Kotak Mahindra Bank Ltd
Directors Reports
To the Members,
KOTAK MAHINDRA BANK LIMITED
Your Directors have pleasure in presenting the Thirty Sixth Annual Report of Kotak
Mahindra Bank Limited ("Bank") together with the audited Financial Statements
for the fi nancial year ("FY") ended 31st March, 2021.
FINANCIAL HIGHLIGHTS
(A) Kotak Mahindra Bank Limited – Consolidated Financial Highlights *:
|
FY 2020-21 |
FY 2019-20 |
| Total income |
56,814.77 |
50,365.74 |
| Total expenditure, excluding provisions and contingencies |
40,386.74 |
36,385.84 |
| Operating Profi t |
16,428.03 |
13,979.90 |
| Provisions and contingencies, excluding provision for tax |
3,259.69 |
2,558.10 |
| Profi t Before Tax |
13,168.34 |
11,421.80 |
| Provision for taxes |
3,265.44 |
2,814.72 |
| Profi t After Tax |
9,902.90 |
8,607.08 |
| Add: Share in profi t of Associates |
87.30 |
(13.72) |
| Consolidated profi t for the Group |
9,990.20 |
8,593.36 |
| Earnings per equity share: |
|
|
| Basic (`) |
50.53 |
44.73 |
| Diluted (`) |
50.49 |
44.68 |
(B) Kotak Mahindra Bank Limited – Standalone Financial Highlights:
|
FY 2020-21 |
FY 2019-20 |
| Total Income |
32,299.47 |
32,301.72 |
| Total expenditure, excluding provisions and contingencies |
20,084.76 |
22,280.89 |
| Operating Profi t |
12,214.71 |
10,020.83 |
| Provisions and contingencies, excluding tax provisions |
2,911.72 |
2,216.16 |
| Profi t Before Tax |
9,302.99 |
7,804.67 |
| Provision for taxes |
2,338.15 |
1,857.49 |
| Profi t After Tax |
6,964.84 |
5,947.18 |
| Add: Surplus brought forward from the previous year |
20,511.81 |
16,919.29 |
| Amount available for appropriation |
27,476.65 |
22,866.47 |
| Appropriations: |
|
|
| Statutory Reserve under Section 17 of the Banking Regulation Act, 1949 |
1,741.21 |
1,486.80 |
| Transfer to Investment Reserve Account |
- |
(31.06) |
| Transfer to Capital Reserve |
14.50 |
114.84 |
| Transfer to Special Reserve |
110.00 |
80.00 |
| Transfer to Investment Fluctuation Reserve Account |
820.66 |
483.13 |
| Transfer to Fraud Provision |
- |
(1.40) |
| Dividend Paid ** |
40.50 |
193.26 |
| Corporate Dividend Tax |
- |
29.09 |
| Surplus carried to Balance Sheet |
24,749.78 |
20,511.81 |
Notes:
* The Financial Statements of the subsidiaries and associates used for preparation of
the consolidated fi nancial statements are in accordance with the Generally Accepted
Accounting Principles in India ("GAAP") specifi ed under Section 133 and
relevant provisions of the Companies Act, 2013. The fi nancial statements of Indian
subsidiaries (excluding insurance companies) and associates are prepared as per Indian
Accounting Standards in accordance with the Companies (Indian Accounting Standards) Rules,
2015.
** The Bank has paid interim dividend at the rate of Rs.0.405 per share on the
Perpetual Non-Cumulative Preference Share ("Preference Shares") for FY 2020-21
(Previous Year: Rs.0.405 per share), to all Preference Shareholders whose names
appeared in the Register of Members / Benefi cial holders list on the book closure date of
19th March, 2021. As per the requirements of revised AS 4 –
‘Contingencies and Events Occurring After the Balance Sheet Date', this payout has
been appropriated from the amount available for appropriation in the year of pay-out.
Further, the Reserve Bank of India ("RBI"), vide its circular dated 22nd
April, 2021, has allowed banks to pay dividend on equity shares from the profi ts for FY
2020 -21, subject to the quantum of dividend being not more than 50% of the amount
determined as per the dividend payout ratio prescribed in the RBI circular dated 4th
May, 2005 and subject to the banks complying with the criteria laid down in the said
circular. As per the above RBI circular, the Bank has complied with all the criteria and
the Board of Directors of the Bank have proposed a dividend of Rs.0.90 per share
(Face Value Rs.5/-) for FY 2020-21.
FINANCIAL PERFORMANCE
On a Standalone basis, Profit After Tax of the Bank was Rs.6,964.80 crore in FY 2020-21
compared to Rs.5,947.20 crore in FY 2019-20. Net Interest Income ("NII") of the
Bank for FY 2020-21 was Rs.15,339.60 crore as against Rs.13,499.70 crore in FY 2019-20.
The consolidated Profit after Tax was Rs.9,990.20 crore in FY 2020-21 compared to
Rs.8,593.36 crore in FY 2019-20. Further, the Group had Capital and Reserves of
Rs.84,836.45 crore as on 31st March, 2021 (Rs.67,134.12 crore as on 31st
March, 2020) and Net worth of Rs.84,336.45 crore as on 31st March, 2021
(Rs.66,634.12 crore as on 31st March, 2020). The book value per Equity Share
was at Rs.425.55 as on 31st March, 2021 (Rs.348.32 as on 31st March,
2020).
Further, details on the financial performance of your Bank are available in the
Management Discussion and Analysis Report.
CAPITAL
During the year, pursuant to the approval granted by the Board of Directors of the Bank
on 22nd April, 2020 and the approval of the equity shareholders by way of
Postal Ballot on 25th May, 2020, your Bank undertook a Qualified Institutional
Placement. The object of the issuance was 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 pandemic or
otherwise. Subsequently, on 30th May, 2020 your Bank allotted 6,50,00,000
equity shares of the face value of Rs.5 each at an issue price of Rs.1,145 per equity
share thereby raising
Rs.74,425,000,000. Further, your Bank allotted 37,97,330 equity shares arising out of
the exercise of Employees Stock Options granted to the Whole-time Directors and employees
of your Bank and its subsidiaries.
Post allotment of the aforesaid equity shares, the issued, subscribed and paid-up share
capital of the Bank as at 31st March, 2021 stood at Rs.14,90,91,78,340
comprising 1,98,18,35,668 equity shares of Rs.5 each and 100,00,00,000 preference shares
of Rs.5 each.
DIVIDEND
The Directors have recommended a dividend of Rs.0.90 per Equity Share for FY 2020-21.
In the previous year, the Reserve Bank of India ("RBI") had, vide its circular
dated 17th April, 2020, directed all banks to not make any further dividend
payouts from profits pertaining to FY 2019-20 until further instructions. Accordingly,
your Bank did not declare dividend on equity shares for the financial year ended 31st
March, 2020.
The dividend for FY 2020-21, if approved by the Members, would entail a payout of
Rs.178.44 crore, based on the number of equity shares as at 30th June, 2021.
The Dividend would be paid to all the equity shareholders, whose names would appear in the
Register of Members / Beneficial holders list on the Record Date. Further, the Board of
Directors of the Bank, at its meeting held on 12th March, 2021, declared an
interim dividend on Perpetual Non-Cumulative Preference Shares ("PNCPS") of the
face value of Rs.5 each issued by the Bank, carrying a dividend rate of 8.10%, on pro-rata
basis, in respect of FY 2020 -21, as per the terms of issuance of PNCPS. This has entailed
a payout of Rs.40.50 crore (Previous Year: Rs.40.50 crore). The Members are requested to
confirm the payment of the aforesaid interim dividend on PNCPS at the ensuing Annual
General Meeting.
The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and
Exchange Board of India ("SEBI") (Listing Obligations and Disclosure
Requirements) Regulations, 2015 ("SEBI Listing Regulations") and as reviewed and
adopted by the Board of Directors of the Bank, is available on the Bank's website viz.
URL: https://www.kotak.com/en/investor-relations/governance/policies.html.
DEBENTURES
During the year, your Bank has not issued any capital under Tier II.
As on 31st March, 2021, outstanding Unsecured, Redeemable Non- Convertible,
Subordinated Debt Bonds ("Bonds") aggregated Rs.456 crore. These Bonds have been
issued on a private placement basis and are listed on the BSE Limited and the National
Stock Exchange of India Limited.
CAPITAL ADEQUACY RATIO
Your Bank has a Capital Adequacy Ratio ("CAR") under Basel III as at 31st
March, 2021 of 22.26%, with Tier I being 21.38%, as against the regulatory requirement of
11.5%.
RATINGS OF VARIOUS DEBT INSTRUMENTS
The details of all credit ratings obtained by the Bank for various securities
outstanding as at 31st March, 2021, are disclosed in the Report on Corporate
Governance, forming part of this report.
DEPOSITS
Being a banking company, the disclosures required under Rule 8(5)(v) and (vi) of the
Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, 2013
are not applicable to your Bank.
OPERATIONS
We organise our principal banking business activities into the following business units
viz. 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 specialised 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 Non Banking Financial Companies
("NBFCs"), Asset Management, Insurance, Broking, Investment Banking, Wealth
Management and Asset Reconstruction.
Consumer Banking
The Consumer Bank business services a customer base covering a wide spectrum across
domestic individuals and households, non-residents, small and medium business segments for
a range of products from basic Savings and Current Accounts to Term Deposits, Credit
Cards, Unsecured and Secured Loans, Working Capital and Investment Advisory.
As of 31st March, 2021, your Bank had 1,604 branches and 2,598 ATMs,
covering 781 locations. Due to the unprecedented circumstances linked to the COVID-19
pandemic and the extended lockdown situation, network expansion plans had to be deferred.
In a year unlike any before, your Bank continued to roll out several initiatives aimed
at offering a superior and differentiated customer experience. With the year starting with
COVID-19 pandemic, your Bank rolled out initiatives to make banking convenient, easy and
secure for its customers including through its Digital channels Mobile and Net Banking.
While your Bank launched a "Zero-Contact Video KYC Savings Account", many other
initiatives were taken to make banking convenient in these times. Your Bank launched
– "Bank from Home" campaign – which brought deals on various essential
items to its customers through alliance partners– right from Daily Newspaper to
Fitness at Home, from deals on Over The Top to exclusively curated offers on Up-skilling
and Education. Your Bank has also supported its customers to transact in contact-less
manner through its offerings like "Scan n Pay"- Cardless Cash withdrawals. Your
Bank has tied up with partners to offer grocery services by integrating links via Mobile
App – Kay Mall. Your Bank had organised various campaigns to make its customers aware
of the fraudulent transactions and measures to avoid falling prey to fraudsters. Further,
for Retail as well as Corporate Salary customers, your Bank has enabled multiple
transactions and service request via Digital channels, thereby avoiding the customer's
need to step out and take undue risks. The Privy League Program of your Bank offering for
the High Net worth Banking was extended to its Asset Customers. Under this, High Net worth
Asset Customers were offered exclusive Privy League Membership to build holistic
relationship with the Bank. Another feature offered for the Privy League Programme
customers was Konnect2RM, a missed call service – enabling customers to connect with
their Relationship Managers by giving a missed call. This has ensured customers one more
way to access the Bank in these testing times.
Your Bank had launched Self On-boarding Digital Kits – for the employees of
corporates, whereby, using the Quick Response interface, customers can complete the
account set up journey in a Do It Yourself ("DIY") mode.
"DigiSign", an end to end eSignature and eStamping of documents, was
introduced by your Bank. This solution helped the Bank to send all required documents to
the customer electronically and get the same e-signed and stamped by the customer. This
brings speed, reduces customer physical touch points and helps to seamlessly process the
documentation for lending.
Your Bank has implemented automation of Valuation systems, which enables end to end
automated process for property valuation. It works as a repository of properties and
provides Property Information Report to the Management along with the benchmark reports.
Some of the initiatives on ease of availing service from the Bank included, enhancing
the range of transactions that can be effected via Digital Channels like updation of
address, change of home branch, integration of deliverable tracking system with the chat
bot, which has generated 55 lakh enquiries in the year. In addition for customer
convenience at frontline, your Bank was accorded the IDC Information Visionary award for
innovation in Cognitive machine reading solution for corporate banking funds transfer
automation, which has helped in speed and accuracy. The Robotics Process Automation has
also assisted to process approximately 8.5 lakh requests in FY 2020-21.
Your Bank has also launched a dedicated toll-free number from United Arab Emirates
("UAE") to cater to its large Non Resident customer base. With this addition,
your Bank now offers toll-free service to its Non-Resident Indian customers from the
United States of America, Canada, United Kingdom, Singapore, Hong Kong, Australia and UAE.
In line with your Bank's overall strategy to enhance the customer experience of its Non
Resident Indian ("NRI") clients, your Bank had launched a service for its NRI
customers that enables them to interact with a Customer Service Representative 24x7,
without having to go through the Interactive Voice Response menu options. This has
significantly reduced the wait time for NRI customers to speak to the Bank's
representative.
Kotak Junior, our banking program for children aged below 18, tied up with Campaign
Gratitude to provide a unique opportunity for children to set up their own fundraiser and
start raising funds for the cause of COVID-19 relief by reaching out to their family,
friends, school mates and relatives. In few steps on the Campaign Gratitude website,
children could set up their own fundraiser and select any one of the 3 partner NGOs -
Sneha Foundation, Concern India Foundation or Pride India they wished to support. To
double the impact of their fundraising, Kotak matched the total amount raised, enabling
Juniors to make an impact. Kotak Silk, our banking program designed especially for women,
believes financial independence is the true independence for women. This International
Women's Day (8th March, 2021), Silk launched its campaign #SheIsTheChange to
financially empower women. The initiative included launch of its dedicated digital
platform https://www.silkmoneymatters.com, created to enhance financial knowledge among
women and empower them towards managing finances and investments. A series of interactive
webinars by experts on different aspects of financial management were also organized for
all women customers. Under the Corporate Salary segment, your bank has launched an
exclusive account for the public sector, Government bodies and Armed Force - Salary
Account for Public Services. The account comes with a host of benefits, designed
specifically to cater to the needs of this segment like Lifetime Free Zero Balance account
– customers can enjoy benefits even after retirement, complimentary insurance covers
for Personal Accident death, partial / permanent disability, education benefit to
dependent child, Family banking, Investment account, Loans and Cards, etc.
Your Bank signed a Memorandum of Understanding with the Indian Army with an exclusive
offer for the "Heroes of our country". Your Bank launched Kotak UNI Account for
students pursuing professional courses from premier institutes. Every year, large number
of students graduate from various Universities / Institutes and join Corporate India. With
this offering, your Bank intends to co-create with the universities to ensure that the
workforce entering Corporate India is not just skilled but also financial prudent. This
program offers facilities such as Digital Banking with 180+ features on Kotak Mobile
Banking App, Pay or recharge phone, DTH, or any bill, Scan and Pay facility for
contactless and cash free payments, Dream Different Credit Card, benefits from curated
brand offers and exciting deals. Most importantly, this program offers strong financial
literacy through webinars/ seminars.
Your Bank continued to ramp up 811 acquisition numbers this year. Your Bank launched
Zero-Contact Video Know Your Customer ("KYC") based Saving account on 18th
May, 2020, during the peak of the pandemic when a face to face meeting was difficult. This
technology helps to complete the KYC process of a new customer without meeting the
customer in person. This enables seamless and quick process of KYC and provides better
experience to the customer. To extend the 811 brand, your Bank launched 811 Dream
different Credit Card, which was backed by Fixed Deposit and thus, available for all. This
was an offering for millennials and people with no bureau score to help get their first
credit card and build credit history.
Your Bank continues to actively participate in various Financial Inclusion initiatives.
During the year, your Bank was instrumental in the credit and distribution of COVID-19
subsidy package offered to Women Jan Dhan Account Holders under the Pradhan Mantri Garib
Kalyan Yojana. Under this scheme, an Ex-gratia payment of Rs.500 was credited and
distributed to women Jan Dhan account holders for three months starting from April 2020.
Further, your Bank has actively participated in the PM Street Vendor's AtmaNirbhar Nidhi
Scheme thereby offering loans upto Rs.10,000 to meet the urgent need of working capital to
street vendors to resume their business impact of the COVID-19 pandemic.
Your Bank has collaborated with multiple Corporate Business Correspondents and operates
with more than 300 customer service points across Chhattisgarh, Karnataka, Tamil Nadu,
Andhra Pradesh and Telangana, offering banking services and Mahatma Gandhi National Rural
Employment Guarantee Act payments to Beneficiaries. To enhance its reach and to build
customer convenience, your Bank has successfully set up over 160 Aadhaar Enrolment Centres
in its branch premises and surpassed the transaction volume mandated by Unique
Identification Authority of India. In Insurance products, at the height of the pandemic,
your Bank created digital DIY solutions so that the customer could avail Insurance Plans
seamlessly without the need of physical meetings and visits to our Branches. Your Bank was
one of the first few banks to enable Sovereign Gold bonds on Mobile Banking and Net
Banking platforms to its customers (Trust and HUF), along with Retail customers.
Your Bank has taken a significant leap in digital initiatives during FY 2020-21. Your
Bank is among the early Banks in the industry to offer National Pension System
("NPS") on Mobile Platform. Your Bank has started offering NPS accounts on its
website, wherein, both your Bank's customers and other banks customers can open an instant
and paperless NPS account with eSign options. Your Bank has integrated with the National
Securities Depository Limited website for this seamless journey.
Consumer Assets
FY 2020-21 was a challenging period on the Consumer Assets side business with two
phases of Moratorium, Emergency Credit Line Guarantee Scheme ("ECLGS"),
Restructuring in-line with regulatory guidelines on account of COVID-19. However, your
Bank was able to meet these challenges effectively and business volumes started picking up
from the second half of FY 2020-21.
During FY 2020-21, the Home Loan business was a key focus area and taking leadership
position on interest rates, your Bank was able to significantly ramp up the business
volumes. The Home Loan business showed a positive growth on volumes, despite of almost
negligible business in the first half of the FY 2020-21. Further, your Bank has launched
four new Credit Card products namely White, Zen, Mojo, 811 Secured, in FY 2020-21. These
new cards have benchmarked against the best card propositions in the industry and have
helped to significantly reposition your Bank's cards offering in the market. The Consumer
Finance ("CF") business continued to grow from strength to strength and in the
month of March 2021, your Bank saw the best volumes ever in the CF business.
Commercial Banking
Your Bank's Commercial Banking business focuses on meeting the banking and financial
needs of various segments. The business has specialised units which offer financial
solutions in the areas of Commercial Vehicles, Construction Equipment ("CE"),
Tractor and Agriculture Business. It services the priority sector by providing finance for
Tractor, Crop Loans to small enterprises and for Allied Agricultural Activities. This
business plays a significant role in meeting financial inclusion goals and financing deep
into ‘Bharat'.
The Construction Equipment industry which was 24% down in FY 2019-20 has reported
decent growth in FY 2020-21. With initial hiccups, the overall industry withered the storm
of the COVID-19 pandemic and the sector proved to be highly responsible for propelling
India's overall development. It enjoys intense focus from Government and plans to spend
US$ 1.4 trillion on infrastructure during FYs 2019-23 to have a sustainable development.
Infra sectors such as roads, power, bridges, dams, water supply, irrigation, railways and
urban infrastructure development are showing significant growth and order flow for
contractors. Overall cash flow of contractors/ infra companies_which are working for
Central Government and its bodies have been good. The overall delinquencies in CE
business are showing sign of improvement month on month.
Your Bank's Commercial Vehicle ("CV") business witnessed a drop in
disbursement level in line with decline in CV industry numbers. The decline is primarily
due to the impact of pandemic and the subsequent lock down. The Passenger segment,
comprising staff/ school bus transportation, tour and travel and public transport
operation, has been impacted the most. The overall delinquency percentage of the CV
portfolio has increased.
Under Agri Business, the Agro and food processing segments were benefitted by their
status of being in the essential services and hence, having a limited impact due to the
lockdowns. The supportive Government schemes ensured enhanced liquidity to these segments
during a period of lengthening receivables due to COVID-19 lockdowns. The segment saw
significant demand rise for Term Loans for capacity expansion and stocking given the
enhanced demand for commodities.
Further, FY 2020-21 saw one of the best monsoon seasons with the widest spread of rains
across geographies and for the most effective period of time. The farmers, therefore, were
assured of a bumper Rabi output. This also ensured stability in prices of commodities
which improved margins for processors. There was also increased demand in the logistics
part of the Agri chain by way of loans for new warehouse / cold storage construction,
pledge facilities, packaging units and for grading of agro commodities. The stress on
portfolio quality was lesser due to the COVID-19 crisis.
In case of Microfinance Institutions ("MFIs"), despite the moratorium
announced, the segment saw improving repayments from their retail borrowers for much of
the year and the collection efficiency had improved to over 95% by the end of the
financial year. The segment, however, was impacted by the lockdown period of curtailed
mobility and saw a flat portfolio growth rate. However, the inflow of equity funding to
MFIs, ample liquidity and improving collections ensured that the overall credit losses
were contained.
During FY 2020-21, Tractor industry has shown high growth of 26.9% based on strong
demand of tractors, mainly due to timely and adequate monsoon and support of commodity
prices. Your Bank's Tractor Financing business has grown in line with the Industry. There
is a marginal impact on portfolio performance due to loan moratorium and COVID-19 impact
on cash flows of farmers due to lockdowns and other restrictions.
Your Bank has Crop Loan business presence in Punjab, Haryana and Western states of
India. Portfolio quality in western markets is stable, however, Punjab has witnessed high
negative impact due to Kissan Union agitation in spite of good monsoon and better yields.
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 deepen existing
relationships and acquire new quality customers on a consistent basis, delivering
customised 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. The year for the Corporate Bank can be best characterised as a
‘Tale of Two Halves'. The business witnessed significant headwinds during the first
half of the year from COVID-19 related economic disruptions which compounded the economic
slowdown that was already visible across sectors. As your Bank navigated those uncertain
times, as a prudent risk measure, your Bank was conservative in its exposures. The
slowdown in economic activity also impacted working capital utilisations and overall
advances were muted during the first half of the year. However, as the country emerged
from the first COVID-19 wave, Corporate India turned out to be more resilient than earlier
envisaged. Strong capital markets, both debt and equity, helped corporates raise funds
that ensured that leverage remained at comfortable levels on company balance sheets.
Companies were, by and large, agile in increasing productivity and reducing costs.
Moreover, high liquidity in the banking system kept borrowing costs low for these
corporates. All these factors ensured that corporates were able to bounce back, largely
unscathed by the crisis, once COVID-19 related disruptions eased by the end of the first
half of the year. Your Bank too adapted to the new conditions and cautiously started
increasing its exposures in line with increasing economic activity. The second half of the
year thus witnessed a bounce back of growth and the Corporate Bank ended the year with a
strong momentum across its various customer segments.
Your Bank 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 the risk reward ratio 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 Current Account grew
strongly, further reducing the cost of funds and improving spreads. While income from
other non-credit income streams including from Forex, Cash Management and other
Transaction Banking products were impacted in the first half of the year, these too grew
strongly in the second half in line with overall economic activity. Your Bank has also
focused on converting opportunities for syndication of loans. This year, the Bank ramped
up its income from debt syndication significantly including from high yield opportunities.
Your Bank has always had robust risk management practices and it is a testimony to
these practices that the Corporate Bank has been able to end the year with one of the
lowest Credit costs it has witnessed in recent times, despite such a challenging
environment. Your Bank continues to remain cautious and watchful of the risks posed by the
second COVID-19 wave and will continue to take proactive steps to minimize the impact of
these risks on the health of the book. 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 as a percentage of Assets over the
past few years. The use of Risk Adjusted Return on Capital pricing models has become
ingrained in the way the Corporate Banking division conducts its business and has helped
to optimise pricing, better utilise capital, increase focus on non-capital intensive
income streams and improve return on equity.
Favorable risk-return metrics, strong liability growth, controlled credit costs and
bounce back of growth across assets and fee incomes in the second half of the year have
ensured that your Bank has been able to grow the profitability of the Corporate Banking
business and maintain a healthy Return on Equity. Your Bank continues to focus on
strengthening its organisation platform and placing the Corporate Bank in a strong
position in the market.
In order to capitalise on market opportunities and offer holistic solutions to clients,
your Bank has taken steps to improve integration between its different businesses
including Lending, Debt Capital Markets, Wealth Management and Investment Banking. These
steps have resulted in an increase in cross divisional synergies and execution of complex
solutions such as syndication of structured debt to wealth investors, referring of
Investment Banking solutions to wholesale banking clients and such others. As part of this
strategy, 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 over the years for your Bank.
The Custody and Clearing business continued on a growth trajectory during the year
despite multiple lockdowns imposed in India as well as key Foreign Portfolio Investment
jurisdictions like the US, UK, Singapore, the Middle East and Hong Kong. Your Bank's
clients were appreciative of the support provided to them during the lockdowns and
operationally there was no impact on client transactions. The domestic Custody business
also grew at a fast pace during the year and your Bank on-boarded a number of marquee
Portfolio Management Services and Alternative Investment Fund names in addition to a few
large family office clients. Your Bank has also opened the first bank account for an AIF
at the Bank's Gujarat International Finance Tec-City ("GIFT") City branch and
your Bank sees a lot of interest, amongst clients, in the choice of GIFT City as an
upcoming Fund jurisdiction.
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.
Digital Initiatives and Robust Business Continuity Practices helped ensure that your
Bank remained open for its customers to transact business in an uninterrupted manner even
during the pandemic. Work from Home was enabled for many of our staff through use of
technology tools. Your Bank was also agile in implementing digital signatures and other
online platform solutions for execution of customer documentation. Also, various digital
platforms and initiatives across the customer lifecycle were taken live so as to enable
smoother and seamless customer experience, safety first for customer and employees,
compliances and improvement in turn-around-time. During the year, a new Cash Management
Portal was launched by your Bank, which provides the Bank's customers with enhanced
features like new journeys, widgets and personalised reports and dashboard creation. The
UI/UX on the Net Banking platform was also upgraded with enhanced login options and ease
of navigation among other benefits. Your Bank continues its investment on a dedicated
portal for providing a seamless and unified transaction banking experience to all Micro,
Small and Medium Enterprises ("MSME"), Multi-nationals, Financial Groups and
Large Corporates. Your Bank also enhanced its Application Program Interface Banking by
upgrading its API Management Portal, which now hosts a wide range of APIs such as United
Payments Interface, Cash Management Services, E-collection, Fund transfer and Account
services amongst others. To further enhance the digital journey of its customers, your
Bank has continued its initiative to partner with Fintech players especially in the areas
of trade, supply chain, acquiring and fund management solutions. During the year, your
Bank has launched Digifarm, an app based platform for digitising the KYC of Farmers for
Corporate Linked Farmer Finance and is now an empaneled online payment partner of
Electronic National Agriculture Marketplace ("ENAM"), a pan India electronic
trading portal for agricultural commodities, which will digitise the agricultural
ecosystem.
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 51% of India's top 100 families (Source: Forbes India Rich List
2020), with clients ranging from entrepreneurs to business families and professionals.
Your Bank provides an open architecture proposition to its customers, offering a
plethora of wealth products. This business has a strong distribution capability for
private clients through distribution/referral model across equities, fixed income and
alternates catering to Ultra High Net worth Individuals and High Net worth Individual
("HNI") investors. In addition to comprehensive financial solutions, the
division provides a strategic consolidated view on the client's overall portfolio, in
addition to comprehensive financial solutions that go beyond investments. These also
include banking and credit, consolidated reporting, referral for estate planning services,
etc. With an in-depth understanding of client requirements and expertise across various
asset classes, this business offers the widest range of financial solutions.
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 of Wealth, Priority Banking and Investment
Advisory offerings was approximately Rs.382,000 crore, as of 31st March, 2021.
Your Bank has added 600 new families in FY 2020-21.
In FY 2020-21, a digital transformation journey was initiated as a tactical solution
for enhancing customer service which has now become a part of long term strategic plan for
the business. Bespoke development was done in partnership with a Fintech to create a
platform to provide customised investment reports to clients. Low code platforms were used
to create work flow automations for processes like task automation and request tracking,
ensuring higher service levels. The overall strategy is focused and devised to use digital
solutions to improve client experience and enhance productivity of the business.
International Business
The Gujarat International Finance Tec-City 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.
Your Bank's first overseas branch at Dubai International Financial Centre, Dubai, was
inaugurated 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 and private banking customers that qualify under the Professional client criteria
of the Dubai Financial Services Authority.
Asset Reconstruction
The resolution of several accounts got seriously impacted due to the slowdown of
economy, even before the first wave of pandemic. Further, the impact in the first two
quarters of FY 2020-21, was due to disruption in functioning of various judicial forums
like Debt Recovery Tribunals, Debt Recovery Appellate Tribunal, High Courts, including
National Company Law Tribunal proceedings under Insolvency and Bankruptcy Code on account
of the pandemic and lockdowns, which resulted in piling of cases and delay in getting
legal remedies in various distressed accounts.
Your Bank adapted to the pandemic situation very diligently and closely monitored and
spared no efforts to resolve the stressed accounts with empathy and compassion.
Unfortunately, now the economy is exposed to the second wave of the pandemic with more
severity. However, your Bank will monitor the impact of second wave of the COVID-19
pandemic and will adopt various measures empathetically and diligently to resolve the
stressed accounts with compassion. Your Bank expects a lot of opportunities to present in
the acquisition side of the stressed loans and is looking at it very closely. If the
prices offered are reasonable and attractive, then your Bank shall be open to acquire
several of them.
Treasury
Your Bank's Treasury actively contributes to your Bank by way of: i. 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 and Liquidity risk within the overall risk appetite of your Bank.
ii. Proprietary Trading: The Proprietary Trading Desks actively trades 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.
iii. Customer Transactions: The Customer-facing desks at the Treasury assist and manage
customer transactions across Foreign Exchange, Derivatives and Bullion products. iv. Forex
and Derivatives: Facilitating customer access to foreign currency markets through cash and
derivatives products for remittances, trade transactions and for managing foreign exchange
and interest rate risks. v. Bullion: The Bullion desk provides efficient working capital
solutions to domestic jewellery manufacturers as per the prescribed rules of RBI. Under
license from the RBI, your Bank also imports gold and silver to meet the needs of
customers.
Further, details of the principal business units of your Bank and their performance are
available in the Management Discussion and Analysis Report.
RESPONSE TO COVID-19 PANDEMIC
The outbreak of COVID-19 pandemic has had and continues to have a material impact on
the global and Indian economy, the financial services sector and your Bank's business. The
lockdowns of various intensities, announced by the National and State Governments, aimed
to prevent the spread of the virus has disrupted the normal flow of business operations.
It has and continues to test the Indian economy like never before. Although the
uncertainty continues, the economy has shown resilience during the first wave and is
confident of facing the second wave with similar resilience, recover quickly and emerge
out stronger. In these testing times, your Bank took steps to help, protect and provide
relief to the customers and employees. Entering the pandemic with a strong financial and
technological foundation, gave your Bank the resources to support the customers and
employees. The key approach taken by your Bank to mitigate the impact of the pandemic for
its customers and employees is, summarised below:
• Well-being of employees: The focus of your Bank has been to protect the health
and ensure the safety of employees, while ensuring minimum disruption to regular banking
operations. Information Technology and Human Resources 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. Your Bank has also put in place a Remote
Working Policy and classified all the employees into 4 categories - "Daily in
Office", "Partially in Office", "Work from Home" and "Field
Roles". The Remote Working Policy reflects a different way of working and shall
remain even after the pandemic is behind us. Your Bank has also formulated a standard
operating procedure which has defined the safety protocols and followed it in all the
branches and offices for the safety of your Bank's employees and customers. In addition, a
dedicated COVID-19 helpline was established to help your Bank's employees and their
families.
• Customer Convenience: Your Bank responded swiftly to the challenges faced by the
lockdown and put in place technological solutions for the customers to get banking
services at the comfort of their homes. Your Bank introduced Zero-Contact Video KYC
facility so that the customers could open the full KYC savings account, without visiting
the branches.
• Your Bank rolled out Net Banking 2.0, a revamped internet banking platform with
new technology stack and new customer experience for key journeys. Net Banking became more
comprehensive with new features such as Positive Pay (Cheque Confirmation), Card Controls
for Credit, Debit and Forex Cards, Address update, integration of additional Insurance
products, etc. The Mobile Banking app continues to be one of the highest rated apps on iOS
and Android. Your Bank has also added several new features to the mobile app such as Send
money abroad, eStatement, NPS, Insurance, shop on Amazon, etc.. Keya Chatbot and WhatsApp
Banking were scaled to start making business impact and become mainstream digital channels
by handling more products, services and related queries. Further, for the convenience of
the Corporate and Small and Medium Enterprise customers, your Bank has implemented various
digital platforms and initiatives across the customer lifecycle so as to enable smoother
and seamless customer experience, safety first for customer and employees, compliances and
improvement in turn-around-time.
• Support to the Indian Economy: In order to ease the financial stress faced by
the businesses and individuals on account of the lockdown, the Reserve Bank of India
("RBI") enabled the banks to allow a one-time rescheduling of payments, by way
of a moratorium of three months on payment of instalments (principal and interest
payments) falling due between 1st March, 2020 and 31st May, 2020 in
respect of all term loans and working capital facilities sanctioned in the form of cash
credit/overdraft. Subsequently, this moratorium period was permitted to be extended by the
RBI by another three months up to August 31, 2020. Accordingly, your Bank granted
the moratorium on payment to the eligible customers. The Government of India launched
ECLGS and provided guarantee cover for emergency credit facilities to Micro Small Medium
Enterprises ("MSME") to meet their working capital requirements. Your Bank has
disbursed about Rs.11,300 crore under this Scheme, which has protected many small and
medium businesses from the vagaries of the pandemic.
• Strengthening the Bank: Your Bank has raised Rs.7,442 crore from the domestic
and foreign institutional investors as equity capital in FY 2020-21. The equity raised by
your Bank has further strengthened the Capital Adequacy Ratio of the Bank. The strong
capital base will provide enough cushion for any potential stress due to the pandemic as
well as provide growth capital for the next few years.
HUMAN RESOURCES
During FY 2020-21, your Bank witnessed the onset of the COVID-19 outbreak and the
subsequent nationwide lockdown. The Human Resources ("HR") Department of your
Bank implemented various initiatives to transform the HR processes, policies and systems
and various employee touchpoints for smooth functioning and business continuity in the new
normal scenario. From making great strides in engaging with employees, numerous health and
wellness drives, to centralising various HR Processes for aligning employee experience,
there have been quite a few measures taken to enhance the experience of employees. It was
indeed a proud moment for your Bank to have certified as ‘The Great Place to Work' by
the Great Place To Work Institute.
Key HR Initiatives taken by your Bank were: i. Health and Wellness: Various health and
wellness related initiatives were launched through online and onsite interactions such as
Emotional Assistance
Program, Employee Outreach program, Covid test reimbursements for employees and their
families, Special Leave - COVID-19 positive and online wellness initiatives such as yoga,
meditation, Zumba, quiz sessions, etc. ii. Leadership and Manager Connect: Your Bank
remains heavily invested in regional initiatives like Leadership Connect/Town Hall,
Webcast, Meet forums for building manager connect and skip level and also strengthens the
platform for top down communication. iii. Hum Fit Kotak Hit: Your Bank has launched a
monthly Fitness allowance with effect from 1st December, 2020, thereby creating
a culture of fitness for Kotak employees by encouraging them to update their fitness goals
online, driving focus on their health and wellbeing.
iv. D iversity and Inclusion: Building diverse and inclusive culture has been a focus
for your Bank over few years. Your Bank has also revamped the Diversity and Inclusion
agenda and formed the Diversity and Inclusion Council, representing leaders from all
businesses in the Bank, led by Ms. Shanti Ekambaram, Group President – Consumer Bank.
The Diversity and Inclusion Council aims to drive changes in the culture, policies,
processes and systems to build an Inclusion focused work environment.
v. Remote Working Policy and Allowance: Your Bank introduced the Remote Working Policy
offering hybrid working opportunities to its employees and also Remote Working allowance
for employees working remotely, to cover Wi-Fi and other work related furnishing expenses.
vi. My Kotak My Say: Your Bank has strengthened the platform for top down
communication. At the same time, your Bank has created listening opportunity for voice of
Kotakites through ‘My Kotak My Say', a bi-annual employee engagement survey engaging
the ‘Great Place to Work Institute'.
vii. Employee Development: Your Bank increased focus on e-learning for delivering
programs at various stages of employee lifecycle. Programs such as Digital
Video-based induction, K-Map for managers, New Age Manager Program, Kotak DigiQ and
K-League have been introduced in FY 2020-21 ensuring smooth transition to online and
digital learning platform.
viii. Talent Acquisition: Your Bank had introduced Oracle Recruiting Cloud, a single
platform for all recruitment activities and moving recruitment towards paperless process.
Your Bank has also relaunched Internal Job posting program - Kotak Fast Track, to reduce
attrition and save cost of hiring.
ix. Talent Management: 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 for key roles. The erstwhile online appraisal
method has been replaced with the online ‘My Agreed Commitment' framework
simplifying the entire Performance Review and Appraisal System for Employees exercise.
Your Bank is taking several initiatives to encourage employees to blow the whistle and
report incidences of any fraud or unusual events. During the year under review, your Bank
has initiated periodic Email campaigns for educating employees on the process of whistle
blowing, creating awareness and encouraging employees to blow the whistle and report
incidences of any fraud or unusual events. In addition, the same has been reiterated and
made an integral part of your Bank's Code of Conduct. Further, the website for reporting
the incidences of fraud or any unusual events by employees has been revamped.
EMPLOYEES
The employee strength of your Bank was 51,734 and along with its subsidiaries was over
73,000 as of 31st March, 2021. 149 employees employed throughout the year were
in receipt of remuneration of Rs.102 lakh or more per annum and 86 employees employed for
part of the year were in receipt of remuneration of Rs.8.5 lakh or more per month.
In terms of the proviso to Section 136(1) of the Companies Act, 2013, the Directors'
Report is being sent to all Members excluding the aforesaid annexure. The annexure is
available for inspection to any Member on request. Any Member interested in obtaining a
copy of the said annexure, may write an email to the Company Secretary at
avan.doomasia@kotak.com.
INFORMATION UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION
AND REDRESSAL) ACT, 2013
Your Bank continues with the belief of zero tolerance towards sexual harassment at
workplace and continues to uphold and maintain itself as a safe and non-discriminatory
organisation. To achieve the same, your Bank reinforces the understanding and awareness of
Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013 ("POSH"). Your Bank has formulated a central Steering Board
Committee and Internal Committee at three regions for reporting any untoward instance of
sexual harassment. Any complaints pertaining to sexual harassment are diligently reviewed
and investigated and treated with great sensitivity. The Internal Committee 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.
The following is a summary of sexual harassment complaints received and disposed off
during FY 2020-21:
Number of complaints pending as on 1st April, 2020 11 Number of complaints
received during FY 2020-21 25 Number of complaints disposed off as on 31st
March, 2021 28 Number of complaints pending as on 31st March, 2021 8*
* Out of the 8 complaints pending as on 31st March, 2021, 5 complaints were
disposed off as on the date of this Report. Further, all complaints that were pending as
on 1st April, 2020, had been disposed off during FY 2020-21.
CODE FOR PREVENTION OF INSIDER TRADING
The Bank has adopted the Kotak Mahindra Bank Limited - Trading Code of Conduct for the
prevention of insider trading in the shares of the Bank as well as in other listed and
proposed to be listed companies. The Trading Code of Conduct, inter-alia, prohibits
dealing in securities by insiders while in possession of unpublished price sensitive
information. The said Code has been amended from time to time to give effect to the
various notifications/circulars of SEBI with respect to SEBI (Prohibition of Insider
Trading) Regulations, 2015.
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, the_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 a Whistle blower 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 and questionable accounting/audit matters/financial malpractice.
The concerns can be reported online on the following websites viz. URL:
https://cwiportal.com/kotak and / or www.speakup.co.in which are managed by independent
third parties. Safeguards to avoid discrimination, retaliation or harassment and
confidentiality have been incorporated in the said 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 portals. Regular communication is made for sustained awareness.
The Policy has been uploaded and is available on the Bank's intranet as well as website
viz. URL: https://www.kotak.com/en/investor-relations/governance/ policies.html.
EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS SCHEMES
The Bank has formulated and adopted the Kotak Mahindra Share Based Employee Benefit
Scheme to:
• provide means to enable the Bank, its subsidiaries and its associate companies,
as applicable, to attract and retain appropriate human talent in the employment of the
Bank, its subsidiaries and its associate companies, as applicable; • motivate the
employees of the Bank, its subsidiaries and its associate companies, as applicable, with
incentives and reward opportunities; • achieve sustained growth of the Bank, its
subsidiaries and its associate companies, as applicable and to create shareholder value by
aligning the interests of the employees with the long term interests of the Bank; and
• create a sense of ownership and participation amongst the employees of the Bank, of
its subsidiaries and of its associate companies, as applicable. The Employee Stock Options
("ESOPs") and the Stock Appreciation Rights ("SARs") granted to the
employees of the Bank and its subsidiaries currently operate under the following Schemes:
i. Kotak Mahindra Equity Option Scheme 2015 ("ESOP Scheme") ii. Kotak Mahindra
Stock Appreciation Rights Scheme 2015 ("SARs Scheme").
During the year, the Bank granted Employee Stock Options and SARs to the eligible
employees of the Bank and its subsidiaries, in accordance with the respective Schemes and
as approved by the Nomination and Remuneration Committee.
The disclosure requirements under the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014, for the aforesaid ESOP and SARs Schemes, in
respect of the year ended 31st March, 2021, are disclosed on the Bank's website
viz. URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html. The
said Schemes are in compliance of the applicable Regulations and during the year under
review, no material changes were made to the Schemes.
CORPORATE SOCIAL RESPONSIBILITY
Your Bank has constituted the Corporate Social Responsibility ("CSR")
Committee of the Board, in accordance with the provisions of Section 135 of the Companies
Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, as
amended, from time to time.
Your Bank's CSR policy sets out your Bank's vision, mission, governance and CSR focus
areas to fulfill its inclusive agenda across many geographies of India. The Policy also
demonstrates your Bank's contribution towards the economic, environmental and social
growth of the nation and also reflects the organisation's commitment to contribute towards
United Nation's ("UN") Sustainable Development Goals ("SDGs").
It is the constant endeavor of your Bank to enhance its CSR footprint 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.
Your Bank's CSR Committee is responsible for reviewing and recommending to the Board,
the various CSR initiatives for the Bank, including the progress of the Bank's CSR
Projects. Base on the recommendations made by the CSR committee, the Board reviewed and
approved the CSR Policy, Design, Path, Projects, Project Expenditure and related matters.
Thereafter, with the approval of the Board, the CSR Projects were implemented by the Bank.
Your Bank's CSR Policy is available on the Bank's website:
https://www.kotak.com/en/about-us/corporate-responsibility/our-governance.html.
Your Bank's CSR Projects and CSR Project Expenditure for FY 2020-21 are compliant with
the CSR mandate as specified under Sections 134 and 135 of the Act read with Schedule VII
to the Act and 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 prescribed CSR expenditure for FY 2020-21, required under Section 135 of the Act
and the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended from
time to time, was Rs.142.27 crore.
The CSR Expenditure for the period 1st April, 2020 to 31st March,
2021 as required under Section 135 of the Act and the Companies (Corporate Social
Responsibility Policy) Rules, 2014, as amended from time to time amounted to Rs.142.99
crore. Of this amount, the Bank's spend on CSR project expenditure and administrative
overheads for FY 2020-21 was Rs.79.40 crore. Your Bank's CSR administration overhead for
FY 2020-21 was Rs.2.47 crore. The balance amount of Rs.63.59 crore on Unspent CSR Project
Expenditure amount of the ongoing CSR Projects of FY 2020-21 has been transferred to the
‘Kotak Mahindra Bank Limited Unspent CSR Account FY 2020-21' in April 2021 and
the Bank is committed to utilise the same, within the stipulated three years from 1st
April, 2021 to 31st March, 2024, towards completion of the Board approved
ongoing CSR projects which were initiated in FY 2020-21 and continue to be under
implementation as on 31st March, 2021.
Your Bank's CSR Expenditure of Rs.142.99 crore in FY 2020-21, as a percentage of
average net profit under Section 198 of the Act, was about 2.01%. The said CSR Expenditure
of Rs.142.99 crore for FY 2020-21 was 67.83% higher than the CSR Expenditure of about
Rs.85.20 crore in FY 2019-20. Furthermore, as against the stipulated 2% CSR Expenditure
requirement of Rs.142.27 crore under the Act, for FY 2020-21, your Bank's CSR Expenditure
for FY 2020-21 was over Rs.142.99 crore.
The implementation of the CSR projects and programmes in FY 2020-21 had been done
either directly and / or through implementing partner organisations having a proven track
record of implementing cost and process efficient CSR projects and/or programmes that were
scalable, sustainable, outcome driven and committed to make a positive societal impact.
Also, your Bank's employees have been actively volunteering and providing on ground
support for the Bank's various CSR initiatives, including financial and other assistance
directly to the severely impact communities and also through various organizations working
on COVID-19 relief operations.
To combat COVID-19 pandemic that continues to hit humanity across geographies, your
Bank continues to support various constituencies including the urban and rural poor,
tribal communities, doctors, nurses, policemen, frontline workers on COVID-19 duty via
various means such as contributing food packets, ration kit, masks, face shields,
sanitizers, Personal Protective Equipment Kits ("PPE Kits"), ICU beds,
ventilators, oxygenators and such other medical equipments, including extending financial
assistance to the marginalised communities who were severely impacted by COVID-19 during
last financial year's lockdown and even post lockdown period.
Based on the CSR Committee's review and recommendation, your Bank's Board had reviewed
and approved all CSR Projects, CSR Project Expenditure Payments, CSR Administration
Overhead Expenses including the Unspent CSR Project Expenditure Funds of FY 2020-21, which
had been transferred to Kotak Mahindra Bank Limited Unspent CSR Account FY 2020-21, in
April 2021. A brief outline of the CSR Policy, including the over view of the programs
undertaken, the composition of the CSR Committee, CSR expenditure during the year under
review, has been provided in the Annual Report on CSR activities annexed to this report
and also in the Business Responsibility Report section of the Annual Report for FY
2020-21.
BUSINESS RESPONSIBILITY REPORT
In terms of Regulation 34(2)(f) of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015, the Bank is required to
submit its Business Responsibility Report as part of its Annual Report. The said Report
describes the initiatives taken by the Bank from an Environmental, Social and
Governance perspective and is available on the Bank's website viz. URL:
https://www.kotak.com/en/investor-relations/ financial-results/annual-reports.html. Any
Member interested in obtaining a copy of this Report may write to the Company Secretary of
the Bank at avan.doomasia@kotak.com or submit a written request to the Registered
Office of the Bank.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE PRACTICES
Your Bank's operations are designed to create a positive impact on environment,
employees, customers and the community at large. Your Bank strives to strike a balance
between the environmental, social and economic aspects acknowledging natural capital and
communities as an integral part of the business. Your Bank believes in growth beyond the
numbers. Growth, which would last long and include all its stakeholders, planet and
society at large. Environmental, Social and Governance ("ESG") practices are
integral components of your Bank's business functions and are embedded in the systems and
processes. Your Bank also acknowledges the importance of the triple bottom-line reporting
and the associated interdependencies. Your Bank has a well-defined ESG framework which
provides guidance to conduct business in an ethical, responsible and transparent manner.
TECHNOLOGY AND DIGITISATION
The COVID-19 crisis has brought about years of change in the way your Bank does its
business and the situation has made it clear how important the below points are to make
Digital work for customers:
• Redefining customer experience: Putting customers and their needs to the
forefront to build solutions with staying power.
• Developing a data strategy / governance for personalisation: Building solutions
means knowing what data you have, what data you need, what questions you need to ask of
that data and how to interpret the answers so that the customers can be catered in a best
way.
• Taking a portable devices view: From contactless banking to account access,
customers expect product and service accessibility from portable devices, at a short
notice.
Focusing on the above points, your Bank has further accelerated the digitisation of
Customer Experience and Digital Channels, Transactions and Payments, Productivity and
Growth Initiatives, New Business Models, Future Ready- Technology and Capability Building
so that it could address the:
• Changing customer needs or expectations
• Increasing customer demand for online purchasing and/or services
• Increase in remote working and/or collaboration
• Increase in migration of assets to cloud
• Increased spending on cyber-security.
As the zero-contact, completely digital and paperless account opening was the need of
the hour in the COVID-19 situation, your Bank ensured that it has integrated the Video KYC
process in the account opening journey to carry out the verification of KYC documents and
recording of the customer's signature via a video call, eliminating the need for a visit
to a Bank's branch or in-person interaction, biometric verification or sharing of physical
documents. After the Video KYC is completed, the customer gets a full-fledged bank account
with no restrictions on deposits or account balances. This is one of the major projects
that has been born and implemented in the cloud.
Net Banking 2.0 was launched keeping in mind the changing customer experience by
ensuring the customer's entire relationship with the Bank at a glance i.e. in a single
page view. The design was envisaged for superior customer experience delivered through
fast, intuitive interface with contextual content, product and service.
Data governance has become indispensable for your Bank's data management initiatives,
along with controlling the ever-growing amount of data in order to improve business
outcomes.
Automated Teller Machine ("ATM") Terminal Security was introduced to ensure
the greatest degree of visibility and control over secured ATM operations and helps to
enforce regulatory compliance. The solution has several security features i.e. application
whitelisting / blacklisting / sand boxing, USB protection, full hard drive encryption,
patch management, time based access management, etc.
Customer Relationship Management NEXT has enabled your Bank to deploy smart,
intelligent journeys resulting in faster fulfillment and go to market for your Bank's new
products and services and lower cost of sales. It has boosted your Bank's capabilities to
deliver superlative customer experience and further strengthen customer loyalty.
Corporate Loan Origination System ("LOS") is the most appropriate automated
solution for all the lending needs of a financial product. Corporate LOS is a mature,
internet-based, end-to-end software solution, specifically built for processing corporate
loans which enables easy tracking, paperless processing, real-time decisions, grow
customer relationships, reduce risk and increase customer satisfaction.
In the era of data deluge, efficient data curation is a persistent challenge across
organisations. Citing this, your Bank has implemented efficient data curation solution
which transforms using Cognitive Machine Reading / Optical Character Recognition based
techniques, the documents / scanned images to readable format for further processing. This
is aimed at the end-to-end management of data lifecycle – from acquisition through
extraction and downstream consumption of such data.
Liquitics Asset Liability Management is implemented which uses advanced scenario and
assumption modeling to give deep insight into the Balance Sheet, Capital and long term
liquidity. This Solution has helped your Bank to scale on demand, cater to regulator with
the reports for ALM, Liquidity Coverage Ratio, Net Stable Funding Ratio, liquidity
risk, etc.
Your Bank has also helped to build the platform of National Health Mission, an
initiative by Government of Rajasthan.
Your Bank has recently forayed into an addition of cloud based platform for its big
data capabilities. The step was taken keeping in mind the scalability challenges,
especially with respect to the time to market and support for advancements in this area.
Your Bank has initiated a small scale set-up on Amazon Web Services cloud based big data
cluster for its ambitious complex use cases for fraud prevention. Based on the success of
these use cases, your Bank intends to scale up the cluster for big use cases like real
time recommendation engine using big data and machine learning.
The changing customer preferences is driving your Bank to provide 24x7 connectivity and
increasingly digitised processes, creating new expectations and new risks. Further, your
Bank is continuously evolving operational resilience to deliver critical operations
through disruption.
Even though Business Continuity Planning has been an integral part of all functions
across your Bank due to COVID-19, the rapid shift to remote working was seamlessly catered
by Information Technology for the majority of the staff and business associates. Further,
the IT operations were been carried out remotely i.e. End of Day / Beginning of Day,
backup, application support, end-user support, etc.
Further, to continuously ensure the protection of the end point systems, your Bank has
implemented Endpoint Protection Platform ("EDPR") on all end points. The
objective of this solution is to detect and prevent the customised malware to be executed
on an endpoint system.
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 and Regulatory, Technology Operations Automation
and Adoption of Emerging Technologies. Your Bank has initiated specific initiatives in
each of the areas to ensure productivity, efficiency and significant improvement in
customer experience, which is an ongoing process. Investments are being made to leverage
Cloud, DevOps, Big Data, Face Recognition, etc. Core Banking, Credit Card Platform, Retail
Assets, Treasury systems were areas which were being modernised.
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.
The technology platforms used by your Bank have adequate level of component / system
level redundancy built into the production systems. Critical technology platforms /
systems have a disaster recovery set up at a Disaster Recovery ("DR") site which
can be utilised in the case of any major outages in the corresponding production system.
Assurance of the DR set up is provided through Disaster Recovery drills carried out as per
an annualised drill calendar and measurement of Recovery Point Objective and Recovery Time
Objective parameters of the DR set up on an ongoing basis.
SUBSIDIARIES AND ASSOCIATES
As at 31st March, 2021, your Bank had nineteen subsidiaries in various
businesses, as listed below:
| Sr. No Name of the subsidiary |
Business activity |
| 1. Kotak Mahindra Prime Limited |
Car Finance and other Lending |
| 2. Kotak Mahindra Investments Limited |
Investments, Lending |
| 3. Kotak Infrastructure Debt Fund Limited |
Infrastructure Financing |
| 4. Kotak Securities Limited |
Stock Broking, E-Broking, Distribution |
| 5. Kotak Mahindra Capital Company Limited |
Investment Banking |
| 6. Kotak Mahindra Life Insurance Company Limited |
Life Insurance |
| 7. Kotak Mahindra General Insurance Company Limited |
General Insurance |
| 8. Kotak Mahindra Asset Management Company Limited |
Mutual Fund |
| 9. Kotak Mahindra Trustee Company Limited |
Trustee company |
| 10. Kotak Mahindra Pension Fund Limited |
Pension Fund |
| 11. Kotak Investment Advisors Limited |
Alternate Asset Management |
| 12. Kotak Mahindra Trusteeship Services Limited |
Trusteeship Services |
| 13. Kotak Mahindra (UK) Limited |
Distribution |
| 14. Kotak Mahindra (International) Limited |
Advisory Services, Investments |
| 15. Kotak Mahindra Inc. |
Broker / Dealer |
| 16. Kotak Mahindra Asset Management (Singapore) Pte. Limited |
Asset Management |
| 17. Kotak Mahindra Financial Services Limited |
Advisory services for Middle East |
| 18. IVY Product Intermediaries Limited |
Distribution |
| 19. BSS Microfinance Limited |
Banking Correspondent |
Kotak Mahindra Life Insurance Company Limited ("KLI"): KLI has recorded a
growth of 7.4% on the gross written premium, mainly coming from renewal premium and
Individual new business. KLI has solvency ratio of 2.90 against a regulatory requirement
of 1.50. The Net worth of KLI increased by 20.60% from
Rs.3,353.50 crore as on 31st March, 2020 to Rs.4,045.50 crore as on 31st
March, 2021. On individual Adjusted Premium Equivalent ("APE") Basis (Single
1/10), KLI was posted 8th rank within the private industry. KLI's market share
for Individual New Business premium (APE terms) was 4.0% for FY 2020-21 amongst private
insurers. On group APE Basis (Single 1/10), KLI has posted 2nd rank within the
private industry. KLI's market share for Group New Business premium (APE terms) was 14.7%
for FY 2020-21 amongst private insurers. KLI saw an increase in its Assets under
Management ("AUM") (including shareholders) by 33.23% YoY to Rs.46,518.07 crore
in FY 2020-21. Further, Operating expense ratio improved to 13.6% as against 14.2% in
previous year. This was possible by a 7.4% YoY growth in total premium in FY 2020-21 and
is also attributed to improved productivity while maintaining cost around the same level
as the previous year. The second wave of COVID-19 led to an unprecedented increase in
fatalities in the country and consequently, the death claims being reported from May 2021.
In view of these COVID related developments, it is estimated that claims, net of
reinsurance, for the quarter ending June 2021, would be significantly higher than
expected. Due to increased claims and higher mortality related provisioning arising on
account of the second wave, KLI incurred a loss for the quarter ended 30th
June, 2021 of Rs.243.44 crore on the Shareholder's Account. The provisioning, going
forward, will depend on the trends in mortality. KLI continues to have a strong capital
and solvency position.
Kotak Securities Limited ("KSL") and Kotak Mahindra Capital Company Limited
("KMCC"): In FY 2020-21, the Indian Equity Capital Markets witnessed a
record fundraising year completing 32 Initial Public Offers ("IPOs"), 1 Further
Public Offer ("FPO"), 32 Qualified Institutional Placement ("QIP"), 35
Offer for Sale ("OFS") and 20 Rights Issue. Post the impact of COVID-19 on the
first few months of FY 2020-21, the record surge in activity can be primarily attributed
to monetary and fiscal stimulus by Central Banks globally and locally leading to a Foreign
Institutional Investors ("FII") inflow of US$ 38 billion into Indian markets in
FY 2020-21. Capital markets initially witnessed mega-QIPs by Banks and NBFCs, followed by
a resumption in IPO activity in the latter half of FY 2020-21. Further, the Sensex
closed at 49,509 as on 31st March, 2021 compared to 29,468 as on 31st
March, 2020, with a high of 52,516 and low of 27,500. Similarly, the benchmark Nifty which
closed at 8,598 as on 31st March, 2020 closed at 14,691 as on 31st
March, 2021 with a high of 15,431 and low of 8,056. Accordingly, KSL and KMCC reported
higher profits compared to previous year.
Kotak Mahindra Asset Management Company Limited ("KMAMC"): The growth in
the Mutual Funds industry continues. The industry registered a growth of 19.2% YoY in Q4
of FY 2020-21 over Q4 of FY 2019-20 with the Quarterly Average Assets under Management
("QAAUM") for Q4 of FY 2020-21 at Rs.32.37 lakh crore. During the same period,
on the basis of percentage growth in QAAUM, KMAMC was amongst the third fastest growing
Mutual Fund House – within the top 10 Fund Houses ranked by QAAUM. The QAAUM which
stood at Rs.234,798 crore for January to March 2021 has seen growth of around 26% in Q4 of
FY 2020-21 over Q4 of FY 2019-20. KMAMC jumped one rank and is now the 5th
largest Fund House in the country in terms of QAAUM as on 31st March, 2021
vis--vis 31st March, 2020. Market Share in QAAUM has grown to 7.25% in Q4 of
FY 2020-21 from 6.86% in Q4 of FY 2019-20 and 5.41%, 3 years back. The annual AAUM of
KMAMC for FY 2020-21 was Rs.202,826 crore against Rs.173,394 crore in FY 2019-20, a growth
of 17%.
Kotak Mahindra Prime Limited ("KMPL") and Kotak Mahindra Investments Limited
("KMIL"): The passenger car market in India de-grew by 1.5% in FY 2020-21
compared to 17.4% de-growth in FY 2019-20. Due to the change in regulations last year,
there was a decrease in the loan book of the Bank's NBFC subsidiaries. KMPL and KMIL held
a COVID-19 related general provision of Rs.90 crore and Rs.27 crore, respectively. The
above factors have impacted the profits of these companies.
Kotak Mahindra Pension Fund Limited ("KMPFL"): Your Bank had acquired
1,30,80,000 equity shares (46.7% of the issued and paid-up Equity Share Capital) of KMPFL
from Kotak Mahindra Asset Management Company Limited on 17th May, 2021.
Post-acquisition of equity shares of KMPFL by the Bank, KMPFL had now become a direct
subsidiary of the Bank, with the Bank now holding 51%.
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 Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015. KLI is a material subsidiary_of the Bank.
The various activities of the subsidiaries and the performance and financial position
of the subsidiaries and associate companies are outlined in the Management Discussion and
Analysis section appended to this Report. Pursuant to the provisions of Section 129(3) of
the Companies Act, 2013 ("Act"), the Statement containing the salient features
of the Financial Statements of the said subsidiary companies of the Bank, in Form AOC-1,
is annexed to this Annual Report. As at 31st March, 2021, your Bank had the
following three Associate companies: i. Infina Finance Private Limited ii. Phoenix ARC
Private Limited iii. ECA Trading Services Limited (previously known as ACE Derivatives
& Commodity Exchange Limited)
Further, pursuant to the provisions of Section 136(1) of the Act, the Annual Report of
the Bank, containing the standalone and consolidated financial statements and all other
relevant documents required to be annexed thereto are available on the Bank's website viz.
URL: https://www.kotak.com/en/investor-relations/ financial-results/annual-reports.html
and the separate audited financial statements in respect of each of the subsidiaries, are
available on the Bank's website viz. URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html.
The financial statements of the subsidiaries used for consolidation of the Bank's
consolidated financial statements are special purpose financial statements prepared in
accordance with "GAAP" specified under Section 133 of the Act read with relevant
notifications.
The Ministry of Corporate Affairs ("MCA") has issued General Circular No.
20/2020 dated 5th May, 2020 and Circular no. 02/2021 dated 13th
January, 2021 and the Securities and Exchange Board of India has issued Circular No.
SEBI/HO/CFD/ CMD1/CIR/P/2020/79 dated 12th May, 2020 and Circular no. SEBI/HO/
CFD/CMD2/CIR/P/2021/11 dated 15th January, 2021 in relation to "Relaxation
from compliance with certain provisions of the SEBI Listing Regulations" in view of
the prevailing situation and owing to the difficulties involved in dispatching of physical
copies of the Annual Report and the Notice convening the Annual General Meeting
("AGM"). Members who wish to have physical copy may write to the Company
Secretary of the Bank at avan.doomasia@kotak.com or submit a written request to the
Registered Office of the Bank. In accordance with the aforesaid Circulars, the weblink of
the Annual Report and the Notice convening the AGM of the Bank 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 financial year ended 31st March, 2021, can get
their email address registered by following the steps as detailed in the Notice convening
the AGM. The Annual Report of your Bank and its subsidiaries will be available on your
Bank's website viz. URL: https://www.kotak.com/
en/investor-relations/financial-results/annual-reports.html.
PROMOTER STAKE DILUTION MATTER
In January 2020, basis a proposal submitted by the Bank and accepted by Reserve Bank of
India ("RBI"), RBI conveyed its ‘in-principle' approval of the revised
terms in relation to the dilution of promoter shareholding which, inter alia,
required the Promoters' shareholding in the Bank to be reduced to 26% of Paid-up Voting
Equity Share Capital ("PUVESC") of the Bank within 6 months from the date of
final approval of RBI.
On this basis, the writ petition filed by the Bank was withdrawn and, thereafter, on 18th
February, 2020, the RBI accorded its final approval to the above. Post the Qualified
Institutional Placement in May 2020 and subsequent sale of shares by promoters in the
secondary market, the shareholding of the promoters in the Bank has reduced.
Your Bank is now in compliance with the requirement of 26% of PUVESC as stipulated by
the RBI, within the prescribed timeline.
BOARD OF DIRECTORS
Board Composition
The composition of the Board of Directors of the Bank is governed by the Companies Act,
2013 ("Act"), Banking Regulation Act, 1949 ("BR Act") and Regulation
17 of the Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015 ("SEBI Listing Regulations"). As on 31st
March, 2021, the Board of Directors comprised a combination of ten Directors viz. Mr.
Prakash Apte, Independent Non-Executive Part-time Chairman, Mr. Uday Chander Khanna, Mr.
Uday Shankar, Ms. Farida Khambata and Dr. Ashok Gulati, Independent Directors, Mr. C.
Jayaram, Non-Executive Director, Mr. Uday Kotak, Managing Director & Chief
Executive Officer, Mr. Dipak Gupta, Joint Managing Director, Mr. K.V.S. Manian and Mr.
Gaurang Shah, both Whole-time Directors. Hence, the Board is in conformity with the
aforementioned provisions with respect to its composition and the size of the Board is
commensurate with the size and business of the Bank. The Board mix provides a combination
of professionalism, knowledge and experience required in the banking industry.
Change in composition of the Board during the year
At the meeting of the Board of Directors of the Bank held on 13th May, 2020,
the Board approved the re-appointments of Mr. Uday Kotak as the Managing Director
& Chief Executive Officer, Mr. Dipak Gupta as Joint Managing Director and Mr. Prakash
Apte as Part-time Chairman of the Bank, with effect from 1st January,
2021 till 31st December, 2023. Subsequently, the Members, at the Annual General
Meeting ("AGM") of the Bank held on 18th August, 2020,
approved the said appointments, subject to the approval of RBI.
Further, Reserve Bank of India ("RBI") approved the aforementioned
re-appointments of Mr. Uday Kotak as the Managing Director & Chief Executive
Officer, Mr. Dipak Gupta as Joint Managing Director and Mr. Prakash Apte as the Part-time
Chairman of the Bank for a period of three years, with effect from 1st January,
2021.
Based on the recommendation of the Nomination and Remuneration Committee
("NRC"), the Board of Directors of the Bank at its meeting held on 5th
March, 2021, approved the appointment of Dr. Ashok Gulati (DIN:07062601) as an Additional
Director of the Bank holding office up to the ensuing AGM of the Bank and as an
Independent Director of the Bank for a term of five years, with effect from 6th
March, 2021, subject to the approval of the Members of the Bank. In terms of Section 160
of the Act, the Bank has received, in writing, a notice from a Member, proposing the
candidature of Dr. Gulati for the office of a Director. The approval of the Members is
being sought at the ensuing AGM of the Bank, for the appointment of Dr. Ashok Gulati as a
Director and as an Independent Director of the Bank for a term of five years, with effect
from 6th March, 2021.
Further, Prof. S. Mahendra Dev (DIN: 06519869) ceased to be an Independent Director of
the Bank, with effect from 14th March, 2021, consequent upon completion of
eight years on the Board of the Bank, in accordance with the provisions of Section 10
(2A)(i) of the B R Act. Your Directors place on record their sincere appreciation for the
contribution made by Prof. Dev during his tenure as a Director of the Bank.
The Members of the Bank had, at the AGM held on 20th July, 2017, approved
the appointment of Mr. Uday Chander Khanna (DIN No. 00079129) as an Independent Director
on the Board of the Bank, to hold office for a period of 5 years commencing from 16th
September, 2016 up to 15th September, 2021. The Bank has received a declaration
from Mr. Khanna to the effect that he meets the criteria of independence as provided under
Section 149(6) of the Act read with the Rules framed thereunder and Regulation 16(1)(b) of
the SEBI Listing Regulations and is also eligible to be appointed as a Director in terms
of
Section 164 of the Act. Mr. Khanna has also given his consent to act as a Director.
Based on the recommendation of the NRC and on the basis of the skill, expertise and
outcome of performance evaluation, the Board of Directors of the Bank, at its meeting held
on 29th June, 2021, approved the re-appointment of Mr. Khanna as an Independent
Director of the Bank, to hold office for a second term of three years, with effect from 16th
September, 2021 up to 15th September, 2024 (both days inclusive),
subject to the approval of the Members of the Bank. This is in line with the provisions of
Section 10A(2A) of the BR Act which stipulates a maximum permissible tenure of eight
continuous years, as a Non-Executive Independent Director.
Directors retiring by rotation
At the Meeting of the Board of Directors held on 29th June, 2021, the Board
approved the proposal relating to the re-appointment of Mr. C. Jayaram (DIN:
00012214), as the Non-Executive Director of the Bank, liable to retire by rotation at the
ensuing AGM, in terms of Section 152 of the Act. The details of the Directors along with
the rationale for their proposed appointment / re-appointment, as mentioned above, are
included in the Notice convening the Thirty-Sixth AGM of the Bank.
Declaration from Independent Directors
All the Independent Directors of the Bank have submitted the requisite declarations
stating that they meet the criteria of independence as prescribed under Section 149 (6)
and (7) of the Act and Regulation 16(1)(b) of the SEBI Listing Regulations. The said
declarations were placed before the Board for their review. The Board, after due
assessment, has confirmed and taken on record the said declarations and has duly verified
the same. In the opinion of the Board, all the Independent Directors fulfil the said
conditions as mentioned in Section 149(6) of the Act and SEBI Listing Regulations 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 with respect to registration with the Indian
Institute of Corporate Affairs for the Independent Directors' Data base and have passed
the proficiency test or are exempted from the same. There has been no change in the
circumstances affecting their status as Independent Directors of the Bank. In the opinion
of the Board, the Independent Directors possess the requisite integrity, experience,
expertise and proficiency required under all applicable laws and the policies of the Bank.
Certificate from a Company Secretary in Practice
In terms of Regulation 34(3) read with Schedule V of the SEBI Listing Regulations, the
Bank has obtained a Certificate from Rupal D. Jhaveri, Practising Company Secretary,
confirming that none of the Directors on the Board of the Bank have been debarred or
disqualified from being appointed or continuing as Directors of the companies either by
the Securities and Exchange Board of India or the Ministry of Corporate Affairs or any
other Statutory / Regulatory Authorities. The certificate obtained by the Bank from Rupal
D. Jhaveri, Practising Company Secretary, is annexed to this Report.
Director e-KYC
The Ministry of Corporate Affairs has vide amendments to the Companies (Appointment and
Qualification of Directors) Rules, 2014, mandated registration of KYC of all Directors.
All the Directors of the Bank have complied with said requirement for FY 2020-21.
Board Evaluation
The Bank conducted the performance evaluation of the Individual Directors, Board
Committees, the Board as a whole and the Chairman of the Bank in accordance with the
provisions of the Act and the SEBI Listing Regulations including Guidance Note on Board
Evaluation issued by SEBI on 5th January, 2017. The NRC of the Board approves
the criteria and the mechanism for carrying out the said performance evaluation process.
Accordingly, the NRC approved the assessment questionnaire designed for the annual
performance evaluation which broadly covered the following criteria: (i) Board -
Competencies, composition and structure, board dynamics, process and procedure,
functioning, oversight of committee functioning and ethics and compliance.
(ii) Committees - Composition and quality, adequacy of independence, congenial
environment for operation, frequency, flow of updates, process and procedure, terms of
reference and effectiveness in terms of respective roles assigned to the Committees.
(iii) Chairman - Key focus areas covering understanding of the role, commitment, team
work attributes, utilisation of domain expertise, effective communication, etc.
(iv) Individual Directors - Understanding of role, commitment, effective contribution,
independent view to decision making, etc.
The aforesaid questionnaire was circulated to all the Directors of the Bank for the
annual performance evaluation. The Board evaluated the effectiveness of its functioning
and that of the Committees and of individual Directors through the annual Board Evaluation
Process.
The Bank had engaged an external professional services firm for issuing a report on the
Board Evaluation for the Bank, based on the responses received from the Directors. 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 held on 5th March, 2021,
assessed the performance of the Independent Directors and the outcome of the Board
performance evaluation exercise.
The Directors noted that the results of the performance evaluation of the Board and its
Committees, Chairman and individual directors indicated a high degree of satisfaction
amongst the directors. Some of the suggestions given by the Directors were continuing
education program including on-boarding, to enhance understanding of relevant risk,
regulatory and industry issues, increasing the frequency of Committee Meetings, enhancing
the role of the NRC and the Audit Committee of the Bank. The Bank has accepted all the
suggestions made which emanated from the Board performance evaluation and appropriate
action has been taken by arranging training programmes for the Directors, re-viewing the
composition of the Board Committees, making the Risk Management Committee and the Group
Risk Management Committee as Board Committees, increasing the frequency of Committee
Meetings, etc.. The status of compliance of the said suggestions will be reviewed and
reported to the Board.
Further, the Bank had taken necessary steps to comply with the suggestions which had
arisen from the Board performance evaluation for FY 2019-20.
KEY MANAGERIAL PERSONNEL
During the year under review, your Bank has appointed Ms. Avan Doomasia as the Company
Secretary and Key Managerial Personnel of the Bank, with effect from 1st
December, 2020 consequent upon the retirement of Ms. Bina Chandarana, with effect from the
close of business hours on 30th November, 2020. The following officials of the
Bank are the Key Managerial Personnel pursuant to the provisions of Section 203 of the
Companies Act, 2013 and Rule 8 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014: i. Mr. Uday Kotak, Managing Director & Chief
Executive Officer ii. Mr. Dipak Gupta, Joint Managing Director iii. Mr. K.V.S. Manian,
Whole-time Director iv. Mr. Gaurang Shah, Whole-time Director v. Mr. Jaimin Bhatt, Group
President and Group Chief Financial Officer vi. Ms. Avan Doomasia, Company Secretary
POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
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 and Remuneration
Committee ("NRC") has formulated the criteria for appointment of Directors and
Senior Management Personnel. Based on the criteria set, the NRC 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
identifies 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 and 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, the NRC recommends the candidate to the Board.
The Bank adheres to the process and methodology prescribed by the Reserve Bank of India
("RBI") in respect of the ‘Fit & Proper' criteria as applicable to
Private Sector Banks, signing of Deeds of Covenants which binds the Directors to discharge
their responsibilities to the best of their abilities, individually and collectively in
order to be eligible for being appointed/re-appointed as a Director of the Bank. The
prescribed declarations / undertakings given by the Directors, other than that of the
Members of the NRC, are placed before the NRC and the declarations / undertakings given by
the Members of the NRC are placed before the Board, for its review and noting.
The said declarations / undertakings are obtained from all the Directors on an annual
basis and also at the time of their appointment / re-appointment, in compliance with the
said laws. An assessment on whether the Directors fulfil the prescribed criteria is
carried out by the NRC and the Board, on an annual basis and also at the time of their
appointment / re-appointment.
RBI, vide its circular no. DOR.Appt.BC.No.23/29.67.001/2019-20 dated 4th
November, 2019, has issued the Guidelines on Compensation of Whole Time Directors / Chief
Executive Officers / Material Risk Takers and Control Function Staff of Private Sector
Banks on Compensation Policy. In accordance with the aforesaid RBI Circular, the Board of
the Bank has adopted a revised Compensation Policy for its Whole-time Directors, Chief
Executive Officer of the Bank and other employees. The said Policy was amended on 30th
May, 2021 and thereafter on 29th June, 2021. The salient features of the
Compensation Policy are, as follows: Objective:
• To maintain fair, consistent and equitable compensation practices in alignment
with Kotak's core values and strategic business goals.
• To ensure effective governance of compensation and alignment of compensation
practices with prudent risk taking.
• To have mechanisms in place for effective supervisory oversight and Board
engagement in compensation.
• To ensure that the compensation practices are within the regulatory framework
stipulated from time to time by RBI.
Compensation structure comprises total remuneration consisting of:
• Fixed Pay, which includes perquisite pay/ benefits
• Variable Pay, which includes Performance bonus/Incentive, Long Term Incentive
Pay in form of cash bonuses, all share-linked instruments (e.g. ESOP, SARS, etc.)
• Other payments, which includes Joining/ Sign on Bonus, Severance package,
Deferred Incentive Plans, etc.
Further, the employees have been broadly classified into following categories:
(i) Category I – Comprising Managing Director & Chief Executive Officer and
Whole Time Directors ("WTDs"). (ii) Category II – Material Risk Takers
("MRTs").
These include employees whose actions may have material impact on the risk exposures of
the Bank and who satisfy both - qualitative and quantitative criteria, as given below: a.
Qualitative Criteria: Employees in the Grade M10 and above b. Quantitative Criteria: Fixed
Cost To Company ("FTCTC") is Rs.1 crore p.a. and above.
This excludes employees under Category III.
(iii) C ategory III – Risk control and compliance employees, comprising staff in
Grade M9 and above in the following Control functions.
• Risk & Policy function
• Financial Control including group consolidation
• Compliance
• Internal Audit
• Back-office Operations
• Vigilance
• Legal
• Secretarial
• Human Resources
• Corporate Social Responsibility
• Investor Relations
(iv) Category IV: Other employees - This includes all employees, not explicitly covered
in the first three categories.
The limits on the ratio of total Variable Pay (Including Cash or Non Cash Pay) to Fixed
Pay and the limits on the ratio of Cash v/s Non Cash within Variable Pay, is outlined for
each category of employee classification. Further, Malus and Clawback clauses are
applicable as per the Compensation Policy.
The NRC of the Bank and the Board reviewed and approved all the amendments to the said
Compensation Policy.
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, 2021 is
provided in the Report on Corporate Governance annexed to this Report.
Mr. Prakash Apte, the Non-Executive Part-time Chairman of the Bank receives a fixed
amount of remuneration as recommended by the Board and approved by the Members of the Bank
and RBI, from time to time. Mr. Apte also receives remuneration by way of sitting fees for
attending meetings of the Board or Committees thereof.
The RBI had, vide its circular no. DBR.No.BC.97/29.67.001/2014-15 dated 1st
June, 2015 issued guidelines on payment of compensation upto a maximum amount of Rs.10
lakh payable annually to the Non-Executive Directors ("NEDs") of private sector
banks. Accordingly, the Board of Directors of the Bank (in consultation with the
NRC) has formulated and adopted a comprehensive compensation policy for NEDs (other than
Non-Executive Part-time Chairperson). Further, RBI vide its circular bearing No.
RBI/2021-22/24 OR.GOV.REC.8/29.67.001/2021-22 dated 26th April, 2021 titled
"Corporate Governance in Banks - Appointment of Directors and Constitution of
Committees of the Board", effective from FY 2021-22, has permitted payment of fixed
remuneration to the NEDs, excluding the Non-Executive Part-time Chairperson, up to a sum
not exceeding Rs.20 lakh per annum for each NED.
Based on the recommendation of the NRC, the Board at its meeting held on 29th
June, 2021, approved the payment of compensation by way of a fixed remuneration to the
NEDs of the Bank (except the Non-Executive Part-time Chairperson) linked to fixed base
amount plus amounts linked to attendance, membership of specific committees or any other
parameter, upto an amount not exceeding Rs.20 lakh per annum or such other amount as may
be prescribed by RBI, from time to time, subject to the approval of the Members of the
Bank, by way of a special resolution, as required under Sections 197 and 198 of the Act,
at the ensuing Annual General Meeting.
The salient features of the revised Compensation Policy for NED are, as follows: i.
Compensation structure broadly divided into: a. Sitting fees b. Re-imbursement of expenses
c. Compensation in the form of Fixed Remuneration ii. Amount of sitting fees and
remuneration to be decided by the Board from time to time, subject to the regulatory
limits. iii. Overall cap on compensation in the form of fixed remuneration for each NED
(excluding the Non-Executive Part-time Chairperson) of Rs.20 lakh per annum or such other
amount as may be prescribed by the RBI, from time to time. iv. NEDs not eligible for any
stock options of the Bank.
The Remuneration paid to the Key Managerial Personnel is in line with the Compensation
Policy of the Bank which is based on the RBI Guidelines. In addition to the above, the
Non-Executive Part-time Chairman of the Bank is paid a fixed remuneration as approved by
RBI and the Members. The Compensation Policy is available on the Bank's website viz. URL:
https://www.kotak.com/content/kotakcl/en/investor-relations/governance/policies.html
DISCLOSURES PURSUANT TO RULE 5 OF COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL
PERSONNEL) RULES, 2014
The disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, are annexed to this Report.
CORPORATE GOVERNANCE REPORT
The Bank is committed to achieving and adhering to the highest standards of Corporate
Governance and constantly benchmarks itself with best practices, in this regard.
Pursuant to Regulation 27 of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing
Regulations"), a separate section entitled ‘Report on Corporate Governance' has
been included in this Annual Report along with the Certificate issued by the Statutory
Auditors of the Bank confirming compliance with the mandatory requirements relating to
Corporate Governance. 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, 2021.
The Bank also files with the Stock Exchanges, the quarterly Report on Corporate
Governance in terms of Regulation 27(2) of the SEBI Listing Regulations. The said Reports
have been uploaded on the website of the Bank and are available on
https://www.kotak.com/en/investor-relations/governance/sebi-listing-disclosures.html.
SECRETARIAL AUDITOR
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of
Directors of your Bank had appointed Parikh & Associates, Company Secretaries, Mumbai,
a peer reviewed firm, to act as the Secretarial Auditor of the Bank for FY 2020-21. The
Secretarial Audit Report for the financial year ended 31st March, 2021 as
required under Section 204 of the Act and Regulation 24A of the Securities and Exchange
Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
("SEBI Listing Regulations") 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
Act for FY 2020-21. The Secretarial Auditor's Report does not contain any qualifications,
reservations, adverse remarks or disclaimers and is annexed to this Report Kotak Mahindra
Life Insurance Company Limited ("KLI"), the Bank's material unlisted subsidiary,
has completed its secretarial audit and there are no reservations or adverse remarks or
disclaimers made in the Secretarial Audit Report for the financial year ended 31st
March, 2021. The Secretarial Audit Report of KLI is annexed to this Report.
In terms of the SEBI circular dated 8th February, 2019, your Bank has
submitted the Annual Secretarial Compliance Report for FY 2020-21 to the Stock Exchanges
within the prescribed time and the same is available on websites of the Stock Exchanges
i.e. the BSE Limited (www.bseindia.com), the National Stock Exchange of India Limited
(www.nseindia.com) and on the Bank's website viz URL:
https://www.kotak.com/en/investor-relations/governance/sebi-listing-disclosures.html.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the operational management,
confirm in pursuance of Sections 134(3) and 134(5) of the Companies Act, 2013
("Act"), that:
(i) your Bank has, in the preparation of the annual accounts for the financial year
ended 31st March, 2021, followed the applicable accounting standards and
guidance provided by The Institute of Chartered Accountants of India 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, 2021 and of the
profit of your Bank for the financial year ended 31st March, 2021;
(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.
ANNUAL RETURN
Pursuant to the provisions of 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 is available on the Bank's website viz. URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html.
STATUTORY AUDITORS
M/s. Walker Chandiok & Co LLP, Chartered Accountants (Firm Registration Number:
001076N/N500013) were appointed as the Statutory Auditors of the Bank for a period of two
years from financial year 2019-20 to financial year 2020-21. In view of the Guidelines for
Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial
Banks (excluding RRBs), UCBs and NBFCs (including HFCs) issued by the Reserve Bank of
India ("RBI") vide Circular No. DoS.CO.ARG/SEC.01/08.91.001/2021-22 dated 27th
April, 2021 ("RBI Circular/Guidelines") read together with Frequently Asked
Questions, the current Statutory Auditors can now be a Joint Statutory Auditor of the Bank
for a continuous period of three years, including the number of years for which they have
been Statutory Auditors, effective FY 2021-22, subject to the audit firms satisfying the
eligibility norms stipulated therein, each year. Further, since the Bank's asset size is
more than the threshold stipulated in the said RBI Circular, the statutory audit of the
Bank would need to be conducted under the joint audit with a minimum of two Joint
Statutory Auditors.
Based on the recommendation of the Audit Committee, the Board at its meeting held on 24th
June, 2021, inter alia, approved and recommended, subject to the approval of RBI,
the following for the approval of the Members: (i) re-appointment of M/s. Walker Chandiok
& Co LLP, as the Joint Statutory Auditors of the Bank, for FY 2021-22, to hold office
from the conclusion of the Thirty Sixth Annual General Meeting ("AGM") until the
conclusion of the Thirty Seventh AGM of the Bank; and (ii) appointment of M/s. Price
Waterhouse LLP, Chartered Accountants (Firm Registration Number: 301112E/E300264) as the
other Joint Statutory Auditors of the Bank, for a period of three years with effect from
FY 2021-22, to hold office from the conclusion of the Thirty Sixth AGM until the
conclusion of the Thirty Ninth AGM of the Bank, subject to the approval of RBI every year,
for the purpose of the audit of the Bank's standalone and consolidated financial
statements.
M/s. Walker Chandiok & Co LLP and M/s. Price Waterhouse LLP have consented to act
as the Joint Statutory Auditors of the Bank and have intimated that such appointment would
be in accordance with the conditions prescribed in Section 139 of the Companies Act, 2013
("Act") and have also confirmed their eligibility to be re-appointed / appointed
(as the case may be) as Statutory Auditors in terms of Section 141 of the Act and
applicable rules and RBI guidelines. The RBI has, vide its letter bearing Ref No.
DOS.ARG.No. PS-91/08.46.005/2021-2022 dated 9th July, 2021 granted its approval
for the aforementioned re-appointment / appointment of the Statutory Auditors for
FY 2021-22.
Further, in terms of the authority granted by the Board to the Audit Committee at its
meeting held on 26th July, 2021, the Audit Committee approved of the
payment of an overall audit fee of Rs.2,90,00,000 lakh for FY 2021-22, to be allocated by
the Bank between M/s. Walker Chandiok & Co LLP and M/s. Price Waterhouse LLP,
depending upon their respective scope of work and additionally out of pocket expenses,
outlays and taxes.
The approval of the Members is being sought at the ensuing AGM for the aforementioned
re-appointment / appointment of the Joint Statutory Auditors of the Bank along with the
proposed annual fee, as set out in the Notice of the ensuing AGM of the Bank.
As required under Regulation 33(1)(d) of the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015, the Joint Auditors
have confirmed that they have subjected themselves to the peer review process of the
Institute of Chartered Accountants of India ("ICAI") and that they hold a valid
certificate issued by the Peer Review Board of ICAI.
There are no qualifications, reservations, adverse remarks or disclaimers made by
Messrs. Walker Chandiok & Co. LLP, Chartered Accountants, in the Statutory Auditors
Report.
Payment of additional fees /remuneration to the existing Statutory Auditors for
financial year 2020-21:
At the AGM of the Bank held on 22nd July, 2019, the Members approved the
appointment of M/s. Walker Chandiok & Co LLP, Chartered Accountants (Firm
Registration Number. 001076N/N500013) as the Statutory Auditors of the Bank for a period
for two years and for the payment of an annual remuneration / fees to them for an
amount of Rs.1,90,00,000 plus outlays and taxes at the applicable rates for the purpose of
audit of the Bank's accounts. Based on the approval and recommendation of the Audit
Committee, the Board at its meeting held on 29th June, 2021, approved of the
payment of additional remuneration, subject to the approval of the Members of the
Bank and such other consents/permissions/ sanctions as may be required from any Regulatory
/ Statutory authority, if any. The approval of the Members is being sought at the ensuing
AGM for payment of additional fees/remuneration of
Rs.24,00,000 plus outlays and taxes at the applicable rates to M/s. Walker Chandiok
& Co LLP, Chartered Accountants, for additional certification requirements and general
increase in efforts for FY 2020-21.
INTERNAL FINANCIAL CONTROLS
The Board of Directors confirm that your Bank has laid down set of standards, processes
and structure which enables it to implement internal financial controls across the
organisation with reference to financial statements and that such controls are adequate
and are operating effectively. Controls are reviewed / revisited / updated / deleted each
year for change in processes / organisational changes/product changes, etc. Given the
COVID-19 pandemic, all additional controls that were implemented due to lockdowns and
consequential Work From Home requirements were also considered and incorporated. Testing
is done for each of the controls with the help of an independent firm of Chartered
Accountants, on behalf of Management, who confirm to the Audit Committee of the Bank, the
existence and operating effectiveness of controls over financial reporting. During the
year under review, no material or serious observations were 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. The Reserve Bank of India ("RBI") had advised Banks vide
circular no. RBI/2015- 16/315DBR.BP.BC. No.76/21.07.001/2015-16 dated 11th
February, 2016 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 ("SCB") (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.BP.BC.No.29/21.07.001/2018-19 dated 22nd March, 2019,
deferred the implementation of Ind AS for SCBs till further notice. The RBI has not issued
any further notification on implementation of Ind AS for SCBs.
As per RBI directions, your Bank has taken the following steps so far: i. Submitted
Standalone Proforma Ind AS Financial Statements to RBI on a quarterly basis effective FY
2018-19, as required. ii. Formed Steering Committee for Ind AS implementation. The
Steering Committee comprises 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 reviews progress of Ind AS implementation.
iii. T he Bank has identified gaps in IT Systems and the changes required to automate
Ind AS. The Bank is in the process of taking necessary steps 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
During the year, except as mentioned below, the Bank has not entered into any
materially significant transactions with its Promoters, Directors, Management,
Subsidiaries or relatives of the Directors/Management, which could lead to a potential
conflict of interest between the Bank and these parties, other than transactions entered
into in the ordinary course of business. All the Related Party Transactions that were
entered into during the financial year were on an arm's length basis and were in ordinary
course of business. Hence, 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 and hence, Form AOC-2 is not applicable to
the Bank. The Members of the Bank have granted their consent by way of Postal Ballot for
entering into / carrying out / and / or continuing with material related party
transactions with Infina Finance Private Limited (Mr. Suresh Kotak, father of Mr. Uday
Kotak, Managing Director & CEO, Promoter and a Key Managerial Personnel of the Bank
and Mr. Jaimin Bhatt, Group President & Group Chief Financial Officer and a Key
Managerial Personnel of the Bank, who are Directors on the Board of Infina Finance Private
Limited) and with Mr. Uday Kotak, Managing Director & CEO and Key Managerial Personnel
of the Bank, with respect to Deposits, other banking transactions / arrangements /
service, etc. which may exceed or have exceeded 10% of the annual consolidated turnover of
the Bank, wherein Deposits would form a substantial portion of such transaction value. The
said transactions were in the ordinary course of business for the Bank and at an arm's
length basis. Other than the aforesaid transactions, the Bank has not entered into any
material financial or commercial transactions with the Directors or the Management or
their relatives or the companies and firms, etc., in which they were either directly or
through their relatives interested as directors and/or partners. The Bank has not entered
into any material financial or commercial transactions with its subsidiaries and other
related parties as per AS-18 and the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 that may have potential
conflict with the interest of the Bank at large. Further, there were no related party
transactions which were not in the ordinary course of business or at an arm's length
basis. 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 25 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.
In terms of the SEBI Listing Regulations relating to Corporate Governance, 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
The provisions of Section 186 of the Companies Act, 2013 ("Act") except
sub-section (1), do not apply to loans made, guarantees given, securities provided by a
banking company in the ordinary course of its business are exempted from the disclosure
requirement under Section 134(3)(g) of the Act.
The particulars of investments made by the Bank are disclosed in Schedule 8 of the
Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.
RISK MANAGEMENT POLICY
Pursuant to Regulation 21 of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015, your Bank has constituted a
Risk Management Committee, details of which can be referred to in the Corporate Governance
report forming part of this Report. Your Bank has a robust Risk Management Framework.
While Risk Management is the responsibility of the Board of Directors, it has delegated
its powers relating to monitoring and reviewing risks associated with the Bank to the Risk
Management Committee. The Bank has also adopted a Group Enterprise wide Risk Management
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 Report appended to this Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
Your Bank has undertaken various initiatives for conservation of energy. Details of the
same are available in the Business Responsibility Report of the Bank which is available on
the Bank's website viz. URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html.
The Bank has used information technology extensively in its operations as detailed in
the para on ‘Technology and Digitisation'. Further, the provisions of Section
134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts)
Rules, 2014 for Foreign Exchange Earnings are not applicable to your Bank.
REPORTING OF FRAUDS BY AUDITORS
During the year under review, no instances of fraud committed in the Bank by its
officers or employees were reported by the Statutory Auditors and Secretarial Auditor
under Section 143(12) of the Companies Act, 2013 to the Audit Committee or the Board of
Directors of the Bank.
MAINTENANCE OF COST RECORDS
Being a Banking Company, your Bank is not required to maintain cost records as
specified by the Central Government under Section 148(1) of the Companies Act,
2013.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
IMPACTING THE GOING CONCERN STATUS AND OPERATIONS IN FUTURE
During the year under review, no significant and / or material order was passed by any
Regulatory or Court or Tribunal against the Bank, which could impact the going concern
status or its future operations.
MATERIAL CHANGES AND COMMITMENT AFFECTING THE FINANCIAL POSITION OF THE BANK
There are no material changes and commitments which affected the financial position of
your Bank, which occurred between the end of the financial year to which the financial
statements relate and up to the date of this Report.
ANNEXURES
The following statements/reports/certificates are annexed to the Directors' Report:
i. Certificate confirming that that none of the Directors of the Bank have been
debarred or disqualified from being appointed or continuing as directors of companies by
SEBI/Ministry of Corporate Affairs or any such statutory authority.
ii. Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014.
iii. Annual Report on Corporate Social Responsibility Activities of the Bank for the
financial year ended 31st March, 2021.
iv. Secretarial Audit Report pursuant to Section 204 of the Companies Act, 2013 and
Regulation 24A of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing
Regulations").
v. Management Discussion and Analysis Report pursuant to Schedule V Part B of the SEBI
Listing Regulations.
vi. Corporate Governance Report pursuant to Schedule V Part C of the SEBI Listing
Regulations.
vii. Certificate from the auditors regarding compliance of conditions of corporate
governance as stipulated in para E of Schedule V of the SEBI Listing
Regulations.
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the valuable guidance
and support received from the Reserve Bank of India, the Securities and Exchange Board of
India, Stock Exchanges, Insurance Regulatory and Development Authority and other
Government and Regulatory agencies.
Your Directors acknowledge the support of the Members for their continued support and
also wish to place on record their appreciation of employees for their commendable
efforts, commitment, teamwork and professionalism.
To,
The Members
Kotak Mahindra Bank Limited
27BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400051
I have examined the relevant registers, records, forms, returns and disclosures
received from the Directors of Kotak Mahindra Bank Limited having CIN L65110MH1985PLC038137
and having registered office at 27BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E),
Mumbai – 400051 (hereinafter referred to as ‘the Company'), produced before me
by the Company for the purpose of issuing this Certificate, in accordance with Regulation
34(3) read with Schedule V Para-C Sub clause 10(i) of the Securities Exchange Board of
India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
In my opinion and to the best of my information and according to the verifications
(including Directors Identification Number (DIN) status at the portal www.mca.gov.in)
as considered necessary and explanations furnished to me by the Company & its
officers, I hereby certify that none of the Directors on the Board of the Company as
stated below for the Financial Year ending on 31st March, 2021 have been
debarred or disqualified from being appointed or continuing as Directors of companies by
the Securities and Exchange Board of India, Ministry of Corporate Affairs, Reserve Bank of
India or any such other Statutory Authority
| Sr. No. Name of the Director |
DIN |
Date of appointment in Company* |
| 1 Mr. Prakash Apte |
00196106 |
18th March, 2011 |
| 2 Prof. S. Mahendra Dev |
06519869 |
15th March, 2013 |
| 3 Ms. Farida Khambata |
06954123 |
7th September, 2014 |
| 4 Mr. Uday Khanna |
00079129 |
16th September, 2016 |
| 5 Mr. Uday Shankar |
01755963 |
16th March, 2019 |
| 6 Dr. Ashok Gulati |
07062601 |
6th March, 2021 |
| 7 Mr. C Jayaram |
00012214 |
1st October, 1999 |
| 8 Mr. Uday Kotak |
00007467 |
21st November, 1985 |
| 9 Mr. Dipak Gupta |
00004771 |
1st October, 1999 |
| 10 Mr. K.V.S Manian |
00031794 |
1st November, 2019 |
| 11 Mr. Gaurang Shah |
00016660 |
1st November, 2019 |
* Date of appointment is taken from MCA1 Ceased to be the Director of
the Bank with effect from 14th March, 2021
Ensuring the eligibility of for the appointment / continuity of every Director on the
Board is the responsibility of the management of the Company. My responsibility is to
express an opinion on these based on my verification. This certificate is neither an
assurance as to the future viability of the Company nor of the efficiency or effectiveness
with which the management has conducted the affairs of the Company.
|
Rupal Dhiren Jhaveri |
|
FCS No: 5441 |
|
Certificate of Practice No.: 4225 |
|
ICSI UDIN: F005441C000522716 |
|
Peer Review Certificate No.: 1139/2021 |
| Place : Mumbai |
|
| Date : June 26, 2021 |
|