C O N T E N T S
Chairman’s Letter to Shareholders
Board of Directors
Highlights
Directors’ Report
Management's Discussion and Analysis
Auditors’ Report
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Schedules Forming Part of the Balance Sheet
Schedules Forming Part of the Profit and Loss Account
Notes to Accounts
Information with regard to Subsidiaries
Auditors' Certificate on Corporate Governance
Corporate Governance
Auditors' Report on Consolidated Financial Statements
Consolidated Financial Statements
Disclosures under the New Capital Adequacy Framework
(Basel II Guidelines)
List of Branches and Extension Counters
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5
7
9
19
31
32
33
34
36
43
44
74
75
76
93
95
128
144
1
CHAIRMAN & CEO'S LETTER TO THE SHAREHOLDERS
In July last year, your Bank was renamed Axis Bank. This necessitated the creation of a
new brand, as the earlier brand had been inherited while the new brand is our very own.
Rebranding the Bank is therefore the theme of this Report, and in several pages we
recreate a feel for the advertising and communication campaign that we ran to nurture
the new brand and to familarise all our stakeholders with it. We wrote to or met with
our shareholders, important customers and alliance partners, and our employees to
emphasise that we would continue to build on the demanding standards of banking
excellence which we had earlier set ourselves.
Rebranding the Bank has certainly been good for our business. Customer acquisition
over the last year has been strong, growing 67% to over 99 lakh customer accounts. We
have a sense of being very competitively positioned in several of our businesses. Low cost
savings and current account deposits grew 71%, advances rose 62% and the size of the
balance sheet went up 50%. As the year ended we realised that we had scaled two
benchmarks - our net profit for the year crossed Rs.1,000 crores, while the balance sheet
size rose to over Rs.100,000 crores. Such is the power of decimalisation!
But while these initial steps have been successful, the new brand will prove
transformational only if the Bank builds on its existing strengths to redefine the style
and content of the banking business. While we believe, at this juncture, that we have
the capabilities and the promise to do so, our success in this will eventually determine
the extent of shareholder value we are able to create.
P. J. Nayak
Chairman & CEO
3
BOARD OF DIRECTORS
P. J. Nayak
Surendra Singh
N. C. Singhal
A. T. Pannir Selvam
J. R. Varma
R. H. Patil
Rama Bijapurkar
R. B. L. Vaish
M. V. Subbiah
Ramesh Ramanathan
K. N. Prithviraj
P. J. Oza
THE CORE MANAGEMENT TEAM
R. Asok Kumar
M. M. Agrawal
V. K. Ramani
S. K. Chakrabarti
Hemant Kaul
Somnath Sengupta
S. S. Bajaj
Snehomoy Bhattacharya
P. Mukherjee
Vinod George
M. V. Subramanian
Rajagopal Srivatsa
S. K. Nandi
R. K. Bammi
S. K. Mitra
C. P. Rangarajan
M/s. S. R. Batliboi & Co.
Chartered Accountants
Chairman & Chief Executive Officer
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Company Secretary
Executive Director - Corporate Strategy
Executive Director - Corporate Banking
Executive Director - Technology & Business Processes
President - Credit
President - Retail Banking
President - Finance & Accounts
President & Chief Compliance Officer
President - Human Resources
President - Treasury
President - International Banking
CEO and Executive Trustee, Axis Bank Foundation
President - Business Banking
President - West Zone
President - North Zone
President - East Zone
President - South Zone
Auditors
M/s. Karvy Computershare Private Limited
Registrar and Share Transfer Agent
UNIT : AXIS BANK LIMITED
Plot No. 17 to 24, Vithalrao Nagar, Madhapur, Hyderabad - 500 081
Tel. No.: 040-23420815 to 23420824 Fax No. : 040-23420814
Registered Office : 'Trishul', 3rd Floor, Opp. Samartheshwar Temple, Law Garden, Ellisbridge,
Ahmedabad - 380 006. Tel. No.: 079-2640 9322 Fax No: 079-2640 9321
Email : p.oza@axisbank.com/rajendra.swaminarayan@axisbank.com Web site: www.axisbank.com
Central Office : Maker Towers 'F', 13th Floor, Cuffe Parade, Colaba, Mumbai - 400 005.
Tel. No.: 022-67074407 Fax No.: 022-2218 6944/2218 1429
5
HIGHLIGHTS
Profit after tax up 62.52% to Rs.
1,071.03
crores
Net Interest Income up 76.07% to Rs.
2,585.35
crores
Fee & Other Income up 65.91% to Rs.
1,367.75
crores
Deposits up 49.06% to Rs.
87,626.22
crores
Demand Deposits up 70.84% to Rs.
40,026.99
crores
Advances up 61.79% to Rs.
59,661.14
crores
Retail Assets up 52.24% to Rs.
13,591.68
crores
Network of branches and extension counters increased from 561 to
671
Total number of ATMs went up from 2341 to
2764
Net NPA ratio as a percentage of net customer
assets down to
0.36%
from 0.61%
Earning per share (Basic) increased from Rs. 23.50 to Rs.
32.15
Proposed Dividend up from 45% to
60%
Capital Adequacy Ratio stood at
13.73%
as against the
minimum regulatory norm of 9%
7
DIRECTORS' REPORT: 2007-08
The Board of Directors has pleasure in presenting the Fourteenth Annual Report of your Bank together with the Audited
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Statement of Accounts, Auditors' Report and the report on business and operations of the Bank for the financial year ended 31
March 2008.
The financial year 2007-08 will be remembered as a year of transformation in the history of the Bank, when the name of the Bank
changed to Axis Bank from UTI Bank. The conviction that it was worthwhile to invest in building a brand that would solely be our
own, helped to create a distinct identity. The name Axis Bank connotes solidity and transcends geographical boundaries as we seek
to become a multinational bank. The Bank was successful in establishing a new identity in the market in a short span of time.
FINANCIAL PERFORMANCE
The Bank once again met with considerable success over the past year and achieved all its key objectives. This encouraging
performance not only underscored the sustainability of the Bank's high tempo of growth, but also helped to move closer to its
objective of being one of the more customer-focused banks in the country. This is reflected in the robust growth in both business and
revenue during 2007-08 and in various financial parameters. The financial highlights for the year under review are presented below:
PARTICULARS
Deposits
Out of which
• Savings Bank Deposits
• Current Account Deposits
Advances
Out of which
• Retail Assets
• Non-retail Advances
Total Assets/Liabilities
Net Interest Income
Other Income
Out of which
• Trading Profit
• Fee & other income
Operating Expenses excl. depreciation
Profit before depreciation, provisions and tax
Depreciation
Provision for Tax
Other Provisions & Write offs
Net Profit
Appropriations :
Transfer to Statutory Reserve
Transfer to Capital Reserve
Proposed Dividend
Surplus carried over to Balance Sheet
2007-08
87,626.22
19,982.41
20,044.58
59,661.14
13,591.68
46,069.46
1,09,577.85
2,585.35
1,795.49
427.74
1,367.75
1,996.81
2,384.03
158.11
575.25
579.64
1,071.03
267.76
26.84
251.64
524.79
2006-07
58,785.60
12,125.88
11,304.31
36,876.48
8,927.54
27,948.94
73,257.22
1,468.33
1,010.11
185.72
824.39
1,102.73
1,375.71
111.86
337.21
267.61
659.03
164.76
15.64
148.79
329.84
(Rs. in crores)
Growth
49.06%
64.79%
77.32%
61.79%
52.24%
64.83%
49.58%
76.07%
77.75%
130.31%
65.91%
81.08%
73.29%
41.35%
70.59%
116.60%
62.52%
62.52%
71.61%
69.12%
59.10%
KEY PERFORMANCE INDICATORS
Interest Income as a percentage of working funds*
Non-Interest Income as a percentage of working funds
Net Interest Margin
Return on Average Net Worth
Operating Profit as a percentage of working funds
Return on Average Assets
Profit per employee**
Business (Deposits less inter bank deposits + Advances) per employee**
Net Non performing assets as a percentage of net customer assets ***
2007-08
8.08%
2.07%
3.47%
16.09%
2.57%
1.24%
Rs. 8.39 lacs
Rs.11.17 crores
0.36%
2006-07
7.42%
1.68%
2.74%
21.84%
2.10%
1.10%
Rs. 7.59 lacs
Rs. 10.24 crores
0.61%
* Working funds represent average total assets.
** Productivity ratios are based on average number of employees.
*** Customer Assets include advances, credit substitutes and unamortised cost of assets leased out.
Previous year figures have been regrouped wherever necessary.
9
During 2007-08, the Bank's business and earnings continued to
show high growth, indicative of a clear strategic focus, the
communication of corporate priorities to branches across the
country, and finally the execution of these goals through intensive
efforts. The Bank reported a net profit of Rs. 1,071.03 crores
during the year ended 31st March 2008, up 62.52%, from Rs.
659.03 crores in the previous year. Diluted earnings per share (EPS)
were Rs. 31.31 per share, up 37.38% from Rs. 22.79 per share a year
earlier. Return on Equity (ROE) was 16.09% compared to 21.84% a
year earlier. The decline in ROE was primarily on account of the
raising of fresh equity capital during the financial year. Return on
Average Assets was 1.24%, compared to 1.10%
in the
previous year.
In 2007-08, the Bank achieved a total income of Rs. 8,800.80 crores, up 60.84% from 2006-07. During this period, operating revenue
was Rs. 4,380.84 crores, up 76.76% from the previous year, while operating profit was up by 76.12% to reach Rs. 2,225.92 crores. The
strong growth in income was largely driven by a strong increase in both net interest income by 76.07% to Rs. 2,585.35 crores, and fee
and other income by 77.75% to Rs. 1,795.49 crores. The strong income growth reflects the solid business growth across all banking
segments and the successful execution of growth initiatives. The strong growth in incomes was partly offset by an increase in
operating expenses, including depreciation, by 77.42% to Rs. 2,154.92 crores. The increase in operating expenses primarily reflects
the higher costs incurred as a result of increased business levels that include additional sales and service personnel and higher
variable compensation. Additional expenses incurred to support the growth initiatives of the Bank (including network expansion as
well as the re-branding exercise) also contributed to the increase in operating expenses.
In 2007-08, net interest income increased by 76.07% to Rs. 2,585.35 crores from Rs. 1,468.33 crores in the previous year. This increase
was largely due to a strong asset side growth, as also the robust growth in low-cost demand deposits (current and savings bank
deposits). On a daily average basis, total earning assets in 2007-08 increased by 39.18% to Rs. 74,589 crores from Rs. 53,591 crores a
year ago. This was partially offset by a rise in funding costs due to the hardening of rates on term deposits during the year. However,
the steady growth in demand deposits, which on a daily average basis increased by 57% to Rs. 25,515 crores from Rs. 16,252 crores a
year ago, helped contain the funding costs. Nevertheless, the average cost of funds in 2007-08 increased to 6.02% from 5.60% a year
earlier. In 2007-08, the cost of deposits increased to 5.91% from 5.38% a year earlier, primarily the result of an increase in the cost of
term deposits by 146 basis points.
During the year, the yield on earning assets increased by 106 basis points to 9.36% from 8.30% a year earlier, reflecting the impact of
changes in the product-mix in advances, together with an improvement in the yield on investments. The Bank was able to absorb the
downward pressure on the yield on advances in the last quarter of the financial year, and the consequent compression of margins,
through concerted efforts in shoring up low-cost demand deposits. In 2007-08, the net interest margin increased to 3.47% from
2.74% a year earlier. On a quarter-to-quarter basis, net interest margin in the year rose from 2.56% in Q1, to 3.28% in Q2, to 3.91% in
Q3 and 3.93% in Q4, highlighting the quality of earnings.
Other income, comprising trading profits, fee and miscellaneous
income, also increased strongly by 77.75% to Rs. 1,795.49 crores in
2007-08 from Rs. 1,010.11 crores in 2006-07. Fee and miscellaneous
income rose by 65.91% to Rs. 1,367.75 crores from Rs. 824.39 crores a
year earlier. Fee income has a significant share in the earnings of the
Bank and its main contributors are service charges for account
maintenance,
inter-change fees, third-party distribution fees,
transaction banking including cash management services, syndication
and placement fees and fees earned on the processing of loans. Trading
profit increased by 130.31% to Rs. 427.74 crores from Rs. 185.72 crores a
year earlier. A significant portion of growth in trading profit was client-
driven, with particularly high growth in profit earned on merchant
foreign exchange business. In 2007-08, profit on foreign exchange transactions increased by 66.18% to Rs. 207.48 crores from Rs.
124.85 crores. Another contributor to the growth of trading profit was profit from investment in equity shares - a result primarily of
the buoyancy in the capital markets.
10
In 2007-08, the operating revenue of the Bank increased by 76.76% to Rs. 4,380.84 crores from Rs. 2,478.44 crores in 2006-07. Net
interest income together with fee and other income (excluding trading profit) constituted 90.24% of operating revenue, reflecting
the robust core earning streams of the Bank.
Operating expenses increased by 77.42% to Rs. 2,154.92 crores from Rs. 1,214.59 crores in 2006-07. Expenses grew mainly due to the
increase in sales and service staff levels, higher performance related pay, an aggressive growth of the Bank's retail network and the
re-branding exercise undertaken by the Bank. Employees' costs increased by 75.76% to Rs. 670.25 crores from Rs. 381.35 crores last
year, constituting 31.10% of the operating expenses, largely prompted by the increase in the number of employees from 9,980 on
31 March 2007 to 14,739 on 31 March 2008. During the year, the cost: income ratio was 49.19% against 49.01% last year.
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Operating profit of the Bank in 2007-08 increased by 76.12% to Rs. 2,225.92 crores from Rs. 1,263.85 crores a year earlier. Further, the
book value per share increased from Rs. 120.50 as on 31 March 2007 to Rs. 245.14 as on 31 March 2008. The business per employee
improved to Rs. 11.17 crores from Rs. 10.24 crores a year ago. Profit per
employee has also improved from Rs. 7.59 lacs in 2006-07 to Rs. 8.39 lacs
in 2007-08. In 2007-08, the Bank has created total provisions (excluding
provisions for tax) of Rs. 579.64 crores compared to Rs. 267.61 crores a
year ago. The Bank has created provisions for loan assets of Rs. 344.01
crores compared to Rs. 73.73 crores a year ago, while provision for
standard assets was Rs. 153.46 crores compared to Rs.122.35 crores a
year ago. The Bank continued to improve its asset quality, as a result of
which net NPAs, as a percentage of net customer assets, declined from
0.61% as on 31 March 2007 to 0.36% as on 31 March 2008. The Bank
has also shown substantial growth in several key balance sheet
parameters for the year ended 31 March 2008. The total balance sheet
size increased by 49.58% to Rs. 1,09,577.85 crores as on 31 March 2008
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from Rs. 73,257.22 crores as on 31 March 2007. Total deposits have
increased by 49.06% from Rs. 58,785.60 crores as on 31 March 2007 to Rs. 87,626.22 crores as on 31 March 2008. Demand deposits
(savings bank and current accounts) increased by 70.84% to Rs. 40,026.99 crores on 31 March 2008. Savings bank account deposits
have increased by 64.79% to Rs. 19,982.41 crores, while current account deposits grew by 77.32% to Rs. 20,044.58 crores. Demand
deposits constituted 45.68% of total deposits on 31 March 2008 compared to 39.86% last year. On a daily average basis, the total
deposits in 2007-08 increased by 37.35% to Rs. 63,341 crores, in which demand deposits increased by 57.00% to Rs. 25,514 crores. As a
result, the percentage share of demand deposits on a daily average basis increased to 40.28% in 2007-08. The total advances of the
Bank as on 31 March 2008 increased by 61.79% to Rs. 59,661.14 crores. Of this, corporate advances (comprising large and mid-
corporates) increased by 68.32% to Rs. 29,025.84 crores. During the same period, advances to SMEs increased by 73.98% to Rs.
11,536.92 crores, while agricultural lending increased by 35.17% to Rs. 5,506.70 crores. Retail loans increased by 52.24% to Rs.
13,591.68 crores. The Bank's total investments increased by 25.31% to Rs. 33,705.10 crores. The investments in government and
approved securities held to meet the Bank's SLR requirement increased by 22.81% to Rs. 20,178.84 crores as a result of the increase in
total deposits. Other investments, including corporate debt securities, increased by 29.24% to Rs. 13,526.26 crores. The total assets of
the Bank's overseas branches as on 31 March 2008 increased by 110% to Rs. 6,672 crores, constituting 6.09% of the Bank's total
assets.
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As a conscious strategy of building an organic growth engine during the year, the Bank continued to expand its distribution
network, in both domestic and overseas geographies, to enlarge its reach and accelerate its business momentum. The Bank has
developed a branch network which is built on customer-convenience and service, helping it particularly in the acquisition of low-cost
retail deposits, retail assets, lending to agriculture, SME and mid-corporates and facilitating the cross-selling of third-party products.
During 2007-08, 143 new branches were added
to the Bank's network, taking the number of
branches to 651. This includes 33 extension
counters that have been upgraded to branches.
As on 31 March 2008, the Bank had a network
of 651 branches and 20 extension counters as
against 508 branches and 53 extension
counters a year earlier. Out of the 651
branches, 158 branches are in semi-urban and
rural areas. With the opening of these offices,
the geographical reach of the Bank extends to
29 States and 3 Union Territories covering 405
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11
centres. During the year, the Bank set up 423 ATMs, thereby taking the ATM network of the Bank from 2,341 to 2,764, enabling it to
retain its status of being the third largest ATM network provider among all banks in the country. During the year, the Bank also
expanded overseas with the opening of a branch at the Dubai International Finance Centre (DIFC). This was in addition to the
existing branches at Singapore and Hong Kong and the representative Office in Shanghai. The Bank has also received the
authorization of the Central Bank of the UAE to establish a Representative Office in Dubai. The opening of these overseas offices will
provide significant opportunities to the Bank to finance cross-border trade and manufacturing activities in addition to the ability to
source remittances and other businesses from the NRI community.
CAPITAL & RESERVES
During the year under review, the Bank has raised capital in the
form of Tier I and Tier II Capital to support future growth. The Bank
has raised Tier I Capital in the form of equity capital through
simultaneous offerings in the form of a follow-on Global Depositary
Receipt (GDR) issue, a Qualified Institutional Placement (QIP) and a
preferential allotment of equity shares to the promoters of the
Bank. As a result, the Bank mobilised an aggregate of Rs. 4,534.36
crores through the three-way offering as per the details below.
The Bank raised Rs. 878.83 crores (equivalent to US Dollars 218.06
million) through the allotment of 1,41,32,466 GDRs, each
representing one equity share of the Bank at a price of US Dollars
15.43 per GDR. The GDR was priced at a nominal discount to the
closing price of the Bank's listed GDR on the London Stock Exchange (LSE) but at par with the preceding one-month average price of
GDRs quoted on the LSE. Converted at the Noon-Day Buying Rate of US Dollars published by the Federal Reserve in New York, the
price of the underlying share in the Indian market was Rs. 620 per share, which is a discount to the closing price of the Bank's share of
Rs. 644.60 on the NSE as on that date. The GDRs are listed and traded on the London Stock Exchange.
The Bank also raised Rs. 1,752.43 crores by issuing 2,82,64,934 equity shares under QIP. The equity shares under the QIP were priced along
with the GDR at Rs. 620 per share (equivalent to the price offered under the GDR offering). To maintain the percentage shareholding of
the Bank's promoters at the pre-GDR/QIP offering level, the Administrator of the Specified Undertaking of the Unit Trust of India (UTI - I),
Life Insurance Corporation of India, General Insurance Corporation of India and three government-owned general insurance companies
participated in a preferential offer by subscribing to 3,06,95,129 equity shares. The equity shares offered under the preferential
allotment route were also priced at Rs. 620 per share (equivalent to price at which both GDR and QIP was priced). Through the process of
preferential allotment of equity shares to promoter entities, the Bank raised Rs.1,903.10 crores. As a result, the Bank raised, as stated
above, an aggregate equity capital of Rs. 4,534.36 crores under GDR/QIP and the preferential offer. This will help the Bank in continuing
its growth strategy and in strengthening its capital adequacy ratio. The Bank is now well capitalised, with the capital adequacy ratio at
the end of the year at 13.73%, substantially above the benchmark requirement of 9% stipulated by Reserve Bank of India. Of this Tier I
Capital amounted to 10.17%, up from 6.42% a year earlier, while Tier II Capital was at 3.56%.
During the year under review, the Bank also allotted equity shares to employees under its Employee Stock Option Plan aggregating
29,86,353 equity shares.
The paid up capital of the Bank as on 31 March 2008 thereby rose to Rs. 357.71 crores from Rs. 281.63 crores as on 31 March 2007.
The shareholding pattern of the Bank as of 31 March 2008 was as under.
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Sr. No.
Name of Shareholders
% of Paid Up Capital
Administrator of the Specified Undertaking of the Unit Trust of India (UTI-I)
Life Insurance Corporation of India
General Insurance Corporation and four PSU Insurance Companies
Overseas Investors including FIIs/ OCBs/ NRIs
Foreign Direct Investment (GDR issue)
Other Indian Financial Institutions/ Mutual Funds/ Banks
Others
Total
27.18
10.40
4.93
35.46
3.64
8.33
10.06
100.00
i.
ii.
iii.
iv.
v.
vi.
vii.
12
During the year, the Bank has also raised US Dollars 60
million (equivalent to Rs. 243.12 crores) as Upper Tier II
Capital from Singapore under its MTN Programme.
The Bank's shares are listed on the NSE, the BSE, the
Ahmedabad Stock Exchange and the OTCEI (under permitted
securities). The GDRs issued by the Bank are listed on the
London Stock Exchange (LSE). The Bonds issued by the Bank
under the MTN programme are listed on the Singapore Stock
Exchange. The listing fees relating to all stock exchanges for
the current year have been paid. With effect from 26 March
2001, the shares of the Bank have been included and traded in
the BSE Group 'A'.
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BOARD OF DIRECTORS
DIVIDEND
The Bank's diluted Earning per Share (EPS) for 2007-08 has
risen to Rs. 31.31 from Rs. 22.79 during 2006-07. In view of the
excellent financial performance of the Bank, the encouraging
future outlook of the Bank as well as the objective of
rewarding shareholders with cash dividends while retaining
capital to maintain a healthy capital adequacy ratio to support
future growth, the Board of Directors has recommended a
higher dividend rate of 60% on equity shares, compared to
the 45% dividend declared for the last year. This increase
reflects our confidence in the Bank's ability to consistently
grow earnings over time.
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During the year, some changes in the Board of Directors have taken place. Shri K. N. Prithviraj was appointed as Additional Director
on 9 January 2008, joining the Board as a nominee of the Administrator of the Specified Undertaking of the Unit Trust of India (UTI -
I). Further, Shri S. B. Mathur, a nominee of the Administrator of the Specified Undertaking of the Unit Trust of India (UTI - I) has
resigned on 6 December 2007.
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The Board of Directors places on record its appreciation and gratitude to Shri S. B. Mathur for the valuable services rendered by him
during his tenure as Director of the Bank.
In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Bank, Shri N. C. Singhal, Shri J. R.
Varma and Shri R. B.L. Vaish retire by rotation at the Fourteenth Annual General Meeting and, being eligible, offer themselves for re-
appointment as Directors of the Bank.
SUBSIDIARIES
The Bank has set up two wholly-owned subsidiaries, Axis Sales Limited, and Axis Private Equity Limited. Axis Sales Limited has been
set up for marketing credit cards and retail asset products. The objective of this subsidiary is to build a specialised force of sales
personnel, optimise operational efficiency and productivity and thereby reduce costs. The sales subsidiary also seeks to provide
greater control and monitoring of the sales effort vis-à-vis the DSA model. The second subsidiary of the Bank, Axis Private Equity
Limited has been formed primarily to carry on the activities of managing (directly or indirectly) investments, venture capital funds
and off-shore funds. In terms of an exemption received from the Ministry of Corporate Affairs, Government of India through its
letter no. 47/417/2007-CL-III dated 22 November 2007 under Section 212(8) of the Companies Act 1956, copies of the Directors'
Report, report of the auditors of the two subsidiaries along with financial statements have not been attached to the accounts of the
Bank for the financial year ended 31 March 2008. Any shareholder who may be interested in obtaining a copy of these details may
write to the Company Secretary at the Registered Office of the Bank. These documents will also be available for examination by any
shareholder of the Bank at its Registered Office and also at the registered offices of the two subsidiaries. In line with the Accounting
Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the consolidated financial results of the Bank along
with its subsidiaries for the year ended 31 March 2008 are enclosed as an Annexure to this report.
nd
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EMPLOYEE STOCK OPTION PLAN (ESOP)
The Bank has instituted an Employee Stock Option Scheme to enable its employees, including whole-time Directors, to participate in
13
the future growth and financial success of the Bank. Under the Scheme 2,78,00,000 options can be granted to employees. The
employee stock option scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and
Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is
determined on the basis of the employee's work performance and is approved by the Board of Directors.
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The Bank's shareholders approved plans in February 2001, June 2004 and June 2006 for the issuance of stock options to employees.
Under the first two plans and upto the grant made on 29 April, 2004, the option conversion price was set at the average daily high-
low price of the Bank's equity shares traded during the 52 weeks preceding the date of grant at the Stock Exchange which has had
the maximum trading volume of the Bank's equity share during that period (presently the NSE). Under the third plan and with effect
from the grant made by the Company on 10 June 2005, the pricing formula has been changed to the closing price on the day
previous to the grant date. The Remuneration and Nomination Committee granted options under these plans on seven occasions,
11,18,925 during 2000-01, 17,79,700 during 2001-02, 27,74,450 during 2003-04, 38,09,830 during 2004-05, 57,08,240 during 2005-06,
46,95,860 during 2006-07 and 67,29,340 during 2007-08. The options granted, which are non-transferable, vest at the rate of 30%,
30% and 40% on each of three successive anniversaries following the granting, subject to standard vesting conditions, and must be
exercised within three years of the date of vesting. As of 31 March 2008, 1,09,50,436 options had been exercised and 1,27,94,268
options were in force.
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Other statutory disclosures as required by the revised SEBI guidelines on ESOPs are given in the Annexure to this report.
CORPORATE GOVERNANCE
The Bank is committed to achieving a high standard of corporate governance and it aspires to benchmark itself with international
best practices. The corporate governance practices followed by the Bank are enclosed as an Annexure to this report.
DIRECTORS' RESPONSIBILITY STATEMENT
The Board of Directors hereby declares and confirms that:
i.
The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations
have been furnished, relating to material departures.
ii. Accounting policies have been selected, and applied consistently and reasonably, and prudent judgements and estimates have
been made so as to give a true and fair view of the state of affairs of the Bank and of the Profit & Loss of the Bank for the
financial year ended 31 March 2008.
iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the
provisions of the Companies (Amendment) Act, 2000, for safeguarding the assets of the Bank and for preventing and detecting
fraud and other irregularities.
The annual accounts have been prepared on a going concern basis.
iv.
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STATUTORY DISCLOSURE
Considering the nature of activities of the Bank, the provisions of Section 217(1)(e) of the Companies Act, 1956 relating to
conservation of energy and technology absorption do not apply to the Bank. The Bank has, however, used information technology
extensively in its operations.
The statement containing particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the rules
made thereunder, is given in an Annexure appended hereto and forms part of this report. In terms of Section 219(1) (iv) of the Act,
the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in
obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Bank.
AUDITORS
M/s S. R. Batliboi & Co., Chartered Accountants, Statutory Auditors of the Bank since 2006, retire on the conclusion of the Fourteenth
Annual General Meeting and are eligible for re-appointment, subject to the approval of Reserve Bank of India, and of the
shareholders. As recommended by the Audit Committee, the Board has proposed the appointment of M/s S.R. Batliboi & Co.,
Chartered Accountants as Statutory Auditors for the financial year 2008-09. The shareholders are requested to consider their
appointment.
ACKNOWLEDGEMENTS
The Board of Directors places on record its gratitude to the Reserve Bank of India, other government and regulatory authorities,
financial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the
shareholders and also places on record its sincere thanks to its valued clients and customers for their continued patronage. The Board
also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance,
professionalism, team work, commitment, and initiative which has led to the Bank making commendable progress in today's
challenging environment.
Place : Mumbai
Date : April 21, 2008
P. J. Nayak
Chairman & Chief Executive Officer
For and on behalf of the Board of Directors
14
A N N E X U R E
STATUTORY DISCLOSURES REGARDING ESOP (FORMING PART OF THE DIRECTORS' REPORT FOR THE YEAR ENDED
31 MARCH 2008)
Options Granted
Pricing Formula
ESOS
Grant
2000-2001 24 Feb 2001 28 Feb 2002 6 May 2003 29 Apr 2004 10 Jun 2005
Grant
Grant
Grant
Grant
Grant
Grant
17 Apr 2006 17 Apr 2007
26,616,345
1,118,925
1,779,700
2,774,450
3,809,830
5,708,240
4,695,860
6,729,340
Rs. 38.63
Rs. 29.68
Rs. 39.77
Rs. 97.62
Rs. 232.10
Rs. 319.00
Rs. 468.90
Fixed Price
ie. The
average daily high - low
price of the shares of the
Bank traded during the
52 weeks preceding the
date of grant at that
stock exchange which
has had the maximum
trading volume of the
Bank`s share during that
period.
For Options Granted on
and after 10 June 2005,
the exercise price
considered is the closing
market price as on the
day preceding the
date of the grant at that
stock exchange which
has had the maximum
trading volume of the
Bank's share.
Options Vested
2,082,034
-
-
27,428
302,185 926,840
741,501
84,080
Options Exercised
10,950,436
1,036,969
1,668,835 2,443,749
2,993,100 2,148,058
659,210
515
Total number of shares arising as
a result of exercise of options
10,950,436
1,036,969
1,668,835 2,443,749
2,993,100 2,148,058
659,210
515
Options lapsed/cancelled
2,871,641
81,956
110,865
303,273
514,545 844,277
503,945
512,780
Variation in terms of ESOP
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Money realised by exercise of
options (Rs. in lacs)
11,881
400.58
495.31 971.88
2,921.86 4,985.64
2,102.88
2.41
Total number of options in force
12,794,268 - - 27,428 302,185
2,715,905
3,532,705
6,216,045
Additional details to be disclosed:
Employeewise details of grants to
Senior managerial personnel i.e.,
-Chairman and CEO
360,970
22,500
36,600 50,000
65,000 74,750
56,060
56,060
-Employees who were granted,
during any one year, options
amounting to 5% or more of the
options granted duringthe year
-Identified employees who were
granted option, during any
one year, equal or exceeding
1% of the Issued capital
(excluding outstanding warrants
and conversions) of the Bank
under the grant
N.A.
N.A.
-Diluted Earnings Per Share pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard (AS) 20 'Earnings
Per share':
Rs. 31.31
15
ESOS
Grant
2000-2001 24 Feb 2001 28 Feb 2002 6 May 2003 29 Apr 2004 10 Jun 2005
Grant
Grant
Grant
Grant
Grant
Grant
17 Apr 2006 17 Apr 2007
Weighted average exercise
price of Options whose:
- Exercise price equals
market price
- Exercise price is greater than
market price
- Exercise price is less than
market price
Weighted average fair value
of Options whose:*
- Exercise price equals
market price
- Exercise price is greater than
market price
- Exercise price is less than
market price
Fair Value Related Disclosure *
Increase in the employee
compensation cost computed
at fair value over the cost
computed using intrinsic
cost method (Rs. in crores)
Net Profit, if the employee
compensation cost had been
computed at fair value
Basic EPS if the employee
compensation cost had been
computed at fair value
Diluted EPS if the employee
compensation cost had been
computed at fair value
Significant Assumptions used
to estimate fair value
Risk free interest rate
Expected life
Expected Volatility
Dividend yield
Price of the underlying share in the
market at the time of option grant
Rs. 468.90
Nil
Nil
Rs.178.36
Nil
Nil
71.67 - - - 1.52 15.20
26.45
28.50
999.36
30.00
29.21
8.21% to 8.33%
2 to 4 years
44.20% to 51.21%
1.37%
468.90
* Note : Fair value method of accounting is applicable only for grants made on or after 30th June 2003. Hence, no disclosures have been made regarding the grants prior to this date.
16
STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES
Sr.
No.
Name of the
Subsidiary
Company
Financial
year end
of the
subsidiary
Number of
equity shares
held by Axis Bank
and/or its
nominees in
subsidiary as on
31 March 2008
Extent of
interest
of Axis Bank
in the capital
of the
subsidiary
Net aggregate
amount of
profits/(losses)
of the subsidiary
so far as it
concerns the members
of Axis Bank Ltd.
and is not dealt
within the accounts
of Axis Bank Ltd.
for the financial year
ended 31 March 2008
(Rs. in thousands)
Net aggregate amount
of profits/(losses)
of the subsidiary
so far as it concerns the
members of Axis Bank Ltd.
and is dealt with or
provided for in the
accounts of Axis Bank Ltd.
for the financial year
ended 31 March 2008
(Rs. in thousands)
1.
2.
Axis Sales
Limited
(formerly
UBL Sales
Ltd.)
Axis Private
Equity Limited
(formerly
UBL Asset
Management
Company Ltd.)
31-3-2008
1,00,00,000 shares
of Rs.10.00 each
fully paid up
100%
(68,021)
31-3-2008
1,50,00,000 shares
of Rs. 10.00 each
fully paid up
100%
(49,291)
Nil
Nil
P. J. Oza
Company Secretary
N. C. Singhal
Director
R. H. Patil
Director
Date: 21 April 2008
Place: Mumbai
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
MACRO-ECONOMIC ENVIRONMENT
Although the fiscal year 2007-08 had started with a relatively bright outlook (supported by generally strong fundamentals in 2006-
07) the macroeconomic environment in the second half of the year turned out to be difficult. GDP growth is expected to slow down
due to the impact of high interest rates and an economic slowdown around the world. It is expected, however, that domestic
demand will continue to remain strong, boosted to an extent by income tax reliefs and the selective excise cuts on consumer goods as
proposed in the budget for fiscal 2008-09.
GDP growth was initially expected to grow 8.7% in fiscal 2007-08, but moderation in economic growth in the third quarter of the
year is expected to lower GDP growth to between 8.0% and 8.5%. The slowdown is likely to emanate from slower industrial growth
but the effect may spread, thereafter, to many service industries dependent upon manufacturing like transport, storage, and even
financial services. The increase in savings that has been driven by public sector and private corporates is also likely to moderate, with
lower corporate earnings and profitability. Although there is likely to be some offsetting increases in household savings, we can
expect overall savings rates to stagnate or even fall from their 2006-07 levels. Fiscal stimulus provided in the budget would to some
extent support the demand. Hence, overall GDP growth may slow down to 7.5% to 8% in fiscal 2008-09.
The level of inflation (as measured by the Wholesale Price Index) at above 7% in April 2008 is significantly higher than the RBI's
targeted ceiling of 5%. Structural imbalances have now come to the fore and are aggravating supply shortages. Food price inflation
is accelerating with rising global food prices and inelastic domestic supply-side responses. Government's initiatives in the recent past
of reducing duties on imported food may curtail inflationary pressures. Going forward, it is expected that the effect of the
government action on food prices will start to show and that the low-base effect will dissipate to ease inflationary pressures.
However, rising international oil prices are likely to push up inflation in fiscal 2008-09 compared to the preceding year.
RBI has used policy rates as well as the Cash Reserve Ratio (CRR) to squeeze systemic liquidity, starting late 2006 and continuing right
upto April 2008. Following these measures, one of the sources of money supply has started shrinking: growth of bank credit to the
commercial sector has fallen from 33% to under 22%. However, even the tightened monetary policy failed to moderate the surge of
capital flows that started in mid-2006. The RBI and the Union Government had to resort to quantitative controls to staunch the flow.
Robust capital inflow resulted in RBI's intervention in the currency markets to protect India's export market share, especially since
the currencies of many of India's export competitors had remained quite stable. However, the effect on India's exports has not been
as severe as had initially been feared. Even though the Rupee has
appreciated over 15% since August 2006, export growth has
held up in the intervening period; both merchandise and
software exports have continued to grow at encouraging rates,
although lower than in the last few years. As a result, the current
account deficit has remained within a band of 1.1% - 2.7% of
GDP, significantly lower than net capital inflows. The Indian
economy is expected to continue to attract foreign inflows as it
presents an attractive investment opportunity. RBI is expected to
continue to intervene in the markets to curb volatility in
exchange rates and to try and moderate the appreciating Rupee.
Presently, the economic outlook for fiscal 2008-09 for India looks
uncertain due to sharp downward revisions of growth estimates
for most major economies. Globally, there is concern about a
return to the stagflation of the seventies, with high oil prices
having the potential to apply brakes on economic momentum. We expect, though, that this bleak scenario will not be as severe for
India on account of continued buoyant domestic demand, although the growth may be accompanied by higher inflation.
Overall, it is unlikely that there will be an easing of domestic monetary policy in the near future. The banking sector, despite the
continuing difficult environment, is likely to remain the primary channel for credit delivery to corporates, although a squeeze in
funds available to corporates for financing capital formation is likely. While banks have tried to maintain credit flow in a difficult
operating environment, there is a chance of a marginal deterioration in the quality of their credit portfolios, as well some valuation
losses due to widening spreads. Despite this, we expect that there will be no impact on systemic stability. Overall, we think that
19
monetary growth will be lower in 2008-09, and liquidity correspondingly tighter.
OVERVIEW OF FINANCIAL AND BUSINESS PERFORMANCE
The Bank once again met with good success over the past year
and achieved all of its key objectives. During 2007-08, the Bank
has witnessed strong growth in business volumes as well as
profits arising from core banking revenues. The high growth in
the Bank's businesses and earnings must be seen in the backdrop
of several negative factors such as a hardening of interest rates
and the crisis in the financial sector in the US (spreading also to
parts of Europe) leading to volatility in the capital and money
markets, and the first signs of a slowdown in Indian economy in
the last quarter. For the Bank's growth to continue, the Bank
would need to become increasingly competitive in its product
offerings. The diversification of businesses across multiple
products, markets and geographies is itself a risk mitigant, and enabled the Bank to deliver strong financial results during 2007-08.
The Bank's ability to serve the needs of its customers continues to improve. The future growth of the Bank will continue to leverage
the robust centralised technology that provides economies of scale, improves time-to-market of new products, and fosters
innovation. Thereby, the creation of customer value will remain congruent to generating profitability for the Bank.
CAPITAL MANAGEMENT
The Bank believes in the continual enhancement of shareholder value and its capital management framework helps to optimise the
use of capital by ensuring the most favourable allocation of capital through an appropriate mix of products and services. The Bank
focused on developing an asset structure which was sensitive to the importance of enlarging the proportion of low risk weighted
assets in order that capital is more efficiently deployed.
During the year, the Bank continued to attract investor interest from domestic and foreign institutional investors, with a perceptible
increase in trading volume and price. To augment capital for maintaining the momentum of business growth, the Bank raised equity
capital of Rs. 4,534 crores in 2007-08 through simultaneous offerings of follow-on Global Depositary Receipts (GDRs), a Qualified
Institutional Placement (QIP) and a preferential allotment of equity shares to the promoters of the Bank. In addition, the Bank has
also raised US Dollars 60 million (equivalent to Rs. 243.12 crores) as Upper Tier II Capital from Singapore under its MTN Programme.
st
As of 31 March 2008, the Bank had implemented the Revised Framework of the International Convergence of Capital Measurement
and Capital Standards (or Basel II). In terms of RBI guidelines for implementation of Basel II, capital charge for credit and market risk
for the financial year ending 31 March 2008 will be required to be maintained at the higher of the levels implied by Basel I and Basel
II. In terms of regulatory guidelines on Basel II, the Bank has computed capital charge for operational risk under the Basic Indicator
Approach and the capital charge for credit risk estimated under the Standardised Approach. The Bank's Capital Adequacy Ratio was
13.73%, as on 31 March 2008, against the minimum regulatory requirement of 9%. The following table sets forth the risk-based
capital, risk-weighted assets and capital adequacy ratios computed as on 31 March 2008 in accordance with the applicable RBI
guidelines under Basel I and Basel II.
st
st
st
AS ON 31 MARCH
Tier I Capital - Shareholders' Funds
Tier II Capital
Out of which
(cid:144) Bonds qualifying as Tier II capital
(cid:144) Upper Tier II capital
(cid:144) Other eligible for Tier II capital
Total Capital qualifying for computation of
Capital Adequacy Ratio
20
2008
Basel II
Basel I
8,826.99
3,063.90
8,822.52
3,082.75
1,572.90
1,148.38
342.62
1,572.90
1,148.38
361.47
11,890.89
11,905.27
(Rs. in crores)
2007
Basel I
3,636.21
2,918.29
1,748.52
959.55
210.22
6,554.50
AS ON 31 MARCH
Total Risk-Weighted Assets and Contingencies
Total Capital Adequacy Ratio (CAR)
Out of above
- Tier I Capital
- Tier II Capital
BUSINESS OVERVIEW
2008
Basel II
Basel I
84,990.65
86,719.66
13.99%
13.73%
10.39%
3.60%
10.17%
3.56%
(Rs. in crores)
2007
Basel I
56,643.37
11.57%
6.42%
5.15%
An overview of various business segments along with the performance during 2007-08 and an outline of future strategies is
presented below.
RETAIL BANKING
The Bank continued with its thrust on customer segmentation in the retail liabilities business to spearhead growth during the
financial year 2007-08. Savings Bank deposits grew to Rs. 19,982 crores on 31 March 2008 from Rs. 12,126 crores as on 31 March
2007 showing a year on year growth of 65%.
st
st
The Priority-Banking offering of the Bank has led the growth in the Savings Bank deposits. Other savings products, especially those
for senior citizens, for women and for NRIs have contributed strongly to the overall growth of the savings bank deposits.
Savings Bank Product
Priority Banking (High Networth)
Savings Accounts for Trusts
Savings Accounts for NRI
Senior Privilege (Affluent Senior Citizens)
Smart Privilege (Savings Accounts for Women)
Salary Power (Pay Roll Account)
Easy Access (Base Savings Bank Account)
Growth in Savings
Bank Balances
Growth in number
of Accounts
100%
133%
80%
29%
50%
38%
49%
108%
39%
262%
46%
73%
28%
26%
The Bank has
implemented a Customer Relationship
Management (CRM) solution which is being integrated with
various other application systems of the Bank including Finacle,
the core banking software solution, and software platforms for
Demat, Mutual Funds, Mobile Banking, Telebanking, and Credit
Cards, to provide a single and comprehensive view of the
customer across product categories and channels. CRM
capabilities will enable the Bank to improve its cross-sell
penetration among its customer base.
The Bank has over time built an efficient in-house sales model,
which has strongly contributed to the overall account
acquisition of the Bank. The effectiveness of the Sales Channel
has been a major factor in the growth of CASA (current account and savings account) deposits by the Bank.
The Retail Term Deposits of the Bank grew by 61% from Rs. 7,094 crores on 31 March 2007 to Rs. 11,449 crores on 31 March 2008.
st
st
Over the years, the alternative banking channels of the Bank, which comprise the ATM network, internet banking, mobile banking
and phone banking, have grown robustly, providing higher levels of convenience and service quality to the Bank's customers. During
21
st
the financial year 2007-08, the Bank has added 423 ATMs to reach
2,764 ATMs as of 31 March 2008. The Bank today has 4.25 ATMs
for every Branch. The mobile banking channel has fast emerged
as an extremely convenient option for the Bank's customers to
keep themselves updated on the activity in their accounts. During
2007-08, 36% of new customers signed on for mobile banking
services. With 1.59 million customers registered for mobile
banking, the Bank has the highest mobile penetration levels
among bank customers in India. Internet banking usage also rose
st
sharply: the registered user base rose from 3.35 million on 31
st
March 2007 to 5.17 million on 31 March 2008, a growth of 54%.
The Bank has a Phone Banking Center providing account
information and assistance in 11 languages.
The Retail Assets portfolio of the Bank grew from Rs. 8,928 crores on 31 March 2007 to Rs. 13,592 crores on 31 March 2008, a growth
of 52%. The segment constitutes 23% of the Bank's total loan portfolio on 31 March 2008 of which 79.83% is secured and 20.17%
comprises unsecured loans. Retail loans are extended by the Bank through 70 Retail Asset Centres (RACs) in select cities of the
country, as also through the Bank's branches in other cities and towns. The Bank's strategy of focusing on the prime customer
segments and staying away from small ticket loans, and the deployment of robust credit and back-office processes, has contributed
to the continued health of the retail asset portfolio.
st
st
st
The Cards business of the Bank comprises four key products -
credit cards, debit cards, pre-paid cards and the merchant
acquiring business. The Bank's credit card business, which
was launched in August 2006, now has a portfolio of
4,52,005 credit cards. In March 2008, the Bank launched
India's first EMV (Europay MasterCard Visa Standards)
certified platinum chip card. The point-of-sale (POS)
terminals installed by the Bank at merchant establishments
are capable of accepting all debit/credit MasterCard/ Visa
cards and American Express cards. The Bank has an installed
base of 74,458 POS terminals as on 31 March 2008 (the
second-largest network in India), registering a growth of
86% over the installed base of 40,058 terminals on 31 March
2007. The transaction throughput at the POS terminals grew from Rs. 2,975 crores in 2006-07 to Rs. 7,713 crores in 2007-08, a year-on-
st
year growth of 159%. All POS terminals are compliant with the EMV security norms. The total debit card base of the Bank as on 31
March 2008 stood at 8.67 million, the third largest in the country. Having started initially with a vanilla debit card product, the Bank
now offers as many as 10 variants, customised for specific customer segments. The Bank is a market leader in the Foreign Currency
Travel Card Segment, and has generated a sales volume of USD 285.33 million in 2007-08 on such cards.
st
st
Wealth Management is a platform for providing financial advisory services to our customers and offers a complete package of
financial and investment solutions backed by research-based advice. Axis Bank is one of the leading distributors of mutual funds in
India. Bancassurance business is one of the key sources of fee-based income for the Bank, as a result of successful partnerships with
MetLife India Insurance Company for life insurance offerings and with Bajaj Allianz General Insurance Company for general
insurance products. Besides the core investment products, the Bank also specialises in providing financial planning services to two
sets of customers through Axis Wealth (that targets affluent customers) and Financial Advisory Services (which targets 'mass
affluent' customers).
CORPORATE BANKING
The products offered by the Corporate Banking business group of the Bank include fund and non-fund based facilities, fee and
commission based products and services, deposits and foreign exchange related products, covering the domestic and international
transaction requirements of large and mid-sized customers. The Corporate Banking group of the Bank was restructured with a view
to increasing the share of core fee income to augment the overall Return on Equity (ROE) from corporate clients. The entire gamut of
Corporate Banking activities, comprising Credit, Treasury, Business Banking and Capital Markets, now work in tandem with joint
product offerings made to corporate customers. Relationship Management and Credit functions have been merged and the
22
Corporate Credit group has been split into two separate segments Large Corporate and Mid-Corporate. The fulcrum of the revised
set-up is the Relationship Manager, who serves as a single point contact for all the banking needs of each corporate.
Besides widening the customer base of the Bank and adopting a careful assessment of acceptable risk-return tradeoffs, the focus of
the Corporate Banking group is to deepen existing client relationships by actively cross-selling the entire range of products and
services, based on detailed client-wise account-plans, and thereby increase the Bank's share of the aggregate business level of the
customer.
CORPORATE CREDIT
The Corporate Credit portfolio of the Bank comprising advances to large and mid-corporates grew by 68.33% to Rs. 29,026 crores
from Rs. 17,244 crores a year ago. This includes advances at overseas branches amounting to Rs. 5,381 crores (equivalent to USD 134
million) comprising in main the portfolio of Indian corporates and their subsidiaries, as also trade finance. Credit exposures are taken
based on risk analyses and mitigation measures, with proposals being subjected to critical scrutiny by the Bank's Risk Department.
Efforts are made to constantly upgrade the skills required for faster turnaround of credit proposals and structuring of financial
products. In addition to working capital loans, the Bank also takes long-term exposures to infrastructure and manufacturing projects
set up by reputed industry groups. Relationship groups in the Bank are organised with an industry-sector focus for better evaluation
of specified risks. The credit policy of the Bank has also put in place ceilings on exposures to various industries with a view to
containing concentration risk and facilitating portfolio diversification.
TREASURY
The Bank has an integrated Treasury, which covers both domestic and global markets and funds the balance sheet across locations.
Balance sheet management assumed great importance during the year when the global interest and currency rates environment
was unsettled for long periods. Statutory reserve requirements were met.
The Bank's investments in government securities were dynamically managed and the portfolio yielded a return of 7.55%. There was
a significant emphasis during the year on developing the customer business in foreign exchange, which saw a 25% rise in turnover
and 56% rise in revenue. During the year, the Bank centralised its foreign trade processing operations, which has led to significant
gains in the form of savings in costs as well improvement in the standards of service as well as compliance.
The efficacy of funds management was reflected in the improvement in the Net Interest Income at Rs. 2,585.35 crores in 2007-08, up
from Rs. 1,468.33 crores a year ago. Net Interest Margin (NIM) improved to 3.47% from 2.74% in the previous year.
BUSINESS BANKING
Business Banking continued to focus on offering the best in transactional banking services by leveraging the Bank's strengths in
terms of network and technology. The Bank has consistently focused on procuring low-cost funds by offering a range of Current
Account products and Cash Management solutions across all business segments covering Corporates, Institutions, Central and State
Government Ministries and Undertakings as well as small business customers. Cross - selling of transactional banking products to
develop account relationships, aided by product innovation and a customer-centric approach has borne fruit in the form of growing
current account balances and increasing realisation of transaction banking fee.
st
Sourcing of current account deposits continued to be the focus
area and as on 31 March 2008, current account balances stood at
Rs. 20,045 crores against Rs. 11,304 crores a year earlier, reflecting a
year-on-year growth of 77%. During the year, the Bank sourced
1,38,765 new current accounts against 97,857 accounts the
previous year. There was a greater focus on the acquisition of high-
value current accounts, thus accelerating the pace of growth in
current account balances. Additionally, the focus was also to
understand the requirements of various business segments and
thereby introduce segment-based current account products for
effectively targeting the diverse requirements of different
segments. On a daily average basis, current accounts grew to a
level of Rs. 11,834 crores in 2007-08 against Rs. 7,193 crores during
the last year.
23
The Cash Management Services (CMS) initiatives to corporates and institutions continued to be a focus area, and the Bank's growing
branch network and robust technology were leveraged to provide a wide range of customised solutions to suit the dynamic
requirements of its clients. The Bank offers CMS solutions for collections and payments with an ideal blend of structured MIS and the
facility for funds movement in order that clients are able to enhance their fund management capabilities. The Bank's Web CMS
initiative further allows them to view their daily transactions on a real time basis. The strong correspondent bank alliance offers
corporate clients a wide geographical coverage. The CMS business has not only emerged as an important source of fee income but is
also contributing significantly towards garnering zero cost funds and forging large relationships. The Bank has established a strong
presence with companies raising equity funds, by offering its services as Bankers to the Issue and providing Dividend/Refund services
to this segment of the market. During the year the CMS throughput saw a growth of 96.87% reaching a level of Rs. 7,46,286 crores
compared to Rs 3,79,067 crores in the last year. During the same period, the number of CMS clients has grown to 3,193 clients from
2,164 clients in the previous year.
The Bank has been acting as an agency Bank for transacting Government Business for the last 7 years offering banking services to
various Central Government Ministries and Departments and to State Governments and Union Territories. Currently, the Bank is
accepting Income and Other Direct Taxes through its 214 Authorised Branches at 137 locations, and Central Excise and Service Taxes
through its 56 Authorised Branches at 13 locations. The Bank is also handling disbursement of Civil Pension through 218 Authorised
Branches, and Defence Pension through 151 Authorised Branches. Additionally, the Bank is providing collection and payment
services to four Central Government Ministries and Departments, and seven State Governments and Union Territories.
The Bank further strengthened its association with the e-Governance initiatives of various State Governments, aimed at providing
better citizen services by setting up integrated citizen facilitation centres. During the year the Bank associated with the
'e-Procurement Project' of the Government of Karnataka as the Nodal Bank and the 'e-Procurement Project' of Government of
Gujarat as a participating Bank.
During the year the Bank has also handled disbursements under various Government Benefit Schemes through IT Enabled Financial
Inclusion on behalf of the Government of Andhra Pradesh. The total government business throughput during the year was
Rs. 53,585 crores against Rs. 37,932 crores in the last year registering a growth of 41%.
CAPITAL MARKETS
The Bank's Capital Markets business encompasses activities both in the equity capital and debt capital markets. Activities in the
equity capital markets involve providing advisory services relating to the raising of equity and quasi-equity funds through various
instruments by corporate clients. The Bank is a SEBI registered Category I Merchant Banker with experience in management of public
and rights issues. The Bank provides debt capital market services by acting as advisors for raising Rupee and foreign currencies term
loans, foreign currency convertible bonds and Rupee denominated bonds.
The Bank has continued to retain its leadership position in the domestic debt market and has syndicated an aggregate amount of
around Rs. 52,000 crores by way of private placement of bonds and debentures, as also term loans during 2007-08. Prime Database
has ranked the Bank as the number 1 arranger for private placement of bonds and debentures for the year till 31st December 2007.
Bloomberg has also ranked the Bank number 2 in the India Domestic Bonds League table for the calendar year 2007. The Bank has
also acted as Book runner and Mandated Lead Arranger to its corporate clients in syndicating their External Commercial Borrowings
aggregating over USD 3 billion in 2007-08.
The Bank's Capital Markets business also involves providing corporate restructuring advisory services, mergers & acquisitions
advisory services, arranging services for acquisition funding, infrastructure and project advisory services (including preparation of
business plans), techno-economic feasibility reports and bid process management. The Bank also provides trusteeship services,
acting as both debenture and security trustees, monitoring agency for equity issue proceeds and trustees for securitisation issues.
The Bank also maintains an investment and proprietary trading portfolio in corporate bonds and equities. As on 31 March 2008, the
Bank's investment in corporate bonds, equities and others was Rs. 13,526 crores as against Rs. 10,462 crores a year ago. Of this, as on
st31 March 2008, the Bank has made investments of US Dollars 153 million at overseas branches as against USD 129 million a year ago.
st
In 2008-09, the Bank will continue to focus on project and corporate finance by raising both debt and equity funds for various
infrastructure and manufacturing projects, acquisition funding for its corporate clients for acquiring overseas targets, and will
concentrate on providing advisory services for overseas capital market products by leveraging on its overseas operations. The Bank
plans to carve out the trusteeship business, presently a part of its Capital Markets business, into a wholly owned subsidiary of the
24
Bank to enhance its efficient functioning.
LENDING TO MICRO, SMALL AND MEDIUM ENTERPRISES, AGRICULTURE AND MICRO FINANCE
The Micro, Small and Medium Enterprises (MSME) segment is an area of intense focus for the Bank, as it plays a vital role in the
development of the economy, generation of employment and in boosting export earnings. MSMEs offer good business potential
both for fund and non-fund based credit limits, diversification of risk and cross-selling. MSME clientele prefer loyal and lasting
banking relationships, reliable service quality and proximity to delivery channels. The Bank has leveraged its geographical reach
through its extensive branch network to fully exploit the business potential. Advances Cells have been located at twenty of the best
business locations, to extensively focus on the credit requirements of MSME clients. This has helped in quick decision-making,
thereby facilitating deepening of existing relationships and providing a strong impetus to new business relationships.
The Schematic Advances group continued to focus on specific sectors of the MSME business with scorecard-based credit appraisals to
ensure a quick turnaround time, thereby bringing in a large number of business relationships to the Bank.
The lending to MSME witnessed an impressive growth and the Bank continued to be compliant with the overall priority sector norms
stipulated by RBI for the seventh year in succession.
The Bank continued its focus on agricultural lending and built on its agriculture cluster based approach. The number of agricultural
clusters increased to 36, thereby linking 136 branches, ensuring excellent coverage of high potential agri-locations across the
country. The agri-business of the Bank grew during the year by 35%. The direct agricultural lending touched 9.91% of the adjusted
net Bank credit of the Bank, the highest ever achieved by the Bank. The Bank offers a bouquet of products to its agri-business
clientele through branches specially identified to handle agri-lending. In the Bank, the number of agri-borrowers has grown by
88.18% to about 1.07 lacs. The Bank has a team of young professionals strategically placed across the country to handle its agri-
business. The Bank aspires to grow its agri-business on sound and profitable lines by offering innovative products, customised
solutions and a high quality of service to its agri-business customers.
The Micro finance business gained significant momentum during the year with an impressive growth in the portfolio of 98.21%.
During the year the Bank has broad-based the portfolio by supporting Micro Finance Institutions (MFIs) working in various parts of
the country. The micro finance business has a client outreach of around 12 lac customers. Through these channels the Bank could
reach small and marginal farmers and small entrepreneurs, the majority of them women. The Bank aims to reach the status of one of
the preferred bankers to MFI institutions in the country. In line with our overall strategy to specifically support MFIs operating in
under-developed parts of the country, the Bank supported up MFIs in Jharkhand, Uttarakhand, and the North Eastern Region. The
Bank continues to grant loans under the various government sponsored schemes.
INTERNATIONAL BANKING
India's growing integration with the global economy has given rise to opportunities to leverage the Bank's strengths in overseas
markets. The Bank has established its presence in Singapore, Hong Kong, Dubai (DIFC) and Shanghai, besides entering into strategic
alliances with Banks and Exchange houses in the Gulf Co-operation Council (GCC) region. While branches in Singapore, Hong Kong
and DIFC (Dubai) provide platforms for offering corporate credit and trade finance solutions in the financial hubs across Asia and
enable the Bank to partner with Indian corporates foraying into the international markets, the strategic alliances with banks and
exchange houses allows access to the NRI population in the GCC region. Treasury and Capital Markets desks at Singapore help in
augmenting fee-based income. The Shanghai Representative Office provides a valuable presence in China - the fastest growing
economy of the world, which is also the second-largest trading partner of India. The Bank has also obtained an authorisation from
the Central Bank of the UAE to establish a Representative Office in Dubai. The Representative Office would enable the Bank to
substantially leverage other existing relationships and deliver enhanced value services to retail customers in the UAE.
The businesses of the overseas branches increased substantially during the year as operations of the newly opened branches at
Hong Kong and DIFC (Dubai) turned profitable and gathered momentum. Since the first overseas branch of the Bank at Singapore
commenced commercial operations in April 2006, the overseas operations of the Bank have scaled critical mass levels, ensuring
profitability. As of 31 March 2008 total assets at overseas branches were USD1.66 billion constituting 6.09% of the Bank's
total assets.
st
25
RISK MANAGEMENT
The very nature of the banking business, particularly in today's rapidly changing operating environment, entails managing complex
and variable risks in a disciplined manner. The Bank has developed in-house skills to manage key areas of risk viz., credit risk, market
risk and operational risk. The Bank's risk management architecture is overseen by the Board of Directors and appropriate policies to
manage risks are approved by the various sub-committees of the Board. The sub-committees of the Board also provide strategic
guidance while reviewing portfolio behaviour. Senior management committees like the various credit and investment committees,
ALCO and the operational risk committees, develop and implement the risk policies.
In respect of credit risk, emphasis is currently placed on evaluation and containment of risk at individual exposures for non-schematic
loans and analysis of portfolio behaviour in case of schematic loans. There is increasing use of sophisticated modelling techniques to
measure credit risk and the Bank is implementing advanced statistical scoring models for the origination and monitoring of the retail
portfolio. Market risk measurement on portfolios uses both statistical and non-statistical measures to monitor risks with triggers in
cases of breaches in the pre-accepted levels of identified risks. In the area of operational risk, the Bank has created a framework to
monitor the resultant risk and to capture loss data. The same risk frameworks extend to its global operations, which operate within
country-specific policies under the global risk policy.
Credit risk:
The Bank is exposed to credit risk through lending and capital market activities. The credit risk management framework integrates
both qualitative and quantitative processes to support growth in the asset book while ensuring an acceptable risk level in relation to
return. The goal of credit risk management during the year has been to maintain a healthy credit portfolio by managing risk at the
portfolio level as well as at the individual transaction level.
A graphical representation highlighting the spread of risk across various rating grades for large corporate and MSME portfolios as
on 31 March 2008 is given below:
st
Market Risk:
Market risk results from changes in foreign exchange rates, commodity prices, equity prices, interest rate yields and credit spreads
and their volatilities and impacts on the Bank's trading positions. The Bank adopts a comprehensive approach to manage market risk
for its trading and banking book. The market risk framework identifies the types of the market risk to be covered, the risk metrics
and methodologies to be used to capture such risks and the standards governing the management of market risk, including
limit setting.
The Bank computes the value at risk for all trading portfolios, which provides valuable insights into the risk profile of the Bank's
exposures. However, since no single measure can capture all aspects of risk, the Bank uses both statistical and non-statistical risk
metrics. Regular stress testing is carried out to monitor the Bank's vulnerability to shocks and the impact of extreme market
movements. Risk limits for the trading book are set according to a number of criteria including relevant market analysis, business
strategy, management experience and the Bank's risk appetite.
Liquidity Risk:
Liquidity risk arises from the general funding needs of the Bank's activities and in the management of its assets and liabilities.
Liquidity obligations arise from withdrawals of deposits, repayments of purchased funds at maturity, extensions of credit and
working capital needs. The primary tool of monitoring liquidity is the maturity mismatch analysis, which is monitored over successive
26
time bands on a static basis. The liquidity profile of the Bank is also estimated on a more dynamic basis by considering the growth in
deposits and loans, investment obligations, etc. for a short-term period of three months. The Bank's ability to meet its obligations
and fund itself in a crisis scenario is very critical and, accordingly, stress tests are conducted under different scenarios at periodic
intervals to assess the impact on the Bank's liquidity to withstand stressed conditions. The liquidity positions of overseas branches are
managed in line with the Bank's internal policies and host country regulations, and such positions are also reviewed centrally by the
Bank's ALCO along with domestic positions.
Operational Risk:
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events.
A policy on management of operational risk has been approved by the Bank to ensure that operational risk within the Bank is
properly identified, monitored and reported in a structured manner. The Bank has an Operational Risk Management Committee to
oversee application of the aforesaid policy directives. The business units put in place the baseline internal controls as approved by
the Product Management Committee to ensure appropriate controls in the operating environment throughout the Bank. Each new
product or service introduced is subject to a risk review and signoff process where all relevant risks are identified and assessed by
departments independent of the risk taking unit proposing the product. Variations of existing products, as well as outsourcing
activities are also subjected to a similar process. The IT Security Committee of the Bank provides direction for mitigating the
operational risk in IT security.
INFORMATION TECHNOLOGY
Technology is the key to delivering customised financial solutions. The Bank aims to maintain a scalable computing infrastructure
backed by a robust network architecture that delivers service across multiple channels for customer convenience and cost reduction
through operational efficiency. In order to retain a competitive edge, the Bank's technology is continuously upgraded. In tune with
the business priorities, the IT strategy was focused on capacity enhancement to be able to maintain an efficient servicing capability in
a multi-channel delivery environment.
The Bank won the Indian Banks Association (IBA) awards during the year in seven categories for innovations in processes and
development of new products and services.
OPERATIONS AND COMPLIANCE
The procedure for delivery of products, approvals of new products and services from the perspective of operational feasibility and
convenience of delivery and ensuring the implementation of regulatory policies concerning the operational aspects of banking are
handled within the Bank in a disciplined manner. Operational processes were constantly refined during the year under review, from
the perspective of implementation of best practices, risk identification and containment. Operational instructions were revisited on
a continual basis and efforts were made to minimise risks at branches.
Compliance is a process of ensuring integrity, based on internal and external standards. It is felt that compliance is an essential and
critical process, aimed at mitigating the risk to the business. Compliance management poses significant challenges, owing to a
plethora of laws, rules and standards from regulatory and other bodies, both domestic and overseas. Continuing with the Bank's
commitment of adhering to the highest compliance standards, technological initiatives for dissemination of guidelines, and the
propagation of information guidance have been initiated.
Corporate Banking Operations (CBO) within the Bank ensures high delivery standards, effective credit administration, monitoring
and efficient customer service to large corporates, mid-corporates and SME segment borrowers. CBO at branches ensures that the
operational risks in monitoring the advances and other related issues are well mitigated. A separate hub has also been created for
the centralised opening of non-retail loan accounts. In addition, separate hubs have been set up for putting through transactions in
respect of Channel Finance and International Trade Finance.
INSPECTION AND AUDIT
The Bank has an Inspection and Audit department whose function is to ensure that the operating and business units adhere to
systems and procedures, as also regulatory and legal requirements. The scope of Inspection and Audit also encompasses the
examination and evaluation of adequacy and effectiveness of the Bank's systems of internal control. It benchmarks on a continuous
basis against international best practices and procedures in the area of internal control systems. It also proactively recommends
quality enhancement measures in operational processes, based on audit findings.
27
The Inspection and Audit function undertakes a comprehensive risk - based audit of all branches, retail asset centres and service
branches. An annual audit plan is drawn up on the basis of a risk profiling of auditee units. The scope of risk-based internal audit
encompasses the examination of adequacy and effectiveness of internal control systems, as well as external compliance and
evaluating the risk residing at the auditee units. Central Office departments of the Bank are also subjected to inspection and audit.
The Audit Committee of the Board oversees the system of inspection and audit and the effectiveness of internal control systems.
Inspection and Audit department has conformed to 'Quality Management System' (QMS) and its internal processes have been
certified to be ISO 9001:2000 compliant by International certifying agency M/s Det Norske Veritas AS, Netherlands.
CORPORATE SOCIAL RESPONSIBILITY
Being an integral part of society, the Bank is aware of its corporate social responsibilities and has engaged in community and social
investments. For this purpose, the Bank has set up a Trust - the Axis Bank Foundation - with the objective of providing philanthropic
assistance for public health and medical relief, education and alleviation of poverty. The Bank has agreed to contribute upto one
percent of its net profit annually to the Foundation under corporate social responsibility initiatives. During the year, the Foundation
partnered with twenty-five NGOs for educating underprivileged children across the country. The projects supported by the Axis Bank
Foundation include focusing on quality education for the underprivileged child (with a special focus on the girl child), focusing
on early childhood programs for 2-6 year olds, and focusing on projects that encourage 'Inclusive Education' for physically
challenged children.
28
HUMAN RESOURCES
The rapid strides made by the Bank in businesses have been
supported by a string of Human Resources initiatives that have
contributed to the creation of a talented and committed
workforce. A primary objective has been to acquire manpower of
the right quality and numbers necessitated by the exponential
increase in the size of the network and proliferation of products
and services in order that the Bank retains its competitive edge.
Viewed against the backdrop of the scarcity of talent prevalent in
the financial sector in recent years, this has proved to be the single
largest HR challenge for the Bank. A concerted recruitment
initiative through the year that has relied primarily on a network
of HR consultants, campus recruitment drives in Tier I and Tier II
Management Institutes and e-recruitment, has ensured that the
required skills were successfully brought on board. There was a
net addition of 4,759 to the manpower pool across geographies as well as business groups and verticals, representing an increase of
48% over March 2007. There is now an increasingly strong perception about the Bank being an employer of choice.
The Bank's expansion overseas brought in its wake a new set of challenges on the recruitment front. In accordance with the business
focus and regulatory issues at these centres, the requirement of skills has been catered to through focused search and a customised
compensation structure. The total number of overseas employees is 44, out of which 13 are local recruits while the remaining
employees are expatriates.
The Bank's talent pool is an aggregation of diverse and disparate skill-sets and effective management of this pool is the parallel
challenge in the Human Resources domain. The significant tools in this regard have been a well-structured system of performance
appraisal and a clutch of employee welfare measures designed to boost employee motivation and morale and improve the work-life
balance.
51.66%
0.02% 2.31% 4.10%
36.48%
5.43%
The Bank has also been building its training infrastructure which
aims to upgrade skill-levels across grades and functions through a
combination of classroom sessions, external programmes, both
domestic and international, outbound training and a well-
structured e-learning module.
The number of man-days
expended on training has increased from 12,742 and 20,662 in
2005-06 and 2006-07 respectively to 33,412 in 2007-08. Officials
across all levels are exposed to programmes according to assessed
training needs. This ensures that the Bank has a team of
professionals well equipped with the latest domain skills and
ready to take on the challenges of the emerging banking scenario.
We believe that some of the other significant contributory factors
for the emergence of the Axis Bank brand as a major player are a
young workforce with an average age of 29.81 years, and the
Bank's stated policy of being an equal opportunity employer as a part of its initiatives on affirmative action.
The Bank's HR structure is appropriately geared and continuously fine-tuned to meet the complexities in the banking sector in the
coming years, and to provide effective support to the business teams to deliver value to customers and stakeholders.
29
Auditors' Report
To,
The Members of Axis Bank Limited
1. We have audited the attached balance sheet of Axis Bank Limited (the 'Bank') (formerly known as UTI Bank Limited) as at March
31, 2008 and also the profit and loss account and cash flow statement for the year ended on that date, annexed thereto. These
financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
3.
The balance sheet and profit and loss account are drawn up in conformity with Forms A and B (revised) of the Third Schedule to
the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956.
4. We report that:
a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the
purposes of our audit and have found them to be satisfactory;
b)
In our opinion, the transactions of the Bank which have come to our notice have been within its powers;
c)
d)
e)
In our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination
of those books and proper returns adequate for the purposes of our audit have been received from the Bank's branches;
The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of
account;
In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, insofar as they apply to banks;
f) On the basis of written representations received from the directors, as on March 31, 2008, and taken on record by the Board of
Directors, we report that none of the directors is disqualified from being appointed as a director in terms of clause (g) of sub-
section (1) of Section 274 of the Companies Act, 1956;
g)
In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the
information required by the Companies Act, 1956 in the manner so required for banking companies, and give a true and fair
view in conformity with the accounting principles generally accepted in India;
i.
ii.
iii.
in case of the balance sheet, of the state of the affairs of the Bank as at March 31, 2008;
in case of the profit and loss account, of the profit for the year ended on that date; and
in case of cash flow statement, of the cash flows for the year ended on that date.
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.: 048749
Place: Mumbai
Date: April 21, 2008
31
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) - BALANCE SHEET
BALANCE SHEET AS ON 31 MARCH 2008
CAPITAL AND LIABILITIES
Capital
Reserves & Surplus
As on
As on
31-03-2008
31-03-2007
Schedule No.
(Rs. in Thousands)
(Rs. in Thousands)
1
2
3,577,097
2,816,308
84,107,939
31,115,981
Employees' Stock Options Outstanding (Net)
17(4.16)
21,868
89,783
Deposits
Borrowings
Other liabilities and provisions
TOTAL
ASSETS
Cash and Balances with Reserve Bank of India
Balances with banks and money at call and short notice
Investments
Advances
Fixed Assets
Other Assets
TOTAL
Contingent liabilities
Bills for collection
3
4
5
6
7
8
9
10
11
876,262,206
587,856,011
56,240,405
51,956,030
75,568,972
58,738,042
1,095,778,487
732,572,155
73,056,569
46,610,303
51,985,835
22,572,748
337,051,008
268,971,603
596,611,446
368,764,832
9,228,501
6,731,941
27,845,128
18,920,728
1,095,778,487
732,572,155
12
2,588,955,997
1,841,647,530
83,233,927
62,746,332
Significant Accounting Policies and Notes to Accounts
17
Schedules referred to above form an integral part of the Balance Sheet
As per our report of even date
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.: 048749
N. C. Singhal
Director
R. H. Patil
Director
P. J. Oza
Company Secretary
Date: 21 April 2008
Place: Mumbai
32
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) - PROFIT & LOSS ACCOUNT
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2008
Year ended
31-03-2008
Year ended
31-03-2007
(Rs. in Thousands) (Rs. in Thousands)
Schedule No.
13
14
70,053,151
17,954,888
44,616,552
10,101,113
88,008,039
54,717,665
I
INCOME
Interest earned
Other income
TOTAL
II
EXPENDITURE
Interest expended
Operating expenses
Provisions and contingencies
TOTAL
15
16
17(5.2.1)
17(5.3.1)
17(5.3.4)
NET PROFIT FOR THE YEAR (I - II)
Balance in Profit & Loss account brought forward from previous year
Utilisation for Employee Benefits Provision under
Accounting Standard (AS)-15 (Revised)
AMOUNT AVAILABLE FOR APPROPRIATION
APPROPRIATIONS :
Transfer to Statutory Reserve
Transfer to Capital Reserve
Proposed Dividend (includes tax on dividend)
Balance in Profit & Loss account carried forward
TOTAL
III
IV
V
VI
EARNINGS PER EQUITY SHARE
(Face value Rs.10/- per share) (Rupees)
Basic
Diluted
Significant Accounting Policies and Notes to Accounts
17
Schedules referred to above form an integral part of the Profit and Loss Account
17(5.3.2)
As per our report of even date
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.: 048749
N. C. Singhal
Director
R. H. Patil
Director
P. J. Oza
Company Secretary
Date: 21 April 2008
Place: Mumbai
44,199,617
21,549,269
11,548,863
29,933,172
12,145,984
6,048,226
77,297,749
48,127,382
10,710,290
10,290,740
6,590,283
7,310,390
-
(318,028)
21,001,030
13,582,645
2,677,572
268,389
2,516,380
15,538,689
1,647,571
156,415
1,487,919
10,290,740
21,001,030
13,582,645
32.15
31.31
23.50
22.79
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
33
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) - CASH FLOW STATEMENT
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2008
Cash flow from operating activities
Net profit before taxes
Adjustments for:
Year ended
31-03-2008
(Rs. in Thousands)
Year ended
31-03-2007
(Rs. in Thousands)
16,462,737
9,962,386
Depreciation & impairment provision on fixed assets
Depreciation on investments
Amortisation of premium on Held to Maturity investments
1,581,140
65,459
977,647
Provision for Non Performing Advances/Investments (including bad debts)
3,440,118
General provision on securitised assets
Provision on standard assets
General provision for retail assets
(1,123)
1,534,574
-
1,118,640
669,666
987,486
737,370
25,400
1,223,500
17,700
Provision for wealth tax
Loss on sale of fixed assets
Provision for country risk
2,155
2,487
151,762
29,101
35,500
-
Contingent provision against derivatives
719,733
-
Amortisation of deferred employee compensation
1,965
27,067
24,971,667
14,800,803
Adjustments for:
(Increase)/Decrease in investments
(Increase)/Decrease in advances
Increase/(Decrease) in borrowings
Increase/(Decrease) in deposits
(Increase)/Decrease in other assets
Increase/(Decrease) in other liabilities & provisions
Direct taxes paid
Net cash flow from operating activities
Cash flow from investing activities
Purchase of fixed assets
(Increase)/Decrease in Held to Maturity Investments
Proceeds from sale of fixed assets
Net cash used in investing activities
(26,351,275)
(231,262,229)
4,284,375
288,406,194
(7,918,483)
14,234,756
(6,760,519)
59,604,486
(4,355,834)
(42,795,739)
126,372
(21,042,997)
(146,307,497)
25,146,713
186,720,698
(1,318,740)
(914,451)
(4,129,261)
52,955,268
(2,225,963)
(34,364,646)
34,855
(47,025,201)
(36,555,754)
34
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2008
Cash flow from financing activities
Proceeds from issue of Subordinated debt (net of repayment)
Proceeds from issue of Perpetual debt and Upper Tier II instruments
Proceeds from issue of Share Capital
Proceeds from Share Premium (net of share issue expenses)
Payment of Dividend
Year ended
31-03-2008
(Rs. in Thousands)
Year ended
31-03-2007
(Rs. in Thousands)
(2,455,000)
1,734,198
760,789
44,706,032
(1,488,087)
3,393,000
13,735,120
29,401
330,025
(1,117,416)
Net cash generated from financing activities
43,257,932
16,370,130
Effect of exchange fluctuation on translation reserve
Net increase in cash and cash equivalents
Cash and cash equivalents as at 1 April 2007
Cash and cash equivalents as at 31 March 2008
22,136
55,859,353
69,183,051
125,042,404
(5,015)
32,764,629
36,418,422
69,183,051
Note :
1. Cash and cash equivalents comprise of cash on hand & in ATM, balances with Reserve Bank of India, balances with banks and
money at call & short notice (refer schedule 6 and 7 of the Balance Sheet).
As per our report of even date
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.: 048749
N. C. Singhal
Director
R. H. Patil
Director
P. J. Oza
Company Secretary
Date: 21 April 2008
Place: Mumbai
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
35
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) - SCHEDULES
SCHEDULES FORMING PART OF THE BALANCE SHEET AS ON 31 MARCH 2008
SCHEDULE 1 - CAPITAL
Authorised Capital
500,000,000 Equity Shares of Rs. 10/- each
(Previous year - 300,000,000 Equity Shares of Rs.10/- each)
Issued, Subscribed and Paid-up capital
357,709,669 Equity Shares of Rs. 10/- each fully paid up
(Previous year - 281,630,787 Equity Shares of Rs.10/- each fully paid-up)
[Included above are 13,033,458 GDRs (previous year 11,994,991) representing
13,033,458 equity shares (previous year 11,994,991)]
SCHEDULE 2 - RESERVES AND SURPLUS
I. Statutory Reserve
Opening Balance
Additions during the year
II. Share Premium Account
Opening Balance
Additions during the year
Less: Share issue expenses [refer 17(5.1)]
III. General Reserve
Opening Balance
Additions during the year
IV. Capital Reserve
Opening Balance
Additions during the year
V.
Foreign Currency Translation Reserve
Opening Balance
Additions during the year [refer 17(4.5)]
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
5,000,000
3,000,000
3,577,097
2,816,308
5,846,822
2,677,572
4,199,251
1,647,571
8,524,394
5,846,822
13,956,295
45,248,464
(472,552)
13,554,592
401,703
-
58,732,207
13,956,295
143,000
-
143,000
883,509
268,389
1,151,898
(4,385)
22,136
17,751
143,000
-
143,000
727,094
156,415
883,509
630
(5,015)
(4,385)
VI. Balance in Profit & Loss Account
15,538,689
10,290,740
TOTAL
84,107,939
31,115,981
36
SCHEDULES FORMING PART OF THE BALANCE SHEET AS ON 31 MARCH 2008
SCHEDULE 3 - DEPOSITS
A.
I. Demand Deposits
(i) From banks
(ii) From others
II. Savings Bank Deposits
III. Term Deposits
(i) From banks
(ii) From others
TOTAL
B.
I. Deposits of branches in India
II. Deposits of branches outside India
TOTAL
SCHEDULE 4 - BORROWINGS
I.
II.
Borrowings in India
(i) Reserve Bank of India
(ii) Other Banks
(iii) Other institutions & agencies
Borrowings outside India
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
8,957,267
191,488,521
199,824,102
36,841,899
439,150,417
7,490,364
105,552,753
121,258,808
60,206,636
293,347,450
876,262,206
587,856,011
863,916,347
12,345,859
585,729,192
2,126,819
876,262,206
587,856,011
-
-
5,466,886
50,773,519
-
6,000,000
12,038,952
33,917,078
TOTAL
56,240,405
51,956,030
Secured borrowing included in I & II above
-
-
SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS
Bills payable
Inter - office adjustments (net)
Interest accrued
Proposed dividend (includes tax on dividend)
Subordinated Debt #
Perpetual Debt and Upper Tier II instruments *
I.
II.
III.
IV.
V.
VI.
VII. Contingent provision against standard assets
VIII. Others (including provisions) @
21,022,319
-
1,777,562
2,511,015
18,824,000
15,469,318
3,589,183
12,375,575
13,095,209
-
1,772,747
1,482,723
21,279,000
13,735,120
2,054,609
5,318,634
TOTAL
75,568,972
58,738,042
#
*
Represents Subordinated Debt of 5,862 Bonds (previous year 10,772 Bonds) of Rs. 5,00,000/- each and 15,893 Bonds (previous
year 15,893 Bonds) of Rs. 10,00,000/- each, in the nature of Non Convertible Debentures [Also refer 17(5.2.2)]
Represents Rs. 398.55 crores (previous year Rs. 413.96 crores) of Perpetual Debt and Rs.1,148.38 crores (previous year Rs. 959.55
crores) of Upper Tier II instruments [Also refer 17(5.2.3)]
@ Includes contingent provision against derivatives of Rs. 71.97 crores [previous year Rs. Nil]
37
SCHEDULES FORMING PART OF THE BALANCE SHEET AS ON 31 MARCH 2008
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA
I.
II.
Cash in hand & in ATM [including foreign currency notes]
Balances with Reserve Bank of India :
(i) in Current Account
(ii) in Other Accounts
15,203,276
8,367,508
57,853,293
-
38,242,795
-
TOTAL
73,056,569
46,610,303
SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
In India
(i) Balance with Banks
(a) in Current Accounts
(b) in Other Deposit Accounts
(ii) Money at Call and Short Notice
(a) With banks
(b) With other institutions
10,461,131
719,499
31,075,560
-
6,242,429
524,183
12,137,816
-
TOTAL
42,256,190
18,904,428
Outside India
(i) in Current Accounts
(ii) in Other Deposit Accounts
(iii) Money at Call & Short Notice
3,845,647
1,203,600
4,680,398
2,903,160
679,180
85,980
TOTAL
9,729,645
3,668,320
GRAND TOTAL (I+II)
51,985,835
22,572,748
I.
II.
38
SCHEDULES FORMING PART OF THE BALANCE SHEET AS ON 31 MARCH 2008
SCHEDULE 8 - INVESTMENTS
I.
Investments in India in -
(i) Government Securities ## **
(ii) Other approved securities
(iii) Shares
(iv) Debentures and Bonds $
(v)
(vi) Others @ (Mutual Fund units, CD / CP, NABARD deposits, PTC etc.)
Investment in Subsidiaries / Joint Ventures
Gross Investments in India
Less : Depreciation in the value of investments
(includes provision for Non Performing Investments
Rs. 8.96 crores, previous year Rs.6.67 crores )
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
201,788,389
-
5,855,920
108,211,618
380,000
15,688,378
331,924,305
(958,994)
164,308,412
-
4,627,908
70,448,978
99,999
24,790,893
264,276,190
(923,298)
Net investments in India
330,965,311
263,352,892
II.
Investments outside India in -
(i) Government Securities (including local authorities)
(ii) Subsidiaries and / or joint ventures abroad
(iii) Others
Gross Investments outside India
Less : Depreciation in the value of investments
Net investments outside India
-
-
6,138,360
6,138,360
(52,663)
6,085,697
54,551
-
5,564,160
5,618,711
-
5,618,711
GRAND TOTAL
(I+II)
337,051,008
268,971,603
@ Includes deposits with NABARD Rs. 1,000.69 crores (previous year Rs. 866.89 crores) and PTC's Rs. 530.66 crores (previous year
Rs. 1,344.40 crores)
Includes securities costing Rs. 3,871.77 crores (previous year Rs. 3,581.47 crores) pledged for availment of fund transfer facility,
clearing facility and margin requirement
Includes Repo Lending of Rs. 503.75 crores (previous year Rs. 1,350.94 crores) and net of Repo borrowing of Rs. Nil under the
Liquidity Adjustment Facility (previous year Rs. 304.64 crores) in line with Reserve Bank of India requirements.
Includes securities costing Rs. 175.06 crores ( previous year Rs. 321.76 crores) pledged for margin requirement
##
**
$
39
SCHEDULES FORMING PART OF THE BALANCE SHEET AS ON 31 MARCH 2008
SCHEDULE 9 - ADVANCES
A.
(i) Bills purchased and discounted #
(ii) Cash credits, overdrafts and loans repayable on demand
(iii) Term loans
TOTAL
B.
(i)
Secured by tangible assets $
(ii) Covered by Bank/Government Guarantees &&
(iii) Unsecured
TOTAL
C.
I.
Advances in India
(i) Priority Sector
(ii) Public Sector
(iii) Banks
(iv) Others
TOTAL
II. Advances Outside India
(i) Due from banks
(ii) Due from others -
(a) Bills purchased and discounted
(b) Syndicated loans
(c) Others
TOTAL
GRAND TOTAL [ C I + C II ]
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
20,236,224
164,432,415
411,942,807
12,737,121
98,866,064
257,161,647
596,611,446
368,764,832
482,473,382
305,022,866
17,698,818
96,439,246
14,489,278
49,252,688
596,611,446
368,764,832
165,722,514
131,963,322
62,114
276,307
215,406
276,841
376,741,283
210,553,634
542,802,218
343,009,203
-
-
2,151,461
20,476,677
31,181,090
53,809,228
2,913,534
2,441,985
20,400,110
25,755,629
596,611,446
368,764,832
#
$
Bills purchased & discounted are net of Rs. Nil (previous year Rs. 700 crores) of borrowings under the Bills Rediscounting
Scheme
Includes advances against book debts.
&& Includes advances against L/Cs issued by Banks
Advances are net of floating provision, which has been adjusted based on management estimate
40
SCHEDULES FORMING PART OF THE BALANCE SHEET AS ON 31 MARCH 2008
SCHEDULE 10 - FIXED ASSETS
I.
Premises
At cost at the beginning of the year
Additions during the year
Deductions during the year
Depreciation to date
TOTAL
II.
Other fixed assets (including Furniture & Fixtures)
At cost at the beginning of the year
Additions during the year
Deductions during the year
Depreciation to date
TOTAL
III.
Assets on Lease
At cost at the beginning of the year
Additions during the year
Deductions during the year
Depreciation to date
Provision for impairment
TOTAL
IV.
CAPITAL WORK-IN-PROGRESS (including capital advances)
GRAND TOTAL (I+II+III+IV)
SCHEDULE 11 - OTHER ASSETS
I.
II.
III.
IV.
V.
Inter-office adjustments (net)
Interest Accrued
Tax paid in advance/tax deducted at source (net of provisions)
Stationery and stamps
Non banking assets acquired in satisfaction of claims
VI. Others #
TOTAL
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
337,296
224,629
(61,603)
(86,192)
414,130
9,886,993
3,094,603
(399,916)
337,296
-
-
(72,401)
264,895
7,884,495
2,121,499
(119,001)
(5,416,626)
(4,191,322)
7,165,054
5,695,671
765,000
765,000
-
-
-
-
(276,010)
(241,776)
(124,426)
-
364,564
7,943,748
1,284,753
523,224
6,483,790
248,151
9,228,501
6,731,941
- -
9,078,710
447,785
9,188
6,419,098
1,035,768
8,463
- -
18,309,445
11,457,399
27,845,128
18,920,728
#
Includes deferred tax assets of Rs. 319.05 crores (previous year Rs. 159.66 crores)
41
SCHEDULES FORMING PART OF THE BALANCE SHEET AS ON 31 MARCH 2008
SCHEDULE 12 - CONTINGENT LIABILITIES
I.
II.
Claims against the bank not acknowledged as debts
Liability for partly paid investments
As on
31-03-2008
As on
31-03-2007
(Rs. in Thousands) (Rs. in Thousands)
2,547,691
1,707,515
- -
III.
Liability on account of outstanding forward exchange and derivative contracts :
(a) Forward Contracts
643,204,542
507,359,036
(b) Interest Rate Swaps, Currency Swaps, Forward Rate Agreement
& Interest Rate Futures
(c) Foreign Currency Options
TOTAL
IV.
Guarantees given on behalf of constituents:
In India
Outside India
V.
Acceptances, endorsements and other obligations
VI. Other items for which the bank is contingently liable
TOTAL
1,565,202,992
1,174,108,994
161,000,980
52,836,220
2,369,408,514
1,734,304,250
117,963,502
1,755,695
82,465,595
14,815,000
43,813,548
50,287
54,771,930
7,000,000
2,588,955,997
1,841,647,530
42
SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2008
SCHEDULE 13 - INTEREST EARNED
I.
II.
III.
Interest/discount on advances/bills
Income on investments
Interest on balances with Reserve Bank of India and other inter-bank funds
IV. Others
TOTAL
SCHEDULE 14 - OTHER INCOME
Year ended
31-03-2008
Year ended
31-03-2007
(Rs. in Thousands) (Rs. in Thousands)
47,456,516
21,023,156
1,076,363
497,116
27,028,573
16,327,166
773,012
487,801
70,053,151
44,616,552
I.
II.
III.
IV.
V.
Commission, exchange and brokerage
Profit/(Loss) on sale of Investments/Derivative transactions (net)
Profit on exchange transactions (net)
Profit/(Loss) on sale of fixed assets (net)
Income earned by way of dividends etc. from
13,207,034
2,202,528
2,074,816
(151,762)
subsidiaries/companies and/or joint venture abroad/in India
-
VI.
Lease rentals
VII. Miscellaneous Income
34,703
587,569
[including recoveries on account of advances/investments written off in earlier years
Rs. 44.90 crores (previous year Rs. 23.62 crores) and profit on account of portfolio
sell downs/securitisation Rs. 9.06 crores (previous year Rs.2.00 crores)]
7,789,647
608,753
1,248,471
(29,101)
-
34,764
448,579
TOTAL
SCHEDULE 15 - INTEREST EXPENDED
I.
II.
III.
Interest on deposits
Interest on Reserve Bank of India/Inter-bank borrowings
Others @
TOTAL
@
Including interest on repos & subordinated debt
SCHEDULE 16 - OPERATING EXPENSES
I.
II.
III.
IV.
V.
VI.
Payments to and provisions for employees
Rent, taxes and lighting
Printing and stationery
Advertisement and publicity
Depreciation on bank's property (incl. impairment provision)
Directors' fees, allowance and expenses
VII. Auditor's fees and expenses
VIII. Law charges
IX.
X.
XI.
Postage, telegrams, telephones etc.
Repairs and maintenance
Insurance
XII. Other expenditure
TOTAL
17,954,888
10,101,113
37,425,239
1,763,008
5,011,370
24,808,886
1,687,973
3,436,313
44,199,617
29,933,172
6,702,491
2,529,253
539,970
744,063
1,581,140
7,028
6,648
51,938
1,011,919
1,895,940
767,215
5,711,664
3,813,461
1,590,798
375,770
296,166
1,118,640
5,879
5,038
63,823
700,988
1,288,730
548,129
2,338,562
21,549,269
12,145,984
43
17 Significant accounting policies and notes forming part of the financial
statements for the year ended 31 March 2008
(Currency : In Indian Rupees)
1
Background
Axis Bank Limited (the 'Bank') was incorporated in 1993 and provides a complete suite of corporate and retail banking
products. Pursuant to the approval received from the Registrar of Companies, Gujarat, the Bank has changed its name from
'UTI Bank Limited' to 'Axis Bank Limited' with effect from 30July 2007.
2
Basis of preparation
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of
accounting, unless otherwise stated, and comply with generally accepted accounting principles, statutory requirements
prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India ('RBI') from
time to time, the Accounting Standards ('AS') issued by the Institute of Chartered Accountants of India ('ICAI') and notified by
Companies Accounting Standard Rules, 2006 to the extent applicable and current practices prevailing within the banking
industry in India.
3
Use of estimates
The preparation of the financial statements, in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and
expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those
estimates. Management believes that the estimates used in the preparation of the financial statements are prudent and
reasonable. Any revisions to the accounting estimates are recognised prospectively in the current and future periods.
4
Significant accounting policies
4.1 Investments
Classification
In accordance with the RBI guidelines, investments are classified at the date of purchase as:
(cid:143) Held for Trading ('HFT');
(cid:143) Available for Sale ('AFS'); and
(cid:143) Held to Maturity ('HTM').
Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT
securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date.
Investments that the Bank intends to hold till maturity are classified under HTM category.
Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM
securities. As permitted by RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only
of those securities which are eligible for complying with the Statutory Liquidity Ratio ('SLR') i.e. SLR securities and the total SLR
securities held in HTM category are not more than 25% of its demand and time liabilities as on the effective date. The effective
date means the last Friday of the second preceding fortnight for computation of the aforesaid limit. In computing the
investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances are
excluded.
All other investments are classified as AFS securities.
However, for disclosure in the balance sheet, investments in India are classified under six categories - Government securities,
Other approved securities, Shares, Debentures and Bonds, Investment in Subsidiaries/Joint Ventures and Others.
Investments made outside India are classified under three categories - Government Securities, Subsidiaries and/or Joint
Ventures abroad and Others.
44
Transfer of security between categories
Transfer of security between categories of investments is accounted for at the acquisition cost/book value/market value as on
the date of transfer, whichever is lower, and the depreciation, if any, on such transfer is recognised in the profit and loss
account.
Valuation
Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is
amortised on a straight-line basis over the remaining period to maturity.
Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of
periodical valuation of quoted investments included in the 'Available for Sale' and 'Held for Trading' categories is the market
price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI or prices
declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association
(“FIMMDA”), periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss
account. The net appreciation if any, under each category is ignored, except to the extent of depreciation previously provided.
The book value of individual securities is not changed consequent to the periodic valuation of investments.
Treasury Bills and Commercial Paper, being discounted instruments, are valued at carrying cost.
Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund.
Market value of investments where current quotations are not available, is determined as per the norms prescribed by the RBI
as under:
(cid:143) market value of unquoted Government securities is derived based on the Prices/Yield to Maturity ('YTM') rate for
Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of
India ('FIMMDA') jointly with the Primary Dealers Association of India ('PDAI') at periodic intervals;
(cid:143)
in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding
50 basis points to the Base Yield Curve of Central Government Securities;
(cid:143) market value of unquoted State Government securities is derived by applying the YTM method by marking it up by 25 basis
points above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at
periodic intervals;
(cid:143)
(cid:143)
(cid:143)
(cid:143)
in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market
price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for credit
risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings along
with residual maturity issued by FIMMDA is adopted for this purpose;
in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in
accordance with the RBI guidelines;
in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential
norms for provisioning as prescribed by RBI; and
equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges,
are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company's
latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not
available, the shares are valued at Re 1 per company.
Investments in subsidiaries/joint ventures are categorised as 'Held to Maturity' in accordance with RBI guidelines.
Repurchase and reverse repurchase transactions
Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The
difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense
over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in
the profit and loss account.
45
4.2 Advances
Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines and are stated net of
specific provisions made towards Non Performing Advances. Further, NPAs are classified into sub-standard, doubtful and loss
assets based on the criteria stipulated by RBI. Provisions for NPAs (other than retail advances) are made for sub-standard and
doubtful assets at rates as prescribed by RBI. Loss assets and unsecured portion of doubtful assets are provided/written off as
per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management.
In the case of retail advances, provisions are made upon reaching specified stages of delinquency (90 days or more of
delinquency) under each type of loan, which satisfies the RBI prudential norms on provisioning.
For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the
present value of the interest sacrifice to be provided at the time of restructuring.
A general provision @ 0.25% to 2.00% is made on the various classes of standard assets as prescribed by RBI.
4.3 Country Risk
In addition to the provisions required to be held according to the asset classification status, provisions are held for individual
country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant,
low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded
scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal provision
requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total
funded assets, no provision is maintained on such country exposure.
4.4 Securitisation
The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (SPV). In
most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides
credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate
(PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing
etc.) accepted by the Bank, appropriate provision/disclosure is made at the time of sale in accordance with AS-29-'Provisions,
contingent liabilities and contingent assets'.
Gain on securitisation transaction is recognised over the period of the underlying securities issued by the SPV. Loss on
securitisation is immediately debited to profit and loss account.
4.5 Foreign currency transactions
In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates prevailing on
the date of the transaction. Foreign currency assets and liabilities are translated at the balance sheet date at rates notified by
Foreign Exchange Dealers Association of India ('FEDAI'). All profits/losses resulting from year-end revaluations are recognised
in the profit and loss account.
Financial statements of foreign branches classified as non-integral foreign operations are translated as follows:
(cid:143) Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing rates
notified by FEDAI at the year-end.
(cid:143)
Income and expenses are translated at the rates prevailing on the date of the transactions.
(cid:143) All resulting exchange differences are accumulated in a separate 'Foreign Currency Translation Reserve' till the disposal of
the net investments.
Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge Foreign Currency Non-Resident
('FCNR') deposits which are not revalued) and spot exchange contracts are revalued at year end exchange rates notified by
FEDAI. The resulting gains or losses on revaluation are included in the profit and loss account in accordance with RBI/FEDAI
guidelines.
Premium/discount on currency swaps undertaken to hedge FCNR deposits is recognised as interest income/expense and is
amortised on a straight-line basis over the underlying swap period.
46
Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances, endorsements and other
obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.
4.6 Derivative transactions
Derivative transactions comprise of swaps and options which are disclosed as contingent liabilities. The swaps/options are
segregated as trading or hedge transactions. Trading swaps/options are revalued at the balance sheet date with the resulting
unrealised gain or loss being recognised in the profit and loss account and correspondingly in other assets or other liabilities
respectively. Hedged swaps/options are accounted for on an accrual basis.
4.7 Revenue recognition
Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on
receipt.
Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee
income is recognised upfront on its becoming due.
Dividend is accounted on an accrual basis when the right to receive the dividend is established.
Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale.
Realised gains on investments under HTM category are recognised in the profit and loss account and subsequently
appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account.
4.8 Fixed assets and depreciation
Fixed assets are carried at cost of acquisition less accumulated depreciation less impairment, if any. Cost includes freight,
duties, taxes and incidental expenses related to the acquisition and installation of the asset.
Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid
to acquire fixed assets.
Depreciation (including on assets given on operating lease) is provided on the straight-line method from the date of addition.
The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the
management's estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life
on a subsequent review is shorter, then depreciation is provided at a higher rate based on management's estimate of the useful
life/remaining useful life. Pursuant to this policy, depreciation has been provided using the following estimated useful lives:
Asset
Owned premises
Assets given on operating lease
Computer hardware
Application software
Vehicles
EPABX, telephone instruments
Mobile phone
Locker cabinets/cash safe/strong room door
Assets at staff residence
All other fixed assets
Estimated useful life
20 years
20 years
3 years
5 years
4 years
8 years
2 years
16 years
5 years
10 years
All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation.
Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale.
The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment,
depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
47
4.9 Lease transactions
Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the profit and loss
account on accrual basis.
Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account on a straight-
line basis over the lease term.
4.10 Retirement and other employee benefits
Provident Fund
Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the
profit and loss account of the year when the contributions to the fund are due. There are no other obligations other than the
contribution payable to the trust.
Gratuity
The Bank contributes towards gratuity fund (defined benefit retirement plan) administered jointly by the Life Insurance
Corporation of India ('LIC') and Metlife Insurance Company Limited ('Metlife') for eligible employees. Under this scheme, the
settlement obligations remain with the Bank, although LIC/Metlife administer the scheme and determines the contribution
premium required to be paid by the Bank. The plan provides a lump sum payment to vested employees at retirement or
termination of employment based on the respective employee's salary and the years of employment with the Bank. Liability
with regard to gratuity fund is accrued based on actuarial valuation conducted by an independent actuary using the projected
unit credit method as at 31 March each year.
Leave Encashment
Short term compensated absences are provided for based on estimates. The Bank provides leave encashment benefit (long
term), which is a defined benefit scheme based on actuarial valuation as at the balance sheet date conducted by an
independent actuary. The actuarial valuation is carried out as per the projected unit credit method.
Superannuation
Employees of the Bank are entitled to receive retirement benefits under the Bank's Superannuation scheme. Superannuation
is a defined contribution plan under which the Bank contributes annually a specified sum of 10% of the employee's eligible
annual basic salary to LIC, which undertakes to pay the lumpsum and annuity benefit payments pursuant to the scheme.
Superannuation contributions are recognised in the profit and loss account in the period in which they accrue.
Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.
4.11 Credit Card reward points
The Bank estimates the probable redemption of credit card reward points using an actuarial method at balance sheet date by
employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report
as furnished by the said independent actuary.
4.12 Taxation
Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. Current year taxes and
fringe benefit tax are determined in accordance with the Income-tax Act, 1961. Deferred tax adjustments comprise changes in
the deferred tax assets or liabilities during the period.
Deferred tax assets and liabilities are recognised on a prudent basis for the future tax consequences of timing differences
arising between the carrying values of assets and liabilities and their respective tax basis, and carry forward losses. Deferred tax
assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the
balance sheet date. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account.
Deferred tax assets are recognised and reassessed at each reporting date, based upon management's judgement as to whether
realisation is considered as reasonably certain.
48
4.13 Share Issue Expenses
Share issue expenses are adjusted from share premium account.
4.14 Earnings per share
The Bank reports basic and diluted earnings per share in accordance with AS 20 -'Earnings per Share' issued by the ICAI. Basic
earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares
outstanding for the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares
were exercised or converted during the year. Diluted earnings per share is computed using the weighted average number of
equity shares and dilutive potential equity shares outstanding at year end.
4.15 Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in ATM, balances with Reserve Bank of India, balances with other banks
and money at call and short notice.
4.16 Employee stock option scheme
The 2001 Employee Stock Option Scheme (the 'Scheme') provides for grant of stock options on equity shares of the Bank to
employees and Directors of the Bank. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI)
(Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value
method to account for its stock based employee compensation plans as per the Guidance Note on 'Accounting for Employee
Share-based Payments' issued by the ICAI. Options are granted at an exercise price, which is equal to/less than the fair market
price of the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the grant
date is recognised as a deferred compensation cost and amortized on a straight-line basis over the vesting period of such
options.
The fair market price is the latest available closing price, prior to the date of the Board of Directors meeting in which options
are granted / shares are issued, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more
than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.
4.17 Provisions, contingent liabilities and contingent assets
A provision is recognised when the Bank has a present obligation as a result of past event where it is probable that an outflow
of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not
discounted to its present value and are determined based on best estimate required to settle the obligation at the balance
sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
A disclosure of contingent liability is made when there is:
(cid:143)
(cid:143)
a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non occurrence
of one or more uncertain future events not within the control of the Bank; or
a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will
be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote,
no provision or disclosure is made.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in
which the change occurs.
5
Notes to Accounts
5.1 Share Capital
During the year ended 31 March 2008, the Bank raised additional equity capital in the form of 1,41,32,466 Global Depository
Receipts (GDRs) (each GDR representing 1 underlying equity share of Rs. 10/- each), at a price of US$ 15.43 per GDR. The Bank
also undertook a Qualified Institutional Placement (QIP) of 2,82,64,934 shares and a preferential allotment of 3,06,95,129
shares at a price of Rs. 620/- per share. As a consequence, the paid-up share capital of the Bank has increased by Rs. 73.09 crores
and the reserves of the Bank have increased by Rs. 4,414.01 crores after charging of issue related expenses.
The funds mobilised from the equity raising (through GDR, QIP and Preferential issue) were utilised for enhancing the capital
adequacy ratio and for general corporate purposes.
49
5.2 Statutory disclosures as per RBI
5.2.1 'Provisions and contingencies' recognised in the profit and loss account include:
For the year ended
Provision for income tax
- Current tax for the year
- Deferred tax for the year
Provision for fringe benefit tax
Provision for wealth tax
Provision for non performing advances & investments,
(including bad debts written off and write backs)
Provision towards standard assets
General provision for retail loans
Provision for depreciation in value of investments
Provision for securitised assets
Contingent provision against derivatives
Provision for country risk
Total
31 March 2008
31 March 2007
(Rs. in crores)
725.59
(159.39)
9.05
575.25
0.22
344.01
153.46
-
6.54
(0.11)
71.97
3.55
1,154.89
412.60
(81.36)
5.97
337.21
0.25
73.73
122.35
1.77
66.97
2.54
-
-
604.82
5.2.2 In terms of its guidelines for implementation of the new capital adequacy framework issued on 27 April 2007, RBI has directed
banks with overseas branches to migrate to the revised framework for capital computation (under Basel II) with effect from 31
March 2008. The migration is proposed in a phased manner over a three-year period during which banks are required to
compute their capital requirements in terms of both Basel I and Basel II. The minimum capital to be maintained by banks under
the Revised Framework is subject to a prudential floor of 100%, 90% and 80% of the capital requirement under Basel I over the
years March 2008, 2009 and 2010 respectively.
The capital adequacy ratio of the Bank, calculated as per RBI guidelines (Basel I requirement being higher) is set out below:
Capital adequacy
Tier I
Tier II
Total capital
Total risk weighted assets and contingents
Capital ratios
Tier I
Tier II
CRAR
31 March 2008
(Rs. in crores)
31 March 2007
8,822.52
3,082.75
11,905.27
86,719.66
10.17%
3.56%
13.73%
3,636.21
2,918.29
6,554.50
56,643.37
6.42%
5.15%
11.57%
Amount of Subordinated Debt raised as Tier-II capital
(as per details given below)
NIL
Rs. 389.30 crores
The Bank has not raised any subordinated debt during the year ended 31 March 2008.
50
During the year ended 31 March 2008, the Bank redeemed subordinated debt of Rs. 245.50 crores, the details of which are set
out below:
Date of maturity
Period
28 April 2007
85 months
4 June 2007
66 months
27 June 2007
63 months
Coupon
11.75%
9.80%
9.30%
Amount
Rs. 100.00 crores
Rs. 112.00 crores
Rs. 33.50 crores
During the year ended 31 March 2007, the Bank raised subordinated debt of Rs. 389.30 crores, the details of which are set out
below:
Date of allotment
Period
28 June 2006
87 months
120 months
30 March 2007
120 months
Coupon
8.95%
9.10%
10.10%
Amount
Rs. 33.50 crores
Rs. 104.90 crores
Rs. 250.90 crores
During the year ended 31 March 2007, the Bank redeemed subordinated debt of Rs. 50 crores, the details of which are set out
below:
Date of maturity
Period
28 June 2006
63 months
Coupon
11.10 %
Amount
Rs. 50 crores
5.2.3 During the year ended 31 March 2008, the Bank raised hybrid capital in the form of Upper Tier II bonds qualifying as Tier II
capital, the details of which are set out below:
Type of Capital
Date of allotment
Period
Coupon
Amount
Upper Tier II
28 June 2007
180 months
7.125%
(USD 60 million)
Rs. 240.72 crores
During the year ended 31 March 2007, the Bank raised hybrid capital in the form of Perpetual Debt of Rs. 413.96 crores
qualifying as Tier I capital and Upper Tier II bonds Rs. 959.55 crores qualifying as Tier II capital, the details of which are set out
below:
Type of Capital
Date of allotment
Period
Coupon
Amount
Upper Tier II
11 August 2006
180 months
7.25%
Perpetual Debt
30 September 2006
Perpetual
Perpetual Debt
15 November 2006
Perpetual
Upper Tier II
24 November 2006
180 months
Upper Tier II
6 February 2007
180 months
10.05%
7.167%
9.35%
9.50%
(USD 150 million)
Rs. 652.05 crores
Rs. 214.00 crores
(USD 46 million)
Rs. 199.96 crores
Rs. 200.00 crores
Rs. 107.50 crores
51
5.2.4 The key business ratios and other information is set out below:
As at
#
Interest income as a percentage to working funds
Non-interest income as a percentage to working funds
Operating profit as a percentage to working funds
Return on assets (based on average working funds)
Business (deposits less inter bank deposits plus advances) per employee**
Profit per employee**
Net non performing assets as a percentage of net customer assets *
31 March 2008
%
8.08
2.07
2.57
1.24
Rs. 11.17 crores
Rs. 8.39 lacs
0.36
31 March 2007
%
7.42
1.68
2.10
1.10
Rs. 10.24 crores
Rs. 7.59 lacs
0.61
# Working funds represent average of total assets as reported to RBI in Form X under Section 27 of the Banking Regulation Act, 1949
* Net Customer assets include advances and credit substitutes
** Productivity ratios are based on average employee numbers
5.2.5 Asset Quality
i) Net non-performing assets to net advances is set out below:
Net non performing assets as a percentage of net advances
ii) Movement in gross non-performing assets is set out below:
Opening balance at the beginning of the year
Additions during the year
Reductions during the year
31 March 2008
%
0.42
31 March 2008
Gross
418.67
384.21
(308.27)
31 March 2007
%
0.72
(Rs. in crores)
31 March 2007
Gross
377.95
169.31
(128.59)
Closing balance at the end of the year
494.61
418.67
iii) Movement in net non-performing assets is set out below:
Opening balance at the beginning of the year
Additions during the year
Reductions during the year
31 March 2008
Net
266.33
135.78
(153.82)
(Rs. in crores)
31 March 2007
Net
219.83
92.49
(45.99)
Closing balance at the end of the year
248.29
266.33
iv) Movement in provisions for non performing assets (excluding provisions for standard assets) is set out below:
Opening balance at the beginning of the year
Provisions made during the year
Write-offs/write back of excess provisions
31 March 2008
152.34
248.43
(154.45)
(Rs. in crores)
31 March 2007
158.12
76.82
(82.60)
Closing balance at the end of the year
246.32
152.34
5.2.6 Movement in Floating Provision is set out below:
For the year ended
Opening balance at the beginning of the year
Provisions made during the year
Draw down made during the year
31 March 2008
1.75
2.87
-
(Rs. in crores)
31 March 2007
24.96
-
(23.21)
Closing balance at the end of the year
4.62
1.75
52
Based on the guidelines contained in Reserve Bank of India circular DBOD.No. BP.BC.89/21.04.048/2005-06 dated June 22, 2006
the general provision of Rs. 2.87 crores held as on 31 March 2007 in respect of retail advances for bucketwise provisioning for
delinquencies less than 90 days was categorised as floating provision effective 1 April 2007. Consequently, the Bank no longer
creates such provisions in respect of retail advances with effect from 1 April 2007.
5.2.7 Provision on Standard Assets
Provision towards Standard Assets
5.2.8 Details of Investments are set out below:
i) Value of Investments:
1) Gross value of Investments
a) In India
b) Outside India
2) Provision for Depreciation/Non-Performing Investments
a) In India
b) Outside India
3) Net value of Investments
a) In India
b) Outside India
ii) Movement of provisions held towards depreciation on investments:
Opening balance
Add: Provisions made during the year
Less: Write offs/write back of excess provisions during the year
Closing balance
31 March 2008
358.92
31 March 2008
33,192.43
613.84
95.90
5.27
33,096.53
608.57
(Rs. in crores)
31 March 2007
205.46
(Rs. in crores)
31 March 2007
26,427.62
561.87
92.33
-
26,335.29
561.87
31 March 2008
85.66
(Rs. in crores)
31 March 2007
18.69
6.54
-
92.20
66.97
-
85.66
5.2.9 A summary of lending to sensitive sectors is set out below:
As at
31 March 2008
(Rs. in crores)
31 March 2007
A. Exposure to Real Estate Sector
1)
Direct Exposure
(i)
Residential mortgages
- of which housing loans upto Rs. 15 lakhs
(ii) Commercial real estate
(iii)
Investments in Mortgage Backed Securities (MBS) and
other securitised exposures -
a. Residential
b. Commercial real estate
2)
Indirect Exposure
Fund based and non-fund based exposures on National Housing Bank (NHB)
and Housing Finance Companies (HFCs)
Total Exposure to Real Estate Sector
7,779.63
2,824.62
5,914.04
-
-
1,508.38
15,202.05
4,763.53
2,287.26
3,885.16
-
-
2,561.30
11,209.99
53
B. Exposure to Capital Market
1. Direct investments made in equity shares, convertible bonds,
convertible debentures and units of equity-oriented mutual funds
the corpus of which is not exclusively invested in corporate debt
2. Advances against shares/bonds/debentures or other securities or
on clean basis to individuals for investment in shares
(including IPOs/ESOPs), convertible bonds, convertible debentures,
and units of equity-oriented mutual funds
3. Advances for any other purposes where shares or convertible bonds
or convertible debentures or units of equity-oriented mutual funds
are taken as primary security
4. Advances for any other purposes to the extent secured by the
collateral security of shares or convertible bonds or convertible
debentures or units of equity-oriented mutual funds
i.e. where primary security other than shares/ convertible
bonds/convertible debentures/units of equity-oriented mutual funds
does not fully cover the advances
5. Secured and unsecured advances to stockbrokers and guarantees
issued on behalf of stockbrokers and marketmakers
6. Loans sanctioned to corporates against the security of
shares/bonds/debentures or other securities or on clean basis for
meeting promoter's contribution to the equity of new companies
in anticipation of raising resources
7. Bridge loans to companies against expected equity flows/issues
8. Underwriting commitments taken up in respect of primary issue
of shares or convertible bonds or convertible debentures
or units of equity-oriented mutual funds
9. Financing to stock brokers for margin trading
10. All exposures to Venture Capital Funds
(both registered and unregistered)
Total exposure to Capital Market (Total of 1 to 10)
5.2.10 Details of loan assets subjected to restructuring are given below:
498.66
281.19
64.09
62.00
195.53
15.06
831.31
-
-
-
-
246.03
1,850.68
-
-
330.60
-
-
-
-
267.95
941.74
Particulars
i) Total amount of loan assets
subjected to restructuring,
rescheduling, renegotiation
- of which under CDR
ii) Total amount of Standard
assets subjected to
restructuring, rescheduling,
renegotiation
- of which under CDR
iii) The amount of Sub-Standard
loan assets subjected to
restructuring, rescheduling,
renegotiation
- of which under CDR
iv) The amount of Doubtful
assets subjected to
restructuring, rescheduling,
renegotiation
- of which under CDR
54
Number
31 March 2008
Amount
712
629.70
Interest
Sacrifice
5.84
(Rs. in crores)
31 March 2007
Number Amount
722
216.95
Interest
Sacrifice
1.68
4
711
253.92
623.67
-
5.84
-
-
312
178.13
-
1.68
4
-
-
1
-
253.92
-
-
6.03
-
-
-
-
-
-
-
189
-
5.95
-
221
-
32.87
-
-
-
-
-
-
-
5.2.11 Details of restructuring undertaken by the Bank during the year for SME accounts are given below:
Particulars
i) Total amount of assets of SMEs subjected to restructuring
ii) The amount of standard assets of SMEs subjected to
restructuring
iii) The amount of sub-standard assets of SMEs subjected to
restructuring
iv) The amount of doubtful assets of SMEs subjected to
restructuring
31 March 2008
58.02
(Rs. in crores)
31 March 2007
62.52
51.99
-
6.03
50.95
-
11.57
5.2.12 Details of Non-SLR investment portfolio are set out below:
i)
Issuer composition as at 31 March 2008 of non-SLR investments:
No.
Issuer
(1)
(2)
Private Corporates
Subsidiaries/ Joint Ventures
Public Sector Units
Financial Institutions
i.
ii.
iii. Banks
iv.
v.
vi. Others
vii. Provision held towards
depreciation/non-
performing investments
Total
Total
Amount
Extent of
private
placement
(3)
2,069.61
3,700.26
1,729.87
5,521.54
38.00
568.15
(4)
1,177.52
2,532.55
1,249.93
4,547.16
38.00
309.15
(101.16)
13,526.27
-
9,854.31
Extent of
"below
investment
grade"
securities
(5)
21.54
7.00
10.00
491.54
-
-
-
530.08
Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive.
Issuer composition as at 31 March 2007 of non-SLR investments:
No.
Issuer
(1)
(2)
Private Corporates
Subsidiaries/ Joint Ventures
Public Sector Units
Financial Institutions
i.
ii.
iii. Banks
iv.
v.
vi. Others
vii. Provision held towards
depreciation/non-
performing investments
Total
Total
Amount
Extent of
private
placement
(3)
1,329.71
2,414.06
1,145.58
5,386.05
10.00
273.25
(4)
660.56
1,995.80
752.89
3,954.28
10.00
-
(91.16)
-
10,467.49
7,373.53
Extent of
"below
investment
grade"
securities
(5)
-
7.00
5.00
650.40
-
-
-
662.40
Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive.
Extent of
"unrated"
securities
(Rs. in crores)
Extent of
"unlisted"
securities
(6)
(7)
99.99
-
-
16.63
-
-
-
116.62
99.99
7.00
439.31
333.65
-
-
-
879.95
Extent of
"unrated"
securities
(Rs. in crores)
Extent of
"unlisted"
securities
(6)
(7)
-
-
-
17.90
-
-
-
17.90
-
7.00
556.42
435.82
-
5.45
-
1,004.69
55
ii) Non-performing non SLR investments is set out below:
Opening balance
Additions during the year since 1 April
Reductions during the above period
st
Closing balance
Total provisions held
31 March 2008
31 March 2007
(Rs. in crores)
8.07
1.12
(0.23)
8.96
8.96
3.67
4.40
-
8.07
6.67
5.2.13 Details of securities sold/ purchased during the year ended 31 March 2008 & 31 March 2007 under repos/ reverse repos
(excluding LAF transactions):
Year ended 31 March 2008
Minimum
outstanding
during the year
Maximum
outstanding
during the year
Daily Average
outstanding
during the year
(Rs. in crores)
As at
31 March 2008
Securities sold under repos
Securities purchased under reverse repos
-
-
111.91
773.94
42.71
45.63
-
503.75
Year ended 31 March 2007
Securities sold under repos
Securities purchased under reverse repos
Minimum
outstanding
during the year
-
-
Maximum
outstanding
during the year
243.82
1,350.94
Daily Average
outstanding
during the year
44.06
57.69
5.2.14 Details of financial assets sold to Securitisation/Reconstruction companies for Asset Reconstruction:
Number of accounts
Book Value of loan asset securitised
Aggregate value (net of provisions) of accounts sold
Aggregate consideration
Additional consideration realised in respect of accounts transferred in earlier years
Aggregate gain/loss over net book value
31 March 2008
-
-
-
-
-
5.2.15 Details of Non-Performing Financial Assets Purchased / Sold :
(Rs. in crores)
As at
31 March 2007
-
1,350.94
(Rs. in crores)
31 March 2007
-
-
-
-
-
-
(Rs. in crores)
Non - Performing Financial Assets Purchased
1.
(a) Number of accounts purchased during the year
(b) Aggregate outstanding
(a) Of these, number of accounts restructured during the year
(b) Aggregate outstanding
2.
Non - Performing Financial Assets Sold
1. Number of accounts sold during the year
2. Aggregate outstanding
3. Aggregate consideration received
31 March 2008
31 March 2007
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5.2.16 Details of securitisation transactions undertaken by the Bank in the year are as follows:
Number of loan accounts securitised
Book value of loan assets securitised
56
(Rs. in crores)
31 March 2008
31 March 2007
19
3,201.95
2
547.16
Sale consideration received for the securitised assets
Net gain / loss over net book value
Net gain / loss recognised in profit and loss account
The information on securitisation activity of the Bank as an originator as on 31 March 2008 and 31 March 2007 is given
below:
3,209.79
7.84
4.68
550.09
2.93
2.00
Outstanding credit enhancement (cash collateral)
Outstanding liquidity facility
Outstanding servicing liability
Outstanding investment in PTCs
31 March 2008
13.66
-
0.54
0.84
(Rs. in crores)
31 March 2007
15.51
-
0.54
1.50
5.2.17 During the year, the Bank's credit exposures to single borrower and group borrowers were within the prudential exposure
limits prescribed by RBI except in 2 cases viz., UTI Asset Management Company Ltd. and HDFC Ltd., where single borrower
limit was exceeded upto an additional exposure of 5% with the approval of the Board of Directors. The details of such cases
are set out below:
(Rs. in crores)
Name of the Borrower
HDFC Ltd
UTI Asset Management Co. Ltd.
Original
Exposure
Ceiling
983.18
983.18
Limit
Sanctioned
% of excess
limit over
original ceiling
Exposure
Ceiling as on
31 March 2008
Exposure as
on 31 March
2008
1,031.78
1,000.00
4.94
1.71
1,690.75
1,690.75
1,620.21
1,000.00
5.2.18 Details of Risk Categorywise Country Exposure:
Risk Category
Exposure
(Net) as at
Provision
Held as at
Exposure
(Net) as at
(Rs. in crores)
Provision
Held as at
Insignificant
Low
Moderate
High
Very High
Restricted
Off-Credit
Total
31 March 2008
31 March 2008
31 March 2007
31 March 2007
1,787.72
2,915.15
31.56
11.68
4.26
-
-
4,750.37
-
3.55
-
-
-
-
-
3.55
735.70
1,491.82
72.28
2.64
0.32
-
-
2,302.76
-
-
-
-
-
-
-
-
5.2.19 A maturity pattern of certain items of assets and liabilities at 31 March 2008 & 31 March 2007 is set out below:
Year ended 31 March 2008
1 day 2 days to 8 days to 15 days to 29 days
Over 3
Over 6
Over 1
Over 3
7 days
14 days
28 days
and months months
year and
upto 3
and
and
upto 3
years
and
months
upto 6
upto 1
years
upto 5
months
year
years
(Rs. in crores)
Over 5
years
Total
Deposits
946.11
3,186.03
1,630.37
3,301.66
9,240.09
10,809.56
17,775.58
16,228.92
790.14
23,717.76 87,626.22
Advances
745.63
1,518.74
550.81
713.04
2,963.36
2,709.54
6,218.47
7,698.98
8,944.38
27,598.19 59,661.14
Investments 564.39
1,692.28
1,200.48
2,821.79
4,884.78
3,157.22
4,913.26
5,176.20
2,254.81
7,039.89 33,705.10
Borrowings
-
-
100.30
160.48
450.75
727.34
966.63
3,189.79
1.82
26.93
5,624.04
Foreign
Currency
Assets
Foreign
Currency
331.61
19.28
86.18
70.74
378.71
712.34
1,012.05
1,578.29
1,708.78
1,269.52
7,167.49
Liabilities
42.09
264.51
117.49
447.53
1,597.37
665.68
1,085.80
2,609.11
28.27
62.26
6,920.11
57
The above disclosure has been made based on the revised maturity buckets as specified by RBI in its guidelines on
Asset-Liability Management (ALM) system issued during the current year. Previous year's disclosure is therefore not
comparable with the figures of the current year.
Year ended 31 March 2007
(Rs. in crores)
1 to 14 days
15 days to
29 days
Over 3
Over 6 Over 1 year Over 3 years
Over
Total
28 days
and upto months and months and
and upto
and upto
5 years
3 months
upto
Deposits
Advances
Investments
Borrowings
5,387.38
1,428.48
2,532.15
33.87
1,910.46
358.97
2,180.60
-
9,166.39
1,333.87
5,608.64
773.88
6 months
8,016.92
1,870.50
2,501.75
1,023.05
upto
1 year
9,381.96
3,101.90
2,472.26
1,053.34
3 years
5 years
23,615.99
11,767.50
7,405.04
1,597.34
966.67
339.81 58,785.60
6,554.65 10,460.61 36,876.48
1,982.31
2,214.41 26,897.16
707.67
6.45
5,195.60
Foreign
Currency
Assets
Foreign
Currency
Liabilities
227.82
16.58
425.15
1,162.61
112.85
1,257.11
135.49
1,275.60
4,613.21
131.53
22.90
743.42
523.48
1,286.87
1,242.32
1,625.32
1,211.55
6,787.39
Classification of assets and liabilities under the different maturity buckets is based on the same estimates and
assumptions as used by the Bank for compiling the return submitted to the RBI. Maturity profile of foreign currency
assets and liabilities is excluding forward contracts.
5.2.20 Disclosure in respect of Interest Rate Swaps (IRS), Forward Rate Agreement (FRA) and Cross Currency Swaps (CCS)
outstanding at 31 March 2008 is set out below:
Sr. No.
Items
i)
ii)
iii)
iv)
Notional principal of swap agreements
Losses which would be incurred if counterparties failed
to fulfill their obligations under the agreements
Collateral required by the Bank upon entering into swaps
Concentration of credit risk arising from the swaps
Maximum single industry exposure with Banks
(previous year with Banks)
- Interest Rate Swaps / FRAs
- Cross Currency Swaps
v)
Fair value of the swap book
- Interest Rate Swaps / FRAs (hedging & trading)
- Currency Swaps
The nature and terms of the IRS are set out below:
As at
(Rs. in crores)
As at
31 March 2008
31 March 2007
155,918.50
117,410.90
1,394.20
76.92
1,153.44
-
79.73%
33.84%
16.54
(1.90)
75.11%
58.49%
(11.38)
30.03
Nature
Hedging
Hedging
Hedging
Hedging
Trading
Trading
Trading
Trading
Trading
58
Nos.
3
2
5
3
1,400
1,409
162
155
78
Notional Principal
Benchmark
Terms
(Rs. in crores)
125.00
50.00
208.80
240.72
65,990.00
66,075.00
4,290.00
4,125.00
3,096.10
MIBOR
MIBOR
INBMK
LIBOR
MIBOR
MIBOR
MIFOR
MIFOR
INBMK
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Receive fixed / Pay floating
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Trading
Trading
Trading
Trading
Trading
Trading
69
40
28
3
5
5
3,080.00
121.60
789.95
492.56
80.24
96.29
INBMK
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
Fixed payable v/s fixed receivable
Receive fixed / Pay floating
Receive floating / Pay fixed
3,367
148,861.26
The nature and terms of the FRA's are set out below:
Nature
Trading
Trading
Nos.
Notional Principal
Benchmark
Terms
(Rs. in crores)
49
39
88
1,274.37
1,060.45
2,334.82
LIBOR
LIBOR
Fixed receivable v/s floating payable
Fixed payable v/s floating receivable
The nature and terms of the CCS are set out below:
Nature
Nos.
Notional Principal
Benchmark
Terms
(Rs. in crores)
Trading Swaps
Trading Swaps
Trading Swaps
Trading Swaps
Trading Swaps
Trading Swaps
Trading Swaps
Trading Swaps
Hedging Swaps
22
15
1
33
32
2
1
1
5
1,354.90
1,256.13
36.11
607.22
587.16
118.62
60.18
60.18
641.92
LIBOR
LIBOR
LIBOR / INBMK
PRINCIPAL ONLY
PRINCIPAL ONLY
PRINCIPAL ONLY
PRINCIPAL ONLY
PRINCIPAL ONLY
LIBOR
Fixed payable v/s floating receivable
Fixed receivable v/s floating payable
Floating receivable v/s floating payable
Fixed receivable
Fixed payable
Fixed receivable & fixed payable
Paying floating
Receive floating
Fixed payable
112
4,722.42
Agreements with Banks/Financial Institutions and corporates are under approved credit lines.
Details of Exchange Traded Interest Rate Derivatives are set out below:
Sr. No.
Particulars
i)
Notional principal amount of exchange traded
interest rate derivatives undertaken during the year
As at
31 March 2008
(Rs. in crores)
As at
31 March 2007
a) 90 Day Euro Future - March 09
b) 90 Day Euro Future - June 08
c) 90 Day Euro Future - June 09
d) 90 Day Euro Future - September 08
e) 90 Day Euro Future - September 09
f) 90 Day Euro Future - December 08
g) 3MO Euro EURIBOR - March 08
h) 3MO Euro EURIBOR - September 08
i) 30 Day InterBank - February 08
j) JPN 10Y Bond (TSE) - March 08
k) EURO-BUND Future - March 08
l) EURO-BUND Future - June 08
m) US 10 years Note - March 08
n) US 10 years Note - June 08
o) AUST 10Y Bond Future - March 08
60.18
88.26
40.12
216.65
40.12
196.59
1,015.00
1,015.00
770.65
8.07
822.15
1,382.94
60.18
67.40
22.02
5,805.33
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
59
ii)
Notional principal amount of exchange traded
interest derivatives outstanding as on 31 March 2008
a) 90 Day Euro Future - March 09
b) 90 Day Euro Future - June 08
c) 90 Day Euro Future - June 09
d) 90 Day Euro Future - September 08
e) 90 Day Euro Future - September 09
f) 90 Day Euro Future - December 08
iii)
Notional principal amount of exchange traded interest
rate derivatives outstanding and “not highly effective”
a) 90 Day Euro Future - March 09
b) 90 Day Euro Future - June 08
c) 90 Day Euro Future - June 09
d) 90 Day Euro Future - September 08
e) 90 Day Euro Future - September 09
f) 90 Day Euro Future - December 08
iv)
Mark-to-market value of exchange traded interest
rate derivatives outstanding and “not highly effective”
a) 90 Day Euro Future - March 09
b) 90 Day Euro Future - June 08
c) 90 Day Euro Future - June 09
d) 90 Day Euro Future - September 08
e) 90 Day Euro Future - September 09
f) 90 Day Euro Future - December 08
20.06
88.26
40.12
216.65
40.12
196.59
601.80
20.06
88.26
40.12
216.65
40.12
196.59
601.80
(0.02)
(0.04)
(0.05)
(0.05)
(0.06)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.02)
-
(0.24)
-
The Bank undertakes derivative transactions for proprietary trading/market making, hedging own balance sheet and for
client servicing. These transactions expose the Bank primarily to counter-party credit risk, market risk and operational risk.
The Bank has adopted the following mechanism for monitoring the portfolio.
The Bank has set up appropriate risk limits for the derivative trading positions and the actual positions are monitored on a
daily basis. Risk limits are fixed based on the analysis of market data on volatility, business strategy and management
experience. A report on the risk assessment of the portfolio is periodically submitted to ALCO and Risk Management
Committee of the Board in accordance with the regulatory guidelines and the internal risk policy laid down by the Bank.
Value at Risk (VaR), Price Value of a Basis Point (PVBP) and option Greeks are computed and reported to appropriate
internal authorities on a daily basis. Simulation of extreme scenarios, based on the significant disturbances observed in the
past is carried out on the derivative portfolio. The Bank ensures that the gross PV01 (price value of a basis point) of all non-
option rupee derivative contracts are within 0.25 per cent of the net worth of the Bank as on last date of the balance sheet.
The Bank has framed a hedging policy for using the derivative products in an efficient manner as a tool for mitigating
market risk. During the year the Bank has put in place a policy on "Suitability and customer appropriateness", duly
approved by the Board for selling derivative products to customers. The Bank undertakes hedge transactions that are
permitted by RBI from time to time to protect against changes in the fair value of the underlying or variability in the cash
flow that is attributable to a particular risk of a recognised asset or liability. The Bank assesses the hedge effectiveness of all
the hedge deals at periodical intervals and transactions that do not conform to the hedge criteria are re-designated as
trading deals with the approval of the competent authority and accordingly accounted like other trading transactions.
60
5.2.21
Disclosure on risk exposure in Derivatives
Particulars
Sr.
No.
Derivatives (Notional Principal Amount)
a) For hedging
b) For trading
Marked to Market Positions#
a) Asset (+)
b) Liability (-)
Likely impact of one percentage change in
interest rate (100*PV01) (as at 31 March 2008)
a) on hedging derivatives
b) on trading derivatives
st
Maximum and Minimum of 100*PV01
observed during the year
a) on hedging
I) Minimum
II) Maximum
b) on Trading
I) Minimum
II) Maximum
# Only on Trading derivatives
1
2
3
4
5
As at 31 March 2008
(Rs. in crores)
Currency Derivatives
Interest rate
Derivatives
CCS
Options
641.92
4,080.50
-
16,100.10
624.52
150,571.57
21.24
-
16.99
-
-
(4.27)
2.09
0.26
0.05
2.09
0.06
3.45
-
-
-
-
-
-
41.15
3.47
30.21
54.55
1.79
18.92
Credit Exposure
592.19
444.77
1,350.39
The notional principal amount of forex contracts classified as hedging outstanding at 31 March 2008 amounted to
Rs. 2,498.59 crores (previous year Rs. 4,356.35 crores). The notional principal amount of forex contracts classified as trading
outstanding at 31 March 2008 amounted to Rs. 77,454.54 crores (previous year Rs. 61,613.78 crores).
The net overnight open position at 31 March 2008 is Rs. 36.71 crores (previous year Rs. 46.71 crores).
5.2.22 No penalty/ strictures have been imposed on the Bank during the year by the Reserve Bank of India.
5.2.23 Disclosure of Customer Complaints
a.
b.
c.
d.
No. of complaints pending at the beginning of the year
No. of complaints received during the year
No. of complaints redressed during the year
No. of complaints pending at the end of the year
5.2.24 Disclosure of Awards passed by the Banking Ombudsman
a.
b.
c.
d.
No. of unimplemented awards at the beginning of the year
No. of awards passed by the Banking Ombudsman during the year
No. of awards implemented during the year
No. of unimplemented awards at the end of the year
13
1,720
1,681
52
-
9
9
-
61
5.2.25 Draw Down from Reserves
The Bank has not undertaken any draw down of reserves during the year except towards issue expenses incurred for the
equity raising through the GDR, QIP and Preferential issue, which have been adjusted against the share premium account.
5.2.26
Letter of Comfort
During the year, the Bank issued a Letter of Comfort (LoC) on behalf of its Singapore branch to the Monetary Authority of
Singapore (MAS) confirming to the overseas regulator that it would ensure that its Singapore branch maintained adequate
liquidity and sound financial position at all times and that in the event of an actual or contingent obligation, the Bank
would meet all future obligations and liabilities of the aforesaid branch. The Bank thus has one outstanding LoC issued by
it at the end of 31 March 2008 without any financial value.
5.3
Other disclosures
5.3.1
During the year, the Bank has appropriated Rs. 26.84 crores (previous year Rs. 15.64 crores) to Capital Reserve, being the
gain on sale of HTM investments in accordance with RBI guidelines.
5.3.2
Earnings Per Share ('EPS')
The details of EPS computation is set out below:
As at
31 March 2008
31 March 2007
Basic and Diluted earnings for the year (Net profit after tax) (Rs. in crores)
1,071.03
659.03
Basic weighted average no. of shares (in crores)
Add: Equity shares for no consideration arising on grant of
stock options under ESOP
Diluted weighted average no. of shares (in crores)
Basic EPS (Rs.)
Diluted EPS (Rs.)
Nominal value of shares (Rs.)
33.31
0.90
34.21
32.15
31.31
10.00
28.05
0.86
28.91
23.50
22.79
10.00
Dilution of equity is on account of 8,986,371 stock options (previous year 8,653,638).
5.3.3
Employee Stock Options Scheme ('the Scheme')
In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the Bank approved
an Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue upto 13,000,000 equity shares to
eligible employees. Eligible employees are granted an option to purchase shares subject to vesting conditions. The options
vest in a graded manner over 3 years. The options can be exercised within 3 years from the date of the vesting. Further, in
June 2004 and June 2006, pursuant to the approval of the shareholders at Annual General Meeting, the Bank approved an
ESOP scheme for additional 10,000,000 and 4,800,000 options respectively.
19,887,005 options have been granted under the Scheme till the previous year ended 31 March 2007.
On 17 April 2007, the Bank granted 6,729,340 stock options (each option representing entitlement to one equity share of
the Bank) to its employees and the Chairman & CEO. These options can be exercised at a price of Rs. 468.90 per option.
The Bank has not recorded any compensation cost on options granted during the year ended 31 March 2001, year ended 31
March 2006, year ended 31 March 2007 and the current year ended 31 March 2008 as the exercise price was more than or
equal to the quoted market price of underlying equity shares on the grant date.
62
The Bank recorded a compensation cost of Rs 1.39 crores on options granted during the year ended 31 March 2002, Rs. 1.99
crores on options granted during the year ended 31 March 2004, Rs. 24.21 crores on options granted during the year ended
31 March 2005, based on the excess of the quoted market price of the underlying equity shares as of the date of the grant
over the exercise price. The compensation cost is amortised over the vesting period.
Compensation expense for all the grants under the Scheme for the year ended 31 March 2008 is Rs. 0.20 crores.
Stock option activity under the Scheme for the year ended 31 March 2008 is set out below:
Options
outstanding
Range of exercise
prices (Rs.)
Weighted
average
exercise
price (Rs.)
Weighted
average
remaining
contractual life
(Years)
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Expired during the year
Exercised during the year
9,872,910
6,729,340
(820,249)
(1,380)
(2,986,353)
29.68 to 319.00
468.90
39.77 to 468.90
39.77
29.68 to 468.90
250.14
468.90
398.10
39.77
199.51
Outstanding at the end of the year
12,794,268
29.68 to 468.90
367.55
Exercisable at the end of the year
2,082,034
29.68 to 468.90
250.56
Stock option activity under the Scheme for the year ended 31 March 2007 is set out below:
3.19
-
-
-
-
3.57
2.12
Options
outstanding
Range of exercise
prices (Rs.)
Weighted
average
exercise
price (Rs.)
Weighted
average
remaining
contractual life
(Years)
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Expired during the year
Exercised during the year
8,838,245
4,695,860
(720,744)
(391)
(2,940,060)
29.68 to 232.10
319.00
29.68 to 319.00
29.68 to 319.00
29.68 to 319.00
Outstanding at the end of the year
9,872,910
29.68 to 319.00
171.39
319.00
254.96
29.70
122.25
250.14
Exercisable at the end of the year
979,768
29.68 to 319.00
200.43
4.00
-
-
-
-
3.19
3.90
Fair Value Methodology
Applying the fair value based method in Guidance Note on 'Accounting for Employee Share-based Payments' the
impact on reported net profit and EPS would be follows:
31 March 2008
31 March 2007
Net Profit (as reported) (Rs. in crores)
Add: Stock based employee compensation expense included
in net income (Rs. in crores)
Less: Stock based employee compensation expense determined
under fair value based method (proforma) (Rs. in crores)
Net Profit (Proforma) (Rs. in crores)
Earnings per share: Basic (in Rs.)
As reported
Proforma
1,071.03
0.20
(71.87)
999.36
32.15
30.00
659.03
2.71
(45.92)
615.82
23.50
21.95
63
Earnings per share: Diluted (in Rs.)
As reported
Proforma
31.31
29.21
22.79
21.30
The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with
the following assumptions:
Dividend yield
Expected life
Risk free interest rate
Volatility
5.3.4
Dividend paid on shares issued on exercise of stock options
31 March 2008
31 March 2007
1.37%
2-4 years
8.21% to 8.33%
44.20% to 51.21%
1.69%
2-4 years
6.93% to 7.17%
46.91% to 52.03%
The Bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the
exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2008, if
approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current
year.
Appropriation to proposed dividend during the year ended 31 March 2008 includes dividend of Rs. 0.54 crores paid
pursuant to exercise of 1,018,992 employee stock options after the previous year end and record date for declaration of
dividend for the year ended 31 March 2007.
5.3.5
Segmental reporting
st
Effective 1 April 2007, the Bank has adopted RBI's revised guidelines on Segment Reporting issued on 18 April 2007 vide
RBI Circular No. DBOD.No. BP.BC. 81 / 21.04.018/ 2006-07 in terms of which the business of the Bank is divided into four
segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Business. The principal activities of
these segments are as under.
th
Segment
Treasury
Corporate /
Wholesale Banking
Retail Banking
Principal Activities
Treasury operations include investments in sovereign and corporate debt, equity and
mutual funds, trading operations, derivative trading and foreign exchange operations on
the proprietary account and for customers and central funding
Includes corporate relationships not included under Retail Banking, corporate advisory
services, placements and syndication, management of public issue, project appraisals,
capital market related services and cash management services
Constitutes lending to individuals/small businesses subject to the orientation, product
and granularity criterion and also includes low value individual exposures not exceeding
the threshold limit of Rs. 5 crores as defined by RBI. Retail Banking activities also include
liability products, card services, internet banking, ATM services, depository, financial
advisory services and NRI services
Other Banking Business
All banking transactions not covered under any of the above three segments
Revenues of the treasury services segment primarily consist of fees and gains or losses from trading operations and interest
income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed
from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and
allocated expenses.
Revenues from the corporate/wholesale banking lending activity consist of interest and fees earned on loans given to
customers falling under this segment, interest earned on cash float and fees arising from transaction services and fees from
merchant banking activities such as syndication and debenture trusteeship. Revenues from the retail lending activity are
derived from interest earned on loans classified under this segment, fees for banking and advisory services, ATM
interchange fees and interest earned from other segments for surplus funds placed with those segments. Expenses of the
Corporate/Wholesale Banking and Retail Banking activity primarily comprise interest expense on deposits, infrastructure
64
and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct
overheads and allocated expenses.
Segment revenue includes earnings from external customers plus earnings from funds transferred to the other segments.
Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that
segment. Segment-wise income and expenses include certain allocations. Inter segment revenue represents the transfer
price paid/received by the Central Funding Unit (CFU). For this purpose, the funds transfer pricing mechanism presently
followed by the Bank, which is based on cost of funds and spreads, has been used. Operating expenses are allocated to the
segments based on an activity-based costing methodology. All activities in the Bank are segregated segment-wise and
allocated to the respective segment.
Geographical segment disclosure is not required to be made since the operations from foreign branches are less than the
prescribed norms.
Segmental results are set out below :
31 March 2008
(Rs. in crores)
Treasury
Corporate/
Wholesale
Banking
Retail
Banking
Other
Banking
Business
Total
Segment Revenue
Gross interest income (external customers)
Other income
2,256.33
460.70
3,162.93
1,584.09
1.96
7,005.31
661.64
684.63
(11.48)
1,795.49
Total income as per profit and loss account
2,717.03
3,824.57
2,268.72
(9.52)
8,800.80
Add / (less) inter segment interest income
9,774.38
953.44
1,991.51
-
12,719.33
Total segment income
12,491.41
4,778.01
4,260.23
(9.52) 21,520.13
Less: Interest expense (external customers)
Less: Inter segment interest expenses
Less: Operating expenses
3,248.46
8,664.44
134.60
-
2,704.98
640.03
1,171.50
1,349.91
1,367.85
-
-
4,419.96
12,719.33
12.44
2,154.92
Operating profit
443.91
1,433.00
370.97
(21.96)
2,225.92
Less: Provision for non performing assets/Others
96.11
242.98
240.33
0.22
579.64
Segment result
347.80
1,190.02
130.64
(22.18)
1,646.28
Less: Provision for Tax
Net Profit
Segment assets
Segment liabilities
-
-
-
-
-
-
-
-
575.25
1,071.03
46,931.15
45,689.09
41,134.98
19,779.07
1,732.64 109,577.84
22,604.53
31,856.44
659.28 100,809.34
Net assets
1,242.06
18,530.45 (12,077.37)
1,073.36
8,768.50
Fixed assets additions during the year
Depreciation and impairment provision
on fixed assets during the year
-
-
-
-
-
-
331.92
331.92
158.11
158.11
65
Treasury
Other Banking
Operations
Unallocated
Total
31 March 2007
(Rs. in crores)
Segment Revenue
Gross interest income (external customers)
Other income
1,761.32
239.50
2,700.33
773.04
-
(2.43)
4,461.65
1,010.11
Total income as per profit and loss account
2,000.82
3,473.37
(2.43)
5,471.76
Add / (less) inter segment interest income
6,775.81
1,841.19
-
8,617.00
Total segment income
Less: Interest expense (external customers)
Less: Inter segment interest expenses
Less: Operating expenses
Operating profit
8,776.63
2,314.57
6,085.65
77.49
298.92
Less: Provision for non performing assets/Others
72.46
5,314.56
678.75
2,531.35
1,137.10
967.36
195.15
772.21
-
-
226.46
-
-
34,339.17
37,073.98
37,667.11
32,405.18
(2.43)
-
-
-
14,088.76
2,993.32
8,617.00
1,214.59
(2.43)
1,243.85
-
267.61
(2.43)
996.24
-
-
1,250.94
384.83
337.21
659.03
73,257.22
69,863.99
Segment result
Less: Provision for Tax
Net Profit
Segment assets
Segment liabilities
Net assets
(2,734.81)
5,261.93
866.11
3,393.23
Fixed assets additions during the year
Depreciation on fixed assets
during the year
-
-
-
-
212.15
111.86
212.15
111.86
In terms of RBI guidelines on Segment Reporting, disclosure of previous year figures in the first year of reporting under the
revised format is not necessary. Segmental results relating to the previous year ended 31 March 2007 have therefore been
disclosed based on the reportable segments then in force and are hence not comparable with results for the current year.
5.3.6
Related party disclosure
The related parties of the Bank are broadly classified as:
a) Promoter
The Bank has identified the following entities as its Promoters.
(cid:143)
(cid:143)
(cid:143)
Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1)
Life Insurance Corporation of India (LIC)
General Insurance Corporation and four PSUs - New India Assurance Co. Ltd, National Insurance Co. Ltd., United
India Insurance Co. Ltd. and The Oriental Insurance Co. Ltd.
66
b) Key Management Personnel
Dr. P. J. Nayak (Chairman & CEO)
Based on RBI guidelines, details of transactions with Key Management Personnel are not disclosed since there is only
one entity / party in this category.
c)
Subsidiary Companies
(cid:143) Axis Sales Limited (formerly UBL Sales Limited)
(cid:143) Axis Private Equity Limited (formerly UBL Asset Management Company Limited)
d)
Joint Venture
(cid:143) Bussan Auto Finance India Limited
Based on RBI guidelines, details of transactions with Joint Venture Companies are not disclosed since there is only one
entity / party in this category.
The details of transactions of the Bank with its related parties during the year ended 31 March 2008 are given below.
Items/Related Party
Promoter
Subsidiaries
Dividend Paid
Interest Paid
Interest Received
Investment of the Bank
Investment of Related Parties in the Bank
Purchase / Sale of Investments
Advances granted
Management Contracts
Sale of fixed assets
Receiving of Services
Rendering of Services
54.63
106.10
0.05
-
1,903.10
131.18
-
-
-
13.13
0.36
-
0.12
0.23
15.00
-
-
185.00
1.18
0.06
84.32
0.28
(Rs. in crores)
Total
54.63
106.22
0.28
15.00
1,903.10
131.18
185.00
1.18
0.06
97.45
0.64
The balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below.
Items/Related Party
Promoter
Subsidiaries
Deposits with the Bank
Placement of Deposits
Advances
Investment of the Bank
Investment of Related Parties in the Bank
Guarantees
Investment in Subordinated Debt/Hybrid
Capital of the Bank
Advance for Rendering of Services
Other Receivables
2,877.68
0.08
0.01
-
152.07
39.00
260.00
-
-
6.88
-
185.16
25.00
-
-
-
19.68
0.26
(Rs. in crores)
Total
2,884.56
0.08
185.17
25.00
152.07
39.00
260.00
19.68
0.26
67
The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below.
Items/Related Party
Promoter
Subsidiaries
Deposits with the Bank
Placement of Deposits
Advances
Investment of the Bank
Investment of Related Parties in the Bank
Repo Borrowing
Guarantees
Investment in Subordinated Debt/Hybrid Capital of the Bank
2,857.83
1.13
432.98
-
389.00
57.52
39.00
154.32
19.16
-
185.16
25.00
-
-
-
-
(Rs. in crores)
Total
2,876.99
1.13
618.14
25.00
389.00
57.52
39.00
154.32
The details of transactions of the Bank with its related parties during the year ended 31 March 2007 are given below.
Items/Related Party
Promoter
Key
Management
Personnel
Related Party to
Key Management
Personnel
(Rs. in crores)
Subsidiaries
Total
Dividend Paid
Interest Paid
Interest Received
Investment of the Bank
Investment of Related
Parties in the Bank
Purchase / Sale of Investments
Management Contracts
Sale of fixed assets
Receiving of Services
Rendering of Services
42.63
31.24
1.54
-
-
158.02
-
-
18.17
0.26
0.05
0.10
0.01
-
-
-
3.05
-
-
-
-
0.03
-
-
-
-
-
-
-
-
-
0.14
0.01
10.00
-
-
-
-
10.95
1.51
42.68
31.51
1.56
10.00
-
158.02
3.05
-
29.12
1.77
The balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below.
Items/Related Party
Promoter
Key
Management
Personnel
Related Party to
Key Management
Personnel
(Rs. in crores)
Subsidiaries
Total
Deposits with the Bank
Placement of Deposits
Advances
Investment of the Bank
Investment of Related
Parties in the Bank
Guarantees
Investment in Subordinated
Debt of the Bank
Advance for
Rendering of Services
Other Receivables
760.77
0.06
0.02
-
121.39
39.00
334.00
-
-
2.25
-
0.21
-
0.13
-
-
-
-
0.58
-
-
-
-
-
-
-
-
0.61
-
0.02
10.00
-
-
-
764.21
0.06
0.25
10.00
121.52
39.00
334.00
0.99
0.15
0.99
0.15
68
The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below.
Items/Related Party
Promoter
Key
Management
Personnel
Related Party to
Key Management
Personnel
(Rs. in crores)
Subsidiaries
Total
Deposits with the Bank
Placement of Deposits
Advances
Investment of the Bank
Investment of Related
Parties in the Bank
Repo Borrowing
Guarantees
Investment in Subordinated
Debt of the Bank
780.99
0.06
399.89
-
121.80
288.50
39.00
431.00
2.41
-
0.31
-
0.14
-
-
-
0.59
-
-
-
-
-
-
-
5.54
-
2.70
10.00
-
-
-
-
789.53
0.06
402.90
10.00
121.94
288.50
39.00
431.00
5.3.7
Leases
Disclosure in respect of assets given on operating lease
Operating lease comprises leasing of power generation equipments.
Gross carrying amount at the beginning of the year
Accumulated depreciation as at the end of the year
Accumulated impairment losses as at the end of the year
Depreciation for the year
Impairment losses for the year
Minimum lease payments receivable at the end of the year
Future lease rentals receivable as at the end of the year:
- Not later than one year
- Later than one year and not later than five years
- Later than five years
There are no provisions relating to contingent rent.
31 March 2008
31 March 2007
(Rs. in crores)
76.50
27.60
12.44
3.42
12.44
-
3.47
11.08
2.07
76.50
24.18
-
3.42
-
1.04
3.47
12.48
4.15
The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements.
Disclosure in respect of assets taken on operating lease
Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing machines and IT
equipment.
Future lease rentals payable as at the end of the year:
- Not later than one year
- Later than one year and not later than five years
- Later than five years
31 March 2008
31 March 2007
(Rs. in crores)
214.56
622.70
368.84
122.89
338.47
116.11
69
Total of minimum lease payments recognised in the
profit and loss account for the year
Total of future minimum sublease payments expected to
be received under non-cancellable subleases
Sub-lease payments recognised in the profit and loss account for the year
The Bank has sub-leased certain of its properties taken on lease.
There are no provisions relating to contingent rent.
192.16
1.42
0.28
71.19
2.19
0.20
The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements.
There are no undue restrictions or onerous clauses in the agreements.
5.3.8
The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under:
As at
Deferred tax assets on account of provisions for doubtful debts
Deferred tax assets on account of amortisation of HTM investments
Deferred tax assets on account of provision for retirement benefits
Deferred tax assets on account of contingent provision against derivatives
Deferred tax liability on account of depreciation and impairment on fixed assets
Other deferred tax assets
Net deferred tax asset/(liability)
5.3.9
Employee Benefits
Provident Fund
31 March 2008
31 March 2007
(Rs. in crores)
205.57
101.38
16.70
24.46
(47.82)
18.76
319.05
121.28
70.96
4.80
-
(52.50)
15.12
159.66
The contribution to the employee's provident fund amounted to Rs. 21.02 crores for the year ended 31 March 2008
(previous year Rs. 13.82 crores).
Superannuation
The Bank contributed Rs. 7.47 crores to the employee's superannuation plan for the year ended 31 March 2008
(previous year Rs. 9.14 crores).
Leave Encashment
The Bank charged an amount of Rs. 28.11 crores as liability for leave encashment for the year ended 31 March 2008
(previous year Rs. 8.28 crores).
Gratuity
The following tables summarize the components of net benefit expenses recognised in the profit and loss account and
funded status and amounts recognised in the balance sheet for the Gratuity benefit plan.
Profit and Loss Account
Net employee benefit expenses (reconginsed in employee cost)
Current Service Cost
Interest on Defined Benefit Obligation
Expected Return on Plan Assets
Net Actuarial Losses/ (Gains) recognised in the year
Past Service Cost
Losses/(Gains) on "Curtailments & Settlements"
Total included in "Employee Benefit Expense"
Actual Return on Plan Assets
70
31 March 2008
3.39
1.15
(0.87)
5.54
-
-
(Rs. in crores)
31 March 2007
2.23
0.71
(0.62)
0.43
-
-
9.21
0.71
2.75
0.75
Balance Sheet
Details of provision for gratuity
Present Value of Funded Obligations
Fair Value of Plan Assets
Present Value of Unfunded Obligations
Unrecognised Past Service Cost
Net Liability
Amounts in Balance Sheet
Liabilities
Assets
Net Liability
Changes in the present value of the defined benefit obligation are as follows:
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation
Current Service Cost
Interest Cost
Actuarial Losses / (Gains)
Liabilities Extinguished on Curtailment
Liabilities Extinguished on Settlements
Liabilities Assumed on Acquisition
Exchange Difference on Foreign Plans
Benefits Paid
Closing Defined Benefit Obligation
Changes in the fair value of plan assets are as follows:
Change in the Fair Value of Assets
Opening Fair Value of Plan Assets
Expected Return on Plan Assets
Actuarial Gains / (Losses)
Assets Distributed on Settlements
Contributions by Employer
Assets Acquired due to Acquisition
Exchange Difference on Foreign Plans
Benefits Paid
Closing Fair Value of Plan Assets
31 March 2008
31 March 2007
(Rs. in crores)
23.35
(17.74)
-
-
5.61
5.61
-
5.61
14.32
(11.89)
-
-
2.43
2.43
-
2.43
31 March 2008
31 March 2007
(Rs. in crores)
14.32
3.39
1.15
5.37
-
-
-
-
(0.88)
23.35
11.55
2.23
0.71
0.61
-
-
-
-
(0.78)
14.32
31 March 2008
31 March 2007
(Rs. in crores)
11.89
0.87
(0.17)
-
6.03
-
-
(0.88)
17.74
7.37
0.62
0.18
-
4.50
-
-
(0.78)
11.89
7145
The major categories of plan assets as a percentage of fair value
of total plan assets - Insurer Managed Funds
Principal actuarial assumptions at the balance sheet date:
Discount Rate
Expected rate of Return on Plan Assets
Salary Escalation Rate
Employee Turnover
- 21 to 44 (age in years)
- 44 to 64 (age in years)
31 March 2008
31 March 2007
100.00%
100.00%
31 March 2008
31 March 2007
7.55% p.a.
7.50% p.a.
6.00% p.a.
10.00%
1.00%
8.50 % p.a.
7.50 % p.a.
6.00 % p.a.
10.00%
1.00%
The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion
and other relevant factors.
The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the
Fund during the estimated term of the obligations.
As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is
based on various internal/external factors, a best estimate of the contribution is not determinable.
5.3.10
Provisions and contingencies
a. Movement in provision for frauds included under other liabilities is set out below:
Opening balance at the beginning of the year
Additions during the year
Reductions on account of payments during the year
Reductions on account of reversals during the year
Closing balance at the end of the year
31 March 2008
31 March 2007
(Rs. in crores)
1.73
3.47
(0.25)
-
4.95
1.00
0.80
-
(0.07)
1.73
b. Movement in provision for credit enhancements on securitised assets is set out below:
Opening balance at the beginning of the year
Additions during the year
Reductions during the year
Closing balance at the end of the year
c. Movement in provision for credit card reward points is set out below:
Opening provision at the beginning of the year
Provision made during the year
Reductions during the year
Closing provision at the end of the year
72
31 March 2008
31 March 2007
(Rs. in crores)
3.21
-
(0.11)
3.10
0.67
2.54
-
3.21
31 March 2008
31 March 2007
(Rs. in crores)
0.23
5.89
(0.18)
5.94
-
0.23
-
0.23
5.3.11 Description of contingent liabilities:
a) Claims against the Bank not acknowledged as debts
These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in
progress. These also include demands raised by income tax and other statutory authorities and disputed by the Bank.
b)
Liability on account of forward exchange and derivative contracts
The Bank enters into foreign exchange contracts, currency options/swaps, interest rate futures and forward rate
agreements on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign
currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of
interest/principal in two currencies, based on ruling spot rates. Interest rate swaps are commitments to exchange fixed
and floating interest rate cash flows. Interest Rate Futures are standardised, exchange traded contracts that represent a
pledge to undertake a certain interest rate transaction at a specified price, on a specified future date. Forward Rate
Agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount
for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other
the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified
future time.
c) Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit
standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer
failing to fulfill its financial or performance obligations.
d) Acceptances, endorsements and other obligations
These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank's customers
that are accepted or endorsed by the Bank.
e) Other items
Other items represent outstanding amount of bills rediscounted by the Bank, estimated amount of contracts remaining
to be executed on capital account and commitments towards underwriting and investment in equity through bids
under Initial Public Offering (IPO) of corporates as at the year end.
5.3.12
Previous year figures have been regrouped and reclassified, where necessary to conform to current year's presentation.
P. J. Oza
Company Secretary
N. C. Singhal
Director
R. H. Patil
Director
Date: 21 April 2008
Place: Mumbai
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
73
Statement pursuant to Section 212 of the Companies Act, 1956,
relating to subsidiary company
In terms of the approval u/s 212(8) of the Companies Act,
1956 granted by the Ministry of Corporate Affairs,
nd
Government of India vide its letter no. 47/417/2007-CL-III dated 22 November 2007.
As on/for the year ended
31 March 2008
Axis Sales Ltd.
Axis Private Equity Ltd.
(Rs. in thousands)
Capital
Reserves and Surplus
Total Assets (Fixed Assets + Investments + Current Assets +
Deferred Tax Assets)
Total Liabilities (Loans + Current Liabilities + Provisions)
Investments
Total Income
Profit/(Loss) Before Taxation
Prior Period Items (net)
Provision for Taxation
Profit/(Loss) After Taxation and Prior Period Items
Proposed Dividend and Tax (including cess) thereon
100,000
(101,276)
291,742
293,018
-
835,962
(66,745)
1,546
2,822
(68,021)
-
150,000
(63,842)
1,943,778
1,857,620
1,851,558
1,783
(47,872)
-
1,419
(49,291)
-
74
C O R P O R AT E G O V E R N A N C E - A U D I T O R S ' C E R T I F I C AT E
To
The Members of Axis Bank Limited
We have examined the compliance of conditions of corporate governance by Axis Bank Limited (the 'Bank'), for the year ended on 31
March 2008, as stipulated in Clause 49 of the Listing Agreement of the Bank with The Stock Exchange, Mumbai, The Ahmedabad
Stock Exchange and The National Stock Exchange.
The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to
procedures and implementation thereof, adopted by the Bank for ensuring the compliance of the conditions of the corporate
governance. It is neither an audit nor an expression of opinion on the financial statements of the Bank.
In our opinion and to the best of our information and according to the explanations given to us, we certify that the Bank has
complied with the conditions of corporate governance as stipulated in the above mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the future viability of the Bank nor the efficiency or effectiveness
with which the management has conducted the affairs of the Bank.
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.: 048749
Place: Mumbai
Date: April 21, 2008
75
C O R P O R AT E G O V E R N A N C E
(Forming Part of the Directors' Report for the Period Ended 31 March 2008)
st
1. Philosophy on Code of Governance:
The Bank's policy on Corporate Governance has been:
I. To enhance the long term interest of its shareholders and to provide good management, the adoption of prudent risk
management techniques and compliance with the required standards of capital adequacy, thereby
safeguarding the interest of its other stakeholders such as depositors, creditors, customers, suppliers and
employees.
II. To identify and recognise the Board of Directors and the Management of the Bank as the principal instruments
through which good corporate governance principles are articulated and implemented. Further, to identify and
recognise accountability, transparency and equality of treatment for all stakeholders, as central tenets of good
corporate governance.
2.
Board of Directors:
The composition of the Board of Directors of the Bank is governed by the Companies Act, 1956, the Banking Regulation Act,
1949 and the Clause 49 of the Listing Agreement. The Bank's Board comprises a combination of executive and non-executive
Directors. It presently consists of 11 Directors and its mix provides a combination of professionalism, knowledge and
experience required in the banking business. The Board is responsible for the management of the Bank's business. The
function, responsibility, role and accountability of the Board are well defined. In addition to monitoring corporate
performance, the Board also carries out functions such as approving the Business Plan, reviewing and approving the annual
budgets and borrowing limits and fixing exposure limits. It ensures that the Bank keeps shareholders informed about plans,
strategies and performance. The detailed reports of the Bank's performance are periodically placed before the Board.
The composition of the Bank's Board includes the representatives of the Administrator of the Specified Undertaking of the
Unit Trust of India (UTI-I), and the Life Insurance Corporation of India, the Bank's promoters. The following members now
constitute the Board:
P. J. Nayak
Surendra Singh
N. C. Singhal
A. T. Pannir Selvam
J. R. Varma
R. H. Patil
Rama Bijapurkar
R. B. L. Vaish
M. V. Subbiah
Chairman and Chief Executive Officer
Independent
Independent
Promoter - Nominee of the Administrator of the Specified Undertaking of the Unit Trust of India
(UTI-I)
Independent
Independent
Independent
LIC Nominee
Independent
Ramesh Ramanathan
Independent
K. N. Prithviraj
Promoter - Nominee of the Administrator of the Specified Undertaking of the Unit Trust of India
(UTI-I)
Of these, all Directors are independent except S/Shri P. J. Nayak, A. T. Pannir Selvam, R. B. L. Vaish and K. N. Prithviraj. Thus, the 7
independent Directors constitute more than 50% of the Board's membership.
S/Shri P. J. Nayak, N. C. Singhal, A. T. Pannir Selvam, R. H. Patil, R. B. L. Vaish and S. B. Mathur attended the last Annual General
Meeting held on 1 June, 2007 at Ahmedabad.
st
In all, 8 meetings of the Board were held during the year on the following dates, besides the Annual General Meeting:
th
17 April 2007, 30 April 2007, 1 June 2007, 25 June 2007, 12 July 2007, 13 July 2007, 15 October 2007 and 9 January 2008.
th
th
th
th
th
th
st
Shri P. J. Nayak, Shri A. T. Pannir Selvam, and Shri R. B. L. Vaish attended all the eight meetings. Shri N. C. Singhal and
Shri R. H. Patil attended seven meetings. Smt. Rama Bijapurkar attended six meetings. Shri Surendra Singh, Shri J. R. Varma and
Shri M. V. Subbiah attended five meetings. Shri S. B. Mathur attended six meetings out of seven for which he was eligible. Shri
K. N. Prithviraj attended one meeting for which he was eligible.
76
These disclosures are made as required under the amended Companies Act.
The Directors of the Bank also hold positions, as directors, trustees, members and partners in other well-known and reputed
companies, trusts, associations and firms as per the details given below:
i. P. J. NAYAK :
Sr. No. Name of the Company/Institution
Nature of Interest
1.
Axis Private Equity Limited
(A wholly owned subsidiary of Axis Bank Ltd.)
Director
ii. SURENDRA SINGH :
Sr. No. Name of the Company/Institution
Nature of Interest
1.
2.
3.
4.
5.
6.
NIIT Technologies Ltd.
NIIT Ltd.
NIIT SmartServe Ltd.
Jubilant Organsoys Ltd.
BAG Films and Media Ltd.
CMC Ltd.
iii. N. C. SINGHAL:
Director/Member - Audit Committee
Director/Chairman - Shareholders' Grievance
Committee/Member - Audit Committee
Director/Member - Audit Committee
Director/Member - Audit Committee
Director
Director/Chairman - Share Transfer cum Shareholders'
Grievance Committee/ Member Audit Committee
Sr. No. Name of the Company/Institution
Nature of Interest
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Shapoorji Pallonji Finance Ltd.
Director
Deepak Fertilisers & Petrochemicals Corporation Ltd.
Director/ Member - Audit Committee
Max India Ltd.
Director/Chairman - Audit Committee/
Member Remuneration Committee
Max New York Life Insurance Company Ltd.
Director / Member - Audit Committee
Birla Sun Life Asset Management Company Ltd.
Director/ Member - Remuneration Committee
Tolani Shipping Ltd.
XL Telecom Ltd.
Mahagujarat Chamunda Cements Limited
SCI Forbes Limited
Binani Industries Limited
Forbes Bumi Armada Limited
Director / Member - Audit Committee
Director
Director
Chairman
Director
Director
Samalpatti Power Company Pvt. Ltd.
Director/Chairman - Remuneration Committee
Ambit Holdings Pvt. Limited
Director/Chairman - Audit Committee
International Chamber of Commerce -
Financial Investigations Services, London
International Chamber of Commerce -
Marine Transport Commission, Paris
Supervisory Board, Ashapura Group
Board of Governors, Institute of
Management Studies
Member - Advisory Board
Member
Member
Member
77
18.
19.
Board of Governors, Tolani Maritime Institute
Strategic Advisory Group,
Development Credit Bank Ltd.
20.
Ashapura Educational Foundation
Member
Member
Trustee
iv. A. T. PANNIR SELVAM:
Sr. No. Name of the Company/Institution
Nature of Interest
1.
2.
Rolta India Ltd.
2iCapital (India) Pvt. Ltd.
v. J. R. VARMA:
Director
Independent Director/Member-Audit Committee
Sr. No. Name of the Company/Institution
Nature of Interest
1.
2.
Infosys BPO Ltd.
Director/Chairman - Compensation Committee/
Chairman - Audit Committee
OnMobile Global Ltd.
Director/Chairman - Audit Committee
vi. R. H. PATIL:
Sr. No. Name of the Company/Institution
Nature of Interest
1.
The Clearing Corporation of India Ltd.
National Securities Clearing Corporation India Ltd.
National Stock Exchange of India Ltd.
NSE.IT Ltd.
Chairman/Chairman-Bye Laws Rules & Regulations
Committee/Chairman-Membership Approval
Committee/Chairman-Capital Expenditure Approval
Committee/Chairman-HR Committee of
DIrectors/Chairman-Committee of Directors on
Preference Shares
Director/Chairman-Audit Committee/Member
Committee for Declaration of Default
Director/Chairman-Audit Committee/Member
Committee for Declaration of Default/
Member-Pricing Committee
Director/Member-Audit Committee/Member-
Compensation Committee
Clear Corp Dealing Systems (India) Ltd.
Chairman/Chairman- Membership Approval Committee
National Securities Depositories Ltd.
SBI Capital Markets Ltd.
Chairman/Member-Audit Committee/Chairman-
Nomination Committee/Chairman-Compensation
Committee
Director/Member-Audit Committee/
Member-Committee of Directors/
Member-Remuneration HR Committee
Corp Bank Securities Ltd.
Director/Chairman-Audit Committee
NSDL Database Management Ltd.
Director/Chairman-Audit Committee
L&T Infrastructure Finance Company Ltd.
Director/Chairman-Audit Committee/
Chairman-Risk Management Committee
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Standard Chartered Asset Management Co. Pvt. Ltd.
Director
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vii. RAMA BIJAPURKAR:
Sr. No. Name of the Company/Institution
Nature of Interest
1.
2.
3.
4.
5.
6.
7.
8.
9.
Infosys Technologies Ltd.
Godrej Consumer Products Ltd.
Independent Director/Member-Audit Committee &
Chairperson-Investor Grievance Committee
Independent Director/ Member - Audit Committee/
Member - Compensation Committee/ Chairperson
Nomination Committee/ Chairperson - Human
Resources Committee
CRISIL Ltd.
Independent Director/Member-Compensation Committee
CRISIL Risk & Infra Structure Solutions Ltd.
Chairperson - Board/ Independent Director
Entertainment Network (India) Ltd.
Independent Director
Mahindra Holidays & Resorts India Ltd.
Independent Director/ Member - Audit Committee
Subhiksha Trading Services Ltd.
Independent Director
Ambit Holdings Pvt. Ltd.
Independent Director/ Member Compensation Committee
Give Foundation (Sec 25 company)
Independent Director
10.
ICICI Prudential Life Insurance Company Ltd.
Independent Director
viii. R. B. L. VAISH :
Sr. No. Name of the Company/Institution
Nature of Interest
1.
OTCEI Securities Limited
Director
ix. M. V. SUBBIAH:
Sr. No. Name of the Company/Institution
Nature of Interest
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
ICI India Limited
SRF Limited
Lakshmi Machine Works Ltd.
Chennai Wellingdon Corporate Foundation
Chennai Heritage Sec 25 Co.
Parry Enterprises India Limited
Murugappa & Sons
Kadamane Estates Company
Vellayan Chettiar Trust
Muna Vena Murugappa Trust
A M M Foundation
India Foundation for the Arts
Chairman - Remuneration & Nomination Committee/
Member - Audit Committee
Director/ Chairman - Audit Committee
Director
Director
Director
Director
Partner
Partner
Trustee
Trustee
Trustee
Trustee
Advisory Board of Oracle India Private Limited
Member
x. RAMESH RAMANATHAN:
Sr. No. Name of the Company/Institution
Nature of Interest
1.
2.
3.
4.
5.
6.
Cross Domain Solutions Pvt. Ltd.
Sanghmithra Rural Financial Service
(Section 25 Company)
Janalakshmi Social Services
Janalakshmi Financial Services Pvt. Ltd.
Financial Information Network & Operations Ltd.
Janadhar Constructions Pvt. Ltd.
Director
Director
Chairman
Chairman
Director
Director
79
xi. K. N. PRITHVIRAJ:
Sr. No. Name of the Company/Institution
Nature of Interest
1.
2.
Administrator of the Specified Undertaking
of the Unit Trust of India
Advisory Board on Bank, Commercial &
Financial Frauds appointed by C.V.C
Administrator & Member of the Board
Member
The business of the Board is also conducted through the following Committees constituted by the Board to deal with
specific matters and delegated powers for different functional areas:
a) Committee of Directors:
P. J. Nayak - Chairman
N. C. Singhal
A. T. Pannir Selvam
R. H. Patil
M. V. Subbiah
b) Audit Committee:
N. C. Singhal - Chairman
R. H. Patil
R. B. L. Vaish
c) Risk Management Committee:
P. J. Nayak - Chairman
J. R. Varma
Ramesh Ramanathan
d) Shareholders/Investors Grievance Committee:
Surendra Singh - Chairman
A. T. Pannir Selvam
R. B. L. Vaish
K. N. Prithviraj (Co-opted w.e.f. 21/4/2008)
e) Remuneration and Nomination Committee:
Surendra Singh - Chairman
R. H. Patil
N. C. Singhal
Rama Bijapurkar
K. N. Prithviraj
f) Special Committee of the Board of Directors for Monitoring of Large Value Frauds:
P. J. Nayak - Chairman
N. C. Singhal
A. T. Pannir Selvam
g) Customer Service Committee:
A. T. Pannir Selvam - Chairman
J. R. Varma
R. B. L. Vaish
The functions of the Committees are discussed below:
a) Committee of Directors:
The Committee of Directors is vested with the following functions and powers:
i.
To provide approvals for loans above certain stipulated limits, discuss strategic issues in relation to credit policy, and
deliberate on the quality of the credit portfolio.
ii. To sanction expenditure above certain stipulated limits.
iii. To approve expansion of the locations of the Bank's network of offices, branches, extension counters, ATMs and
currency chests.
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To issue Powers of Attorney to the officers of the Bank.
iv. To review investment strategy and approve investment related proposals above certain limits.
v.
vi. To make allotments of shares.
vii. To approve proposals related to the Bank's operations covering all departments and business segments.
viii. To discuss issues relating to day-to-day affairs and problems and to take such steps for the smooth functioning of the Bank.
Meetings and Attendance during the year:
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12 meetings of the Committee of the Directors were held during the year on 18 April 2007, 16 May 2007, 14 June 2007,
12 July 2007, 13 August 2007, 18 September 2007, 13 October 2007, 15 November 2007, 13 December 2007, 8 January
2008, 18 February 2008, and 19 March 2008. Shri P. J. Nayak, Shri N. C. Singhal and Shri A. T. Pannir Selvam attended all the 12
meetings. Shri R. H. Patil attended 11 meetings and Shri M. V. Subbiah attended 9 meetings.
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b) Audit Committee:
To provide direction and to oversee the operations of the audit functions in the Bank.
The Audit Committee functions with the following objectives:
i.
ii. To review the internal audit and inspection systems with special emphasis on their quality and effectiveness.
iii. To review inspection and concurrent audit reports of large branches with a focus on all major areas of housekeeping,
particularly inter-branch adjustment accounts, arrears in the balancing of books and unreconciled entries in inter-bank
and Nostro accounts, and frauds.
iv. To follow up issues raised in LFAR and RBI inspection reports.
v.
vi. To review the quarterly financial results and the annual results of the Bank and to recommend their adoption to the
To review the system of appointment and remuneration of concurrent auditors and external auditors.
Board.
As required under Section 292A and Clause 49 of the Listing Agreement, the new 'Terms of Reference' of the Committee were
approved by the Board of Directors at its meeting held on 23.1.2001.
Meetings and Attendance during the year:
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12 meetings of the Audit Committee of the Board were held during the year on 16 April 2007, 21 May 2007, 14 June 2007,
12 July 2007, 13 August 2007, 17 September 2007, 13 October 2007, 16 November 2007, 12 December 2007, 8 January
2008, 18 February 2008 and 17 March 2008. Shri N. C. Singhal and Shri R. B. L. Vaish attended all the 12 meetings. Shri R. H.
Patil attended 11 meetings.
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c) Risk Management Committee:
The Risk Management Committee functions with the following objectives:
i.
To perform the role of Risk Management in pursuance of the Risk Management guidelines issued periodically by RBI and
the Board.
ii. To monitor the business of the Bank periodically and also to suggest ways and means to improve the working and
profitability of the Bank from time to time.
Meetings and Attendance during the year:
4 meetings of the Risk Management Committee were held during the year on 17 April 2007, 15 October 2007, 9 January
2008 and 14 March 2008. Shri J. R. Varma attended all the 4 meetings, Shri P. J. Nayak attended 3 meetings and Shri Ramesh
Ramanathan attended 2 meetings.
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d) Shareholders/Investors Grievance Committee:
The objective of the Shareholders/Investors Grievance Committee is to look into redressal of shareholders' and investors'
grievances relating to non-receipt of dividend, refund orders, shares sent for transfer, non-receipt of balance sheet and other
similar grievances.
Meetings and Attendance during the year:
4 meetings of the Shareholders/Investors Grievance Committee were held during the year on 16 April 2007, 5 September
2007, 15 October 2007 and 9 January 2008. Shri Surendra Singh, Shri A. T. Pannir Selvam and Shri R. B. L. Vaish attended all
the 4 meetings.
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81
At monthly intervals, the Bank sends to the members of the Committee investors' service status reports giving brief details of
the complaints received. Details of the status of the references/complaints received for the year are given in the following
statement:
Status of the References/Complaints from 1.4.2007 to 31.3.2008
Sr. No. Nature of Reference/Complaints
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Change of Address
Bank Mandates
ECS
Nomination
Non-receipt of Share Certificates
Correction of names
Stock Exchange queries
NSDL/CDSL Queries
SEBI
Receipt of dividend warrant for revalidation
Non-receipt of Dividend
Transfers
Received
773
94
277
87
36
38
4
2
5
194
516
1081
Disposed Off
773
94
277
87
36
38
4
2
5
194
514
1070
Pending
-
-
-
-
-
-
-
-
-
-
*2
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* Received in the last week of March 2008 and disposed off during first week of April 2008.
** Received in last week of March 2008. Hence, transferred during first week of April 2008.
Shri P. J. Oza, Company Secretary, is the Compliance Officer for SEBI/Stock Exchange related issues.
e) Remuneration and Nomination Committee:
The Remuneration Committee of the Board was reconstituted as the Remuneration and Nomination Committee w.e.f. 14 July
2004 and it functions with the objective of deciding the remuneration package for all employees and directors, which includes
salaries, benefits, bonuses, pensions and stock options. The Committee is also consulted on appointments and promotions at
very senior levels of the Bank. The Committee also undertakes a process of due diligence to determine the suitability of the
person for appointment/continuing to hold appointment as a Director on the Board, based upon qualification, expertise,
track record, integrity, and other “fit and proper” criteria.
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Meetings and Attendance during the year:
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6 meetings of the Remuneration and Nomination Committee were held during the year on 13 April 2007, 20 April
2007, 30 April 2007, 4 September 2007, 9 January 2008, and 4 March 2008. Shri Surendra Singh and Shri R. H. Patil
attended all the 6 meetings. Shri N. C. Singhal attended 4 out of 5 meetings for which he was eligible. Shri S. B. Mathur
attended all 4 meetings for which he was eligible. Smt. Rama Bijapurkar and Shri K. N. Prithviraj attended one meeting
for which they were eligible.
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Remuneration Policy:
The Bank believes that to attract the right talent, the Remuneration Policy should be structured in line with the other
peer group banks, and is sensitive to compensation packages in this part of the financial market. Compensation is
structured in terms of fixed pay, variable pay and employee stock options, with the last two being strongly contingent on
employee performance. The Remuneration Policy for the Chairman and Chief Executive Officer is similarly structured and
approved by the Board of Directors, the shareholders and the Reserve Bank of India from time to time.
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Remuneration of Directors:
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I. Shri P. J. Nayak had been appointed as the Chairman and Managing Director of the Bank w.e.f. 1 January 2000 to 31
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December 2004 and he has been thereafter reappointed as the Chairman and Managing Director of the Bank w.e.f. 1
January 2005 till 31 July 2007. The term of Shri P. J. Nayak as the Chairman and Managing Director expired on 31 July
2007. Shri Nayak has been reappointed as Chairman and Chief Executive Officer (whole time Chairman) of the Bank for
the period 1 August 2007 to 31 July 2009. The terms and conditions and remuneration payable to him are approved
from time to time by the Board of Directors, shareholders of the Bank and Reserve Bank of India. The Bank has entered
into a service agreement with Shri P. J. Nayak for a period from 1 August 2007 till 31 July 2009. Either side can terminate
the agreement by giving ninety days notice in writing. If, prior to expiration of the agreement, the Bank terminates the
term of office of the Chairman and Chief Executive Officer, he shall be entitled, subject to the provisions of and limitations
contained in Section 318 of the Companies Act, 1956, to receive compensation from the Bank for the loss of office to the
extent provided in the agreement.
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82
Salary of Rs. 1,15,00,000/- p.a.
The details of remuneration paid to Shri P. J. Nayak during 2007-08 are:
i.
ii. Leave Fare Concession facility of Rs. 7,00,000 /- p.a.
iii. Personal Entertainment Allowance of Rs. 3,90,000/- p.a.
iv. Variable pay to be paid as decided by the Remuneration and Nomination Committee/Board of Directors subject to a
v.
maximum of 25% of salary drawn during the year.
Provident Fund @ 12% of pay with equal contribution by the Bank or as decided by the Board of Trustees from time to
time.
vi. Gratuity @ one month's salary for each completed year of service or part thereof.
vii. Superannuation @ 10% of pay.
Perquisites (evaluated as per Income Tax Rules wherever applicable, or otherwise at actual cost to the Bank) such as the benefit
of the Bank's furnished accommodation, electricity, water and furnishings, club fees, personal accident insurance, loans, use
of car and telephone at residence, medical reimbursement, travelling and halting allowances, newspapers and periodicals,
and others were provided in accordance with the Rules of the Bank.
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Shri P. J. Nayak was granted 22,500, 36,600, 50,000, 65,000, 74,750, 56,060 and 56,060 options under the Employee Stock
Option Plan, Grant I (24 February 2001), Grant II (28 February 2002), Grant III (6 May 2003), Grant IV (29 April 2004), Grant V
(10 June 2005), Grant VI (17 April 2006) and Grant VII (17 April 2007) respectively. From these seven tranches, 2,35,768
options were vested up to March 2008 and all these vested options have been exercised by Shri P. J. Nayak. Out of the total
options exercised by Shri P. J. Nayak, 87,668 options were exercised during the period under review.
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II. All Directors of the Bank, except for Shri P. J. Nayak were paid sitting fees of Rs. 20,000/ - for every meeting of the Board
and also for every meeting of the Committees attended by them. Reimbursement of expenses, if any, for travel to and
from the places of their residence to the venue of the meeting, lodging and board when attending the meeting, being on
actual basis, is made directly by the Bank to the service providers. During the year, the Bank paid Rs. 39,00,000/- as sitting
fees to its Directors.
Sitting Fees:
The details of sitting fees paid to the Directors during the period from 1 April 2007 to 31 March 2008 are as follows:
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Sr. No. Name of Directors
P. J. Nayak
Surendra Singh
N. C. Singhal
A. T. Pannir Selvam
J. R. Varma
R. H. Patil
Rama Bijapurkar
R. B. L. Vaish
S. B. Mathur
M. V. Subbiah
Ramesh Ramanathan
K. N. Prithviraj
1.
2.
3.
4
5.
6.
7.
8.
9.
10.
11.
12.
TOTAL
Sitting Fees Paid
(Rs.)
NIL
3,00,000
7,40,000
6,00,000
2,40,000
7,00,000
1,40,000
5,60,000
2,00,000
2,80,000
1,00,000
40,000
39,00,000
The details of shares of the Bank, held by the non-whole time Directors as on 31 March 2008 are set out in thefollowing table:
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Name of Director
Shri R. B. L. Vaish
No. of shares held
225 equity shares
f) Special Committee of the Board of Directors for Monitoring of Large Value Frauds:
The Special Committee of the Board of Directors for Monitoring of Large Value Frauds was constituted on 14 July 2004 and
the Committee functions with the following objective:
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83
To monitor and review all the frauds of Rs. 1 crore and above so as to:
i.
Identify the systematic lacunae, if any, that facilitated perpetration of the fraud and put in place measures to plug the
same;
Identify the reasons for delay in detection, if any, in reporting to top management of the Bank and RBI;
ii.
iii. Monitor progress of CBI/Police Investigation, and recovery position;
iv. Ensure that staff accountability is examined at all levels in all cases of frauds and staff side action, if required, is completed
quickly without loss of time;
v. Review the efficacy of the remedial action taken to prevent recurrence of frauds, such as strengthening of internal
controls;
vi. Put in place other measures as may be considered relevant to strengthen preventive measures against frauds.
Meetings and Attendance during the year:
Meetings are to be held whenever large value frauds occur, or as deemed necessary by the Committee. Two meetings of the
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Special Committee of the Board of Directors for Monitoring of Large Value Frauds were held on 18 September 2007 and 8
January 2008 during the year. Shri P. J. Nayak, Shri N. C. Singhal and Shri A. T. Pannir Selvam attended both the meetings.
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g) Customer Service Committee:
The Customer Service Committee was constituted on 14 October 2004 and the Committee functions with the following
objectives:
i. Overseeing the functioning of the Adhoc Committee of the Bank which would also include compliance with the
recommendations of the Committee on Procedures and Performance Audit on Public Services (CPPAPS) constituted by RBI
under the Chairmanship of Dr. S. S. Tarapore, Former Deputy Governor of RBI;
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ii. Strengthening the corporate governance structure in the Bank;
iii. Bringing about ongoing improvements in the quality of customer service provided by the Bank;
iv. Mounting innovative measures towards enhancing the quality of customer service and improving the level of customer
satisfaction for all categories of the Bank's clientele.
Meetings and Attendance during the year:
4 meetings of the Customer Service Committee were held during the year on 16 May 2007, 13 August 2007, 15 November
2007 and 18 February 2008. Shri A. T. Pannir Selvam and Shri R. B. L. Vaish attended all the 4 meetings. Shri J. R. Varma
attended 3 meetings.
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3. General Body Meetings:
The last three Annual General Meetings were held as follows:
Annual General Meeting
Date and Day
Time
Location
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10.06.2005 - Friday
10.00 a.m.
Bhaikaka Bhavan, Ellisbridge, Ahmedabad - 380 006
02.06.2006 - Friday
10.00 a.m.
Bhaikaka Bhavan, Ellisbridge, Ahmedabad - 380 006
01.06.2007 - Friday
10.00 a.m.
Bhaikaka Bhavan, Ellisbridge, Ahmedabad - 380 006
The special resolutions passed, during the last three Annual General Meetings, were as under:
Annual General Meeting
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Date of Annual General Meeting
10.06.2005 - Friday
Special Resolutions
• Resolution No. 5 - Appointment of Statutory
•
•
•
Auditors under Section 224A of the Companies
Act, 1956
*Resolution No. 12 - Alteration of the Object
clause of the Memorandum of Association of the
Company (*Passed by postal ballot)
Resolution No. 13 - Approval for commencement
of new business of distributing Non-Life
Insurance or Life Insurance products as a
Corporate Agent pursuant to the provision of
Section 149 of the Companies Act 1956 and
Resolution No. 14 - Revision in the existing
exercise pricing formula of grant of stock
options to employees under ESOP scheme of the
Bank
84
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02.06.2006 - Friday
• Resolution No. 5 - Appointment of Statutory
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01.06.2007 - Friday
Auditors under Section 224A of the Companies
Act, 1956
• Resolution No. 11 - Approval of the
shareholders of the Bank pursuant to Section 81
of the Companies Act, 1956 authorising the
Board of Directors of the Bank to issue, offer,
and allot equity stock options under the
Employees Stock Option Scheme, 2006 of the
Bank
• Resolution No. 12 - Approval of the shareholders
of the Bank pursuant to Section 293(1)(d) of the
Companies Act, 1956 for raising the borrowing
limits to Rs. 20,000 crores
• Resolution No. 6 - Appointment of Statutory
Auditors under Section 224A of the Companies
Act, 1956
• Resolution No. 8 - Change of Name of Bank
pursuant to Section 21 of the Companies Act,
1956
• Resolution No. 9 - Alteration of Articles of
Association of the Bank pursuant to Section 31
of the Companies Act, 1956.
No Resolution in the notice of the proposed Fourteenth Annual General Meeting is proposed to be passed by Postal Ballot.
4. Dividend History of Last Five Years:
Sr. No.
Financial Year
Rate of Dividend
Date of Declaration (AGM)
Date of Payment
(Date of Dividend Warrant)
1.
2.
3.
4.
5.
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
Unclaimed Dividends:
22%
25%
28%
35%
45%
25-06-2003
18-06-2004
10-06-2005
02-06-2006
01-06-2007
26-06-2003
19-06-2004
11-06-2005
03-06-2006
02-06-2007
All the shareholders whose dividend is unpaid have been intimated individually to claim their dividend. Under the Transfer of
Unclaimed Dividend Rules, it would not be possible to claim the dividend amount once deposited in Investors' Education &
Protection Fund (IEPF), therefore, shareholders are again requested to claim their unpaid dividend, if not already claimed.
Transfer to Investor Protection Fund:
Pursuant to Section 205C of the Companies Act, 1956, dividends that are unclaimed for a period of seven years get transferred
to the Investors' Education and Protection Fund administered by the Central Government. The table presented below gives
the dates of dividend declaration since 2000-01 and the corresponding dates when unclaimed dividends are due to be
transferred to the Central Government.
Year
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Dividend-Type
Date of Declaration
Due Date of Transfer
Final
Final
Final
Final
Final
Final
Final
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30 June, 2001
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10 July, 2002
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25 June, 2003
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18 June, 2004
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10 June, 2005
nd
2 June, 2006
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1 June, 2007
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30 July, 2008
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10 August, 2009
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25 July, 2010
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18 July, 2011
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10 July, 2012
nd
2 July, 2013
st
1 July, 2014
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5. Disclosures:
•
•
•
•
•
There were no transactions of a material nature undertaken by the Bank with its promoters, directors or the management,
their subsidiaries or relatives that may have a potential conflict with the interests of the Bank.
There are no instances of non-compliance by the Bank, penalties, and strictures imposed by Stock Exchanges and SEBI on
any matter related to capital markets, during the last three years.
The Bank has introduced a Whistle Blower Policy under which the Bank employees who observe an unethical or improper
practice can approach the Audit Committee without necessarily informing their supervisors. The policy contains provisions
protecting Whistle Blowers from unfair termination and other unfair prejudicial and employment practice. The Whistle
Blower Policy is required to be reviewed by the Audit Committee of the Board on half-yearly basis.
It is hereby affirmed that the Bank has not denied any personal access to the Audit Committee of the Bank and it has
further provided protection to Whistle Blowers from unfair termination and other unfair prejudicial employment
practices.
The Bank has complied with the mandatory requirements regarding the Board of Directors, Audit Committees and other
Board Committees and other disclosures as required under the provisions of the revised Clause 49 of the Listing
Agreement effective 1 January 2006. The Bank has also complied with the non-mandatory requirements like formation of
Remuneration & Nomination Committee, sending summary of significant event like change of name to each shareholder,
the performance evaluation of all Directors under 'Fit & Proper' Criteria laid down by RBI and establishment of a Whistle
Blower Policy.
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•
It is hereby affirmed that all members of the Board of Directors and Senior Management Personnel have complied with the
st
code of conduct applicable to them during the year ended 31 March 2008.
6. Means of Communication:
• Quarterly/Half-yearly results are communicated through newspaper advertisements, press releases and by posting
information on the Bank's web site.
• As required by SEBI and the listing agreements, Axis Bank files its financial and other information on the Electronic Data
Information Filing and Retrieval (EDIFAR) website /Corpfiling System.
• The results are generally published in the Economic Times and Gujarat Samachar or Sandesh or Divya Bhaskar.
• Address of our official website is www.axisbank.com where the information is displayed.
• Generally after the half-yearly and the annual results are taken on record by the Board, formal presentations are made to
analysts by the management and the same is also placed on the Bank's website.
• The Management's Discussion and Analysis Report for the year 2007-08 is part of the Annual Report.
7. General Shareholder Information:
• AGM: Date, time and venue - 6 June 2008 - 10.00 a.m. at Bhaikaka Bhavan (British Library Building), Near Law Garden,
th
Ellisbridge, Ahmedabad 380 006.
•
Financial Year/ Calendar - 1 April 2008 to 31 March 2009. All meetings to consider Quarterly results are proposed to be
held during first half of July 2008, October 2008 and January 2009. The meeting to consider audited annual accounts and
Q4 results is proposed to be held during second half of April 2009.
st
st
• Date of Book Closure - 26 May 2008 to 6 June 2008 (both days inclusive)
th
th
• Dividend Payment Date - on or after 7 June 2008
th
• The Bank's shares are listed on the following Stock Exchanges:
i. The Ahmedabad Stock Exchange Limited, Kamdhenu Complex, Opp. Sahajanand College, Panjara Pole, Ambawadi,
Ahmedabad 380 015
ii. The Bombay Stock Exchange Limited, P. J. Towers, Dalal Street, Mumbai - 400 001.
iii. The National Stock Exchange of India Limited, Exchange Plaza, Plot No. C/1, “G” Block, Bandra-Kurla Complex,
Bandra (E), Mumbai - 400 051.
• The Bank's Global Depositary Receipts (GDRs) issued during March and April 2005, and July 2007 are listed and traded on
the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS, UK.
86
Stock Code
Sr. No.
Name of Stock Exchange
Distinctive Nos. of Shares
Listing/Trading date
Code
LISTING DETAILS OF EQUITY SHARES OF AXIS BANK LIMITED
1.
Ahmedabad Stock Exchange Limited
Upto Public Issue - 1998
1 to 13,19,03,170
11.11.1998 & 01.12.1998
63134
4,63,50,000 equity shares
(CDCFS/SARF)
13,19,03,171 to 17,82,53,170
05.02.2002 & 14.02.2002
1,35,59,700 equity shares
(LIC/GIC/New India Assurance/National Insurance)
17,82,53,171 to 19,18,12,870
21.05.2002 & 05.06.2002
3,83,62,834 equity shares
(LIC/ChrysCapital/Citicorp/Karur Vysya Bank)
4,34,91,000 equity shares representing the
underlying shares to the Global Depository
Receipts (GDRs) to the Investors Overseas
issued during March/April 2005
1,41,32,466 equity shares representing the
underlying shares to the Global Depository
Receipts (GDRs) to the Investors Overseas
issued during July 2007
19,18,14,171 to 23,01,77,004
25.07.2003 & 28.07.2003
23,28,91,948 to 27,33,82,247
04.04.2005 & 06.04.2005
27,38,46,972 to 27,68,47,671
12.05.2005 & 27.05.2005
31,09,14,714 to 32,50,47,179
09.08.2007 & 17.08.2007
2,82,64,934 equity shares (QIP issue)
28,26,49,780 to 31,09,14,713
27.07.2007 & 02.08.2007
3,06,95,129 equity shares (SUUTI/LIC/GIC/
New India Assurance/United India Insurance/
Oriental Insurance)
1,09,50,436 equity shares (ESOPs)
`
2.
Bombay Stock Exchange Limited
32,50,47,180 to 35,57,42,308
26.07.2007 & 22.08.2007
19,18,12,871 to 19,18,14, 170
23,01,77,005 to 23,28,91,947
27,33,82,248 to 27,38,46,971
27,68,47,672 to 28,26,49,779
35,57,42,309 to 35,77,09,669
On various dates
Upto Public Issue - 1998
1 to 13,19,03,170
19.11.1998 & 27.11.1998
532215
4,63,50,000 equity shares
13,19,03,171 to 17,82,53,170
09.02.2002 & 20.02.2002
1,35,59,700 equity shares
17,82,53,171 to 19,18,12,870
31.05.2002 & 13.06.2002
3,83,62,834 equity shares
19,18,14,171 to 23,01,77,004
27.08.2003 & 28.08.2003
4,34,91,000 equity shares representing the
underlying shares to the Global Depository
Receipts (GDRs) to the Investors Overseas
issued during March/April 2005
1,41,32,466 equity shares representing the
underlying shares to the Global Depository
Receipts (GDRs) to the Investors Overseas
issued during July, 2007
23,28,91,948 to 27,33,82,247
30.03.2005 & 08.04.2005
27,38,46,972 to 27,68,46,671
18.05.2005 & 27.05.2005
31,09,14,714 to 32,50,47,179
10.08.2007& 14.08.2007
87
2,82,64,934 equity shares (QIP issue)
28,26,49,780 to 31,09,14,713
27.07.2007 & 01.08.2007
3,06,95,129 equity shares (SUUTI/LIC/GIC/
New India Assurance/United India Insurance/
Oriental Insurance)
1,09,50,436 equity shares (ESOPs)
32,50,47,180 to 35,57,42,308
16.08.2007& 20.08.2007
19,18,12,871 to 19,18,14, 170
23,01,77,005 to 23,28,91,947
27,33,82, 248 to 27,38,46,971
27,68,47,672 to 28,26,49,779
35,57,42,309 to 35,77,09,669
On various dates
3.
National Stock Exchange of India Limited
Upto Public Issue - 1998
1 to 13,19,03,170
16.11.1998 & 03.12.1998 AXISBANKEQ
4,63,50,000 equity shares
13,19,03,171 to 17,82,53,170
12.02.2002 & 20.02.2002
1,35,59,700 equity shares
17,82,53,171 to 19,18,12,870
27.05.2002 & 12.06.2002
3,83,62,834 equity shares
19,18,14,171 to 23,01,77,004
01.09.2003 & 03.09.2003
4,34,91,000 equity shares representing the
underlying shares to the Global Depository
Receipts (GDRs) to the Investors Overseas
issued during March/April 2005
1,41,32,466 equity shares representing the
underlying shares to the Global Depository
Receipts (GDRs) to the Investors Overseas
issued during July, 2007
23,28,91,948 to 27,33,82,247
05.04.2005 & 12.04.2005
27,38,46,972 to 27,68,46,671
16.05.2005 & 23.05.2005
31,09,14,714 to 32,50,47,179
10.08.2007& 14.08.2007
2,82,64,934 equity shares (QIP issue)
28,26,49,780 to 31,09,14,713
27.07.2007& 01.08.2007
3,06,95,129 equity shares (SUUTI/LIC/GIC/
New India Assurance/United India Insurance/
Oriental Insurance)
1,09,50,436 equity shares (ESOPs)
32,50,47,180 to 35,57,42,308
14.08.2007 & 20.08.2007
19,18,12,871 to 19,18,14,170
23,01,77,005 to 23,28,91,947
27,33,82, 248 to 27,38,46,971
27,68,47,672 to 28,26,49,779
35,57,42,309 to 35,77,09,669
On various dates
The annual fees for 2008-09 have been paid to all the Stock Exchanges where the shares are listed.
ISIN Number
Name of Depositories
: INE 238A01026
: i. National Securities Depository Limited
ii. Central Depository Services (India) Limited
LISTING DETAILS OF GLOBAL DEPOSITARY RECEIPTS (GDRs) OF AXIS BANK LIMITED
Sr. No.
Name of Stock Exchange
Listing/Trading date
Code
London Stock Exchange
4,04,90,300 GDRs
30,00,700 GDRs
1,41,32,466 GDRs
16.03.2005 & 22.03.2005
25.04.2005 & 26.04.2005
30.07.2007
US05462W1099
US05462W1099
1.
2.
88
•
Market Price Data: The price of the Bank's Share - High, Low during each month in the last financial year on NSE was as under:
MONTH
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
LOW (Rs.)
HIGH (Rs.)
435.00
469.90
551.30
596.05
534.00
612.65
689.00
870.35
902.25
848.55
901.00
712.50
505.00
591.90
628.50
678.80
643.00
776.00
956.90
1025.00
1013.30
1291.50
1150.00
998.00
•
The Share price of the Bank's equity share performed well on the stock exchange with a low of Rs.435/- during April, 2007
on the National Stock Exchange. It touched a high of Rs. 1,291.50 - during January, 2008. It showed a 196.89% appreciation
between the low of April, 2007 and the high of January, 2008.
The reported high and low closing prices of GDRs of Axis Bank traded during 2007-08 on the London Stock Exchange are given
below:
MONTH
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
LOW (USD)
HIGH (USD)
10.68
11.40
13.73
14.73
12.99
15.90
17.60
22.80
23.00
24.00
23.90
18.00
12.50
14.60
15.24
16.45
16.20
19.36
23.70
25.43
25.28
32.20
28.00
25.00
•
Registrar and Share Transfer Agent:
M/s. Karvy Computershare Private Limited
Unit : Axis Bank Limited
Plot No. 17 to 24, Vithalrao Nagar
Madhapur, Hyderabad 500 081
Phone No. 040-23420815 to 23420824
Fax No. 040-23420814
Contact Persons: Shri V. K. Jayaraman, GM (RIS)/Ms. Varalakshmi, Manager (RIS)
89
•
Share Transfer System
A Share Committee consisting of the Executive Director (Corporate Banking), Senior Vice President (Law) and the Company
Secretary of the Bank has been formed to look after the matters relating to the transfer of shares, issue of duplicate share
certificates in lieu of mutilated share certificates, and other related matters. The resolutions passed by the Share Committee
are confirmed at subsequent Board meetings. The Bank's Registrar and Share Transfer Agent, M/s Karvy Computershare Pvt.
Limited, Hyderabad looks after the work relating to transfers.
The Bank ensures that all transfers are effected within a period of one month from the date of their lodgment. As at 31 March
2008, share transfers received a few days earlier, were transferred in the first week of April 2008.
st
According to a notification of the Securities and Exchange Board of India (SEBI), the equity shares of the Bank shall be traded
compulsorily in demat form by all investors w.e.f. 21 March 2000. The Bank has already entered into agreements with the
National Securities Depository Limited (NSDL) and the Central Depository Services (India) Limited (CDSL) so as to provide the
members an opportunity to hold and trade shares of the Bank in electronic form.
st
The number of equity shares of Axis Bank transferred during the last three years (excluding electronic transfer of shares in
dematerialised form) is given below:
Number of transfer deeds
Number of shares transferred
2005-06
1,712
1,71,011
2006-07
1,405
1,40,550
2007-08
1,081
1,61,413
As required under Clause 47(c) of the listing agreements entered into by Axis Bank with stock exchanges, a certificate is obtained
every six months from a practicing Company Secretary, with regard to, inter alia, effecting transfer, transmission, sub-division, and
consolidation, of equity shares within one month of their lodgment. The certificates are forwarded to ASE, BSE and NSE, where the
equity shares are listed and also placed before the Shareholders/Investors Grievance Committee.
In terms of SEBI circular no. D&CC/FITTC/CIR-16 dated 31 December 2002, a Secretarial Audit is conducted on a quarterly basis by a
practicing Company Secretary, for the purpose of, inter alia, reconciliation of the total admitted equity share capital with the
depositories and in the physical form with the total issued/paid-up equity capital of Axis Bank. Certificates issued in this regard are
placed before the Shareholders/Investors Grievance Committee and forwarded to ASE, BSE and NSE, where the equity shares of Axis
Bank are listed.
st
Shareholders of Axis Bank with more than one per cent holding at 31 March 2008
st
NAME OF THE SHAREHOLDER
NO. OF SHARES
% TO TOTAL NO. OF SHARES
Administrator of The Specified Undertaking of the
Unit Trust of India (SUUTI)
Life Insurance Corporation of India
HSBC Financial Services (Middle East) Limited A/C
HSBC IRIS Investments (Mauritius) Limited
Orient Global Tamarind (Mauritius) Limited
ICICI Prudential Life Insurance Company Limited
The Bank of New York - As Depository for the Equity Shares
Representing the Underlying Shares to the Global
Depository Receipts (GDRs) issued to the Investors Overseas -
FDI Route
General Insurance Corporation of India
Citigroup Global Markets Mauritius Private Limited
Norges Bank A/C Government Petroleum Fund
JP Morgan Asset Management (Europe) S.A.R.L.A/C Flagship
Indian Investment Company (Mauritius)
9,72,24,373
3,71,95,831
1,77,09,210
1,61,43,701
1,46,11,770
1,30,33,458
81,61,404
61,56,594
58,36,479
54,59,710
27.18%
10.40%
4.95%
4.51%
4.08%
3.64%
2.28%
1.72%
1.63%
1.53%
90
CLSA (Mauritius) Limited
DALI Limited
The New India Assurance Company Limited
Goldman Sachs Investments (Mauritius) I Ltd
48,79,176
43,47,450
38,06,443
36,28,447
1.36%
1.22%
1.06%
1.01%
Distribution of shareholding as on 31 March 2008
st
Total nominal value
Nominal value of each equity share
Total number of equity shares
Distinctive numbers from
:
:
:
:
357,70,96,690
Rs.10/-
35,77,09,669
1 to 35,77,09,669
Shareholding of
Nominal Value
Rs.
Rs.
Numbers
Shareholders
% to total
Shareholders
Share Amount
Nominal Value
In Rs.
% to Capital
Up to
5001
10001
20001
30001
40001
50001
100001
TOTAL
5,000
10,000
20,000
30,000
40,000
50,000
1,00,000
Above
76,654
3,289
1,097
332
158
117
232
526
93.02
3.99
1.33
0.40
0.19
0.14
0.28
0.64
8,17,52,420
2,42,67,460
1,58,12,180
81,55,470
55,89,640
53,64,030
1,68,54,960
3,41,93,00,530
82,405
100.00
3,57,70,96,690
2.29%
0.68%
0.44%
0.23%
0.16%
0.15%
0.47%
95.59%
100.00%
As on 31 March 2008, out of a total of equity shares of the Bank, 35,44,91,209 shares representing 99.10% of total shares have been
st
dematerialised.
•
•
•
•
The Bank has issued in the course of an international offering to the investors overseas, securities linked to 4,34,91,000 ordinary
shares in the form of Global Depositary Receipts (GDRs) during March/April, 2005 and 1,41,32,466 ordinary shares in the form of
GDRs during July 2007 and the GDRs have been listed and traded on the London Stock Exchange. The Bank has simultaneously
issued 4,34,91,000 and 1,41,32,466 equity shares representing the underlying shares to the Global Depositary Receipts (GDRs)
to the investors overseas. The underlying equity shares have been listed and permitted to be traded on the NSE, BSE and the
Ahmedabad Stock Exchange. The numbers of outstanding GDRs as on 31 March 2008 were 1,30,33,458.
st
The Bank has not issued any ADRs/Warrants or any other convertible instruments, the conversion of which will have an impact
on equity shares.
Branch Locations Given elsewhere
rd
Address for Correspondence:
The Company Secretary
Axis Bank Limited
Registered Office
'Trishul', 3 Floor,
Opp. Samartheshwar Temple,
Law Garden,
Ellisbridge, Ahmedabad 380 006.
Phone No.
Fax No.
Email
: 079-26409322
: 079-26409321
: p.oza@axisbank.com/ rajendra.swaminarayan@axisbank.com
91
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) GROUP - AUDITOR'S REPORT
Auditor's Report on the Consolidated Financial Statements of Axis Bank Limited and its Subsidiaries
To
The Board of Directors
Axis Bank Limited
1. We have audited the attached consolidated balance sheet of Axis Bank Limited (formerly known as UTI Bank Limited) and its
subsidiaries (the 'Group') as at March 31, 2008, and also the consolidated profit and loss account and the consolidated cash flow
statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of Axis Bank
Limited's management and have been prepared by the management on the basis of separate financial statements and other
financial information regarding components. Our responsibility is to express an opinion on these financial statements based
on our audit.
2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. We did not audit the financial statement of subsidiary whose financial statement reflect total assets of Rs. 1,943.78 million as at
March 31, 2008, total revenue of Rs.1.78 million and cash flow amounting to Rs. 23.81 million for the year then ended. These
financial statement and other financial information have been audited by other auditor whose report has been furnished to us,
and our opinion is based solely on the report of other auditor.
4. We report that the consolidated financial statements have been prepared by Axis Bank Limited's management in accordance
with the requirements of Accounting Standard 21 issued by the Institute of Chartered Accountants of India.
5. Based on our audit and on consideration of report of other auditor on separate financial statement and on the other financial
information of the components, and to the best of our information and according to explanations given to us, we are of the
opinion that the attached consolidated financial statements gives a true and fair view in conformity with the accounting
principles generally accepted in India:
i.
in the case of the consolidated balance sheet, of the state of affairs of the Group as at March 31, 2008;
ii.
in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and
iii.
in the case of the consolidated cash flow statement, the cash flows for the year ended on that date.
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.:048749
Place: Mumbai
Date: April 21, 2008
93
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) GROUP - BALANCE SHEET
CONSOLIDATED BALANCE SHEET AS ON 31 MARCH 2008
CAPITAL AND LIABILITIES
Capital
Reserves & Surplus
As on
As on
31-03-2008
31-03-2007
Schedule No.
(Rs. in Thousands)
(Rs. in Thousands)
1
2
3,577,097
2,816,308
83,941,262
31,068,175
Employees' Stock Options Outstanding (Net)
17(4.16)
21,868
89,783
Deposits
Borrowings
Other liabilities and provisions
TOTAL
ASSETS
Cash and Balances with Reserve Bank of India
Balances with banks and money at call and short notice
Investments
Advances
Fixed Assets
Other Assets
TOTAL
Contingent liabilities
Bills for collection
3
4
5
6
7
8
9
10
11
876,193,450
587,850,227
56,240,405
51,956,030
75,689,729
58,779,259
1,095,663,811
732,559,782
73,056,584
46,610,303
51,998,614
22,572,748
338,651,008
268,871,605
594,759,888
368,764,606
9,324,663
6,778,359
27,873,054
18,962,161
1,095,663,811
732,559,782
12
2,588,956,615
1,841,653,501
83,233,927
62,746,332
Significant Accounting Policies and Notes to Accounts
17
Schedules referred to above form an integral part of the Consolidated Balance Sheet
As per our report of even date
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.: 048749
N. C. Singhal
Director
R. H. Patil
Director
P. J. Oza
Company Secretary
Date: 21 April 2008
Place: Mumbai
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
95
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) GROUP - PROFIT AND LOSS ACCOUNT
CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2008
I
INCOME
Interest earned
Other income
TOTAL
II
EXPENDITURE
Interest expended
Operating expenses
Provisions and contingencies
TOTAL
Schedule No.
Year ended
31-03-2008
(Rs. in Thousands)
Year ended
31-03-2007
(Rs. in Thousands)
13
14
70,050,803
17,959,215
88,010,018
44,616,457
10,099,065
54,715,522
15
16
17(5.1.2)
17(5.1.6)
44,198,438
21,667,056
11,553,104
29,931,767
12,193,592
6,047,687
77,418,598
48,173,046
10,591,420
10,242,933
6,542,476
7,310,390
-
(318,028)
20,834,353
13,534,838
2,677,572
268,389
2,516,380
15,372,012
1,647,571
156,415
1,487,919
10,242,933
20,834,353
13,534,838
31.80
30.96
23.33
22.63
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
CONSOLIDATED NET PROFIT ATTRIBUTABLE TO GROUP
Balance in Profit & Loss account brought forward from previous year
Utilisation for Employee Benefits Provision under
Accounting Standard (AS)-15 (Revised)
AMOUNT AVAILABLE FOR APPROPRIATION
APPROPRIATIONS :
Transfer to Statutory Reserve
Transfer to Capital Reserve
Proposed Dividend (includes tax on dividend)
Balance in Profit & Loss account carried forward
TOTAL
III
IV
V
VI
EARNINGS PER EQUITY SHARE
(Face value Rs.10/- per share) (Rupees)
Basic
Diluted
Significant Accounting Policies and Notes to Accounts
Schedules referred to above form an integral part of the Consolidated Profit and Loss Account
17(5.1.5)
17
As per our report of even date
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.: 048749
N. C. Singhal
Director
R. H. Patil
Director
P. J. Oza
Company Secretary
Date: 21 April 2008
Place: Mumbai
96
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) GROUP - CASH FLOW STATEMENT
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2008
Cash flow from operating activities
Net profit before taxes
Adjustments for:
Year ended
31-03-2008
(Rs. in Thousands)
Year ended
31-03-2007
(Rs. in Thousands)
16,348,108
9,914,041
Depreciation & impairment provision on fixed assets
Depreciation on investments
Amortisation of premium on Held to Maturity investments
1,592,998
65,459
977,647
Provision for Non Performing Advances/Investments (including bad debts)
3,440,118
General provision on securitised assets
Provision on standard assets
General provision for retail assets
(1,123)
1,534,574
-
1,120,129
669,666
987,486
737,370
25,400
1,223,500
17,700
Provision for wealth tax
Loss on sale of fixed assets
Provision for country risk
2,155
2,487
151,762
29,101
35,500
-
Contingent provision against derivatives
719,733
-
Amortisation of deferred employee compensation
1,965
27,067
Adjustments for:
(Increase)/Decrease in investments
(Increase)/Decrease in advances
Increase/(Decrease) in borrowings
Increase/(Decrease) in deposits
(Increase)/Decrease in other assets
Increase/(Decrease) in other liabilities & provisions
Direct taxes paid
Net cash flow from operating activities
Cash flow from investing activities
Purchase of fixed assets
(Increase)/Decrease in Held to Maturity Investments
Proceeds from sale of fixed assets
Net cash used in investing activities
24,868,896
14,753,947
(26,331,275)
(229,410,896)
4,284,375
288,343,222
(7,784,117)
14,314,296
(6,885,620)
61,398,881
(4,417,436)
(44,515,738)
126,372
(21,042,997)
(146,307,272)
25,146,713
186,714,914
(1,351,054)
(873,234)
(4,137,841)
52,903,176
(2,273,870)
(34,264,647)
34,855
(48,806,802)
(36,503,662)
97
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2008
Cash flow from financing activities
Proceeds from issue of Subordinated debt (net of repayment)
Proceeds from issue of Perpetual debt and Upper Tier II instruments
Proceeds from issue of Share Capital
Proceeds from Share Premium (net of share issue expenses)
Payment of Dividend
Year ended
31-03-2008
(Rs. in Thousands)
Year ended
31-03-2007
(Rs. in Thousands)
(2,455,000)
1,734,198
760,789
44,706,032
(1,488,087)
3,393,000
13,735,120
29,401
330,025
(1,117,416)
Net cash generated from financing activities
43,257,932
16,370,130
Effect of exchange fluctuation translation reserve
Net increase in cash and cash equivalents
Cash and cash equivalents as at 1 April 2007
Cash and cash equivalents as at 31 March 2008
Note :
22,135
55,872,146
69,183,051
125,055,197
(5,015)
32,764,629
36,418,422
69,183,051
1. Cash and cash equivalents comprise of cash on hand & in ATM, balances with Reserve Bank of India, balances with banks and
money at call & short notice (refer schedule 6 and 7 of the Balance Sheet).
As per our report of even date
For S. R. Batliboi & Co.
Chartered Accountants
per Viren H. Mehta
Partner
Membership No.: 048749
N. C. Singhal
Director
R. H. Patil
Director
P. J. Oza
Company Secretary
Date: 21 April 2008
Place: Mumbai
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
98
AXIS BANK LIMITED (FORMERLY UTI BANK LIMITED) GROUP - SCHEDULES
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS ON 31 MARCH, 2008
SCHEDULE 1 - CAPITAL
Authorised Capital
500,000,000 Equity Shares of Rs. 10/- each
(Previous year - 300,000,000 Equity Shares of Rs.10/- each)
Issued, Subscribed and Paid-up capital
357,709,669 Equity Shares of Rs. 10/- each fully paid up
(Previous year - 281,630,787 Equity Shares of Rs.10/- each fully paid-up)
[Included above are 13,033,458 GDRs (previous year 11,994,991) representing
13,033,458 equity shares (previous year 11,994,991)]
SCHEDULE 2 - RESERVES AND SURPLUS
I. Statutory Reserve
Opening Balance
Additions during the year
II. Share Premium Account
Opening Balance
Additions during the year
Less: Share issue expenses [refer 17(5.1.1)]
III. General Reserve
Opening Balance
Additions during the year
IV. Capital Reserve
Opening Balance
Additions during the year
V.
Foreign Currency Translation Reserve
Opening Balance
Additions during the year [refer 17(4.5)]
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
5,000,000
3,000,000
3,577,097
2,816,308
5,846,822
2,677,572
4,199,251
1,647,571
8,524,394
5,846,822
13,956,295
45,248,464
(472,552)
13,554,592
401,703
-
58,732,207
13,956,295
143,000
-
143,000
883,509
268,389
1,151,898
(4,384)
22,135
17,751
143,000
-
143,000
727,094
156,415
883,509
630
(5,014)
(4,384)
VI. Balance in Profit & Loss Account
15,372,012
10,242,933
TOTAL
83,941,262
31,068,175
99
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS ON 31 MARCH, 2008
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
SCHEDULE 3 - DEPOSITS
A.
I. Demand Deposits
(i) From banks
(ii) From others
II. Savings Bank Deposits
III. Term Deposits
(i) From banks
(ii) From others
TOTAL
B.
I. Deposits of branches in India
II. Deposits of branches outside India
TOTAL
SCHEDULE 4 - BORROWINGS
I.
II.
Borrowings in India
(i) Reserve Bank of India
(ii) Other Banks
(iii) Other institutions & agencies
Borrowings outside India
8,957,267
191,471,732
199,824,102
36,841,899
439,098,450
7,490,364
105,551,056
121,258,808
60,206,636
293,343,363
876,193,450
587,850,227
863,847,591
12,345,859
585,723,408
2,126,819
876,193,450
587,850,227
-
-
5,466,886
50,773,519
-
6,000,000
12,038,952
33,917,078
TOTAL
56,240,405
51,956,030
Secured borrowing included in I & II above
-
-
SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS
Bills payable
Inter - office adjustments (net)
Interest accrued
Proposed dividend (includes tax on dividend)
Subordinated Debt #
Perpetual Debt and Upper Tier II instruments *
I.
II.
III.
IV.
V.
VI.
VII. Contingent provision against standard assets
VIII. Others (including provisions) @
21,022,319
-
1,777,562
2,511,015
18,824,000
15,469,318
3,589,183
12,496,332
13,095,209
-
1,772,747
1,482,723
21,279,000
13,735,120
2,054,609
5,359,851
TOTAL
75,689,729
58,779,259
#
*
Represents Subordinated Debt of 5,862 Bonds (previous year 10,772 Bonds) of Rs. 5,00,000/- each and 15,893 Bonds (previous
year 15,893 Bonds) of Rs. 10,00,000/- each, in the nature of Non Convertible Debentures [Also refer 17(5.1.3)]
Represents Rs. 398.55 crores (previous year Rs. 413.96 crores) of Perpetual Debt and Rs.1,148.38 crores (previous year Rs. 959.55
crores) of Upper Tier II instruments [Also refer 17(5.1.4)]
@ Includes contingent provision against derivatives of Rs. 71.97 crores [previous year Rs. Nil]
100
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS ON 31 MARCH, 2008
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA
I.
II.
Cash in hand & in ATM [including foreign currency notes]
Balances with Reserve Bank of India :
(i) in Current Account
(ii) in Other Accounts
15,203,291
8,367,508
57,853,293
-
38,242,795
-
TOTAL
73,056,584
46,610,303
SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
I.
II.
In India
(i) Balance with Banks
(a) in Current Accounts
(b) in Other Deposit Accounts
(ii) Money at Call and Short Notice
(a) With banks
(b) With other institutions
10,461,130
732,279
31,075,560
-
6,242,429
524,183
12,137,816
-
TOTAL
42,268,969
18,904,428
Outside India
(i)
in Current Accounts
(ii) in Other Deposit Accounts
(iii) Money at Call & Short Notice
3,845,647
1,203,600
4,680,398
2,903,160
679,180
85,980
TOTAL
9,729,645
3,668,320
GRAND TOTAL (I+II)
51,998,614
22,572,748
101
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS ON 31 MARCH, 2008
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
SCHEDULE 8 - INVESTMENTS
I.
Investments in India in -
(i) Government Securities ## **
(ii) Other approved securities
(iii) Shares
(iv) Debentures and Bonds $
(v) Investment in Joint Ventures
(vi) Others @ (Mutual Fund units, CD / CP, NABARD deposits, PTC etc.)
Gross Investments in India
Less : Depreciation in the value of investments
(includes provision for Non Performing Investments
Rs. 8.96 crores, previous year Rs.6.67 crores)
201,788,389
-
7,705,920
108,211,618
130,000
15,688,378
333,524,305
(958,994)
164,308,412
-
4,627,908
70,448,978
-
24,790,893
264,176,191
(923,298)
Net investments in India
332,565,311
263,252,893
II.
Investments outside India in -
(i) Government Securities (including local authorities)
(ii) Subsidiaries and / or joint ventures abroad
(iii) Others
Gross Investments outside India
Less : Depreciation in the value of investments
Net investments outside India
GRAND TOTAL
-
-
6,138,360
6,138,360
(52,663)
6,085,697
54,552
-
5,564,160
5,618,712
-
5,618,712
338,651,008
268,871,605
@ Includes deposits with NABARD Rs. 1,000.69 crores (previous year Rs. 866.89 crores) and PTC's Rs. 530.66 crores (previous year
Rs. 1,344.40 crores)
##
**
Includes securities costing Rs. 3,871.77 crores (previous year Rs. 3,581.47 crores) pledged for availment of fund transfer facility,
clearing facility and margin requirement
Includes Repo Lending of Rs. 503.75 crores (previous year Rs. 1,350.94 crores) and net of Repo borrowing of Rs. Nil under the
Liquidity Adjustment Facility (previous year Rs. 304.64 crores) in line with Reserve Bank of India requirements.
$
Includes securities costing Rs. 175.06 crores (previous year Rs. 321.76 crores) pledged for margin requirement
102
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS ON 31 MARCH, 2008
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
SCHEDULE 9 - ADVANCES
A.
(i) Bills purchased and discounted #
(ii) Cash credits, overdrafts and loans repayable on demand
(iii) Term loans
TOTAL
B.
(i)
Secured by tangible assets $
(ii) Covered by Bank/Government Guarantees &&
(iii) Unsecured
TOTAL
C.
I.
Advances in India
(i) Priority Sector
(ii) Public Sector
(iii) Banks
(iv) Others
TOTAL
II. Advances Outside India
(i) Due from banks
(ii) Due from others -
(a) Bills purchased and discounted
(b) Syndicated loans
(c) Others
TOTAL
GRAND TOTAL [ C I + C II ]
20,236,224
164,432,415
410,091,249
12,737,121
98,865,838
257,161,647
594,759,888
368,764,606
480,621,824
305,022,640
17,698,818
96,439,246
14,489,278
49,252,688
594,759,888
368,764,606
165,722,514
131,963,321
62,114
276,307
215,406
276,841
374,889,725
210,553,409
540,950,660
343,008,977
-
-
2,151,461
20,476,677
31,181,090
53,809,228
2,913,534
2,441,985
20,400,110
25,755,629
594,759,888
368,764,606
#
$
Bills purchased & discounted are net of Rs. Nil (previous year Rs. 700 crores) of borrowings under the Bills Rediscounting
Scheme
Includes advances against book debts.
&&
Includes advances against L/Cs issued by Banks
Advances are net of floating provision, which has been adjusted based on management estimate
103
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS ON 31 MARCH, 2008
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
SCHEDULE 10 - FIXED ASSETS
I.
Premises
At cost at the beginning of the year
Additions during the year
Deductions during the year
Depreciation to date
TOTAL
II.
Other fixed assets (including Furniture & Fixtures)
At cost at the beginning of the year
Additions during the year
Deductions during the year
Depreciation to date
TOTAL
III.
Assets on Lease
At cost at the beginning of the year
Additions during the year
Deductions during the year
Depreciation to date
Provision for impairment
TOTAL
IV.
CAPITAL WORK-IN-PROGRESS (including capital advances)
GRAND TOTAL (I+II+III+IV)
SCHEDULE 11 - OTHER ASSETS
I.
II.
III.
IV.
V.
Inter-office adjustments (net)
Interest Accrued
Tax paid in advance/tax deducted at source (net of provisions)
Stationery and stamps
Non banking assets acquired in satisfaction of claims
VI. Others #
TOTAL
337,296
224,629
(61,603)
(86,192)
414,130
9,930,815
3,160,290
(399,916)
337,296
-
-
(72,401)
264,895
7,884,495
2,165,321
(119,001)
(5,429,973)
(4,192,811)
7,261,216
5,738,004
765,000
765,000
-
-
-
-
(276,010)
(241,776)
(124,426)
-
364,564
8
,039,910
1,284,753
523,224
6,526,123
252,236
9,324,663
6,778,359
- -
9,078,710
57
7,732
9,188
6,419,098
1,043,522
8,463
- -
18,207,424
11,491,078
27,873,054
18,962,161
#
Includes deferred tax assets of Rs. 319.05 crores (previous year Rs. 159.80 crores)
104
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS ON 31 MARCH, 2008
As on
31-03-2008
(Rs. in Thousands)
As on
31-03-2007
(Rs. in Thousands)
SCHEDULE 12 - CONTINGENT LIABILITIES
I.
II.
Claims against the Group not acknowledged as debts
2,547,691
1,707,515
Liability for partly paid investments
- -
III.
Liability on account of outstanding forward exchange and derivative contracts :
(a) Forward Contracts
643,204,542
507,359,036
(b) Interest Rate Swaps, Currency Swaps, Forward Rate Agreement
& Interest Rate Futures
(c) Foreign Currency Options
TOTAL
IV.
Guarantees given on behalf of constituents
In India
Outside India
V.
Acceptances, endorsements and other obligations
VI. Other items for which the Group is contingently liable
TOTAL
1,565,202,992
1,174,108,995
161,000,980
52,836,219
2,369,408,514
1,734,304,250
117,963,502
1,755,695
82,465,595
14,815,618
43,813,548
50,287
54,771,929
7,005,972
2,588,956,615
1,841,653,501
105
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2008
SCHEDULE 13 - INTEREST EARNED
I.
II.
III.
Interest/discount on advances/bills
Income on investments
Interest on balances with Reserve Bank of India and other inter-bank funds
IV. Others
TOTAL
SCHEDULE 14 - OTHER INCOME
Year ended
31-03-2008
Year ended
31-03-2007
(Rs. in Thousands)
(Rs. in Thousands)
47,454,168
21,023,156
1,076,363
497,116
27,028,479
16,327,165
773,012
487,801
70,050,803
44,616,457
I.
II.
III.
IV.
V.
Commission, exchange and brokerage
Profit/(Loss) on sale of Investments/Derivative transactions (net)
Profit on exchange transactions (net)
Profit/(Loss) on sale of fixed assets (net)
Income earned by way of dividends etc. from
13,209,366
2,202,527
2,074,816
(151,762)
subsidiaries/companies and/or joint venture abroad/in India
-
VI.
Lease rentals
VII. Miscellaneous Income
34,702
589,566
[including recoveries on account of advances/investments written off in earlier years
Rs. 44.90 crores (previous year Rs. 23.62 crores) and profit on account of
portfolio sell downs/securitisation Rs. 9.06 crores (previous year Rs.2.00 crores)]
7,789,647
608,753
1,248,471
(29,101)
-
34,764
446,531
TOTAL
SCHEDULE 15 - INTEREST EXPENDED
I.
II.
III.
Interest on deposits
Interest on Reserve Bank of India/Inter-bank borrowings
Others @
TOTAL
@
Including interest on repos & subordinated debt
SCHEDULE 16 - OPERATING EXPENSES
I.
II.
III.
IV.
V.
VI.
Payments to and provisions for employees
Rent, taxes and lighting
Printing and stationery
Advertisement and publicity
Depreciation on bank's property (incl. Impairment provision)
Directors' fees, allowance and expenses
VII. Auditor's fees and expenses
VIII. Law charges
IX.
X.
XI.
Postage, telegrams, telephones etc.
Repairs and maintenance
Insurance
XII. Other expenditure
TOTAL
106
17,959,215
10,099,065
37,424,060
1,763,008
5,011,370
24,807,481
1,687,973
3,436,313
44,198,438
29,931,767
7,520,971
2,579,994
544,723
744,067
1,592,998
7,108
6,649
52,713
1,051,018
1,907,586
767,285
4,891,944
3,911,833
1,599,232
376,380
296,166
1,120,129
5,879
5,038
64,051
701,018
1,289,791
548,160
2,275,915
21,667,056
12,193,592
17 Significant accounting policies and notes forming part of the
consolidated financial statements for the year ended 31 March 2008
(Currency : In Indian Rupees)
1
Principles of Consolidation
The consolidated financial statements comprise the financial statements of Axis Bank Limited ('the Bank') and its subsidiaries,
which together constitute the 'Group'. Pursuant to the approval received from the Registrar of Companies, Gujarat, the Bank
has changed its name from 'UTI Bank Limited' to 'Axis Bank Limited' with effect from 30July 2007.
The Bank consolidates its subsidiaries in accordance with AS-21, Consolidated Financial Statements issued by the Institute of
Chartered Accountants of India on a line-by-line basis by adding together the like items of assets, liabilities, income and
expenditure.
2
Basis of preparation
The financial statements of the Group have been prepared and presented under the historical cost convention on the accrual basis
of accounting, unless otherwise stated, and comply with generally accepted accounting principles, statutory requirements
prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India ('RBI') from time to
time, the Accounting Standards ('AS') issued by the Institute of Chartered Accountants of India ('ICAI') and notified by Companies
Accounting Standards Rules, 2006 to the extent applicable and current practices prevailing within the banking industry in India.
The consolidated financial statements present the accounts of Axis Bank Ltd. with its following subsidiaries:
Name
Country of Incorporation
Ownership Interest
Axis Sales Ltd. (formerly UBL Sales Ltd.)
Axis Private Equity Ltd.
(formerly UBL Asset Management Company Ltd.)
India
India
100.00%
100.00%
The audited financial statements of the subsidiaries have been drawn up to the same reporting date as that of the Bank, i.e. 31
March 2008.
The Bank has made investment in a corporate entity wherein it holds more than 25% of the equity shares of that company.
Such investment does not fall within the definition of a joint venture as per AS-27, Financial Reporting of Interest in Joint
Ventures, issued by the Institute of Chartered Accountants of India, and the said accounting standard is thus not applicable.
The Bank indirectly through its subsidiary holds more than 20% of the equity shares of certain companies. These investments
are acquired for a temporary period with an intention to transfer in future. Such investments do not fall within the definition
of an Associate as per AS-23, Accounting for Investments in Associates in Consolidated Financial Statements, issued by the
Institute of Chartered Accountants of India, and the said accounting standard is thus not applicable.
3
Use of estimates
The preparation of the financial statements, in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and
expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those
estimates. Management believes that the estimates used in the preparation of the financial statements are prudent and
reasonable. Any revisions to the accounting estimates are recognised prospectively in the current and future periods.
4
Significant accounting policies
4.1
Investments
Group
Classification
In accordance with the RBI guidelines, investments are classified at the date of purchase as:
(cid:143) Held for Trading ('HFT');
(cid:143) Available for Sale ('AFS'); and
(cid:143) Held to Maturity ('HTM')
107
Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT
securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date.
Investments that the Bank intends to hold till maturity are classified under HTM category.
Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM
securities. As permitted by RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only
of those securities which are eligible for complying with the Statutory Liquidity Ratio ('SLR') i.e. SLR securities and the total SLR
securities held in HTM category are not more than 25% of its demand and time liabilities as on the effective date. The effective
date means the last Friday of the second preceding fortnight for computation of the aforesaid limit. In computing the
investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances
are excluded.
All other investments are classified as AFS securities.
However, for disclosure in the balance sheet, investments in India are classified under six categories - Government securities,
Investment in Subsidiaries/Joint Ventures
Other approved securities, Shares, Debentures and Bonds,
and Others.
Investments made outside India are classified under three categories - Government Securities, Subsidiaries and/or Joint
Ventures abroad and Others.
Transfer of security between categories
Transfer of security between categories of investments is accounted for at the acquisition cost/book value/market value as on
the date of transfer, whichever is lower, and the depreciation, if any, on such transfer is recognised in the profit and loss
account.
Valuation
Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is
amortised on a straight-line basis over the remaining period to maturity.
Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of
periodical valuation of quoted investments included in the 'Available for Sale' and 'Held for Trading' categories is the market
price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI or prices
declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association
('FIMMDA'), periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss
account. The net appreciation if any, under each category is ignored, except to the extent of depreciation previously provided.
The book value of individual securities is not changed consequent to the periodic valuation of investments.
Treasury Bills and Commercial Paper, being discounted instruments, are valued at carrying cost.
Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund.
Market value of investments where current quotations are not available, is determined as per the norms prescribed by the RBI
as under:
• market value of unquoted Government securities is derived based on the Prices/Yield to Maturity ('YTM') rate for
Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of
India ('FIMMDA') jointly with the Primary Dealers Association of India ('PDAI') at periodic intervals;
•
in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding
50 basis points to the Base Yield Curve of Central Government Securities;
• market value of unquoted State Government securities is derived by applying the YTM method by marking it up by 25 basis
points above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at
periodic intervals;
in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market
price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for
credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings
along with residual maturity issued by FIMMDA is adopted for this purpose;
in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in
accordance with the RBI guidelines;
•
•
108
•
in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential
norms for provisioning as prescribed by RBI; and
• equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges,
are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company's
latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not
available, the shares are valued at Re 1 per company.
Investments in subsidiaries/joint ventures are categorised as 'Held to Maturity' in accordance with RBI guidelines.
Repurchase and reverse repurchase transactions
Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The
difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense
over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in
the profit and loss account.
4.2 Advances
Axis Bank Ltd.
Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines and are stated net of
specific provisions made towards Non Performing Advances. Further, NPAs are classified into sub-standard, doubtful and loss
assets based on the criteria stipulated by RBI. Provisions for NPAs (other than retail advances) are made for sub-standard and
doubtful assets at rates as prescribed by RBI. Loss assets and unsecured portion of doubtful assets are provided/written off as
per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management.
In the case of retail advances, provisions are made upon reaching specified stages of delinquency (90 days or more of
delinquency) under each type of loan, which satisfies the RBI prudential norms on provisioning.
For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the
present value of the interest sacrifice to be provided at the time of restructuring.
A general provision @ 0.25% to 2.00% is made on the various classes of standard assets as prescribed by RBI.
4.3 Country Risk
Axis Bank Ltd.
In addition to the provisions required to be held according to the asset classification status, provisions are held for individual
country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant,
low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded
scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal provision
requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total
funded assets, no provision is maintained on such country exposure.
4.4 Securitisation
Axis Bank Ltd.
The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (SPV). In
most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides
credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate
(PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing
etc.) accepted by the Bank, appropriate provision/disclosure is made at the time of sale in accordance with AS-29-'Provisions,
contingent liabilities and contingent assets'.
Gain on securitisation transaction is recognised over the period of the underlying securities issued by the SPV. Loss on
securitisation is immediately debited to profit and loss account.
109
4.5 Foreign currency transactions
Axis Bank Ltd.
In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates prevailing on
the date of the transaction. Foreign currency assets and liabilities are translated at the balance sheet date at rates notified by
Foreign Exchange Dealers Association of India ('FEDAI'). All profits/losses resulting from year-end revaluations are recognised
in the profit and loss account.
Financial statements of foreign branches classified as non-integral foreign operations are translated as follows:
• Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing rates
notified by FEDAI at the year-end.
•
Income and expenses are translated at the rates prevailing on the date of the transactions.
• All resulting exchange differences are accumulated in a separate 'Foreign Currency Translation Reserve' till the disposal of
the net investments.
Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge Foreign Currency Non-Resident
('FCNR') deposits which are not revalued) and spot exchange contracts are revalued at year end exchange rates notified by
FEDAI. The resulting gains or losses on revaluation are included in the profit and loss account in accordance with RBI/FEDAI
guidelines.
Premium/discount on currency swaps undertaken to hedge FCNR deposits is recognised as interest income/expense and is
amortised on a straight-line basis over the underlying swap period.
Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances, endorsements and other
obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.
Axis Private Equity Ltd.
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of transactions. Exchange
differences arising on foreign exchange transactions settled during the period are recognised in the profit and loss account of
the period.
4.6 Derivative transactions
Axis Bank Ltd.
Derivative transactions comprise of swaps and options, which are disclosed as contingent liabilities. The swaps/options are
segregated as trading or hedge transactions. Trading swaps/options are revalued at the balance sheet date with the resulting
unrealised gain or loss being recognised in the profit and loss account and correspondingly in other assets or other liabilities
respectively. Hedged swaps/options are accounted for on an accrual basis.
4.7 Revenue recognition
Axis Bank Ltd.
Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on
receipt.
Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee
income is recognised upfront on its becoming due.
Dividend is accounted on an accrual basis when the right to receive the dividend is established.
Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale.
Realised gains on investments under HTM category are recognised in the profit and loss account and subsequently
appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account.
Axis Sales Ltd.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue
can be reliably measured.
Commission income is recognised on the basis of accrual when all the services are performed.
110
4.8 Fixed assets and depreciation
Group
Fixed assets are carried at cost of acquisition less accumulated depreciation less impairment, if any. Cost includes freight,
duties, taxes and incidental expenses related to the acquisition and installation of the asset.
Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid
to acquire fixed assets.
Depreciation (including on assets given on operating lease) is provided on the straight-line method from the date of addition.
The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the
management's estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life
on a subsequent review is shorter, then depreciation is provided at a higher rate based on management's estimate of
the useful life/remaining useful life. Pursuant to this policy, depreciation has been provided using the following estimated
useful lives:
Asset
Owned premises
Assets given on operating lease
Computer hardware
Application software
Vehicles
EPABX, telephone instruments
Mobile phone
Locker cabinets/cash safe/strong room door
Assets at staff residence
All other fixed assets
Estimated useful life
20 years
20 years
3 years
5 years
4 years
8 years
2 years
16 years
5 years
10 years
All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation.
Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date
of sale.
The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment,
depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
4.9 Lease transactions
Axis Bank Ltd.
Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the profit and loss
account on accrual basis.
Group
Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account on a straight-
line basis over the lease term.
4.10 Retirement and other employee benefits
Group
Provident Fund
Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the
profit and loss account of the year when the contributions to the fund are due. There are no other obligations other than the
contribution payable to the trust.
111
Axis Bank Ltd.
Gratuity
The Bank contributes towards gratuity fund (defined benefit retirement plan) administered jointly by the Life Insurance
Corporation of India ('LIC') and Metlife Insurance Company Limited ('Metlife') for eligible employees. Under this scheme, the
settlement obligations remain with the Bank, although LIC/Metlife administer the scheme and determines the contribution
premium required to be paid by the Bank. The plan provides a lump sum payment to vested employees at retirement or
termination of employment based on the respective employee's salary and the years of employment with the Bank. Liability
with regard to gratuity fund is accrued based on actuarial valuation conducted by an independent actuary using the projected
unit credit method as at 31 March each year.
Leave Encashment
Short term compensated absences are provided for based on estimates. The Bank provides leave encashment benefit (long
term), which is a defined benefit scheme based on actuarial valuation as at the balance sheet date conducted by an
independent actuary. The actuarial valuation is carried out as per the projected unit credit method.
Superannuation
Employees of the Bank are entitled to receive retirement benefits under the Bank's Superannuation scheme. Superannuation
is a defined contribution plan under which the Bank contributes annually a specified sum of 10% of the employee's eligible
annual basic salary to LIC, which undertakes to pay the lumpsum and annuity benefit payments pursuant to the scheme.
Superannuation contributions are recognised in the profit and loss account in the period in which they accrue.
Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.
Axis Sales Ltd.
Gratuity
Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation using projected unit
credit method made at the end of each financial year.
Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.
During the year, the Company has adopted Accounting Standard 15 (Revised) on 'Employee Benefits' which is mandatory from
accounting periods commencing on or after December 7, 2006. Accordingly the company has provided for gratuity based on
actuarial valuation done as per projected unit credit method. Since the Company has adequately provided the liability in
the previous year there is no adjustment made to the general reserve as per the transitional provision of the revised
accounting standard.
Leave Encashment
Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based
on actuarial valuation. The actuarial valuation is done, at the end of each financial year, using projected unit credit method.
Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.
Axis Private Equity Ltd.
Gratuity
The payment of Gratuity Act, 1972 is not yet applicable to the Company.
4.11 Credit Card reward points
Axis Bank Ltd.
The Bank estimates the probable redemption of credit card reward points using an actuarial method at balance sheet date by
employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report
as furnished by the said independent actuary.
112
4.12 Taxation
Group
Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. Current year taxes and
fringe benefit tax are determined in accordance with the Income-tax Act, 1961. Deferred tax adjustments comprise changes in
the deferred tax assets or liabilities during the period.
Deferred tax assets and liabilities are recognised on a prudent basis for the future tax consequences of timing differences
arising between the carrying values of assets and liabilities and their respective tax basis, and carry forward losses. Deferred tax
assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the
balance sheet date. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account.
Deferred tax assets are recognised and reassessed at each reporting date, based upon management's judgement as to whether
realisation is considered as reasonably certain. Deferred tax assets are recognised on carry forward of unabsorbed
depreciation and tax losses only if there is virtual certainty that such deferred tax asset can be realised against future profits.
4.13 Share Issue Expenses
Axis Bank Ltd.
Share issue expenses are adjusted from share premium account.
4.14 Earnings per share
Group
The Group reports basic and diluted earnings per share in accordance with AS 20 -'Earnings per Share'. Basic earnings per
share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the
year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares
were exercised or converted during the year. Diluted earnings per share is computed using the weighted average number of
equity shares and dilutive potential equity shares outstanding at year end.
4.15 Cash and cash equivalents
Group
Cash and cash equivalents include cash on hand and in ATM, balances with Reserve Bank of India, balances with other banks
and money at call and short notice.
4.16 Employee stock option scheme
Axis Bank Ltd.
The 2001 Employee Stock Option Scheme ('the Scheme') provides for grant of stock options on equity shares of the Bank to
employees and Directors of the Bank. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI)
(Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value
method to account for its stock based employee compensation plans as per the Guidance Note on 'Accounting for Employee
Share-based Payments' issued by the ICAI. Options are granted at an exercise price, which is equal to/less than the fair market
price of the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the grant
date is recognised as a deferred compensation cost and amortised on a straight-line basis over the vesting period of such
options.
The fair market price is the latest available closing price, prior to the date of the Board of Directors meeting in which options
are granted / shares are issued, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more
than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.
4.17 Provisions, contingent liabilities and contingent assets
Group
A provision is recognised when the Group has a present obligation as a result of past event where it is probable that an outflow
of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not
discounted to its present value and are determined based on best estimate required to settle the obligation at the balance
113
sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
A disclosure of contingent liability is made when there is:
• a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non occurrence of
one or more uncertain future events not within the control of the Group; or
• a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will
be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote,
no provision or disclosure is made.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it
is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in
which the change occurs.
5
Notes to Accounts
5.1.1 Share Capital
During the year ended 31 March 2008, the Bank raised additional equity capital in the form of 1,41,32,466 Global Depository
Receipts (GDRs) (each GDR representing 1 underlying equity share of Rs. 10/- each), at a price of US$ 15.43 per GDR. The Bank
also undertook a Qualified Institutional Placement (QIP) of 2,82,64,934 shares and a preferential allotment of 3,06,95,129
shares at a price of Rs. 620/- per share. As a consequence, the paid-up share capital of the Bank has increased by Rs. 73.09 crores
and the reserves of the Bank have increased by Rs. 4,414.01 crores after charging of issue related expenses.
The funds mobilised from the equity raising (through GDR, QIP and Preferential issue) were utilized for enhancing the capital
adequacy ratio and for general corporate purposes.
5.1.2 'Provisions and contingencies' recognised in the profit and loss account include:
For the year ended
Provision for income tax
- Current tax for the year
- Deferred tax for the year
Provision for fringe benefit tax
Provision for wealth tax
Provision for non performing advances & investments
(including bad debts written off and write backs)
Provision towards standard assets
General provision for retail loans
Provision for depreciation in value of investments
Provision for securitised assets
Contingent provision against derivatives
Provision for country risk
Total
31 March 2008
31 March 2007
(Rs. in crores)
725.59
(159.25)
9.33
575.67
0.22
344.01
153.46
-
6.54
(0.11)
71.97
3.55
412.60
(81.49)
6.05
337.16
0.25
73.73
122.35
1.77
66.97
2.54
-
-
1,155.31
604.77
114
5.1.3 The Bank has not raised any subordinated debt during the year ended 31 March 2008.
During the year ended 31 March 2008, the Bank redeemed subordinated debt of Rs. 245.50 crores, the details of which are set
out below:
Date of maturity
28 April 2007
4 June 2007
27 June 2007
Period
85 months
66 months
63 months
Coupon
11.75%
9.80%
9.30%
Amount
Rs. 100.00 crores
Rs. 112.00 crores
Rs. 33.50 crores
During the year ended 31 March 2007, the Bank raised subordinated debt of Rs. 389.30 crores, the details of which are set
out below:
Date of allotment
28 June 2006
30 March 2007
Period
87 months
120 months
120 months
Coupon
8.95%
9.10%
10.10%
Amount
Rs. 33.50 crores
Rs. 104.90 crores
Rs. 250.90 crores
During the year ended 31 March 2007, the Bank redeemed subordinated debt of Rs. 50 crores, the details of which are set out
below:
Date of maturity
28 June 2006
Period
63 months
Coupon
11.10%
Amount
Rs. 50.00 crores
5.1.4 During the year ended 31 March 2008, the Bank raised hybrid capital in the form of Upper Tier II bonds qualifying as Tier II
capital, the details of which are set out below:
Type of Capital
Upper Tier II
Date of allotment
Period
Coupon
Amount
28 June 2007
180 months
7.125%
(USD 60 million)
Rs. 240.72 crores
During the year ended 31 March 2007, the Bank raised hybrid capital in the form of Perpetual Debt of Rs. 413.96 crores
qualifying as Tier I capital and Rs. 959.55 crores qualifying as Tier II capital, the details of which are set out below:
Type of Capital
Upper Tier II
Perpetual Debt
Perpetual Debt
Upper Tier II
Upper Tier II
Date of allotment
Period
Coupon
Amount
11 August 2006
180 months
7.25%
30 September 2006
Perpetual
15 November 2006
Perpetual
24 November 2006
180 months
6 February 2007
180 months
10.05%
7.167%
9.35%
9.50%
(USD 150 million)
Rs. 652.05 crores
Rs. 214.00 crores
(USD 46 million)
Rs. 199.96 crores
Rs. 200.00 crores
Rs. 107.50 crores
5.1.5 Earnings Per Share ('EPS')
The details of EPS computation is set out below:
As at
31 March 2008
31 March 2007
Basic and Diluted earnings for the year (Net profit after tax) (Rs. in crores)
Basic weighted average no. of shares (in crores)
Add: Equity shares for no consideration arising
on grant of stock options under ESOP
Diluted weighted average no. of shares (in crores)
Basic EPS (Rs.)
Diluted EPS (Rs.)
Nominal value of shares (Rs.)
1,059.14
33.31
0.90
34.21
31.80
30.96
10.00
Dilution of equity is on account of 8,986,371 stock options (previous year 8,653,638).
654.25
28.05
0.86
28.91
23.33
22.63
10.00
115
5.1.6 Dividend paid on shares issued on exercise of stock options
The Bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the
exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2008, if
approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current year.
Appropriation to proposed dividend during the year ended 31 March 2008 includes dividend of Rs. 0.54 crores paid pursuant to
exercise of 1,018,992 employee stock options after the previous year end and record date for declaration of dividend for the
year ended 31 March 2007.
5.1.7 Employee Stock Options Scheme ('the Scheme')
In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the Bank approved an
Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue upto 13,000,000 equity shares to eligible
employees. Eligible employees are granted an option to purchase shares subject to vesting conditions. The options vest in a
graded manner over 3 years. The options can be exercised within 3 years from the date of the vesting. Further, in June 2004 and
June 2006, pursuant to the approval of the shareholders at Annual General Meeting, the Bank approved an ESOP scheme for
additional 10,000,000 and 4,800,000 options respectively.
19,887,005 options have been granted under the Scheme till the previous year ended 31 March 2007.
On 17 April 2007, the Bank granted 6,729,340 stock options (each option representing entitlement to one equity share of the
Bank) to its employees and the Chairman & CEO. These options can be exercised at a price of Rs. 468.90 per option.
The Bank has not recorded any compensation cost on options granted during the year ended 31 March 2001, year ended 31
March 2006, year ended 31 March 2007 and the current year ended 31 March 2008 as the exercise price was more than or equal
to the quoted market price of underlying equity shares on the grant date.
The Bank recorded a compensation cost of Rs 1.39 crores on options granted during the year ended 31 March 2002, Rs. 1.99
crores on options granted during the year ended 31 March 2004, Rs. 24.21 crores on options granted during the year ended 31
March 2005, based on the excess of the quoted market price of the underlying equity shares as of the date of the grant over the
exercise price. The compensation cost is amortised over the vesting period.
Compensation expense for all the grants under the Scheme for the year ended 31 March 2008 is Rs. 0.20 crores.
Stock option activity under the Scheme for the year ended 31 March 2008 is set out below:
Options
outstanding
Range of Weighted Weighted average
remaining
exercise
contractual life
prices (Rs.)
(Years)
average
exercise
price (Rs.)
Outstanding at the beginning of the year
9,872,910
29.68 to 319.00
Granted during the year
Forfeited during the year
Expired during the year
6,729,340
468.90
(820,249)
39.77 to 468.90
(1,380)
39.77
Exercised during the year
(2,986,353)
29.68 to 468.90
Outstanding at the end of the year
12,794,268
29.68 to 468.90
Exercisable at the end of the year
2,082,034
29.68 to 468.90
250.14
468.90
398.10
39.77
199.51
367.55
250.56
Stock option activity under the Scheme for the year ended 31 March 2007 is set out below:
3.19
-
-
-
-
3.57
2.12
Options
outstanding
Range of Weighted Weighted average
remaining
exercise
contractual life
prices (Rs.)
(Years)
average
exercise
price (Rs.)
Outstanding at the beginning of the year
8,838,245
29.68 to 232.10
Granted during the year
Forfeited during the year
Expired during the year
4,695,860
319.00
(720,744)
29.68 to 319.00
(391)
29.68 to 319.00
171.39
319.00
254.96
29.70
4.00
-
-
-
116
Exercised during the year
(2,940,060)
29.68 to 319.00
Outstanding at the end of the year
9,872,910
29.68 to 319.00
Exercisable at the end of the year
979,768
29.68 to 319.00
122.25
250.14
200.43
-
3.19
3.90
Fair Value Methodology
Applying the fair value based method in Guidance Note on 'Accounting for Employee Share-based Payments' the
impact on reported net profit and EPS would be follows:
31 March 2008
31 March 2007
Net Profit (as reported) (Rs. in crores)
Add: Stock based employee compensation expense included
in net income (Rs. in crores)
Less: Stock based employee compensation expense determined
under fair value based method (proforma) (Rs. in crores)
Net Profit (Proforma) (Rs. in crores)
Earnings per share: Basic (in Rs.)
As reported
Proforma
Earnings per share: Diluted (in Rs.)
As reported
Proforma
1,059.14
0.20
(71.87)
987.47
31.80
29.64
30.96
28.86
654.25
2.71
(45.92)
611.04
23.33
21.78
22.63
21.14
The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with the
following assumptions:
Dividend yield
Expected life
Risk free interest rate
Volatility
5.1.8 Segmental reporting
31 March 2008
31 March 2007
1.37%
2-4 years
8.21% to 8.33%
44.20% to 51.21%
1.69%
2-4 years
6.93% to 7.17%
46.91% to 52.03%
st
Effective 1 April 2007, the Group has adopted RBI's revised guidelines on Segment Reporting issued on 18 April 2007
vide RBI Circular No. DBOD.No. BP.BC. 81 / 21.04.018/ 2006-07 in terms of which the business of the Group is divided into
four segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Business. The operations of
Axis Sales Ltd. and Axis Private Equity Ltd. have been classified under the 'Retail Banking' and 'Treasury' segment
respectively. The principal activities of these segments are as under:
th
Segment
Treasury
Corporate /
Wholesale Banking
Retail Banking
Principal Activities
Treasury operations include investments in sovereign and corporate debt, equity and
mutual funds, trading operations, derivative trading and foreign exchange operations on
the proprietary account and for customers and central funding
Includes corporate relationships not included under Retail Banking, corporate advisory
services, placements and syndication, management of public issue, project appraisals,
capital market related services and cash management services
Constitutes lending to individuals/small businesses subject to the orientation, product
and granularity criterion and also includes low value individual exposures not exceeding
the threshold limit of Rs. 5 crores as defined by RBI. Retail Banking activities also include
liability products, card services, internet banking, ATM services, depository, financial
advisory services and NRI services
Other Banking Business
All banking transactions not covered under any of the above three segments
117
Revenues of the treasury services segment primarily consist of fees and gains or losses from trading operations and interest
income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed
from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated
expenses.
Revenues from the corporate/wholesale banking lending activity consist of interest and fees earned on loans given to
customers falling under this segment, interest earned on cash float and fees arising from transaction services and fees from
merchant banking activities such as syndication and debenture trusteeship. Revenues from the retail lending activity are
derived from interest earned on loans classified under this segment, fees for banking and advisory services, ATM interchange
fees and interest earned from other segments for surplus funds placed with those segments. Expenses of the
Corporate/Wholesale Banking and Retail Banking activity primarily comprise interest expense on deposits, infrastructure and
premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and
allocated expenses.
Segment revenue includes earnings from external customers plus earnings from funds transferred to the other segments.
Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that
segment. Segment-wise income and expenses include certain allocations. Inter segment revenue represents the transfer price
paid/received by the Central Funding Unit (CFU). For this purpose, the funds transfer pricing mechanism presently followed
by the Bank, which is based on cost of funds and spreads, has been used. Operating expenses are allocated to the segments
based on an activity-based costing methodology. All activities in the Group are segregated segment-wise and allocated to the
respective segment.
Geographical segment disclosure is not required to be made since the operations from foreign branches are less than the
prescribed norms.
Segmental results are set out below :
31 March 2008
(Rs. in crores)
Treasury
Corporate/
Wholesale
Banking
Retail
Banking
Other
Banking
Business
Total
Segment Revenue
Gross interest income (external customers)
Other income
2,256.10
460.88
3,162.93
661.64
1,584.09
684.88
1.96
(11.48)
7,005.08
1,795.92
Total income as per profit and
loss account
2,716.98
3,824.57
2,268.97
(9.52)
8,801.00
Add/(less) inter segment interest income
9,774.38
953.44
1,991.51
-
12,719.33
Total segment income
12,491.36
4,778.01
4,260.48
(9.52) 21,520.33
Less: Interest expense (external customers)
Less: Inter segment interest expenses
Less: Operating expenses
3,248.34
8,664.44
139.50
-
2,704.98
640.03
1,171.50
1,349.91
1,374.74
-
-
12.44
4,419.84
12,719.33
2,166.71
Operating profit
439.08
1,433.00
364.33
(21.96)
2,214.45
Less: Provision for non performing assets/Others
96.11
242.98
240.33
0.22
579.64
Segment result
Less: Provision for Tax
Net Profit
Segment assets
Segment liabilities
Net assets
342.97
1,190.02
124.00
(22.18)
1,634.81
-
-
-
-
-
-
-
-
575.67
1,059.14
47,099.27
45,682.81
40,949.83
22,604.53
19,784.63
31,867.91
1,732.64 109,566.37
659.28 100,814.53
1,416.46
18,345.30 (12,083.28)
1,073.36
8,751.84
Fixed assets additions during the year
Depreciation and impairment provision
on fixed assets during the year
-
-
-
-
-
-
338.49
338.49
159.30
159.30
118
Treasury
31 March 2007
Other Banking
Operations
(Rs. in crores)
Unallocated
Total
Segment Revenue
Gross interest income (external customers)
Other income
1,761.32
239.50
Total income as per profit and loss account
2,000.82
Add/(less) inter segment interest income
Total segment income
Less: Interest expense (external customers)
Less: Inter segment interest expenses
Less: Operating expenses
Operating profit
Less: Provision for non performing assets/Others
Segment result
Less: Provision for Tax
Net Profit
Segment assets
Segment liabilities
Net assets
Fixed assets additions during the year
Depreciation on fixed assets during the year
6,775.81
8,776.63
2,314.57
6,085.65
77.49
298.92
72.46
226.46
-
-
34,329.18
37,073.98
(2,744.80)
-
-
2,700.32
772.84
3,473.16
1,841.19
5,314.35
678.60
2,531.35
1,141.87
962.53
195.15
767.38
-
-
37,667.09
32,404.60
5,262.49
-
-
-
(2.43)
4,461.64
1,009.91
(2.43)
5,471.55
-
8,617.00
(2.43)
14,088.55
-
-
-
2,993.17
8,617.00
1,219.36
(2.43)
1,259.02
-
(2.43)
-
-
1,259.71
388.95
267.61
991.41
337.16
654.25
73,255.98
69,867.53
870.76
3,388.45
216.53
112.01
216.53
112.01
In terms of RBI guidelines on Segment Reporting, disclosure of previous year figures in the first year of reporting under the
revised format is not necessary. Segmental results relating to the previous year ended 31 March 2007 have therefore been
disclosed based on the reportable segments then in force and are hence not comparable with results for the current year.
5.1.9 Related party disclosure
The related parties of the Bank are broadly classified as:
a) Promoter
The Bank has identified the following entities as its Promoters.
• Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1)
•
Life Insurance Corporation of India (LIC)
• General Insurance Corporation and four PSUs - New India Assurance Co. Ltd., National Insurance Co. Ltd., United India
Insurance Co. Ltd. and The Oriental Insurance Co. Ltd.
b) Key Management Personnel
• Dr. P. J. Nayak (Chairman & CEO)
Based on RBI guidelines, details of transactions with Key Management Personnel are not disclosed since there is only
one entity / party in this category.
c) Joint Venture
• Bussan Auto Finance India Limited
Based on RBI guidelines, details of transactions with Joint Venture Companies are not disclosed since there is only one
entity / party in this category.
119
The details of transactions of the Bank with its related parties during the year ended 31 March 2008 are given below.
Items/Related Party
Dividend Paid
Interest Paid
Interest Received
Investment of Related Parties in the Bank
Purchase / Sale of Investments
Receiving of Services
Rendering of Services
(Rs. in crores)
Promoter
54.63
106.10
0.05
1,903.10
131.18
13.13
0.36
The balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below.
Items/Related Party
Deposits with the Bank
Placement of Deposits
Advances
Investment of Related Parties in the Bank
Guarantees
Investment in Subordinated Debt/Hybrid Capital of the Bank
(Rs. in crores)
Promoter
2,877.68
0.08
0.01
152.07
39.00
260.00
The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below.
Items/Related Party
Deposits with the Bank
Placement of Deposits
Advances
Investment of Related Parties in the Bank
Repo Borrowing
Guarantees
Investment in Subordinated Debt/Hybrid Capital of the Bank
(Rs. in crores)
Promoter
2,857.83
1.13
432.98
389.00
57.52
39.00
154.32
The details of transactions of the Bank with its related parties during the year ended 31 March 2007 are given below.
(Rs. in crores)
Items/Related Party
Promoter
Key
Management
Personnel
Related Party to
Key Management
Personnel
Dividend Paid
Interest Paid
Interest Received
Investments
Management Contracts
Receiving of Services
Rendering of Services
42.63
31.24
1.54
158.02
-
18.17
0.26
0.05
0.10
0.01
-
3.05
-
-
-
0.03
-
-
-
-
-
Total
42.68
31.37
1.55
158.02
3.05
18.17
0.26
120
The balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below.
(Rs. in crores)
Items/Related Party
Promoter
Key
Management
Personnel
Related Party to
Key Management
Personnel
Deposits with the Bank
Placement of Deposits
Advances
Investment of Related Parties in the Bank
Guarantees
Investment in Subordinated Debt of the Bank
760.77
0.06
0.02
121.39
39.00
334.00
2.25
-
0.21
0.13
-
-
0.58
-
-
-
-
-
Total
763.60
0.06
0.23
121.52
39.00
334.00
The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below.
(Rs. in crores)
Items/Related Party
Promoter
Key
Management
Personnel
Related Party to
Key Management
Personnel
Deposits with the Bank
Placement of Deposits
Advances
Investment of Related Parties in the Bank
Repo Borrowing
Guarantees
Investment in Subordinated Debt of the Bank
780.99
0.06
399.89
121.80
288.50
39.00
431.00
2.41
-
0.31
0.14
-
-
-
0.59
-
-
-
-
-
-
Total
783.99
0.06
400.20
121.94
288.50
39.00
431.00
5.1.10 Leases
Disclosure in respect of assets given on operating lease
Operating lease comprises leasing of power generation equipments.
Gross carrying amount at the beginning of the year
Accumulated depreciation as at the end of the year
Accumulated impairment losses as at the end of the year
Depreciation for the year
Impairment losses for the year
Minimum lease payments receivable at the end of the year
Future lease rentals receivable as at the end of the year:
- Not later than one year
- Later than one year and not later than five years
- Later than five years
There are no provisions relating to contingent rent.
31 March 2008
31 March 2007
(Rs. in crores)
76.50
27.60
12.44
3.42
12.44
-
3.47
11.08
2.07
76.50
24.18
-
3.42
-
1.04
3.47
12.48
4.15
The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements.
Disclosure in respect of assets taken on operating lease
Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing machines and
IT equipment.
121
Future lease rentals payable as at the end of the year:
- Not later than one year
- Later than one year and not later than five years
- Later than five years
Total of minimum lease payments recognised in the profit and
loss account for the year
31 March 2008
31 March 2007
(Rs. in crores)
219.67
638.97
381.01
196.12
124.14
340.81
116.11
71.19
There are no provisions relating to contingent rent.
The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements.
There are no undue restrictions or onerous clauses in the agreements.
5.1.11 The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under:
As at
31 March 2008
31 March 2007
(Rs. in crores)
Deferred tax assets on account of provisions for doubtful debts
Deferred tax assets on account of amortisation of HTM investments
Deferred tax assets on account of provision for retirement benefits
Deferred tax assets on account of contingent provision against derivatives
Deferred tax liability on account of depreciation and
impairment on fixed assets
Other deferred tax assets
Net deferred tax asset/(liability)
205.57
101.38
16.70
24.46
(47.82)
18.76
319.05
121.28
70.96
4.80
-
(52.50)
15.26
159.80
5.1.12 Employee Benefits
Group
Provident Fund
The contribution to the employee's provident fund of the Group amounted to Rs. 22.20 crores for the year ended 31 March
2008 (previous year Rs. 14.01 crores).
Axis Bank Ltd.
Superannuation
The Bank contributed Rs. 7.47 crores to the employee's superannuation plan for the year ended 31 March 2008 (previous
year Rs. 9.14 crores).
Leave Encashment
The Bank charged an amount of Rs. 28.11 crores as liability for leave encashment for the year ended 31 March 2008
(previous year Rs. 8.28 crores).
Gratuity
Axis Bank Ltd.
The following tables summarize the components of net benefit expenses recognised in the profit and loss account and
funded status and amounts recognised in the balance sheet for the Gratuity benefit plan.
Profit and Loss Account
Net employee benefit expenses (reconginsed in employee cost)
Current Service Cost
Interest on Defined Benefit Obligation
Expected Return on Plan Assets
Net Actuarial Losses/ (Gains) recognised in the year
Past Service Cost
Losses/(Gains) on "Curtailments & Settlements"
Total included in "Employee Benefit Expense"
Actual Return on Plan Assets
122
31 March 2008
3.39
1.15
(0.87)
5.54
-
-
9.21
0.71
(Rs. in crores)
31 March 2007
2.23
0.71
(0.62)
0.43
-
-
2.75
0.75
Balance Sheet
Details of provision for gratuity
Present Value of Funded Obligations
Fair Value of Plan Assets
Present Value of Unfunded Obligations
Unrecognised Past Service Cost
Net Liability
Amounts in Balance Sheet
Liabilities
Assets
Net Liability
Changes in the present value of the defined benefit obligation are as follows:
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation
Current Service Cost
Interest Cost
Actuarial Losses / (Gains)
Liabilities Extinguished on Curtailment
Liabilities Extinguished on Settlements
Liabilities Assumed on Acquisition
Exchange Difference on Foreign Plans
Benefits Paid
Closing Defined Benefit Obligation
Changes in the fair value of plan assets are as follows:
Change in the Fair Value of Assets
Opening Fair Value of Plan Assets
Expected Return on Plan Assets
Actuarial Gains / (Losses)
Assets Distributed on Settlements
Contributions by Employer
Assets Acquired due to Acquisition
Exchange Difference on Foreign Plans
Benefits Paid
Closing Fair Value of Plan Assets
31 March 2008
31 March 2007
(Rs. in crores)
23.35
(17.74)
-
-
5.61
5.61
-
5.61
14.32
(11.89)
-
-
2.43
2.43
-
2.43
31 March 2008
31 March 2007
(Rs. in crores)
14.32
3.39
1.15
5.37
-
-
-
-
(0.88)
23.35
11.55
2.23
0.71
0.61
-
-
-
-
(0.78)
14.32
31 March 2008
31 March 2007
(Rs. in crores)
11.89
0.87
(0.17)
-
6.03
-
-
(0.88)
17.74
7.37
0.62
0.18
-
4.50
-
-
(0.78)
11.89
123
The major categories of plan assets as a percentage of
fair value of total plan assets - Insurer Managed Funds
31 March 2008
31 March 2007
100.00%
100.00%
31 March 2008
31 March 2007
Principal actuarial assumptions at the balance sheet date:
Discount Rate
Expected rate of Return on Plan Assets
Salary Escalation Rate
Employee Turnover
- 21 to 44 (age in years)
- 44 to 64 (age in years)
7.55% p.a.
7.50% p.a.
6.00% p.a.
10.00%
1.00%
8.50 % p.a.
7.50 % p.a.
6.00 % p.a.
10.00%
1.00%
The estimates of future salary increases considered take into account the inflation, seniority, promotion and other
relevant factors.
The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the
Fund during the estimated term of the obligations.
As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is based
on various internal/external factors, a best estimate of the contribution is not determinable.
Axis Sales Ltd.
Gratuity
Present Value of Funded Obligations
Fair Value of Plan Assets
Present Value of Unfunded Obligations
Unrecognised Past Service Cost
Net Liability
Amounts in Balance Sheet
Liabilities
Assets
Net Liability
The amount recognised in the statement of profit and loss are as follows:
Current Service Cost
Interest on Defined Benefit Obligation
Expected Return on Plan Assets
Net Actuarial Losses/ (Gains) Recognised in Year
Past Service Cost
Losses/(Gains) on “Curtailments & Settlements”
Total included in “Employee Benefit Expense”
Actual Return on Plan Assets
124
(Rs. in crores)
31 March 2008
0.07
(0.04)
-
-
0.03
0.03
-
0.03
(Rs. in crores)
31 March 2008
0.04
-
-
0.02
-
-
0.06
-
Changes in the present value of the defined benefit obligation representing reconciliation of opening and closing
balances thereof are as follows:
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation
Current Service Cost
Interest Cost
Actuarial Losses/(Gains)
Liabilities Extinguished on Curtailment
Liabilities Extinguished on Settlements
Liabilities Assumed on Acquisition
Exchange Difference on Foreign Plans
Benefits Paid
Closing Defined Benefit Obligation
(Rs. in crores)
31 March 2008
0.01
0.04
-
0.02
-
-
-
-
-
0.07
Changes in the fair value of plan assets representing reconciliation of the opening and closing balances thereof are as follows:
Change in the Fair Value of Assets
Opening Fair Value of Plan Assets
Expected Return on Plan Assets
Actuarial Gains / (Losses)
Assets Distributed on Settlements
Contributions by Employer
Assets Acquired due to Acquisition
Exchange Difference on Foreign Plans
Benefits Paid
Closing Fair Value of Plan Assets
The major categories of plan assets as a percentage of
fair value of total plan assets - Insurer Managed Funds
Principal actuarial assumptions at the balance sheet date:
Discount Rate
Expected rate of Return on Plan Assets
Salary Escalation Rate
Employee Turnover
(Rs. in crores)
31 March 2008
0.04
-
-
-
-
-
-
-
0.04
31 March 2008
100.00%
31 March 2008
7.95 % p.a.
7.50 % p.a.
6.00 % p.a.
30.00 % p.a.
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and
other relevant factors, such as supply and demand in the employment market.
The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to
the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets
due to the improved stock market scenario.
The Company expects to contribute Rs. 300,000 as gratuity in the year 2008-09.
125
5.1.13 Provisions and contingencies
a. Movement in provision for frauds included under other liabilities is set out below:
Opening balance at the beginning of the year
Additions during the year
Reductions on account of payments during the year
Reductions on account of reversals during the year
Closing balance at the end of the year
31 March 2008
31 March 2007
(Rs. in crores)
1.73
3.47
(0.25)
-
4.95
1.00
0.80
-
(0.07)
1.73
b. Movement in provision for credit enhancements on securitised assets is set out below:
Opening balance at the beginning of the year
Additions during the year
Reductions during the year
Closing balance at the end of the year
c. Movement in provision for credit card reward points is set out below:
Opening provision at the beginning of the year
Provision made during the year
Reductions during the year
Closing provision at the end of the year
5.1.14 Description of contingent liabilities:
a) Claims against the Group not acknowledged as debts
31 March 2008
31 March 2007
(Rs. in crores)
3.21
-
(0.11)
3.10
0.67
2.54
-
3.21
31 March 2008
31 March 2007
(Rs. in crores)
0.23
5.89
(0.18)
5.94
-
0.23
-
0.23
These represent claims filed against the Group in the normal course of business relating to various legal cases currently in
progress. These also include demands raised by income tax and other statutory authorities and disputed by the Group.
b) Liability on account of forward exchange and derivative contracts
The Bank enters into foreign exchange contracts, currency options/swaps and forward rate agreements on its own account
and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the
contracted rate. Currency swaps are commitments to exchange cash flows by way of interest/principal in two currencies,
based on ruling spot rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows.
Forward Rate Agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional
amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the
other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified
future time.
c) Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing.
Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to
fulfill its financial or performance obligations.
d) Acceptances, endorsements and other obligations
These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank's customers
that are accepted or endorsed by the Bank.
126
e) Other items for which the Group is contingently liable
Other items represent outstanding amount of bills rediscounted by the Bank, estimated amount of contracts remaining to
be executed on capital account and commitments towards underwriting and investment in equity through bids under
Initial Public Offering (IPO) of corporates as at the year end.
5.1.15 Comparative Figures
Previous year figures have been regrouped and reclassified, where necessary to conform to current years presentation.
P. J. Oza
Company Secretary
N. C. Singhal
Director
R. H. Patil
Director
Date: 21 April 2008
Place: Mumbai
For Axis Bank Ltd.
P. J. Nayak
Chairman & CEO
R. B. L. Vaish
Director
127
DISCLOSURES UNDER THE NEW CAPITAL ADEQUACY FRAMEWORK (BASEL II GUIDELINES)
I. SCOPE OF APPLICATION
Axis Bank Limited ('the Bank') is a commercial bank, which was incorporated on 3 December 1993. The Bank is the controlling entity
for all group entities that include its two wholly-owned subsidiaries namely Axis Sales Limited and Axis Private Equity Limited.
rd
The consolidated financial statements comprise the financial statements of Axis Bank Limited and two subsidiaries which
together constitute the 'Group'. The Bank consolidates its subsidiaries in accordance with Accounting Standard 21 (AS 21)
'Consolidated Financial Statements' issued by the Institute of Chartered Accountants of India on a line-by-line basis by adding
together the like items of assets, liabilities, income and expenditure. While computing the consolidated Bank's Capital to Risk-
weighted Assets Ratio (CRAR), the Bank's investment in the equity capital of the wholly-owned subsidiaries is deducted, 50%
from Tier 1 Capital and 50% from Tier 2 Capital. The subsidiaries of the Bank are not required to maintain any regulatory capital.
The Bank has also entered into a joint venture agreement and holds an equity investment to the extent of 26% in Bussan Auto
Finance India Private Limited, a non-banking financial company. The financials of the joint venture company are not
consolidated with the balance sheet of the Bank. The investment in the joint venture is not deducted from the capital funds of
the Bank but is assigned risk-weights as an investment.
The Bank does not have any interest in any insurance entity.
II. CAPITAL STRUCTURE
Equity Capital
The Bank has authorised share capital of Rs. 500.00 crores comprising 50,00,00,000 equity shares of Rs. 10/- each. As on 31 March
2008 the Bank has issued, subscribed and paid-up equity capital of Rs. 357.71 crores, constituting 35,77,09,669 number of shares of
Rs. 10/- each. The Bank's shares are listed on the National Stock Exchange, the Bombay Stock Exchange, the Ahmedabad Stock
Exchange and the Over-The-Counter Exchange of India. The GDRs issued by the Bank are listed on the London Stock Exchange (LSE).
st
During the year the Bank has raised capital in the form of equity shares through simultaneous offerings in a mix of an overseas
offering of follow-on Global Depository Receipts (GDRs), offering by way of Qualified Institutional Placement (QIP) and a
preferential allotment of equity shares to the promoters of the Bank. The GDR was priced at nominal discount to the closing
price of the Bank's listed GDR on the LSE. Each GDR represents one equity share of the Bank. The QIP and preferential allotment
offerings were priced equivalent to the price offered under the GDR offering.
During the year the bank has also allotted equity shares to employees under its Employee Stock Option Plan.
The provisions of the Companies Act, 1956 and other applicable laws and regulations govern the rights and obligations of the
equity share capital of the Bank.
Debt Capital Instruments
The Bank has raised capital through Innovative Perpetual Debt Instrument (IPDI) eligible as Tier 1 Capital and Tier 2 Capital in the
form of Upper Tier 2 and subordinated bonds (unsecured redeemable non-convertible debentures), details of which are given
below.
Perpetual Debt Instrument
The Bank has raised Perpetual Debt Instruments, the aggregate value of which as on 31 March 2008 was Rs. 398.55 crores as stated
below.
st
Date of Allotment
Rate of Interest
30 September 2006
15 November 2006
10.05%
7.167%
Period
Perpetual
Perpetual
Total Perpetual Debt
*Converted to INR @ Rs. 40.12 to a US Dollar (prevailing exchange rate as on 31.3.2008)
Amount
Rs. 214.00 crores
USD 46 million*
(Rs. 184.55 crores)
Rs. 398.55 crores
128
Upper Tier 2 Capital
The Bank has also raised Upper Tier 2 capital, the aggregate value of which as on 31 March 2008 was Rs. 1,148.38 crores as per the
table below.
st
Date of Allotment
Date of Redemption
Rate of Interest
Amount
11 August 2006
11 August 2021
7.25%
24 November 2006
24 November 2021
6 February 2007
28 June 2007
6 February 2022
28 June 2022
9.35%
9.50%
7.125%
Total Upper Tier 2 Capital
*Converted to INR @ Rs. 40.12 to a US Dollar (prevailing exchange rate as on 31.3.2008)
Subordinated Debt
USD 149.80 million*
(Rs. 600.99 crores)
Rs. 200.00 crores
Rs. 107.50 crores
USD 59.79 million*
(Rs. 239.89 crores)
Rs. 1,148.38 crores
st
As on 31 March 2008, the Bank had an outstanding subordinated debt (unsecured redeemable non-convertible debentures)
aggregating Rs. 1,882.40 crores. Of this, Rs. 1,572.90 crores qualified as Tier 2 capital, the details of which are stated below.
Date of Redemption
Rate of Interest
Amount
(Rs. in crores)
Date of Allotment
20 September 2002
20 September 2002
20 September 2002
21 December 2002
21 December 2002
26 July 2003
26 July 2003
26 July 2003
15 January 2004
4 June 2004
20 June 2008
20 June 2010
20 June 2012
21 September 2008
21 September 2012
26 April 2009
26 April 2011
26 April 2013
15 October 2013
4 June 2010
25 July 2005
25 July 2012
8.80%
9.05%
9.30%
8.40%
8.95%
6.50%
6.70%
7.00%
6.50%
One-year G-sec. semi-
annual yield plus a
margin of 85 basis
points to be reset at
semi-annual intervals.
Simple average of Mid
of Bid and offer yield of
the 1-year GOI bench
mark (i.e. INBMK) plus a
m a r g i n o f 6 5 b a s i s
points to be reset at
semi annual intervals.
22 March 2006
22 March 2006
22 March 2006
22 March 2006
28 June 2006
28 June 2006
30 March 2007
Total
22 June 2013
22 June 2013
22 March 2016
22 March 2016
28 September 2013
28 June 2016
30 March 2017
8.50%
8.32%
8.75%
8.56%
8.95%
9.10%
10.10%
33.00
5.00
62.00
33.10
60.00
30.00
5.00
65.00
50.00
150.00
500.00
125.00
5.00
360.00
10.00
33.50
104.90
250.90
1,882.40
129
Capital Funds
A Tier 1 Capital
Of which
- Paid-up Share Capital
- Reserves and surplus
- Innovative Perpetual Debt Instruments
- Amount deducted from Tier 1 capital
- Investments in subsidiaries
- Deferred Tax Assets
- Cash Collaterals against securitisation
B
Tier 2 Capital (net of deductions) (B.1+B.2+B.3-B.4)
Of which
B.1 Debt Capital Instruments eligible for inclusion as Upper Tier 2 capital
- Total amount outstanding
- Of which amount raised during the current year
- Amount eligible as capital funds
B.2 Subordinated debt eligible for inclusion in Lower Tier 2 capital
- Total amount outstanding
- Of which amount raised during the current year
- Amount eligible as capital funds
B.3 Other Tier 2 Capital - Provision for Standard Assets
B.4 Deductions from Tier 2 Capital
- Investments in subsidiaries
- Cash Collaterals against securitisation
C
Total Eligible Capital
III. CAPITAL ADEQUACY
(Rs. in crores)
Amount
8,826.99
357.71
8,409.11
398.55
(12.50)
(319.05)
(6.83)
3,063.90
1,148.38
239.89
1,148.38
1,882.40
-
1,572.90
361.95
(12.50)
(6.83)
11,890.89
An assessment of the capital requirement of the Bank is carried out through a comprehensive projection of future businesses
that takes cognizance of the strategic intent of the Bank, profitability of particular businesses and opportunities for growth.
The proper mapping of credit, operational and market risks to this projected business growth enables assignment of capital that
not only adequately covers the minimum regulatory capital requirement but also provides headroom for growth. The
calibration of risk to business is enabled by a strong risk culture in the Bank aided by effective, technology-based risk
management systems.
st
A summary of the Bank's capital requirement for credit, market and operational risk and the capital adequacy ratio as on 31
March 2008 is presented below.
A
Capital requirements for Credit Risk
- Portfolios subject to standardised approach
- Securitisation exposures
130
(Rs. in crores)
Amount
6,433.96
10.41
B
C
Capital requirements for Market Risk
- Standardised duration approach
- Interest rate risk
- Foreign exchange risk (including gold)
- Equity risk
Capital requirements for Operational risk
- Basic indicator approach
D
Capital Adequacy Ratio of the Bank (%)
E
Tier 1 CRAR (%)
934.43
831.10
19.95
83.38
270.31
13.99
10.39
RISK MANAGEMENT: OBJECTIVES AND ORGANISATION STRUCTURE
The wide variety of businesses undertaken by the Bank requires it to identify, measure, control, monitor and report risks effectively.
The key components of the Bank's risk management rely on the risk governance architecture, comprehensive processes and internal
control mechanism. The Bank's risk governance architecture focuses attention on key areas of risk such as credit, market and
operational risk and quantification of these risks wherever possible for effective and continuous monitoring.
Objectives and Policies
The Bank's risk management processes are guided by well-defined policies appropriate for various risk categories, independent risk
oversight and periodic monitoring through the sub-committees of the Board of Directors. The Board sets the overall risk appetite
and philosophy for the Bank. The Committee of Directors, the Risk Management Committee and the Audit Committee of the Board,
which are sub-committees of the Board, review various aspects of risk arising from the businesses of the Bank. Various senior
management committees, Asset-Liability Committee (ALCO) and Operational Risk Management Committee (ORMC) operate within
the broad policy framework as illustrated below.
Board of Directors
Board level
committees
Committee of
Directors
Risk Management
Committee of the Board
Audit
Committee
Credit Committees &
Investment Committees
ALCO
Operational Risk
Management Committee
Committee of
Executives
The Bank has also formulated a global risk policy for overseas operations and a country specific risk policy for its Singapore, Hong
Kong and Dubai branches. The policies were drawn based on the risk dimensions of dynamic economies and the Bank's risk appetite.
The Bank has formulated a comprehensive Stress Testing policy to measure impact of adverse stress scenarios on the adequacy of
capital.
Structure and Organisation
Risk Management Department reports to the Executive Director (Corporate Strategy) and Risk Management Committee of the
Board oversees the functioning of the Department. The Department has four separate teams for Credit Risk, Market Risk,
Operational Risk and Business and Economic Research and the head of each team reports to the head of the department.
Head of Risk
Credit Risk
Market RIsk
Operational Risk
Business and Economic Research
131
IV. CREDIT RISK
Credit Risk Management Policy
Credit risk covers the inability of a borrower or counter-party to honour commitments under an agreement and any such failure
has an adverse impact on the financial performance of the Bank. The Bank is exposed to credit risk through lending and capital
market activities.
The Bank's credit risk management process integrates risk management into the business management processes, while
preserving the independence and integrity of risk assessment. The Board of Directors establishes the parameters for risk
appetite, which is defined quantitatively and qualitatively in accordance with the laid-down strategic business plan. This is
dovetailed in the process through a combination of governance structures and credit risk policies, control processes and credit
systems embedded in a Credit Risk Management Framework (CRMF). The foundation of CRMF rests on the rating tool.
Scope and Nature of Risk Reporting and Measurement Systems
The Bank has put in place the following hierarchical committee structure for credit sanction and review:
(cid:143)
(cid:143)
(cid:143)
(cid:143)
(cid:143)
Zonal Office Credit Committee (ZOCC)
Central Office Credit Committee (COCC)
Committee of Executives (COE)
Senior Management Committee (SMC)
Committee of Directors (COD)
Credit risk in respect of exposures on corporate and micro and small and medium enterprises (MSME) is measured and managed
at individual transaction level as well as portfolio level. In the case of schematic SME exposures, the credit risk is measured and
managed at the portfolio level as the products are score card driven. Credit rating tools are an integral part of risk-assessment of
the corporate borrowers and the Bank has developed different rating models for each segment that has distinct risk
characteristics viz. Large corporates, MSME, small traders, financial companies, micro-finance institutions, project finance etc.
The Bank's continuing aggressive foray in retail banking has resulted in a sharp build-up in the retail asset portfolio. The key
challenge for a healthy retail asset portfolio is to ensure stable risk adjusted earnings stream by maintaining customer defaults
within acceptable levels. The Bank periodically carries out a comprehensive portfolio level analysis of retail asset portfolio with
a risk-return perspective. Risk measurement for the retail exposures is done on basis of credit scoring models. During the year,
the Bank has initiated a project to revamp its existing credit scoring models for retail assets with external support from a reputed
international vendor and has initiated designing of application, behavioural and collection scorecards.
Credit Rating System
Internal reporting and oversight of assets is principally differentiated by the credit ratings applied. The Bank has developed
rating tools specific to market segment such as large corporates, mid-corporates, SME, financial companies and microfinance
companies to objectively assess underlying risk associated with such exposures. For retail and schematic SME exposures,
scorecards and borrower-scoring templates are used for application screening.
The credit rating tool uses a combination of quantitative inputs and qualitative inputs to arrive at a 'point-in-time' view of the
rating of counterparty. The monitoring tool developed by the Bank helps in objectively assessing the credit quality of the
borrower taking into cognizance the actual behaviour post-disbursement. The output of the rating model is primarily to assess
the chances of delinquency over a one year time horizon. Each internal rating grade corresponds to a distinct probability of
default. Model validation is carried out periodically by objectively assessing its calibration accuracy and stability of ratings.
The other guiding principles behind Credit Risk Management Framework are stated below.
132
Credit Sanction and related processes
(cid:143)
(cid:143)
(cid:143)
(cid:143)
(cid:143)
(cid:143)
(cid:143)
(cid:143)
'Know your Customer' is a leading principle for all activities.
Sound credit approval process with well laid credit-granting criteria.
The acceptability of credit exposure is primarily based on the sustainability and adequacy of borrower's normal business
operations and not based solely on the availability of security.
Portfolio level risk analytics and reporting to ensure optimal spread of risk across various rating classes, prevent undue risk
concentration across any particular industry segments and monitor credit risk quality migration.
Sector specific studies are periodically undertaken to highlight risk and opportunities in those sectors.
Rating linked exposure norms have been adopted by the Bank.
Industry-wise exposure ceilings are based on the industry performance, prospects and the competitiveness of the sector.
Separate risk limits are set up for credit portfolios like advances to NBFC and unsecured loans that require special
monitoring.
(cid:143) With heightened activity in the real estate sector, the Bank has strengthened its risk management systems to ensure that its
advances are to borrowers having a good track record and satisfying the criterion of minimum acceptable credit rating.
Appropriate covenants are stipulated for risk containment and monitoring.
Review and Monitoring
(cid:143)
(cid:143)
(cid:143)
All credit exposures, once approved, are monitored and reviewed periodically against the approved limits. Borrowers with
lower credit rating are subject to more frequent reviews.
Credit audit involves independent review of credit risk assessment, compliance with internal policies of the Bank and with
the regulatory framework, compliance of sanction terms and conditions and effectiveness of loan administration.
Customers with emerging credit problems are identified early and classified accordingly. Remedial action is initiated
promptly to minimise the potential loss to the Bank.
Concentration Risk
The Bank controls and limits concentration risk by means of appropriate structural limits and borrower limits based on
creditworthiness. These include:
Large exposures to individual clients or group
The Bank has individual borrower-wise exposure ceilings based on the internal rating of the borrower as well as group-wise
borrowing limits. The Bank monitors the level of credit risk (Low/Moderate/High/Very High) and direction of change in credit risk
(increasing /decreasing/stable) at the portfolio level based on the following six parameters that capture concentration risk.
(cid:143)
(cid:143)
(cid:143)
(cid:143)
(cid:143)
(cid:143)
Highest geographic concentration in a region.
Exposure to Top 20 accounts as a percentage of Credit Risk Exposure (CRE).
Percentage of term loans with residual maturity more than 3 years to total loans and advance.
Percentage of unsecured loans to total loan and advances.
Number of single borrower exposures exceeding 15% of capital funds.
Number of group exposures exceeding 40% of capital funds.
While determining level and direction of credit risk, parameters like percentage of low- risk credit (investment grade and above) to
credit risk exposure and migration from investment to non-investment grade (quantum as percentage of credit risk exposure) are
also considered. The Bank also monitors the rating-wise distribution of its borrowers.
Industries
Industry analysis plays an important part in assessing the concentration risk within the loan portfolio. Particular attention is given to
industry sectors where the Bank believes there is a high degree of risk or potential for volatility in the future. The Bank has fixed
internal limits for aggregate commitments to different sectors so that the exposures are evenly spread over various sectors.
133
Policies for Hedging and Mitigating Credit Risk
Credit Risk Mitigants (CRM) like financial collateral, non-financial collateral and guarantees are used to mitigate credit risk exposure.
Availability of CRM either reduces effective exposure on the borrower (in case of collaterals) or transfers the risk to the more
creditworthy party (in case of guarantees). The Bank has formulated a Collateral Management Policy as required under Basel II
guidelines.
Credit Risk Asset Quality
Distribution of Credit Risk by Asset Quality
Rating scale for large and mid corporates is a 14-point granular scale that ranges from AB-AAA to AB-D. The rating tool for SME has
an 8-point rating scale, which ranges from SME1 to SME 8. The Bank has separate rating tools for financial companies and schematic
SME exposures.
Definitions of Non-Performing Assets
Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines. NPAs are further classified into
sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. An asset, including a leased asset, becomes non-
performing when it ceases to generate income for the Bank.
An NPA is a loan or an advance where:
1.
interest and/or instalment of principal remains overdue for a period of more than 90 days in respect of a term loan;
2.
the account remains "out-of-order'' in respect of an Overdraft or Cash Credit (OD/CC);
3.
the bill remains overdue for a period of more than 90 days in case of bills purchased and discounted;
4. A loan granted for short duration crops will be treated as an NPA if the installments of principal or interest thereon remain
overdue for two crop seasons; and
5.
a loan granted for long duration crops will be treated as an NPA if the installments of principal or interest thereon remain
overdue for one crop season.
The Bank classifies an account as an NPA only if the interest imposed during any quarter is not fully repaid within 90 days from the
end of the relevant quarter.
Definition of Impairment
At each balance sheet date, the Bank ascertains if there is any impairment in its assets. If such an indication is detected, the Bank
estimates the recoverable amount of the asset. If the recoverable amount of the asset or the cash-generating unit, which the asset
belongs to, is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an
impairment loss and is recognised in the profit and loss account.
134
CREDIT RISK EXPOSURES
Total Gross Credit Risk Exposure Including Geographic Distribution of Exposure
Fund Based
Non Fund Based *
Total
Domestic
86,783.69
19,952.61
106,736.30
Overseas
6,139.99
265.86
6,405.85
* Non-fund based exposures are guarantees given on behalf of constituents and acceptances and endorsements.
(Rs. in crores)
Total
92,923.68
20,218.47
113,142.15
Distribution of credit risk exposure by industry sector
S. No.
Industry Classification
(Rs. in crores)
Amount
Fund Based
Non Fund Based
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
Mining
Iron and Steel
Other Metal and Metal Products
All Engineering
Electricity
Cotton Textiles
Jute Textiles
Other Textiles
Sugar
Tea
Food Processing
Vegetable Oil and Vanaspati
Tobacco and Tobacco Products
Paper and Paper Products
Rubber and Rubber Products
Chemicals, Dyes, Paints etc.
Cement
Leather and Leather Products
Gems and Jewellery
Construction
Petroleum
Automobiles including trucks
Computer Software
Infrastructure
NBFCs & Trading
Other Industries
Residual exposures to balance the total exposure
135.91
1,397.20
409.63
1,032.99
935.90
2,124.88
6.79
652.38
704.64
141.79
801.26
506.48
343.56
372.75
53.29
1,337.32
881.89
90.83
816.23
3,491.91
624.34
1,217.08
757.42
4,178.13
12,619.95
13,277.32
44,011.81
97.82
700.83
281.62
572.43
561.16
189.74
2.15
42.43
23.91
2.91
41.17
749.71
5.61
35.27
17.13
498.69
231.02
5.77
7,990.35
106.46
678.39
156.57
175.60
2,638.03
2,002.62
2,399.41
11.67
Total
92,923.68
20,218.47
135
As on 31 March 2008 the Bank's exposure to the industries stated below was more than 5% of the total gross credit exposure:
st
S. No.
Industry classification
Percentage of the total gross credit exposure
1.
2.
3.
Infrastructure
Gems and Jewellery
NBFCs and Trading
Residual Contractual Maturity breakdown of Assets
Maturity bucket
1day
2 to 7 days
8 to 14 days
15 to 28 days
29 days to 3 months
3 to 6 months
6 to 12 months
1 to 3 years
3 to 5 years
Over 5 years
Total
Cash, balances
with RBI and
other banks
2,166.21
1,299.85
488.31
649.87
1,799.22
976.10
1,312.78
2,023.83
80.72
1,707.35
Investments
Advances
564.39
1,692.28
1,200.48
2,821.79
4,884.78
3,157.22
4,913.26
5,176.20
2,254.81
7,039.89
745.63
1,518.74
550.81
713.04
2,963.36
2,709.54
6,218.47
7,698.98
8,944.38
27,598.19
12,504.24
33,705.10
59,661.14
Movement of NPAs and Provision for NPAs
A
B
C
Amount of NPAs (Gross)
- Substandard
- Doubtful 1
- Doubtful 2
- Doubtful 3
- Loss
Net NPAs
NPA Ratios
- Gross NPAs to gross advances (%)
- Net NPAs to net advances (%)
D Movement of NPAs (Gross)
- Opening balance as on 1.4.2007
- Additions
- Reductions
- Closing balance as on 31.3.2008
136
6%
8%
13%
(Rs. in crores)
Other assets
including
fixed assets
-
230.47
173.90
851.19
-
-
-
-
-
2,451.80
3,707.36
(Rs. in crores)
Amount
494.61
309.68
75.77
56.22
5.72
47.22
248.29
0.83
0.42
418.67
384.21
(308.27)
494.61
E Movement of Provision for NPAs
- Opening balance as on 1.4.2007
- Provision made in 2007-08
- Write - offs
- Write back of excess provision
- Closing balance as on 31.3.2008
NPIs and movement of provision for depreciations on NPIs
A Amount of Non-Performing Investments
B
Amount of provision held for non- performing investments
C Movement of provision for depreciation on investments
- Opening balance as on 1.4.2007
- Provision made in 2007-08
- Write - offs
- Write - back of excess provision
- Closing balance as on 31.3.2008
152.34
248.43
(154.45)
-
246.32
(Rs. in crores)
Amount
8.96
8.96
85.66
6.54
-
-
92.20
V. Credit Risk: Use of Rating Agency under the Standardised Approach
The Bank is using issuer ratings and short-term and long-term instrument/bank facilities' ratings which are assigned by the
accredited rating agencies viz. CRISIL, ICRA, Fitch and CARE and published in the public domain to assign risk-weights in terms of
RBI guidelines. In respect of claims on non-resident corporates and foreign banks, ratings assigned by international rating
agencies i.e. Standard & Poor's, Moody's and Fitch are used. For exposures with contractual maturity of less than one year, a
short-term rating is used. For cash credit facilities and exposures with contractual maturity of more than one year, long-term
rating is used.
Issue ratings would be used if the Bank has an exposure in the rated issue and this would include fund-based and non-fund
based working capital facilities as well as loans and investments. In case the Bank does not have exposure in a rated issue, the
Bank would use the issue rating for its comparable unrated exposures to the same borrower, provided that the Bank's exposures
are pari-passu or senior and of similar or lesser maturity as compared to the rated issue. Structured Obligation (SO) ratings are
not used unless the Bank has a direct exposure in the 'SO' rated issue. If an issuer has a long-term or short-term exposure with an
external rating that warrants a risk weight of 150%, all unrated claims on the same counterparty, whether short-term or long-
term, also receive 150% risk weight, unless the Bank uses recognised credit risk mitigation techniques for such claims.
Issuer ratings provide an opinion on the general credit worthiness of the rated entities in relation to their senior unsecured
obligations. Therefore, issuer ratings would be used to assign risk-weight to unrated exposures provided that the unrated
exposures are senior or pari-passu as compared to senior unsecured obligations of the same borrower.
Details of Gross Credit Risk Exposure (Fund based and Non-fund based) based on Risk-Weight:
Below 100% risk weight
100% risk weight
More than 100% risk weight
Deductions
- Investments in subsidiaries
(Rs. in crores)
Amount
60,713.14
42,076.33
10,352.68
(25)
137
VI. CREDIT RISK MITIGATION
The Bank uses various collaterals both financial as well as non-financial, guarantees and credit insurance as credit risk mitigants.
The main financial collaterals include bank deposits, NSC/KVP/LIP, gold and equity shares, while the main non-financial
collaterals include land and building, plant and machinery, residential and commercial mortgages. The guarantees include
guarantees given by corporate, bank and personal guarantees. This also includes loan and advances guaranteed by Export
Credit & Guarantee Corporation Limited (ECGC).
The Bank has in place a collateral management policy, which underlines the eligibility requirements for credit risk mitigants
(CRM) for capital computation as per Basel II guidelines. The Bank reduces its credit exposure to a counterparty with the value of
eligible financial collateral to take account of the risk mitigating effect of the collateral. To account for the volatility in the value
of collateral, haircut is applied based on the type, issuer, maturity, rating and remargining/revaluation frequency of the
collateral. The Bank has a valuation policy that covers processes for collateral valuation and empanelment of valuers.
Under the Standardised Approach, the total credit exposure covered by eligible financial collaterals after application of
haircuts as on 31 March 2008 were Rs. 7,802.63 crores.
st
VII. SECURITISATION
The primary objectives for undertaking securitisation activity by the Bank are enhancing liquidity, optimisation of usage of
capital and churning of the assets as part of risk management strategy.
The securitisation of assets generally being undertaken by the Bank is on the basis of “True Sale”, which provides 100%
protection to the Bank from default. All risks in the securitised portfolio are transferred to a Special Purpose Vehicle (SPV),
except where the Bank provides sub-ordination of cash flows to Senior Pass-Through Certificate (PTC) holders by retaining the
junior tranche of the securitised pool.
The Bank enters into purchase/sale of corporate and retail loans through direct assignment/SPV. In most cases, post
securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides credit
enhancement in the form of cash collaterals and/or by sub-ordination of cash flows to Senior PTC holders.
The Bank follows the standardised approach prescribed by the RBI for the securitisation activities.
Gain on securitisation is recognised over the period of the underlying securities issued by the SPV. Loss on securitisation is
immediately debited to profit and loss account. In respect of credit enhancements provided or recourse obligations (projected
delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/disclosure is made at the time of sale in
accordance with AS 29 'Provisions, contingent liabilities and contingent assets'.
The Bank uses the ratings assigned by various external credit rating agencies viz. CRISIL, ICRA, Fitch and CARE for its
securitisation exposures.
st
As on 31 March 2008, the Bank has no retained exposure on securitisation transactions originated by it. All transfers of assets
under securitisation were effected on true sale basis. In the financial year ended 31 March 2008, the Bank has securitised Rs.
3,201.95 crores as an originator.
st
Details of exposure securitised by the Bank and subject to securitisation framework
S.No.
1.
2.
Type of Securitisation
Impaired/past due assets securitised
Losses recognised by the Bank during the current period
- Personal Loan portfolio
- Commercial Vehicle portfolio
(Rs. in crores)
Amount
-
-
1.26
4.18
138
Aggregate amount of securitisation exposures retained or purchased as on 31 March 2008 is given below
st
S.No.
1.
2.
3.
4.
5.
Type of Securitisation
Retained
- Personal Loans
Securities purchased
- Corporate Loans
- Retail Auto Loans
Liquidity facility
Credit enhancement
Other commitments
Risk weight wise bucket details of the securitisation exposures on the basis of book value
Below 100% risk weight
100% risk weight
More than 100% risk weight
Deductions
-
-
-
Entirely from Tier I capital
Credit enchasing I/Os deducted from Total Capital
Credit enhancement (cash collateral)
Comparative position of two years of the portfolio securitised by the Bank is given below
S.No.
Type of Securitisation
1.
2.
3.
4.
5.
Total number of loan assets securitised
- Corporate Loans
Total book value of loan assets securitised
- Corporate Loans
Sale consideration received for securitised assets
Gain / loss on sale on account of securitisation
Form and quantum (outstanding value) of service provided
- Credit enhancement
- Outstanding servicing liability
- Liquidity support
VIII. MARKET RISK IN TRADING BOOK
2008
19
3,201.95
3,209.79
7.84
13.66
0.54
-
(Rs. in crores)
Amount
-
0.84
49.96
479.86
-
13.66
-
(Rs. in crores)
Amount
530.66
-
-
-
-
13.66
(Rs. in crores)
2007
2
547.16
550.09
2.93
15.51
0.54
-
Market risk is the risk to the Bank's earnings and capital due to changes in the market level of interest rates or prices of
securities, foreign exchange and equities, as well as the volatilities of those changes. The Bank is exposed to market risk
through its trading activities, which are carried out both for customers and on a proprietary basis. The Bank adopts a
comprehensive approach to market risk management for its trading, investment and asset/liability portfolios. The Bank uses
various risk metrics, both statistical and non-statistical, including:
(cid:143) Non-statistical measures like position, gaps and sensitivities (duration, PVBP, option greeks)
(cid:143) Value at risk (VaR)
139
The VaR methodology adopted by the Bank for its VaR calculation is Historical Simulation and variants thereof, and is
calculated at a 99% confidence level for a one-day holding period. The model as with many other VaR models assumes that the
risk factor changes observed in the past are a good estimate of those likely to occur in the future and is, therefore, limited by
the relevance of the historical data used. The Bank typically uses 500 days of historical data or two years of relative changes in
historical rates and prices. The method, however, does not make any assumption about the nature or type of the loss
distribution. The VaR models for different portfolios are back-tested at regular intervals and the results are used to maintain
and improve the efficacy of the model. The VaR is computed on a daily basis for the trading portfolio and reported to the senior
management of the Bank. The VaR measure is also supplemented by a series of stress scenarios and sensitivity tests that shed
light on the behaviour of a portfolio and the impact of extreme market movements. Expected Tail Loss (ETL) or Conditional
Value at Risk (CVaR) is one of the concepts used to devise stress scenarios.
Risk limits such as position, gaps and sensitivities (duration, PVBP, option greeks) are set up according to a number of criteria
including relevant market analysis, business strategy, management experience and the Bank's risk appetite for each of the
market risk exposures i.e. interest rate, exchange rate and equity price risk. These limits are monitored on a daily basis and the
exceptions are put up to ALCO. Risk limits are reviewed, at least, annually or more frequently, if deemed necessary, to maintain
consistency with trading strategies and material developments in market conditions.
Concentration Risk
The Bank has allocated the internal risk limits in order to avoid concentrations, wherever relevant. For example, the Aggregate
Gap Limit is allocated to various currencies and maturities as Individual Gap Limits. Similarly PV01 for interest rate swaps have
been allocated to various benchmarks. Where such allocation may not have been undertaken, the Bank continues to monitor
the position closely for any possible concentrations.
Liquidity Risk
Liquidity risk arises in any bank's general funding of its activities. As part of the liquidity management contingency planning,
the Bank assesses potential trends, demands, events and uncertainties that could reasonably result in adverse liquidity
condition. The Bank considers the impact of these potential changes on its sources of short term funding and long term
liquidity planning. The Bank's ALM policy defines the gap limits for the structural liquidity and the liquidity profile of the Bank
is analyzed on a static basis as well as on a dynamic basis by tracking all cash inflows and outflows in the maturity ladder based
on the expected occurrence of cash flows. The Bank undertakes behavioral analysis of the non-maturity products viz. savings
and current deposits and cash credit / overdraft accounts on a periodic basis to ascertain the volatility of residual balances in
those accounts. The renewal pattern and premature withdrawals of term deposits and draw-down of unavailed credit limits
are also captured through behavioural studies. The liquidity profile of the Bank is estimated on a dynamic basis by considering
the growth in deposits and loans, investment obligations, etc. for a short-term period of three months. The concentration of
large deposits is monitored on a periodic basis. The Bank's ability to meet its obligations and fund itself in a crisis scenario is
critical and accordingly, stress tests are conducted under different scenarios at periodical intervals to assess the impact on
liquidity to withstand stressed conditions.
The liquidity positions of overseas branches are managed in line with the Bank's internal policies and host country regulations.
Such positions are also reviewed centrally by the Bank's ALCO along with domestic positions.
Country Risk
The Bank has put in place a risk monitoring system for the management of country risk. The Bank uses the seven-category
classification i.e. insignificant, low, moderate, high, very high, restricted and off-credit followed by the Export Credit
Guarantee Corporation Ltd. (ECGC) and ratings of international rating agency Dun & Bradstreet for monitoring the country
140
exposures. The ratings of countries are being undertaken at monthly intervals or at more frequent intervals if the situation so
warrant i.e. in case of a significant change in the condition of a country involving sharp deterioration of its ratings. Exposure to
a country includes all credit-related lending, trading and investment activities, whether cross border or locally funded. The
Bank has set up exposure limits for each risk category as also per country exposure limits and the exposure limits are monitored
at weekly intervals except for those on high, very high categories through approval from appropriate authorities at the
transaction level.
Risk Management framework for overseas operations
The Bank has opened branches in Singapore, Hong Kong, and Dubai. The Bank has put in place a comprehensive Risk
Management Policy for its global operations and has also formulated country-specific risk policy for these operations based on
the host country regulators' guidelines. The Asset Liability Management and all the risk exposures for the overseas operations
are monitored centrally by implementing sound systems and controls, and also by adopting the norms as specified by the
regulators in the host country.
Capital Requirement for Market Risk
- Interest rate risk
- Equity position risk
- Foreign exchange risk (including gold)
IX. OPERATIONAL RISK
Strategies and Processes
(Rs. in crores)
Amount of Capital Required
831.10
83.38
19.95
The Bank has initiated several measures to manage operational risk through identification, assessment and monitoring.
Simultaneously, a framework has been laid to capture loss data which can be mapped to operational risk events to measure the
impact quantitatively. The Bank has put in place a hierarchical structure to effectively manage operational risk through the
formation of several internal committees viz., Operational Risk Management Committee (ORMC), Product Management
Committee (PMC), Change Management Committee (CMC), Outsourcing Committee and IT Security Committee. The
functioning of these committees has stabilised. The Risk Department acts as the convenor of ORMC, PMC and CMC and is a
member in Outsourcing Committee and IT Security Committee.
The Bank is further enhancing its capability for effective management of operational risk with the implementation of a
software solution (OR Monitor) which will create a database on loss events experienced by the different business lines of
the Bank, identify areas which show manifestation of weak controls through Risk & Control Self Assessment (RCSA) and
Key Risk Indicator (KRI) modules, and over a period would enable the Bank to adopt sophisticated approaches for the
computation of capital for operational risk
141
Structure and Organisation
The Risk Management Committee (RMC) of the Board at the apex level is the policy making body. RMC is supported by the
Operational Risk Management Committee (ORMC), consisting of Senior Management personnel, which is responsible for
implementation of the Operational Risk policies of the Bank.
This internal committee supervises effective monitoring of operational risk and the implementation of software driven
framework for enhanced capability to manage operational risk.
Scope and Nature of Operational Risk Reporting and Measurement Systems
A systematic process for reporting risks, losses, “near misses” and non-compliance issues relating to operational risks has been
developed and implemented. The information gathered shall be used to develop triggers to initiate corrective actions to
improve controls. All critical risks and potential loss events would be reported to the Senior Management/ORMC/RMC as
appropriate, for their directions and suggestions.
Policies for Hedging and Mitigating Operational risk
An Operational Risk Management Policy approved by the Risk Management Committee of the Board details the framework for
hedging and/or mitigating operational risk in the Bank. As per the policy, all new products are being vetted by the Product
Management Committee to identify and assess potential operational risks involved and suggest control measures to mitigate
the risks. Similarly, any changes to the existing products/ processes are being vetted by the Change Management Committee.
In addition to the above, the business departments submit Action Taken Reports, after implementation of the product, to the
Product Management Committee for their review. The product is then independently reviewed by the Inspection & Audit
Department of the Bank.
Approach for Operational Risk Capital Assessment
As per the RBI guidelines, the Bank has followed the Basic Indicator Approach for the year ending 31 March 2008. The Bank is
also ready for compilation of capital charge for operational risk under the Standardised Approach. However, the Bank is in the
process of putting in place the structure for identifying gaps in internal controls across the entire Bank. A model for the same
has been developed using the OR software and tested on Retail Liabilities. Simultaneously, the Bank is preparing itself for
migration to the Advanced Measurement Approach.
st
X.
INTEREST RATE RISK IN THE BANKING BOOK
Calculation of interest rate risk in the banking book (IRRBB) is based on a present value perspective with cash flows discounted
at zero coupon yields published by National Stock Exchange (NSE) for domestic balance sheet and USD LIBOR for overseas
balance sheet. Other currencies are taken in equivalent base currencies (INR for domestic books and USD for overseas branches)
as the Bank does not have material exposures to other currencies as a percentage of the balance sheet. While basis risk is
presently ignored, it will be incorporated in future analyses. Cash flows would be assumed to occur at the middle of the
regulatory buckets (as specified by RBI for DSB9) for the interest rate sensitive gap statements. Non-interest sensitive products
like cash, current account, capital, volatile portion of savings bank deposits, etc. are excluded from the computation. The Bank
does not run a position on interest rate options that might result in non-linear pay-off. Future interest cash flows from
outstanding balances are included in the analysis.
The Earnings at Risk (EaR) measures the sensitivity of net interest income to parallel movement in interest rates on the entire
balance sheet, is reported to the senior management on a weekly basis.
142
Details of increase (decline) in earnings and economic value for upward and downward rate shocks are given below:
Earnings Perspective
Country
India
Overseas
Total
Economic Value Perspective
Country
India
Overseas
Total
Interest Rate Shock
0.50%
(15.41)
7.34
(8.07)
Interest Rate Shock
0.50%
(508.12)
14.11
(494.01)
(Rs. in crores)
(-) 0.50%
15.41
(7.34)
8.07
(Rs. in crores)
(-) 0.50%
525.01
(14.73)
510.28
143
LIST OF BRANCHES AND EXTENSION COUNTERS
AS ON MAY 5, 2008
Srinagar Colony, Main Road
Tarnaka, Opp. Railway Degree College
Service Branch, Hyderabad - Begumpet
Service Branch/CPC, Hyderabad -
(Necklace Road)
JANGAREDDIGUDEM
Eluru Road
KAKINADA
Subhash Road, Suryaraopet
KARIMNAGAR
Mukarrumpura
KHAMMAM
Vyra Road
KURNOOL
R.S. Road
MACHILIPATNAM
Kennady Road, Jagannadapuram
MIRYALGUDA
Sagar Road
NANDYAL
RS Road
NARASARAOPET
Arundelpet, Bank Street
NELLORE
G T Road, Near RTC Depot
NIZAMABAD
Hyderabad Road
ONGOLE
Trunk Road, Bhagya Nagar
PAIDIPARRU
Tadepalligudem Road
POOLAPALLE
Palakole-Bhimavaram Road
PRODDATUR
Sundaracharlu Street
RAJAHMUNDRY
Vygram Road, T. Nagar
SRIKAKULAM
Palakonda Road, Near Krishna Park
TENALI
Prakasam Road
VIJAYAWADA
One Town, KT Road, Kothapet
Ring Road, Near Benz Circle
Service Branch/CPC -
(Vijayawada - Benz Circle)
VISAKHAPATNAM
MVP Colony, Sector 10
Ram Nagar, Waltair Main Road
Visakhapatnam, Dwaraka Nagar
VIZIANAGARAM
MG Road
WARANGAL
Chowrastra, Station Road
ARUNACHAL PRADESH
ITANAGAR
E Sector, Teli Plaza NH 52A
ASSAM
BONGAIGAON
Chapaguri Road
DIBRUGARH
Opp. Head Post Office, RKB Path
GUWAHATI
Dispur, G.S. Road
Fancy Bazar, SS Road
Paltan Bazar, A.T. Road
JORHAT
A.T. Road, Chowkbazar
NAGAON
AT Road, Haibargaon
SILCHAR
Shyama Prasad Road, Shillong Patty
TEZPUR
SC Road
TINSUKIA
Chirwapatty Road
BIHAR
BETTIAH
Supriya Road
BHAGALPUR
Patal Babu Road
GAYA
North Church Road
MUZAFFARPUR
Club Road, Kalyani
PATNA
Boring Road
Patna, SP Verma Road
CHANDIGARH (U.T.)
CHANDIGARH
Sector 35-B
Madhya Marg, Sector 8C
Sector 17
Service Branch/CPC, Chandigarh -
(Sector 34 A, SCO 134, 135)
Service Branch/CPC, Chandigarh -
(Sector 34 A, SCO 20-21-22)
ANDAMAN & NICOBAR
ISLANDS (U.T.)
PORT BLAIR
Middle Point
ANDHRA PRADESH
ALAMURU
Mandapeta to Alamuru Road
ANANTAPUR
Saptagiri Circle, Subhash Road
BAPATLA
Radam Bazar, Car Street
CHILLAKALLU
Jaggayyapeta Road, Main Bazar
CHINNAMIRAM
J.P. Road, Venkatrajunagar
CHITTOOR
Prakasam High Road
EDARAPALLI
Near RTC Complex
GAJUWAKA
NH-5, Old Gajuwaka
GUDIVADA
Eluru Road
GUNTUR
P.R. Raju Plaza, Naaz Centre
HYDERABAD
A.S. Rao Nagar, Kapra
Ashok Nagar, Udit Chambers
Banjara Hills, Alcazar Plaza
Chandanagar, Hemadurga -
(Sharada Galaxy)
Charminar, Gulzar House -
(Balala Estate)
Dilsukhnagar, Moosarambagh
Humayun Nagar -
(AP Khadi & Village Industries Board)
Hyderabad, Begumpet Road
Commercial Tax Office -
(Extension Counter , Nampally)
Vanenburg IT Park -
(Extension Counter, Madhapur)
Jubilee Hills, (Opp. Bharatiya
Vidhya Bhavan Public School)
Kukatpally, Dharmareddy Colony
Madhapur, Hitech City
Sanjeeva Reddy Nagar, 257/3 RT
Secunderabad, Rashtrapati House
144
8.25x10.75inch
MANIMAJRA
Chandigarh-Shimla Road
CHHATISGARH
AMBIKAPUR
Benaras Chowk
BHILAI
Uttar Gangotri, Supela Chowk
BILASPUR
New Bus Stand
DURG
GE Road, Ganjpara
KORBA
Power House Road
RAIGARH
Jagatpur
RAIPUR
Jeevan Bima Marg, Pandri
Tagore Nagar, Pachpedi Naka
RAJNANDGAON
Sahdeo Nagar, GE Road
DAMAN & DIU (U.T.)
DAMAN
Teen Batti, Nani Daman
DELHI
DELHI
New Delhi, Barakhamba Road
Ministry of Defence Extension Counter -
(E Block, DHQ PO)
Ministry of Urban Development -
(Extension Counter, Nirman Bhavan,
Maulana Azad Road)
Ashok Vihar, Phase I
Chandni Chowk,
(Coronation Hotel Building)
Chittaranjan Park, Raisina Bengali School
Daryaganj, Netaji Subhash Marg
Defence Colony, D 81
Dwarka, HL Arcade, Sector 5 (MLU)
East of Kailash, D-70A
Greater Kailash - I (E-64)
Greater Kailash - II (S-266)
Green Park Market, K-12
Hauz Khas, NIFT Campus
Janakpuri, C3/21
Karkardooma, Community Centre
Karol Bagh, Padam Singh Road
Khan Market, 2A & 2B
Kirti Nagar, F-43
Krishna Nagar, F-2/25
Lajpat Nagar, B-6
Lok Vihar, Pitampura
Malviya Nagar, D-81
Mayur Vihar, LSC, Phase II
Meera Bagh, A-356
Model Town III, G-06
Najafgarh, Main Road
Naraina Vihar, E-9
Palam Village
Paschim Vihar, B-2/11
Pitampura, DP Block
Punjabi Bagh, West Avenue Road
Rajinder Nagar, Old Rajinder Nagar Market
Rajouri Garden, Vishal Enclave
Shadley Public School Extension Counter -
(Press Colony, G8 Road, Rajouri Garden)
Rohini (Community Centre DC Chowk,
Sector 9)
Saket, E-146
Sector- 7, Rohini
Shakti Nagar, Indra Chand Shastri Marg
Shalimar Bagh, AM 196
Swasthya Vihar, Vikas Marg
Tilak Nagar, Nazafgarh Road
Vasant Kunj, Nelson Mandela Road
Vasant Vihar, Basant Lok Complex
Vikaspuri, G12-A
Service Branch, New Delhi -
(Parliament Street)
Service Branch/CPC, New Delhi -
(Asaf Ali Road)
Service Branch/CPC, Vikaspuri - J-3
GOA
CANDOLIM
Murrod Vaddo
MAPUSA
Near Aldona Bus Stand, Angod
MARGAO
Padre Miranda Road
PANJIM
Dr. Atmaram Borkar Road
VASCO
Heritage, Swatantra Path
GUJARAT
AHMEDABAD
Asarwa, Civil Campus
Ellis Bridge, Law Garden -
(Office of Commissioner of Sales Tax
Extension Counter, Ashram Road)
Maninagar, Krishna Baug Char Rasta
Naranpura, Ankur Road
Relief Road, Patthar Kuva
S.G. Highway, Balleswar Avenue
Shahibaug, Police Commissioner Road
Vastrapur, Near Swaminarayan Mandir
Vejalpur, Prahaladnagar, Satellite
Service Branch, Ahmedabad -
(Opp. Samartheshwar Temple)
AMRELI
Near Nagnath Temple
ANAND
Subhash Road
ANKLESHWAR
Near Ankleshwar Industrial Association, GIDC
ATUL
Atul Complex, Opp. Post Office
BARDOLI
Sardar Baug
BHARUCH
Old NH No. 8
BHAVNAGAR
Waghawadi Road
DAHOD
Station Road
DEESA
Railway Station Road
GANDHIDHAM
Sector 12 B,
Service Branch/CPC, Gandhidham -
(Ward No. 12/B)
GANDHINAGAR
Sector 16, (Gandhinagar Milk Consumers
Co-op Union Ltd.)
GAWLI PALASIA
Agra Bombay Road
GODHRA
Bhagwat Nagar, Prabha Road
HIMATNAGAR
Opp. Civil Hospital
JAMNAGAR
Pandit Nehru Marg
JUNAGADH
N.K. Mehta Road, Moti Baug
KALOL
Vakharia PJ High School Campus
MADHAPAR
Near Panchayat Office
MEHSANA
Near Nagalpur College, Highway Road
145
MUNDRA
New Port Users Building,
(Mundra Port & SEZ Ltd.)
NADIAD
Sheth Mahagujarat Hospital -
(College Road)
NAVSARI
Navsari Gandevi Road
PALANPUR
Movie World Building, College Road
PATAN
Opp. GPO, Station Road
PORBANDAR
MG Road
RAJKOT
Rajkot (Kalawad Road, Near KKV Circle)
Shastri Maidan
RAJPIPLA
Station Road
SURAT
Adajan, Anand Mahal Road
Surat, Ghod Dod Road
Textile Market, Umarwada, Ring Road
SURENDRANAGAR
S. T. Road
VADODARA
Karelibaug, VIP Road
Manjalpur, Aditi School,
(Opp. Indira Complex)
Nizampura, Nizampura Main Road
Race Course Circle North
Sayajigunj, (Opp. Panchmukhi Hanuman
Temple, Tilak Road )
Service Branch/CPC, Vadodara -
(Gautam Nagar)
VALLABH VIDYANAGAR
Mota Bazar
VALSAD
Halar Road
VAPI
GIDC, Near Koparli Road
VERAVAL
Nr. Tower Chowk, Rajmahal Road
VISNAGAR
Gunz Bazar Road
HARYANA
AMBALA
JLN Marg, Jagadri Road
BAHADURGARH
Nehru Park, Chowri Gali
146
BHIWANI
Circular Road, Baba Nagar
FARIDABAD
Ballabhgarh, Sector 7
Faridabad, 1-2 Chowk, N.I.T.
FATEHABAD
Mauz Bast Bhivan, Karan Plaza
GURGAON
DLF City, Galleria Shopping Mall
RITES Ltd. Office Complex (Extension
Counter, Sector-29, Plot No.1)
Gurgaon, Nr. HUDA House
MG Road, Mega City Mall
Service Branch/CPC, Gurgaon -
(Opp. HUDA House)
HISSAR
Commercial Urban Estate
KAITHAL
Ambala Road
KARNAL
Mall Road
KURUKSHETRA
Railway Road
PALWAL
Delhi Agra Bye Pass Road
(Near Rasulpur Chowk)
PANCHKULA
SCO 10, Sector 10
PANIPAT
G.T. Road
REWARI
Circular Road
ROHTAK
Delhi Road
SADAURA
Opposite DAV Public School
SIRSA
Sangwan Chowk, Dabwali Road
YAMUNANAGAR
Mela Singh Chowk
HIMACHAL PRADESH
BADDI
Sai Road, Fauzi Complex
SHIMLA
Commercial Complex, Kasumpti
JAMMU & KASHMIR
JAMMU
Rail Head Complex
Service Branch/CPC Jammu, Gandhi Nagar
JHARKHAND
BOKARO
Western Avenue, Bokaro Steel City
DEOGHAR
Seth Surajmal Jalan Road, Caster Town
DHANBAD
Shri Ram Plaza, Bank More
GIRIDIH
Raja Bangal, Main Road
HAZARIBAGH
NH33, Opp. Civil Court
JAMSHEDPUR
Bistupur, Near Ram Mandir
Sakchi, 1 Sand Line Road
RAMGARH
Main Road, Ramgarh Cantt
RANCHI
Main Road, Albert Ekka Chowk
KARNATAKA
ATHNI
Inamdarpet
BAGALKOT
Extension Area Road, Nagappana Katte
BANGALORE
Banashankari, CT Bed Extension
Bangalore, MG Road
Basaveswarnagar, 80 Feet Road
Chamarajapet, 5th Main Road, 6th Cross
Cox Town, Wheeler Road
Indiranagar, HAL II Stage
J.P. Nagar, Bannaragatta Main Road
Jayanagar, 30th Cross, 4th Block
Koramangala, Industrial Layout, 7th Block
NIFT (HSR Layout) Extension Counter
Malleswaram, Sampige Road
Marathahalli, Varthur Main Road
Peenya, NH 4
R.T. Nagar Main Road, Main Market
Rajajinagar, Saptharshidhama
Sahakaranagar, Bellary Road
Vijayanagar, West of Chord Road
Whitefield, First Technology Place
Yelahanka, New Town
Service Branch, Bangalore, KH Road
Service Branch/CPC, Bangalore -
(Cauvery Bhavan, KG Road)
BELGAUM
Congress Road, Tilakwadi
BELLARY
Main Road, Parvathi Nagar
BIDAR
B.V.B. College Road, Gandhi Gunj
BIJAPUR
MG Road
CHICKMAGALUR
Basavanahalli Main Road
DAVANGERE
P.B. Road, Onkarappa Lane
GADAG
J.T Mutt Road, Near General Hospital
GOKAK
Bus Stand Road
GULBARGA
Super Market
HASSAN
B M Road
HOSPET
College Road
HUBLI
Dharwad, Near Toll Naka
Main Road, Deshpandenagar
Service Branch/CPC, Hubli -
(Desai Cross - Deshpande Nagar)
JAMKHANDI
Kudachi Road, Opp. Tennis Court
KARWAR
Green Street
MANGALORE
Bunts Hostel Circle
Mangalore Chemical & Fertilizers Ltd. -
(Penambur Extension Counter)
MYSORE
Kuvempunagar- Vishwamanava -
(Double Road)
Mysore - Temple Road, VV Mohalla
Service Branch/CPC, Mysore
(Kantharaj Urs Road, Saraswathipuram)
RAICHUR
Station Road
SAIDAPUR
Mahalingapura SO
SHIMOGA
JPN Road, 1st Cross
SINDHNUR
Venkatesh Nagar, Gangavathi Road
TUMKUR
B.H. Road
UDUPI
Near Diana Circle
KERALA
ALAPPUZHA
Cullen Road, Mullackal Junction
ALUVA
Palace Road, Opp. St. Francis High School
CALICUT (KOZHIKODE)
YMCA Cross Road
Service Branch/CPC, Calicut
(YMCA Cross Road, 1st floor)
KANNUR
Muneeswarankoil Road
KASARGOD
Bank Road
KOCHI
Rajaji Road, Ernakulam
Wellingdon Island, Bristow Road
KOLLAM
Asramam Road, Chinnakada
KOTTAYAM
M.C. Road, Near YWCA
MALAPPURAM
Down Hill
PALAI
Near Municipal Bus Stand
PALAKKAD
English Church Road
PATHANAMTHITTA
General Hospital Road
THIRUVANANTHAPURAM
M.G. Road, Pattom
Salvation Army India (South-Western
Territory Extension Counter
Kowdiar-Kuravanconam Rd)
THODUPUZHA
Opp. Mini Civil Station
THRISSUR
City Centre, Round West
TIRUVALLA
M.C. Road
MADHYA PRADESH
BHOPAL
Bittan Market, Arera Colony
Koh-e-Fiza, Airport Road
M.P. Nagar
DEWAS
A. B. Road
GWALIOR
Shrimant Madhavrao Scindia Marg
HOSHANGABAD
Sadar Bazar, Meenakshi Chowk
INDORE
Annapoorna, Mishra Nagar
Sapna Sangita Road, Sneh Nagar Main Road
Vijayanagar, Scheme No. 54
Yeshwant Niwas Road
JABALPUR
Napier Town, Shastri Bridge Chowk
KATNI
Opposite Old Collectorate
MANDSAUR
Greater Kailash Hospital Road
NEEMUCH
Vijay Talkies Compound
RATLAM
Opp. DRM Office, Do Batti
REWA
Pilikothi Road
SAGAR
Civil Lines, Near VC Bunglow
SATNA
Rewa Road
UJJAIN
Dewas Road
VIDISHA
Subhash Road
MAHARASHTRA
AHMEDNAGAR
Tilak Road
AMRAVATI
Near Jaistambh Chowk
AURANGABAD
Adalat Road
BARAMATI
Bhigwan Road
BHIWANDI
Bhiwandi-Kalyan Road
CHAKAN
Nr Mahatma Phule Market Yard
CHANDRAPUR
Civil lines, Next to DCC
DEVALALI (NASHIK)
Umrao Plaza (43 Field Regiment -
Extension Counter)
147
DHULE
Main Market, Lalbaug
DINDORI
Nashik-Kalwan Road
(Near Manbhari Cloth Centre)
DOMBIVLI
Cross Phadke Road
ICHALKARANJI
Ichalkaranji Co-op Estate, Kolhapur Road
ILANJI
Meenatchi Nagar, Kurtalam Madurai Road
ISLAMPUR
Near Asta Naka
JALGAON
M G Road, Patel Plaza
JALNA
Head Post Office Road
KALYAN
Bail Bazar
KOLHAPUR
Sykes Extension Rajaram Road
LASALGAON
Lasalgaon-Vinchur Road
LATUR
Ausa Road
MIRA-BHAYANDER
Bhayander (East), Navghar Road
Mira Road (East), Station Road
MUMBAI
Andheri (East), Andheri-Kurla Road
Andheri (West), Lokhandwala Complex
Nanavati Hospital (Vile Parle - East -
Extension Counter, SV Road)
Bandra (W), Turner Road
UTI Tower (BKC) Extension Counter -
(Bandra-East)
Bandra - Kurla Complex, Bandra - East
Bhandup - West, LBS Marg
Borivali (West), Sodawalla Lane
St. Francis High School Extension Counter -
(IC Colony, Laxman Mhatre Road)
Borivali - East, Kulupwadi
(Western Express Highway)
Byculla, Opp. JJ Hospital
Chembur, Sandu Garden Corner
Crawford Market, Lokmanya Tilak Marg
Cuffe Parade (G. D. Somani Memorial
School, Colaba)
Dadar East, Opp. Dadar Central Rly. Stn.
Fort (Mumbai), Sir. P. M. Road
148
Ghatkopar - East (Jn. of R. B. Mehta Marg
& Vallabh Baug Lane)
Goregaon (East), Sonawala Road
Goregaon (West), SV Road
Goregaon-Malad Link Road
Kandivali (East),Thakur Complex -
(Western Express Highway)
Kandivali (West), Mahavir Nagar
Khar (West), Main Linking Road
Lamington Road, Grant Road (East) -
(Dr. BD Marg)
LBS Marg (Mulund-West)
Malad, S.V. Road
MIDC, Andheri (East),
(Mahakali Caves Road)
Mulund West, Zaver Road
Napean Sea Road, Monolith Building
Nariman Point, Atlanta
New Marine Lines, Sir V Thackersey Marg
Powai, Hiranandani Business Park
Shivaji Park, Veer Savarkar Marg
Sion (East), Vijay Sadan
Springfields (PB Branch) Andheri West -
(Lokhandwala Complex)
Thakur Village, Kandivali East
Vile Parle (East), Subhash Road
Vile Parle (West),10th Road
Worli, Dr. Annie Besant Road
Worli (Naka), Atur Park, Dr. Annie Besant Road
Service Branch (Fort) -
(Janmabhoomi Bhavan)
Service Branch, Chembur -
(Corporate Park)
Service Branch/CPC, Andheri -
(Saki Vihar Road)
Service Branch/CPC, Mumbai (Chembur) -
(Sion-Trombay Road)
NAGPUR
Lakadganj, Central Avenue Road
Madhav Nagar, South Ambazari Road
Nagpur, Rabindranath Tagore Road
NALASOPARA
LIC Housing Finance Ltd, Shripal Plaza -
(Nalasopara West)
NANDED
Vazirabad - Bus Stand Road
NASHIK
Nashik, Sharanpur Road
Nashik Road, Anand Commerce Centre
NEW BOMBAY
Kharghar, Sector 4
Nerul (West), Sector 44
Sanpada East, Off. Palm Beach Road
Vashi, Vardhaman Chambers Premises CSL
PANVEL
Shivaji Chowk
New Panvel, SC Marg
PIMPALGAON
Opp. S.T. Bus Depot, Mumbai-Agra Road
PIMPRI CHINCHWAD
Station Road, Chapekar Chowk
PUNE
Baner, S Mart
Bundgarden, Dhole Patil Road
Hadapsar, Pune-Solapur Highway
Jangli Maharaj Road
(Nr. Deccan Gymkhana)
Kalyani Nagar, Vadgaonsheri
Kothrud, Infotech House
Pune (Camp), Gen. Thimayya Road
Sahakar Nagar, Shahu College Road
Senapati Bapat Marg
Wanawadi, Sacred Heart Town
Service Branch - Pune -
(Shankersheth Road)
Service Branch/CPC, Pune -
(Bhandarkar Road)
RATNAGIRI
M.D. Naik Road
SANGLI
Ambrai Road, Azad Chowk
SATARA
G D Tapase Marg, Bhosale Marg
SOLAPUR
Dufferin Chowk, Railway Lines
TASGAON
Guruwar Peth
THANE
Hiranandani Estate, Patlipada -
(Ghodbunder Road)
LBS Marg, Naupada, Thane - West
Manpada,Chitalsar, Thane -West
Utalsar Naka, L.B.S. Marg, Thane - West
ULHASNAGAR
Near Sapna Garden
VASAI
Near Navghar Bus Depot, Vasai West
VIRAR
Agashi Road, Virar (West)
YAVATMAL
Azad Maidan Road
MEGHALAYA
SHILLONG
Jail Road
MIZORAM
AIZAWL
Chanmari
NAGALAND
DIMAPUR
Circular Road
KOHIMA
Opp. UBC Church
ORISSA
ANGUL
Main Road
BALASORE
O T Road, Padhuan Pada
BARBIL
Opp. Barbil Bus Stand
BARGARH
NH 6, Chanda Market Complex
BERHAMPUR (GANJAM)
Time World, Tata Benz Square
BHADRAK
Salandi By Pass
BHUBANESWAR
Chandrasekharpur, District Centre
CRPF Square, Stewart School
Kalpana Square
Satyanagar
Service Branch/CPC, Bhubaneswar -
(Satyanagar)
CUTTACK
Bidanasi, CDA
Dolamondai, Badambadi
DHENKANAL
Mahabirbazar
JAJPUR
Bank Street, Jajpur Road
JEYPORE
NH 43, Near Inspection Bunglow
JHARSUGUDA
By Pass Road
PURI
Badasankha, Grand Road
RAYAGADA
Rayagada Nagar Mouza
ROURKELA
Kachery Road
SAMBALPUR
Ashok Talkies Road, V.S.S. Marg
PONDICHERRY
PONDICHERRY
Bussy Street
PUNJAB
ABOHAR
Circular Road
ADDA DAKHA
Ferozepur Road
AMRITSAR
Court Road, Kennedy Avenue
BAGHA PURANA
Mudki Road
BARNALA
College Road
BATHINDA
TP Scheme, The Mall
DERABASSI
Chandigarh – Ambala Road
FARIDKOT
Circular Road
FEROZEPUR
1-The Mall
GARHSHANKAR
Garhshankar-Chandigarh Road,
(Near LIC Office)
GURDASPUR
Tibri Road, AP Palace
HOSHIARPUR
Main Court Road
JAGRAON
Tehsil Road
JALANDHAR
Mahavir Marg, Near BMC Chowk
Service Branch/CPC, Jalandhar -
(Near BMC Chowk)
KAPURTHALA
Mall Road
KHANNA
G.T. Road, Nr. Kalgidhar Gurudwara
KOTKAPURA
Faridkot Road
LUDHIANA
108, The Mall
Miller Ganj, G.T. Road
Service Branch/CPC, Ludhiana - The Mall
MALERKOTLA
Satta Bazar Road
MALOUT
G T Road
MANSA
Water Works Road
MOGA
G.T. Road, SCF No. 26 & 27
MOHALI
Phase VII, Sector 61, S A S Nagar
NABHA
Dr. Ambedkar Market
NAKODAR
Noor Mahal Road
PATIALA
The Mall Road
PATTI
Ward No. 16
PHAGWARA
G. T. Road
PHULLANWALA
Pakhowal Road
RAJPURA
Caliber Market
RUPNAGAR
Dashmesh Nagar, Near Bela Chowk
SAMANA
Main Road
SANGRUR
Kaula Park Market
SUDHAR
Raikot Road, Opp. GHG
TARN TARAN
Amritsar Road, Nr. Pratap Talkies
THREEKE
Ferozpur Road
RAJASTHAN
AJMER
Kutchery Road, India Motor Circle
ALWAR
Road No.2, Jai Complex
BANSWARA
Mohan Colony Circle, Udaipur Road
BHILWARA
Pur Road, Heera Panna Complex
BHIWADI
RIICO Chowk
149
BIKANER
Rani Bazar Road (Nr. Dak Bunglow and
Railway Station)
BUNDI
New Dhan Mandi Road
GANGANAGAR
Jawahar Nagar (Adjoining Gupta
Nursing Home)
JAIPUR
Ashok Marg, C Scheme
Malviya Nagar, Sundar Nagar
Sanganer, Pratap Nagar
Tilak Nagar, Opp. LBS College
Vaishali Nagar, Saurav Towers
Service Branch/CPC, Jaipur -
(Green House, Ashoka Marg)
JODHPUR
Chopasni Road
KOTA
Shopping Centre
RAWATBHATA
RAPS Shopping Cluster, Anukiran Colony
UDAIPUR
Chetak Marg, Parihar Bhawan
SIKKIM
GANGTOK
M.G. Road
RANGPO
Main Market, 31A NH
TAMIL NADU
ARNI
Thatchur Road
CHENNAI
Adyar, Mahatma Gandhi Road -
(Shastri Nagar)
Annanagar, II Avenue -
(ICF Perambur Extension Counter
Shell Division)
Annasalai, Opp. Spencers Plaza
Ashok Nagar, 4th Avenue
George Town, Moore Street
Kilpauk, Poonamallee High Road
Madipakkam, No.2 (Medavakkam
High Road)
Mogappair East, Bazar Street
Mylapore, Dr. Radhakrishnan Salai
Shastri Bhavan Extension Counter -
(Haddows Road, Nungambakkam)
150
Tamil Nadu Housing Board Nandanam -
(Extension Counter Annasalai)
Nanganallur, 4th Main Road
Old Washermanpet (Thiruvottiyur
High Road)
Periyar Nagar, Karthikeyan Salai
Purasawalkam High Road
Ramapuram, Mount Poonamalle Road
T. Nagar, G N Chetty Road
Kesari School Extension Counter -
(Thyagaraya Road)
Tambaram West, G S T Road
Thiruvanmiyur, East Coast Road -
(Srinivasapuram)
Velachery Tambaram Main Road
Virugambakkam, Arcot Road
Service Branch, Chennai -
(Dr. Radhakrishnan Salai, Mylapore)
Service Branch/CPC, Annasalai
COIMBATORE
Avinashi Road, Pappanaickenpalayyam
RS Puram, DB Road
Trichy Road
DINDIGUL
Salai Road
ERODE
Perundurai Road
HOSUR
Bye Pass Road
KANCHEEPURAM
Gandhi Road
KARUR
Dindigul Road
KUMBAKONAM
Nageshwaran North Street
MADURAI
Goods Shed Street
NAGERCOIL
Court Road
OMALUR
5th Ward
OOTY (OOTACAMUND)
Ettines Road
POLLACHI
Kovai Road
PUDUKKOTTAI
East Main Street
SALEM
Omalur Main Road
SATHYAMANGALAM
Mysore Trunk Road
SIVAKASI
Rajarathnam Street
THANJAVUR
Trichy Road, LIC Building
THENI
Madurai Road
THIRUVALLUR
JN Road
TIRUNELVELI
East Car Street
TIRUPUR
Court Street
TRICHY
Salai Road, Thillai Nagar
TUTICORIN
Palayamkottai Road
VELLORE
Officers Line
VILLUPURAM
Opp. New Bus Stand, Trichy Road
TRIPURA
AGARTALA
HG Basak Road
UTTAR PRADESH
AGRA
Sanjay Place
Taj Link Road, Fatehabad Road
ALIGARH
Ramghat Road, Niranjan Puri
ALLAHABAD
M.G. Marg, Civil Lines
Chowk, Shivcharan Lal Road
AZAMGARH
Civil Lines, Raidopur
BAREILLY
Civil Lines
BULANDSHAHR
DM Colony Road, Civil Lines
FAIZABAD
Civil Lines, Opp. Circuit House
FARRUKHABAD
ITI Chauraha, Shyam Nagar
GHAZIABAD
Ambedkar Road, Nehru Nagar
Indirapuram, Vaibhav Khand
GORAKHPUR
AD Chowk, Bank Road
JAUNPUR
Kutchery Road, Civil Lines
JHANSI
Civil Lines, Natraj Cinema Complex
KANPUR
The Mall, Opp. Phool Bagh
LUCKNOW
Ashok Marg
(Sikander Bagh Chauraha)
Hewett Road, Shivaji Marg
Indira Nagar, Faizabad Road
Service Branch/CPC, Lucknow -
(Opp. Doordarshan Kendra)
MATHURA
Junction Road
MEERUT
Civil Lines, Boundary Road
MIRZAPUR
Badali Katara (Beltar)
MORADABAD
Civil Lines, Sarai Khalsa
MUZAFFARNAGAR
Civil Lines (South), Court Road
NOIDA
Greater Noida, Alpha Commercial Belt I
Sector 16
S.T. Microelectronics Private Ltd. -
(Extension Counter, Knowledge Park III)
Sector 18
PILIBHIT
Chhatari Chouraha, Tanakpur Bye Pass Road
SAHARANPUR
Mission Compound, Court Road
SITAPUR
Eye Hospital Road, Civil Lines
VARANASI
Shastri Nagar, Sigra
UTTARAKHAND
BAZPUR
Main Doraha Road, Rampur Road
DEHRADUN
Rajpur Road
Service Branch/CPC, Dehradun - New Road
Service Branch/CPC, Dehradun - Rajpur Road
HARIDWAR
Main Haridwar-Delhi Road
KASHIPUR
City Centre, Station Road
MUSSOORIE
The Mall, Garhwal Terrace
PANDRI
Sitarganj Road
RISHIKESH
Adarsh Gram, Dehradun Road
ROORKEE
Civil Lines
RUDRAPUR
Awas Vikas Colony, Nainital Road
TALLI HALDWANI
Bareilly Road
WEST BENGAL
AMTALA
Diamond Harbour Road
(KE Carmel School)
ARAMBAGH
Link Road
ASANSOL
Sen Raleigh Road, Apcar Garden
BAGNAN
OT Road, Behind Sujata Cinema
BAHARAMPUR
K K Banerjee Road, Lal Dighi
BALURGHAT
Chakbhabani, Rathtala
BANKURA
Nutan Chati
BARRACKPORE
S. N. Banerjee Road (Near Champa
Cinema Hall)
BARUIPUR
Kulpi Road, Paddapukur
BASIRHAT
Basirhat Municipality Office
BOLPUR
Shantiniketan Road
BURDWAN
G. T. Road
CHANDERNAGORE
Barabazar
CHINSURAH
Hooghly-Chinsurah Municipality, Pipulpati
CONTAI
Serpur Etwaribar
DANKUNI
T.N. Mukherjee Road
DARJEELING
Rink Mall, Laden La Road
DIAMOND HARBOUR
Mouza – Raynagar
DURGAPUR
Sahid Khudiram Sarani, City Centre
FULIA
Chatkatola, Nutan Fulia
HABRA
Jessore Road, Habra Bazar
HALDIA
Basudevpur
HOWRAH
Dr. Abani Dutta Road, Salkia
Panchanantala, Deshpran Sashmal Road
JALPAIGURI
DBC Road, Rupasree Golden Cineplex
KALIMPONG
DS Gurgung Road, Near Damber Chowk
KALNA
Saptagram Kalna Katwa Road -
(Ambika Kalna)
KALYANI
B-9/276 (CA)
KATWA
Najrul Sarani, Circus Maidan
KHARAGPUR
Malancha Road
KOCH BIHAR
Sunity Road
KOLKATA
Airport, Jessore Road
Baguiati, V I P Road
Behala Chowrasta
Burra Bazar, Chaitan Sett Street
C I T Road, Deb Lane
Dalhousie Square, Clive Row
Dum Dum, Motijheel Avenue
Dunlop Bridge, B.T. Road
Electronic Complex, Sector V, Salt Lake City
Garia, Raja Subodh Chandra Mullick Road
Golpark, Gariahat Road
Kankurgachi, Manicktala Main Road
Lake Town, South Dum Dum
New Alipore, Bankim Mukherjee Sarani
Prince Anwar Shah Road, City High
Rash Behari Avenue, 41 B
151
OVERSEAS OFFICES:
SINGAPORE
9,Raffles Place
#48-01 Republic Plaza I
Singapore - 048619
SHANGHAI, CHINA
Representative Office
Suite No. 2303, Level No. 23, Citigroup Tower,
No. 33, Huayuanshiquiao Road
Lujiazhi, Pudong New Area,
Shanghai-200120
HONG KONG
805-809, Alexandra House
18 Charter Road
Central, Hong Kong
DUBAI, UAE
Unit No. 1101,
Dubai National Insurance Building
`Al Yamamah Towers’,
Opp. City Centre Mall
Port Saeed, Deira, P.O. Box 506593,
Dubai
Representative Office
Office No. 4,
Plot No. 3318-1238,
Near Karama Post Office,
P.O. Box 122504
Karama, Bur - Dubai
Dubai
Salt Lake City, BD 20, Sector I
Eastern Zonal Cultural Centre (Extension
Counter, Sector III, Salt Lake City)
Sarat Bose Road (PB Branch)
Shakespeare Sarani
Shyambazar, 5 Point Crossing
Tollygunge, N.S.C.Bose Road
Service Branch, Kolkata -
(Shakespeare Sarani)
Service Branch/CPC, Kolkata -
(Nagaland House)
KONNAGAR
G. T. Road
KRISHNANAGAR, W. BENGAL
M.M. Ghosh Street, Near Main Post Office
MADHYAMGRAM
Madhyamgram Chowmatha
MAHESHTALA
Budge Budge Trunk Road
MALDA
K J Sanyal Road
MEMARI
G.T. Road
MIDNAPUR
Station Road
NABAPALLY
Sangam Market, Colony More
PANIHATI
B. T. Road, Panihati Municipality
PURULIYA
Ranchi Road, Near Puruliya Club
RAIGANJ
Mohanbati, NS Road
RISHRA
Bangur Park
SERAMPORE
T. C. Goswami Street
SILIGURI
Sevoke Road
SF Road, Near Don Bosco School -
(Sevoke Road)
SINGUR
Nutan Bazar
SURI
Post Office More
TAMLUK
Bhimer Bazar, Main Road
152