SME and agriculture;
• Retail banking; and
• Business banking.
Large and Mid-Corporate Banking
Products and Services
A broad classification of products and services offered by the Bank to its large and mid-corporate banking
clients (as well as to SME and agriculture clients, see “SME and Agriculture”) is set forth below.
• Fund-based products.
Loans and advances for working capital, corporate finance and project finance.
• Non-fund-based products.
and guarantees.
Non-funded advances such as documentary credits, standby letters of credit
• Fee-based services. Including fund transfers, cash management services, collection of Government
taxes, trade services and loan syndication.
Other products and services offered include time deposits and current accounts (checking accounts). These
products and services are delivered to customers through the Bank’s network of branches, correspondent banking
networks, telephone banking and the internet.
Fund-Based Products
Fund-based limits are generally granted by way of overdrafts, cash credit, demand loans, term loans and
bills discounted. Generally, the type of facility to be granted is determined based on factors such as the loan
purpose, the security offered, the size of the advance, repayment terms and the requirements of the customer.
The following table sets forth a breakdown of the Bank’s non-retail loans (including SME and agriculture
loans) as at the dates indicated.
2010
As at March 31,
2011
2012
(Rupees in millions)
As at
September 30,
2012
Working Capital Finance . . . . . . . . . . . . . . . . . .
Project and Corporate Finance . . . . . . . . . . . . . .
285,807
549,395
369,788
776,698
492,750
829,142
465,949
812,505
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
835,202
1,146,486
1,321,892
1,278,454
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Working Capital Finance
Cash credit, working capital demand loans and overdraft facilities are funded facilities usually secured by
current assets such as inventory and receivables. These facilities are generally extended for a period of one year.
In almost all cases, facilities are subject to an annual review and are generally repayable on demand. Interest is
collected on a monthly basis, based on daily outstanding amounts.
Bill discounting involves discounting negotiable instruments, which are generally issued for trade
receivables. These can also be re-discounted with other banks if required.
As at March 31, 2012, the Bank’s outstanding net corporate working capital loans amounted to
Rs.492.75 billion, constituting 29.03% of its net loan portfolio and as at March 31, 2011, these amounted to
Rs.369.79 billion, constituting 25.97% of the Bank’s net loan portfolio. As at September 30, 2012, net corporate
working capital loans amounted to Rs.465.95 billion, constituting 27.07% of its net loan portfolio.
Project and Corporate Finance
The Bank provides project finance to companies in the manufacturing, service and infrastructure sectors by
way of medium and long-term loans. Corporate financing is offered to customers based on the Bank’s appraisal
of the quality of management, industry, prospects, business model and financial strength of the firm. This
financing is provided by way of term loans of various tenors. The Bank offers asset-based lending such as
receivable financing and also offers customized corporate finance products to meet specific customer needs.
As at March 31, 2012, the Bank’s outstanding net non-retail loans for project and corporate finance
amounted to Rs.829.14 billion, constituting 48.84% of its net loan portfolio and as at March 31, 2011, these
amounted to Rs.776.70 billion, constituting 54.54% of the Bank’s net loan portfolio. As at September 30, 2012,
the Bank’s outstanding net non-retail loans for project and corporate finance amounted to Rs.812.51 billion,
constituting 47.20% of its net loan portfolio
The Bank earned interest income on its non-retail loan portfolio of Rs.120.54 billion in the year ended
March 31, 2012 and Rs.82.30 billion in the year ended March 31, 2011. For the half year ended September 30,
2012, the Bank earned interest income on its non-retail loan portfolio of Rs.70.64 billion.
Non-Fund-Based Products
Documentary Credits
The Bank provides documentary credits to customers to meet their working capital requirements as well as
for capital equipment purchases. Documentary credits are approved together with a working capital assessment
or a project finance assessment. Typically, a working capital line can be drawn down on a revolving basis over
the term of the facility. Customers pay fees for draw downs of the documentary credit, and the Bank may require
additional collateral by way of a cash margin. The percentage of any such margin is determined according to the
Bank’s perception of the transaction’s risk. As at March 31, 2012, the Bank’s documentary credit portfolio
amounted to Rs.302.61 billion and as at March 31, 2011, it amounted to Rs.249.28 billion. As at September 30,
2012, the documentary credit portfolio was Rs.268.97 billion
Guarantees
Guarantees, which also include standby letters of credit, can be drawn down in a revolving manner over the
life of the facility. Guarantees are also assessed during the course of working capital requirements. Guarantees
are issued for various purposes such as bid bonds, performance guarantees on behalf of borrowers for execution
of contracts, deferral or exemption from payment of statutory duties against performance obligations, advance
payments, release of retention monies and other purposes.
The term of guarantees is generally 36 months or less, although certain guarantees with a longer term may
be approved. As with documentary credits, the Bank sometimes obtains additional collateral by way of a cash
margin which, in the case of certain types of guarantees, may be as much as 100%. As at March 31, 2012, the
Bank’s outstanding guarantees amounted to Rs.566.12 billion and as at March 31, 2011, these amounted to
Rs.540.61 billion. As at September 30, 2012, the Bank’s outstanding guarantees amounted Rs.596.87 billion.
Fee-Based Services
Fee income (including merchant profit) from large and mid-corporate banking services (which also includes
fees from SME and agriculture, business banking and treasury) constitutes one of the significant revenue streams
of the Bank. Fee income accounted for 25.70% of total operating revenue of the Bank (which represents the
aggregate of net interest income and other income for the relevant period) for the year ended March 31, 2012. For
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the half year ended September 30, 2012, fee income was 23.53% of total operating revenue of the Bank. The
Bank offers a variety of fee-based services, including cash management services, collection of commercial taxes,
trade services, remittances, collections and loan syndication. In addition to these traditional fee-generating
products and services, the Bank also offers tailor-made products on a fee-basis to address specific corporate
customer needs through a structured products group.
Credit Selection Strategy
The Bank’s criteria for acceptability of credit include:
• an acceptable internal credit rating (generally A- and above for large and mid-corporates and SME4
(moderate safety) and above for borrowers in the SME segment);
• significant probability of credit rating enhancement in the medium term;
• strong cash flows;
• satisfactory quality of management in terms of past track record of performance and reputation of
competence, integrity and respectable corporate governance practices;
• long-term sustainability of the borrower’s business model
• likely future leader in emerging businesses;
• acceptable underlying security and credit enhancement measures;
• reasonable pricing and acceptable rate of return on capital; and
• long-term sustainability of the business model.
Pricing Policy
The Bank prices its credit products based on its assessment of the risk profile of borrowers, largely based
on:
• internal credit rating of customers;
• tenor of the loan;
• the specific structure of the product (such as embedded options);
• available collateral;
• overall relationship value; and
• market conditions.
Export Credit
As per the Master Circular on Export Credit issued on July 2, 2012, banks are able to offer Indian Rupee
export credit at interest rates at or above the Base Rate. Pre-shipment and post-shipment export credit can be
provided in both Indian Rupees and foreign currencies. Banks should endeavor to reach a level of outstanding
export credit equivalent to 12% of each bank’s adjusted net bank credit. Export credit for eligible activities under
agriculture and MSE is reckoned for priority sector lending under respective categories. The RBI provides export
refinancing for an eligible portion of total outstanding export loans at the bank rate prevailing from time to time.
Banks also earn fees and commissions from exporter customers for certain fee-based products and services
provided to them, in addition to the interest income earned on export credits. As at the last reporting Friday of the
year ended March 31, 2012, the Bank’s outstanding export credit amounted to Rs.29.73 billion, constituting
2.39% of the Bank’s adjusted net bank credit, and as at the last reporting Friday of year ended March 31, 2011,
the Bank’s outstanding export credit amounted to Rs.27.34 billion, constituting 2.94% of the Bank’s adjusted net
bank credit. As at the last reporting Friday of the half year ended September 30, 2012, the Bank’s outstanding
export credit amounted to Rs.28.65 billion, constituting 1.96% of the Bank’s adjusted net bank credit.
SME and Agriculture
SME
The SME segment is an area of particular focus for the Bank, as it generates higher yields and helps to
disperse risk. SMEs offer good business potential both for fund and non-fund based products, as well as for cross
selling of products.
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The Bank continued its focus on the SME segment during the year ended March 31, 2012 by providing
timely and adequate credit to customers with quick turnaround time. The segment offers schematic and
non-schematic products, including term loans and working capital finance, tailored to the specific requirements
of clients.
Under schematic lending, specific loan-based products have been devised to target the requirements of
specific customers and loans are made available based on predetermined features, parameters and levels. Loans
not falling under any of the product-based schematic lending schemes are treated as non-schematic lending.
The Bank’s SME business segment achieved growth by implementing comprehensive strategies and
focusing on specific industry segments and customer preferences. Loans to SMEs increased by 11.16% to
Rs.237.95 billion as at March 31, 2012 from Rs.214.06 billion as at March 31, 2011. As at September 30, 2012,
total loans to SMEs was Rs.236.28 billion. The SME segment continued its focus on increasing fee income
through non-fund based advances.
The Bank continues to pursue a two-pronged strategy of deepening existing relationships and widening its
customer base. To further increase the amount of loans and advances made to SMEs across the country, 32 SME
cells have been set-up at key locations.
Agriculture
The RBI requires the Bank to lend 18% of its adjusted net bank credit of the previous year to the agricultural
sector. In light of future business prospects in the Indian agricultural and related sectors, the Bank has identified
agricultural lending as an area of potential growth.
The Bank offers a diverse range of schematic products targeted at its agricultural loan customers, including
the “Kisan Credit Card” (credit facilities extended to farmers for various requirements), loans against pledges of
gold ornaments for farmers, a comprehensive scheme for warehouse receipt financing and cattle loans. As at
September 30, 2012, the agriculture business of the Bank is operated through 732 branches attached to
90 agricultural clusters, which facilitate the Bank’s growth in agricultural lending. In order to provide a strategic
focus to agricultural lending, the Bank has adopted a cluster-centric approach for agricultural lending in areas
where the Bank believes agriculture is very intensive and where a potential market exists for the Bank’s
agriculture finance. This initiative also aims to help the Bank in scaling up the proposed regulatory requirement
of increasing lending to small and marginal farmers. In addition, the Bank has established relationships with
various companies and cooperatives in the plantation, poultry and seed sectors to meet their project financing and
working capital requirements.
The Bank’s strategy in agricultural lending is based on a comprehensive view of the agricultural value
chain, a focus on diversification and partnerships with other companies in the agricultural sector, micro finance
and other rural institutions and non-governmental organizations (“NGOs”) that have close links to the
agricultural sector. The Bank has also devised a separate risk evaluation model for agricultural loans with an
objective to measure and mitigate the risk involved in financing this sector.
There has been considerable improvement in the rural infrastructure in select geographies in India in recent
years. The Bank’s agricultural financing initiatives are largely focused on regions where the need for credit has
consequently increased. The Bank intends to develop its agricultural finance business by:
• offering a comprehensive range of products to individual farmers in select geographies covered by an
adequate number of rural branches;
• offering suitable products to various members in the supply chain in the agriculture business (such as
warehouses and cold storage units); and
• leveraging the Bank’s technology platform to distribute its products and services conveniently and costeffectively in rural areas.
As at March 31, 2012, the Bank’s outstanding loan portfolio in the agricultural sector was Rs.173.40 billion
as against from Rs.173.20 billion as at March 31, 2011. As at September 30, 2012, the outstanding loan portfolio
in the agricultural sector amounted to Rs.121.53 billion.
Financial Inclusion
The Bank regards financial inclusion not merely as a corporate social responsibility initiative, nor a
regulation-driven measure, but as an important business opportunity that lies untapped in the rural and untapped
portions of the urban market. As at September 30, 2012, the Bank opened more than 4.8 million “No-Frills”
accounts in over 8,070 villages through a network of 15 Business Correspondents and nearly 9,618 customer
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service points. The Bank believes it has a strong presence in the “electronic benefit transfer” space and has
covered approximately 7,852 villages across 30 districts and 10 states to date with approximately 4.3 million
beneficiaries. The Bank’s financial inclusion efforts are not merely restricted to launching of financial inclusion
initiatives and sourcing basic No-Frills accounts, but to also promote good savings habits and enable customers
to obtain customized solutions for their financial needs. The Bank has sourced more than 50,000 micro-insurance
products (in both the life and non-life spaces) and has provided small value overdraft facilities to nearly
5,000 customers on their No-Frills accounts. The Bank also has a range of other customized products for this
customer segment such as different variants of Axis Uday No-Frills savings accounts. The Bank has also been
one of the first Indian banks to have tied-up with telecom companies in order to offer remittance led financial
inclusion services on a mobile platform.
Credit Selection Strategy and Pricing Policy
The credit selection strategy and pricing policy used in the SME and agriculture segment follow
substantially the same procedures as those used for the large and mid-corporate segment. See “— Large and
Mid-Corporate Banking — Credit Selection Strategy” and “— Large and Mid-Corporate Banking —
Pricing Policy”.
Priority Sector Lending
Commercial banks in India are required by the RBI to lend 40% of their adjusted net bank credit of the
previous year to specified sectors known as “priority sectors”, subject to certain exemptions permitted by the RBI
from time to time. Priority sector advances include loans to the SME and agriculture sector, microfinance loans
to sectors deemed “weaker” by the RBI, housing and education finance up to certain ceilings, lending for specific
infrastructure projects and investments in instruments issued by specified institutions. The Bank is required to
comply with the priority sector lending requirements. See “Selected Statistical Information — Directed Lending”.
A summary of the Bank’s priority sector lending position as at the last reporting Friday is as follows.
As at the last reporting Friday of March,
2010
2011
2012
(Rupees in millions)
Agricultural advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Micro & Small Enterprises(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other priority sector lending(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
105,367
72,987
119,368
141,489
113,582
157,930
177,115
151,308
172,096
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
297,722
413,001
500,519
(1) Pertains to SME business of the Bank.
(2) Includes indirect financing to the agriculture sector in excess of 4.50% of net bank credit.
As at September 30, 2012, the Bank had a portfolio of Rs.390.72 billion in priority sector lending, and the
Bank is endeavoring to achieve the RBI stipulated norm as of the current fiscal year.
For the year ended March 31, 2012, the SME and agriculture segment recorded fee income of
Rs.2.90 billion, an increase of 19.34% from Rs.2.43 billion in the year ended March 31, 2011. For the half year
ended September 30, 2012, the SME and agriculture segment recorded fee income of Rs.1.40 billion.
Retail Banking
The Bank’s retail strategy focuses on network expansion, product differentiation, customer segmentation,
sales effectiveness and provision of quality customer service. To access a larger segment of India’s population,
the Bank has developed a wide network of fully inter-connected retail branches, extension counters, ATMs, asset
sales centers, an internet banking channel, a call center and mobile banking. The Bank’s branches distribute
liability accounts, debit cards, travel cards and remittance cards, and have POS terminal machines and depository
services, and sell third party products such as mutual funds and savings bonds issued by the Government. The
Bank’s asset sales centers distribute retail credit products such as mortgage loans, personal loans, vehicle loans
and educational loans. The Bank is focused on providing each customer with its choice of channel for
transactions and products to meet its financial needs and quality service.
Retail Banking includes products and services in the following areas:
• Retail Liabilities
• Investment Products
• Consumer Lending
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Retail Liabilities
The Bank’s retail liability products include the following:
• Term Deposits. Tenure-based deposits of a fixed amount over a fixed term that accrue interest at a fixed
rate and may be withdrawn before maturity in accordance with applicable rates.
• Recurring Deposits. Tenure-based periodic deposits of a fixed amount over a fixed term that accrue
interest at a fixed rate and may be withdrawn before maturity in accordance with applicable rates by
paying penalties.
• Savings Bank Accounts. Demand deposits from retail customers are interest-bearing and offer a
withdrawal facility through cheque books and debit cards. While formerly set by the RBI, savings bank
deposit interest rates have been deregulated with effect since October 25, 2011. See “Supervision and
Regulation”.
In addition to the Bank’s conventional deposit products, it offers a variety of special value-added products
and services thereby increasing product offerings and providing greater convenience for customers. The Bank
believes it is one of the largest issuers of debit cards in India.
Adopting a customer-centric segmentation strategy, the Bank offers differentiated liability products to
various categories of customers depending on one or more factors such as age group, gender, income and
occupation. While “Axis Privee”, “Axis Wealth” and “Axis Bank Priority” services cater to high-net worth
individuals, the “Savings Bank Easy Account” serves as an entry-level product to customers. The Bank has also
launched savings bank products tailored for senior citizens, trusts and NGOs. The Bank’s payroll account scheme
offers customized products for the employees of armed services, corporations, Government and other public
sector entities. In order to maintain a continuous focus on these customer segments and to ensure quality product
management, the Bank has organized its retail banking division into two primary teams: the “channel team”,
which focuses on delivering high quality service to these customer segments, and the “retail product team”,
which manages all existing product and process management decisions.
The following provides a discussion of the products and services of the Bank’s retail liability business.
Prime Segment
The segment aims at offering prompt banking services with accessibility to the account through the Bank’s
network of 1,741 branches and extension counters, 10,297 ATMs, the internet, the Bank’s call center, a mobile
banking platform, debit cards with high withdrawal limits and its “AT PAR Chequebook” facility. This segment
offers customers products such as the “Easy Access Savings Account” (an entry level savings account), “Prime
Savings Account” (Rs.25,000 average quarterly balance requirement) and “Prime Plus Savings Account”
(Rs.100,000 average quarterly balance requirement). As at March 31, 2012, deposits under this segment
accounted for Rs.219.14 billion constituting 42.41% of the Bank’s total savings bank deposits. As at
September 30, 2012, deposits under the Prime segment increased to Rs.253.17 billion constituting 45.06% of the
Bank’s total savings bank deposits.
Savings Bank Account for Trusts and NGOs
The Bank also has a savings bank product for the trusts, societies and NGO segment. The product provides
banking solutions by leveraging the “Anywhere Banking” platform of the Bank, the AT PAR Chequebook
facility (which has no upper limit) and other value-added services. As at March 31, 2012, this segment accounted
for Rs.31.15 billion in deposits, constituting 6.03% of the total savings bank deposits of the Bank. As at
September 30, 2012, the segment accounted for Rs.33.99 billion in deposits, constituting 6.05% of the total
savings bank deposits of the Bank.
Payroll Account Scheme
To offer complete banking solutions to salaried employees, the Bank has introduced a comprehensive
payroll product consisting of differential privileges and offered on the basis of the net monthly salary of an
employee. It allows the employer to manage salaries across various centers, with the employee benefiting from
banking facilities including retail loans, a debit card and overdrafts, and privileges including concessional
average balance requirements. As at March 31, 2012, the payroll product portfolio had a total of
Rs.111.36 billion. The share of business as against the overall savings portfolio was 44.00% in terms of number
of accounts and 21.58% in terms of month end balances. As at September 30, 2012, the portfolio had a total of
Rs.120.76 billion. The share of business as against the overall savings portfolio was 36.75% in terms of number
of accounts and 21.72% in terms of month end balances.
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Encash 24 Account
The Bank’s Encash 24 account is a savings account linked to a time deposit product that offers the customer
the liquidity of a savings account as well as higher returns of a time deposit. This product provides weekly
automatic transfer of idle balances above a certain minimum amount from savings accounts to time deposits,
resulting in higher yields for the customer. Whenever there is a shortfall in the customer’s savings account,
deposits are automatically transferred from the time deposit account to meet the shortfall.
Axis Bank Priority
The “Priority” initiative targets the mass affluent customer segment and is structured to cater to their entire
relationship with the Bank with specific focus on banking and investment needs. Priority offers personalized
services, convenience, preferential pricing across various banking products and flexible eligibility criteria.
Priority benefits include access to a relationship team, a premium “Priority Platinum International Debit Card”
with unlimited and free usage at any Visa ATM and other discounts and offers along with complimentary airport
lounge access and home banking facilities. The service also includes investment advice across products such as
savings banks, fixed deposits, bonds and mutual funds based on the customer’s risk appetite. Customers also
benefit from lifestyle privileges such as invitations to art exhibitions, musical evenings and shows.
Investment Products
Life Insurance
The Bank has a bancassurance tie-up with a life insurance company for sales of life insurance products
through its branches. The tie-up is in the nature of a corporate agency model under which the Bank’s staff is
licensed and responsible for selling the life insurance products.
For the year ended March 31, 2012, the Bank earned fee income of Rs.2,586.20 million from its life
insurance business, which represented a growth of 94.07% from Rs.1,332.66 million in the year ended March 31,
2011. For the half year ended September 30, 2012, the Bank earned fee income of Rs.1,310.13 million from its
life insurance business,
The number of new policies entered into in the year ended March 31, 2012 was 149,708 with a total
premium collection of Rs.6.54 billion. The number of new policies entered into in the half year ended
September 30, 2012 was 73,914, with a total premium collection of Rs.3.06 billion.
General Insurance
The Bank offers general insurance through the Bank’s branch distribution network to its customers. The
Bank has a corporate agency relationship with a general insurance company. Apart from standard products, such
as motor or fire insurance products, the Bank also sells products such as health, personal accident, jewellery and
home insurance products. The Bank also sells exclusive co-branded products and products that are bundled with
the Bank’s asset products. All of these products are sold through the Bank’s branch network.
Fee income generated from the Bank’s general insurance business increased from Rs.230.4 million from the
year ended March 31, 2011 to Rs.313.3 million in the year ended March 31, 2012, which represented an increase
of 35.98%. The fee income for the half year ended September 30, 2012 was Rs.109.52 million.
Mutual Fund Sales
The Bank is one of the leading distributors of mutual funds in India. The Bank distributes mutual fund
products of all major asset management companies in India to its clients. The Bank recommends suitable
schemes to its clients based on the recommendations of its own in-house research team. Mutual fund products are
sold through the Bank’s branch distribution network based on client requirements. The Bank earns fee income in
the form of up-front retention remuneration on the sale of mutual funds and transaction charges on sale of mutual
fund products.
The Bank earned a fee income of Rs.576.52 million through the distribution of mutual fund products for the
year ended March 31, 2012, which was an increase of 31.82% from Rs.443.32 million for the year ended
March 31, 2011. For the half year ended September 30, 2012, the income from distribution of mutual fund
products was Rs.272.03 million. The launch of the perpetual systematic investment plan campaign during the
half year has enabled the Bank to collect 70,000 new systematic investment plan applications.
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The Bank won the “Best Mutual Fund Distributor of the Year 2010” award (Bank Distributor Category) and
was also adjudged “Growth Champion of the Year 2010” for highest Net Sales — Equity Funds in the recently
concluded Wealth Forum Advisor Award 2010.
Online Trading
The Bank offers online trading services in collaboration with ACL (formerly known as Axis Securities and
Sales Limited (which is a 100% subsidiary of the Bank)) under the name AxisDirect. Initially, AxisDirect was
available only for resident individuals with features to trade in equity and derivative markets. Within a span of
one and a half years, AxisDirect has added more product offerings, such as Equity SIP, mutual funds, investment
in products like NCDs and trading in ETFs, for its customers. The portal is now available for NRI customers as
well. As at September 30, 2012, approximately 225,000 online trading accounts were opened, out of which
approximately 150,000 accounts were opened as at March 31, 2012.
Demateralised Account (Demat Account)
The Bank is a registered depository participant (“DP”) of the National Securities Depositories Limited
(“NSDL”) and the Central Depository Services (India) Limited. The Bank began offering DP services in 1998
when it registered with NSDL. At present, the Bank offers DP services through more than 1,300 branches,
serving more than 0.3 million retail demat account holders.
The Bank earned fee income of Rs.117.40 million from Demat Accounts in the year ended March 31, 2012.
The fee income for the half year ended September 30, 2012 amounted to Rs.63.10 million.
Bullion Retail
Gold bars were introduced by the Bank in April 2007 and silver bars in March 2012. Both gold and silver
bars are sold to retail and corporate customers under the brand “Mohur” through its branches across the centers.
Gold bars are available in denominations ranging from 2 grams to 100 grams and silver bars in 100 gram
denomination only. Gold and Silver bars are imported from Switzerland and are of highest purity and comes with
assay certification. The Bank also sells one kilogram gold bricks to its customers.
With the rise in precious metal prices, gold and silver bars are being bought not just on festivals and special
occasions, but they have also become a popular avenue of investment for the Bank’s customers.
During the year ended March 31, 2012, the Bank sold 1,483.77 kilograms of gold worth Rs.4,122.95 million
through its branches and earned a commission income of Rs.228.01 million. For the half year ended
September 30, 2012, the Bank sold 783.52 kilograms of gold worth Rs.2,569.40 million and 358.40 kilograms of
silver worth Rs.20.66 million through its branches and earned a commission income of Rs.140.25 million for the
sale of both gold and silver.
Axis Wealth
Axis Wealth is a product offered to the affluent clients of the Bank. The Axis Wealth proposition offers an
end-to-end solution for all financial requirements of the clients across transaction banking requirements and
investment requirements. Under Axis Wealth, the Bank offers a comprehensive product suite backed by in-depth
research and a structured advisory process. The product is delivered through the Bank’s branch network.
The Axis Wealth segment had Rs.69.85 billion of client assets under advice and more than 16,000 clients as
at March 31, 2012. As at September 30, 2012, the portfolio had increased to Rs.81.21 billion of client assets
under advice and more than 20,000 clients.
Private Banking
The Bank launched private banking in the domestic market in September 2009 to comprehensively address
the banking, investment and business needs of customers. “Axis Bank Privée”, the Bank’s branded exclusive
private investment banking solution for entrepreneurs and wealthy families, focuses on addressing both the
personal and corporate advisory needs of customers by bringing solutions offered by various business groups
within the Bank under one integrated platform. The assets under advice of Axis Bank Privée as at March 31,
2012 totaled Rs.57.57 billion. The portfolio grew to Rs.72.64 billion as at September 30, 2012.
Consumer Lending
The growth of retail and consumer lending in India is a consequence of growing affluence and changing
consumer behavior. This growth is evidenced by the utilization of credit for consumer asset acquisition. The
Bank has identified this activity as one of its core growth areas. The Bank’s focused marketing approach, product
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innovation, risk management systems and competent back-office processes contribute to the strength of the
Bank’s retail lending strategy. The target markets identified for retail loans are salaried or self-employed
professionals and other self-employed individuals, HUFs, trusts, firms, private limited and public limited
companies.
The Bank offers a variety of retail credit products such as mortgage loans, automobile loans, commercial
vehicle loans, personal loans, education loans, credit cards, loans against time deposits and loans against
securities. The major components of the Bank’s retail asset portfolio are home and mortgage finance, personal
loans and automobile finance. As at March 31, 2012 and 2011 and September 30, 2012, the Bank’s net retail loan
portfolio was Rs.375.70 billion, Rs.277.59 billion and Rs.442.86 billion, respectively, constituting 22.13%,
19.49% and 25.73%, respectively, of the Bank’s net loan portfolio.
These loans are provided by the Bank directly through asset sales centers in metropolitan areas and major
cities of India and through branches in cities where the Bank does not have an asset sales center. The asset sales
centers serve as the focal point for marketing, distribution and servicing of retail loan products.
Retail Loan Portfolio by Category
The Bank’s retail loan portfolio consists of schematic and non-schematic loans. As at March 31, 2012, the
portfolio mainly consists of automobile loans (13%), mortgage loans (75%), personal loans (6%) and
non-schematic loans (credit cards, loans against deposits and loans against securities) (6%). The Bank’s retail
loan portfolio by product is set forth below.
As at
As at March 31,
September 30,
2010
2011
2012
2012
(Rupees in millions)
Product
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,730
30,847
50,400
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,190 189,079 281,991
Personal loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,788
38,004
21,295
Education loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
185
169
171
Consumer durable loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
2
2
56,188
330,539
29,279
226
2
Total schematic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,896 258,101 353,859
Non-schematic (including cards portfolio) . . . . . . . . . . . . . . . . . . . .
13,333
19,491
21,843
416,234
26,628
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
442,862
208,229
277,592
375,702
Home loans and automobile finance have been major contributors to the increase in the Bank’s retail loan
portfolio. The Bank’s retail loan portfolio also includes loans acquired through portfolio buy-outs.
The Bank’s home and mortgage finance business involves extending long-term secured housing and
commercial property loans to individuals and companies. Currently, these loans are being offered for the
purchase, construction and extension of residential and commercial premises. As at March 31, 2012, the Bank’s
total home and mortgage finance portfolio, which predominantly comprised floating rate loans, totaled Rs.281.99
billion, representing 75% of the Bank’s total retail asset portfolio. As at September 30, 2012, this portfolio
totaled Rs.330.54 billion, representing 75% of the Bank’s total retail asset portfolio. Automobile finance, which
includes financing four-wheelers and commercial vehicles, involves providing consumer credit for an average
period of three to five years to acquire a new or used vehicle. Automobile loans are secured by a lien on the
purchased asset. As at March 31, 2012, the Bank’s total automobile finance portfolio of Rs.50.40 billion
represented 13% of its total retail asset portfolio. As at September 30, 2012, automobile loan portfolio totaled
Rs.56.19 billion representing 13% of its total retail asset portfolio. The Bank has developed relationships with
several established NBFCs in India, providing both direct automobile finance (to individual borrowers) as well as
indirect automobile finance (portfolio buy-outs). Personal loans are unsecured loans provided to customers for
various purposes, such as medical expenses and social obligations, and are generally repayable over four years.
As at March 31, 2012, the Bank’s personal loan portfolio totaled Rs.21.29 billion, which represented 6% of its
total retail asset portfolio. As at September 30, 2012, the Bank’s personal loan portfolio totaled Rs.29.28 billion
representing 6% of its total retail asset portfolio.
Credit Evaluation: Retail Loans
All prospective borrowers are granted loans only if they pass the credit evaluation process. The Bank has
detailed product lending parameters and devised a credit-scoring sheet for all major products. For a loan to be
approved, a minimum cut-off score must be achieved by a borrower. This credit rating mechanism is periodically
updated and reviewed.
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Merchant acquiring
The Bank launched its merchant acquiring business in December 2003 and in nine years it has emerged as
one of the largest merchant acquirers in the country based on Bank-wise ATM/POS/CARD statistics as published
by the RBI of September 2012. Under its merchant acquiring business, the Bank focuses on strengthening its
relationship with its merchant partners to open up avenues of cross-selling the Bank’s transactional products. The
Bank has installed 208,164 terminals as at September 30, 2012. The Bank has processed more than 148 million
and 84 million card transactions amounting to Rs.352.87 billion and Rs.195.73 billion, respectively, during fiscal
2012 and the first half year ended September 30, 2012. The Bank generated total revenue of Rs.369.40 million in
fiscal 2012 and Rs.134.90 million in the half year ended September 30, 2012. Electronic data capture business
also contributed to 172,223 and 181,920 current accounts during the same period with cumulative daily average
balances of Rs.22.52 billion and Rs.24.82 billion, respectively. The Bank has launched a mobile POS solution
Swipeon, a phone based card acceptance service in July 2012. Swipeon includes a card reader attached to a
mobile phone which works as a POS terminal and customers are sent a receipt via SMS or email.
Other Products and Services
Other products and services offered by the retail banking segment include debit cards, meal cards, gift cards,
rewards cards, remittance cards, payroll cards, annuity cards (co-branded with LIC), credit cards, card acceptance
services and loans against gold.
Retail Banking — Fee Income
Fee income is generated from ATM interchange transactions, cards, safe deposit lockers, service charges on
deposit transactions, processing fees from retail loans as well as fees earned from third-party product sales. Fee
income from retail banking activities amounted to Rs.12,951.40 million in the year ended March 31, 2012, as
compared to Rs.9,772.63 million in the year ended March 31, 2011. For the half year ended September 30, 2012,
fee income from retail banking activities amounted to Rs.7,450.00 million.
International Retail
In order to have an integrated NRI strategy for the Bank to capture the remittances and NRI business and to
achieve a leadership position in the NRI segment in the key geographies of the Gulf Cooperation Council
(“GCC”), United States of America and Canada, the Bank’s NRI business has been re-organized in 2012 by
creating a new group called “International Retail”. International Retail provides businesses related to the NRI
segment with specific focus on Overseas Sales Channel, Retail Forex and Remittances and Overseas Retail (retail
businesses in countries like Hong Kong, Sri Lanka, etc., where the Bank has a presence).
Non-Resident Products and Services
The Bank offers a broad suite of banking and investment products to the Overseas Indian diaspora under the
umbrella brand “NRI Services”. The product suite ranges from basic products like demand and term deposits to
private banking solutions for discerning high net worth individuals.
Key products include Non-Resident (External) (“NRE”) and Ordinary Non-Resident (“NRO”) Savings and
Term Deposits, Foreign Currency Non-Resident (“FCNR”) (B) Fixed Deposits, Resident Foreign Currency
(“RFC”) Accounts for Returning NRIs and a host of investment products such as bullion, life and general
insurance, mutual funds and bonds as permitted by the regulator. The Bank also offers the facility of
loans/overdrafts to its NRI customers against their term deposits with the Bank.
The bank has 49 branches authorized to issue PIS permissions to NRI/PIO who want to trade in the Indian
secondary markets through a registered stock broker on a recognized exchange. The Bank also facilitates
payment/receipt of such bonafide transactions and computes the capital gains tax.
The Bank’s aggregate NRI Deposits (Savings and Term Deposits) was Rs.86.24 billion as at March 31,
2012 and increased to Rs.110.18 billion as at September 30, 2012.
Retail Remittances
The Bank provides multiple inward remittance solutions to customers based on the target customer profile
and the geography.
AxisRemit Online is the Bank’s online remittance platform which is available to customers in the United
States, the United Kingdom, Canada, Australia, Europe, Singapore, Hong Kong and the UAE. Customers can log
on to the platform and remit money from their overseas bank account to any bank account in India.
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AxisRemit Direct is the Bank’s Alliance management platform and is being offered to partner banks and
exchange houses in overseas locations. Banks and exchange houses can use this platform to route remittance
payments of their customers to any bank account in India. The Bank has tied up with 29 exchange houses in the
GCC region and with 24 partner banks overseas.
The Bank also offers its customers the facility to send SWIFT-enabled remittances from their overseas bank
accounts to their accounts with the Bank. The Bank facilitates these remittances in 14 currencies through its
Nostro accounts with overseas correspondent banks. Additionally, through these Nostro accounts, the Bank also
supports foreign currency cheque/draft clearing for its customers.
With the focused approach on retail remittances, a volume of U.S.$1,915 million has been processed by the
Bank during the six month period ended September 30, 2012.
Retail Forex
The products offered under the Retail Forex and Remittances include Travel Currency Cards, Inward and
Outward Wire Transfers, traveler’s cheques and currency notes.
The Bank believes it pioneered the introduction of its Travel Currency Card product in September 2003 and
has continued to maintain a market leading position in Travel Currency Cards with a sales volume of
U.S.$425 million in the half year ended September 30, 2012. Travel Currency Cards are offered in 11 currency
options.
While the foreign-currency denominated Travel Currency Cards focused on the outbound tourist segment,
the Bank has identified significant business potential in the inbound tourist segment of foreign nationals and
NRIs. Accordingly, the Bank secured the approval of the RBI and launched a rupee-denominated India Travel
Card to be offered to foreign nationals and NRIs in January 2011.
In addition to its Travel Cards portfolio, the Bank also offers foreign currency demand drafts and wire
transfer services to enable domestic accountholders to remit funds to overseas accounts. The Bank leverages its
associations with more than 200 global banks to enable delivery of outward remittance services. The Bank is also
an authorized seller of American Express Travelers Cheques and foreign currency notes which help the Bank
address the retail foreign exchange requirements of its retail customers.
With the focused approach on retail foreign exchange, a volume of U.S.$852 million has been processed by
the Bank as of September 30, 2012.
The Bank has won several awards for its branding, including CMO Asia Award for impactful retail design
and merchandizing in 2012, the second Most Trusted Private Sector Bank in India in the Brand Equity — Most
Trusted Brands Survey in 2012. In addition, the Bank was named one of the top 500 Banking Brands in the
World in a study conducted by Brand Finance in 2012.
Business Banking
The Bank focuses on procuring low cost funds by offering a range of current account products and
transactional banking solutions across all business segments such as corporates, institutions, central and state
governments and small and retail business customers. The Bank’s current account products provide flexibility to
its customers to choose from a range of products depending on their average balance requirements. In addition to
the traditional channel such as the Bank’s branches and ATMs, customers can access and conduct transactions
through the Bank’s internet banking platform. Customers can also access their account information through the
phone banking and mobile banking facilities offered by the Bank.
The Bank provides end-to-end cash management solutions by combining an efficient collections and
disbursements products, backed by state-of-the-art systems to ensure customized delivery. The Bank offers cash
management services such as collection, payment and remittance services with a focus on improving clients’
cash flows. In the cash management services business, the Bank focuses on offering customized services to its
customers to cater to specific corporate requirements and improve the existing product line to offer enhanced
features to the customers. These solutions leverage the Bank’s growing branch network and robust technology to
provide an ideal blend of structured monthly information systems and faster funds movement, so that customers
are able to enhance their fund management capabilities. Cash management products include local and remote
collections, local and remote payments through customer cheques and bulk demand drafts, electronic clearing
services, disbursement of dividend and interest and internet-based payment products along with a customized
management information system. The Bank is also focusing on host-to-host integration for both collections and
payments, such as IT integration between corporates and the Bank for seamless transactions and information
flow. The Bank provides comprehensive structured MIS reports on a daily or monthly basis or as required by
111
clients for better accounting and reporting. Cash management services is not only emerging as an important
source of fee income but is also contributing significantly towards mobilizing zero-cost funds and building strong
client relationships.
Under the custodial business segment, the Bank offers a full range of custodial services for primary and
secondary market operations involving debt, equity and money market instruments. The Bank also began
providing document verification activity for Axis AMC for the portfolio management services provided by them.
The Bank is approaching insurance companies, mutual funds, foreign corporate entities, foreign venture capital
investors and foreign institutional investors to further market these services.
The Bank has more than 1,700 branches spread across India and in addition offers services through
arrangements with reputed correspondent banks. These arrangements help to respond to increasing customer
demand and offer a broader distribution network. As a result of these correspondent banking relationships, cash
management services are provided at more than 3,100 locations in India, with a capability of extending the
network to other remote locations depending on need. The Bank also offers its services and network of 867 cash
management service locations to other private and foreign banks as a correspondent bank which ensures fasterrealization of funds. Its dedicated services desk, the Centralized Collection and Payment Hub, ensures that the
clients’ collection and payment activities are executed within minimum transit times thereby reducing interest
cost and improving clients’ liquidity.
Business Accounts Group
The Business Accounts Group has been constituted by the Bank to provide a focused approach for SME and
non-corporate clients. The group houses a Business Development Team, Product Development Team and
Custodial and Corporate Demat Business.
Corporate Accounts Group
The Corporate Accounts Group was constituted by the Bank to provide a more focused approach for large
and medium sized corporate clients, NBFCs and co-operative banks.
The Corporate Accounts Group’s primary focus is to offer end-to-end solutions to all the collections and
payment requirements for the businesses of the clients.
Government Business and Tax Collections
In July 2001, the Bank became the first Indian private sector bank to be authorized by the Government and
the RBI to collect taxes on behalf of the State of Andhra Pradesh on a pilot basis. In October 2003, the Bank’s
authorization was extended, permitting it to offer banking services to various Central Government ministries and
departments and other state governments and union territories, including collection of direct and indirect taxes on
behalf of the Government and state governments.
Currently, the Bank accepts income and other direct taxes and central excise and service taxes through its
authorized branches. The Bank also handles disbursement of civil service and defense pensions through its
authorized branches. Additionally, the Bank provides collection and payment services to four Central
Government Ministries/Departments and thirteen state Governments/Union Territories. The Bank also handles
the business of stamp duty collection through franking on behalf of four state Governments: Maharashtra,
Gujarat, Rajasthan and Goa. The Bank is associated with 12 state governments and other government
organizations for the disbursement of government benefits (wages) under the Mahatma Gandhi National Rural
Employment Guarantee Scheme and Social Security Pension by way of direct credit to the bank accounts of the
beneficiaries under the smart card based IT Enabled Financial Inclusion Model.
e-Governance Initiatives
Central and state Governments have undertaken e-Governance initiatives aimed at providing better citizen
services by setting up integrated citizen facilitation centers. The Bank is aggressively seeking to participate in
e-Governance initiatives. The Bank is presently associated with the e-Governance initiatives of six state and
union territories which are Andhra Pradesh (e-Seva), Karnataka (Bangalore One and Hubli-Dharwad One),
Chandigarh UT (Sampark), Chhattisgarh (CHOiCE), Uttar Pradesh (e-Suvidha) and Rajasthan (e-Mitra). The
Bank receives fee income on all state Government revenues collected at these citizen facilitation centers and also
earns income on non-interest bearing deposits in user department accounts opened by the Bank in connection
with these services.
Additionally, the Bank also provides e-Payment facilities for payment of direct and indirect taxes as well as
state taxes in Gujarat, Delhi, Chhattisgarh, Odisha, Tamil Nadu, Karnataka, Madhya Pradesh, Andhra Pradesh
and West Bengal through the internet for its customers, as part of the e-Governance initiatives of Central Board
112
of Direct Taxes and Central Board of Excise & Customs and the concerned state Governments, respectively. The
Bank has strengthened its association with e-Governance initiatives of state Governments by extending its
banking services for the G2B space with e-Procurement Projects of the Government of Karnataka, Gujarat,
Bihar, Odisha, Chhattisgarh and Punjab.
The Bank also seeks to participate in the e-Governance initiatives of various government departments (such
as railways and defense establishments) by offering a single window payment system at which the Bank
undertakes payments to suppliers, contractors and other vendors through multiple electronic channels like Direct
Credit (Transfer), National Electronic Fund Transfer and real time gross settlement (“RTGS”).
As at September 30, 2012, the current account balances with the Bank was Rs.393.50 billion compared to
Rs.353.54 billion as at September 30, 2011. For the half year ended September 30, 2012, the current accounts on
a daily average basis was Rs.278.68 billion compared to Rs.260.21 billion as at September 30, 2011. In line with
the Bank’s vision to provide complete financial solutions, there is a greater focus on acquisition of high value
current account customers in fiscal year 2013. The total number of current accounts with the Bank as at
September 30, 2012 was 1,211,407.
For the half year ended September 30, 2012, the average daily balance and fee earned from current accounts
availing cash management services (collections and payments) by the Bank was. Rs.62.94 billion and Rs.0.46
billion, respectively, for the half year ended September 30, 2012.
As at September 30, 2012, the Bank maintained assets worth Rs.124.51 billion across 24 institutional clients
under its custodial business. The Bank provides DP services to 3,395 corporate and broker clients as at March 31,
2012 as compared to 3,199 accounts as at March 31, 2011. The clients availing DP services as at September 30,
2012 was 3,490. The net income earned from the custodial services and corporate demat business during the
fiscal year ended March 31, 2012 was Rs.34.70 million. The net income earned from the custodial services and
corporate demat business during the half year ended September 30, 2012 was Rs.10.5 million. The clients using
custody services maintained an average balance of more than Rs.0.72 billion during the fiscal year ended
March 31, 2012 in the current accounts maintained by them. The average balance maintained during the half year
ended September 30, 2012 amounted to Rs.0.13 billion.
The total Government business turnover handled by the Bank for the year ended March 31, 2012 was
Rs.943.14 billion. The business turnover handled by the Bank for the half year ended September 30, 2012 was
Rs.429.99 billion. The RBI pays a fee for all Government businesses (collections and payments) handled as its
agent and the Bank has earned fee income of Rs.458.6 million for the year ended March 31, 2012 under
Government business. The fee income of for the half year ended September 30, 2012 was Rs.129.6 million.
Treasury
The Treasury manages the funding position of the Bank and also manages and maintains its regulatory
reserve requirements. As part of liquidity management, the department invests in sovereign and corporate debt
instruments, commercial paper, mutual funds and floating rate instruments. The department also undertakes
proprietary trading in equity, fixed income securities, foreign exchange, currency futures and options. Apart from
proprietary trading, the department also offers a wide range of treasury products and services to customers,
including derivative instruments such as forward contracts, interest rate swaps, currency swaps, foreign currency
options and remittances.
Funding and Balance Sheet Management
The Treasury manages short-term liquidity through short-term borrowings such as overnight inter-bank
borrowings, CBLO, repo, rediscounting bills and through other money market operations. The Bank raises
foreign currency borrowings from local banks and foreign counterparties. The Bank also raises retail foreign
currency deposits from NRIs at rates regulated by the RBI.
The table below describes the deposits position of the Bank as at specified dates.
2010
Savings bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As at March 31,
2011
2012
(Rupees in millions)
As at
September 30,
2012
338,618
321,677
752,707
408,503
369,171
1,114,704
516,679
397,541
1,286,823
561,888
393,496
1,400,807
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,413,002
1,892,378
2,201,043
2,356,191
113
The Treasury ensures day-to-day funding for branch operations and asset build-up. Since these CRR
balances earn no interest from the RBI, the funding desk also ensures that only optimal CRR balances are
maintained and that additional surpluses are deployed in the form of short-term investments in commercial paper,
CDs or debt schemes of mutual funds.
The Treasury measures and monitors the spreads of the Bank. Yields on assets and cost of funds are
monitored on an ongoing basis. Maturity profiles of new deposits are adjusted to ensure that the Bank reaches its
targeted spreads and that its liquidity profile remains comfortable.
The funding desk considers suitable hedging options for items on the balance sheet at appropriate times to
protect or increase the Bank’s spreads.
The table below provides details of the net interest income and net interest margin for the accounting
periods ended on specified dates.
For the year ended March 31,
2010
2011
2012
Net interest income (Rupees in millions) . . . . . . . . . . . . . . . . . . . . . . . . 50,044 65,630 80,178
Net interest margin (Percentage) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.75
3.65
3.59
For the halfyear ended
September 30,
2012
45,068
3.42
Trading Operations
The Treasury manages integrated trading operations in foreign exchange and domestic money markets. It is
responsible for maintaining regulatory reserves and using the trading portfolio to earn profits through exchange
income and capital gains.
The investment policy is designed to address the following:
• Compliance with regulatory requirements;
• Guidelines for taking exposure in various debt instruments; and
• Risk mitigation.
The Treasury maintains the RBI-mandated SLR requirements in the form of investments in Government
bonds and treasury bills. This portfolio is actively managed and churned and, depending on an internal view of
interest rates, surpluses are maintained in the trading book. The Treasury uses these surpluses to take advantage
of favorable movements in interest rates to book capital gains on the investment book. In accordance with RBI
guidelines, investments are categorized as “Held for Trading”, “Available for Sale” and “Held to Maturity”.
The size of the Bank’s equity portfolio is restricted by a ceiling imposed by the RBI on the capital market
exposure of banks to 40% of their net worth as at March 31 of the previous year. The Bank’s aggregate limit for
exposure to the capital markets for fiscal 2012 was Rs.72.73 billion (40% of its net worth as at March 31, 2011,
as adjusted for subsequent capital injection). The Bank’s exposure to the capital markets as at March 31, 2012
was Rs.47.47 billion. The Bank’s aggregate limit for exposure to the capital markets for fiscal year 2013 is
Rs.87.12 billion (40% of its net worth as at March 31, 2012 as adjusted for subsequent capital injection). The
Bank’s exposure to the capital markets as at September 30, 2012 was Rs.46.63 billion.
In general, the Bank pursues a strategy of active management of its equity portfolio to maximize its return
on investments. To ensure compliance with SEBI’s insider trading regulations (see “Indian Securities
Market — Insider Trading Regulations”), all dealings in equity investments in listed companies are
undertaken by the equity-trading desk, which is securely segregated from the Bank’s other business groups.
The Treasury also offers investment options to retail and institutional investors and servicing support
through all branches of the Bank. In this connection, the Bank facilitates the holding of government securities.
Commission and trading profits are earned through these transactions.
114
The table below describes the gross book value of the investment portfolio as at the specified dates.
As at
As at March 31,
September 30,
2010
2011
2012
2012
(Rupees in millions)
Investment in government securities . . . . . . . . . . . . . . . . . . . . . . . . 342,062 442,075 584,880
Investment in shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,177
8,577
10,205
Investment in bonds and debentures . . . . . . . . . . . . . . . . . . . . . . . . . 138,285 180,730 231,985
Investment in commercial paper (CP) . . . . . . . . . . . . . . . . . . . . . . .
4,741
2,181
—
Investment in certificate of deposit (CD) . . . . . . . . . . . . . . . . . . . . .
22,716
31,025
44,272
Investment in venture capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,723
1,854
708
Investment in wholly owned subsidiary/joint venture . . . . . . . . . . .
1,536
2,596
3,496
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,780
47,377
53,212
625,424
8,774
249,613
3,978
40,939
414
3,310
58,961
Gross investments in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554,020 716,415 928,758
Investments outside India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,592
6,320
7,074
991,413
7,966
Gross investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,612
999,379
722,735
935,832
The table below presents figures relating to income earned from the following activities during specified
periods
For the halfyear ended
For the year ended March 31, September 30,
2010
2011
2012
2012
(Rupees in millions)
Interest earned on government securities . . . . . . . . . . . . . . . . . . . . . . . . 19,845 28,189 38,937
Interest earned on debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,034 13,492 20,868
Interest earned from investments in CP/CD . . . . . . . . . . . . . . . . . . . . . .
132
790 1,364
Dividends from investments in units of mutual funds . . . . . . . . . . . . . .
—
—
360
Dividends from investments in shares . . . . . . . . . . . . . . . . . . . . . . . . . .
137
156
126
Net gain from sale of government securities . . . . . . . . . . . . . . . . . . . . . 3,024
63
535
Net gain from sale of debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,118
2,388
308
Net gain from sale of equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,047
151
(318)
Net gain from sale of CP/CD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
55
127
Net gain from sale of units of mutual funds . . . . . . . . . . . . . . . . . . . . . .
1,249
1,006
82
22,696
11,909
913
341
93
(324)
956
197
194
—
The table below presents the maturity profile of the gross book value of government securities at the
specified dates
2010
Maturity Buckets
Gross
Book
Value
% to
total
As at March 31,
2011
2012
Gross
Gross
Book
% to
Book
% to
Value
total
Value
total
(Rupees in millions, except percentage)
As at September 30,
2012
Gross
Book
% to
Value
total
1 year . . . . . . . . . . . . . . . . .
1-3 years . . . . . . . . . . . . . . .
3-5 years . . . . . . . . . . . . . . .
5 years . . . . . . . . . . . . . . . .
55,838
13,962
73,412
198,850
16.33% 17,699
4.08% 51,606
21.46% 91,445
58.13% 281,325
4.00% 72,629
11.67% 75,144
20.69% 91,602
63.64% 345,505
12.41% 65,584
12.85% 91,261
15.66% 95,211
59.07% 373,368
10.49%
14.59%
15.22%
59.70%
Total . . . . . . . . . . . . . . . . .
342,062
100.00% 442,075
100.00% 584,880
100.00% 625,424
100.00%
115
Set out below are breakdowns of the Bank’s gross book value of its corporate bond portfolio by maturity
profile and ratings distribution
2010
Maturity Buckets
Gross
Book
Value
% to
total
1 year . . . . . . . . . . . . . . . . . .
1-3 years . . . . . . . . . . . . . . . .
3-5 years . . . . . . . . . . . . . . . .
5 years . . . . . . . . . . . . . . . . .
10,766
66,333
25,008
36,178
7.79%
47.97%
18.08%
26.16%
Total . . . . . . . . . . . . . . . . . . .
138,285
As at March 31,
2011
2012
Gross
Gross
% to
% to
Book
Book
total
total
Value
Value
(Rupees in millions, except percentage)
22,665
67,503
55,722
34,840
100.00% 180,730
2010
Rating Distribution
Gross
Book
Value
% to
total
AAA . . . . . . . . . . . . . . . . . . . .
AA+ . . . . . . . . . . . . . . . . . . . .
AA . . . . . . . . . . . . . . . . . . . . .
AA- . . . . . . . . . . . . . . . . . . . . .
A+ . . . . . . . . . . . . . . . . . . . . . .
A .......................
A- . . . . . . . . . . . . . . . . . . . . . .
B+ . . . . . . . . . . . . . . . . . . . . . .
B .......................
BB . . . . . . . . . . . . . . . . . . . . . .
BB- . . . . . . . . . . . . . . . . . . . . .
BBB+ . . . . . . . . . . . . . . . . . . .
BBB . . . . . . . . . . . . . . . . . . . .
BBB- . . . . . . . . . . . . . . . . . . . .
C .......................
D .......................
Unrated . . . . . . . . . . . . . . . . . .
65,490
9,232
15,359
9,368
20,597
6,482
1,083
—
—
123
—
3,610
6,250
—
—
552
139
47.35%
6.68%
11.11%
6.77%
14.90%
4.69%
0.78%
—
—
0.09%
—
2.61%
4.52%
—
—
0.40%
0.10%
Total . . . . . . . . . . . . . . . . . . . .
138,285
12.54%
37.35%
30.83%
19.28%
41,816
83,016
41,602
65,551
100.00% 231,985
18.03%
35.79%
17.93%
28.25%
53,024
86,019
32,581
77,989
21.24%
34.46%
13.05%
31.25%
100.00% 249,613
100.00%
As at March 31,
2011
2012
Gross
Gross
Book
% to
Book
% to
Value
total
Value
total
(Rupees in millions, except percentage)
75,505
11,162
24,757
19,618
33,335
12,588
10
—
425
—
—
275
2,500
—
219
278
58
100.00% 180,730
41.78%
6.18%
13.70%
10.85%
18.44%
6.97%
0.01%
—
0.24%
—
—
0.15%
1.38%
—
0.12%
0.15%
0.03%
99,682
14,052
29,374
19,633
29,749
33,023
1,670
2,250
—
1,200
297
188
200
—
220
—
449
100.00%231,985
As at September 30,
2012
Gross
% to
Book
total
Value
42.97%
6.06%
12.66%
8.46%
12.82%
14.23%
0.72%
0.97%
—
0.52%
0.13%
0.08%
0.09%
—
0.09%
—
0.19%
As at September 30,
2012
Gross
Book
% to
Value
total
95,077
28,710
26,307
20,703
33,909
28,118
2,109
—
1,060
—
304
217
10,190
—
—
2,460
449
38.09%
11.50%
10.54%
8.29%
13.59%
11.26%
0.85%
—
0.42%
—
0.12%
0.09%
4.08%
—
—
0.99%
0.18%
100.00% 249,613
100.00%
Foreign Exchange and Derivatives
The trading desk deals in several major currencies and manages the Bank’s exposure through foreign
exchange and money market instruments and derivatives within the guidelines and limits stipulated by the RBI
and management. Appropriate internal limits for counterparty and currency exposure are in place. The Bank is a
market maker in the spot and forward exchange markets, swaps and options.
The Bank offers both off-the-shelf and specifically structured products to its customers to meet funding and
risk management requirements in foreign currencies.
The Bank offers forward contracts to customers to hedge against exchange risk on foreign currency
receivables and payables, usually up to one year. The Bank also acts as market maker in interest rate and
currency swaps for proprietary trading and customer hedging. Commission and exchange income is earned from
such transactions. As at March 31, 2012, the Bank had Rs.2,009.25 billion in outstanding forward contracts and
Rs.1,883.03 billion in outstanding derivatives contracts. As at September 30, 2012, the Bank had
Rs.2,773.93 billion in outstanding forward contracts and Rs.2,311.96 billion in outstanding derivatives contracts.
Foreign exchange and derivative trading income has increased year on year. Profits increased from
Rs.5,636.05 million in the year ended March 31, 2011 to Rs.6,739.67 million in the year ended March 31, 2012.
Profits were Rs.3,016.80 million during the half year ended September 30, 2012.
116
Global Financial Institutions Division (“GFID”)
The GFID under the Treasury consists of the following two sub-groups:
• Financial Institutions Relations; and
• International Trade and Bank Risk.
Financial Institutions Relations undertakes the responsibility of establishing new relationships with financial
institutions and growing the existing relationships in India and in countries around the world. Regular visits are
made by relationship managers to various countries in order to maintain and explore new relationships.
International Trade and Bank Risk is entrusted with the dual responsibility of managing allocation of
exposure for counterparty banks and is responsible for managing the Bank’s correspondent banking relationships
and developing inter-bank trade and loan products for revenue generation. At present, the Bank, including its
overseas offices, has nostro accounts in 14 different currencies. In addition, the Bank has active trade
relationships with a number of major banks in different locations globally.
GFID has been instrumental in facilitating the trade flows of customers through its correspondent banks.
The Bank arranges international guarantees and confirmation of letters of credit (“LCs”) at competitive prices.
Buyers’ credit, inter-bank loans and LC financing is also available to meet the funding requirements of
customers. GFID operations seek to increase reciprocal revenue generation from the Bank’s correspondents by
way of fee income through export LC advice, confirmations and issuing domestic guarantees against counter
guarantees of foreign banks. Income generated from the Bank’s correspondent banking business in India
increased from Rs.1,153.93 million in the year ended March 31, 2011 to Rs.1,366.80 million in the year ended
March 31, 2012. Income generated from the Bank’s correspondent banking business in India was
Rs.711.84 million in the half-year ended September 30, 2012.
With the operations of the Bank’s overseas branches in Singapore, Hong Kong, Colombo and DIFC, the
Bank has generated additional revenue by way of re-issuance, risk participations and reimbursements and other
correspondent banking fees. GFID intends to expand the scope of trade operations through the Bank’s overseas
branches by projecting these branches as correspondent banks to Indian and international banks which do not
have presence in Singapore, Hong Kong, Colombo or Dubai.
Customer Trade and Forex Group
This division of Treasury is responsible for managing customer foreign exchange business. The division
serves as a one-point contact on foreign exchange matters for the Bank’s branches with the RBI and other
regulatory agencies.
The Bank’s network of 200 authorized B-category branches spread across 26 circles has resulted in it being
one of the largest banks with respect to foreign exchange business. A circle is an administrative unit that controls
a cluster of branches.
A dedicated team of Treasury Relationship Managers exclusively serve the trade relationships from the
large corporate, mid-corporate and SME segments across India.
The derivative team provides a variety of hedging solutions from simple exchange and interest rate contracts
to derivative structures, including options and swaps to all clients.
Apart from the traditional credit linked trade products, such as export financing, import LCs and foreign
bank guarantees, the collection business is a significant contributor of customer foreign exchange income.
Debt Syndication
The major activities carried out in this area are:
• placement and syndication in the form of Rupee term loans, external commercial borrowings and foreign
currency loans;
• assessing client debt profiles and funding requirements; and
• advising on suitable instruments and structure, including cost reduction measures, pricing and timing of
taking the instrument to market.
The Bank has developed strong relationships with other banks, financial institutions, mutual funds and
provident funds, among others. The Bank is active in the domestic debt market and syndicated approximately
Rs.231.59 billion domestically and approximately U.S.$3.45 billion in the international market during the year
ended March 31, 2012. During the half-year ended September 30, 2012, the Bank syndicated approximately
Rs.109.11 billion domestically and approximately U.S.$1.02 billion in the international market. The Bank
continued to maintain its leadership position in arranging and placement of domestic corporate bonds. During the
117
calendar year 2012, the Bank arranged Rs.450.50 billion worth of bonds. The Bank was ranked the number one
debt arranger by Bloomberg League Table for calendar year ended on December 31, 2012. As per Prime
Database the Bank was ranked as number one debt arranger for the six months period ended on September 30,
2012. The Bank received following awards namely — The Deal maker of the year in rupee bonds 2012 by
Business World, Best Domestic Bond House in India by IFR Asia and Best Domestic Bond House in India by
Asset Magazine.
While the Bank continues to handle the debt syndication activities described above, the investment banking
activities relating to equity capital markets business, mergers and acquisitions and private equity advisory are
now conducted by the Bank’s wholly-owned subsidiary, ACL. See “— Subsidiaries”
Delivery Channels
The Bank distributes its products and services through various access points ranging from traditional bank
branches to ATMs, call centers for telephone banking, mobile banking and the internet. The Bank’s channel
migration effort is aimed at reducing costs while enhancing customer satisfaction levels by providing customers
access to their accounts at all times.
Branch Network
As at September 30, 2012, the Bank had a network of 1,732 branches, 281 service branches and central
processing centers, nine extension counters and 10,297 ATMs covering 1,113 centers across India. The Bank
undertakes a detailed study of the demographic factors of an area to assess its business potential before setting up
a branch. Branch premises are generally leased. Back-office operations are centralized at a central processing
unit in Mumbai, allowing the Bank’s branch network to focus on business acquisition and expanding customer
relationships.
The Bank finalizes its Branch Expansion Plan based on the norms and guidelines laid down by the RBI. The
RBI grants necessary authorizations for setting up the branches in Tier 1 population category centers after
assessing the Bank’s plan for opening of branches in Tiers 2 to 6 population category centers and also the Bank’s
contribution under financial inclusion and better customer service.
The state-wise distribution of the Bank’s branches as at December 31, 2012 is set forth below:
Jammu & Kashmir
6
Chandigarh
9
Delhi
94
Himachal
Pradesh
Punjab 5
Uarkhand
120
11
Haryana
Meghalaya
4
70
Rajasthan
82
Uar Pradesh
108
Sikkim
3
Bihar
39
Arunachal
Pradesh
1
Assam
32
Nagaland
6
Manipur
Tripura
Jharkhand
4
West
Gujarat
5
25
Mizoram
Madhya Pradesh
Bengal
142
1
76
Chasgarh
136
37
Orissa
Daman &
61
Diu
Maharashtra
2 Dadra &
237
Nagar
Haveli
Andhra
1
Pradesh
125
Goa
7
Andaman and
Karnataka
Nicobar Islands
106
3
Pondicherry
Tamilnadu
2
170
Kerala
48
The following table sets forth the number of the Bank’s branches in India, classified by category, as at
September 30, 2012.
Number of
Branches
Percentage of
Total
Metro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Urban . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Semi-urban . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
487
514
545
186
28.12
29.68
31.46
10.74
Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,732
100.00
(1) This excludes 281 service branches and central processing centers which conduct non-customer interface support
activities.
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Overseas Operations
India’s growing integration with the global economy has given rise to opportunities to leverage the Bank’s
strengths in overseas markets. In order to participate in the growing trade and investment flows between India
and other major financial centers of Asia, the Bank has established branches at Singapore, Hong Kong, DIFC and
Colombo and representative offices at Shanghai, DIFC and Abu Dhabi. The total assets at the Bank’s overseas
branches amounted to Rs.320.39 billion, which constituted 10.59% of the Bank’s total assets as at September 30,
2012.
The Bank has established a subsidiary in the United Kingdom called Axis U.K. Limited (“Axis U.K.”) with
the main purpose of filing an application with the FSA for a banking license in the United Kingdom and for the
creation of the necessary infrastructure for the subsidiary to commence banking business. As at September 30,
2012, the subsidiary had not yet commenced operations.
ATMs
The Bank has one of the largest ATM networks among private sector banks, with 10,297 ATMs installed as
at September 30, 2012. The Bank believes it was among the first banks to use the concept of ATM deployment in
the country by Independent ATM Deployers with a total deployment of approximately 6,588 ATMs as at
September 30, 2012. Also, to optimize the performance of its existing network, the Bank has outsourced the
maintenance and management of the bank-owned ATMs to managed service providers.
The Bank has deployed these ATMs across the country, with approximately 79% of the ATMs located in
offsite locations in and around commercial areas, markets, residential and corporate locations, railway and metro
stations, airports, petrol pumps, etc. Almost all major cards are accepted at the Bank’s ATMs. In view of the
diversity of regional languages used in various parts of India, the Bank’s ATMs offer multilingual screens in
12 languages. In addition to basic ATM services, the Bank offers various other value-added services through its
ATMs, such as fund transfer, mobile recharging, bill payments, insurance payments and mutual fund investment.
Internet Banking Services
The Bank offers internet banking services to its customers through its website. A complete range of online
services are offered to customers, including online, real-time access to their accounts, information on fixed
deposits, online fund transfer to accounts of the Bank as well as other banks, bill payments to
over 180 merchants, credit card bill payment and placement of requests for demand drafts and cheque books. In
addition, the Bank offers an online direct debit facility to customers for purchase of products and services
through a host of online merchants in the e-commerce space. The Bank has also launched Instant Money
Transfer, a payment service wherein beneficiaries can withdraw money without using a card. As at
September 30, 2012, over 3.5 million of the Bank’s customers were registered for internet banking facilities.
Mobile Banking
The mobile banking channel has fast emerged as an extremely convenient option for the Bank’s customers
for information on their accounts, transferring funds and payments. SMS banking, a short message service
(“SMS”) based transaction alert system, has provided an additional level of security to the Bank’s customers, as
customers are alerted by SMS of any activity in their account above a threshold limit. In addition, customers can
request their balance or details of the last three transactions through their registered mobile phones via SMS. The
Bank has also enabled transactional banking through mobile phones through “Axis Mobile”. Customers can now
use their account with the Bank to make bill payments, transfer funds, recharge their prepaid mobile phones, log
requests for cheque books, stop cheques and change PINs via mobile phone. Customers can also make payments
to merchants by using their mobile phones. The Bank believes it was the first Indian bank to offer merchant
payments on a mobile platform. Further, the Bank has been amongst the pioneers in launching remittance
services like InterBank Mobile Payment Service for account to account transfers and merchant payments.
SMS banking has become the second most frequently used alternative delivery channel of the Bank. The
total number of subscribers as at September 30, 2012 was approximately 7.9 million for SMS alerts and
approximately 0.25 million for Axis Mobile.
Online Bill Payment
The Bank has also entered into arrangements with several telecommunication companies, utility providers,
insurance companies, internet shopping portals and various merchant groups, in addition to aggregators, to
enable online payment of bills for its internet banking customers and credit card customers. The Bank generates
revenue from these services either by a per-transaction fee or a variable fee based on the value of the transaction.
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Phone Banking Center
The Bank has an outbound phone banking center manned by trained personnel which caters to all customers.
Sales Channel
The Bank employs a frontline sales force for its liability products. The sales force, which sells a basket of
liability products, currently contributes approximately 77% of total deposits from new acquisitions and
approximately 90% of the total number of account acquisitions of the Bank and is a critical resource in the
Bank’s aggressive customer acquisition strategy. This sales force comprised 7,900 employees as at
September 30, 2012 and operates on a performance-based remuneration package. Members of the sales channel
are based at all branches and extension counters, and their performance is monitored at both the circle level, as
well as the Bank’s corporate office levels.
Operations
The Bank’s business model separates production and distribution functions within the Bank, with
transaction processing and customer databases (production technology) becoming increasingly centralized and
product sales and customer handling (the distribution technology) being the primary function at the branches.
The separation of functions has helped reduce transaction costs as well as to help ensure smoothness in
operations and increase productivity. Operational processes were constantly refined during the year from the
perspective of implementation of best practices, risk identification and containment. Operational instructions
were revisited on a continual basis and efforts were made to minimize risks at the branches.
Retail Banking Operations
Retail Banking Operations (“RBO”) provides seamless services to retail customers while ensuring secure
and compliant systems for risk containment and regulatory compliance. The Bank continued to strengthen its
oversight function through centralized monitoring of the working of the branches in respect of KYC, AML and
other regulatory compliance, management of cash and currency, clearing operations and internal housing
keeping, with the objective of ensuring compliance with risk guidelines and delivering operational efficiency and
customer service. To ensure enhanced customer service and better handling of cash and currency, the Bank has
installed note sorting machines at several branches, besides opening and operating the Currency Chests of the
RBI at select major cities. The Bank has implemented the Clean Note Policy of the RBI across all branches of the
Bank. The Bank has been appointed as the Primary Clearing House at certain places.
Further, with a view to having increased oversight of the branch operations of the Bank and to entail better
controls, the RBO structure has been created in each of the circles (“circle RBOs”), to have a closer working
relationship with the branches. These 26 circle RBOs constantly support the branches, and are considered “first
ports of call” to oversee complete branch operations on a day to day basis. The circle RBOs are strong enablers
for all functions and businesses that operate in the branch.
Apart from the general monitoring, the oversight is done mainly through conducting structured visits of the
branches where the branch operations are evaluated on a pre-defined risk weighted parameters, the aggregate
score of which indicates the effectiveness of the operations at each of the branches.
Wholesale Banking Operations
The Wholesale Banking Operations is responsible for providing best in class services to non-retail
customers of the Bank through four vertical operations: Corporate Banking Operations, Treasury Operations,
Trade and Forex Operations, and Centralized Collection and Payment Hub.
Corporate Banking Operations
The Corporate Banking Operations (“CBO”) Department within the Bank is responsible for monitoring the
accounts of large and mid-corporate, SME, agri-corporate and micro-finance institution customers while ensuring
compliance with regulatory guidelines and the systems and procedures of the Bank in the conduct of credit
operations.
The CBO Department controls the credit operations of the Bank through its eight corporate banking
branches, located at Chennai, Kolkata, Pune, New Delhi, Bangalore, Ahmedabad, Hyderabad and Mumbai,
56 mini credit management centers and two corporate credit operations hubs. These branches, centers and hubs
have a standardized skill pool to efficiently monitor and control advances under the large and mid-corporate,
SME and agriculture and micro-finance institution customer segments. Facilitation centers have been set up at
select branches to provide prompt customer service in co-ordination with the corporate banking branches. The
Bank has mapped nearly its entire branch network through this arrangement.
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The Ministry of Textiles has appointed the Bank as a “nodal bank” for granting eligibility approvals under
the Technology Upgradation Fund Scheme (“TUFS”). TUFS is a Government programme intended to provide
incentives for the modernisation of the Indian textiles industry though subsidised lending. A TUFS Cell has been
set up within the CBO Department to handle the eligibility process and subsidy claims under the scheme. The
cell also handles other subsidy schemes such as subsidies granted by the Ministry of Food Processing Industry.
Trade and Foreign Exchange Operations
The Bank has separated its foreign exchange business and foreign exchange operations to reduce operational
risk, to enforce strict compliance with regulatory and internal guidelines and to provide better customer service.
The foreign exchange business team handles sales of foreign exchange products and sources foreign exchange
business for the Bank, and the foreign exchange operations team handles processing of the foreign exchange
transactions.
The Trade and Foreign Exchange Operations Unit has been created to supervise and control the foreign
exchange operations of the Bank. The unit provides trade finance and retail foreign exchange services to
corporates, “Full Fledged Money Changers” (as licensed by the RBI) and individuals through 200 B-Category
branches and state of the art centralized knowledge processing centers called “Trade Finance Centers” located in
Mumbai and Hyderabad. The operations are mainly located in Mumbai, with Hyderabad supporting operations
for redundancy and business continuation purposes. The Trade and Forex Operations Unit is responsible for
ensuring compliance of regulatory and internal guidelines and the processing of foreign exchange transactions of
the Bank including the trade finance operations of the Hong Kong Branch as per the service level agreements
with the business department.
The Bank’s payment service is one of the key differentiating services for all customer segments. In order to
enhance speed, scalability and straight through processing by technological advancement, the Bank has launched
a plan of introducing an Enterprise Payment Hub to handle all types of payment services through a centralized
and channel agnostic processing engine.
Central Processing Unit
As part of the Bank’s initiative to leverage technology, redefine business processes and deliver quality
products to its customers with efficiency and cost effectiveness, the Bank set up a central processing unit in
Mumbai in December 2001. The central processing unit opens all liability accounts, retail advance accounts, loan
accounts and trade finance accounts for all of the branches. It also produces welcome kits, delivers cheque books,
debit cards, term deposit receipts and statements of account. A separate team verifies whether the accounts are
being opened only in compliance with the Bank’s KYC procedures, and turnaround time is strictly monitored.
Data Center and Disaster Recovery System
The Bank’s primary data center is located at Chembur in Mumbai and is currently in the process of moving
its operations to a hosted data center located in Mahape, Navi Mumbai. The hosted data center in Mahape is a tier
IV data center and considered to be in compliance with the highest benchmarking standards applicable to data
centers with built-in redundancy composed of multiple active power and cooling distribution paths and is fault
tolerant, providing 99.995% availability. The Bank has a hot site disaster recovery data center in Bangalore that
is connected to the main data center. It has the capability to host critical banking applications in the event of a
disaster at the primary site. The Bank regularly conducts data recovery drills for critical applications to ensure
continuity of its operations in the event of disaster.
Operational Controls and Procedures in Branches
An operational framework has been established to ensure that transactions are handled with precision,
regularity and efficiency in a risk mitigating manner. Operational instruction manuals at the branches detail
procedures for processing various banking transactions. Amendments to these manuals are implemented through
circulars sent to all branches. Any revision in the processes or operating instructions is reviewed by a committee
comprising representatives from all functional and business groups. Adherence to these instructions is
continuously monitored by both onsite and offsite inspection mechanisms, complemented by an independent
internal audit process.
The Bank places great importance on computer security and has adopted an information security policy.
Most of the Bank’s IT assets, including critical servers are hosted in a centralized data center, which are subject
to appropriate physical and logical access controls. The core banking software used by the Bank is based on the
“maker and checker” concept, whereby no transaction can be initiated and authorized by a single individual. The
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power to authorize transactions is exercised by officials in accordance with a scheme of delegation of powers,
and monetary limits are incorporated as authorization levels in the software, which validates each payment.
Operational Controls and Procedures for Internet Banking
Internet banking services are provided only in respect of existing customer accounts for which the necessary
identity documentation has been obtained prior to providing the customer with a user identity and password to
access his account online. The Bank has in place a two-factor authentication system for interbanking transactions
called “NetSecure”.
Operational Controls and Procedures in Regional and Central Processing Centers
The Bank has centralized transaction processing on a nationwide basis for certain transactions at its central
processing centers. These transactions include the issue of ATM cards and personal identification number
mailers, reconciliation of ATM transactions, mailing of passwords to internet banking customers, depositing
post-dated cheques received from retail loan customers and processing of credit/debit card transactions routed
through the Bank’s channels. At select centers, the handling of clearing operations and the management of ATMs
have also been centralized for better control.
Risk Management
The Bank is exposed to various risks that are an integral part of any banking business, with the major risks
being credit risk, market risk and operational risk. The Bank places emphasis on risk management measures to
ensure that there is an appropriate balance between risk and return and has implemented comprehensive policies
and procedures to identify, monitor and manage risk throughout the Bank. The risk management strategy of the
Bank is based on understanding the various types of risks, disciplined risk assessment and continuous
monitoring.
Objectives and Policies
The Bank’s risk management processes are guided by well-defined policies appropriate for various risk
categories, independent risk oversight and periodic monitoring through the sub-committees of the Board of
Directors. The Board sets the overall risk appetite and philosophy for the Bank. The Committee of Directors, the
Risk Management Committee and the Audit Committee of the Board, which are sub-committees of the Board,
review various aspects of risk arising from the businesses of the Bank. Various senior management committees
operate within the broad policy framework as illustrated below.
Board of Directors
Board level
committees
Credit Committees
& Investment
Committees
Committee of
Directors
ALCO
Risk Management
Committee of the Board
Operational Risk
Management
Committee
Credit Risk
Management
Committee
Audit Committee
Committee of
Executives
The Bank has implemented policies relating to management of credit risk, market risk, operational risk and
asset-liability both for its domestic and overseas operations. The overseas policies are formulated based on the
perceived risk of the relevant economies and the Bank’s risk appetite.
The Bank has formulated a comprehensive stress testing policy to measure the probable impact of adverse
stress scenarios on the Bank’s capital adequacy.
Structure and Organization
The Head of the Risk Department reports to the Executive Director (Corporate Center), and the Risk
Management Committee of the Board oversees the functioning of the Department. The Department has three
separate teams: one each for credit risk, market risk and operational risk. The head of each team reports to the
Chief Risk Officer.
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Credit Risk
Credit risk is the risk that a borrower or counterparty may fail to meet its obligations in accordance with
agreed terms, principally the failure to make required payments on loans or obligations due to the Bank. The
Bank is exposed to credit risk through lending and capital markets activities.
The goal of credit risk management is to maintain a healthy portfolio, and the Bank places emphasis on the
evaluation and containment of credit risk of each individual counterparty as well as careful analysis of portfolio
behavior.
Credit Risk Management Policy
The Bank’s credit risk management policy sets forth the roles and responsibilities of various departments
and parties, acceptable levels of risk, key processes and the reporting framework. The Board of Directors
establishes the parameters for risk appetite, which are defined quantitatively and qualitatively through a strategic
business plan as well as the corporate credit policy. Corporate credit is managed through risk assessment of
individual exposure at origination and through periodic post-disbursement review used to detect deterioration in
the credit risk profile of borrowers. Retail credit to individuals and small business is managed through definition
of product criteria, appropriate credit filters and subsequent portfolio monitoring.
Credit Rating System
The foundation of the Bank’s credit risk management rests on its internal credit rating system. The Bank has
adopted ratings-based single borrower exposure norms, delegation of powers and review frequency. The Bank
has developed rating tools specific to market segments such as large and mid-corporates, SME, financial
companies, microfinance companies and project finance to objectively assess underlying risk associated with
such exposures.
The credit rating system uses a combination of quantitative and qualitative inputs to arrive at a
“point-in-time” view of the risk profile of the counterparty. Each internal rating grade corresponds to a distinct
probability of default over one year. “Go/no-go” score cards are used for various SME schematic products and
retail agricultural sector schemes. Statistical application and behavioral scorecards have been developed for all
major retail portfolios.
The Bank takes into account cash margins, guarantees from the Government, state governments, banks and
corporations, exclusive mortgages of property and lease rental securitizations for the purpose of credit
enhancement.
Model validation is carried out periodically by objectively assessing the discriminatory power, calibration
accuracy and stability of the rating system.
Credit Approval and Related Processes
The guiding principles behind the credit approval process are as follows:
• KYC is a leading principle for all activities;
• The acceptability of credit exposure is primarily based on the sustainability and adequacy of a borrower’s
normal business operations and not based solely on the availability of security.
The Bank has established various levels of credit approval based on the size and rating of the exposure. The
Bank has put in place the following hierarchical committee structure (listed from least to greatest) for credit
approval and review:
• Retail Agriculture Credit Committee;
• Central Agriculture Business Credit Committee;
• Regional Credit Committee;
• Central Office Credit Committee;
• Committee of Executives;
• Senior Management Committee; and
• Committee of Directors, a sub-committee of the Board.
All management level sanctioning committees require the mandatory presence of a representative from the
Risk Department for quorum.
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Review and Monitoring
All credit exposures, once approved, are monitored and reviewed periodically against approved limits.
Borrowers with lower credit rating are subject to more frequent review. Credit audit involves independent review
of credit risk assessment, compliance with internal policies of the Bank and with the regulatory framework,
compliance with the approval terms at disbursement, adherence to post-approval processes and procedures and
effectiveness of loan administration. Customers with emerging credit problems are identified early and classified
accordingly. Remedial action is initiated promptly to minimize the potential loss to the Bank
Concentration Risk
The Bank manages concentration risk by means of appropriate structural limits and single borrower
exposure limits based on credit-worthiness. Credit concentration in the Banks’ portfolios is monitored for the
following:
• Large exposure to individual clients or groups: the Bank has single borrower exposure ceilings based on
the internal rating of the borrower as well as group-wide borrowing limits which are continuously tracked
and monitored;
• Geographic concentration to sensitive sectors;
• Residual maturity concentration of loans and advances;
• Concentration of unsecured loans to total loans and advances; and
• Concentration by industry: industry analysis plays an important part in assessing the concentration risk
within the loan portfolio. Industries are classified into various categories based on factors such as
demand-supply, input related risks, government policy stance towards the sector and financial strength of
the sector in general. Such categorization is used in determining the expansion strategy for the particular
industry.
Market Risk in the Trading Book
Market risk is the risk of loss to the Bank’s earnings and capital due to changes in the market level of
interest rates, price of securities, foreign exchange rates and equities, as well as the volatilities of those changes.
The Bank is exposed to market risk through its investment activities and trading activity, undertaken on behalf of
customers and on a proprietary basis. The Bank adopts a comprehensive approach to market risk management for
its trading, investment and asset/liability portfolios. For market risk management, the Bank has:
• Well laid policies and guidelines that are aligned with regulatory norms and developed according to the
experience gained by the Bank over time;
• Mechanism for periodic review of the market risk management policies;
• Process manuals which are updated regularly to incorporate best practices;
• Market risk identification mechanisms through elaborate mapping of the Bank’s main businesses for
various market risks;
• Statistical measures, such as Value at Risk (“VaR”), which are supplemented by stress tests, back-testing
and scenario analysis;
• Non-statistical measures, such as position limits, marked to market, gaps and sensitivities, price value of a
basis point (“PVBP”) and options greeks (risk management tools); and
• A customized management information system for timely market risk reporting to senior management
functionaries.
Risk limits such as position limits, stop-loss limits, alarm limits, gaps and sensitivities (duration, PVBP,
options greeks) are set up based on a number of criteria including regulatory guidelines, relevant market analysis,
business strategy, management experience and the Bank’s risk appetite. These limits are monitored on a daily
basis and the exceptions are put up to the Asset Liability Management Committee (“ALCO”) and the Risk
Management Committee of the Board. As a prudent market risk management measure, risk limits are reviewed at
least annually or more frequently, if deemed necessary, to align the limits with the Bank’s risk appetite, market
conditions and trading strategies.
The Bank uses the historical simulation method and its variants for computing VaR for its trading portfolio.
VaR is calculated at a 99% confidence level for a one-day holding period. The model assumes that risk factor
changes observed in the past are a good estimate of those likely to occur in the future and is, therefore, limited by
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the relevance of the historical data used. The Bank typically uses 250 days of historical data or one year of
relative changes in historical rates and prices. The method, however, does not make any assumption about the
nature or type of the loss distribution. The VaR models for different portfolios are back-tested at regular intervals
and the results are used to maintain and improve the efficacy of the model. The VaR is computed on a daily basis
for the trading portfolio and reported to the senior management of the Bank.
The VaR measure is supplemented by a series of stress tests and sensitivity analysis that estimates the likely
behavior of a portfolio under extreme but plausible conditions and its impact on earnings and capital. The Bank
undertakes stress tests for market risks for its trading book, interest rate swaps, foreign exchange open position
and gaps as well as for liquidity risk at the end of each quarter. The Bank is in the process of building its
capabilities to migrate to a more advanced approach — namely, the internal models approach — for assessment
of market risk capital.
For this purpose, system capabilities are being strengthened, newer processes are being introduced and
employee skills are being improved.
Concentration Risk
The Bank has allocated internal risk limits to avoid concentration risk, wherever relevant. For example, an
aggregate gap limit is allocated to various currencies and maturities as individual gap limits to monitor
concentrations. Similarly, stop-loss limits and duration limits have been set up for different categories within a
portfolio. Within the overall PV01 limit (impact of one basis point shift on the yield curve), a sub-limit is set up
which is not expected to be breached by trades linked to any individual benchmark.
Liquidity Risk
Liquidity risk is the current and prospective risk to earnings or capital arising from a bank’s inability to meet
its current or future obligations on the due date. Liquidity risk is two-dimensional: the liability dimension,
comprising the risk of being unable to fund a portfolio of assets at appropriate maturity, and the asset dimension,
comprising the risk of being unable to liquidate an asset in a timely manner at a reasonable price.
The goal of liquidity risk management is to meet all commitments on the due date and also be able to fund
new investment opportunities by raising sufficient funds in the form of increasing fresh liabilities or by
expeditious asset sell-off without incurring unacceptable losses, both under normal and adverse conditions. These
objectives are ensured by setting up policies, operational level committees, measurement tools and monitoring
and reporting mechanisms making effective use of IT systems for availability of quality data.
The Bank manages its liquidity on a static as well as dynamic basis using various tools such as gap analysis,
ratio analysis, dynamic liquidity statements and scenario analysis. The Bank’s asset liability management policy
defines the tolerance limits for its structural liquidity position. The liquidity policy for the Bank’s domestic
operations as well as for its overseas branches lays down the operational framework for prudent risk management
in the Bank. The liquidity profile of the Bank is analyzed on a static basis by tracking all cash inflows and
outflows in the maturity ladder based on the expected occurrence of cash flows. The liquidity profile of the Bank
is also estimated on a dynamic basis by considering the growth in deposits and loans, investment obligations, etc.
for a short-term period of three months. The Bank undertakes behavioral analysis of the non-maturity products
viz. savings and current deposits and cash credit/overdraft accounts on a periodic basis, to ascertain the volatility
of residual balances in those accounts. The renewal pattern and premature withdrawals of term deposits and
drawdown of un-availed credit limits are also captured through behavioral studies. The concentration of large
deposits is monitored on a periodic basis.
The Bank’s ability to meet its obligations and fund itself in a crisis scenario is critical and, accordingly,
liquidity stress tests are conducted under different scenarios at periodic intervals to assess the impact on liquidity
to withstand stressed conditions. The liquidity positions of overseas branches are managed in line with the
Bank’s internal policies and host country regulations. Such positions are also reviewed centrally by the Bank’s
ALCO along with domestic positions.
Counterparty Risk
The Bank has a counterparty risk management policy incorporating well-laid guidelines, processes and
measures for counterparty risk management. The policy includes separate counterparty rating models for
commercial banks, foreign banks and co-operative banks for determining maximum permissible limits for
counterparties. Counterparty limits are monitored daily, and internal triggers are put in place to guard against any
breach in limits. Credit exposures to issuers of bonds, advances, etc. are monitored separately under the
prudential norms for exposure to a single borrower as per the Bank’s corporate credit risk policy or investment
125
policy, as applicable. The counterparty exposure limits are reviewed at periodic intervals based on financials of
the counterparties, business need, past transaction experiences and market conditions. The Bank has also put in
place the “Suitability & Appropriateness” Policy and Loan Equivalent Risk Policy to evaluate counterparty risk
arising out of all customer derivatives contracts.
Country Risk
The Bank has a comprehensive country risk management policy, which uses a seven-category classification
for monitoring country risk, namely insignificant, low, moderate, high, very high, restricted and off-credit. The
rating exercise is undertaken on the basis of ratings published by Export Credit Guarantee Corporation of India
Limited and also by the international rating agency, Dun & Bradstreet. The country ratings are undertaken at
quarterly intervals or more frequently if the situation so warrants it; for example, a significant change in the
condition of a country results in a downgrade of its rating. Country-related alerts and updates are sent to the
business departments on a real time basis. Exposure to a country includes all credit-related lending, trading and
investment activities, whether cross border or locally funded. The Bank has established exposure limits for each
risk category as well as limits for countries where the Bank has its presence. These limits are monitored at
weekly intervals. In addition, exposures to high risk, very high risk, restricted and off-credit countries are
approved on a case-by-case basis by the Risk Department. As a proactive measure for country risk management,
the Risk Department issues a “rating watch” from time to time on the basis of country-specific developments and
provides relevant business departments with news and brief reviews of countries which have a very high
probability of a rating downgrade or where there have been adverse developments.
Risk Management Framework for Overseas Operations
The Bank has put in place separate risk management policies for its overseas branches in Singapore, Hong
Kong, DIFC and Colombo. These country-specific risk policies are based on the host country regulators’
guidelines and in line with the practices followed for the Indian operations. The asset liability management
policy and all the risk exposures for the overseas operations are monitored centrally at the central office.
Operational Risk
Strategies and Processes
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems,
or from external events. The operational risk management (“ORM”) framework, ORM policy, operational risk
loss data collection methodology, risk and control self-assessment framework, key risk indicator framework,
roles and responsibilities of ORM function have been approved by the Bank to ensure that operational risk within
the Bank is properly identified, assessed, monitored, controlled/mitigated and reported in a structured manner.
Based on the above framework/policy/methodologies, the Bank has initiated several measures to manage
operational risk. The Bank has put in place a hierarchical structure to effectively manage operational risk through
the formation of several internal committees, namely, the Operational Risk Management Committee (“ORMC”),
Product Management Committee (“PMC”), Change Management Committee, Outsourcing Committee, Software
Evaluation Committee and IT Security Committee. The Risk Department acts as the convenor of ORMC and
sub-ORMC and is a member in PMC, CMC, Outsourcing Committee, Software Evaluation Committee and IT
Security Committee.
The Bank has further enhanced its capability for effective management of operational risk with the
implementation of a software solution (OR Monitor) which creates a database of loss events experienced by the
different business lines of the Bank, identifies areas which manifest weak controls through a “risk and control
self assessment” and “key risk indicator” modules and, over a period, enables the Bank to adopt sophisticated
approaches for the computation of capital for operational risk.
Structure and Organization
The Risk Management Committee of the Board is the governing and overarching policy-making body in the
Bank’s risk management framework. The Risk Management Committee is supported by the ORMC, consisting
of senior management personnel, who are responsible for implementation of the ORM policies of the Bank. This
internal committee supervises effective monitoring of operational risk and the implementation of the softwaredriven framework for enhanced capability to manage operational risk. A sub-committee of the ORMC has been
constituted to assist the ORMC in discharging its functions by deliberating operational risk issues in detail and
reporting critical issues to the ORMC.
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Scope and Nature of Operational Risk Reporting and Measurement Systems
A systematic process for reporting risks, losses and non-compliance issues relating to operational risks has
been developed and implemented. The information gathered is being used to develop triggers to initiate
corrective actions to improve controls. All critical risks and potential loss events are reported to the Senior
Management/ORMC/Risk Management Committee as appropriate, for their direction and guidance.
Policies for Hedging and Mitigating Operational Risk
An ORM policy approved by the Risk Management Committee of the Board details the framework for
hedging and/or mitigating operational risk in the Bank. Business units put in place basic internal controls as
approved by the PMC to ensure appropriate controls in the operating environment throughout the Bank. As per
the policy, all new products are being vetted by the PMC to identify and assess potential operational risks
involved and suggest control measures to mitigate the risks. Each new product or service introduced is subject to
a risk review and signoff process wherein all relevant risks are identified and assessed by departments
independent of the business unit proposing the product. Similarly, any changes to existing products and processes
are vetted by the CMC. In addition to the above, business departments submit “action taken reports” to the PMC
for review after introduction of a product or implementation of policy. Products are also independently reviewed
by the Internal Audit Department of the Bank.
Interest Rate Risk in the Banking Book (“IRRBB”)
The IRRBB is managed according to the guidelines of the Bank’s asset liability management policy. The
Bank assesses its exposure to interest rate risk in the banking book at the end of each quarter considering a drop
in the market value of investments due to 200 bps change in interest rates. Calculation of IRRBB is based on a
present value perspective with cash flows discounted at zero coupon yields published by National Stock
Exchange (NSE) for domestic balance sheet and the curve generated using the U.S.$ LIBOR swap curve for
overseas balance sheet. Other currencies are taken in equivalent base currencies (INR for domestic book and
U.S.$ for overseas branches) as the Bank does not have material exposures to other currencies as a percentage of
the total balance sheet size. Cash flows are assumed to occur in the middle of the regulatory buckets.
Non-interest sensitive products like cash, capital, etc. are excluded from the computation. The Bank does not run
a position in interest rate options that might result in non-linear pay-off. Future interest cash flows from
outstanding balances are excluded from the analysis.
The Bank employs Earnings at Risk (“EaR”) measures to assess the sensitivity of its net interest income to
parallel movement of interest rates on the entire balance sheet. The results of the analysis are reported to the
senior management on a weekly basis.
Financial Crime Management Unit (“FCMU”)
Recognizing the need for a focus on monitoring and vigilance, the Bank has set up a FCMU within the Risk
department. This merger of the fraud surveillance, investigation and reporting functions helps to ensure optimum
utilization of resources within the Bank. The FCMU has four groups with the following responsibilities:
• Fraud risk management — Organize fraud investigations, fraud analysis and reporting, ascertaining staff
accountability, periodical reporting of developments, sharing of fraud related information with other
departments, trend analysis and pattern recognition on frauds and attempted frauds and proactively
upgrading system capabilities for fraud management.
• Continuous offsite monitoring — Generate and investigate transaction alerts, check KYC compliance of
customers.
• Anti-money laundering — Monitor alerts and reports generated by AMLOCK software, risk rating of
customers, reduplications.
• Offsite audit — Support the audit function with critical data inputs.
Compliance
The Compliance function of the Bank is responsible for monitoring and ensuring that operating and business
units comply with regulatory and internal guidelines. Its objective is the adoption of best practices and globally
accepted standards of corporate governance. The focal point of contact with the RBI and other regulatory entities,
the Compliance department periodically apprises both the Bank’s management as well as the Board of Directors
of the compliance status of the organization and changes in the regulatory environment.
127
Guidelines, notifications and directives issued by regulatory bodies during the year were disseminated
through the Bank to ensure that business and functional units operate within the compliance parameters set by the
regulators. The level of compliance is monitored through a Compliance Testing Programme. New products and
processes launched during the year are subjected to scrutiny to ensure that these did not violate any rules, laws
and standards. The Bank has recently embarked upon an Enterprise-wide Governance Risk and Compliance
Framework. This is an online tool, which addresses operational, compliance and financial reporting risks and
helps bring efficiency to processes and improvement in compliance levels. Significant aspects of the Bank’s
compliance culture are the Whistleblower Policy and zero tolerance for fraud, corruption and financial
irregularities.
Pursuant to the Prevention of Money Laundering Act, 2002, the Bank has implemented a policy on antimoney laundering controls. The policy has been approved by the Board of Directors and is being followed by
each of the Bank’s branches. The Bank’s KYC policy, which consists of customer identification procedures and
customer acceptance policies, forms the basis of the Bank’s anti-money laundering controls. Activities in
accounts are also monitored by a central team using a dedicated software for identification of suspicious
activities. In addition, transactions crossing a threshold amount of Rs.1.0 million are monitored with the help of
reports generated by the Bank’s data center. The money laundering reporting officer who is a senior Bank official
oversees the anti-money laundering activities and ensures compliance with the Bank’s policy.
Internal Audit Department
The Bank’s Internal Audit Department performs independent and objective evaluations of the adequacy and
effectiveness of the Bank’s internal controls to ensure that the operating and business units adhere to systems and
procedures as well as regulatory and legal requirements. The internal audit function aims to continuously
benchmark their standards against international best practices and procedures in the area of internal control
systems. It is also responsible for recommending quality enhancement measures in operational processes based
on audit findings. The Internal Audit Department has conformed to “Quality Management System” and its
internal processes have been certified ISO 9001:2008 compliant by Det Norske Veritas AS, Netherlands, an
international certifying agency.
The Bank’s Internal Audit Department undertakes a comprehensive risk-based audit of all branches, service
branches, corporate banking branches, credit processing centers and asset sales centers, mini credit management
centers, agriculture operation hubs, currency chests, ATM channel management cells, overseas branches and
Treasury and Treasury operations. Additionally, corporate office departments and verticals handling operations
such as the Centralized Accounts Payable Hub (“CAPHUB”), Trade Finance Centers, the Centralized Collection
and Payment Hub and the channel finance hub are also subject to internal audit. An annual audit plan is drawn up
on the basis of the risk profile of the units audited. The scope of a risk-based internal audit encompasses the
examination of adequacy and effectiveness of internal control systems as well as external compliance and the
evaluation of the risk residing at the audited units. The central office departments and overseas representative
offices of the Bank are also subjected to management audits. Approximately 61% of the Bank’s total business
and approximately 88% of total advances are subjected to concurrent audit. Audits on all information systems,
the business continuity center and all relevant applications at the central office are also conducted. The Internal
Audit Department has also developed an effective off-site surveillance system.
To ensure independence, the Internal Audit Department reports to the Audit Committee of the Board, which
oversees its performance and reviews the effectiveness of controls laid down by the Bank and compliance with
regulatory guidelines.
Competition
The Bank faces strong competition in all of its principal lines of business. The Bank’s primary competitors
are large public sector banks, other private sector banks, foreign banks and, in some product areas, development
financial institutions.
Large and Mid-Corporate Banking, SME and Agriculture
The Bank’s corporate banking products and services face competition from a number of banks and financial
institutions. Public sector banks, which pose major competition to the Bank, have a significant history of
operations. These competitors have, over time, built extensive branch networks, providing them with the
advantage of a low-cost deposit base, and enabling them to lend at competitive rates. In addition, the extensive
geographic reach of many of these institutions enables product delivery in remote parts of the country. The Bank
seeks to compete with these banks through faster response to customer requirements, quality of service, a fast
growing inter-connected branch network and technology-enabled delivery capabilities.
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Other private sector banks also compete in the corporate banking market on the basis of efficiency, service
delivery and technology. However, the Bank’s management believes that its product portfolio, credit selection
strategy, response time, service quality and the strength of its established relationships, provide it with a
competitive edge over these other private sector banks.
The Bank also faces competition from foreign banks, with foreign banks traditionally having been active in
providing trade finance, fee-based services and other short-term financing products to top-tier Indian
corporations. The Bank has established strong ties in trade finance, strong fee-based cash management services
and competes with foreign banks using its broader branch network in the country, innovative products and
competitive pricing.
Retail Banking
In retail banking, the Bank’s principal competitors are the large public sector banks, which have much larger
deposit bases and branch networks, as well as aggressive new private sector banks and foreign banks. The retail
deposit share of foreign banks in India is quite small in comparison to the public sector banks, and has also
declined in the last five years, which the Bank’s management attributes principally to competition from new
private sector banks. However, some foreign banks have a significant presence among NRIs and also compete for
non-branch-based products such as auto loans.
The Bank faces significant competition primarily from foreign banks in the debit card segment. In mutual
fund sales and other investment-related products, the Bank’s principal competitors are brokers, foreign banks and
new private sector banks.
Treasury
In its treasury advisory services for corporate clients, the Bank competes principally with foreign banks in
foreign exchange and derivatives, as well as public sector banks in the foreign exchange and money markets
business.
Employees
The Bank has built up a team of professionals comprising experts in risk management, credit analysis,
treasury, merchant banking, relationship management, retail products, marketing and IT, as well as general
banking professionals. As at March 31, 2012, the Bank had 31,738 employees, compared to 26,435 as at
March 31, 2011 and 21,640 as at March 31, 2010. As at September 30, 2012, the Bank had 35,819 employees,
18,052 of whom were professionally qualified in management, accounting, economics, banking, engineering, IT
or law.
Set forth below is a breakdown of the number of employees of the Bank between corporate headquarters,
corporate office verticals, circle offices and branches.
2010
As at March 31,
2011
2012
As at September 30,
2012
Corporate Headquarters . . . . . . . . . . . . . . . . . . . . .
Corporate Office Verticals . . . . . . . . . . . . . . . . . . .
Zonal Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Circle Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas Branches . . . . . . . . . . . . . . . . . . . . . . . . .
3,312
2,544
1,561
—(1) 3,451
5,498
2,987
—(1)
—(1)
(1)
—
781
982
15,246
19,555
23,579
95
104
118
1,649
5,786
—(1)
1,129
27,135
120
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,640
35,819
26,435
31,738
(1) The corporate office verticals and the circle office structure was implemented after March 31, 2010 and the zonal office
concept was discontinued in 2011. Employees attached to corporate office departments but posted in non-corporate
office locations are classified in the corporate office verticals category. A circle is an administrative unit that controls a
cluster of branches. There are currently 26 circles.
Training is an area of continuing focus for the Bank to ensure that its professionals are equipped to render
quality customer service and also be aware of the latest developments in their respective fields. The depth and
breadth of training is continually improved and refined in consultation with the business departments. Training
programmes are also devised and revised based on feedback from participants in the various programmes, circle
offices, business departments, Internal Audit, Risk and Compliance departments. While the induction, refresher
and orientation training covering functional inputs are conducted by the in-house faculty, sales-focused training,
behavioral training and trainings where specialized domain skills need to be are covered are conducted by
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specialists in the respective fields who are invited from outside the Bank. Some senior functionaries are also
nominated to external programmes that are conducted by management institutes and professional training
institutes for honing their skills and taking on newer challenges. Continuous training, the opportunity to work on
challenging tasks and job rotation are all a part of the Bank’s talent retention strategy.
To improve leadership capability within the organization, the Bank has teamed up with among the best
leadership trainers in the countries that it operates in. The intention is to reach out to the key position holders in
the Bank and to strengthen their potential. The Bank also runs a series of programmes titled the “Inspired
Leadership Programme” which focuses on the fundamentals of self and team leadership though a series of
in-house leadership workshops targeting the middle and top management.
Employee engagement is the key theme adopted by senior management and the human resources
department to ensure two-way communication across the Bank. The key communication platforms are
(a) quarterly messages from MD & CEO; (b) iAxis — intranet of the Bank; (c) Axis Ratna (an employee
appreciation and recognition platform) and CareerNext (an Internal Job posting site).
The Bank has a performance management system which helps in the alignment of the employees’ individual
performance with the Bank’s corporate objectives. This is done by adopting the Balanced Score Card
methodology which helps in attaining organization sustainability through strategic alignment and ownership at
all levels.
Employee compensation is structured in terms of fixed pay and variable pay. To create a sense of ownership
among the Bank employees and also to serve as a retention tool, employee stock option plans are granted to only
senior level employees. Variable pay and stock options are strongly contingent on performance and are designed
to encourage team effort. To drive a performance driven culture in the Bank, employees who deliver a
performance which either meets or exceeds expectations are entitled to earn an annual bonus.
Apart from the various components of compensation mentioned above, all Bank employees are entitled to
avail of various benefits in the form of loans at concessional rates of interest, company lease, company car
facility, etc. Retirement benefits by way of provident fund and gratuity payment are in line with statutory
requirements. Additionally, the Bank provides personal accident and health insurance coverage to its employees.
The Bank considers its relations with its employees to be cordial.
All compensation and benefits proposals are first referred to the HR and Remuneration Committee of the
Board which recommends them to the Board of Directors for approval.
None of the Bank’s employees belong to a trade union.
Information Technology
The Information Technology (“IT”) Department of the Bank manages all banking applications through a
central team having strong domain capabilities in banking, treasury, channels, payments and collections, along
with technical capabilities. The IT operations are managed through five main verticals, namely the IT
Infrastructure Group, Systems and Solution Group, Business Relations and Project Management Group, System
Architecture and Strategy Group and Information Security Group. The central IT team manages both domestic
and overseas operations.
The IT infrastructure of the Bank is centralized and operated from two data centers located in Mumbai and
Bangalore. The applications are delivered to the domestic and overseas branches and offices through a highly
redundant wide area network consisting of leased and multiprotocol label switching (“MPLS”) connectivity. The
core banking platforms support multi-branch, multi-currency and multi-general ledger accounting standards. The
treasury operations are integrated with the core banking applications.
The IT operations are divided between the production center in Mumbai and the disaster recovery (“DR”)
center in Bangalore. All applications and data of the critical banking applications supporting banking transactions
and customer services are replicated at the DR location on a real time basis. The DR location is connected
through a redundant wide-area network to the Mumbai data center, all branches and offices. Scheduled drills for
switching IT operations to the DR site are conducted at routine intervals to test DR readiness.
Technology risks in the Bank are periodically assessed and appropriate actions initiated wherever necessary
through a dedicated Information Security Group, with support from a managed security service from an external
security expert company. The Bank has well-defined information systems security policies drawn on the basis of
ISO standards, regulatory guidelines and industry best practices. All of the Bank’s systems and applications
undergo various security tests, such as vulnerability assessments and penetration tests and application security
tests before going into production. The Bank is in the final stages of the ISO 27001 certification process for its
data production center in Mumbai and its business continuity center in Bangalore.
130
Insurance
The Bank maintains its own insurance policies and coverage that it deems to be appropriate. The Bank’s
insurance policies include a banker’s indemnity insurance policy, which is a comprehensive insurance policy that
offers coverage for various forms of risk. Some of the items covered under this insurance policy include:
(a) money (cash and precious metals) on premises;
(b) money (cash and precious metals) in transit;
(c) cash in ATMs/dispensers owned by the Bank;
(d) losses from external/internal fraud;
(e) losses from bank card fraud.
In addition, the Bank also obtains insurance to cover its fixed assets and the liability of the directors, officers
and other key management members of the Bank and its subsidiaries. The Bank carries insurance coverage at
levels it believes are customary for a bank of its size and nature.
Properties
The Bank’s registered office is located at “TRISHUL”, Third Floor, Opposite Samartheshwar Temple, Near
Law Garden, Ellisbridge, Ahmedabad 380 006, Gujarat, India. The Bank’s corporate office is located at Axis
House, Wadia International Center, Pandurang Budhkar Marg, Worli, Mumbai 400 025, India. The Bank owns
the following properties:
(a) the building housing its corporate headquarters;
(b) part of a branch located on J M Road, Pune;
(c) the space occupied by its data center located in Corporate Park II, Chembur, Mumbai;
(d) the space occupied by its National Processing Center II located at Mind Space, near Sanskriti
Township, Hyderabad;
(e) the space occupied by its Business Continuity Center located at Electronic City, Phase II,
Bangalore; and
(f) one residential apartment in Jolly Maker III, Cuffe Parade, Mumbai.
The aggregate book value, as at September 30, 2012, of all the properties capitalized by the Bank, was
Rs.8,705.00 million.
Apart from the above properties, all other properties used by the Bank and its branches, offices and off-site
ATM centers are leased. As at September 30, 2012, the Bank had a domestic network of 1,732 branches,
281 service branch and central processing centers, nine extension counters and 10,297 ATMs spread across 1,113
centers in India. In addition, the Bank has four overseas branches in Singapore, Hong Kong, Colombo and DIFC
and three overseas representative offices in Shanghai, Dubai and Abu Dhabi.
Subsidiaries
The Bank has set up six subsidiaries, namely Axis Capital Limited (“ACL”), Axis Private Equity Limited
(“Axis PE”), Axis Trustee Services Limited (“Axis TS”), Axis Asset Management Company Limited (“Axis
AMC”), Axis Mutual Fund Trustee Limited (“Axis MFT”) and Axis U.K. Limited (“Axis UK”).
Axis Capital Limited (formerly Axis Securities and Sales Limited)
ACL was incorporated in India, as a wholly-owned subsidiary of the Bank, on December 6, 2005 and
received its certificate of commencement of business on May 2, 2006. The paid up capital of ACL as at
September 30, 2012 is Rs.1,450 million. ACL commenced its business operations in August 2006 with the
marketing of credit cards and retail loan products of the Bank. During fiscal 2007, ACL also began marketing
electronic data capturing (“EDC”) machines of the Bank to merchants and motor vehicle loans.
The primary objective of ACL is to market financial products with optimization of sales productivity,
minimization of costs along with bringing greater focus on process adherence, quality of acquisition and reducing
risk.
During the fiscal year 2010 ACL ventured into the business of retail broking which includes acquisition of
customers for opening the bank and demat accounts with Axis Bank Limited. For fiscal 2012, ACL reported a
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loss of Rs.89.25 million. At the end of fiscal 2012, ACL had 51 branch offices for sales across India with a staff
of 8,085 employees involved in the marketing and distribution of financial products of the Bank, providing retail
end support and support services for collection and recovery of dues from customers and in the business of retail
broking.
Demerger of Certain businesses of Enam Securities Private Limited (“ESPL”)
The Board of Directors of the Bank and ACL approved a proposal to acquire certain businesses (investment
banking, equity and debt capital markets, stock broking, initial public offering distribution and financing, etc.)
from ESPL subject to regulatory and other approvals.
The scheme contemplated the transfer of the stock-broking businesses of ESPL to the Bank with a
simultaneous transfer of these businesses to ACL. Subsequent to the receipt of approvals from the regulators
(RBI, SEBI, BSE, NSE) and the High Courts of Gujarat and Bombay, the demerger was concluded on
October 20, 2012.
In terms of the approved transaction structure, the acquired businesses of ESPL initially merged into the
Bank. The Bank simultaneously transferred the acquired businesses to ACL, its wholly-owned subsidiary, for
cash consideration. Subsequently, the subsidiaries of ESPL became subsidiaries of ACL on October 20, 2012 as
described below:
• Axis Securities Limited (100% holding by ACL)
• Enam Finance Private Limited (100% holding by ACL)
• Enam International Limited UAE (100% holding by ACL)
• Enam Securities Europe Limited (100% holding by ACL)
Axis Private Equity Limited (“Axis PE”)
Axis PE was incorporated in India as a wholly-owned subsidiary of the Bank on October 3, 2006 and
received its certificate of commencement of business on December 4, 2006. The paid up capital of Axis PE is
Rs.150 million. Axis PE has been formed primarily to manage equity investments and provide venture capital
support to businesses. Axis PE launched its first infrastructure fund and raised a total commitment of
Rs.6,000 million during fiscal year 2009. For fiscal year 2012, Axis PE reported a profit of Rs.8.49 million.
Axis Trustee Services Limited (“Axis TS”)
Axis TS was incorporated in India as a wholly-owned subsidiary of the Bank on May 16, 2008 and received
its certificate of commencement of business on September 30, 2008. During fiscal 2012, it reported a net profit of
Rs.107.20 million. The main objective of Axis TS is to carry on trusteeship activities such as debenture trustee,
security trustee, escrow agent and facility agent, among others.
Axis Asset Management Company Limited (“Axis AMC”)
Axis AMC was incorporated on January 13, 2009 as a wholly-owned subsidiary of the Bank and received its
certificate of commencement of business on March 4, 2009. The main objective of Axis AMC is to manage
mutual fund businesses.
In September 2012, the Bank entered into a strategic tie up with Schroders plc pursuant to which Schroder
Investment Management (Singapore) Limited (“SIMSL”), through its wholly-owned subsidiary, Schroder
Singapore Holdings Private Limited (“SSHPL”), both subsidiaries of Schroders plc, acquired 25% of the total
issued and paid up equity share capital plus one equity share in Axis AMC.
Axis AMC is approved by the SEBI to act as Investment Manager to Axis Mutual Fund. Axis Mutual Fund
is also registered with the SEBI. Axis AMC is also registered with the SEBI as a Portfolio Manager. For fiscal
2012, Axis AMC reported a loss of Rs.215.93 million.
Axis Mutual Fund Trustee Limited (“Axis MFT”)
Axis MFT was incorporated on January 2, 2009 and received its certificate of commencement of business
on March 4, 2009. Axis MFT is acting as a trustee to Axis Mutual Fund. The SEBI has, by way of its letter dated
September 4, 2009, granted registration to Axis Mutual Fund.
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In September 2012, the Bank entered into a strategic tie up with Schroders plc pursuant to which Schroder
Investment Management (Singapore) Limited (SIMSL) through its wholly owned subsidiary, Schroder Singapore
Holdings Private Limited (SSHPL), both subsidiaries of Schroders plc, acquired 25% of the total issued and paid
up equity share capital plus one equity share in Axis MFT.
Axis U.K. Limited (“Axis UK”)
On March 7, 2011, the Bank established Axis U.K., a subsidiary in the United Kingdom (the “U.K.”), for
the main purpose of filing an application with the FSA for a banking license in the U.K. and for the creation of
the necessary infrastructure for the subsidiary to commence banking business in the U.K. Upon receiving
permission from the RBI to establish a banking subsidiary in the U.K., an application was submitted to the FSA
in February 2011. An in-principle approval letter was received from the FSA on September 27, 2012 which
stipulated certain conditions for receipt of final approval. Axis U.K. has not yet commenced operations and the
Bank expects all conditions for final approval from the FSA will be satisfied during the current fiscal year.
Summary of the Financial Results of the Axis Bank Group
A summary of the financial results of the Axis Bank Group (consolidated) and its subsidiaries for fiscal
2012 is given below:
Axis Bank
Group
(consolidated)
ACL
Axis PE
2,854,165
274,821
42,198
1,249
1,646
(89)
200
132
9
Axis TS
Axis
MFT
Axis
AMC
Axis
U.K.
1
1
*
955
383
(216)
84
—
—
(Rs. in millions)
Total Assets . . . . . . . . . . . . . . . .
Total Income . . . . . . . . . . . . . . .
Profit/(Loss) after tax . . . . . . . . .
*
Figure less than Rs.1 million
133
274
199
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SUPERVISION AND REGULATION
The following description is a summary of certain laws and regulations in India, which are applicable to the
Bank. The regulations set out below may not be exhaustive, and are only intended to provide general information
to the investors and are neither designed nor intended to be a substitute for professional legal advice.
The main legislation governing commercial banks in India is the Banking Regulation Act. Other important
laws include the RBI Act and the Negotiable Instruments Act, 1881. Additionally, the RBI, from time to time,
issues guidelines to be followed by banks. Banking companies are also subject to the purview of the Companies
Act, to the extent applicable, and if such companies are listed on a stock exchange in India then various
regulations of the SEBI would additionally apply to such companies, including the Equity Listing Agreements.
Banking Regulations
Banking Regulation Act, 1949
Commercial banks in India are required to obtain a license from the RBI to carry on banking business in
India. Such license is granted to the bank subject to compliance of certain conditions including (i) that the bank
has the ability to pay its present and future depositors in full as their claims accrue; (ii) that the affairs of the bank
will not be or are not likely to be conducted in a manner detrimental to the interests of present or future
depositors; (iii) that the bank has adequate capital and earnings prospects; and (iv) that public interest will be
served if such license is granted to the bank. The RBI has the power to cancel the license if the bank fails to meet
the qualifications or if the bank ceases to carry on banking operations in India. Additionally, the RBI has issued
various reporting and record keeping requirements for such commercial banks. The appointment of the auditors
of the banks is subject to the approval of the RBI. The RBI can direct a special audit in the interest of the
depositors or in the public interest. It also sets out the provisions in relation to the loan granting activities of a
banking company. The Banking Regulation Act specifies the business activities in which a bank may engage.
Banks are prohibited from engaging in business activities other than the specified activities. No shareholder in a
bank can exercise voting rights on poll in excess of 10% of total voting rights of all the shareholders of the bank.
However, the RBI may increase this ceiling to 26% in a phased manner.
Further, the Banking Regulation Act, as amended, requires any person to seek prior approval of the RBI, to
acquire or agree to acquire, shares or voting rights of a bank, by himself or with persons acting in concert,
wherein such acquisition (taken together with shares or voting rights held by him or his relative or associate
enterprise or persons acting in concert with him) results in aggregate shareholding of such person to be 5% or
more of paid up capital of a bank or entitles him to exercise 5% or more of the voting rights in a bank. Further,
the RBI may, by passing an order, restrict any person holding more than 5% of the total voting rights of a bank
from exercising voting rights in excess of 5%, if such person is deemed to be not fit and proper by the RBI.
Further, the RBI requires the banks to create a reserve fund to which it must transfer not less than 20% of
the profits of each year before dividends. If there is an appropriation from this account, the bank is required to
report the same to the RBI within 21 days, explaining the circumstances leading to such appropriation.
Recent amendments also permit the RBI to establish a “Depositor Education and Awareness Fund”, which
will take over the deposit accounts which have not been claimed or operated for a period of 10 years or more.
The recent amendments also confer power on the RBI (in consultation with the central government) to
supersede the board of directors of a banking company for a period not exceeding a total period of 12 months, in
public interest or for preventing the affairs of the bank from being conducted in a manner detrimental to the
interest of the depositors or any banking company or for securing the proper management of any banking
company.
The RBI may impose penalties on banks and its employees in case of infringement of regulations under the
Banking Regulation Act. The penalty may be a fixed amount or may be related to the amount involved in any
contravention of the regulations. The penalty may also include imprisonment. The banks are also required to
disclose the penalty in their annual report.
Restrictions on Investments in a Single Company
A bank may hold shares in a subsidiary company in accordance with the provisions of the Banking
Regulation Act. Further the “Investments in subsidiaries and other companies — Guidelines”, issued by the RBI
on December 12, 2011 lay down the framework for banks’ investments in companies which are not subsidiaries.
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Regulatory Reporting and Examination Procedures
The RBI is empowered under the Banking Regulation Act to inspect a bank. The RBI monitors prudential
parameters at quarterly intervals. To this end and to enable off-site monitoring and surveillance by the RBI,
banks are required to report to the RBI on various aspects. The RBI also conducts periodical on-site inspections
on matters relating to the bank’s portfolio, risk management systems, internal controls, credit allocation and
regulatory compliance, at intervals ranging from one to three years. The RBI also conducts on-site supervision of
selected branches with respect to their general operations and foreign exchange related transactions.
Maintenance of Records
The Banking Regulation Act specifically requires banks to maintain books and records in a particular
manner and file the same with the Registrar of Companies on a periodic basis. The provisions for production of
documents and availability of records for inspection by shareholders as stipulated under the Companies Act and
the rules thereunder would apply to the Bank as in the case of any company. The “KYC / AML Guidelines”
framed by the RBI also provide for certain records to be maintained for a minimum period of ten years from the
cessation of relationship with the client.
Regulations Relating to the Opening of Branches
As per the “Master Circular on Branch Authorization” dated July 2, 2012, banks are required to obtain
licenses from the RBI to open or shift its branches. From September 2005 the process of giving authorization to
individual branches was replaced by a system of aggregated approvals on an annual basis. Permission of the RBI
is not required for installation of on-site ATMs. Further since June 2009 RBI has permitted installation of off-site
ATMs at centers identified by banks, without the need for permission from the RBI in each case. Further, new
private sector banks are required to ensure that at least 25% of their total branches are in semi-urban and rural
centers on an ongoing basis.
Capital adequacy requirements
As per the RBI “Master Circular on Prudential Norms on Capital Adequacy- Basel I framework”, the Bank
is required to maintain a minimum CRAR of 9%.
The total capital of a banking company is classified into Tier I capital and Tier II capital. Tier I capital, the
core capital, provides the most permanent and readily available support against unexpected losses. It comprises
paid up capital, reserves consisting of any statutory reserves and innovative perpetual debt instruments issued in
compliance with extant regulations issued by the RBI for inclusion in Tier I capital. Tier II capital includes
provision for standard assets, revaluation reserves, hybrid debt capital instruments (which combine certain
features of both equity and debt securities and are able to support losses on an ongoing basis without triggering
liquidation), and subordinated debt. Deductions permitted from Tier I capital are (a) Intangible assets and losses
in the current period and those brought forward from previous periods and (b) deferred tax asset. Further the
investments of a bank in the equity as well as non-equity capital instruments issued by a subsidiary, which are
reckoned towards its regulatory capital as per norms prescribed by the respective regulator, should be deducted at
50 per cent each, from Tier I and Tier II capital of the parent bank.
Further in May 2012, the RBI issued guidelines on the Basel III capital regulations. These guidelines would
become effective from April 1, 2013 in a phased manner. The Basel III capital ratios will be fully implemented
as on March 31, 2018. In January 2006, the RBI issued guidelines permitting banks to issue perpetual debt with a
call option after not less than 10 years, to be exercised with its prior approval, for inclusion in Tier I Capital up to
a maximum of 15% of total Tier I Capital as on March 31, of the previous financial year. The RBI also permitted
banks to issue debt instruments with a minimum maturity of 15 years and a call option after not less than
10 years, to be exercised with its prior approval, for inclusion in Tier II capital. In July 2006, the RBI issued
guidelines permitting the issuance of Tier I and Tier II debt instruments denominated in foreign currencies. In
October 2007, the RBI issued guidelines for issuance of certain type of preference shares as part of the regulatory
capital.
To further ensure compliance with the guidelines of Basel II, the RBI has set out compliance periods for
banks to transition into the Internal Ratings Based and Advanced Measurement Approach methods of risk
assessment. Under the RBI’s guidelines, banks were to submit their revised methodologies by April 1, 2012, with
the RBI set to approve these no later than March 31, 2014.
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Prudential norms on income recognition, asset classification and provisioning pertaining to advances
(“Prudential Norms”)
The RBI, pursuant to its “Master Circular on Prudential Norms on Income Recognition, Asset Classification
and Provisioning Pertaining to Advances” (“Prudential Norms”) issued on July 2, 2012, has classified NPAs as
(i) sub-standard assets; (ii) doubtful assets; and (iii) loss assets. These guidelines specify provisioning
requirements specific to the classification of the assets.
In July 2005, the RBI issued guidelines on sales and purchases of NPAs between banks, financial
institutions and NBFCs. These guidelines require that the board of directors of a bank must establish a policy for
purchases and sales of NPAs. An asset must have been classified as non-performing for at least two years by the
seller bank to be eligible for sale. In October 2007, the RBI issued guidelines regarding valuation of NPAs being
put up for sale. Further, the RBI has advised banks to maintain provisioning coverage ratio of at least 70%.
The RBI has also issued a separate set of prudential guidelines on restructuring of advances by banks in
relation to the norms/conditions, which must be fulfilled in order to maintain the category of the restructured
account as a ‘standard asset’. The earlier guidelines issued by the RBI on restructuring of advances specified that
“standard” advances should be re-classified as a “sub-standard” immediately on restructuring. Post August 2008
the RBI has issued a series of circulars on special regulatory treatment on restructuring of advances by banks.
The RBI has specified that during the pendency of the application for restructuring of the advance, the usual asset
classification norms continue to apply. However, as an incentive for quick implementation of the package, if the
approved package is implemented by the bank as per the specified time schedule (within 120 days from the date
of approval under the corporate debt restructuring (“CDR”) mechanism or within 90 days from the date of
receipt of application by the bank in cases other than those restructured under the CDR mechanism), the asset
classification status may be restored to the position which existed when the reference was made to the CDR cell
in respect of cases covered under the CDR mechanism or when the restructuring application was received by the
bank in non-CDR cases. This special regulatory treatment is not applicable to consumer and personal advances,
advances classified as capital market exposures and advances classified as commercial real estate exposures.
Corporate debt restructuring mechanism (“CDR system”)
The institutional mechanism for restructuring has been set up through establishment of the CDR system in
2001. It is a joint forum of all banks and financial institutions and operates as a non-judicial body. The CDR
system operates on the principle of super-majority amongst the participating banks and financial institutions for a
particular advance. The Bank has signed the inter-se agreement (amongst the banks and financial institutions)
and is accordingly a member of the CDR system. The Prudential Norms as mentioned above equally apply to the
accounts restructured under the CDR system.
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
(“SARFAESI Act”)
The SARFAESI Act provides for sale of financial assets by banks and financial institutions to asset
reconstruction companies. The Prudential Norms issued by the RBI describe the process to be followed for sales
of financial assets to asset reconstruction companies. The banks may not sell financial assets at a contingent price
with an agreement to bear a part of the shortfall on ultimate realization. However, banks may sell specific
financial assets with an agreement to share in any surplus realized by the asset reconstruction company in the
future. Consideration for the sale may be in the form of cash, bonds or debentures or security receipts or PTCs
issued by the asset reconstruction company or trusts set up by it to acquire the financial assets.
Priority sector lending
The RBI circular on Priority Sector Lending- Targets and Classification dated July 20, 2012 sets out the
broad policy in relation to priority sector lending. In accordance with this circular, the priority sectors for all
scheduled banks include (i) agriculture; (ii) micro and small enterprises (“MSE”); (iii) education; and
(iv) housing. While export credit is no longer a separate category under this circular, export credit for eligible
activities under agriculture and MSE will be reckoned for priority sector lending under respective categories.
Under the RBI guidelines, the priority sector lending targets are linked to adjusted net bank credit (net bank
credit plus investments made by banks in non-statutory liquidity bonds included in the HTM category and not
taking in account the recapitalization bonds floated by the Government) or credit equivalent amount of offbalance sheet exposure, whichever is higher, as on March 31 of the previous year.
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Export credit
As per the Master Circular on Export Credit issued on July 2, 2012, banks can offer export credit at interest
rates at or above the Base Rate. Pre-shipment and post-shipment export credit can be provided in both Indian
Rupees and foreign currencies. Banks are required to reach a level of outstanding export credit equivalent of 12%
of each bank’s adjusted net bank credit.
Exposure norms
As a prudent measure aimed at better risk management and avoidance of concentration of credit risk, the
RBI has prescribed credit exposure limits for banks and long-term lending institutions in respect of their lending
to individual borrowers and to all companies in a single group (or sponsor group). The RBI has prescribed
exposure ceiling for a single borrower as 15% of capital funds and group exposure limit as 40% of capital funds.
Relaxations are permitted in exceptional circumstances and lending to infrastructure sector. The total exposure to
a single NBFC has been limited to 10% of the bank’s capital funds while exposure to non-banking asset finance
company has been restricted to 15% of the bank’s capital funds. The limit may be increased to 15% and 20%,
respectively, provided that the excess exposure is on account of funds lent by the NBFC to the infrastructure
sector.
The aggregate exposure of a bank to the capital markets in all forms (both fund based and non-fund based)
should not exceed 40% of its net worth, on both standalone and consolidated basis as on March 31 of the
previous year.
Short-selling of Government securities
As per the “Master Circular on Prudential Norms for Classification, Valuation and Operation of Investment
Portfolio by Banks” dated July 2, 2012, banks and primary dealers are allowed to undertake short sale of
Government dated securities, subject to the short position being covered within a maximum period of three
months, including the day of trade. Further, such short positions shall be covered only by outright purchase of an
equivalent amount of the same security.
Regulations relating to Making Loans
The provisions of the Banking Regulation Act govern the making of loans by banks in India. The RBI issues
directions covering the loan activities of banks. Some of the major guidelines of the RBI, which are now in
effect, are as follows:
• The RBI has prescribed norms for banks lending to non-bank financial companies and the financing of
public sector disinvestment.
• RBI introduced the “Base Rate” in place of the BPLR with effect from July 1, 2010. For loans sanctioned
up to June 30, 2010, BPLR would be applicable. However, for those loans sanctioned up to June 30, 2010
which come up for renewal from July 1, 2010 onwards, Base Rate would be applicable.
• Section 21A of the Banking Regulation Act provides that the rate of interest charged by a bank shall not
be reopened by any court on the ground that the rate of interest charged by a bank is excessive. The
Banking Regulation Act provides for protection to banks for interest rates charged by them.
Regulations relating to interest rates on Rupee deposits held in domestic, Ordinary Non-Resident (“NRO”)
and Non-Resident (External) (“NRE”) accounts
As per the master circular on “Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident
(NRO) and Non-Resident (External) (NRE) Accounts”, dated July 2, 2012, the RBI has permitted banks to
independently determine their interest rates on savings and term deposits (minimum period of 7 days) under
domestic/NRO accounts. Banks are also free to determine interest rates for savings deposits and term deposits of
maturity of one year and above under NRE deposit accounts. However, interest rates offered by banks on NRO
and NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
Regulations relating to Know Your Customer (“KYC”) and anti-money laundering
The RBI issued a master circular on July 2, 2012 prescribing the guidelines for KYC and anti-money
laundering procedures. With effect from April 1, 2012, banks are not permitted to make payment of cheques/
drafts/pay orders/banker’s cheques bearing that date or any subsequent date, if they are presented beyond the
period of three months from the date of such instrument. Further, banks are required to frame their KYC policies
incorporating (i) customer acceptance policy, (ii) customer identification procedures (including the allotment of
unique customer identification code for existing customers by end-May 2013), (iii) monitoring of transactions
and (iv) risk management.
137
Regulations relating to maintenance of statutory reserves
A bank is required to maintain, on a daily basis, CRR, which is a specified percentage of its NDTL,
excluding interbank deposits, by way of a balance in a current account with the RBI. At present the required CRR
is 4.25%. The RBI does not pay any interest on CRR balances. The CRR has to be maintained on an average
basis for a fortnightly period and should not be below 70% of the required CRR on any day of the fortnight. The
RBI may impose penal interest at the rate of 3% above the bank rate on the amount by which the reserve falls
short of the CRR required to be maintained on a particular day and if the shortfall continues further the penal
interest charged shall be increased to a rate of 5% above the bank rate in respect of each subsequent day during
which the default continues.
In addition to the CRR, a bank is required to maintain SLR, a specified percentage of its NDTL by way of
liquid assets like cash, gold or approved unencumbered securities. The percentage of this liquidity ratio is fixed
by the RBI from time to time, pursuant to Section 24 of the Banking Regulation Act. At present, the RBI requires
banks to maintain SLR of 23%. Further, in December 2011, the RBI has permitted banks to avail funds from the
RBI on an overnight basis, under the Marginal Standing Facility, against their excess SLR holdings.
Additionally, they can also avail themselves of funds, on an overnight basis below the stipulated SLR, up to 1%
of their respective NDTL outstanding at the end of the second preceding fortnight.
Regulations relating to authorized dealers for foreign exchange and cross-border business transactions
The foreign exchange and cross border transactions undertaken by banks are subject to the provisions of the
Foreign Exchange Management Act. All branches should monitor all non-resident accounts to prevent money
laundering. The RBI master circular on External Commercial Borrowings and Trade Credits, dated July 2, 2012,
states that no financial intermediary, including banks, will be permitted to raise external commercial borrowings
or provide guarantees in favor of overseas lenders for external commercial borrowings.
The RBI master circular on risk management and interbank dealings, dated July 2, 2012, states that all
categories of overseas foreign currency borrowings of banks, including existing external commercial borrowings
and loans or overdrafts from their head office, overseas branches and correspondents and overdrafts in nostro
accounts (not adjusted within five days), shall not exceed 50% of their unimpaired Tier I capital or
U.S$ 10.00 million (or its equivalent), whichever is higher. Overseas borrowings for the purpose of financing
export credit, capital funds raised/augmented by the issue of innovative perpetual debt instruments and debt
capital instruments in foreign currency, subordinated debt placed by head offices of foreign banks with their
branches in India as Tier II capital and any other overseas borrowings with the specific approval of the RBI
would continue to be outside the limit of 50%.
Secrecy obligations
A bank’s obligations relating to maintaining secrecy arise out of Section 13 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (for public sector banks specifically) and common law
principles governing its relationship with its customers. Subject to certain exceptions, a bank cannot disclose any
information to third parties. Further, the RBI may, in the public interest, publish the information obtained from
the bank.
Ownership restrictions
In terms of the Consolidated FDI Policy effective from April 10, 2012 (the “FDI Policy”) and the RBI
Master Circular on Foreign Investment in India, effective from July 2, 2012, the total foreign ownership in a
private sector bank cannot exceed 74% (49% under the automatic route and beyond 49% and up to 74% under
the approval route) of the paid-up capital subject to guidelines for setting up branches or subsidiaries of foreign
banks issued by the RBI. Shares held by foreign institutional investors within this limit of 74% cannot exceed
49% of the paid-up capital of the bank. The RBI’s acknowledgement is required for the acquisition or transfer of
a bank’s shares, which will take the aggregate holding (both direct and indirect, beneficial or otherwise) of an
individual or a group to equivalent of 5% or more of its total paid up capital. Further, the Banking Regulation
Act, as amended, requires any person to seek prior approval of the RBI, to acquire or agree to acquire, shares or
voting rights of a bank, by himself or with persons acting in concert, wherein such acquisition (taken together
with shares or voting rights held by him or his relative or associate enterprise or persons acting in concert with
him) results in aggregate shareholding of such person to be 5% or more of paid up capital of a bank or entitles
him to exercise 5% or more of the voting rights in a bank. The RBI may grant acknowledgement for acquisition
or transfer of shares that takes the acquirer’s shareholding to 10% or more and up to 30% of a private sector
bank’s paid-up capital subject to consideration of various additional factors.
138
Guidelines for merger and amalgamation of private sector banks
The RBI issued guidelines in May 2005 on mergers and amalgamation of private sector banks. The
guidelines relate to: (i) an amalgamation of two banking companies; and (ii) an amalgamation of a NBFC with a
banking company. In the case of an amalgamation of two banking companies, the draft scheme of amalgamation
must be approved by the board and majority of the shareholders of each of the banking companies. Additionally,
such approved draft scheme must also be submitted to the RBI for sanction.
Where a NBFC is proposed to be amalgamated into a banking company, the banking company should obtain
the approval of the board and the RBI before it is submitted to the relevant high court for approval.
Special status of banks in India
The special status of banks is recognized under various statutes including the SICA, Recovery of Debts Due
to Banks and Financial Institutions Act, 1993, and the SARFAESI Act. As a bank, the Bank is entitled to certain
benefits under the provisions of these legislations.
The Banking Ombudsman Scheme, 2006
The Banking Ombudsman Scheme, 2006 provides the extent and scope of the authority and functions of the
Banking Ombudsman for redressal of grievances against deficiency in banking services, concerning loans and
advances and other specified matters. On February 3, 2009, the said scheme was amended to provide for revised
procedures for redressal of grievances by a complainant under the scheme.
Regulations governing International Operations
The Bank’s international operations are governed by regulations in the countries in which the Bank has a
presence.
Consolidated Supervision Guidelines
In financial year 2003, the RBI issued guidelines for consolidated accounting and consolidated supervision
for banks. These guidelines became effective on August 1, 2003. The principal features of these guidelines are:
• Consolidated financial statements: Banks are required to annually prepare consolidated financial
statements intended for public disclosure
• Consolidated prudential returns: Banks are required to submit to the RBI, at half yearly intervals,
consolidated prudential returns reporting their compliance with various prudential norms on a
consolidated basis, excluding insurance subsidiaries
Restrictions on payment of dividends
The guidelines on payment of dividends by banks issued by the RBI in 2004 shifted focus from the
“quantum of dividend” to “dividend payout ratio”. These guidelines have since been revised in 2005 and the
banks have been given general permission to declare dividends subject to compliance with certain norms.
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BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Directors and Senior Management Team
The Board of Directors is responsible for the management of the Bank’s business. The Bank’s Articles
provide that, unless otherwise agreed by the Bank, the number of Directors shall not be less than three or more
than 15. As at January 18, 2013, the Board of Directors consisted of 14 members. Under the terms of the Articles,
SUUTI, one of the Bank’s Promoters, has the right to nominate the Chairman and three Directors. SUUTI has
presently nominated the Chairman and two Directors to the Bank’s Board. In addition, LIC, one of the Bank’s
Promoters, has appointed one representative to the Board although the Articles do not confer any specific rights
to appoint Directors on LIC. None of the Bank’s Promoters is involved in the day-to-day affairs of the Bank.
The Banking Regulation Act requires that at least 51% of directors have specialized knowledge or practical
experience in one or more of the following areas: accounting, finance, agriculture and rural economy, banking,
cooperation, economics, law, small scale industry and any other matter RBI may specify. Among these directors,
not less than two are required to have specialized knowledge or practical experience in agriculture and rural
economy, cooperation or small scale industry. All of the Bank’s Directors are professionals with specialized
knowledge of one or more of the above areas. The Managing Director and CEO and the Whole-Time Directors of
the Bank are employed on a full-time basis. The appointment of full-time Directors requires the approval of the
RBI and the shareholders. The RBI has also prescribed “fit and proper” criteria to be considered when appointing
directors of banks. The Bank’s Directors are required to make declarations confirming their ongoing compliance
with such criteria. The Board of Directors has reviewed the declarations received from the Directors and
determined that all of the Bank’s Directors satisfy the fit and proper criteria.
Pursuant to the provisions of the Companies Act, at least two-thirds of the total number of Directors are
required to retire by rotation, with one-third of the total number of Directors retiring at each AGM. A retiring
Director is eligible for re-election. Pursuant to the provisions of the Banking Regulation Act, none of the
Directors other than full-time Directors may hold office continuously for a period of eight years.
None of the Bank’s Directors or officers of the rank of President and above holds 1% or more of the Bank’s
issued, subscribed and paid-up capital. No potential conflicts of interest exist between the duties of any of the
Bank’s Directors or senior management to the Bank and their private interests or other duties. As at January 18,
2013, the Board of Directors comprised:
Name
Dr. Adarsh Kishore . . . . . . . . . . . . . . . . .
Ms. Shikha Sharma . . . . . . . . . . . . . . . . .
Mr. K. N. Prithviraj . . . . . . . . . . . . . . . . .
Mr. V. R. Kaundinya . . . . . . . . . . . . . . . .
Mr. S. B. Mathur . . . . . . . . . . . . . . . . . . .
Mr. Prasad R. Menon . . . . . . . . . . . . . . .
Mr. R. N. Bhattacharyya . . . . . . . . . . . . .
Prof. Samir K. Barua . . . . . . . . . . . . . . . .
Mr. A. K. Dasgupta . . . . . . . . . . . . . . . . .
Mr. Som Mittal . . . . . . . . . . . . . . . . . . . .
Mr. Somnath Sengupta . . . . . . . . . . . . . .
Mr. V. Srinivasan . . . . . . . . . . . . . . . . . .
Ms. Ireena Vittal . . . . . . . . . . . . . . . . . . .
Mr. Rohit Bhagat . . . . . . . . . . . . . . . . . . .
*
Position
Chairman
Managing Director and CEO
Director
Director
Director
Director
Director
Director
Director
Director
Executive Director and Head
(Corporate Center)
Executive Director and Head
(Corporate Banking)
Director
Director
Age
(in completed years)
66
54
65
56
68
67
70
61
60
60
57
48
44
48
The term of Dr. Adarsh Kishore will expire on March 7, 2013. The Board of Directors have, in their meeting held on
January 16, 2013, appointed Dr. Sanjeev Misra as the non-executive chairman of the Bank with effect from March 8,
2013, subject to approval of the RBI.
The business address for the Bank’s Directors and senior managers is its corporate headquarters, Axis
House, Wadia International Center, Pandurang Budhkar Marg, Worli, Mumbai 400 025, India.
140
The following are brief biographies of the Bank’s Directors as at January 18, 2013.
Directors
Name of Director
Experience
Dr. Adarsh Kishore
Dr. Adarsh Kishore is currently the Chairman of the Board of the Bank. He was
a member of the Indian Administrative Service from 1969 to 2006. He is a
former finance secretary to the Government of India and executive director of
the International Monetary Fund in Washington D.C., representing Bangladesh,
Bhutan, India and Sri Lanka. Dr. Adarsh Kishore was also district collector and
district development officer for eight years in rural districts of Rajasthan, where
he dealt with issues in rural economy, development and poverty and agriculture.
He handled a variety of economic and financial issues and issues in different
industries, particularly small-scale industries, as director of Industries and a
special secretary to the State Government of Rajasthan. Mr. Kishore also has
experience with matters concerning heavy industries and state enterprises as
secretary to the Government of India. Additionally, he has dealt with economic
issues on a national scale, including budget, expenditure and economic policy, as
well as a range of issues in economics and finance as the finance secretary to the
Government of India. Mr. Kishore has an M.A. in Political Science and a Ph.D.
in Political Economy.
Ms. Shikha Sharma
Ms. Shikha Sharma has been the Managing Director and CEO of the Bank since
June 2009. Ms. Sharma started her career with the ICICI Group and worked
across several practices including project finance, retail banking and investment
banking. Prior to joining the Bank, Ms. Sharma was Managing Director and
CEO of ICICI Prudential Life Insurance Company, a leading private sector life
insurance company in India. Ms. Sharma is a recipient of many business awards,
including the “Transformational Business Leader of the Year” award at the All
India Management Association’s AIMA Managing India Awards 2012, as well
as the “Woman Leader of the Year” award at Bloomberg-UTV’s Financial
Leadership Awards 2012. She has also been featured in prominent publications,
including the Forbes List of Asia’s 50 Power Businesswomen 2012, Indian
Express’s Most Powerful Indians in 2012 and India Today’s Power List of
25 Most Influential Women 2012.
Ms. Shikha Sharma has a B.A. (Hons.) in Economics and received a PGDM
from the Indian Institute of Management (“IIM”), Ahmedabad in 1980. She has
a Post Graduate Diploma in Software Technology, from the National Center for
Software Technology, Mumbai.
Mr. K. N. Prithviraj
Mr. K. N. Prithviraj is currently the administrator of SUUTI. Formerly, he was
the chairman and managing director of Oriental Bank of Commerce and the
executive director of United Bank of India. He has also served in various
capacities at Punjab National Bank, where he worked from 1969 through 2003.
Mr. Prithviraj has a Masters degree in Economics.
Mr. V. R. Kaundinya
Mr. V. R. Kaundinya has been working in the field of agriculture since 1979.
Mr. Kaundinya’s work has put him in touch with farmers, scientists, policy
makers, input industry, trade and other stakeholders who are involved in
agriculture in India and abroad. He has specialized in areas including crop
protection, seeds, other agronomic practices and farming economics. He was a
member of the Dr. Swaminathan Committee to develop India’s biotech policy.
He has also held various leadership positions in industry associations such as the
Indian Crop Protection Association, the Association of Seed Industry and the All
India Crop Biotech Association. He is currently the chairman of the Agriculture
Group in the Association of Biotech Led Enterprises. He has developed case
studies and taken courses on agricultural marketing and rural development at
various management institutes including IIM, Ahmedabad. Mr. Kaundinya has a
degree in Agriculture from Andhra Pradesh Agricultural University, Hyderabad
and a PGDM with a specialization in Agriculture from IIM, Ahmedabad.
141
Name of Director
Experience
Mr. S. B. Mathur
Mr. S. B. Mathur is the current director of the NSE and a former chairman of
LIC. Prior to serving as chairman of LIC, Mr. Mathur was executive director of
marketing and international operations at LIC. He has also held various senior
positions at LIC and attended several seminars at national and international
forums. He was appointed by the Government of India to serve as the
administrator of SUUTI from December 2004 to November 2007. Mr. Mathur is
a chartered accountant, registered with the Institute of Chartered Accountants of
India. He has also been trained at the Institute of Costs and Works Accountants,
London.
Mr. Prasad R. Menon
Mr. Prasad R. Menon is a chemical engineer with over 40 years of diverse
experience in premier multinational and Indian companies in the chemical and
power industry. In October 2000, Mr. Menon took over as the managing director
of Tata Chemicals Limited where he helped complete the successful acquisition
and integration of Brunner Mond (U.K.) Limited, Magadi Soda Company
(Kenya) and Indo Maroc Phosphore S.A. (Morocco). In October 2006,
Mr. Menon took over as the managing director of Tata Power Limited. He has
championed sustainability as a key strategic initiative in the organization.
Mr. Menon serves on the boards of directors of several major Tata Group
companies, as well as on the supervisory board of Sanmar Group in Chennai. He
is on the steering committee of Combat Climate Change, a group of 66 global
companies committed to policy change and implementation of climate change
initiatives. He is the first chairperson of the Association of Power Producers, an
association of private-sector power generating companies, the chairperson of the
Group Safety Committee and a member of other key Tata Group
committees, including the Climate Change Committee and Business Excellence
Committee. Mr. Menon holds a degree from the Indian Institute of Technology
(“IIT”) Kharagpur.
Mr. R. N. Bhattacharyya
Mr. R. N. Bhattacharyya was a member of the local board of the State Bank of
India at the Kolkata region from June 2010 to January 2011 and is a 36-year
veteran of the Indian Police Service. From July 2006 to July 2009,
Mr. Bhattacharyya served as a nominee director on the board of directors of
Hindustan Aeronautics Limited, Bangalore. He was also the director of insurance
in the Department of Economic Affairs, Ministry of Finance, from 1984 to 1986
and the director of the Department of Steel, Ministry of Steel and Mines, from
1981 to 1984. In addition, Mr. Bhattacharyya has served as government director
on the boards of Oriental Insurance Company in Delhi, United India Insurance
Company in Chennai and New India Assurance Company in Mumbai from 1984
to 1986.
Mr. Bhattacharyya has a Masters degree in Economics from Calcutta University
and has worked for two years as a lecturer at WB educational services.
Prof. Samir K. Barua
Prof. Samir K. Barua is currently the director of IIM, Ahmedabad, where he has
served on the faculty for the past 30 years and held various administrative
positions. Prof. Barua brings considerable expertise in financial markets and risk
management. He is an independent director on the boards of many corporations,
including Coal India Limited, Torrent Power Limited and IOT Infrastructure and
Energy Services Limited.
Prof. Barua has a Masters degree in Technology from IIT, Kanpur and a Ph.D. in
Management from IIM, Ahmedabad.
142
Name of Director
Mr. A. K. Dasgupta
Experience
Mr. A. K. Dasgupta was the managing director of LIC from April 3, 2007
through his retirement on January 31, 2012. In addition to his role as managing
director, Mr. Dasgupta also served in a variety of other capacities during his
career at LIC. Before taking over as managing director, he was executive
director of the International Operations and Corporate Communications
Departments at LIC’s corporate headquarters. He has also served as senior
divisional manager of Guwahati and Karnal; deputy general manager of LIC
(International) Bahrain; regional manager (marketing) of Western Zone,
Mumbai; the chief executive of LIC Housing Finance, Mumbai; and the zonal
manager of LIC, Central Zone, Bhopal.
While at LIC, Mr. Dasgupta was associated with many organizational
development programs and involved in introducing several new initiatives
designed to advance the corporation into the future including LIC’s successful
initial GDR issuance.
Mr. Dasgupta has a B.Sc. (Hons.) and a diploma in Personnel Management and
Labor Welfare from Punjab University. He is a licentiate of the Federation of
Insurance Institute and a direct recruit officer of the tenth batch at LIC.
Mr. Som Mittal
Mr. Som Mittal is the chairman of the IT Strategy Committee of the Board of the
Bank. He is also currently the president of the National Association of Software
and Services Companies, a trade organization for the IT-BPO industry in India.
Mr. Mittal has over 23 years of experience in the IT industry handling both
domestic and international operations. He has served as a managing director and
chief executive of many companies, including listed companies, where he has
become familiar with operations and governance structure. From 1989 to 1994,
Mr. Mittal was the chief executive of the PC Server and Services Division of
Wipro Limited, an Indian multinational provider of IT services. From 1994 to
1999, he was the managing director of Digital Equipment India Limited, a
company engaged in providing technology solutions to corporations including
banks and financial institutions. From 1999 to 2006, he was the managing
director of Digital GlobalSoft, a subsidiary of Hewlett-Packard and a software
services company providing global solutions. From 2006 to 2007, he was
Hewlett-Packard’s senior vice president, Asia Pacific and Japan.
Mr. Mittal has a B.Tech. from IIT, Kanpur and a PGDM from IIM, Ahmedabad.
Mr. Somnath Sengupta
Mr. Somnath Sengupta joined the Bank in 1996 and is presently the Bank’s
Executive Director (board position) and Head (Corporate Center) of the Bank.
Mr. Sengupta also served as the Chief Financial Officer of the Bank from
October 1, 2009 through July 1, 2012, prior to which he served as the head of the
Finance and Accounts Department beginning from June 2, 2003. Mr. Sengupta
has been Executive Director (a non-board position) of the Bank since October 1,
2009.
Mr. Sengupta has been in the banking industry for 35 years, including 20 years
with the State Bank of India group, and has extensive experience in foreign
exchange, treasury operations and finance and accounts. In 2009 and 2010,
Mr. Sengupta was the recipient of CNBC TV 18’s Best CFO award.
Mr. Sengupta has a B.A. in Economics from the University of Delhi.
Mr. V. Srinivasan
Mr. V. Srinivasan is currently the Executive Director (board position) and Head
(Corporate Banking) of the Bank. He joined the Bank in September 2009 as the
Executive Director of Corporate Banking (a non-board position). Mr. Srinivasan
began his career in the financial services industry in 1990 with ICICI Limited,
working in its Merchant Banking Division. He was a part of the start-up team of
ICICI Securities and Finance Co. Limited, a joint venture between ICICI and J.P.
Morgan, where he headed the Fixed Income Department. Since 1999, he has
worked with J.P. Morgan, India, where he most recently served as managing
director and head of markets, wherein he had the dual responsibility of acting as
CEO of J.P. Morgan Chase Bank, Mumbai Branch and Chairman of J.P. Morgan
Securities (I) Private Limited.
143
Name of Director
Experience
He has served on various RBI Committees, including the Technical Advisory
Committee of RBI, Committee of Repos, STRIPS and others, and is a member of
the Banking Committee, CII. He has also served as a Chairman of FIMMDA, the
key self-regulatory body for market participants, and PDAI, the self-regulatory
organization for primary dealers.
Mr. Srinivasan qualified as an engineer from the College of Engineering, Anna
University, Chennai and received an MBA from IIM, Calcutta in 1990.
Ms. Ireena Vittal
Ms. Ireena Vittal is an independent strategic advisor, with significant knowledge
in agriculture and urban development in India and emerging markets. She
worked at McKinsey & Company for 16 years, where she assisted local and
multinational companies in driving profitable growth. Ms. Vittal has also
co-authored several studies relating to agriculture and urbanization.
Ms. Vittal has a B.Sc. in Electronics from Osmania University and a PGDM
from IIM, Calcutta.
Mr. Rohit Bhagat
Mr. Rohit Bhagat is former senior managing director and chairman of Asia
Pacific, BlackRock Inc. and former member of its global executive committee.
He has over 20 years of extensive global experience in financial services
industry having worked in India, Hong Kong and USA in business leadership,
consulting and advisory space. He has held several directorships with various
entities of BlackRock Inc. Prior to BlackRock Inc., he was the global chief
operating officer for Barclays Global Investors prior to which he was the senior
partner and co-leader of the United States Financial Services practice at Boston
Consulting Group. Mr. Bhagat has a B. Tech degree in mechanical engineering,
M.S. in engineering from University of Texas and an MBA from Kellogg
Graduate School of Management, Northwestern University.
Senior Management Team
As at January 18, 2013, the Bank’s senior management team comprised the following members:
Name
Position
Ms. Shikha Sharma . . . . . . . . . . . . . . . . . Managing Director and CEO
Mr. Somnath Sengupta . . . . . . . . . . . . . . Executive Director — Corporate Center
Mr. V. Srinivasan . . . . . . . . . . . . . . . . . . Executive Director — Corporate
Banking
Mr. R. K. Bammi . . . . . . . . . . . . . . . . . . . Executive Director — Retail Banking
Mr. P. Mukherjee . . . . . . . . . . . . . . . . . . President — Treasury, International
Business & Business Banking
Mr. S. S. Bajaj . . . . . . . . . . . . . . . . . . . . . President and Chief Audit Executive
Mr. Vinod George . . . . . . . . . . . . . . . . . . President (Wholesale Banking
Operations)
Mr. M. V. Subramanian . . . . . . . . . . . . . President (Rural & Inclusive Banking)
Mr. S. K. Mitra . . . . . . . . . . . . . . . . . . . . President (Distribution)
Mr. B. Gopalakrishnan . . . . . . . . . . . . . . President (Law)
Mr. Bapi Munshi . . . . . . . . . . . . . . . . . . . President and Chief Risk Officer
Mr. C. Babu Joseph . . . . . . . . . . . . . . . . . Executive Trustee and CEO (Axis Bank
Foundation)
Mr. Sanjeev K. Gupta . . . . . . . . . . . . . . . President & Chief Financial Officer
Mr. V. K. Bajaj . . . . . . . . . . . . . . . . . . . . President (Mid Corporates and SME)
Mr. Sidharth Rath . . . . . . . . . . . . . . . . . . President (Large Corporate)
Mr. A. R. Gokulakrishnan . . . . . . . . . . . . President (Stressed Assets)
Mr. Rajendra Adsul . . . . . . . . . . . . . . . . . President (SME)
Mr. R. V. S. Sridhar . . . . . . . . . . . . . . . . President (IT & Retail Operations)
Mr. Lalit Chawla . . . . . . . . . . . . . . . . . . . President (Corporate Credit)
Mr. Rajesh Kumar Dahiya . . . . . . . . . . . President (Human Resources)
Mr. Nilesh Shah . . . . . . . . . . . . . . . . . . . . President (Investment Banking)
144
Age
(in completed years)
54
57
48
58
52
58
59
55
59
59
56
57
51
55
43
56
53
50
54
45
44
SENIOR MANAGEMENT STRUCTURE
Managing Director
and CEO
Executive Director &
Head – Corporate Banking
Executive Director –
Retail Banking
President
Human Resources
Executive Director &
Head – Corporate Center
Executive Trustee & CEO
(Axis Bank Foundation)
President Treasury,
International Business &
Business Banking
President
Large Corporate
President
Distribution
President & CFO
President
Stressed Assets
President
Mid Corporates & SME
President
Corporate Credit
President
Rural & Inclusive Banking
President Wholesale
Banking Operations
President
IT & Retail Operations
President SME
President
Investment Banking
President &
Chief Risk Officer
President
Law
President &
Chief Audit Executive
The following are brief biographies of the Bank’s senior management team.
Mr. R. K. Bammi, Executive Director
— Retail Banking
Mr. R. K. Bammi has served as the Bank’s Executive Director of
Retail Banking (a non-board position) since May 2011. Mr. Bammi
brings extensive knowledge and experience in retail banking and
related areas, especially in branch banking, having had 13 years of
experience in the banking industry before joining the Bank in 1994 as
a credit officer. Mr. Bammi started his career as a lecturer in
Economics at Delhi University, where he worked from 1976 to 1981.
Mr. Bammi has a Masters degree in Economics and is a CAIIB.
Mr. P. Mukherjee, President —
Treasury, International Business &
Business Banking
Mr. P. Mukherjee joined the Bank in 1994. He has extensive foreign
exchange and treasury management skills acquired during his
30 years in the banking industry, including 12 years with the State
Bank of India. While at the State Bank of India, he was posted at its
New York branch as a dealer. Mr. Mukherjee is a graduate in Science.
Mr. S. S. Bajaj, President and Chief
Audit Executive
Mr. S. S. Bajaj joined the Bank in June 1995. He has worked as
branch head in various branches of the Bank and has also handled
credit, foreign exchange and audit desks. Before joining the Bank,
Mr. Bajaj worked for the State Bank of India group from December
1976 to December 1994 in the capacities of branch manager, chief
manager and senior manager in various departments. Mr. Bajaj is a
graduate in Arts.
Mr. Vinod George, President
(Wholesale Banking Operations)
Mr. Vinod George joined the Bank in 1995 and currently heads the
Wholesale Banking Operations Department. He is a specialist in
merchant banking and corporate banking. Prior to joining the Bank,
he worked for the State Bank of India group for 15 years. Mr. George
is a graduate in science and also has a degree in Management.
Mr. M. V. Subramanian, President
(Rural & Inclusive Banking)
Mr. M. V. Subramanian joined the Bank in 2002. He has handled
credit and risk management areas in the Bank and currently heads the
Rural and Inclusive Banking Department. Mr. Subramanian has
several years of experience in the banking industry, working in
commercial banking at the Bank of Baroda from January 1978 to
January 1987, and thereafter joining Standard Chartered Bank where
he worked in various capacities from 1987 to 2001. Immediately
before joining the Bank, he worked in Transmerica Finance as vice
president of Credit and Operations from March 2001 to November
2002. Mr. Subramanian is a graduate in Physics with CAIIB
certification.
145
Mr. S. K. Mitra, President
(Distribution)
Mr. S. K. Mitra joined the Bank in February 1995 as a credit officer.
During his career at the Bank, he served as branch head in various
branches and was the head of the Bank’s Eastern Zonal Office until
April 2010. Mr. Mitra was promoted to the grade of President in
January 2007 and now heads the Distribution Department of the
Bank. Before joining the Bank, Mr. Mitra had more than 20 years of
banking experience at the State Bank of India, working
predominantly in the credit area. Mr. Mitra has a B.Sc. (Hons.) in
Physics from Delhi University, a PGDM and CAIIB certification.
Mr. B. Gopalakrishnan, President
(Law)
Mr. B. Gopalakrishnan joined the Bank in March 2000 and was
promoted to the grade of President in November 2008. He started his
career in private practice in 1976 after enrolling with the Kerala Bar
Council. He joined the Unit Trust of India in 1989 where he served as
a deputy general manager (legal) prior to joining the Bank.
Mr. Gopalakrishnan has a B.A., an M.B.A. and a postgraduate
qualification in law.
Mr. Bapi Munshi, President and Chief
Risk Officer
Mr. Bapi Munshi joined the Bank in 1994, and worked in areas of
credit and foreign exchange and as head of the Bank’s Baroda branch
before becoming head of the Risk Department. He was promoted to
the grade of President in November 2008. Mr. Munshi started his
banking career with the State Bank of Bikaner and Jaipur in 1979. He
has a postgraduate degree in science from IIT, Kharagpur and is a
certified Junior Associate of Indian Institute of Banking.
Mr. C. Babu Joseph, Executive
Trustee and CEO (Axis Bank
Foundation)
Mr. C. Babu Joseph joined the Bank in 1995 and served at different
branches before moving to the corporate headquarters in 2005 to head
the Advances Department. He was promoted to the grade of President
in November 2008. He has been heading the Axis Bank Foundation
since May 2010. Prior to his career at the Bank, Mr. Joseph worked at
the State Bank of Travancore, beginning as a probationary officer in
1979 and serving as branch manager of its Pune branch from 1992 to
1995. Mr. Joseph has a Masters degree with CAIIB certification.
Mr. Sanjeev K. Gupta, President &
Chief Financial Officer
Mr. Sanjeev K. Gupta currently serves as the Bank’s Chief Financial
Officer. He was promoted to the grade of President in 2009. Before
joining the Bank, Mr. Gupta worked with State Bank of Bikaner and
Jaipur from November 1986 to December 1994 in various aspects of
banking, handling issues in credit, finance and foreign exchange.
Mr. Gupta has a Masters degree in Commerce and an MBA with
CAIIB certification. He is a fellow member of the Association of
Chartered Certified Accountants of the U.K. and is a Certified
General Accountant in Canada.
Mr. V. K. Bajaj, President (Mid
Corporates and SME)
Mr. V. K. Bajaj joined the Bank in 1995 and served at different
branches and offices before moving to the central office in 2009 to
head the Mid-Corporates and SME Department. Prior to joining the
Bank, Mr. Bajaj worked at the State Bank of India, where he began in
1982 as a trainee officer. He has extensive experience dealing in
foreign exchange and money market operations. Mr. Bajaj has a
postgraduate degree in Commerce with CAIIB certification.
Mr. Sidharth Rath, President (Large
Corporate)
Mr. Sidharth Rath is currently the head of the Large Corporates
Department. He joined the Bank in September 2001 with the Capital
Markets Department and subsequently became head of the
department. He was promoted to the grade of President in 2009. Prior
to joining the Bank, Mr. Rath worked at IFCI Limited, which he
joined in 1992. He has work experience in different capacities in the
credit operations and monitoring, corporate restructuring and
corporate credit divisions. Mr. Rath has a PGDM in Finance.
146
Mr. A. R. Gokulakrishnan, President
(Stressed Assets)
Mr. A. R. Gokulakrishnan joined the Bank in December 1997 and
was promoted to the grade of President in April 2010. He currently
heads the Stressed Assets Department of the Bank.
Mr. Gokulakrishnan has vast experience in the Bank’s capital
markets, credit risk and compliance divisions. Prior to joining the
Bank, he had over 20 years of banking experience with the State Bank
of India, where he worked in various capacities. Mr. Gokulakrishnan
has a B.Sc. and CAIIB certification.
Mr. Rajendra Adsul, President (SME)
Mr. Rajendra Adsul joined the Bank in 1994 as a credit officer. He
worked in various capacities in the Bank’s Credit and Relationship
Management Department before being promoted to the grade of
President in April 2010. Mr. Adsul now heads the SME Department
of the Bank. Prior to joining the Bank, he had nine years of banking
experience predominantly in the area of credit. Mr. Adsul is a first
class commerce graduate with CAIIB certification.
Mr. R. V. S. Sridhar, President (IT &
Retail Operations)
Mr. R.V. S. Sridhar joined the Bank in 1995 and was promoted to the
grade of President in April 2010. Mr. Sridhar has extensive
experience in dealing with forex and the Bank’s Treasury division.
Prior to joining the Bank, he had ten years of banking experience at
the State Bank of India, where he was promoted to the grade of
Middle Management Scale II. While at the State Bank of India,
Mr. Sridhar was posted at its Tokyo branch for two years.
Mr. R.V. S. Sridhar has an M.B.A. degree in Finance with CAIIB
certification.
Mr. Lalit Chawla, President
(Corporate Credit)
Mr. Lalit Chawla joined the Bank in November 2001, specializing in
large corporate and mid-corporate credit. He was promoted to
President of Corporate Credit in April 2010 and now heads the
Corporate Credit Department of the Bank. Mr. Chawla began his
career as a trainee officer at the State Bank of India in 1982. Mr. Lalit
Chawla has a postgraduate degree in Commerce with CAIIB
certification.
Mr. Rajesh Kumar Dahiya, President
(Human Resources)
Mr. Rajesh Kumar Dahiya joined the Bank in June 2010. He began
his career in 1990 with Rallis India Limited, a Tata Group company,
as a trainee and subsequently became manager of Personnel and
Administration. He held various positions in the company, including
factory manager, exports manager and head of distribution and
institutional business, before ultimately becoming the head of human
resources. In 2005, he moved within the Tata Group to Tata Sons
Limited as vice president of Group Talent Acquisition and the head of
Tata Administrative Services. As a human resources professional,
Mr. Dahiya has wide experience at the shop floor level and also in
corporate human resources. In his last assignment he was part of a
senior level strategic team working on a joint venture between Tata
Tea and Pepsi focusing on nutritional beverages. Mr. Dahiya is a civil
engineer with a Masters degree in Human Resources Management
from UBS Chandigarh.
Mr. Nilesh Shah, President
(Investment Banking)
Mr. Nilesh Shah joined the Bank in March 2011. He has more than
20 years of experience in capital markets and market related
investments and has managed money across equity, fixed income
securities and real estate for local and global investors. Mr. Shah has
been recognized in his field and was the recipient of the inaugural
Business Standard Fund Manager of the Year (Debt) Award in 2003
and the inaugural ICAI Award in the Professional Manager (Private
Sector) Category in 2008. Mr. Shah is a qualified chartered
accountant, registered with the ICAI, and was the top scoring
qualifier of his class in 1991.
147
Corporate Governance
The Bank’s corporate governance policies recognize the accountability of the Board and the importance of
transparency to all its constituents, including employees, customers, investors and the regulatory authorities and
of demonstrating that the shareholders are the ultimate beneficiaries of the Bank’s economic activities.
The Bank’s corporate governance philosophy encompasses not only regulatory and legal requirements but
also other practices aimed at a high level of business ethics, effective supervision and enhancement of value for
all shareholders. The Board’s role, functions, responsibility and accountability are clearly defined. In addition to
its primary role of monitoring corporate performance, the Board also carries out functions such as taking care of
all statutory agenda, approving a business plan, reviewing and approving annual budgets and borrowing limits,
fixing exposure limits and ensuring that the Bank’s shareholders are kept informed about the Bank’s plans,
strategies and performance. To enable the Board of Directors to discharge these responsibilities effectively,
management gives detailed reports on the Bank’s performance to the Board on a quarterly basis.
The Board of Directors functions either as a full Board or through various committees such as the
Committee of Directors, the Audit Committee, the HR and Remuneration Committee, the Nomination
Committee, the Risk Management Committee, the Shareholders/Investors Grievance Committee, the Customer
Service Committee, the Special Committee of the Board of Directors for monitoring large value frauds, the
Acquisitions, Divestments and Mergers Committee, the IT Strategy Committee and the Committee of
Whole-Time Directors. These Board committees meet regularly. The constitution of the various committees as at
December 31, 2012 and its main functions are given below.
The Bank is in compliance with Clause 49 of the Listing Agreement relating to corporate governance.
Committee of Directors
The Committee of Directors comprises seven Directors: Ms. Shikha Sharma, Mr. S. B. Mathur,
Mr. K. N. Prithviraj, Mr. Prasad R Menon, Mr. R. N. Bhattacharyya, Mr. Somnath Sengupta and
Mr. V. Srinivasan. The committee is chaired by Mr. K. N. Prithviraj. The functions of the Committee of
Directors include providing approvals for loans above certain stipulated limits, discuss strategic issues in relation
to credit policy, and deliberate on the quality of the credit portfolio, monitoring the exposures (both credit and
investment) of the Bank, sanctioning expenditures above certain stipulated limits, approving expansion of the
location of the Bank’s Network of offices, branches, extension counters, ATMs and currency chests, reviewing
investment strategy and approve investment related proposals above certain limits, approving proposals relating
to the Bank’s operations covering all departments and business segments, ensuring compliance with the
statutory/ regulatory framework, etc.; and discussing issues relating to day to day affairs/problems and to take
such steps as may be deemed necessary for the smooth functioning of the Bank (all routine matters other than the
strategic matters and review of policies other than strategic policies like credit policy, investment policy and
other policies which the Committee of Directors may consider necessary or RBI may specifically require to be
reviewed by the Board).
Audit Committee
The Audit Committee comprises four Directors: Mr. S. B. Mathur, Mr. V. R. Kaundinya,
Mr. K. N. Prithviraj and Prof. Samir K. Barua. The Committee is chaired by Mr. S. B. Mathur. The function of
the Audit Committee is to review internal and external audit reports and compliance matters. The responsibilities
of the Audit Committee include overseeing the financial reporting process to ensure fairness, sufficiency and
credibility of financial statements, review of annual financial statements before submission to the Board of
Directors, review of the adequacy of internal control systems and the internal audit function, review of
compliance with the inspection and audit reports of the RBI and reports of statutory auditors, review of the
findings of internal investigations, discussion on the scope of audit with internal auditors and examination of
reasons for substantial defaults, if any. All audit services provided by the Bank’s statutory auditors are
pre-approved by the Audit Committee.
HR and Remuneration Committee
The HR and Remuneration Committee comprises four Directors: Mr. K. N. Prithviraj, Mr. Prasad
R. Menon, Mr. V. R. Kaundinya and Prof. Samir K. Barua. The committee is chaired by Mr. Prasad R. Menon.
The functions of the HR and Remuneration Committee include reviewing and recommending to the Board for
approval the overall remuneration philosophy and policy of the Bank, which covers the level and structure of
fixed pay, variable pay, perquisites, bonus pool, stock-based compensation to employees of the Bank, and any
other form of compensation as may be included from time to time, reviewing and recommending to the Board for
148
approval increases in manpower cost budget of the Bank as a whole for the next year, reviewing and
recommending to the Board for approval the talent management and succession policy and process in the Bank
for ensuring business continuity, especially at the level of Managing Director and Chief Executive Officer, the
other full-time Directors, senior managers one level below the Board position and other key roles, reviewing
organizational health through feedback from employee surveys conducted on a regular basis, reviewing the Code
of Conduct and HR strategy, policy and performance appraisal process within the Bank, as well as any
fundamental changes in organizational structure which could have wide ranging or high risk implications,
reviewing and recommending to the Board for approval the creation of new positions at the level of Executive
Director and above, reviewing appointments, promotions and exits of senior managers one level below the Board
position, setting goals, objectives and performance benchmarks for the Bank and for the Managing Director and
Chief Executive Officer, the other Whole-time Directors and Executive Directors for the financial year and over
the medium to long term, reviewing the performance of the Managing Director and Chief Executive Officer,
other Whole-time Directors and Executive Directors at the end of each year, recommending to the Board the
remuneration package for the Managing Director and Chief Executive Officer, the other Whole-time Directors
and senior managers one level below the Board and recommending to the Board the compensation payable to the
Chairman of the Bank.
Nomination Committee
The Nomination Committee comprises three Directors: Mr. S. B. Mathur, Mr. V. R. Kaundinya and
Prof. Samir K. Barua. The Committee is chaired by Mr. S. B. Mathur. The functions of the Nomination
Committee include undertaking a process of due diligence to determine the suitability of any person for
appointment/continuing to hold appointment as a director on the Board, based upon qualification, expertise, track
record, integrity and other “fit and proper” criteria, examining the vacancies that will come up at the Board on
account of retirement or otherwise, evaluating the skills that exist, and those that are absent but needed at the
Board level, and searching for appropriate candidates who have the profile to provide such skill sets, creating a
recommended list for deliberation and decision-making at the Board level and reviewing the composition of
Committees of the Board, and identifying and recommending to the Board the Directors who can best serve as
members of each Board Committee.
Risk Management Committee
The Risk Management Committee comprises five Directors: Dr. Adarsh Kishore, Ms. Shikha Sharma,
Mr. K. N. Prithviraj, Prof. Samir K. Barua and Ms. Ireena Vittal. The Committee is chaired by Dr. Adarsh
Kishore. The objective of the Risk Management Committee is to review the Bank’s risk management policies
against guidelines issued by the RBI and the Board of Directors. The Committee reviews the Bank’s risk
management policies in relation to various risks (credit, market and operational risks), investment policies,
strategy and regulatory and compliance issues.
Shareholders’/Investors’ Grievance Committee
The Shareholders’/Investors’ Grievance Committee comprises four Directors: Dr. Adarsh Kishore,
Mr. S. B. Mathur, Mr. R. N. Bhattacharyya and Mr. Somnath Sengupta. The committee is chaired by Dr. Adarsh
Kishore. The primary objective of the Shareholders’/Investors’ Grievance Committee is to look into the redressal
of shareholders’ and investors’ grievances relating to non-receipt of dividends, refund orders, shares sent for
transfer, non-receipt of annual reports and other similar grievances.
Customer Service Committee
The Customer Service Committee comprises four Directors: Dr. Adarsh Kishore, Ms. Shikha Sharma,
Prof. Samir K. Barua and Ms. Ireena Vittal. The committee is chaired by Dr. Adarsh Kishore. The functions of
the Customer Service Committee include overseeing the functioning of the Bank’s internal committee setup for
customer service, reviewing the level of customer service in the Bank including customer complaints and the
nature of their resolutions, providing guidance in improving the customer service level and reviewing any award
by the Banking Ombudsman to any customer after a complaint filed with the Ombudsman.
Special Committee of the Board of Directors for Monitoring of Large Value Frauds
The Special Committee for Monitoring Large Value Frauds comprises five Directors: Ms. Shikha Sharma,
Mr. V. R. Kaundinya, Mr. R. N. Bhattacharyya, Prof. Samir K. Barua and Mr. A. K. Dasgupta. The committee is
chaired by Ms. Shikha Sharma. The Special Committee for Monitoring Large Value Frauds was constituted in
response to an RBI circular in relation to fraudulent activity involving Rs.10 million and above. The major
149
functions of the Special Committee are to monitor and review all the frauds of Rs.10 million and above, so as to
identify the systemic lacunae, if any, which facilitated perpetration of the fraud and put in place remedial
measures, identify the reasons for delay, if any, in detection and reporting to the Bank’s senior management and
the RBI, monitor progress of CBI/police investigations and recovery position, ensure that staff accountability is
examined at all levels in all the cases of frauds and staff related action, if required, is completed in a timely
manner, review the efficacy of the remedial action taken to prevent recurrence of frauds, such as, strengthening
of internal controls and put in place other relevant measures to strengthen preventive measures against frauds.
Acquisitions, Divestments and Mergers Committee
The Acquisitions, Divestments and Mergers Committee comprises five Directors: Mr. Prasad R. Menon,
Mr. S. B. Mathur, Mr. K. N. Prithviraj, Ms. Shikha Sharma and Ms. Ireena Vittal. The Committee is chaired by
Mr. Prasad R. Menon. The function of the Committee is to discuss and consider any idea or proposal for merger
or acquisition, give its in-principle approval and recommend the proposal to the Board of Directors for its final
decision.
IT Strategy Committee
The IT Strategy Committee comprises four Directors: Mr. Som Mittal, Ms. Shikha Sharma, Mr. Prasad
R. Menon and Mr. Somnath Sengupta. The Committee is chaired by Mr. Som Mittal. The function of the
Committee is to approve IT strategy and policies, ensure that management has an effective strategic planning
process in place, ensure that the business strategy is aligned with the IT strategy, ensure that the IT organizational
structure serves business requirements and direction, oversee implementation of processes and practices that
ensures IT delivers value to businesses, monitor the method that management uses to determine the IT resources
needed to achieve strategic goals and provide high-level direction for sourcing and use of IT resources, ensure
proper balance of IT investments for sustaining the Bank’s growth, assess exposure to IT risks and its controls
and evaluating effectiveness of management’s monitoring of IT risks, assess management’s performance in
implementing IT strategies, assess whether IT architecture has been designed to derive maximum business value
and review IT performance measurement and contribution to businesses.
Committee of Whole-Time Directors
The Committee of Whole-Time Directors presently comprises three Directors, Ms. Shikha Sharma,
Mr. Somnath Sengupta and Mr. V. Srinivasan. The Committee is chaired by Ms. Shikha Sharma. The
Committee’s functions include allotment of shares under employee stock options, grant of powers of attorney,
issue of duplicate share certificates and any other routine administrative matters.
Litigation Statement about Management
At the date of this Placement Document, for at least the previous five years, none of the members of the
Board of Directors, the Audit Committee, the senior management team or any of the other committees listed
above:
• has had any convictions in relation to fraudulent offences;
• has held an executive function in the form of a senior executive officer or a member of the administrative,
management or supervisory bodies, of any company at the time of or preceding any bankruptcy,
receivership or liquidation; or
• has been subject to any official public incrimination and/or sanction by any statutory or regulatory
authority (including any designated professional body) or has ever been disqualified by a court from
acting as a member of the administrative, management or supervisory bodies of a company or from acting
in the management or conduct of the affairs of any company.
Memorandum and Articles of Association
The Bank’s main objectives are to carry on banking activity and other related activities. The Bank’s main
objectives and the objectives incidental or ancillary to the attainment of the main objectives are found in Clause
III (A) and (B) of the Memorandum of Association.
The Board of Directors may not hold meetings in the absence of a quorum. Pursuant to the Companies Act,
the Directors have the power to borrow money for business purposes only with the consent of the shareholders
(with certain limited exceptions). Articles 125 to 137 set forth certain rights and restrictions relating to dividend
distribution. One of the restrictions is that dividends may be declared only at general meetings of the
150
shareholders, but in no event shall an amount greater than the amount recommended by the Board of Directors be
approved. Under the Articles, no Director shall be required to hold any Equity Shares as qualification shares.
Under Section 300 of the Companies Act, no director of a company shall, as a director, take part in the discussion
of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if
he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement.
The AGM is held during business hours at the Bank’s registered office or at such other place in Ahmedabad
as the Board of Directors may determine. The Board may also call an EGM. The Board of Directors is required
to call an EGM upon the request of a set number of shareholders, as set forth in the Companies Act. Under the
Articles, every member present in person, on a show of hands, shall have one vote and upon a poll every member
present in person or by proxy shall have the right to vote (in proportion to his share of the paid equity capital of
the Bank) in accordance with the provisions of applicable law. However, according to section 12(2) of the
Banking Regulation Act, no person holding shares in a banking company shall, in respect of any shares held by
such person, exercise voting rights on poll in excess of 10% of the total voting rights of all the shareholders of
the banking company. The RBI, in accordance with the Banking Regulation Act, as amended, may increase the
limit on voting rights from 10% to 26% in a phased manner.
Under Article 52A, the acquisition of Equity Shares by a person or group which would take its holding to a
level of 5% or more of the total paid-up capital of the Bank (or such other percentage as may be prescribed by the
RBI from time to time) requires the prior approval of the RBI.
Under Section 106 of the Companies Act, where the share capital of a company is divided into different
classes of shares, the rights attached to the shares of any class may be varied with the written consent of the
holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution
passed at a separate meeting of the holders of the issued shares of that class, if provision with respect to such
variation is contained in the memorandum or articles of association of the company, or in the absence of any such
provision in the memorandum or articles of association, if such variation is not prohibited by the terms of issue of
the shares of that class.
Under the Companies Act, any business to be transacted by an ordinary resolution requires simple majority,
with votes cast in favor of the resolution should be more than the votes cast against the resolution. Further, any
business to be transacted by way of a special resolution requires the approval of 75% of the shareholders present
at the meeting. The votes cast in favor of the resolution should be at least three-fourth of the total votes cast with
respect to the resolution.
The subscribed capital of the Bank shall not, at any time, be less than one-half of the authorized share
capital of the Bank, and the paid-up share capital of the Bank shall not be less than one-half of the subscribed
share capital of the Bank. The RBI may, however, extend the period of time within which the Bank must achieve
these proportions, not to exceed two years from the date of the increase.
The Directors have the authority to issue, allot or otherwise dispose of Equity Shares to such persons and on
such terms and conditions as they see fit. In addition, the Bank may determine in a General Meeting of
shareholders to issue further shares out of the authorized but unissued capital of the Bank and may determine that
any shares shall be offered to such persons in such proportions and on such terms and conditions as determined
by the shareholders in such a General Meeting. The Bank may reduce its share capital in accordance with the
provisions of the Companies Act and the Articles.
Related Party Transactions
The related parties of the Bank as identified on March 31, 2012 are broadly classified as:
(a) Promoters
The Bank has identified the following entities as its Promoters.
• Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1)
• Life Insurance Corporation of India (“LIC”)
• General Insurance Corporation of India (“GIC”) and four Government-owned general insurance
companies — New India Assurance Company Limited, National Insurance Company Limited, Oriental
Insurance Company Limited and United India Insurance Company Limited.
(b) Key Management Personnel
• Ms. Shikha Sharma (Managing Director & Chief Executive Officer)
• Mr. Sisir Kumar Chakrabarti (Deputy Managing Director) until retirement upon October 1, 2011.
151
(c) Relatives of Key Management Personnel
Mr. Sanjaya Sharma, Mrs. Usha Bharadwaj, Mr. Tilak Sharma, Ms. Tvisha Sharma, Dr. Sanjiv Bharadwaj,
Dr. Prashant Bharadwaj, Dr. Brevis Bharadwaj, Dr. Reena Bharadwaj, Mrs. Swapna Chakraborty, Mr. Hirendra
Nath Chakraborty, Mr. Rajat Chakraborty, Mrs. Devikalpa Chakraborty (Kundu), Master Ahan Chakraborty,
Mr. Nabakumar Chakraborty, Mr. Prabir Chakraborty, Mrs. Minati Chakraborty, Mrs. Krishna Chakraborty,
Mrs. Sipra Chakraborty, Ms. Shikha Bhattacharya, Ms. Shila Chakraborty, Mr. Asim Kumar Chakraborty,
Mr. Arunabha Bhattacharya.
(d) Subsidiary Companies
• Axis Capital Limited (formerly known as Axis Securities and Sales Limited)
• Axis Private Equity Limited
• Axis Trustee Services Limited
• Axis Asset Management Company Limited
• Axis Mutual Fund Trustee Limited
• Axis U.K. Limited
(e) Associates
• Bussan Auto Finance India Private Limited
Based on RBI guidelines, details of transactions with Associates are not disclosed since there is only one
entity/party in this category.
The details of transactions of the Bank with its related parties during the year ended March 31, 2012 are
given below:
Items /Related Party
Dividend Paid . . . . . . . . . . . . . . . .
Dividend Received . . . . . . . . . . . .
Interest Paid . . . . . . . . . . . . . . . . . .
Interest Received . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . . .
Investment of Related Parties in
the Bank . . . . . . . . . . . . . . . . . .
Investment in Subordinated
Debt/Hybrid Capital of the
Bank . . . . . . . . . . . . . . . . . . . . .
Redemption of Subordinated
Debt. . . . . . . . . . . . . . . . . . . . . .
Purchase of investments . . . . . . . .
Sale of Investments . . . . . . . . . . . .
Management Contracts and Other
reimbursements . . . . . . . . . . . . .
Contribution to employee benefit
fund . . . . . . . . . . . . . . . . . . . . . .
Purchase of Fixed Assets . . . . . . .
Non-funded commitments . . . . . . .
Advance granted (net) . . . . . . . . . .
Advance repaid . . . . . . . . . . . . . . .
Sale of fixed assets . . . . . . . . . . . .
Receiving of Services . . . . . . . . . .
Rendering of Services . . . . . . . . . .
Other reimbursements from
related party . . . . . . . . . . . . . . . .
Other reimbursements to related
party . . . . . . . . . . . . . . . . . . . . .
Promoters
Key
Management
Personnel
2,142
—
5,405
—
—
1
—
—
—
—
—
—
—
—
—
—
11
77
—
900
2,143
11
5,482
—
900
—
18
—
—
18
—
—
—
—
—
—
—
2,448
—
—
—
—
—
—
—
—
—
—
—
2,448
—
55
—
69
124
138
—
—
6
—
—
515
17
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
160
—
—
—
1,409
125
138
—
160
6
—
—
1,924
142
—
—
—
103
103
10
—
—
17
27
152
Relatives of Key
Management
Personnel
(Rs. in millions)
Subsidiaries
Total
The balances payable to /receivable from the related parties of the Bank as at March 31, 2012 are given
below.
Items /Related Party
Borrowings from the Bank . . . . .
Deposits with the Bank . . . . . . . .
Placement of Deposits . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . .
Investment of Related Parties in
the Bank . . . . . . . . . . . . . . . . .
Non-funded commitments . . . . . .
Investment in Subordinated
Debt /Hybrid Capital of the
Bank . . . . . . . . . . . . . . . . . . . .
Advance for Rendering of
Services . . . . . . . . . . . . . . . . . .
Other Receivables . . . . . . . . . . . .
Other Payables . . . . . . . . . . . . . .
Promoters
Key
Management
Personnel
—
56,935
2
437
—
—
3
—
2
—
1,545
30
Relatives of Key
Management
Personnel
(Rs. in millions)
Subsidiaries
Total
—
3
—
—
—
—
1,166
—
—
3,106
—
58,107
2
439
3,106
—
—
—
—
—
160
1,545
190
28,373
—
—
—
28,373
—
—
—
—
—
—
—
—
—
—
345
212
—
345
212
The maximum balances payable to /receivable from the related parties of the Bank during the year ended
March 31, 2012 are given below:
Items /Related Party
Borrowings from the Bank . . . . . .
Deposits with the Bank . . . . . . . . .
Placement of Deposits . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . . .
Investment of Related Parties in
The Bank . . . . . . . . . . . . . . . . . .
Investment in Subordinated Debt /
Hybrid Capital of the Bank . . . .
Other Receivables . . . . . . . . . . . . .
Other Payables . . . . . . . . . . . . . . .
Promoters
Key
Management
Personnel
—
56,936
2
482
—
—
12
—
3
—
1,551
28,250
—
—
153
Relatives of Key
Management
Personnel
(Rs. in millions)
Subsidiaries
Total
—
27
—
—
—
—
1,850
—
—
3,106
—
58,825
2
485
3,106
—
—
—
1,551
—
—
—
—
—
—
—
345
228
28,250
345
228
PRINCIPAL SHAREHOLDERS
The shareholding pattern of the Bank as on December 31, 2012 is as indicated in the table below:
Sr.
no.
Category of
Shareholder
Total no. of
Equity Shares
held in
Total Shareholding as Equity Shares pledged
No. of
Total no. of Dematerialized a % of total no. of
or
Shareholders Equity Shares
Form
Equity Shares
otherwise encumbered
As a % of
Number of Total no.
As a %
As a % of
Equity
of Equity
of (A+B) (A+B+C)
Shares
Shares
(A)
Shareholding of Promoter
and promoter group
(1) Indian
Financial Institutions/ Banks . . . .
10
Sub Total . . . . . . . . . . . . . . . . . . .
10
(2) Foreign
Total shareholding of Promoter
and promoter group (A) . . . . .
10
(B) Public Shareholding
(1) Institutions
Mutual Funds / UTI . . . . . . . . . . .
225
Financial Institutions / Banks . . . .
36
Insurance Companies . . . . . . . . . .
138
Foreign Institutional Investors . . .
651
Sub Total . . . . . . . . . . . . . . . . . . .
1,050
(2) Non-Institutions
Bodies Corporate . . . . . . . . . . . . .
1,911
Individuals
Individual shareholders holding
nominal share capital up to
Rs.0.1 million . . . . . . . . . . . . . . 162,305
Individual shareholders holding
nominal share capital in excess
of Rs.0.1 million . . . . . . . . . . . .
176
Any Others (Specify) . . . . . . . . .
6,346
Hindu Undivided Families . . . . . .
2,023
Trusts . . . . . . . . . . . . . . . . . . . . . .
24
Clearing Members . . . . . . . . . . . .
230
Foreign Banks . . . . . . . . . . . . . . . .
1
Foreign Bodies- DR . . . . . . . . . . .
2
Foreign Nationals . . . . . . . . . . . . .
1
Non Resident Indians . . . . . . . . . .
4,065
Sub Total . . . . . . . . . . . . . . . . . . . 170,738
151,767,952 151,767,952
151,767,952 151,767,952
38.97
38.97
35.53
35.53
0
0
0.00
0.00
151,767,952 151,767,952
38.97
35.53
0
0.00
18,108,421
6,021,923
23,201,924
148,775,084
196,107,352
18,108,421
6,021,523
23,201,924
148,775,084
196,106,952
4.65
1.55
5.96
38.20
50.36
4.24
1.41
5.43
34.83
45.91
0
0
0
0
0
0.00
0.00
0.00
0.00
0.00
8,358,310
7,148,138
2.15
1.96
0
0.00
18,731,912 16,292,992
4.81
4.39
0
0.00
12,006,828 12,006,828
2,452,071 2,452,071
230,744
230,744
312,870
312,870
962,575
962,575
3,439
3,439
36,401
36,401
100
100
905,942
905,942
41,549,121 37,900,029
3.08
0.63
0.06
0.08
0.25
0.00
0.01
0.00
0.23
10.67
2.81
0.57
0.05
0.07
0.23
0.00
0.01
0.00
0.21
9.73
0
0
0
0
0
0
0
0
0
0
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total Public shareholding (B) . . 171,788 237,656,473 234,006,981
61.03
55.64
0
0.00
Total (A)+(B) . . . . . . . . . . . . . . . . 171,798 389,424,425 385,774,933 100.00
91.17
0
0.00
(C)
Shares held by Custodians
and against which
Depository Receipts
have been issued
(1) Promoter and promoter
group . . . . . . . . . . . . . . . .
(2) Public . . . . . . . . . . . . . . . . . .
Sub Total . . . . . . . . . . . . . . . . . . .
0
2
2
0
0
37,731,208 37,731,208
37,731,208 37,731,208
0.00
0.00
0.00
0.00
8.83
8.83
0
0
0
0.00
0.00
0.00
Total (A)+(B)+(C) . . . . . . . . . . . . 171,800 427,155,633 423,506,141
0.00
100.00
0
0.00
154
The following table sets forth the shareholding of the Promoters as at December 31, 2012 and the number of
shares proposed to be allotted to some of the Promoters in the Preferential Allotment as approved by the
shareholders of the Bank on January 28, 2013.
Sr.
No.
1
2
3
4
5
6
7
Total Equity Shares held
Number of Equity
Total Shareholding
Total Shareholding as
Shares proposed to
as a% of total No. of
a% of total No. of
be allotted in the
Equity Shares adjusted
Number
Equity Shares
Preferential Allotment
for the Issue(1)
Name of the Shareholder
Administrator of the specified
undertaking of the Unit Trust
of India — UTI — 1
SUUTI . . . . . . . . . . . . . . . . . .
Life Insurance Corporation of
India . . . . . . . . . . . . . . . . . . . .
General Insurance
Corporation of India . . . . . . .
The New India Assurance
Company Limited . . . . . . . . .
National Insurance Company
Limited . . . . . . . . . . . . . . . . .
The Oriental Insurance
Company Limited . . . . . . . . .
United India Insurance
Company Limited . . . . . . . . .
Total
97,224,373
22.76
—
21.08
37,868,816
8.87
4,240,450
8.21
7,050,000
1.65
771,990
1.53
3,786,078
0.89
353,102
0.82
3,287,000
0.77
363,157
0.71
1,380,312
0.32
—
0.30
1,171,373
0.27
109,246
0.26
151,767,952
35.53
5,837,945
32.91
(1) Simultaneously with the Issue, the Bank is conducting the Preferential Allotment. The adjustment does not include the
effects of any take-up by the Promoters of any of the Equity Shares offered in the Preferential Allotment.
The following table sets forth the shareholders of the Bank, other than the shareholders belonging to the
Promoters, holding more than 1% of the Bank’s paid-up capital as at December 31, 2012
Sr.
No.
1.
2.
3.
4.
5.
6.
No. of
Equity
Shares
Name of the Shareholder
HSBC Bank Mauritius Limited A/c Cinnamon Capital Ltd . . . . . . . . . . . . . 16,860,155
Genesis Indian Investment Company Limited — General Sub Fund . . . . . 11,978,006
ICICI Prudential Life Insurance Company Limited . . . . . . . . . . . . . . . . . . . 11,033,146
Europacific Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,446,776
Centaura Investment (Mauritius) Pte. Limited . . . . . . . . . . . . . . . . . . . . . . .
4,803,544
Vanguard Emerging Market Stock Index Fund A Series of Vanguard
International Equity Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,488,810
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
55,610,437
Total Shareholding
as a% of total No. of
Equity Shares
3.95
2.80
2.58
1.51
1.12
1.05
13.02
ISSUE PROCEDURE
The following is a summary intended to present a general outline of the procedure relating to the
application, payment, Allocation and Allotment. The procedure followed in the Issue may differ from the one
mentioned below and the investors are assumed to have apprised themselves of the same from the Bank or the
Book Running Lead Managers. The investors are advised to inform themselves of any restrictions or limitations
that may be applicable to them. See “Selling Restrictions” and “Transfer Restrictions”.
Qualified Institutions Placement
The Issue is being made to QIBs in reliance upon Chapter VIII of the SEBI Regulations. Under Chapter VIII
of the SEBI Regulations, a listed company in India may issue eligible securities, including equity shares to QIBs,
provided inter alia, that:
• the shareholders of the issuer have passed a special resolution approving such QIP;
• equity shares of the same class of such issuer, which are proposed to be allotted through the QIP or
pursuant to conversion or exchange of eligible securities, are listed on a stock exchange in India that has
nation-wide trading terminals for a period of at least one year as on the date of issuance of notice to its
shareholders for convening the meeting to pass the above-mentioned special resolution; and
• such issuer complies with the minimum public shareholding requirements as specified in the SCRR.
At least 10% of the equity shares issued to QIBs must be allotted to Mutual Funds, provided that, if this
portion, or any part thereof to be allotted to Mutual Funds remains unsubscribed, it may be allotted to other QIBs.
QIBs have been specifically defined under Regulation 2(1)(zd) of the SEBI Regulations.
Additionally, there is a minimum pricing requirement under the SEBI Regulations. The issue price of the
equity shares issued under the QIP shall not be less than the average of the weekly high and low of the closing
prices of the related equity shares of such issuer quoted on the stock exchange during the two weeks preceding
the relevant date. However, a discount of up to 5% of the floor price is permitted in accordance with the
provisions of the SEBI Regulations.
The “relevant date” referred to above means, in case of allotment of equity shares, the date of the meeting in
which the board or the committee of directors duly authorized by the board decides to open the proposed issue
and “stock exchange” means any of the recognized stock exchanges on which the equity shares of the same class
are listed and on which the highest trading volume in such equity shares has been recorded during the two weeks
immediately preceding the relevant date.
The securities must be allotted within 12 months from the date of the shareholders’ resolution approving the
QIP. Securities issued pursuant to a QIP must be issued on the basis of a placement document that shall contain
all material information including the information as specified in Schedule XVIII of the SEBI Regulations. The
preliminary placement document and the placement document are private documents provided to select investors
through serially numbered copies and are required to be placed on the website of the concerned stock exchanges
and the issuer company with a disclaimer to the effect that it is in connection with an issue to QIBs and no offer
is being made to the public or to any other category of investors.
Pursuant to the provisions of Section 67(3) of the Companies Act, for a transaction that is not a public
offering, an invitation or offer may not be made to more than 49 persons.
The minimum number of allottees for each QIP shall not be less than:
• two, where the issue size is less than or equal to Rs.2.5 billion; and
• five, where the issue size is greater than Rs.2.5 billion.
No single allottee shall be allotted more than 50% of the issue size.
QIBs that belong to the same group or that are under common control shall be deemed to be a single
allottee.
In terms of Regulation 89 of the SEBI Regulations, the aggregate of the proposed QIP and all previous QIPs
made in the same fiscal year shall not exceed five times the net worth of the issuer as per the audited balance
sheet of the previous fiscal year. The issuer shall furnish a copy of the preliminary placement document to each
stock exchange on which its equity shares are listed.
The Bank has applied for and received the in-principle approvals each dated January 28, 2013 from the
Stock Exchanges under Clause 24 (a) of the Equity Listing Agreements for the listing of the Equity Shares issued
pursuant to the Issue on the Stock Exchanges. The Bank has also filed a copy of the Preliminary Placement
Document and this Placement Document with the Stock Exchanges.
156
The Issue has been authorized and approved by the Board of Directors on December 17, 2012 and by the
shareholders of the Bank through a resolution passed through postal ballot on January 28, 2013.
The eligible securities including equity shares allotted to a QIB pursuant to a QIP shall not be sold for a
period of one year from the date of allotment, except on the floor of a recognized stock exchange in India.
Allotments made to FVCIs, VCFs and AIFs in the Issue are subject to the rules and regulations that are
applicable to them, including in relation to lock-in requirements.
The Equity Shares offered hereby have not been and will not be registered under the Securities Act and may
not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in
Regulation S) except pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. Accordingly, the Equity Shares are being
offered and sold (a) in the United States only to persons reasonably believed to be Qualified Institutional Buyers
(as defined in Rule 144A under the Securities Act) pursuant to Section 4(a)(2) under the Securities Act, and
(b) outside the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the
Securities Act. For a description of certain restrictions on transfer of the Equity Shares, see “Transfer
Restrictions”.
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other
jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any
such jurisdiction, except in compliance with the applicable laws of such jurisdiction.
Issue Procedure
1. The Bank and the Book Running Lead Managers shall circulate serially numbered copies of the
Preliminary Placement Document and the Application Forms, either in electronic form or physical form, to not
more than 49 QIBs.
2. The list of QIBs to whom the Application Form is delivered shall be determined by the Book Running
Lead Managers in consultation with the Bank. Unless a serially numbered Preliminary Placement Document
along with the Application Form is addressed to a particular QIB, no invitation to subscribe shall be
deemed to have been made to such QIB. Even if such documentation were to come into the possession of any
person other than the intended recipient, no offer or invitation to offer shall be deemed to have been made to such
person.
3. QIBs may submit an Application Form, including any revisions thereof, to the Book Running Lead
Managers during the Bid/Issue Period.
4. QIBs will be required to indicate the following in the Application Form:
a. Name of the QIB to whom Equity Shares are to be Allotted;
b. Number of Equity Shares Bid for;
c. Price at which they offer to apply for the Equity Shares, provided that the QIBs may also indicate
that they are agreeable to submit a Bid in respect of the Equity Shares at “Cut-off Price” which shall be any
price as may be determined by the Bank in consultation with the Book Running Lead Managers at or above
the Floor Price or the Floor Price net of such discount as approved in accordance with SEBI Regulations;
d. Details of the depository account to which the Equity Shares should be credited; and
e. A representation that it is either (i) outside the United States, or (ii) an institutional investor meeting
the requirements of a “qualified institutional buyer” as defined in Rule 144A, and (iii) it has agreed to
certain other representations set forth in the Application Form.
Note: Each sub-account of an FII other than a sub-account which is a foreign corporate or a foreign
individual will be considered as an individual QIB and separate Application Forms would be required
from each such sub-account for submitting Application Forms.
5. Once a duly filled Application Form is submitted by a QIB, such Application Form constitutes an
irrevocable offer and cannot be withdrawn after the Bid/Issue Closing Date.
The Bid/Issue Closing Date shall be notified to the Stock Exchanges and the QIBs shall be deemed to have
been given notice of such date after the receipt of the Application Form.
The Bids made by the asset management companies or custodian of Mutual Funds shall specifically state the
names of the concerned schemes for which the Bids are made. In case of a Mutual Fund, a separate Bid can be
made in respect of each scheme of the Mutual Fund registered with SEBI and such Bids in respect of more than
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one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the
scheme for which the Bid has been made. Application by various schemes or funds of a Mutual Fund will be
treated as one application from the Mutual Fund.
Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or
maximum number of Equity Shares that can be held by them under applicable laws.
6. Upon receipt of the Application Form, the Bank, after closure of the Issue, shall determine the final terms,
including the Issue Price of the Equity Shares to be issued in consultation with the Book Running Lead
Managers. On determination of the final terms of the Equity Shares, the Book Running Lead Managers on behalf
of the Bank will send the CAN, along with serially numbered Placement Document, to the QIBs who have been
Allocated Equity Shares. The dispatch of the CAN shall be deemed a valid, binding and irrevocable contract for
the QIBs to pay the Issue Price for the Equity Shares Allocated to such QIBs. The CAN shall contain details such
as the number of Equity Shares Allocated to the QIB and payment instructions including the details of the
amounts payable by the QIB for Allotment in its name and the Pay-in Date as applicable to the respective QIB.
Please note that the Allocation will be at the absolute discretion of the Bank and will be based on the
recommendation of the Book Running Lead Managers.
7. Pursuant to receiving the CAN, each QIB shall be required to make the payment of the entire application
monies for the Equity Shares indicated in the CAN at the Issue Price, through electronic transfer to the
designated bank account of the Bank by the Pay-in Date as specified in the CAN sent to the respective QIBs.
8. Upon receipt of the application monies from the QIBs, the Bank shall Allot Equity Shares to the Bidders
as per the details in the CAN sent to them. The Bank shall not Allot to more than 49 QIBs. The Bank will
intimate to the Stock Exchanges the details of the Allotment and apply for approvals for listing of the Equity
Shares on the Stock Exchanges prior to crediting the Equity Shares into the beneficiary account maintained with
the Depository Participant by the QIBs.
9. After receipt of the listing approval from the Stock Exchanges, the Bank shall credit the Equity Shares
into the Depository Participant accounts of the respective QIBs. The Bank shall then apply for the trading
permissions from the Stock Exchanges.
10. The Equity Shares that have been credited to the beneficiary account with the Depository Participant of
the QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of final trading and listing
approvals from the Stock Exchanges.
11. Upon receipt of intimation of final trading and listing approval from the Stock Exchanges, the Bank may
inform the QIBs who have received an Allotment of the receipt of such approval. The Bank shall not be
responsible for any delay or non-receipt of the communication of the final trading and listing permissions from
the Stock Exchanges or any loss arising from such delay or non-receipt. Final listing and trading approvals
granted by the Stock Exchanges are also placed on their respective websites. QIBs are advised to apprise
themselves of the status of the receipt of the permissions from the Stock Exchanges or the Bank.
Qualified Institutional Buyers
Only QIBs as defined in Regulation 2(1)(zd) of the SEBI Regulations, and not otherwise excluded pursuant
to Regulation 86(1)(b) of Chapter VIII of the SEBI Regulations, are eligible to invest.
Currently, under Regulation 2(1)(zd) of the SEBI Regulations, a QIB means:
• Public financial institutions as defined in Section 4A of the Companies Act;
• Scheduled commercial banks;
• Mutual Funds;
• FII and sub-accounts registered with SEBI, other than a sub-account which is a foreign corporate or
foreign individual;
• Multilateral and bilateral development financial institutions;
• VCFs;
• FVCIs;
• AIFs;
• State industrial development corporations;
• Insurance companies registered with the Insurance Regulatory and Development Authority;
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• Provident funds with a minimum corpus of Rs.250 million;
• Pension funds with a minimum corpus of Rs.250 million;
• National Investment Fund set up by the Government;
• Insurance funds set up and managed by the army, navy or air force of the Union of India; and
• Insurance funds set up and managed by the Department of Posts, India.
Under Regulation 86(1)(b) of the SEBI Regulations, no Allotment shall be made, either directly or
indirectly, to any QIB who is a Promoter of the Bank or any person related to the Promoters.
For this purpose, any QIB who has all or any of the following rights shall be deemed to be a person related
to the Promoter(s):
• rights under a shareholders’ agreement or voting agreement entered into with Promoters or persons
related to the Promoters;
• veto rights; or
• the right to appoint a nominee director on the Board.
unless such QIB has acquired any of these rights in its capacity as a lender to the Bank and such QIB does not
hold any Equity Shares.
Non-resident QIBs can participate in the Issue under Schedule 1 of the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as
amended.
FIIs are permitted to participate in the Issue subject to compliance with all applicable laws and such
that the shareholding of the FIIs does not exceed specified limits as prescribed under applicable laws in
this regard.
No single FII can hold more than 10% of the post Issue paid-up capital of the Bank. In respect of an FII
investing in the Equity Shares on behalf of its eligible sub-accounts, the investment on behalf of each eligible sub
account shall not exceed 10% of the Bank’s total issued capital or 5% of the total issued capital of the Bank in
case such eligible sub-account is a foreign corporate or an individual. The shareholders of the Bank have passed a
special resolution dated October 23, 2001 increasing the investment limits by FIIs up to 49% of the share capital
of the Bank.
The Bank and the Book Running Lead Managers are not liable for any amendment or modification or
change to applicable laws or regulations, which may occur after the date of this Placement Document.
QIBs are advised to make their independent investigations and satisfy themselves that they are eligible to
apply. QIBs are advised to ensure that any single application from them does not exceed the investment
limits or maximum number of Equity Shares that can be held by them under applicable law or regulation
or as specified in this Placement Document. Further, QIBs are required to satisfy themselves that their
Application Form would not eventually result in triggering a tender offer under the Takeover Code.
A minimum of 10% of the Equity Shares in the Issue shall be Allocated to Mutual Funds. If no
Mutual Fund is agreeable to take up the Mutual Fund Portion, such Mutual Fund Portion or part thereof
may be Allotted to other QIBs by the Bank.
No person holding shares in a banking company shall, in respect of any shares held by him, exercise voting
rights on poll in excess of 10% of the total voting rights of all the shareholders of the banking company. Provided
that the RBI may, increase such ceiling on voting rights from 10% to 26%, in a phased manner.
Note: Affiliates or associates of the Book Running Lead Managers who are QIBs may participate in
the Issue in compliance with applicable laws.
Application Form
QIBs shall only use the serially numbered Application Form supplied by the Book Running Lead Managers
in either electronic form or by physical delivery for the purpose of making a Bid (including revision of Bid) in
terms of the Preliminary Placement Document.
By making a Bid (including the revision thereof) for the Equity Shares through an Application Form and
pursuant to the terms of the Preliminary Placement Document, each QIB will be deemed to have made the
following representations and warranties and the representations, warranties and agreements made under the
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sections and paragraphs “Notice to Investors — Representation by Investors”, “Selling Restrictions” and
“Transfer Restrictions”:
1. it is a QIB in terms of Regulation 2(1)(zd) of the SEBI Regulations and not excluded under
Regulation 86 of the SEBI Regulations, has a valid and existing registration under the applicable laws in
India (as applicable) and is eligible to participate in the Issue;
2. it is not a Promoter of the Bank and is not a person related to the Promoters, either directly or
indirectly, and its Bid does not directly or indirectly represent the Promoters or promoter group or persons
related to the Promoter(s);
3. it has no rights under a shareholders’ agreement or voting agreement with the Promoters or persons
related to the Promoters, no veto rights or right to appoint any nominee director on the Board other than that
acquired in the capacity of a lender not holding any Equity Shares, which shall not be deemed to be a person
related to the Promoters;
4. it has no right to withdraw its Bid after the Bid/Issue Closing Date;
5. if the Equity Shares are Allotted pursuant to the Issue, the QIB shall not, for a period of one year
from Allotment, sell such Equity Shares so acquired otherwise than on the floor of the Stock Exchanges;
6. it is eligible to Bid and hold any of the Equity Shares so Allotted. The QIB further confirms that the
holding of the QIB, does not and shall not, exceed the permissible limits as per any regulations applicable to
the QIB;
7. its Bids would not eventually result in triggering a tender offer under the Takeover Code;
8. that to the best of its knowledge and belief, together with other QIBs in the Issue that belong to the
same group or are under common control, the Allotment to the QIB shall not exceed 50% of the Issue Size.
For the purposes of this statement:
a. The expression “belongs to the same group” shall be interpreted by applying the concept of
“companies under the same group” as provided in sub-section (11) of Section 372 of the Companies
Act; and
b. “Control” shall have the same meaning as is assigned to it by Regulation 2(1)(e) of the
Takeover Code.
9. it shall not undertake any trade in the Equity Shares credited into the beneficiary account maintained
with the Depository Participant by the QIBs until such time that the final listing and trading approvals for
the Equity Shares are issued by the Stock Exchanges;
10. it acknowledges, represents and agrees that its total Holding in the paid-up share capital of the
Bank, when aggregated together with any existing Holding and/or Holding of any of its “relative” or
“associated enterprises” (as defined under Section 92A of the Indian Income Tax Act, 1961), does not
exceed 5% of the total paid-up share capital of the Bank, unless it is an existing shareholder who already
holds 5% or more of the underlying paid up share capital of the Bank pursuant to the acknowledgment of the
RBI, provided that its Holding does not, without the further acknowledgment of the RBI, exceed its existing
Holding after Allotment; and
11. it acknowledges that as specified by RBI in its letter dated January 7, 2013 and as required in terms
of the RBI circular dated April 20, 2010, the Bank shall apply for a post facto approval from the RBI in
respect of this Issue, upon completion of the Allotment process. In the event that RBI does not grant the post
facto approval in respect of Allotment to any Allottee(s), such Allottee shall be required to comply with the
instructions that may be received from the RBI, in this regard.
QIBS WOULD NEED TO PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, PAN, THEIR
DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION
NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBS MUST
ENSURE THAT THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS
THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. FOR THIS PURPOSE, ELIGIBLE
SUB ACCOUNTS OF AN FII WOULD BE CONSIDERED AS AN INDEPENDENT QIB.
Demographic details such as address and bank account will be obtained from the Depositories as per the
beneficiary account details given above.
The submission of an Application Form by the QIBs shall be deemed a valid, binding and irrevocable offer
for the QIB to pay the Issue Price for the Equity Shares (as indicated by the CAN) and becomes a binding
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contract on the QIB, upon issuance of the CAN by the Book Running Lead Managers on behalf of the Bank in
favor of the QIB.
Submission of Application Form
All Application Forms must be duly completed with information (including the name of the QIB and the
number of the Equity Shares applied for). The Application Form shall be submitted to the Book Running Lead
Managers either through electronic form or through physical delivery at the following address:
Axis Capital Limited
Axis House
1st Floor, C-2
Wadia International Center
P. B. Marg, Worli
Mumbai 400 025
Tel: (91 22) 4325 4587
Fax: (91 22) 4325 5599
Email: venkatesh.iyer@axiscap.in
Contact Person: G. Venkatesh
Citigroup Global Markets India
Private Limited
12th Floor
Bakhtawar
Nariman Point
Mumbai 400 021
Tel: (91 22) 6631 9817
Fax: (91 22) 6646 6366
Email: shashank.pandey@citi.com
Contact Person: Shashank Pandey
J. P. Morgan India Private
Limited
J. P. Morgan Tower
Off C. S. T. Road, Kalina
Santacruz (East)
Mumbai 400 098
Tel: (91 22) 6157 3458
Fax: (91 22) 6157 3901
Email: ipo.india@jpmorgan.com
Contact Person: Ankit Maniar
The Book Running Lead Managers shall not be required to provide written acknowledgement of the same.
Pricing and Allocation
Build up of the book
The QIBs subscribing to the Equity Shares shall submit their Bids (including the revision thereof) for the
Equity Shares, within the Bid/Issue Period to the Book Running Lead Managers and cannot be withdrawn after
the Bid/Issue Closing Date.
Price discovery, terms and allocation
The Bank, in consultation with the Book Running Lead Managers, shall determine Issue Price which shall
be at or above the Floor Price or the Floor Price net of such discount as approved in accordance with SEBI
Regulations. A discount of up to 5% to the floor price is permitted in accordance with the provisions of SEBI
Regulations.
After finalization of the Issue Price, the Bank has updated the Preliminary Placement Document with such
details and has filed the same with the Stock Exchanges as the Placement Document.
Method of Allocation
The Bank shall determine the Allocation in consultation with the Book Running Lead Managers on a
discretionary basis and in compliance with Chapter VIII of the SEBI Regulations.
Application Forms received from the QIBs at or above the Issue Price shall be grouped together to
determine the total demand for each type of Equity Share. The Allocation to all such QIBs will be made at the
Issue Price. Allocation to Mutual Funds for up to a minimum of 10% of the applicable Issue size shall be
undertaken subject to valid Bids being received at or above the Issue Price.
THE DECISION OF THE BANK AND THE BOOK RUNNING LEAD MANAGERS IN RESPECT
OF ALLOCATION SHALL BE BINDING ON ALL QIBs. QIBs MAY NOTE THAT ALLOCATION IS
AT THE SOLE AND ABSOLUTE DISCRETION OF THE BANK AND QIBS MAY NOT RECEIVE
ANY ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID APPLICATION FORMS AT OR
ABOVE THE ISSUE PRICE. NEITHER THE BANK NOR THE BOOK RUNNING LEAD MANAGERS
ARE OBLIGED TO ASSIGN ANY REASONS FOR SUCH NON-ALLOCATION.
All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment
letter shall be submitted to the Book Running Lead Managers as per the details provided in the respective CAN.
CAN
Based on the Application Forms received, the Bank and the Book Running Lead Managers, in their sole and
absolute discretion, decide the list of QIBs to whom the serially numbered CAN shall be sent, pursuant to which
the details of the Equity Shares Allocated to them and the details of the amounts payable for Allotment of such
Equity Shares in their respective names shall be notified to such QIBs. Additionally, the CAN will include details
of the relevant Escrow Bank Account into which such payments would need to be made, address where the
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application money needs to be sent, Pay-in Date as well as the probable designated date, being the date of credit
of the Equity Shares to the QIB’s account, as applicable to the respective QIBs (“Designated Date”).
The QIBs who have been Allocated Equity Shares would also be sent a serially numbered Placement
Document either in electronic form or by physical delivery along with the serially numbered CAN.
The dispatch of the serially numbered Placement Document and the CAN to the QIB shall be deemed a
valid, binding and irrevocable contract for the QIB to furnish all details that may be required by the Book
Running Lead Managers and to pay the entire Issue Price for all the Equity Shares Allocated to such QIB.
QIBs are advised to instruct their Depository Participant to accept the Equity Shares that may be
Allotted to them pursuant to the Issue.
Company Account for Payment of Application Money
The Bank has opened the Escrow Bank Account with Axis Bank Limited, Fort branch, acting as the Escrow
Bank in terms of the arrangement amongst the Bank, the Book Running Lead Managers and the Escrow Bank.
The QIB will be required to deposit the entire amount payable for the Equity Shares Allocated to it by the Pay-in
Date as mentioned in the respective CAN.
If the payment is not made favoring the “Axis Bank Limited — QIP Escrow Account” within the time
stipulated in the CAN, the Application Form and the CAN of the QIB are liable to be cancelled.
In case of cancellations or default by the QIBs, the Bank and the Book Running Lead Managers have the
right to reallocate the Equity Shares at the Issue Price among existing or new QIBs at their sole and absolute
discretion, subject to the compliance with the requirement of ensuring that the Application Forms are sent to not
more than 49 QIBs.
Payment Instructions
The payment of application money shall be made by the QIBs to the relevant Escrow Bank Account
identified in the CAN, in the name of “Axis Bank Limited — QIP Escrow Account” as per the payment
instructions provided in the CAN.
QIBs may make payment only through electronic fund transfer.
Note: Payments through cheques are liable to be rejected.
Designated Date and Allotment of Equity Shares
1. The Equity Shares will not be Allotted unless the QIBs pay the Issue Price to the relevant Escrow Bank
Account as stated above.
2. In accordance with the SEBI Regulations, Equity Shares will be issued and Allotment shall be made only
in the dematerialized form to the Allottees. Allottees will have the option to re-materialize the Equity Shares, if
they so desire, as per the provisions of the Companies Act and the Depositories Act.
3. The Bank reserves the right to cancel the Issue at any time up to Allotment without assigning any reasons
whatsoever.
4. Post Allotment and credit of Equity Shares into the QIB’s Depository Participant account, the Bank
would be required to obtain final listing and trading approvals from the Stock Exchanges.
In the unlikely event of any delay in the Allotment or credit of Equity Shares, or delay in receipt of trading
or listing approvals or cancellation of the Issue, no interest or penalty would be payable by the Bank.
5. QIBs who have been Allotted more than 5% of the Equity Shares in the Issue, the Bank shall disclose the
name and the number of the Equity Shares Allotted to such QIB to the Stock Exchanges and the Stock Exchanges
will make the same available on their website.
6. The Escrow Bank shall release the monies lying to the credit of the Escrow Bank Account to the Bank
after Allotment of Equity Shares to QIBs.
Other Instructions
Permanent Account Number or PAN
Each QIB should mention its PAN allotted under the I.T. Act in the Application Form. Applications without
this information will be considered incomplete and are liable to be rejected. It is to be specifically noted that
applicants should not submit the GIR number instead of the PAN as the Application Form is liable to be rejected
on this ground.
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Right to Reject Applications
The Bank, in consultation with the Book Running Lead Managers, may reject Bids, in part or in full,
without assigning any reasons whatsoever. The decision of the Bank and the Book Running Lead Managers in
relation to the rejection of Bids shall be final and binding.
Equity Shares in dematerialized form with NSDL or CDSL
The allotment of each of the Equity Shares in the Issue shall be only in dematerialized form (i.e., not in the
form of physical certificates but be fungible and be represented by the statement issued through the electronic
mode).
1. A QIB applying for Equity Shares must have at least one beneficiary account with a Depository
Participant of either NSDL or CDSL prior to making the Bid.
2. Equity Shares Allotted pursuant to the Issue to a successful QIB will be credited in electronic form
directly to the relevant beneficiary account (with the Depository Participant) of the QIB.
3. Equity Shares in electronic form can be traded only on the Stock Exchanges having electronic
connectivity with the Depositories. The Stock Exchanges have electronic connectivity with the Depositories.
4. The trading of each of the Equity Shares would be in dematerialized form only for all QIBs in the
demat segment of the respective Stock Exchanges.
The Bank will not be responsible or liable for the delay in the credit of any of the Equity Shares due to
errors in the Application Form or otherwise on part of the QIBs.
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PLACEMENT
Placement Agreement
The Book Running Lead Managers have entered into a placement agreement with the Bank dated
January 28, 2013 (the “Placement Agreement”), pursuant to which the Book Running Lead Managers have
agreed to manage the Issue and procure subscription on a best effort basis for the Equity Shares to be placed with
the QIBs, pursuant to Chapter VIII of the SEBI Regulations.
The Placement Agreement contains customary representations and warranties, as well as indemnities from
us and is subject to termination in accordance with the terms contained therein.
Applications shall be made to list the Equity Shares issued pursuant to the Issue and admit them to trading
on the Stock Exchanges. No assurance can be given as to the liquidity or sustainability of the trading market for
such Equity Shares, the ability of holders of the Equity Shares to sell their Equity Shares or the price at which
holders of the Equity Shares will be able to sell their Equity Shares.
This Placement Document has not been, and will not be, registered as a prospectus with the RoC and, no
Equity Shares issued pursuant to the Issue will be offered in India or overseas to the public or any members of
the public in India or any class of investors, other than QIBs.
In connection with the Issue, the Book Running Lead Managers (or their affiliates) may, for their own
accounts, subscribe to the Equity Shares or enter into asset swaps, credit derivatives or other derivative
transactions relating to the Equity Shares to be issued pursuant to the Issue at the same time as the offer and sale
of the Equity Shares, or in secondary market transactions. As a result of such transactions, the Book Running
Lead Managers may hold long or short positions in such Equity Shares. These transactions may comprise a
substantial portion of the Issue and no specific disclosure will be made of such positions.
Affiliates of the Book Running Lead Managers may purchase Equity Shares and be Allotted Equity Shares
for proprietary purposes and not with a view to distribute or in connection with the issuance of P-Notes.
The Book Running Lead Managers and their affiliates may engage in transactions with and perform services
for the Bank and its subsidiaries, group companies or affiliates in the ordinary course of business and have
engaged, or may in the future engage, in commercial banking and investment banking transactions with the Bank
and its subsidiaries, group companies or affiliates, for which they have received compensation and may in the
future receive compensation.
Lock-up
The Bank shall not, for a period commencing the date of the Placement Agreement and ending 180 days
from the date of the Allotment, without the prior written consent of the Book Running Lead Managers, directly
or indirectly (a) offer, sell or announce the intention to sell, pledge, issue, contract to issue, grant any option,
right or warrant for the issuance and allotment, or otherwise dispose of or transfer, or establish or increase a put
equivalent position or liquidate or decrease a call equivalent position with respect to, any Equity Shares or
securities convertible into or exchangeable or exercisable for Equity Shares (including any warrants or other
rights to subscribe for any Equity Shares), (b) enter into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, any of the economic consequences associated with the
ownership of any of the Equity Shares or any securities convertible into or exercisable or exchangeable for
Equity Shares (regardless of whether any of the transactions described in clause (a) or (b) is to be settled by the
delivery of Equity Shares or such other securities, in cash or otherwise), or (c) deposit Equity Shares with any
other depositary in connection with a depositary receipt facility, or (d) enter into any transaction (including a
transaction involving derivatives) having an economic effect similar to that of a sale or deposit of the Equity
Shares in any depository receipt facility; or (e) publicly disclose any intention to enter into any transaction falling
within (a) to (d) above or enter into any transaction falling within (a) to (d) above.
Provided, however, that the foregoing shall not apply to (a) issuance of Equity Shares pursuant to the Issue,
(b) any Equity Shares issued or options to purchase Equity Shares granted pursuant to existing employee benefit
plans of the Bank referred to in the Preliminary Placement Document or (c) any Equity Shares issued pursuant to
the Preferential Allotment.
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SELLING RESTRICTIONS
The distribution of this Placement Document and the offer, sale or delivery of the Equity Shares is restricted
by law in certain jurisdictions. Persons who come into possession of this Placement Document are advised to
take legal advice with regard to any restrictions that may be applicable to them and to observe such restrictions.
This Placement Document may not be used for the purpose of an offer or sale in any circumstances in which such
offer or sale is not authorized or permitted.
General
No action has been taken or will be taken that would permit a public offering of the Equity Shares to occur
in any jurisdiction, or the possession, circulation or distribution of this Placement Document or any other
material relating to the Bank or the Equity Shares in any jurisdiction where action for such purpose is required.
Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither this Placement
Document nor any offering materials or advertisements in connection with the Equity Shares may be distributed
or published in or from any country or jurisdiction except under circumstances that will result in compliance with
any applicable rules and regulations of any such country or jurisdiction. The Issue will be made in compliance
with the applicable SEBI Regulations. Each purchaser of the Equity Shares in the Issue will be required to make,
or be deemed to have made, as applicable, the acknowledgments and agreements as described under “Transfer
Restrictions”.
Republic of India
This Placement Document may not be distributed directly or indirectly in India or to residents of India and
any Equity Shares may not be offered or sold directly or indirectly in India to, or for the account or benefit of,
any resident of India except as permitted by applicable Indian laws and regulations, under which an offer is
strictly on a private and confidential basis and is limited to eligible and not exceeding 49 QIBs and is not an offer
to the public. This Placement Document is neither a public issue nor a prospectus under the Companies Act or an
advertisement and should not be circulated to any person other than to whom the offer is made. This Placement
Document has not been and will not be registered as a prospectus with the Registrar of Companies in India.
Canada
The Equity Shares will not be qualified for sale under the securities laws of any province or territory of
Canada. Each Book Running Lead Manager has represented and agreed that it has not offered, sold or distributed
and will not offer, sell or distribute any securities, directly or indirectly, in Canada or to or for the benefit of any
resident of Canada, other than in compliance with applicable securities laws. Each Book Running Lead Manager
has also represented and agreed that it has not distributed or delivered and will not distribute or deliver the
Placement Document, or any other offering material in connection with any offering of the Equity Shares, in
Canada other than in compliance with applicable securities laws.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a “Relevant Member State”), an offer to the public of any Equity Shares which are the subject
of the Issue contemplated by this Placement Document may not be made in that Relevant Member State except
that an offer to the public in that Relevant Member State of any Equity Shares may be made at any time under the
following exemptions under the Prospective Directive, if they have been implemented in that Relevant Member
State:
(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so
authorized or regulated, whose corporate purpose is solely to invest in securities,
(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the
2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the
Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of
the relevant Dealer or Dealers nominated by the Issuer for any such offer; or
(c) in any other circumstances failing which Article 3(2) of the Prospectus Directive,
provided that no such offer of the Equity Shares shall result in a requirement for the publication by the Bank or
any Book Running Lead Managers or the initial purchaser of a prospectus pursuant to Article 3 of the Prospectus
Directive.
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For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any
Relevant Member State means the communication in any form and by any means of sufficient information on the
terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any securities,
as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that
Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto,
including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and
includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD
Amending Directive” means Directive 2010/73/EU and includes any relevant implementing measure in each
Relevant Member State.
Hong Kong
The contents of this Placement Document have not been reviewed by any regulatory authority in Hong
Kong. Prospective investors are advised to exercise caution in relation to the Issue. If prospective investors are in
any doubt about any of the contents of this Placement Document, they should obtain independent professional
advice. Please note that (1) Equity Shares may not be offered or sold in Hong Kong by means of this or any other
document other than to professional investors within the meaning of Part I of Schedule 1 to the Securities and
Futures Ordinance of Hong Kong (Cap. 571) (SFO) and any rules made thereunder, or in other circumstances
which do not result in the document being a “prospectus” as defined in the Companies Ordinance of Hong Kong
(Cap. 32) (CO) or which do not constitute an offer or invitation to the public for the purposes of the CO or the
SFO, and (2) no person shall issue, or possess for the purposes of issue, whether in Hong Kong or elsewhere, any
advertisement, invitation or document relating to Equity Shares which is directed at, or the contents of which are
likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws
of Hong Kong) other than with respect to the Equity Shares which are or are intended to be disposed of only to
persons outside Hong Kong or only to such professional investors.
Japan
The Equity Shares have not been and will not be registered under the Financial Instruments and Exchange
Law of Japan (Law No. 25 of 1948, as amended; the “FIEL”) The Book Running Lead Managers have
represented and agreed that they will not offer or sell any Equity Shares, directly or indirectly, in Japan or to, or
for the benefit of, any resident in Japan (which term as used herein means any person resident in Japan, including
any corporation or other entity organized under the laws of Japan), or to others for reoffering or resale, directly or
indirectly, in Japan or to, or for the benefit of, a resident of Japan except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the FIEL and any other applicable laws,
regulations and ministerial guidelines of Japan.
Singapore
This Placement Document has not been registered as a prospectus with the Monetary Authority of Singapore
under the Securities and Futures Act, Chapter 289 of Singapore (the “Securities and Futures Act”).
Accordingly, the Equity Shares may not be offered or sold or made the subject of an invitation for subscription or
purchase nor may this Placement Document or any other document or material in connection with the offer or
sale or invitation for subscription or purchase of any Equity Shares be circulated or distributed, whether directly
or indirectly, to any person in Singapore other than (a) to an institutional investor pursuant to Section 274 of the
Securities and Futures Act, (b) to a relevant person, or any person pursuant to Section 275(1A) of the Securities
and Futures Act, and in accordance with the conditions specified in Section 275 of the Securities and Futures
Act, or (c) pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities
and Futures Act.
Each of the following relevant persons specified in Section 275 of the Securities and Futures Act who has
subscribed for or purchased shares, namely a person who is:
(a) a corporation (which is not an accredited investor) the sole business of which is to hold investments
and the entire share capital of which is owned by one or more individuals, each of whom is an accredited
investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments
and each beneficiary is an accredited investor, should note that shares, debentures and units of shares and
debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable
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for six months after that corporation or that trust has acquired the shares under Section 275 of the Securities
and Futures Act except:
(1) to an institutional investor under Section 274 of the Securities and Futures Act or to a relevant
person, or any person pursuant to Section 275(1A) of the Securities and Futures Act, and in accordance
with the conditions, specified in Section 275 of the Securities and Futures Act;
(2) where no consideration is given for the transfer; or
(3) by operation of law.
United Arab Emirates
The Equity Shares have not been, and are not being, publicly offered, sold, promoted or advertised in the
United Arab Emirates (including the DIFC) other than in compliance with the laws of the United Arab Emirates
(and the DIFC) governing the issue, offering and sale of securities. Further, the Placement Document does not
constitute a public offer of securities in the United Arab Emirates (including the DIFC) and is not intended to be
a public offer. The Placement Document has not been approved by or filed with the Central Bank of the United
Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.
United Kingdom
Each of the Book Running Lead Managers has represented and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of section
21 of the FSMA in connection with the issue or sale of any Equity Shares in circumstances in which section
21(1) of FSMA does not apply to the Bank; and
(b) it has complied and will comply with all applicable provisions of FSMA with respect to anything
done by it in relation to the Equity Shares in, from or otherwise involving the United Kingdom.
United States
The Equity Shares have not been and will not be registered under the Securities Act and may not be offered
or sold within the United States or to, or for the account or benefit of, U.S. persons except in either case, pursuant
to an effective registration statement or in accordance with an applicable exemption from the registration
requirements of the Securities Act. Accordingly, the Equity Shares are being offered and sold only (1) in the
United States to “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) pursuant to
the exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the
Securities Act and (2) outside the United States in reliance upon Regulation S.
Each purchaser of the Equity Shares will be deemed to have made the representations, agreements and
acknowledgements as described under the section titled — “Transfer Restrictions”.
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TRANSFER RESTRICTIONS
Due to the following restrictions, investors are advised to consult legal counsel prior to purchasing Equity
Shares or making any resale, pledge or transfer of the Equity Shares.
Purchasers are not permitted to sell the Equity Shares Allotted pursuant to the Issue, for a period of one year
from the date of Allotment, except on the Stock Exchanges. Allotments made to FVCIs, VCFs and AIFs in the
Issue are subject to the rules and regulations that are applicable to them, including in relation to lock-in
requirements. Additional transfer restrictions applicable to the Equity Shares are listed below.
U.S. Transfer Restrictions
The Equity Shares have not been and will not be registered under the United States Securities Act of 1933,
as amended, and the related rules and regulations (the “Securities Act”) and may not be offered or sold within
the United States except pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
Each purchaser of the Equity Shares in the United States or a U.S. person is deemed to have
represented, agreed and acknowledged as follows:
• It (A) is a “qualified institutional buyer” (as defined in Rule 144A) and (B) is aware that the sale of the
Equity Shares to it is being made in reliance on an exemption under the Securities Act.
• It is acquiring the Equity Shares for its own account or for the account of one or more eligible U.S.
investors (i.e., “qualified institutional buyers”, as defined above), each of which is acquiring beneficial
interests in the Equity Shares for its own account.
• It understands that the Equity Shares are being offered in a transaction not involving any public offering
in the United States within the meaning of the Securities Act, that the Equity Shares have not been and
will not be registered under the Securities Act and that if in the future it decides to offer, resell, pledge or
otherwise transfer any of the Equity Shares, such Equity Shares may be offered, resold, pledged or
otherwise transferred in compliance with the Securities Act and other applicable securities laws only
outside the United States to a purchaser not known by it to be a U.S. person in a transaction complying
with the provisions of Rule 903 or Rule 904 of Regulation S or in a transaction otherwise exempt from
the registration requirements of the Securities Act.
• It understands and agrees that if it decides to offer, resell, pledge or otherwise transfer any of the Equity
Shares in accordance with the restrictions set forth herein, it shall obtain from the transferee a
representation letter in substantially the same form as the representations in this section. Such a letter will
not be required for a non-prearranged transaction executed on the BSE Limited or the National Stock
Exchange of India Limited or any other recognized stock exchange where the Equity Shares are listed.
• It will deliver to the Bank an exit letter upon the resale of the Equity Shares purchased in the Issue stating
that the Equity Shares were sold in compliance with the above restriction.
• It will notify the executing broker and any other agent involved in any resale of the Equity Shares of the
forgoing restrictions applicable to the Equity Shares and instruct such broker or agent to abide by such
restrictions.
• It understands that the Bank has not been and will not be registered under the Investment Company Act
and investors will not be entitled to the benefits of the Investment Company Act.
• It acknowledges that if at any time its representations cease to be true, it agrees to resell the Equity Shares
at the Bank’s request.
• It is a sophisticated investor and has such knowledge and experience in financial, business and
investments as to be capable of evaluating the merits and risks of the investment in the Equity Shares. It is
experienced in investing in private placement transactions of securities of companies in a similar stage of
development and in similar jurisdictions. It and any accounts for which it is subscribing to the Equity
Shares (i) are each able to bear the economic risk of the investment in the Equity Shares, (ii) will not look
to the Bank or any of the Book Running Lead Managers for all or part of any such loss or losses that may
be suffered, (iii) are able to sustain a complete loss on the investment in the Equity Shares, (iv) have no
need for liquidity with respect to the investment in the Equity Shares, and (v) have no reason to anticipate
any change in its or their circumstances, financial or otherwise, which may cause or require any sale or
distribution by it or them of all or any part of the Equity Shares. It acknowledges that an investment in the
Equity Shares involves a high degree of risk and that the Equity Shares are, therefore, a speculative
investment. It is seeking to subscribe to the Equity Shares in this Issue for its own investment and not
with a view to distribution.
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• It has been provided access to the Preliminary Placement Document and the Placement Document which
it has read in its entirety.
• It agrees to indemnify and hold the Bank and each of the Book Running Lead Managers harmless from
any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in
connection with any breach of these representations and warranties. It will not hold any of the Bank or the
Book Running Lead Managers liable with respect to its investment in the Equity Shares. It agrees that the
indemnity set forth in this paragraph shall survive the resale of the Equity Shares.
• Where it is subscribing to the Equity Shares for one or more managed accounts, it represents and warrants
that it is authorized in writing, by each such managed account to subscribe to the Equity Shares for each
managed account and to make (and it hereby makes) the acknowledgements and agreements herein for
and on behalf of each such account, reading the reference to “it” to include such accounts.
• It acknowledges that the Bank and the Book Running Lead Managers and their respective affiliates and
others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and
agreements and agrees that, if any of such acknowledgements, representations or agreements is no longer
accurate, it will promptly notify the Bank and the Book Running Lead Managers.
Each purchaser of the Equity Shares outside the United States that is not a U.S. person is deemed to
have represented, agreed and acknowledged as follows:
• It is authorized to consummate the purchase of the Equity Shares in compliance with all applicable laws
and regulations.
• It acknowledges (or if it is a broker-dealer acting on behalf of a customer, its customer has confirmed to it
that such customer acknowledges) that the Equity Shares are being issued in reliance upon Regulation S
and such Equity Shares have not been and will not be registered under the Securities Act.
• It certifies that either (A) it is, or at the time the Equity Shares are purchased will be, the beneficial owner
of the Equity Shares and it is not a U.S. person and is located outside the United States (within the
meaning of Regulation S) or (B) it is a broker-dealer acting on behalf of its customer and its customer has
confirmed to it that (i) such customer is, or at the time the Equity Shares are purchased will be, the
beneficial owner of the Equity Shares, and (ii) such customer is not a U.S. person and is located outside
the United States (within the meaning of Regulation S).
• It is aware of the restrictions of the offer, sale and resale of the Equity Shares pursuant to Regulation S.
• The Equity Shares have not been offered to it by means of any “directed selling efforts” as defined in
Regulation S.
• It understands that the Equity Shares are being offered in a transaction not involving any public offering
in the United States within the meaning of the Securities Act, that the Equity Shares have not been and
will not be registered under the Securities Act and that if in the future it decides to offer, resell, pledge or
otherwise transfer any of the Equity Shares, such Equity Shares may be offered, resold, pledged or
otherwise transferred in compliance with the Securities Act and other applicable securities laws only
outside the United States to a purchaser not known by it to be a U.S. person in a transaction complying
with the provisions of Rule 903 or Rule 904 of Regulation S or in a transaction otherwise exempt from
the registration requirements of the Securities Act.
• It is a sophisticated investor and has such knowledge and experience in financial, business and
investments as to be capable of evaluating the merits and risks of the investment in the Equity Shares. It is
experienced in investing in private placement transactions of securities of companies in a similar stage of
development and in similar jurisdictions. It and any accounts for which it is subscribing to the Equity
Shares (i) are each able to bear the economic risk of the investment in the Equity Shares, (ii) will not look
to the Bank or any of the Book Running Lead Managers for all or part of any such loss or losses that may
be suffered, (iii) are able to sustain a complete loss on the investment in the Equity Shares, (iv) have no
need for liquidity with respect to the investment in the Equity Shares, and (v) have no reason to anticipate
any change in its or their circumstances, financial or otherwise, which may cause or require any sale or
distribution by it or them of all or any part of the Equity Shares. It acknowledges that an investment in the
Equity Shares involves a high degree of risk and that the Equity Shares are, therefore, a speculative
investment. It is seeking to subscribe to the Equity Shares in this Issue for its own investment and not
with a view to distribution.
• It has been provided access to the Preliminary Placement Document and the Placement Document which
it has read in its entirety.
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• It agrees to indemnify and hold the Bank and each of the Book Running Lead Managers harmless from
any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in
connection with any breach of these representations and warranties. It will not hold any of the Bank or the
Book Running Lead Mangers liable with respect to its investment in the Equity Shares. It agrees that the
indemnity set forth in this paragraph shall survive the resale of the Equity Shares.
• Where it is subscribing to the Equity Shares for one or more managed accounts, it represents and warrants
that it is authorized in writing, by each such managed account to subscribe to the Equity Shares for each
managed account and to make (and it hereby makes) the acknowledgements and agreements herein for
and on behalf of each such account, reading the reference to “it” to include such accounts.
• It acknowledges that the Bank and the Book Running Lead Managers and their respective affiliates and
others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and
agreements and agrees that, if any of such acknowledgements, representations or agreements is no longer
accurate, it will promptly notify the Bank and the Book Running Lead Managers.
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THE SECURITIES MARKET OF INDIA
The information in this section has been extracted from documents available on the website of SEBI and the
Stock Exchanges and has not been prepared or independently verified by the Bank or the Book Running Lead
Managers or any of their respective affiliates or advisors.
India has a long history of organized securities trading. In 1875, the first stock exchange of Asia was
established in Mumbai.
Indian Stock Exchanges
Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the
Ministry of Finance, Capital Markets Division, under the Securities Contracts (Regulation) Act, 1956 (the
“SCRA”) and the Securities Contracts (Regulation) Rules, 1957 (the “SCRR”). On June 20, 2012, SEBI, in
exercise of its powers under the SCRA and the Securities and Exchange Board of India Act, 1992, as amended
from time to time (the “SEBI Act”), notified the Securities Contracts (Regulation) (Stock Exchanges and
Clearing Corporations) Regulations, 2012 (the “SCR (SECC) Rules”), which regulate inter alia the recognition,
ownership and internal governance of stock exchanges and clearing corporations in India together with providing
for minimum capitalization requirements for stock exchanges. The SCRA, the SCRR and the SCR (SECC) Rules
along with various rules, bye-laws and regulations of the respective stock exchanges, regulate the recognition of
stock exchanges, the qualifications for membership thereof and the manner, in which contracts are entered into,
settled and enforced between members of the stock exchanges.
The SEBI Act empowers SEBI to regulate the Indian securities markets, including stock exchanges and
intermediaries in the capital markets, promote and monitor self-regulatory organizations and prohibit fraudulent
and unfair trade practices. Regulations concerning minimum disclosure requirements by public companies, rules
and regulations concerning investor protection, insider trading, substantial acquisitions of shares and takeover of
companies, buy-backs of securities, employee stock option schemes, stockbrokers, merchant bankers,
underwriters, mutual funds, foreign institutional investors, credit rating agencies and other capital market
participants have been notified by the relevant regulatory authority.
There are 20 recognized stock exchanges in India. Most of the stock exchanges have their own governing
board for self regulation. The BSE and the NSE together hold a dominant position among the stock exchanges in
terms of the number of listed companies, market capitalization and trading activity.
Listing of Securities
The listing of securities on a recognized Indian stock exchange is regulated by the applicable Indian laws
including the Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued
by the SEBI and the listing agreements of the respective stock exchanges. The SCRA empowers the governing
body of each recognized stock exchange to suspend trading of or withdraw admission to dealings in a listed
security for breach of or non compliance with any conditions or breach of company’s obligations under such
listing agreement or for any reason, subject to the issuer receiving prior written notice of the intent of the
exchange and upon granting of a hearing in the matter. SEBI also has the power to amend such equity listing
agreements and bye-laws of the stock exchanges in India, to overrule a stock exchange’s governing body and
withdraw recognition of a recognized stock exchange.
SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations,
2009 in relation to the voluntary and compulsory delisting of equity shares from the stock exchanges. In addition,
certain amendments to the SCRR have also been notified in relation to delisting.
Pursuant to an amendment of the SCRR in June 2010, all listed companies (except public sector
undertakings) are required to maintain a minimum public shareholding of 25% and have been given a period of
three years to comply with such requirement.
Index-Based Market-Wide Circuit Breaker System
In order to restrict abnormal price volatility in any particular stock, the SEBI has instructed stock exchanges
to apply daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The
index-based market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the
index movement, at 10%, 15% and 20%. These circuit breakers, when triggered, bring about a co-ordinated
trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are
triggered by movement of either the SENSEX of the BSE or the S&P CNX NIFTY of the NSE, whichever is
breached earlier.
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In addition to the market-wide index-based circuit breakers, there are currently in place individual
scrip-wise price bands of 20% movements either up or down. However, no price bands are applicable on scrips
on which derivative products are available or scrips included in indices on which derivative products are
available.
The stock exchanges in India can also exercise the power to suspend trading during periods of market
volatility. Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.
BSE
Established in 1875, it is the oldest stock exchange in India. In 1956, it became the first stock exchange in
India to obtain permanent recognition from the Government under the SCRA. As at December 31, 2012, the one
month average daily traded value of the capital market segment was Rs.25,189 million. As at December 31, 2012
there were 5,191 scripts traded on the BSE and the estimated market capitalization of stocks trading on the BSE
as at December 31, 2012 was Rs.69,218,152 million. (Source: www.bseindia.com.)
NSE
The NSE was established by financial institutions and banks to provide nationwide online, satellite-linked,
screen-based trading facilities with market-makers and electronic clearing and settlement for securities including
government securities, debentures, public sector bonds and units. The NSE was recognized as a stock exchange
under the SCRA in April 1993 and commenced operations in the wholesale debt market segment in June 1994.
The capital market (equities) segment commenced operations in November 1994 and operations in the
derivatives segment commenced in June 2000. NSE launched the NSE 50 Index, now known as S&P CNX
NIFTY, on April 22, 1996 and the Mid-cap Index on January 1, 1996. The securities in the NSE 50 Index are
highly liquid.
On December 31, 2012, the average daily traded value of the capital market segment was
Rs.130,258 million. As at December 31, 2012, there were 1,625 listed companies trading on the NSE. As at
December 31, 2012, the estimated market capitalization of stock trading on the NSE was Rs.67,637,814 million.
(Source: www.nseindia.com.)
Internet-based Securities Trading and Services
Internet trading takes place through order routing systems, which route client orders to exchange trading
systems for execution. Stockbrokers interested in providing this service are required to apply for permission to
the relevant stock exchange and also have to comply with certain minimum conditions stipulated by SEBI. The
NSE became the first exchange to grant approval to its members for providing internet-based trading services.
Internet trading is possible on both the “equities” as well as the “derivatives” segments of the NSE.
Trading Hours
Trading on both the BSE and the NSE occurs from Monday through Friday, from 9.00 a.m. to 3.30 p.m.
Indian Standard Time. The BSE and the NSE are closed on public holidays. The recognized stock exchanges
have been permitted by SEBI to set their own trading hours (in cash and derivatives segments) subject to the
condition that (i) the trading hours are between 9 a.m. and 5 p.m.; and (ii) the stock exchange has in place risk
management system and infrastructure commensurate to the trading hours.
Trading Procedure
In order to facilitate smooth transactions, the BSE replaced its open outcry system with BSE On-line
Trading (or “BOLT”) facility in 1995. This totally automated screen based trading in securities was put into
practice nation-wide. This has enhanced transparency in dealings and has assisted considerably in smoothening
settlement cycles and improving efficiency in back-office work.
NSE has introduced a fully automated trading system called National Exchange for Automated Trading (or
“NEAT”), which operates on strict time/price priority besides enabling efficient trade. NEAT has provided depth
in the market by enabling large number of members all over India to trade simultaneously, narrowing the
spreads.
Takeover Code
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
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(the “Takeover Code”) which provides specific regulations in relation to substantial acquisition of shares and
takeover. Once the equity shares of a company are listed on a stock exchange in India, the provisions of the
Takeover Code will apply to any acquisition of the company’s shares/voting rights/control. The Takeover Code
prescribes certain thresholds or trigger points in the shareholding a person or entity has in the listed Indian
company, which give rise to certain obligations on part of the acquirer. Acquisitions up to a certain threshold
prescribed under the Takeover Code mandate specific disclosure requirements, while acquisitions crossing
particular thresholds may result in the acquirer having to make an open offer of the shares of the target company.
The Takeover Code also provides for the possibility of indirect acquisitions, imposing specific obligations on the
acquirer in case of such indirect acquisition.
Insider Trading Regulations
The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended
(the “Insider Trading Regulations”) have been notified by SEBI to prohibit and penalize insider trading in
India. An insider is, among other things, prohibited from dealing in the securities of a listed company when in
possession of unpublished price sensitive information.
The Insider Trading Regulations also provide disclosure obligations for shareholders holding more than a
pre-defined percentage, and directors and officers, with respect to their shareholding in the company, and the
changes therein. The definition of “insider” includes any person who has received or has had access to
unpublished price sensitive information in relation to securities of a company or any person reasonably expected
to have access to unpublished price sensitive information in relation to securities of a company and who is or was
connected with the company or is deemed to have been connected with the company.
Depositories
The Depositories Act provides a legal framework for the establishment of depositories to record ownership
details and effect transfer in book-entry form. Further, SEBI framed regulations in relation to the registration of
such depositories, the registration of participants as well as the rights and obligations of the depositories,
participants, companies and beneficial owners. The depository system has significantly improved the operation
of the Indian securities markets.
Derivatives (Futures and Options)
Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in
February, 2000 and derivatives contracts were included within the term “securities”, as defined by the SCRA.
Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a
separate segment of an existing stock exchange. The derivatives exchange or derivatives segment of a stock
exchange functions as a self-regulatory organization under the supervision of the SEBI.
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DESCRIPTION OF THE EQUITY SHARES
The following is information relating to the Equity Shares including a brief summary of the Memorandum
and Articles of Association and the Companies Act. Prospective investors are urged to read the Memorandum
and Articles of Association carefully, and consult with their advisers, as the Memorandum and Articles of
Association and applicable Indian law, and not this summary, govern the rights attached to the Equity Shares.
General
The Bank’s authorized share capital consists of 850,000,000 Equity Shares. As of December 31, 2012
427,155,633 Equity Shares of the Bank are issued and outstanding. The Equity Shares are listed on the NSE and
the BSE.
Dividends
Under Indian law, a company pays dividends upon a recommendation by its board of directors and approval
by a majority of the shareholders at the Annual General Meeting of shareholders held within six months of the
end of each fiscal year. The Articles authorize, the shareholders to decrease but not increase the dividend amount
recommended by the Board of Directors. Dividends are generally declared as a percentage of face value and
distributed and paid to shareholders in proportion to the paid up value of their equity shares. Under the listing
agreements with the Stock Exchanges, listed companies are required to declare and disclose their dividends only
on a per share basis. The Companies Act provides that shares of a company of the same class must receive equal
dividend treatment.
These distributions and payments are required to be deposited into a separate bank account and paid to
shareholders within 30 days of the Annual General Meeting where the resolution for declaration of dividend is
approved.
The Companies Act states that any dividends that remain unpaid or unclaimed after the 30 day period are to
be transferred to a special unpaid dividend bank account held with a scheduled bank within a further period of
seven days. Any money that remains unclaimed for seven years from the date of the transfer is to be transferred
by the Bank to the Investor Education and Protection Fund created by the Government. No claims for the
payment of dividends unpaid or unclaimed for a period of seven years shall lie against the Investor Education and
Protection Fund or against the Bank.
The Articles authorize the Board of Directors to declare interim dividends, the amount of which must, in
accordance with the provisions of the Companies Act, be deposited in a separate bank account within five days
and paid to the shareholders within 30 days of declaration of such interim dividend.
Under the Companies Act, dividends payable can be paid only in cash to the registered shareholder at the
record date fixed prior to the relevant Annual General Meeting, to his order or to the order of his banker.
Before paying any dividend on the Equity Shares, the Bank is required under the Banking Regulation Act to
completely write off all capitalized expenses (including preliminary expenses, organization expenses, shareselling commission, brokerage, amounts of losses incurred or any other item of expenditure not represented by
tangible assets). The Bank is permitted to declare dividend up to 40% of current year’s profit without prior RBI
approval subject to compliance with certain prescribed requirements, including maintenance of capital adequacy
and net NPA ratios. Further, upon compliance with the prescribed requirements, the Bank is also permitted to
declare interim dividends subject to the above mentioned cap computed for the relevant accounting period.
Dividends may only be paid out of the Bank’s profits for the relevant year and in certain contingencies out
of the reserves of the company. Before declaring dividends, the Bank is required, under the Banking Regulation
Act and the Articles to transfer 20% of the balance of profits of each year to a reserve fund.
Bonus Shares
The Articles permit the Bank by a resolution of the shareholders in a general meeting to resolve in certain
circumstances that certain amounts standing to the credit of certain reserves or securities premium can be
capitalized by the issue of fully paid bonus shares or by crediting shares not fully paid-up with the whole or part
of any sum outstanding. Bonus shares must be issued pro rata to the amount of capital paid-up on existing
shareholdings. Any issue of bonus shares would be subject to the guidelines issued by SEBI in this regard.
Preemptive Rights and Issue of Additional Shares
The Companies Act gives shareholders the right to subscribe for new shares in proportion to their existing
shareholdings unless otherwise determined by a resolution passed by three-fourths of the shareholders present
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and voting at a general meeting. Under the Companies Act and the Bank’s Articles, in the event of an issuance of
securities, subject to the limitations set forth above, the Bank must first offer the new equity shares to the holders
of equity shares on a fixed record date. The offer, required to be made by notice, must include:
• the right, exercisable by the shareholders of record, to renounce the equity shares offered in favor of any
other person;
• the number of equity shares offered; and
• the period of the offer, which may not be less than 15 days from the date of the offer. If the offer is not
accepted, it is deemed to have been declined.
The Board of Directors is permitted to distribute equity shares not accepted by existing shareholders in the
manner it deems beneficial for the Bank in accordance with the Companies Act.
Under the provisions of the Companies Act, new shares may be offered to any persons whether or not those
persons include existing shareholders, if a special resolution to that effect is passed by the shareholders of a
company in a general meeting.
The Articles also provide that if at any time the Bank’s share capital is divided into different classes of
shares, the rights attached to any one class (unless otherwise provided by the terms of issue of the shares of that
class) may be varied with the consent in writing of the holders of three-fourths of the issued shares of that class,
or with the sanction of a special resolution, passed at a separate meeting of the holders of the shares of that class.
General Meetings of Shareholders
There are two types of general meetings of shareholders: Annual General Meetings and Extraordinary
General Meetings. The Bank is required to convene its Annual General Meeting within 15 months of the
previous Annual General Meeting and in any event not later than six months after the end of each fiscal year. The
Bank may convene an Extraordinary General Meeting when necessary or at the request of a shareholder or
shareholders holding on the date of the request at least 10% of the Bank’s paid-up capital. A general meeting is
generally convened by the Bank’s company secretary in accordance with a resolution of the Board of Directors.
Written notice stating the agenda of the meeting must be given at least 21 days prior to the date set for the
general meeting to the shareholders whose names are in the register at the record date.
The Annual General Meeting is held in Ahmedabad, the city in which the Bank’s registered office is
located.
Voting Rights
A shareholder has one vote for each equity share and voting may be by a show of hands or on a poll.
However, under the Banking Regulation Act, on poll, a shareholder cannot exercise voting rights in excess of
10% of the total voting rights of all shareholders. Voting is by show of hands, unless a poll is ordered by the
chairman of the meeting or demanded by a shareholder or shareholders holding at least 10% of the voting rights
in respect of the resolution or by those holding paid-up capital of at least Rs.50,000 (that is, 5,000 shares of Rs.10
each). The chairman of the meeting has a casting vote. The quorum for a general meeting is five members
personally present. Generally, resolutions may be passed by simple majority of the shareholders present and
voting at any general meeting. However, special resolutions require that the votes cast in favor of the resolution
must be at least three times the votes cast against the resolution. As provided in the Bank’s Articles, a
shareholder may exercise its voting rights by proxy to be given in the form prescribed by the Bank. This proxy,
however, is required to be lodged with the Bank at least 48 hours before the time of the relevant meeting. A
shareholder may, by a single power of attorney, grant general power of representation covering several general
meetings. A proxy may not vote except on a poll and does not have a right to speak at meetings. A corporate
shareholder is also entitled to nominate a representative to attend and vote on its behalf at all general meetings.
The Companies Act has been amended to provide for passing of resolutions in relation to specified matters,
which have been notified by the Government, by means of a postal ballot. A notice to all the shareholders shall
be sent along with a draft resolution explaining the reasons therefore and requesting them to send their assent or
dissent in writing on a postal ballot within a period of 30 days from the date of posting the letter. Postal ballot
includes voting by electronic mode.
Transfer of Shares
Shares held through depositories are transferred in the form of book entries or in electronic form in
accordance with the regulations laid down by SEBI. These regulations provide the regime for the functioning of
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the depositories and the participants and set out the manner in which the records are to be kept and maintained
and the safeguards to be followed in this system. Transfers of beneficial ownership of shares held through a
depository are exempt from stamp duty. The Bank has entered into an agreement for such depository services
with the NSDL and the CSDL. SEBI requires that the Bank’s shares for trading and settlement purposes be in
book-entry form for all investors, except for transactions that are not made on a stock exchange and transactions
that are not required to be reported to the stock exchange. The Bank shall keep a book in which every transfer or
transmission of shares will be entered.
Pursuant to the Equity Listing Agreements, in the event the Bank has not effected the transfer of shares
within fifteen days or where the Bank has failed to communicate to the transferee any valid objection to the
transfer within the stipulated time period of fifteen days, it is required to compensate the aggrieved party for the
opportunity loss caused during the period of the delay. The shares of the Bank shall be freely transferable. Under
the Equity Listing Agreements, notice of such refusal must be sent to the transferee within fifteen days of the
date on which the transfer was lodged with the Bank.
The Articles also provide that acquisitions of shares by a person or group which would take the shareholding
of such person or group to 5% or more of the paid up capital of the Bank shall require prior approval of the RBI.
Liquidation Rights
Subject to the rights of depositors, creditors, employees, the Government or any State government in the
event of the Bank’s winding up, the holders of the Equity Shares are entitled to be repaid the amounts of capital
paid up or credited as paid up on these Equity Shares. All surplus assets remaining after the above payments are
made belong to the holders of the Equity Shares in proportion to the amount paid up or credited as paid up on
these Equity Shares, respectively, at the commencement of the winding-up.
Acquisition of the Undertaking by the Government
Under the Banking Regulation Act, the Government may, after consultation with RBI, in the interest of the
Bank’s depositors or banking policy or better provision of credit generally or to a particular community or area,
acquire the Bank’s banking undertaking. The RBI may acquire the Bank’s business if it is satisfied that the Bank
has failed to comply with the directions given to the Bank by the RBI or that the Bank’s business is being
managed in a manner detrimental to the interest of the Bank’s depositors. Similarly, the Government may also
acquire the Bank’s business based on a report by RBI.
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TAXATION
The information provided below sets out the possible tax benefits available to the shareholders in a
summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase,
ownership and disposal of equity shares under the current tax laws presently in force in India. Several of these
benefits are dependent on us or our shareholders fulfilling conditions prescribed under relevant tax laws. We may
not choose to fulfill such conditions. This information is not exhaustive or comprehensive and is not intended to
be a substitute for professional advice. Investors are advised to consult their own tax consultant with respect to
the tax implications of an investment in the Equity Shares. Investors should note that a draft of the Direct Tax
Code Bill has been placed before the Indian Parliament which has been referred to Parliamentary Standing
Committee. The said committee has suggested major modifications which are under consideration of Ministry of
Finance. If that law comes into effect, there could be an impact on the tax provisions mentioned below.
Further, the Government has already introduced the provisions relating to general anti-avoidance rules
(“GAAR”). With regard to GAAR, the provisions have been introduced by the Finance Act, 2012, scheduled to
come into effect from the financial year starting from April 1, 2013. The GAAR provisions are intended to catch
arrangements declared as “impermissible avoidance arrangements”, which is defined in the Finance Act, 2012 as
any arrangement, the main purpose or one of the main purposes of which is to obtain a tax benefit and which
satisfy at least one of the following tests: (i) creates rights, or obligations, which are not ordinarily created
between persons dealing at arm’s length; (ii) results, directly or indirectly, in misuse, or abuse, of the provisions
of the Income Tax Act, 1961; (iii) lacks commercial substance or is deemed to lack commercial substance, in
whole or in part; or (iv) is entered into, or carried out, by means, or in a manner, which are not ordinarily
employed for bona fide purposes. The onus to prove that the transaction is an “impermissible avoidance
agreement” is on the tax authorities. If GAAR provisions are invoked, then the tax authorities have wide powers,
including the denial of tax benefit or the denial of a benefit under a tax treaty otherwise allowable in normal
scenario. An Expert Committee was constituted by the Prime Minister to undertake stakeholder consultations and
to finalize the GAAR guidelines. The Finance Minister came out with a press statement dated January 14, 2013
stating that the Government has carefully considered the report of the Expert Committee and accepted major
recommendations of the Expert Committee with some modifications. It is therefore expected that the upcoming
budget for the year 2013 would bring more changes in the Income tax Act, 1961 relating to the GAAR
provisions.
The law stated below is as per the Income tax Act, 1961 as amended by the Finance Act, 2012.
Indian Taxation
Under the Income Tax Act, 1961 (unless otherwise specified, all sections hereinafter referred to shall be
meant to have meaning as provided in the Income Tax Act, 1961), “Non-Resident” means a person who is not a
resident in India. An individual is considered to be a resident of India during any financial year if he or she is in
India in that year for:
(a) a period or periods amounting to 182 days or more; or
(b) a period or periods amounting to 60 days or more if, within the four preceding years, he/she has been in
India for a period or periods amounting to 365 days or more; provided that:
(i) in the case of a citizen of India who leaves India as a member of the crew of an Indian ship or for
the purposes of employment outside India, the words “60 days” in paragraph (b) above shall be substituted
by words “182 days”; or
(ii) in the case of a citizen of India or a person of Indian origin living abroad who visits India, the
words “60 days” in paragraph (b) above shall be substituted by words “182 days”.
A company is resident in India if it is an Indian Company or in case of a company other than the Indian
Company the control and management of its affairs is situated wholly in India. An Indian Company as defined in
section 2(26) means a company formed and incorporated in accordance with the Companies Act 1956 and its
registered or principal office is in India. A firm or other association of persons is resident in India except where
the control and management of its affairs is situated wholly outside India.
I. Income-tax Act, 1961
A. Tax Benefits to the Bank:
1. Income by way of interest, premium on redemption or other payment on notified securities, bonds,
certificates issued by the Central Government is exempt from tax under Section 10(15) in accordance with and
subject to the conditions and limits as may be specified in Notifications.
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2. Dividends from domestic companies earned by the Bank are exempt from tax in accordance with and
subject to the provisions of Section 10 (34) read with Section 115-O. However, as per Section 94(7), losses
arising from sale/ transfer of shares, where such shares are purchased within three months prior to the record date
and sold within three months from the record date, will be disallowed to the extent such loss does not exceed the
amount of dividend claimed exempt.
3. Income earned by the Bank from investment in units of mutual fund specified under Section 10(23D) or
income received in respect of units from the administrator of the specified undertaking or income received in
respect of units from a specified company is exempt from tax under Section 10(35). However, as per Section 94(7),
losses arising from the sale/ redemption of units purchased within three months prior to the record date (for
entitlement to receive income) and sold within nine months from the record date, will be disallowed to the extent
such loss does not exceed the amount of income claimed exempt. Under Section 94(8), losses arising from sale/
transfer of units of mutual funds specified under section 10(23D) or of Unit Trust of India, where such units are
purchased within three months prior to the record date, additional units are allotted without payment based on
holdings on such date and all or any units initially purchased are sold within nine months from the record date while
continuing to hold all or any additional units, will be ignored for computing chargeable income. Such loss ignored
will be considered as the cost of acquisition of the additional units held on the date of sale/transfer.
4. Section 14A provides that any expenditure incurred in relation to exempt income is not allowable as
deduction in computing total income. In case the tax officer is not satisfied with the correctness of the claim of
the taxpayer or in case the taxpayer contends that no expenditure have been incurred towards earning exempt
income, disallowance under section 14A shall be computed as per Rule 8D of the Income-tax Rules, 1962.
5. Any income realized from the sale/ transfer of capital assets (including equity shares in a company or
units of equity oriented mutual funds) held by the Bank as part of its stock-in-trade would be included in the
income computed under the head “profits and gains of business or profession” as per the provisions of the Act.
6. Under Section 32, the Bank can claim depreciation allowance at the prescribed rates on tangible assets
such as building, machinery, plant or furniture and intangible assets such as know-how, patents, copyrights,
trademarks, licenses, franchises or other business or commercial rights of similar nature, subject to satisfaction of
conditions. In terms of sub section (2) of Section 32, the Bank is entitled to carry forward and set off the
unabsorbed depreciation arising due to absence/ insufficiency of profits or gains chargeable for the previous year.
The amount is allowed to be carried forward and set off in the succeeding previous years against any income (not
restricted to business income), without any time limit.
7. Deduction for expenses incurred while computing the Bank’s income under the head “Profits and gains of
business or profession’ is available in terms of provisions of Sections 29 to 43D.
8. Under Sections 35D, 35DD and 35DDA the Bank will be entitled to a deduction equal to one fifth of the
expenditure incurred of the nature specified in that section by way of amortization over a period of 5 successive
years, subject to the limits specified in the section.
9. Under Section 36(1)(vii), any bad debt or part thereof written off as irrecoverable in the accounts of the
Bank is allowable as a deduction. The deduction of bad debts is limited to the amount, by which such bad debts
or part thereof, exceeds the credit balance in the provision for bad and doubtful debts account made under
Section36(1)(viia).
10. Under Section 36(1)(viia), a deduction is allowable in respect of any provision made for bad and
doubtful debts, by an amount not exceeding 7.5% of total income (computed before making any deduction under
this Clause and Chapter VIA) and an amount not exceeding 10% of the aggregate average advances made by
rural branches of the Bank.
11. Under Section 36(1)(xv), securities transaction tax paid by a taxpayer in respect of taxable securities
transactions entered into in the course of its business, would be allowed as a deduction if the income arising from
such taxable securities transactions is included in the income computed under the head “Profits and gains of
business or profession”.
12. Interest income on certain categories of bad and doubtful debts, as specified in Rule 6EA of the Incometax Rules, 1962, is chargeable to tax only in the year of receipt or credit to the profit & loss account of the Bank
whichever is earlier, in accordance with the provisions of Section 43D.
13. As per provisions of Section 72, the Bank is entitled to carry forward business losses that cannot be set
off against permitted sources of income in the relevant assessment year, for a period of 8 consecutive assessment
years immediately succeeding the assessment year when the losses were first computed, and set off such losses
against income chargeable under the head “Profits and gains from business or profession” in such assessment
year. The set off is permissible even if the business in which the loss was sustained is not carried on in the year of
set off.
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14. Under Section 74, short-term capital loss suffered during the year is allowed to be carried forward and
set-off against short-term as well as long-term capital gains of a subsequent year. Such loss is permitted to be
carried forward for eight years immediately succeeding the year in which such loss arises, for claiming set-off
against subsequent years’ short-term as well as long term capital gains. Long-term capital loss suffered during
the year is allowed to be set-off against long-term capital gains. Balance loss, if any, could be carried forward for
eight years for claiming set-off against subsequent years’ long-term capital gains.
Tax Rates
1. The tax rate applicable to the Indian banks for the Assessment Year (AY) 2013-14 relevant to financial
year 2012-13 is 30%. A surcharge on income tax of 5% would be levied if the total income exceeds Rs.10
million. Education cess of 2% and Secondary Higher Education cess of 1% is levied on the amount of tax and
surcharge.
2. Under section 115BBD, any dividend received by an Indian company from a specified foreign company
in which Indian company holds 26% or more in nominal value of the equity share capital of such company is
taxable at 15% for the assessment year 2013-14, relevant to the financial year 2012-13.
3. As per Section 115JB, Minimum Alternate Tax (“MAT”) is payable by the Bank @18.5% of the Book
profits computed in accordance with the provisions of this section, where income-tax computed under the normal
provisions of the Act is less than 18.5% of the Book profits as computed under the said section. A surcharge on
income tax of 5% would be levied if the total income exceeds Rs.10 million. Education cess of 2% and
Secondary Higher Education cess of 1% is levied on the amount of tax and surcharge.
Under Section 115JAA(1A), credit is allowed in respect of any MAT paid under Section 115JB for any
assessment year commencing on or after April 1, 2006. Tax credit eligible to be carried forward will be the
difference between MAT paid and the tax computed as per the normal provisions of the Act for that assessment
year. Such MAT credit is allowed to be carried forward to be set off against the difference between normal tax
liability and MAT, for a period of up to ten years succeeding the year in which the MAT credit arises.
4. The tax rate on distributed profits of the Bank/ dividends covered under Section 115-O viz. Dividend
Distribution Tax (DDT) is 15%. A surcharge of 5% would be levied on the amount of DDT. Further, Education
cess of 2% and Secondary Higher Education cess of 1% is levied on the amount of tax and surcharge. The
amount of dividend shall be reduced by the amount of dividend received from a subsidiary company (i.e. a
company in which the domestic company holds more than half of voting power), if the subsidiary has paid tax on
such dividends under section 115-O, irrespective of whether the domestic company is a subsidiary of another
company or not.
B. Benefits to Qualified Institutional Buyers’ (QIB) shareholders
Under SEBI (ICDR) regulations, QIB means a public financial institution, a scheduled commercial bank, a
mutual fund registered with SEBI, a foreign institutional investor and sub-account registered with SEBI, other
than a sub-account which is a foreign corporate or foreign individual, a multilateral and bilateral development
financial institution, a venture capital fund registered with SEBI, a foreign venture capital investor registered
with SEBI, a state industrial development corporation, an insurance company registered with the Insurance
Regulatory and Development Authority (IRDA), a provident fund with minimum corpus of Rs.25 crores, a
pension fund with minimum corpus of Rs.25 crores), National Investment Fund, insurance funds set- up and
managed by army, navy or air force of the Union of India.
Dividends earned on shares of the Bank are exempt from tax in accordance with and subject to the
provisions of Section 10(34) read with Section 115-O. However, as per Section 94(7), losses arising from said
transfer of shares, where such shares are purchased within three months prior to the record date and sold within
three months from the record date, will be disallowed to the extent such loss does not exceed the amount of
dividend claimed exempt.
B.1. To Resident QIB shareholders
B.1.1 Scheduled Commercial Banks, public financial institutions, state industrial development
corporations, others:
1. The characterization of gains/losses, arising from sale of shares, as Capital Gains or Business Income
would depend on the nature of holding in the hands of the shareholder and various other factors. It may be noted
that there are contradicting judicial rulings on characterization of income of a taxpayer regularly trading in shares
and securities in India. Taxability of income on regular trading of securities will depend on facts and
circumstances of each case.
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2. Where the gains on sale/transfer of shares are characterized as business profits, the same would be subject
to tax at the normal rates applicable (plus applicable surcharge and education cess).
2.1 If trading in securities other than the eligible transaction of trading in derivatives is carried out
without obtaining delivery of securities, such transactions would be deemed to be speculative transactions
and consequentially, gains are taxed as ‘speculative income’ whereas losses are allowed to be set off only
against speculative gains. Also a contract in respect of stocks and shares entered into by a dealer or investor
therein to guard against loss in his holding of stock and shares thru through price fluctuations shall not be
treated as speculative transaction as defined under section 43(5).
2.2 Explanation to section 73 of the Act which provides that the purchase and sale of shares are deemed
to be carrying on speculative business should not be applicable to the Scheduled Commercial Banks, public
financial institutions, state industrial development corporations as its a company the principal business of
which is the business of banking or the granting of loans and advances
2.3 Under Section 36(1)(xv), STT paid by a taxpayer in respect of taxable securities transactions
entered into in the course of its business, would be allowed as a deduction if the income arising from such
taxable securities transactions is included in the income computed under the head “Profits and gains of
business or profession”.
2.4 Section 14A provides that any expenditure incurred in relation to exempt income is not allowable
as deduction in computing total income. In case the tax officer is not satisfied with the correctness of the
claim of the taxpayer or in case the taxpayer contends that no expenditure have been incurred towards
earning exempt income, disallowance under section 14A shall be computed as per Rule 8D of the Incometax Rules, 1962.
3. Where the shares acquired of the Bank are treated as investments giving rise to capital gains on its
transfer, the taxation of such gains is as under:
Equity Shares of a company held for a period of more than 12 months with an intention to hold as
“investments” are treated as long-term capital assets. If the Equity Shares are held for a period of 12 months or
less than 12 months, the capital gain arising on the sale thereof is to be treated as short-term capital gain.
In accordance with and subject to provisions of Section 48, in order to arrive at quantum of capital gains, the
following amounts would be deductible from the full value of consideration:
(a) Cost of acquisition of the shares
(b) Cost of improvement, if any
(c) Expenditure incurred wholly and exclusively in connection with the transfer of shares
In computing long term capital gain, cost of acquisition and cost of improvement is substituted by indexed
cost of acquisition and indexed cost of improvement using the cost inflation index notified by the Government.
Long-Term Capital Gains
• As per Section 10(38), long-term capital gains on sale of equity shares of company listed on a recognized
stock exchange held for a period of more than twelve months, would not be taxable, provided STT has
been paid on the same. However, such exempt capital gains cannot be reduced from “book profits” of the
Company under Section 115JB and the Company will be required to pay Minimum Alternate Tax, 18.5%
(plus applicable surcharge and education cess) on such book profits if 18.5% of “book profits” is higher
than tax liability under normal provisions of the Act. Book Profits means the net profit as shown in the
profit and loss account of the taxpayer after giving effect to adjustments as provided in section 115JB (2).
• Long-term capital gains on the sale of listed Indian securities not routed through a recognized stock
exchange in India and therefore not subject to STT would be taxed at the rate of 20% plus applicable
surcharge and education cess. However, in case of listed securities, the amount of such tax could be
limited to 10% (plus applicable surcharge and cess), without indexation, at the option of the shareholder
in cases where securities transaction tax is not levied.
The aforesaid tax treatment is applicable if the concerned transaction is not in nature of business and/or
speculative business.
Short-Term Capital Gains
•
Short-term capital gains, being gains on sale of equity shares of a company listed on recognized stock
exchange held for a period of twelve months or less, will be taxed at the rate of 15% plus applicable
surcharge and education cess, provided STT has been paid on the sale;
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•
Short Term Capital gains on sale of unlisted equity shares and short term capital gains on sale of listed
Indian equity shares otherwise than on a recognized stock exchange and as a result no STT is paid, are
chargeable to tax at 30% plus applicable surcharge and education cess in case of resident company and
firms.
4. Under Section 54EC and subject to the conditions and to the extent specified therein, long-term capital
gains (other than those exempt under Section 10(38)) arising on transfer of Bank’s shares would be exempt from
tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term
specified assets) issued on or after April 1, 2007 by:
(a) National Highways Authority of India constituted under Section 3 of The National Highways
Authority of India Act, 1988; or
(b) Rural Electrification Corporation Limited, a company formed and registered under the Companies
Act, 1956.
The investment in the long term specified assets is eligible for such deduction to the extent of Rs.5 million
during a financial year.
If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as
the cost of long term specified assets bears to the whole of the capital gain, However, in case the long term
specified asset is transferred or converted into money within three years from the date of its acquisition, the
amount so exempted shall be chargeable to tax during the year of such transfer or conversion.
However in case of companies, such exempt capital gains cannot be reduced from “book profits” under
Section 115JB and the company will be required to pay Minimum Alternate Tax at 18.5% (plus applicable
surcharge and education cess) on such book profits if 18.5% of ‘book profits” is higher than tax liability under
normal provisions of the Act.
5. Under Section 74, a short-term capital loss can be set off against capital gain, whether short-term or long
term. To the extent that the loss is not absorbed in the year of transfer, it would be carried forward for eight
subsequent years. Long-term loss arising from a transfer of a capital asset can only be set off against long-term
capital gain. The excess/ balance loss, if any, can be carried forward for eight years for claiming setoff against
subsequent years’ long-term capital gains. Long term capital loss on sale of listed equity shares in respect of
which STT has been paid is not allowed to be set- off and carried forward since the gains in respect of such
shares is exempt under section 10(38).
B.1.2 To the Resident Mutual Fund QIB shareholders:
Under Section 10(23D), exemption is available in respect of all income (including capital gains arising on
transfer of shares of the Bank) earned by a Mutual Fund registered under the Securities and Exchange Board of
India Act, 1992 or such other mutual fund set up by a public- sector bank or a public financial institution or
authorized by the Reserve Bank of India and subject to the conditions as the Central Government may specify by
notification.
B.1.3 To the Resident Insurance Company QIB shareholders
Taxation of insurance companies is governed by Section 44 of the Act which provides a special regime for
taxation of insurance companies. The section states that notwithstanding anything to the contrary contained in the
provisions of this Act relating to computation of income chargeable under the head “income from house
property”, “capital gains” or “income from other sources” or in section 199 or in sections 28 to 43B, the profits
and gains of any business of insurance, including a mutual insurance company or by a co-operative society shall
be computed in accordance with the rules contained in the First Schedule.
Taxation of life insurance business in India governed by section 115B, section 44 and the First Schedule of
the Income Tax Act, 1961. “Profit and gains of the life insurance business” is taken as “annual average of the
surplus or deficit disclosed by the actuarial valuation” excluding “from it any surplus or deficit included therein
which was made in any earlier inter-valuation period.”
Provisions of computation of Minimum Alternative Tax under section 115JB of the Act are not applicable to
Life Insurance Companies.
Profits and gains of business of general insurance companies is computed based on the profit and loss
account prepared in accordance with the provisions of the Insurance Act, 1938 and the IRDA Act, 1999 subject
to the following adjustments:
1. Additions of the amounts which are not admissible under the provisions of section 30 to 43B
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2. Any gains or loss on realization of investments shall be added or deducted, if such gain or loss is not
credited or debited to the profit and loss account
3. Any provision for diminution in the value of investments debited to profit and loss account shall be
added back
4. Amount carried to reserve for unexpired risk shall be allowed as a deduction as prescribed in rule 6E
of the Income Tax Rules, 1962.
Tax rate: For Life Insurance Companies: 12.5% on profits from life insurance business and 30% on other
than life insurance business income as increased by surcharge and education cess. The tax authorities may
contend that income from investments made by life insurance companies is not income from life insurance
business but income from other sources and hence should be charged to tax @ 30% (plus surcharge and
education cess as applicable). Therefore, the matter is litigative in nature.
For general insurance companies: 30% of profits as increased by surcharge and education cess.
B.1.4 Provident Fund and Pension Fund
Under section 10(25) of the Act, any income received by trustees on behalf of a recognized provident fund
and a recognized superannuation fund is exempt from tax.
B.1.5 Venture Capital Fund or Venture Capital Company (VCC or VCF):
VCF or VCC have been granted a pass-through status in the Indian Income-tax Act, 1961.
Income of a VCF or VCC from investments in a Venture Capital Undertaking is exempt under section
10(23FB) of the Act.
Any income received by a person out of investment in venture capital fund or venture capital company shall
be chargeable to income tax in the same manner as if it were income received by such person had he made
investment in the venture capital undertaking directly. The income paid by VCF or VCC shall be deemed to be of
the same nature and in the same proportion in the hands of the person receiving it as it had been received by or
had accrued or arisen to VCF or VCC as the case may be. The income accruing or arising to a VCF of VCC shall
be deemed to be accruing or arising to a person during a previous year shall be deemed to have been paid to a
person on the last day of the previous year in the same proportion in which such person would have been entitled
to receive the income.
B.1.6 Tax Deduction at source
No income tax is deductible at source from income by way of capital gains arising to a resident shareholder
under the present provisions.
B.2 To non-resident QIB shareholders:
Income Tax Laws and Tax Treaty Benefits
The taxation of non-residents in India is governed by the provisions of the Income Tax Act and the tax
treaty between India and the jurisdiction of the non-residents (“Tax Treaty”). As per Section 90 (2), the
provisions of the Income Tax Act would apply to the extent they are more beneficial than the provisions of the
applicable tax treaty. However, in case where the provisions relating to General Anti Avoidance Rule (GAAR)
have been invoked, the taxpayer will not be allowed to the beneficial treaty benefits.
The non-resident eligible to avail DTAA benefits shall obtain TRC from the Government of the Country of
his residence or specified territory containing the prescribed particulars which has been notified by the CBDT
through insertion of Rule 21AB in the Income Tax Rules, 1962.
B.2.1 Multi-lateral and bilateral development financial institutions
Generally, Multilateral and bilateral development financial institutions may be exempt from taxation in
India on the capital gains arising on the sale of shares of the bank depending on the applicable Statute and Acts
passed in India. For e.g., world bank, IBRD, IFC, etc. In case they are not specifically exempt from tax then the
provisions as applicable for capital gains to a non-resident FII as they should be registered as FII should apply to
these institutions.
B.2.2 Foreign Institutional Investors (FIIs) (including multi-lateral and bilateral development financial
institutions excluding foreign corporations and foreign individuals)
1. Dividends earned on shares of the Bank are exempt from tax in accordance with and subject to the
provisions of Section 10(34) read with Section 115-O.
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2. As per Section 115AD, FIIs will be taxed at:
a) 10% (plus applicable surcharge and Education cess) on long-term capital gains, where STT is not
payable on the transfer of the shares.
b) 15% (plus applicable surcharge and Education cess) on short-term capital gains arising on the sale of
the shares of the Indian company which is subject to STT.
c) 30% (plus applicable surcharge and Education cess) on short-term capital gains arising on the sale of
the shares of the Indian Company which is not subject to STT.
3. As per Section 10(38), Long-term capital gains on sale of equity share of a company listed on recognized
stock exchange which is held for a period of more than twelve months, would not be taxable, provided STT has
been paid on the sale transaction.
The FII eligible to avail DTAA benefits shall obtain TRC from the Government of the Country of its
residence or specified territory containing the prescribed particulars which has been notified by the CBDT
through insertion of Rule 21AB in the Income Tax Rules, 1962.
B.2.2 Foreign Venture Capital Investor:
1. FVCI should be granted a pass-through status in the Indian Income-tax Act, 1961.
2. Income of a FVCI from investments in a Venture Capital Undertaking/ Companies is exempt under
section 10(23FB) of the Act.
3. Any income received by a person out of investment in venture capital fund or venture capital company
shall be chargeable to income tax in the same manner as if it were income received by such person had he made
investment in the venture capital undertaking directly. The income paid by VCF or VCC shall be deemed to be of
the same nature and in the same proportion in the hands of the person receiving it as it had been received by or
had accrued or arisen to VCF or VCC as the case may be. The income accruing or arising to a VCF of VCC shall
be deemed to be accruing or arising to a person during a previous year shall be deemed to have been paid to a
person on the last day of the previous year in the same proportion in which such person would have been entitled
to receive the income.
The FVCI eligible to avail DTAA benefits shall obtain TRC from the Government of the Country of its
residence or specified territory containing the prescribed particulars which has been notified by the CBDT
through insertion of Rule 21AB in the Income Tax Rules, 1962
B.2.3 Tax Deduction at Source
Under section 195, dividends as referred to in section 115-O paid by the Bank are not subject to deduction
of tax at source.
As per the provisions of Section 195, any income by way of capital gains payable to non-residents (other
than LTCG exempt under Section 10(38)) may be subject to withholding of tax at the rate under the domestic tax
laws or under the DTAA, whichever is beneficial to the taxpayer. The withholding tax rates are subject to the
recipients of income obtaining and furnishing a permanent account number (PAN) to the payer, in the absence of
which the applicable withholding tax rate would be the higher of the applicable rates or 20%, under section
206AA of the Act.
Generally, there should be no requirement to withhold tax on gains arising on sale of shares of the bank by
the FVCI as the income of the FVCI should be exempt from tax.
As per Section 196D, no deduction of tax at source shall be made in respect of capital gains arising on sale
proceeds to FIIs on transfer of shares.
II. Wealth Tax and Gift Tax
No Indian wealth tax will be payable with respect to the Equity Shares. Presently there is no gift tax
enactment in India.
III. Securities Transaction Tax (STT):
1. For Purchaser: The transaction for purchase of equity shares entered into on a recognized stock exchange
and settled by actual delivery or transfer is liable to STT @ 0.1%.
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2. For Seller: The transaction for sale of equity shares entered into on a recognized stock exchange and
settled by actual delivery or transfer is liable to STT @ 0.1%. The transaction for sale of equity shares entered
into on a recognized stock exchange and not settled by actual delivery or transfer is liable to STT @ 0.025%.
The foregoing does not purport to be a complete analysis of the potential tax considerations relating
to the Issue, and should not be construed as tax advice/opinion. Prospective investors should consult their
own tax advisors as to the particular tax considerations applicable to them relating to the purchase,
ownership and disposition of the Equity Shares, including the applicability of the local tax laws or non-tax
laws, any changes in applicable tax laws and any pending or proposed laws or regulations.
184
U.S. FEDERAL INCOME TAXATION
The following summary of material U.S. federal income tax consequences of ownership of the Equity
Shares is based upon laws, regulations, decrees, rulings, income tax conventions (treaties), administrative
practice and judicial decisions in effect at the date of this Placement Document. Legislative, judicial or
administrative changes or interpretations may, however, be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may be retroactive and could affect the tax
consequences to holders of the Equity Shares. This summary does not purport to be a legal opinion or to address
all tax aspects that may be relevant to a holder of the Equity Shares.
U.S. Federal Income Tax Considerations
TO COMPLY WITH INTERNAL REVENUE SERVICE CIRCULAR 230, PROSPECTIVE
INVESTORS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX
ISSUES CONTAINED OR REFERRED TO IN THIS PLACEMENT DOCUMENT IS NOT INTENDED
OR WRITTEN TO BE USED, AND CANNOT BE USED BY PROSPECTIVE INVESTORS, FOR THE
PURPOSES OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THEM UNDER THE
UNITED STATES INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS BEING USED IN
CONNECTION WITH THE PROMOTION OR MARKETING BY THE BANK OF THE
TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) PROSPECTIVE INVESTORS
SHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM
AN INDEPENDENT TAX ADVISOR.
The following is a general description of certain material United States federal income tax consequences to
U.S. Holders and Non-U.S. Holders (as defined below) under present law of an investment in the Equity Shares.
This summary applies only to investors that hold the Equity Shares as capital assets and that have the U.S. dollar
as their functional currency. This discussion is based on the tax laws of the United States as in effect on the date
of this Placement Document and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date
of this Placement Document, as well as judicial and administrative interpretations thereof available on or before
such date. All of the foregoing authorities are subject to change, which change could apply retroactively and
could affect the tax consequences described below.
The following discussion does not address state, local, non-United States or other tax laws, or the tax
consequences to any particular investor or to persons in special tax situations such as:
• banks;
• certain financial institutions;
• insurance companies;
• broker dealers;
• U.S. expatriates;
• traders that elect to mark-to-market;
• tax-exempt entities;
• persons liable for the alternative minimum tax;
• persons holding an Equity Share as part of a straddle, hedging, conversion or integrated transaction;
• persons that actually or constructively own 10% or more of the Bank’s voting stock;
• persons who acquired Equity Shares pursuant to the exercise of any employee share option or otherwise
as consideration; or
• persons holding Equity Shares through partnerships or other pass-through entities.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL TAX RULES TO THEIR
PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL, FOREIGN AND OTHER
TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
EQUITY SHARES.
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For purposes of this summary, a “U.S. Holder” is a beneficial owner of Equity Shares that is for
United States federal income tax purposes,
• an individual who is a citizen or resident of the United States;
• a corporation organized under the laws of the United States, any state thereof or the District of Columbia;
• an estate whose income is subject to United States federal income taxation regardless of its source; or
• a trust that(1)is subject to the primary supervision of a court within the United States and the control of
one or more U.S. persons for all substantial decisions of the trust, or (2) has a valid election in effect
under the applicable U.S. Treasury regulations to be treated as a U.S. person.
A “Non-U.S. Holder” is a beneficial owner of Equity Shares that is not a U.S. Holder. If you are a partner in
a partnership, or other entity taxable as a partnership for United States federal income tax purposes, that holds
Equity Shares, your tax treatment generally will depend on your status and the activities of the partnership.
U.S. Holders
Taxation of Distributions on the Equity Shares
Subject to the PFIC rules discussed below, the gross amount of distributions to you with respect to the
Equity Shares generally will be included in your gross income in the year received as foreign source ordinary
dividend income, but only to the extent that the distribution is paid out of the Bank’s current or accumulated
earnings and profits (as determined under United States federal income tax principles). To the extent that the
amount of the distribution exceeds the Bank’s current and accumulated earnings and profits, it will be treated
first as a tax-free return of your tax basis in your Equity Shares, and to the extent the amount of the distribution
exceeds your tax basis, the excess will be taxed as capital gain. However, the Bank does not intend to calculate
its earnings and profits under United States federal income tax principles. Therefore, a U.S. Holder should expect
that a distribution will generally be treated as a dividend even if that distribution would otherwise be treated as a
non-taxable return of capital or as capital gain under the rules described above. The dividends will not be eligible
for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S.
corporations.
Subject to applicable limitations, with respect to non-corporate U.S. Holders (including individual U.S.
Holders), dividends may constitute “qualified dividend income” that is taxed at the lower applicable capital gains
rate provided that (1) the Bank is not a PFIC (as discussed below) for either the taxable year in which the
dividend is paid or the preceding taxable year, (2) certain holding period requirements are met, and (3) the Bank
is eligible for the benefits of the Convention Between the Government of the United States of America and the
Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion
with Respect to Taxes on Income. Non-corporate U.S. Holders are strongly urged to consult their tax advisors
regarding the availability of the lower rate for dividends paid with respect to the Equity Shares.
The amount of any distribution paid in Indian rupees will be equal to the U.S. dollar value of such Indian
rupees on the date such distribution is received by the U.S. Holder, regardless of whether the payment is in fact
converted into U.S. dollars at that time. Gain or loss, if any, realized on the sale or other disposition of such
Indian rupees will generally be U.S. source ordinary income or loss. The amount of any distribution of property
other than cash will be the fair market value of such property on the date of distribution.
For foreign tax credit purposes, dividends distributed with respect to Equity Shares will generally constitute
“passive category income” but could, in the case of certain U.S. Holders, constitute “general category income”. A
U.S. Holder will not be able to claim a U.S. foreign tax credit for Indian taxes for which the Bank is liable and
must pay with respect to distributions on Equity Shares. The rules relating to the determination of the U.S.
foreign tax credit are complex and U.S. Holders should consult their tax advisors to determine whether and to
what extent a credit would be available in their particular circumstances.
Taxation of a Disposition of Equity Shares
Subject to the PFIC rules discussed below, you generally will recognize capital gain or loss on any sale or
other taxable disposition of an Equity Share equal to the difference between the U.S. dollar value of the amount
realized for the Equity Share and your tax basis (in U.S. dollars) in the Equity Share. If you are a non-corporate
U.S. Holder (including an individual U.S. Holder) who has held the Equity Share for more than one year, capital
gain on a disposition of the Equity Share generally will be eligible for reduced federal income tax rates. The
deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize generally will be
treated as U.S. source income or loss for foreign tax credit limitation purposes.
186
Because gains on a disposition of an Equity Share generally will be treated as U.S. source, the use of foreign
tax credits relating to any Indian income tax imposed upon gains in respect of Equity Shares may be limited. U.S.
Holders should consult their tax advisors regarding the application of Indian taxes to a disposition of an Equity
Share and their ability to credit an Indian tax against their United States federal income tax liability.
Passive Foreign Investment Company
In general, a non-U.S. corporation is considered to be a passive foreign investment company, or a PFIC, for
any taxable year if either:
• at least 75% of its gross income is passive income, or
• at least 50% of its assets (based on an average of the quarterly values of the assets during a taxable year)
is attributable to assets that produce or are held for the production of passive income.
The Bank will be treated as owning its proportionate share of the assets and earning its proportionate share
of the income of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the
stock.
Based in part on certain proposed Treasury regulations with respect to banks, which are not yet finalized,
although not free from doubt, the Bank does not expect to be a PFIC for its current taxable year ending March 31,
2013. However, the determination of whether the Bank is a PFIC is a factual determination made annually after
the end of each taxable year, and there can be no assurance that the Bank will not be considered a PFIC in the
current taxable year or any future taxable year because, among other reasons, (i) the composition of the Bank’s
income and assets will vary over time, (ii) there can be no assurance that the proposed Treasury regulations will
be finalized in their current form, and (iii) the manner of the application of the proposed Treasury regulations and
other relevant rules is uncertain in several respects. Furthermore, the Bank’s PFIC status may depend on the
market price of its Equity Shares, which may fluctuate considerably. PROSPECTIVE PURCHASERS ARE
URGED TO CONSULT YOUR TAX ADVISORS REGARDING THE BANK’S POSSIBLE STATUS AS
A PFIC.
If the Bank is a PFIC for any taxable year during which you hold Equity Shares, you will be subject to
special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or
other disposition (including a pledge) of the Equity Shares, unless you make a “mark-to-market” election as
discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual
distributions you received during the shorter of the three preceding taxable years or your holding period for the
Equity Shares will be treated as an excess distribution. Under these special tax rules:
• the excess distribution or gain will be allocated ratably over your holding period for the Equity Shares,
• the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in
which the Bank became a PFIC, will be treated as ordinary income, and
• the amount allocated to each other year will be subject to the highest tax rate in effect for that year and
the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax
attributable to each such year.
The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution”
cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the
Equity Shares cannot be treated as capital, even if you hold the Equity Shares as capital assets.
If the Bank is a PFIC for any year during which you hold Equity Shares, the Bank generally will continue to
be treated as a PFIC with respect to you for all succeeding years during which you hold Equity Shares. However,
if the Bank ceases to be a PFIC you may avoid some of the adverse effects of the PFIC regime by making a
deemed sale election with respect to Equity Shares, as applicable. The Bank does not currently intend to prepare
or provide the information that would enable you to make a qualified electing fund election.
In addition, if the Bank is treated as a PFIC, to the extent any of its direct or indirect subsidiaries are also
PFICs, you may be deemed to own shares in such subsidiaries and you may be subject to the adverse PFIC tax
consequences with respect to the shares of such subsidiaries that you would be deemed to own.
A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election
with respect to such stock to elect out of the tax treatment discussed above, although it is possible the
mark-to-market election may not apply or be available with respect to the shares in the Bank’s subsidiaries to the
extent they are PFICs that you may be deemed to own if the Bank is treated as a PFIC, as discussed above. If you
make a valid mark-to-market election for the Equity Shares, you will include in income each year an amount
equal to the excess, if any, of the fair market value of the Equity Shares as of the close of your taxable year over
187
your adjusted basis in such Equity Shares. You are allowed a deduction for the excess, if any, of the adjusted
basis of the Equity Shares over their fair market value as of the close of the taxable year. However, deductions
are allowable only to the extent of any net mark-to-market gains on the Equity Shares included in your income
for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the
actual sale or other disposition of the Equity Shares, are treated as ordinary income. Ordinary loss treatment also
applies to the deductible portion of any mark-to-market loss on the Equity Shares, as well as to any loss realized
on the actual sale or disposition of the Equity Shares, to the extent that the amount of such loss does not exceed
the net mark-to-market gains previously included for such Equity Shares. Your basis in the Equity Shares will be
adjusted to reflect any such income or loss amounts. If you make such an election, the tax rules that apply to
distributions by corporations that are not PFICs generally would apply to distributions by the Bank, except that
the lower applicable capital gains rate with respect to qualified dividend income (discussed above) would not
apply.
The mark-to-market election is available only for “marketable stock”, which is stock that is traded in other
than de minimis quantities on at least 15 days during each calendar quarter on a qualified exchange or other
market, as defined in the applicable U.S. Treasury regulations. Under applicable U.S. Treasury regulations, a
“qualified exchange” includes a foreign exchange that is regulated by a governmental authority in the jurisdiction
in which the exchange is located and in respect of which certain other requirements are met. U.S. Holders of
Equity Shares should consult their own tax advisors as to whether the Equity Shares would qualify for the
mark-to-market election.
If you hold Equity Shares in any year in which the Bank is a PFIC, you will be required to file Internal
Revenue Service Form 8621 regarding distributions received on the Equity Shares and any gain realized on the
disposition of the Equity Shares. PROSPECTIVE PURCHASERS ARE URGED TO CONSULT YOUR
TAX ADVISOR REGARDING THE APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT
IN EQUITY SHARES, AND THE AVAILABILITY AND ADVISABILITY OF ANY ELECTIONS.
Non-U.S. Holders
Subject to the below discussions about backup withholding and FATCA, a Non-U.S. Holder generally
should not be subject to U.S. federal income or withholding tax on any distributions made on the Equity Shares
or gain from the sale, redemption or other disposition of the Equity Shares unless: (i) that distribution and/or gain
is effectively connected with the conduct by that Non-U.S. Holder of a trade or business in the United States; or
(ii) in the case of any gain realized on the sale or exchange of an Equity Share by an individual Non-U.S. Holder,
that Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the sale,
exchange or retirement and certain other conditions are met.
Information Reporting and Backup Withholding
Dividend payments with respect to Equity Shares and proceeds from the sale, exchange or redemption of
Equity Shares may be subject to information reporting to the Internal Revenue Service and possible U.S. backup
withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer
identification number and makes any other required certification or who is otherwise exempt from backup
withholding. U.S. Holders who are required to establish their exempt status generally must provide such
certification on Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisors regarding the
application of the U.S. information reporting and backup withholding rules. Non-U.S. Holders may be required
to comply with applicable certification procedures to establish that they are not US Holders in order to avoid the
application of such information reporting requirements and backup withholding.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited
against your United States federal income tax liability, and you may obtain a refund of any excess amounts
withheld under the backup withholding rules by timely filing the appropriate claim for refund with the Internal
Revenue Service and furnishing any required information.
Foreign Account Tax Compliance Act
Sections 1471 through 1474 of the U.S. Internal Revenue Code (“FATCA”) impose a new reporting regime
and potentially a 30% withholding tax with respect to certain payments to any non-U.S. financial institution (a
“foreign financial institution”, or “FFI” (as defined by FATCA)) that does not become a “Participating FFI” by
entering into an agreement with the U.S. Internal Revenue Service (“IRS”) to provide the IRS with certain
information in respect of its account holders and investors or is not otherwise exempt from or in deemed
compliance with FATCA. The Bank is classified as an FFI.
188
The new withholding regime will be phased in beginning January 1, 2014 for payments from sources within
the United States and will apply to “foreign passthru payments” (a term not yet defined) no earlier than
January 1, 2017.
The United States and a number of other jurisdictions have announced their intention to negotiate
intergovernmental agreements to facilitate the implementation of FATCA (each, an “IGA”). Pursuant to FATCA
and the “Model 1” and “Model 2” IGAs released by the United States, an FFI in an IGA signatory country could
be treated as a “Reporting FI” not subject to withholding under FATCA on any payments it receives. Further, an
FFI in a Model 1 IGA jurisdiction would not be required to withhold under FATCA or an IGA (or any law
implementing an IGA) (any such withholding being “FATCA Withholding”) from payments it makes (unless it
has agreed to do so under the U.S. “qualified intermediary,” “withholding foreign partnership,” or “withholding
foreign trust” regimes). The Model 2 IGA leaves open the possibility that a Reporting FI might in the future be
required to withhold as a Participating FFI on foreign passthru payments. Under each Model IGA, a Reporting FI
would still be required to report certain information in respect of its account holders and investors to its home
government or to the IRS.
If the Bank and other FFIs in its group do not become Participating FFIs, Reporting FIs, or are not treated as
exempt from or in deemed compliance with FATCA, the Bank and other FFIs in its group may be subject to
FATCA Withholding on payments received from U.S. sources and Participating FFIs. Any such withholding
imposed on the Bank or other FFIs in its group may have a material adverse effect on the group’s business,
prospects, results of operations and financial position.
If the Bank becomes a Participating FFI under FATCA, the Bank and financial institutions through which
payments on the Equity Shares are made may be required to withhold FATCA Withholding if any FFI through or
to which payment on such Equity Shares is made is not a Participating FFI, a Reporting FI, or otherwise exempt
from or in deemed compliance with FATCA.
If an amount in respect of FATCA Withholding were to be deducted or withheld from any payments, neither
the Bank nor any other person will pay additional amounts as a result of the deduction or withholding.
FATCA is particularly complex and its application is uncertain at this time. The above description is
based in part on regulations, official guidance and model IGAs, all of which are subject to change or may
be implemented in a materially different form. Prospective investors should consult their tax advisers on
how these rules may apply to payments they may receive in connection with the Equity Shares.
189
LEGAL PROCEEDINGS
Other than as mentioned below, the Bank is not a party to any proceedings which, if adversely determined,
might have a material adverse effect on its financial condition or results of operations. However, the Bank is
involved in legal proceedings, including criminal cases, before various courts and other forums in the ordinary
course of business and its usual course of banking.
1. The Bank has filed two original applications before the Debt Recovery Tribunal at Hyderabad for
recovery of dues from a borrower company (“Borrower”) in an amount of Rs.4.28 billion. The Bank has also
invoked the personal guarantees issued by certain directors of the Borrower (“Guarantors”) and suits have been
filed against the Guarantors for recovery. The Bank has initiated proceedings against the Borrower and certain
directors under Section 138 of the Negotiable Instrument Act, 1881 before the Additional Chief Metropolitan
Magistrate. The Bank is also in the process of initiating winding up proceedings against the Borrower for
recovery of the amount at issue.
2. The Bank received a show cause notice dated October 3, 2012 (“Notice”) from SEBI alleging violations
under Merchant Banking Regulations, Insider Trading Regulations and the Takeover Code, for trading in shares
of two companies during the period the Bank was engaged as a merchant banker with respect to open offers of
the aforementioned companies. Subsequently, the Bank conducted inspection of the documents referred to in the
Notice and submitted a response with SEBI on January 14, 2013.
190
INDEPENDENT ACCOUNTANTS
The financial statements (consolidated and non-consolidated) of the Bank as at and for the years ended
March 31, 2012 and March 31, 2011 included in this Placement Document have been audited by Deloitte
Haskins & Sells, Chartered Accountants. The financial statements (consolidated and non-consolidated) of the
Bank as at and for the year ended March 31, 2010 included in this Placement Document have been audited by
S.R. Batliboi & Co., Chartered Accountants. The interim results for the half year ended September 30, 2012 and
for the nine months ended December 31, 2012 have been reviewed by Deloitte Haskins & Sells, Chartered
Accountants. The financial statements and the interim results have been prepared in accordance with Indian
GAAP as applicable to banks. The independent auditors have issued standard audit opinions or review reports, as
the case may be, on these financial statements and interim results.
191
GENERAL INFORMATION
1. The Bank was incorporated on December 3, 1993 for an indefinite period as “UTI Bank Limited” with the
registration number 04-20769 issued by the Registrar of Companies, Gujarat, Dadra and Nagar Haveli, India. The
name of the Bank was changed to Axis Bank Limited with effect from July 30, 2007. The Bank has been allotted
Corporate Identity Number L65110GJ1993PLC020769 under the Companies Act. The registered office of the
Bank is situated at “TRISHUL”, 3rd Floor, Opposite Samartheshwar Temple, Near Law Garden, Ellisbridge,
Ahmedabad 380 006, India.
2. The Issue was authorized and approved by the Board of Directors through the resolution passed on
December 17, 2012 and approved by the Bank’s shareholders through the resolution passed through postal ballot
on January 28, 2013.
3. The Bank has received in-principle approvals each dated January 28, 2013 from the BSE and the NSE, to
list the Equity Shares on the Stock Exchanges.
4. Copies of the Memorandum and Articles of Association will be available for inspection during usual
business hours on any weekday between 9:30 a.m. to 5:30 p.m. (except Saturdays and public holidays), during
the Bid/Issue Period at the Registered Office.
5. The Bank has obtained necessary consents, approvals and authorizations required in connection with the
Issue including in principle approval from the RBI dated January 7, 2013. As required by the RBI in its letter
dated January 7, 2013 and circular dated April 20, 2010 the Bank shall apply for a post facto approval from the
RBI in respect of the Issue, upon completion of the allotment process.
6. There has been no significant change in the financial or trading position of the Bank or the Group since
December 31, 2012.
7. The Bank’s statutory auditors, Deloitte Haskins & Sells, Chartered Accountants have (i) audited the
financial statements (consolidated and unconsolidated) as of and for the fiscal years 2012 and 2011; and
(ii) conducted limited review on the unconsolidated financial results for the six months ended September 30,
2012 and nine months ended December 31, 2012 and S.R. Batliboi & Co. Chartered Accountants have audited
the financial statements (consolidated and unconsolidated) as of and for the fiscal year 2010, included in this
Placement Document, together with their report in relation thereto.
8. The Bank confirms that it is in compliance with the minimum public shareholding requirements as
specified in the SCRR.
9. The Floor Price for the Issue is Rs.1,398.56 per Equity Share. The Floor Price has been calculated in
accordance with Chapter VIII of the SEBI Regulations. The committee of the Board approved discount of
Rs.8.56 to the Floor Price of Rs.1,398.56 in accordance with the approval of the shareholders accorded on
January 28, 2013 and Regulation 85(1) of the SEBI Regulations.
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SUMMARY OF SIGNIFICANT DIFFERENCES AMONG INDIAN GAAP AND U.S. GAAP
The financial statements have been prepared in accordance with the accounting policies followed by the
Bank which conform to India GAAP and RBI Guidelines as applicable to the Bank. The following are significant
differences between Indian GAAP and U.S. GAAP limited to those significant differences that are appropriate to
the Bank’s financial statements. However, they should not be construed as being exhaustive, and no attempt has
been made to identify possible future differences between Indian GAAP and U.S. GAAP as a result of prescribed
changes in accounting standards nor to identify future differences that may affect the Bank’s financial statements
as a result of transactions or events that may occur in the future. The financial statements reflect applicable
statutory requirements, regulatory guidelines and accounting practices in India; these requirements, guidelines
and practices change from time to time and may have been applied prospectively. As a result, the financial
statements of the Bank on a period-by-period basis may not be directly comparable.
Indian GAAP
U.S. GAAP
Changes in accounting policies
Changes in accounting policies
Impact of adjustments resulting from the change to be
shown in the income statement of the period in which
the change is made except as specified in certain
standards where the change resulting from adoption of
such standards has to be shown by an adjustment to
opening retained earnings.
Retrospective application requiring the entity to
adjust each affected component of equity for the
earliest period presented and comparative income
statement presented, except where impracticable to do
so. Transition provisions are generally specified in
new standards and may be different.
Revaluation of property, plant and equipment
Revaluation of property, plant and equipment
Use of historical cost or revalued amounts is permitted.
Revaluation of an entire class of assets or of a selection
of assets is required to be carried out on a systematic
basis.
Upward revaluation is not permitted. Downward
valuations are required when future undiscounted
cash flows are less than the carrying value of the
asset.
An increase in net book value as a result of revaluation
is taken directly to revaluation reserves while a decline
is charged to profit and loss account.
Depreciation
Depreciation
The Indian Companies Act provides minimum rates of
depreciation. If management’s estimate of useful life of
a fixed asset is shorter than depreciation rates as per
the Companies Act, depreciation is provided at higher
rate based on management’s estimate of useful life.
Depreciation is provided over the useful life of a fixed
asset.
Unrealized gains/losses on investments
Unrealized gains/losses on investments
All investments are categorized into “Held to
Maturity”, “Available for Sale” and “Held for
Trading”. “Held to Maturity” securities are carried at
their acquisition cost or at amortized cost if acquired at
a premium over the face value. “Available for Sale”
and “Held for Trading” securities are valued
periodically as per RBI guidelines. Net depreciation, if
any, within each category of investments is recognized
in the profit and loss account. The net appreciation if
any, under each classification is ignored.
Investments are categorized into “Held to Maturity”,
“Available for Sale” or “Trading” based on
management’s intent and ability. While “trading” and
“Available For Sale” securities are valued at fair
value, “Held to Maturity” securities are valued at
cost, adjusted for amortization of premiums and
accretion of discount. The unrealized gains and losses
on “Trading” securities are taken to the income
statement, while those of “Available for Sale”
securities are reported as a separate component of
stockholders’ equity, net of applicable taxes, until
realized. In case a security is assessed to be other than
temporarily impaired, the unrealized losses are
recognized in income statement.
Amortization of premium/discount on the purchase of
investments
Amortization of premium/discount on the purchase
of investments
No amortization of premium/discount is allowed on Premium/discount amortization is permitted for all
investments except for the premium on investments categories of investments.
categorized as HTM.
193
Indian GAAP
U.S. GAAP
Allowances for credit losses
Allowances for credit losses
All credit exposures, including overdues arising from
crystallized derivative contracts, are classified as per
RBI guidelines, into performing and NPAs. Further,
NPAs are classified into substandard, doubtful and loss
assets for provisioning based on the criteria stipulated
by the RBI. Provisions are made in accordance with
RBI guidelines. For restructured assets, a provision is
made in accordance with the guidelines issued by the
RBI, which require that a provision equal to the
difference between fair value of the loan before and
after restructuring. In addition to the specific
provisioning made on NPAs the Bank maintains
general provisions to cover potential credit losses of
standard assets in accordance with RBI guidelines.
Loans are tested for impairment and placed on a nonaccrual basis (i.e., interest income is not accrued)
when based on current information and events,
management estimates that the collection of
outstanding interest and principal amounts are
doubtful. The impairment of a loan is measured based
on the present value of the loan’s contractual effective
rate, or at the observable market price of the loan, or
at the fair value of the collateral if the loan is
collateral dependent. The impairment is recognized if
the measured value is less than the recorded
investment in the impaired loan. The allowances on
the performing portfolios are established after
considering historical and projected default rates and
loss severities.
Loan origination fees/costs
Loan origination fees/costs
Loan origination fees are recognized upfront on their
becoming due. Loan origination costs are taken to the
profit and loss account in the year in which accrued/
incurred.
Non-refundable loan origination fees (net of certain
loan origination costs) are deferred and recognized as
an adjustment to yield over the life of the loan.
Derivatives
Derivatives
Derivatives are disclosed as off balance sheet
exposures. The derivatives are bifurcated as trading or
hedge transaction. Trading derivatives are revalued at
the balance sheet date with the resulting unrealized
gain/loss being recognized in the profit and loss
account and is included in other assets or other
liabilities. Hedged swaps/options are accounted for on
an accrual/at fair value pursuant to the principles of
hedge accounting.
All derivatives are required to be recognized as assets
or liabilities on the balance sheet and measured at fair
value with changes in fair value being recognized in
earnings. Fair values are based on quoted market
prices, or absent quoted market prices, based on
valuation technique, which may take into account
available current market and contractual prices of the
similar instrument as well a time value underlying the
positions.
If a derivative is a hedge, depending on the nature of
the hedge, the effective portion of the hedge’s change
in fair value is either offset against the change in fair
value of the hedged asset, liability or firm
commitment through income or held in equity until
the hedge item is recognized in income. The
ineffective portion of a hedge is immediately
recognized in income.
Employee Benefits
Employee Benefits
AS 15 (Revised) (mandatory with effect from
December 7, 2006) requires the use of projected unit
credit method to determine benefit obligation. The
discount rate for obligations is based on market yields
of government securities All actuarial gains and losses
have to be recognized immediately in profit and loss
account.
Obligation for defined benefit plans must be
measured using projected unit credit method. The
discount rate for obligations is based on market yields
of high quality corporate bonds. An entity may
choose an immediate recognition of actuarial gains or
losses or adopt a deferral method.
194
Indian GAAP
U.S. GAAP
Deferred Taxes
The deferred tax charge or credit and the
corresponding deferred tax liabilities or assets are
recognized using the tax rates that have been enacted
or substantially enacted by the balance sheet date.
Deferred tax assets are recognized only to the extent
there is reasonable certainty that the assets can be
realized in future. However, where there is unabsorbed
depreciation or carried forward loss under taxation
laws, deferred tax assets are recognized only if there is
virtual certainty of realization of such assets. Deferred
tax assets are reviewed as at each balance sheet date
and written down or written up to reflect the amount
that is reasonably/virtually certain to be realized.
Deferred tax is not created on undistributed earnings of
subsidiaries and affiliates.
Deferred Taxes
Income taxes are accounted for as per the provisions
of FASB ASC 740, “Income Taxes”. FASB ASC 740
requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of
events that have been included in the consolidated
financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined
based on the difference between the financial
reporting and tax basis of assets and liabilities, using
enacted tax rates in force. Deferred tax assets are
recognized subject to a valuation allowance based
upon management’s judgment as to whether
realization is considered more likely than not that the
assets will be realized. Deferred tax is created on
undistributed earnings of subsidiaries and affiliates.
Employee Stock Option Plan
As per the guidance note on Accounting for Employee
Share based payments, effective for all share based
grants made after April 1, 2005, employee share based
plans are classified into equity settled, cash settled and
employee share based payments plans with
alternatives. Any plan falling into the above categories
can be accounted for adopting fair value method or
intrinsic value method as of the grant date. An
enterprise using the intrinsic value method is required
to make fair value disclosures.
Employee Stock Option Plan
Under U.S. GAAP, share based payments are
accounted for under per FASB ASC 718,
“Compensation — stock compensation”, employee
stock based compensation plans have to be accounted
in income statement using the fair value method.
Listed companies are also to observe the specific
guidance by market regulator.
Proposed dividend
Dividend proposed after the Balance Sheet date for the
year/period then ended, is required to be recognized as
a liability on the Balance Sheet date.
Accounting for subsidiaries and affiliates
Under Indian GAAP, the Bank is required to present
both unconsolidated and consolidated financial
statement. Under unconsolidated financial statement,
financial position and results of operations of
controlled entities are not consolidated, but are
reflected on the basis of cost subject to consideration of
impairment. The Bank is also required to consolidate
subsidiaries where it controls the ownership, directly or
indirectly of more than one-half of the voting power or
controls the composition of board of directors with the
objective of obtaining economic benefits from their
activities. The Bank accounts for investments in
associates under the equity method of accounting.
Accounting for Securitization
Under Indian GAAP, profits/premium arising from
securitization of loan assets are accounted for over the
life of the securities issued or to be issued by the
special purpose vehicle/special purpose entity to which
the assets are sold. The losses, if any, are charged off
immediately.
Proposed dividend
The declaration of a cash dividend is a non-adjusting
event. Dividends are recorded when they are
approved by the shareholders.
Accounting for subsidiaries and affiliates
U.S. GAAP mandate preparation of consolidated
financial statement.
Consolidates of subsidiaries is required in where the
Bank, directly or indirectly, holds more than 50% of
the voting rights or exercises control. Entities where
the Bank holds 20% to 50% of the voting rights and/
or has the ability to exercise significant influence are
accounted for under the equity method, and the pro
rata share of their income (loss) is require to be
included in income statement. The Bank will be
required to consolidate Variable Interest Entities
(“VIEs”) where the Bank is determined to be the
primary beneficiary under FASB ASC 810 and FASB
ASC Topic 323.
Accounting for Securitization
Under U.S. GAAP, any gain or loss on the sale of the
financial asset is accounted for in the income
statement at the time of the sale as per ASC Topic
860, “Transfers and Servicing Financial Assets and
Extinguishment”.
195
INDEX TO FINANCIAL STATEMENTS
Audited Non-Consolidated Financial Statements
Year ended 31 March 2012
Auditors’ report on the non-consolidated financial statements as of 31 March 2012 . . . . . . . . . . . . . . . . . .
Non-consolidated balance sheet as of 31 March 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-consolidated profit and loss account for the year ended 31 March 2012 . . . . . . . . . . . . . . . . . . . . . . .
Non-consolidated cash flow statement for the year ended 31 March 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the non-consolidated financial statements as of and for the year ended 31 March 2012 . . . . . . . .
Year ended 31 March 2011
Auditors’ report on the non-consolidated financial statements as of 31 March 2011 . . . . . . . . . . . . . . . . . .
Non-consolidated balance sheet as of 31 March 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-consolidated profit and loss account for the year ended 31 March 2011 . . . . . . . . . . . . . . . . . . . . . . .
Non-consolidated cash flow statement for the year ended 31 March 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the non-consolidated financial statements as of and for the year ended 31 March 2011 . . . . . . . .
Year ended 31 March 2010
Auditors’ report on the non-consolidated financial statements as of 31 March 2010 . . . . . . . . . . . . . . . . . .
Non-consolidated balance sheet as of 31 March 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-consolidated profit and loss account for the year ended 31 March 2010 . . . . . . . . . . . . . . . . . . . . . . .
Non-consolidated cash flow statement for the year ended 31 March 2010 . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the non-consolidated financial statements as of and for the year ended 31 March 2010 . . . . . . . .
Audited Consolidated Financial Statements
Year ended 31 March 2012
Auditors’ report on the consolidated financial statements as of 31 March 2012 . . . . . . . . . . . . . . . . . . . . .
Consolidated balance sheet as of 31 March 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated profit and loss account for the year ended 31 March 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated cash flow statement for the year ended 31 March 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the consolidated financial statements as of and for the year ended 31 March 2012 . . . . . . . . . . . .
Year ended 31 March 2011
Auditors’ report on the consolidated financial statements as of 31 March 2011 . . . . . . . . . . . . . . . . . . . . .
Consolidated balance sheet as of 31 March 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated profit and loss account for the year ended 31 March 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated cash flow statement for the year ended 31 March 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the consolidated financial statements as of and for the year ended 31 March 2011 . . . . . . . . . . . .
Year ended 31 March 2010
Auditors’ report on the consolidated financial statements as of 31 March 2010 . . . . . . . . . . . . . . . . . . . . .
Consolidated balance sheet as of 31 March 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated profit and loss account for the year ended 31 March 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated cash flow statement for the year ended 31 March 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the consolidated financial statements as of and for the year ended 31 March 2010 . . . . . . . . . . . .
Unaudited Non-Consolidated Interim Financial Results for the Half Year Ended 30 September
2012
Limited review report for the half year ended 30 September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited financial results for the half year ended 30 September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Non-Consolidated Interim Financial Results for the Nine Months Ended 31 December
2012
Limited review report for the nine months ended 31 December 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited financial results for the nine months ended 31 December 2012 . . . . . . . . . . . . . . . . . . . . . . . . .
F-1
F-2
F-4
F-5
F-6
F-13
F-51
F-52
F-53
F-54
F-62
F-100
F-101
F-102
F-103
F-112
F-150
F-151
F-152
F-153
F-161
F-187
F-188
F-189
F-190
F-198
F-223
F-224
F-225
F-226
F-233
F-256
F-257
F-261
F-262
AUDITORS’ REPORT
TO
THE MEMBERS OF AXIS BANK LIMITED
1. We have audited the attached Balance Sheet of AXIS BANK LIMITED (“the Bank”) as at 31 March
2012, the Profit and Loss Account and the Cash Flow Statement of the Bank for the year ended on that
date, both annexed thereto. These financial statements are the responsibility of the Bank’s Management.
Our responsibility is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those
Standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and the disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by the Management, as well
as evaluating the overall financial statement presentation. We believe that our audit provides reasonable
basis for our opinion.
3. The Balance Sheet and the Profit and Loss Account are drawn up in conformity with Forms A and B
(revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the
Companies Act, 1956.
4. Without qualifying our report, we invite attention to Note 1(a) of Schedule 18 regarding the Scheme of
Arrangement for the demerger of Enam Securities Private Ltd. with the Bank’s subsidiary. For the
reasons stated therein, no effect to the proposed Scheme has been given in the accounts.
5. We further report as follows:
(a) we have obtained all the information and explanations which to the best of oar knowledge and
belief were necessary for the purposes of our audit and have found them to be satisfactory;
(b) in our opinion, the transactions of the Bank which have come to our notice have been within its
powers;
(c) in our opinion, proper books of account as required by law have been kept by the Bank so far as it
appears from our examination of those books;
(d) the financial accounting systems of the Bank are centralised and, therefore, accounting returns are
not required to be submitted by the Branches;
(e) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this
report are in agreement with the books of account;
(f) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt
with by this report comply with the Accounting Standards referred to in Section 211 (3C) of the
Companies Act, 1956, insofar as they apply to banks;
(g) in our opinion and to the best of our information and according to the explanations given to us, the
said accounts give the information required by the Companies Act, 1956 in the manner so required
for banking companies and the Guidelines issued by the Reserve Bank of India from time to time
and give a true and fair view in conformity with the accounting principles generally accepted in
India:
(i) in the case of the Balance Sheet, of the state of the affairs of the Bank as at 31 March 2012;
(ii) in the case of the Profit and Loss Account, of the profit of the Bank for the year ended on that
date and
(iii) in the case of Cash Flow Statement, of the cash flows of the Bank for the year ended on that
date.
6. On the basis of the written representations received from the Directors as on 31st March 2012 and as per
the information and representation provided to us by the Bank, taken on record by the Board of
Directors, we report that none of the Directors is disqualified as on 31st March 2012 from being
appointed as a director in terms of Section 274(l)(g) of the Companies Act, 1956.
F-2
7. We report that during the course of our audit we have visited 56 Branches. Since the key operations of
the Bank are completely automated with the key applications integrated to the core banking systems, the
audit is carried out centrally at the Head Office as all the necessary records and data required for the
purposes of our audit are available therein and the Branches are not required to submit any financial
returns.
For DELOITTE HASKINS & SELLS
Chartered Accountants
(Registration No: 117365W)
Z. F. Billimoria
(Membership No.42791)
Partner
Place: Mumbai
Date: 27th April 2012
F-3
NON-CONSOLIDATED BALANCE SHEET AS OF 31 MARCH 2012
Schedule
No.
CAPITAL AND LIABILITIES
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves & Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities and provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ASSETS
Cash and Balances with Reserve Bank of India . . . . . . . . . . . . . . . . . . . . . . . . .
Balance with banks and money at call and short notice . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
As of
31-03-2012
31-03-2011
Rs.
Rs.
Figures in million
1
4,132
4,105
2
223,953
185,883
3 2,201,043 1,892,378
4
340,717
262,679
5
86,433
82,089
2,856,278
2,427,134
6
107,029
138,862
7
32,310
75,225
8
931,921
719,916
9 1,697,595 1,424,078
10
22,593
22,732
11
64,830
46,321
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,856,278
2,427,134
Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bills for collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Significant Accounting Policies and Notes to accounts . . . . . . . . . . . . . . . . . . .
12 4,802,374
346,346
17 & 18
4,453,914
324,731
Schedules referred to above form an integral part of the Balance Sheet.
F-4
NON-CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2012
Schedule
No.
I.
II.
III.
IV.
V.
VI.
INCOME
Interest earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
14
Year ended on
31-03-2012 31-03-2011
Rs.
Rs.
Figures in million
except EPS data
219,946
54,202
151,548
46,321
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
274,148
197,869
EXPENDITURE
Interest expended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Provisions and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (2.1.1)
139,769
60,070
31,887
85,918
47,794
30,272
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
231,726
163,984
42,422
33,885
49,698
92,120
34,274
68,159
10,606
—
519
—
7,701
73,294
92,120
8,471
(149)
47
3,388
6,704
49,698
68,159
102.94
102.20
82.95
81.61
NET PROFIT FOR THE YEAR (I — II) . . . . . . . . . . . . . . . . . . . . . .
Balance in Profit & Loss account brought forward from previous
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AMOUNT AVAILABLE FOR APPROPRIATION . . . . . . . . . . . . . .
APPROPRIATIONS:
Transfer to Statutory Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer to/(from) Investment Reserve . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer to Capital Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (2.2.1)
Transfer to General Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposed dividend (includes tax on dividend) . . . . . . . . . . . . . . . . . . . . . 18 (2.2.4)
Balance in Profit & Loss account carried forward . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EARNINGS PER EQUITY SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (2.2.2)
(Face value Rs. 10/- per share) (Rupees)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Significant Accounting Policies and Notes to accounts . . . . . . . . . . . . . .
17 &18
Schedules referred to above form an integral part of the Profit & Loss Account.
F-5
NON-CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2012
Year ended
31-03-2012 31-03-2011
Rs.
Rs.
Figures in million
Cash flow from operating activities
Net profit before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:
Depreciation & impairment provision on fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortisation of premium on Held to Maturity Investments . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Non Performing Advances/ Investments (including bad debts) . . . . . . . . . . .
Provision on Standard assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for wealth tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for interest tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Profit)/Loss on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for country risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for restructured assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for other contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,878
3,422
581
628
8,604
1,503
4
—
(203)
48
889
(198)
78,156
Adjustments for:
(Increase)/Decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)/Decrease in advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/(Decrease) in borrowings
Increase/(Decrease) in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)/Decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/(Decrease) in other liabilities & provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,357
2,896
993
605
9,551
1,662
5
3
70
24
150
412
67,728
(165,599) (35,372)
(282,226) (390,403)
308,665
(15,673)
1,757
(23,350)
479,376
(5,451)
17,665
(19,292)
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(98,270)
114,251
Cash flow from investing activities
Purchase of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in Held to Maturity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,843) (13,603)
(48,105) (126,380)
762
130
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(51,186) (139,853)
Cash flow from financing activities
Proceeds from issue of Subordinated debt, Perpetual Debt
& Upper Tier II instruments (net of repayments) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/(Decrease) in borrowings (excluding subordinated debt,
perpetual debt & upper Tier II instruments) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issue of Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from share premium (net of share issue expenses) . . . . . . . . . . . . . . . . . . . . . . . .
Payment of Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,808
(1,626)
42,230
27
1,337
(6,698)
92,610
53
2,354
(5,694)
Net cash generated from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,704
87,697
Effect of exchange fluctuation translation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents as at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . .
2,004
(74,748)
214,087
(47)
62,048
152,039
Cash and cash equivalents as at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139,339
214,087
Note:
1.
Cash and cash equivalents comprise of cash on hand (including foreign currency notes), balances with
Reserve Bank of India, balances with banks and money at call & short notice (refer Schedules 6 and 7 of the
Balance Sheet).
F-6
SCHEDULES TO THE NON-CONSOLIDATED BALANCE SHEET
AS OF 31 MARCH 2012 AND
NON-CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2012
SCHEDULE 1 — CAPITAL
As of
31-03-2012
Rs.
As of
31-03-2011
Rs.
Authorised Capital
500,000,000 Equity Shares of Rs. 10/- each . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,000
5,000
Issued, Subscribed and Paid-up capital# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,132
4,105
#
413,203,952 and (410,545,843 Previous year) equity shares of Rs. 10/- each fully paid up as of 31 March
2012 and 31 March 2011 respectively.
SCHEDULE 2 — RESERVES AND SURPLUS
As of
31-03-2012
Rs.
I.
Statutory Reserve
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Share Premium Account
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Share issue expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Investment Reserve Account
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer to P&L Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. General Reserve
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year [Refer Schedule 18(2.1.31)] . . . . . . . . . . . . . . . . . . . . . . . .
V.
Capital Reserve
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year [Refer Schedule 18(2.2.1)] . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Foreign Currency Translation Reserve [Refer Schedule 17(5.5)]
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
31-03-2011
Rs.
27,820
10,606
19,349
8,471
38,426
27,820
100,051
1,337
—
97,695
2,356
—
101,388
100,051
—
—
—
150
—
(150)
—
—
3,535
8
146
3,389
3,543
3,535
4,906
519
4,858
48
5,425
4,906
(127)
2,004
(80)
(47)
1,877
(127)
VII. Balance in Profit & Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,294
49,698
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
223,953
185,883
F-7
SCHEDULE 3 — DEPOSITS
A.I.
II.
III.
B.I.
II.
As of
31-03-2012
Rs.
As of
31-03-2011
Rs.
Demand Deposits
(i) From banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) From others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings Bank Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Deposits
(i) From banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) From others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,981
376,560
516,679
14,305
354,866
408,503
100,944
1,185,879
76,751
1,037,953
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,201,043
1,892,378
Deposits of branches in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits of branches outside India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,094,496
105,647
1,826,772
65,606
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,201,043
1,892,378
SCHEDULE 4 — BORROWINGS
I.
II.
As of
31-03-2012
Rs.
As of
31-03-2011
Rs.
Borrowings in India
(i) Reserve Bank of India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Other Banks# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Other institutions & agencies** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings outside India$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,150
4,472
121,211
213,884
—
14,237
64,072
184,370
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
340,717
262,679
Secured borrowing included in I & II above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
#
Borrowings from other Banks include Subordinated Debt of Rs. 3,646 million and Rs. 3,596 million in the
nature of Non-Convertible Debentures as of 31 March 2011 and 31 March 2012 respectively, Rs. Nil
million and Rs. Nil of Perpetual Debt as of 31 March 2011 and 31 March 2012 respectively, and
Rs. 591 million and Rs. 591 million of Upper Tier II instruments as of 31 March 2011 and 31 March 2012
respectively. [Also refer 18(2.1.2) & 18(2.1.3)].
**
Borrowings from other institutions & agencies include Subordinated debt of Rs. 49,667 million and
Rs. 83,917 million in the nature of Non-Convertible Debentures as of 31 March 2011 and 31 March 2012
respectively, Rs. 2,140 million and Rs. 2,140 million of Perpetual Debt as of 31 March 2011 and 31 March
2012 respectively and Rs. 2,484 million and Rs. 2,484 million of Upper Tier II instruments as of 31 March
2011 and 31 March 2012 respectively. [Also refer 18(2.1.2) & 18(2.1.3)].
$
Borrowings outside India include Rs. 2,051 million and Rs. 2,340 million of Perpetual Debt as of 31 March
2011 and 31 March 2012 respectively and Rs. 9,353 million and Rs. 10,672 million of Upper Tier II
instruments as of 31 March 2011 and 31 March 2012 respectively. [Also refer 18(2.1.3)].
SCHEDULE 5 — OTHER LIABILITIES AND PROVISIONS
I.
II.
III.
IV.
V.
VI
As of
31-03-2012
Rs.
As of
31-03-2011
Rs.
Bills payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inter — office adjustments (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposed dividend (includes tax on dividend) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent Provision against Standard Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others (including provisions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,853
—
6,478
7,682
7,800
33,620
37,445
—
4,143
6,679
6,297
27,525
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86,433
82,089
F-8
SCHEDULE 6 — CASH AND BALANCES WITH RESERVE BANK OF INDIA
As of
31-03-2012
Rs.
I.
II.
Cash in hand & in ATM
(including foreign currency notes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances with Reserve Bank of India:
(i) in Current Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) in Other Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
31-03-2011
Rs.
35,957
22,083
71,072
—
116,779
—
107,029
138,862
SCHEDULE 7 — BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
As of
31-03-2012
Rs.
I.
II.
In India
(i) Balance with Banks
(a) in Current Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) in Other Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Money at Call and Short Notice
(a) With banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) With other institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
31-03-2011
Rs.
3,516
6,147
4,408
49,184
—
—
30
—
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,663
53,622
Outside India
i) in Current Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ii) in Other Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iii) Money at Call & Short Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,666
3,846
11,135
4,836
10,658
6,109
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,647
21,603
GRAND TOTAL (I+II) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,310
75,225
As of
31-03-2012
Rs.
As of
31-03-2011
Rs.
Investments in India in —
(i) Government Securities##** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Other approved securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iv) Debentures and Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(v) Investments in Subsidiaries/Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(vi) Others@ (Mutual Fund units, CD / CP, NABARD Deposits, PTC etc.) . . . . . . . .
584,162
—
7,400
231,508
3,495
98,083
441,550
—
6,929
180,705
2,596
82,406
Total Investments in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
924,649
714,184
Investments outside India in —
(i) Government Securities (including local authorities) . . . . . . . . . . . . . . . . . . . . . . .
(ii) Subsidiaries and/or joint ventures abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,170
—
6,103
430
—
5,302
Gross Investments outside India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,273
5,732
GRAND TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
931,921
719,916
SCHEDULE 8 — INVESTMENTS
I.
II.
## Includes securities costing Rs. 44,249 million and Rs. 44,272 million as of 31 March 2011 and 31 March
2012 respectively pledged for availment of fund transfer facility, clearing facility and margin requirement.
@ Includes priority sector shortfall deposits Rs. 40,647 million and Rs. 51,005 million as of 31 March 2011
and 31 March 2012 respectively and PTC’s Rs. 2,130 million and Rs. 2,047 million as of 31 March 2011
and 31 March 2012 respectively.
** Inclusive of Repo Lending of Rs. Nil million and Rs. 36,750 as of 31 March 2011 and 31 March 2012
respectively and net of repo borrowing of Rs. Nil million and Rs. 31,408 as of 31 March 2011 and 31 March
2012 respectively under the Liquidity Adjustment Facility in line with the RBI requirements.
F-9
SCHEDULE 9 — ADVANCES
A.(i)
(ii)
(iii)
B.(i)
(ii)
(iii)
C.I.
II.
As of
31-03-2012
Rs.
As of
31-03-2011
Rs.
Bills purchased and discounted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash credits, overdrafts and loans repayable on demand . . . . . . . . . . . . . . . . . . .
Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,089
468,609
1,189,897
34,813
349,803
1,039,462
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,697,595
1,424,078
Secured by tangible assets# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered by Bank/Government Guarantees&& . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,417,163
50,234
230,198
1,131,027
32,394
260,657
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,697,595
1,424,078
Advances in India
(i) Priority Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iv) Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
484,792
32,536
3,478
923,768
412,891
30,039
2,408
782,964
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,444,574
1,228,302
Advances Outside India
(i) Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(i) Due from others —
(a) Bills purchased and discounted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Syndicate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,128
4,197
6,438
108,035
137,420
6,265
70,389
114,925
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
253,021
195,776
GRAND TOTAL (CI + CII) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,697,595
1,424,078
*
Net of borrowing under Bills rediscounting Scheme Rs. 18,000 and Rs. 34,800 million as of 31 March 2011
and 31 March 2012 respectively.
@
Net of borrowing under Inter Bank Participation Certificate Rs. Nil and Rs. 604 million as of 31 March
2011 and 31 March 2012 respectively.
#
Net of borrowing under Inter Bank Participation Certificate Rs. 34,010 and Rs. 79,682 million as of
31 March 2011 and 31 March 2012 respectively.
$
Includes advances against book debts.
&& Includes advances against L/Cs issued by Banks.
F-10
SCHEDULE 10 — FIXED ASSETS
I.
As of
31-03-2012
Rs.
As of
31-03-2011
Rs.
Premises
At cost at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,117
97
(212)
891
8,245
(19)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,002
9,117
Depreciation
As at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation to date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
198
146
(82)
262
162
46
(10)
198
Net Block . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,740
8,919
Other Fixed Assets (including Furniture & Fixtures)
At cost at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,148
3,266
(1,579)
20,189
5,704
(745)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,835
25,148
Depreciation
As at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation to date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,562
3,276
(1,149)
13,689
9,266
2,849
(553)
11,562
Net Block . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,146
13,586
III. CAPITAL WORK-IN-PROGRESS (including Capital Advances) . . . . . . . . . . .
707
227
GRAND TOTAL (I+II+III+IV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,593
22,732
As of
31-03-2012
Rs.
As of
31-03-2011
Rs.
Inter-office adjustments (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax paid in advance/tax deducted at source (net of provisions) . . . . . . . . . . . . . . . . . .
Stationery and stamps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non banking assets acquired in satisfaction of claims . . . . . . . . . . . . . . . . . . . . . . . . .
Others# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
24,195
1,185
13
263
39,174
—
17,166
401
12
53
28,689
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,830
46,321
II.
SCHEDULE 11 — OTHER ASSETS
I
II
III
IV
V
VI
#
Includes deferred tax assets Rs. 8,169 million and Rs. 10,274 million as of 31 March 2011 and 31 March
2012 respectively.
F-11
SCHEDULE 12 — CONTINGENT LIABILITIES
As of
31-03-2012
Rs.
I.
II.
III.
IV.
V
VI
As of
31-03-2011
Rs.
Claims against the bank not acknowledged as debts . . . . . . . . . . . . . . . . . . . . . . . . .
2,602
2,344
Liability for partly paid investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Liability on account of outstanding
Forward exchange and derivative contracts
a) Forward Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,009,255 1,854,438
b) Interest Rate Swaps, Currency Swaps, Forward Rate Agreement &
Interest Rate Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,752,491 1,647,016
c) Foreign Currency Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130,543
141,259
TOTAL (a+b+c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,892,289
3,642,713
Guarantees given on behalf of constituents
In India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acceptances and endorsements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items for which the Bank is Contingently liable . . . . . . . . . . . . . . . . . . . . . . .
467,506
98,613
302,613
38,751
464,333
76,278
249,277
18,969
TOTAL (I+II+III+IV+V+VI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,802,374
4,453,914
SCHEDULE 13 — INTEREST EARNED
Year ended
31-03-2012 31-03-2011
Rs.
Rs.
I.
II.
III.
IV.
Interest/discount on advances/bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on balances with Reserve Bank of India and other inter-bank funds . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
153,793
63,943
984
1,226
104,031
44,387
1,826
1,304
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
219,946
151,548
SCHEDULE 14 — OTHER INCOME
Year ended
31-03-2012 31-03-2011
Rs.
Rs.
I.
Commission, exchange and brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Profit on sale of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Profit/(Loss) on sale of fixed assets (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Profit on exchange transactions/Derivative transaction (net) . . . . . . . . . . . . . . . . . . .
V. Income earned by way of dividends etc. from Subsidiaries/companies and/or joint
venture abroad/in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Miscellaneous Income# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,417
728
203
6,740
33,574
3,663
(70)
5,636
11
3,103
8
3,510
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54,202
46,321
#
Including recoveries on account of advances/investments/derivative receivables written off in earlier years
Rs. 3,252 million and Rs. 2,918 million for the year ended 31 March 2011 & 31 March 2012 respectively
and profit on account of portfolio sell downs/securitisation Rs. 180 million and Rs. (16) million for the year
ended 31 March 2011 & 31 March 2012 respectively.
SCHEDULE 15 — INTEREST EXPENDED
Year ended
31-03-2012 31-03-2011
Rs.
Rs.
I.
II.
III.
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on Reserve Bank of India/Inter-bank borrowings . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121,836
2,320
15,613
74,985
1,610
9,323
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139,769
85,918
F-12
SCHEDULE 16 — OPERATING EXPENSES
Year ended
31-03-2012 31-03-2011
Rs.
Rs.
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
17
1
Payments to and provisions for employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent, taxes and lighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing and stationery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertisement and publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation on bank’s property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors’ fees, allowance and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auditor’s fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Law Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postage, Telegrams, Telephones, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,802
6,564
935
881
3,422
8
9
183
2,587
5,295
2,313
17,071
16,139
6,798
1,096
790
2,896
6
8
134
1,985
3,839
1,849
12,254
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60,070
47,794
SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR ENDED 31 MARCH 2012
Background
Axis Bank Limited (‘the Bank’) was incorporated in 1993 and provides a complete suite of corporate and
retail banking products.
2
Basis of preparation
The financial statements have been prepared and presented under the historical cost convention on the
accrual basis of accounting, and comply with the generally accepted accounting principles, statutory
requirements prescribed under the Banking Regulation Act, 1949, the circulars and guidelines issued by the
Reserve Bank of India (‘RBI’) from time to time and the Accounting Standards notified under the Companies
(Accounting Standards) Rules, 2006, to the extent applicable and current practices prevailing within the banking
industry in India.
3
Use of estimates
The preparation of the financial statements in conformity with the generally accepted accounting principles
requires the Management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements.
Actual results could differ from those estimates. The Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are
recognised prospectively in the current and future periods.
4
Change in accounting estimates
Change in estimated useful life of fixed assets
During the year, the Bank has revised the estimated useful lives of the certain fixed assets viz; cheque book
encoder, currency counting machine, cheque encoder, fax machine/telex, fake note detector, UPS, VSAT and
scrollers from 10 years to 5 years. As a result of the aforesaid revision, the net depreciation charge for the year is
higher by Rs. 222 million with a corresponding decrease in the net block of the fixed assets.
5
Significant accounting policies
5.1
Investments
Classification
In accordance with the RBI guidelines, investments are classified at the date of purchase as:
• Held for Trading (‘HFT’);
• Available for Sale (‘AFS’); and
• Held to Maturity (‘HTM’).
F-13
Investments that are held principally for sale within a short period are classified as HFT securities. As per
the RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS
securities as on that date.
Investments that the Bank intends to hold till maturity are classified under the HTM category. All other
investments are classified as AFS securities.
However, for disclosure in the Balance Sheet, investments in India are classified under six categories —
Government Securities, Other approved securities, Shares, Debentures and Bonds, Investment in Subsidiaries/
Joint Ventures and Others.
Investments made outside India are classified under three categories — Government Securities, Subsidiaries
and/or Joint Ventures abroad and Others.
Transfer of security between categories
Transfer of security between categories of investments is accounted as per the RBI guidelines.
Acquisition cost
Costs including brokerage, commission pertaining to investments, paid at the time of acquisition, are
charged to the Profit and Loss Account.
Broken period interest is charged to the Profit and Loss Account.
Cost of investments is computed based on the weighted average cost method.
Valuation
Investments classified under the HTM category are carried at acquisition cost unless it is more than the face
value, in which case the premium is amortised over the period remaining to maturity. In terms of RBI guidelines,
discount on securities held under HTM category is not accrued and such securities are held at the acquisition cost
till maturity.
Investments classified under the AFS and HFT categories are marked to market. The market/fair value of
quoted investments included in the ‘AFS’ and ‘HFT’ categories is the market price of the scrip as available from
the trades/quotes on the stock exchanges or prices declared by Primary Dealers Association of India (‘PDAI’)
jointly with Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’), periodically. Net
depreciation, if any, within each category of each investment classification is recognised in the Profit and Loss
Account. The net appreciation if any, under each category of each investment classification is ignored. The book
value of individual securities is not changed consequent to the periodic valuation of investments.
Treasury Bills, Exchange Funded Bills, Commercial Paper and Certificate of Deposits being discounted
instruments, are valued at carrying cost.
Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund.
Market value of investments where current quotations are not available, is determined as per the norms
prescribed by the RBI as under:
• in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly
(i.e. not overdue beyond 90 days), the market price is derived based on the YTM for Government
Securities as published by FIMMDA/PDAI and suitably marked up for credit risk applicable to the credit
rating of the instrument. The matrix for credit risk mark-up for each categories and credit ratings along
with residual maturity issued by FIMMDA is adopted for this purpose;
• in case of bonds and debentures (including Pass Through Certificates) where interest is not received
regularly (i.e. overdue beyond 90 days), the valuation is in accordance with prudential norms for
provisioning as prescribed by RBI;
• equity shares, for which current quotations are not available or where the shares are not quoted on the
stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is
ascertained from the company’s latest Balance Sheet. In case the latest Balance Sheet is not available, the
shares are valued at Re 1 per company;
• units of Venture Capital Funds (VCF) held under AFS category where current quotations are not available
are marked to market based on the Net Asset Value (NAV) shown by VCF as per the latest audited
financials of the fund. In case the audited financials are not available for a period beyond 18 months, the
F-14
investments are valued at Re 1 per VCF. Investment in unquoted VCF after 23rd August 2006 are
categorised under HTM category for the initial period of three years and valued at cost as per RBI
guidelines;
• investments in Credit Linked Notes (‘CLNs’), are valued based on current quotations where the same are
available. In the absence of quotes, the same are valued based on internal valuation methodology using
appropriate mark-up and other estimates such as price of the underlying Foreign Currency Convertible
Bond (FCCB), rating category of the CLN etc. and
• security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Reconstruction
Company / Securitisation Company.
Investments in subsidiaries/joint ventures are categorised as HTM and assessed for impairment to determine
permanent diminution, if any, in accordance with the RBI guidelines.
Realised gains on investments under the HTM category are recognised in the Profit and Loss Account and
subsequently appropriated to Capital Reserve account in accordance with the RBI guidelines. Losses are
recognised in the Profit and Loss Account.
All investments are accounted for on settlement date except investments in equity shares which are
accounted for on trade date as the corporate actions are effected in equity on the trade date.
Repurchase and reverse repurchase transactions
Repurchase and reverse repurchase transactions [excluding those conducted under the Liquid Adjustment
Facility (LAF) with RBI] are accounted as collateralised borrowing and lending respectively. Such transactions
done under LAF are accounted as outright sale and outright purchase respectively. However, depreciation in their
value, if any, compared to their original cost, is recognised in the Profit and Loss Account.
5.2
Advances
Advances are classified into performing and non-performing advances (‘NPAs’) as per the RBI guidelines
and are stated net of specific provisions made towards NPAs and floating provisions. Further, NPAs are
classified into sub-standard, doubtful and loss assets based on the criteria stipulated by the RBI. Provisions for
NPAs are made for sub-standard and doubtful assets at rates as prescribed by the RBI with the exception for
agriculture advances and schematic retail advances. In respect of schematic retail advances, provisions are made
in terms of a bucket-wise policy upon reaching specified stages of delinquency (90 days or more of delinquency)
under each type of loan, which satisfies the RBI prudential norms on provisioning. Provisions in respect of
agriculture advances classified into sub-standard and doubtful assets are made at rates which are higher than
those prescribed by the RBI.
Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI
guidelines. NPAs are identified by periodic appraisals of the loan portfolio by the Management.
Amounts recovered against debts written off are recognised in the profit and loss account.
For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI,
which requires the diminution in the fair value of the assets to be provided at the time of restructuring.
A general provision @ 0.25% in case of direct advances to agricultural and SME sectors, 1% in respect of
advances classified as commercial real estate, 2% in respect of housing loans at teaser rates and certain class of
restructured assets and 0.40% for all other advances is made as prescribed by the RBI.
5.3
Country risk
In addition to the provisions required to be held according to the asset classification status, provisions are
held for individual country exposure (other than for home country). The countries are categorised into seven risk
categories namely insignificant, low, moderate, high, very high, restricted and off-credit and provision is made
on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual
maturity of less than 180 days, 25% of the normal provision requirement is held. If the country exposure (net) of
the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on
such country exposure.
5.4
Securitisation
The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose
Vehicle (‘SPV’). In most cases, post securtisation, the Bank continues to service the loans transferred to the
F-15
assignee/SPV. The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination
of cash flows to Senior Pass Through Certificate (‘PTC’) holders. In respect of credit enhancements provided or
recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/
disclosure is made at the time of sale in accordance with AS 29, Provisions, Contingent Liabilities and
Contingent Assets as notified under the Companies (Accounting Standards) Rules, 2006.
In accordance with RBI guidelines of 2nd February 2006, on ‘Guidelines on Securitisation of Standard
Assets’, gain on securtisation transactions is recognised over the period of the underlying securities issued by the
SPV. Loss on securtisation is immediately debited to the Profit and Loss Account.
5.5
Foreign currency transactions
In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the
rates prevailing on the date of the transaction. Monetary foreign currency assets and liabilities are translated at
the Balance Sheet date at rates notified by Foreign Exchange Dealers Association of India (‘FEDAI’). All profits/
losses resulting from year end revaluations are recognised in the Profit and Loss Account.
Financial statements of foreign branches classified as non-integral foreign operations are translated as
follows:
• Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at
closing rates notified by FEDAI at the year end.
• Income and expenses are translated at the rates prevailing on the date of the transactions.
• All resulting exchange differences are accumulated in a separate ‘Foreign Currency Translation Reserve’
till the disposal of the net investments.
Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge foreign currency
assets/liabilities and funding swaps which are not revalued) and spot exchange contracts are revalued at year end
exchange rates notified by FEDAI for specified maturities and at interpolated rates for contract of interim
maturities. The resulting gains or losses on revaluation are included in the Profit and Loss Account in accordance
with RBI/FEDAI guidelines. The forward exchange contracts of longer maturities where exchange rates are not
notified by FEDAI are revalued at the forward exchange rates implied by the swap curves in respective
currencies. The resultant gains or losses are recognised in the Profit and Loss Account.
Premium/discount on currency swaps undertaken to hedge foreign currency assets and liabilities and
funding swaps is recognised as interest income/expense and is amortised on a pro-rata basis over the underlying
swap period.
Currency futures contracts are marked to market using daily settlement price on a trading day, which is the
closing price of the respective futures contracts on that day. While the daily settlement price is computed based
on the last half an hour weighted average price of such contract, the final settlement price is taken as the RBI
reference rate on the last trading day of the futures contract or as may be specified by the relevant authority from
time to time. All open positions are marked to market based on the settlement price and the resultant marked to
market profit/loss is daily settled with the exchange.
Valuation of Exchange Traded Currency Options (ETCO) is carried out on the basis of the daily settlement
price of each individual option provided by the exchange.
Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances,
endorsements and other obligations denominated in foreign currencies are disclosed at closing rates of exchange
notified by FEDAI.
5.6
Derivative transactions
Derivative transactions comprise of forward contracts, swaps and options which are disclosed as contingent
liabilities. The forwards, swaps and options are categorised as trading or hedge transactions. Trading derivative
contracts are revalued at the Balance Sheet date with the resulting unrealised gain or loss being recognised in the
Profit and Loss Account and correspondingly in other assets or other liabilities respectively. For hedge
transactions, the Bank identifies the hedged item (asset or liability) at the inception of transaction itself. The
effectiveness is ascertained at the time of inception of the hedge and periodically thereafter. Hedge swaps are
accounted for on accrual basis except in case of swaps designated with an asset or liability that is carried at
market value or lower of cost or market value in the financial statements. In such cases the swaps are marked to
market with the resulting gain or loss recorded as an adjustment to the market value of designated asset or
liability. The premium on option contracts is accounted for as per Foreign Exchange Dealers’ Association of
F-16
India guidelines. Pursuant to the RBI guidelines any receivables under derivative contracts comprising of
crystallised receivables as well as positive Mark to Market (MTM) in respect of future receivables which remain
overdue for more than 90 days are reversed through the profit and loss account and are held in separate Suspense
account.
5.7
Revenue recognition
Interest income is recognised on an accrual basis except interest income on non-performing assets, which is
recognised on receipt in accordance with AS — 9, Revenue Recognition as notified under the Companies
(Accounting Standards) Rules, 2006 and the RBI guidelines.
Fees and commission income is recognised when due, except for guarantee commission which is recognised
pro-rata over the period of the guarantee.
Dividend is accounted on an accrual basis when the right to receive the dividend is established.
Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale.
Gain or loss arising on sale of NPAs is accounted as per the guidelines prescribed by the RBI, which require
provisions to be made for any deficit (where sale price is lower than the net book value), while surplus (where
sale price is higher than the net book value) is ignored.
Arrangership/syndication fee is accounted for on completion of the agreed service and when right to receive
is established.
5.8
Fixed assets and depreciation
Fixed assets are carried at cost of acquisition less accumulated depreciation and impairment, if any. Cost
includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset.
Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also
includes advances paid to acquire fixed assets.
Depreciation is provided on the straight-line method from the date of addition. The rates of depreciation
prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the
Management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the
remaining useful life on a subsequent review is shorter, then depreciation is provided at a higher rate based on the
Management’s estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation has been
provided using the following estimated useful lives:
Asset
Estimated
useful life
Owned premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets given on operating lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer hardware including printers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Application software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EPABX, telephone instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CCTV and video conferencing equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mobile phone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Locker cabinets/cash safe/strong room door . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Modem, scanner, routers, hubs, switches, racks/cabinets for IT equipment . . . . . . . . . . . . . .
UPS, VSAT, fax machines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cheque book/cheque encoder, currency counting machine, fake note detector . . . . . . . . . . .
Assets at staff residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61 years
20 years
3 years
5 years
4 years
8 years
3 years
2 years
16 years
5 years
5 years
5 years
3 years
10 years
All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation.
Depreciation on assets sold during the year is recognised on a pro-rata basis to the Profit and Loss Account
till the date of sale.
The carrying amounts of assets are reviewed at each Balance Sheet date to ascertain if there is any
indication of impairment based on internal/external factors. An impairment loss is recognised wherever the
carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s
net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to
their present value at the weighted average cost of capital. After impairment, depreciation is provided on the
revised carrying amount of the asset over its remaining useful life.
Profit on sale of premises is appropriated to Capital Reserve Account in accordance with RBI instructions.
F-17
5.9
Lease transactions
Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the
Profit and Loss Account on accrual basis.
Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease
term are classified as operating lease. Lease payments for assets taken on operating lease are recognised as an
expense in the Profit and Loss Account on a straight-line basis over the lease term.
5.10
Retirement and other employee benefits
Provident Fund
Retirement benefit in the form of provident fund is a defined benefit plan wherein the contributions are
charged to the Profit and Loss Account of the year when the contributions to the fund are due. Further, an
actuarial valuation is conducted by an independent actuary to determine the deficiency, if any, in the interest
payable on the contributions as compared to the interest liability as per the statutory rate.
Gratuity
The Bank contributes towards gratuity fund (defined benefit retirement plan) administered by the Life
Insurance
Corporation of India (‘LIC’), Metlife Insurance Company Limited (‘Metlife’), HDFC Standard Life
Insurance Company Limited (‘HDFC Life’), ICICI Prudential Life Insurance Company Limited (‘ICICI Pru’)
and Bajaj Life Insurance Company Limited (‘BLIC’) for eligible employees. Under this scheme, the settlement
obligations remain with the Bank, although LIC/Metlife/HDFC Life/ICICI Pru/BLIC administer the scheme and
determine the contribution premium required to be paid by the Bank. The plan provides a lump sum payment to
vested employees at retirement or termination of employment based on the respective employee’s salary and the
years of employment with the Bank. Liability with regard to gratuity fund is accrued based on actuarial valuation
conducted by an independent actuary using the Projected Unit Credit Method as at 31 March each year.
Leave Encashment
Short term compensated absences are provided for based on estimates. The Bank provides leave encashment
benefit (long term), which is a defined benefit scheme based on actuarial valuation conducted by an independent
actuary. The actuarial valuation is carried out as per the Projected Unit Credit Method as at 31 March each year.
Superannuation
Employees of the Bank are entitled to receive retirement benefits under the Bank’s Superannuation scheme
either under a cash-out option through salary or under a defined contribution plan. Through the defined
contribution plan, the Bank contributes annually a specified sum of 10% of the employee’s eligible annual basic
salary to LIC, which undertakes to pay the lump sum and annuity benefit payments pursuant to the scheme.
Superannuation contributions are recognised in the Profit and Loss Account in the period in which they accrue.
Actuarial gains/losses are immediately taken to the Profit and Loss Account and are not deferred.
5.11
Debit/Credit card reward points
The Bank estimates the probable redemption of debit and credit card reward points using an actuarial
method at the Balance Sheet date by employing an independent actuary. Provision for the said reward points is
then made based on the actuarial valuation report as furnished by the said independent actuary.
5.12
Taxation
Income tax expense is the aggregate amount of current tax and deferred tax charge. Current year taxes are
determined in accordance with the Income tax Act, 1961. Deferred income taxes reflects the impact of current
year timing differences between taxable income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the
Balance Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists
to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities
relate to the taxes on income levied by same governing taxation laws.
F-18
Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets can be realised. The impact of changes in
the deferred tax assets and liabilities is recognised in the Profit and Loss Account.
Deferred tax assets are recognised and reassessed at each reporting date, based upon the Management’s
judgement as to whether realisation is considered as reasonably certain. Deferred tax assets are recognised on
carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax
asset can be realised against future profits.
5.13
Share issue expenses
Share issue expenses are adjusted from Share Premium Account in terms of Section 78 of the Companies
Act, 1956.
5.14
Earnings per share
The Bank reports basic and diluted earnings per share in accordance with AS 20, Earnings per Share, as
notified by the Companies (Accounting Standards) Rules, 2006. Basic earnings per share is computed by
dividing the net profit after tax by the weighted average number of equity shares outstanding for the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to
issue equity shares were exercised or converted during the year. Diluted earnings per share is computed using the
weighted average number of equity shares and dilutive potential equity shares outstanding at the year end.
5.15
Employee stock option scheme
The 2001 Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options on equity
shares of the Bank to employees and Directors of the Bank and its subsidiaries. The Scheme is in accordance
with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value method to account for its stock based
employee compensation plans as per the Guidance Note on ‘Accounting for Employee Share-based Payments’
issued by the ICAI. Options are granted at an exercise price, which is equal to/less than the fair market price of
the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the
grant date is recognised as a deferred compensation cost and amortised on a straight-line basis over the vesting
period of such options.
The fair market price is the latest available closing price, prior to the date of grant, on the stock exchange on
which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock
exchange where there is highest trading volume on the said date is considered.
5.16
Provisions, contingent liabilities and contingent assets
A provision is recognised when the Bank has a present obligation as a result of past event where it is
probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable
estimate can be made. Provisions are not discounted to its present value and are determined based on best
estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet
date and adjusted to reflect the current best estimates.
A disclosure of contingent liability is made when there is:
• a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or
non occurrence of one or more uncertain future events not within the control of the Bank; or
• a present obligation arising from a past event which is not recognised as it is not probable that an outflow
of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation
cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed
continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related
income are recognised in the period in which the change occurs.
F-19
18
NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 MARCH 2012 (CURRENCY: IN INDIAN RUPEES)
1 a) On 17 November 2010, the Board of Directors of the Bank had approved the acquisition of certain
financial services businesses undertaken by Enam Securities Private Limited (ESPL) directly and through its
wholly owned subsidiaries, by Axis Securities and Sales Limited (ASSL), a wholly owned subsidiary of the Bank
by way of a demerger. However, pursuant to conditions prescribed by the Reserve Bank of India, certain
modifications have been carried out to the demerger structure in terms of a revised Scheme of Arrangement
under Sections 391-394 and other relevant provisions of the Companies Act, 1956. Accordingly, the acquisition
will now comprise of (a) a demerger of the financial services businesses from ESPL to the Bank, in consideration
of which the Bank will issue shares to the shareholders of ESPL, and (b) immediately upon completion of the
demerger under the Scheme, a simultaneous sale of the financial services businesses will be undertaken from the
Bank to ASSL for a cash consideration, with both the aforesaid steps occurring simultaneously. The Reserve
Bank of India has on 30 March 2012, conveyed its no objection to the Scheme. Further, on 27 April 2012, the
Board of Directors of the Bank have approved the reassessment of the valuation of the ESPL business at
Rs. 13,958 million and consequently, in consideration for the demerger of the financial services business of
ESPL, the Bank will issue shares in the ratio of 5 equity shares of the Bank (aggregating 120,90,000 equity
shares) of the face value of Rs. 10 each for every 1 equity share (aggregating 2,418,000 equity shares) of Rs. 10
each held by the shareholders of ESPL. The sale of the financial services businesses will be simultaneously
undertaken from the Bank to ASSL for a cash consideration of Rs. 2,742 million only. The appointed date under
the Scheme is 1 April 2010, and the parties shall proceed with filing the Revised Scheme and other necessary
documents with the relevant High Courts and other regulatory authorities for their approval.
b) The Board of Directors of the Bank have, on 27 April 2012, approved a proposal to induct Schroder
Singapore Holdings Private Limited, a wholly owned subsidiary of Schroders plc, as a 25% shareholder in Axis
Asset Management Company Ltd., a wholly owned subsidiary of the Bank. The transaction is subject to
regulatory approvals.
2
Statutory disclosures as per RBI
2.1.1 ‘Provisions and contingencies’ recognised in the Profit and Loss Account include:
For the year ended
31 March 2012
31 March 2011
(Rs. in million)
Provision for income tax
— Current tax for the year . . . . . . . . . . . . . . . . . . . . . . . . .
— Deferred tax for the year . . . . . . . . . . . . . . . . . . . . . . . .
Provision for fringe benefit tax . . . . . . . . . . . . . . . . . . . . . . .
Provision for wealth tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for interest tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for non-performing assets
(including bad debts written off and write backs) . . . . . .
Provision for restructured assets . . . . . . . . . . . . . . . . . . . . . .
Provision towards standard assets . . . . . . . . . . . . . . . . . . . .
Provision for depreciation in value of investments . . . . . . .
Provision for country risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for other contingencies . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-20
22,562
(2,106)
—
19,530
(2,055)
(3)
20,456
4
—
17,472
5
3
8,604
889
1,503
581
48
(198)
31,887
9,551
150
1,662
993
24
412
30,272
2.1.2 The capital adequacy ratio of the Bank, calculated as per the RBI guidelines (Basel II requirement
being higher) is set out below:
31 March 2012
31 March 2011
(Rs. in million)
Capital adequacy
Tier I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
218,861
97,588
185,035
63,669
Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk weighted assets and contingents . . . . . . . . . . . . . . . . . .
Capital ratios
Tier I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
316,449
2,317,114
248,704
1,965,626
9.45%
4.21%
9.41%
3.24%
CRAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.66%
12.65%
—
—
—
—
Rs. 34,250 million
—
Amount raised by issue of Innovative Perpetual Debt
Instruments (IPDI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount raised by issue of Upper Tier II instruments . . . . . . . . . .
Amount of Subordinated Debt raised as Tier II capital
(details given below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
During the year ended 31 March 2012, the Bank raised subordinated debt of Rs. 34,250 million, the details
of which are set out below:
Date of allotment
Period
1 December 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 March 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Coupon
120 months
120 months
9.73%
9.30%
Amount
Rs. 15,000 million
Rs. 19,250 million
The Bank has not raised any subordinated debt during the year ended 31 March 2011.
During the year ended 31 March 2012, the Bank redeemed subordinated debt of Rs. 50 million, the details
of which are set out below:
Date of maturity
Period
26 April 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93 months
Coupon
Amount
6.70%
Rs. 50 million
During the year ended 31 March 2011, the Bank redeemed subordinated debt of Rs. 1,550 million, the
details of which are set out below:
Date of maturity
Period
4 June 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 June 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Coupon
72 months
93 months
5.75%
9.05%
Amount
Rs. 1,500 million
Rs. 50 million
2.1.3 The Bank has not raised any hybrid capital during the years ended 31 March 2012 and 31 March
2011.
2.1.4 The key business ratios and other information is set out below:
As at
31 March 2012
%
Interest income as a percentage to working funds# . . . . . . . . . . . .
Non-interest income as a percentage to working funds# . . . . . . . .
Operating profit as a percentage to working funds# . . . . . . . . . . .
Return on assets (based on working funds)# . . . . . . . . . . . . . . . . .
Business (deposits less inter bank deposits plus advances) per
employee** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit per employee** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net non performing assets as a percentage of net customer
assets* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 March 2011
%
8.71
2.15
2.94
1.68
7.49
2.29
3.17
1.68
Rs. 128 million
Rs. 1 million
Rs. 137 million
Rs. 1 million
0.25
0.26
#
Working funds represent average of total assets as reported to RBI in Form X under Section 27 of the
Banking Regulation Act, 1949 during the year.
*
Net Customer assets include advances and credit substitutes.
**
Productivity ratios are based on average employee numbers for the year.
F-21
2.1.5 The provisioning coverage ratio of the Bank computed in terms of the RBI guidelines as on 31 March
2012 was 80.91% (previous year 80.90%).
2.1.6 Asset Quality
i) Net non-performing assets to net advances is set out below:
Net non performing assets as a percentage of net
advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ii) Movement in gross non-performing assets is set out below:
Advances
*
31 March 2012
%
31 March 2011
%
0.27
0.29
31 March 2012
Investments
Others*
(Rs. in million)
Total
Gross NPAs as at the beginning of the year . .
Transfer from advances to others . . . . . . . . . .
Additions (fresh NPAs) during the year . . . . .
15,870
(53)
17,728
124
—
679
—
53
13
15,994
—
18,420
Sub-total (A) . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:(i) Upgradations . . . . . . . . . . . . . . . . . . . . . .
(ii) Recoveries (excluding recoveries made
from upgraded accounts) . . . . . . . . . . . . .
(iii) Write-offs . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total (B) . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross NPAs as at the end of the year
(A-B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,545
803
66
34,414
7,450
—
—
7,450
2,234
6,659
16,343
8
—
8
—
—
—
2,242
6,659
16,351
17,202
795
66
18,063
represents amount outstanding under application money classified as non-performing asset.
Advances
Gross NPAs as at the beginning of the year . . .
Additions (fresh NPAs) during the year . . . . . .
Sub-total (A) . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:(i) Upgradations . . . . . . . . . . . . . . . . . . . . . . .
(ii) Recoveries (excluding recoveries made
from upgraded accounts) . . . . . . . . . . . . . .
(iii) Write-offs . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total (B) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross NPAs as at the end of the year
(A-B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 March 2011
Investments
Others
(Rs. in million)
Total
12,954
14,483
27,437
226
—
226
—
—
—
13,180
14,483
27,663
2,286
—
—
2,286
2,602
6,679
11,567
99
3
102
—
—
—
2,701
6,682
11,669
15,870
124
—
15,994
iii) Movement in net non-performing assets is set out below:
Advances
Opening balance at the beginning of the year . .
Additions during the year . . . . . . . . . . . . . . . . . .
Reductions during the year . . . . . . . . . . . . . . . . .
Interest Capitalisation — Restructured NPA
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance at the end of the year . . . . . . . .
F-22
Total
4,104
10,001
(9,475)
—
159
—
—
11
—
4,104
10,171
(9,475)
(74)
4,556
—
159
—
11
(74)
4,726
Advances
Opening balance at the beginning of the year . . .
Additions during the year . . . . . . . . . . . . . . . . . .
Reductions during the year . . . . . . . . . . . . . . . . .
Interest Capitalisation — Restructured NPA
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance at the end of the year . . . . . . . . .
31 March 2012
Investments
Others
(Rs. in million)
31 March 2011
Investments
Others
(Rs. in million)
Total
4,126
4,531
(4,530)
64
—
(64)
—
—
—
4,190
4,531
(4,594)
(23)
4,104
—
—
—
—
(23)
4,104
iv) Movement in provisions for non-performing assets is set out below:
Advances
31 March 2012
Investments
Others
(Rs. in million)
Total
Opening balance at the beginning of the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions made during the year . . . . . . . . . . . .
Transfer to restructuring provision . . . . . . . . . .
Write-offs/(write back) of excess provisions . .
11,743
7,688
(14)
(6,868)
124
519
—
(8)
—
55
—
—
11,867
8,262
(14)
(6,876)
Closing balance at the end of the year . . . . . . .
12,549
635
55
13,239
Advances
31 March 2011
Investments
Others
(Rs. in million)
Total
Opening balance at the beginning of the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions made during the year . . . . . . . . . . . .
Transfer from restructuring provision . . . . . . . .
Write-offs/(write back) of excess provision . . .
8,828
9,843
110
(7,038)
162
—
—
(38)
—
—
—
—
8,990
9,843
110
(7,076)
Closing balance at the end of the year . . . . . . .
11,743
124
—
11,867
v) Total exposure to top four non-performing assets is given below:
31 March 2012
31 March 2011
(Rs. in million)
Total exposure to top four NPA accounts . . . . . . . . . . . . . . .
5,821
2,915
vi) Non-performing assets as percentage of total assets in that sector is set out below:
*
Sr.
No
Sector
31 March 2012
%
31 March 2011
%
1.
2.
3.
4.
Agriculture and allied activities . . . . . . . . . . . . . . . . . .
Industry (Micro & Small, Medium and Large) . . . . . .
Services* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Personal loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.33
0.75
0.96
0.81
2.56
1.15
0.21
1.38
includes 0.01% (previous year Nil) NPAs in respect of commercial real estate and 0.16% (previous year
0.11%) in respect of trade segment.
2.1.7 Movement in floating provision is set out below:
For the year ended
31 March 2012
31 March 2011
(Rs. in million)
Opening balance at the beginning of the year . . . . . . . . . . . . . . . . . . . .
Provisions made during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Draw down made during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
—
—
33
—
—
Closing balance at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . .
33
33
The Bank has not made any draw down out of the floating provision during the current and the
previous year.
2.1.8 Provision on Standard Assets
31 March 2012
31 March 2011
(Rs. in million)
Provision towards Standard Assets [includes Rs. 216 million,
(previous year Rs. 167 million) of standard provision on derivative
exposures] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-23
7,800
6,297
2.1.9 Amount of provisions made for income-tax during the year:
31 March 2012
31 March 2011
(Rs. in million)
Provision for Income Tax
a)
Current tax for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b)
Deferred tax for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c)
Provision for fringe benefit tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,562
(2,106)
—
19,530
(2,055)
(3)
20,456
17,472
2.1.10 Details of Investments are set out below:
i) Value of Investments:
31 March 2012
31 March 2011
(Rs. in million)
1) Gross value of Investments
a) In India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b) Outside India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
928,758
7,074
2) (i) Provision for Depreciation
a)
In India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b)
Outside India . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,480)
204
(2,107)
(588)
(630)
(5)
(124)
—
(ii) Provision for Non-Performing Investments
a)
In India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b)
Outside India . . . . . . . . . . . . . . . . . . . . . . . . . .
3) Net value of Investments
a) In India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b) Outside India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
924,648
7,273
716,415
6,320
714,184
5,732
ii) Movement of provisions held towards depreciation on investments:
31 March 2012
31 March 2011
(Rs. in million)
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Provisions made during the year . . . . . . . . . . . . . . . . . .
Less: Write offs/write back of excess provisions during the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,695
1,060
1,702
1,247
479
254
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,276
2,695
F-24
2.1.11 A summary of lending to sensitive sectors is set out below:
As at
31 March 2012 31 March 2011
(Rs. in million)
A. Exposure to Real Estate Sector
1) Direct Exposure
(i) Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— of which housing loans eligible for inclusion in priority
sector advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Investments in Mortgage Backed Securities (MBS) and other
securitised exposures —
a. Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b. Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2) Indirect Exposure
Fund based and non-fund based exposures on National Housing
Bank (NHB) and Housing Finance Companies (HFCs) . . . . . . . . . . .
Total Exposure to Real Estate Sector . . . . . . . . . . . . . . . . . . . . . . . . .
B.
Exposure to Capital Market
1. Direct investments in equity shares, convertible bonds,
convertible debentures and units of equity-oriented mutual
funds the corpus of which is not exclusively invested in
corporate debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Advances against shares/bonds/debentures or other securities
or on clean basis to individuals for investment in shares
(including IPOs/ESOPs), convertible bonds, convertible
debentures, and units of equity-oriented mutual funds . . . . . . . .
3. Advances for any other purposes where shares or convertible
bonds or convertible debentures or units of equity-oriented
mutual funds are taken as primary security . . . . . . . . . . . . . . . .
4. Advances for any other purposes to the extent secured by the
collateral security of shares or convertible bonds or convertible
debentures or units of equity-oriented mutual funds i.e. where
primary security other than shares/ convertible bonds/
convertible debentures/units of equity-oriented mutual funds
does not fully cover the advances . . . . . . . . . . . . . . . . . . . . . . . .
5. Secured and unsecured advances to stockbrokers and
guarantees issued on behalf of stockbrokers and
marketmakers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Loans sanctioned to corporates against the security of shares/
bonds/debentures or other securities or on clean basis for
meeting promoter’s contribution to the equity of new
companies in anticipation of raising resources . . . . . . . . . . . . . .
7. Bridge loans to companies against expected equity
flows/issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Underwriting commitments taken up in respect of primary
issue of shares or convertible bonds or convertible debentures
or units of equity-oriented mutual funds . . . . . . . . . . . . . . . . . . .
9. Financing to stock brokers for margin trading . . . . . . . . . . . . . .
10. All exposures to Venture Capital Funds (both registered and
unregistered) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total exposure to Capital Market (Total of 1 to 10) . . . . . . . . . . . . . .
F-25
307,750
206,469
102,488
112,923
69,783
90,292
—
—
—
—
106,631
97,252
527,304
394,013
13,269
9,997
25
57
4,481
2,568
15
76
25,219
19,662
3,031
474
20
3
—
—
—
—
1,409
2,581
47,469
35,418
2.1.12 Details of loan assets subjected to restructuring during the years ended 31 March 2012 and 31 March
2011 are given below:
CDR
Mechanism
Particulars
i)
ii)
iii)
Standard
advances
restructured**
Sub-Standard
advances
restructured
Doubtful
advances
restructured
Total
No. of borrowers
Amount outstanding — Restructured
facility#
Amount outstanding — Other facilities
Sacrifice (diminution in the fair value)
No. of borrowers
Amount outstanding — Restructured
facility
Amount outstanding — Other facilities
Sacrifice (diminution in the fair value)
No. of borrowers
Amount outstanding — Restructured
facility
Amount outstanding — Other facilities
Sacrifice (diminution in the fair value)
No. of borrowers
Amount outstanding — Restructured
facility
Amount outstanding — Other facilities
Sacrifice (diminution in the fair value)
31 March 2012
SME Debt
Restructuring
(Rs. in million)
Others
16
8,811
4
648
82
3,544
150
1,462
—
—
—
16
—
—
98
24
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16
8,811
—
—
4
648
—
—
82
3,544
150
1,462
—
16
98
24
**
Asset classification as on the date of reference to CDR / date of application for Non-CDR cases.
#
Amount subjected to restructuring determined as on the date of approval of restructuring proposal.
CDR
Mechanism
Particulars
i)
ii)
iii)
Standard
advances
restructured**
Sub-Standard
advances
restructured
Doubtful
advances
restructured
Total
No. of borrowers
Amount outstanding — Restructured
facility#
Amount outstanding — Other facilities
Sacrifice (diminution in the fair value)
No. of borrowers
Amount outstanding — Restructured
facility
Amount outstanding — Other facilities
Sacrifice (diminution in the fair value)
No. of borrowers
Amount outstanding — Restructured
facility
Amount outstanding — Other facilities
Sacrifice (diminution in the fair value)
No. of borrowers
Amount outstanding — Restructured
facility
Amount outstanding — Other facilities
Sacrifice (diminution in the fair value)
31 March 2011
SME Debt
Restructuring
(Rs. in million)
Others
2
966
4
472
1,17
2,600
29
142
—
—
55
40
—
—
153
26
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
966
—
—
4
472
—
—
117
2,600
29
142
55
40
153
26
**
Asset classification as on the date of reference to CDR / date of application for Non-CDR cases.
#
Amount subjected to restructuring determined as on the date of approval of restructuring proposal.
F-26
2.1.13 There are no advances as on 31 March 2012 (previous year: Nil) for which intangible securities have
been taken as collateral by the Bank.
2.1.14 Details of Non-SLR investment portfolio are set out below:
i) Issuer composition as at 31 March 2012 of non-SLR investments*:
Total
Amount
(3)
No.
(1)
Issuer
(2)
i.
ii.
iii.
iv.
v.
vi.
vii.
Public Sector Units . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . .
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private Corporates . . . . . . . . . . . . . . . . . . . . . . . . . .
Subsidiaries/ Joint Ventures . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision held towards depreciation on
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision held towards non performing
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,201
96,812
51,607
162,710
3,496
4,126
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
347,759
viii
Extent of
“below
Extent of investment Extent of
grade”
private
“unrated”
securities
placement
securities
(5)
(4)
(6)
(Rs. in million)
Extent of
“unlisted”
securities
(7)
22,028
78,244
25,314
131,345
3,496
2,581
1,670
—
—
4,863
—
—
—
—
—
1,756
—
—
100
51,005
44,272
7,437
3,496
2,907
—
—
—
—
—
—
—
—
263,008
6,533
1,756
109,217
(2,558)
(635)
Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive.
Issuer composition as at 31 March 2011 of non-SLR investments*:
Total
Amount
(3)
No.
(1)
Issuer
(2)
i.
ii.
iii.
iv.
v.
vi.
vii.
Public Sector Units . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . .
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private Corporates . . . . . . . . . . . . . . . . . . . . . . . . . .
Subsidiaries/ Joint Ventures . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision held towards depreciation on
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision held towards non performing
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,077
71,581
40,872
135,522
2,595
9,013
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
278,367
viii
Extent of
“below
Extent of investment Extent of
private
grade”
“unrated”
placement
securities
securities
(4)
(5)
(6)
(Rs. in million)
(2,169)
(124)
Extent of
“unlisted”
securities
(7)
10,813
49,467
16,877
109,869
2,595
8,472
10
—
100
5,351
—
—
—
—
—
2,299
—
—
100
41,146
31,025
12,265
2,595
4,074
—
—
—
—
—
—
—
—
198,093
5,461
2,299
91,205
Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive.
*
Excludes investments in Non-SLR Government Securities amounting to Rs. 1,567 million (previous year
Rs. 1,580 million).
ii) Non-performing non SLR investments is set out below:
31 March 2012
31 March 2011
(Rs. in million)
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . .
124
679
(8)
226
—
(102)
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
795
124
Total provisions held . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
635
124
F-27
2.1.15 Details of securities sold/purchased (in face value terms) during the years ended 31 March 2012 and
31 March 2011 under repos/reverse repos (excluding LAF transactions):
Year ended 31 March 2012
Securities sold under repos
i. Government Securities . . . . . . . . .
ii. Corporate debt Securities . . . . . .
Securities purchased under reverse repos
i. Government Securities . . . . . . . . .
ii. Corporate debt Securities . . . . . .
Year ended 31 March 2011
Securities sold under repos
i. Government Securities . . . . . . . . .
ii. Corporate debt Securities . . . . . .
Securities purchased under reverse repos
i. Government Securities . . . . . . . . .
ii. Corporate debt Securities . . . . . .
Minimum
outstanding
during the year
Maximum
Daily Average
outstanding
outstanding
during the year during the year
(Rs. in million)
As at
31 March 2012
—
—
1,222
—
263
—
—
—
—
—
19,524
—
1,055
—
—
—
Minimum
outstanding
during the year
Maximum
Daily Average
outstanding
outstanding
during the year during the year
(Rs. in million)
As at
31 March 2011
—
—
2,200
—
309
—
—
—
—
—
39,198
—
342
—
—
—
2.1.16 Details of financial assets sold to Securtisation/Reconstruction companies for Asset Reconstruction:
31 March 2012
31 March 2011
(Rs. in million)
Number of accounts* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book value of loan asset securitized* . . . . . . . . . . . . . . . . . . . . . . . . . .
Aggregate value (net of provisions) of accounts sold . . . . . . . . . . . . . .
Aggregate consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional consideration realized in respect of accounts transferred in
earlier years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aggregate gain/loss over net book value . . . . . . . . . . . . . . . . . . . . . . . .
*
—
—
—
—
—
—
—
—
—
—
—
—
Excludes 71 accounts already written-off from books amounting to Rs. 2,777 million (Previous year
50 accounts amounting to Rs. 2,443 million).
2.1.17 During the years ended 31 March 2012 and 31 March 2011 there were no Non-Performing Financial
Assets Purchased or Sold (excluding accounts previously written off) by the Bank.
2.1.18 Details of securtisation transactions undertaken by the Bank during the year are as follows:
31 March 2012
31 March 2011
(Rs. in million)
Number of loan accounts securitised . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book value of loan assets securitised . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale consideration received for the securtised assets . . . . . . . . . . . . . . .
Net gain/loss over net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain/loss recognised in the Profit and Loss Account . . . . . . . . . . . .
—
—
—
—
—
3
3,017
3,090
73
73
The information on securtisation activity of the Bank as an originator as at 31 March 2012 and 31 March
2011 is given below:
31 March 2012
31 March 2011
(Rs. in million)
Outstanding credit enhancement (cash collateral) . . . . . . . . . . . . . . . . .
Outstanding liquidity facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding servicing liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding investment in PTCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-28
—
—
—
—
—
—
—
—
2.1.19 The information on concentration of deposits is given below:
31 March 2012
31 March 2011
(Rs. in million)
Total deposits of twenty largest depositors . . . . . . . . . . . . . . . . . . . . . .
Percentage of deposits of twenty largest depositors to total deposits . .
311,177
14.14
345,405
18.25
2.1.20 The information on concentration of advances* is given below:
31 March 2012
31 March 2011
(Rs. in million)
Total advances to twenty largest borrowers . . . . . . . . . . . . . . . . . . . . . .
Percentage of advances to twenty largest borrowers to total advances
of the Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*
403,592
421,702
11.87
13.63
Advances represent credit exposure (funded and non-funded) including derivative exposure as defined by
RBI.
2.1.21 The information on concentration of exposure* is given below:
31 March 2012
31 March 2011
(Rs. in million)
Total exposure to twenty largest borrowers/customers . . . . . . . . . . . . .
Percentage of exposures to twenty largest borrowers/customers to
total exposure on borrowers/customers . . . . . . . . . . . . . . . . . . . . . . .
*
457,920
531,840
12.29
15.13
Exposure includes credit exposure (funded and non-funded), derivative exposure and investment exposure
(including underwriting and similar commitments).
2.1.22 During the year, the Bank’s credit exposure to single borrower and group borrowers was within the
prudential exposure limits prescribed by RBI.
During the year ended 31 March 2011, the Bank’s credit exposure to single borrower was within the
prudential exposure limits prescribed by RBI except in 2 cases, where the single borrower limit was exceeded
upto an additional exposure of 5%, the details of which are set out below:
Name of the Borrower
Original
Exposure
Ceiling
Period
Housing Development
Finance Corporation
Limited . . . . . . . . . . . . . . Feb 2011 and March 2011
LIC Housing Finance
Ltd.@ . . . . . . . . . . . . . . . . March 2011
% of excess
limit
Exposure
sanctioned Ceiling as
over
on
Exposure as
Limit
original
31 March on 31 March
Sanctioned
ceiling
2011
2011
(Rs. in million)
33,462
42,277
26.34
33,462
44,190#
33,462
35,639
6.51
33,462
31,308
#
the excess of the limit of Rs. 42,277 million over the original exposure ceiling was approved by the
Committee of Directors. However, the excess of the exposure as on 31 March 2011 over the limit approved
by the Committee is subject to ratification of the Committee.
@
the excess of the limit of Rs. 35,639 million over the original exposure ceiling is subject to ratification by
the Committee of Directors.
During the year ended 31 March 2011, the Bank’s credit exposure to group borrowers was within the
prudential exposure limits prescribed by RBI.
F-29
2.1.23 Details of Risk Category wise Country Exposure:
Exposure
(Net) as at
31 March 2012
Risk Category
Provision
Exposure
Held as at
(Net) as at
31 March 2012 31 March 2011
(Rs. in million)
Provision
Held as at
31 March 2011
Insignificant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Moderate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Very High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Off-Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,775
133,979
26,677
7,025
5,182
1
1
—
96
—
—
—
—
—
4,595
91,607
24,478
4,679
3,390
—
—
—
48
—
—
—
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
191,640
96
128,749
48
2.1.24 A maturity pattern of certain items of assets and liabilities at 31 March 2012 and Year ended
31 March 2011 is set out below:
Year ended
31 March 2012
Deposits . . . . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . .
Foreign Currency Assets . . . . . . . .
Foreign Currency Liabilities . . . . .
Year ended
31 March 2011
Deposits . . . . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . .
Foreign Currency Assets . . . . . . . . .
Foreign Currency Liabilities . . . . . .
Over
Over
Over
Over
29 days 3 months 6 months 1 year 3 years
2 days to 8 days to 15 days to and upto and upto and upto and upto and upto Over
1 day
7 days
14 days
28 days 3 months 6 months 1 year
3 years 5 years 5 years
(Rs. in million)
19,597
27,071
18,156
—
14,321
7,312
71,356
12,200
49,678
4,644
19,563
36,624
75,962
11,520
36,912
19,072
6,297
23,787
76,814
15,321
58,746
14,202
6,706
22,893
237,750 258,084 533,592 182,319 138,447 607,122 2,201,043
93,629 109,888 114,775 390,024 237,917 685,250 1,697,595
135,060 74,634 151,728 137,432 69,971 199,604 931,921
28,008 43,171 22,217 35,049 65,979 108,375 340,717
29,498 24,974 21,390 60,678 59,435 81,926 324,788
53,578 42,651 48,824 27,820 61,656 46,558 371,703
Over
Over
Over
Over
29 days 3 months 6 months 1 year 3 years
2 days to 8 days to 15 days to and upto and upto and upto and upto and upto Over
1 day
7 days
14 days
28 days 3 months 6 months 1 year
3 years 5 years 5 years
(Rs. in million)
16,454
28,744
8,446
1,115
14,369
7,602
74,238
36,358
17,949
9,811
10,541
16,205
48,356
10,030
32,472
446
3,225
2,521
75,211
24,408
46,094
12,934
13,496
19,678
Total
Total
235,286 179,307 370,573 268,103 118,666 506,184 1,892,378
95,874 81,622 118,154 352,369 194,595 481,924 1,424,078
103,507 53,190 93,351 134,170 81,819 148,918 719,916
49,343 23,845 25,377 36,481 20,365 82,962 262,679
28,107 32,732 29,277 47,735 47,648 38,386 265,516
52,842 43,583 45,064 25,529 19,923 42,152 275,099
Classification of assets and liabilities under the different maturity buckets is based on the same estimates
and assumptions as used by the Bank for compiling the return submitted to the RBI, which has been relied upon
by the auditors. Maturity profile of foreign currency assets and liabilities is excluding forward contracts.
2.1.25 Disclosure in respect of Interest Rate Swaps (IRS), Forward Rate Agreement (FRA) and Cross
Currency Swaps (CCS) outstanding is set out below:
Sr. No.
i)
ii)
iii)
iv)
v)
As at
As at
31 March 2012 31 March 2011
(Rs. in million)
Items
Notional principal of swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Losses which would be incurred if counterparties failed to fulfil their
obligations under the agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateral required by the Bank upon entering into swaps . . . . . . . . . . . . . .
Concentration of credit risk arising from the swaps
Maximum single industry exposure with Banks (previous year with
Banks)
— Interest Rate Swaps/FRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— Cross Currency Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of the swap book (hedging & trading)
— Interest Rate Swaps/FRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— Currency Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-30
1,752,491
1,646,972
17,996
2,606
14,445
1,234
23,347
4,615
21,750
4,015
3,159
1,678
11
611
The nature and terms of the IRS as on 31 March 2012 are set out below:
Nature
Hedging
Trading
Trading
Trading
Trading
Trading
Trading
Hedging
Trading
Trading
Trading
Trading
Trading
Trading
Nos.
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
Notional
Principal
5
1,058
1,020
154
112
60
74
21
122
180
1
1
1
8
4,500
651,078
609,760
61,610
44,020
25,601
46,280
64,103
61,202
84,738
1,500
4,197
4,197
4,019
2,817
1,666,805
Benchmark
(Rs. in million)
MIBOR
MIBOR
MIBOR
MIFOR
MIFOR
INBMK
INBMK
LIBOR
LIBOR
LIBOR
OTHERS
LIBOR
LIBOR
LIBOR
Terms
Fixed receivable v/s floating payable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed payable v/s fixed receivable
Pay cap/receive floor
Pay floor/receive cap
Floating payable v/s floating receivable
The nature and terms of the IRS as on 31 March 2011 are set out below:
Nature
Hedging
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Nos.
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
Notional
Principal
13
1,338
1,319
118
101
62
73
108
148
1
3
1
1
29,433
635,200
619,675
46,395
34,690
26,211
45,890
35,760
53,419
1,500
1,382
3,679
3,679
3,286
1,536,913
Benchmark
(Rs. in million)
LIBOR
MIBOR
MIBOR
MIFOR
MIFOR
INBMK
INBMK
LIBOR
LIBOR
OTHERS
LIBOR
LIBOR
LIBOR
Terms
Fixed receivable v/s floating payable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed payable v/s fixed receivable
Floating payable v/s floating receivable
Pay cap / receive floor
Pay floor / receive cap
The nature and terms of the FRA’s as on 31 March 2012 are set out below:
Nature
Trading . . . . . . . . . . .
Trading . . . . . . . . . . .
Nos.
Notional
Principal
4
9
2,035
5,088
13
7,123
Benchmark
(Rs. in million)
LIBOR
LIBOR
Terms
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
The nature and terms of the FRA’s as on 31 March 2011 are set out below:
Nature
Trading . . . . . . . . . . .
Trading . . . . . . . . . . .
Nos.
Notional
Principal
80
73
29,900
28,401
153
58,301
Benchmark
(Rs. in million)
LIBOR
LIBOR
Terms
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
F-31
The nature and terms of the CCS as on 31 March 2012 are set out below:
Notional
Nos. Principal
Nature
Hedging
Hedging
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
Benchmark
(Rs. in million)
1
702 Principal & Coupon Swap
1 2,544 Principal & Coupon Swap
34 26,754 LIBOR
24 21,336 LIBOR
1
458 LIBOR/INBMK
4 2,152 Principal Only
25 9,828 Principal Only
1
763 Principal Only
1
763 Principal Only
22 13,263 Principal & Coupon Swap
Terms
Fixed payable v/s fixed receivable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Floating receivable v/s floating payable
Fixed receivable
Fixed payable
Floating payable
Floating receivable
Fixed payable v/s fixed receivable
114 78,563
Agreements with Banks/Financial Institutions and corporates are under approved credit lines.
The nature and terms of the CCS as on 31 March 2011 are set out below:
Nature
Trading
Trading
Hedging
Hedging
Hedging
Trading
Trading
Trading
Trading
Trading
Trading
Notional
Nos. Principal
. . . . . . . . . . . 22
. . . . . . . . . . . 21
........... 2
........... 3
........... 1
........... 1
........... 5
........... 2
........... 8
........... 1
........... 1
17,282
19,362
1,296
3,054
1,338
401
4,286
979
2,422
669
669
67
51,758
Benchmark
(Rs. in million)
LIBOR
LIBOR
LIBOR
Principal & Coupon Swap
LIBOR
LIBOR/INBMK
Principal & Coupon Swap
Principal Only
Principal Only
Principal Only
Principal Only
Terms
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed receivable v/s floating payable
Fixed receivable v/s fixed payable
Floating receivable v/s floating payable
Floating receivable v/s floating payable
Fixed payable v/s fixed receivable
Fixed receivable
Fixed payable
Floating receivable
Floating payable
Agreements with Banks/Financial Institutions and corporates are under approved credit lines.
Details of Exchange Traded Interest Rate Derivatives for the year ended 31 March 2012 are set out below:
Sr.
No.
i)
Particulars
Notional principal amount of exchange traded interest rate derivatives
undertaken during the year
91 day T-Bill — July 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As at
31 March 2012
(Rs. in million)
50
50
ii)
Notional principal amount of exchange traded interest rate derivatives
outstanding as on 31 March 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
iii)
iv)
Notional principal amount of exchange traded interest rate derivatives
outstanding as on 31 March 2012 and “not highly effective” . . . . . . . . . . . . . . .
Mark-to-market value of exchange traded interest rate derivatives
outstanding as on 31 March 2012 and “not highly effective” . . . . . . . . . . . . . . .
F-32
N.A.
N.A.
Details of Exchange Traded Interest Rate Derivatives for the year ended 31 March 2011 are set out below:
Sr.
No.
i)
Particulars
Notional principal amount of exchange traded interest rate derivatives
undertaken during the year
90 day euro $ Future — June 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 years 7% GOI Security — June 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As at
31 March 2011
(Rs. in million)
178
29
208
ii)
Notional principal amount of exchange traded interest rate derivatives
outstanding as on 31 March 2011
90 Day Euro $ Futures — June 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45
45
iii)
iv)
Notional principal amount of exchange traded interest rate derivatives
outstanding as on 31 March 2011 and “not highly effective” . . . . . . . . . . . . . . .
Mark-to-market value of exchange traded interest rate derivatives
outstanding as on 31 March 2011 and “not highly effective” . . . . . . . . . . . . . . .
N.A.
N.A.
2.1.26 Disclosure on risk exposure in Derivatives
Qualitative disclosures:
(a) Structure and organisation for management of risk in derivatives trading, the scope and nature of risk
measurement, risk reporting and risk monitoring systems, policies for hedging and/or mitigating risk and
strategies and processes for monitoring the continuing effectiveness of hedges/mitigants:
Derivatives are financial instruments whose characteristics are derived from an underlying asset, or from interest
and exchange rates or indices. The Bank undertakes over the counter and Exchange Traded derivative transactions for
Balance Sheet management and also for proprietary trading/market making whereby the Bank offers derivative
products to the customers to enable them to hedge their earnings risks within the prevalent regulatory guidelines.
Proprietary trading includes Interest Rate Futures, Currency Futures and Rupee Interest Rate Swaps under
different benchmarks (viz. MIBOR, MIFOR and INBMK), and Currency Options for USD/INR pair (both OTC and
exchange traded). The Bank also undertakes transactions in Cross Currency Swaps, Principal Only Swaps, Coupon
Only Swaps, and Long Term Forex Contracts (LTFX) for hedging its Balance Sheet and also offers them to its
customers. These transactions expose the Bank to various risks, primarily credit, market and operational risk. The
Bank has adopted the following mechanism for managing risks arising out of the derivative transactions.
There is a functional separation between the Treasury Front Office, Risk and Treasury Back Office to undertake
derivative transactions. The derivative transactions are originated by Treasury Front Office, which ensures compliance
with the trade origination requirements as per the Bank’s policy and the RBI guidelines. The Market Risk Group
within the Bank’s Risk Department independently identifies, measures and monitors the market risks associated with
derivative transactions and appraises the Asset Liability Management Committee (ALCO) and the Risk Management
Committee of the Board (RMC) on the compliance with the risk limits. The Treasury Back Office undertakes activities
such as confirmation, settlement, ISDA documentation, accounting and other MIS reporting.
The derivative transactions are governed by the derivative policy, market risk management policy, hedging
policy and the suitability and appropriateness policy of the Bank as well as by the extant RBI guidelines. The
Bank has also put in place a detailed process flow for customer derivative transactions for effective management
of operational risk/reputation risk.
Various risk limits are set up and actual exposures are monitored vis-à-vis the limits. These limits are set up
taking into account market volatility, business strategy and management experience. Risk limits are in place for
risk parameters viz. PV01, VaR, stop loss, Delta, Gamma and Vega. Actual positions are monitored against these
limits on a daily basis and breaches, if any, are reported promptly. Risk assessment of the portfolio is undertaken
periodically. The Bank ensures that the Gross PV01 (Price value of a basis point) position arising out of all
non-option rupee derivative contracts are within 0.25% of net worth of the Bank as on Balance Sheet date.
Hedging transactions are undertaken by the Bank to protect the variability in the fair value or the cash flow of the
underlying Balance Sheet item. These deals are accounted on an accrual basis except the swap designated with an
asset/liability that is carried at market value or lower of cost or market value. In that case, the swap is marked to market
with the resulting gain or loss recorded as an adjustment to the market value of designated asset or liability. These
transactions are tested for hedge effectiveness and in case any transaction fails the test, the same is re-designated as a
trading deal with the approval of the competent authority and appropriate accounting treatment is followed.
F-33
(b) Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums
and discounts, valuation of outstanding contracts
The Hedging Policy approved by the RMC governs the use of derivatives for hedging purpose. Subject to
the prevailing RBI guidelines, the Bank deals in derivatives for hedging fixed rate and floating rate coupon or
foreign currency assets/liabilities. Transactions for hedging and market making purposes are recorded separately.
For hedge transactions, the Bank identifies the hedged item (asset or liability) at the inception of the transaction
itself. The effectiveness is ascertained at the time of inception of the hedge and periodically thereafter. Hedge
derivative transactions are accounted for in accordance with the hedge accounting principles. Derivatives for
market making purpose are marked to market and the resulting gain/loss is recorded in the Profit and Loss
Account. The premium on option contracts is accounted for as per FEDAI guidelines. Derivative transactions are
covered under International Swaps and Derivatives Association (ISDA) master agreements with respective
counterparties. The exposure on account of derivative transactions is computed as per the RBI guidelines and is
marked against the credit limits approved for the respective counterparties.
(c) Provisioning, collateral and credit risk mitigation
Derivative transactions comprise of swaps and options which are disclosed as contingent liabilities. The
swaps are categorised as trading or hedging and all the options are categorised as the trading book. Trading
swaps/options are revalued at the Balance Sheet date with the resulting unrealised gain or loss being recognised
in the Profit and Loss Account and correspondingly in other assets or other liabilities respectively. Hedged swaps
are accounted for as per the RBI guidelines. Pursuant to the RBI guidelines, any receivables (crystallised
receivables as well as positive MTM) under derivatives contracts, which remain overdue for more than 90 days,
are reversed through the Profit and Loss Account and are held in a separate suspense account.
Collateral requirements for derivative transactions are laid down as part of credit sanction terms on a case
by case basis. Such collateral requirements are determined, based on usual credit appraisal process. The Bank
retains the right to terminate transactions as a risk mitigation measure in certain cases.
The credit risk in respect of customer derivative transactions is sought to be mitigated through a laid down
policy on sanction of Loan Equivalent Risk (LER) limits, monitoring mechanism for LER limits and trigger
events for escalation/margin calls/termination.
Quantitative Disclosure:
Sr.
No.
1
2
3
4
5
As at 31 March 2012
Currency Derivatives
Forward
Contracts
CCS
Options
(Rs. in million)
Particulars
Derivatives (Notional Principal Amount)
a) For hedging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67,372
3,246
b) For trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,941,883 75,317
Marked to Market Positions#
a) Asset (+) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,581
1,841
b) Liability (-) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Credit Exposure@ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,969 12,137
Likely impact of one percentage change in interest rate
(100*PV01) (as at 31 March 2012)
a) on hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
125
b) on trading derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
487
Maximum and Minimum of 100*PV01 observed during
the year
a) on hedging
I)
Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
II) Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
127
b) on Trading
I)
Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
II) Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
888
#
Only on trading derivatives and represents net position.
@
Includes accrued interest.
F-34
Interest rate
Derivatives
—
125,114
68,603
1,605,325
61
—
2,640
367
—
27,767
—
17
2,831
724
—
—
1,273
2,867
13
72
21
927
Sr.
No.
1
2
3
4
5
As at 31 March 2011
Currency Derivatives
Forward
Contracts
CCS
Options
(Rs. in million)
Particulars
Derivatives (Notional Principal Amount)
a) For hedging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b) For trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marked to Market Positions#
a) Asset (+) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b) Liability (-) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit Exposure@ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Likely impact of one percentage change in interest rate
(100*PV01) (as at 31 March 2011)
a) on hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b) on trading derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum and Minimum of 100*PV01 observed during the
year
a) on hedging
I) Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II) Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b) on Trading
I) Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II) Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#
Only on trading derivatives and represents net position.
@
Includes accrued interest.
—
131,304
Interest
rate
Derivatives
44,709
1,809,729
5,688
46,070
29,433
1,565,781
1,162
—
69,541
358
—
7,608
4
3
3
4
—
—
1,358
386
—
150
1
18
—
—
758
1,786
1
23
1
9
—
—
303
1,376
—
(46)
2,859
—
(740)
25,420
Pursuant to RBI guidelines, the Bank has started dealing in Exchange Traded Currency Options. The
outstanding notional principal amount of these derivatives as at 31 March 2012 was Rs. 5,429 million (previous
year Rs. 9,954 million) and the mark-to-market value was Rs. 57 million (previous year Rs. 54 million).
2.1.27 During the year ended 31 March 2012, RBI levied a penalty of Rs. 2 million on the Bank for
non-compliance of certain instructions relating to derivative transactions. The Bank has paid the penalty of
Rs. 2 million on 5 May 2011.
No penalty/strictures have been imposed on the Bank in the previous year by the RBI.
2.1.28 Disclosure of Customer Complaints
a. No. of complaints pending at the beginning of the year . . . . . . . . . . .
b. No. of complaints received during the year . . . . . . . . . . . . . . . . . . . .
c. No. of complaints redressed during the year . . . . . . . . . . . . . . . . . . . .
d. No. of complaints pending at the end of the year . . . . . . . . . . . . . . . .
31 March 2012
31 March 2011
16
12,205
12,183
38
80
12,766
12,830
16
The above information is as certified by the Management and relied upon by the auditors.
2.1.29 Disclosure of Awards passed by the Banking Ombudsman
31 March 2012
a.
b.
c.
d.
No. of unimplemented awards at the beginning of the year . . . . . . . .
No. of awards passed by the Banking Ombudsman during the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No. of awards implemented during the year . . . . . . . . . . . . . . . . . . . .
No. of unimplemented awards at the end of the year . . . . . . . . . . . . .
31 March 2011
—
—
1
1
—
2
2
—
The above information is as certified by the Management and relied upon by the auditors.
2.1.30 Draw Down from Reserves
The Bank has not undertaken any drawdown from reserves during the year. During the year ended 31 March
2011, the Bank made a draw down out of the investment reserves account towards depreciation in investments in
AFS and HFT categories in terms of RBI guidelines.
F-35
2.1.31 a) During the year ended 31 March 2011, an amount of Rs. 3,389 million being 10% of the net
profit for that year was transferred to the general reserve in terms of the provisions of the
Transfer of Profits to Reserve Rules under the Companies Act, 1956. During the current year, the
Bank has been advised by RBI that in respect of transfer of profits to reserve fund, the Bank
should be guided by the provisions of Section 17(1) of the Banking Regulation Act, 1949
relating to transfer to Statutory Reserve. Accordingly, no appropriation is proposed to be made to
the general reserve for the current year.
b) During the current year, pursuant to receipt of final instalment from the Government of India
under the Agricultural Debt Waiver and Debt Relief Scheme, 2008, an amount of Rs. 9 million
being the provision held for loss in present value terms on the claim amount, has been transferred
to the General Reserve in accordance with RBI guidelines.
2.1.32 Letter of Comfort
The Bank has not issued any Letter of Comfort (LoC) on behalf of its subsidiaries.
2.1.33 Bancassurance Business
Details of income earned from Bancassurance business are as under:
*
Sr. No
Nature of Income*
31 March 2012 31 March 2011
(Rs. in million)
1.
2.
3.
4.
For selling life insurance policies . . . . . . . . . . . . . . . . . . . . . . . . .
For selling non-life insurance policies . . . . . . . . . . . . . . . . . . . . . .
For selling mutual fund products . . . . . . . . . . . . . . . . . . . . . . . . . .
Others (selling of online trading accounts, gold coins, wealth
advisory, RBI and other bonds) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,586
313
576
1,333
230
444
247
3,723
287
2,294
includes receipts on account of marketing activities undertaken on behalf of bancassurance partners.
2.1.34 The Bank has not sponsored any special purpose vehicle which is required to be consolidated in the
consolidated financial statements as per accounting norms.
2.1.35 Amount of total assets, non-performing assets and revenue of overseas branches is given below:
Particulars
31 March 2012 31 March 2011
(Rs. in million)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total NPAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
323,024
5
16,280
236,271
—
11,081
2.1.36 During the current year, the value of sales/transfers of securities to/from HTM category (excluding
one-time transfer of securities and sales to RBI under OMO auctions) was within 5% of the book value of
investments held in HTM category at the beginning of the year.
2.2
Other disclosures
2.2.1 During the year, the Bank has appropriated Rs. 382 million (previous year Rs. 48 million), net of
taxes and transfer to statutory reserve to the Capital Reserve, being the gain on sale of HTM investments in
accordance with RBI guidelines. As advised by the RBI during the year, the Bank has also appropriated
Rs. 137 million, net of taxes and transfer to statutory reserve, being the profit earned on sale of premises to the
Capital Reserve.
F-36
2.2.2 Earnings Per Share (‘EPS’)
The details of EPS computation is set out below:
31 March 2012
31 March 2011
42,422
412
33,885
408
3
415
102.94
102.20
10.00
7
415
82.95
81.61
10.00
Basic and Diluted earnings for the year (Net profit after tax) (Rs. in
million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic weighted average no. of shares (in million) . . . . . . . . . . . . . . . . .
Add: Equity shares for no consideration arising on grant of stock
options under ESOP (in million) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted average no. of shares (in million) . . . . . . . . . . . . . . .
Basic EPS (Rs.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted EPS (Rs.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nominal value of shares (Rs.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilution of equity is on account of 2,991,727 (previous year 6,721,352) stock options.
2.2.3 Employee Stock Options Scheme (‘the Scheme’)
In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the
Bank approved an Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue upto
13,000,000 equity shares to eligible employees. Eligible employees are granted an option to purchase shares
subject to vesting conditions. The options vest in a graded manner over 3 years. The options can be exercised
within 3 years from the date of the vesting. Further, over the period June 2004 to June 2010, pursuant to the
approval of the shareholders at Annual General Meetings, the Bank approved an ESOP scheme for additional
options aggregating 27,517,400. Within the overall ceiling of 40,517,400 stock options approved for grant by the
shareholders as stated earlier, the Bank is also authorised to issue options to employees and directors of the
subsidiary companies.
36,622,890 options have been granted under the Scheme till the previous year ended 31 March 2011.
On 22 April 2011, the Bank granted 3,096,500 stock options (each option representing entitlement to one
equity share of the Bank) to its employees including the MD & CEO and 172,200 stock options to employees of
Axis Asset Management Company Limited, a subsidiary of the Bank. These options can be exercised at a price
of Rs. 1,447.55 per option.
Stock option activity under the Scheme for the year ended 31 March 2012 is set out below:
Options
outstanding
Range of exercise
prices
(Rs.)
Weighted
average
exercise
price
(Rs.)
Weighted average
remaining
contractual life
(Years)
712.90
1,447.55
960.75
406.46
512.92
2.86
—
—
—
—
Outstanding at the beginning of the year . . . . . . .
Granted during the year . . . . . . . . . . . . . . . . . . . .
Forfeited during the year . . . . . . . . . . . . . . . . . . .
Expired during the year . . . . . . . . . . . . . . . . . . . .
Exercised during the year . . . . . . . . . . . . . . . . . . .
11,122,518 232.10 to 1,245.45
3,268,700
1,447.55
(243,596) 232.10 to 1,447.55
(61,265) 232.10 to 468.90
(2,658,109) 232.10 to 1,159.30
Outstanding at the end of the year . . . . . . . . . . . .
11,428,248
319.00 to 1,447.55
965.90
2.79
Exercisable at the end of the year . . . . . . . . . . . . .
4,983,892
319.00 to 1,245.45
717.76
1.53
The weighted average share price in respect of options exercised during the year was Rs. 1,200.12.
Stock option activity under the Scheme for the year ended 31 March 2011 is set out below:
Options
outstanding
Range of exercise
prices
(Rs.)
Weighted
average
exercise
price
(Rs.)
Weighted average
remaining
contractual life
(Years)
Outstanding at the beginning of the year . . . . . . 13,897,518
97.62 to 907.25
514.27
Granted during the year . . . . . . . . . . . . . . . . . . . 2,915,200 1,159.30 to 1,245.45 1,163.05
Forfeited during the year . . . . . . . . . . . . . . . . . .
(295,348) 232.10 to 1,214.80
658.88
Expired during the year . . . . . . . . . . . . . . . . . . .
(23,128)
97.62 to 319.00
264.72
Exercised during the year . . . . . . . . . . . . . . . . . (5,371,724)
97.62 to 824.40
448.22
2.87
—
—
—
—
Outstanding at the end of the year . . . . . . . . . . .
11,122,518
232.10 to 1,245.45
712.90
2.86
Exercisable at the end of the year . . . . . . . . . . .
4,479,300
232.10 to 907.25
525.53
1.49
The weighted average share price in respect of options exercised during the year was Rs. 1,324.47.
F-37
Fair Value Methodology
Applying the fair value based method in Guidance Note on ‘Accounting for Employee Share-based
Payments’ the impact on reported net profit and EPS would be as follows:
31 March
2012
31 March
2011
Net Profit (as reported) (Rs. in million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Stock based employee compensation expense included in net income
(Rs. in million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Stock based employee compensation expense determined under fair value
based method (proforma) (Rs. in million) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,422
33,885
—
—
(1,472)
(1,080)
Net Profit (Proforma) (Rs. in million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,950
32,805
102.94
99.37
82.95
80.31
102.20
98.65
81.61
79.01
Earnings per share: Basic (in Rs.)
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proforma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share: Diluted (in Rs.)
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proforma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing
model, with the following assumptions:
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 March 2012
31 March 2011
1.23%
2-4 years
8.05% to 8.10%
39.43% to 53.33%
1.24% to 1.32%
2-4 years
5.98% to 7.17%
54.72% to 61.66%
Volatility is the measure of the amount by which a price has fluctuated or is expected to fluctuate during a
period. The measure of volatility used in the Black-Scholes options pricing model is the annualised standard
deviation of the continuously compounded rates of return on the stock over a period of time. For calculating
volatility, the daily volatility of the stock prices on the National Stock Exchange, over a period prior to the date
of grant, corresponding with the expected life of the options has been considered.
The weighted average fair value of options granted during the year ended 31 March 2012 is Rs. 559.31
(previous year Rs. 485.98).
2.2.4 Dividend paid on shares issued on exercise of stock options
The Bank may allot shares between the Balance Sheet date and record date for the declaration of dividend
pursuant to the exercise of any employee stock options. These shares will be eligible for full dividend for the year
ended 31 March 2012, if approved at the ensuing Annual General Meeting. Dividend relating to these shares has
not been recorded in the current year.
Appropriation to proposed dividend during the year ended 31 March 2012 includes dividend of
Rs. 19 million (previous year Rs. 25 million) paid pursuant to exercise of 1,153,890 employee stock options after
the previous year end but before the record date for declaration of dividend for the year ended 31 March 2011.
F-38
2.2.5 Segmental reporting
The business of the Bank is divided into four segments: Treasury, Retail Banking, Corporate/Wholesale
Banking and Other Banking Business. These segments have been identified based on the RBI’s revised
guidelines
on
Segment
Reporting
issued
on
18
April
2007
vide
Circular
No.
DBOD.No.BP.BC.81/21.04.018/2006-07. The principal activities of these segments are as under.
Segment
Principal Activities
Treasury
Treasury operations include investments in sovereign and
corporate debt, equity and mutual funds, trading operations,
derivative trading and foreign exchange operations on the
proprietary account and for customers and central funding.
Retail Banking
Constitutes lending to individuals/small businesses subject to the
orientation, product and granularity criterion and also includes
low value individual exposures not exceeding the threshold limit
of Rs. 50 million as defined by RBI. Retail Banking activities
also include liability products, card services, internet banking,
ATM services, depository, financial advisory services and NRI
services.
Corporate / Wholesale Banking
Includes corporate relationships not included under Retail
Banking, corporate advisory services, placements and
syndication, management of public issue, project appraisals,
capital market related services and cash management services.
Other Banking Business
Includes para banking activities like third party product
distribution and other banking transactions not covered under
any of the above three segments.
Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and
interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on
funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other
direct overheads and allocated expenses.
Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to
customers falling under this segment and fees arising from transaction services and merchant banking activities
such as syndication and debenture trusteeship. Revenues of the Retail Banking segment are derived from interest
earned on loans classified under this segment and fees for banking and advisory services, ATM interchange fees
and cards products. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily
comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and
premises expenses for operating the branch network and other delivery channels, personnel costs, other direct
overheads and allocated expenses.
Segment income includes earnings from external customers and from funds transferred to the other
segments. Segment result includes revenue as reduced by interest expense and operating expenses and
provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter
segment interest income and interest expense represent the transfer price received from and paid to the Central
Funding Unit (CFU) respectively. For this purpose, the funds transfer pricing mechanism presently followed by
the Bank, which is based on historical matched maturity and market-linked benchmarks, has been used.
Operating expenses other than those directly attributable to segments are allocated to the segments based on an
activity-based costing methodology. All activities in the Bank are segregated segment-wise and allocated to the
respective segment.
F-39
Segmental results are set out below:
Treasury
31 March 2012
Corporate/
Other
Wholesale
Retail
Banking
Banking
Banking
Business
(Rs. in million)
Total
Segment Revenue
Gross interest income (external customers) . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,925
10,037
112,922
28,009
47,099
12,388
—
3,768
219,946
54,202
Total income as per Profit and Loss Account . . . . . .
Add/(less) inter segment interest income . . . . . . . . . . .
69,962
289,924
140,931
30,936
59,487
72,750
3,768
1
274,148
393,611
Total segment revenue . . . . . . . . . . . . . . . . . . . . . . . .
Less: Interest expense (external customers) . . . . . . . . .
Less: Inter segment interest expense . . . . . . . . . . . . . . .
Less: Operating expenses . . . . . . . . . . . . . . . . . . . . . . .
359,886
87,471
258,179
4,263
171,867
2,147
93,358
17,355
132,237
50,151
42,074
37,596
3,769
—
—
856
667,759
139,769
393,611
60,070
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Provision for non-performing assets/others . . . . .
9,973
1,608
59,007
7,356
2,416
2,463
2,913
4
74,309
11,431
Segment result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,365
51,651
2,909
62,878
Less: Provision for tax . . . . . . . . . . . . . . . . . . . . . . . . .
Extraordinary profit/loss . . . . . . . . . . . . . . . . . . . . . . . .
Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,083,942
Unallocated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,164,455
Unallocated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditure for the year . . . . . . . . . . . . . . . .
Depreciation on fixed assets for the year . . . . . . . . .
F-40
(80,513)
203
207
(47)
1,176,471
582,584
1,686
512,610
943,058
195
663,861
(360,474)
970
987
2,138
2,175
20,456
—
42,422
2,844,683
11,595
2,856,278
2,620,318
7,875
2,628,193
1,491
228,085
52
53
3,363
3,422
Treasury
31 March 2011
Corporate/
Other
Wholesale
Retail
Banking
Banking
Banking
Business
(Rs. in million)
Total
Segment Revenue
Gross interest income (external customers) . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,517
11,230
70,830
22,894
33,201
9,905
—
2,292
151,548
46,321
Total income as per Profit and Loss
Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add/(less) inter segment interest income . . . . . . . . . . .
58,747
185,420
93,724
23,787
43,106
50,154
2,292
5
197,869
259,366
Total segment revenue . . . . . . . . . . . . . . . . . . . . . . . .
Less: Interest expense (external customers) . . . . . . . . .
Less: Inter segment interest expense . . . . . . . . . . . . . . .
Less: Operating expenses . . . . . . . . . . . . . . . . . . . . . . .
244,167
53,272
178,322
3,845
117,511
1,476
55,541
14,405
93,260
31,154
25,503
28,572
2,297
16
—
972
457,235
85,918
259,366
47,794
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Provision for non-performing assets/others . . . . .
8,728
1,405
46,089
7,259
8,031
4,129
1,309
7
64,157
12,800
Segment result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,323
38,830
3,902
1,302
51,357
Less: Provision for tax . . . . . . . . . . . . . . . . . . . . . . . . .
Extraordinary profit/loss . . . . . . . . . . . . . . . . . . . . . . . .
Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
944,753 1,043,023
Unallocated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,053,924
464,629
Unallocated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(109,171)
Capital expenditure for the year . . . . . . . . . . . . . . . .
Depreciation on fixed assets for the year . . . . . . . . .
419
87
578,394
428,967
1,761
710,949
243
(281,982)
4,684
973
8,599
1,785
17,472
—
33,885
2,418,504
8,630
2,427,134
2,229,745
7,400
2,237,145
1,518
189,989
246
51
13,948
2,896
Geographic Segments
Domestic
31 March
31 March
2012
2011
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257,868
2,533,254
186,789
2,190,863
International
31 March 31 March
2012
2011
(Rs. in million)
16,280
323,024
11,080
236,271
Total
31 March
31 March
2012
2011
274,148
2,856,278
197,869
2,427,134
2.2.6 Related party disclosure
The related parties of the Bank are broadly classified as:
a) Promoters
The Bank has identified the following entities as its Promoters.
• Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1)
• Life Insurance Corporation of India (LIC)
• General Insurance Corporation and four Government-owned general insurance companies—New India
Assurance Co. Ltd., National Insurance Co. Ltd., United India Insurance Co. Ltd. and The Oriental
Insurance Co. Ltd.
b) Key Management Personnel
• Mrs. Shikha Sharma (Managing Director & Chief Executive Officer)
• Mr. Sisir Kumar Chakrabarti (Deputy Managing Director) upto 30 September 2011.
F-41
c) Relatives of Key Management Personnel
Mr. Sanjaya Sharma, Mrs. Usha Bharadwaj, Mr. Tilak Sharma, Ms. Tvisha Sharma, Dr. Sanjiv Bharadwaj,
Dr. Prashant Bharadwaj, Dr. Brevis Bharadwaj, Dr. Reena Bharadwaj, Mrs. Swapna Chakraborty, Mr. Hirendra
Nath Chakraborty, Mr. Rajat Chakraborty, Mrs. Devikalpa Chakraborty (Kundu), Master Ahan Chakraborty,
Mr. Nabakumar Chakraborty, Mr. Prabir Chakraborty, Mrs. Minati Chakraborty, Mrs. Krishna Chakraborty,
Mrs. Sipra Chakraborty, Mrs. Shikha Bhattacharya, Ms. Shila Chakraborty, Mr. Asim Kumar Chakraborty,
Mr. Arunabha Bhattacharya.
d) Subsidiary Companies
• Axis Securities and Sales Limited
• Axis Private Equity Limited
• Axis Trustee Services Limited
• Axis Asset Management Company Limited
• Axis Mutual Fund Trustee Limited
• Axis U.K. Limited
e) Associate
• Bussan Auto Finance India Private Limited
The above investment does not fall within the definition of a Joint Venture as per AS-27, Financial
Reporting of Interest in Joint Ventures, notified under the Companies (Accounting Standards) Rules, 2006, and
the said accounting standard is thus not applicable. However, pursuant to RBI guidelines, the Bank has classified
the same as investment in joint ventures in the Balance Sheet. Such investment has been accounted as an
Associate in Consolidated Financial Statements notified under the Companies (Accounting Standards)
Rules, 2006. Based on RBI guidelines, details of transactions with Associates are not disclosed since there is only
one entity/party in this category.
The details of transactions of the Bank with its related parties during the year ended 31 March 2012 are
given below:
Items/Related Party
Dividend paid . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend received . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest received . . . . . . . . . . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . . . . . . . . . . . .
Investment of related party in the Bank . . . . .
Investment of related party in Subordinated
Debt/Hybrid Capital of the Bank . . . . . . . .
Redemption of subordinated debt . . . . . . . . . .
Purchase of investments . . . . . . . . . . . . . . . . .
Sale of investments . . . . . . . . . . . . . . . . . . . . .
Management contracts . . . . . . . . . . . . . . . . . .
Contribution to employee benefit fund . . . . . .
Purchase of fixed assets . . . . . . . . . . . . . . . . .
Sale of fixed assets . . . . . . . . . . . . . . . . . . . . .
Non-funded commitments . . . . . . . . . . . . . . .
Advance granted (net) . . . . . . . . . . . . . . . . . . .
Advance repaid . . . . . . . . . . . . . . . . . . . . . . . .
Receiving of services . . . . . . . . . . . . . . . . . . .
Rendering of services . . . . . . . . . . . . . . . . . . .
Other reimbursements from related party . . . .
Other reimbursements to related party . . . . . .
Promoters
Relatives of
Key Management Key Management
Personnel
Personnel
(Rs. in million)
Subsidiaries
Total
2,142
—
5,405
—
—
—
1
—
—
—
—
18
—
—
—
—
—
—
—
11
77
—
900
—
2,143
11
5,482
—
900
18
—
—
—
2,448
—
138
—
—
—
6
—
515
17
—
10
—
—
—
—
55
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
69
—
—
—
160
—
—
1,409
125
103
17
—
—
—
2,448
124
138
—
—
160
6
—
1,924
142
103
27
F-42
The balances payable to/receivable from the related parties of the Bank as on 31 March 2012 are given
below:
Items/Related Party
Borrowings from the Bank . . . . . . . . . . . . . .
Deposits with the Bank . . . . . . . . . . . . . . . . .
Placement of deposits . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . . . . . . . . . . .
Investment of related party in the Bank . . . .
Non-funded commitments . . . . . . . . . . . . . .
Investment of related party in Subordinated
Debt/Hybrid Capital of the Bank . . . . . . .
Advance for rendering of services . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . .
Other payables . . . . . . . . . . . . . . . . . . . . . . .
Promoters
Key Management
Personnel
—
56,935
2
437
—
1,545
30
—
3
—
2
—
—
—
28,373
—
—
—
—
—
—
—
Relatives of
Key Management
Personnel
(Rs. in million)
Subsidiaries
Total
—
3
—
—
—
—
—
—
1,166
—
—
3,106
—
160
—
58,107
2
439
3,106
1,545
190
—
—
—
—
—
—
345
212
28,373
—
345
212
The maximum balances payable to/receivable from the related parties of the Bank during the year ended
31 March 2012 are given below:
Items/Related Party
Borrowings from the Bank . . . . . . . . . . . . . .
Deposits with the Bank . . . . . . . . . . . . . . . . .
Placement of deposits . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . . . . . . . . . . .
Investment of related party in the Bank . . . .
Non-funded commitments . . . . . . . . . . . . . .
Investment of related party in Subordinated
Debt/Hybrid Capital of the Bank . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . .
Other payables . . . . . . . . . . . . . . . . . . . . . . .
Promoters
Key Management
Personnel
—
56,936
2
482
—
1,551
30
—
12
—
3
—
1
—
28,373
—
—
—
—
—
F-43
Relatives of
Key Management
Personnel
(Rs. in million)
Subsidiaries
Total
—
27
—
—
—
—
—
—
1,850
—
—
3,106
—
160
—
58,825
2
485
3,106
1,552
190
—
—
—
—
345
228
28,373
345
228
The details of transactions of the Bank with its related parties during the year ended 31 March 2011 are
given below:
Items/Related Party
Dividend paid . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend received . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest received . . . . . . . . . . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . . . . . . . . . . . .
Investment of related party in the Bank . . . . .
Investment of related party in Subordinated
Debt/Hybrid Capital of the Bank . . . . . . . .
Redemption of Subordinated Debt . . . . . . . . .
Purchase of investments . . . . . . . . . . . . . . . . .
Sale of investments . . . . . . . . . . . . . . . . . . . . .
Management contracts . . . . . . . . . . . . . . . . . .
Purchase of fixed assets . . . . . . . . . . . . . . . . .
Non-funded commitments . . . . . . . . . . . . . . .
Advance granted (net) . . . . . . . . . . . . . . . . . . .
Advance repaid . . . . . . . . . . . . . . . . . . . . . . . .
Sale of fixed assets . . . . . . . . . . . . . . . . . . . . .
Contribution to employee benefit fund . . . . . .
Receiving of services . . . . . . . . . . . . . . . . . . .
Rendering of services . . . . . . . . . . . . . . . . . . .
Other reimbursements to related party . . . . . .
Other reimbursements from related party . . . .
*
Relatives of
Key Management Key Management
Personnel
Personnel
(Rs. in million)
Promoters
Subsidiaries
Total
1,847
—
3,897
2
—
—
—
—
1
—
—
23
—
—
—
—
—
—
—
8
32
—
1,060
—
1,847
8
3,930
2
1,060
23
—
—
102
5,632
—
—
—
—
—
—
152
302
25
2
—
—
—
—
—
55*
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
47
—
—
—
—
—
—
1,053
109
5
57
—
—
102
5,632
102
—
—
—
1
—
152
1,355
134
7
57
includes Rs. 7 million subject to approval of Shareholders.
The balances payable to/receivable from the related parties of the Bank as on 31 March 2011 are given
below:
Items/Related Party
Borrowings from the Bank . . . . . . . . . . . . . .
Deposits with the Bank . . . . . . . . . . . . . . . . .
Placement of deposits . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . . . . . . . . . . .
Investment of related party in the Bank . . . .
Non-funded commitments . . . . . . . . . . . . . .
Investment of related party in Subordinated
Debt/Hybrid Capital of the Bank . . . . . . .
Advance for rendering of services . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . .
Other payables . . . . . . . . . . . . . . . . . . . . . . .
Promoters
Key Management
Personnel
—
47,161
2
430
—
1,528
30
—
2
—
3
—
—
—
28,250
—
—
—
—
—
—
—
F-44
Relatives of
Key Management
Personnel
(Rs. in million)
Subsidiaries
Total
—
2
—
—
—
—
—
—
714
—
—
2,206
—
—
—
47,879
2
433
2,206
1,528
30
—
—
—
—
—
—
6
143
28,250
—
6
143
The maximum balances payable to/receivable from the related parties of the Bank during the year ended
31 March 2011 are given below:
Items/Related Party
Borrowings from the Bank . . . . . . . . . . . . . .
Deposits with the Bank . . . . . . . . . . . . . . . . .
Placement of deposits . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment of the Bank . . . . . . . . . . . . . . . . .
Investment of related party in the Bank . . . .
Investment of related party in Subordinated
Debt/Hybrid Capital of the Bank . . . . . . .
Advance for rendering of services . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . .
Other payables . . . . . . . . . . . . . . . . . . . . . . .
Non-funded commitments . . . . . . . . . . . . . .
Promoters
Key Management
Personnel
—
47,161
2
1,325
—
1,562
—
39
—
4
—
—
28,250
—
—
—
390
—
—
—
—
—
Relatives of
Key Management
Personnel
(Rs. in million)
Subsidiaries
Total
—
50
—
—
—
—
—
818
—
3
2,206
—
—
48,068
2
1,332
2,206
1,562
—
—
—
—
—
—
—
72
163
—
28,250
—
72
163
390
Details of transactions with Axis Mutual Fund and Axis Infrastructure Fund-I, the funds floated by Axis
Asset Management Company Ltd. and Axis Private Equity Ltd., the Bank’s wholly owned subsidiaries have not
been disclosed since these entities do not qualify as Related Parties as defined under the Accounting Standard 18,
Related Party Disclosure, as notified under the Companies (Accounting Standards) Rules, 2006 and as per RBI
guidelines.
2.2.7 Leases
Disclosure in respect of assets given on operating lease
The Bank has not given any assets on operating lease.
Disclosure in respect of assets taken on operating lease
Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing
machines and IT equipment.
31 March 2012 31 March 2011
(Rs. in million)
Future lease rentals payable as at the end of the year:
— Not later than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— Later than one year and not later than five years . . . . . . . . . . . . . . . . .
— Later than five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total of minimum lease payments recognised in the Profit and Loss
Account for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total of future minimum sub-lease payments expected to be received
under non-cancellable subleases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-lease payments recognised in the Profit and Loss Account for the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,651
16,167
4,776
4,354
12,221
6,711
5,604
5,601
3
12
11
9
The Bank has sub-leased certain of its properties taken on lease.
There are no provisions relating to contingent rent.
The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar
agreements. There are no undue restrictions or onerous clauses in the agreements.
2.2.8 Other Fixed Assets (including furniture & fixtures)
The movement in fixed assets capitalised as application software is given below:
Particulars
31 March 2012 31 March 2011
(Rs. in million)
At cost at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation as at 31 March . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance as at 31 March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-45
3,303
570
(84)
(2,580)
1,209
547
2,667
652
(16)
(2,084)
1,219
469
2.2.9 The major components of deferred tax assets and deferred tax liabilities arising out of timing
differences are as under:
As at
31 March 2012 31 March 2011
(Rs. in million)
Deferred tax assets on account of provisions for doubtful debts . . . . . . . .
Deferred tax assets on account of amortisation of HTM investments . . . .
Deferred tax assets on account of provision for employee benefits . . . . . .
Deferred tax liability on account of depreciation on fixed assets . . . . . . .
Deferred tax assets on account of other contingencies . . . . . . . . . . . . . . .
Other deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,432
1,841
826
(230)
69
337
5,742
1,641
707
(327)
134
272
10,275
8,169
2.2.10 Employee Benefits
Provident Fund
The contribution to the employee’s provident fund amounted to Rs. 679 million (previous year Rs. 418
million) for the year.
The rules of the Bank’s Provident Fund administered by a Trust require that if the Board of Trustees are
unable to pay interest at the rate declared for Employees’ Provident Fund by the Government under para 60 of
the Employees’ Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other
reason, then the deficiency shall be made good by the Bank. Based on an actuarial valuation conducted by an
independent actuary, there is no deficiency as at the Balance Sheet date. The principal assumptions used by the
actuary are as under.
31 March 2012
Discount rate for the term of the obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average historic yield on the investment portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rate for the remaining term to maturity of the investment portfolio . . . . . . . . . .
Expected investment return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guaranteed rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.35%
9.09%
8.45%
8.99%
8.25%
Superannuation
The Bank contributed Rs. 139 million (previous year Rs. 102 million) to the employees’ superannuation
plan for the year.
Leave Encashment
The actuarial liability of compensated absences of accumulated privileged and sick leaves of the employees
of the Bank is given below:
31 March 2012 31 March 2011
(Rs. in million)
Privileged leave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sick leave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total actuarial liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salary escalation rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-46
2,524
203
2,727
8.35% p.a.
6.00% p.a.
2,174
186
2,360
8.05% p.a.
6.00% p.a.
Gratuity
The following tables summarise the components of net benefit expenses recognised in the Profit and Loss
Account and funded status and amounts recognised in the Balance Sheet for the Gratuity benefit plan.
Profit and Loss Account
Net employee benefit expenses (recognised in payments to and provisions for employees)
31 March 2012 31 March 2011
(Rs. in million)
Current Service Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on Defined Benefit Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Return on Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Actuarial Losses/ (Gains) recognised in the year . . . . . . . . . . . . . . . .
Past Service Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116
55
(48)
237
(37)
90
39
(33)
7
87
Total included in “Employee Benefit Expense” . . . . . . . . . . . . . . . . . . .
323
190
Actual Return on Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53
26
Balance Sheet
Details of provision for gratuity
31 March 2012 31 March 2011
(Rs. in million)
Fair Value of Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present Value of Funded Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
979
(934)
635
(607)
Net Asset/(Liability) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45
28
Amounts in Balance Sheet
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
45
—
28
Net Asset/(Liability) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45
28
Changes in the present value of the defined benefit obligation are as follows:
31 March 2012 31 March 2011
(Rs. in million)
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Service Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial Losses / (Gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Past service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
607
116
55
242
(37)
(49)
426
90
39
(1)
87
(34)
Closing Defined Benefit Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
934
607
Changes in the fair value of plan assets are as follows:
31 March 2012 31 March 2011
(Rs. in million)
Change in the Fair Value of Assets
Opening Fair Value of Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Return on Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial Gains / (Losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contributions by Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
634
48
5
341
(49)
440
33
(8)
204
(34)
Closing Fair Value of Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
979
635
F-47
Experience adjustments
Defined Benefit Obligations . . . . . . . . . . . . . . . . . . . . . . . . .
Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surplus/(Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experience Adjustments on Plan Liabilities . . . . . . . . . . . . .
Experience Adjustments on Plan Assets . . . . . . . . . . . . . . . .
31 March
2012
31 March
2011
934
979
45
271
5
607
635
28
14
(8)
31 March 31 March
2010
2009
(Rs. in million)
426
440
14
12
5
31 March
2008
364
298
(66)
34
(7)
234
177
(57)
36
(2)
Major categories of plan assets (managed by Insurers) as a percentage of fair value of total plan assets
Government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds, debentures and other fixed income instruments . . . . . . . . . . . . .
Money market instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal actuarial assumptions at the Balance Sheet date:
Discount Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Rate of Return on Plan Assets . . . . . . . . . . . . . . . . . . . . . . . .
Salary Escalation Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 21 to 30 (age in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 31 to 44 (age in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 45 to 59 (age in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 March 2012
%
31 March 2011
%
42.81
43.85
9.89
2.31
1.14
40.48
34.66
18.34
5.20
1.32
31 March 2012
31 March 2011
8.35% p.a.
7.50% p.a.
6.00% p.a.
20.41%
10.00%
1.00%
8.05% p.a.
7.50% p.a.
6.00% p.a.
16.55%
10.00%
1.00%
The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority,
promotion and other relevant factors.
The expected rate of return on plan assets is based on the average long-term rate of return expected on
investments of the Fund during the estimated term of the obligations.
As the contribution expected to be paid to the plan during the annual period beginning after the balance
sheet date is based on various internal/external factors, a best estimate of the contribution is not determinable.
The above information is as certified by the actuary and relied upon by the auditors.
2.2.11 Provisions and contingencies
a)
Movement in provision for frauds included under other liabilities is set out below:
31 March 2012
31 March 2011
(Rs. in million)
Opening balance at the beginning of the year . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions on account of payments during the year . . . . . . . . . . . . . . .
Reductions on account of reversals during the year . . . . . . . . . . . . . . . .
50
124
—
—
2
48
—
—
Closing balance at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . .
174
50
b)
Movement in provision for debit/credit card reward points is set out below:
31 March 2012
31 March 2011
(Rs. in million)
Opening provision at the beginning of the year . . . . . . . . . . . . . . . . . . .
Provision made during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
250
203
(20)
184
83
(17)
Closing provision at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . .
433
250
F-48
c)
Movement in provision for other contingencies (including derivatives) is set out below:
31 March 2012
31 March 2011
(Rs. in million)
Opening provision at the beginning of the year . . . . . . . . . . . . . . . . . . .
Provision made during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing provision at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . .
364
4
(360)
8
—
364
—
364
2.2.12 Unclaimed Shares:
Details of unclaimed shares as of 31 March 2012 and 31 March 2011 are as follows:
31 March 2012
Aggregate number of shareholders at the beginning of the year . . . . . .
Total outstanding shares in Unclaimed Suspense Account at the
beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shareholders who approached to issuer for transfer of
shares from Unclaimed Suspense Account during the year . . . . . . . .
Number of shareholders to whom shares were transferred from
Unclaimed Suspense Account during the year . . . . . . . . . . . . . . . . . .
Aggregate number of shareholders at the end of the year . . . . . . . . . . .
Total outstanding shares in Unclaimed Suspense Account at the end of
the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 March 2011
38
49
4,900
6,200
9
11
9
29
11
38
3,600
4,900
2.2.13 Small and Micro Industries
Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from
2 October 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises.
There have been no reported cases of delays in payments to micro and small enterprises or of interest payments
due to delays in such payments. The above is based on the information available with the Bank which has been
relied upon the auditors.
2.2.14 Description of contingent liabilities:
a) Claims against the Bank not acknowledged as debts
These represent claims filed against the Bank in the normal course of business relating to various legal cases
currently in progress. These also include demands raised by income tax and other statutory authorities and
disputed by the Bank.
b) Liability on account of forward exchange and derivative contracts
The Bank enters into foreign exchange contracts, currency options/swaps, interest rate/currency futures and
forward rate agreements on its own account and for customers. Forward exchange contracts are commitments to
buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange
cash flows by way of interest/principal in two currencies, based on ruling spot rates. Interest rate swaps are
commitments to exchange fixed and floating interest rate cash flows. Interest rate futures are standardised,
exchange-traded contracts that represent a pledge to undertake a certain interest rate transaction at a specified
price, on a specified future date. Forward rate agreements are agreements to pay or receive a certain sum based
on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an
agreement between two parties in which one grants to the other the right to buy or sell a specified amount of
currency at a specific price within a specified time period or at a specified future time. An Exchange Traded
Currency Option contract is a standardised foreign exchange derivative contract, which gives the owner the right,
but not the obligation, to exchange money denominated in one currency into another currency at a pre-agreed
exchange rate on a specified date on the date of expiry. Currency Futures contract is a standardised, exchangetraded contract, to buy or sell a certain underlying currency at a certain date in the future, at a specified price.
c) Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their
credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the
customer failing to fulfil its financial or performance obligations.
F-49
d) Acceptances, endorsements and other obligations
These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the
Bank’s customers that are accepted or endorsed by the Bank.
e) Other items
Other items represent outstanding amount of bills rediscounted by the Bank, estimated amount of contracts
remaining to be executed on capital account and commitments towards underwriting and investment in equity
through bids under Initial Public Offering (IPO) of corporates as at the year end.
2.2.15 Previous year figures have been regrouped and reclassified, where necessary to conform to current
year’s presentation.
F-50
Auditors’ Report
To
The members of Axis Bank Limited
1. We have audited the attached Balance Sheet of AXIS BANK LIMITED (“the Bank”) as at 31 March
2011, the Profit and Loss Account and the Cash Flow Statement of the Bank for the year ended on that
dated, both annexed thereto. These financial statements are the responsibility of the Bank’s Management.
Our responsibility is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those
Standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and the disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by the Management, as well
as evaluating the overall financial statement presentation. We believe that our audit provides reasonable
basis for our opinion.
3. The Balance Sheet and the Profit and Loss Account are drawn up in conformity with Forms A and B
(revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the
Companies Act, 1956.
4. Without qualifying our report, we invite attention to Note 1 of Schedule 18 regarding the Scheme of
Arrangement for the demerger of Enam Securities Private Ltd. with the Bank’s subsidiary. For the
reasons stated therein, no effect to the proposed Scheme has been given in the accounts.
5. We further report as follows:
(a) we have obtained all the information and explanations which to the best of our knowledge and
belief were necessary for the purposes of our audit and have found them to be satisfactory;
(b) in our opinion, the transactions of the Bank which have come to our notice have been within its
powers;
(c) in our opinion, proper books of account as required by law have been kept by the Bank so far as it
appears from our examination of those books;
(d) the financial accounting systems of the Bank are centralised and, therefore, accounting returns are
not required to be submitted by the Branches;
(e) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this
report are in agreement with the books of account;
(f) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt
with by this report comply with the Accounting Standards referred to in Section 211 (3C) of the
Companies Act, 1956, insofar as they apply to banks;
(g) in our opinion and to the best of our information and according to the explanations given to us, the
said accounts give the information required by the Companies Act, 1956 in the manner so required
for banking companies and the Guidelines issued by the Reserve Bank of India from time to time
and give a true and fair view in conformity with the accounting principles generally accepted in
India:
(i) in the case of the Balance Sheet, of the state of the affairs of the Bank as at 31 March 2011;
(ii) in the case of the Profit and Loss Account, of the profit of the Bank for the year ended on that
date and
(iii) in the case of Cash Flow Statement, of the cash flows of the Bank for the year ended on that
date.
6. On the basis of the written representations received from the Directors as on 31 March 2011 taken on
record by the Board of Directors, we report that none of the Directors is disqualified from being
appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956.
For DELOITTE HASKINS & SELLS
Chartered Accountants
(Registration no: 117365W)
Nalin M. Shah
Partner
(Membership No. 15860)
Place: Mumbai
Date: 22nd April 2011
F-51
Non-consolidated Balance Sheet as of 31 March 2011
Schedule
No.
As of
As of
31-03-2011
31-03-2010
Rs.
Rs.
Figures in million
CAPITAL AND LIABILITIES
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
4,105
4,052
Reserves & Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
185,883
156,393
Employees’ Stock Options Outstanding (Net) . . . . . . . . . . . . . . . . . . . . . . . . . 17(5.15)
—
2
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 1,892,378 1,413,002
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
262,679
171,695
Other liabilities and provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
82,089
61,335
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ASSETS
Cash and Balances with Reserve Bank of India . . . . . . . . . . . . . . . . . . . . . . . .
Balances with banks and money at call and short notice . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,427,134
6
138,862
94,820
7
75,225
57,219
8
719,916
559,748
9 1,424,078 1,043,410
10
22,732
12,224
11
46,321
39,058
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bills for collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Significant Accounting Policies and Notes to accounts . . . . . . . . . . . . . . . . . .
Schedules referred to above form an integral part of the Balance Sheet
F-52
1,806,479
12
17 & 18
2,427,134
1,806,479
4,539,973
324,731
3,182,812
192,929
Non-consolidated Profit and Loss Account for the year ended 31 March 2011
Schedule
No.
I. INCOME
Interest earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
14
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. EXPENDITURE
Interest expended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
16
18(2.1.1)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. NET PROFIT FOR THE YEAR (I — II) . . . . . . . . . . . . . . . . . . . . . . .
Balance in Profit & Loss account brought forward from previous year . . . . . .
IV. AMOUNT AVAILABLE FOR APPROPRIATION . . . . . . . . . . . . . .
V. APPROPRIATIONS:
Transfer to Statutory Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer to/(from) Investment Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer to Capital Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18(2.2.1)
Transfer to General Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposed dividend (includes tax on dividend) . . . . . . . . . . . . . . . . . . . . . . . . . . 18(2.2.4)
Balance in Profit & Loss account carried forward . . . . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. EARNINGS PER EQUITY SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . 18(2.2.2)
(Face value Rs. 10/- per share)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Significant Accounting Policies and Notes to accounts . . . . . . . . . . . . . . . . . . .
17 &18
Schedules referred to above form an integral part of the Profit and Loss Account
F-53
Year ended on
31-03-2011 31-03-2010
Rs.
Rs.
Figures in million
except EPS data
151,548
46,321
116,380
39,458
197,869
155,838
85,918
47,794
30,272
66,336
37,097
27,260
163,984
130,693
33,885
34,275
68,160
25,145
23,481
48,626
8,471
(150)
48
3,389
6,704
49,698
6,286
149
2,239
3
5,674
34,275
68,160
48,626
82.95
81.61
65.78
64.31
Non-consolidated Cash Flow Statement for the year ended 31 March 2011
Year ended
31-03-2011 31-03-2010
Rs.
Rs.
Figures in million
Cash flow from operating activities
Net profit before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:
Depreciation on fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortisation of premium on Held to Maturity Investments . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Non Performing Advances/Investments (including bad debts) . . . . . . . . . . . .
Provision on Standard assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for wealth tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for interest tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for country risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for restructured assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for other contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortisation of deferred employee compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:
(Increase) /Decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) /Decrease in advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase /(Decrease) in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) /Decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase /(Decrease) in other liabilities & provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,357
38,513
2,896
993
605
9,551
1,662
5
3
70
24
150
412
—
2,343
(222)
830
13,570
(9)
3
—
39
(15)
565
—
—
67,728
55,617
(35,372) (49,860)
(390,403) (241,787)
479,376 239,261
(5,451)
169
17,665
13,728
(19,292) (15,147)
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114,251
1,981
Cash flow from investing activities
Purchase of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)/Decrease in Held to Maturity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13,603)
(126,380)
130
(4,066)
(47,353)
189
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(139,853)
(51,230)
Cash flow from financing activities
Proceeds from issue of Subordinated debt, Perpetual Debt & Upper Tier II instruments
(net of repayments) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase /(Decrease) in borrowings (excluding subordinated debt, perpetual debt & upper
Tier II instruments) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issue of Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from share premium (net of share issue expenses) . . . . . . . . . . . . . . . . . . . . . . . .
Payment of Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,626)
18,214
92,610
53
2,354
(5,694)
(1,717)
462
38,570
(4,205)
Net cash generated from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,697
51,324
Effect of exchange fluctuation translation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents as at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . .
(47)
62,048
152,039
(205)
1,870
150,169
Cash and cash equivalents as at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
214,087
152,039
Note:
1.
Cash and cash equivalents comprise of cash on hand (including foreign currency notes), balances with
Reserve Bank of India, balances with banks and money at call & short notice (refer Schedules 6 and 7 of the
Balance Sheet).
F-54
Schedules to the Non-consolidated Balance Sheet
as of 31 March 2011 and
Non-consolidated Profit and Loss Account
for the year ended 31 March 2011
SCHEDULE 1 — CAPITAL
Authorised Capital
500,000,000 Equity Shares of Rs. 10/- each . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued, Subscribed and Paid-up capital# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#
As of
31-03-2011
Rs.
in million
As of
31-03-2010
Rs.
in million
5,000
4,105
5,000
4,052
405,174,119 and 410,545,843 equity shares of Rs. 10/- each fully paid up as of 31 March 2010 and
31 March 2011 respectively.
SCHEDULE 2 — RESERVES AND SURPLUS
As of
31-03-2011
Rs.
in million
I Statutory Reserve
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II Share Premium Account
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Share issue expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III Investment Reserve Account
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer to P&L Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV General Reserve
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V Capital Reserve
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI Foreign Currency Translation Reserve [refer schedule 17(5.5)]
Opening Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VII
As of
31-03-2010
Rs.
in million
19,349
8,471
13,063
6,286
27,820
19,349
97,695
2,356
—
59,115
39,064
(484)
100,051
97,695
150
—
(150)
1
150
(1)
—
150
146
3,389
143
3
3,535
146
4,858
48
2,619
2,239
4,906
4,858
(80)
(47)
124
(204)
(127)
(80)
Balance in Profit & Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,698
34,275
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
185,883
156,393
F-55
SCHEDULE 3 — DEPOSITS
A.
I
II
III
B.
I
II
As of
31-03-2011
Rs.
in million
As of
31-03-2010
Rs.
in million
Demand Deposits
(i) From banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) From others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings Bank Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Deposits
(i) From banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) From others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,305
354,866
408,503
13,565
308,113
338,618
76,751
1,037,953
41,073
711,633
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,892,378
1,413,002
Deposits of branches in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits of branches outside India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,826,772
65,606
1,371,814
41,188
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,892,378
1,413,002
SCHEDULE 4 — BORROWINGS
As of
31-03-2011
Rs.
in million
As of
31-03-2010
Rs.
in million
I
Borrowings in India
(i) Reserve Bank of India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Other Banks# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Other institutions & agencies** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II . Borrowings outside India$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
14,237
64,072
184,370
—
4,535
69,317
97,843
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
262,679
171,695
Secured borrowing included in I & II above . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
#
Borrowings from other Banks include Subordinated Debt of Rs. 3,845 million and Rs. 3,646 million in the
nature of Non-Convertible Debentures as of 31 March 2010 and 31 March 2011 respectively, Rs. 50 million
and Rs. Nil of Perpetual Debt as of 31 March 2010 and 31 March 2011 respectively, and Rs. 640 million
and Rs. 591 million of Upper Tier II instruments as of 31 March 2010 and 31 March 2011 respectively.
[Also refer 18(2.1.2) & 18(2.1.3)].
**
Borrowings from other institutions & agencies include Subordinated debt of Rs. 51,019 million and
Rs. 49,667 million in the nature of Non-Convertible Debentures as of 31 March 2010 and 31 March 2011
respectively, Rs. 2,090 million and Rs. 2,140 million of Perpetual Debt as of 31 March 2010 and 31 March
2011 respectively and Rs. 2,435 million and Rs. 2,484 million of Upper Tier II instruments as of 31 March
2010 and 31 March 2011 respectively. [Also refer 18(2.1.2) & 18(2.1.3)].
$
Borrowings outside India include Rs. 2,065 million and Rs. 2,051 million of Perpetual Debt as of 31 March
2010 and 31 March 2011 respectively and Rs. 9,415 million and Rs. 9,353 million of Upper Tier II
instruments as of 31 March 2010 and 31 March 2011 respectively. [Also refer 18(2.1.3)].
SCHEDULE 5 — OTHER LIABILITIES AND PROVISIONS
I
II
III
IV
V
VI
As of
31-03-2011
Rs.
in million
As of
31-03-2010
Rs.
in million
Bills payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inter — office adjustments (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposed dividend (includes tax on dividend) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent Provision against Standard Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others (including provisions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,843
—
4,143
6,679
6,297
29,127
29,104
—
3,480
5,670
4,635
18,446
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82,089
61,335
F-56
SCHEDULE 6 — CASH AND BALANCES WITH RESERVE BANK OF INDIA
As of
31-03-2011
Rs.
in million
I
II
As of
31-03-2010
Rs.
in million
Cash in hand & in ATM (including foreign currency notes) . . . . . . . . . . . . . . . . . . . .
Balances with Reserve Bank of India:
(i) in Current Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) in Other Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,083
19,007
116,779
—
75,813
—
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138,862
94,820
SCHEDULE 7 — BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
I
II
As of
31-03-2011
Rs.
in million
As of
31-03-2010
Rs.
in million
4,408
49,184
7,922
34,402
30
—
5
—
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53,622
42,329
Outside India
i) in Current Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ii) in Other Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iii) Money at Call & Short Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,836
10,658
6,109
9,079
5,811
—
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,603
14,890
GRAND TOTAL (I+II) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75,225
57,219
As of
31-03-2011
Rs.
in million
As of
31-03-2010
Rs.
in million
Investments in India in —
(i) Government Securities## . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Other approved securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iv) Debentures and Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(v) Investments in Subsidiaries / Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(vi) Others (Mutual Fund units, CD / CP, NABARD Deposits, PTC etc.)@ . . . . . . . .
441,549
—
6,929
180,705
2,595
82,406
341,959
—
5,296
138,232
1,536
65,941
Total Investments in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
714,184
552,964
In India
(i) Balance with Banks
(a) in Current Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) in Other Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Money at Call and Short Notice
(a) With banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) With other institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 8 — INVESTMENTS
I
II
Investments outside India in —
(i) Government Securities (including local authorities) . . . . . . . . . . . . . . . . . . . . . . .
(ii) Subsidiaries and / or joint ventures abroad (amount less than Rs. 1,000 for
current year, previous year Rs. nil) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
430
—
—
5,302
—
6,784
Total Investments outside India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,732
6,784
GRAND TOTAL (I + II) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
719,916
559,748
## Includes securities costing Rs. 42,376 million and Rs. 44,249 million as of 31 March 2010 and 31 March
2011 respectively pledged for availment of fund transfer facility, clearing facility and margin requirement.
@
Includes deposits with NABARD Rs. 30,027 million and Rs. 40,647 million as of 31 March 2010 and
31 March 2011 respectively and PTC’s Rs. 3,513 million and Rs. 2,130 million, net of depreciation as of
31 March 2010 and 31 March 2011 respectively.
F-57
SCHEDULE 9 — ADVANCES
A.(i)
(ii)
(iii)
B.(i)
(ii)
(iii)
C.I
II
As of
31-03-2011
Rs.
in million
As of
31-03-2010
Rs.
in million
Bills purchased and discounted* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,813
Cash credits, overdrafts and loans repayable on demand . . . . . . . . . . . . . . . . . . .
349,803
Term loans# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,039,462
34,501
260,136
748,773
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,424,078
1,043,410
Secured by tangible assets$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered by Bank/Government Guarantees&& . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,131,027
32,394
260,657
865,762
16,368
161,280
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,424,078
1,043,410
Advances in India
(i) Priority Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iv) Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
412,891
30,039
2,408
782,964
299,404
32,048
3,826
584,824
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,228,302
920,102
Advances Outside India
(i) Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(i) Due from others —
(a) Bills purchased and discounted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Syndicated loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,197
333
6,265
70,389
114,925
4,316
63,702
54,957
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
195,776
123,308
GRAND TOTAL (CI + CII) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,424,078
1,043,410
*
Net of borrowing under Bills rediscounting Scheme Rs. Nil and Rs. 18,000 million as of 31 March 2010 and
31 March 2011 respectively.
#
Net of borrowing under Inter Bank Participation Certificate Rs. Nil and Rs. 34,010 million as of 31 March
2010 and 31 March 2011 respectively.
$
Includes advances against book debts
&& Includes advances against L/Cs issued by Bank.
F-58
SCHEDULE 10 — FIXED ASSETS
As of
31-03-2011
Rs.
in million
I
Premises
Gross Block . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At cost at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation
As at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation to date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Block . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II
Other Fixed Assets (including Furniture & Fixtures)
Gross Block . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At cost at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation
As at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation to date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III
As of
31-03-2010
Rs.
in million
891
8,245
(19)
891
—
—
9,117
891
162
46
(10)
198
8,919
117
45
—
162
729
20,188
5,704
(744)
16,528
4,068
(407)
25,148
20,189
9,266
2,849
(553)
11,562
7,147
2,299
(180)
9,266
Net Block . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,586
10,923
CAPITAL WORK-IN-PROGRESS (including Capital Advances) . . . . . . . . . . . . . . .
227
572
GRAND TOTAL (I+II+III) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,732
12,224
As of
31-03-2011
Rs.
in million
As of
31-03-2010
Rs.
in million
Inter-office adjustments (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax paid in advance / tax deducted at source (net of provisions) . . . . . . . . . . . . . . . . .
Stationery and stamps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non banking assets acquired in satisfaction of claims . . . . . . . . . . . . . . . . . . . . . . . . .
Others# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
17,166
401
12
53
28,689
—
12,771
643
10
22
25,612
TOTAL . . . . . . . . . . . . . . .