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Your Bank's Board of Directors is pleased to present the Report on its business and operations for the financial year ended March 31, 2016.
During 2015–16, your Bank's business strategy was shaped by emerging macroeconomic developments and evolving business dynamics. Re–balancing the portfolio mix continued to be the mainstay of your Bank's business strategy during the year. This, along with other critical business enablers such as a well–calibrated organizational structure, strategic expansion of banking touch–points, actively leveraging on its proven IT prowess, digitization of business processes, among other measures, has enabled your Bank to deliver enhanced customer experience at a reduced operating cost.
As on March 31, 2016. your Bank's aggregate deposits and advances touched Rs. 2,65,720 crore and 7 2,15,893 crore, respectively, implying a growth of 2% and 4%, respectively, over the previous year. Your Bank's business highlights for the period under review are presented in Table 1.
During the year under review, your Bank's gross income amounted to Rs. 31,453 crore, comprising interest income of Rs. 28,043 crore and other income of 7 3,410 crore. Interest expenses stood at Rs. 21,954 crore and operational expenses at Rs. 4,130 crore, accounting for total expenditure (excluding provisions and contingencies). Your Bank's operations during the year resulted in an operating profit of Rs. 5.370 crore.
However, total provisioning of your Bank increased following the RBI's Asset Quality Review (AQR) which required banks to proactive!/ provide for certain accounts. Total provisions other than tax during the year were at Rs. 10,340.82 crore, which mainly include Rs. 9,191 ctore towards provision for non–performing assets, bad and doubtful debts and investments. As a result, your Bank incurred a net loss of Rs. 3,665 crore during 2015–16
For each share with face value of Rs. 10, Earnings per Share (EPS) during the year stood at 7 (21.77), while Book Value per Share stood at 7 107.41 as at end–March 2016. For the financial year 2015–16, the Board of Directors has not recommended any dividend
Institute of Chartered Accountants of India, the Bank's consolidated financial statements included in this Annual Report incorporate the accounts of its subsidiaries and other consolidating entities.
A statement pursuant to Section 129 of Companies Act, 2013 showing key financial of the Bank's subsidiaries/ Joint Venture is included separately in this Annual Report,
Material changes and commitments, if any, affecting financial position of IDBI Bank which have occurred during the end of financial year and the date of Board Report.
There are no material changes and commitments affecting the financial position of the Bank which have occurred between the end of the financial year of the Bank i.e. March 31, 2016 and the date of the Directors' Report i.e. May 20, 2016.
The details in respect of adequacy of Internal financial controls with reference to the financial statements,
The Bank has adequate internal controls and processes in place with respect to its financial statements which provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. These controls and processes are driven through various policies, procedures and certifications. The processes and controls are reviewed periodically.
Your Bank computes regulatory capital requirement for credit, market and operational risks, as prescribed under the Pillar–I guidelines of the Basel III framework, on a quarterly basis. With regard to the requirement for higher quality capital highlighted under Basel III norms, your Bank, at present, has sufficient common equity to meet the regulatory requirements as stipulated in the guidelines.
The Basel guidelines have introduced a mandatory Capital Conservation Buffer (CCB) with effect from March 31, 2016. The CCB is designed to ensure that banks build up buffers during normal times (i.e. outside periods of stress) which can be drawn down in case of losses incurred during stressed period. In line with the transitional arrangements of the regulatory guidelines, the CCB applicable for March 31, 2016 is 0.625% (25% of total CCB of 2.5%). As on March 31, 2016, the Capital to Risk–weighted Assets Ratio (CRAR) of your Bank was 11.67% which is above the minimum regulatory requirement of 9.625% (including CCB). Your Bank's Common Equity Tier 1 (CET 1) ratio was 7.99% which is also above the minimum applicable CET 1 ratio of 6.125% (including CCB) stipulated by RBI. The Tier–I ratio stood at 8.90% as on March 31, 2016 against the regulatory requirement of 7.625% (including CCB).
Your Bank has a Board approved policy on Internal Capital Adequacy Assessment Process (ICAAP), in line with the Piliar–il norms of the Basel 111 framework, which. enables it to internally assess and quantify those risks that are not covered under Pillar–1 as well as develop appropriate strategies to manage risks under normal and stress conditions. Your Bank has adopted a Disclosure Policy in accordance with the Pillar–Ill norms under the Basel framework and consequently, publishes disclosures on the Bank's website at the end of each quarter.
Your Bank is at an inflection point and has a significant opportunity to embark on a path of transformation in order to reinvigorate its financial health. The comprehensive transformational process of the Bank is based on five pillars, viz. Business, People, Processes, Technology and Capital Management. Your Bank, along with leveraging on these five transformational pillars, will also adopt a multi–pronged strategy to achieve its business targets. This multi–pronged strategy will encompass further leveraging the synergy across vertical's, subsidiaries and associate companies; capitalize on areas of core competencies such as project advisory and loan syndication business; augmenting the depositor base; aggressive focus on raising CASA deposits; boosting fee income: stepping up lending to retai' including agricultural and msme Lending, particularly PSL; digitization of processes: strengthening recovery efforts etc. These initiatives will be complemented by strategic expansion of your Bank's network and adoption of latest cutting edge technology to further leverage on its IT prowess to seamlessly cater to the growing business requirements. All these initiatives will ensure high level of customer satisfaction and consequently, improve the profitability of the Bank. The transformation process of your Bank will enable it to carve a niche for itself and emerge as a leading financial conglomerate.
Key Business initiatives
In tandem with the broader objective of obtaining a mere balanced business portfolio mix, your Bank continued to focus on increasing its retail business. To lend support to this business re–orientation process, your Bank offers a bouquet of innovative and customised products and services covering Liability, Asset, Capital Market, Third Party products through its brick and mortar branches and ATMs as well as alternate channels to cater to the diverse needs of its customers. To lend it a competitive edge, your Bank continued to revamp its existing product and services as also introduced new ones.
To widen its reach to the retail customers, the Bank has been continuously striving to expand its footprints by tactically augmenting its branch and ATM network. As on March 31, 2016. your Bank's network stood at 1,846 branches (including one overseas branch) and the number of ATMs stood at 3,310.
Apart from augmenting its brick and mortar branches, your Bank is also continuously expanding and strengthening its alternate channels of delivery by leveraging its state–of–the–art technology infrastructure to provide a wide range of banking services to its customers on 24x7 basis. Your Bank's alternate channels of delivery viz. ATM, internet banking, mobile and tab banking, kiosks, e–lounge facility etc. are designed to deliver a wide range of banking services in a seamless manner. Your Bank accords topmost priority to security and confidentiality of customer transactions, information and data. Consequently, your Bank continues to employ highly sophisticated technology to ensure safe and secure environment for the customer while transacting through alternates channels. Towards this end. one of the path–breaking initiatives launched by your Bank during the year was the 'Abhay App' which enables the customers lo manage their debit card, thereby minimizing chance of misuse.
In adherence to the regulatory guidelines, your Bank continued to focus on Priority Sector Lending (PSL). During the year, your Bank launched two major products viz. IDBI MUDRA Loan and IDBI Bunkar MUDRA Yojana (IBMY) to cater to the credit requirements of all non–farm income generating activities under the Pradhan Mantri Mudra Yojna (PMMY). To supplement the Bank's network, your Bank has appointed corporate as well as individual Business Correspondents/ Business Facilitators (BCs/ BFs) to expand its outreach to the priority sector segments, thereby building a sustainable PSL portfolio.
Your Bank has been proactive in partnering with the policymakers to further the objective of financial inclusion by ensuring access to appropriate financial products and services needed by most vulnerable sections of the society at an affordable cost in a fair and transparent manner.
Your Bank, through its strategically located branches, serves the corporate customers through its three dedicated verticals viz. Corporate Banking Group–I (CBG–I), Corporate Banking Group–ll (CBG–II) and Infrastructure Corporate Group (ICG). While CBG I and CBG II cater to large–sized and mid–sized corporate customers, ICG caters to corporate customers in the infrastructure sector which includes power, telecom, ports, roads and bridges, airports, urban infrastructure development, among other sectors.
Your Bank continues to be proactive in extending project appraisal, debt syndication, structuring and advisory services across various sectors. During the year, your Bank bagged several mandates for appraisal and debt syndication. Your Bank has been consistently ranked as one of the leading debt syndicators in India.
Your Bank has been active in the field of environmental banking for over two decades and has attained the role of a pioneer in this field. Your Bank became the first public sector commercial bank in India to have successfully raised US$ 350 million by way of Green Bonds from the international market. The funds raised through these Green Bonds will be utilised towards funding clean energy projects in India.
Your Bank conducts its domestic and international Trade Finance (TF) business through its full–fledged TF Centres (Authorised Dealer in Foreign Exchange) and retail banking branches across the country so as to serve its corporate and retail trade finance customers. An innovative online facility 'IDBI eTrade' was launched during the year for enabling customers to place online requests for various TF products in a paperless mode and hassle–free manner.
Your Bank's overseas branch at the Dubai International! Financial Centre (DIFC) provides a wide–range of corporate banking services, including External Commercial Borrowings (ECB), Foreign Currency Loans (FCL) and syndication of ECB/ FCL, and trade finance products. Your Bank is also exploring opportunities to expand its presence internationally.
The detailed descriptive of the Bank's business initiatives undertaken during the year is contained in the Management Discussion and Analysis section of the Annual Report.
Considering CSR interventions as an investment in building corporate reputation and employee engagement, your Bank has put in place a Board approved CSR policy in compliance with Companies Act, 2013. Through its CSR interventions, your Bank has been, inter alia, contributing towards promotion of healthcare, improved access to sanitation facilities, advancement of vocational and employable skills, enhancement of livelihood opportunities for disadvantaged strata of the society, supplementing environmental sustainability and holistic development of villages.
Board of Directors
Your Bank's Board of Directors is broad–based and its constitution is governed by the provisions of the Banking Regulation Act, 1949, the Companies Act, 2013, the Articles of Association of your Bank and the requirements of Corporate Governance, as envisaged in SEBI (LODR) Regulations, 2015. The Board functions directly as well as through various Board Committees constituted to provide focused governance in the important functional areas of your Bank.
As on March 31, 2016, the Board comprised of seven Directors, including Managing Director and CEO (MD & CEO), Deputy Managing Director (DMD), one Non–Executive Director and four Independent Directors. Shri Kishor Kharat, Managing Director & CEO as Executive Director, Shri B.K. Batra, Dy. Managing Director as Executive Director, Ms. Snehlata Shrivastava, Central Government official Nominee as Non–Executive Director, Shri S. Ravi, Shri Ninad Karpe, Shri Pankaj Vats and Shri Gyan Prakash Joshi as Independent Directors constituted the Board as on March 31, 2016. The present strength of seven Directors on the Board, as against constitution for the maximum strength of 13 Directors provided for under Article 116 (1), meets the requirement of Article 114 (a) of the Articles of Association.
The Board has a total of sixteen committees, namely, Audit Committee of the Board, Customer Service Committee, Business Review Committee, Information Technology Committee, Executive Committee, Remuneration Committee, Stakeholders' Relationship Committee, Nomination Committee, Frauds Monitoring Committee, HR Steering Committee, Risk Management Committee, Recovery Review Committee, Corporate Social Responsibility Committee, Independent Directors' Committee, Non–Cooperative Borrowers' Review Committee and Wilful Defaulters Review Committee, to oversee various functional aspects of your Bank's business and operations.
Your Bank is committed to adopting the best corporate governance practices. It believes that proper corporate governance is not just a requirement for regulatory compliance, but also a facilitator for enhancement of stakeholders' value. The details of your Bank's corporate governance practices are given in this Annual Report as a separate section under Corporate Governance Report
Business Responsibility Report
The Securities and Exchange Board of India (SEBI), vide its notification in The Gazette of India SEBI/LAD–NR07 GN/2015–16/27 dated December 22, 2015, has mandated the inclusion of Business Responsibility (BR) Report as part of the Annual Report for Top 500 listed entities based on market capitalization at BSE and NSE. The BR Report should describe initiatives taken by the listed entity from an environmental, social and governance perspective. The Bank's Business Responsibility Report has been hosted on the website of the Bank (www.idbi.com >).
Statement under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014
There were no personnel in your Bank's services, during the financial year under review, who received remuneration over Rs. 60 lakh annually. Besides, there were no personnel in the service of the Bank for a part of the year who received remuneration in excess of Rs. 5 lakh per month. Further, there was no personnel employed throughout the financial year or part thereof who was in receipt of remuneration at a rate, which in the aggregate, was in excess of that drawn by Managing Director & CEO or Deputy Managing Director of the Bank and who held by himself or along with his spouse and dependent children, not less than 2% of the equity shares of the Bank.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings, and Outgo
The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not applicable to your Bank. However, your Bank has been increasingly using information technology in its operations.
Directors' Responsibility Statement
The Board of Directors, hereby, declares and confirms that:
a. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
b. The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss of the Bank for that period;
c. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;
d. The Directors had prepared the annual accounts on a going concern basis;
e. The Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and
f. The Directors had devised proper systems to ensure compliance with the provisions of ail applicable laws and that such systems were adequate and operating effectively.
Your Bank's Board of Directors is sincerely grateful to the Government of India, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDA) and all other statutory/ regulatory authorities for their valuable co–operation and guidance. The Board also acknowledges, with gratitude, the co–operation and support received from various State Governments and other banks/ financial institutions. The Board thanks various multilateral institutions and international banks/ institutions for their periodic support. The Board takes this opportunity to put on record its deep sense of gratitude to its loyal shareholders and customers for extending their support during the year, and iooks forward to their continued association in the years ahead. During the financial year, the Bank has received various recognitions and accolades for its excellence in the banking domain. The Board is thankful to all such organizations/ agencies for formally recognizing the Bank's efforts. The Board appreciates the sincere and devoted services displayed by its entire staff and highly values their commitment in improving your Bank's performance.
Deputy Managing Director
Managing Director & CEO (DIN–07266945)
Date : May 20, 2016