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Board ’s REPORT
Your Directors have pleasure in presenting the Second Annual Report of IDFC Bank together with the audited financial statements for the financial year ended March 31, 2016.
IDFC Limited was granted an In–principle approval by the Reserve Bank of India ('RBI') on April 09, 2014 ('RBI In–Principle Approval') to set up a new bank in the private sector under Section 22 of the Banking Regulation Act, 1949. Accordingly, a new company namely IDFC Bank Limited ('IDFC Bank' or the 'Bank') was incorporated on October 21, 2014.
The terms and conditions contained in the RBI In–principle Approval and the Guidelines for Licensing of New Banks in the Private Sector dated February 22, 2013 ('RBI New Banking Guidelines') required IDFC Limited to transfer its lending and borrowing business ('Financing Undertaking') to IDFC Bank. Accordingly, the Financing Undertaking was demerged into IDFC Bank pursuant to the Scheme of Arrangement amongst IDFC Limited and IDFC Bank and their respective Shareholders and Creditors under Sections 391 to 394 of the Companies Act, 1956 ('Demerger Scheme').
Your Bank received final approval from RBI on July 23, 2015 to commence banking business.
The Demerger Scheme became effective and your Bank started its Banking Operations on October 01, 2015.
On October 09, 2015, your Bank issued and allotted to the Shareholders of IDFC Limited; whose names were recorded in the Register of Members of IDFC Limited as on the Record Date (i.e. October 05, 2015), equity shares of IDFC Bank in the ratio of one (1) equity share having a face value of Rs. 10 each of IDFC Bank for every one (1) equity share having a face value of H 10 each of IDFC Limited, each equity share being fully paid–up.
On completion of Demerger, approximately 53% of equity share capital of IDFC Bank was held by IDFC Financial Holding Company Limited, a 100% subsidiary of IDFC Limited and approximately 47% by the Shareholders of IDFC Limited (as on the Record Date).
Your Bank was formally inaugurated by the Hon'ble Prime Minister Shri Narendra Modi at a ceremony in New Delhi on October 19, 2015. Union Minister of Finance, Corporate Affairs, and Information & Broadcasting, Shri Arun Jaitley and Minister of State for Finance, Shri Jayant Sinha, were also present at the launch.
Your Bank got listed on November 06, 2015 on the National Stock Exchange of India Limited ('NSE') and BSE Limited ('BSE').
BUSINESS OVERVIEW AND OUTLOOK
Your Bank's overall business strategy is to replicate IDFC Limited's success as an NBFC, through a differentiated and calibrated foray into the banking sector, with a diversified focus on Commercial and Wholesale Banking, Bharat Banking and Personal and Business Banking business and an added emphasis on infrastructure financing. Accordingly, your Bank's banking business consists of three distinct strategic business verticals as follows:
Commercial and Wholesale Banking caters to large corporates, mid–markets & SME clients (commercial banking), Government business, financial institutions, treasury, cash management, transaction banking and investment banking.
Bharat Banking caters to semi–urban and rural areas.
personal and Business Banking caters to the urban retail consumers.
IDFC Bank is the first universal bank in India to adopt a differentiated service strategy for catering to people in rural and semiurban locations, through intensive use of technology.
Your Bank performed well in FY16 with a Net Profit of Rs. 467 crore. In its first six months of operations, your Bank has successfully and steadily diversified its business mix and added new revenue streams. It has expanded its reach to serve new customer segments both on the retail as well as wholesale side of the business, and is thus well positioned to build a sustainable banking franchise.
Total deposits and borrowings of your Bank stood at Rs. 8,219 crore and Rs. 47,914 crore respectively. The gross advances of your Bank were Rs. 49,667 crore and after reducing provisions of Rs. 3,968 crore, your Bank reported net advances of Rs. 45,699 crore. As at March 31, 2016, your Bank's total balance sheet was of Rs. 73,970 crore.
As at March 31, 2016, your Bank's network comprised 60 branches, 45 of which were Bharat Bank branches in the states of Madhya Pradesh and Karnataka.
Further, details on Financial Summary and Business Review are appearing in the Chapter Management Discussion and Analysis, which forms part of this Annual Report.
Your Directors are pleased to recommend a dividend of Rs. 0.25 per equity share of Rs.10 each (i.e. 2.5%), entailing a payout of Rs. 102 crore including tax on dividend, for the year ended March 31, 2016.
The Register of Members and Share Transfer Books will remain closed from Thursday, July 21, 2016 to Wednesday, July 27, 2016 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2016.
Dividend will be paid to those Members whose names appear in the Register of Members as on Wednesday, July 20, 2016; in respect of shares held in dematerialized form, it will be paid to those Members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date.
Above dividend would be paid subject to approval by the Members at the ensuing Annual General Meeting ('AGM').
AWARDS AND RECOGNITIONS
During the year under review, your Bank was recognized in various ways and the significant awards presented to your Bank are listed below:
• IDFC Bank's Corporate Internet Banking Platform BXP, has been recognized with 'The Innovators 2016 Awards' by the highly respected Global Finance magazine.
• IDFC Bank has won the 'NetApp Innovation Award 2016' for its innovative concept of Micro ATM, which is set to transform rural banking.
• IDFC Bank was named as the bank with 'Best HR & Talent Practices' among private sector banks by the Banking Frontiers magazine, at its Inspiring Workplaces 2015 event.
• IDFC Bank was named the 'India Bond House' for the year 2015, by International Financing Review Asia ('IFR Asia'). The award validates the strength of IDFC Bank's Debt Capital Market ('DCM') business in creating landmark transactions.
CAPITAL RAISING & CAPITAL ADEQUACY RATIO
During FY16, the Board of Directors of the Bank at its meeting held on April 29, 2015 and August 25, 2015 issued 1,250,000,000 and 547,462,668 equity shares respectively to IDFC Financial Holding Company Limited (Holding Company) by way of Rights Issue and subsequently the allotment was made.
Pursuant to the Demerger Scheme, the Allotment & Share Transfer Committee of the Bank at its meeting held on October 09, 2015 allotted 1,594,020,668 equity shares of Rs. 10 each to 492,106 equity shareholders of IDFC Limited whose names were recorded in the Register of Members of IDFC Limited as on the Record Date, i.e. October 05, 2015.
Additionally, the Bank issued and allotted 1,090,000 equity shares of Rs. 10 each of the Bank to eligible employees of the Bank on exercise of Options granted under IDFC Bank Limited Employee Stock Option Scheme 2015 ('IDFC Bank ESOS – 2015').
As on March 31, 2016, the issued, subscribed and paid–up share capital of your Bank was Rs.33,926,233,360 comprising of 3,392,623,336 equity shares of Rs. 10 each.
Subsequently in April 2016, the Bank issued and allotted 2,223,674 equity shares of Rs. 10 each of the Bank to eligible employees of the Bank on exercise of Options granted under IDFC Bank ESOS – 2015 which resulted in an increase in share capital and the share capital now stands at Rs. 33,948,470,100 i.e. 3,394,847,010 equity shares of Rs. 10 each.
Your Bank is well capitalised and has a Capital Adequacy Ratio ('CAR') under Basel III as at March 31, 2016 of 22.04% with Tier I being 21.50%.
During the year, your Bank has not issued any instrument eligible under Tier II.
Also, your Bank has not issued any equity shares with differential voting rights during the year.
Being a banking company, the disclosures required as per Rule 8(5)(v)&(vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.
LOANS, GUARANTEES OR INVESTMENTS IN SECURITIES
Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given or securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from disclosure requirements under Section 134(3)(g) of the Companies Act, 2013.
SUBSIDIARY / ASSOCIATE COMPANIES
IDFC Bank does not have any subsidiary company. However, it has two associate companies namely Feedback Infra Private Limited and Millennium City Expressways Private Limited in which it holds 24.61% and 29.98% equity stake respectively.
The Bank's policy for determining material subsidiaries is available on the Bank's website: www.idfcbank.com.
Further, a statement containing salient features of the financial statement of associate companies in Form AOC–I is appended as Annexure 1.
IDFC Bank considers gender diversity during its recruitment process. The employee strength of your Bank was 2,405 as of March 31, 2016 out of which 466 are women employees.
In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in this Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the Members of the Bank. The said information is available for inspection at the Registered Office and Corporate Office of the Bank during working hours and any Member interested in obtaining such information may write to the Company Secretary & Chief Compliance Officer and the same will be furnished on request.
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure 2.
EMPLOYEE STOCK OPTION SCHEME
The Stock Option Scheme enables the Bank to hire the best talent for its senior management.
Pursuant to the Resolution passed by the Members of the Bank at the Extraordinary General Meeting held on December 09, 2014; your Bank had introduced 'IDFC Bank ESOS – 2015' and approved grant of Options not more than 2.5% of the paid up capital of the Bank, from time to time, to enable the eligible employees of the Bank to participate in the future growth and financial success of the Bank.
Pursuant to the Demerger Scheme, on the Effective Date, the employees that were transferred with the Financing Undertaking to IDFC Bank, as well as all remaining employees of IDFC Limited or their respective subsidiaries, who had been granted Options under IDFC Limited Employee Stock Option Scheme 2007, which were not exercised (vested or unvested), as of the Record Date, were granted One (1) stock option by IDFC Bank under IDFC Bank ESOS – 2015 for every One (1) stock option held in IDFC Limited by such employee.
Accordingly, it was necessary to increase the pool of ESOPs that can be granted under IDFC Bank ESOS – 2015 from 2.5% to 7% so as to accomodate grants to IDFC Group employees (pursuant to the Demerger Scheme) and grants to new employees of IDFC Bank. Therefore, the shareholders at the 1st AGM of the Bank approved and increased the pool of ESOPs from 2.5% to 7% of the paid–up equity share capital of the Bank at any point of time.
However, the Management is now of the view that with large capital base, the reduced ESOP pool of 6% would be sufficient to adequately compensate employees of IDFC Bank and its subsidiary companies (present & future) in next 2–3 years.
Accordingly, at the ensuing AGM to be held on July 27, 2016, the Board of Directors recommends reduction in ESOP pool from 7% to 6% of the paid up share capital of the Bank.
Being a new company, there were no outstanding Options at the beginning of the financial year. During FY16, Options granted pursuant to the Demerger Scheme were 32,210,878 Options. Also, 45,440,500 fresh Options were granted to eligible employees under IDFC Bank ESOS – 2015. Further, 1,910,217 Options lapsed / forfeited and 1,090,000 Options were exercised during the year. Accordingly, 74,651,161 Options remain outstanding as of March 31, 2016. All Options vests in graded manner and are required to be exercised within a specific period. The Bank has used the intrinsic value method to account for the compensation cost of stock to employees of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the Option. IDFC Bank ESOS – 2015 is administered by the Nomination & Remuneration Committee ('NRC') of the Board of the Bank.
During FY16, there has been no material change in IDFC Bank ESOS – 2015 and the said scheme is in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014, as amended from time to time. Disclosures as required under SEBI (Share Based Employee Benefits) Regulations, 2014 and circulars issued thereunder, is disclosed on the Bank's website: www.idfcbank.com.
DIRECTORS AND KEY MANAGERIAL PERSONNEL APPOINTMENTS
Based on the recommendation of NRC of the Bank and subject to the approval of the Members at the AGM and RBI, the Board of Directors of the Bank at its meeting held on July 27, 2015, accorded its consent to appoint Mr. Abhijit Sen (DIN: 00002593), Mr. Ajay Sondhi (DIN: 01657614), Dr. Ashok Gulati (DIN: 07062601), and Ms. Veena Mankar (DIN: 00004168) as Independent Directors ('IDs') of the Bank under the Companies Act, 2013, for a period of three (3) consecutive years w.e.f July 27, 2015 and also consented to the appointment of Mr. Vinod Rai (DIN: 01119922) as Nominee Director representing IDFC Limited / IDFC Financial Holding Company Limited.
IDFC Bank commenced its banking operations on October 01, 2015. Accordingly, Dr. Rajiv B. Lall stepped down as the Executive Chairman of IDFC Limited w.e.f. September 30, 2015 and took the position of Founder Managing Director & CEO of IDFC Bank w.e.f October 01, 2015. Dr. Rajiv B. Lall shall hold office of Founder Managing Director & CEO of the Bank for a period of three (3) years w.e.f October 01, 2015.
The aforesaid appointments have been approved by the RBI, Board of Directors and the Shareholders of the Bank. Based on the recommendation of the NRC of the Bank and subject to the approval of the Members at the AGM and RBI, the Board appointed Mr. Rajan Anandan (DIN: 02395272) as an Additional Director in the category of Independent Director of IDFC Bank w.e.f. December 01, 2015. It is proposed to appoint him for a period of three (3) consecutive years at the ensuing AGM to hold office from December 01, 2015 to November 30, 2018.
None of the Directors of the Bank are disqualified to be appointed as Directors in accordance with Section 164 of the Companies Act, 2013.
Further, the Bank has received a declaration from all the aforesaid IDs, at the time of appointment and also before the first meeting of the Board of Directors held in FY16, that they meet the criteria of independence specified under sub–section (6) of Section 149 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Qualification of Directors) Rules 2014, for holding the position of Independent Director and that they shall abide by the 'Code for Independent Directors' as per Schedule IV of the Companies Act, 2013.
In terms of Section 160 of the Companies Act, 2013, your Bank has received notice in writing from a Member along with requisite deposit of Rs. 1,00,000 proposing candidature of Mr. Rajan Anandan for appointment as an Independent Director. The Board recommends the appointment of Mr. Rajan Anandan to the shareholders at the ensuing AGM. Brief Profiles and other details of all the aforesaid Directors are set out in the Corporate Governance Report which forms part of this Annual Report.
During the year, Mr. Gautam Kaji (DIN: 02333127), Independent Director of the Bank resigned from the Board with effect from September 30, 2015 for complying with RBI regulations.
The Board placed on record its appreciation for the valuable services rendered by him during his tenure as a Director of the Bank.
RETIREMENT BY ROTATION
In accordance with the Articles of Association of the Bank and pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. Vinod Rai (DIN: 01119922) would retire by rotation at the ensuing AGM and being eligible, offers himself for reappointment.
KEY MANAGERIAL PERSONNEL
The Board identified the following officials as Key Managerial Personnel pursuant to Section 203 of the Companies Act, 2013:
Dr. Rajiv B. Lall
Founder Managing Director & CEO
Mr. Sunil Kakar
Chief Financial Officer
Mr. Mahendra N. Shah
Company Secretary & Chief Compliance Officer
FAMILIARISATION PROGRAMMES FOR BOARD MEMBERS
The Board members are provided with necessary documents, reports and internal policies to enable them to familiarise with the Bank's procedures and practices.
Periodic presentations are made at the Board meetings, on business and performance of the Bank, global business environment, business strategy and associated risks, roles, rights and responsibilities of IDs etc. Detailed presentations on the Bank's business were made at the meetings of the Directors held during the year.
The details of the said programmes are available on the Bank's website: www.idfcbank.com.
Pursuant to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('Listing Regulations') and Companies Act, 2013, the process indicating the manner in which formal annual evaluation of the Directors, Board and Board–level committees are given in detail in the Corporate Governance Report, which forms part of this Annual Report.
During the period under review, eight (8) board meetings were held; details of which are given in the Corporate Governance Report which forms part of this Annual Report.
The Board has constituted various Board Committees to delegate various matters that require greater and more focused attention.
Brief overview of some of the Board–level Committees is furnished below. The details of the constitution, terms of reference and meetings of all the Board–level Committees is given in the Corporate Governance Report which forms part of this Annual Report.
The Audit Committee of the Bank as constituted under Section 177 of the Companies Act, 2013 has the following members:
Mr. Abhijit Sen
Chairman DIN: 00002593
Mr. Ajay Sondhi
Member DIN: 01657614
MS. veena Mankar
Member DIN: 00004168
Mr. vikram Limaye
Member DIN: 00488534
The Audit Committee of the Bank met two (2) times during FY16 i.e. on October 26, 2015 and January 27, 2016. All the recommendations made by the Audit Committee during the year were accepted by the Board.
CORPORATE SOCIAL RESPONSIBLITY
Being the 1st year of operations, the provision relating to contribution towards CSR as per Section 135 of the Companies Act, 2013 was not applicable to IDFC Bank for FY16.
Pursuant to the Demerger Scheme, the Financing Undertaking of IDFC Limited was transferred to IDFC Bank w.e.f. October 01, 2015 (Effective date of the Demerger Scheme).
Accordingly, the CSR spend from the Financing Undertaking was carried out by IDFC Limited (Ultimate Holding Company of IDFC Bank) through IDFC Foundation, a Section 8 company under the Companies Act, 2013.
The Board of Directors at its meeting held on August 25, 2015 constituted the CSR Committee of the Bank comprising of the following:
Dr. Rajiv B. Lall
Chairman DIN: 00131782
Mr. Anil Baijal
Member DIN: 01608892
Dr. Ashok Gulati
Member DIN: 07062601
The Board at its meeting held on April 26, 2016 approved the CSR Policy of the Bank. The CSR Policy is available on the Bank's website: www.idfcbank.com. The CSR initiatives undertaken by IDFC Limited are given in Annexure 3.
In compliance with the RBI New Banking Guidelines and the directions and circulars issued by the RBI, from time to time and in accordance with Section 178 of the Companies Act, 2013 and the Rules made thereunder; the Board of Directors at its meeting held on December 09, 2014 constituted the Nomination and Remuneration Committee of the Bank.
As on March 31, 2016, the Committee consisted of:
Mr. Ajay Sondhi
Chairman DIN: 01657614
Mr. Anil Baijal
Member DIN: 01608892
Ms. veena Mankar
Member DIN: 00004168
Mr. vinod Rai
Member DIN: 01119922
The Bank has a process in place for identification of independence, qualifications and positive attributes of Directors. The Board approved the Remuneration Policy for the Directors, Key Managerial Personnel, Senior Management Personnel and other Employees which is formulated in line with the applicable regulations. The aforesaid Remuneration Policy is available on the Bank's website: www.idfcbank.com.
NRC recommends the remuneration of all the Directors to the Board for its approval.
The details of the remuneration to Directors and related disclosures have been included in the Report on Corporate Governance, which is forming part of this Annual Report.
INTERNAL FINANCIAL CONTROLS
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 preparation of financial statements. These controls and processes are driven through various policies, procedures and certification. The controls and processes shall be reviewed periodically. The Bank has a mechanism of testing the controls and processes at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.
Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad ('DHS') (Registration No – 117365W), will retire as the Statutory Auditors of the Bank at the ensuing AGM. In terms of Section 139 of the Companies Act, 2013 read with Companies (Audit & Auditors) Rules, 2014, the Board of Directors has recommended the appointment of DHS as Statutory Auditors of the Bank for a period of One (1) year, subject to the approval of the RBI, to hold office from the conclusion of the ensuing 2nd AGM till the conclusion of 3rd AGM, on remuneration to be decided by the Board or Committee thereof.
DHS, the retiring auditors, have confirmed that their appointment, if made, would be in conformity with the provisions of Section 139(1) read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and Section 141 of the Companies Act, 2013 and have given their consent to be appointed.
The Board recommends the appointment of DHS as the Statutory Auditors of the Bank at the ensuing AGM.
There were no qualifications, reservations, adverse remarks or disclaimers made by the Statutory Auditors in their report.
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank had appointed Bhandari & Associates, Company Secretaries to undertake the Secretarial Audit of the Bank for FY16.
The Bank provided all assistance and facilities to the Secretarial Auditor for conducting their audit.
The Secretarial Audit Report is appended as an Annexure 4 to this report.
There were no qualifications, reservations, adverse remarks or disclaimers made by the Secretarial Auditors in their report.
Your Bank has a regular process of getting concurrent audit done for the treasury operations. The concurrent audit is done by BSR & Co. LLP, Chartered Accountants. The concurrent audit reports are placed before the Audit Committee for review.
INSTANCES OF FRAUD, IF ANY REPORTED BY THE AUDITORS OR MANAGEMENT
There have been no instances of fraud reported by the Auditors under Section 143(12) of the Companies Act, 2013 or by the Management.
RISK MANAGEMENT POLICY
Your Bank operates within an effective risk management framework to actively manage all the material risks faced by the Bank, in a manner consistent with the Bank's risk appetite. Your Bank aims to establish itself as an industry leader in the management of risks and strive to reach the efficient frontier of risk and return for the Bank and its shareholders. The Board has ultimate responsibility for the Bank's risk management framework. It is responsible for approving the Bank's risk appetite, risk tolerance and related strategies and policies. To ensure the Bank has a sound system of risk management and internal controls in place, the Board has established the Risk Management Committee of the Board. The Risk Management Committee of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity and operational risks. The Committee also reviews the Risk Appetite & Enterprise Risk Management frameworks, Internal Capital Adequacy Assessment Process ('ICAAP') and stress testing. Your Bank has in place a Risk Management Policy approved by the Board.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Bank has implemented a Whistle Blower Policy pursuant to which Whistle Blowers can raise concerns relating to reportable matters (as defined in the policy) such as breach of IDFC Bank Code of Conduct, employee misconduct, fraud, illegal unethical imprudent behaviour, corruption, safety and misappropriation or misuse of Bank funds / assets, etc. Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower to those who avail of such mechanism and also provides for direct access to the Chairman of the Audit Committee, in exceptional cases. The Audit Committee reviews the functioning of the Vigil mechanism from time to time. None of the Whistle Blowers has been denied access to the Audit Committee of the Board. The Whistle Blower Policy is available on the Bank's website: www.idfcbank.com. The Whistle Blower Policy has been periodically communicated to the employees and also posted on the Bank's intranet.
In addition to the above, IDFC Bank has formulated Vigilance Policy for effectively managing the risks faced by the Bank on account of corruption, malpractices and frauds. In accordance with RBI circular, Dr. Rajeev Uberoi is the Chief Vigilance Officer of IDFC Bank.
ANTI SEXUAL HARASSMENT POLICY
Your Bank has in place a policy on Anti Sexual Harassment, which reflects the Bank's zero–tolerance to any form of prejudice, gender bias and sexual harassment at the workplace. Your Bank undertakes ongoing trainings to create awareness on this policy. There were no instances of Sexual Harassment that were reported during FY16.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNAL
The Hon'ble High Court of Judicature at Madras, vide its Order dated June 25, 2015, had sanctioned the Scheme of Arrangement among IDFC Limited and IDFC Bank Limited and their respective Shareholders and Creditors under Sections 391 to 394 of the Companies Act, 1956.
MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE BANK
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 this Board's Report.
TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
The Bank will update the details of unclaimed / unpaid dividend / interest on the Bank's website: www.idfcbank.com and on MCA website: www.mca.gov.in, from time to time.
All the Related Party Transactions that were entered into during the financial year were on arm's length basis and were in ordinary course of business. IDFC Group including the Bank has always been committed to good corporate governance practices, including in matters relating to Related Party Transactions.
RELATED PARTY TRANSACTION
All Related Party Transactions are placed before the Audit Committee for approval.
Prior omnibus approval is also obtained from the Audit Committee for the related party transactions which are of repetitive nature as well as for the normal banking transactions which cannot be foreseen and accordingly the required disclosures are made to the Committee on quarterly basis in terms of the approval of the Committee.
Pursuant to the provisions of Companies Act, 2013 and Rules made there under & Listing Regulations and in the back–drop of the Bank's philosophy on such matters, on the recommendation of the Audit Committee, the Board approved 'Policy on Related Party Transactions' at its meeting held on January 27, 2016. The said policy is also uploaded on the Bank's website: www.idfcbank.com. Since all related party transactions entered into by the Bank were in the ordinary course of business and were on an arm's length basis, Form AOC–2 is not applicable to 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 taking steps at all times for conservation of energy.
The initiatives taken for conservation of energy has been mentioned in the Business Responsibility Report, which is hosted on the Bank's website: www.idfcbank.com.
Also, your Bank has been increasingly using information technology in its operations, for more details please refer the section on Information Technology under Management Discussion & Analysis, which forms part of this Annual Report.
The Board of Directors recommends the following items under special business for approval of the Shareholders at the ensuing AGM:
1. Appointment of Mr. Rajan Anandan as an Independent Director
2. Offer and Issue of Debt Securities on Private Placement Basis
3. Reduction in ESOP pool from 7% to 6% of the paid up share capital of the Bank and Ratification of IDFC Bank Limited Employee Stock Option Scheme 2015 ('IDFC BANK ESOS – 2015' or the 'Scheme')
4. Ratification of IDFC Bank Limited Employee Stock Option Scheme 2015 ('IDFC Bank ESOS – 2015' or the 'Scheme') and grant of Options to the Eligible Employees / Directors of the Subsidiary Company(ies) of the Bank under the Scheme
5. Payment of Commission to Non–Executive Directors
6. Approval of remuneration payable to Dr. Rajiv B. Lall, Founder Managing Director & CEO of the Bank.
In accordance with the 'Green Initiative', the Bank will be sending the Annual Report / Notice of AGM in electronic mode to those Shareholders whose e–mail Ids are registered with the Bank and / or the Depository Participants.
Your Directors are thankful to the Shareholders for their participation in this Green Initiative.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Management's Discussion and Analysis Report for the year under review, as required by Regulation 34(2)(e) of the Listing Regulations forms part of this Annual Report.
The Bank is committed to achieve the highest standards of Corporate Governance. A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures, as stipulated under Listing Regulations, Companies Act, 2013 and rules made thereunder forms part of this Annual Report.
A Certificate from the Statutory Auditors of the Bank, Deloitte Haskins & Sells, Chartered Accountants (Registration No. 117365W), conforming compliance to the conditions of Corporate Governance as stipulated under Listing Regulations, forms part of this Annual Report.
Certificate issued by Dr. Rajiv B. Lall, Founder Managing Director & CEO and Mr. Sunil Kakar, Chief Financial Officer of the Bank, in terms of Regulation 17(8) of Listing Regulations, for the year under review was placed before the Board of Directors and forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report, in terms of Regulation 34(2)(f) of Listing Regulations, describing the initiatives taken by IDFC Bank from an environmental, social and governance perspective is hosted on the Bank's website: www.idfcbank.com. Any Member interested in obtaining a physical copy of the same may write to the Company Secretary of the Bank by sending an e–mail on email@example.com .
EXTRACTS OF ANNUAL RETURN
Pursuant to sub–section 3(a) of Section 134 and sub–section (3) of Section 92 of the Companies Act 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extracts of the Annual Return (Form MGT–9) as at March 31, 2016 forms part of this report and is appended as Annexure 6.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, it is hereby confirmed 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 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 all applicable laws and that such systems were adequate and operating effectively.
Your Directors take this opportunity to express their deep and sincere gratitude to the customers for their trust and confidence in the Bank. We would like to thank all our Shareholders, Bondholders, Banks and Financial Institutions for their co–operation and assistance during the year under review.
Your Directors would like to place on record their appreciation for the valuable guidance and support received from IDFC Group, Government of India, State Governments, various Ministries, Hon'ble Madras High Court, RBI, Securities and Exchange Board of India, Insurance Regulatory and Development Authority and other Government and Regulatory agencies. Your Directors would also like to thank the employees for the hard work put in by them for creating a robust foundation of the Bank.
For and on behalf of the Board of Directors
Independent Non–Executive Chairman
New Delhi Date: June 25, 2016