Kotak Mahindra Bank Ltd
Directors Reports
To the Members of
KOTAK MAHINDRA BANK LIMITED
The Directors present their Thirty-fifth Annual Report together with the audited
accounts of your Bank for the year ended 31st March, 2020.
FINANCIAL HIGHLIGHTS
(A) Kotak Mahindra Bank Limited - Consolidated financial highlights *:
|
31st March, 2020 |
31st March, 2019 |
|
Rs in crore |
Rs in crore |
| Total income |
50,365.74 |
45,979.11 |
| Total expenditure, excluding provisions and contingencies |
36,385.84 |
34,358.03 |
| Operating Profit |
13,979.90 |
11,621.08 |
| Provisions and contingencies, excluding provision for tax |
2,558.10 |
1,045.36 |
| Profit before tax |
11,421.80 |
10,575.72 |
| Provision for taxes |
2,814.72 |
3,456.02 |
| Profit after tax |
8,607.08 |
7,119.70 |
| Add: Share in profit of Associates |
(13.72) |
84.43 |
| Consolidated profit for the Group |
8,593.36 |
7,204.13 |
| Earnings per Equity Share: |
|
|
| Basic (' |
44.73 |
37.61 |
| Diluted (' |
44.68 |
37.57 |
(B) Kotak Mahindra Bank Limited - Standalone financial highlights:
|
31st March, 2020 |
31st March, 2019 |
|
Rs in crore |
Rs in crore |
| Total Income |
32,301.72 |
28,547.24 |
| Total expenditure, excluding provisions and contingencies |
22,280.89 |
20,199.06 |
| Operating Profit |
10,020.83 |
8,348.18 |
| Provisions and contingencies, excluding tax provisions |
2,216.16 |
962.39 |
| Profit before tax |
7,804.67 |
7,385.79 |
| Provision for taxes |
1,857.49 |
2,520.46 |
| Profit after tax |
5,947.18 |
4,865.33 |
| Add: Surplus brought forward from the previous year |
16,919.29 |
13,604.60 |
| Amount available for appropriation |
22,866.47 |
18,469.93 |
| Appropriations: |
|
|
| Statutory Reserve under Section 17 of the Banking Regulation Act, 1949 |
1,486.80 |
1,216.34 |
| Transfer to Investment Reserve Account |
(31.06) |
31.06 |
| Transfer to Capital Reserve |
114.84 |
6.99 |
| Transfer to Special Reserve |
80.00 |
40.00 |
| Transfer to Investment Fluctuation Reserve Account |
483.13 |
70.89 |
| Transfer to Fraud Provision |
(1.40) |
1.40 |
| Dividend Paid ** |
193.26 |
160.28 |
| Corporate Dividend Tax |
29.09 |
23.68 |
| Surplus carried to Balance Sheet |
20,511.81 |
16,919.29 |
* The financial results of the subsidiaries (excluding insurance companies) and
associates used for preparation of the consolidated financial results are in accordance
with Generally Accepted Accounting Principles in India ('GAAP') specified under Section
133 and relevant provision of Companies Act, 2013. The financial statements of such Indian
subsidiaries and associates are prepared as per Indian Accounting Standards in accordance
with the Companies (Indian Accounting Standards) Rules, 2015.
** The Bank has paid a dividend at rate of Rs 0.80 per equity share for the year ended
31st March, 2019 (previous year: 0.70 per equity share for the year ended 31st
March, 2018) and has paid interim dividend at rate of Re.0.405 per share on preference
shares for year ended 31st March, 2020 (previous year: interim dividend at rate
of 8.10% (on pro-rata basis)), to all shareholders, whose names appear on the Register of
members / beneficial holders list on the book closure date. As per the requirements of
revised AS 4 - 'Contingencies and Events Occurring After the Balance Sheet Date', this
payout (including dividend distribution tax) has been appropriated from amount available
for appropriation in the year of pay-out.
DIVIDEND
Reserve Bank of India vide its circular No. DOR.BP.BC.No.64/21.02.067/2019-20 dated
April 17, 2020, has directed all banks to not make any further dividend payouts from
profits pertaining to the financial year ending March 31, 2020 until further instructions.
In March 2020, your Directors declared an interim dividend on Perpetual Non-Cumulative
Preference Shares of face value of Rs 5 each issued by the Bank, carrying a dividend rate
of 8.10%, in respect of the financial year 2019-20, as per the terms of issuance. This
entailed a payout of Rs 40.50 crore (previous year Rs 26.86 crore), excluding dividend
distribution tax.
Pursuant to Regulation 43A of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the
Bank have adopted a Dividend Distribution Policy which is in line with the parameters
prescribed by SEBI for distribution of dividend. The Policy is available on the Bank's
website viz. URL: https://www.kotak.com/en/investor-relations/governance/ policies.html
CAPITAL
During the year, your Bank allotted 42,83,511 equity shares arising out of the exercise
of Employees Stock Options granted to the whole time director and employees of your Bank
and its subsidiaries.
Post allotment of equity shares as aforesaid, the issued, subscribed and paid-up share
capital of the Bank as at 31st March, 2020 stood at Rs 14,56,51,91,690
comprising of 191,30,38,338 equity shares of Rs 5 each and 100,00,00,000 preference shares
of Rs 5 each.
Your Bank has a Capital Adequacy Ratio ('CAR') under Basel III as at 31st
March, 2020 of 17.89% with Tier I being 17.27%.
During the year, your Bank has not issued any capital under Tier II. As on 31st
March, 2020, outstanding Unsecured, Redeemable NonConvertible, Subordinated Debt Bonds
were Rs 456 crore.
Pursuant to the approval of the Board of Directors on 22nd April 2020 and
approval of the shareholders by way of postal ballot on 25th May 2020, your
Bank undertook a Qualified Institutions Placement. The object of the issuance is to
augment the Bank's capital base and to strengthen its balance sheet, which would assist
the Bank in dealing with contingencies or financing business opportunities (which may
either be organic or inorganic), or both, which may arise pursuant to the economic events
driven by the outbreak of COVID-19 (which has been declared a pandemic by the World Health
Organization), or otherwise. On 30th May 2020, your Bank allotted 6,50,00,000
equity shares of face value of Rs 5 each at an issue price of Rs 1,145 per equity share
thereby raising Rs 74,42,50,00,000.
OPERATIONS
We organize our principal banking business activities into the following business
units: consumer banking, commercial banking, corporate banking, treasury, and other
financial services. The consumer, commercial and corporate banking businesses correspond
to the key customer segments of our Bank. The treasury offers specialized products and
services to these customer segments and also undertakes asset liability management as well
as proprietary trading for the Bank.
In addition to our banking activities, our Group offers a significant array of other
financial products and services as well, which we operate through our subsidiaries. These
products and services include banking, financing through NBFCs, asset management,
insurance, broking, investment banking, wealth management and asset reconstruction.
Consumer Banking
The Consumer Bank services a customer base in excess of 19 million customers covering a
wide spectrum across domestic individuals and households, non-residents, small and medium
business segments for a range of products from basic savings & current accounts to
term deposits, credit cards, unsecured and secured loans, working capital and investment
advisory.
Your Bank continued its strategy of calibrated expansion of its branch network. As of
31st March, 2020, your Bank had 1,600 branches and 2,637 ATMs, covering 779
locations. Of the 100 new branches commissioned this year, 50 were in metro, 18 were in
urban, 3 semi urban & 29 rural branches. Aided partly by 811, your Bank saw fast-paced
customer acquisition across all core banking products including savings and current
accounts, term deposits, overdrafts and non-resident accounts. Your Bank has also set up
82 e-lobbies, and relocated 20 branches across metro and semi urban locations to give
easier access and higher convenience to its customers.
Your Bank rolled out several initiatives aimed at offering a superior and
differentiated customer experience. Your Bank's investment in the phone based remote
engagement through VRM (Virtual Relationship Model) yielded good results and your Bank has
expanded this model to now serve over 0.8 million customers (across 10 languages) and
provide them services across banking, deposit, lending and investment needs.
Your Bank has continued to take significant steps in the area of digital initiatives.
Your Bank continued to ramp up 811 acquisition numbers this year. Your Bank also
increased its focus on cross selling to these customers using newer digital channel like
Whatsapp & Web Notifications, while also driving Digital channel adoption &
transactions to better engage with existing 811 customers.
Additionally, after the new regulations on Aadhaar-based account opening in October
2019, your Bank has quickly enabled its officers to acquire new customers using
Aadhaar-based biometric acquisition. Now on a monthly basis, 30% of the customers (non
811) are acquired digitally using Biometric authentication.
In order to ensure that banking relationships are also at the start of asset
relationships, your Bank has implemented a biometric process to open accounts for consumer
durable finance customers.
The National Pension System (NPS) has started offering Your Bank's customers with
online and paperless journey with e-signature for account opening. We have integrated with
the NSDL website for this seamless journey.
Your Bank has also successfully enabled Applications Supported by Blocked Amount (ASBA)
Application through United Payments Interface (UPI) mode both as an Issuer Bank and as a
Sponsor Bank, thereby reducing the physical movement of Broker ASBA Applications.
Your Bank is taking aggressive steps to grow its presence in several large customer
segments:
Your Bank's exclusive women-oriented Silk program entered into an alliances with
Sheroes (a women-only social networking platform with over 14 million users) to extend
banking services to their customer base. Your Bank holds live chats for the Sheroes
fraternity where women from various walks of life can ask questions and clarify their
financial concerns.
Your Bank, in the last quarter of Financial Year 2020, launched an exclusive Salary
Account offering for PSU and Government bodies. This offering comes with exclusive
features like Permanent & Partial Disability Cover and Education benefit. With this
offering, your Bank intends to foray into this large salaried segment to increase its mark
on salary business.
For its premium Salary offering, your Bank tied up with vHealth by Aetna (Indian Health
Organization) and offered Family Health Care Benefits, like free Health Check-up,
unlimited Tele-consultation with doctors and discounts on various Health care benefits.
In line with your Bank's overall strategy, the Non-Resident Indian Business has focused
on enhancing customer experience through use of technology, across our banking products
and platforms. As part of this endeavour, your Bank has gone live with 5 partners on
Ripple, a distributed ledger based payment network facilitating seamless cross-border
transactions. Additionally, your Bank on-boarded 11 new MSB (Money-transfer Service
Business) relationships in the Financial Year 2019-20 to increase coverage across US, UK,
Europe and Middle East.
Your Bank integrated its services with the Ministry of Corporate Affairs (MCA) and has
enabled customers coming to MCA portal for registration of their companies to select and
open a Current Account with the Bank, online from the MCA portal.
In the Retail Institutional Business, your Bank introduced a collection solution-based
UPI & Quick Response (QR) code, so as to digitise payments for traditionally
cash-based segments like religious institutions. This solution solves collection-related
requirement of clients and shall help your Bank to acquire new customers in this segment.
Your Bank has actively taken part in various Financial Inclusion initiatives. Your Bank
has partnered with multiple Corporate Business Correspondents, and operates with more than
300 customer service points across Chhattisgarh, Karnataka, Tamil Nadu, Andhra Pradesh
& Telangana, offering banking services and Mahatma Gandhi National Rural Employment
Guarantee Act (MGNREGA) payments to Beneficiaries. To enhance its reach and to build
customer convenience, your Bank has successfully set up 145 Aadhaar Enrolment Centres in
its branch premises and surpassed the transaction volume mandated by Unique Identification
Authority of India (UIDAI). As a result of these efforts, your Bank has been recognized by
UIDAI as the Best Performing Private Bank for conducting highest average daily
transactions. Your Bank has been awarded, twice, by the Pension Fund Regulatory Authority
of India (PFRDA) as the Best Performing Private Sector Bank for highest persistency of
Atal Pension Yojana (APY) subscribers.
Commercial Banking
Your Bank's Commercial Banking business focuses on meeting the banking and financial
needs of various customer segments with deeper coverage that goes beyond metro and urban
centers, through an expanding network of branches and associates. The business has
specialized units which offer financial solutions in the areas of Commercial Vehicles,
Construction Equipment, Tractor and Agriculture business. It services the priority sector
by providing finance for Tractor, Crop loans, Small Enterprises and Allied agricultural
activities, thereby helping your Bank meet its financial inclusion goal. In line with
growing rural incomes, our Bank's Commercial Bank branches have experienced robust growth
across product lines on savings as well as lending side.
The Tractor Finance businesses reported significant growth and gained market share,
while the Commercial Vehicle (CV) and Construction Equipment Business witnessed a sharp
drop in disbursements due to excess load carrying norms, proposed change to BS-VI norms
& a reduction in infrastructure spending by the Government. Asset quality also
deteriorated.
Your Bank's Agriculture Financing business continued its focus on the agriculture value
chain funding for various agro processing activities. It has registered good growth
despite volatility and uncertainty in the commodities market. A Good monsoon and
expectations of a bumper Rabi output supported the robust growth. Microfinance
Institutions (MFI) segment growth remains robust and asset quality remains good.
Branches in semi-urban and rural areas come under the umbrella of the Commercial Bank.
This network plays a crucial role in meeting your Bank's financial inclusion goals and the
credit demand of 'Bharat'. The Commercial Bank's Branch network has expanded and the
Liabilities book has grown at a healthy pace.
Corporate Banking
Your Bank's Corporate Banking business caters to a wide range of corporate customer
segments including major Indian corporates, conglomerates, financial institutions, public
sector undertakings, multinational companies, small and medium enterprises and realty
businesses.
This business offers a comprehensive portfolio of products and services to these
customers including working capital finance, medium term finance, trade finance, foreign
exchange services, other transaction banking services, custody services, debt capital
markets and treasury services. The core focus of this business has been to acquire deepen
existing relationships and acquire new quality customers on a consistent basis, delivering
customized solutions through efficient technology platforms backed by high quality
service. Your Bank also aims to secure value addition through the cross-selling of varied
products and services.
Corporate Banking was subjected to a number of headwinds through the year including
from a slowdown in the economy that was particularly visible in certain key segments such
as auto & auto-ancillaries, telecom and real estate. Your Bank has a higher proportion
of working capital and short term assets and these were impacted due to the slowdown. The
slowdown was compounded by elevated risks in the industry due to high leverage across
sectors. In the face of this uncertainty, your Bank was cautious in increasing its
exposures and concentration risks. The result has been a muted growth in Assets for the
year.
Your Bank has continued to focus on maintaining the health and profitability of the
business. There is far more focus on ensuring right risk- return metrics and this has led
to continued improvement in Asset spreads during the year. There has also been greater
focus on increasing the liability side of our business and other non-risk income streams.
Improved customer service and product innovations have helped us increase cross-sell and
wallet share in non-credit businesses. Corporate deposits including Current Account and
Savings Account (CASA) grew strongly, further reducing our cost of funds and improving our
spreads. Income from other non-credit income streams including from Forex, Cash Management
and other Transaction Banking products has also grown at a healthy rate. We have also
focused on converting opportunities for syndication of loans. This year, we ramped up our
income from debt syndication significantly including from high yield opportunities.
Robust risk management practices are in place and your Bank has achieved growth over
the years without compromising the health of the book. This year too, despite increased
stress in the industry, your Bank has been able to navigate the credit challenges without
significantly increasing credit costs. Non Performing Assets (NPAs) have been reasonably
controlled though recoveries were muted given the slowdown in the economy.
Across corporate segments, your Bank has been proactive in rebalancing its portfolios
to reflect economic situations and reducing exposure to situations with heightened risk.
Your Bank's focus on risk management has helped the business reduce its Risk Weighted
Assets (RWA) as a percentage of assets over the past few years. The use of Risk Adjusted
Return on Capital (RaRoC) pricing models has become ingrained in the way the Corporate
Banking division conducts its business and has helped to optimize pricing, better utilize
capital and improve return on equity. Economic Value Add (EVA) measurement tools have been
implemented that help your Bank monitor the true risk adjusted value being derived from
each client. These initiatives ensure greater focus on improving income mix in favour of
non-capital intensive income streams.
Improved credit spreads, higher non-credit income streams and controlled credit costs
have ensured that your Bank has been able to grow the profitability of the Corporate
Banking business at a strong rate and maintain a healthy Return on Equity (RoE).
Your Bank continues to focus on strengthening its organization platform that positions
the Corporate Bank in a strong position to capture opportunities in the market.
Your Bank has an integrated Corporate and Investment Banking (CIB) approach towards
certain top conglomerates and large corporates. The CIB model has ramped up well and your
Bank was awarded the 'Best Corporate & Investment Bank in India' by Asiamoney for the
calendar year 2019, an award that the Bank has won for the third time in the last four
years as a testimony to its capabilities.
The Custody business continues to grow both in terms of Assets under Custody (AUC) as
well as new clients added during the year. Your bank continues to be one of India's
largest local Custodians despite the volatility in listed markets in the last 6-12 months.
We on-boarded a number of marquee Foreign Portfolio Investment (FPIs), Alternative
Investment Fund (AIFs) and Portfolio Management Services (PMS) Clients during the year who
started using our Custody, Clearing and Fund Accounting solutions. Your Bank also
implemented a new Fund Accounting software during the year with minimal disruption to
clients and we expect this to be a good driver of new business as we go forward.
Your Bank's dedicated Service Solutions vertical has helped ensure faster customer
response and improve customer experience. This vertical is the single point of contact for
all service related and documentation issues with personnel present across the country.
While your Bank has been successful in significantly reducing Turn-Around-Time across
various processes, it has also smoothly transitioned into its Business Continuity Planning
(BCP) processes in the Covid-19 scenario and ensured business continuity. Additionally, to
address challenges in this Covid-19 climate, the Bank has accelerated a number of its
digital initiatives on e-signatures and e-stamping to enhance customer options and is
focused on gradually moving the entire customer lifecycle to the electronic platform.
Your Bank continues to target productivity and efficiency improvements. There is
greater focus on measuring and improving employee productivity including of its sales
force through use of technology and digital tools. Given high focus in this area, costs
have been kept well in control further improving profitability of the business.
Your Bank continues on its Digital journey to provide the best in class solutions and
enhance its customers' experiences. During the year, we have updated our Core Trade
Platform which has laid the foundation for an integrated trade portal, have built a
comprehensive Quickcheck platform to automate all types of recurring payments through
error-free real time mandate registration, have built an Application Program Interface
(API) based instant and end to end automated e-collections solution, have implemented the
United Payments Interface (UPI) 2.0 recurring mandate solution and have partnered with
FinTechs to provide API and Digital payment solutions. During this digital journey, your
Bank has become the leading bank in Bharat Bill Payments System (BBPS), has built the Best
in class Corporate Mobility Portal for providing on the go approvals and has been
recognized as the Best Cash Management Bank by Asia Money and The Asian Banker. As part of
our digital journey, we are also upgrading our Cash Management Services (CMS) platform to
enhance efficiency and experience, focusing on API based solutions and its use across our
partners and customers and building a Loan Management and an Escrow Management solution to
digitize the entire transaction process including the documentation process. Furthermore,
we have also provided Best in Class Structured solutions to various state and central
governments, including our all in one and modular electronic fund flow application for
National Health Mission, Rajasthan.
Wealth Management
Wealth Management, your Bank's private banking arm, caters to a number of distinguished
Indian families and is one of the oldest and the most respected Indian wealth management
firms, managing wealth for 50% of India's top 100 families (Source: Forbes India Rich List
2019), with customers range from entrepreneurs to business families and professionals.
Your Bank provides an open architecture proposition to its customers, offering both
proprietary and external wealth products. This business has a strong distribution
capability for private clients through distribution/referral model across equities, fixed
income & alternates across High Networth Individual (HNI) investors. In addition to
comprehensive financial solutions, the family office service provides a strategic
consolidated view on the client's overall portfolio across multiple advisors, in addition
to comprehensive financial solutions that go beyond investments. These include value added
services such as assistance with investment structuring, banking and credit, consolidated
reporting, referral for philanthropy services and concierge services. The trusteeship
services offers estate planning services helping clients with succession planning
activities through creation of private trusts. With an in-depth understanding of client
requirements and expertise across various asset classes, this business offers the widest
range of financial solutions through transaction-based investment approach. As per the
Reserve Bank of India guidelines, advisory activities that were being offered out of your
Bank are now offered out of Kotak Investment Advisors Limited, a subsidiary of your Bank
with effect from 20th April, 2019.
In addition, your Bank has also built a large Priority Banking business, assisting mass
affluent customers with products and solutions developed to meet their financial
requirements. The total relationship value across your Bank's Wealth & Priority
offerings is INR 306k crore (as of December 2019) across 4,400 families.
In 2019, Kotak Wealth Management has been consistently featured as the Best Private
Bank, India across multiple Global and Domestic Surveys. Some of the recent accolades
include:
• Best Private Bank, India by Euromoney Private Banking and Wealth Management
Survey- 2019 and 2018
• Best Private Bank, Domestic by Asian Private Banker 2018
• Best Wealth Management Firm, India by Asian Private Banker's Indian 2018 AUM
League table
• Best Performing Private Bank by The PWM Global Private Banking Awards 2018
International Business
• GIFT City Branch:
The GIFT City Branch, an International Financial Services Centre Banking Unit of your
Bank, facilitates your Bank's participation in syndication of overseas loans, lending to
clients in international markets and providing External Commercial Borrowing to eligible
Indian corporates. Your Bank also undertakes client forex and derivative transactions to
help offshore clients with management of interest rate and currency risks, in addition to
investments in offshore bonds.
• DIFC Branch:
Your Bank successfully obtained license approvals from the Dubai Financial Services
Authority [DFSA] and inaugurated its first overseas branch at Dubai International
Financial Centre [DIFC], Dubai in October, 2019. With this, the Bank complemented its
ability to advise and arrange global investment products, provide loans and accept
deposits from its overseas wealth & private banking customers that qualify under the
Professional client criteria of the DFSA.
Asset Reconstruction
The Resolutions of several large accounts got seriously impacted due to slow down in
the economy even before the Covid 19 crisis. It further exacerbated by the large
unresolved piling of cases in various judicial forums like Debt Recovery Tribunals
(DRT's), Debt Recovery Appellate Tribunal (DRAT), High Courts, including National Company
Law Tribunal (NCLT) proceedings under Insolvency and Bankruptcy Code (IBC).
Crucial recoveries expected in the month of March has been delayed because of the
lockdown due to spread of Corona Virus.
The situation looks grim at the moment. The Reserve Bank of India has offered six
months moratorium to all the standard borrowers which will give some breather to the
borrowers to handle the financial crisis.
Your Bank will however monitor the resolution impact of Covid situation very closely
and diligently, spare no efforts to resolve the stress and bad accounts with empathy and
compassion.
We expect a lot of opportunities to present in the acquisition side, of the stressed
loans which your Bank will look at very closely and if the prices offered are reasonable
and attractive, we shall be open to acquire several of them.
Treasury
Your Bank's Treasury actively contributes to your Bank by way of:
• Balance Sheet Management: The Balance Sheet Management Unit (BMU) ensures
maintenance of regulatory reserves and adequate liquidity buffers and requisite
investments. The BMU also manages Interest Rate & Liquidity risk within the overall
risk appetite of the Bank.
• Proprietary Trading: The proprietary trading desks actively trade in products
such as Fixed Income, Money Markets, Derivatives, Foreign Exchange and Equity. The Primary
Dealer Desk - a part of the proprietary Trading desk, actively participates in primary
auctions of government securities, makes market in government securities and engages in
retailing of government securities.
• Customer Transactions: The Customer-facing desks at the Treasury assist and
manage customer transactions across Foreign Exchange, Derivatives and Bullion products.
• Forex & Derivatives: Facilitating customer access to foreign currency
markets through cash & derivatives products for remittances, trade transactions and
for managing foreign exchange and interest rate risks.
• Bullion: The Bullion desk provides efficient working capital solutions to
domestic Jewellery manufacturers as per the prescribed rules of Reserve Bank of India.
Under License from the Reserve Bank of India, your Bank also imports gold and silver to
meet the needs of customers.
Further details of the principle business units of your Bank and their performance are
available in the Management's Discussion and Analysis
Report.
Response to Covid
The outbreak of COVID-19 has had and continues to have a material impact on the global
and Indian economy, the financial services sector and our business. We summarise below the
significant areas where we have seen an impact of COVID-19 on our business and your Bank's
approach on these areas going forward:
• Operations and business continuity: Your Bank has taken a number of steps
at various levels to enable supervision and support of its employees who are working from
home. IT and HR teams of your Bank have worked to move many employee systems to
internet-first and mobile-first platforms, ensuring seamless access from home in several
areas of operations. While the focus so far had been to protect the health and ensure the
safety of employees, while ensuring minimum disruption to regular banking operations, your
Bank will continue to improve productivity monitoring as an ongoing process as 'work from
home' continues. To enhance the quality of customer interactions and to enable increased
personalization, your Bank has upgraded to a new customer relationship management tool
which has enabled the relationship teams to reach out and service clients in the current
situation, thus facilitating banking from home.
• The moratorium: Until April 30, 2020, at the account level, 26.2% by
value of borrowers of your Bank (as of March 1, 2020, i.e., the reference date for
applicability of the moratorium) had availed the moratorium prescribed by the RBI. The
accounts which benefit from the moratorium period are not classified as NPAs if the
accounts have any instalments/ interest that fall overdue during the moratorium period.
However, lenders are required to make general provisions in respect of accounts which were
in default on March 1, 2020 and the benefit of the Moratorium Period has been availed. For
fiscal year 2020, your Bank recognised a general provision for COVID-19 deferment cases
amounting to Rs 6,500 million, which is higher than the minimum levels required by the
RBI. If your Bank had not considered the standstill clause on accounts granted moratorium,
Gross Non Performing Assets (GNPA) of your Bank as of March 31, 2020 would have been
higher by approximately Rs 6,600 million. Further, on May 22, 2020, the RBI has further
permitted the extension of the moratorium period by another three months to August 31,
2020. The impact of this circular is difficult to ascertain, as your Bank may permit more
customers to avail the moratorium beyond May 31,2020, which may require your Bank to make
higher provisions and impact overall profitability and growth. Your Bank may be required
to recognise higher loan loss provisions in future periods, on account of the uncertainty
in the external environment due to COVID-19, which may adversely impact asset quality and
profitability of your Bank in future periods.
• Collections: The lockdown and social distancing measures have restrained
the ability of collections team of your Bank to go out in the field, which may impact
recovery of dues. However, your Bank is calling its customers using traditional
tele-calling setups. Further, with the focus on customer convenience, your Bank has
activated additional digital channels for payments, and are sending payment links to
customers with pre-filled data, making it convenient for the customers to make payment.
Your Bank continues to have 'awareness calls' with its customers to inform them of the
terms of the moratorium. Post the completion of the moratorium period, your Bank aims to
proactively focus on collections.
• Cost reduction measures and investments in technology: Your Bank has
implemented and is looking to implement cost reduction measures such as reduction in
employee pay and re-negotiation of branch rentals. Going forward, as working from home,
flexible hours and flexible location become commonplace, there will be a requirement to
make upfront investment in infrastructure and technology, but at the same time, there will
be an opportunity to achieve savings in rental and travel costs.
• Advances and credit policy: Your Bank has tightened credit policy across
customer segments. Some of the key elements of revised credit policy of your Bank are as
follows:
• Corporates: Your Bank is continuously reviewing exposures, disbursements,
sanctions given and not yet availed on a case-by-case basis. Further, for fresh sanctions,
your Bank expects to focus on corporates with high credit rating, low leverage, low fixed
cost and industries where the impact of COVID-19 is not likely to be as severe.
• SME customers: For many of these companies, your Bank is the sole bank
and we aim to continue to support such companies, subject to acceptable levels of risk.
Further, in terms of new SME customers, your Bank will look at customers that have no/low
leverage, low fixed cost operating models and can provide good collateral.
• Retail customers: For secured customers, your Bank may provide additional
funding to its existing customers subject to acceptable levels of risk. Further, as the
situation is evolving, your Bank is working on alternative risk models for different
products and location. For unsecured customers, your Bank plans to continue to increase
its sourcing from internal customers and customers employed by leading corporates.
Stress testing: Your Bank has carried out specific stress testing to gauge the
impact of COVID-19 in various stress scenarios. Your Bank is actively monitoring economic
developments by performing sensitivity analysis on its loan portfolio and will take
precautionary actions accordingly, such as exposure management and proactive
restructuring.
Your Bank has made a provision towards advances of Rs 650 crore at the standalone bank
level and Rs 714 crore at the group level on account of COVID-19.
In the middle of the unprecedented lockdown due to the Covid-19 situation, your Bank
helped its Corporates customers to open salary accounts for their new joinees using
Digital 811accounts. This helped new joinees across corporates to open their accounts and
get their salary credited without delays.
In order to support the country during the ongoing pandemic, your Bank has enabled
online donations to the "PM Cares fund" and State Chief Ministers' funds through
Click2Remit online remittance platform.
Human Resources
The past financial year saw the HR department of your bank implement various
initiatives to transform the HR Processes and various employee touchpoints. From making
great strides in engaging with employees, numerous health and wellness drives, to
centralizing various HR Processes for bringing in aligning employee experience, driving
more and more processes through employee and manager self-service, there have been a quiet
few measures taken to enhance the experience of employees.
Key HR Initiatives
Engagement is key for employee retention and growth. Which is why, your bank remains
heavily invested in manager-led programs and theme- based regional initiatives like
Leadership Connect/Town Hall, Webcast, Meet 5 for building manager connect and skip level
and also strengthen the platform for top down communication at the same time create
listening opportunity for voice of employees. As they say it takes 21 days to build a
habit, your bank had rolled out the plan for manager led engagement through
#21DayChallenge.
Employees are the greatest assets, and their well-being directly translates to your
Bank's well-being. Keeping this in mind, your Bank has championed Health and Wellness
drives with the initiative, #HumFitKotakHit. This initiative has been pivotal in ensuring
your Bank remains a positive and healthy workspace at all times. Various health and
wellness related initiatives were launch through online and onsite interactions.
Building diverse & inclusive culture has been a focus for your Bank over few years.
To honor the peerless efforts of the women, your Bank revisited its D&I journey by
renewing its format. Your Bank has formed the council that consists of leaders from
various segments of the Bank and Shanti Ekambaram - Group President - Consumer Bank leads
it. Council has been instrumental in launching short term and long-term plan for building
gender diverse workforce at various levels of the Bank.
Your Bank values digitization, automation and self-service for employees and managers
above all else. Especially, during times when working from outside the workspace is the
only option, your Bank continues to drive more and more employee and manager self-service
to enhance accessibility of key functions for employees and managers like push for
mobile/cloud based solutions for all employee touch points. Your Bank has also enhanced.
To increase efficiency, automation and centralisation, your Bank has transitioned HR
operations and many more processes to shared service. Your Bank has also started the
journey through Robotics process automation / Robot for HR Processes.
Talent identification and building leadership pipeline has been one of the key focus of
your Bank during the year. The talent management framework has been revamped and a
rigorous talent review process has been implemented at the senior level to ensure talent
classification and succession planning.
Your Bank focused on strengthening the capabilities in digital, machine learning,
analytics and new age technology. While focus on talent acquisition had been on frontline
roles and building capabilities for internal talent movement continued to be key agenda
for your Bank.
Learning is key for growth. Keeping this in mind at all times, your Bank has
spearheaded clearing Digital Blur, various People-Manager programs for functional and
behavioural skill building at all levels. Increased focus on e-learning for delivering
programs at various stages of employee lifecycle has been the focus of your Bank.
The end of the financial year witnessed the COVID-19 outbreak. Your Bank pulled out all
the stops and bulked up preparedness for the BCP by rolling out plans for moving teams to
work from home, ensuring essential staff and essential services operational in branch and
back offices, creating awareness, communicating DOs and DON'Ts to the employees.
Technology & Digitization
Digital strategy of your Bank focuses on (i) acquiring customers, (ii) enhancing
customer experience, (iii) making internal business operations more efficient, and (iv)
enhancing cyber security and data protection framework. The strategy is supported by core
pillars which include ease of use, scalability, cost effectiveness and increased agility.
Your Bank has effectively leveraged technology this year to deliver enhanced customer
experience, business efficiency, business collaborations and cybersecurity.
Our mobile banking app continues to be one of the highest, both on iOS (Apple Appstore)
apps (rating of 4.8 / 5) and Android (4.3 / 5). Your Bank has made a number of
improvements to the customer experience of the app, making it more user friendly. We have
added new sections including Billpay, Loan & Insurance, as well as new features like
Forex cards, Premature withdrawal of Fixed Deposit, Payday loan, Fastag, Insurance, Ola,
UPI 2.0, Image credit card etc. Your Bank also launched innovative features like 'SIRI'
and "Google Assistant" option for fetching account balance using voice commands.
Your Bank scaled newer channels including the Keya Chatbot and WhatsApp Banking to
start making business impact and become mainstream digital channels by handling more
products and services.
Keya Chatbot uses a conversational banking approach and Natural Language Processing
(NLP) to interact with customers and is enabled on all digital channels, viz. Mobile App,
website (www.kotak.com) and Net Banking. Keya Chatbot is able to handle queries about a
variety of products like Credit Card, Debit Card, Accounts, Fund Transfer, Bill Payment,
NPS, Fixed Deposits, Home Loan and Personal Loan. It handles customer requests such as
online tracking of packages, switching cards on and off, and paying credit card bills, and
also allows customer to explore and apply for new products such as credit card, personal
loan, debit card.
WhatsApp has become an important channel for your Bank to communicate with customers on
matters like welcome kits. Your Bank is building more such journeys for customers to
receive important information as well as to perform additional service requests. Your Bank
has been one of the first Indian banks to offer banking services on WhatsApp which allows
customers access banking services without installing any app or visiting any webpages.
Your Bank enhanced its Net Banking experience with features such as Deliverables
tracking using Keya Chatbot, Re-KYC update for low risk customers and option to
authenticate using Kotak Mobile Banking App instead of OTP (One Time Password) while
logging into Net Banking.
Your Bank is the first Bank in the entire ecosystem to launch the new National Payments
Corporation of India (NPCI) eMandate API method as part of the Electronic National
Automated Clearing House (eNACH) product as both a Destination Bank as well as a Sponsor
Bank. This allows for both consumers and corporates associated with Kotak to have a
seamless experience in creating and approving recurring payment collection requests via
the NPCI eMandate platform.
Your Bank is also the leading Bank on the Bharat Bill Payment System to acquire Billers
onto the platform as a Biller Operating Unit. On the digital consumer payments, your Bank
continues to serve customers with seamless in-channel payment experiences via Fund
Transfers and Bill Payments/Recharges which are the primary transacting channels for most
Bank consumers.
Your Bank introduced new digital payment methods including UPI 2.0, allowing customers
to create one-time mandates and apply for IPOs via the new UPI product enhancement from
NPCI.
Within KayMall (In-app commerce platform), your Bank is one of the first Banks to
launch a direct integration with OLA Cabs allowing Bank customers to seamlessly book
travel via Cabs in addition to Trains, Flights and Buses.
For the third consecutive year, your Bank has overachieved targets set by Ministry of
Electronics & Information Technology (MeitY) for FY 201920 on Digital Payments
transactions, with approximately 107% of target achievement.
Your Bank has also started collaboration with large external digital platforms to
develop a new channel for instant loan disbursals for its existing customers. One such
collaboration has been done with Google i.e Google Pay, where customers can avail
pre-approved Personal loans by using the Google Pay platform. These loans are instantly
credited to customers' Kotak Bank accounts.
In order to serve salaried customer segment of the Bank, your Bank launched a new
product: "Kotak PayDay Loans", which offer short-term, single instalment loans
to customers. Customers can avail loans instantly during the month by using digital
channels. Repayment of the loan is basis the date on which customers receive their salary.
Your Bank suspended biometric-based savings account opening following the APEX court
ruling last year. However, after revision of UIDAI guidelines for biometric savings
account in August 2019, your Bank reintroduced biometric-based account opening for Savings
and Corporate Salary accounts.
Revised Prevention of Money Laundering Act (PMLA) guidelines required your Bank to
change its account opening journey in November 2019. Besides the branch and sales
channels, other sales units of the bank like the Group Relation (GR) team, Consumer
Durable group, Housing Loan and Personal Loan users were enabled for this mode of
sourcing. Your Bank plans to introduce self on-boarding for corporate salary customers
soon.
Your Bank relaunched a number of its digital initiatives this year, basis the revised
guidelines on Aadhaar. Project Velocity, which aimed at servicing through biometric means,
was a hit with customers and branches with a high Net Promoter Score (NPS) of 86+ till
March. It was awarded at the CII DX Summit & Awards for Best Practice in Customer
Experience. In addition, your Bank has enabled debit card, cheque book, PINS tracking on
Keya chatbot with a massive 4 lakh requests monthly average. Robotics Process Automation
has helped process 4 lakh+ service requests in FY 2019-20.
Your Bank's Kotak Innovation Lab based out of Bangalore has been awarded Best
Innovation Centre by The Asian Banker.
Your Bank's Open Banking platform has enabled 100+ partnership across different lending
and payments product since its incubation. The Kotak Mahindra API Store has been declared
as a RUNNER-UP in Infosys Finacle Client Innovation Awards for 2019.
Apart from above, your Bank's technology direction has been formulated to address six
areas of strategic importance viz. Platform Building, Modernization and Refresh of Legacy,
Analytics and Reporting, Cyber Security & Regulatory, Technology Operations Automation
and Adoption of Emerging Technologies.
Your Bank has initiated specific initiatives in each of the areas to ensure that
productivity, efficiency and customer experience improve significantly and in an ongoing
manner. Your Bank has invested in leveraging Cloud, DevOps, Big Data, Face Recognition
etc., and in modernizing its Core Banking, Credit Card Platform, Retail Assets and
Treasury systems.
Cyber Security and Fraud Detection is a continuous evolving space. Your Bank invests
significantly in technologies to be at the forefront to prevent, detect and act in
situations arising from it.
SUBSIDIARIES & ASSOCIATES
As at 31st March, 2020, your Bank has nineteen (19) subsidiaries as listed
below:
Domestic Subsidiaries
Kotak Mahindra Prime Limited
Kotak Mahindra Investments Limited
Kotak Securities Limited
Kotak Mahindra Capital Company Limited
Kotak Mahindra Life Insurance Company Limited
Kotak Mahindra General Insurance Company Limited
Kotak Mahindra Asset Management Company Limited
Kotak Mahindra Trustee Company Limited
Kotak Mahindra Pension Fund Limited
Kotak Investment Advisors Limited
Kotak Mahindra Trusteeship Services Limited
Kotak Infrastructure Debt Fund Limited
IVY Product Intermediaries Limited
BSS Microfinance Limited
International Subsidiaries
Kotak Mahindra (UK) Limited
Kotak Mahindra (International) Limited
Kotak Mahindra Inc.
Kotak Mahindra Financial Services Limited
Kotak Mahindra Asset Management (Singapore) Pte. Limited
The key business segments where the subsidiaries operate include investment banking,
stock broking, vehicle finance, advisory services, asset management, life insurance and
general insurance.
Kotak Mahindra Life Insurance Company Limited (KLI) has recorded a growth of 28.4% on
the gross written premium, mainly coming from Individual renewal premium and Group
business. KLI has solvency ratio of 2.90 against a regulatory requirement of 1.50.
In FY 2020, the Indian Equity Capital Markets witnessed a revival in primary market
activity from the previous fiscal year. The uptick in activity in the market during FY
2020 could largely be attributed to a number of factors, including deals in the stressed
asset situations, increasing investment activity by financial investors including private
equity. Accordingly, Kotak Securities Limited and Kotak Mahindra Capital Company Limited
reported higher profits compared to previous year.
The growth in the mutual funds industry continued during the year. The industry
registered a growth of 10.4% YOY in Q4FY20 over Q4FY19 with the Quarterly Average Assets
under Management (QAAUM) for Q4FY20 at Rs 27.0 lakh crore. During the same period, on the
basis of percentage growth in QAAUM, Kotak Mahindra Asset Management Company Limited
(KMAMC) was amongst the fourth fastest growing Mutual Fund House. KMAMC is now the 6th
largest Fund House in the country in terms of QAAUM as on 31st March, 2020 and
its market Share in QAAUM has grown to 6.9% in Q4FY20 from 6.1% in Q4FY19 and 5.0%, 3
years back.
The key regulatory changes for Asset Management Company (AMC) business during the year
was the rationalization of the scheme Total Expense Ratio's (TER's). Also with effect from
October 2018, all scheme related expenses had to be paid from schemes and not from AMC,
which was to be factored in pricing of direct plans. Further, no upfront commissions could
be paid.
The passenger car market in India degrew by 17.4% for FY 2020 compared to 2.8% growth
in FY 2019. Further, due to the change in regulations, there was a decrease in the loan
book of our NBFC subsidiaries. In accordance with RBI guidelines, Kotak Mahindra Prime
Limited and Kotak Mahindra Investments Limited made a general provision of Rs 50 crore and
Rs 14 crore respectively, relating to COVID-19 in FY2020. The above factors have impacted
the profits of these companies.
The Bank and most of its subsidiaries have elected to exercise the option permitted
under section 115BAA of the Income-tax Act, 1961 introduced by the Taxation Laws
(Amendment) Act, 2019, during the fiscal year 2020, resulting in lower tax expense during
FY 2020.
The Group has reduced its stake in ECA Trading Services Limited, an Associate company,
from 40% to 20% on 18th March, 2020.
The various activities of the subsidiaries and the performance and financial position
of the subsidiaries and associates are outlined in the Management Discussion and Analysis
section appended to this Report.
The Bank's Policy for determining material subsidiaries is available on the Bank's
website viz. URL: https://www.kotak.com/en/investor-relations/ governance/policies.html in
line with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
KLI is a material subsidiary of the Bank.
As at 31st March, 2020, your Bank has the following three (3) Associate
companies:
Infina Finance Private Limited
Phoenix ARC Private Limited
ECA Trading Services Limited
(previously known as ACE Derivatives & Commodity Exchange Limited
The Annual Report consists of the financial statements of your Bank on standalone basis
as well as consolidated financial statements of the group for the year ended 31st
March, 2020, Report of Board of Directors, Auditor's report or other documents required to
be attached therewith. The financial statements of the subsidiaries used for consolidation
of the Bank's consolidated financial results are special purpose financial statements
prepared in accordance with Generally Accepted Accounting Principles in India ('GAAP')
specified under Section 133 of the Companies Act, 2013 read with relevant notifications.
In accordance with, the General Circular No. 20/2020 dated 5th May, 2020 issued
by Ministry of Corporate Affairs (MCA) and Circular No. SEBI/HO/CFD/ CMD1/CIR/P/2020/79
dated 12th May, 2020 issued by the Securities and Exchange Board of India
(SEBI) in view of the prevailing situation, owing to the difficulties involved in
dispatching of physical copies of the Annual Report and the Notice convening the Annual
General Meeting (AGM), the weblink of the same is being sent in electronic mode only to
Members whose e-mail address is registered with the Bank or the Depository Participant(s).
Those Members, whose email address is not registered with the Bank or with their
respective Depository Participant(s), and who wish to receive the Notice of the AGM and
the Annual Report for the year ended 31st March 2020, can get their email
address registered by following the steps as detailed in the Notice convening the AGM. The
full Annual Report (including the Annual Reports of all the subsidiaries) will be
available on your Bank's website viz. URL: https://
www.kotak.com/en/investor-relations/financial-results/annual-reports.html.
EMPLOYEE STOCK OPTION & STOCK APPRECIATION RIGHTS SCHEMES
The stock options and the stock appreciation rights granted to the employees of the
Bank and its subsidiaries currently operate under the following Schemes:
• Kotak Mahindra Equity Option Scheme 2015
• Kotak Mahindra Stock Appreciation Rights Scheme 2015
The disclosures requirements under the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014, for the aforesaid ESOP & SARs Schemes, in
respect of the year ended 31st March, 2020, are disclosed on the Bank's website
viz. URL: https://
www.kotak.com/en/investor-relations/financial-results/annual-reports.html
PROMOTER STAKE DILUTION MATTER
In August 2018, your Bank completed an issuance of Perpetual Non-Convertible Preference
Shares (PNCPS) resulting in dilution of promoter stake to 19.70% of the paid-up capital of
the Bank. However, the Reserve Bank of India (RBI) communicated to the Bank that the PNCPS
issuance did not meet their promoter dilution requirement. The Bank filed a writ petition
before the Hon'ble Bombay High Court to validate its position.
In January 2020, basis a proposal submitted by the Bank, and accepted by the RBI, the
RBI conveyed its in-principle approval of the following revised terms in relation to the
dilution of promoter shareholding:
1. Promoters' voting rights in the Bank to be capped to 20% of paid-up voting equity
share capital (PUVESC) until March 31, 2020.
2. Promoters' voting rights in the Bank to be capped to 15% of PUVESC from April 1,
2020.
3. Promoters' shareholding in the Bank to be reduced to 26% of PUVESC of the Bank
within 6 months from the date of final approval of
RBI.
4. Promoters will not thereafter purchase any further paid up voting equity shares of
the Bank till the percentage of promoters' shareholding reaches 15% of PUVESC of the Bank
or such higher percentage as may be permitted by RBI from time to time.
5. Promoters' will be entitled to purchase paid up voting equity shares of the Bank up
to 15% of the PUVESC of the Bank or such higher percentage as may be permitted in the
future and exercise voting rights on such shares.
On this basis, the writ petition filed by the Bank was withdrawn, and thereafter, on
February 18, 2020, the RBI accorded its final approval to the above. Post the Qualified
Institutions Placement in May 2020 and subsequent sale of shares by promoters in secondary
market, the shareholding of the promoters in the Bank has reduced. The requirement of 26%
of PUVESC will be achieved within the time period stipulated by the RBI.
CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT
Pursuant to Regulation 27 of the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 (SEBI LODR Regulations), a separate section entitled 'Report on
Corporate Governance' has been included in this Annual Report. The Report of Corporate
Governance also contains certain disclosures required under the Companies Act, 2013,
including the details of the board meetings held during the year ended 31st
March 2020. A Business Responsibility Report containing the requisite details under
Regulation 34 of the SEBI LODR Regulations is disclosed on the Bank's website viz. URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html
DIRECTORS & KEY MANAGERIAL PERSONNEL
Directors retiring by rotation
Mr. Dipak Gupta (DIN 00004771) retires by rotation at the Thirty Fifth Annual General
Meeting (AGM) of the Bank and is eligible for reappointment, subject to approval of the
Reserve Bank of India.
Appointment/Re-appointment of Directors
The Board of Directors of the Bank had recommended appointment of Mr. K.VS. Manian (DIN
00031794) & Mr. Gaurang Shah (DIN 00016660) as Whole-time Directors of the Bank for a
period of three years with effect from the date of approval of the Reserve Bank of India
and subject to necessary approval from the shareholders. Subsequently, the shareholders at
the Annual General Meeting held on 22nd July 2019 had also approved the same.
Further, Reserve Bank of India has granted its approval for appointment of Mr. K.VS.
Manian and Mr. Gaurang Shah as Whole-time Directors of the Bank for a period of three
years. Accordingly, Mr. Manian and Mr. Shah took charge as Whole-time Directors of the
Bank with effect from 1st November 2019.
Further, the Board of Directors of the Bank at its meeting held on 13th May
2020, based on the recommendation of the Nomination and Remuneration Committee (NRC) and
performance evaluation, as applicable, have approved the following, subject to the
approval of the shareholders and the Reserve Bank of India:
1. Re-appointment of Mr. Uday Kotak as the Managing Director & CEO for the period
from 1st January 2021 to 31st December 2023.
2. Re-appointment of Mr. Dipak Gupta as Whole-time Director of the Bank designated as
Joint Managing Director for the period from 1st January 2021 to 31st
December 2023.
3. Re-appointment of Mr. Prakash Apte as the part-time Chairman of the Bank for the
period from 1st January 2021 to 31st December 2023.
The approval of the shareholders in this regard is being sought at the ensuing AGM of
the Bank. The details of the Directors being re-appointed are set out in the Notice of the
ensuing AGM of the Bank.
Declaration from Independent Directors
The Board has received declarations from the Independent Directors as per the
requirement of Section 149(7) of the Companies Act, 2013 and the Board is satisfied that
the Independent Directors meet the criteria of independence and fulfil the conditions as
mentioned in Section 149(6) of the Companies Act, 2013 and are independent of the
management. All the Independent Directors of the Bank have complied with the provisions of
sub rule (1) and (2) of rule 6 of the Companies (Appointment and Qualification of
Directors) Rules, 2014.
Board Evaluation
The Nomination and Remuneration Committee (NRC) of the Bank's Board has formulated the
criteria for performance evaluation of the Directors and the Board as a whole which
broadly covers the Board role, Board/Committee membership, practice & procedure and
collaboration & style. The performance of the Committees of the Board is evaluated on
the criteria viz. composition & quality, process & procedure and the terms of
reference.
The NRC of the Bank's Board engaged an external professional services firm to
facilitate the self-evaluation process of the Board, its committees, Chairman and
individual directors.
A Board effectiveness assessment questionnaire designed for the performance evaluation
of the Board, its Committees, Chairman and individual directors (including Independent
directors) in accordance with the criteria set and covering various aspects of performance
including structure of the board, meetings of the board, functions of the board, role and
responsibilities of the board, governance and compliance, evaluation of risks, grievance
redressal for investors, conflict of interest, stakeholder value and responsibility,
relationship among directors, director competency, board procedures, processes,
functioning and effectiveness was circulated to all the directors of the Bank for the
annual performance evaluation.
Based on the assessment of the responses received to the questionnaire from the
directors on the annual evaluation of the Board, its Committees, the Chairman and the
individual directors, the Board Evaluation Report was placed before the meeting of the
Independent Directors for consideration. Similarly, the Board at its meeting assessed the
performance of the Independent Directors. The Directors noted that the results of the
performance evaluation of the Board & its Committees, Chairman and individual
directors indicated a high degree of satisfaction amongst the directors. Some of the
suggestions this year for improving the performance of the Board & Committees were
mapping of potential impact of changes in macroeconomic factors, product development with
customer centric lens and improvement in area of customer service.
Key Managerial Personnel (KMPs)
The following officials of the Bank are the "Key Managerial Personnel"
pursuant to the provisions of Section 203 of the Companies Act, 2013:
• Mr. Uday Kotak, Managing Director & CEO
• Mr. Dipak Gupta, Joint Managing Director
• Mr. K.VS. Manian, Whole-time Director (with effect from 1st November
2020)
• Mr. Gaurang Shah , Whole-time Director (with effect from 1st November
2020)
• Mr. Jaimin Bhatt, President & Group Chief Financial Officer
• Ms. Bina Chandarana, Company Secretary
Appointment & Remuneration of Directors & KMPs
The appointment and remuneration of Directors of the Bank is governed by the provisions
of Section 35B of the Banking Regulation Act, 1949. The Nomination & Remuneration
Committee (NRC) of the Bank's Board has formulated criteria for appointment of Senior
Management personnel and the Directors. Based on the criteria set it recommends to the
Board the appointment of Directors and Senior Management personnel.
The NRC reviews the range of skills, experience and expertise on the Board and identify
its needs. After a detailed search, a master list of candidates is prepared. The NRC then
shortlists the candidates from the master list based on the selection criteria viz.
qualifications, knowledge, experience, skills, expertise, fit & proper status,
positive attributes as per the suitability of the role, independent status and various
regulatory/ statutory requirements as may be required of the candidate. After detailed
discussions and deliberations NRC recommends the candidate to the Board.
The Reserve Bank of India ('RBI') vide its circular no.DBOD.No.BC.72/29.67.001/2011-12
dated 13th January 2012 has issued the Guidelines on Compensation of Whole Time
Directors / Chief Executive Officers / Other Risk Takers of Private Sector Banks on
Compensation Policy which inter alia cover the following:
• Proper balance between fixed pay and variable pay;
• Variable pay not to exceed 70% (Seventy Per Cent) of the fixed pay in a year;
In accordance with the aforesaid RBI Circular, the Board of the Bank has adopted a
Compensation Policy for its Whole-time Directors, Chief Executive Officer of the Bank and
other employees which includes issue of stock appreciation rights as a form of variable
pay, linked to the Bank's stock price, payable over a period of time. The salient features
of the Compensation Policy are as follows: •
• Objective is to maintain fair, consistent and equitable compensation practices
in alignment with Kotak's core values and strategic business goals.
• Applicable to all employees of the Bank. Employees classified into 3 groups: o
Whole-time Directors/Chief Executive Officer
• Risk Control and Compliance Staff
• Other categories of Staff
• Compensation structure broadly divided into Fixed, Variable and ESOPs
• Fixed Pay - Total cost to the Company i.e. Salary, Retirals and Other Benefits
• Variable Pay - Linked to assessment of performance and potential based on
Balanced Key Result Areas (KRAs), Standards of Performance and achievement of targets with
overall linkage to Bank budgets and business objectives. The main form of incentive
compensation includes
- Cash, Deferred Cash/Incentive Plan and Stock Appreciation Rights.
• ESOPs - Granted on a discretionary basis to employee based on their performance
and potential with the objective of retaining the employee.
• Compensation Composition - The ratio of Variable Pay to Fixed Pay and the ratio
of Cash v/s Non Cash within Variable pay outlined for each category of employee
classification.
• Any variation in the Policy to be with approval of the Nomination &
Remuneration Committee.
• Malus and Clawback clauses applicable on Deferred Variable Pay.
• Ensuring no personal hedging strategies by employees which undermine risk
alignment effects as part of their remuneration.
The details of the remuneration paid to the Non-Executive Chairman, Executive and
Non-Executive Directors of the Bank for the year ended 31st March, 2020 is
provided in the Corporate Governance Report annexed to this Report.
The Non-Executive Chairman of the Bank receives a fixed amount of remuneration as
recommended by the Board and approved by the shareholders of the Bank and RBI, from time
to time. He also receives remuneration by way of sitting fees for attending meetings of
the Board or Committees thereof.
RBI vide its circular no. DBR.No.BC.97/29.67.001/2014-15 dated June 1, 2015 has issued
guidelines on payment of compensation to the Non-Executive Directors (NEDs) of private
sector banks which inter-alia specifies the following:
• The Board of Directors of the Bank (in consultation with the NRC) needs to
formulate and adopt a comprehensive compensation policy for NEDs (other than part-time
non-executive Chairman).
• Maximum amount of profit related commission not to exceed Rs 10 lakh per annum
for each director of the Bank.
Accordingly, in line with the aforesaid RBI circular and pursuant to the relevant
provisions of the Companies Act, 2013, the Board of the Bank has adopted a compensation
policy for the NEDs (excluding the part-time Non-Executive Chairman). The salient features
of the Compensation Policy are as follows:
• Compensation structure broadly divided into:
• Sitting fees
• Re-imbursement of expenses
• Commission (profit based)
• Amount of sitting fees and commission to be decided by the Board from time to
time, subject to the regulatory limits.
• Overall cap on commission for each director Rs 10 lakh per annum.
• NEDs not eligible for any stock options of the Bank.
Remuneration paid to the KMPs is in line with the Compensation Policy of the Bank which
is based on the RBI Guidelines.
Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014
1. Ratio of the remuneration of each director to the median remuneration of the
employees for the financial year:
| Directors |
Title |
Ratio |
| Mr. Prakash Apte |
Non-Executive Chairman |
4.02x |
| Mr. Uday Kotak |
Managing Director & CEO |
42.68x |
| Mr. Dipak Gupta |
Joint Managing Director |
42.53x |
| Mr. K.V.S. Manian* |
Whole-time Director |
44.63x |
| Mr. Gaurang Shah* |
Whole-time Director |
44.79x |
* Refer Note 3
2. Percentage increase in remuneration of each director, Chief Financial Officer, Chief
Executive Officer, Company Secretary or Manager, if any, in the financial year:
| Directors/KMP |
Title |
% increase in remuneration |
% increase in remuneration excluding SARs |
| Mr. Prakash Apte |
Non-Executive Chairman |
- |
- |
| Mr. Uday Kotak# |
Managing Director & CEO |
-18.26 |
-18.26 |
| Mr. Dipak Gupta# |
Joint Managing Director |
-18.31 |
-18.31 |
| Mr. K.VS. Manian* |
Whole-time Director |
5.70 |
4.85 |
| Mr. Gaurang Shah* |
Whole-time Director |
9.66 |
4.80 |
| Mr. Jaimin Bhatt |
Group CFO |
7.51 |
8.69 |
| Ms. Bina Chandarana |
Company Secretary |
6.83 |
8.80 |
* Refer Note 3
# Refer Note 5
3. Percentage increase in the median remuneration of employees in the financial year:
For employees other than managerial personnel who were in employment for the whole of
FY 2018-19 and FY 2019-20 increase in the median remuneration is 11.97%.
4. Number of permanent employees on the rolls of Bank at the end of the year: 50,034
5. Average percentile increase already made in the salaries of employees other than the
managerial personnel in the last financial year and its comparison with the percentile
increase in the managerial remuneration and justification thereof and point out if there
are any exceptional circumstances for increase in the managerial remuneration:
For employees other than managerial personnel who were in employment for the whole of
FY 2018-19 and FY 2019-20 the average increase is 11.97% and 11.70% excluding SARs.
Average increase for managerial personnel is 0.34% and -2.31% excluding SARs.
6. Affirmation that the remuneration is as per the remuneration policy of the Bank:
The Bank is in compliance with its Compensation Policy.
Notes:
1) Remuneration includes Fixed pay + Variable paid during the year + perquisite value
as calculated under the Income Tax Act, 1961. Remuneration does not include value of Stock
Options.
2) Stock Appreciation Rights (SARs) are awarded as variable pay. These are settled in
cash and are linked to the average market price/closing market price of the Bank's stock
on specified value dates. Cash paid out during the year is included for the purposes of
remuneration.
3) Pursuant to the approval of the Reserve Bank of India, Mr. Manian and Mr. Shah took
charge as Whole-time Directors of the Bank with effect from 1st November 2019.
4) The Non-Executive Directors of the Bank, other than the Non-Executive Chairman
receive remuneration in the form of sitting fees for attending the Board/ Committee
meetings and in the form of an annual profit based commission. The Non-Executive Chairman
gets sitting fees for attending meetings and gets a remuneration approved by the
shareholders and the Reserve Bank of India.
5) Remuneration for Mr. Uday Kotak and Mr. Dipak Gupta does not include variable pay
for the year ended 31st March 2019, which is pending approval of the Reserve
Bank of India.
SECRETARIAL AUDITOR
Pursuant to Section 204 of the Companies Act, 2013 ('Act'), your Bank has appointed
Parikh & Associates, Company Secretaries, as its Secretarial Auditor. The Secretarial
Audit Report for the financial year ended 31st March, 2020 as required under
Section 204 of the Act and Regulation 24A of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 is annexed to this Report. Your Bank is in compliance with
the applicable Secretarial Standards issued by The Institute of Company Secretaries of
India and approved by the Central Government under Section 118(10) of the Companies Act,
2013 for FY 2019-2020.
Kotak Mahindra Life Insurance Company Limited ('KLI'), the Bank's material unlisted
subsidiary has got its secretarial audit done and there are no reservations or adverse
remarks or disclaimers made in the Secretarial Audit Report for the financial year ended
31st March, 2020. The Secretarial Audit Report of KLI is annexed to this
Report.
ANNUAL RETURN
Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 read with
Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the Annual Return
of the Bank as on 31st March, 2020 once prepared shall be disclosed on the
Bank's website viz. URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html
An extract of the Annual Return as on 31st March, 2020 in Form MGT-9 is
annexed to this Report.
DEPOSITS
Being a banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the
Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013
are not applicable to your Bank.
AUDITORS
In terms of Section 139 of the Companies Act, 2013, Messrs Walker Chandiok & Co.
LLP, Chartered Accountants (Registration No. 001076N/ N500013), were appointed as
statutory auditors of your Bank from the conclusion of the Thirty Fourth Annual General
Meeting until the conclusion of the Thirty Sixth Annual General Meeting of the Bank,
subject to the annual approval of the Reserve Bank of India (RBI). The Bank has received
the approval of RBI for Messrs Walker Chandiok & Co. LLP, Chartered Accountants to act
as auditors for the year 2020- 2021.
INTERNAL FINANCIAL CONTROLS
The Board of Directors confirms that your Bank has laid down set of standards,
processes and structure which enables to implement internal financial controls across the
organization with reference to financial statements and that such controls are adequate
and are operating effectively. During the year under review, no material or serious
observation has been observed for inefficiency or inadequacy of such controls.
IMPLEMENTATION OF IND AS
The Ministry of Finance, Government of India has vide its press release dated 18th
January, 2016 outlined the roadmap for implementation of International Financial Reporting
Standards (IFRS) converged Indian Accounting Standards (Ind AS) for Scheduled commercial
bank (excluding RRBs), Non-banking Financial Companies and Insurance companies. Reserve
Bank of India (RBI) had advised Banks vide circular no. RBI/2015- 16/315DBR.BP.BC.
No.76/21.07.001/2015-16 to follow Ind AS from 1st April, 2018 as notified under
the Companies (Indian Accounting Standards) Rules, 2015 subject to any guideline/direction
issued in this regard. Subsequently, RBI through its first monetary policy statement for
FY 2018-19 on 5th April, 2018, deferred Ind AS implementation for the Scheduled
commercial bank (excluding RRBs) by one year i.e. the implementation of Ind AS to begin
from 1st April, 2019 onwards. Further, RBI vide circular no.
DBR.BPBC.No.29/21.07.001/2018-19 dated 22nd March 2019, deferred the
implementation of Ind AS for scheduled commercial banks till further notice. The RBI has
not issued any further notification on implementation of Ind AS for scheduled commercial
banks.
As per RBI directions, your Bank has taken following steps so far:
• Submitted Standalone Proforma Ind AS financial statements to RBI on a quarterly
basis effective FY 2018-19, as required.
• Formed Steering Committee for Ind AS implementation. The Steering Committee
comprises of representatives from Finance, Risk, Operations and Treasury. The Committee
oversees the progress of Ind AS implementation in the Bank, and provides guidance on
critical aspects of the implementation such as Ind AS technical requirements, systems and
processes, business impact, people and project management. The Committee closely review's
progress of Ind AS implementation.
• The Bank has identified gaps in IT Systems and the changes required to automate
Ind AS. The Bank is in advanced stages for Ind AS implementation.
The Bank will continue to liaise with RBI and industry bodies on various aspects
pertaining to Ind AS implementation.
RELATED PARTY TRANSACTIONS
All the Related Party Transactions that were entered into during the financial year
were on arm's length basis and were in ordinary course of business.
Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules,
2014, there are no Related Party Transactions to be reported under Section 188(1) of the
Companies Act, 2013, in form AOC-2.
All Related Party Transactions are placed before the Audit Committee for its review and
approved on a quarterly basis. An omnibus approval of the Audit Committee is obtained for
the Related Party Transactions which are repetitive in nature. Further, all Related Party
Transactions are reviewed by the statutory auditors of the Bank. Also, during the year,
the Bank had engaged the services of an external auditor for verification of the Related
Party Transactions, its disclosure and validation of the process followed by the Bank.
All Related Party Transactions as required under Accounting Standards AS-18 are
reported in Note 23 of Schedule 17 - Notes to Accounts of the Consolidated financial
statements and Note 7 of Schedule 18B - Notes to Accounts of the Standalone financial
statements of your Bank.
The Bank's Policy on dealing with Related Party Transactions is available on the Bank's
website viz. URL: https://www.kotak.com/en/investor- relations/governance/policies.html
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given,
securities provided or acquisition of securities by a banking company in the ordinary
course of its business are exempted from the disclosure requirement under Section
134(3)(g) of the Companies Act, 2013.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
Your Bank is committed to its "Vision Statement" of upholding its Global
Indian Financial Services Brand creating an ethos of trust across all constituents,
developing a culture of empowerment and a spirit of enterprise thereby becoming the most
preferred employer in the financial services sector.
Consistent with the Vision Statement, your Bank is committed to maintain and provide to
all its employees and directors highest standards of transparency, probity and
accountability. The Kotak Group endeavours to develop a culture where it is safe and
acceptable for all employees and directors to raise / voice genuine concerns in good
faith, and in a responsible as well as effective manner.
A vigil mechanism has been implemented through the adoption of Whistleblower Policy
with an objective to enable any employee or director or vendor, raise genuine concern or
report evidence of activity by the Bank or its employee or director or vendor that may
constitute: Instances of corporate fraud; unethical business conduct; a violation of
Central or State laws, rules, regulations and/or any other regulatory or judicial
directives; any unlawful act, whether criminal or civil; malpractice; serious
irregularities; impropriety, abuse or wrong doing; deliberate breaches and non-compliance
with the Bank's policies; questionable accounting/audit matters/financial malpractice. The
concerns can be reported online on the website viz. URL: https://cwiportal.com/kotak which
is managed by independent third party.
Safeguards to avoid discrimination, retaliation, or harassment, and confidentiality
have been incorporated in the policy. All employees and directors have access to the
Chairman of the Audit Committee in appropriate and exceptional circumstances. Further, the
Chairman of the Audit Committee has access rights to the whistle blower portal.
The Policy has been uploaded on the Bank's intranet as well as website viz. URL:
https://www.kotak.com/en/investor-relations/governance/ policies.html and regular
communication is made for sustained awareness.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Kotak Mahindra Bank Ltd. further referred to as your Bank, has constituted a Board
Corporate Social Responsibility Committee (CSR Committee) and consists of the following
Directors:
1) Mr. C. Jayaram
2) Prof. S. Mahendra Dev
3) Mr. Dipak Gupta
Your Bank's CSR Committee is responsible to monitor, review and approve CSR initiatives
and expenditure. It also makes recommendations to the Board on CSR Policy and related
matters. It is the CSR Committee's role to oversee the implementation of all the CSR
activities of the Bank.
The CSR approach of your Bank is charted out in its Board approved CSR policy. This
policy sets out your Bank's vision, mission, governance, and CSR focus areas to fulfill
its inclusive growth agenda in India. It also demonstrates your Bank's contribution
towards the economic, environmental and social growth of the nation and is also committed
to contribute towards United Nation's (UN) Sustainable Development Goals (SDGs). It is the
constant endeavour of the Bank to enhance its CSR capabilities by adopting a purpose
driven CSR approach, focusing on sustainable and scalable programmes, spreading in focused
geographies and aligning to SDGs and the national narrative.
The Bank's CSR Policy is available on the Bank's website:
https://www.kotak.com/en/about-us/corporate-responsibility.html
The CSR policy, interventions, programmes and the CSR expenditure are all compliant
with the CSR mandate as specified under section 134, section 135 read with schedule VII of
the Companies Act, 2013 along with the Companies (Corporate Social Responsibility Policy)
Rules, 2014 as amended from time to time and in line with the Government of India's
notifications issued from time-to-time.
The average net profit U/S 198 of the Companies Act, 2013 for Bank for the last three
financial years preceding 31st March, 2020 is Rs 6,211.52 crore.
The prescribed CSR expenditure required U/S 135 of the Act for FY 2019-20 is Rs 124.23
crore.
The CSR Expenditure incurred for the period 1st April 2019 to 31st
March 2020 U/S 135 of Companies Act, 2013 amounts to Rs 85.20 crore as against Rs 36.55
crore CSR spend in the financial year 2018-19. The unutilised CSR Expenditure from the
prescribed CSR expenditure amount U/S 135 of the Companies Act, 2013 is Rs 39.03 crore.
CSR Expenditure of Rs 85.20 crore in FY 2019-20 as a percentage of average net profit
U/S 198 of the Companies Act, 2013 for the last three financial years preceding 31st
March, 2020 at Rs 6,211.52 crore is 1.37%. Further, your Bank's CSR Expenditure at Rs
85.20 crore, in FY 2019-20, was 133% higher than the CSR expenditure of Rs 36.55 crore in
FY 2018-19, which in turn was 38.45% higher than our CSR expenditure of Rs 26.40 crore in
FY 2017-18.
To support the government's effort in combating COVID-19, your Bank has contributed Rs
25.00 crore to the Prime Minister's Citizen Assistance and Relief in Emergency Situations
Fund (PM Cares Fund), and donated Rs 10.00 crore to the Chief Minister's Relief Fund -
COVID 19 in Maharashtra in FY 2019-20. Even in FY 2020-21, your Bank has been continuously
supporting various constituencies including the urban & rural poor, tribal
communities, doctors, nurses and policemen on COVID-19 duty via various means such as
contributing food packets, ration kit, masks, face shields, sanitisers, Personal
Protective Equipment Kits (PPE Kits), and the like.
The implementation of the CSR projects and programmes is done directly and /or through
selected partner who may be either governmental agencies, NGOs and/or other institution,
having a proven track record of implementing cost and process efficient CSR projects
and/or programmes that are scalable, sustainable, and have measurable social outcomes and
impact. Also, the implementation is done through employee volunteering. The Bank's CSR
footprint has been consistently increasing over the years. The Bank is committed to
stepping-up its CSR programmes and expenditure in the years ahead.
Foremost reason for underspend of Bank CSR expenditure in FY 2019-20 is the NGOs'
inability to utilise large CSR expenditure allocated under the Bank's CSR Programmes. For
the Bank's CSR Programme Education & Livelihood ' 5.56 crore were unutilised by the
Bank's NGO partners, in CSR Programme on Healthcare Rs 0.75 crore were unutilised by the
Bank's NGO partners, and in CSR Programme on Sports Rs 0.25 crore were unutilised by the
NGO partners, in FY2019-20. The NGOs have assured that they will utilise these unutilised
CSR funds towards the Bank's Programmes in FY2020-21.
Your Bank does not consider "administrative overheads" as part of its CSR
Expenditure.
The CSR Committee of the Board confirms that the implementation and monitoring of CSR
Policy, is in compliance with CSR objectives and Policy of the Bank.
The details of CSR activities and spends under Section 135 of the Companies Act, 2013
for FY 2019-20, are annexed to this report.
RISK MANAGEMENT POLICY
Your Bank has a Group Enterprise wide Risk Management (ERM) framework supported by
appropriate policies and processes for management of Credit Risk, Market Risk, Liquidity
Risk, Operational Risk and various other Risks. Details of identification, assessment,
mitigations, monitoring and the management of these Risks are mentioned in the Management
Discussion and Analysis section appended to this Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of
the Companies (Accounts) Rules, 2014 are not applicable to your Bank.
EMPLOYEES
The employee strength of your Bank, standalone, was 50,034 and along with its
subsidiaries was over 71,000 as of 31st March, 2020.
135 employees employed throughout the year were in receipt of remuneration of Rs 102
lakh or more per annum and 74 employees employed for part of the year were in receipt of
remuneration of Rs 8.5 lakh or more per month.
Prevention of Sexual Harassment (POSH): Bank continues with the belief on zero
tolerance towards sexual harassment at workplace and continues to uphold and maintain
itself as a safe and non discriminatory organization. To achieve the same Kotak reinforces
the understanding and awareness of Prevention of Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013. Bank has formulated Internal Complaints
Committee (ICC) at three regions for reporting any untoward instance. Any complaints
pertaining to sexual harassment are diligently reviewed and investigated and treated with
great sensitivity. The ICC members have been trained in handling and resolving complaints
and have also designed an online e-learning POSH Awareness module which covers the larger
employee base.
Following is a summary of sexual harassment complaints received and disposed off during
the year 2019-20:
• No. of complaints received : 27
• No. of complaints disposed off * : 26
* In respect of one pending case, enquiries were in progress at the close of the year
and as on the date of this report the same has been closed. One case pertaining to the
previous year which was pending at the beginning has been closed.
As Bank enters in its next phase of growth and expansion of footprint across urban and
rural India, Bank and its subsidiaries continued to carry out several initiatives to
attract and retain a pool of highly skilled and motivated employees who are aligned to the
firm's vision of becoming the most trusted financial services provider.
In accordance with the provisions of Rule 5 of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 the names and other particulars of the
employees are set out in the annexure to the Directors' Report. In terms of the proviso to
Section 136(1) of the Companies Act, 2013, the Directors' Report is being sent to all
shareholders excluding the aforesaid annexure. The annexure is available for inspection to
any shareholder on request. Any shareholder interested in obtaining a copy of the said
annexure may write an email to the Company Secretary at bina.chandarana@kotak.com.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the operational management,
confirm in pursuance of Section 134(5) of the
Companies Act, 2013, that:
(i) your Bank has, in the preparation of the annual accounts for the year ended 31st
March, 2020, followed the applicable accounting standards along with proper explanations
relating to material departures, if any;
(ii) they have selected such accounting policies and applied them consistently and made
judgements and estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of your Bank as at 31st March, 2020 and of the
profit of your Bank for the financial year ended 31st March, 2020;
(iii) they have taken proper and sufficient care to the best of their knowledge and
ability, for the maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of your Bank and for preventing and
detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern basis;
(v) they have laid down internal financial controls to be followed by the Bank and that
such internal financial controls are adequate and are operating effectively; and
(vi) they have devised proper systems to ensure compliance with the provisions of all
applicable laws and that such systems are adequate and operating effectively.
ANNEXURES
Following statements/reports/certificates are set out as Annexures to the Directors'
Report:
• Extract of Annual Return under Section 134(3)(a) of the Companies Act, 2013 read
with Rule 12 (1) of Companies (Management & Administration) Rules, 2014.
• Secretarial Audit Report pursuant to Section 204 of the Companies Act, 2013 and
Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015.
• Details of CSR activities and spends under Section 135 of the Companies Act,
2013.
• Certificate from the auditors regarding compliance of conditions of corporate
governance as stipulated in para E of Schedule V of the Securities and Exchange Board of
India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the valuable guidance
and support received from the Reserve Bank of India, Securities and Exchange Board of
India, Insurance Regulatory and Development Authority and other Government and Regulatory
agencies. Your Directors acknowledge the support of the members and also wish to place on
record their appreciation of employees for their commendable efforts, teamwork and
professionalism.
For and on behalf of the Board of Directors
| Prakash Apte |
Place: Pune |
| Chairman |
Date: 30th June 2020 |