HDFC Bank Limited Annual Report 2016

Plain-text annual report

HIGHLIGHTS • Net Profit: ` 12,296 crore. An increase of 20.4% compared to the previous year • Balance Sheet Size: ` 708,846 crore. An increase of 20.0% compared to the previous year • Total Deposits: ` 546,424 crore. An increase of 21.2% compared to the previous year • Total Advances: ` 464,594 crore. An increase of 27.1% compared to the previous year • Capital Adequacy Ratio: 15.5% • Tier I Capital Ratio: 13.2% • Gross Non-Performing Assets: 0.94% of Gross Advances • Network: - Branches: 4,520 - ATMs: 12,000 - Cities/Towns: 2,587 Do more, Live more! B A N K I NG BHARAT Financial Highlights Interest income Interest expense Net interest income Other income Net revenues Operating costs Operating result Provisions and contingencies Loan loss provisions Others Proﬁt before tax Provision for taxation Proﬁt after tax Funds : Deposits Subordinated debt Stockholders’ equity Working funds Loans Investments # Key Ratios : Earnings per share (`) * Return on average networth Tier I capital ratio Total capital ratio Dividend per share (`) * Dividend payout ratio Book value per share as at March 31 (`) * Market price per share as at March 31 (`) ** Price to earnings ratio 2006-2007 2007-2008 2008-2009 7,055.35 10,530.43 16,584.01 3,179.45 4,887.12 8,911.10 3,875.90 5,643.31 7,672.91 1,679.21 2,495.94 3,700.65 5,555.11 8,139.25 11,373.56 2,975.08 4,311.03 5,950.54 2,580.03 3,828.22 5,423.02 941.28 877.13 64.15 1,547.59 2,123.78 1,278.84 1,970.35 268.75 153.43 1,638.75 2,280.63 3,299.24 497.30 690.45 1,054.31 1,141.45 1,590.18 2,244.93 68,297.94 100,768.60 142,811.58 3,282.60 3,249.10 8,738.58 6,433.15 11,497.23 14,646.33 91,235.61 133,176.60 183,270.77 46,944.78 63,426.90 98,883.05 30,281.96 48,908.96 55,784.95 7.26 19.40% 8.58% 13.08% 1.40 22.92% 40.28 190.83 26.29 9.24 16.05% 10.30% 13.60% 1.70 22.17% 64.88 266.25 28.80 10.57 16.12% 10.58% 15.69% 2.00 22.17% 68.86 194.68 18.42 ` 1 Crore = ` 10 Million * Figures for the years prior to 2011-2012 have been adjusted to reﬂect the effect of split of equity shares from nominal value of ` 10 each into ﬁve equity shares of nominal value of ` 2 each. ** Source : NSE (prices for years prior to 2011-2012 have been divided by ﬁve to reﬂect the sub-division of shares) *** Proposed # Figures for the previous years have been adjusted to reﬂect the effect of reclassiﬁcation as mentioned in Schedule 18, Note no. 1 forming part of ‘Notes to Accounts’. HDFC Bank Limited Annual Report 2015-16 12 (` crore) 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 16,467.92 20,380.77 27,874.19 35,064.87 41,135.53 48,469.91 7,786.30 9,385.08 14,989.58 19,253.75 22,652.90 26,074.23 8,681.62 10,995.69 12,884.61 15,811.12 18,482.63 22,395.68 4,573.63 4,945.23 5,783.62 6,852.62 7,919.64 8,996.34 13,255.25 15,940.92 18,668.23 22,663.74 26,402.28 31,392.02 6,475.71 7,780.02 9,277.64 11,236.11 12,042.20 13,987.55 6,779.54 8,160.90 9,390.59 11,427.63 14,360.08 17,404.47 2,490.40 2,342.24 1,877.44 1,677.01 1,588.03 2,075.75 2,288.74 1,198.55 1,091.77 1,234.21 1,632.58 1,723.58 201.66 1,143.69 785.67 442.80 (44.56) 352.17 60,221.45 32,629.93 27,591.52 10,751.72 38,343.24 16,979.69 21,363.55 2,725.61 2,133.63 591.98 4,289.14 5,818.66 7,513.15 9,750.62 12,772.05 15,328.72 18,637.94 1,340.44 1,892.26 2,346.08 3,024.34 4,293.67 5,112.80 6,341.71 2,948.70 3,926.40 5,167.07 6,726.28 8,478.38 10,215.92 12,296.23 167,404.44 208,586.41 246,706.45 296,246.98 367,337.48 450,795.65 546,424.19 6,353.10 7,393.05 11,105.65 16,586.75 16,643.05 16,254.90 21,519.58 25,376.35 29,924.37 36,214.15 43,478.63 62,009.42 15,090.45 72,677.77 222,458.57 277,352.59 337,909.50 400,331.90 491,599.50 590,503.08 708,845.57 125,830.59 159,982.67 195,420.03 239,720.64 303,000.27 365,495.04 464,593.96 53,113.32 61,670.94 84,728.34 97,342.80 105,831.88 151,641.77 163,885.78 13.51 16.80% 13.26% 17.44% 2.40 21.72% 94.02 386.70 28.62 17.00 16.52% 12.23% 16.22% 3.30 22.72% 109.09 469.17 27.59 22.11 18.37% 11.60% 16.52% 4.30 22.70% 127.52 519.85 23.51 28.49 20.07% 11.08% 16.80% 5.50 22.77% 152.20 625.35 21.95 35.47 20.88% 11.77% 16.07% 6.85 22.68% 181.23 748.80 21.11 42.15 20.36% 13.66% 16.79% 8.00 23.62% 247.39 1,022.70 24.26 48.84 17.97% 13.22% 15.53% 9.50 *** 23.51% 287.47 1,071.15 21.93 HDFC Bank Limited Annual Report 2015-16 13 BOARD OF DIRECTORS STATUTORY AUDITORS Mrs. Shyamala Gopinath, Chairperson Mr. A. N. Roy Mr. Bobby Parikh Mr. Keki Mistry Dr. Pandit Palande (Retired as Director w.e.f. close of business hours on April 23, 2015) Mr. Partho Datta Mrs. Renu Karnad Mr. Malay Patel Mr. Umesh Chandra Sarangi (Appointed as Additional Director w.e.f. March 1, 2016) Mr. Aditya Puri, Managing Director Mr. Paresh Sukthankar, Deputy Managing Director Mr. Kaizad Bharucha, Executive Director Deloitte Haskins & Sells Chartered Accountants REGISTERED OFFICE HDFC Bank House, Senapati Bapat Marg, Lower Parel, Mumbai 400 013. Tel: + 91 22 66521000 Fax: + 91 22 24960737 Website: www.hdfcbank.com CORPORATE IDENTIFICATION NO CIN - L65920MH1994PLC080618 REGISTRARS & TRANSFER AGENTS Datamatics Financial Services Ltd Plot No. B 5, Part B Crosslane, MIDC, Marol, Andheri (East), Mumbai 400 093. Tel: + 91 22 66712213-14 Fax: + 91 22 66712011 E-mail: hdinvestors@dfssl.com KEY MANAGERIAL PERSONS Mr. Aditya Puri, Managing Director Mr. Paresh Sukthankar, Deputy Managing Director Mr. Kaizad Bharucha, Executive Director Mr. Sashidhar Jagdishan, Chief Financial Ofﬁcer Mr. Sanjay Dongre, Executive Vice President (Legal) & Company Secretary SENIOR MANAGEMENT TEAM Mr. Abhay Aima Mr. Ashish Parthasarthy Mrs. Ashima Bhat Mr. Ashok Khanna Mr. Arvind Kapil Mr. Aseem Dhru Mr. Bhavesh Zaveri Mr. Chakrapani Venkatachari Mr. Deepak Maheshwari Mr. Dhiraj Relli (on deputation to HDFC Securities Limited, the Bank’s subsidiary) Mr. Jimmy M Tata Mr. Munish Mittal Mr. Navin Puri Mr. Nitin Chugh Mr. Nitin Rao Mr. Nirav Shah Mr. Parag Rao Mr. Rajender Sehgal Mr. Rakesh K. Singh Mr. Rajesh Rathanchand Mr. Ravi Narayanan HDFC Bank Limited Annual Report 2015-16 14 22nd ANNUAL GENERAL MEETING Date Day Time Place July 21, 2016 Thursday 2.30 p.m. : : : : Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400 020 Record date for determining eligibility of dividend : June 30, 2016 (both physical and electronic) Contents Directors’ Report Independent Auditor's Report Financial Statements Basel III - Pillar 3 Disclosures 16 - 62 65 - 67 68 - 140 141 Independent Auditor's Report for Consolidated Financial Statements 142 - 145 Consolidated Financial Statements 146 - 194 Independent Auditor's Certiﬁcate on Corporate Governance 195 Corporate Governance Shareholder Information 196 - 212 213 - 215 HDFC Bank Limited Annual Report 2015-16 15 Directors' Report To the Members, Introduction: Your Directors take great pleasure in presenting the 22nd Annual Report on the business and operations of your Bank, together with the audited accounts for the year ended March 31, 2016. It’s been a transformational year for your Bank in more ways than one. Led by a slew of digital innovations, many of them pioneering and several initiatives in rural India, your Bank was able to cement its position as a premier Bank across markets, from metros to the hinterland. The Bank’s singular endeavour to offer an agnostic customer experience across all its geographies has enabled it to garner not just substantial mindshare but also market share. Your Bank has also contributed as a corporate citizen substantially through its Sustainable Livelihood Initiative, which skills those at the Bottom of the Pyramid and enables them to earn a livelihood by providing captial and in the process substituting usurious lending by the unorganized ﬁnancial sector. Through its CSR programme, your Bank is helping create sustainable communities. These initiatives helped the larger society bond better with the Bank. They were also instrumental in establishing your Bank as India’s Most Valuable Brand for the 2nd consecutive year in a study conducted by Millward Brown, a leading global research agency specializing in media and brand equity research and a part of communications group WPP. While the Bank’s operations complemented by new initiatives during the year led to higher revenues and proﬁtability, its traditional prudence ensured that it did not come at the cost of asset quality. Summary of Financial Performance Particulars Deposits and Other Borrowings Advances Total Income Proﬁt Before Depreciation and Tax Proﬁt After Tax Proﬁt Brought Forward Total Proﬁt Available for Appropriation Appropriations Transfer to Statutory Reserve Transfer to General Reserve Transfer to Capital Reserve Transfer to / (from) Investment Reserve Proposed Dividend Tax Including Surcharge and Education cess on Dividend Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits (` crore) For the year ended / As on March 31, 2016 March 31, 2015 599,442.7 464,594.0 70,973.2 19,343.8 12,296.2 18,627.8 30,924.0 3,074.1 1,229.6 222.2 (8.5) 2,401.8 488.9 (11.7) 496,009.2 365,495.0 57,466.3 15,985.0 10,215.9 14,654.2 24,870.1 2,554.0 1,021.6 224.9 27.5 2,005.2 408.2 0.8 Balance carried over to Balance Sheet 23,527.6 18,627.8 The Bank posted total income and net profit of ` 70,973.2 crore and ` 12,296.2 crore respectively for the year ended March 31, 2016 as against ` 57,466.3 crore and ` 10,215.9 crore respectively for the year ended March 31, 2015. Appropriations from net proﬁt have been effected as per the table given above. HDFC Bank Limited Annual Report 2015-16 16 Directors' Report Dividend Your Bank has had a dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital in order to maintain a healthy capital adequacy ratio to support future growth. It has had a consistent track record of steady increase in dividend distribution over its history with the dividend pay-out ratio ranging between 20-25 per cent. Consistent with this policy and in recognition of the overall performance during this ﬁnancial year, your Directors are pleased to recommend a dividend of ` 9.50 per equity share of ` 2 for the year ended March 31, 2016 as against ` 8 per equity share of ` 2 for the year ended March 31, 2015. This dividend shall be subject to tax on dividend to be paid by the Bank. Ratings Instrument Fixed Deposit Programme Rating Rating Agency Comments CARE AAA (FD) CARE Ratings IND Taaa India Ratings Certiﬁcate of Deposits Programme CARE A1+ CARE Ratings IND A1+ India Ratings Long term unsecured, subordinated (Lower Tier 2) Bonds CARE AAA CARE Ratings IND AAA India Ratings Tier 1 Perpetual Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL Upper Tier 2 Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL Infrastructure Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL Instruments with this rating are considered to have very strong degree of safety regarding timely payment of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely payment of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely payment of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely payment of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. HDFC Bank Limited Annual Report 2015-16 17 Directors' Report Issuance of Equity Shares HDFC Securities Limited During the year under review, 2,16,91,200 equity shares were allotted to the employees of your Bank in respect of the equity stock options exercised under the Employee Stock Option schemes. As on March 31, 2016, the issued, subscribed and paid-up capital of your Bank stood at ` 5,056,373,034 comprising 2,52,81,86,517 equity shares of ` 2 each. Employee Stock Options The information pertaining to Employee Stock Options is given in ANNEXURE 1 to this report. HDFC Securities Limited (HSL) is among India’s largest retail broking ﬁrms and offers a large bouquet of ﬁnancial services. As on March 31, 2016, your Bank continued to hold 97.9 per cent stake in HSL. HSL increased its physical distribution network by a further 12 branches during the year, taking the total to 262 branches across 189 cities in the country. During the year under review, HSL’s total income amounted to ` 401.6 crore as against ` 417 crore in the previous year. During the same period, the net proﬁt after tax was ` 133.3 crore compared to ` 165 crore in the previous year. Capital Adequacy Ratio Your Bank’s total Capital Adequacy Ratio (CAR) calculated in line with Basel III capital regulations stood at 15.5 per cent, well above the regulatory minimum of 9 per cent. Of this, Tier I CAR was 13.2 per cent. Subsidiary Companies Your Bank has two subsidiaries, HDB Financial Services Limited (‘HDBFS’) and HDFC Securities Limited (‘HSL’). HDB Financial Services Limited HDBFS is a non-deposit taking non-bank ﬁnance company (‘NBFC’). The customer segments being addressed by HDBFS are typically underserviced by larger commercial banks, and thus create a proﬁtable niche for the company. Apart from lending to individuals, the company grants loans to micro, small and medium business enterprises. It also operates call centres for collection services to the Bank’s retail loan products. During the year ended March 31, 2016, the company’s total income increased by 31 per cent to ` 3,302 crore as compared to ` 2,527.3 crore in the previous year. During the same period, the company’s net proﬁt after tax grew by 52.9 per cent to ` 534.4 crore compared to ` 349.5 crore in the previous year. HDBFS offers its loan and asset ﬁnance products through its branches and digital and assisted channels. It has 929 branches in 623 cities. As on March 31, 2016, your Bank held 97.1 per cent stake in HDBFS. A Scheme of Amalgamation has been proposed for the amalgamation of Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited (associates of the Bank) with HDBFS. Necessary procedures have been initiated in this regard and are pending as on the date of this Report. Insights Award 2015 During the year under review, HSL won the prestigious IDC in Customer Experience in the BFSI category and the Digital Business Leader Award for Best CRM Implementation. It was adjudged runner up in the Best e-Brokerage category at the Outlook Money Awards 2015. for Excellence The annual reports of HDBFS and HSL are available on the website of the Bank. Shareholders who wish to have a copy of the annual accounts and detailed information on HDBFS and HSL may write to the Bank. These documents shall also be available for inspection by shareholders at the registered ofﬁces of the Bank, HDBFS and HSL. MANAGEMENT DISCUSSION AND ANALYSIS Macroeconomic and Industry Developments India’s economy recorded a growth rate of 7.6 per cent in terms of real Gross Domestic Product (GDP) in 2015-16. This was the highest in ﬁve years despite the continued slowdown in global growth and two consecutive years of deﬁcient monsoons in India. Inﬂation moderated, with the average level of Consumer Price Inﬂation declining to 5 per cent in 2015-16 from 6 per cent in 2014-15. Domestic manufacturing growth improved to a robust 9.5 per cent compared to 5.5 per cent in ﬁnancial year 2014-15. It reﬂects stronger value addition due to subdued input prices, which was a result of the declining global commodity cycle. Foreign Direct Investment inﬂows (FDI) increased by 40 per cent in the April–December period of 2015 over the corresponding period of the previous year. A range of supply side measures, including prudent food stock management, appropriate monetary policy action and subdued global commodity prices aided the decline in inﬂation. Meanwhile, initiatives such as ‘Make in India’, power sector reforms, the liberalization of FDI rules and higher government capital expenditure spending indicate an incipient revival in domestic investment activity. HDFC Bank Limited Annual Report 2015-16 18 Directors' Report Going forward, weakness in private investment cycle and asset quality strain in the banking sector could prevent a full-ﬂedged recovery, though some improvement in the growth rate is quite likely. Risks on the external front continue to loom in the form of a wider emerging market slowdown, especially on account of China and the likely volatility in global ﬁnancial markets. improve inﬂation mix should The growth for 2016-17 as the Government is expected to undertake more structural reforms and the RBI is likely to be more accommodative in its monetary policy. Going by the Union Budget, the focus of ﬁscal policy in the coming year will be the revival of rural economy and sustained increase in capital expenditure. Besides, higher outlay on various social sector programmes and implementation of Seventh Central Pay Commission recommendations should boost consumption spending. Going forward, headline GDP growth should increase to 7.8 per cent in 2016-17 from 7.6 per cent in 2015-16. Mission, Business Strategy and Approach to Business Your Bank’s mission is to be a “World Class Indian Bank” benchmarking itself against international standards and best practices in terms of product offerings, technology, customer service levels, risk management, audit and compliance. The objective is to continue building sound customer franchises across distinct businesses so as to be a preferred provider of banking services for its target retail and wholesale customer segments and to achieve a healthy growth in proﬁtability, consistent with the Bank’s risk appetite. Your Bank’s business philosophy is based on ﬁve core values: Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Based on these cornerstones, it is your Bank’s aim to meet the ﬁnancial needs of customers while ensuring service of the highest quality. Your Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. The Bank understands and respects its ﬁduciary role and responsibility to all stakeholders and strives to meet their expectations. The cardinal principles of independence, accountability, responsibility, transparency, fair and timely disclosures serve as the basis of your Bank’s approach to corporate governance. Your Bank believes that diversity and independence of the Board, transparent disclosures, shareholder communication and effective regulatory compliance are necessary for creating and sustaining shareholder value. Your Bank has infused these principles into all its activities. Your Bank also has a well-documented Code of Ethics / Conduct which deﬁnes the high business responsibility and ethical standards to be adhered to while conducting the business of the Bank and mandates compliance with legal and regulatory requirements. All employees, including senior management have to afﬁrm annually that they have adhered to the Code of Conduct rules. 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Revenue growth was driven by an increase in both Net Interest Income and Other Income. Net Interest Income grew by 23.2 per cent due to acceleration in loan growth coupled with a Net Interest Margin (NIM) of 4.3 per cent for the year ended March 31, 2016. Income was largest component of Other Other Income grew 19.5 per cent over that of the previous year to ` 10,751.7 crore during the year ended March 31, 2016. The fees and commissions, which increased by 17.8 per cent to ` 7,759 crore with the primary drivers being commissions on debit and credit cards, transactional charges, fees on deposit accounts, fees on retail assets and commission on distribution of mutual funds and insurance products. Foreign exchange and derivatives revenue was ` 1,227.7 crore, gain on revaluation and sale of investments was ` 731.8 crore and recoveries from written-off accounts were ` 808 crore in the year ended March 31, 2016. Operating (Non-Interest) expenses increased to ` 16,979.7 crore for the year under review from ` 13,987.6 crore in the previous year. During the year, your Bank opened 506 new branches and 234 ATMs coupled with strong growth in retail asset and HDFC Bank Limited Annual Report 2015-16 19 Directors' Report card products, which resulted in higher infrastructure and stafﬁng expenses. Staff expenses also increased on account of annual wage revisions. Despite the addition to the infrastructure, your Bank maintained its Cost to Income ratio at 44.3 per cent for the year ended March 31, 2016, as against 44.6 per cent for the previous year. Total Provisions and Contingencies were ` 2,725.6 crore for the year ended March 31, 2016 as compared to ` 2,075.8 crore during the previous year. Your Bank’s provisioning policies remain higher than regulatory requirements. The coverage ratio based on speciﬁc provisions alone excluding write-offs was around 70 per cent and including general and ﬂoating provisions was around 146 per cent as on March 31, 2016. Your Bank made General Provisions of ` 440 crore during the year ended March 31, 2016. Your Bank’s Proﬁt before Tax was ` 18,637.9 crore, an increase of 21.6 per cent over the year ended March 31, 2015. After providing for Income Tax of ` 6,341.7 crore, the Net Proﬁt for year ended March 31, 2016 was ` 12,296.2 crore, up 20.4 per cent over the year ended March 31, 2015. Return on Average Net worth was 18 per cent while the Basic Earnings per Share increased from ` 42.1 to ` 48.8 per equity share. As on March 31, 2016, your Bank’s total balance sheet stood at ` 708,846 crore, an increase of 20 per cent over ` 590,503 crore in the previous year. Total Deposits increased by 21.2 per cent to ` 546,424 crore as on March 31, 2016 from ` 450,796 crore as on March 31, 2015. Savings Account Deposits grew by 18.4 per cent to ` 147,886 crore while Current Account Deposits grew by 20.2 per cent to ` 88,425 crore as on March 31, 2016. The proportion of Current and Savings Deposits to total deposits was at 43 per cent as on March 31, 2016. During the ﬁnancial year under review, Net Advances grew by 27.1 per cent to ` 464,594 crore. The Bank had a market share of approximately 5.4 per cent and 5.8 per cent in total Domestic System Deposits and Advances respectively. Your Bank’s Credit Deposit (CD) Ratio was 85 per cent as on March 31, 2016. Business Segments’ Update Consistent with its past performance, your Bank has achieved healthy growth across various operating and ﬁnancial parameters in the last ﬁnancial year. This performance reﬂected the strength and diversity of three primary business franchises - retail banking, wholesale banking and treasury and of its disciplined approach to risk-reward management. Retail Banking ended March 31, 2016, driven by Retail Term Deposits which grew faster at 23.4 per cent during the same period. The Bank’s Retail Advances grew by 28.6 per cent to ` 248,319 crore during the year ended March 31, 2016 driven primarily by growth in Personal Loans, Auto Loans, Home Loans, and Credit Cards. Retail Advances include loans which fulﬁl the criteria of orientation, nature of product, granularity and low value of individual exposures for retail exposures as laid down by the Basel Committee. The growth in Retail Advances has been primarily due to two factors. First is the extensive network of branches across the length and breadth of the country which allows the Bank to reach out to different customer segments. Second is the emphasis on innovation across multiple channels, which offers customers choice, convenience and a superior experience. Faster and more efﬁcient platform deliveries across ATMs, Internet, Phones and Mobiles have been the cornerstone of the growth in Retail Advances. Focus on cutting edge analytics and Customer Relationship Management (CRM) has helped the Bank to understand the customers’ life cycle better and offer them products appropriate to their proﬁle and needs. Further, analytics also allow the Bank to target potential customers in a cost effective manner. This enables your Bank to strengthen its relationship with existing customers, as well as forge new relationships. Focus on analytics and CRM also helps in understanding the risk proﬁle of customers and helps improve fraud control and collections. During the year under review, your Bank added 506 branches taking its physical distribution network to 4,520 branches in 2,587 cities / towns from 4,014 branches in 2,464 cities / towns as on March 31, 2015. Number of ATMs increased to 12,000 from 11,766 during the same period. The Bank’s focus on semi-urban and under-banked markets continued with 55 per cent of its branches in such areas. The Bank’s customer base has grown to 3.77 crore. In order to provide its customers greater choice, ﬂexibility and convenience, your Bank continued to make signiﬁcant headway (investments) in its multichannel servicing strategy, offering its customers the use of ATMs, Internet, Phones and MobileBanking in addition to its expanded branch network to serve their banking needs. PhoneBanking services are available even for Non Resident Indian (NRI) customers across the globe. The growth in your Bank’s retail banking business was robust during the year ended March 31, 2016. Your Bank’s total Retail Deposits grew by 20.9 per cent to ` 436,383 crore in the year The Bank continued its focus on existing customers for its credit cards portfolio, with over 75 per cent of new cards issued to this segment. As part of its strategy to drive usage HDFC Bank Limited Annual Report 2015-16 20 Directors' Report of its credit cards, the Bank also has a signiﬁcant presence in the ‘merchant acquiring’ business, with the total number of point-of-sale (POS) terminals installed crossing 2.8 lakh. In addition to the aforementioned products, the Bank operates in the home loan business in conjunction with HDFC Limited. Under this arrangement, the Bank sells loans provided by HDFC Limited through its branches. HDFC Limited approves and disburses the loans, with the Bank receiving a sourcing fee for these loans. The Bank has the option to purchase up to 70 per cent of the fully disbursed home loans sourced under this arrangement either through the issue of mortgage backed pass through certiﬁcates (PTCs) or by a direct assignment of loans. The balance is retained by HDFC Limited. A fee is paid to HDFC Limited for the administration and servicing of the loans. Your Bank originated, on an average, approximately ` 1,300 crore of home loans every month in the year under review. During the same period, the Bank purchased from HDFC Limited home loans worth ` 12,773 crore under the “loan assignment” route. Your Bank also distributes Life Insurance, General Insurance and Mutual Fund products through its tie-ups with insurance companies and mutual fund houses. Third Party Distribution Income contributed approximately 14 per cent of total fee income for the year ended March 31, 2016, compared to 15 per cent of the total fee income for the previous year. customer The Bank’s data warehouse, relationship management (CRM) and analytics solutions have helped it target existing and potential customers in a cost effective manner and offer them products appropriate to their proﬁle and needs. Apart from reducing costs of acquisition, this has also helped in deepening customer relationships and greater efﬁciency in fraud control and collection activities resulting in lower credit losses. The Bank is committed to investing in advanced technology in this area which will provide a cutting edge to its product and service offerings. Wholesale Banking Your Bank provides its corporate and institutional clients a wide range of commercial and transactional banking products, backed by high quality service and relationship management. The Bank’s Wholesale Banking business covers not only the top end of the corporate sector but also the Emerging Corporate Segment and SMEs. It has a number of business groups catering to various segments with a wide range of banking services covering their Working Capital, Term Finance, Trade Services, Cash Management, Investment Banking services, Foreign Exchange and Electronic Banking requirements. Your Bank provides its customers’ access to both Working Capital and Term Financing. Working Capital Loans and Short Tenor Term Loans continued to account for a large share of its Wholesale Advances. During the year ended March 31, 2016, growth in the Wholesale Banking business continued to be driven by new customer acquisition and securing a higher share of the wallet of existing customers by cross-selling with a focus on optimizing yields and increasing product penetration. for focus Your Bank’s Financial Institutions and Government Business Group (FIG) offers commercial and transaction banking products to ﬁnancial institutions, mutual funds, insurance companies, public sector undertakings, central and state government this segment remained departments. The main the offering of various deposit and transaction banking products besides deepening these relationships by offering Funded, Non-Funded, Treasury and Foreign Exchange products. Your Bank is authorised to collect Direct Taxes. It made a total collection of nearly ` 1,90,000 crore during the year and was ranked second in terms of total collections made by any Bank. Your Bank is also authorised to collect Excise as well as Service Tax and collected over ` 97,000 crore, during the year. Governments of 13 States have authorised your Bank to collect State Taxes / Duties. These mandates enable a greater convenience to customers and help the exchequer in mobilizing resources in a seamless manner. The Bank continues to be the market leader in cash settlement services for major stock and commodity exchanges in the country. Your Bank’s Investment Banking Group has established itself as a leading player in Debt Capital Markets and Project Finance. In recognition of the strong position enjoyed by the Bank in the Debt Capital Market, Bloomberg ranked it No. 2 amongst book runners in INR bonds for Calendar Year 2015. Your Bank has executed a well thought out strategy of offering a full range of banking products under one roof to the commercial vehicle and infrastructure equipment market. It has, in a short span of time, established itself as one of the preferred and trusted brands in this segment with an enviable list of MoUs and Programmes with the leading commercial vehicles and Original Equipment Manufacturers (OEMs). Your Bank offers under one roof, Commercial Vehicle and Equipment Working Capital Loans, Bank Guarantee, Tax Payments, Cash Management Services and other banking services enabling it to cut down on transaction time and costs for customers. Your Bank’s Cash Management Business (CMS) (including all outstation collection, disbursement and electronic fund transfer products across its various customer segments) registered volumes of over ` 39 lakh crore. The Bank is one of the front runners in making signiﬁcant progress in web-enabling its CMS business. In line with the Bank’s overall drive towards digitization, HDFC Bank Limited Annual Report 2015-16 21 Directors' Report it has further ensured a larger conversion of physical payments into electronic in the Cash Management Business. The Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share by offering customised solutions. From customised ERP integrations to high-end SAP certiﬁed solutions, the Bank has been a leading proponent of adopting innovative technology. As part of the Bank’s on-going digital transformation, the Bank extended its “Trade on Net” offering on mobile. This product enables customers to avail of Remittances, Letters of Credit, and Guarantees through the net platform. It gained enormous acceptance with customers due to the savings and convenience it offers. International Operations Your Bank currently has three overseas branches: a Wholesale Banking branch in Bahrain, a branch in Hong Kong and a branch at Dubai International Finance Centre (DIFC) in Dubai. The overseas branches offer multiple banking services including Treasury Products, Trade Finance and Loans to customers. The DIFC branch offers advisory services to High Net Worth Individuals and Corporates. Your Bank also has Representative Ofﬁces in Abu Dhabi and Nairobi which are engaged in promotional and marketing activities of the Bank’s brand name among the Non-Resident Indians. As of March 31, 2016, the combined balance sheet size of overseas branches was over $ 5 billion. Advances at overseas branches constituted close to 7 per cent of the Bank’s gross advances as on March 31, 2016. The total income of the overseas branches constituted over 1.5 per cent of the Bank’s total income for the year. Your Bank mobilized $ 3.4 billion in special FCNR (B) deposits from NRI clients under RBI swap window in 2013. This was the highest among all Banks. NRI clients had availed of loans amounting to $ 1.8 billion from the Bahrain branch towards booking these deposits. As a major portion of these deposits was for a 3 year tenor, this would come up for maturity during September - November 2016. Treasury The Treasury Group is responsible for compliance with reserve requirements and management of liquidity and interest rate risk on the Bank’s balance sheet. On the foreign exchange and derivatives front, revenues were driven primarily by spreads on customer transactions based on trade ﬂows and customers’ demonstrated hedging needs. The year ended March 31, 2016 recorded ` 1,227.7 crore in revenues from foreign exchange and derivative transactions. These revenues were distributed across large and emerging corporates, business banking and retail customer segments for plain vanilla foreign exchange products and across primarily large and emerging corporate segments for derivatives. The Bank offers Indian Rupee and foreign exchange derivative products to its customers, who use them to hedge their market risks. The Bank enters into foreign exchange and derivative deals with counterparties after it has set up appropriate counterparty credit limits based on its evaluation of the ability of the counterparty to meet its obligations in the event of crystallization of the exposure. Appropriate credit covenants may be stipulated where required as trigger events to call for collaterals or terminate a transaction and contain the risk. Where the Bank enters into foreign currency derivative contracts, not involving the Indian Rupee, with its customers it lays them off in the inter- Bank market on a matched basis. For such foreign currency derivatives, the Bank primarily carries the counterparty credit risk (where the customer has crystallized payables or mark-to-market losses). The Bank also deals in derivatives on its own account, including for the purpose of its own balance sheet risk management. to meet Given the regulatory requirement of holding government securities the Statutory Liquidity Ratio (SLR) requirement, your Bank maintains a portfolio of Government Securities. While a signiﬁcant portion of these SLR securities are held in the “Held-to-Maturity” (HTM) category, some of these are held in the “Available for Sale” (AFS) category. The Bank is also a Primary Dealer for Government Securities. As a part of this business, as well as otherwise, the Bank holds ﬁxed income securities in the ‘Held for Trading’ (HFT) category. Information Technology Technology is a key enabler and facilitator to the critical goals of your Bank allowing it to make systems and processes even more efﬁcient. Since inception, your Bank continued to invest heavily in technology to provide better products and superior customer experience. Your Bank continues to spread its electronically linked branch network with state-of-the-art IT enabled core banking platform to ensure customers have access to 24*7 banking services. limitations infrastructure Your Bank now has a large branch network in rural India. There are in deep geography. Your Bank has taken steps to address these issues, so that the Bank can offer various products and seamless services to clients across the length and breadth of the country. Your Bank also implemented Desktop Virtualisation, a cloud technology solution, to ensure that your Bank is able to overcome telecom networks. Bandwidth acceleration limitations of and compression implemented to empower rural / semi urban branches to improve the speed of the telecommunication network. QuickBanking, a mobile app catering to the off-line Internet has been launched by your Bank. technology has been HDFC Bank Limited Annual Report 2015-16 22 Directors' Report Your Bank has a large presence in the transactional processing space in most products including RTGS, NEFT and other electronic payments, Retail Assets and Direct Banking. Your Bank has made signiﬁcant investments in technology re-engineering, system design and architecture and smart storage capacity. Your Bank maintains state-of-the-art IT Infrastructure, Products and Services to meet growing business needs. It’s imperative that these services are provided without any disruption. Your Bank has sophisticated architecture and well-rehearsed Disaster Recovery set-up, so as to ensure 99.5 per cent up-time of important applications. initiatives These reafﬁrmed your Bank’s commitment to a signiﬁcantly enhanced customer experience across all channels including Digital Banking. Your Bank is glad to share that technology initiatives of your Bank have also been recognized in the form of many awards and accolades including from Institute for Development and Research in Banking Technology (IDRBT) and Indian Banks’ Association (IBA). Cyber Security Your Bank has setup an effective governance framework to manage cyber security. A suitable organizational structure has been put in place to ensure that your Bank monitors various cyber security threats and minimizes them. Your Bank conducts the cyber security threat assessment and mitigation requirements on a continuous basis and is committed to implement necessary improvements in an on-going manner. The Bank has to counter these: implemented various security initiatives (cid:115)(cid:0) (cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:54)(cid:85)(cid:76)(cid:78)(cid:69)(cid:82)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0) (cid:33)(cid:83)(cid:83)(cid:69)(cid:83)(cid:83)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:48)(cid:69)(cid:78)(cid:69)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:52)(cid:69)(cid:83)(cid:84)(cid:83)(cid:0) are carried out to assess and remedy the vulnerabilities in applications and IT Infrastructure (cid:115)(cid:0) (cid:33)(cid:78)(cid:84)(cid:73)(cid:13)(cid:48)(cid:72)(cid:73)(cid:83)(cid:72)(cid:73)(cid:78)(cid:71)(cid:0) (cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0) (cid:72)(cid:65)(cid:86)(cid:69)(cid:0) (cid:66)(cid:69)(cid:69)(cid:78)(cid:0) (cid:83)(cid:85)(cid:66)(cid:83)(cid:67)(cid:82)(cid:73)(cid:66)(cid:69)(cid:68)(cid:0) (cid:84)(cid:79)(cid:0) (cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) that the phishing sites are shutdown in a timely manner. This ensures that customers are not lured to fraudulent sites (cid:115)(cid:0) (cid:50)(cid:73)(cid:83)(cid:75)(cid:0) (cid:37)(cid:78)(cid:71)(cid:73)(cid:78)(cid:69)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:52)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:45)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) implemented to monitor suspicious transactions on Internet Banking, ATM and e-commerce channel (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:0) (cid:67)(cid:89)(cid:66)(cid:69)(cid:82)(cid:13)(cid:65)(cid:84)(cid:84)(cid:65)(cid:67)(cid:75)(cid:83)(cid:0) (cid:84)(cid:65)(cid:82)(cid:71)(cid:69)(cid:84)(cid:69)(cid:68)(cid:0) (cid:65)(cid:84)(cid:0) (cid:67)(cid:82)(cid:73)(cid:84)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0) (cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) assets, the Bank has setup 24*7 Cyber Security Command Centre (cid:115)(cid:0) (cid:40)(cid:85)(cid:77)(cid:65)(cid:78)(cid:83)(cid:0) (cid:66)(cid:69)(cid:73)(cid:78)(cid:71)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:87)(cid:69)(cid:65)(cid:75)(cid:69)(cid:83)(cid:84)(cid:0) (cid:76)(cid:73)(cid:78)(cid:75)(cid:0) (cid:73)(cid:78)(cid:0) (cid:35)(cid:89)(cid:66)(cid:69)(cid:82)(cid:0) (cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:89)(cid:12)(cid:0) (cid:89)(cid:79)(cid:85)(cid:82)(cid:0) Bank has been carrying out continuous awareness among employees and customers (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:67)(cid:82)(cid:73)(cid:84)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:87)(cid:69)(cid:66)(cid:83)(cid:73)(cid:84)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:83)(cid:67)(cid:65)(cid:78)(cid:78)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:69)(cid:68)(cid:0) continuously for early detection of any malware A testimony to the Bank’s crisis preparedness is that it has secured PCI DSS and ISO 27001 certiﬁcation for its critical information assets. Its efforts have been further recognized through awards IDRBT, Data Security Council of India-National Association of Software and Services Companies (NASSCOM) for various cyber security initiatives. from Service Quality Initiatives is undertaken from customers in product, processes and service A regular process of reviewing the service levels and capturing feedback for continuous levels. improvement This has gained even more criticality as the customer can now access the Bank’s services across traditional touch points like branches, ATMs as well as the digital ones like the Internet and Mobile. Thanks to the new digital products on offer from the Bank - constantly monitoring the customer experience, securing feedback and acting on it becomes even more imperative. Your Bank has therefore augmented the training and skill development mechanism to empower and equip employees to deliver improved quality of Customer Service, as well as put in place a more stringent grievance monitoring and redressal mechanism across different delivery channels. The effectiveness of these measures is reviewed periodically at different levels including the Board of Directors. All these initiatives have helped in consistent reduction in total number of customer complaints. It is also a testimony to the Bank’s strong and objective review mechanism. These are done by an independent cross functional team of senior staff to ensure unbiased resolution. In addition to the aforementioned measures, in compliance with Regulatory guidelines, your Bank has appointed a senior retired banker as Chief Customer Service Ofﬁcer (Internal Ombudsman) who heads the review mechanism. As a result of the continued focus on customer service, your Bank has received written appreciation from many of the Banking Ombudsmen appointed by Reserve Bank of India across locations such as Andhra Pradesh, Chhattisgarh, Goa, Gujarat, Haryana, Madhya Pradesh, Maharashtra, Punjab, Sikkim, Uttarakhand, Uttar Pradesh and West Bengal. Risk Management and Portfolio Quality Integral to its business, the Bank takes on various types of risk, the most important of which are credit risk, market risk, liquidity risk and operational risk. The identiﬁcation, measurement, monitoring and management of risks remain a key focus area for the Bank. Sound risk management and balancing risk-reward trade-offs are critical to the Bank’s success. Business and revenue growth are therefore to be weighed in the context of the risks implicit in the Bank’s business strategy. The Board of Directors of your Bank endorses the risk strategy and approves HDFC Bank Limited Annual Report 2015-16 23 Directors' Report the risk policies. The Risk Policy and Monitoring Committee of the Board supervises implementation of the risk strategy. It guides the development of policies, procedures and systems for managing risk. The committee periodically reviews risk level and direction, portfolio composition, status of impaired credits as well as limits for treasury operations. To manage credit risk, the Bank has a comprehensive centralized risk management function, independent from the operations and business units of the Bank. Distinct policies, processes and systems are in place for the retail and wholesale lending businesses. In the retail loan businesses, the credit cycle is managed through appropriate front-end credit, operational and collection processes. For each product, programmes deﬁning customer segments, underwriting standards and security structure are speciﬁed to ensure consistency of credit buying patterns. Given the granularity of individual exposures, retail credit risk is monitored largely on a portfolio basis, across various products and customer segments. For wholesale credit exposures, management of credit risk is done through target market deﬁnition, appropriate credit approval processes, ongoing post-disbursement monitoring and remedial management procedures. Overall portfolio diversiﬁcation, prudential ceilings across various dimensions (individual/ borrower group, industry, credit risk rating grades, and country), product mix, security structures and periodic as well as proactive reviews facilitate risk mitigation and management. The asset quality of the Indian banking industry came under severe pressure during the year due to broader macroeconomic factors as well as issues speciﬁc to certain sectors in the economy. The banking industry on a collective basis saw a sharp spike in non-performing assets as also ﬂexible structuring of loans under the RBI framework. Your Bank did not witness any signiﬁcant deterioration in overall asset quality and continues to maintain the highest standards of governance in respect of recognition and provisioning of non-performing loans. During the year ended March 31, 2016, your Bank’s ratio of gross non-performing assets (NPAs) to gross advances was 0.9 per cent. Net non-performing assets (gross non-performing assets less speciﬁc loan loss provisions) were 0.3 per cent of net advances as of March 31, 2016. Total restructured assets (including applications under process restructuring) were 0.1 per cent of gross advances as of March 31, 2016. The speciﬁc loan loss provisions that the Bank has made for its non-performing assets continue to be more conservative than the regulatory requirements. In addition, the Bank has made general provisions for standard assets which are as per the regulatory prescription. The coverage ratio taking into account speciﬁc, general and ﬂoating provisions was 146 per cent as of March 31, 2016. for A dedicated team within the risk management function is responsible for assessment, monitoring and reporting of operational risk exposures across the Bank. A Board approved Operational Risk Management Framework has been put in place. A bottom up risk control self-assessment process identiﬁes high risk areas so that the Bank can initiate timely remedial measures. Key Operational Risk Indicators are employed to alert the Bank on impending problems in a timely manner to ensure risk mitigation actions. Material operational risk identify areas of risk exposures and gaps in controls on the basis of which appropriate risk mitigating actions are initiated. losses are examined thoroughly to Market Risk in the trading portfolio of your Bank has been adequately managed through a well-deﬁned Board approved market risk policy and stringent trading risk limits such as positions limits, gap limits, tenor restrictions, sensitivity limits viz. PV01, Modiﬁed Duration and Option Greeks, Value-at-Risk (VaR) limit and Stop Loss Trigger Level (SLTL). The Bank also has an approved investment policy which is adhered to while investing or trading. Additionally, the Bank has a Board approved stress testing policy and framework which encompasses the market risk stress test scenarios and simulations so that stress losses can be measured and adequate control measures can be initiated. losses. Liquidity risk is the risk that the Bank may not be able to fund increases in assets or meet obligations as they fall due without Interest incurring unacceptable rate risk is the risk where changes in market interest rates affect the Bank’s earnings through changes in its net interest income (NII) and the market value of equity through changes in the economic value of its interest rate sensitive assets, liabilities and off-balance sheet positions. The policy framework for liquidity and interest rate risk management is established in the Bank’s ALM policy which is guided by regulatory instructions. Your Bank has established various Board approved limits viz., maturity gap limits and limits on stock ratios for liquidity risk and limits on income impact and market value impact for interest rate risk. Your Bank’s Asset Liability Committee (ALCO) is responsible for adherence to liquidity risk and interest rate risk limits. Additionally, your Bank has a comprehensive Board approved stress testing programme covering liquidity and interest rate risk which is aligned with the regulatory guidelines. The Liquidity Coverage Ratio (LCR) is a global minimum standard for Bank liquidity. The ratio aims to ensure that a bank has an adequate stock of unencumbered High - Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs for a 30 calendar day liquidity stress scenario. In June 2014, RBI released Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity HDFC Bank Limited Annual Report 2015-16 24 Directors' Report Risk Monitoring Tools and LCR Disclosure Standards. Based on the guidelines, LCR became effective on January 1, 2015. The minimum requirement for the ratio was 70 per cent on January 1, 2016, increasing in equal annual increments to reach 100 per cent on January 1, 2019. As per the prevailing guidelines, your Bank’s monthly average LCR, for the quarter ended March 31, 2016 was 80 per cent. In accordance with RBI’s guidelines, the Bank is currently on the Standardized Approach for Credit Risk, the Basic Indicator Approach for Operational Risk and the Standardized Approach for Market Risk. Parallely, the Bank is progressing with its initiatives for migrating to the advanced approaches for these risks. The framework of the advanced approaches is in harmony with the Bank’s objective of adopting best practices in risk management. The Bank has a structured management framework in the Internal Capital Adequacy Assessment Process (ICAAP) for the identiﬁcation and evaluation of the signiﬁcance of all risks that the Bank faces, which may have a material adverse impact on its business and ﬁnancial position. The Bank considers the following as material risks it is exposed to in the course of its business and therefore, factors these while assessing / planning capital: (cid:115)(cid:0) (cid:35)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:12)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:50)(cid:69)(cid:83)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:83)(cid:0) (cid:115)(cid:0) (cid:35)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:0)(cid:35)(cid:79)(cid:78)(cid:67)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:45)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:0) (cid:115)(cid:0) (cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:47)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:0) (cid:115)(cid:0) (cid:51)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:73)(cid:67)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:50)(cid:65)(cid:84)(cid:69)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:34)(cid:79)(cid:79)(cid:75)(cid:0) (cid:115)(cid:0) (cid:35)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:44)(cid:73)(cid:81)(cid:85)(cid:73)(cid:68)(cid:73)(cid:84)(cid:89)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:0) (cid:115)(cid:0) (cid:50)(cid:69)(cid:80)(cid:85)(cid:84)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:82)(cid:65)(cid:68)(cid:65)(cid:89)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:45)(cid:79)(cid:68)(cid:69)(cid:76)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:52)(cid:69)(cid:67)(cid:72)(cid:78)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:69)(cid:82)(cid:80)(cid:65)(cid:82)(cid:84)(cid:89)(cid:0)(cid:35)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75) (cid:115)(cid:0) (cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0) (cid:50)(cid:73)(cid:83)(cid:75)(cid:0) (cid:8)(cid:67)(cid:79)(cid:86)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:40)(cid:36)(cid:34)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0) (cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0) (cid:44)(cid:84)(cid:68)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) HDFC Securities Ltd) The Bank has a Board approved Stress Testing Policy and Framework which forms an integral part of the Bank’s ICAAP. Stress Testing involves the use of various techniques to assess the Bank’s potential vulnerability to extreme but plausible stressed business conditions. The changes in the levels of various risks and the changes in the on and off balance sheet positions of the Bank are assessed under assumed stress scenarios and sensitivity factors. Typically, these relate, inter alia, to the impact on the Bank’s proﬁtability and capital adequacy. Internal Controls, Audit and Compliance Your Bank has Internal Audit and Compliance functions which are responsible for independently evaluating the adequacy of all internal controls and ensuring operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements. The audit function also proactively recommends improvements in operational processes and service quality. To mitigate operational risks, the Bank has put in place extensive internal controls including audit trails, appropriate segregation of front and back ofﬁce operations, post transaction monitoring processes at the back end to ensure independent checks and balances, adherence to the laid down policies and procedures of the Bank and to all applicable regulatory guidelines. The function also carries out management self-assessment of adequacy of the Bank’s internal ﬁnancial controls and operating effectiveness of such controls in terms of Sarbanes Oxley (SOX) Act and Companies Act, 2013. Your Bank has always adhered to the highest standards of compliance and governance and has put in place controls and an appropriate structure to ensure this. To ensure independence, the internal audit function has a reporting line to the Chairman of the Audit Committee of the Board and only a dotted line reporting to the Managing Director. The Audit Committee of the Board also reviews the performance of the audit and compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines. internal audit Corporate Social Responsibility - Building Sustainable Communities Building sustainable communities especially in rural India is a core CSR objective of the Bank. Your Bank has identiﬁed Integrated Rural Development as a vehicle for socio-economic change and community building. This encompasses Education, Sanitation, Skill Development and Livelihood Creation. Within these broad areas, particular focus is to impart ﬁnancial literacy / inclusion and sanitation. The recipients of these interventions are primarily women from the marginal sections of society. The Integrated Rural Development Programme (IRDP) is spread across diverse geographies ranging from the arid regions of Marathwada in Maharashtra to the wet lands of Meghalaya. HDFC Bank Limited Annual Report 2015-16 25 Directors' Report In the endeavour to create sustainable livelihood, the Bank promotes activities that are economically empowering while keeping in mind the socio-economic context and the ecology of the region. These include providing assistance to villages in soil and water conservation, water management, construction, renovation and maintenance of water harvesting structures for improving surface and ground water availability, in partnership with the Village Development Committees. Soil and water conservation work has been initiated in 550 acres of land (covering over 140 farmer families) with 65 acres brought under irrigation for the ﬁrst time and 45 acres brought under assured irrigation. In one such intervention in Madhya Pradesh, the development of a cluster of seven villages situated in Mandla district has been undertaken. This region is home to a signiﬁcant tribal population, which is largely cut off from mainstream development. Similar programmes are in progress at Maharashtra and Chhattisgarh. Raigarh in Maharashtra is a case in point, where ESR (Elevated Storage Reservoir) has been provided which ensures that every house has a water connection. Your Bank has also installed solar street lights which beneﬁt the entire community especially women / girls as they face difﬁculties in venturing out after sunset. Since economic and social empowerment are the end objective of the development interventions, the Bank’s CSR efforts are reinforced by its direct intervention on ﬁnancial inclusion and literacy, thereby creating economically sustainable communities. The disclosures as required under Rule 8 of the Companies Act (Accounts) Rules, 2014 have been given at ANNEXURE 2 to this report. Skill Development and Livelihood skill-oriented The livelihood initiatives of the Bank centre around providing training and capacity development to youth and women from sections of society that have no access to formal education. The support programmes are aimed at providing competency- based, training. technical and With various combinations of initiatives based on agriculture and allied businesses, your Bank has supported more than 4,000 households, trained more than 500 youth on different trades enabling to be entrepreneurs. Another 600 have been trained to become employable. In 2015-16 alone, the Bank trained over 85,000 people through the Sustainable Livelihood Initiative. vocational them initiated a pilot programme In 2015-16, your Bank in skill development: The National University Students Skill Development Programme in association with the Tata Institute of Social Sciences which focuses on increasing employability of university students by imparting knowledge and skills that make them job ready. The students are trained and certiﬁed in vocational skills in addition to their university graduate degree. There is also a need to ensure that a minimum 80 per cent of the students secure jobs on completion of graduation. About 4,200 students have undergone such training. Your Bank has also initiated entrepreneurship and youth skills development programme in the villages around Bilaspur and Ponsara in Chhattisgarh which provide training in the ﬁelds of IT enabled Skills (ITeS), Industrial Electrician and Agriculture. Education is the key to initiating change. Keeping this in mind, programmes are structured to ensure that the children are provided with basic infrastructure to create a conducive learning environment to acquire quality education. Continuing with its mission to provide clean sanitation in schools, your Bank has covered over 850 such institutions in more than 500 villages across Chhattisgarh, Gujarat, Haryana, Maharashtra, Madhya Pradesh, Meghalaya, Punjab and Rajasthan. In addition to construction of toilets, the Bank has tied up with over 10 NGO partners to implement a behavioural change programme which is oriented towards hygiene. The School Management Committee is encouraged to take ownership of maintaining the units. The interventions under WASH (Water Sanitation and Hygiene) have also addressed the need for clean drinking water in schools. In addition to this, 30,000 students have beneﬁted from an on-going programme of ﬁnancial literacy, offered with a partner NGO in 300 schools of Chhattisgarh and Bihar. Some other key initiatives under education are teachers training, learning camps and career guidance programmes. In one such programme, your Bank has undertaken the challenging task of implementing an innovative programme ‘Zero Investment Innovation in Education Initiative’ across schools in Uttar Pradesh to encourage low cost innovation. The ﬁrst phase has seen over 2 lakh teachers oriented on this concept with over 1 lakh innovative ideas submitted. Twenty ﬁve shortlisted ideas will be recognized and implemented across the state run schools in Uttar Pradesh. Environment Sustainability Maintaining a balance between the natural capital and communities is now integral to the Bank’s functioning. Towards this end, Bank’s ATMs have gone paperless, enabling reduction of carbon footprint. The Bank has given this effort a further ﬁllip by ensuring multichannel delivery through NetBanking, PhoneBanking and MobileBanking. This reduces carbon emission from operations as well as on account of reduced customer travel requirements. Another source for reducing the environmental footprint is solar ATMs. These use rechargeable Lithium Ion batteries that bring down the consumption of power generated using conventional sources. HDFC Bank Limited Annual Report 2015-16 26 Directors' Report Blood Donation Campaign The ninth year of Blood Donation campaign witnessed unprecedented participation with more than 1.75 lakh lakh units of blood. individuals contributing nearly 1.5 The campaign recorded highest participation in terms of number of cities, number of camps and number of colleges in the year under review. Apart from branch and college level camps, the Bank also tied up with Corporate and Defence establishments their premises, to organize camps on thus increasing the reach and spread of this social campaign. Financial Inclusion It is well accepted that increased ﬁnancial inclusion leads to enhanced GDP growth. The potential in India is especially enormous as 40 per cent of the country’s total population does not have access to formal banking services. Your Bank’s ﬁnancial inclusion initiatives are integrated across its various businesses and product groups. Your Bank is committed to furthering ﬁnancial inclusion under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and social security schemes. In line with the Government’s philosophy of “Digital India” it has implemented customer friendly technology solutions to make basic banking available to the common man through Aadhaar and Rupay Card enabled micro-ATMs (compliant to Unique Identiﬁcation Authority of India) at every Bank Mitra or Business Correspondent location. the Government’s efforts, your Bank Complementing the “J-A-M” has aggressively advocated and pursued (Jandhan, Aadhaar, Mobile) trinity to ensure a holistic coverage of customers and easy access through digital channels as well as Aadhaar seeding to ensure Government beneﬁts reach the end-customer. The Bank has opened 15.8 lakh PMJDY accounts since the launch of the scheme. Prior to the launch of PMJDY, the Bank had been mobilising Basic Banking Savings Deposit Accounts (BBSDA) with the speciﬁc objective of providing customers a platform to inculcate savings habit. The Bank periodically tracks the behaviour in these accounts to ensure that the accounts opened are active. The total number of BBSDA was 73.8 lakh (including those opened under PMJDY umbrella) as on March 31, 2016 as against 49.35 lakh as on March 31, 2015. The Government launched social security schemes in May 2015 with an objective of providing risk cover at minimal cost. The Bank offers all three schemes i.e. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) through its branches, business correspondents and digital channels. The Bank is among the leading Private Sector Banks in PMJJBY and PMSBY and is a leader in APY, enrolling a total of 24.5 lakh customers in these three social security schemes. As on March 31, 2016, your Bank has brought over one crore households into the banking fold, which were hitherto excluded from basic banking services. Of these, over 55 lakh households are in over 5,000 villages with a population less than 2,000. These have been largely excluded from the formal banking sector. Your Bank ﬁrmly believes that ﬁnancial literacy is the ﬁrst step towards ﬁnancial inclusion. In order to educate people who do not have access to formal banking channels and bring them within this fold, various training programmes for customers and even intermediaries like Business Correspondents have been put in place. Dhanchayat and Other Financial Literacy Initiatives In the period under review, your Bank rolled out its programme “Dhanchayat: Financial Literacy on Wheels”. Dhanchayat is an educational ﬁlm to raise awareness on the perils of unorganised ﬁnance and how the malpractices associated with it hurt the dignity of the individual. Launched under the aegis of Swachch Banking - the Bank’s CSR initiative for rural India, HDFC Bank- branded Dhanchayat video vans travelled to villages to educate the rural populace. The initiative covered nearly 4,900 villages thus beneﬁting nearly 10 lakh people. Your Bank regularly undertakes training programmes on credit counselling and inculcating the savings habit. Besides, it also provides information on asset creation, insurance, and income generation programmes. During the year almost over 1.4 lakh ﬁnancial awareness programmes covering over 22 lakh households were conducted. As on the year ended March 31, 2016, your Bank had 1,025 branches in rural areas and 1,439 branches in semi urban areas. Agriculture and Allied Activities A large portion of India’s un-banked population relies on agriculture as its main source of livelihood. It is imperative that banks replace the traditional unorganized money lending channels by providing transparent credit to farmers through various methods, while simultaneously enabling income generating activities. Your Bank provides various loans to farmers through its suite of speciﬁcally designed products such as the Kisan Gold Card, Tractor and Cattle Loans. In addition, the Bank offers post-harvest cash credit, warehouse receipt ﬁnancing and bill discounting facilities to Mandi (markets for grain and other agricultural produce) participants and farmers. These facilities enable the Mandi participants to make timely payments to farmers. The Bank carries out this business through branches that are located in HDFC Bank Limited Annual Report 2015-16 27 Directors' Report close proximity to Mandis. For the year ended March 31, 2016, the Bank’s credit to agriculture and allied activities was about ` 65,250 crore as against approximately ` 49,085 crore in the previous year. The Bank targets speciﬁc sectors to capture supply chain of certain crops from the production to the sales stages. On the basis of these cash ﬂows, your Bank is able to ﬁnance speciﬁc needs of the farmers. This model has currently been implemented with sugar, fruit, vegetable, and tea crops, as well as dairy farmers. The initiative currently underway with dairy farmers includes the appointment of dairy societies as business correspondents, through whom the Bank opens accounts of individual farmers attached to these societies. The societies route payments through these accounts. A number of retail credit products such as two-wheeler loans, car loans, mortgages that are consumption products in urban centres are also means of income generation for rural consumers. Apart from loans directly linked to agriculture, your Bank is one of the few to offer many other credit products under one roof to aid ﬁnancial betterment in rural locations. Your Bank has extended provision of its retail loans to large segments of the rural population, where the end use of the products acquired (by availing Bank loans) is used for income generating activities. For example, loans for tractors, commercial vehicles, two wheelers improving productivity supplement and reducing expenses. income by farmer’s the Milk-to-Money The use of appropriate technology is necessary to bring about efﬁciency in the agri-value chain, reducing the time taken between delivery of produce by the farmer to his ﬁnal payment. One such innovative technology initiative is the Milk-to-Money for dairy supply chain. Under the initiative, your Bank has deployed Multifunction Terminals (MFTs), also known as Milk-to-Money ATMs, in dairy societies at the villages. The MFTs link to the milk procurement system of the dairy society to facilitate payment of milk proceeds into farmers’ accounts on payment day. The entire process is done by the society without any intervention by the Bank at the front-end. MFTs have cash dispensers that function as standard ATMs enabling the farmer to withdraw the amount from his account immediately. the milk collection process beneﬁts The both farmers and the society as they get payments quickly without the hassle of cash distribution. Based on the payment data, the Bank is able to lend to the farmers which improves the collection of the society and ultimately milk production. transparency in farmers. These centres also enable rural customers to receive the direct beneﬁt transfers from the Government in the same account. Apart from dairy and cattle loans, customers gain access to all bank products such as Vehicle Loans, 10 Second Personal Loans and Kisan Credit Card. The farmers also avail other digital facilities such as Bill Pay, Missed Call Banking and Mobile Recharge. They are also enabled to transact digitally with local merchants using products like PayZapp. This also provides a transacting point for other customers in the village, thus creating a complete rural ecosystem. Loans against Gold Jewellery Loans against gold jewellery have traditionally been an important source of credit, dominated by the unorganized sector and pawn brokers. Banks and other organized institutions have expanded their product suite and reach to offer gold loans. The entry of such players has resulted in increased awareness, and at the same time provided greater transparency, substituting the money lenders. The availability of the asset and the ease of securing a loan has made this a convenient and viable credit option. For the year ended March 31, 2016, loans against gold jewellery stood at over ` 4,500 crore as against above ` 4,000 crore as on March 31, 2015. Small and Micro Enterprises The Micro, Small and Medium Enterprises (MSME) segment is a vital component of the Indian economy. It contributes 45 per cent to the country’s total manufacturing output and 30 per cent to exports. Your Bank has been a very active participant in this segment and in order to engage better with businesses of different sizes, the Bank has created specialized verticals. It offers complete banking solutions to micro, small and medium scale enterprises across industry segments including manufacturing, retailing, wholesale, trading and services. The entire suite of ﬁnancial products including Cash Credit, Overdrafts, Term Loans, Bill Discounting, Export Packing Credit, Letter of Credit, Bank Guarantees, Cash Management Services and other structured products are available to these customers. To drive the growth in MSME segment, your Bank organized outreach programmes for SME customers. The programmes were also used to create awareness among customers about the new digital offerings of the Bank to improve efﬁciencies. In the year 2015-16, your Bank conducted 27 loan meets across 17 cities including Guntur, Guwahati, Kanpur, Kutch, Lucknow, Nagpur, Vijayawada, and Visakhapatnam. The Bank’s MFT footprint now encompasses Gujarat, Maharashtra, Punjab and Rajasthan with over 800 Milk-to-Money ATMs and Micro ATMs, servicing about 2.5 lakh The Bank’s advances to Micro, Small and Medium Enterprises has grown by 35.8 per cent in the year ended March 31, 2016 to touch more than ` 74,500 crore from close to ` 55,000 crore HDFC Bank Limited Annual Report 2015-16 28 Directors' Report for the year ended March 31, 2015. The Bank exceeded the overall priority sector lending requirement of net Bank credit. Sustainable Livelihood Initiative (SLI) SLI is a board mandated programme to ﬁnancially include and uplift one crore households at the Bottom of the Pyramid through a holistic approach to empowering people and making a difference to their lives. It entails occupational training, ﬁnancial literacy, credit counselling, livelihood ﬁnance, and market linkages. Over the last six years, your Bank has accelerated its direct linkage programme to people at the Bottom of the Pyramid through Self-Help Groups and Joint Liability Groups. The Bank engages with women in villages to conduct ﬁnancial literacy and credit counselling programmes, form groups, and then funds these groups for income generating activities. This enables the delivery of viable credit to the rural poor in a sustainable manner and at the same time inculcates saving and banking habits. As on March 31, 2016, your Bank has covered approximately over 55 lakh households in villages spread over 360 districts in more than 25 states including Assam, Bihar, Chhattisgarh, Meghalaya, Madhya Pradesh, Odisha, Rajasthan, Sikkim, Tripura, Uttar Pradesh and Uttarakhand. In keeping with your Bank’s commitment to this initiative, SLI has about 6,900 dedicated employees, who are trained to identify and cater to diverse customer needs. They recognize that villages are not homogeneous, but have their unique socio-economic and cultural characteristics. This leads to formulation of village speciﬁc strategies for customer acquisition and retention. Given the proﬁle of the clientele, the transactions are often low in value but high in volume. In keeping with the Bank’s “GoDigital” focus, it has leveraged technology to reduce transaction costs and enhanced ease of doing business. The “GoDigital” drive has resulted in reduced response time in processing customer requests. Lengthy forms have been shortened for greater convenience to customers. These initiatives have reduced turnaround time for customers by as much as 30 per cent. e-KYC and Credit bureau check without PAN have addressed the issue of data validation to a great extent. Transaction based on mobile Apps / platforms to move villages towards cashless economies are in the ofﬁng. The success of the SLI programme has been validated by various awards and recognitions. One such accolade has come from National Bank for Agriculture and Rural Development. In its annual publication, ‘The Status of Microﬁnance in India 2014-15’ the status of micro ﬁnance initiatives in the country is illustrated and gives a glimpse of interventions by various banks across geographies. The publication serves as a reference point for people in policy making functions, researchers and others involved in developmental ﬁnance. A special mention commending the SLI programme of the bank has been made in the publication. It recognizes that the SLI model of HDFC Bank may be studied for adoption by other Banks. It is interesting to note that SLI is a relatively new model that has been in operation since 2010. Innovation Innovation is now embedded in the DNA of HDFC Bank. Employees are encouraged across functions to continuously come up with new ideas and act as digital evangelists. in Innovation the Bank has been driven by digitization, the building block for which was laid two decades ago by investing in technology. Digitization has been a theme for the Bank in the last two years and it gained substantial momentum in the year under review. The Bank is happy to share that it has a Digital Innovation team, perhaps the only such group in the Indian banking context, to scout for and experiment with technology both contemporary and even futuristic. Your Bank hosted a Digital Innovation Summit in March 2016 to tap into emerging technological trends that are shaping the ﬁnancial technology space. We are happy to report that ﬁve companies have been chosen as potential partners in its journey. These companies have been drawn from the domains of Artiﬁcial Intelligence, Marketing, Mobile Payments, Quality Assurance and Biometric Payments. Some of the major digital innovations introduced this year are: Innovations in Retail Business (cid:115)(cid:0) PayZapp with SmartBuy: A comprehensive, convenient and secure payment solution which allows customers to link their cards once and then pay through one click. Smart Buy within PayZapp brings the best deals and discounts offered by merchant partners exclusively for HDFC Bank customers. PayZapp offers the unique combination of the convenience of 1-click payments and security. PayZapp for business allows merchants to bill their customers and receive payments instantly over the mobile, thereby making it easier for them to collect cash remotely and expand their business. (cid:115)(cid:0) 10 second Personal Loan: A pre-approved instant loan on NetBanking which is offered to select customers and is disbursed within 10 seconds of applying. (cid:115)(cid:0) ZipDrive: An instant auto loan approval, which allows customers to generate an online approval with reference number, walk into a dealership and drive out with the car of their choice. This approval, valid for 30 days, enables the dealer to request HDFC Bank for the already pre-approved loan sanctioned to the customer. HDFC Bank Limited Annual Report 2015-16 29 Directors' Report (cid:115) Virtual Relationship Manager: Offered to High Net Worth customers by invitation, this is a 24*7 access to a relationship manager through a safe and secure video interface on the mobile banking app. (cid:115)(cid:0) Chillr: Your Bank’s partner app, which allows customers to send and receive money using phone book contacts. The app also allows customers to recharge mobiles, DTH, data cards and make merchant payments. (cid:115)(cid:0) Design Your Own Loan Against Securities (LAS): This combines the power of a loan and a bank account. LAS can be availed against securities ranging from equity to mutual funds to Kisan Vikas Patra. What’s more, customers can design the loan on the basis of these securities. (cid:115)(cid:0) Loans on ATMs: Your Bank offers 10 second personal loans on ATMs. Various consumer loans and top-up of existing loans to customers through ATMs will also be made available in the future. (cid:115)(cid:0) Missed Called Recharge: A simple and innovative way of recharging pre-paid mobile phones. It requires one-time activation of the service. The mobile number gets recharged for the selected amount, every time the customer gives a missed call to a particular number. (cid:115)(cid:0) MobileBanking Liteapp: A mobile banking app, offering several basic transactions in Hindi and English targeted at semi-urban as well as rural customers. This app caters to the off-line internet customers. Innovations in Wholesale Business (cid:115)(cid:0) Trade on Net and E Net on Mobile for corporate customers: For cash management, trade ﬁnance, treasury and supply chain services, dynamic digital platforms like ‘Enet’ and ‘Trade on Net’ offer value additions at every stage of the ﬁnancial value chain. With Trade Finance Mobile, the services are now accessible anytime, anywhere, allowing customers to authorize transactions on-the-go with OTP- based security. People People are a core value of the Bank and they constitute Human Capital. Your Bank ﬁrmly believes that a well-trained and motivated workforce is critical to achieving its strategic goals. The Bank’s HR strategy is closely allied to its business strategy as enunciated in the section on ‘Mission, Business Strategy and Approach to Business’. The ﬁve broad pillars of HDFC Bank’s People strategy are: (cid:115)(cid:0) Resourcing and Stafﬁng: In an industry where agility in talent acquisition and deployment is key to geographic expansion and growth, your Bank has leveraged online recruitment along with other channels like job ready model to develop reach and quality of hires. It has created a strong leadership pipeline across levels by identifying the right talent internally and grooming them for challenging roles. This has resulted in an 85,000 plus strong work force that is well motivated, and trained to deliver value to the customer. (cid:115)(cid:0) Career Management: Your Bank’s talent management processes create opportunities for employees to develop and grow. The systematic investment of time in career discussion with employees, competency assessment, and intensive functional and behavioural training through the Gurukul programmes sends a strong message of the Bank’s commitment to employees on career progression. (cid:115)(cid:0) Employee Engagement: The Bank has nurtured an enabling performance culture in line with its vision to be a “World Class Indian Bank”. The performance management system aligns organization goals with key objectives for each business which drives individuals to strive for excellence. In addition, your Bank strives to strengthen its connect with employees and has created employee engagement events, conducted both at local and national levels. o Josh Unlimited: Pan-India Sports event conducted in 26 cities o Stepathlon: Almost 2500 employees participated in the employee wellness initiative o Hunar: In-house Talent competition conducted in 9 cities o Corporate Online Library: Inculcates reading habit. Almost 1.5 lakh books made available o Kwiz Kat: National Banking Quiz with participation by 200 teams In addition to the aforementioned programmes, employees can participate in the “HDFC Bank Voice Hunt Contest” in association with Shankar Mahadevan Academy and “STILLS” which is an inter-corporate photography contest. The Bank encourages employees to participate in community and social work. Through your Bank’s “Employee Payroll Giving” programme, employees can choose to donate a certain amount from their salary each month for speciﬁc causes. The other ﬂagship programmes are the Blood Donation Drive and the Bank’s volunteering programme which involves employees imparting ﬁnancial literacy as well as relief efforts like the J&K ﬂood relief. HDFC Bank Limited Annual Report 2015-16 30 Directors' Report “HDFC Bank Cares” is an initiative to address healthcare needs of employees. Activities under this programme include Health mailers, Doctor on Call, Health check-up camps and Health Talks by experts. The Bank runs an on-site crèche at Kanjurmarg, Mumbai. These initiatives help create a connect among employees and also helps them forge an emotional bond with the organization. Further, a strong feedback mechanism helps shape the programmes and aligns them with people’s expectations and organization policies. (cid:115)(cid:0) Training and Development: Training plans are developed based on analysis of training needs done in consultation with various businesses. An extensive bouquet of training programmes are delivered covering on-boarding, product and process training, advanced programmes and behavioural training. The on-boarding training ensures that new employees are trained comprehensively and equipped with necessary know-how, as well as functional and behavioural skills required for the role. The product training and advanced programmes enable skill development, regular updates and build expertise in staff. The training methodology has evolved to application based training to include simulations, case studies and games. Today, over 100 courses can be availed on e-learning platforms. (cid:115)(cid:0) Rewards: Merit is the driving force in the organization. The distinctive part of the milieu of rewards both ﬁnancial and non-ﬁnancial is the objectivity and transparency with which it is done. This fair and equitable approach encourages staff to give off their best. The compensation policy ensures that remuneration is not only competitive but also includes wealth creation opportunities through long term rewards like ESOPs. The Bank has a comprehensive compensation policy that has been articulated in line with the Reserve Bank of India’s guidelines. The “Star Awards” is an institutionalized recognition programme recognizes performers. The “Tejaswini Awards” is a special category to recognize women achievers. that periodically Other Statutory Disclosures Board and Board Committees Extract of Annual Return Pursuant to section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return is annexed as ANNEXURE 3. Directors’ Responsibility Statement Pursuant to Section 134 (3)(c) read with Section 134 (5) of the Companies Act, 2013, the Board of Directors hereby state that: (cid:115)(cid:0) (cid:41)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0) (cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) accounting standards have been followed along with proper explanation relating to material departures, if any (cid:115)(cid:0) (cid:55)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:83)(cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:69)(cid:68)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:69)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:77)(cid:0) consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2016 and of the proﬁt of the Bank for the year ended on that date (cid:115)(cid:0) (cid:55)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:84)(cid:65)(cid:75)(cid:69)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:85)(cid:70)(cid:108)(cid:67)(cid:73)(cid:69)(cid:78)(cid:84)(cid:0)(cid:67)(cid:65)(cid:82)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:84)(cid:69)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities (cid:115)(cid:0) (cid:55)(cid:69)(cid:0) (cid:72)(cid:65)(cid:86)(cid:69)(cid:0) (cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0) (cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0) (cid:79)(cid:78)(cid:0) (cid:65)(cid:0) (cid:71)(cid:79)(cid:73)(cid:78)(cid:71)(cid:0) (cid:67)(cid:79)(cid:78)(cid:67)(cid:69)(cid:82)(cid:78)(cid:0) basis (cid:115)(cid:0) (cid:55)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:76)(cid:65)(cid:73)(cid:68)(cid:0)(cid:68)(cid:79)(cid:87)(cid:78)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:76)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0)(cid:70)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0) the Bank and that such internal ﬁnancial controls are adequate and were operating effectively (cid:115)(cid:0) (cid:55)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:68)(cid:69)(cid:86)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0) the provisions of all applicable laws and that such systems were adequate and were operating effectively Auditors The Auditors, M/s. Deloitte Haskins & Sells, Chartered Accountants, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. Members are requested to consider their re-appointment for ﬁnancial year 2016-17 on an annual remuneration of ` 1,90,00,000 (previous year ` 1,10,00,000 and additional fees, proposed for ratiﬁcation by the members, of ` 40,00,000 for reporting on internal ﬁnancial controls for ﬁnancial year 2015-16) plus service taxes as applicable, which has been approved by the Audit Committee of the Board. Disclosure under Foreign Exchange Management Act, 1999 The details of Board meetings held during the year, attendance of Directors at the meetings and constitution of various Committees of the Board are included separately in the Corporate Governance Report. The Bank is in compliance with the Foreign Exchange Management Act, 1999 (“FEMA”) provisions with respect to downstream investments made in its subsidiaries. Further the Bank has obtianed a certiﬁcate from its statutory auditors certifying that HDFC Bank Limited Annual Report 2015-16 31 Directors' Report the Bank is in compliance with the FEMA provisions with respect to the downstream investments made in its subsidiaries during the year. Related Party Transactions The details of transactions entered into with related parties are enclosed as ANNEXURE 4 to this report. Particulars of Loans, Guarantees or Investments Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business. Further, in terms of the Companies (Removal of Difﬁculties) Order, 2015, nothing in Section 186 except sub section (1) shall apply to any acquisition made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949. Financial Statements of Subsidiaries and Associates In terms of Section 134 of the Companies Act, 2013 and read with Rule 8(1) of the Companies (Accounts) Rules, 2014 the performance and ﬁnancial position of the Bank’s subsidiaries and associates are enclosed as ANNEXURE 5 to this report. There were no entities which became or ceased to be the Bank’s subsidiaries, associates or joint ventures during the year. Whistle Blower Policy / Vigil Mechanism The Bank has adopted a Whistle Blower Policy pursuant to which employees of the Bank can raise their concerns relating to fraud, malpractice or any other activity or event which is against the interest of the Bank or society as a whole. Details of complaints received and the action taken are reviewed by the Audit Committee. The functioning of the Whistle Blower mechanism is reviewed by the Audit Committee from time to time. None of the Bank’s personnel have been denied access to the Audit Committee. Declaration by Independent Directors Board Performance Evaluation The Nomination and Remuneration Committee (NRC) has approved a framework / policy for evaluation of the Board, Committees of the Board and the individual members of the Board. The said framework / policy was duly reviewed during the year. A questionnaire for the evaluation of the Board and its Committees, designed in accordance with the said framework and covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in Corporate Governance was sent out to the directors. The responses received to the questionnaires on evaluation of the Board and its Committees were placed before the meeting of the Independent Directors for consideration. The assessment of the performance of the Board and its Committees was subsequently discussed by the Board at its meeting. Independent Directors on the Your Bank has in place a process wherein declarations are obtained from the directors regarding fulﬁlment of the “ﬁt and proper” criteria in accordance with the guidelines of the Reserve Bank of India. The declarations from the Directors other than members of the NRC are placed before the NRC and the declarations of the members of the NRC are placed before the Board. Assessment on whether the Directors fulﬁl the said criteria is made by the NRC and the Board on an annual basis. In addition, the framework / policy approved by the NRC provides for a performance evaluation of the Non-Independent Directors by the Independent Directors on key personal and professional attributes and a similar performance evaluation of the Independent Directors by the Board, excluding the Director being evaluated. Such performance evaluation has been duly completed as above. Policy on Appointment and Remuneration of Directors and Key Managerial Personnel The Nomination and Remuneration Committee (NRC) recommends the appointment of Directors to the Board. The NRC identiﬁes persons who are qualiﬁed to become Directors on the Board and evaluates criteria such as academic qualiﬁcations, previous experience, track record and integrity of their appointment to the Board. identiﬁed before recommending the persons Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh, Mr. A. N. Roy and Mr. Malay Patel are Independent Directors on the Board of the Bank as on March 31, 2016. All the Independent Directors have given their respective declarations under Section 149 (6) and (7) of the Companies Act, 2013 and the Rules made thereunder. In the opinion of the Board, the Independent Directors fulﬁl the conditions relating to their status as Independent Directors as speciﬁed in Section 149 of the Companies Act, 2013 and the Rules made thereunder. The remuneration of whole time Directors is governed by the compensation policy of the Bank. The compensation policy of the Bank, duly reviewed and recommended by the NRC has been articulated in line with the Reserve Bank of India guidelines. Your Bank’s compensation policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long term success. Compensation policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate HDFC Bank Limited Annual Report 2015-16 32 Directors' Report objective is to provide a fair and transparent structure that helps the Bank to retain and acquire the talent pool critical to building competitive advantage and brand equity. Your Bank’s approach is to have a pay for performance culture based on the belief that the performance management system provides a sound basis for assessing performance holistically. The compensation system should also take into account factors like roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the compensation policy are also included in Schedule 18 - Notes forming part of the Accounts - Note no. 24. expenses Independent Directors Non-Executive Directors are paid remuneration by way of sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based regulatory prescriptions. Non-Executive on applicable Directors incurred reimbursed also are by them for attending meetings of the Board and its Committees at actuals. The remuneration payable to the is Non-Executive Directors and governed by the provisions of the Banking Regulation Act, 1949, RBI guidelines issued from time to time and the provisions of the Companies Act, 2013 and related rules to the extent it is not inconsistent with the provisions of the Banking Regulation Act, 1949 and RBI guidelines. The Companies Act, 2013, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and dynamic business environment have placed more onerous responsibilities on the Non-Executive Directors, particularly the Independent Directors. These require the Directors to play a more pro-active role, along with greater involvement in Board’s decision making process. In order to enable the Bank to attract and retain professional directors, that such Directors are appropriately it compensated. In terms of the guidelines issued by RBI for compensation of Non-Executive Directors of private sector banks dated June 1, 2015, the Board has, subject to the approval of the members at the ensuing Annual General Meeting of the Bank, approved payment of proﬁt-related commission to its non-executive directors, other than the Chairperson, not exceeding ` 10,00,000/- (Rupees Ten Lakh only) per annum for each Non-Executive Director. is essential None of the Directors of your Bank other than Mr. Kaizad Bharucha is a director of the Bank’s subsidiaries as on March 31, 2016. Mr. Bharucha is paid sitting fees by the subsidiary for attending meetings of the Board and Committees of the subsidiary. During the year, Mr. Bharucha was paid sitting fees of ` 4,50,000 by the subsidiary. Mr. Bharucha has not received any commission from the subsidiary. The Board of Directors of HDB Financial Services Limited, the Bank’s subsidiary, has appointed Mr. Aditya Puri as the Non-Executive Chairman on their company with effect from May 1, 2016. the Board of Signiﬁcant and Material Orders Passed By Regulators During the year under review no signiﬁcant or material Orders were passed by any regulators or courts or tribunals against the Bank other than those disclosed separately in the ﬁnancial statements and in the Corporate Governance Report. Directors and Key Managerial Personnel Mrs. Renu Karnad and Mr. Keki Mistry will retire by rotation at the ensuing Annual General Meeting of the Bank and are eligible for re-appointment. During the year, Dr. Pandit Palande ceased to be a Director on the Bank from the close of business hours on April 23, 2015, on completing the maximum permitted tenure of eight years as per Banking Regulation Act, 1949. Your Directors wish to place on record their sincere appreciation of the contribution made by Dr. Palande during his tenure with the Bank. Mr. Umesh Chandra Sarangi was appointed as Additional Director with effect from March 1, 2016 to hold ofﬁce till the conclusion of the ensuing Annual General Meeting. Mr. Sarangi has been appointed as a director having specialized knowledge and practical experience in agriculture and rural economy as per the provisions of Section 10-A (2)(a) of the Banking Regulation Act, 1949. In terms of Section 149 of the Companies Act, 2013, it is proposed to appoint Mr. Sarangi as an Independent Director for a tenure of ﬁve (5) years, determined in accordance with the applicable provisions of the Banking Regulation Act, 1949 and the guidelines of RBI in this regard. The Bank has received a notice from a member proposing the candidature of Mr. Sarangi as Director of the Bank at the ensuing Annual General Meeting. The brief resume / details regarding the Directors proposed to be appointed / re-appointed as above are furnished in the report on Corporate Governance. There have been no changes in the Directors and Key Managerial Personnel of the Bank other than the above. Familiarization Programme for Independent Directors The various programmes undertaken for familiarizing Independent Directors with the functions and procedures of the Bank are disclosed in the Corporate Governance Report. Particulars of Employees The information in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in the ANNEXURE 6 to this report. HDFC Bank Limited Annual Report 2015-16 33 Directors' Report The Bank had 87,555 employees as on March 31, 2016. There were 311 employees employed throughout the year who were in receipt of remuneration of more than ` 60 lakh per annum and 23 employees employed for part of the year who were in receipt of remuneration of more than ` 5 lakh per month. The details of such employees in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are appended separately and form part of this report. The Report and Accounts are being sent to the shareholders excluding these particulars and any shareholder interested in obtaining the said details may write to the Company Secretary at the Registered Ofﬁce of the Bank. Conservation Of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo (A) Conservation of Energy Your Bank has undertaken several initiatives in this area such as: (cid:115)(cid:0) (cid:50)(cid:69)(cid:80)(cid:76)(cid:65)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0) (cid:79)(cid:66)(cid:83)(cid:79)(cid:76)(cid:69)(cid:84)(cid:69)(cid:0) (cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:82)(cid:0) (cid:73)(cid:78)(cid:70)(cid:82)(cid:65)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0) (cid:87)(cid:73)(cid:84)(cid:72)(cid:0) (cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:82)(cid:83)(cid:0) (cid:87)(cid:73)(cid:84)(cid:72)(cid:0) virtualization thus saving on Data Centre power and cooling (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:83)(cid:84)(cid:65)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71)(cid:0)(cid:69)(cid:78)(cid:69)(cid:82)(cid:71)(cid:89)(cid:0)(cid:67)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:72)(cid:73)(cid:71)(cid:72)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:85)(cid:77)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0) reduce energy consumption (cid:41)(cid:78)(cid:83)(cid:84)(cid:65)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71)(cid:0) (cid:69)(cid:78)(cid:69)(cid:82)(cid:71)(cid:89)(cid:0) (cid:83)(cid:65)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0) (cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:82)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:83)(cid:65)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0) (cid:69)(cid:78)(cid:69)(cid:82)(cid:71)(cid:89)(cid:0) and supporting go-green initiative. (Device in ACs) (cid:115)(cid:0) (cid:33)(cid:68)(cid:86)(cid:79)(cid:67)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) (cid:83)(cid:87)(cid:73)(cid:84)(cid:67)(cid:72)(cid:73)(cid:78)(cid:71)(cid:0) (cid:79)(cid:70)(cid:70)(cid:0) (cid:76)(cid:73)(cid:71)(cid:72)(cid:84)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:33)(cid:35)(cid:83)(cid:0) (cid:87)(cid:72)(cid:69)(cid:78)(cid:0) (cid:78)(cid:79)(cid:84)(cid:0) (cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:12)(cid:0) turning off PCs when not in use (post 10 PM through remote control) setting higher temperatures on ACs to reduce consumption (cid:115)(cid:0) (cid:33)(cid:76)(cid:76)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:0)(cid:51)(cid:73)(cid:71)(cid:78)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:34)(cid:82)(cid:65)(cid:78)(cid:67)(cid:72)(cid:69)(cid:83)(cid:0)(cid:83)(cid:87)(cid:73)(cid:84)(cid:67)(cid:72)(cid:69)(cid:68)(cid:0)(cid:79)(cid:70)(cid:70)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0) post 10 pm (cid:115)(cid:0) (cid:48)(cid:85)(cid:84)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:85)(cid:83)(cid:65)(cid:71)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:44)(cid:73)(cid:70)(cid:84)(cid:83)(cid:12)(cid:0)(cid:33)(cid:35)(cid:83)(cid:12)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:79)(cid:78)(cid:0)(cid:48)(cid:65)(cid:83)(cid:83)(cid:65)(cid:71)(cid:69)(cid:0)(cid:76)(cid:73)(cid:71)(cid:72)(cid:84)(cid:83)(cid:0) and other electrical equipment (B) Technology Absorption Your Bank has been at the forefront of technology absorption. Technology has continued to provide business and customers with state-of-the-art products and services. Through adoption of carefully evaluated technology solutions, the Bank has been able to offer an enhanced customer experience at optimal costs. This is made possible by using advanced analytics to create a 360 degree view of all 3.7 crore customers. The analytics engine uses machine learning to analyse structured and unstructured data - transactional, behavioural, demographics, system logs, click streams, bureau data and more - for insights. This helps in offering relevant recommendations using a mix of advanced algorithms, behavioural micro-segments, real time action and event triggers built on the backbone of cutting edge big data technologies. These recommendations are served via personalised campaigns, delivered through an Omni channel approach. The Bank’s Technology Absorption is illustrated further by: (cid:115)(cid:0) (cid:51)(cid:85)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:70)(cid:85)(cid:76)(cid:76)(cid:89)(cid:0)(cid:77)(cid:73)(cid:71)(cid:82)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:79)(cid:0)(cid:45)(cid:48)(cid:44)(cid:51)(cid:0)(cid:84)(cid:69)(cid:67)(cid:72)(cid:78)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89) (cid:115)(cid:0) (cid:45)(cid:65)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:69)(cid:84)(cid:0) (cid:70)(cid:65)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0) (cid:73)(cid:78)(cid:70)(cid:82)(cid:65)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) IPV6 compliant (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:77)(cid:80)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) (cid:67)(cid:85)(cid:84)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) (cid:69)(cid:68)(cid:71)(cid:69)(cid:0) (cid:48)(cid:18)(cid:48)(cid:0) (cid:80)(cid:65)(cid:89)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:83)(cid:79)(cid:76)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:73)(cid:78)(cid:0) partnership with relevant industry players (cid:41)(cid:77)(cid:80)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) (cid:83)(cid:84)(cid:82)(cid:65)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0) (cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0) (cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:73)(cid:78)(cid:71)(cid:12)(cid:0) (cid:85)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0) (cid:51)(cid:47)(cid:33)(cid:0) (services oriented architecture) enabled bio-metric authorization for 30 minutes Vehicle Loan Approval (cid:41)(cid:77)(cid:80)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:76)(cid:76)(cid:73)(cid:71)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:51)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:0) for Retail Assets to enable monitoring from loan pre-disbursement to repayment / closure (cid:115)(cid:0) (cid:37)(cid:77)(cid:66)(cid:65)(cid:82)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:80)(cid:82)(cid:79)(cid:71)(cid:82)(cid:65)(cid:77)(cid:77)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:77)(cid:80)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:50)(cid:34)(cid:41)(cid:0) guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds (cid:115)(cid:0) (cid:51)(cid:84)(cid:82)(cid:69)(cid:78)(cid:71)(cid:84)(cid:72)(cid:69)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0) (cid:84)(cid:69)(cid:67)(cid:72)(cid:78)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89)(cid:0) (cid:73)(cid:78)(cid:70)(cid:82)(cid:65)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0) (cid:84)(cid:79)(cid:0) (cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) uninterrupted service to customers expenditure The Development incurred on Research and Being in the Financial Services Space, your Bank evaluates innovative technology solutions that are readily available or near-ready for deployment and broadly ﬁt its business requirements. Solutions that are commercially viable are then tested in collaboration with the relevant technology partners. Once proven, the technology solutions are then procured and commissioned for active business use. (C) Foreign Exchange Earnings and Outgo During the year the total foreign exchange earned by the Bank was ` 1,227.7 crore (on account of net gains arising on all exchange / derivative transactions) and the total foreign exchange outgo was about ` 151.12 crore towards the operating and capital expenditure requirements. Secretarial Audit In terms of Section 204 of the Companies Act, 2013 and the Rules made there under, M/s. BNP & Associates, Practising Company Secretaries have been appointed as Secretarial HDFC Bank Limited Annual Report 2015-16 34 Directors' Report Auditors of the Bank for the ﬁnancial year 2015-16. The report of the Secretarial Auditors is enclosed as ANNEXURE 7 to this Report. The observations in the said report are self-explanatory and no further comments / explanations are called for. Corporate Governance In compliance with Regulation 34 and other applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate report on Corporate Governance along with a certiﬁcate of compliance from the Secretarial Auditors, forms an integral part of this Report. Business Responsibility Report The Bank’s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its website www.hdfcbank.com. Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 Acknowledgement Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank’s employees and look forward to their continued contribution in building a “World Class Indian Bank.” Conclusion Your Bank believes that the Indian economy is expected to grow faster in 2016-17. The Bank is well positioned to continue to grow faster than the banking system both in retail and wholesale segments. A good monsoon holds the key to accelerated GDP growth and consequently to that of the banking industry. Over the next couple of years, the Bank will leverage on its distribution strength and digital platforms especially in the rural and semi-urban parts of the country for a more sustained growth. Your Bank will continue its focus on ﬁve core values of Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Needless to say, your Bank will continue to operate with the strongest possible commitment to Corporate Governance. All of this will help the Bank on its onward growth journey and help create long term shareholder value. On behalf of the Board of Directors Mrs. Shyamala Gopinath Chairperson The relevant information is included in Section E - Principle 3 of the Business Responsibility Report for 2015-16. Mumbai, May 19, 2016 HDFC Bank Limited Annual Report 2015-16 35 Directors' Report ANNEXURE 1 to Directors’ Report The ESOP Schemes of the Bank are in compliance with SEBI (Share Based Employee Beneﬁts) Regulations, 2014 (“the Regulations”) and the details as per the Regulations are as under: EMPLOYEES’ STOCK OPTIONS AS ON MARCH 31, 2016 Plan/ Schemes Date of Shareholders’ Approval Total No. of Options Approved Grant Price (`) Number of Options Outstanding at the beginning of the year Number of Options Granted / Options Re-instated Options Vested Number of Options Exercised & Shares Allotted during the year Number of Options Forfeited during the year Number of Options Lapsed during the year Number of Options in Force at the end of the year Plan E- ESOS XVI 30th June, 2010 100,000,000 440.16 9,219,200 Plan E- ESOS XVII 30th June, 2010 100,000,000 508.23 180,100 Plan E- ESOS XVIII 30th June, 2010 100,000,000 468.40 17,504,400 - - - - - - 7,521,200 68,500 4,937,400 - - - 24,000 1,674,000 - 111,600 14,500 12,552,500 Plan E- ESOS XIX 30th June, 2010 100,000,000 680.00 29,014,200 - 9,364,000 5,081,100 410,600 10,400 23,512,100 - - - 5,133,900 5,260,800 - Plan D- ESOS XX 16th June, 2007 75,000,000 680.00 6,402,300 - 2,002,200 1,078,200 190,200 Plan C- ESOS XXI 17th June, 2005 50,000,000 680.00 6,233,000 - 2,013,300 798,200 174,000 Plan E- ESOS XXII 30th June, 2010 100,000,000 664.45 21,800 Plan C- ESOS XXIII 17th June, 2005 50,000,000 835.50 545,000 - - - 21,800 - 212,400 28,400 35,000 1,600 480,000 Plan F- ESOS XXIV 27th June, 2013 100,000,000 835.50 39,913,000 - 15,965,800 2,156,400 1,308,000 6,400 36,442,200 Plan F- ESOS XXV 27th June, 2013 100,000,000 1092.65 Plan F- ESOS XXVI 27th June, 2013 100,000,000 1097.80 - - 44,833,200 3,000 - - - - 1,349,000 - 43,484,200 - - 3,000 Total :- 109,033,000 44,836,200 29,557,700 21,691,200 3,466,800 56,900 128,654,300 Options Exercised during the aforesaid period Share Capital Money received during the above period (`) Share Premium Money received during the above period (`) Perquisite Tax Amount collected during the aforesaid period (`) Total Amount collected during the aforesaid period (`) 21,691,200 43,382,400 12,185,626,317 3,645,181,338 15,874,190,055 Note: One (1) share of the face value of ` 2/- each would arise on exercise of One (1) Equity Stock Option. HDFC Bank Limited Annual Report 2015-16 36 Directors' Report Vesting Requirements Except for the death / permanent disablement or retirement of the employee, the options will vest only if the employee is in the continuous employment of the Bank as on the date of vesting Maximum Term of Options Provided the employee is in the continuous employment of the Bank, the options vested will lapse in case the same are not exercised by the employee within 4 years from the date of vesting. Except in the case of death/ permanent disablement or retirement of the employee, all unvested options get forfeited on the employee’s last working date in the Bank. Source of shares Primary Variation in terms of ESOS Nil i. Directors & Senior Managerial Personnel DETAILS OF OPTIONS GRANTED TO DIRECTORS AND SENIOR MANAGERIAL PERSONNEL Sl No Employee Name Grade 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 Aditya Puri Paresh Sukthankar Kaizad Bharucha Abhay Aima Ashish Parthasarthy Ashima Bhat Ashok Khanna Arvind Kapil Aseem Dhru Bhavesh Zaveri Chakrapani Venkatachari Deepak Maheshwari Dhiraj Relli (on deputation to HDFC Securities Limited, the Bank’s subsidiary) Jimmy M Tata Munish Mittal Navin Puri Nitin Chugh Nitin Rao Nirav Shah Parag Rao Rajender Sehgal Rakesh K. Singh Rajesh Rathanchand Ravi Narayanan Sashidhar Jagdishan Sanjay Dongre Managing Director Deputy Managing Director Executive Director Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head CFO (KMP) Executive Vice President - Legal & Company Secretary (KMP) HDFC Bank Limited Annual Report 2015-16 37 No. of Options 639,000 390,000 335,000 200,000 200,000 108,000 41,700 108,000 140,000 170,000 140,000 42,800 75,000 170,000 108,000 200,000 108,000 75,000 75,000 108,000 40,400 140,000 108,000 108,000 170,000 39,700 Directors' Report ii. Other employee who receives a grant in any one year of options amounting to 5 per cent or more of options granted during that year None iii. Identiﬁed employees who were granted options, during any one year, equal to or exceeding 1 per cent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of the grant None Diluted Earnings Per Share (EPS) pursuant to the issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) - 20 (Earnings Per Share) The diluted EPS of the Bank calculated after considering the effect of potential equity shares arising on account of exercise of options is ` 48.3 Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on proﬁts and on EPS of the company shall also be disclosed Weighted average exercise prices and weighted average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock options A description of the method and signiﬁcant assumptions used during the year to estimate the fair value of options, at the time of the grant including the following weighted average information: i. Risk-free interest rate ii. Expected life iii. Expected volatility iv. Expected dividends v. The price of the underlying share in the market at the time of option grant vi. Weighted average market price of Bank’s shares on NSE at the time of option grant Method used and assumptions made to incorporate effects of expected early exercise How expected volatility was determined, including explanation of the extent to which expected volatility was based on historical volatility Whether and how any other features of the option grant were incorporated into the measurement of fair value, such as a market condition Had the Bank followed fair value method for accounting, the stock option compensation expense would have been higher by ` 1,265.9 crore. Consequently proﬁt after tax would have been lower by ` 1,265.9 crore and the basic EPS of the Bank would have been ` 43.8 per share (lower by ` 5.0 per share) and the diluted EPS would have been ` 43.3 per share (lower by ` 5.0 per share) The weighted average price of the stock options exercised is ` 563.8 and the weighted average fair value is ` 191.4 The Securities and Exchange Board of India (SEBI) has prescribed two methods to account for stock grants; (i) the intrinsic value method; (ii) the fair value method. The Bank adopts the intrinsic value method to account for the stock options it grants to the employees. The Bank also calculates the fair value of options at the time of grant, using internally developed and tested model with the following assumptions: 7.71 per cent to 8.07 per cent 1 to 7 years 23.29 per cent to 26.46 per cent 0.73 per cent The per share market price was ` 1,092.65 and ` 1,097.80 at the time of grant of options under ESOS XXV and ESOS XXVI respectively. ` 1,091.82 and ` 1,098.11 at the time of grant of options under ESOS XXV and ESOS XXVI respectively. The exercise multiple, which is based on historical data of early option exercise decisions of the employees, incorporates early exercise effect in the valuation of ESOPs. The exercise multiple indicates that option holders tend to exercise their options when the share price reaches a particular multiple of the exercise price. Stock expected volatility is completely based on GARCH volatility forecasting model using historical stock prices from the market. Stock Price and risk free interest rate are variables based on actual market data at the time of ESOP valuation. HDFC Bank Limited Annual Report 2015-16 38 Directors' Report ANNEXURE 2 to Directors’ Report 1. Brief outline of the CSR Policy HDFC Bank Annual CSR Report 2015-2016 HDFC Bank, has worked towards the vision of “Creating Sustainable Communities” through its CSR Programmes. In line with the requirements of Section 135 of the Companies Act, the Bank has instituted the CSR Policy, duly approved by the Board. HDFC Bank’s CSR policy outlines the Bank’s mission to contribute to social and economic development of the communities at large. During the ﬁnancial year 2015-16, the Bank has undertaken CSR Programmes aligned to the CSR Policy in the following focus areas: 1. Financial Literacy and Empowerment 2. Promoting Education 3. Skill Training and Livelihood Enhancement 4. Health Care 5. Environmental Sustainability 6. Eradicating Poverty 7. Rural Development The Bank’s CSR Policy can be found on the corporate website at http://www.hdfcbank.com/assets/pdf/CSR_Policy.pdf 2. Composition of CSR Committee The Bank has also constituted a Board-level CSR Committee to govern the implementation of the policy. The composition of the Committee is as follows: (cid:115)(cid:0) (cid:45)(cid:82)(cid:83)(cid:14)(cid:0)(cid:50)(cid:69)(cid:78)(cid:85)(cid:0)(cid:43)(cid:65)(cid:82)(cid:78)(cid:65)(cid:68) (cid:115)(cid:0) (cid:45)(cid:82)(cid:14)(cid:0)(cid:34)(cid:79)(cid:66)(cid:66)(cid:89)(cid:0)(cid:48)(cid:65)(cid:82)(cid:73)(cid:75)(cid:72)(cid:0)(cid:8)(cid:41)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:9) (cid:115)(cid:0) (cid:45)(cid:82)(cid:14)(cid:0)(cid:48)(cid:65)(cid:82)(cid:84)(cid:72)(cid:79)(cid:0)(cid:36)(cid:65)(cid:84)(cid:84)(cid:65)(cid:0)(cid:8)(cid:41)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:9) (cid:115)(cid:0) (cid:45)(cid:82)(cid:14)(cid:0)(cid:33)(cid:68)(cid:73)(cid:84)(cid:89)(cid:65)(cid:0)(cid:48)(cid:85)(cid:82)(cid:73) (cid:115)(cid:0) (cid:45)(cid:82)(cid:14)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:83)(cid:72)(cid:0)(cid:51)(cid:85)(cid:75)(cid:84)(cid:72)(cid:65)(cid:78)(cid:75)(cid:65)(cid:82) 3. Average net proﬁt of the company for last three ﬁnancial years ` 12,385 crore 4. Prescribed CSR Expenditure (two percent of the amount as in item 4 above) ` 248 crore 5. Details of CSR spent during the ﬁnancial year (cid:115)(cid:0) (cid:52)(cid:79)(cid:84)(cid:65)(cid:76)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:83)(cid:80)(cid:69)(cid:78)(cid:84)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:26)(cid:0)` 194.81 crore (cid:115)(cid:0) (cid:33)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:85)(cid:78)(cid:83)(cid:80)(cid:69)(cid:78)(cid:84)(cid:12)(cid:0)(cid:73)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:26)(cid:0)` 53.19 crore HDFC Bank Limited Annual Report 2015-16 39 Directors' Report (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:78)(cid:78)(cid:69)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:83)(cid:80)(cid:69)(cid:78)(cid:84)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:73)(cid:83)(cid:0)(cid:68)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:69)(cid:68)(cid:0)(cid:66)(cid:69)(cid:76)(cid:79)(cid:87) Sr. no CSR project / Activity Sector (Schedule VII) Projects or programs 1. Local area or others 2. State and district Pan India Amount outlay (project-wise) (` crore) (Budget) Amount spent (` crore) 1. Direct expenditure Financial Literacy and Empowerment Promoting Education Promotion of Education Promotion of Education Pan India Skill Training and Livelihood Enhancement Health Care Skill development and Vocational Training Preventive and Curative Healthcare Environmental Sustainability Environment Pan India Pan India Pan India Eradicating Poverty Eradicating poverty Pan India 1. 2. 3. 4. 5. 6. 7. Rural Development Rural Development Projects Pan India 140.89 1.00 24.59 17.99 8.26 0.72 1.36 2. Overheads 1. 0.74 2. 0.26 1. 9.41 2. 0.26 1. 14.33 2. 0.26 1. 8.00 2. 0.26 1. 0.72 2. 0.00 1. 0.00 2. 0.00 1. 92.78 2. 0.26 Cumulative expenditure up to reporting period (` crore)* 8.67 33.15 30.52 15.54 1.67 2.36 221.45 Amount spent: Direct or through *implementing agency (` crore) Direct Implementing Agency - 14.92 Implementing Agency - 3.40 Direct Direct Implementing Agency - 1.36 Implementing Agency - 47.85 *Details of the implementing agencies are listed below: Promotion of Education: KC Mahindra Education Trust, Nisvartha Foundation, Tomorrows Foundation, Friends Union For Energising Lives, Katha, Parivaar Education Society, Meljol, Nabha Foundation, Bodh Shiksha Samiti, Navjyoti India Foundation, Kasturi Shiksha Samiti, Pratham Education Foundation, Shri Aurobindo Society, Teach to Lead, Isha Education, Bombay Scottish Orphanage Society, Magic Bus India Foundation. Skills Training & Livelihood Enhancement: Dr M.L. Dhawale Trust, Aide-et- Action India, HOPE Foundation, Nav Bharat Jagriti Kendra, SGBS Trust, Quest Alliance, Gram Unnati Foundation, Tata Institute of Social Sciences, BAIF Development Research Foundation, Aroh Foundation, Indo Global Social Service Society, Voluntary Association for People Service, Enactus, FXB Suraksha India, The Leprosy Mission Trust India, Navrachana Mahila Vikas Trust; Rural Development Programme: Watershed Organisation Trust, Share Society to Heal, Aid, Restore, Educate, Action for Food Production, Sanjeevani Institute for Empowerment and Development, Mysore Resettlement And Development Agency, Krushi Vikas Va Gramin Prashikshan Sanstha, Indo Global Social Service Society, Professional Assistance for Development Action, Society for Action in Community Health, Navrachana Mahila Vikas Trust, Shaktishali Mahila Sanghatan Samithi, Aroh Foundation, Shikhar Yuva Manch, Community Advancement & Rural Development Society, SAKSHI - Centre for Information, Education and Communication; Eradicating Poverty: Give India, HelpAge India 6. In case company has failed to spend the two percent of the average net proﬁt for the last three ﬁnancial years or any part thereof, the reasons for not spending the amount. Building upon and scaling up on various interventions initiated in areas prescribed in our CSR policy, we increased our overall CSR spend by 64 per cent from ` 118.55 crore last year to ` 194.81 crore this year, i.e. to 1.6 per cent of the average net proﬁt for the last three ﬁnancial years. Given the absolute size and the substantial increase in the magnitude of our CSR spend, it was important that we identify appropriate implementation partners and further strengthen our resources and systems to ensure that projects are executed effectively and have the desired impact. With the strong foundations that we laid towards this end in this year, and the proposed scaling up of a number of our CSR Projects, we believe we have made meaningful progress towards reaching the target in the coming ﬁnancial year. 7. A responsibility statement of CSR committee: Our CSR activities are guided by the vision and objectives as provided in our CSR Policy. We have also put in place a robust monitoring and reporting mechanism to ensure effective implementation of our CSR activities, in line with the requirements of Companies Act, 2013. A description of our current projects is included in the Directors’ report. Mr. Aditya Puri Managing Director Date: April 21, 2016 Mrs. Renu Karnad Chairperson, CSR Committee HDFC Bank Limited Annual Report 2015-16 40 Directors' Report ANNEXURE 3 to Directors’ Report Form No. MGT-9 Extract of the Annual Return as on the ﬁnancial year ended March 31, 2016 [Pursuant to section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014] I. REGISTRATION AND OTHER DETAILS: i. CIN: L65920MH1994PLC080618 ii. Registration Date: August 30, 1994 iii. Name of the Company: HDFC Bank Limited iv. Category / Sub-Category of the Company: Company Limited by Shares / Indian Non-Government Company v. Address of the Registered ofﬁce and contact details: HDFC Bank Limited HDFC Bank House, Senapati Bapat Marg, Lower Parel, Mumbai- 400 013. Tel: 022 2498 8484 vi. Whether listed: Yes vii. Name, Address and Contact Details of Registrar and Transfer Agent: Datamatics Financial Services Ltd., Plot No. B 5, Part B, Cross Lane, MIDC, Marol, Andheri East, Mumbai- 400 093 Tel: 022- 6671 2213/14, Email: hdinvestors@dfssl.com II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY: All the business activities contributing 10 per cent or more of the total turnover of the Company shall be stated- Name and Description of the main products / services NIC Code Per cent to Total Turnover of the Bank Banking and Financial Services 64191 100 per cent III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES: Name and Address of the Company CIN/ GLN Sr. no. Holding / Subsidiary / Associate Percentage of shares held Applicable section 1 HDB Financial Services Ltd. U65993GJ2007PLC051028 Subsidiary Radhika, 2nd Floor, Law Garden Road, Navrangpura, Ahmedabad- 380 009. 2 HDFC Securities Ltd. U67120MH2000PLC152193 Subsidiary 97.12 97.91 I Think, Techno Campus, Building-B, “Alpha” ofﬁce, 8th Floor, opposite Crompton Greaves, Kanjurmarg (East), Mumbai- 400 042. 3 Atlas Documentary Facilitators U74999MH1997PTC107143 Associate 28.99 Company Pvt. Ltd 29A, Narayan Properties, 1st Floor, Bldg A, Chandivali, Off Saki Naka, Andheri (East), Mumbai- 400 072 4 HBL Global Pvt. Ltd U74140MH2000PTC129812 Associate NIL Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai- 400 013 5 International Asset Reconstruction Company Pvt. Ltd. 709, 7th Floor, Ansal Bhavan, 16, Kasturba Gandhi Marg, New Delhi-110 001 U74999DL2002PTC117357 Associate 29.41 Sec 2(87) of Companies Act, 2013 Sec 2(87) of Companies Act, 2013 Sec 2(6) of Companies Act, 2013 Sec 2(6) of Companies Act, 2013 Sec 2(6) of Companies Act, 2013 HDFC Bank Limited Annual Report 2015-16 41 Directors' Report IV. SHAREHOLDING PATTERN: (EQUITY SHARE CAPITAL BREAKUP AS PERCENTAGE OF TOTAL EQUITY) (i) Category-wise Share Holding No. of Shares held at the beginning of the year No. of Shares held at the end of the year Demat Physical Total Percentage of Total shares Demat Physical Total Percentage of Total shares Percentage change during the year 543,216,100 0 543,216,100 21.67 543,216,100 0 543,216,100 21.49 (0.19) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 543,216,100 0 543,216,100 21.67 543,216,100 0 543,216,100 21.49 (0.19) Category of Shareholders A. Promoters (1) Indian a) Individual/HUF b) Central Govt c) State Govt (s) d) Bodies Corp# e) Banks / FI f) Any Other Sub Total (A)(1) (2) Foreign a) NRIs -Individuals b) Other-Individuals c) Bodies Corp. d) Banks / FI’s e) Any Other Sub Total (A)(2) 0 0 0 0 0 0 0 0 0 543,216,100 0 543,216,100 21.67 543,216,100 0 543,216,100 21.49 (0.19) Total shareholding of Promoter (A)=(A)(1)+(A)(2) B. Public Shareholding 1. Institutions a) Mutual Funds b) Banks / FI’s g) Foreign Venture Capital Funds h) Others (specify) Qualiﬁed Foreign Investors Sub Total (B)(1) 2. Non-Institutions 168,641,437 33,185 168,674,622 6.73 211,659,875 33,185 211,693,060 4,342,137 17,390 4,359,527 c) Central Govt / State Govt(s) 1,505,225 d) Venture Capital Funds 0 0 0 1,505,225 0 0.17 0.06 0 2,822,510 17,390 2,839,900 2,676,950 0 0 0 2,676,950 0 e) Insurance Companies 69,215,256 0 69,215,256 2.76 68,146,983 0 68,146,983 f) FIIs 816,373,592 15,170 816,388,762 32.57 814,448,518 15,170 814,463,688 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8.37 0.11 0.11 0 2.70 32.21 0 0 1.64 (0.06) 0.05 0 (0.06) (0.36) 0 0 1,060,077,647 65,745 1,060,143,392 42.30 1,099,754,836 65,745 1,099,820,581 43.50 1.21 a) Bodies Corporate 216,171,947 224,880 216,396,827 8.63 185,438,125 183,245 185,621,370 7.34 (1.29) b) Individuals i) Individual shareholders 140,615,965 18,492,186 159,108,151 6.35 146,520,140 17,200,720 163,720,860 6.47 0.12 holding nominal share capital upto ` 1 lakh ii) Individual shareholders 47,024,976 259,500 47,284,476 1.89 55,330,724 191,000 55,521,724 2.20 0.31 holding nominal share capital in excess of ` 1 lakh HDFC Bank Limited Annual Report 2015-16 42 Directors' Report Category of Shareholders c) Others (specify) No. of Shares held at the beginning of the year No. of Shares held at the end of the year Demat Physical Total Percentage of Total shares Demat Physical Total Percentage of Total shares i. Non Resident Indians (Repat) 2,532,721 48,320 2,581,041 ii. Non Resident Indians 4,705,498 2,765 4,708,263 (Non- Repat) iii. Overseas Corporate Bodies 0 10,075 iv. Foreign Corporate Bodies v. Foreign Nationals 41,000 1,335 0 0 10,075 41,000 1,335 0.10 0.19 0.00 0 0 2,360,398 41,720 2,402,118 4,833,762 2,765 4,836,527 1,248 31,000 1,505 10,075 0 0 11,323 31,000 1,505 0.10 0.19 0 0 0 Percentage change during the year (0.00) 0 0 0 0 Sub Total (B)(2) 411,093,442 19,037,726 430,131,168 17.16 394,516,902 17,629,525 412,146,427 Total Public Shareholding (B)=(B)(1) + (B)(2) 1,471,171,089 19,103,471 1,490,274,560 59.46 1,494,271,738 17,695,270 1,511,967,008 16.30 59.80 (0.86) 0.34 C. Shares held by Custodian for 473,004,657 0 473,004,657 18.87 473,003,409 0 473,003,409 18.71 (0.16) GDRs & ADRs Grand Total (A+B+C) 2,487,391,846 19,103,471 2,506,495,317 100 2,510,491,247 17,695,270 2,528,186,517 100 0 # Promoters are Indian Companies incorporated under the Indian Companies Act 1956 and are controlled by Indian management. Foreign shareholding in the principal promoter company exceeds 51 per cent of their paid up share capital and accordingly the shareholding of the company in the Bank may be deemed as indirect foreign shareholding in terms of the extant FDI Policy. The Bank has made a representation to the Ministry of Finance stating that the shareholding of the Indian Promoters should not be treated as foreign shareholding. Conﬁrmation is awaited from the Ministry of Finance in this regard. (ii) Shareholding of Promoters Sr. No. Shareholder’s Name Shareholding at the beginning of the year Shareholding at the end of the year No.of Shares Percentage of total Shares of the company Percentage of Shares Pledged / encumbered to total shares No.of Shares Percentage of total Shares of the company Percentage of Shares Pledged / encumbered to total shares Percentage change in shareholding during the year** 1 Housing Development Finance Corporation Ltd 393,211,100 15.69 2 HDFC Investments Ltd 3 HDFC Holdings Ltd 150,000,000 5,000 5.98 0 Total 543,216,100 21.67 0 0 0 0 393,211,100 15.55 150,000,000 5,000 5.93 0 543,216,100 21.49 0 0 0 0 0 0 0 0 (iii) Change in Promoters’ Shareholding: Shareholder’s Name Shareholding at the beginning of the year Cumulative Shareholding during the year No. of shares Percentage of total Shares of the company No.of Shares Percentage of total Shares of the company At the beginning of the year 543,216,100 21.67 543,216,100 21.49 (**) Date wise Increase / Decrease in Promoters shareholding during the year specifying the reasons for increase/ decrease (e.g. allotment / transfer / bonus/ sweat/ equity etc.) ** At the end of the year 543,216,100 21.49 (**) ** During the year under review, there is no change with respect to the shares held by the promoters. However, there is a change in the percentage to capital because of issuance and allotment of additional equity shares by the Bank upon exercise of equity stock options by the employees during the FY 2015-16. HDFC Bank Limited Annual Report 2015-16 43 Directors' Report (iv) Shareholding Pattern of top ten shareholders (other than directors, promoters and holders of GDRs and ADRs): Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the company Cumulative shareholding during the year No. of shares Percentage of total shares of the company 1 EUROPACIFIC GROWTH FUND At the beginning of the Year 31-MAR-2015 96,200,435 2 LIFE INSURANCE CORPORATION OF INDIA Increase Increase Increase Increase Increase 10-APR-2015 17-APR-2015 25-DEC-2015 29-JAN-2016 19-FEB-2016 At the END of the Year 31-MAR-2016 324,964 729,360 20,274 350,000 413,431 0 At the beginning of the Year 31-MAR-2015 64,087,196 Decrease Decrease Increase Increase Increase Increase Decrease Decrease Decrease Decrease Decrease Decrease Decrease Increase Increase Decrease Decrease Decrease Decrease Decrease Increase Increase Increase Increase Increase Increase Increase Increase Increase 24-APR-2015 01-MAY-2015 (80,000) (60,000) 15-MAY-2015 1,759,576 22-MAY-2015 12-JUN-2015 19-JUN-2015 14-JUL-2015 17-JUL-2015 409,006 2,588 584,551 (260,000) (861,471) 24-JUL-2015 (2,303,102) 31-JUL-2015 (1,860,174) 07-AUG-2015 14-AUG-2015 21-AUG-2015 28-AUG-2015 04-SEP-2015 (863,871) (292,039) (47,951) 45,000 10,000 09-OCT-2015 (1,131,724) 16-OCT-2015 (904,923) 23-OCT-2015 (1,470,489) 30-OCT-2015 (1,954,286) 06-NOV-2015 (325,665) 15-JAN-2016 752,772 22-JAN-2016 1,465,705 29-JAN-2016 05-FEB-2016 12-FEB-2016 19-FEB-2016 26-FEB-2016 04-MAR-2016 11-MAR-2016 724,226 200,000 350,000 1,420,353 1,244,374 642,520 20,853 At the END of the Year 31-MAR-2016 0 3.84 0.01 0.03 0.00 0.01 0.02 0.00 2.56 (0.00) (0.00) 0.07 0.02 0.00 0.02 (0.01) (0.03) (0.09) (0.07) (0.03) (0.01) (0.00) 0.00 0.00 (0.05) (0.04) (0.06) (0.08) (0.01) 0.03 0.06 0.03 0.01 0.01 0.06 0.05 0.03 0.00 0.00 96,525,399 97,254,759 97,275,033 97,625,033 98,038,464 98,038,464 64,007,196 63,947,196 65,706,772 66,115,778 66,118,366 66,702,917 66,442,917 65,581,446 63,278,344 61,418,170 60,554,299 60,262,260 60,214,309 60,259,309 60,269,309 59,137,585 58,232,662 56,762,173 54,807,887 54,482,222 55,234,994 56,700,699 57,424,925 57,624,925 57,974,925 59,395,278 60,639,652 61,282,172 61,303,025 61,303,025 3.85 3.88 3.85 3.87 3.88 3.88 2.55 2.55 2.62 2.64 2.64 2.66 2.65 2.61 2.52 2.44 2.41 2.40 2.40 2.40 2.39 2.35 2.31 2.25 2.17 2.16 2.19 2.25 2.27 2.28 2.30 2.35 2.40 2.42 2.43 2.43 HDFC Bank Limited Annual Report 2015-16 44 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the company Cumulative shareholding during the year No. of shares Percentage of total shares of the company 3 ICICI PRUDENTIAL LIFE INSURANCE COMPANY LTD At the beginning of the Year 31-MAR-2015 41,029,927 1.64 0.01 0.01 0.00 0.00 0.00 0.01 0.00 (0.01) (0.01) 0.01 0.00 (0.00) (0.01) (0.01) 41,214,323 41,387,943 41,393,527 41,397,370 41,506,215 41,636,952 41,701,876 41,502,043 41,232,852 41,349,387 41,386,455 41,361,772 41,172,753 41,023,391 0.01 41,175,010 (0.03) (0.01) 40,444,892 40,309,257 0.01 40,424,554 (0.01) 40,276,454 0.00 0.00 0.00 0.01 0.00 0.01 40,317,120 40,330,920 40,333,161 40,675,215 40,714,488 41,056,906 (0.01) 40,891,248 0.01 41,068,230 (0.02) (0.02) 40,659,617 40,219,775 0.00 40,299,148 (0.00) (0.00) (0.00) (0.00) 40,188,679 40,168,030 40,161,438 40,150,518 0.01 40,350,244 (0.00) 40,308,287 0.01 0.01 40,449,375 40,746,503 184,396 173,620 5,584 3,843 108,845 130,737 64,924 (199,833) (269,191) 116,535 37,068 (24,683) (189,019) (149,362) 151,619 (730,118) (135,635) 115,297 (148,100) 40,666 13,800 2,241 342,054 39,273 342,418 (165,658) 176,982 (408,613) (439,842) 79,373 (110,469) (20,649) (6,592) (10,920) 199,726 (41,957) 141,088 297,128 Increase Increase Increase Increase Increase Increase Increase Decrease Decrease Increase Increase Decrease Decrease Decrease Increase Decrease Decrease Increase Decrease Increase Increase Increase Increase Increase Increase Decrease Increase Decrease Decrease Increase Decrease Decrease Decrease Decrease Increase Decrease Increase Increase Decrease Increase Decrease Increase Decrease 10-APR-2015 17-APR-2015 24-APR-2015 01-MAY-2015 08-MAY-2015 15-MAY-2015 22-MAY-2015 29-MAY-2015 05-JUN-2015 12-JUN-2015 19-JUN-2015 26-JUN-2015 30-JUN-2015 03-JUL-2015 10-JUL-2015 14-JUL-2015 17-JUL-2015 24-JUL-2015 31-JUL-2015 07-AUG-2015 14-AUG-2015 21-AUG-2015 28-AUG-2015 04-SEP-2015 11-SEP-2015 18-SEP-2015 25-SEP-2015 30-SEP-2015 02-OCT-2015 09-OCT-2015 16-OCT-2015 23-OCT-2015 30-OCT-2015 06-NOV-2015 13-NOV-2015 20-NOV-2015 27-NOV-2015 04-DEC-2015 11-DEC-2015 18-DEC-2015 25-DEC-2015 31-DEC-2015 08-JAN-2016 (121,662) (0.01) 40,624,841 202,489 (17,223) 181,289 0.01 40,827,330 (0.00) 40,810,107 0.01 40,991,396 (135,885) (0.01) 40,855,511 1.64 1.65 1.65 1.65 1.66 1.66 1.66 1.65 1.64 1.65 1.65 1.65 1.64 1.63 1.64 1.61 1.61 1.61 1.60 1.60 1.60 1.60 1.62 1.62 1.63 1.63 1.63 1.62 1.60 1.60 1.60 1.60 1.59 1.59 1.60 1.60 1.61 1.62 1.61 1.62 1.62 1.62 1.62 HDFC Bank Limited Annual Report 2015-16 45 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year Cumulative shareholding during the year No. of shares Percentage of total shares of the company No. of shares Percentage of total shares of the company Decrease Increase Decrease Increase Increase Increase Increase Increase Increase Increase Increase Decrease 15-JAN-2016 22-JAN-2016 29-JAN-2016 05-FEB-2016 12-FEB-2016 19-FEB-2016 26-FEB-2016 04-MAR-2016 11-MAR-2016 18-MAR-2016 25-MAR-2016 31-MAR-2016 At the END of the Year 31-MAR-2016 (59,368) 112,549 (3,721) 2,513 1,091 185,671 132,442 27,254 197,524 728 168,574 (96,966) 0 4 CAPITAL WORLD GROWTH AND At the beginning of the Year 31-MAR-2015 22,191,303 INCOME FUND 5 ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase 10-APR-2015 17-APR-2015 24-APR-2015 01-MAY-2015 08-MAY-2015 30-JUN-2015 03-JUL-2015 10-JUL-2015 14-JUL-2015 17-JUL-2015 24-JUL-2015 31-JUL-2015 16-OCT-2015 23-OCT-2015 12-FEB-2016 19-FEB-2016 26-FEB-2016 At the END of the Year 31-MAR-2016 380,800 3,066,149 3,242,386 1,494,430 505,614 164,661 796,498 705,156 725,266 564,504 143,766 405,149 515,000 159,444 600,000 100,000 825,000 0 At the beginning of the Year 31-MAR-2015 29,828,619 Increase Increase Increase Increase Increase Increase Increase Increase 10-APR-2015 17-APR-2015 24-APR-2015 01-MAY-2015 08-MAY-2015 372,453 90,317 465,547 170,199 863,024 15-MAY-2015 1,232,676 22-MAY-2015 29-MAY-2015 175,099 31,341 (0.00) 40,796,143 0.00 40,908,692 (0.00) 40,904,971 0.00 0.00 0.01 0.01 0.00 0.01 0.00 0.01 40,907,484 40,908,575 41,094,246 41,226,688 41,253,942 41,451,466 41,452,194 41,620,768 (0.00) 41,523,802 0.00 0.89 0.02 0.12 0.13 0.06 0.02 0.01 0.03 0.03 0.03 0.02 0.01 0.02 0.02 0.01 0.02 0.00 0.03 0.00 1.19 0.02 0.00 0.02 0.01 0.03 0.05 0.01 0.00 41,523,802 22,572,103 25,638,252 28,880,638 30,375,068 30,880,682 31,045,343 31,841,841 32,546,997 33,272,263 33,836,767 33,980,533 34,385,682 34,900,682 35,060,126 35,660,126 35,760,126 36,585,126 36,585,126 30, 201,072 30,291,389 30,756,936 30,927,135 31,790,159 33,022,835 33,197,934 33,229,275 Decrease 05-JUN-2015 (320,975) (0.01) 32,908,300 HDFC Bank Limited Annual Report 2015-16 46 1.62 1.62 1.62 1.62 1.62 1.63 1.63 1.63 1.64 1.64 1.65 1.64 1.64 0.90 1.02 1.15 1.21 1.23 1.24 1.27 1.30 1.33 1.35 1.35 1.37 1.39 1.39 1.41 1.42 1.45 1.45 1.21 1.21 1.23 1.23 1.27 1.32 1.32 1.32 1.31 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the company Cumulative shareholding during the year No. of shares Percentage of total shares of the company Increase Increase Decrease Decrease Increase Decrease Increase Decrease Increase Increase Increase Increase Increase Increase Increase Decrease Increase Increase Decrease Decrease Decrease Decrease Decrease Increase Increase Increase Decrease Decrease Decrease Decrease Increase Increase Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Increase Decrease 12-JUN-2015 19-JUN-2015 26-JUN-2015 30-JUN-2015 03-JUL-2015 14-JUL-2015 17-JUL-2015 24-JUL-2015 31-JUL-2015 07-AUG-2015 14-AUG-2015 21-AUG-2015 28-AUG-2015 04-SEP-2015 11-SEP-2015 25-SEP-2015 30-SEP-2015 09-OCT-2015 16-OCT-2015 23-OCT-2015 30-OCT-2015 06-NOV-2015 13-NOV-2015 20-NOV-2015 27-NOV-2015 04-DEC-2015 11-DEC-2015 18-DEC-2015 25-DEC-2015 31-DEC-2015 08-JAN-2016 15-JAN-2016 22-JAN-2016 29-JAN-2016 803,348 3,065,970 (142,090) (250,000) 233,638 (145,865) 8,814 (583,859) 50,519 141,948 385,907 55,330 965,631 778,847 156,527 (23,879) 2,121 12,272 (17,778) (30,533) (659,275) (365,251) (586,838) 9,690 230,531 390,511 (351,517) (256,011) (131,774) (137,848) 228,726 150,745 (212,119) (63,717) 05-FEB-2016 (2,646,146) 12-FEB-2016 (1,801,876) 19-FEB-2016 (1,318,753) 26-FEB-2016 (1,068,871) 04-MAR-2016 11-MAR-2016 18-MAR-2016 25-MAR-2016 31-MAR-2016 (413,600) (594,623) (33,481) 2,102 (37,610) 0.03 0.12 (0.01) (0.01) 33,711,648 36,777,618 36,635,528 36,385,528 0.01 36,619,166 (0.01) 36,473,301 0.00 36,482,115 (0.02) 35,898,256 0.00 0.01 0.02 0.00 0.04 0.03 0.01 35,948,775 36,090,723 36,476,630 36,531,960 37,497,591 38,276,438 38,432,965 (0.00) 38,409,086 0.00 0.00 (0.00) (0.00) (0.03) (0.01) (0.02) 0.00 0.01 0.02 (0.01) (0.01) (0.01) (0.01) 0.01 0.01 (0.01) (0.00) (0.11) (0.07) (0.05) (0.04) (0.02) (0.02) (0.00) 38,411,207 38,423,479 38,405,701 38,375,168 37,715,893 37,350,642 36,763,804 36,773,494 37,004,025 37,394,536 37,043,019 36,787,008 36,655,234 36,517,386 36,746,112 36,896,857 36,684,738 36,621,021 33,974,875 32,172,999 30,854,246 29,785,375 29,371,775 28,777,152 28,743,671 0.00 28,745,773 (0.00) 28,708,163 At the END of the Year 31-MAR-2016 0 0.00 28,708,163 1.34 1.47 1.46 1.45 1.46 1.45 1.45 1.43 1.43 1.44 1.45 1.45 1.49 1.52 1.53 1.53 1.53 1.53 1.53 1.52 1.50 1.48 1.46 1.46 1.47 1.48 1.47 1.46 1.45 1.45 1.46 1.46 1.45 1.45 1.35 1.27 1.22 1.18 1.16 1.14 1.14 1.14 1.14 1.14 HDFC Bank Limited Annual Report 2015-16 47 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the company Cumulative shareholding during the year No. of shares Percentage of total shares of the company 6 GOVERNMENT OF SINGAPORE 7 RELIANCE CAPITAL TRUSTEE CO. LTD A/C RELIANCE VISION FUND Decrease Decrease Decrease Decrease Increase Increase Decrease Decrease Increase Increase Increase Increase Increase Decrease Increase Increase Decrease Increase Increase Increase Decrease Decrease Decrease Decrease Decrease At the END of the Year At the beginning of the Year 31-MAR-2015 10-APR-2015 17-APR-2015 01-MAY-2015 15-MAY-2015 12-JUN-2015 26-JUN-2015 14-JUL-2015 17-JUL-2015 14-AUG-2015 04-SEP-2015 11-SEP-2015 25-SEP-2015 09-OCT-2015 30-OCT-2015 13-NOV-2015 20-NOV-2015 04-DEC-2015 15-JAN-2016 22-JAN-2016 29-JAN-2016 12-FEB-2016 19-FEB-2016 26-FEB-2016 04-MAR-2016 11-MAR-2016 31-MAR-2016 At the beginning of the Year 31-MAR-2015 10-APR-2015 17-APR-2015 24-APR-2015 01-MAY-2015 08-MAY-2015 15-MAY-2015 22-MAY-2015 29-MAY-2015 05-JUN-2015 12-JUN-2015 19-JUN-2015 26-JUN-2015 30-JUN-2015 03-JUL-2015 10-JUL-2015 14-JUL-2015 17-JUL-2015 Decrease Decrease Decrease Decrease Increase Decrease Increase Increase Increase Decrease Decrease Increase Increase Increase Increase Increase Increase 29,581,912 (39,981) (13,582) (121,659) (315,919) 6,214 75,760 (9,702) (4,288) 4,239 22,074 5,594 86,259 20,166 (186,653) 101,916 116,500 (330,214) 15,662 66,883 165,000 (25,166) (244,309) (25,440) (473,744) (2,831) 0 20,061,322 (174,431) (98,787) (296,202) (98,656) 198,719 (608,829) 259,074 310,552 532,106 (270,744) (153,807) 1,521,179 965,740 493,324 280,485 4,032 25,850 1.18 (0.00) (0.00) (0.01) (0.01) 0.00 0.00 (0.00) (0.00) 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00 0.01 (0.01) 0.00 0.00 0.01 (0.00) (0.01) (0.00) (0.02) (0.00) 0.00 0.80 (0.01) (0.00) (0.01) (0.00) 0.01 (0.02) 0.01 0.01 0.02 (0.01) (0.01) 0.06 0.04 0.02 0.01 0.00 0.00 29,541,931 29,528,349 29,406,690 29,090,771 29,096,985 29,172,745 29,163,043 29,158,755 29,162,994 29,185,068 29,190,662 29,276,921 29,297,087 29,110,434 29,212,350 29,328,850 28,998,636 29,014,298 29,081,181 29,246,181 29,221,015 28,976,706 28,951,266 28,477,522 28,474,691 28,474,691 19,886,891 19,788,104 19,491,902 19,393,246 19,591,965 18,983,136 19,242,210 19,552,762 20,084,868 19,814,124 19,660,317 21,181,496 22,147,236 22,640,560 22,921,045 22,925,077 22,950,927 1.18 1.18 1.17 1.16 1.16 1.16 1.16 1.16 1.16 1.16 1.16 1.16 1.16 1.16 1.16 1.16 1.15 1.15 1.15 1.16 1.16 1.15 1.15 1.13 1.13 1.13 0.79 0.79 0.78 0.77 0.78 0.76 0.77 0.78 0.80 0.79 0.78 0.84 0.88 0.90 0.91 0.91 0.91 HDFC Bank Limited Annual Report 2015-16 48 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Increase Increase Decrease Increase Increase Increase Increase Decrease Increase Decrease Decrease Increase Decrease Decrease Decrease Increase Increase Increase Increase Increase Increase Increase Decrease Decrease Increase Increase Decrease Decrease Decrease Increase Decrease Decrease Increase Increase Increase Decrease Increase Decrease At the END of the Year 24-JUL-2015 31-JUL-2015 07-AUG-2015 14-AUG-2015 21-AUG-2015 28-AUG-2015 04-SEP-2015 11-SEP-2015 18-SEP-2015 25-SEP-2015 30-SEP-2015 02-OCT-2015 09-OCT-2015 16-OCT-2015 23-OCT-2015 30-OCT-2015 06-NOV-2015 13-NOV-2015 20-NOV-2015 27-NOV-2015 04-DEC-2015 11-DEC-2015 18-DEC-2015 25-DEC-2015 31-DEC-2015 08-JAN-2016 15-JAN-2016 22-JAN-2016 29-JAN-2016 05-FEB-2016 12-FEB-2016 19-FEB-2016 26-FEB-2016 04-MAR-2016 11-MAR-2016 18-MAR-2016 25-MAR-2016 31-MAR-2016 31-MAR-2016 At the beginning of the Year 31-MAR-2015 10-APR-2015 17-APR-2015 24-APR-2015 01-MAY-2015 08-MAY-2015 15-MAY-2015 22-MAY-2015 Increase Decrease Decrease Increase Increase Increase Increase 32,680 565,554 (4,465) 270,209 235,255 163,313 575,929 (13,085) 28,152 (282,314) (283,995) 48,817 (67,522) (118,226) (122,827) 366,897 398,099 131,830 243,191 44,360 212,950 88,958 (287,071) (168,431) 627,488 569,361 (6,546) (584,784) (496,060) 95,369 (195,504) (25,721) 641,436 307,449 96,956 (297,220) 199,346 (855,382) 0 13,815,526 257,000 (100,000) (244,855) 51,408 221,200 355,000 52,546 8 HDFC TRUSTEE COMPANY LIMITED - HDFC TOP 200 FUND HDFC Bank Limited Annual Report 2015-16 49 Cumulative shareholding during the year No. of shares 22,983,607 23,549,161 23,544,696 23,814,905 24,050,160 24,213,473 24,789,402 24,776,317 24,804,469 24,522,155 24,238,160 24,286,977 24,219,455 24,101,229 23,978,402 24,345,299 24,743,398 24,875,228 25,118,419 25,162,779 25,375,729 25,464,687 25,177,616 25,009,185 25,636,673 26,206,034 26,199,488 25,614,704 25,118,644 25,214,013 25,018,509 24,992,788 25,634,224 25,941,673 26,038,629 25,741,409 25,940,755 25,085,373 25,085,373 14,072,526 13,972,526 13,727,671 13,779,079 14,000,279 14,355,279 14,407,825 Percentage of total shares of the company 0.92 0.94 0.94 0.95 0.96 0.96 0.99 0.98 0.99 0.97 0.96 0.96 0.96 0.96 0.95 0.97 0.98 0.99 1.00 1.00 1.01 1.01 1.00 0.99 1.02 1.04 1.04 1.01 0.99 1.00 0.99 0.99 1.01 1.03 1.03 1.02 1.03 0.99 0.99 0.56 0.56 0.55 0.55 0.56 0.57 0.58 Percentage of total shares of the company 0.00 0.02 (0.00) 0.01 0.01 0.01 0.02 (0.00) 0.00 (0.01) (0.01) 0.00 (0.00) (0.01) (0.01) 0.02 0.02 0.01 0.01 0.00 0.01 0.00 (0.01) (0.01) 0.03 0.02 (0.00) (0.02) (0.02) 0.00 (0.01) (0.00) 0.03 0.01 0.00 (0.01) 0.01 (0.03) 0.00 0.55 0.01 (0.00) (0.01) 0.00 0.01 0.01 0.00 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Increase Increase Increase Increase Increase Increase Decrease Decrease Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Decrease Increase Increase Increase Increase Increase Increase Increase Increase Increase Decrease Increase Increase Increase Increase Increase Increase Decrease Increase Increase Decrease Decrease Increase At the END of the Year 29-MAY-2015 05-JUN-2015 12-JUN-2015 19-JUN-2015 26-JUN-2015 30-JUN-2015 03-JUL-2015 10-JUL-2015 17-JUL-2015 24-JUL-2015 31-JUL-2015 07-AUG-2015 14-AUG-2015 21-AUG-2015 28-AUG-2015 04-SEP-2015 11-SEP-2015 18-SEP-2015 25-SEP-2015 30-SEP-2015 09-OCT-2015 16-OCT-2015 23-OCT-2015 30-OCT-2015 06-NOV-2015 13-NOV-2015 20-NOV-2015 27-NOV-2015 04-DEC-2015 11-DEC-2015 18-DEC-2015 25-DEC-2015 31-DEC-2015 01-JAN-2016 08-JAN-2016 15-JAN-2016 22-JAN-2016 29-JAN-2016 05-FEB-2016 12-FEB-2016 19-FEB-2016 26-FEB-2016 04-MAR-2016 11-MAR-2016 18-MAR-2016 25-MAR-2016 31-MAR-2016 31-MAR-2016 264,516 15,066 683,078 216,179 199,673 128,750 (45,538) (436) 101,500 83,656 22,000 80,226 37,750 182,500 300,723 161,696 147,559 550,466 250,086 278,250 177,630 28,929 203,338 282,695 (100,000) 503,480 205,421 108,213 21,330 284,509 243,749 17,931 116,771 50,000 (39,834) 42,307 330,318 337,635 225,171 737,843 726,457 (198,080) 154,248 279,504 (35,474) (56,285) 3,379 0 HDFC Bank Limited Annual Report 2015-16 50 Cumulative shareholding during the year No. of shares 14,672,341 14,687,407 15,370,485 15,586,664 15,786,337 15,915,087 15,869,549 15,869,113 15,970,613 16,054,269 16,076,269 16,156,495 16,194,245 16,376,745 16,677,468 16,839,164 16,986,723 17,537,189 17,787,275 18,065,525 18,243,155 18,272,084 18,475,422 18,758,117 18,658,117 19,161,597 19,367,018 19,475,231 19,496,561 19,781,070 20,024,819 20,042,750 20,159,521 20,209,521 20,169,687 20,211,994 20,542,312 20,879,947 21,105,118 21,842,961 22,569,418 22,371,338 22,525,586 22,805,090 22,769,616 22,713,331 22,716,710 22,716,710 Percentage of total shares of the company 0.59 0.59 0.61 0.62 0.63 0.63 0.63 0.63 0.64 0.64 0.64 0.64 0.64 0.65 0.66 0.67 0.68 0.70 0.71 0.72 0.72 0.73 0.73 0.74 0.74 0.76 0.77 0.77 0.77 0.78 0.79 0.79 0.80 0.80 0.80 0.80 0.81 0.83 0.84 0.87 0.89 0.89 0.89 0.90 0.90 0.90 0.90 0.90 Percentage of total shares of the company 0.01 0.00 0.03 0.01 0.01 0.01 (0.00) (0.00) 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.00 0.01 0.01 (0.00) 0.02 0.01 0.00 0.00 0.01 0.01 0.00 0.01 0.00 (0.00) 0.00 0.01 0.01 0.01 0.03 0.03 (0.01) 0.01 0.01 (0.00) (0.00) 0.00 0.00 Directors' Report Name Sl. No. Remarks Date *** 9 HDFCSL SHAREHOLDERS SOLVENCY MARGIN ACCOUNT At the beginning of the Year 31-MAR-2015 10-APR-2015 17-APR-2015 24-APR-2015 01-MAY-2015 08-MAY-2015 15-MAY-2015 22-MAY-2015 29-MAY-2015 05-JUN-2015 12-JUN-2015 19-JUN-2015 26-JUN-2015 30-JUN-2015 03-JUL-2015 10-JUL-2015 24-JUL-2015 14-AUG-2015 28-AUG-2015 04-SEP-2015 11-SEP-2015 18-SEP-2015 25-SEP-2015 30-SEP-2015 02-OCT-2015 09-OCT-2015 16-OCT-2015 23-OCT-2015 30-OCT-2015 06-NOV-2015 13-NOV-2015 20-NOV-2015 04-DEC-2015 11-DEC-2015 18-DEC-2015 01-JAN-2016 08-JAN-2016 15-JAN-2016 22-JAN-2016 29-JAN-2016 05-FEB-2016 12-FEB-2016 19-FEB-2016 26-FEB-2016 04-MAR-2016 11-MAR-2016 Increase Increase Increase Increase Decrease Increase Increase Increase Increase Increase Increase Increase Increase Decrease Decrease Decrease Decrease Decrease Increase Increase Decrease Increase Increase Decrease Increase Increase Increase Increase Increase Increase Increase Increase Decrease Increase Decrease Decrease Increase Decrease Increase Increase Increase Increase Increase Increase Increase HDFC Bank Limited Annual Report 2015-16 51 Shareholding at the beginning of the year No. of shares 17,694,392 412,098 564,323 591,334 284,870 (11,637) 329,900 209,310 32,344 234,700 159,410 21,319 10,295 142,140 (200,000) (39,809) (12,762) (14,403) (39,560) 234,343 838,505 (15,696) 10,000 110,119 (249,999) 190,000 25,277 310,131 120,097 191 113,192 72,396 46,836 (95,590) 87,164 (100,000) (126,017) 72,000 (103,321) 99,995 50,308 28,053 41,514 25,383 65,235 1,169 Percentage of total shares of the company 0.71 0.02 0.02 0.02 0.01 (0.00) 0.01 0.01 0.00 0.01 0.01 0.00 0.00 0.01 (0.01) (0.00) (0.00) (0.00) (0.00) 0.01 0.03 (0.00) 0.00 0.00 (0.01) 0.01 0.00 0.01 0.01 0.00 0.00 0.00 0.00 (0.00) 0.00 (0.00) (0.01) 0.00 (0.00) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Cumulative shareholding during the year No. of shares Percentage of total shares of the company 18,106,490 18,670,813 19,262,147 19,547,017 19,535,380 19,865,280 20,074,590 20,106,934 20,341,634 20,501,044 20,522,363 20,532,658 20,674,798 20,474,798 20,434,989 20,422,227 20,407,824 20,368,264 20,602,607 21,441,112 21,425,416 21,435,416 21,545,535 21,295,536 21,485,536 21,510,813 21,820,944 21,941,041 21,941,232 22,054,424 22,126,820 22,173,656 22,078,066 22,165,230 22,065,230 21,939,213 22,011,213 21,907,892 22,007,887 22,058,195 22,086,248 22,127,762 22,153,145 22,218,380 22,219,549 0.72 0.75 0.77 0.78 0.78 0.79 0.80 0.80 0.81 0.82 0.82 0.82 0.82 0.82 0.81 0.81 0.81 0.81 0.82 0.85 0.85 0.85 0.86 0.85 0.85 0.85 0.87 0.87 0.87 0.88 0.88 0.88 0.88 0.88 0.87 0.87 0.87 0.87 0.87 0.87 0.87 0.88 0.88 0.88 0.88 Directors' Report Name Sl. No. Remarks Date *** 10 VIRTUS EMERGING MARKETS OPPORTUNITIES FUND Increase Increase Decrease At the END of the Year 18-MAR-2016 25-MAR-2016 31-MAR-2016 31-MAR-2016 At the beginning of the Year 31-MAR-2015 10-APR-2015 24-APR-2015 01-MAY-2015 08-MAY-2015 31-JUL-2015 07-AUG-2015 22-JAN-2016 29-JAN-2016 18-MAR-2016 31-MAR-2016 31-MAR-2016 Increase Increase Increase Increase Decrease Decrease Decrease Decrease Decrease Decrease At the END of the Year 26,783 80,362 (299,000) 0 19,225,805 236,803 175,979 2,359,860 1,629,494 (459,821) (135,079) (105,534) (1,121,466) (311,500) (347,100) 0 Shareholding at the beginning of the year No. of shares Cumulative shareholding during the year No. of shares 22,246,332 22,326,694 22,027,694 22,027,694 Percentage of total shares of the company 0.88 0.88 0.87 0.87 19,462,608 19,638,587 21,998,447 23,627,941 23,168,120 23,033,041 22,927,507 21,806,041 21,494,541 21,147,441 21,147,441 0.78 0.78 0.88 0.94 0.92 0.92 0.91 0.86 0.85 0.84 0.84 Percentage of total shares of the company 0.00 0.00 (0.01) 0.00 0.77 0.01 0.01 0.09 0.07 (0.02) (0.01) (0.00) (0.04) (0.01) (0.01) 0.00 *** Date of transfer has been considered as the date on which the beneﬁciary position was provided by the Depositories to the Bank. Increase = Purchase of shares of the Bank Decrease = Sale of shares of the Bank (v) Shareholding of Directors and Key Managerial Personnel Name Sr. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the company Cumulative shareholding during the year No. of shares Percentage of total shares of the company 1 Aditya Puri At the beginning of the Year Increase At the END of the Year 2 Bobby Parikh At the beginning of the Year At the END of the Year Jointly With Relatives At the beginning of the Year At the END of the Year 3 Kaizad Bharucha At the beginning of the Year Decrease Decrease Increase Increase At the END of the Year Jointly With Relatives At the beginning of the Year At the END of the year 4 Keki Mistry At the beginning of the year At the END of the year Jointly With Relatives At the beginning of the year At the END of the year 5 Paresh Sukthankar At the beginning of the year Increase 31-MAR-2015 30-OCT-2015 31-MAR-2016 31-MAR-2015 31-MAR-2016 31-MAR-2015 31-MAR-2016 31-MAR-2015 30-OCT-2015 20-NOV-2015 04-DEC-2015 25-DEC-2015 31-MAR-2016 31-MAR-2015 31-MAR-2016 31-MAR-2015 31-MAR-2016 31-MAR-2015 31-MAR-2016 31-MAR-2015 29-MAY-2015 2,731,544 337,500 3,837 3,538 829,455 (15,000) (80,000) 129,000 21,000 500 291,915 4,215 617,655 30,000 0.11 0.01 0.00 0.00 0.03 (0.00) (0.00) 0.00 0.00 0.00 0.01 0.00 0.02 0.00 3,069,044 3,069,044 3,837 3,538 814,455 734,455 863,455 884,455 884,455 500 291,915 4,215 647,655 0.12 0.12 0.00 0.00 0.03 0.03 0.03 0.04 0.04 0.00 0.01 0.00 0.03 HDFC Bank Limited Annual Report 2015-16 52 Directors' Report Name Sr. No. Remarks Date *** Increase Increase Increase At the End of the year Jointly With Relatives At the beginning of the year Renu Karnad At the END of the year At the beginning of the year At the END of the year Sashidhar Jagdishan At the beginning of the year 6 7 8 Sanjay Dongre Increase At the END of the year At the beginning of the year Decrease Increase Increase Decrease Decrease Increase Decrease At the END of the year 26-JUN-2015 04-DEC-2015 25-DEC-2015 31-MAR-2016 31-MAR-2015 31-MAR-2016 31-MAR-2015 25-DEC-2015 31-MAR-2016 31-MAR-2015 22-MAY-2015 25-SEP-2015 30-OCT-2015 06-NOV-2015 20-NOV-2015 04-DEC-2015 05-FEB-2016 31-MAR-2016 5,000 20,000 170,000 3,250 294,620 575,194 7,400 60,750 (5,000) 12,000 12,500 (4,500) (12,500) 28,000 (6,000) Shareholding at the beginning of the year No. of shares Percentage of total shares of the company 0.00 0.00 0.00 Cumulative shareholding during the year No. of shares 652,655 672,655 842,655 842,655 3,250 294,620 582,594 582,594 55,750 67,750 80,250 75,750 63,250 91,250 85,250 85,250 Percentage of total shares of the company 0.03 0.03 0.03 0.03 0.00 0.01 0.02 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.02 0.00 0.00 (0.00) 0.00 0.00 (0.00) (0.00) 0.00 (0.00) *** Date of transfer has been considered as the date on which the beneﬁciary position was provided by the Depositories to the Bank. Increase= Allotment of equity shares on exercise of equity stock options Decrease= Sale of shares of the Bank during the year V. INDEBTEDNESS Indebtedness of the Bank including interest outstanding / accrued but not due for payment: (` crore) Secured Loans excluding deposits Unsecured Loans (1) Deposits (2) Total Indebtedness Indebtedness at the beginning of the ﬁnancial year i) Principal Amount ii) Interest due but not paid iii) Interest accrued but not due Total (i+ii+iii) Change in Indebtedness during the ﬁnancial year (cid:115)(cid:0)(cid:33)(cid:68)(cid:68)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78) (cid:115)(cid:0)(cid:50)(cid:69)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) Net change Indebtedness at the end of the ﬁnancial year i) Principal Amount ii) Interest due but not paid iii) Interest accrued but not due Total (i+ii+iii) (1) Movement in long-term subordinated debt is shown on a gross basis. - - - - - - - - - - - 45,213.6 - 298.9 45,512.5 9,092.0 (1,202.0) 7,890.0 53,018.5 - 384.0 53,402.5 45,213.6 - 298.9 45,512.5 9,092.0 (1,202.0) 7,890.0 53,018.5 - 384.0 53,402.5 (2) Section 73 (1) of the Companies Act, 2013, states that the provisions of the said Act relating to acceptance of deposits by companies do not apply to a Banking company as deﬁned in the Reserve Bank of India Act, 1934. Accordingly, information relating to the Bank’s deposits is not disclosed in the table above. As per the applicable provisions of the Banking Regulation Act, 1949, details of the Bank’s deposits have been included under Schedule 3 - Deposits, in the ﬁnancial statements of the Bank. HDFC Bank Limited Annual Report 2015-16 53 Directors' Report VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL: A. Remuneration to Managing Director, Whole-time Directors and/or Manager: (`) Sr. no. Particulars of Remuneration 1 Gross Salary a) Salary as per provisions contained in Section 17(1) of the Income Tax Act, 1961 b) Value of perquisites u/s. 17(2) of Income Tax Act, 1961 except stock options Name of Managing Director / Whole Time Director / Manager Aditya Puri (Managing Director) Paresh Sukthankar Kaizad Bharucha (Deputy Managing Director) (Executive Director) Total Amount 79,869,230 42,338,451 27,921,726 150,129,407 13,393,447 6,828,293 5,329,498 25,551,238 c) Proﬁts in lieu of salary under section 17(3) - - - - of Income Tax Act, 1961. 2 Stock options exercised during the year 3 Sweat Equity 4 Commission - as per cent of proﬁts - others, specify 5 Others * Total (A) ** Ceiling as per the Act^ 218,046,125 0 137,508,300 0 94,969,070 450,523,495 0 0 0 0 4,041,568 97,304,245 0 0 2,292,880 51,459,624 0 0 1,360,000 0 0 7,694,448 34,611,224 183,375,093 ^ Section 198 of the Companies Act, 1956 (which corresponds to the now applicable section 197 of the Companies Act, 2013) does not by virtue of section 35B (2A) of the Banking Regulation Act, 1949, apply to Banking companies. * Includes Provident Fund and tax exempted portion of Superannuation. ** Does not include the value of the stock options exercised during the year B. Remuneration to other Directors: Sr. no. Name of Director Independent Directors 1 Mrs. Shyamala Gopinath 2 Mr. Partho Datta 3 Mr. Bobby Parikh 4 Mr. A.N. Roy 5 Mr. Malay Patel 6 Dr. Pandit Palande (retired w.e.f. April 23, 2015) Sub total (i) Other Non-Executive Directors 1 Mrs. Renu Karnad 2 Mr. Keki Mistry 3 Mr. Umesh Chandra Sarangi (appointed w.e.f March 1, 2016) Sub total (ii) Total (i+ii) Overall ceiling as per the Act ^ Particulars of Remuneration Fees for attending Board / committee meetings Commission Others 30,00,000 25,00,000 20,00,000 24,00,000 21,00,000 13,00,000 3,50,000 11,00,000 16,00,000 - - - - - - - - - - - - - - (`) Total Amount 55,00,000 20,00,000 24,00,000 21,00,000 13,00,000 3,50,000 1,36,50,000 11,00,000 16,00,000 - - 27,00,000 1,63,50,000 Total Managerial Remuneration = (A)+(B) = ` 199,725,093 ^ Section 198 of the Companies Act, 1956 (which corresponds to the now applicable section 197 of the Companies Act, 2013) does not, by virtue of section 35B (2A) of the Banking Regulation Act, 1949, apply to Banking companies. HDFC Bank Limited Annual Report 2015-16 54 Directors' Report C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MANAGING DIRECTOR/ WHOLE TIME DIRECTOR (`) / MANAGER Sr. no. Particulars of Remuneration 1 Gross salary (a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961 Key Managerial Personnel Mr. Sanjay Dongre (Company Secretary) Mr. Sashidhar Jagdishan (Chief Financial Ofﬁcer) Total 8,956,421 17,076,921 26,033,342 (b) Value of perquisites u/s 17(2) of Income-tax 323,832 3,196,943 3,520,775 Act, 1961 except stock options (c) Proﬁts in lieu of salary under section 17(3) 0 0 0 of Income-tax Act, 1961 2 Stock options exercised during the year 32,346,755 4,541,158 36,887,913 3 Sweat Equity 4 Commission -as per cent of proﬁts -others, specify 5 Others* Total** 0 0 0 0 0 0 0 0 0 276,748 9,557,001 417,832 694,580 20,691,696 30,248,697 * Includes Provident Fund and tax exempted portion of superannuation. ** Does not include the value of stock options exercised during the year. VII. PENALTIES / PUNISHMENT / COMPOUNDING OF OFFENCES: Type Section of the Companies Act Brief description Details of penalties / punishment / compounding fees imposed Authority (RD / NCLT / Court) Appeal made, if any (give details) A. COMPANY Penalty Punishment Compounding B. DIRECTORS Penalty Punishment Compounding C. OTHER OFFICERS IN DEFAULT Penalty Punishment Compounding NONE NONE NONE HDFC Bank Limited Annual Report 2015-16 55 2 s r a e y 5 s r a e y i g n y r a V i g n y r a V o t p U s e i t i r u t a m s e i t i r u t a m s h t n o m 3 5 o t p U s y a d 0 3 - s h t n o m 2 4 s r a e y 5 Directors' Report n o i t c e s f o ) 1 ( n o i t c e s - b u s n i o t d e r r e e r f s e i t r a p d e t l a e r h t i w y n a p m o c e h t y b o t n i d e r e t n e s t n e m e g n a r r a / s t c a r t n o c f o l s r a u c i t r a p f o e r u s o c s d i l r o f m r o F 2 - C O A . o N m r o F ) 4 1 0 2 , s e u R l ) s t n u o c c A ( i s e n a p m o C e h t f l o ) 2 ( 8 e u R d n a t c A e h t f o 4 3 1 n o i t c e s f o ) 3 ( n o i t c e s - b u s f o ) h ( e s u a c o t l t n a u s r u P ( t r o p e R ’ s r o t c e r i D e h t o t 4 E R U X E N N A o t e r e h t i o s v o r p d r i h t r e d n u s n o i t c a s n a r t h t g n e l ’ s m r a n a t r e c i i g n d u c n l i 3 1 0 2 i , t c A s e n a p m o C e h t f o 8 8 1 l i N i : s s a b h t g n e l ’ s m r a t a t o n s n o i t c a s n a r t r o s t n e m e g n a r r a r o s t c a r t n o c f o s l i a t e D . 1 i s s a b h t g n e l ’ s m r a t a s n o i t c a s n a r t r o t n e m e g n a r r a r o s t c a r t n o c l a i r e t a m f o s l i a t e D . 2 ) e r o r c ` ( l l a b o G L B H y r a t n e m u c o D s a l t A e t a v i r P d e t i m L i y n a p m o C s r o t a t i l i c a F d e t i i m L e t a v i r P C F D H s e i t i r u c e S d e t i m L i d e t i m L i i s e c v r e S l i i a c n a n F B D H y t r a p d e a e r t l e h t f o ) s ( e m a N ) a ( f o i e t a c o s s A k n a B e h t f o i e t a c o s s A f o i i y r a d s b u S k n a B e h t i f o y r a d s b u S i i p h s n o i t l a e r f o e r u a N t k n a B e h t t n e m y a P l s e a S f o t r o p p u S f o t n e m y a P e c ﬁ f O k c a B t r o p p u S i s e e F e c v r e S s e e F e c v r e S i k n a B e h t f o i t p e c e R s t i s o p e D s t i s o p e D & r e g n a r r A n o d e n r a e i d e d v o r p f o i t p e c e R n o i t a s i t i r u c e S / i r o t a c d n y S t s e r e t n I y t i l i c a f t i d e r C r o t s e v n I y t i l i c a F t i d e r C i d e d v o r p t n e m y a P s d r a w o t n o i t c e l l o c i s e c v r e s d e l i a v a s t i s o p e D / s t n e m e g n a r r a s n o i t c a s n a r t f o i t p e c e R / s t c a r t n o c f o e r u t a N ) b ( t r o p p u s l s e a S e c ﬁ f o k c a B d n a m r e T d n a m r e T n i t n e m t s e v n I i r o t a c d n y S r o f i s e c v r e s d n a s n a o l y t r a p d r i h t s t c u d o r p t r o p p u s i s e c v r e s d n a m e d s t i s o p e d d n a m e d s t i s o p e d h g u o r h T s s a P r e g n a r r A / s e t a c ﬁ i t r e C r o f s e e F a t a d s a h c u s h t i w d e c a p l h t i w d e c a p l i g n s s e c o r p k n a B e h t k n a B e h t s d n o B / s D C N 6 4 . 0 : e u a V l k n a B e h t k n a B y b i d e d v o r p e h t y b d e l i a v a : e u a V l 1 2 . 1 0 7 : e u a V l 0 2 . 1 7 4 3 7 . 7 5 : l e u a V 6 1 . 9 7 3 : e u a V l 6 6 . 8 4 7 , 1 i g n d n a t s t u O i g n d n a t s t u O : e u a V l 0 0 . 2 2 3 : e u a V l t n e m t s e v n I t s e r e t n I d e n r a e s n a o L m r e T i d e d v o r p i s e c v r e S r o f d e l i a v a d n a p u - w o l l o f n o i t c e l l o c : e u a V l 6 0 . 0 0 1 i g n d n a t s t u O 5 8 . 9 7 : e u a V l i g n d n a t s t u O : e u a V l 0 0 . 0 9 5 , 1 0 7 . 0 3 1 : e u a V l e c n a r u s n i i s e n a p m o c m o r f s m a c l i r e m o t s u c f o k n a B e h t , e u a v l e h t i g n d u c n l i d n a s e u d : y n a f i i g n y r a V s e i t i r u t a m d n a m r e T d n a m e d s t i s o p e d h t i w d e c a p l / s t c a r t n o c e h t / s t n e m e g n a r r a s n o i t c a s n a r t f o n o i t a r u D ) c ( r o s t c a r t n o c e h t s t n e m e g n a r r a s n o i t c a s n a r t r o f o s m r e t t n e i l a S ) d ( A N A N A N A N A N A N A N A N A N A N l a v o r p p a f o ) s ( e t a D ) e ( f i , d r a o B e h t y b : y n a l i N - e c n a v d A 6 6 . 4 l i N l i N l i N l i N l i N l i N y t i r u c e S 5 7 . 9 - t i s o p e d l i N : y n a f i , s e c n a v d a s a d a p i t n u o m A ) f ( l e u R n i d e b i r c s e r p s a s i l d o h s e r h t y t i l a i r e a M t . s s e n s u b i f o e s r u o c y r a n d r o i s t i n i k n a B e h t y b o t n i d e r e t n e e r e w s n o i t c a s n a r t d e n o i t n e m e v o b a e h T . 4 1 0 2 , s e u R l t n e m d n e m A d n o c e S ) s r e w o P s t i d n a d r a o B f o s g n i t e e M ( i s e n a p m o C e h t f o ) 3 ( 5 1 HDFC Bank Limited Annual Report 2015-16 56 Directors' Report ANNEXURE 5 to the Directors’ Report Performance and ﬁnancial position of subsidiaries and associates of the Bank as on March 31, 2016 (` crore) Name of entity Parent: HDFC Bank Limited Subsidiaries*: Net assets as of March 31, 2016 Proﬁt or loss for the year ended March 31, 2016 As percentage of consolidated net assets** Amount*** As percentage of consolidated proﬁt or loss Amount*** 97.81 72,677.77 96.05 12,296.23 1. HDFC Securities Limited 2. HDB Financial Services Limited Minority Interest in all subsidiaries 0.90 4.79 0.24 666.04 3,561.80 180.62 1.04 4.17 0.15 133.34 534.41 19.72 *The subsidiaries are domestic entities **Consolidated net assets are total assets minus total liabilities including minority interest ***Amounts are before inter-company adjustments. (` crore) Name of entity Investment as per equity method as of March 31, 2016 Share of proﬁt or loss for the year ended March 31, 2016 Associates*: 1. Atlas Documentary Facilitators Company Private Limited (ADFC) ** 2. International Asset Reconstruction Company Private Limited As percetage of consolidated net assets Amount As percentage of consolidated proﬁt or loss Amount 0.03 0.05 23.45 37.96 0.02 0.01 2.69 1.04 *The associates are domestic entities **Includes proportionate share of proﬁt / loss of HBL Global Private Limited, which is a subsidiary of ADFC HDFC Bank Limited Annual Report 2015-16 57 Directors' Report ANNEXURE 6 to the Directors’ Report Disclosures on Remuneration 1. Ratio of Remuneration of each director to the median employees remuneration for the year Designation Managing Director Deputy Managing Director Executive Director Note: Ratio 179:1 107:1 78:1 a. We have considered ﬁxed pay for the computation of ratios as the performance bonus for the previous year for Whole time Directors is b. c. d. subject to RBI approval. Fixed pay includes-Salary, Allowances, Retiral Beneﬁts as well as value of perquisites excluding ESOPs The above includes all employees of the Bank excluding overseas employees. The ratios include all on-roll employees including 22,960 frontline sales staff, who got absorbed on the rolls of the Bank during FY 15-16. The ratios excluding front line sales staff would have been MD-138:1, DMD-83:1, ED-60:1. 2. Percentage increase in remuneration of each Director, CFO, CEO, CS or Manager, if any, in the FY Designation Managing Director Deputy Managing Director Executive Director * Chief Financial Ofﬁcer Company Secretary Percentage Increase 20.00 20.00 50.00 17.80 12.00 *The increase in the remuneration includes increase given for salary alignment with Whole Time Directors both internally and externally. 3. Percentage Increase in the median remuneration of employees in the ﬁnancial year The percentage increase in the median remuneration of the employees in the ﬁnancial year was 9.63 per cent. 4. The number of permanent employees on the rolls of the Bank As of March 31, 2016 the number of permanent employees on the rolls of the Bank was 87,555. 5. Explanation on relationship between average increase in remuneration and the Bank’s performance The remuneration for Bank employees is governed by an elaborate and comprehensive Compensation Policy that has been articulated in alignment with the Reserve Bank of India guidelines. The Compensation Policy clearly lays down the principles for determining remuneration. The Bank’s approach is to have a pay for performance culture based on the belief that the performance management system provides a sound basis for assessing performance holistically. The compensation system also takes into account factors like roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent. Further, in line with the philosophy of prudent risk taking, remuneration is subject to adjustment against all types of risk. The average increase in employee remuneration for the year has been 10.88 per cent. The growth of proﬁt (PBT) during the similar period has been 21.6 per cent. Note: Includes employees who were eligible for salary increase in the ﬁnancial year 2014-2015 and 2015-2016 HDFC Bank Limited Annual Report 2015-16 58 Directors' Report 6. Comparison of Remuneration of KMP against performance of the Bank : For FY 15 - 16, KMPs were paid approximately 0.08 per cent of the PBT for the year. Note: We have considered the ﬁxed annualised salary for Key Managerial Personnel vis-à-vis the proﬁt of the Bank. 7. Variations in the market capitalisation of the Bank, price earnings ratio as at the closing date of the current FY and the previous FY and percentage increase or decrease in market quotations of the shares of the Bank in comparison to the rate at which the Bank came out with the last public offer. Market Capitalisation (in ` Billion ) Price / Earnings Ratio Percentage Increase / Decrease in market quotations of the shares of the Bank in comparison to the rate at which the Bank came out with last public offer * March 31, 2016 March 31, 2015 2,708.1 21.9 2,563.4 24.3 6.7 per cent 2.0 per cent Percentage Increase / Decrease in market quotations of the shares of the Bank in comparison to the rate at which the Bank came out with last public offer. (Annualised)* 5.9 per cent 14.6 per cent * Last public offer considered for the above was the ADR issue in Feb 2015. 8. Average percentage increase already made in the salaries of employees other than the managerial personnel in the last ﬁnancial year and its comparison with the percentage increase in the managerial remuneration and justiﬁcation thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration. The average percentage increase for Key Managerial Personnel : 23.95 per cent The average percentage increase for Non Managerial Staff : 10.88 per cent 9. Comparison of each remuneration of the Key Managerial Personnel against the performance of the Bank Particulars Company Secretary Chief Financial Ofﬁcer Managing Director Deputy Managing Director Executive Director Percentage of PBT 0.005 0.009 0.034 0.020 0.015 The above is based on the ratio of Fixed Pay to Proﬁt before tax. 10. Key Parameters for any variable component of remuneration availed by the Directors The variable pay for Directors is based on a comprehensive framework governed by the compensation policy of the Bank framed in accordance with the Reserve Bank of India Guidelines. The variable remuneration is based on multiple parameters: Computation of Bonus Pool: The Pool for Bonus is computed based on the proﬁtability of the Bank. The bonus pool is computed as a per cent of the surplus generated post adjustment for all types of risk as approved by the Nomination and Remuneration Committee of the Board. The variable pay for Whole-time Directors too is part of the aforementioned pool. HDFC Bank Limited Annual Report 2015-16 59 Directors' Report Distribution of Variable Pay: The distribution of Variable Pay is principally performance linked. This is based on a comprehensive evaluation of each of the Directors as per the Performance Evaluation Framework. The framework takes into consideration performance against set objectives, performance vis-à-vis peer group and adherence to compliance standards. Capping and Deferment: The variable pay of Whole Time Directors is capped at 70 per cent of Fixed Pay. Further in the event variable pay exceeds 50 per cent of ﬁxed pay, 60 per cent would be paid on immediate approval by the Reserve Bank of India. 40 per cent of the Variable Pay will be deferred over a period of 3 years Malus and Clawback: In the event there is a deferment of variable pay the deferred portion of variable pay shall be subject to Malus and Clawback subject to the terms and conditions as deﬁned in the Compensation policy of the Bank. Malus: The Malus clause that governs variable pay is aimed at ensuring withdrawal of the deferred bonus subject to the performance of the Bank in the future and as decided and approved by Nomination and Remuneration Committee of the Board. Clawback: The clawback clause provides for the return of any bonus paid to the Director subject to terms and conditions as may be decided and approved by the Nomination and Remuneration Committee of the Board. 11. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director: NA 12. Afﬁrmation that the remuneration is as per the remuneration policy of the company: YES HDFC Bank Limited Annual Report 2015-16 60 Directors' Report ANNEXURE 7 to the Directors’ Report Form No. MR-3 SECRETARIAL AUDIT REPORT For the ﬁnancial year ended 31st March, 2016 [Pursuant to section 204 (1) of the Companies Act, 2013 and Rule No.9 of the Companies (Appointment and Remuneration of Personnel) Rules, 2014] To The Members HDFC Bank Limited HDFC Bank House, Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013 We have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to corporate practices by HDFC Bank Limited (hereinafter called ‘the Bank’) for the audit period covering the ﬁnancial year ended on 31st March, 2016. Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts / statutory compliances and expressing our opinion thereon. Based on our veriﬁcation of the Bank’s books, papers, minute books, forms and returns ﬁled and other records maintained by the Bank and also the information provided by the Bank, its ofﬁcers, agents and authorized representatives during the conduct of Secretarial Audit; and subject to our separate letter attached as Annexure I; we hereby report that in our opinion, the Bank has, during the audit period generally complied with the statutory provisions listed hereunder and also that the Bank has proper Board-processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter. We have examined the books, papers, minute books, forms and returns ﬁled and other records maintained by the Bank for the ﬁnancial year ended on 31st March, 2016 according to the provisions of: (i) The Companies Act, 2013 (‘the Act’) and the Rules made there under; (ii) The Securities Contracts (Regulation) Act, 1956 (SCRA) and the Rules made there under; (iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under; (iv) Foreign Exchange Management Act, 1999 and the Rules and Regulations made there under to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings; (v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’): (a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; (b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015; (c) The Securities and Exchange Board of India (Share Based Employee Beneﬁts) Regulations, 2014; (d) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008; (e) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client; (f) The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015; (g) The Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992; (h) The Securities and Exchange Board of India (Bankers to an Issue) Regulation, 1994 (vi) The Banking Regulation Act, 1949. We have also examined compliance with the applicable clauses of the following: 1. 2. Secretarial Standards issued by The Institute of Company Secretaries of India related to meetings and minutes Listing Agreement entered into by the Bank with the Stock Exchanges(s) During the period under review, the Bank has generally complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards etc. mentioned above. During the period under review, provisions of the following regulations were not applicable to the Bank: (i) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009; HDFC Bank Limited Annual Report 2015-16 61 Directors' Report (ii) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; (iii) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998 We further report that- The Board of Directors of the Bank is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act. Proper notice is given to all Directors to schedule the Board meetings in compliance with the provisions of Section 173(3) of the Companies Act, 2013, agenda and detailed notes on agenda were generally sent at least seven days in advance and a system exists for seeking and obtaining further information and clariﬁcations on the agenda items before the meeting and for meaningful participation at the meeting. Decisions at the meetings of the Board of Directors of the Bank were carried through on the basis of majority. There were no dissenting views by any member of the Board of Directors during the period under review. We further report that- There are adequate systems and processes in the Bank commensurate with the size and operations of the Bank to monitor and ensure compliance with the applicable laws, rules, regulations and guidelines. We further report that during the audit period, the Bank has- 1. Obtained approval of members by way of special resolution under section 180 (1) (c) of the Act to authorize the Board of Directors to borrow money in excess of the aggregate of the paid up share capital and free reserves of the Bank, but not exceeding a sum of `50,000 crore. 2. Issued and allotted 29750 Senior Unsecured Redeemable Long Term Non-Convertible Bonds in nature of Debentures of face value of ` 10,00,000/- each aggregating to ` 2975 crore on private placement basis. Place: Mumbai Date: May 19, 2016 For BNP & Associates Company Secretaries Keyoor Bakshi Partner FCS 1844 / CP No. 2720 Annexure I to the Secretarial Audit Report for the ﬁnancial year ended 31st March, 2016 To, The Members, HDFC Bank Limited Our secretarial audit report of even date is to be read along with this letter. 1. Maintenance of Secretarial records and compliance of the provisions of corporate and other applicable laws, rules, regulations, standards are the responsibility of the management of the Bank. Our responsibility is to express an opinion on these secretarial records and compliance based on our audit. 2. We have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial Records. The veriﬁcation was done on the test basis to ensure that correct facts are reﬂected in secretarial records. We believe that the processes and practices, we followed provide a reasonable basis for our opinion. 3. We have not veriﬁed the correctness and appropriateness of ﬁnancial records and Books of Accounts of the Bank. 4. Wherever required, we have obtained the management representation about the compliance of laws, rules and regulations and happening of events etc. Place: Mumbai Date: May 19, 2016 HDFC Bank Limited Annual Report 2015-16 62 For BNP & Associates Company Secretaries Keyoor Bakshi Partner FCS 1844/ CP No. 2720 Independent Auditor's Report To the Members of HDFC Bank Limited Report on the Standalone Financial Statements We have audited the accompanying standalone ﬁnancial statements of HDFC BANK LIMITED (“the Bank”), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Proﬁt and Loss and the Cash Flow Statement for the year then ended, and a summary of the signiﬁcant accounting policies and other explanatory information. Management’s Responsibility for the Standalone Financial Statements The Bank’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone ﬁnancial statements that give a true and fair view of the ﬁnancial position, ﬁnancial performance and cash ﬂows of the Bank in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949, accounting principles generally accepted in India, including the Accounting Standards prescribed under Section 133 of the Act, in so far as applicable to banks, and the guidelines issued by the Reserve Bank of India. frauds and other This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Bank and for preventing and detecting irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal ﬁnancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the ﬁnancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these standalone ﬁnancial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit of the standalone ﬁnancial statements in accordance with the Standards on Auditing speciﬁed under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the ﬁnancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the ﬁnancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the ﬁnancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal ﬁnancial control relevant to the Bank’s preparation of the ﬁnancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Bank’s Directors, and evaluating the overall presentation of the ﬁnancial statements. We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our audit opinion on the standalone ﬁnancial statements. Opinion In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone ﬁnancial statements give the information required by the Banking Regulation Act, 1949 and the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Bank as at 31st March, 2016, and its proﬁt and its cash ﬂows for the year ended on that date. Report on Other Legal and Regulatory Requirements 1. As required by Section 143(3) of the Act and Section 30 of the Banking Regulation Act, 1949, we report that: a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. b) In our opinion, the transactions of the Bank which have come to our notice have been within the powers of the Bank. c) As explained in paragraph 2 below, the ﬁnancial accounting systems of the Bank are centralised and, therefore, accounting returns are not required to be submitted by the Branches. d) In our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books. e) The Balance Sheet, the Statement of Proﬁt and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account. HDFC Bank Limited Annual Report 2015-16 65 f) In our opinion, the aforesaid standalone ﬁnancial statements comply with the Accounting Standards prescribed under Section 133 of the Act, as applicable. g) On the basis of the written representations received from the directors as on 31st March, 2016 taken on record by the Board of Directors, none of the directors is disqualiﬁed as on 31st March, 2016 from being appointed as a director in terms of Section 164 (2) of the Act. h) With respect to the adequacy of the internal ﬁnancial controls over ﬁnancial reporting of the Bank and the operating effectiveness of such controls, refer to our Report in “Annexure A”. Our report expresses an unmodiﬁed opinion on the adequacy and operating effectiveness of the Bank’s internal ﬁnancial controls over ﬁnancial reporting. i) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us: iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank. 2. We report that during the course of our audit we have performed select relevant procedures at 54 branches. Since the Bank considers its key operations to be automated, with the key applications largely integrated to the core banking systems, it does not require its branches, to submit any ﬁnancial returns. Accordingly our audit is carried out centrally at the Head Ofﬁce and Central Processing Units based on the necessary records and data required for the purposes of the audit and made available to us. For Deloitte Haskins & Sells Chartered Accountants (Firm’s Registration No. 117365W) Porus B. Pardiwalla Partner (Membership No. 40005) i. ii. The Bank has disclosed the impact of pending litigations on its ﬁnancial position in its ﬁnancial statements - Refer Schedule 17/C-17 and Schedule 18 Note 16(b) and Note 16(c) to the ﬁnancial statements; Mumbai April 22, 2016 the applicable The Bank has made provision, as required under law or accounting standards, for material foreseeable losses, if any, on including derivative contracts-Refer Schedule 17/C 17 and Schedule 18 Note 16 to the ﬁnancial statements; long-term contracts HDFC Bank Limited Annual Report 2015-16 66 ANNEXURE “A” TO THE REPORT INDEPENDENT AUDITOR’S (Referred to in paragraph 1.h under ‘Report on Other Legal and Regulatory Requirements’ of our report of even date) Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”) We have audited the internal ﬁnancial controls over ﬁnancial reporting of HDFC BANK LIMITED (“the Bank”) as at 31st March, 2016 in conjunction with our audit of the standalone ﬁnancial statements of the Bank for the year ended on that date. Management’s Responsibility for Internal Financial Controls The Bank’s management is responsible for establishing and maintaining internal ﬁnancial controls based on the internal control over ﬁnancial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal ﬁnancial controls that were operating effectively for ensuring the orderly and efﬁcient conduct of its business, including adherence to Bank’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable ﬁnancial information, as required under the Companies Act, 2013, the Banking Regulation Act, 1949 and the guidelines issued by the Reserve Bank of India. Auditor’s Responsibility Our responsibility is to express an opinion on the Bank’s internal ﬁnancial controls over ﬁnancial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal ﬁnancial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal ﬁnancial controls over ﬁnancial reporting was established and maintained and if such controls operated effectively in all material respects. the the adequacy of Our audit involves performing procedures to obtain audit evidence about internal ﬁnancial controls system over ﬁnancial reporting and their operating effectiveness. Our audit of internal ﬁnancial controls over ﬁnancial reporting included obtaining an understanding of internal ﬁnancial controls over ﬁnancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the ﬁnancial statements, whether due to fraud or error. the reporting and reliability of ﬁnancial We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our audit opinion on the Bank’s internal ﬁnancial controls system over ﬁnancial reporting. Meaning of Internal Financial Controls Over Financial Reporting A company’s internal ﬁnancial control over ﬁnancial reporting is a process designed to provide reasonable assurance regarding the preparation of ﬁnancial statements for external purposes in accordance with generally accepted accounting principles and other applicable regulations. A company’s internal ﬁnancial control over ﬁnancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the ﬁnancial statements. Inherent Limitations of Internal Financial Controls Over Financial Reporting Because of the inherent limitations of internal ﬁnancial controls over ﬁnancial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal ﬁnancial controls over ﬁnancial reporting to future periods are subject to the risk that the internal ﬁnancial control over ﬁnancial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Opinion In our opinion, to the best of our information and according to the explanations given to us, the Bank has, in all material respects, an adequate internal ﬁnancial controls system over ﬁnancial reporting and such internal ﬁnancial controls over ﬁnancial reporting were operating effectively as at 31st March, 2016, based on the internal control over ﬁnancial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. For Deloitte Haskins & Sells Chartered Accountants (Firm’s Registration No. 117365W) Mumbai April 22, 2016 Porus B. Pardiwalla Partner (Membership No. 40005) HDFC Bank Limited Annual Report 2015-16 67 Balance Sheet As at March 31, 2016 CAPITAL AND LIABILITIES Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions 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 Contingent liabilities Bills for collection Schedule As at 31-Mar-16 ` in ‘000 As at 31-Mar-15 1 2 3 4 5 5,056,373 5,012,991 721,721,274 615,081,174 5,464,241,920 4,507,956,425 530,184,746 452,135,582 367,251,338 324,844,559 Total 7,088,455,651 5,905,030,731 6 7 8 9 10 11 300,583,087 275,104,536 88,605,293 88,209,982 1,638,857,691 1,516,417,540 4,645,939,589 3,654,950,312 33,431,573 31,217,343 381,038,418 339,131,018 Total 7,088,455,651 5,905,030,731 12 8,533,181,145 9,752,339,539 234,899,997 223,049,263 Signiﬁcant accounting policies and notes to the ﬁnancial statements 17 & 18 The schedules referred to above form an integral part of the Balance Sheet. As per our report of even date. For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 22, 2016 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors HDFC Bank Limited Annual Report 2015-16 68 Statement of Proﬁt and Loss For the year ended March 31, 2016 I INCOME Interest earned Other income II EXPENDITURE Interest expended Operating expenses Provisions and contingencies III PROFIT Net proﬁt for the year Balance in Proﬁt and Loss account brought forward IV APPROPRIATIONS Transfer to Statutory Reserve Proposed dividend Tax (including cess) on dividend Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits Transfer to General Reserve Transfer to Capital Reserve Transfer to / (from) Investment Reserve Account Balance carried over to Balance Sheet V EARNINGS PER EQUITY SHARE (Face value ` 2 per share) Basic Diluted Schedule Year ended 31-Mar-16 ` in ‘000 Year ended 31-Mar-15 13 14 602,214,451 484,699,044 107,517,233 89,963,521 Total 709,731,684 574,662,565 15 16 326,299,330 260,742,352 169,797,000 139,875,416 90,673,223 71,885,608 Total 586,769,553 472,503,376 122,962,131 102,159,189 186,277,944 146,541,532 Total 309,240,075 248,700,721 30,740,533 25,539,798 24,017,772 20,051,963 4,889,453 4,082,107 (117,135) 8,411 12,296,213 10,215,919 2,221,532 2,249,166 (85,184) 275,413 235,276,891 186,277,944 Total 309,240,075 248,700,721 ` 48.84 48.26 ` 42.15 41.67 Signiﬁcant accounting policies and notes to the ﬁnancial statements 17 & 18 The schedules referred to above form an integral part of the Statement of Proﬁt and Loss. As per our report of even date. For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 22, 2016 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors HDFC Bank Limited Annual Report 2015-16 69 Cash Flow Statement For the year ended March 31, 2016 Cash ﬂows from operating activities Proﬁt before income tax Adjustments for: Depreciation on ﬁxed assets (Proﬁt) / loss on revaluation of investments Amortisation of premia on held to maturity investments (Proﬁt) / loss on sale of ﬁxed assets Provision / charge for non performing assets Provision for dimunition in value of investment Floating provisions Provision for standard assets Provision for wealth tax Contingency provisions Adjustments for: (Increase) / decrease in investments (excluding investments in subsidiaries and joint ventures) (Increase) / decrease in advances Increase / (decrease) in deposits (Increase) / decrease in other assets Increase / (decrease) in other liabilities and provisions Direct taxes paid (net of refunds) Year ended 31-Mar-16 ` in ‘000 Year ended 31-Mar-15 186,379,247 153,287,238 7,058,390 6,562,963 173,689 (556,306) 1,002,801 805,534 626 (111,598) 22,963,803 18,794,809 151,722 (38,184) 1,150,000 - 4,399,962 2,962,495 - 7,500 218,102 589,904 223,498,342 182,304,355 (123,768,363) (445,894,140) (1,015,961,758) (647,034,038) 956,285,495 834,581,648 (37,562,160) 66,122,651 32,720,884 (94,828,734) 35,212,440 (104,748,258) (67,459,133) (53,874,446) Net cash ﬂow (used in) / from operating activities (32,246,693) (158,622,704) Cash ﬂows used in investing activities Purchase of ﬁxed assets Proceeds from sale of ﬁxed assets Investment in subsidiaries and / or joint ventures Net cash used in investing activities (8,159,133) (7,356,260) 111,518 329,189 - (12,415,656) (8,047,615) (19,442,727) HDFC Bank Limited Annual Report 2015-16 70 Cash Flow Statement For the year ended March 31, 2016 ` in ‘000 Year ended 31-Mar-16 Year ended 31-Mar-15 Cash ﬂows from ﬁnancing activities Money received on exercise of stock options by employees 12,229,008 9,954,171 Increase / (decrease) in borrowings (excluding subordinate debt, perpetual debt and upper Tier II instruments) 89,693,664 61,627,164 Proceeds from issue of shares under Qualiﬁed Institutions Placement and American Depository Receipt offering (net of issue expenses) - 97,227,855 Redemption of subordinated debt Dividend paid during the year Tax on dividend Net cash generated from ﬁnancing activities Effect of exchange ﬂuctuation on translation reserve Net increase / (decrease) in cash and cash equivalents (12,020,000) (4,140,000) (20,091,666) (16,492,770) (3,925,269) (2,742,009) 65,885,737 145,434,411 282,433 109,160 25,873,862 (32,521,860) Cash and cash equivalents as at April 1st (Schedules 6 and 7) 363,314,518 395,836,378 Cash and cash equivalents as at March 31st (Schedules 6 and 7) 389,188,380 363,314,518 As per our report of even date. For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 22, 2016 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors HDFC Bank Limited Annual Report 2015-16 71 Schedules to the Financial Statements As at March 31, 2016 SCHEDULE 1 - CAPITAL Authorised capital 2,75,00,00,000 ( 31 March, 2015 : 2,75,00,00,000) Equity Shares of ` 2/- each Issued, subscribed and paid-up capital 2,52,81,86,517 (31 March, 2015 : 2,50,64,95,317) Equity Shares of ` 2/- each SCHEDULE 2 - RESERVES AND SURPLUS I Statutory reserve Opening balance Additions during the year II General reserve Opening balance Additions during the year III Balance in proﬁt and loss account IV Share premium account Opening balance Additions during the year Deductions during the year [Refer Schedule 18(4)] V Amalgamation reserve Opening balance Additions during the year VI Capital reserve Opening balance Additions during the year VII Investment reserve account Opening balance Additions during the year Deductions during the year [Refer Schedule 18(4)] VIII Foreign currency translation account Opening balance Additions during the year HDFC Bank Limited Annual Report 2015-16 72 As at 31-Mar-16 ` in ‘000 As at 31-Mar-15 5,500,000 5,500,000 Total 5,056,373 5,056,373 5,012,991 5,012,991 Total Total 116,644,222 30,740,533 147,384,755 91,104,424 25,539,798 116,644,222 44,823,296 12,296,213 57,119,509 34,607,377 10,215,919 44,823,296 235,276,891 186,277,944 249,531,232 142,564,095 12,185,626 108,477,413 - (1,510,276) Total 261,716,858 249,531,232 10,635,564 10,635,564 - - Total 10,635,564 10,635,564 6,645,051 4,395,885 2,221,532 2,249,166 Total 8,866,583 6,645,051 484,268 76 (85,260) 399,084 39,597 282,433 322,030 208,855 310,612 (35,199) 484,268 (69,563) 109,160 39,597 721,721,274 615,081,174 Total Total Total Schedules to the Financial Statements As at March 31, 2016 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 B I Deposits of branches in India II Deposits of branches outside India SCHEDULE 4 - BORROWINGS I Borrowings in India (i) Reserve Bank of India (ii) Other banks (iii) Other institutions and agencies (iv) Upper and lower tier II capital and innovative perpetual debts II Borrowings outside India* *Includes Upper Tier II debt of ` 662.55 crore (previous year: ` 625.00 crore) Secured borrowings included in I & II above: Nil (previous year: Nil) SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS I Bills payable II Interest accrued III Others (including provisions) IV Contingent provisions against standard assets V Proposed dividend (including tax on dividend) HDFC Bank Limited Annual Report 2015-16 73 As at 31-Mar-16 ` in ‘000 As at 31-Mar-15 22,017,200 16,319,866 862,229,501 719,334,552 Total 884,246,701 735,654,418 1,478,861,798 1,249,266,089 25,095,540 18,405,279 3,076,037,881 2,504,630,639 Total 3,101,133,421 2,523,035,918 Total 5,464,241,920 4,507,956,425 5,397,071,812 4,449,045,841 67,170,108 58,910,584 Total 5,464,241,920 4,507,956,425 - - 15,792,856 14,851,586 59,750,000 30,000,000 144,279,000 156,299,000 Total 219,821,856 201,150,586 310,362,890 250,984,996 Total 530,184,746 452,135,582 73,784,974 60,853,248 35,987,631 29,949,880 208,559,451 194,323,194 20,012,057 15,584,167 28,907,225 24,134,070 Total 367,251,338 324,844,559 Schedules to the Financial Statements As at March 31, 2016 SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA I Cash in hand (including foreign currency notes) II Balances with Reserve Bank of India : (a) In current accounts (b) In other accounts SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE I In India (i) Balances 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 II Outside India (i) In current accounts (ii) In deposit accounts (iii) Money at call and short notice SCHEDULE 8 - INVESTMENTS A Investments in India in (i) Government securities (ii) Other approved securities (iii) Shares (iv) Debentures and bonds (v) Subsidiaries / joint ventures (vi) Others (Units, CDs/CPs, PTCs and security receipts) B Investments outside India in Other investments (a) Shares (b) Debentures and bonds HDFC Bank Limited Annual Report 2015-16 74 As at ` in ‘000 As at 31-Mar-16 31-Mar-15 55,694,577 53,214,928 242,888,510 219,889,608 2,000,000 2,000,000 Total Total 244,888,510 221,889,608 300,583,087 275,104,536 2,380,626 2,316,337 6,824,510 21,126,770 Total 9,205,136 23,443,107 - 1,359,867 1,359,867 2,500,000 2,238,499 4,738,499 10,565,003 28,181,606 23,909,955 16,465,876 3,776,535 625,000 50,353,800 42,937,500 78,040,290 60,028,376 88,605,293 88,209,982 Total Total Total Total 1,257,105,578 1,203,902,956 - - 739,032 1,284,423 48,873,774 11,254,750 27,829,565 27,829,565 290,582,987 261,087,214 Total 1,625,130,936 1,505,358,908 28,375 9,396 13,698,380 11,049,236 13,726,755 11,058,632 1,638,857,691 1,516,417,540 Total Total Schedules to the Financial Statements As at March 31, 2016 C Investments (i) Gross value of investments (a) In India (b) Outside India (ii) Provision for depreciation (a) In India (b) Outside India (iii) Net value of investments (a) In India (b) Outside India SCHEDULE 9 - ADVANCES A (i) Bills purchased and discounted (ii) Cash credits, overdrafts and loans repayable on demand (iii) Term loans B (i) Secured by tangible assets* (ii) Covered by bank / government guarantees (iii) Unsecured * Including advances against book debts C I Advances in India (i) (ii) Priority sector Public sector (iii) Banks (iv) Others C II Advances outside India (i) Due from banks (ii) Due from others (a) Bills purchased and discounted (b) Syndicated loans (c) Others (Advances are net of provisions) HDFC Bank Limited Annual Report 2015-16 75 As at ` in ‘000 As at 31-Mar-16 31-Mar-15 1,626,326,344 1,506,498,794 13,726,755 11,058,632 Total 1,640,053,099 1,517,557,426 1,195,408 1,139,886 - - Total 1,195,408 1,139,886 1,625,130,936 1,505,358,908 13,726,755 11,058,632 Total 1,638,857,691 1,516,417,540 185,136,903 177,134,003 1,242,774,115 993,671,410 3,218,028,571 2,484,144,899 Total 4,645,939,589 3,654,950,312 3,458,703,399 2,735,499,707 114,128,823 63,453,979 1,073,107,367 855,996,626 Total 4,645,939,589 3,654,950,312 1,417,909,585 1,061,040,411 134,556,082 118,066,442 4,659,631 51,278 2,767,906,764 2,187,379,246 Total 4,325,032,062 3,366,537,377 6,879,777 16,094,350 1,245,263 1,849,427 38,624,247 14,652,002 274,158,240 255,817,156 320,907,527 288,412,935 4,645,939,589 3,654,950,312 Total Total Schedules to the Financial Statements As at March 31, 2016 SCHEDULE 10 - FIXED ASSETS A Premises (including land) Gross block At cost on 31 March of the preceding year Additions during the year Deductions during the year Depreciation As at 31 March of the preceding year Charge for the year On deductions during the year Net block B Other ﬁxed assets (including furniture and ﬁxtures) Gross block At cost on 31 March of the preceding year Additions during the year Deductions during the year Depreciation As at 31 March of the preceding year Charge for the year On deductions during the year Net block C Assets on lease (plant and machinery) Gross block At cost on 31 March of the preceding year Additions during the year HDFC Bank Limited Annual Report 2015-16 76 As at 31-Mar-16 ` in ‘000 As at 31-Mar-15 14,756,943 14,169,660 839,927 793,539 (85,166) (206,256) Total 15,511,704 14,756,943 3,764,471 3,337,178 551,090 519,617 (68,719) (92,324) Total 4,246,842 3,764,471 11,264,862 10,992,472 65,329,178 58,341,584 8,548,465 7,807,332 (1,410,076) (819,738) Total 72,467,567 65,329,178 45,104,307 39,774,886 6,510,901 6,045,463 (1,314,352) (716,042) Total 50,300,856 45,104,307 22,166,711 20,224,871 4,546,923 4,546,923 - - Total 4,546,923 4,546,923 Schedules to the Financial Statements As at March 31, 2016 Depreciation As at 31 March of the preceding year Charge for the year Lease adjustment account As at 31 March of the preceding year Charge for the year Unamortised cost of assets on lease SCHEDULE 11 - OTHER ASSETS I II III IV V VI Interest accrued Advance tax / tax deducted at source (net of provisions) Stationery and stamps Non banking assets acquired in satisfaction of claims Bond and share application money pending allotments Security deposit for commercial and residential property VII Others* As at 31-Mar-16 ` in ‘000 As at 31-Mar-15 4,104,467 4,104,467 - - Total 4,104,467 4,104,467 442,456 442,456 - - Total 442,456 442,456 - - Total 33,431,573 31,217,343 75,482,713 56,319,984 17,646,013 14,935,373 220,786 168,394 - - - - 4,626,811 4,232,087 283,062,095 263,475,180 Total 381,038,418 339,131,018 *Includes deferred tax asset (net) of ` 2,116.62 crore (previous year: ` 1,950.74 crore) and deposits placed with NABARD / SIDBI / NHB on account of shortfall in lending to priority sector of ` 13,719.68 crore (previous year: ` 14,818.19 crore) SCHEDULE 12 - CONTINGENT LIABILITIES I II III IV V Claims against the bank not acknowledged as debts - taxation Claims against the bank not acknowledged as debts - others Liability on account of outstanding forward exchange contracts Liability on account of outstanding derivative contracts Guarantees given on behalf of constituents : - In India - Outside India VI Acceptances, endorsements and other obligations VII Other items for which the Bank is contingently liable HDFC Bank Limited Annual Report 2015-16 77 11,877,300 8,979,600 762,010 713,542 5,290,757,746 6,740,520,896 2,570,471,528 2,433,779,738 301,311,242 240,381,176 31,094,714 32,080,401 317,525,754 279,900,503 9,380,851 15,983,683 Total 8,533,181,145 9,752,339,539 Schedules to the Financial Statements For the year ended March 31, 2016 SCHEDULE 13 - INTEREST EARNED I II III Interest / discount on advances / bills Income from investments Interest on balance with RBI and other inter-bank funds IV Others SCHEDULE 14 - OTHER INCOME I Commission, exchange and brokerage II Proﬁt / (loss) on sale of investments (net) III Proﬁt / (loss) on revaluation of investments (net) IV Proﬁt / (loss) on sale of building and other assets (net) V Proﬁt / (loss) on exchange / derivative transactions (net) VI Income earned by way of dividends from subsidiaries / associates and / or joint ventures abroad / in India VII Miscellaneous income SCHEDULE 15 - INTEREST EXPENDED I Interest on deposits II Interest on RBI / inter-bank borrowings III Other interest SCHEDULE 16 - OPERATING EXPENSES I II Payments to and provisions for employees Rent, taxes and lighting III Printing and stationery IV Advertisement and publicity V Depreciation on bank's property VI Directors' fees / remuneration, allowances and expenses VII Auditors' fees and expenses VIII Law charges IX Postage, telegram, telephone etc. X Repairs and maintenance XI Insurance XII Other expenditure* ` in ‘000 Year ended Year ended 31-Mar-16 31-Mar-15 448,278,559 371,807,856 141,200,321 98,584,846 3,616,100 9,119,471 5,170,990 9,135,352 Total 602,214,451 484,699,044 77,590,448 65,842,024 7,491,483 (173,689) (626) 5,259,706 556,306 111,598 12,277,267 10,279,548 1,490,542 325,932 8,841,808 7,588,407 Total 107,517,233 89,963,521 291,782,889 235,138,320 33,664,532 24,785,390 851,909 818,642 Total 326,299,330 260,742,352 57,021,980 47,509,591 12,326,423 10,520,867 4,234,603 2,483,938 7,058,390 25,761 19,331 998,702 3,997,235 10,287,303 5,613,318 3,861,460 1,874,691 6,562,963 9,696 14,508 717,718 3,995,952 8,499,506 4,470,026 65,730,016 51,838,438 Total 169,797,000 139,875,416 *Includes professional fees, commission to sales agents, travel and hotel charges, card and merchant acquiring expenses and system management fees. HDFC Bank Limited Annual Report 2015-16 78 Schedules to the Financials Statements For the year ended March 31, 2016 SCHEDULE 17 - Signiﬁcant accounting policies appended to and forming part of the ﬁnancial statements for the year ended March 31, 2016 A BACKGROUND HDFC Bank Limited (‘HDFC Bank’ or ‘the Bank’), incorporated in Mumbai, India is a publicly held banking company engaged in providing a range of banking and ﬁnancial services including retail banking, wholesale banking and treasury operations. The Bank is governed by the Banking Regulation Act, 1949 and the Companies Act, 2013. The Bank has overseas branch operations in Bahrain, Hong Kong and Dubai. The ﬁnancial accounting systems of the Bank are centralised and, therefore, accounting returns are not required to be submitted by branches of the Bank. B BASIS OF PREPARATION The ﬁnancial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India (‘GAAP’), statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time, Accounting Standards (‘AS’) speciﬁed under Section 133 of the Companies Act, 2013, in so far as they apply to banks and current practices prevailing within the banking industry in India. Use of estimates The preparation of ﬁnancial statements in conformity with GAAP requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the ﬁnancial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the ﬁnancial statements are prudent and reasonable. Actual results could differ from these estimates. Any revision in the accounting estimates is recognised prospectively in the current and future periods. C 1 PRINCIPAL ACCOUNTING POLICIES Investments Classiﬁcation: In accordance with the RBI guidelines on investment classiﬁcation and valuation, investments are classiﬁed on the date of purchase into “Held for Trading” (‘HFT’), “Available for Sale” (‘AFS’) and “Held to Maturity” (‘HTM’) categories (hereinafter called “categories”). Subsequent shifting amongst the categories is done in accordance with the RBI guidelines. Under each of these categories, investments are further classiﬁed under six groups (hereinafter called “groups”) - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments. Purchase and sale transactions in securities are recorded under ‘Settlement Date’ of accounting, except in the case of equity shares where ‘Trade Date’ accounting is followed. Basis of classiﬁcation: Investments that are held principally for resale within 90 days from the date of purchase are classiﬁed under HFT category. Investments which the Bank intends to hold till maturity are classiﬁed as HTM securities. Investments in the equity of subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines. Investments which are not classiﬁed in either of the above categories are classiﬁed under AFS category. Acquisition cost: (cid:115)(cid:0) (cid:34)(cid:82)(cid:79)(cid:75)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:12)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:69)(cid:84)(cid:67)(cid:14)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:66)(cid:82)(cid:79)(cid:75)(cid:69)(cid:78)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:68)(cid:69)(cid:66)(cid:84)(cid:0)(cid:73)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0) and Loss and are not included in the cost of acquisition. Disposal of investments: (cid:115)(cid:0) (cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:15)(cid:0)(cid:44)(cid:79)(cid:83)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:70)(cid:79)(cid:82)(cid:69)(cid:83)(cid:65)(cid:73)(cid:68)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) Loss. Cost of investments is based on the weighted average cost method. The proﬁt from sale of investment under HTM category, net of taxes and transfer to statutory reserve is appropriated from Statement of Proﬁt and Loss to “Capital Reserve” in accordance with the RBI Guidelines. HDFC Bank Limited Annual Report 2015-16 79 Schedules to the Financials Statements For the year ended March 31, 2016 Short sale: The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines. The short position is reﬂected as the amount received on sale and is classiﬁed under ‘Other Liabilities’. The short position is marked to market and loss, if any, is charged to the Statement of Proﬁt and Loss while gain, if any, is ignored. Proﬁt / Loss on settlement of the short position is recognised in the Statement of Proﬁt and Loss. Valuation: Investments classiﬁed under AFS and HFT categories are marked to market as per the RBI guidelines. Traded investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices declared by Primary Dealers Association of India (‘PDAI’) jointly with Fixed Income Money Market and Derivatives Association (‘FIMMDA’), periodically. The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR’) included in the AFS and HFT categories is computed as per the Yield-to-Maturity (‘YTM’) rates published by FIMMDA. The valuation of other unquoted ﬁxed income securities (viz. State Government securities, other approved securities, bonds and debentures) and preference shares, is done with a mark-up (reﬂecting associated credit and liquidity risk) over the YTM rates for government securities published by FIMMDA. Special bonds such as oil bonds, fertilizer bonds etc. which are directly issued by Government of India (‘GOI’) that do not qualify for SLR are also valued by applying the mark-up above the corresponding yield on GOI securities. Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available or at ` 1 as per the RBI guidelines. Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund. Treasury bills, commercial papers and certiﬁcate of deposits being discounted instruments, are valued at carrying cost and stated at acquisition cost. Security receipts are valued as per the net asset value provided by the issuing Asset Reconstruction Company from time to time. Net depreciation in the value, if any, compared to the acquisition cost, in any of the six groups, is charged to the Statement of Proﬁt and Loss. The net appreciation, if any, in any of the six groups is not recognised except to the extent of depreciation already provided. The valuation of investments includes securities under repo transactions. The book value of individual securities is not changed after the valuation of investments. Investments classiﬁed under HTM category are carried at their acquisition cost and not marked to market. Any premium on acquisition is amortised over the remaining maturity period of the security on a constant yield-to-maturity basis. Such amortisation of premium is adjusted against interest income under the head “Income from investments” as per the RBI guidelines. Any diminution, other than temporary, in the value of investments in subsidiaries / joint ventures is provided for. Non-performing investments are identiﬁed and depreciation / provision are made thereon based on the RBI guidelines. The depreciation / provision on such non-performing investments are not set off against the appreciation in respect of other performing securities. Interest on non-performing investments is not recognised in the Statement of Proﬁt and Loss until received. Repo and reverse repo transactions: In accordance with the RBI guidelines repo and reverse repo transactions in government securities and corporate debt securities (excluding transactions conducted under Liquidity Adjustment Facility (‘LAF’) and Marginal Standby Facility (‘MSF’) with RBI) are reﬂected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted for as interest expense and revenue on reverse repo transactions are accounted for as interest income. In respect of repo transactions under LAF and MSF with RBI, amount borrowed from RBI is credited to investment account and reversed on maturity of the transaction. Costs thereon are accounted for as interest expense. In respect of reverse repo transactions under LAF, amount lent to RBI is debited to investment account and reversed on maturity of the transaction. Revenues thereon are accounted for as interest income. HDFC Bank Limited Annual Report 2015-16 80 Schedules to the Financials Statements For the year ended March 31, 2016 2 Advances Classiﬁcation: Advances are classiﬁed as performing and non-performing based on the RBI guidelines and are stated net of bills rediscounted, speciﬁc provisions, interest in suspense for non-performing advances, claims received from Export Credit Guarantee Corporation, provisions for funded interest term loan classiﬁed as non-performing advances and provisions in lieu of diminution in the fair value of restructured assets. Interest on non-performing advances is transferred to an interest suspense account and not recognised in the Statement of Proﬁt and Loss until received. Provisioning: Speciﬁc loan loss provisions in respect of non-performing advances are made based on management’s assessment of the degree of impairment of wholesale and retail advances, subject to the minimum provisioning level prescribed by the RBI. The speciﬁc provision levels for retail non-performing assets are also based on the nature of product and delinquency levels. Speciﬁc loan loss provisions in respect of non-performing advances are charged to the Statement of Proﬁt and Loss and included under Provisions and Contingencies. In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier reported by the Bank as Special Mention Account under “SMA-2” category to Central Repository of Information on Large Credits (CRILC). Accelerated provision is also made on non-performing advances which are erstwhile SMA-2 accounts with Aggregate Exposure (AE) ` 1,000 million or above and Joint Lenders’ Forum (JLF) is not formed or they fail to agree upon a common Corrective Action Plan (CAP) within the stipulated time frame. Accounts are written-off in accordance with the Bank’s policies. Recoveries from bad debts written-off are recognised in the Statement of Proﬁt and Loss and included under other income. In relation to non-performing derivative contracts, as per the extant RBI guidelines, the Bank makes provision for the entire amount of overdue and future receivables relating to positive marked to market value of the said derivative contracts. The Bank maintains general provision for standard assets including credit exposures computed as per the current marked to market values of interest rate and foreign exchange derivative contracts, and gold in accordance with the guidelines and at levels stipulated by RBI from time to time. In the case of overseas branches, general provision on standard advances is maintained at the higher of the levels stipulated by the respective overseas regulator or RBI. In accordance with RBI guidelines, provision is made against standard assets representing all exposures to the wholly owned step down subsidiaries of the overseas subsidiaries of Indian companies, sanctioned / renewed after December 31, 2015. Provision for standard assets is included under other liabilities. Provisions made in excess of the Bank’s policy for speciﬁc loan loss provisions for non-performing assets and regulatory general provisions are categorised as ﬂoating provisions. Creation of ﬂoating provisions is considered by the Bank up to a level approved by the Board of Directors. In accordance with the RBI guidelines, ﬂoating provisions are used up to a level approved by the Board only for contingencies under extraordinary circumstances and for making speciﬁc provisions for impaired accounts as per these guidelines or any regulatory guidance / instructions. Floating provisions have been included under other liabilities. Further to the provisions required to be held according to the asset classiﬁcation status, provisions are held for individual country exposures (other than for home country exposure). Countries are categorised into risk categories as per Export Credit Guarantee Corporation of India Ltd. (‘ECGC’) guidelines and provisioning is done in respect of that country where the net funded exposure is one percent or more of the Bank’s total assets. In addition to the above, the Bank on a prudential basis makes provisions on advances or exposures which are not NPAs, but has reasons to believe on the basis of the extant environment or speciﬁc information or basis regulatory guidance / instructions, the possible slippage of a speciﬁc advance or a group of advances or exposures or potential exposures. These are classiﬁed as contingent provisions and included under other liabilities. The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower’s ﬁnancial difﬁculty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would normally involve modiﬁcation of terms of the advance / securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive reasons). Restructured accounts are classiﬁed as such by the Bank only upon approval and implementation of the restructuring package. Necessary provision for diminution in the fair value of a restructured account is made and classiﬁcation thereof is as per the extant RBI guidelines. Restructuring of an account is done at a borrower level. HDFC Bank Limited Annual Report 2015-16 81 Schedules to the Financials Statements For the year ended March 31, 2016 3 Securitisation and transfer of assets The Bank securitises out its receivables, subject to the Minimum Holding Period (‘MHP’) criteria and the Minimum Retention Requirements (‘MRR’) of RBI, to Special Purpose Vehicles (‘SPVs’) in securitisation transactions. Such securitised-out receivables are de-recognised in the balance sheet when they are sold (true sale criteria being fully met with) and consideration is received by the Bank. Sales / Transfers that do not meet these criteria for surrender of control are accounted for as secured borrowings. In respect of receivable pools securitised-out, the Bank provides liquidity and credit enhancements, as speciﬁed by the rating agencies, in the form of cash collaterals / guarantees and / or by subordination of cash ﬂows, not exceeding 20% of the total securitised instruments, in line with RBI guidelines. The Bank also acts as a servicing agent for receivable pools securitised-out. The Bank also enters into transactions for transfer of standard assets through the direct assignment of cash ﬂows, which are similar to asset-backed securitisation transactions through the SPV route, except that such portfolios of receivables are assigned directly to the purchaser and are not represented by Pass Through Certiﬁcates (‘PTCs’), subject to the RBI prescribed MHP criteria and the MRR. The RBI issued addendum guidelines on securitisation of standard assets vide its circular dated May 7, 2012. Accordingly, the Bank does not provide liquidity or credit enhancements on the direct assignment transactions undertaken subsequent to these guidelines. Pursuant to these guidelines, the Bank amortises any proﬁt received in cash for every individual securitisation or direct assignment transaction. This amortisation is calculated as the maximum of either of the three parameters stated below: (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:79)(cid:82)(cid:84)(cid:70)(cid:79)(cid:76)(cid:73)(cid:79)(cid:12)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:67)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:83)(cid:80)(cid:69)(cid:67)(cid:73)(cid:108)(cid:67)(cid:0) provisions, if any, and direct write-offs made on the MRR and any other exposures to the securitisation transaction (other than credit enhancing interest only strip); or (cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:85)(cid:78)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:67)(cid:65)(cid:83)(cid:72)(cid:0)(cid:80)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:69)(cid:71)(cid:73)(cid:78)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:77)(cid:85)(cid:76)(cid:84)(cid:73)(cid:80)(cid:76)(cid:73)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:80)(cid:82)(cid:73)(cid:78)(cid:67)(cid:73)(cid:80)(cid:65)(cid:76)(cid:0)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) during the year as a proportion to the amount of unamortised principal at the beginning of the year; or (cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:85)(cid:78)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:67)(cid:65)(cid:83)(cid:72)(cid:0)(cid:80)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:69)(cid:71)(cid:73)(cid:78)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:0)(cid:77)(cid:65)(cid:84)(cid:85)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:82)(cid:0) the direct assignment transaction. In relation to securitisation transactions undertaken prior to the aforementioned RBI guidelines, including those undertaken through the direct assignment route, the Bank continues to amortise the proﬁt / premium that arose on account of sale of receivables over the life of the securities sold, in accordance with the RBI guidelines on securitisation of standard assets issued vide its circular dated February 1, 2006. Any loss arising on account of sale of receivables is recognised in the Statement of Proﬁt and Loss for the period in which the sale occurs in accordance with the said RBI guidelines. The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI guidelines, in the case of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances and where the Bank is participating, the aggregate amount of the participation is classiﬁed under advances. In the case of participation without risk, the aggregate amount of participation issued by the Bank is classiﬁed under borrowings and where the Bank is participating, the aggregate amount of participation is shown as due from banks under advances. In accordance with RBI guidelines on sale of non-performing advances, if the sale is at a price below the net book value (i.e., book value less provisions held), the shortfall is charged to the Statement of Proﬁt and Loss. If the sale is for a value higher than the net book value, the excess provision is not reversed but is utilised to meet the shortfall / loss on account of sale of other non-performing advances. The RBI issued new guidelines on sale of non-performing advances on February 26, 2014. In accordance with these guidelines, if the sale of non-performing advances is at a price below the net book value, the shortfall is charged to the Statement of Proﬁt and Loss spread over a period of two years. If the sale is for a value higher than the net book value, the excess provision is credited to the Statement of Proﬁt and Loss in the year the amounts are received. The Bank invests in PTCs issued by other SPVs. These are accounted for at the deal value and are classiﬁed as investments. The Bank also buys loans through the direct assignment route which are classiﬁed as advances. These are carried at acquisition cost unless it is more than the face value, in which case the premium is amortised based on Effective Interest Rate (EIR) method. HDFC Bank Limited Annual Report 2015-16 82 Schedules to the Financials Statements For the year ended March 31, 2016 4 Fixed assets and depreciation Fixed assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of purchase and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is ready to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future beneﬁt / functioning capability from / of such assets. Depreciation is charged over the estimated useful life of the ﬁxed asset on a straight-line basis. The Bank, pursuant to the Companies Act, 2013, has carried out a technical assessment of the useful life of its assets taking into account changes in environment, changes in technology, the utility and efﬁcacy of the asset in use. The estimated useful lives of key ﬁxed assets are given below: Asset Owned Premises Automated Teller Machines (‘ATMs’) Electrical equipment and installations Ofﬁce equipment Computers Estimated useful life as assessed by the Bank Estimated useful life speciﬁed under Schedule II of the Companies Act, 2013 61 years 10 years 6 to 10 years 3 to 6 years 3 years 60 years 15 years 10 years 5 years 3 years 6 years 8 years 10 years Modems, routers, switches, servers, network and related IT equipment 3 to 6 years Motor cars Furniture and ﬁttings 4 years 16 years (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:69)(cid:0)(cid:72)(cid:79)(cid:76)(cid:68)(cid:0)(cid:80)(cid:82)(cid:69)(cid:77)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:71)(cid:69)(cid:68)(cid:0)(cid:79)(cid:70)(cid:70)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:77)(cid:65)(cid:73)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:82)(cid:73)(cid:77)(cid:65)(cid:82)(cid:89)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:69)(cid:14) (cid:51)(cid:79)(cid:70)(cid:84)(cid:87)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:78)(cid:68)(cid:73)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:65)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:21)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:83)(cid:14) (cid:48)(cid:79)(cid:73)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:78)(cid:65)(cid:76)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:70)(cid:85)(cid:76)(cid:76)(cid:89)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:14) (cid:38)(cid:79)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:79)(cid:76)(cid:68)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:12)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:83)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:13)(cid:82)(cid:65)(cid:84)(cid:65)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:14) (cid:55)(cid:72)(cid:69)(cid:78)(cid:69)(cid:86)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:85)(cid:83)(cid:69)(cid:70)(cid:85)(cid:76)(cid:0)(cid:76)(cid:73)(cid:70)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:85)(cid:78)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:71)(cid:69)(cid:68)(cid:0) over the revised remaining useful life of the said asset. (cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:77)(cid:77)(cid:79)(cid:86)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:84)(cid:89)(cid:0)(cid:78)(cid:69)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:65)(cid:88)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:70)(cid:69)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:85)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:82)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:12)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:0) account. 5 Impairment of assets The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Statement of Proﬁt and Loss to the extent the carrying amount of assets exceeds their estimated recoverable amount. 6 Transactions involving foreign exchange Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing on the date of the transaction. Income and expenditure items of integral foreign operations (representative ofﬁces) are translated at the weekly average closing rates and of non-integral foreign operations (foreign branches) at the monthly average closing rates. Foreign currency monetary items of domestic and integral foreign operations are translated at the closing exchange rates notiﬁed by Foreign Exchange Dealers’ Association of India (‘FEDAI’) as at the Balance Sheet date and the resulting net valuation proﬁt or loss arising due to a net open position in any foreign currency is recognised in the Statement of Proﬁt and Loss. Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated at closing exchange rates notiﬁed by FEDAI at the Balance Sheet date and the resulting proﬁt / loss arising from exchange differences are accumulated in the Foreign Currency Translation Account until remittance or the disposal of the net investment in the non-integral foreign operations in accordance with AS - 11, The Effects of Changes in Foreign Exchange Rates. HDFC Bank Limited Annual Report 2015-16 83 Schedules to the Financials Statements For the year ended March 31, 2016 Foreign exchange spot and forward contracts outstanding as at the Balance Sheet date and held for trading, are revalued at the closing spot and forward rates respectively as notiﬁed by FEDAI and at interpolated rates for contracts of interim maturities. The USD-INR rate for valuation of contracts having longer maturities i.e. greater than one year, is implied from MIFOR and LIBOR curves. For other currency pairs, the forward points (for rates / tenors not published by FEDAI) are obtained from Reuters for valuation of the FX deals. As directed by FEDAI to consider P&L on present value basis, the forward proﬁt or loss on the deals are discounted till the valuation date using the discounting yields. The resulting proﬁt or loss on valuation is recognised in the Statement of Proﬁt and Loss. Foreign exchange contracts are classiﬁed as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction, and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract is amortised as expense or income over the life of the contract. Currency future contracts are marked to market daily using settlement price on a trading day, which is the closing price of (cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:70)(cid:85)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:68)(cid:65)(cid:89)(cid:14)(cid:0)(cid:55)(cid:72)(cid:73)(cid:76)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:65)(cid:73)(cid:76)(cid:89)(cid:0)(cid:83)(cid:69)(cid:84)(cid:84)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:80)(cid:82)(cid:73)(cid:67)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:85)(cid:84)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:76)(cid:65)(cid:83)(cid:84)(cid:0)(cid:72)(cid:65)(cid:76)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:72)(cid:79)(cid:85)(cid:82)(cid:0) weighted average price of such contract, the ﬁnal settlement price is taken as the RBI reference rate on the last trading day of the future contract or as may be speciﬁed by the relevant authority from time to time. All open positions are marked to market based on the settlement price and the resultant marked to market proﬁt / loss is daily settled with the exchange. Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. 7 Derivative contracts The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the derivative contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting dates. Derivatives are classiﬁed as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Changes in the fair value of derivatives other than those designated as hedges are recognised in the Statement of Proﬁt and Loss. Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market. In respect of derivative contracts that are marked to market, changes in the market value are recognised in the Statement of Proﬁt and Loss in the relevant period. The Bank identiﬁes the hedged item (asset or liability) at the inception of the transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically thereafter. Gains or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Proﬁt and Loss. Contingent liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. 8 Revenue recognition Interest income is recognised in the Statement of Proﬁt and Loss on an accrual basis, except in the case of non-performing assets where it is recognised upon realisation as per RBI norms. Interest income on investments in PTCs and loans bought out through the direct assignment route is recognised at their effective interest rate. Income on non-coupon bearing discounted instruments is recognised over the tenor of the instrument on a constant effective yield basis. Loan processing fee is recognised as income when due. Syndication / Arranger fee is recognised as income when a signiﬁcant act / milestone is completed. Gain / loss on sell down of loans is recognised in line with the extant RBI guidelines. Dividend on equity shares, preference shares and on mutual fund units is recognised as income when the right to receive the dividend is established. Guarantee commission, commission on letter of credit, annual locker rent fees and annual fees for credit cards are recognised on a straight-line basis over the period of contract. Other fees and commission income are recognised when due, except in cases where the Bank is uncertain of ultimate collection. HDFC Bank Limited Annual Report 2015-16 84 Schedules to the Financials Statements For the year ended March 31, 2016 9 Employee beneﬁts Employee Stock Option Scheme (‘ESOS’): The Employee Stock Option Scheme (‘the Scheme’) provides for the grant of options to acquire equity shares of the Bank to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a speciﬁed period. The Bank follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume on the working day immediately preceding the date of grant. Compensation cost, if any is amortised over the vesting period. Gratuity: The Bank provides for gratuity to all employees. The beneﬁt vests upon completion of ﬁve years of service and is in the form of lump sum payment to employees on resignation, retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service. The Bank makes contributions to funds administered by trustees and managed by insurance companies for amounts notiﬁed by the said insurance companies. In respect of erstwhile Lord Krishna Bank (‘eLKB’) employees, the Bank makes contribution to a fund set up by eLKB and administered by the Board of Trustees. The deﬁned gratuity beneﬁt plans are valued by an independent actuary as at the Balance Sheet date using the projected unit credit method as per the requirement of AS-15, Employee Beneﬁts, to determine the present value of the deﬁned beneﬁt obligation and the related service costs. Under this method, the determination is based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognised in the Statement of Proﬁt and Loss. Superannuation: Employees of the Bank, above a prescribed grade, are entitled to receive retirement beneﬁts under the Bank’s Superannuation Fund. The Bank contributes a sum equivalent to 13% of the employee’s eligible annual basic salary (15% for the whole time directors and for certain eligible erstwhile Centurion Bank of Punjab (‘eCBoP’) staff) to insurance companies, which administer the fund. The Bank has no liability for future superannuation fund beneﬁts other than its contribution, and recognises such contributions as an expense in the year incurred, as such contribution is in the nature of deﬁned contribution. Provident fund: In accordance with law, all employees of the Bank are entitled to receive beneﬁts under the provident fund. The Bank contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary). Of this, the Bank contributes an amount equal to 8.33% of employee’s basic salary up to a maximum salary level of `15,000/- per month, to the Pension Scheme administered by the Regional Provident Fund Commissioner (‘RPFC’). The balance amount is contributed to a fund set up by the Bank and administered by a Board of Trustees. In respect of eCBoP employees, employer’s and employee’s share of contribution to Provident Fund till March 2009, was administered by RPFC and from April 2009 onwards, the same is transferred to the fund set up by the Bank and administered by the Board of Trustees. In respect of eLKB employees, the Bank contributes to a fund set up by eLKB and administered by a Board of Trustees. The Bank recognises such contributions as an expense in the year in which it is incurred. Interest payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Bank. The guidance note on implementing AS-15, Employee Beneﬁts, states that beneﬁts involving employer established provident funds, which require interest shortfalls to be provided, are to be considered as deﬁned beneﬁt plans. Actuarial valuation of this Provident Fund interest shortfall is done as per the guidance note issued in this respect by The Institute of Actuaries of India (IAI) and provision towards this liability is made. The overseas branches of the Bank makes contribution to the respective relevant government scheme calculated as a percentage of the employees’ salaries. The Bank’s obligations are limited to these contributions, which are expensed when due, as such contribution is in the nature of deﬁned contribution. HDFC Bank Limited Annual Report 2015-16 85 Schedules to the Financials Statements For the year ended March 31, 2016 Leave encashment / Compensated absences: The Bank does not have a policy of encashing unavailed leave for its employees, except for certain eLKB employees under Indian Banks’ Association (‘IBA’) structure. The Bank provides for leave encashment / compensated absences based on an independent actuarial valuation at the Balance Sheet date, which includes assumptions about demographics, early retirement, salary increases, interest rates and leave utilisation. Pension: In respect of pension payable to certain eLKB employees under IBA structure, which is a deﬁned beneﬁt scheme, the Bank contributes 10% of basic salary to a pension fund set up by the Bank and administered by the Board of Trustees and the balance amount is provided based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary. In respect of certain eLKB employees who had moved to a Cost to Company (‘CTC’) driven compensation structure and had completed less than 15 years of service, the contribution which was made until then, is maintained as a fund and will be converted into annuity on separation after a lock-in-period of two years. For this category of employees, liability stands frozen and no additional provision is required except for interest as applicable to Provident Fund, which is provided for. In respect of certain eLKB employees who moved to a CTC structure and had completed service of more than 15 years, pension would be paid on separation based on salary applicable as on the date of movement to CTC structure. Provision thereto is made based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary. 10 Debit and credit cards reward points The Bank estimates the probable redemption of debit and credit card reward points and cost per point using an actuarial method by employing an independent actuary, which includes assumptions such as mortality, redemption and spends. Provisions for liabilities on said reward points are made based on the actuarial valuation report as furnished by the said independent actuary and included in other liabilities. 11 Bullion The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale and retail customers. The imports are typically on a back-to-back basis and are priced to the customer based on an estimated price quoted by the supplier. The Bank earns a fee on such wholesale bullion transactions. The fee is classiﬁed under commission income. The Bank also sells bullion to its retail customers. The difference between the sale price to customers and actual price paid to the supplier is recorded under commission income. The Bank also deals in bullion on a borrowing and lending basis and the interest paid / received thereon is classiﬁed as interest expense / income respectively. 12 Lease accounting Lease payments including cost escalation for assets taken on operating lease are recognised in the Statement of Proﬁt and Loss over the lease term on a straight-line basis in accordance with the AS-19, Leases. 13 Income tax Income tax expense comprises current tax provision (i.e. the amount of tax for the period determined in accordance with the Income Tax Act, 1961, the rules framed there under and considering the material principles set out in Income Computation and Disclosure Standards) and the net change in the deferred tax asset or liability during the year. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences between the carrying values of assets and liabilities and their respective tax bases, and operating loss carried forward, if any. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates as at the Balance Sheet date. Current tax assets and liabilities and deferred tax assets and liabilities are off-set when they relate to income taxes levied by the same taxation authority, when the Bank has a legal right to off-set and when the Bank intends to settle on a net basis. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. In case of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and appropriately adjusted to reﬂect the amount that is reasonably / virtually certain to be realised. HDFC Bank Limited Annual Report 2015-16 86 Schedules to the Financials Statements For the year ended March 31, 2016 14 Earnings per share The Bank reports basic and diluted earnings per equity share in accordance with AS-20, Earnings per Share. Basic earnings per equity share has been computed by dividing net proﬁt for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reﬂect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted to equity during the year. Diluted earnings per equity share are computed using the weighted average number of equity shares and the dilutive potential equity shares outstanding during the period except where the results are anti-dilutive. 15 Share issue expenses Share issue expenses are adjusted from Share Premium Account in terms of Section 52 of the Companies Act, 2013. 16 Segment information The disclosure relating to segment information is in accordance with AS-17, Segment Reporting and as per guidelines issued by RBI. 17 Accounting for provisions, contingent liabilities and contingent assets In accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets, the Bank recognises provisions when it has a present obligation as a result of a past event, it is probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Provisions are determined based on management estimate required to settle the obligation at the Balance Sheet date, supplemented by experience of similar transactions. These are reviewed at each Balance Sheet date and adjusted to reﬂect the current management estimates. A disclosure of contingent liability is made when there is: (cid:115)(cid:0) (cid:115)(cid:0) (cid:65)(cid:0)(cid:80)(cid:79)(cid:83)(cid:83)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:66)(cid:76)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:82)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:65)(cid:0)(cid:80)(cid:65)(cid:83)(cid:84)(cid:0)(cid:69)(cid:86)(cid:69)(cid:78)(cid:84)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:66)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:108)(cid:82)(cid:77)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:67)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:82)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13) occurrence of one or more uncertain future events not within the control of the Bank; or (cid:65)(cid:0)(cid:80)(cid:82)(cid:69)(cid:83)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:66)(cid:76)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:82)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:65)(cid:0)(cid:80)(cid:65)(cid:83)(cid:84)(cid:0)(cid:69)(cid:86)(cid:69)(cid:78)(cid:84)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:73)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:73)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:80)(cid:82)(cid:79)(cid:66)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:65)(cid:78)(cid:0)(cid:79)(cid:85)(cid:84)(cid:109)(cid:79)(cid:87)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:69)(cid:83)(cid:79)(cid:85)(cid:82)(cid:67)(cid:69)(cid:83)(cid:0) will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. (cid:0) (cid:55)(cid:72)(cid:69)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:0)(cid:80)(cid:79)(cid:83)(cid:83)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:66)(cid:76)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:0)(cid:80)(cid:82)(cid:69)(cid:83)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:66)(cid:76)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:78)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:76)(cid:73)(cid:75)(cid:69)(cid:76)(cid:73)(cid:72)(cid:79)(cid:79)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:79)(cid:85)(cid:84)(cid:109)(cid:79)(cid:87)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:69)(cid:83)(cid:79)(cid:85)(cid:82)(cid:67)(cid:69)(cid:83)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:77)(cid:79)(cid:84)(cid:69)(cid:12)(cid:0) no provision or disclosure is made. Contingent assets, if any, are not recognised in the ﬁnancial statements since this may result in the recognition of income that may never be realised. Onerous contracts Provisions for onerous contracts are recognised when the expected beneﬁts to be derived by the Bank from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Bank recognises any impairment loss on the assets associated with that contract. 18 Cash and cash equivalents Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short notice. 19 Corporate social responsibility Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013, are recognised in the Statement of Proﬁt and Loss. HDFC Bank Limited Annual Report 2015-16 87 Schedules to the Financial Statements For the year ended March 31, 2016 SCHEDULE 18 - Notes forming part of the ﬁnancial statements for the year ended March 31, 2016 Amounts in notes forming part of the ﬁnancial statements for the year ended March 31, 2016 are denominated in rupee crore to conform to extant RBI guidelines. 1 Change in classiﬁcation Pursuant to RBI circular dated July 16, 2015, deposits placed, with NABARD, SIDBI and NHB aggregating to ` 13,719.68 crore (previous year: ` 14,818.19 crore), arising out of the shortfall in meeting the priority sector lending targets / sub-targets, have been included under ‘Other Assets’ and interest thereon aggregating to ` 861.15 crore (previous year: ` 847.12 crore) under ‘Interest Earned - Others’. Hitherto, these were included under ‘Investments’ and ‘Interest Earned - Income on Investments’ respectively. Figures for the previous year have been regrouped / reclassiﬁed to conform to current year’s classiﬁcation. The above change in classiﬁcation has no impact on the proﬁt of the Bank for the years ended March 31, 2016 and March 31, 2015. 2 Capital adequacy The Bank’s capital to risk-weighted asset ratio (‘Capital Adequacy Ratio’) as on March 31, 2016 is calculated in accordance with the RBI’s guidelines on Basel III capital regulations (‘Basel III’). The phasing in of the minimum capital requirement under Basel III is as follows: (% of RWAs) Minimum ratio of capital to risk-weighted assets Common equity tier I ratio Capital conservation buffer Tier I capital ratio Total capital adequacy ratio As on April 1, 2013 4.5 - 6.0 9.0 2014 5.0 - 6.5 9.0 As on March 31, 2015 5.5 - 7.0 9.0 2016 5.5 0.625 7.0 9.0 2017 5.5 1.25 7.0 9.0 2018 5.5 1.875 7.0 9.0 2019 5.5 2.5 7.0 9.0 The Bank’s capital adequacy ratio computed under Basel III is given below: Particulars Tier I capital Of which common equity tier I capital Tier II capital Total capital Total risk weighted assets Capital adequacy ratios under Basel lII Tier I Of which common equity tier I Tier II March 31, 2016 March 31, 2015 (` crore) 70,032.52 70,032.52 12,243.44 82,275.96 57,722.07 57,722.07 13,244.22 70,966.29 529,768.14 422,669.92 13.22% 13.22% 2.31% 15.53% 13.66% 13.66% 3.13% 16.79% Total The Bank has not raised any additional tier I and tier II capital during the year ended March 31, 2016 and March 31, 2015. Subordinated debt (lower Tier II capital), upper Tier II capital and innovative perpetual debt instruments outstanding as at March 31, 2016 are ` 10,812.00 crore (previous year: ` 12,014.00 crore), ` 4,078.45 crore (previous year: ` 4,040.90 crore) and ` 200.00 crore (previous year: ` 200.00 crore) respectively. III capital In accordance with RBI guidelines, banks are required regulations. The Bank has made link: these disclosures which are available on http://www.hdfcbank.com/aboutus/basel_disclosures/default.htm. These Pillar 3 disclosures have not been subjected to audit. to make Pillar 3 disclosures under Basel its website at following the HDFC Bank Limited Annual Report 2015-16 88 Schedules to the Financial Statements For the year ended March 31, 2016 2 Capital Infusion During the year ended March 31, 2016, the Bank allotted 2,16,91,200 equity shares (previous year: 2,27,00,740 equity shares) aggregating to face value ` 4.34 crore (previous year: ` 4.54 crore) in respect of stock options exercised. Accordingly, share capital increased by ` 4.34 crore (previous year: ` 4.54 crore) and share premium increased by ` 1,218.56 crore (previous year: ` 990.88 crore). Pursuant to the shareholder and regulatory approvals, the Bank on February 10, 2015, concluded a Qualiﬁed Institutions Placement (QIP) of 1,87,44,142 equity shares at a price of ` 1,067 per equity share aggregating ` 2,000 crore and an American Depository Receipt (ADR) offering of 2,20,00,000 ADRs (representing 6,60,00,000 equity shares) at a price of USD 57.76 per ADR, aggregating USD 1,271 million. Pursuant to these issuances, the Bank allotted 8,47,44,142 additional equity shares. Accordingly, share capital increased by ` 16.95 crore and share premium increased by ` 9,705.84 crore, net of share issue expenses of ` 151.03 crore. Details of movement in the paid-up equity share capital of the Bank are given below: (` crore) Particulars Opening balance Addition pursuant to QIP / ADR offering Addition pursuant to stock options exercised Closing balance 3 Earnings per equity share March 31, 2016 March 31, 2015 501.30 - 4.34 505.64 479.81 16.95 4.54 501.30 Basic and diluted earnings per equity share have been calculated based on the net proﬁt after taxation of ` 12,296.23 crore (previous year: ` 10,215.92 crore) and the weighted average number of equity shares outstanding during the year of 2,51,74,29,120 (previous year: 2,42,37,77,245). Following is the reconciliation between basic and diluted earnings per equity share: Particulars Nominal value per share Basic earnings per share Effect of potential equity shares (per share) Diluted earnings per share For the years ended (`) March 31, 2016 March 31, 2015 2.00 48.84 (0.58) 48.26 2.00 42.15 (0.48) 41.67 Basic earnings per equity share have been computed by dividing net proﬁt for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share have been computed by dividing the net proﬁt for the year attributable to the equity shareholders by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive. The dilutive impact is on account of stock options granted to employees by the Bank. There is no impact of dilution on the proﬁts in the current year and previous year. Following is the reconciliation of weighted average number of equity shares used in the computation of basic and diluted earnings per share: Particulars Weighted average number of equity shares used in computing basic earnings per equity share Effect of potential equity shares outstanding Weighted average number of equity shares used in computing diluted earnings per equity share For the years ended March 31, 2016 March 31, 2015 2,51,74,29,120 2,42,37,77,245 3,04,43,320 2,77,45,406 2,54,78,72,440 2,45,15,22,651 HDFC Bank Limited Annual Report 2015-16 89 Schedules to the Financial Statements For the year ended March 31, 2016 4 Reserves and Surplus Draw down from reserves Share Premium The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2016 and March 31, 2015, except towards share issue expenses of ` 151.03 crore, incurred for the equity raised through the Qualiﬁed Institutions Placement (QIP) and American Depository Receipt (ADR) routes during the year ended March 31, 2015, which have been adjusted in that year against the share premium account in terms of Section 52 of the Companies Act, 2013. Statutory Reserve The Bank has made an appropriation of ` 3,074.05 crore (previous year: ` 2,553.98 crore) out of proﬁts for the year ended March 31, 2016 to Statutory Reserve pursuant to the requirements of Section 17 of the Banking Regulation Act, 1949 and RBI guidelines dated September 23, 2000. Capital Reserve During the year ended March 31, 2016, the Bank appropriated ` 222.15 crore (previous year: ` 224.92 crore), being the proﬁt from sale of investments under HTM category and proﬁt on sale of immovable properties, net of taxes and transfer to statutory reserve, from Proﬁt and Loss Account to Capital Reserve Account. General Reserve The Bank has made an appropriation of ` 1,229.62 crore (previous year: ` 1,021.59 crore) out of proﬁts for the year ended March 31, 2016, to General Reserve pursuant to provisions of the Companies Act, 2013. Investment Reserve Account During the year ended March 31, 2016, the Bank has transferred ` 8.52 crore (net) from Investment Reserve Account to Proﬁt and Loss Account and in the previous year, the Bank appropriated ` 27.54 crore (net) from Proﬁt and Loss Account to Investment Reserve Account as per RBI guidelines. 5 Dividend on shares allotted pursuant to exercise of stock options The Bank may allot equity shares after the Balance Sheet date but before the book closure date pursuant to the exercise of any employee stock options. These equity shares will be eligible for full dividend for the year ended March 31, 2016, if approved at the ensuing Annual General Meeting. 6 Accounting for employee share based payments The shareholders of the Bank approved grant of equity share options under Plan “C” in June 2005, Plan “D” in June 2007, Plan “E” in June 2010 and Plan “F” in June 2013. Under the terms of each of these Plans, the Bank may issue Equity Stock Options (‘ESOPs’) to employees and Whole Time Directors of the Bank, each of which is convertible into one equity share. All the plans were framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time and as applicable at the time of grant. Accounting for the stock options has been in accordance with the SEBI (Share Based Employee Beneﬁts) Regulations, 2014 to the extent applicable. Plans C, D, E and F provide for the issuance of options at the recommendation of the Nomination & Remuneration Committee at the closing price on the working day immediately preceding the date when options are granted. The price being the closing price of the share on an Indian stock exchange with the highest trading volume as of the working day preceding the date of grant. Vesting conditions applicable to the options are at the discretion of the Nomination & Remuneration Committee. These options are exercisable on vesting, for a period as set forth by the Nomination & Remuneration Committee at the time of grant. The period in which options may be exercised cannot exceed ﬁve years. During the years ended March 31, 2016 and March 31, 2015, no modiﬁcations were made to the terms and conditions of ESOPs as approved by the Nomination & Remuneration Committee. HDFC Bank Limited Annual Report 2015-16 90 Schedules to the Financial Statements For the year ended March 31, 2016 Activity in the options outstanding under the Employee Stock Option Plans (cid:0) (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:26) Particulars Options outstanding, beginning of year Granted during the year Exercised during the year Forfeited / Lapsed during the year Options outstanding, end of year Options exercisable Options Weighted average exercise price (`) 10,90,33,000 4,48,36,200 2,16,91,200 35,23,700 12,86,54,300 4,96,81,000 683.16 1,092.65 563.78 895.09 840.19 661.84 (cid:0) (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:26) Particulars Options outstanding, beginning of year Granted during the year Exercised during the year Forfeited / Lapsed during the year Options outstanding, end of year Options exercisable Options Weighted average exercise price (`) 9,24,76,600 556.06 4,16,59,000 835.50 2,27,00,740 438.50 24,01,860 744.09 10,90,33,000 683.16 4,18,71,400 537.99 (cid:115)(cid:0)(cid:0) (cid:38)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:26) Plan Plan C Plan D Plan E Plan F Range of exercise price (`) Number of shares arising out of options Weighted average life of options (in years) Weighted average exercise price (`) 680.00 to 835.50 680.00 440.16 to 680.00 835.50 to 1,097.80 57,40,800 51,33,900 3,78,50,200 7,99,29,400 3.34 3.32 2.49 4.80 693.00 680.00 598.71 975.41 (cid:115)(cid:0)(cid:0) (cid:38)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:26) Plan Plan C Plan D Plan E Plan F Range of exercise price (`) Number of shares arising out of options Weighted average life of options (in years) Weighted average exercise price (`) 680.00 to 835.50 680.00 440.16 to 680.00 835.50 67,78,000 64,02,300 5,59,39,700 3,99,13,000 4.32 4.26 3.05 5.22 692.50 680.00 573.70 835.50 HDFC Bank Limited Annual Report 2015-16 91 Schedules to the Financial Statements For the year ended March 31, 2016 Fair value methodology The fair value of options used to compute proforma net income and earnings per equity share have been estimated on the dates of each grant using the binomial option-pricing model. The Bank estimates the volatility based on the historical share prices. 4,48,36,200 options were granted during the year ended March 31, 2016 (previous year: 4,16,59,000). The various assumptions considered in the pricing model for the ESOPs granted during the years ended March 31, 2016 and March 31, 2015 were: Particulars Dividend yield Expected volatility Risk-free interest rate Expected life of the options March 31, 2016 March 31, 2015 0.73% 0.82% 23.29% to 26.46% 24.30% to 32.00% 7.71% to 8.07% 8.42 % to 8.63 % 1 to 7 years 1 to 7 years Impact of fair value method on net proﬁt and Earnings Per Share (‘EPS’) Had the compensation cost for the Bank’s stock option plans been determined based on the fair value approach, the Bank’s net proﬁt and earnings per share would have been as per the proforma amounts indicated below: Particulars Net proﬁt (as reported) Add: Stock-based employee compensation expense included in net income Less: Stock-based compensation expense determined under fair value based method (proforma) (` crore) March 31, 2016 March 31, 2015 12,296.23 10,215.92 - 1,265.93 - 944.47 Net proﬁt (proforma) 11,030.30 9,271.45 Basic earnings per share (as reported) Basic earnings per share (proforma) Diluted earnings per share (as reported) Diluted earnings per share (proforma) 7 Other liabilities (`) 48.84 43.82 48.26 43.29 (`) 42.15 38.25 41.67 37.82 (cid:115)(cid:0) (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:72)(cid:69)(cid:76)(cid:68)(cid:0) (cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:69)(cid:78)(cid:84)(cid:0) (cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:84)(cid:79)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0) (cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:0) (cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) (cid:84)(cid:79)(cid:0) ` 2,001.21 crore as on March 31, 2016 (previous year: ` 1,558.42 crore). These are included under other liabilities. (cid:48)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:0) (cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (cid:73)(cid:83)(cid:0) (cid:77)(cid:65)(cid:68)(cid:69)(cid:0) (cid:73)(cid:78)(cid:0) (cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) (cid:87)(cid:73)(cid:84)(cid:72)(cid:0) (cid:50)(cid:34)(cid:41)(cid:0) (cid:71)(cid:85)(cid:73)(cid:68)(cid:69)(cid:76)(cid:73)(cid:78)(cid:69)(cid:83)(cid:14)(cid:0) (cid:48)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:0) (cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (cid:73)(cid:83)(cid:0) (cid:77)(cid:65)(cid:68)(cid:69)(cid:0) @ 0.25% for direct advances to agriculture and Small and Micro Enterprises (SMEs) sectors, @ 1% for advances to commercial real estate sector, @ 0.75% for advances to commercial real estate - residential housing sector and @ 5% on restructured standard advances. Provision for standard assets is made @ 2% on all exposures to the wholly owned step down subsidiaries of the overseas subsidiaries of Indian companies, sanctioned / renewed after December 31, 2015. For housing loans offered at a comparatively lower rate of interest in the ﬁrst few years after which rates are reset at higher rates (teaser rate loans), provision for standard assets is made @ 2% until after one year from the date on which the rates are reset at higher rates. For accounts classiﬁed under special mention account “SMA-2” category, provision for standard advances is made @ 5% where the Bank under consortium / multiple banking arrangement has the largest Aggregate Exposure (AE) or second largest AE with aggregate exposure of ` 1,000 million or above and Joint Lenders’ Forum (JLF) is not formed or the JLF fails to agree upon a common corrective action plan within the stipulated time frame. The Bank maintains general provision for standard assets including credit exposures computed as per the current HDFC Bank Limited Annual Report 2015-16 92 Schedules to the Financial Statements For the year ended March 31, 2016 marked to market values of interest rate and foreign exchange derivative contracts at levels stipulated by RBI from time to time. In accordance with regulatory guidelines and based on the information made available by its customers to the Bank, for exposures to customers who have not hedged their foreign currency exposures, provision for standard assets is made at levels ranging up to 0.80% depending on the likely loss the entities could incur on account of exchange rate movements. For all other loans and advances provision for standard assets is made @ 0.40%. Provision for standard assets of overseas branches has been made at higher of rates prescribed by the overseas regulator or RBI. (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:80)(cid:82)(cid:69)(cid:83)(cid:69)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:71)(cid:82)(cid:79)(cid:83)(cid:83)(cid:0)(cid:85)(cid:78)(cid:82)(cid:69)(cid:65)(cid:76)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:71)(cid:65)(cid:73)(cid:78)(cid:0)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:69)(cid:73)(cid:71)(cid:78)(cid:0)(cid:69)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:68)(cid:69)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) gross unrealised loss on foreign exchange and derivative contracts under other liabilities. Accordingly, other liabilities as on March 31, 2016 include unrealised loss on foreign exchange and derivative contracts of ` 7,524.88 crore (previous year: ` 6,914.10 crore). 8 Unhedged foreign currency exposure (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:67)(cid:69)(cid:0)(cid:65)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:67)(cid:89)(cid:0)(cid:73)(cid:78)(cid:68)(cid:85)(cid:67)(cid:69)(cid:68)(cid:0)(cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:65)(cid:73)(cid:83)(cid:65)(cid:76)(cid:0)(cid:77)(cid:69)(cid:77)(cid:79)(cid:82)(cid:65)(cid:78)(cid:68)(cid:85)(cid:77)(cid:0) prepared at the time of origination and review of a credit is required to discuss the exchange risk that the customer is exposed to from all sources, including trade related, foreign currency borrowings and external commercial borrowings. It could cover the natural hedge available to the customer as well as other hedging methods adopted by the customer to mitigate exchange risk. For foreign currency loans granted by the Bank beyond a deﬁned threshold the customer will be encouraged to enter into appropriate risk hedging mechanisms with the Bank. Alternatively, the Bank will satisfy itself that the customer has the ﬁnancial capacity to bear the exchange risk in the normal course of its business and / or has other mitigants to reduce the risk. On a monthly basis, the Bank reviews information on the unhedged portion of foreign currency exposures of customers, whose total foreign currency exposure with the Bank exceeds a deﬁned threshold. Based on the monthly review, the Bank proposes suitable hedging techniques to the customer to contain the risk. A Board approved credit risk rating linked limit on unhedged foreign currency position of customers is applicable when extending credit facilities to a customer. The compliance with the limit is assessed by estimating the extent of drop in a customer’s annual EBID due to a potentially large adverse movement in exchange rate impacting the unhedged foreign currency exposure of the customer. Where a breach is observed in such a simulation, the customer is advised to reduce its unhedged exposure. (cid:115)(cid:0) (cid:41)(cid:78)(cid:0) (cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) (cid:87)(cid:73)(cid:84)(cid:72)(cid:0) (cid:50)(cid:34)(cid:41)(cid:0) (cid:71)(cid:85)(cid:73)(cid:68)(cid:69)(cid:76)(cid:73)(cid:78)(cid:69)(cid:83)(cid:12)(cid:0) (cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:72)(cid:69)(cid:76)(cid:68)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:0) (cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0) (cid:77)(cid:65)(cid:73)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0) (cid:66)(cid:89)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:65)(cid:83)(cid:0) (cid:65)(cid:84)(cid:0) March 31, 2016 in respect of the unhedged foreign currency exposure of customers was ` 114.84 crore (previous year: ` 76.49 crore) and ` 275.44 crore (previous year: ` 199.59 crore) respectively. 9 Investments (cid:0)(cid:115)(cid:0) (cid:54)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26)(cid:0) Particulars Gross value of investments - In India - Outside India Provisions for depreciation on investments - In India - Outside India Net value of investments - In India - Outside India HDFC Bank Limited Annual Report 2015-16 93 (cid:8)` crore) March 31, 2016 March 31, 2015 162,632.63 150,649.88 1,372.68 1,105.86 119.54 - 113.99 - 162,513.09 150,535.89 1,372.68 1,105.86 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:0)(cid:115)(cid:0) (cid:45)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:84)(cid:79)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:78)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26) (` crore) Particulars Opening balance Add: Provision made during the year Less: Write-off, write back of excess provision during the year Closing balance March 31, 2016 March 31, 2015 113.99 36.51 30.96 119.54 173.44 7.55 67.00 113.99 Movement in provisions held towards depreciation on investments have been reckoned on a yearly basis. (cid:115)(cid:0) (cid:50)(cid:69)(cid:80)(cid:79)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) In accordance with RBI’s guidelines, accounting of repo / reverse repo transactions excludes those done with the RBI. Following are the details of the repo / reverse repo transactions deals done during the years ended March 31, 2016 and March 31, 2015: (cid:23) Details of repo / reverse repo deals (in face value terms) done during the year ended March 31, 2016: (` crore) Particulars Securities sold under repo 1. Corporate debt securities 2. Government securities Securities purchased under reverse repo 1. Corporate debt securities 2. Government securities Minimum outstanding during the year Maximum outstanding during the year Daily average outstanding during the year Outstanding as at March 31, 2016 - - - - - - 11,144.49 745.11 - - 211.60 8,948.60 144.49 539.25 132.00 - (cid:23) Details of repo / reverse repo deals (in face value terms) done during the year ended March 31, 2015: (` crore) Particulars Securities sold under repo 1. Corporate debt securities 2. Government securities Securities purchased under reverse repo 1. Corporate debt securities 2. Government securities Minimum outstanding during the year Maximum outstanding during the year Daily average outstanding during the year Outstanding as at March 31, 2015 - - - - - - 7,719.96 468.30 - - 520.40 5,420.07 308.49 356.74 211.60 - (cid:23) Outstanding repo and deals with RBI under liquidity adjustment facility / marginal standing facility as of March 31, 2016 were ` 31,830.24 crore (previous year: ` 5,200.00 crore). There were no outstanding reverse repo deals with RBI under liquidity adjustment facility / marginal standing facility as of March 31, 2016 and as of March 31, 2015. HDFC Bank Limited Annual Report 2015-16 94 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:0) (cid:115)(cid:0) (cid:46)(cid:79)(cid:78)(cid:13)(cid:51)(cid:44)(cid:50)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:80)(cid:79)(cid:82)(cid:84)(cid:70)(cid:79)(cid:76)(cid:73)(cid:79) (cid:23) Issuer-wise composition of non-SLR investments as at March 31, 2016: (` crore) Sr. No. Issuer Amount Extent of private placement# Extent of “below investment grade” securities# Extent of “unrated” securities#* Extent of “unlisted” securities#** 1 Public sector undertakings 1,357.71 1,357.71 2 Financial institutions 4,875.28 4,775.38 3 Banks 873.92 1.00 4 Private corporate 24,911.15 23,242.35 5 Subsidiaries / Joint ventures 2,782.96 2,782.96 6 Others 3,493.73 3,490.73 7 Provision held towards depreciation (119.54) Total 38,175.21 35,650.13 - - - - - - - - - - - - - 83.80 431.21 - - - - 83.80 431.21 # * Amounts reported under these columns above are not mutually exclusive. Excludes investments in equity shares and units of equity oriented mutual funds in line with extant RBI guidelines. ** Excludes investments in equity shares, units of equity oriented mutual funds, pass through certiﬁcates, security receipts, commercial paper and certiﬁcate of deposits in line with extant RBI guidelines. (cid:23) Issuer-wise composition of non-SLR investments as at March 31, 2015: (` crore) Sr. No. Issuer 1 Public sector undertakings 2 Financial institutions 3 Banks 4 Private corporate Amount Extent of private placement# 596.92 100.00 596.92 100.00 6,240.26 5,604.09 19,136.11 18,200.81 5 Subsidiaries / Joint ventures 2,782.96 2,782.96 Extent of “below investment grade” securities# Extent of “unrated” securities# * Extent of “unlisted” securities# ** - - - - - - - - - - - 351.80 152.92 - - - - 6 Others 2,509.18 2,506.18 36.68 7 Provision held towards depreciation (113.97) Total 31,251.46 29,790.96 36.68 351.80 152.92 # * Amounts reported under these columns above are not mutually exclusive. Excludes investments in equity shares and units of equity oriented mutual funds and in line with extant RBI guidelines. ** Excludes investments in equity shares, units of equity oriented mutual funds, pass through certiﬁcates, security receipts, commercial paper and certiﬁcate of deposits in line with extant RBI guidelines. HDFC Bank Limited Annual Report 2015-16 95 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:23)(cid:3) Non-performing non-SLR investments: (` crore) Particulars Opening balance Additions during the year Reductions during the year Closing balance Total provisions held (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:89)(cid:13)(cid:87)(cid:73)(cid:83)(cid:69) March 31, 2016 March 31, 2015 101.30 19.13 33.41 87.02 84.33 107.38 0.49 6.57 101.30 96.14 The details of investments held under the three categories viz. Held for Trading (HFT), Available for Sale (AFS) and Held (` crore) to Maturity (HTM) is as under: Particulars As at March 31, 2016 As at March 31, 2015 HFT AFS HTM Total HFT AFS HTM Total Government securities 5,444.11 46,212.83 74,053.62 125,710.56 5,913.40 32,362.64 82,114.26 120,390.30 Other approved securities Shares - - - 76.74 - - - 76.74 - - - 129.38 Debentures and bonds 1,474.90 4,282.31 500.00 6,257.21 100.00 2,130.40 - - - - 129.38 2,230.40 Subsidiary / Joint ventures Others - - - 2,782.96 2,782.96 29,058.30 - 29,058.30 - - - 2,782.96 2,782.96 26,108.72 - 26,108.72 Total 6,919.01 79,630.18 77,336.58 163,885.77 6,013.40 60,731.14 84,897.22 151,641.76 (cid:115)(cid:0) Other investments as at the Balance Sheet date include the following: (` crore) Other Investments Certiﬁcate of deposits Commercial paper March 31, 2016 March 31, 2015 - 25,431.18 5,603.08 17,822.55 (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0) (cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) (cid:38)(cid:65)(cid:67)(cid:69)(cid:0)(cid:54)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0) (cid:8)(cid:38)(cid:54)(cid:9)(cid:0) (cid:65)(cid:71)(cid:71)(cid:82)(cid:69)(cid:71)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) ` 1,520.00 crore (previous year: FV ` 1,563.00 crore) which are kept as margin for clearing of securities, of FV ` 13,729.30 crore (previous year: FV ` 16,249.30 crore) which are kept as margin for Collateralised Borrowing and Lending Obligation (CBLO) and of FV aggregating ` 56.00 crore (previous year: FV ` 63.25 crore) which are kept as margin for Forex Forward segment - Default Fund with the Clearing Corporation of India Ltd. (cid:41)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0) (cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) (cid:38)(cid:54)(cid:0) (cid:65)(cid:71)(cid:71)(cid:82)(cid:69)(cid:71)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) ` 16.00 crore (previous year: FV ` 16.00 crore) which are kept as margin with National Securities Clearing Corporation of India Ltd. (‘NSCCIL’), of FV aggregating ` 13.00 crore (previous year: FV ` 13.00 crore) which are kept as margin with MCX - SX Clearing Corporation Ltd. and of FV aggregating ` 1.00 crore (previous year: ` 2.00 crore) which are kept as margin with Indian Clearing Corporation Limited in the BSE currency derivatives segment. (cid:41)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:38)(cid:54)(cid:0)(cid:65)(cid:71)(cid:71)(cid:82)(cid:69)(cid:71)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)` 35,937.22 crore (previous year: FV ` 34,127.16 crore) are kept as margin towards Real Time Gross Settlement (RTGS) and those having FV aggregating ` 13,091.46 crore (previous year: ` 19,077.83 crore) are kept as margin towards repo transactions with the RBI. (cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:67)(cid:69)(cid:82)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:73)(cid:69)(cid:83)(cid:0)(cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:73)(cid:78)(cid:0)(cid:73)(cid:84)(cid:0)(cid:72)(cid:79)(cid:76)(cid:68)(cid:83)(cid:0)(cid:77)(cid:79)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0)(cid:18)(cid:21)(cid:5)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:81)(cid:85)(cid:73)(cid:84)(cid:89)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:79)(cid:83)(cid:69)(cid:0) companies. Such investments do not fall within the deﬁnition of a joint venture as per AS-27, Financial Reporting of Interest in Joint Ventures and the said accounting standard is thus not applicable. However, pursuant to RBI guidelines, the Bank has classiﬁed and disclosed these investments as joint ventures. HDFC Bank Limited Annual Report 2015-16 96 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:115)(cid:0) (cid:36)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:89)(cid:69)(cid:65)(cid:82)(cid:0) (cid:69)(cid:78)(cid:68)(cid:69)(cid:68)(cid:0) (cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0) (cid:19)(cid:17)(cid:12)(cid:0) (cid:18)(cid:16)(cid:17)(cid:22)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:65)(cid:71)(cid:71)(cid:82)(cid:69)(cid:71)(cid:65)(cid:84)(cid:69)(cid:0) (cid:66)(cid:79)(cid:79)(cid:75)(cid:0) (cid:86)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0) (cid:79)(cid:70)(cid:0) (cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:83)(cid:79)(cid:76)(cid:68)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:12)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0) (cid:84)(cid:79)(cid:0) (cid:15)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:12)(cid:0) HTM category was in excess of 5% of the book value of investments held in HTM category at the beginning of the year. The market value of investments (excluding investments in subsidiaries / joint ventures and Non SLR bonds) under HTM category as on March 31, 2016 was ` 75,466.02 crore (previous year: ` 83,733.68 crore) and was higher than the book value thereof as of that date. In accordance with the RBI guidelines, sale from, and transfer to / from, HTM category excludes: (cid:57)(cid:3) one-time transfer of securities permitted to be undertaken by banks at the beginning of the accounting year with approval of the Board of Directors; (cid:57) (cid:57) (cid:57) sales to the RBI under pre-announced open market operation auctions; repurchase of Government securities by Government of India from banks; and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM at the beginning of January, July and September 2015, in addition to the shifting permitted at the beginning of the accounting year, i.e, April 2015. 10 Derivatives (cid:115)(cid:0) (cid:38)(cid:79)(cid:82)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:50)(cid:65)(cid:84)(cid:69)(cid:0)(cid:33)(cid:71)(cid:82)(cid:69)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:8)(cid:38)(cid:50)(cid:33)(cid:9)(cid:0)(cid:15)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:50)(cid:65)(cid:84)(cid:69)(cid:0)(cid:51)(cid:87)(cid:65)(cid:80)(cid:83)(cid:0)(cid:8)(cid:41)(cid:50)(cid:51)(cid:9)(cid:10)(cid:10)(cid:26)(cid:0) (cid:0) (cid:0)(cid:8)` crore) Sr. No. i) ii) Particulars March 31, 2016 March 31, 2015 The total notional principal of swap agreements 220,137.21 221,218.07 Total losses which would be incurred if counter parties failed to fulﬁll their obligations under the agreements iii) Concentration of credit risk arising from swaps* iv) Collateral required by the Bank upon entering into swaps v) The fair value of the swap book 912.36 701.72 83.02% 85.95% - - (48.40) (22.30) * Concentration of credit risk arising from swaps is with banks as on March 31, 2016 and March 31, 2015. ** Interest Rate Swaps comprises of INR Interest Rate Swaps and FCY Interest Rate Swaps. The nature and terms of rupee IRS as on March 31, 2016 are set out below: Nature Trading Trading Trading Trading Trading Trading Trading Trading Nos. Notional principal (` crore) Benchmark Terms 7 8 4 944 901 323 239 8 275.00 INBMK Fixed receivable v/s ﬂoating payable 450.00 INBMK Floating receivable v/s ﬁxed payable 1,250.00 INCMT Floating receivable v/s ﬁxed payable 67,667.84 OIS 61,759.95 OIS Fixed receivable v/s ﬂoating payable Floating receivable v/s ﬁxed payable 23,437.00 MIFOR Fixed receivable v/s ﬂoating payable 15,135.00 MIFOR Floating receivable v/s ﬁxed payable 620.00 MIOIS Floating receivable v/s ﬁxed payable Total 170,594.79 HDFC Bank Limited Annual Report 2015-16 97 Schedules to the Financial Statements For the year ended March 31, 2016 The nature and terms of foreign currency IRS as on March 31, 2016 are set out below: Nature Trading Trading Trading Trading Trading Trading Hedging Hedging Nos. Notional principal (` crore) Benchmark Terms 1 1 2 2 90 184 3 6 29.41 GBP Libor Fixed receivable v/s ﬂoating payable 29.41 GBP Libor Floating receivable v/s ﬁxed payable 753.95 EURIBOR Fixed receivable v/s ﬂoating payable 753.95 EURIBOR Floating receivable v/s ﬁxed payable 14,568.32 USD Libor Fixed receivable v/s ﬂoating payable 26,816.42 USD Libor Floating receivable v/s ﬁxed payable 3,312.75 USD Libor Fixed receivable v/s ﬂoating payable 2,848.97 USD Libor Floating receivable v/s ﬁxed payable Total 49,113.18 The nature and terms of foreign currency FRA as on March 31, 2016 are set out below: Nature Nos. Notional principal (` crore) Benchmark Terms Trading Trading 1 1 214.63 USD Libor Payable FRA 214.63 USD Libor Receivable FRA Total 429.26 The nature and terms of rupee IRS as on March 31, 2015 are set out below: Nature Nos. Notional principal (` crore) Benchmark Terms Trading Trading Trading Trading Trading Trading Trading Trading Trading 18 15 4 1 783 757 304 259 13 600.00 INBMK Fixed receivable v/s ﬂoating payable 675.00 INBMK Floating receivable v/s ﬁxed payable 1,250.00 INCMT Floating receivable v/s ﬁxed payable 15.00 FIX TO FIX Fixed receivable v/s ﬁxed payable 69,773.34 OIS Fixed receivable v/s ﬂoating payable 78,003.28 OIS Floating receivable v/s ﬁxed payable 18,939.00 MIFOR Fixed receivable v/s ﬂoating payable 16,150.00 MIFOR Floating receivable v/s ﬁxed payable 600.00 MIOIS Floating receivable v/s ﬁxed payable Total 186,005.62 HDFC Bank Limited Annual Report 2015-16 98 Schedules to the Financial Statements For the year ended March 31, 2016 The nature and terms of foreign currency IRS as on March 31, 2015 are set out below: Nature Nos. Notional principal (` crore) Benchmark Terms Trading Trading Trading Trading Trading Trading Trading Trading 1 1 2 2 84 151 3 7 36.62 GBP Libor Fixed receivable v/s ﬂoating payable 36.62 GBP Libor Floating receivable v/s ﬁxed payable 671.90 EURIBOR Fixed receivable v/s ﬂoating payable 671.90 EURIBOR Floating receivable v/s ﬁxed payable 10,812.94 USD Libor Fixed receivable v/s ﬂoating payable 16,047.63 USD Libor Floating receivable v/s ﬁxed payable 3,125.00 USD Libor Fixed receivable v/s ﬂoating payable 3,000.00 USD Libor Floating receivable v/s ﬁxed payable Total 34,402.61 The nature and terms of foreign currency FRA as on March 31, 2015 are set out below: Nature Trading Trading Nos. Notional principal (` crore) Benchmark Terms 2 2 404.92 USD Libor Payable FRA 404.92 USD Libor Receivable FRA Total 809.84 (cid:115)(cid:0) (cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:84)(cid:82)(cid:65)(cid:68)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:82)(cid:65)(cid:84)(cid:69)(cid:0)(cid:68)(cid:69)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0) (cid:0) (cid:0)(cid:8)` crore) Particulars March 31, 2016 March 31, 2015 Sr. No. i) ii) iii) The total notional principal amount of exchange traded interest rate derivatives undertaken during the year ended March 31, (instrument- wise): (a) 10 year Government Security Notional Bond The total notional principal amount of exchange traded interest rate derivatives outstanding The notional principal amount of exchange traded interest rate derivatives outstanding and not ‘highly effective’, iv) Mark-to-market value of exchange traded interest rate derivatives outstanding and not ‘highly effective’, (cid:115)(cid:0) (cid:49)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:68)(cid:69)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83) Overview of business and processes Nil Nil N.A. N.A. 0.40 Nil N.A. N.A. Derivatives are ﬁnancial instruments whose characteristics are derived from underlying assets, or from interest and exchange rates or indices. These include forwards, swaps, futures and options. The notional amounts of ﬁnancial instruments such as foreign exchange contracts and derivatives provide a basis for comparison with instruments recognised on the Balance Sheet but do not necessarily indicate the amounts of future cash ﬂows involved or the current fair value of the instruments and, therefore, do not indicate the Bank’s exposure to credit or price risks. The following sections outline the nature and terms of the derivative transactions generally undertaken by the Bank. HDFC Bank Limited Annual Report 2015-16 99 Schedules to the Financial Statements For the year ended March 31, 2016 Interest rate contracts Forward rate agreements give the buyer the ability to determine the underlying rate of interest for a speciﬁed period commencing on a speciﬁed future date (the settlement date). There is no exchange of principal and settlement is effected on the settlement date. The settlement amount is the difference between the contracted rate and the market rate prevailing on the settlement date. Interest rate swaps involve the exchange of interest obligations with the counterparty for a speciﬁed period without exchanging the underlying (or notional) principal. Interest rate caps and ﬂoors give the buyer the ability to ﬁx the maximum or minimum rate of interest. The writer of the contract pays the amount by which the market rate exceeds or is less than the cap rate or the ﬂoor rate respectively. A combination of interest rate caps and ﬂoors is known as an interest rate collar. Interest rate futures are standardised interest rate derivative contracts traded on a recognised stock exchange to buy or sell a notional security or any other interest bearing instrument or an index of such instruments or interest rates at a speciﬁed future date, at a price determined at the time of the contract. Exchange rate contracts Forward foreign exchange contracts are agreements to buy or sell ﬁxed amounts of currency at agreed rates of exchange on future date. All such instruments are carried at fair value, determined based on either FEDAI rates or on market quotations. Cross currency swaps are agreements to exchange principal amounts denominated in different currencies. Cross currency swaps may also involve the exchange of interest payments on one speciﬁed currency for interest payments in another speciﬁed currency for a speciﬁed period. Currency options give the buyer, on payment of a premium, the right but not an obligation, to buy or sell speciﬁed amounts of currency at agreed rates of exchange on or before a speciﬁed future date. Option premia paid or received is recorded in Statement of Proﬁt and Loss for rupee options at the expiry of the option and for foreign currency options on premium settlement date. Currency futures contract is a standardised contract traded on an exchange, to buy or sell a certain underlying asset or an instrument at a certain date in the future, at a speciﬁed price. The underlying instrument of a currency future contract is the rate of exchange between one unit of foreign currency and the INR. The Bank’s derivative transactions relate to sales and trading activities. Sale activities include the structuring and marketing of derivatives to customers to enable them to hedge their market risks (both interest rate and exchange risks), within the framework of regulations as may apply from time to time. The Bank deals in derivatives on its own account (trading activity) principally for the purpose of generating a proﬁt from short term ﬂuctuations in price or yields. The Bank also deals in derivatives to hedge the risk embedded in some of its Balance Sheet assets and liabilities. Constituents involved in derivative business The Treasury front-ofﬁce enters into derivative transactions with customers and inter-bank counterparties. The Bank has an independent back-ofﬁce and mid-ofﬁce as per regulatory guidelines. The Bank has a credit and market risk department that assesses various counterparty risk and market risk limits, within the risk architecture and processes of the Bank. HDFC Bank Limited Annual Report 2015-16 100 Schedules to the Financial Statements For the year ended March 31, 2016 Derivative policy The Bank has in place a policy which covers various aspects that apply to the functioning of the derivative business. The derivative business is administered by various market risk limits such as position limits, tenor limits, sensitivity limits and value-at-risk limits that are approved by the Board and the Risk Policy and Monitoring Committee (‘RPMC’). All methodologies used to assess credit and market risks for derivative transactions are speciﬁed by the market risk unit. Limits are monitored on a daily basis by the mid-ofﬁce. The Bank has implemented a Board approved policy on Customer Suitability & Appropriateness to ensure that derivative transactions entered into are appropriate and suitable to the customer’s nature of business / operations. Before entering into a derivative deal with a customer, the Bank scores the customer on various risk parameters and based on the overall score level it determines the kind of product that best suits its risk appetite and the customer’s requirements. Classiﬁcation of derivatives book The derivative book is classiﬁed into trading and hedging book. Classiﬁcation of the derivative book is made on the basis of the deﬁnitions of the trading and hedging books speciﬁed in the RBI guidelines. The trading book is managed within the trading limits approved by the RPMC. Hedging policy For derivative contracts designated as hedge the Bank documents, at inception, the relationship between the hedging instrument and the hedged item, the risk management objective for undertaking the hedge and the methods used to assess the hedge effectiveness. Hedge effectiveness is ascertained at the time of inception of the hedge and periodically thereafter. Hedge effectiveness is measured by the degree to which changes in the fair value or cash ﬂows of the hedged item that are attributable to a hedged risk are offset by changes in the fair value or cash ﬂows of the hedging instrument. The hedging book consists of transactions to hedge Balance Sheet assets or liabilities. The tenor of hedging instrument may be less than or equal to the tenor of underlying hedged asset or liability. Derivative contracts designated as hedges are not marked to market unless their underlying asset or liability is marked to market. In respect of derivative contracts that are marked to market, changes in the market value are recognised in the Statement of Proﬁt and Loss in the relevant period. Gain or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Proﬁt and Loss. Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction, and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract is amortised as expense or income over the life of the contract. (cid:115)(cid:0) (cid:48)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:73)(cid:78)(cid:71)(cid:12)(cid:0)(cid:67)(cid:79)(cid:76)(cid:76)(cid:65)(cid:84)(cid:69)(cid:82)(cid:65)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:77)(cid:73)(cid:84)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) The Bank enters into derivative transactions with counter parties based on their business ranking and ﬁnancial position. The Bank sets up appropriate limits upon evaluating the ability of the counterparty to honour its obligations in the event of crystallisation of the exposure. Appropriate credit covenants are stipulated where required as trigger events to call for collaterals or terminate a transaction and contain the risk. The Bank, at the minimum, conforms to the RBI guidelines with regard to provisioning requirements. Overdue receivables representing crystallised positive mark-to-market value of a derivative contract are transferred to the account of the borrower and treated as non-performing assets, if these remain unpaid for 90 days or more. Full provision is made for the entire amount of overdue and future receivables relating to positive marked to market value of non-performing derivative contracts. HDFC Bank Limited Annual Report 2015-16 101 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:115)(cid:0) (cid:49)(cid:85)(cid:65)(cid:78)(cid:84)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:68)(cid:69)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83) (` crore) Sr. No. Particulars Currency derivatives Interest rate derivatives March 31, 2016 March 31, 2015 March 31, 2016 March 31, 2015 1 Derivatives (notional principal amount) a) Hedging b) Trading 2 Marked to Market positions 3 4 a) Asset (+) b) Liability (-) Credit Exposure Likely impact of one percentage change in interest rate (100*PV01) a) On hedging derivatives b) On trading derivatives 5 Maximum of 100*PV01 observed during the year a) On hedging b) On trading 6 Minimum of 100*PV01 observed during the year a) On hedging b) On trading 160.35 151.26 6,161.72 6,125.00 36,149.17 21,383.65 214,575.93 215,718.07 740.09 (494.47) 2,114.96 533.77 (393.68) 1,411.84 911.43 (964.86) 2,355.78 706.49 (718.18) 2,460.14 0.09 35.06 0.21 39.41 0.02 0.21 0.03 0.36 6.87 13.94 Nil 0.36 32.24 30.84 44.04 116.25 30.02 30.84 28.13 152.12 40.08 152.12 1.18 77.60 (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) The notional principal amount of foreign exchange contracts classiﬁed as hedging and trading outstanding as on March 31, 2016 amounted to ` 23,182.85 crore (previous year: ` 21,868.96 crore) and ` 505,892.93 crore (previous year: ` 652,183.13 crore) respectively. The notional principal amounts of derivatives reﬂect the volume of transactions outstanding as at the Balance Sheet date and do not represent the amounts at risk. For the purpose of this disclosure, currency derivatives include currency options purchased and sold and cross currency interest rate swaps. Interest rate derivatives include interest rate swaps, forward rate agreements and interest rate caps. The Bank has computed the maximum and minimum of PV01 for the year based on the balances as at the end of every month. In respect of derivative contracts, the Bank evaluates the credit exposure arising therefrom, in line with RBI guidelines. Credit exposure has been computed using the current exposure method which is the sum of: (a) the current replacement cost (marked to market value including accruals) of the contract or zero whichever is higher; and (b) the Potential Future Exposure (PFE) is a product of the notional principal amount of the contract and a factor that is based on the grid of credit conversion factors prescribed in RBI guidelines, which is applied on the basis of the residual maturity and the type of contract. HDFC Bank Limited Annual Report 2015-16 102 Schedules to the Financial Statements For the year ended March 31, 2016 11 Asset quality (cid:115)(cid:0) (cid:45)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:46)(cid:48)(cid:33)(cid:83)(cid:0)(cid:8)(cid:70)(cid:85)(cid:78)(cid:68)(cid:69)(cid:68)(cid:9)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0)(cid:8)` crore) Particulars (i) Net NPAs to net advances (ii) Movement of NPAs (Gross) (a) Opening balance (b) Additions (fresh NPAs) during the year (c) Reductions during the year: - Upgradation - Recoveries (excluding recoveries made from upgraded accounts) - Write-offs (d) Closing balance (iii) Movement of net NPAs (a) Opening balance (b) Additions during the year (c) Reductions during the year (d) Closing balance (iv) Movement of provisions for NPAs (excluding provisions on standard assets) (a) Opening balance (b) Additions during the year (c) Write-offs (d) Write-back of excess provisions (e) Closing balance March 31, 2016 March 31, 2015 0.25% 0.28% 3,438.38 5,712.64 4,758.19 1,377.12 1,438.65 1,942.42 4,392.83 896.28 1,968.39 1,544.30 1,320.37 2,542.10 3,744.25 1,942.42 1,271.47 3,072.46 2,989.28 4,790.12 4,341.02 1,076.64 1,413.04 1,851.34 3,438.38 820.03 1,461.31 1,385.06 896.28 2,169.25 3,328.81 1,851.34 1,104.62 2,542.10 NPAs include all loans, investments and foreign exchange and derivatives that are classiﬁed as non-performing by the Bank. (cid:115)(cid:0) (cid:52)(cid:69)(cid:67)(cid:72)(cid:78)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:79)(cid:82)(cid:0)(cid:80)(cid:82)(cid:85)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0)(cid:87)(cid:82)(cid:73)(cid:84)(cid:69)(cid:13)(cid:79)(cid:70)(cid:70)(cid:83) Technical or prudential write-offs refer to the amount of non-performing assets which are outstanding in the books of the branches, but have been written-off (fully or partially) at the head ofﬁce level. The ﬁnancial accounting systems of the Bank are integrated and there are no write-offs done by the Bank which remain outstanding in the books of the branches. (` crore) Movement in the stock of technically or prudentially written-off accounts given below: Particulars Opening balance of technical / prudential write-offs Technical / Prudential write-offs during the year Recoveries made from previously technically / prudentially written-off accounts during the year Closing balance of technical / prudential write-offs March 31, 2016 March 31, 2015 - - - - - - - - (cid:115)(cid:0) (cid:38)(cid:76)(cid:79)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83) Floating provisions of ` 1,335.64 crore (previous year: ` 1,523.22 crore) have been included under “Other Liabilities”. (` crore) Movement in ﬂoating provision is given below: Particulars Opening balance Provisions made during the year Draw down made during the year Closing balance March 31, 2016 March 31, 2015 1,835.03 - (311.81) 1,523.22 1,523.22 115.00 (302.58) 1,335.64 Floating provisions have been utilised as per the Board approved policy for contingencies under extraordinary circumstances and for making speciﬁc provision for impaired accounts in accordance with the RBI guidelines / directives. 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- - - - - - - - 4 9 1 0 0 . 7 4 6 6 . 6 9 4 6 4 . 9 - - - - - - - - - - - - - - - - - 8 3 9 0 1 2 6 . 4 4 2 2 0 . 9 0 8 . 2 6 2 8 0 . 9 0 2 2 1 . 7 3 2 . 0 2 1 . 8 1 9 5 . 7 1 2 1 - 2 5 6 . 9 8 2 . 5 9 2 . 2 1 5 7 . 5 1 - - - - - - 1 0 . 0 5 7 . 0 - - - - - - - 3 + 3 - 2 + 2 - 2 0 . 9 9 8 . 5 5 1 9 . 4 6 - 3 2 . 0 + 8 5 . 0 + 1 8 . 0 - - - - - - - - - - 6 7 . 0 1 - 3 3 3 0 . 1 4 5 8 . 1 2 1 . 4 8 9 . 6 2 1 3 4 9 6 2 . 2 2 2 4 3 . 8 6 6 0 . 6 0 2 5 8 . 7 1 2 4 3 . 2 2 6 . 1 0 5 . 5 9 3 . 6 - - - - - - - - - - - - - - - - - 1 3 6 4 7 . 7 2 0 . 9 2 3 . 2 9 1 4 3 . 1 3 2 . 0 2 0 . 6 1 1 1 - 5 9 . 2 0 8 . 3 0 0 . 9 - - - - - - 1 0 . 0 5 7 . 0 - - - - - - - 3 + 3 - 1 + 1 - 2 0 . 9 2 7 . 5 1 4 7 . 4 2 - 3 2 . 0 + 8 5 . 0 + 1 8 . 0 - - - 3 5 2 2 1 0 . 1 5 8 . 1 2 1 . 4 0 7 . 8 1 9 6 . 6 2 6 4 . 2 7 1 7 7 . 0 2 6 . 1 0 0 . 4 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - i . t h g e w k s i r - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0 1 6 3 . 7 0 3 1 8 8 . 7 7 4 . 1 1 - - - - - - - - - - 1 0 1 2 0 . 0 4 1 8 . 8 7 2 7 0 . 3 - - - - - - - - - - - - - - - - - 7 8 8 . 6 3 2 1 8 7 . 5 - - - - 3 s r e w o r r o b f o . o N 8 4 . 0 7 i g n d n a t s t u o t n u o m A 0 1 . 2 n o e r e h t n o i s i v o r P - s r e w o r r o b f o . o N 0 7 . 6 8 4 . 1 9 2 . 3 i g n d n a t s t u o t n u o m A g n i r u t c u r t s e r f o e p y T (cid:5) n o i t a c ﬁ i s s a l C t e s s A d e r u t c u r t s e R s a s t n u o c c a , 1 l i r p A n o * 5 1 0 2 (cid:7) s l i a t e D . r S . o N 1 g n i r u t c u r t s e r e h t g n i r u d # r a e y h s e r F 2 - - - - - - - 1 7 2 0 . 0 4 - - - - - - - - - - - n o e r e h t n o i s i v o r P i g n d n a t s t u o t n u o m A n o e r e h t n o i s i v o r P s r e w o r r o b f o . o N i g n d n a t s t u o t n u o m A d r a d n a t s y r o g e t a c e h t g n i r u d r a e y s a n w o h s t o n d e r u t c u r t s e r t a s e c n a v d a d r a d n a t s s e c n a v d A 4 s r e w o r r o b f o . o N d e r u t c u r t s e r o t n o i t a d a r g p U 3 n o e r e h t n o i s i v o r P t x e n e h t f o ^ r a e y i g n n n g e b i e h t 1 + 1 - s r e w o r r o b f o . o N 7 1 . 0 4 7 1 . 0 4 - i g n d n a t s t u o t n u o m A - - - 1 - - - 2 n o e r e h t n o i s i v o r P s r e w o r r o b f o . o N i g n d n a t s t u o t n u o m A s r e w o r r o b f o . o N f o n o i t a d a r g d e r u t c u r t s e r e h t g n i r u d s t n u o c c a r a e y n w o D 5 f o s f f o - e t i r W d e r u t c u r t s e r e h t g n i r u d s t n u o c c a # # r a e y d e r u t c u r t s e R s a s t n u o c c a , 1 3 h c r a M n o * 6 1 0 2 6 7 6 5 . 3 0 2 5 6 . 1 4 0 6 . 3 3 i g n d n a t s t u o t n u o m A 7 5 . 1 - 0 5 . 1 n o e r e h t n o s v o r P i i HDFC Bank Limited Annual Report 2015-16 104 d e r u t c u r t s e r s a n w o h s e b t o n d e e n e c n e h d n a r a e y e h t f o d n e e h t t a i t h g e w k s i r l a n o i t i d d a r o / d n a i i g n n o s v o r p i r e h g h i t c a r t t a o t e s a e c i h c h w s e c n a v d a d r a d n a t s d e r u t c u r t s e r e r a e s e h T . e g a k c a p r e h t o d n a R D C n i s t n u o c c a d e r u t c u r t s e r i g n i t s x e o t ) e r o r c 1 1 . 6 ` i i n o s v o r p d n a s t n u o c c a 5 ( n o i t c n a s l a n o i t i d d a f o e r o r c 0 8 . 4 1 ` e d u c n l i . r a e y t x e n e h t i f o g n n n g e b i e h t t a s e c n a v d a d r a d n a t s r e g n o l o n s i ) e r o r c 7 1 . 0 ` i i n o s v o r p d n a s t n u o c c a 2 ( e r o r c 1 0 . 1 ` d n a y r e v o c e r f o y a w y b s t n u o c c a d e r u t c u r t s e r g n i t s x e i n i ) e r o r c 8 1 . 5 ` i i n o s v o r p . d e r u t c u r t s e r s a d e t r o p e r e b o t d e r i u q e r d n a s t n u o c c a 0 1 ( e r o r c 9 7 . 0 1 ` e d u c n l i # # i r o g n n o s v o r p i i r e h g h i t c a r t t a t o n o d i h c h w s e c n a v d a d e r u t c u r t s e r d r a d n a t s f o s e r u g ﬁ e h t s e d u c x E l * ^ # Schedules to the Financial Statements For the year ended March 31, 2016 ) s r e b m u n t p e c x e , e r o r c ` ( (cid:26) (cid:21) (cid:17) (cid:16) (cid:18) (cid:0) (cid:12) (cid:17) (cid:19) (cid:0) (cid:0) (cid:72) (cid:67) (cid:82) (cid:65) (cid:45) (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:65) (cid:69) (cid:89) (cid:0) (cid:69) (cid:72) (cid:84) (cid:0) (cid:82) (cid:79) (cid:70) (cid:0) (cid:71) (cid:78) (cid:73) (cid:82) (cid:85) (cid:84) (cid:67) (cid:85) (cid:82) (cid:84) (cid:83) (cid:69) (cid:82) (cid:0) (cid:79) (cid:84) (cid:0) (cid:68) (cid:69) (cid:84) (cid:67) (cid:69) (cid:74) (cid:66) (cid:85) (cid:83) (cid:0) (cid:83) (cid:84) (cid:78) (cid:85) (cid:79) (cid:67) (cid:67) (cid:65) (cid:0) (cid:78) (cid:79) (cid:0) (cid:69) (cid:82) (cid:85) (cid:83) (cid:79) (cid:76) (cid:67) (cid:83) (cid:73) (cid:36) (cid:0) (cid:115) l a t o T s s o L l u f t b u o D b u S d r a d n a t S d r a d n a t S l a t o T s s o L l u f t b u o D b u S d r a d n a t S d r a d n a t S l a t o T s s o L l u f t b u o D b u S d r a d n a t S d r a d n a t S l a t o T s s o L l u f t b u o D b u S d r a d n a t S d r a d n a t S l a t o T s r e h t O m s i n a h c e M g n i r u t c u r t s e R t b e D m s i n a h c e M ) E M S ( s e s i r p r e t n E m u i d e M & l l a m S r e d n U ) R D C ( g n i r u t c u r t s e R t b e D e t a r o p r o C r e d n U g n i r u t c u r t s e r f o e p y T (cid:5) n o i t a c ﬁ i s s a l C t e s s A . r S . o N 9 1 7 4 . 1 9 4 5 0 . 8 1 6 6 4 . 3 2 2 8 0 . 8 1 - - - 1 8 8 . 0 3 - - - - 4 1 6 . 7 6 1 0 2 4 4 . 6 1 5 7 4 . 5 2 - - - - - - - - - - - - - - - - - 1 1 2 6 7 5 9 . 2 9 3 0 8 . 8 1 2 7 . 9 7 1 3 . 9 3 6 8 . 7 1 - 2 0 . 0 - - - - - - - 3 - - - - - - - 2 + - - - 1 - 2 - 8 8 . 0 3 - - - - - - - - - 8 0 . 7 + 8 0 . 7 - 3 2 . 0 + 3 2 . 0 - 1 - 1 6 4 9 1 . 0 2 2 . 0 4 4 . 3 2 2 6 1 . 9 8 1 8 0 . 8 1 8 9 . 5 1 5 3 . 8 4 1 6 8 . 6 1 0 4 . 2 9 3 . 9 1 8 3 9 0 1 2 6 . 4 4 2 2 0 . 9 0 8 . 2 6 2 8 0 . 9 0 2 2 1 . 7 3 2 . 0 2 1 . 8 1 9 5 . 7 1 - - - - - - - - - - - - - - - - - 1 2 4 7 8 . 7 0 8 . 8 1 4 6 . 2 1 - - - - - - - - - - 3 0 . 0 - - - - - - - 4 9 1 . 0 6 1 . 9 8 1 8 9 . 5 1 - - - - - - 2 + 2 - 8 0 . 7 + 8 0 . 7 - 3 2 . 0 + 3 2 . 0 - 1 - 1 3 6 3 1 . 0 6 8 . 6 1 0 4 . 2 4 7 . 7 2 0 . 9 2 3 . 2 9 1 4 3 . 1 3 2 . 0 2 0 . 6 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - i . t h g e w k s i r - - - - - - - - - - - - - - - - - - - - 2 1 6 1 . 2 5 4 3 8 . 7 1 2 0 3 . 4 3 0 1 . 2 - - - 1 8 8 . 0 3 - - - - 3 2 2 . 8 4 1 0 1 6 3 . 7 0 3 8 8 . 7 - - - - - - - - - - - - - - - - - 0 1 8 0 . 5 8 3 3 8 . 7 1 - 2 0 . 0 - - - - - - - 3 2 2 . 8 4 1 7 8 8 . 6 3 2 8 7 . 5 - - - - - - - - - - - - - - - - - 2 s r e w o r r o b f o . o N 8 0 . 7 6 i g n d n a t s t u o t n u o m A - 2 n o e r e h t n o i s i v o r P s r e w o r r o b f o . o N 8 2 . 4 3 i g n d n a t s t u o t n u o m A 0 1 . 2 n o e r e h t n o i s i v o r P - - - 1 - - - - - - 3 i g n d n a t s t u o t n u o m A n o e r e h t n o i s i v o r P s r e w o r r o b f o . o N i g n d n a t s t u o t n u o m A s r e w o r r o b f o . o N n o e r e h t n o i s i v o r P s r e w o r r o b f o . o N i g n d n a t s t u o t n u o m A s r e w o r r o b f o . o N 8 4 . 0 7 i g n d n a t s t u o t n u o m A 0 1 . 2 n o e r e h t n o i s i v o r P (cid:7) s l i a t e D d e r u t c u r t s e R s a s t n u o c c a , 1 l i r p A n o * 4 1 0 2 1 g n i r u t c u r t s e r e h t g n i r u d # r a e y h s e r F 2 d r a d n a t s y r o g e t a c e h t g n i r u d r a e y s a n w o h s t o n d e r u t c u r t s e r t a s e c n a v d a d r a d n a t s s e c n a v d A 4 i g n n n g e b i e h t f o n o i t a d a r g d e r u t c u r t s e r e h t g n i r u d s t n u o c c a r a e y n w o D 5 f o s f f o - e t i r W d e r u t c u r t s e r e h t g n i r u d s t n u o c c a # # r a e y d e r u t c u r t s e R s a s t n u o c c a , 1 3 h c r a M n o * 5 1 0 2 6 7 8 8 . 0 3 i g n d n a t s t u o t n u o m A n o e r e h t n o i s i v o r P t x e n e h t f o ^ r a e y s r e w o r r o b f o . o N d e r u t c u r t s e r o t n o i t a d a r g p U 3 i i g n n n g e b e h t t a s e c n a v d a d r a d n a t s d e r u t c u r t s e r s a n w o h s e b t o n d e e n e c n e h d n a r a e y e h t f o d n e e h t i t a t h g e w k s i r l i i i i a n o i t i d d a r o / d n a g n n o s v o r p r e h g h t c a r t t a o t e s a e c h c h w s e c n a v d a d r a d n a t s d e r u t c u r t s e r e r a e s e h T i t n u o c c a d e r u t c u r t s e r g n i t s x e m o r f n o i t c u d e r i i i ) e r o r c 5 . 5 ` n o s v o r p d n a s t n u o c c a 3 ( e r o r c 7 2 . 1 1 1 ` d n a y r e v o c e r f o y a w y b s t n u o c c a d e r u t c u r t s e r g n i t s x e o t i i i ) e r o r c 5 4 . 1 1 ` n o s v o r p d n a s t n u o c c a 2 1 ( e r o r c 9 6 . 8 ` e d u c n l i . d e k o v e r s i e g a k c a p R D C s a . e g a k c a p R D C n i s t n u o c c a d e r u t c u r t s e r g n i t s x e o t i ) l i i N n o s v o r p i d n a s t n u o c c a 2 ( n o i t c n a s l a n o i t i d d a f o e r o r c 0 0 . 4 ` e d u c n l i . r a e y t x e n e h t f o i r o g n n o s v o r p i i i r e h g h t c a r t t a t o n i o d h c h w s e c n a v d a d e r u t c u r t s e r d r a d n a t s f o s e r u g ﬁ e h t s e d u c x E l * ^ # # # HDFC Bank Limited Annual Report 2015-16 105 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:83)(cid:79)(cid:76)(cid:68)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:15)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:73)(cid:69)(cid:83)(cid:0)(cid:8)(cid:51)(cid:35)(cid:0)(cid:15)(cid:0)(cid:50)(cid:35)(cid:9)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0) (` crore) (cid:82)(cid:69)(cid:67)(cid:79)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:26) Particulars March 31, 2016 March 31, 2015 Number of accounts Aggregate value (net of provisions) of accounts sold to SC / RC Aggregate considerations Additional consideration realised in respect of accounts transferred in earlier years Aggregate gain / (loss) over net book value 1 3.96 2.95 - (1.01) (cid:115) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:66)(cid:79)(cid:79)(cid:75)(cid:0)(cid:86)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:80)(cid:84)(cid:83)(cid:0)(cid:66)(cid:65)(cid:67)(cid:75)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:46)(cid:48)(cid:33)(cid:83)(cid:26) 3 313.59 296.45 7.86 (17.14) (` crore) Particulars March 31, 2016 March 31, 2015 (i) Backed by NPAs sold by the Bank as underlying (ii) Backed by NPAs sold by other banks / financial institutions / non-banking ﬁnancial companies as underlying Total 203.80 36.05 239.85 219.72 42.86 262.58 During the years ended March 31, 2016 and March 31, 2015, no non-performing ﬁnancial assets were sold, excluding those sold to SC / RC. (cid:36)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:83)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:12)(cid:0)(cid:78)(cid:79)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:73)(cid:78)(cid:71)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0) the Bank. (cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:80)(cid:69)(cid:82)(cid:0)(cid:66)(cid:79)(cid:79)(cid:75)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:51)(cid:48)(cid:54)(cid:83)(cid:0)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:79)(cid:82)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:26) There are no SPVs sponsored by the Bank as at March 31, 2016 and as at March 31, 2015. (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) 12 Details of exposures to real estate and capital market sectors, risk category-wise country exposures, factoring (cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:12)(cid:0) (cid:83)(cid:73)(cid:78)(cid:71)(cid:76)(cid:69)(cid:0) (cid:15)(cid:0) (cid:71)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0) (cid:66)(cid:79)(cid:82)(cid:82)(cid:79)(cid:87)(cid:69)(cid:82)(cid:0) (cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:12)(cid:0) (cid:85)(cid:78)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0) (cid:65)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:67)(cid:79)(cid:78)(cid:67)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:68)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:83)(cid:12)(cid:0) (cid:65)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:12)(cid:0) exposures and NPAs (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:65)(cid:76)(cid:0)(cid:69)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:0)(cid:83)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) Exposure is higher of limits sanctioned or the amounts outstanding as at the year end. (` crore) Category a) Direct exposure (i) Residential mortgages* March 31, 2016 March 31, 2015 49,428.76 32,245.03 36,278.61 24,678.61 (of which housing loans eligible for inclusion in priority sector advances) (18,697.97) (19,310.94) (ii) Commercial real estate 17,118.59 11,471.80 (iii) Investments in Mortgage Backed Securities (MBS) and other securitised exposures: (a) Residential (b) Commercial real estate b) Indirect exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) 65.14 - 14,490.76 14,490.76 128.20 - 10,007.37 10,007.37 *includes loans purchased under the direct loan assignment route Of the above, exposure to real estate developers as at March 31, 2016 is 0.5% (previous year: 0.3%) of total advances. Total exposure to real estate sector 63,919.52 46,285.98 HDFC Bank Limited Annual Report 2015-16 106 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) Exposure is higher of limits sanctioned or the amount outstanding as at the year end. (` crore) Sr. No. (i) (ii) (iii) (iv) (v) (vi) Particulars March 31, 2016 March 31, 2015 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 Advances against shares, bonds, debentures or other securities or on clean basis to individuals for investment in shares (including IPO’s / ESOP’s), convertible bonds, convertible debentures and units of equity oriented mutual funds 86.50 72.61 158.75 166.37 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 3,133.85 1,636.51 Advances for any other purposes to the extent secured by collateral security of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds i.e. where the primary security other than shares / convertible bonds / convertible debentures / units of equity oriented mutual funds does not fully cover the advances 48.31 30.81 Secured and unsecured advances to stock brokers and guarantees issued on behalf of stock brokers and market makers 6,881.17 6,462.82 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 2,576.32 1,888.90 (vii) Bridge loans to companies against expected equity ﬂows / issues (viii) Underwriting commitments taken up in respect of primary issue of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds (ix) Financing to stock brokers for margin trading - - - - - - (x) All exposures to venture capital funds (both registered and unregistered) 0.20 1.70 Total exposure to capital market 12,885.10 10,259.72 (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:89)(cid:0)(cid:87)(cid:73)(cid:83)(cid:69)(cid:0)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:82)(cid:89)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0)(cid:0)(cid:0)(cid:8)` crore) Risk Category Insigniﬁcant Low Moderately low Moderate Moderately high High Very high March 31, 2016 March 31, 2015 Exposure (net) Provision held Exposure (net) Provision held 13,857.28 8,222.23 370.13 143.82 20.23 5.25 - Total 22,618.94 - - - - - - - - 11,561.34 6,802.22 123.03 63.62 1.67 0.97 - 18,552.85 - - - - - - - - HDFC Bank Limited Annual Report 2015-16 107 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:70)(cid:65)(cid:67)(cid:84)(cid:79)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) The factoring exposure of the Bank as on March 31, 2016 is ` 3,515.98 crore (previous year: ` 3,298.59 crore) (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:51)(cid:73)(cid:78)(cid:71)(cid:76)(cid:69)(cid:0)(cid:34)(cid:79)(cid:82)(cid:82)(cid:79)(cid:87)(cid:69)(cid:82)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:0)(cid:8)(cid:51)(cid:39)(cid:44)(cid:9)(cid:12)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:34)(cid:79)(cid:82)(cid:82)(cid:79)(cid:87)(cid:69)(cid:82)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:0)(cid:8)(cid:39)(cid:34)(cid:44)(cid:9)(cid:0)(cid:69)(cid:88)(cid:67)(cid:69)(cid:69)(cid:68)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75) The RBI has prescribed single and group borrower exposure limits linked to a Bank’s capital funds and such limits can be enhanced by a further 5 percent thereof with the approval of the Board of Directors of the Bank. During the year ended March 31, 2016 the Bank was within the limits prescribed by the RBI. During the year ended March 31, 2015 the Bank’s exposure to single and group borrowers were within the limits prescribed by RBI except, with the prior approval of the Board of the Bank, in respect of single borrower limits for Reliance Industries Limited. (cid:115)(cid:0) (cid:53)(cid:78)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83) Advances for which intangible collaterals such as rights, licenses, authority etc. are charged in favour of the Bank in respect of projects ﬁnanced by the Bank, are reckoned as unsecured advances under Schedule 9 of the Balance Sheet in line with extant RBI guidelines. There are no such advances outstanding as on March 31, 2016 (previous year: Nil). (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:13)(cid:66)(cid:65)(cid:78)(cid:75)(cid:0)(cid:48)(cid:65)(cid:82)(cid:84)(cid:73)(cid:67)(cid:73)(cid:80)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:73)(cid:78)(cid:71) The aggregate amount of participation issued by the Bank and reduced from advances as per regulatory guidelines as of March 31, 2016 was ` 6,450.00 crore (previous year: ` 7,600.00 crore). (cid:115)(cid:0) (cid:35)(cid:79)(cid:78)(cid:67)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:68)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:83)(cid:12)(cid:0)(cid:65)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:12)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:46)(cid:48)(cid:33)(cid:83) a) Concentration of deposits (` crore) Particulars Total deposits of twenty largest depositors Percentage of deposits of twenty largest depositors to total deposits of the Bank March 31, 2016 March 31, 2015 28,890.12 28,137.41 5.3% 6.2% b) Concentration of advances (` crore) Particulars Total advances to twenty largest borrowers Percentage of advances of twenty largest borrowers to total advances of the Bank March 31, 2016 March 31, 2015 81,781.38 67,842.14 11.9% 12.5% Advances comprise credit exposure (funded and non-funded credit limits) including derivative transactions computed as per current exposure method in accordance with RBI guidelines. c) Concentration of exposure (` crore) Particulars March 31, 2016 March 31, 2015 Total exposure to twenty largest borrowers / customers 89,137.40 83,922.23 Percentage of exposure of twenty largest borrowers / customers to total exposure of the Bank on borrowers / customers 12.3% 14.3% Exposures comprise credit exposure (funded and non-funded credit limits) including derivative transactions and investment exposure in accordance with RBI guidelines. HDFC Bank Limited Annual Report 2015-16 108 Schedules to the Financial Statements For the year ended March 31, 2016 d) Concentration of NPAs (` crore) Particulars March 31, 2016 March 31, 2015 Total gross exposure to top four NPA accounts 497.16 348.83 e) Sector-wise advances (` crore) Sector Sr. No. A Priority sector March 31, 2016 March 31, 2015 Outstanding total advances Gross non- performing loans Outstanding total advances Gross non- performing loans Percentage of gross non- performing loans to total advances in that sector Percentage of gross non- performing loans to total advances in that sector 1 Agriculture and allied activities 52,867.24 764.18 1.45% 39,244.74 511.52 2 Advances to industries eligible as priority sector lending 24,059.96 386.90 1.61% 18,426.43 280.00 3 Services 44,202.22 431.43 0.98% 27,045.25 293.85 4 Personal loans 21,730.26 79.58 0.37% 22,182.38 77.54 Sub-total (A) 142,859.68 1,662.09 1.16% 106,898.80 1,162.91 B Non Priority sector 1 Agriculture and allied activities 7,303.08 85.77 1.17% 360.25 8.81 2 Industry 3 Services 98,854.02 793.83 0.80% 74,595.34 649.16 104,002.56 967.17 0.93% 92,033.54 923.78 4 Personal loans 114,560.04 788.74 0.69% 93,999.91 521.15 Sub-total (B) 324,719.70 2,635.51 0.81% 260,989.04 2,102.90 Total (A) + (B) 467,579.38 4,297.60 0.92% 367,887.84 3,265.81 1.30% 1.52% 1.09% 0.35% 1.09% 2.45% 0.87% 1.00% 0.55% 0.81% 0.89% 13 Other ﬁxed assets Other ﬁxed assets includes amount capitalised relating to software having useful life of ﬁve years. Details regarding the same (` crore) are tabulated below: Particulars Cost As at March 31 of the previous year Additions during the year Deductions during the year March 31, 2016 March 31, 2015 1,575.65 1,282.08 161.45 (0.01) 293.63 (0.06) Total (a) 1,737.09 1,575.65 HDFC Bank Limited Annual Report 2015-16 109 Schedules to the Financial Statements For the year ended March 31, 2016 Particulars Depreciation As at March 31 of the previous year Charge for the year On deductions during the year March 31, 2016 March 31, 2015 1,022.83 195.71 (0.01) 1,218.53 518.56 857.49 165.40 (0.06) 1,022.83 552.82 Total (b) Net value (a-b) 14 Other assets (cid:115)(cid:0) (cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:68)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:65)(cid:88)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:8)(cid:78)(cid:69)(cid:84)(cid:9)(cid:0)(cid:79)(cid:70)(cid:0)` 2,116.62 crore (previous year: ` 1,950.74 crore). The break-up of the (` crore) same is as follows: Particulars (cid:36)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:65)(cid:88)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:65)(cid:82)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:85)(cid:84)(cid:0)(cid:79)(cid:70)(cid:26) Loan loss provisions Employee beneﬁts Others (cid:36)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:65)(cid:88)(cid:0)(cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:65)(cid:82)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:85)(cid:84)(cid:0)(cid:79)(cid:70)(cid:26) Depreciation March 31, 2016 March 31, 2015 1,748.18 1,599.07 148.17 314.12 114.51 310.09 Total (a) 2,210.47 2,023.67 Total (b) (93.85) (93.85) (72.93) (72.93) Deferred tax asset (net) (a-b) 2,116.62 1,950.74 (cid:115)(cid:0) (cid:43)(cid:69)(cid:89)(cid:0)(cid:73)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:2)(cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:83)(cid:2)(cid:0)(cid:73)(cid:78)(cid:0)(cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:26)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0)(cid:0)(cid:0)(cid:0)(` crore) Particulars March 31, 2016 March 31, 2015 Deposit with NABARD / SIDBI / NHB - PSL shortfall 13,719.68 14,818.19 Unrealised gain on foreign exchange and derivative contracts* Deferred tax assets Deposits & amounts paid in advance Accounts receivable Margin for LAF with RBI Residual items 8,566.14 2,116.62 1,282.19 1,274.66 1,344.51 2.41 7,199.56 1,950.74 1,234.97 933.25 200.00 10.80 *The Bank has presented gross unrealised gain on foreign exchange and derivative contracts under other assets and gross unrealised loss on foreign exchange and derivative contracts under other liabilities. Total 28,306.21 26,347.51 HDFC Bank Limited Annual Report 2015-16 110 Schedules to the Financial Statements For the year ended March 31, 2016 l a t o T 5 r e v O s r a e y 5 o t s r a e y 3 o t r a e y o t s h t n o m o t s h t n o m 3 o t 2 o t 3 r e v O 1 r e v O 6 r e v O 3 r e v O s h t n o m 2 s y a d 1 3 s r a e y s r a e y r a e y 1 s h t n o m 6 * s h t n o m * s h t n o m 0 3 o t 5 1 * s y a d 4 1 o t 8 s y a d 7 o t 2 s y a d y a d 1 h c r a M t a s A 6 1 0 2 , 1 3 6 9 . 3 9 5 , 4 6 4 7 1 . 0 0 7 , 3 3 0 3 . 0 8 6 , 0 4 9 1 . 6 8 9 , 7 0 2 7 6 . 2 8 8 , 1 6 4 7 . 8 4 6 , 4 3 9 5 . 0 9 7 , 0 2 3 2 . 7 8 6 , 2 2 0 9 . 9 3 2 , 0 2 2 0 . 5 1 7 , 6 5 3 . 3 6 3 , 9 0 8 . 9 9 8 , 5 s e c n a v d a & s n a o L 7 7 . 5 8 8 , 3 6 1 9 7 . 6 6 5 , 6 2 3 4 . 5 1 5 , 3 3 8 . 9 4 2 , 5 4 7 1 . 3 7 9 , 3 1 3 9 . 5 1 5 , 1 1 2 0 . 9 9 7 , 8 5 0 . 7 7 6 , 3 1 4 8 . 0 1 0 , 2 1 7 1 . 9 0 9 , 6 8 7 . 1 5 3 , 7 6 7 . 6 1 3 , 4 1 s t n e m t s e v n I 9 1 . 4 2 4 , 6 4 5 2 6 . 4 9 1 , 7 9 1 5 . 1 6 3 , 2 1 6 7 . 0 9 8 , 2 2 2 3 1 . 0 4 2 , 8 7 1 8 . 1 0 3 , 9 3 1 0 . 8 6 8 , 7 1 5 0 . 7 4 9 , 8 1 8 3 . 3 7 8 , 2 1 8 5 . 2 0 5 , 4 1 8 5 . 0 1 4 , 4 2 6 7 . 3 3 8 , 7 s t i s o p e D 7 4 . 8 1 0 , 3 5 5 5 . 4 6 8 , 3 1 5 5 . 7 6 7 , 1 5 0 . 7 7 9 , 8 5 2 . 6 4 0 , 0 1 8 0 . 0 6 9 , 3 9 9 . 8 4 6 , 2 1 6 . 3 9 6 , 5 6 8 . 9 6 6 , 2 1 6 . 3 5 2 , 1 1 4 . 4 9 0 , 2 1 5 . 2 4 i s g n w o r r o B 4 1 . 5 1 0 , 4 5 0 6 . 3 0 6 5 1 . 6 2 3 , 1 1 2 . 1 7 5 , 5 1 0 . 9 2 8 , 5 1 5 0 . 5 7 2 , 5 0 7 . 8 8 1 , 3 1 8 . 9 0 3 , 4 1 4 . 6 2 3 , 6 0 0 . 6 0 0 , 2 2 5 . 5 6 9 , 5 8 6 . 3 1 6 , 3 5 4 . 9 6 1 , 5 7 4 1 . 9 1 7 8 4 . 0 9 2 , 1 4 2 . 8 1 4 , 4 1 2 9 . 3 9 2 , 5 3 3 3 . 4 5 5 , 6 7 6 . 7 2 1 , 3 9 1 . 4 3 3 , 6 6 2 . 0 2 6 , 3 8 3 . 3 5 5 , 1 1 2 . 9 2 4 , 1 3 6 . 8 2 8 y c n e r r u c i n g e r o F s t e s s a y c n e r r u c s e i t i l i b a i l i n g e r o F ) e r o r c ` ( l a t o T 5 r e v O s r a e y 5 o t s r a e y 3 o t r a e y o t s h t n o m o t s h t n o m 3 o t 3 r e v O 1 r e v O 6 r e v O 3 r e v O s y a d 9 2 s r a e y s r a e y s h t n o m 2 1 s h t n o m 6 s h t n o m 8 2 o t 5 1 s y a d 4 1 o t 8 s y a d 7 o t 2 s y a d y a d 1 h c r a M t a s A 5 1 0 2 , 1 3 3 0 . 5 9 4 , 5 6 3 2 2 . 2 9 4 , 8 2 1 4 . 7 4 2 , 8 2 1 3 . 2 1 5 , 3 7 1 0 9 . 3 1 0 , 8 3 6 6 . 3 7 8 , 6 2 2 2 . 3 2 3 , 8 3 7 0 . 2 7 1 , 1 1 7 8 . 6 1 3 , 6 8 7 . 8 7 7 , 7 9 5 . 4 6 7 , 6 s e c n a v d a & s n a o L 5 7 . 1 4 6 , 1 5 1 5 6 . 8 9 3 , 9 2 1 1 . 3 0 0 , 2 1 4 . 8 8 1 , 7 3 3 2 . 5 9 3 , 3 1 8 7 . 9 7 3 , 8 1 4 . 9 1 3 , 3 1 9 8 . 1 5 9 , 4 1 9 . 5 2 2 , 5 4 5 . 7 1 5 , 3 2 8 . 1 6 2 , 4 3 s t n e m t s e v n I 4 6 . 5 9 7 , 0 5 4 9 9 . 7 7 6 , 6 1 1 1 6 . 6 8 3 , 0 1 1 5 . 0 1 4 , 3 0 2 5 5 . 6 6 2 , 1 3 1 1 . 2 3 4 , 4 2 7 5 . 8 4 9 , 2 2 1 9 . 6 9 1 , 9 1 5 . 0 0 4 , 0 1 4 7 . 5 8 6 , 4 1 4 1 . 0 9 3 , 7 s t i s o p e D 6 5 . 3 1 2 , 5 4 0 0 . 7 5 9 , 1 1 0 0 . 5 7 8 , 2 6 8 . 1 6 4 , 4 1 5 1 . 8 8 1 , 2 9 4 . 1 1 9 , 1 5 9 . 2 2 2 , 7 1 8 . 8 7 2 , 1 6 8 . 5 4 4 , 1 9 3 . 2 7 8 , 1 5 0 . 0 i s g n w o r r o B . 6 1 0 2 , 3 2 h c r a M d e t a d e n i l e d u g i I B R e h t n o d e s a b d e s v e r i n e e b s a h e r u t c u r t s g n i t e k c u b e h T * 5 7 . 1 7 2 , 7 4 0 5 . 2 3 2 1 4 . 4 2 1 , 1 8 3 . 1 0 6 , 8 1 3 1 . 7 6 3 , 2 0 9 . 7 6 4 , 4 5 9 . 6 3 6 , 7 2 0 . 7 9 1 , 4 9 6 . 5 1 3 , 1 4 4 . 2 1 9 , 4 3 3 . 6 1 4 , 2 3 5 . 7 0 4 , 2 6 9 5 . 1 7 6 4 1 . 5 6 3 , 4 7 5 . 6 6 6 , 7 3 3 7 . 6 3 3 , 4 6 1 . 3 2 8 , 2 2 4 . 5 0 0 , 8 1 1 . 0 2 3 , 1 6 8 . 6 7 6 , 1 8 4 . 0 1 8 7 4 . 1 3 7 y c n e r r u c i n g e r o F s t e s s a y c n e r r u c s e i t i l i b a i l i n g e r o F ) e r o r c ` ( . I B R e h t y b d e u s s i s e n i l i e d u g e h t r e p s a s t e k c u b y t i r u t a m e h t n i i d e ﬁ s s a c l e r a s e i t i l i b a i l d n a s t e s s A s e i t i l i b a i l d n a s t e s s a y e k f o n r e t t a p y t i r u t a M 5 1 HDFC Bank Limited Annual Report 2015-16 111 e h t o t d e t t i m b u s n r u t e r e h t g n i l i p m o c r o f k n a B e h t y b d e s u s a s n o i t p m u s s a d n a s e t a m i t s e e m a s e h t n o d e s a b s i s t e k c u b y t i r u t a m t n e r e f f i d e h t r e d n u s e i t i l i b a i l d n a s t e s s a f o n o i t a c ﬁ s s a C l i . m e t i t e e h S e c n a a B l f f i O g n d u c x e l s i s e i t i l i b a i l d n a s t e s s a y c n e r r u c i n g e r o f f o l e ﬁ o r p y t i r u t a M . I B R Schedules to the Financial Statements For the year ended March 31, 2016 16 Provisions, contingent liabilities and contingent assets Given below is the movement in provisions and a brief description of the nature of contingent liabilities recognised by the Bank. a) Provision for credit card and debit card reward points (` crore) Particulars Opening provision for reward points Provision for reward points made during the year Utilisation / write-back of provision for reward points Closing provision for reward points b) Provision for legal and other contingencies Particulars Opening provision Movement during the year (net) Closing provision c) Description of contingent liabilities Sr. No. Contingent liability* Brief description March 31, 2016 March 31, 2015 200.07 179.50 (73.21) 306.36 150.91 112.92 (63.76) 200.07 (` crore) March 31, 2016 March 31, 2015 354.91 (10.35) 344.56 352.61 2.30 354.91 1 2 3 4 5 Claims against the Bank not acknowledged as debts - taxation The Bank is a party to various taxation matters in respect of which appeals are pending. The Bank expects the outcome of the appeals to be favorable based on decisions on similar issues in the previous years by the appellate authorities, based on the facts of the case and the provisions of Income Tax Act, 1961. Claims against the Bank not acknowledged as debts - others The Bank is a party to various legal proceedings in the normal course of business. The Bank does not expect the outcome of these proceedings to have a material adverse effect on the Bank’s ﬁnancial conditions, results of operations or cash ﬂows. Liability on account of forward exchange and derivative contracts The Bank enters into foreign exchange contracts, currency options, forward rate agreements, currency swaps and interest rate swaps with inter-bank participants 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 one currency against another, based on predetermined rates. Interest rate swaps are commitments to exchange ﬁxed and ﬂoating interest rate cash ﬂows. The notional amounts of ﬁnancial instruments such as foreign exchange contracts and derivatives provide a basis for comparison with instruments recognised on the Balance Sheet but do not necessarily indicate the amounts of future cash ﬂows involved or the current fair value of the instruments and, therefore, do not indicate the Bank’s exposure to credit or price risks. The derivative instruments become favorable (assets) or unfavorable (liabilities) as a result of ﬂuctuations in market rates or prices relative to their terms. Guarantees given on behalf of constituents, acceptances, endorsements and other obligations As a part of its commercial banking activities, the Bank issues documentary credit and guarantees on behalf of its customers. Documentary credits such as letters of credit enhance the credit standing of the Bank’s customers. Guarantees generally represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulﬁll its ﬁnancial or performance obligations. Other items for which the Bank is contingently liable These include: a) Credit enhancements in respect of securitised-out loans; b) Bills rediscounted by the Bank; c) Capital commitments; d) Underwriting commitments. *Also refer Schedule 12 - Contingent liabilities HDFC Bank Limited Annual Report 2015-16 112 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:17)(cid:23)(cid:0) (cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:83)(cid:0)(cid:15)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) Particulars March 31, 2016 March 31, 2015 Interest income as a percentage to working funds1 Net interest income as a percentage to working funds Non-interest income as a percentage to working funds Operating proﬁt2 as a percentage to working funds Return on assets (average) Business3 per employee (` in crore) Proﬁt per employee4 (` in crore) Gross non-performing assets to gross advances5 Gross non-performing advances to gross advances Percentage of net non-performing assets6 to net advances7 9.40% 4.31% 1.68% 3.34% 1.92% 11.39 0.15 0.94% 0.92% 0.28% 9.59% 4.43% 1.78% 3.44% 2.02% 10.10 0.10 0.93% 0.89% 0.25% Provision coverage ratio8 69.94% 73.93% Deﬁnitions of certain items in Business ratios / information: 1. Working funds is the daily average of total assets during the year. 2. Operating proﬁt is net proﬁt for the year before provisions and contingencies. 3. 4. “Business” is the total of net advances and deposits (net of inter-bank deposits). Productivity ratios are based on average employee numbers. 5. Gross advances are net of bills rediscounted and interest in suspense. 6. 7. Net NPAs are non-performing assets net of interest in suspense, speciﬁc provisions, ECGC claims received, provisions for funded interest term loans classiﬁed as NPAs and provisions in lieu of diminution in the fair value of restructured assets classiﬁed as NPAs. Net advances are equivalent to gross advances net of speciﬁc loan loss provisions, ECGC claims received, provision for funded interest term loans classiﬁed as NPA and provisions in lieu of diminution in the fair value of restructured assets. 8. Provision coverage ratio does not include assets written off. 18 Interest income Interest income under the sub-head Income from Investments includes dividend received during the year ended March 31, 2016 on units of mutual funds, equity and preference shares amounting to ` 182.03 crore (previous year: ` 192.58 crore). 19 Earnings from standard assets securitised-out There are no Special Purpose Vehicles (‘SPV’s) sponsored by the Bank for securitisation transactions. During the years ended March 31, 2016 and March 31, 2015, there were no standard assets securitised-out by the Bank. Form and quantum of services and liquidity provided by way of credit enhancement The Bank has provided credit and liquidity enhancements in the form of cash collaterals / guarantees / subordination of cash ﬂows etc., to the senior Pass Through Certiﬁcates (‘PTC’s) as well as on loan assignment transactions. The RBI issued addendum guidelines on securitisation of standard assets vide its circular dated May 7, 2012. Accordingly, the Bank does not provide liquidity or credit enhancements on the direct assignment transactions undertaken subsequent to these guidelines. The total value of credit enhancement outstanding in the books as at March 31, 2016 was ` 225.65 crore (previous year: ` 345.79 crore), and liquidity enhancement was Nil (previous year: ` 8.10 crore). Outstanding servicing liability was ` 0.10 crore (previous year: ` 0.14 crore). HDFC Bank Limited Annual Report 2015-16 113 Schedules to the Financial Statements For the year ended March 31, 2016 20 Other income (cid:115)(cid:0) (cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:69)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:66)(cid:82)(cid:79)(cid:75)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69) (cid:57) (cid:57) Commission, exchange and brokerage income is net of correspondent bank charges. Commission income for the year ended March 31, 2016 includes fees of ` 661.75 crore (previous year: ` 454.01 crore) in respect of life insurance business and ` 156.13 crore (previous year: ` 137.07 crore) in respect of general insurance business. (cid:115)(cid:0) (cid:45)(cid:73)(cid:83)(cid:67)(cid:69)(cid:76)(cid:76)(cid:65)(cid:78)(cid:69)(cid:79)(cid:85)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69) Miscellaneous income includes recoveries from written-off accounts amounting to ` 807.99 crore (previous year: ` 716.33 crore). 21 Other expenditure Other expenditure includes outsourcing fees amounting to ` 764.76 crore (previous year: ` 671.38 crore) and commission paid to sales agents amounting to ` 1,671.88 crore (previous year: ` 1,305.11 crore), exceeding 1% of the total income of the Bank. 22 Provisions and contingencies The break-up of provisions and contingencies included in the Statement of Proﬁt and Loss is given below: (` crore) Particulars Provision for income tax - Current - Deferred Provision for wealth tax Provision for NPAs Provision for diminution in value of non-performing investments Provision for standard assets Other provisions and contingencies* March 31, 2016 March 31, 2015 6,507.59 (165.88) - 2,133.63 15.17 440.00 136.81 5,204.03 (91.23) 0.75 1,723.58 (3.82) 296.25 59.00 *Includes provisions for tax, legal and other contingencies ` 37.28 crore (previous year: ` 36.47 crore), ﬂoating provisions ` 115.00 crore (previous year: Nil), provisions / (write-back) for securitised-out assets ` (2.85) crore (previous year: ` 4.60 crore) and standard restructured assets ` (12.62) crore (previous year: ` 17.93 crore). Total 9,067.32 7,188.56 23 Employee beneﬁts Gratuity Particulars Reconciliation of opening and closing balance of the present value of the deﬁned beneﬁt obligation Present value of obligation as at April 1 Interest cost Current service cost Beneﬁts paid Actuarial (gain) / loss on obligation: Experience adjustment Assumption change Present value of obligation as at March 31 (` crore) March 31, 2016 March 31, 2015 310.59 22.38 53.78 (24.30) 16.24 11.78 390.47 237.43 18.24 50.47 (15.99) 4.59 15.85 310.59 HDFC Bank Limited Annual Report 2015-16 114 Schedules to the Financial Statements For the year ended March 31, 2016 Particulars March 31, 2016 March 31, 2015 Reconciliation of opening and closing balance of the fair value of the plan assets Fair value of plan assets as at April 1 Expected return on plan assets Contributions Beneﬁts paid Actuarial gain / (loss) on plan assets: Experience adjustment Assumption change Fair value of plan assets as at March 31 Amount recognised in Balance Sheet Fair value of plan assets as at March 31 Present value of obligation as at March 31 (cid:33)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:15)(cid:0)(cid:8)(cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:9)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:0) Expenses recognised in Statement of Proﬁt and Loss Interest cost Current service cost Expected return on plan assets Net actuarial (gain) / loss recognised in the year Net cost Actual return on plan assets Estimated contribution for the next year Assumptions Discount rate Expected return on plan assets Salary escalation rate 242.88 21.23 61.81 (24.30) (13.69) - 287.93 287.93 (390.47) (102.54) 22.38 53.78 (21.23) 41.71 96.64 7.54 47.95 172.60 16.62 48.30 (15.99) 21.35 - 242.88 242.88 (310.59) (67.71) 18.24 50.47 (16.62) (0.91) 51.18 37.97 61.64 7.5% per annum 7.9% per annum 8.0% per annum 8.0% per annum 8.0% per annum 8.0% per annum (cid:37)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:68)(cid:74)(cid:85)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:8)` crore) Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Years ended March 31, 2016 2015 2014 2013 2012 287.93 390.47 242.88 310.59 172.60 237.43 130.22 206.28 (102.54) (67.71) (64.83) (76.06) 91.86 166.30 (74.44) (0.93) 1.25 Experience adjustment gain / (loss) on plan assets Experience adjustment (gain) / loss on plan liabilities (13.69) 16.24 21.35 4.59 1.87 5.87 2.00 2.72 HDFC Bank Limited Annual Report 2015-16 115 Schedules to the Financial Statements For the year ended March 31, 2016 Expected rate of return on investments is determined based on the assessment made by the Bank at the beginning of the year with regard to its existing portfolio. Major categories of plan assets as a percentage of fair value of total plan assets as of March 31, 2016 are given below: Category of plan assets Government securities Debenture and bonds Equity shares Others Pension Particulars % of fair value to total plan assets March 31, 2016 33.3% 23.1% 37.2% 6.4% 100.0% March 31, 2016 March 31, 2015 (` crore) Total Reconciliation of opening and closing balance of the present value of the deﬁned beneﬁt obligation Present value of obligation as at April 1 Interest cost Current service cost Beneﬁts paid Actuarial (gain) / loss on obligation: Experience adjustment Assumption change Present value of obligation as at March 31 Reconciliation of opening and closing balance of the fair value of the plan assets Fair value of plan assets as at April 1 Expected return on plan assets Contributions Beneﬁts paid Actuarial gain / (loss) on plan assets: Experience adjustment Assumption change Fair value of plan assets as at March 31 Amount recognised in Balance Sheet Fair value of plan assets as at March 31 Present value of obligation as at March 31 (cid:33)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:15)(cid:0)(cid:8)(cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:9)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:0) Expenses recognised in Statement of Proﬁt and Loss Interest cost Current service cost Expected return on plan assets Net actuarial (gain) / loss recognised in the year Net cost Actual return on plan assets Estimated contribution for the next year Assumptions Discount rate Expected return on plan assets Salary escalation rate 57.45 3.92 1.12 (10.18) 17.35 1.22 70.88 41.91 3.21 2.01 (10.18) 1.43 - 38.38 38.38 (70.88) (32.50) 3.92 1.12 (3.21) 17.14 18.97 4.64 14.00 58.89 4.37 1.02 (7.94) (0.19) 1.30 57.45 47.99 3.60 0.64 (7.94) (2.38) - 41.91 41.91 (57.45) (15.54) 4.37 1.02 (3.60) 3.48 5.27 1.22 15.70 7.5% per annum 7.9% per annum 8.0% per annum 8.0% per annum 8.0% per annum 8.0% per annum HDFC Bank Limited Annual Report 2015-16 116 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:0) (cid:37)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:68)(cid:74)(cid:85)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0)(cid:0)(cid:0)(cid:0)(cid:8)` crore) Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Experience adjustment gain / (loss) on plan assets Experience adjustment (gain) / loss on plan liabilities Years ended March 31, 2016 2015 2014 2013 2012 38.38 70.88 41.91 57.45 47.99 58.89 (32.50) (15.54) (10.90) 1.43 17.35 (2.38) (0.19) 3.45 3.62 48.88 58.19 (9.31) (1.58) 6.12 51.14 56.85 (5.71) (1.29) 1.36 Expected rate of return on investments is determined based on the assessment made by the Bank at the beginning of the year with regard to its existing portfolio. Major categories of plan assets as a percentage of fair value of total plan assets as of March 31, 2016 are given below: Category of plan assets Government securities Debenture and bonds Others Provident fund % of fair value to total plan assets March 31, 2016 6.6% 83.3% 10.1% 100.0% Total The guidance note on AS-15, Employee Beneﬁts, states that employer established provident funds, where interest is guaranteed are to be considered as deﬁned beneﬁt plans and the liability has to be valued. The Institute of Actuaries of India (IAI) has issued a guidance note on valuation of interest rate guarantees on exempt provident funds. The actuary has accordingly valued the same and the Bank held a provision of Nil as on March 31, 2016 (previous year: ` 0.52 crore), towards the present value of the guaranteed interest beneﬁt obligation. The actuary has followed deterministic approach as prescribed by the guidance note. Assumptions Assumptions Discount rate (GOI security yield) Expected guaranteed interest rate March 31, 2016 March 31, 2015 7.5% per annum 7.9% per annum 9.0% per annum 9.0% per annum The Bank does not have any unfunded deﬁned beneﬁt plan. The Bank contributed ` 188.94 crore (previous year: ` 160.02 crore) to the provident fund and ` 56.54 crore (previous year: ` 53.68 crore) to the superannuation plan. Compensated absences The actuarial liability of compensated absences of accumulated privileged and sick leaves of the employees of the Bank is (` crore) given below: Particulars Privileged leave Sick leave Total actuarial liability Assumptions Discount rate Salary escalation rate March 31, 2016 March 31, 2015 222.07 47.40 269.47 185.75 38.26 224.01 7.5% per annum 7.9% per annum 8.0% per annum 8.0% per annum HDFC Bank Limited Annual Report 2015-16 117 Schedules to the Financial Statements For the year ended March 31, 2016 24 Disclosures on remuneration (cid:49)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)Disclosures A. Information relating to the bodies that oversee remuneration Name and composition The Board of Directors of the Bank has constituted the Nomination and Remuneration Committee (hereinafter, the ‘NRC’) for overseeing and governing the compensation policies of the Bank. The NRC is comprised of four independent directors and is chaired by the Board of Directors of the Bank. Further, two members of the NRC are also members of the Risk Policy and Monitoring Committee (hereinafter, the ‘RPMC’) of the Board. The NRC is comprised of the Chairperson, Mrs. Shyamala Gopinath, Mr. A N Roy, Mr. Partho Datta and Mr. Bobby Parikh. Further, Mrs. Shyamala Gopinath and Mr. Partho Dutta are also members of the RPMC. Mr. Bobby Parikh is the chairperson of the NRC. Mandate of the NRC The primary mandate of the NRC is to oversee the implementation of compensation policies of the Bank. The NRC periodically reviews the overall compensation policy of the Bank with a view to attract, retain and motivate employees. In this capacity it is required to review and approve the design of the total compensation framework, including compensation strategy programs and plans, on behalf of the Board of Directors. The compensation structure and pay revision for Whole Time Directors is also approved by the NRC. The NRC co-ordinates with the RPMC to ensure that compensation is aligned with prudent risk taking. External Consultants (cid:0) (cid:0) (cid:0) The Bank employed the services of the following consulting ﬁrms in the area of compensation and beneﬁts and human resources. (cid:33)(cid:47)(cid:46)(cid:26) The Bank employed the services of AON in the area of compensation market benchmarking, and executive compensation. AON, apart from being a globally reputed consulting ﬁrm, has the longest running year on year banking study in India and was found to be the most appropriate by the NRC. (cid:37)(cid:82)(cid:78)(cid:83)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:57)(cid:79)(cid:85)(cid:78)(cid:71)(cid:26)(cid:0)The Bank employed the services of Ernst and Young to review the compensation policy of the Bank in light of the best in class practices in the banking industry. (cid:45)(cid:69)(cid:82)(cid:67)(cid:69)(cid:82)(cid:0) (cid:35)(cid:79)(cid:78)(cid:83)(cid:85)(cid:76)(cid:84)(cid:73)(cid:78)(cid:71)(cid:26) The Bank employed the services of Mercer Consulting in the area of job evaluation. Mercer’s International Position Evaluation system is a globally reputed job evaluation tool. (cid:51)(cid:67)(cid:79)(cid:80)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:7)(cid:83)(cid:0)(cid:50)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:48)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:26) The Remuneration Policy of the Bank includes within its scope all business lines, all permanent staff in its domestic as well as international ofﬁces. Further the principles articulated in the compensation policy are universal, however in the event there are any statutory provisions in overseas locations the same shall take precedence over the remuneration policy of the Bank. All permanent employees of the Bank except those covered under the long term wage agreement are covered by the said compensation policy. The number of employees covered under the compensation policy was 87,263 as of March 31, 2016 (previous year: 75,977). (cid:34)(cid:14)(cid:0) (cid:41)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:69)(cid:83)(cid:73)(cid:71)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:75)(cid:69)(cid:89)(cid:0)(cid:70)(cid:69)(cid:65)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0) of remuneration policy (cid:41)(cid:14)(cid:0) (cid:43)(cid:69)(cid:89)(cid:0)(cid:38)(cid:69)(cid:65)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:47)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:50)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:48)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89) HDFC Bank Limited Annual Report 2015-16 118 Schedules to the Financial Statements For the year ended March 31, 2016 The Bank’s Compensation Policy (the ‘Policy’) is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective of the Policy is to provide a fair and transparent structure that helps in acquiring and retaining the talent pool critical to build competitive advantage and brand equity. The Policy has been designed basis the principles for sound compensation practices in accordance with regulatory requirements and provides a framework to create, modify and maintain appropriate compensation programs and processes with adequate supervision and control. The Bank’s performance management system provides a sound basis for assessing employee performance holistically. The Bank’s compensation framework is aligned with the performance management system and differentiates pay appropriately amongst its employees based on degree of contribution, skill and availability of talent owing to competitive market forces by taking into account factors such as role, skills, competencies, experience and grade / seniority. The NRC reviews the following critical principles enunciated in the policy and ensures that: (a) the compensation is adjusted for all types of prudent risk taking; (b) compensation outcomes are symmetric with risk outcomes; (c) compensation payouts are sensitive to the time horizon of risk; and (d) the mix of cash, equity and other forms of compensation are aligned with risk. II. Design and Structure of Remuneration a) Fixed Pay The NRC ensures that the ﬁxed component of the compensation is reasonable, taking into account all relevant factors including industry practice. Elements of Fixed Pay The ﬁxed pay component of the Bank’s compensation structure typically consists of elements such as base salary, allowances, perquisites, retirement and other employee beneﬁts. Perquisites extended are in the nature of company car, hard furnishing, company leased accommodation, club membership and such other beneﬁts or allowances in lieu of such perquisites / beneﬁts. Retirement beneﬁts include contributions to provident fund, superannuation fund (for certain job bands) and gratuity. The Whole Time Directors of the Bank are entitled to other post-retirement beneﬁts such as car and medical facilities, in accordance with speciﬁed terms of employment as per the policy of the Bank, subject to RBI approval. The Bank also provides pension to certain employees of the erstwhile Lord Krishna Bank (eLKB) under the Indian Banks’ Association (‘IBA’) structure. Determinants of Fixed Pay The ﬁxed pay is primarily determined by taking into account factors such as the job size, performance, experience, location, market competitiveness of pay and is designed to meet the following key objectives of: (a) fair compensation given the role complexity and size; (b) fair compensation given the individual’s skill, competence, experience and market pay position; (c) sufﬁcient contribution to post retirement beneﬁts; and (d) compliance with all statutory obligations. HDFC Bank Limited Annual Report 2015-16 119 Schedules to the Financial Statements For the year ended March 31, 2016 For Whole Time Directors additional dimensions such as prominence of leadership among industry leaders, consistency of the Bank’s performance over the years on key parameters such as proﬁtability, growth and asset quality in relation to its own past performance and that of its peer banks would be considered. The quantum of ﬁxed pay for Whole Time Directors is approved by the NRC as well as the Board and is subject to the approval of the RBI. (cid:66)(cid:9)(cid:0) (cid:54)(cid:65)(cid:82)(cid:73)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:48)(cid:65)(cid:89) The performance management system forms the basis for variable pay allocation of the Bank. The Bank ensures that the performance management system is comprehensive and considers both, quantitative and qualitative performance measures. Whole Time Directors The bonus for Whole Time Directors will not exceed 70% of the ﬁxed pay in a year, thereby ensuring that there is a balance between the ﬁxed and variable pays. The variable pay for Whole Time Directors is approved by the NRC as well as the Board and is subject to the approval of the RBI. The variable pay component is paid out subject to the following conditions: (cid:115)(cid:0) (cid:55)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:86)(cid:65)(cid:82)(cid:73)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) (cid:80)(cid:65)(cid:89)(cid:0) (cid:67)(cid:79)(cid:78)(cid:83)(cid:84)(cid:73)(cid:84)(cid:85)(cid:84)(cid:69)(cid:83)(cid:0) (cid:21)(cid:16)(cid:5)(cid:0) (cid:79)(cid:82)(cid:0) (cid:77)(cid:79)(cid:82)(cid:69)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:108)(cid:88)(cid:69)(cid:68)(cid:0) (cid:80)(cid:65)(cid:89)(cid:12)(cid:0) (cid:65)(cid:0) (cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:83)(cid:65)(cid:77)(cid:69)(cid:0) (cid:87)(cid:79)(cid:85)(cid:76)(cid:68)(cid:0) (cid:66)(cid:69)(cid:0) deferred as per the schedule mentioned in the table below: (cid:48)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:54)(cid:65)(cid:82)(cid:73)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:48)(cid:65)(cid:89) Timelines 60% 13.33% 13.33% 13.33% Payable effective April 1 of the ﬁnancial year immediately following the performance year. Payable effective April 1 of the second ﬁnancial year following the reference performance year. Payable effective April 1 of the third ﬁnancial year following the reference performance year. Payable effective April 1 of the fourth ﬁnancial year following the reference performance year. (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0) (cid:68)(cid:69)(cid:86)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) (cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:0) (cid:77)(cid:65)(cid:76)(cid:85)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:67)(cid:76)(cid:65)(cid:87)(cid:0) (cid:66)(cid:65)(cid:67)(cid:75)(cid:0) (cid:67)(cid:76)(cid:65)(cid:85)(cid:83)(cid:69)(cid:83)(cid:0) (cid:65)(cid:83)(cid:0) (cid:65)(cid:0) (cid:82)(cid:73)(cid:83)(cid:75)(cid:0) (cid:77)(cid:73)(cid:84)(cid:73)(cid:71)(cid:65)(cid:78)(cid:84)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:65)(cid:78)(cid:89)(cid:0) (cid:78)(cid:69)(cid:71)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0) contributions of the Bank and / or relevant line of business in any year. Under the malus clause the incumbent foregoes the vesting of the deferred variable pay in full or in part. Under the claw back clause the incumbent is obligated to return all the tranches of payout received of bonus amounts pertaining to the relevant performance year. Employees other than Whole Time Directors The Bank has formulated the following variable pay plans: (cid:115)(cid:0) (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:0) The quantum of variable payout is a function of the performance of the Bank, performance of the business unit, performance of the individual employee, job band of the employee and the functional category. Basis these key determinants and due adjustment for risk alignment, a payout matrix for variable pay is developed. Market trends for speciﬁc businesses / functions along with inputs from compensation surveys may also be used in ﬁnalising the payout. Bonus pools are designed to meet speciﬁc business needs therefore resulting in differentiation in both the quantum and the method of payout across functions. Typically higher levels of responsibility receive a higher proportion of variable pay vis-à-vis ﬁxed pay. The Bank ensures that the time horizon for risk is assessed and the deferment period, if any, for bonus is set accordingly. Employees on the annual bonus plan are not part of performance-linked plans. The following is taken into account while administering the annual bonus: HDFC Bank Limited Annual Report 2015-16 120 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:57) (cid:57) In the event the proportion of variable pay to ﬁxed pay is substantially high (variable pay exceeding 50% of ﬁxed pay), the Bank may devise an appropriate deferment schedule after taking into consideration the nature of risk, time horizon of risk, and the materiality of risk. In cases of deferment of variable pay the Bank makes an assessment prior to the due date for payment of the deferred portion for any negative contribution. The criteria for negative contribution are decided basis pre-deﬁned ﬁnancial benchmarks. The Bank has in place appropriate methods for prevention of vesting of deferred variable pay or any part thereof, on account of negative contribution. The Bank also has in place claw back arrangements in relation to amounts already paid in the eventuality of a negative contribution. (cid:115)(cid:0) (cid:48)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:13)(cid:76)(cid:73)(cid:78)(cid:75)(cid:69)(cid:68)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:8)(cid:48)(cid:44)(cid:48)(cid:83)(cid:9)(cid:0) PLPs are formulated for sales personnel who are given sales targets but have limited impact on risk since credit decisions are exercised independent of the sales function. All PLP payouts are based on a balanced scorecard framework and are subject to achievement of individual targets enumerated in the respective scorecards of the employees. A portion of the PLP payouts is deferred till the end of the year to provide for any unforeseen performance risks. (cid:50)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:79)(cid:70)(cid:0)(cid:50)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:48)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:65)(cid:83)(cid:84)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:26) The Compensation Policy of the Bank was reviewed by the NRC. The Bank has appointed Ernst and Young a globally reputed consulting ﬁrm to assess the compensation policy of the Bank in light of best in class practices. The study is currently underway. c) Guaranteed Bonus Guaranteed Bonuses may not be consistent with sound risk management or pay for performance principles of the Bank and therefore do not form an integral part of the general compensation practice. For critical hiring for some select strategic roles, the Bank may consider granting of a sign-on bonus as a prudent way to avoid loading the entire cost of attraction into the ﬁxed component of the compensation which could have a long term cost implication for the Bank. For such hiring, the sign-on bonus is generally decided by taking into account appropriate risk factors and market conditions. For hiring at levels of Whole Time Directors / Managing Director a sign-on bonus, if any, is limited to the ﬁrst year only and is in the form of Employee Stock Options. d) Employee Stock Option Plan (‘ESOP’s) The Bank considers ESOPs as a vehicle to create a balance between short term rewards and long term sustainable value creation. ESOPs play a key role in the attraction and retention of key talent. The Bank grants equity share options to its Whole Time Directors and other employees above a certain grade. Options are also granted to employees in the talent pool across all levels. All plans for grant of options are framed in accordance with the SEBI guidelines, 1999 as amended from time to time and are approved by the shareholders of the Bank. These plans provide for the grant of options post approval by the NRC. The grant of options is reviewed and approved by the NRC. The number of options granted varies at the discretion of the NRC after considering parameters such as the incumbent’s grade and performance rating, and such other appropriate relevant factors as may be deemed appropriate by the NRC. Equity share options granted to the Whole Time Directors are subject to the approval of the NRC, the Board and the RBI. e) Severance Pay The Bank does not grant severance pay other than accrued beneﬁts (such as gratuity, pension) except in cases where it is mandated by any statute. HDFC Bank Limited Annual Report 2015-16 121 Schedules to the Financial Statements For the year ended March 31, 2016 f) Hedging The Bank does not provide any facility or fund or permit its Whole Time Directors and employees to insure or hedge their compensation structure to offset the risk alignment effects embedded in their compensation arrangement. III. Remuneration Processes Fitment at the time of Hire Pay ranges of the Bank are set basis the job size, experience, location and the academic and professional credentials of the incumbent. The compensation of new hires is in line with the existing pay ranges and consistent with the compensation levels of the existing employees of the Bank at similar proﬁles. The pay ranges are subject to change basis market trends and the Bank’s talent management priorities. While the Bank believes in the internal equity and parity as a key determinant of pay it does acknowledge the external competitive pressures of the talent market. Accordingly, there could be certain key proﬁles with critical competencies which may be hired at a premium and treated as an exception to the overall pay philosophy. Any deviation from the deﬁned pay ranges is treated as a hiring exception requiring approval with appropriate justiﬁcation. (cid:41)(cid:78)(cid:67)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:15)(cid:0)(cid:48)(cid:65)(cid:89)(cid:0)(cid:50)(cid:69)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78) It is the endeavor of the Bank to ensure external competitiveness as well as internal equity without diluting the overall focus on optimising cost. In order to enhance our external competitiveness the Bank participates in an annual salary survey of the banking sector to understand key market trends as well as get insights on relative market pay position compared to peers. The Bank endeavors to ensure that most employees progress to the median of the market in terms of ﬁxed pay over time. This coupled with key internal data indicators like performance score, job family, experience, job grade and salary budget form the basis of decision making on revisions in ﬁxed pay. Increments in ﬁxed pay for majority of the employee population are generally undertaken effective April 1 every year. However promotions, conﬁrmations and change in job dimensions could also lead to a change in the ﬁxed pay during other times of the year. The Bank also makes salary corrections and adjustments during the year for those employees whose compensation is found to be below the market pay and who have a good performance track record. However such pay revisions are done on an exception basis. Risk, Control and Compliance Staff The Bank has separated the Risk, Control and Compliance functions from the Business functions in order to create a strong culture of checks and balances thereby ensuring good asset quality and to eliminate any possible conﬂict of interest between revenue generation and risk management and control. Accordingly, the overall variable pay as well as the annual salary increment of the employees in the Risk, Control and Compliance functions is based on their performance, functional objectives and goals. The Bank ensures that the mix of ﬁxed to variable compensation for these functions is weighted in favour of ﬁxed compensation. C. Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks An overview of the key risks that the Bank takes into account when implementing remuneration measures. The Bank takes into account all types of risks in its remuneration processes. The Bank takes into consideration the fact that a portion of the Bank’s proﬁts are directly attributable to various types of risks the Bank is exposed to, such as credit risk, market risk, operational risk and other quantiﬁable risks. The Bank uses the capital charge on these risks as a key measure to HDFC Bank Limited Annual Report 2015-16 122 Schedules to the Financial Statements For the year ended March 31, 2016 evaluate the quantum of risk. The Bank takes into consideration the surplus available post adjustment of the cost of capital to cover all such risks and pre bonus proﬁt as the basis for allocation of variable pay. Further the Bank also evaluates the impact of such remuneration on the overall cost to income ratio of the Bank. The Bank takes into consideration both Ex-Ante as well as Ex-Post risks. The above mentioned risks are Ex-Ante in their approach. The Bank also provides for deferment of bonus in the event the proportion of variable pay as compared to ﬁxed pay is substantially high. The Bank has also devised appropriate malus and claw back clauses as a risk mitigant for any negative contributions of the Bank and / or relevant line of business in any year. Under the malus clause, the incumbent foregoes the vesting of the deferred variable pay in full or in part. Under the claw back clause, the incumbent is obligated to return all the tranches of payout received of bonus amounts pertaining to the relevant performance year. This is an Ex-Post risk management provision. The Bank also takes into consideration key steps to mitigate talent risk. The key measures here include attrition rate of employees as well as key talent. In order to moderate talent risk the Bank conducts a comprehensive market benchmarking exercise to ensure that employees are competitively positioned against market in terms of ﬁxed, variable as well as long term incentives (LTI). The risk measures and the models for assessing risk were introduced for the ﬁrst time in ﬁnancial year ended March 31, 2013. Post the introduction of the risk models the adjustment of risk for remuneration has become fundamentally more comprehensive and robust in coverage both from an Ex-Ante as well as an Ex-Post approach. There have not been any changes to the Bank’s risk adjustment model over the past year. D. Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration The Bank has a very comprehensive multi-dimensional performance measurement metrics that takes into consideration multiple factors that include qualitative as well as quantitative factors. The following are the key performance measurement metrics for the Bank. These also form part of the key metrics for the measurement of the performance of Whole Time Directors and impact the ﬁnal remuneration: A. Business Growth - This includes growth in advances and deposits; B. Proﬁtability - This includes growth in proﬁt after tax; C. Asset Quality - Gross NPA, Net NPA and % of Restructured assets to net advances; D. Financial Soundness - Capital Adequacy Ratio Position and Tier I capital; E. Shareholder value creation - Return on equity; and F. Financial Inclusion - Growth in number of households covered, growth in the value of loans disbursed under this category and achievement against priority sector lending targets. Most of the above parameters are evaluated in two steps: A. Achievement against the plans of the Bank; and B. Achievement against the performance of peers. Apart from the factors related to business growth there is also a key qualitative factor such as regulatory compliance. Compliance is the key qualitative factor that acts as the moderator in the entire organisation evaluation process. A low score on compliance can signiﬁcantly moderate the other performance measures and depending on severity may even nullify their impact. While the above parameters form the core evaluation parameters for the Bank each of the business units are measured on the following from a remuneration standpoint: HDFC Bank Limited Annual Report 2015-16 123 Schedules to the Financial Statements For the year ended March 31, 2016 A. Increase in plan over the previous year; B. Actual growth in revenue over previous year; C. Growth in net revenue (%); D. Achievement of net revenue against plan (%); E. Actual proﬁt before tax; F. Growth in proﬁt before tax compared to the previous year; G. Current cost to income; and H. Improvement in cost to income over the previous year. Apart from the above the business units are also measured against certain key business objectives that are qualitative in nature. The process by which levels of remuneration in the Bank are aligned to the performance of the Bank, business unit and individual employees is articulated below. Fixed Pay At the conclusion of every ﬁnancial year the Bank reviews the ﬁxed pay portion of the compensation structure basis merit-based increments and market corrections. These are based on a combination of performance rating, job band and the functional category of the individual employee. For a given job band, the merit increment is directly related to the performance rating. The Bank strives to ensure that most employees progress to the median of the market in terms of ﬁxed pay over time. All other things remaining equal, the correction percentage is directly related to the performance rating of the individual. Variable Pay Basis the performance of the business unit, individual performance and role, the Bank has formulated the following variable pay plans: (cid:115)(cid:0) (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:34)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78) The Bank’s annual bonus is computed as a percentage of the gross salary for every job band. The bonus multiple is based on performance of the business unit (based on the parameters above), performance rating, job band and the functional category of the individual employee. The business performance re-categorised into different performance levels. The performance level determines the multiplier for the bonus. All other things remaining equal, for a given job band, the bonus is directly related to the performance rating. The proportion of variable pay to ﬁxed pay increases with job band. Employees on the annual bonus plan are not part of the PLPs. (cid:115)(cid:0) (cid:48)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:13)(cid:76)(cid:73)(cid:78)(cid:75)(cid:69)(cid:68)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:8)(cid:48)(cid:44)(cid:48)(cid:83)(cid:9) The Bank has formulated PLPs for its sales personnel who are given sales targets basis a balanced scorecard methodology. All PLP payouts are subject to the achievement of individual targets enumerated in the respective scorecards of the employees and moderated by qualitative parameters. A portion of the PLP payouts is deferred till the end of the year to provide for any unforeseen performance risks. (cid:37)(cid:14)(cid:0) (cid:36)(cid:69)(cid:83)(cid:67)(cid:82)(cid:73)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:87)(cid:65)(cid:89)(cid:83)(cid:0) (cid:73)(cid:78)(cid:0) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:83)(cid:69)(cid:69)(cid:75)(cid:83)(cid:0) (cid:84)(cid:79)(cid:0) (cid:65)(cid:68)(cid:74)(cid:85)(cid:83)(cid:84)(cid:0) (cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:84)(cid:79)(cid:0) (cid:84)(cid:65)(cid:75)(cid:69)(cid:0) (cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:76)(cid:79)(cid:78)(cid:71)(cid:69)(cid:82)(cid:0) (cid:84)(cid:69)(cid:82)(cid:77)(cid:0) performance A discussion of the Bank’s policy on deferral and vesting of variable remuneration and a discussion of the Bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting HDFC Bank Limited Annual Report 2015-16 124 Schedules to the Financial Statements For the year ended March 31, 2016 Whole Time Directors The bonus for Whole Time Directors will not exceed 70% of the ﬁxed pay in a year, thereby ensuring that there is a balance between the ﬁxed and variable pay. The variable pay for Whole Time Directors is approved by the NRC as well as the Board and is subject to the approval of the RBI. The variable pay component is paid out subject to the following conditions: (cid:115)(cid:0) (cid:55)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:80)(cid:65)(cid:89)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:84)(cid:73)(cid:84)(cid:85)(cid:84)(cid:69)(cid:83)(cid:0)(cid:21)(cid:16)(cid:5)(cid:0)(cid:79)(cid:82)(cid:0)(cid:77)(cid:79)(cid:82)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:88)(cid:69)(cid:68)(cid:0)(cid:80)(cid:65)(cid:89)(cid:12)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:0)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:79)(cid:70)(cid:0)(cid:73)(cid:83)(cid:0)(cid:68)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) vests as per the schedule mentioned in the table below: (cid:48)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:54)(cid:65)(cid:82)(cid:73)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:48)(cid:65)(cid:89) Timelines 60% Payable effective April 1 of the ﬁnancial year immediately following the performance year. 13.33% 13.33% 13.33% Payable effective April 1 of the second ﬁnancial year following the reference performance year. Payable effective April 1 of the third ﬁnancial year following the reference performance year. Payable effective April 1 of the fourth ﬁnancial year following the reference performance year. (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:68)(cid:69)(cid:86)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:0)(cid:77)(cid:65)(cid:76)(cid:85)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:67)(cid:76)(cid:65)(cid:87)(cid:0)(cid:66)(cid:65)(cid:67)(cid:75)(cid:0)(cid:67)(cid:76)(cid:65)(cid:85)(cid:83)(cid:69)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:77)(cid:73)(cid:84)(cid:73)(cid:71)(cid:65)(cid:78)(cid:84)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:78)(cid:69)(cid:71)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0) the Bank and / or relevant line of business in any year. (cid:57) Malus clause Under the malus clause the incumbent foregoes the vesting of the deferred variable pay in full or in part. In the event there is a deterioration in speciﬁc performance criteria (such as criteria relating to proﬁt or asset quality) that are laid down by the NRC, then the NRC would review the deterioration in the performance taking into consideration the macroeconomic environment as well as internal performance indicators and accordingly decide whether any part of the deferred tranche pertaining to that ﬁnancial year merits a withdrawal. (cid:57) Claw back clause Under the claw back clause the incumbent is obligated to return all the tranches of payout received of bonus amounts pertaining to the relevant performance year. In the event there is any act attributable to the concerned Whole Time Director / Managing Director resulting in an incident of willful and deliberate misinterpretation / misreporting of ﬁnancial performance (inﬂating the ﬁnancials) of the Bank, for a ﬁnancial year, which comes to light in the subsequent three years, the incumbent is obligated to return all the tranches of payout received of bonus amounts pertaining to the relevant performance year. The speciﬁc criteria on the applicability of malus and claw back arrangements are reviewed by the NRC annually. Employees other than Whole Time Directors The Bank has formulated the following variable pay plans: (cid:115)(cid:0) (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:0) The quantum of variable payout is a function of the performance of the Bank, performance of the individual employee, job band of the employee and the functional category. Basis these key determinants and due adjustment for risk alignment, a payout matrix for variable pay is developed. Market trends for speciﬁc businesses / functions along with inputs from compensation surveys may also be used in ﬁnalising the payout. HDFC Bank Limited Annual Report 2015-16 125 Schedules to the Financial Statements For the year ended March 31, 2016 Bonus pools are designed to meet speciﬁc business needs therefore resulting in differentiation in both the quantum and the method of payout across functions. Typically higher levels of responsibility receive a higher proportion of variable pay vis-à-vis ﬁxed pay. The Bank ensures that the time horizon for risk is assessed and the deferment period, if any, for bonus is set accordingly. Employees on the annual bonus plan are not part of the PLPs. The following is taken into account while administering the annual bonus: (cid:57) (cid:57) In the event the proportion of variable pay to ﬁxed pay is substantially high (typically variable pay exceeding 50% of ﬁxed pay), the Bank may devise an appropriate deferment schedule after taking into consideration the nature of risk, time horizon of risk, and the materiality of risk. In cases of deferment of variable pay the Bank makes an assessment prior to the due date for payment of the deferred portion for any negative contribution. The criteria for negative contribution are decided basis pre-deﬁned ﬁnancial benchmarks. The Bank has in place appropriate methods for prevention of vesting of deferred variable pay or any part thereof, on account of negative contribution. The Bank also has in place claw back arrangements in relation to amounts already paid in the eventuality of a negative contribution. (cid:115)(cid:0) (cid:48)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:13)(cid:76)(cid:73)(cid:78)(cid:75)(cid:69)(cid:68)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:8)(cid:48)(cid:44)(cid:48)(cid:83)(cid:9) PLPs are formulated for sales personnel who are given sales targets but have limited impact on risk since credit decisions are exercised independent of the sales function. All PLP payouts are subject to the achievement of individual targets enumerated in the respective scorecards of the employees. A portion of the PLP payouts is deferred till the end of the year to provide for any unforeseen performance risks. F. Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the Bank utilises and the rationale for using these different forms The Bank recognises the importance of variable pay in reinforcing a pay for performance culture. Variable pay stimulates employees to stretch their abilities to exceed expectations. (cid:115)(cid:0) (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78) These are paid to reward performance for a given ﬁnancial year. This covers all employees and excludes employees receiving PLP payouts. This is based on performance of the business unit, performance rating, job band and functional category of the individual. For higher job bands the proportion of variable pay to total compensation tends to be higher. (cid:115)(cid:0) (cid:48)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:13)(cid:76)(cid:73)(cid:78)(cid:75)(cid:69)(cid:68)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:8)(cid:48)(cid:44)(cid:48)(cid:83)(cid:9) These are paid to frontline sales staff for the achievement of speciﬁc sales targets but have limited impact on risk as credit decisions are exercised independent of the sales function. Further, it has been the endeavor of the Bank to ensure that the objectives set are based on the principles of a balanced scorecard that takes into account quantitative and qualitative measures rather than just the achievement of ﬁnancial numbers. Further all PLPs have inherent risk adjustment mechanisms manifested in the form of deterrents. All PLP payouts are subject to the achievement of parameters, both qualitative and quantitative enumerated in the respective scorecards of the employees. A portion of the PLP payouts is deferred till the end of the year to provide for any unforeseen performance risks. (cid:115)(cid:0) (cid:37)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78) This is to reward for contribution of employees in creating a long term, sustainable earnings and enhancing shareholder value. Only employees in a certain job band and with a speciﬁc performance rating are eligible for stock options. Performance is the key criteria for granting stock options. HDFC Bank Limited Annual Report 2015-16 126 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:49)(cid:85)(cid:65)(cid:78)(cid:84)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83) The quantitative disclosures cover the Bank’s Whole Time Directors and Key Risk Takers. Key Risk Takers are individuals who can materially set, commit or control signiﬁcant amounts of the Bank’s resources, and / or exert signiﬁcant inﬂuence over its risk proﬁle. The Bank’s Key Risk Takers include Whole Time Directors, Group Heads, Business Heads directly reporting to the Managing Director and select roles in the Bank’s Treasury and Investment Banking functions. Sr. No. (a) (cid:51)(cid:85)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84) March 31, 2016 March 31, 2015 Number of meetings held by the NRC during the ﬁnancial year and remuneration paid to its members Number of meetings: 9 Number of meetings: 5 Remuneration paid: ` 0.17 crore Remuneration paid: ` 0.04 crore (b) (i) Number of employees having received a variable remuneration award during the ﬁnancial year 30 employees 23 employees (b) (ii) Number and total amount of sign-on None awards made during the ﬁnancial year (b) (iii) Number and total amount of guaranteed bonuses awarded during the ﬁnancial year None (b) (iv) Details of severance pay, in addition to None accrued beneﬁts, if any None None None (c) (i) Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms Total amount of outstanding deferred remuneration (cash bonus) was ` 3.13 crore. Total amount of outstanding deferred remuneration (cash bonus) was ` 1.81 crore. (c) (ii) Total amount of deferred remuneration ` 1.20 crore ` 1.20 crore paid out in the ﬁnancial year (d) Breakdown of amount of remuneration awards for the ﬁnancial year to show ﬁxed and variable, deferred and non-deferred (e) (i) Total amount of outstanding deferred remuneration and retained remuneration exposed to ex-post explicit and / or implicit adjustments ` 46.04 crore (Fixed*) ` 34.58 crore (Fixed*) ` 9.75 crore (variable pay pertaining to ﬁnancial year ended March 31, 2015, in relation to employees where there was no deferment of pay). ` 10.48 crore (variable pay pertaining to ﬁnancial year ended March 31, 2014, in relation to employees where there was no deferment of pay). ` 6.32 crore (variable pay pertaining to ﬁnancial year ended March 31, 2015, in relation to employees where there was a deferment of pay), of which ` 3.79 crore was non-deferred variable pay and ` 2.53 crore was deferred variable pay. Deferred variable pay pertaining to ﬁnancial year ended March 31, 2014: Nil Number of stock options granted during the ﬁnancial year: 40,86,600 Number of stock options granted during the ﬁnancial year: 30,42,000 Total amount of outstanding deferred remuneration (cash bonus) was ` 3.13 crore. Total amount of outstanding deferred remuneration (cash bonus) was ` 1.81 crore. (e) (ii) Total amount of reductions during the ﬁnancial year due to ex-post explicit adjustments (e) (iii) Total amount of reductions during the ﬁnancial year due to ex-post implicit adjustments Nil Nil Nil Nil * Excludes gratuity beneﬁts, since the same is computed at Bank level. HDFC Bank Limited Annual Report 2015-16 127 Schedules to the Financial Statements For the year ended March 31, 2016 25 Segment reporting Business segments Business segments have been identiﬁed and reported taking into account, the target customer proﬁle, the nature of products and services, the differing risks and returns, the organisation structure, the internal business reporting system and the guidelines prescribed by RBI. The Bank operates in the following segments: a) Treasury The treasury segment primarily consists of net interest earnings from the Bank’s investment portfolio, money market borrowing and lending, gains or losses on investment operations and on account of trading in foreign exchange and derivative contracts. b) Retail banking The retail banking segment serves retail customers through a branch network and other delivery channels. This segment raises deposits from customers and provides loans and other services to customers with the help of specialist product groups. Exposures are classiﬁed under retail banking taking into account the status of the borrower (orientation criterion), the nature of product, granularity of the exposure and the quantum thereof. Revenues of the retail banking segment are derived from interest earned on retail loans, interest earned from other segments for surplus funds placed with those segments, subvention received from dealers and manufacturers, fees from services rendered, foreign exchange earnings on retail products etc. Expenses of this segment primarily comprise interest expense on deposits, commission paid to retail assets sales agents, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses of specialist product groups, processing units and support groups. c) Wholesale banking The wholesale banking segment provides loans, non-fund facilities and transaction services to large corporates, emerging corporates, public sector units, government bodies, ﬁnancial institutions and medium scale enterprises. Revenues of the wholesale banking segment consist of interest earned on loans made to customers, interest / fees earned on the cash ﬂoat arising from transaction services, earnings from trade services and other non-fund facilities and also earnings from foreign exchange and derivative transactions on behalf of customers. 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 of delivery channels, specialist product groups, processing units and support groups. d) Other banking business This segment includes income from para banking activities such as credit cards, debit cards, third party product distribution, primary dealership business and the associated costs. e) Unallocated All items which are reckoned at an enterprise level are classiﬁed under this segment. This includes capital and reserves, debt classiﬁed as Tier I or Tier II capital and other unallocable assets and liabilities such as deferred tax, prepaid expenses, etc. Segment revenue includes earnings from external customers plus earnings from funds transferred to other segments. Segment result includes revenue less interest expense less operating expense and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Interest income is charged by a segment that provides funding to another segment, based on yields benchmarked to an internally approved yield curve or at a certain agreed transfer price rate. Transaction charges are levied by the retail banking segment to the wholesale banking segment for the use by its customers of the retail banking segment’s branch network or other delivery channels. Such transaction costs are determined on a cost plus basis. Segment capital employed represents the net assets in that segment. HDFC Bank Limited Annual Report 2015-16 128 Schedules to the Financial Statements For the year ended March 31, 2016 Geographic segments The geographic segments of the Bank are categorised as domestic operations and foreign operations. Domestic operations comprise branches in India and foreign operations comprise branches outside India. Segment reporting for the year ended March 31, 2016 is given below: (cid:0) (cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26)(cid:0) Particulars Sr. No. 1 2 3 4 5 6 7 8 9 Segment revenue Unallocated revenue Less: Inter-segment revenue Income from operations (1) + (2) - (3) Segment results Unallocated expenses Income tax expense (including deferred tax) Net proﬁt (5) - (6) - (7) Segment assets 10 Unallocated assets 11 12 Total assets (9) + (10) Segment liabilities 13 Unallocated liabilities 14 Total liabilities (12) + (13) Treasury Retail banking Wholesale banking Other banking operations (cid:8)` crore) Total 18,264.88 59,252.34 27,162.39 7,554.42 112,234.03 - 41,260.86 70,973.17 1,489.21 7,522.30 8,219.93 2,832.27 20,063.71 1,425.77 6,341.71 12,296.23 203,381.47 252,690.65 226,242.65 21,633.06 703,947.83 4,897.74 708,845.57 45,389.87 448,313.40 120,425.52 2,476.31 616,605.10 19,562.70 636,167.80 15 Capital employed (9) - (12) 157,991.60 (195,622.75) 105,817.13 19,156.75 87,342.73 (Segment assets - Segment liabilities) 16 17 18 19 Unallocated (10) - (13) Total (15) + (16) Capital expenditure Depreciation 5.09 6.16 729.46 540.47 134.59 101.67 69.70 57.54 (cid:0) (cid:39)(cid:69)(cid:79)(cid:71)(cid:82)(cid:65)(cid:80)(cid:72)(cid:73)(cid:67)(cid:0)(cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (14,664.96) 72,677.77 938.84 705.84 (cid:8)` crore) Particulars Revenue Assets Capital expenditure Domestic International 69,816.77 1,156.40 672,888.69 35,956.88 937.95 0.89 HDFC Bank Limited Annual Report 2015-16 129 Schedules to the Financial Statements For the year ended March 31, 2016 Segment reporting for the year ended March 31, 2015 is given below: (cid:0) (cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26)(cid:0) (cid:0) (cid:8)` crore) Total Particulars Sr. No. 1 Segment revenue 2 Unallocated revenue 3 4 Less: Inter-segment revenue Income from operations (1) + (2) - (3) 5 Segment results 6 Unallocated expenses 7 Income tax expense (including deferred tax) 8 Net proﬁt (5) - (6) - (7) 9 Segment assets 10 Unallocated assets 11 Total assets (9) + (10) 12 Segment liabilities 13 Unallocated liabilities 14 Total liabilities (12) + (13) Treasury Retail banking Wholesale banking Other banking operations 12,903.89 48,814.18 23,152.60 6,201.02 91,071.69 8.62 33,614.06 57,466.25 618.30 6,228.83 7,471.83 2,486.89 16,805.85 1,477.13 5,112.80 10,215.92 190,609.16 197,144.15 181,325.74 16,995.47 586,074.52 4,428.56 590,503.08 36,352.78 371,355.13 98,250.45 1,537.93 507,496.29 20,997.36 528,493.65 15 Capital employed (9) - (12) 154,256.38 (174,210.98) 83,075.29 15,457.54 78,578.23 (Segment assets - Segment liabilities) 16 Unallocated (10) - (13) 17 Total (15) + (16) 18 Capital expenditure 19 Depreciation (cid:0) (cid:39)(cid:69)(cid:79)(cid:71)(cid:82)(cid:65)(cid:80)(cid:72)(cid:73)(cid:67)(cid:0)(cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26)(cid:0) Particulars Revenue Assets Capital expenditure 6.02 5.91 587.72 214.09 521.71 79.44 52.26 49.24 (16,568.80) 62,009.43 860.09 656.30 (cid:8)` crore) Domestic International 56,493.08 973.17 558,753.03 31,750.05 857.85 2.24 HDFC Bank Limited Annual Report 2015-16 130 Schedules to the Financial Statements For the year ended March 31, 2016 ) e r o r c ` ( : w o e b l n e v g s i i ) R C L ( o i t a R e g a r e v o C y t i d u q L i i o i t a r e g a r e v o c i y t i d u q L i n o n o i t a m r o f n i e v i t a t i t n a u Q (cid:0) (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 5 1 0 2 , 1 3 h c r a M (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 5 1 0 2 , 0 3 e n u J (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 5 1 0 2 , 0 3 r e b m e t p e S (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 5 1 0 2 , 1 3 r e b m e c e D (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 6 1 0 2 , 1 3 h c r a M * * * * * ) e g a r e v a ( * * * * * ) e g a r e v a ( * * * * ) e g a r e v a ( * * * * ) e g a r e v a ( * * * ) e g a r e v a ( * * * ) e g a r e v a ( * * ) e g a r e v a ( * * ) e g a r e v a ( * ) e g a r e v a ( * ) e g a r e v a ( l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v d e t h g i e w d e t h g i e w n u d e t h g i e w d e t h g i e w n u d e t h g i e w d e t h g i e w n u d e t h g i e w d e t h g i e w n u d e t h g i e w d e t h g i e w n u s r a u c l i t r a P (cid:0) (cid:83) (cid:84) (cid:69) (cid:83) (cid:83) (cid:33) (cid:68) (cid:85) (cid:81) (cid:44) (cid:89) (cid:84) (cid:73) (cid:76) (cid:0) (cid:73) (cid:73) (cid:0) (cid:65) (cid:85) (cid:49) (cid:72) (cid:71) (cid:40) (cid:73) h g H i l t a o T 1 3 2 . 1 3 9 , 1 7 2 0 . 3 0 1 , 4 8 5 0 . 0 8 3 , 5 8 8 5 . 3 2 9 , 2 8 0 7 . 0 9 3 , 7 8 5 3 . 1 0 2 , 7 2 9 7 . 2 3 5 , 8 9 2 3 0 . 5 0 6 , 7 2 6 2 . 1 7 3 , 3 0 3 6 2 . 1 5 8 , 9 2 0 8 . 3 6 0 , 7 2 3 5 1 . 6 3 7 , 0 3 5 1 . 1 8 5 , 6 3 3 1 7 . 1 2 5 , 1 3 1 4 . 5 9 2 , 5 4 3 2 9 . 1 5 6 , 2 7 4 . 8 3 0 , 3 5 9 0 . 2 3 7 , 2 5 8 . 1 4 6 , 4 5 1 1 . 5 5 8 , 2 7 2 . 2 0 1 , 7 5 6 9 . 1 2 9 , 2 6 2 . 9 3 4 , 8 5 3 8 . 7 0 0 , 3 5 6 . 6 5 1 , 0 6 3 4 . 9 4 5 , 4 2 2 3 . 4 9 4 , 5 4 2 4 9 . 2 7 8 , 4 2 1 4 . 9 2 7 , 8 4 2 5 1 . 6 9 9 , 6 2 3 5 . 1 6 9 , 9 6 2 9 1 . 4 1 8 , 7 2 9 8 . 1 4 1 , 8 7 2 8 8 . 3 1 5 , 8 2 6 7 . 8 3 1 , 5 8 2 6 3 . 5 1 1 , 2 4 0 9 . 0 9 4 , 0 2 1 8 0 . 9 3 6 , 7 6 8 8 . 4 3 3 , 2 3 1 6 2 . 3 5 1 , 6 7 5 4 . 1 7 9 , 3 4 1 9 7 . 4 4 1 , 8 7 3 2 . 1 6 7 , 0 5 1 9 7 . 0 1 3 , 7 7 6 4 . 6 4 3 , 2 5 1 3 2 . 2 6 4 , 3 2 0 7 . 7 5 6 , 4 9 1 2 . 5 4 3 , 5 2 7 . 6 4 6 , 1 2 5 4 . 7 6 0 , 5 9 3 . 0 6 4 , 0 2 8 8 . 0 6 2 , 5 2 0 . 5 1 3 , 1 2 6 1 . 0 1 3 , 6 0 5 . 3 1 5 , 5 2 8 8 . 6 1 0 , 4 1 5 9 . 6 9 1 , 1 2 8 3 . 4 3 2 , 7 5 7 6 . 8 2 6 , 5 0 1 4 6 . 3 9 0 , 5 6 9 8 . 8 1 5 , 7 1 1 2 8 . 0 1 4 , 4 6 2 1 . 3 7 9 , 0 2 1 8 2 . 0 9 5 , 4 6 1 6 . 2 2 4 , 0 2 1 - - - - - 5 2 . 6 3 6 , 4 5 2 . 6 3 6 , 4 9 4 . 9 5 0 , 5 9 4 . 9 5 0 , 5 7 1 . 2 9 9 , 5 7 1 . 2 9 9 , 5 9 0 . 3 7 4 , 8 9 0 . 3 7 4 , 8 5 3 . 0 1 4 , 6 5 3 . 0 1 4 , 6 i d u q L i y t i l a u Q ) A L Q H ( s t e s s A s t i s o p e d l i a t e R 2 s w o ﬂ t u O h s a C s t i s o p e d d n a l l a m s m o r f s s e n s u b i f o , s r e m o t s u c : i h c h w s t i s o p e d e b a S t l ) i ( s t i s o p e d l e b a t s s s e L ) i i ( d e r u c e s n U 3 f o , i g n d n u f : i h c h w ) s e i t r a p r e n u o c t l l a ( s t i s o p e d l a n o i t a r e p o ) s e i t r a p r e n u o c t l l a ( s t i s o p e d l a n o i t a r e p O ) i ( - n o N ) i i ( d e r u c e s n U ) i i i ( t b e d d e r u c e S 4 l e a s e o h w l l e a s e o h w l 3 0 . 0 6 2 , 0 6 1 2 9 . 4 2 1 , 8 0 2 6 2 . 5 5 4 , 9 2 1 2 7 . 5 3 4 , 5 8 1 1 1 . 1 7 6 , 1 1 1 6 9 . 5 3 8 , 7 6 1 1 9 . 1 3 2 , 7 5 5 4 . 0 8 6 , 4 0 1 6 4 . 3 0 0 , 1 6 7 9 . 3 7 3 , 7 9 , s t n e m e r i u q e r i g n d n u f l a n o i t i d d A 5 : i h c h w f o 6 2 . 4 7 6 , 8 4 1 6 2 . 4 7 6 , 8 4 1 5 3 . 9 8 8 , 8 1 1 5 3 . 9 8 8 , 8 1 1 9 9 . 2 8 1 , 1 0 1 9 9 . 2 8 1 , 1 0 1 4 7 . 8 2 0 , 6 4 4 7 . 8 2 0 , 6 4 1 8 . 2 5 7 , 9 4 1 8 . 2 5 7 , 9 4 d n a s e r u s o p x e l a r e a t l l o c r e h o t t n e m e r i u q e r o t d e t l a e r e v i t a v i r e d s w o ﬂ t u O ) i ( 6 2 HDFC Bank Limited Annual Report 2015-16 131 Schedules to the Financial Statements For the year ended March 31, 2016 ) e r o r c ` ( : w o e b l n e v g s i i ) R C L ( o i t a R e g a r e v o C y t i d u q L i i n o n o i t a m r o f n i e v i t a t i t n a u Q - - - - - - - - - - (cid:0) (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 5 1 0 2 , 1 3 h c r a M (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 5 1 0 2 , 0 3 e n u J (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 5 1 0 2 , 0 3 r e b m e t p e S (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 5 1 0 2 , 1 3 r e b m e c e D (cid:68) (cid:69) (cid:68) (cid:78) (cid:69) (cid:0) (cid:82) (cid:69) (cid:84) (cid:82) (cid:65) (cid:85) (cid:49) 6 1 0 2 , 1 3 h c r a M * * * * * ) e g a r e v a ( * * * * * ) e g a r e v a ( * * * * ) e g a r e v a ( * * * * ) e g a r e v a ( * * * ) e g a r e v a ( * * * ) e g a r e v a ( * * ) e g a r e v a ( * * ) e g a r e v a ( * ) e g a r e v a ( * ) e g a r e v a ( l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T l a t o T e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v e u l a v d e t h g i e w d e t h g i e w n u d e t h g i e w d e t h g i e w n u d e t h g i e w d e t h g i e w n u d e t h g i e w d e t h g i e w n u d e t h g i e w d e t h g i e w n u s s o l o t d e t l a e r n o i g n d n u f f o s t c u d o r p t b e d s w o ﬂ t u O ) i i ( d n a t i d e r C ) i i i ( s r a u c l i t r a P ) . d t n o c ( o i t a r e g a r e v o c i y t i d u q L i 7 7 . 5 8 5 , 1 1 6 6 . 0 5 4 , 9 5 1 9 . 5 6 5 , 0 1 7 3 . 6 4 5 , 6 6 2 1 . 8 8 4 , 0 1 7 9 . 2 5 6 , 6 6 7 1 . 3 0 2 , 1 1 1 7 . 1 5 6 , 8 5 5 6 . 0 5 2 , 1 1 6 1 . 1 2 6 , 7 4 y t i i d u q i l 7 3 . 2 9 8 , 2 1 7 3 . 2 9 8 , 2 1 0 6 . 8 9 7 , 4 1 0 6 . 8 9 7 , 4 1 3 6 . 3 6 7 , 3 1 3 6 . 3 6 7 , 3 1 5 3 . 1 3 8 , 2 1 5 3 . 1 3 8 , 2 1 4 8 . 9 4 3 , 4 1 4 8 . 9 4 3 , 4 1 7 9 . 2 4 3 , 4 4 2 6 0 . 8 6 6 , 1 4 2 5 0 . 0 7 5 , 3 3 2 1 6 . 0 0 2 , 1 8 1 4 0 . 0 1 9 , 5 8 1 6 8 . 3 7 8 , 1 1 1 . 7 7 4 , 7 3 9 0 . 0 7 1 , 2 8 8 . 1 0 4 , 3 4 9 7 . 0 3 1 , 2 1 7 . 5 1 6 , 2 4 1 4 . 6 5 2 , 2 5 2 . 8 2 1 , 5 4 4 2 . 4 2 7 , 1 7 2 . 6 3 9 , 6 4 9 6 . 4 1 3 8 . 1 7 2 , 4 - 0 0 . 2 1 2 , 3 - 3 3 . 3 3 3 , 5 6 8 . 5 5 0 . 9 3 - 7 6 . 6 6 1 . l a u t c a r t n o c n o i t a g i l b o i g n d n u f s e i t i l i c a f r e h O t 6 r e h O t 7 t n e g n i t n o c s n o i t a g i l b o i g n d n u f s w o ﬂ t u O h s a C l a t o T 8 s w o ﬂ n I h s a C d e r u c e S 9 . g e ( g n d n e i l 4 8 . 9 6 5 , 7 1 0 6 . 1 5 2 , 1 3 6 8 . 0 0 6 , 3 1 2 6 . 5 3 4 , 5 2 9 2 . 2 0 5 , 5 1 2 4 . 6 3 5 , 8 2 8 4 . 4 5 5 , 5 1 0 8 . 8 9 0 , 9 2 0 9 . 6 4 3 , 7 1 0 4 . 7 9 4 , 2 3 i g n m r o f r e p y l l u f ) o p e r e s r e v e r m o r f s w o ﬂ n I 0 1 3 2 . 1 3 9 , 1 7 2 4 . 0 6 3 , 1 7 d e t s u d A j l e u a V l a t o T 2 0 . 3 0 1 , 4 8 0 1 . 5 4 0 , 9 9 d e t s u d A j l e u a V l a t o T 5 0 . 0 8 3 , 5 8 7 6 . 1 3 2 , 7 0 1 d e t s u d A j l e u a V l a t o T 8 5 . 3 2 9 , 2 8 5 6 . 6 7 7 , 2 1 1 d e t s u d A j l e u a V l a t o T 0 7 . 0 9 3 , 7 8 6 9 . 3 1 4 , 8 0 1 d e t s u d A j l e u a V l a t o T 2 0 . 8 9 3 , 5 5 1 7 2 . 1 4 2 , 2 6 1 0 1 . 2 2 0 , 9 2 1 8 1 . 7 2 0 , 4 3 1 9 0 . 6 3 8 , 0 1 1 3 7 . 6 9 2 , 6 1 1 2 6 . 3 6 8 , 2 5 2 6 . 7 8 2 , 8 5 7 1 . 9 4 1 , 0 6 8 7 . 6 3 6 , 5 6 5 5 . 2 8 9 , 2 7 1 0 7 . 4 6 7 , 7 9 1 6 9 . 2 2 6 , 2 4 1 0 8 . 4 7 6 , 2 6 1 8 3 . 8 3 3 , 6 2 1 8 4 . 6 6 1 , 0 5 1 6 9 . 3 2 4 , 8 6 7 4 . 5 2 4 , 7 8 7 0 . 6 9 4 , 7 7 5 8 . 0 0 3 , 8 9 s e r u s o p x e h s a c r e h O t 1 1 s w o ﬂ n i h s a C l a t o T 2 1 s w o ﬂ n I h s a C t e N l a t o T s w o ﬂ t u O (cid:0) (cid:33) (cid:44) (cid:49) (cid:40) (cid:44) (cid:33) (cid:52) (cid:47) (cid:52) i y t i d u q L i 3 1 4 1 5 1 % 0 8 . 0 0 1 % 1 9 . 4 8 % 2 6 . 9 7 % 3 5 . 3 7 % 1 6 . 0 8 e g a r e v o C ) % ( o i t a R . s e r u g ﬁ 5 1 0 2 r e b m e c e D d n a 5 1 0 2 r e b m e v o N , 5 1 0 2 r e b o t c O . s e r u g ﬁ 6 1 0 2 h c r a M d n a 6 1 0 2 y r a u r b e F , 6 1 0 2 y r a u n a J f o f o e g a r e v a e g a r e v a . s e r u g ﬁ 5 1 0 2 r e b m e t p e S d n a 5 1 0 2 t s u g u A , 5 1 0 2 l y u J f o e g a r e v a . s e r u g ﬁ 5 1 0 2 h c r a M d n a 5 1 0 2 y r a u r b e F , 5 1 0 2 y r a u n a J f o e g a r e v a . s e r u g ﬁ 5 1 0 2 e n u J d n a 5 1 0 2 y a M , 5 1 0 2 l i r p A f o e g a r e v a l i e p m s g n k a t i l d e t a u c a c l l e p m s i l e p m s i l e p m s i l e p m s i i g n k a t i g n k a t i g n k a t i g n k a t l d e t a u c a c l l d e t a u c a c l l d e t a u c a c l l d e t a u c a c l e r a e r a s t n u o m a d e t h g e w n u i s t n u o m a d e t h g e w n u i e r a s t n u o m a d e t h g e w n u i e r a s t n u o m a d e t h g e w n u i e r a s t n u o m a d e t h g e w n u i d n a d n a d n a d n a d n a i d e t h g e w e g a r e v a i d e t h g e w e g a r e v a i d e t h g e w e g a r e v a i d e t h g e w e g a r e v a i d e t h g e w e g a r e v a e h T e h T e h T e h T e h T * * * * * * * * * * * * * * * 6 2 HDFC Bank Limited Annual Report 2015-16 132 Schedules to the Financial Statements For the year ended March 31, 2016 Qualitative disclosure on LCR The Liquidity Coverage Ratio (LCR) is a global minimum standard for bank liquidity. It aims to ensure that a bank has an adequate stock of unencumbered High Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs for a 30 calendar day liquidity stress scenario. The LCR is calculated by dividing the amount of High Quality Liquid unencumbered Assets (HQLA) by the estimated net outﬂows over a stressed 30 calendar day period. The net cash outﬂows are calculated by applying RBI prescribed outﬂow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivative-related exposures, partially offset by inﬂows from assets maturing within 30 days. The average LCR was at 80.61% for the quarter ended March 2016. The average HQLA was ` 87,390.70 crore of which government securities constituted about 73%. The outﬂows related to derivative exposures (net of cash inﬂows) / collateral requirements and undrawn commitments constituted about 2% and 6% respectively of average cash outﬂow of ` 185,910.04 crore. Average inﬂows from assets were ` 77,496.07 crore. Average LCR for the quarter ended March 2016 is 80.61%, which is comfortably above RBI prescribed minimum requirement of 70%. Major reasons for movement in average LCR as compared to the previous quarter ended December 2015 are as follows: (cid:115)(cid:0) (cid:40)(cid:49)(cid:44)(cid:33)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:81)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0) (cid:69)(cid:78)(cid:68)(cid:69)(cid:68)(cid:0) (cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0) (cid:18)(cid:16)(cid:17)(cid:22)(cid:0) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0) (cid:65)(cid:83)(cid:0) (cid:65)(cid:68)(cid:68)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0) (cid:38)(cid:33)(cid:44)(cid:44)(cid:35)(cid:50)(cid:0) (cid:8)(cid:19)(cid:5)(cid:0) (cid:79)(cid:70)(cid:0) (cid:46)(cid:36)(cid:52)(cid:44)(cid:9)(cid:0) (cid:73)(cid:83)(cid:0) (cid:80)(cid:69)(cid:82)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:68)(cid:0) (cid:66)(cid:89)(cid:0) (cid:50)(cid:34)(cid:41)(cid:0) (cid:84)(cid:79)(cid:0) (cid:66)(cid:69)(cid:0) considered as HQLA from February 2016. (cid:115)(cid:0) (cid:55)(cid:73)(cid:84)(cid:72)(cid:73)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:85)(cid:78)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0) (cid:87)(cid:72)(cid:79)(cid:76)(cid:69)(cid:83)(cid:65)(cid:76)(cid:69)(cid:0) (cid:70)(cid:85)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:80)(cid:82)(cid:79)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:85)(cid:78)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0) (cid:68)(cid:69)(cid:66)(cid:84)(cid:0) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0) (cid:65)(cid:84)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:83)(cid:0) (cid:72)(cid:73)(cid:71)(cid:72)(cid:69)(cid:82)(cid:0) (cid:79)(cid:85)(cid:84)(cid:109)(cid:79)(cid:87)(cid:0) (cid:70)(cid:65)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0) decreased. (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:55)(cid:73)(cid:84)(cid:72)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:0)(cid:68)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:83)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:76)(cid:69)(cid:83)(cid:83)(cid:0)(cid:83)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:70)(cid:85)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:65)(cid:84)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:0)(cid:72)(cid:73)(cid:71)(cid:72)(cid:69)(cid:82)(cid:0)(cid:79)(cid:85)(cid:84)(cid:109)(cid:79)(cid:87)(cid:0)(cid:70)(cid:65)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:12)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:68)(cid:14) (cid:41)(cid:78)(cid:109)(cid:79)(cid:87)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:68)(cid:14) (cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:67)(cid:65)(cid:83)(cid:72)(cid:0)(cid:73)(cid:78)(cid:109)(cid:79)(cid:87)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:76)(cid:89)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:73)(cid:78)(cid:109)(cid:79)(cid:87)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:83)(cid:72)(cid:79)(cid:82)(cid:84)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:0)(cid:76)(cid:69)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:14) (cid:33)(cid:0) (cid:83)(cid:84)(cid:82)(cid:79)(cid:78)(cid:71)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:68)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:108)(cid:69)(cid:68)(cid:0) (cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:80)(cid:82)(cid:79)(cid:108)(cid:76)(cid:69)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0) (cid:66)(cid:69)(cid:69)(cid:78)(cid:0) (cid:65)(cid:84)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:72)(cid:69)(cid:76)(cid:77)(cid:0) (cid:79)(cid:78)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:7)(cid:83)(cid:0) (cid:71)(cid:82)(cid:79)(cid:87)(cid:84)(cid:72)(cid:0) (cid:83)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:89)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0) (cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:0) maintained a robust funding proﬁle with a signiﬁcant portion of funding through deposits. As of March 2016 the top 20 depositors comprised of around 5% of total deposits. Note: 1. CCIL guaranteed deals were netted for computing FX & Derivatives numbers from December 2015 quarter end. Hence, the numbers for serial number 5(i) and 11 are not strictly comparable with previous quarter numbers. 2. LCR for the quarter end March 2015 had been computed based on the guidelines applicable at that point in time. Subsequently there have been amendments in the RBI guidelines w.e.f. April 2015. Hence, the previous year end numbers are not comparable with current ﬁnancial year. HDFC Bank Limited Annual Report 2015-16 133 Schedules to the Financial Statements For the year ended March 31, 2016 27 Related party disclosures As per AS-18, Related Party Disclosure, the Bank’s related parties are disclosed below: Promoter Housing Development Finance Corporation Limited Subsidiaries HDFC Securities Limited HDB Financial Services Limited Associates Atlas Documentary Facilitators Company Private Limited HBL Global Private Limited International Asset Reconstruction Company Private Limited Welfare trust of the Bank HDB Employees Welfare Trust Key management personnel Aditya Puri, Managing Director Paresh Sukthankar, Deputy Managing Director Kaizad Bharucha, Executive Director Related parties to key management personnel Salisbury Investments Private Limited, Tanaksh Innovations Private Limited, Anita Puri, Amit Puri, Amrita Puri, Adishwar Puri, Aarti Sood, Sangeeta Sukthankar, Dattatraya Sukthankar, Shubhada Sukthankar, Akshay Sukthankar, Ankita Sukthankar, Madhavi Lad, Havovi Bharucha, Huzaan Bharucha, Danesh Bharucha, Daraius Bharucha. In accordance with paragraph 5 of AS - 18, the Bank has not disclosed certain transactions with relatives of key management personnel as they are in the nature of banker-customer relationship. The signiﬁcant transactions between the Bank and related parties for year ended March 31, 2016 are given below. A speciﬁc related party transaction is disclosed as a signiﬁcant related party transaction wherever it exceeds 10% of all related party transactions in that category: (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0) (cid:80)(cid:65)(cid:73)(cid:68)(cid:26)(cid:0) (cid:40)(cid:36)(cid:38)(cid:35)(cid:0) (cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0) ` 18.96 crore (previous year: ` 2.89 crore); Housing Development Finance Corporation Limited ` 7.25 crore (previous year: ` 7.60 crore); HDB Financial Services Limited ` 4.52 crore (previous year: ` 1.99 crore); Atlas Documentary Facilitators Company Private Limited ` 3.84 crore (previous year: ` 4.25 crore). (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:26)(cid:0)(cid:40)(cid:36)(cid:34)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 100.06 crore (previous year: ` 117.17 crore). (cid:50)(cid:69)(cid:78)(cid:68)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:79)(cid:70)(cid:0) (cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:26)(cid:0) (cid:40)(cid:79)(cid:85)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0) (cid:36)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) (cid:35)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0) ` 178.83 crore (previous year: ` 144.37 crore); HDFC Securities Limited ` 21.07 crore (previous year: ` 13.94 crore). (cid:50)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:26)(cid:0)(cid:40)(cid:34)(cid:44)(cid:0)(cid:39)(cid:76)(cid:79)(cid:66)(cid:65)(cid:76)(cid:0)(cid:48)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:69)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 702.20 crore (previous year: ` 589.50 crore); Atlas Documentary Facilitators Company Private Limited ` 471.44 crore (previous year: ` 449.50 crore); Housing Development Finance Corporation Limited ` 247.21 crore (previous year: ` 139.83 crore). (cid:36)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:80)(cid:65)(cid:73)(cid:68)(cid:26)(cid:0)(cid:40)(cid:79)(cid:85)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:36)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:35)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 314.57 crore (previous year: ` 269.35 crore). (cid:36)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:26)(cid:0)(cid:40)(cid:36)(cid:34)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 88.40 crore (previous year: ` 25.00 crore); HDFC Securities Limited ` 60.64 crore (previous year: ` 7.58 crore). (cid:48)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:108)(cid:88)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:26)(cid:0)(cid:40)(cid:36)(cid:38)(cid:35)(cid:0)(cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 0.12 crore (previous year: Nil). HDFC Bank Limited Annual Report 2015-16 134 Schedules to the Financial Statements For the year ended March 31, 2016 The Bank’s related party balances and transactions for the year ended March 31, 2016 are summarised as follows: (` crore) (cid:41)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:15)(cid:0)(cid:50)(cid:69)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:89) Promoter Subsidiaries Associates Key management personnel Total Deposits taken Deposits placed Advances given Fixed assets purchased from Fixed assets sold to Interest paid to Interest received from Income from services rendered to Expenses for receiving services from Equity investments Dividend paid to Dividend received from Receivable from Payable to Guarantees given Remuneration paid Loans purchased from 4,405.56 (4,405.56) 0.15 (0.15) - - - - 7.25 - 178.83 247.21 - - 314.57 - 16.30 (28.42) 26.93 (26.93) 0.14 (0.14) - 12,773.37 509.86 (811.10) 10.51 (10.51) 1,590.12 (1,590.12) 0.12 - 23.48 100.06 24.12 81.77 2,751.77 (2,751.77) - 149.04 0.08 (1.81) 21.57 (25.65) 0.05 (0.05) - - 100.02 (100.02) 0.10 (7.10) 0.22 (36.95) - - 3.89 2.27 6.07 1,173.64 31.19 (31.19) - 0.01 - (0.38) 39.85 (102.70) - - - - 10.12 (11.50) 2.51 (2.51) 0.95 (0.99) - - 0.84 0.02 - 0.76 - - 3.37 - 5,025.56 (5,328.18) 13.27 (20.27) 1,591.29 (1,628.06) 0.12 - 35.46 102.35 209.02 1,503.38 2,782.96 (2,782.96) 317.94 149.05 - 16.38 - - - - - 18.34 - (30.61) 88.35 (155.28) 0.19 (0.19) 18.34 12,773.37 Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding balances at each quarter-end. Remuneration paid excludes value of employee stock options exercised during the year. The Bank being an authorised dealer, deals in foreign exchange and derivative transactions with parties which include its promoter. The foreign exchange and derivative transactions are undertaken in line with the RBI guidelines. The notional principal amount of foreign exchange and derivative contracts transacted with the promoter that were outstanding as on March 31, 2016 is ` 491.21 crore (previous year: ` 100.00 crore). The contingent credit exposure pertaining to these contracts computed in line with the extant RBI guidelines on exposure norms is ` 18.90 crore (previous year: ` 2.80 crore). During the year ended March 31, 2016, the Bank purchased debt securities from Housing Development Finance Corporation Limited ` 1,415.00 crore (previous year: Nil) and from HDB Financial Services Limited ` 322.00 crore (previous year: ` 485.00 crore) issued by these entities. During the year ended March 31, 2016, the Bank made investment of ` 1,748.66 crore (previous year: ` 204.05 crore) in pass through certiﬁcates in respect of assets securitised out by HDB Financial Services Limited. During the year ended March 31, 2016, the Bank paid rent of ` 0.66 crore (previous year: ` 0.66 crore) to parties related to the Bank’s key management personnel in relation to residential accommodation. As at March 31, 2016, the security deposit outstanding was ` 3.50 crore (previous year: ` 3.50 crore). The deposit outstanding from HDB Employees Welfare Trust as of March 31, 2016 was ` 46.46 crore (previous year: ` 44.13 crore). The Bank also paid interest on deposit from HDB Employees Welfare Trust aggregating to ` 3.88 crore (previous year: ` 4.19 crore). HDFC Bank Limited Annual Report 2015-16 135 Schedules to the Financial Statements For the year ended March 31, 2016 The Bank’s related party balances and transactions for the year ended March 31, 2015 are summarised as follows: (cid:41)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:15)(cid:0)(cid:50)(cid:69)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:89) Promoter Subsidiaries Associates Key management personnel Deposits taken Deposits placed Advances given Fixed assets purchased from Fixed assets sold to Interest paid to Interest received from Income from services rendered to Expenses for receiving services from Equity investments Dividend paid to Dividend received from Receivable from Payable to Guarantees given Remuneration paid Loans purchased from 2,203.45 (2,203.45) 0.15 (0.15) - - - - 7.60 - 144.37 139.83 - - 269.35 - 14.89 (14.89) 19.25 (19.25) 0.11 (0.11) - 8,249.21 471.78 (471.78) 10.52 (10.52) 1,006.36 (1,259.54) - - 4.88 117.17 17.22 77.66 2,751.77 (2,751.77) - 32.58 2.39 (2.39) 12.63 (20.09) 0.05 (0.05) - - 113.06 (113.06) 13.35 (33.45) 25.67 (46.55) - - 4.27 4.53 12.25 1,039.00 31.19 (31.19) - 0.01 - (1.30) 5.99 (92.45) - - - - 12.68 (12.68) 2.51 (2.51) 0.95 (0.95) - - 0.99 0.02 - 0.71 - - 2.95 - - - - (0.03) - - 15.10 - (` crore) Total 2,800.97 (2,800.97) 26.53 (46.63) 1,032.98 (1,307.04) - - 17.74 121.72 173.84 1,257.20 2,782.96 (2,782.96) 272.30 32.59 17.28 (18.58) 37.87 (131.82) 0.16 (0.16) 15.10 8,249.21 Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding balances at each quarter-end. Remuneration paid excludes value of employee stock options exercised during the year. 28 Intra-Group exposure Intra-Group exposures in accordance with RBI guidelines are as follows: (` crore) Particulars March 31, 2016 March 31, 2015 Total amount of intra-group exposures Total amount of top 20 intra-group exposures Percentage of intra-group exposures to total exposure of the Bank on borrowers / customers 2,413.58 2,413.58 0.33% 1,436.10 1,436.10 0.26% Details of breach of limits on intra-group exposures and regulatory action thereon, if any Nil Nil HDFC Bank Limited Annual Report 2015-16 136 Schedules to the Financial Statements For the year ended March 31, 2016 29 Leases Operating leases primarily comprise ofﬁce premises, staff residences and Automated Teller Machines (‘ATM’s), which are renewable at the option of the Bank. The details of maturity proﬁle of future operating lease payments are given below: Particulars Not later than one year Later than one year and not later than ﬁve years Later than ﬁve years Total The total of minimum lease payments recognised in the Statement of Proﬁt and Loss for the year Total of future minimum sub-lease payments expected to be received under non-cancellable sub-leases Sub-lease amounts recognised in the Statement of Proﬁt and Loss for the year Contingent (usage based) lease payments recognised in the Statement of Proﬁt and Loss for the year The Bank has sub-leased certain of its properties taken on lease. (` crore) March 31, 2016 March 31, 2015 887.30 2,805.03 2,481.82 6,174.15 1,005.70 783.02 2,591.87 1,974.45 5,349.34 866.97 37.13 38.05 10.67 180.53 16.01 169.44 The terms of renewal and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements. 30 Transfers to Depositor Education and Awareness Fund (DEAF) The details of amount transferred during the respective year to DEAF are as under: (` crore) Particulars March 31, 2016 March 31, 2015 Opening balance of amounts transferred to DEAF Add : Amounts transferred to DEAF during the year Less : Amounts reimbursed by DEAF towards claims Closing balance of amounts transferred to DEAF 31 Penalties levied by the RBI 92.14 45.89 (1.18) 136.85 Nil 94.45 (2.31) 92.14 During the year ended March 31, 2016, RBI has not imposed any penalties on the Bank. During the previous year ended March 31, 2015, RBI levied on the Bank a penalty of ` 0.05 crore on the grounds that the Bank failed to exchange information about the conduct of a corporate borrower’s account with other banks at intervals as prescribed in the RBI guidelines on ‘Lending under Consortium Arrangement / Multiple Banking Arrangements’ and the same was paid by the Bank. HDFC Bank Limited Annual Report 2015-16 137 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:19)(cid:18)(cid:0) (cid:36)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:65)(cid:73)(cid:78)(cid:84)(cid:83)(cid:0)(cid:15)(cid:0)(cid:85)(cid:78)(cid:73)(cid:77)(cid:80)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:47)(cid:77)(cid:66)(cid:85)(cid:68)(cid:83)(cid:77)(cid:65)(cid:78) (cid:115)(cid:0) (cid:35)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:65)(cid:73)(cid:78)(cid:84)(cid:83) (A) Customer complaints other than ATM transaction disputes Particulars March 31, 2016 March 31, 2015 (a) No. of complaints pending at the beginning of the year (b) No. of complaints received during the year (c) No. of complaints redressed during the year (d) No. of complaints pending at the end of the year 496 62,224 62,069 651 455 72,075 72,034 496 (B) ATM transaction disputes relating to the Bank’s customers on the Bank’s ATMs Particulars March 31, 2016 March 31, 2015 (a) No. of complaints pending at the beginning of the year (b) No. of complaints received during the year (c) No. of complaints redressed during the year (d) No. of complaints pending at the end of the year (e) Complaints per ten thousand transactions 71 13,170 13,140 101 0.50 159 11,300 11,388 71 0.42 (C) ATM transaction disputes relating to the Bank’s customers on other banks’ ATMs Particulars March 31, 2016 March 31, 2015 (a) No. of complaints pending at the beginning of the year (b) No. of complaints received during the year (c) No. of complaints redressed during the year (d) No. of complaints pending at the end of the year (e) Complaints per ten thousand transactions 1,334 89,975 90,191 1,118 3.86 1,601 82,572 82,839 1,334 3.91 (D) Total customer complaints and ATM transaction disputes [total of tables (A), (B) and (C) above] Particulars March 31, 2016 March 31, 2015 (a) No. of complaints pending at the beginning of the year (b) No. of complaints received during the year (c) No. of complaints redressed during the year (d) No. of complaints pending at the end of the year 1,901 1,65,369 1,65,400 1,870 2,215 1,65,947 1,66,261 1,901 Note: ATM transaction disputes reported in the above tables are in accordance with RBI guidelines on disclosure of customer complaints. HDFC Bank Limited Annual Report 2015-16 138 Schedules to the Financial Statements For the year ended March 31, 2016 (cid:115)(cid:0) Awards passed by the Banking Ombudsman (BO) Particulars March 31, 2016 March 31, 2015 (a) No. of unimplemented awards at the beginning of the year (b) No. of awards passed by the BO during the year (c) No. of awards implemented during the year (d) No. of unimplemented awards at the end of the year (cid:115)(cid:0) (cid:52)(cid:79)(cid:80)(cid:0)(cid:65)(cid:82)(cid:69)(cid:65)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:65)(cid:73)(cid:78)(cid:84)(cid:83) Nil Nil Nil Nil Nil Nil Nil Nil The average number of customer complaints per branch, including ATM transaction disputes, was 3.3 per month during the year ended March 31, 2016 (previous year: 3.8 per month). For the year ended March 31, 2016, retail branch banking segment accounted for 82.60% of the total complaints (an increase from 76.62% for the previous year) followed by credit cards at 11.86% of the total complaints (a reduction from 14.09% for the previous year), retail assets at 3.68% of the total complaints (a reduction from 4.52% for the previous year), while other segments accounted for 1.86% of total complaints (as against 4.77% in the previous year). The top 10 areas of customer complaints for the year ended March 31, 2016, including ATM transaction disputes, accounted for 1,23,323 complaints and were 74.57% of total complaints as against 1,16,708 complaints which were 70.33% of the total complaints for the year ended March 31, 2015. The top 5 areas of customer complaints on which the Bank is working towards root cause remediation are - ‘cash not dispensed or less cash dispensed in the Bank’s ATMs’, ‘instant account not activated - personal details not updated’, ‘statement related - credit cards’, ‘delay in closure of account’ and ‘marketing related - credit cards’. (cid:115) Position of BO complaints as per RBI annual report As per a report published by the RBI for the year ended June 30, 2015, the number of BO complaints per branch for the Bank was 1.36 (previous year: 1.44). The number of BO complaints other than credit cards per 1,000 accounts was at 0.10 (previous year: 0.09).The number of BO complaints (credit card related) per 1,000 cards was at 0.06 (previous year: 0.08) for the Bank. 33 Disclosure of Letters of Comfort (LoC) issued by the Bank The Bank has not issued any Letter of Comfort during the years ended March 31, 2016 and March 31, 2015. 34 Small and micro industries Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. 35 Overseas assets, NPAs and revenue (` crore) Particulars Total Assets Total NPAs Total Revenue (cid:19)(cid:22)(cid:0) (cid:47)(cid:70)(cid:70)(cid:13)(cid:34)(cid:65)(cid:76)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:51)(cid:72)(cid:69)(cid:69)(cid:84)(cid:0)(cid:51)(cid:48)(cid:54)(cid:83) March 31, 2016 March 31, 2015 35,956.88 31,750.05 124.23 1,156.39 157.44 973.17 There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms. 37 Credit default swaps The Bank has not transacted in credit default swaps during the year ended March 31, 2016 (previous year: Nil). HDFC Bank Limited Annual Report 2015-16 139 Schedules to the Financial Statements For the year ended March 31, 2016 38 Corporate social responsibility Operating expenses include ` 194.81 crore (previous year: ` 118.55 crore) for the year ended March 31, 2016 towards Corporate Social Responsibility (CSR), in accordance with Companies Act, 2013. The Bank has spent 1.6% (previous year: 1.2%) of its average net proﬁt for the last three ﬁnancial years as part of its CSR for the year ended March 31, 2016. As a responsible bank, it has approached the mandatory requirements of CSR spends positively by laying a foundation on which it would build and scale future projects and partnerships. The Bank continues to evaluate strategic avenues for CSR expenditure in order to deliver maximum impact. In the years to come, the Bank will further strengthen its processes as per requirement. The details of amount spent during the respective year towards CSR are as under: (` crore) Sr. No. Particulars March 31, 2016 March 31, 2015 Amount spent Amount (cid:85)(cid:78)(cid:80)(cid:65)(cid:73)(cid:68)(cid:0)(cid:15) provision Total Amount spent Total Amount (cid:85)(cid:78)(cid:80)(cid:65)(cid:73)(cid:68)(cid:0)(cid:15) provision (i) Construction / acquisition of any asset Nil Nil Nil Nil Nil Nil (ii) On purpose other than (i) above 186.46 8.35 194.81 111.54 7.01 118.55 39 Investor education and protection fund There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank. 40 Disclosure on remuneration to Non-Executive Directors The Non-Executive Directors are paid remuneration by way of sitting fees for attending meetings of the Board and its committees. Sitting fees are paid at the rate of ` 100,000 per Board meeting and at the rate of ` 50,000 per meeting of the Board Committees. An amount of ` 1.33 crore was paid as sitting fees to the Non-Executive Directors during the year ended March 31, 2016 (previous year: ` 0.76 crore). In accordance with RBI guidelines, the Board of Directors has, subject to the approval of the shareholders at the ensuing Annual General Meeting, approved payment of proﬁt related commission to all Non-Executive Directors at the rate of ` 10 lacs per annum per Director other than the Chairperson. 41 Comparative ﬁgures Figures for the previous year have been regrouped and reclassiﬁed wherever necessary to conform to the current year’s presentation. For and on behalf of the Board Shyamala Gopinath Chairperson Aditya Puri Managing Director Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director (cid:51)(cid:65)(cid:78)(cid:74)(cid:65)(cid:89)(cid:0)(cid:36)(cid:79)(cid:78)(cid:71)(cid:82)(cid:69) Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors Mumbai, April 22, 2016 HDFC Bank Limited Annual Report 2015-16 140 Basel III - Pillar 3 Disclosures As at March 31, 2016 The Reserve Bank of India (RBI) vide its circular under reference DBOD.No.BP.BC.1/21.06.201/2015-16 dated July 1, 2015 on ‘Basel III Capital Regulations’ (‘Basel III circular’) read together with the circular under reference DBR.No.BP.BC.80/21.06.201/2014- 15 dated March 31, 2015 on ‘Prudential Guidelines on Capital Adequacy and Liquidity Standards - Amendments’ requires banks to make Pillar 3 disclosures including leverage ratio and liquidity coverage ratio under the Basel III Framework. These disclosures are available on HDFC Bank’s website under the ‘Regulatory Disclosures’ section. The link to this section is http://www.hdfcbank.com/aboutus/basel_disclosures/default.htm. The Regulatory Disclosures section contains the following disclosures: (cid:115)(cid:0) (cid:49)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:81)(cid:85)(cid:65)(cid:78)(cid:84)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:48)(cid:73)(cid:76)(cid:76)(cid:65)(cid:82)(cid:0)(cid:19)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:26) (cid:131) (cid:131) (cid:131) (cid:131) (cid:131) (cid:131) (cid:131) (cid:131) (cid:131) (cid:131) (cid:131) Scope of application Capital adequacy Credit risk Credit risk: Portfolios subject to the standardised approach Credit risk mitigation: Disclosures for standardised approach Securitisation exposures Market risk in trading book Operational risk Asset Liability Management (‘ALM’) risk management General disclosures for exposures related to counterparty credit risk Equities: Disclosure for banking book positions (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:35)(cid:79)(cid:77)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:78)(cid:67)(cid:73)(cid:76)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:14) (cid:45)(cid:65)(cid:73)(cid:78)(cid:0)(cid:70)(cid:69)(cid:65)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:70)(cid:85)(cid:76)(cid:76)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:67)(cid:79)(cid:78)(cid:68)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:73)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:14) (cid:44)(cid:69)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:0)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:14) (cid:44)(cid:73)(cid:81)(cid:85)(cid:73)(cid:68)(cid:73)(cid:84)(cid:89)(cid:0)(cid:67)(cid:79)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:0)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:14) HDFC Bank Limited Annual Report 2015-16 141 Independent Auditor’s Report To the Members of HDFC Bank Limited Report on the Consolidated Financial Statements We have audited the accompanying consolidated ﬁnancial statements of HDFC BANK LIMITED (hereinafter referred to as “the Bank” or “the Holding Company”) and its subsidiaries (the Bank and its subsidiaries together referred to as “the Group”) and its associates, comprising the Consolidated Balance Sheet as at 31st March, 2016, the Consolidated Statement of Proﬁt and Loss, the Consolidated Cash Flow Statement for the year then ended, and a summary of the signiﬁcant accounting policies and other explanatory information (hereinafter referred to as “the consolidated ﬁnancial statements”). Management’s Responsibility for the Consolidated Financial Statements The Bank’s Board of Directors is responsible for the preparation of these consolidated ﬁnancial statements in terms of the requirements of the Companies Act, 2013 (hereinafter referred to as “the Act”) that give a true and fair view of the consolidated ﬁnancial position, consolidated ﬁnancial performance and consolidated cash ﬂows of the Group including its Associates in accordance with the accounting principles generally accepted in India, including the Accounting Standards prescribed under Section 133 of the Act, the Banking Regulation Act, 1949 and guidelines issued by the Reserve Bank of India as applicable to the respective entities. The respective Board of Directors of the companies included in the Group and its associates are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities, the selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal ﬁnancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the ﬁnancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated ﬁnancial statements by the Directors of the Bank, as aforesaid. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. While conducting the audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing speciﬁed under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated ﬁnancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated ﬁnancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated ﬁnancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal ﬁnancial control relevant to the Bank’s preparation of the consolidated ﬁnancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Bank’s Board of Directors, as well as evaluating the overall presentation of the consolidated ﬁnancial statements. We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditors in terms of their reports referred to in sub-paragraph (a) of the Other Matters paragraph below, is sufﬁcient and appropriate to provide a basis for our audit opinion on the consolidated ﬁnancial statements. Opinion In our opinion and to the best of our information and according to the explanations given to us, the aforesaid consolidated ﬁnancial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs of the Group and its associates as at 31st March, 2016, and their consolidated proﬁt and their consolidated cash ﬂows for the year ended on that date. Other Matters a) We did not audit the financial statements of 2 subsidiaries whose ﬁnancial statements reﬂect total assets of ` 2,611,598 lacs as at 31st March, 2016, total revenues of ` 371,041 lacs and net cash outﬂows amounting to ` 4,140 lacs for the year ended on that date, as considered in the consolidated financial statements. The consolidated ﬁnancial statements also include the Group’s share of net proﬁt of ` 267 lacs for the year ended 31st March, 2016, as considered in the consolidated ﬁnancial statements, in respect of two associates, whose ﬁnancial statements have not been audited by us. These ﬁnancial statements have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the consolidated ﬁnancial statements, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and associates, is based solely on the reports of the other auditors. HDFC Bank Limited Annual Report 2015-16 142 f) With respect to the adequacy of the internal ﬁnancial controls over ﬁnancial reporting and the operating effectiveness of such controls, refer to our Report in “Annexure A”, which is based on the auditors’ reports of the Bank, subsidiary companies and associate companies incorporated in India. Our report expresses an unmodiﬁed opinion on the adequacy and operating effectiveness of the Bank’s / subsidiary company’s / associate company’s incorporated in India internal ﬁnancial controls over ﬁnancial reporting. g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditor’s) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us: i. ii. iii. The consolidated ﬁnancial statements disclose the impact of pending litigations on the consolidated ﬁnancial position of the Group and its associates. Provision has been made in the consolidated financial statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank and its subsidiary companies and associate companies. For Deloitte Haskins & Sells Chartered Accountants (Firm’s Registration No. 117365W) Porus B. Pardiwalla Partner (Membership No. 40005) Mumbai April 22, 2016 b) The consolidated financial statements also include the Group’s share of net proﬁt of ` 104 lacs for the year ended 31st March, 2016, as considered in the consolidated ﬁnancial statements, in respect of an associate, whose ﬁnancial statements have not been audited by us. These ﬁnancial statements are unaudited and have been furnished to us by the Management and our opinion on the consolidated ﬁnancial statements, in so far as it relates to the amounts and disclosures included in respect of this associate, is based solely on such unaudited ﬁnancial statements as certiﬁed by the Management of that associate. In our opinion and according to the information and explanations given to us by the Management, these ﬁnancial statements are not material to the Group. Our opinion on the consolidated ﬁnancial statements, and our report on Other Legal and Regulatory Requirements below is not modiﬁed in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors and the ﬁnancial statements certiﬁed by the Management. Report on Other Legal and Regulatory Requirements As required by Section143(3) of the Act, we report, to the extent applicable, that: a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the aforesaid consolidated ﬁnancial statements. b) c) In our opinion, proper books of account as required by law relating to preparation of the aforesaid consolidated ﬁnancial statements have been kept so far as it appears from our examination of those books and the reports of the other auditors. The Consolidated Balance Sheet, the Consolidated Statement of Proﬁt and Loss, and the Consolidated Cash Flow Statement dealt with by this Report are in agreement with the relevant books of account maintained for the purpose of preparation of the consolidated ﬁnancial statements. d) In our opinion, the aforesaid consolidated ﬁnancial statements comply with the Accounting Standards prescribed under Section 133 of the Act, as applicable. e) On the basis of the written representations received from the directors of the Holding Company as on 31st March, 2016 taken on record by the Board of Directors of the Bank and the reports of the statutory auditors of its subsidiary companies and associate companies incorporated in India, none of the directors of the Group companies and its associate companies incorporated in India is disqualiﬁed as on 31st March, 2016 from being appointed as a director in terms of Section 164 (2) of the Act. HDFC Bank Limited Annual Report 2015-16 143 ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S REPORT (Referred to in paragraph 1.f under ‘Report on Other Legal and Regulatory Requirements’ of our report of even date) Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”) We have audited the internal ﬁnancial controls over ﬁnancial reporting of HDFC BANK LIMITED (hereinafter referred to as “the Holding Company”), its subsidiary companies, and its associate companies, which are companies incorporated in India, as of 31st March, 2016 in conjunction with our audit of the consolidated ﬁnancial statements of the Holding Company for the year then ended. Management’s Responsibility for Internal Financial Controls The respective Board of Directors of the Holding Company, its subsidiary companies and its associate companies, which are companies incorporated in India, are responsible for establishing and maintaining the internal control over ﬁnancial reporting criteria established by the respective companies considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (“the Guidance Note”) issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal ﬁnancial controls that were operating effectively for ensuring the orderly and efﬁcient conduct of its business, including adherence to the respective company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable ﬁnancial information, as required under the Companies Act, 2013, the Banking Regulation Act, 1949 and the guidelines issued by the Reserve Bank of India. Auditor’s Responsibility Our responsibility is to express an opinion on the internal ﬁnancial controls over ﬁnancial reporting of the Holding Company, its subsidiary companies, its associate companies which are companies incorporated in India based on our audit. We conducted our audit in accordance with the Guidance Note issued by the Institute of Chartered Accountants of India and the Standards on Auditing, prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal ﬁnancial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal ﬁnancial controls over ﬁnancial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over ﬁnancial reporting and their operating effectiveness. Our audit of internal ﬁnancial controls over ﬁnancial reporting included obtaining an understanding of internal ﬁnancial controls over ﬁnancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. We believe that the audit evidence we have obtained and the other Auditors’ Report on the Internal Financial Controls over Financial Reporting, furnished to us by management, in relation to two subsidiaries and two associates which are not audited by us, which are companies incorporated in India, and as referred to in the Other Matters paragraph below, is sufﬁcient and appropriate to provide a basis for our audit opinion on the internal ﬁnancial controls system over ﬁnancial reporting of the aforesaid entities. Meaning of Internal Financial Controls Over Financial Reporting A company’s internal ﬁnancial control over ﬁnancial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of ﬁnancial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal ﬁnancial control over ﬁnancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the ﬁnancial statements. Inherent Limitations of Internal Financial Controls Over Financial Reporting Because of the inherent limitations of internal financial controls over ﬁnancial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal ﬁnancial controls over ﬁnancial reporting to future periods are subject to the risk that the internal ﬁnancial control HDFC Bank Limited Annual Report 2015-16 144 over ﬁnancial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Opinion In our opinion to the best of our information and according to the explanations given to us, and taking into consideration the reports of the other auditors referred to in the Other Matters paragraph below the Holding Company, its subsidiary companies and its associate companies, which are companies incorporated in India, have, in all material respects, an adequate internal ﬁnancial controls system over ﬁnancial reporting and such internal ﬁnancial controls over ﬁnancial reporting were operating effectively as at 31st March, 2016, based on the internal control over ﬁnancial reporting criteria established by the respective companies considering the essential components of internal control stated in the Guidance Note issued by the Institute of Chartered Accountants of India. Other Matters Our aforesaid report under Section 143(3)(i) of the Act on the adequacy and operating effectiveness of the internal ﬁnancial controls over ﬁnancial reporting insofar as it relates to two subsidiary companies and two associate companies, which are companies incorporated in India, is based on the corresponding reports of the auditors of such companies incorporated in India. The ﬁnancial statements and internal ﬁnancial controls over ﬁnancial reporting in relation to one associate company, which is a company incorporated in India, is unaudited. Our opinion on the internal ﬁnancial controls over ﬁnancial reporting of the aforesaid entities excludes consideration of the internal ﬁnancial controls over ﬁnancial reporting in respect of this associate. In our opinion and according to the information and explanations given to us by the Holding Company’s management, the ﬁnancial statements of the associate, and the related internal ﬁnancial controls over ﬁnancial reporting are not material to the consolidated ﬁnancial statements, and the related internal ﬁnancial control over ﬁnancial reporting of the aforesaid entities. Our opinion on the adequacy and operating effectiveness of internal ﬁnancial controls over ﬁnancial reporting is not modiﬁed in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors and representation of the Board of Director and management. For Deloitte Haskins & Sells Chartered Accountants (Firm’s Registration No. 117365W) Porus B. Pardiwalla Partner (Membership No. 40005) Mumbai April 22, 2016 HDFC Bank Limited Annual Report 2015-16 145 Consolidated Balance Sheet As at March 31, 2016 CAPITAL AND LIABILITIES Capital Reserves and surplus Minority interest Deposits Borrowings Other liabilities and provisions 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 Contingent liabilities Bills for collection Schedule 31-Mar-16 As at ` in ‘000 As at 31-Mar-15 1 2 2A 3 4 5 5,056,373 5,012,991 737,984,869 626,527,660 1,806,228 1,616,274 5,458,732,889 4,502,836,477 717,634,520 594,782,505 381,403,308 340,189,270 Total 7,302,618,187 6,070,965,177 6 7 8 9 10 11 300,765,846 275,222,870 89,922,969 90,041,344 1,616,833,398 1,494,544,156 4,872,904,174 3,834,079,720 34,796,976 32,249,444 387,394,824 344,827,643 Total 7,302,618,187 6,070,965,177 12 8,535,273,826 9,752,785,962 234,899,997 223,049,263 Signiﬁcant accounting policies and notes to the Consolidated ﬁnancial statements The schedules referred to above form an integral part of the Consolidated Balance Sheet 17 & 18 As per our report of even date. (cid:41)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71) For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 22, 2016 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors HDFC Bank Limited Annual Report 2015-16 146 Consolidated Statement of Proﬁt and Loss For the year ended March 31, 2016 I II III INCOME Interest earned Other income EXPENDITURE Interest expended Operating expenses Provisions and contingencies PROFIT Net proﬁt for the year Less : Minority interest Add : Share in proﬁts of associates Consolidated proﬁt for the year attributable to the Group Balance in Proﬁt and Loss account brought forward IV APPROPRIATIONS Transfer to Statutory Reserve Proposed dividend Tax (including cess) on dividend Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits Transfer to General Reserve Transfer to Capital Reserve Transfer to/(from) Investment Reserve Account Balance carried over to Balance Sheet V EARNINGS PER EQUITY SHARE (Face value ` 2 per share) Basic Diluted Signiﬁcant accounting policies and notes to the Consolidated ﬁnancial statements The schedules referred to above form an integral part of the Consolidated Statement of Proﬁt and Loss Schedule 13 14 Total 15 16 Total Total Total 17 & 18 Year ended 31-Mar-16 631,615,614 112,116,541 743,732,155 340,695,748 178,318,808 96,544,349 615,558,905 128,173,250 197,212 37,278 128,013,316 195,508,642 323,521,958 31,809,345 24,017,772 5,123,529 (117,135) 12,296,213 2,221,532 (85,184) 248,255,886 323,521,958 ` 50.85 50.24 ` in ‘000 Year ended 31-Mar-15 506,664,925 95,456,835 602,121,760 272,884,553 145,775,249 76,461,474 495,121,276 107,000,484 144,068 32,494 106,888,910 152,074,676 258,963,586 26,238,698 20,051,963 4,245,374 8,411 10,385,919 2,249,166 275,413 195,508,642 258,963,586 ` 44.10 43.60 As per our report of even date. (cid:41)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71) For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 22, 2016 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors HDFC Bank Limited Annual Report 2015-16 147 Consolidated Cash Flow Statement For the year ended March 31, 2016 Cash ﬂows from operating activities Consolidated proﬁt before income tax 194,949,948 160,682,894 ` in ‘000 Year ended Year ended 31-Mar-16 31-Mar-15 Adjustments for: Depreciation on ﬁxed assets (Proﬁt) / loss on revaluation of investments Amortisation of premia on held to maturity investments (Proﬁt) / loss on sale of ﬁxed assets Provision / charge for non performing assets Provision for dimunition in value of investments Floating provisions Provision for standard assets Provision for wealth tax Contingency provisions Share in current year's proﬁts of associates Adjustments for: (Increase) / decrease in investments (excluding investments in subsidiaries and joint ventures) (Increase) / decrease in advances Increase / (decrease) in deposits (Increase) / decrease in other assets Increase / (decrease) in other liabilities and provisions Direct taxes paid (net of refunds) Net cash ﬂow (used in) / from operating activities Cash ﬂows used in investing activities Purchase of ﬁxed assets Proceeds from sale of ﬁxed assets Investment in subsidiaries and / or joint ventures Net cash used in investing activities HDFC Bank Limited Annual Report 2015-16 148 7,380,326 6,804,512 173,689 (556,306) 1,002,801 805,534 1,185 (111,264) 25,179,864 20,377,433 146,543 1,150,000 (38,184) 321,959 4,648,890 3,103,466 - 218,602 (37,278) 7,676 590,405 (32,494) 234,814,570 191,955,631 (123,574,997) (450,203,993) (1,066,012,996) (703,560,180) 955,896,412 832,033,154 (38,485,747) 66,328,224 31,324,658 (92,889,220) (6,038,100) (156,336,384) (70,730,944) (56,473,398) (76,769,044) (212,809,782) (8,771,635) (7,723,564) 116,125 331,066 - (715,656) (8,655,510) (8,108,154) Consolidated Cash Flow Statement For the year ended March 31, 2016 Cash ﬂows from ﬁnancing activities Increase in minority interest ` in ‘000 Year ended Year ended 31-Mar-16 31-Mar-15 189,954 491,482 Money received on exercise of stock options by employees 12,229,008 9,954,171 Increase / (decrease) in borrowings (excluding subordinate debt, perpetual debt and upper tier II instruments) Proceeds from issue of shares under Qualiﬁed Institutions Placement and American Depository Receipt offering (net of issue expenses) Proceeds from issue of upper and lower tier II capital instruments Redemption of subordinated debt Dividend paid during the year Tax on dividend Net cash generated from ﬁnancing activities 134,496,515 97,696,829 - - 97,227,855 5,000,000 (12,020,000) (4,140,000) (20,091,666) (16,492,770) (4,237,089) (2,798,859) 110,566,722 186,938,708 Effect of exchange ﬂuctuation on translation reserve 282,433 109,160 Net increase / (decrease) in cash and cash equivalents 25,424,601 (33,870,068) Cash and cash equivalents as at April 1st (Schedules 6 and 7) 365,264,214 399,134,282 Cash and cash equivalents as at March 31st (Schedules 6 and 7) 390,688,815 365,264,214 As per our report of even date. (cid:41)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71) For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 22, 2016 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors HDFC Bank Limited Annual Report 2015-16 149 Schedules to the Consolidated Financial Statements As at March 31, 2016 SCHEDULE 1 - CAPITAL Authorised capital 2,75,00,00,000 (31 March, 2015 : 2,75,00,00,000) Equity Shares of ` 2/- each Issued, subscribed and paid-up capital 2,52,81,86,517 (31 March, 2015 : 2,50,64,95,317) Equity Shares of ` 2/- each SCHEDULE 2 - RESERVES AND SURPLUS I Statutory reserve Opening balance Additions during the year II General reserve Opening balance Additions during the year III Balance in proﬁt and loss account IV Share premium account Opening balance Additions during the year Deductions during the year [Refer Schedule 18 (4)] V Amalgamation reserve Opening balance Additions during the year VI Capital reserve Opening balance Additions during the year VII Investment reserve account Opening balance Additions during the year Deductions during the year [Refer Schedule 18 (4)] VIII Foreign currency translation account Opening balance Additions during the year HDFC Bank Limited Annual Report 2015-16 150 As at ` in ‘000 As at 31-Mar-16 31-Mar-15 5,500,000 5,500,000 Total 5,056,373 5,056,373 5,012,991 5,012,991 118,122,222 31,809,345 149,931,567 91,883,524 26,238,698 118,122,222 45,073,296 12,296,213 57,369,509 34,687,377 10,385,919 45,073,296 248,255,886 195,508,642 250,019,020 12,185,626 - 262,204,646 143,051,883 108,477,413 (1,510,276) 250,019,020 10,635,564 - 10,635,564 10,635,564 - 10,635,564 6,645,051 2,221,532 8,866,583 484,268 76 (85,260) 399,084 4,395,885 2,249,166 6,645,051 208,855 310,612 (35,199) 484,268 39,597 282,433 322,030 737,984,869 (69,563) 109,160 39,597 626,527,660 Total Total Total Total Total Total Total Total Schedules to the Consolidated Financial Statements As at March 31, 2016 SCHEDULE 2A - MINORITY INTEREST Minority interest at the date on which parent subsidiary relationship came into existence Subsequent increase Includes reserves of Employee Welfare Trust of ` 63.85 crore (previous year: ` 61.68 crore) SCHEDULE 3 - DEPOSITS A I Demand deposits (i) (ii) From banks From others II III I II B Savings bank deposits Term deposits (i) (ii) From banks From others Deposits of branches in India Deposits of branches outside India SCHEDULE 4 - BORROWINGS I Borrowings in India (i) Reserve Bank of India (ii) Other banks (iii) Other institutions and agencies ` in ‘000 As at As at 31-Mar-16 31-Mar-15 276,029 276,029 Total 1,530,199 1,806,228 1,340,245 1,616,274 22,017,200 16,319,866 860,725,166 717,067,581 Total 882,742,366 733,387,447 1,478,861,198 1,249,266,040 25,095,540 18,405,279 3,072,033,785 2,501,777,711 3,097,129,325 2,520,182,990 5,458,732,889 4,502,836,477 Total Total 5,391,562,781 4,443,925,893 67,170,108 58,910,584 Total 5,458,732,889 4,502,836,477 - - 98,174,819 86,817,617 151,517,811 87,380,892 (iv) Upper and lower Tier II capital and innovative perpetual debts 157,579,000 169,599,000 II Borrowings outside India* Total 407,271,630 343,797,509 310,362,890 250,984,996 Total 717,634,520 594,782,505 *Includes Upper Tier II debt of ` 662.55 crore (previous year: ` 625.00 crore) Secured borrowings included in I & II above: ` 15,781.77 crore (previous year: ` 12,591.32 crore) SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS I II III IV V Bills payable Interest accrued Others (including provisions) Contingent provisions against standard assets Proposed dividend (including tax on dividend) 73,784,974 60,853,248 40,976,952 33,697,037 216,913,280 205,283,077 20,735,354 16,058,571 28,992,748 24,297,337 Total 381,403,308 340,189,270 HDFC Bank Limited Annual Report 2015-16 151 Schedules to the Consolidated Financial Statements As at March 31, 2016 SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA I II Cash in hand (including foreign currency notes) Balances with Reserve Bank of India: (a) (b) In current accounts In other accounts SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE I In India (i) Balances with banks: (a) (b) In current accounts In other deposit accounts (ii) Money at call and short notice: (a) With banks (b) With other institutions II Outside India (i) (ii) (iii) Money at call and short notice In current accounts In deposit accounts SCHEDULE 8 - INVESTMENTS A Investments in India in (i) Government securities (ii) Other approved securities (iii) Shares (iv) Debentures and bonds (v) (vi) Others (Units, CDs/CPs, PTCs and security receipts) Investment in associates* *Includes goodwill of ` 0.70 crore (previous year: ` 0.70 crore) and capital reserve of ` 0.43 crore on account of investment in associates (previous year: ` 0.43 crore) B Investments outside India in Other investments (a) Shares (b) Debentures and bonds HDFC Bank Limited Annual Report 2015-16 152 As at ` in ‘000 As at 31-Mar-16 31-Mar-15 55,877,336 53,333,262 242,888,510 2,000,000 244,888,510 300,765,846 219,889,608 2,000,000 221,889,608 275,222,870 Total Total 2,596,227 7,926,585 10,522,812 2,466,929 22,807,540 25,274,469 - 1,359,867 1,359,867 11,882,679 23,909,955 3,776,535 50,353,800 78,040,290 89,922,969 2,500,000 2,238,499 4,738,499 30,012,968 16,465,876 625,000 42,937,500 60,028,376 90,041,344 1,257,105,578 - 885,214 48,882,174 614,020 295,619,657 1,603,106,643 1,203,902,956 - 1,437,392 11,263,150 576,872 266,305,154 1,483,485,524 Total Total Total Total Total Total 28,375 13,698,380 13,726,755 1,616,833,398 9,396 11,049,236 11,058,632 1,494,544,156 Total Total Schedules to the Consolidated Financial Statements As at March 31, 2016 C Investments (i) Gross value of investments (a) In India (b) Outside India (ii) Provision for depreciation (a) In India (b) Outside India (iii) Net value of investments (a) In India (b) Outside India SCHEDULE 9 - ADVANCES A (i) Bills purchased and discounted (ii) Cash credits, overdrafts and loans repayable on demand (iii) Term loans B (i) Secured by tangible assets* (ii) Covered by bank / government guarantees (iii) Unsecured * Including advances against book debts C I Advances in India (i) Priority sector (ii) Public sector (iii) Banks (iv) Others C II Advances outside India (i) Due from banks (ii) Due from others (a) Bills purchased and discounted (b) Syndicated loans (c) Others Advances are net of provisions HDFC Bank Limited Annual Report 2015-16 153 As at 31-Mar-16 ` in ‘000 As at 31-Mar-15 1,604,312,021 1,484,640,559 13,726,755 11,058,632 Total 1,618,038,776 1,495,699,191 1,205,378 1,155,035 - - Total 1,205,378 1,155,035 1,603,106,643 1,483,485,524 13,726,755 11,058,632 Total 1,616,833,398 1,494,544,156 185,136,903 177,134,003 1,242,774,115 993,671,410 3,444,993,156 2,663,274,307 Total 4,872,904,174 3,834,079,720 3,648,290,355 2,894,274,719 114,128,823 63,453,979 1,110,484,996 876,351,022 Total 4,872,904,174 3,834,079,720 1,427,201,985 1,066,872,841 134,556,082 118,066,442 4,659,631 51,278 2,985,578,949 2,360,676,224 Total 4,551,996,647 3,545,666,785 6,879,777 16,094,350 1,245,263 1,849,427 38,624,247 14,652,002 274,158,240 255,817,156 320,907,527 288,412,935 4,872,904,174 3,834,079,720 Total Total Schedules to the Consolidated Financial Statements As at March 31, 2016 SCHEDULE 10 - FIXED ASSETS A Premises (including land) Gross block At cost on 31 March of the preceding year Additions during the year Deductions during the year Depreciation As at 31 March of the preceding year Charge for the year On deductions during the year Net block B Other ﬁxed assets (including furniture and ﬁxtures) Gross block At cost on 31 March of the preceding year Additions during the year Deductions during the year Depreciation As at 31 March of the preceding year Charge for the year On deductions during the year Net block C Assets on lease (plant and machinery) Gross block At cost on 31 March of the preceding year Additions during the year HDFC Bank Limited Annual Report 2015-16 154 As at 31-Mar-16 ` in ‘000 As at 31-Mar-15 15,030,782 14,443,499 839,927 793,539 (85,166) (206,256) Total 15,785,543 15,030,782 3,775,762 3,343,891 555,657 524,195 (68,719) (92,324) Total 4,262,700 3,775,762 11,522,843 11,255,020 67,150,536 59,825,186 9,208,628 8,219,396 (1,458,923) (894,046) Total 74,900,241 67,150,536 46,156,112 40,662,007 6,828,000 6,282,551 (1,358,004) (788,446) Total 51,626,108 46,156,112 23,274,133 20,994,424 4,546,923 4,546,923 - - Total 4,546,923 4,546,923 Schedules to the Consolidated Financial Statements As at March 31, 2016 Depreciation As at 31 March of the preceding year Charge for the year Lease adjustment account As at 31 March of the preceding year Charge for the year Unamortised cost of assets on lease SCHEDULE 11 - OTHER ASSETS I II III IV V VI Interest accrued Advance tax / tax deducted at source (net of provisions) Stationery and stamps Non banking assets acquired in satisfaction of claims Bond and share application money pending allotment Security deposit for commercial and residential property VII Others * *Includes deferred tax asset (net) of ` 2,227.23 crore (previous year: ` 2,031.98 crore), goodwill of ` 187.16 crore (previous year: ` 187.16 crore) and deposits placed with NABARD / SIDBI / NHB on account of shortfall in lending to priority sector of ` 13,719.68 crore (previous year: ` 14,818.19 crore) SCHEDULE 12 - CONTINGENT LIABILITIES As at ` in ‘000 As at 31-Mar-16 31-Mar-15 4,104,467 4,104,467 - - Total 4,104,467 4,104,467 442,456 442,456 - - Total 442,456 442,456 - - Total 34,796,976 32,249,444 75,547,122 56,365,672 17,625,441 15,138,242 220,786 168,394 - - - - 4,791,869 4,339,629 289,209,606 268,815,706 Total 387,394,824 344,827,643 Claims against the bank not acknowledged as debts - taxation Claims against the bank not acknowledged as debts - others 11,879,900 8,982,200 777,310 719,342 Liability on account of outstanding forward exchange contracts 5,290,757,746 6,740,520,896 Liability on account of outstanding derivative contracts 2,570,471,528 2,433,779,738 I II III IV V Guarantees given on behalf of constituents - in India - outside India VI Acceptances, endorsements and other obligations VII Other items for which the Bank is contingently liable HDFC Bank Limited Annual Report 2015-16 155 301,310,742 240,818,699 31,094,714 32,080,401 317,525,754 279,900,503 11,456,132 15,984,183 Total 8,535,273,826 9,752,785,962 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 SCHEDULE 13 - INTEREST EARNED I II III IV Interest / discount on advances / bills Income from investments Interest on balance with RBI and other inter-bank funds Others SCHEDULE 14 - OTHER INCOME I II III IV V VI Commission, exchange and brokerage Proﬁt / (loss) on sale of investments (net) Proﬁt / (loss) on revaluation of investments (net) Proﬁt / (loss) on sale of building and other assets (net) Proﬁt / (loss) on exchange / derivative transactions (net) Miscellaneous income SCHEDULE 15 - INTEREST EXPENDED I II III Interest on deposits Interest on RBI / inter-bank borrowings Other interest SCHEDULE 16 - OPERATING EXPENSES I Payments to and provisions for employees II Rent, taxes and lighting III Printing and stationery IV V VI VII VIII IX X XI XII Advertisement and publicity Depreciation on bank's property Directors' fees / remuneration, allowances and expenses Auditors' fees and expenses Law charges Postage, telegram, telephone etc. Repairs and maintenance Insurance Other expenditure* ` in ‘000 Year ended Year ended 31-Mar-16 31-Mar-15 477,361,879 393,346,623 141,254,962 98,627,289 3,751,556 5,429,360 9,247,217 9,261,653 Total 631,615,614 506,664,925 83,067,577 71,243,564 7,525,247 5,320,048 (173,689) (1,185) 556,306 111,264 12,277,267 10,279,548 9,421,324 7,946,105 Total 112,116,541 95,456,835 291,509,468 235,047,802 33,664,532 24,785,390 15,521,748 13,051,361 Total 340,695,748 272,884,553 63,061,367 51,626,755 12,740,606 10,878,565 4,251,803 3,871,910 2,584,338 1,903,378 7,380,326 6,804,512 28,861 19,331 10,871 14,508 998,702 717,718 4,217,982 4,162,472 10,417,860 8,602,081 5,618,738 4,476,139 66,998,894 52,706,340 Total 178,318,808 145,775,249 *Includes professional fees, commission to sales agents, travel and hotel charges, card and merchant acquiring expenses and system management fees. HDFC Bank Limited Annual Report 2015-16 156 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 SCHEDULE 17 - Signiﬁcant accounting policies appended to and forming part of the consolidated ﬁnancial statements for the year ended March 31, 2016 A BACKGROUND HDFC Bank Limited (‘HDFC Bank’ or ‘the Bank’), incorporated in Mumbai, India is a publicly held banking company engaged in providing a range of banking and ﬁnancial services including retail banking, wholesale banking and treasury operations. The Bank is governed by the Banking Regulation Act, 1949 and the Companies Act, 2013. The Bank has overseas branch operations in Bahrain, Hong Kong and Dubai. The ﬁnancial accounting systems of the Bank are centralised and, therefore, accounting returns are not required to be submitted by branches of the Bank. B PRINCIPLES OF CONSOLIDATION The consolidated ﬁnancial statements comprise the ﬁnancial statements of the Bank and its subsidiaries constituting the ‘Group’ and ‘Group’s’ share of proﬁts of associates. The Bank consolidates its subsidiaries in accordance with Accounting Standard (‘AS’) 21, Consolidated Financial Statements, speciﬁed under section 133 of the Companies Act, 2013, on a line-by-line basis by adding together the like items of assets, liabilities, income and expenditure. Capital reserve / Goodwill on consolidation represent the difference between the Bank’s share in the net worth of the subsidiary and the cost of acquisition at the time of making the investment in the subsidiary. Further, the Bank accounts for investments in associates under equity method of accounting in accordance with AS-23, Accounting for Investments in Associates in Consolidated Financial Statements, speciﬁed under section 133 of the Companies Act, 2013. C BASIS OF PREPARATION The consolidated ﬁnancial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India (‘GAAP’), statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time, Accounting Standards (‘AS’) speciﬁed under section 133 of the Companies Act, 2013, in so far as they apply to banks and current practices prevailing within the banking industry in India. Use of estimates The preparation of consolidated ﬁnancial statements in conformity with GAAP requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the ﬁnancial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the ﬁnancial statements are prudent and reasonable. Actual results could differ from these estimates. Any revision in the accounting estimates is recognised prospectively in the current and future periods. HDB Financial Services Limited is a non-banking ﬁnancial company and a subsidiary of the Bank. HDFC Securities Limited is a ﬁnancial services provider along with broking as core product and a subsidiary of the Bank. The consolidated ﬁnancial statements present the accounts of HDFC Bank Limited with its following subsidiaries and associates: Name HDFC Securities Limited HDB Financial Services Limited Atlas Documentary Facilitators Company Private Limited International Asset Reconstruction Company Private Limited HBL Global Private Limited HDB Employee Welfare Trust Relation Subsidiary Subsidiary Associate Associate Associate * Country of incorporation Ownership interest** India India India India India India 97.9% 97.1% 29.0% 29.4% Nil * The accounts of HDB Employee Welfare Trust, a trust established for providing general welfare measures such as medical relief and educational assistance to the employees of the Bank and their dependents has been entirely consolidated. ** Denotes HDFC Bank’s direct interest. HDFC Bank Limited Annual Report 2015-16 157 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 During the year ended March 31, 2016 the shareholding in HDB Financial Services Limited decreased from 97.2% to 97.1% on account of 7,02,550 stock options exercised by minority stakeholders. The audited ﬁnancial statements of the subsidiary companies, entity controlled by the Bank, associates and the un-audited ﬁnancial statements of an associate have been drawn up to the same reporting date as that of the Bank, i.e. March 31, 2016. D 1 PRINCIPAL ACCOUNTING POLICIES Investments HDFC Bank Limited Classiﬁcation: In accordance with the RBI guidelines on investment classiﬁcation and valuation, investments are classiﬁed on the date of purchase into “Held for Trading” (‘HFT’), “Available for Sale” (‘AFS’) and “Held to Maturity” (‘HTM’) categories (hereinafter called “categories”). Subsequent shifting amongst the categories is done in accordance with the RBI guidelines. Under each of these categories, investments are further classiﬁed under six groups (hereinafter called “groups”) - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments. Purchase and sale transactions in securities are recorded under ‘Settlement Date’ of accounting, except in the case of equity shares where ‘Trade Date’ accounting is followed. Basis of classiﬁcation: Investments that are held principally for resale within 90 days from the date of purchase are classiﬁed under HFT category. Investments which the Bank intends to hold till maturity are classiﬁed as HTM securities. Investments in the equity of subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines. Investments which are not classiﬁed in either of the above categories are classiﬁed under AFS category. Acquisition cost: Brokerage, commission, etc. and broken period interest on debt instruments are recognised in the Statement of Proﬁt and Loss and are not included in the cost of acquisition. Disposal of investments: Proﬁt / Loss on sale of investments under the aforesaid three categories is recognised in the Statement of Proﬁt and Loss. Cost of investments is based on the weighted average cost method. The proﬁt from sale of investment under HTM category, net of taxes and transfer to statutory reserve is appropriated from Statement of Proﬁt and Loss to “Capital Reserve” in accordance with the RBI Guidelines. Short sale: The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines. The short position is reﬂected as the amount received on sale and is classiﬁed under ‘Other Liabilities’. The short position is marked to market and loss, if any, is charged to the Statement of Proﬁt and Loss while gain, if any, is ignored. Proﬁt / Loss on settlement of the short position is recognised in the Statement of Proﬁt and Loss. Valuation: Investments classiﬁed under AFS and HFT categories are marked to market as per the RBI guidelines. Traded investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices declared by Primary Dealers Association of India (‘PDAI’) jointly with Fixed Income Money Market and Derivatives Association (‘FIMMDA’), periodically. The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR’) included in the AFS and HFT categories is computed as per the Yield-to-Maturity (‘YTM’) rates published by FIMMDA. The valuation of other unquoted ﬁxed income securities (viz. State Government securities, other approved securities, bonds and debentures) and preference shares, is done with a mark-up (reﬂecting associated credit and liquidity risk) over the YTM rates for government securities published by FIMMDA. Special bonds such as oil bonds, fertilizer bonds etc. which are directly issued by Government of India (‘GOI’) that do not HDFC Bank Limited Annual Report 2015-16 158 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 qualify for SLR are also valued by applying the mark-up above the corresponding yield on GOI securities. Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available or at ` 1 as per the RBI guidelines. Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund. Treasury bills, commercial papers and certiﬁcate of deposits being discounted instruments, are valued at carrying cost and stated at acquisition cost. Security receipts are valued as per the net asset value provided by the issuing Asset Reconstruction Company from time to time. Net depreciation in the value, if any, compared to the acquisition cost, in any of the six groups, is charged to the Statement of Proﬁt and Loss. The net appreciation, if any, in any of the six groups is not recognised except to the extent of depreciation already provided. The valuation of investments includes securities under repo transactions. The book value of individual securities is not changed after the valuation of investments. Investments classiﬁed under HTM category are carried at their acquisition cost and not marked to market. Any premium on acquisition is amortised over the remaining maturity period of the security on a constant yield to maturity basis. Such amortisation of premium is adjusted against interest income under the head “Income from investments” as per the RBI guidelines. Any diminution, other than temporary, in the value of investments in subsidiaries / joint ventures is provided for. Non-performing investments are identiﬁed and depreciation / provision are made thereon based on the RBI guidelines. The depreciation / provision on such non-performing investments are not set off against the appreciation in respect of other performing securities. Interest on non-performing investments is not recognised in the Statement of Proﬁt and Loss until received. Repo and reverse repo transactions: In accordance with the RBI guidelines repo and reverse repo transactions in government securities and corporate debt securities (excluding transactions conducted under Liquidity Adjustment Facility (‘LAF’) and Marginal Standby Facility (‘MSF’) with RBI) are reﬂected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted for as interest expense and revenue on reverse repo transactions are accounted for as interest income. In respect of repo transactions under LAF and MSF with RBI, amount borrowed from RBI is credited to investment account and reversed on maturity of the transaction. Costs thereon are accounted for as interest expense. In respect of reverse repo transactions under LAF, amount lent to RBI is debited to investment account and reversed on maturity of the transaction. Revenues thereon are accounted for as interest income. HDFC Securities Limited Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classiﬁed as current investments. All other investments are classiﬁed as long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually. HDB Financial Services Limited Investments expected to mature after twelve months are taken as long term / non-current investment and stated at cost. Provision is recognised only in case of diminution, which is other than temporary in nature. Investments maturing within three months from the date of acquisition are classiﬁed as cash equivalents if they are readily convertible into cash. All other investment are recognised as short term / current investments and are valued at lower of cost and net realisable value. Interest on borrowings is recognised in Statement of Proﬁt and Loss on an accrual basis. Costs associated with borrowings are grouped under ﬁnancial charges along with the interest costs. HDB Employees Welfare Trust Long-term investments are stated at cost of acquisition. Provision for diminution is made if such diminution is considered as being other than temporary in nature. HDFC Bank Limited Annual Report 2015-16 159 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 2 Advances HDFC Bank Limited Classiﬁcation: Advances are classiﬁed as performing and non-performing based on the RBI guidelines and are stated net of bills rediscounted, speciﬁc provisions, interest in suspense for non-performing advances, claims received from Export Credit Guarantee Corporation, provisions for funded interest term loan classiﬁed as non-performing advances and provisions in lieu of diminution in the fair value of restructured assets. Interest on non-performing advances is transferred to an interest suspense account and not recognised in the Statement of Proﬁt and Loss until received. Provisioning: Speciﬁc loan loss provisions in respect of non-performing advances are made based on management’s assessment of the degree of impairment of wholesale and retail advances, subject to the minimum provisioning level prescribed by the RBI. The speciﬁc provision levels for retail non-performing assets are also based on the nature of product and delinquency levels. Speciﬁc loan loss provisions in respect of non-performing advances are charged to the Statement of Proﬁt and Loss and included under Provisions and Contingencies. In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier reported by the Bank as Special Mention Account under “SMA-2” category to Central Repository of Information on Large Credits (CRILC). Accelerated provision is also made on non-performing advances which are erstwhile SMA-2 accounts with Aggregate Exposure (AE) ` 1,000 million or above and Joint Lenders’ Forum (JLF) is not formed or they fail to agree upon a common Corrective Action Plan (CAP) within the stipulated time frame. Accounts are written-off in accordance with the Bank’s policies. Recoveries from bad debts written-off are recognised in the Statement of Proﬁt and Loss and included under other income. In relation to non-performing derivative contracts, as per the extant RBI guidelines, the Bank makes provision for the entire amount of overdue and future receivables relating to positive marked to market value of the said derivative contracts. The Bank maintains general provision for standard assets including credit exposures computed as per the current marked to market values of interest rate and foreign exchange derivative contracts and gold in accordance with the guidelines and at levels stipulated by RBI from time to time. In the case of overseas branches, general provision on standard advances is maintained at the higher of the levels stipulated by the respective overseas regulator or RBI. In accordance with RBI guidelines, provision is made against standard assets representing all exposures to the wholly owned step down subsidiaries of the overseas subsidiaries of Indian companies, sanctioned / renewed after December 31, 2015. Provision for standard assets is included under other liabilities. Provisions made in excess of the Bank’s policy for speciﬁc loan loss provisions for non-performing assets and regulatory general provisions are categorised as ﬂoating provisions. Creation of ﬂoating provisions is considered by the Bank up to a level approved by the Board of Directors. In accordance with the RBI guidelines, ﬂoating provisions are used up to a level approved by the Board only for contingencies under extraordinary circumstances and for making speciﬁc provisions for impaired accounts as per these guidelines or any regulatory guidance / instructions. Floating provisions have been included under other liabilities. Further to the provisions required to be held according to the asset classiﬁcation status, provisions are held for individual country exposures (other than for home country exposure). Countries are categorised into risk categories as per Export Credit Guarantee Corporation of India Ltd. (‘ECGC’) guidelines and provisioning is done in respect of that country where the net funded exposure is one percent or more of the Bank’s total assets. In addition to the above, the Bank on a prudential basis makes provisions on advances or exposures which are not NPAs, but has reasons to believe on the basis of the extant environment or speciﬁc information or basis regulatory guidance / instructions, the possible slippage of a speciﬁc advance or a group of advances or exposures or potential exposures. These are classiﬁed as contingent provisions and included under other liabilities. The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower’s ﬁnancial difﬁculty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would HDFC Bank Limited Annual Report 2015-16 160 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 normally involve modiﬁcation of terms of the advance / securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive reasons). Restructured accounts are classiﬁed as such by the Bank only upon approval and implementation of the restructuring package. Necessary provision for diminution in the fair value of a restructured account is made and classiﬁcation thereof is as per the extant RBI guidelines. Restructuring of an account is done at a borrower level. HDB Financial Services Limited Classiﬁcation: Advances are classiﬁed as standard, substandard and doubtful assets as per the Company policy approved by the Board. The rates applied for making provisions on non-performing advances are higher than those required by the relevant RBI guidelines. Interest on non-performing advances is transferred to an interest suspense account and not recognised in the Statement of Proﬁt and Loss until received. Loan assets are recognised on disbursement of loan and in case of new asset ﬁnancing on the transfer of ownership. Provisioning: The Company assesses all receivables for their recoverability and accordingly recognises provision for non-performing and doubtful assets as per approved Company policies and guidelines. The Company ensures provisions made are not lower than as stipulated by RBI guidelines. The Company provides 0.30% on standard assets as stipulated by Circular No. DNBR (PD) CC.No.002/03.10.001/2014-15 dated November 10, 2014 issued by RBI under the head “Contingent Provision against Standard Assets”. Loan origination costs: Brokerage, commission, incentive to employee, etc. paid at the time of acquisition of loans are charged to revenue. 3 Securitisation and transfer of assets HDFC Bank Limited The Bank securitises out its receivables subject to the Minimum Holding Period (‘MHP’) criteria and the Minimum Retention Requirements (‘MRR’) of RBI, to Special Purpose Vehicles (‘SPVs’) in securitisation transactions. Such securitised- out receivables are de-recognised in the balance sheet when they are sold (true sale criteria being fully met with) and consideration is received by the Bank. Sales / Transfers that do not meet these criteria for surrender of control are accounted for as secured borrowings. In respect of receivable pools securitised-out, the Bank provides liquidity and credit enhancements, as speciﬁed by the rating agencies, in the form of cash collaterals / guarantees and / or by subordination of cash ﬂows, not exceeding 20% of the total securitised instruments, in line with RBI guidelines. The Bank also acts as a servicing agent for receivable pools securitised-out. The Bank also enters into transactions for transfer of standard assets through the direct assignment of cash ﬂows, which are similar to asset-backed securitisation transactions through the SPV route, except that such portfolios of receivables are assigned directly to the purchaser and are not represented by Pass Through Certiﬁcates (‘PTCs’), subject to the RBI prescribed MHP criteria and the MRR. The RBI issued addendum guidelines on securitisation of standard assets vide its circular dated May 7, 2012. Accordingly, the Bank does not provide liquidity or credit enhancements on the direct assignment transactions undertaken subsequent to these guidelines. Pursuant to these guidelines, the Bank amortises any proﬁt received in cash for every individual securitisation or direct assignment transaction. This amortisation is calculated as the maximum of either of the three parameters stated below: (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:79)(cid:82)(cid:84)(cid:70)(cid:79)(cid:76)(cid:73)(cid:79)(cid:12)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:67)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:83)(cid:80)(cid:69)(cid:67)(cid:73)(cid:108)(cid:67)(cid:0) provisions, if any, and direct write-offs made on the MRR and any other exposures to the securitisation transaction (other than credit enhancing interest only strip); or (cid:84)(cid:72)(cid:69)(cid:0) (cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:85)(cid:78)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) (cid:67)(cid:65)(cid:83)(cid:72)(cid:0) (cid:80)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0) (cid:65)(cid:84)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:66)(cid:69)(cid:71)(cid:73)(cid:78)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:89)(cid:69)(cid:65)(cid:82)(cid:0) (cid:77)(cid:85)(cid:76)(cid:84)(cid:73)(cid:80)(cid:76)(cid:73)(cid:69)(cid:68)(cid:0) (cid:66)(cid:89)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:80)(cid:82)(cid:73)(cid:78)(cid:67)(cid:73)(cid:80)(cid:65)(cid:76)(cid:0) (cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) during the year as a proportion to the amount of unamortised principal at the beginning of the year; or (cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:85)(cid:78)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:67)(cid:65)(cid:83)(cid:72)(cid:0)(cid:80)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:69)(cid:71)(cid:73)(cid:78)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:0)(cid:77)(cid:65)(cid:84)(cid:85)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:82)(cid:0) the direct assignment transaction. HDFC Bank Limited Annual Report 2015-16 161 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 In relation to securitisation transactions undertaken prior to the aforementioned RBI guidelines, including those undertaken through the direct assignment route, the Bank continues to amortise the proﬁt / premium that arose on account of sale of receivables over the life of the securities sold, in accordance with the RBI guidelines on securitisation of standard assets issued vide its circular dated February 1, 2006. Any loss arising on account of sale of receivables is recognised in the Statement of Proﬁt and Loss for the period in which the sale occurs in accordance with the said RBI guidelines. The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI guidelines, in the case of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances and where the Bank is participating, the aggregate amount of the participation is classiﬁed under advances. In the case of participation without risk, the aggregate amount of participation issued by the Bank is classiﬁed under borrowings and where the Bank is participating, the aggregate amount of participation is shown as due from banks under advances. In accordance with RBI guidelines on sale of non-performing advances, if the sale is at a price below the net book value (i.e., book value less provisions held), the shortfall is charged to the Statement of Proﬁt and Loss. If the sale is for a value higher than the net book value, the excess provision is not reversed but is utilised to meet the shortfall / loss on account of sale of other non-performing advances. The RBI issued new guidelines on sale of non-performing advances on February 26, 2014. In accordance with these guidelines, if the sale of non-performing advances is at a price below the net book value, the shortfall is charged to the Statement of Proﬁt and Loss spread over a period of two years. If the sale is for a value higher than the net book value, the excess provision is credited to the Statement of Proﬁt and Loss in the year the amounts are received. The Bank invests in PTCs issued by other SPVs. These are accounted for at the deal value and are classiﬁed as investments. The Bank also buys loans through the direct assignment route which are classiﬁed as advances. These are carried at acquisition cost unless it is more than the face value, in which case the premium is amortised based on Effective Interest Rate (EIR) method. HDB Financial Services Limited (cid:115)(cid:0) (cid:48)(cid:82)(cid:73)(cid:79)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:41)(cid:83)(cid:83)(cid:85)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:50)(cid:34)(cid:41)(cid:0)(cid:35)(cid:73)(cid:82)(cid:67)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:68)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:33)(cid:85)(cid:71)(cid:85)(cid:83)(cid:84)(cid:0)(cid:18)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:18) a) On receivables being assigned / securtised, the assets are de-recognised as all the rights, title, future receivables & interest thereof are assigned to the purchaser. b) Gains arising on assignment of receivables will be recognised at the end of the tenure of assignment contract as per the RBI guidelines, while loss, if any is recognised upfront. (cid:115)(cid:0) (cid:48)(cid:79)(cid:83)(cid:84)(cid:0)(cid:41)(cid:83)(cid:83)(cid:85)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:50)(cid:34)(cid:41)(cid:0)(cid:35)(cid:73)(cid:82)(cid:67)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:68)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:33)(cid:85)(cid:71)(cid:85)(cid:83)(cid:84)(cid:0)(cid:18)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:18) a) Securitised receivables are de-recognised in the balance sheet when they are sold i.e. they meet true sale criteria. b) Gains arising out of securitisation of assets are recognised over the tenure of the securities issued by Special Purpose Vehicle Trust (SPV). c) The excess interest spread on the securitisation transactions are recognised in the Statement of Proﬁt and Loss only when it is redeemed in cash by the SPV after adjusting for overdue receivable. Losses, if any, are recognised upfront. 4 Fixed assets and depreciation HDFC Bank Limited Fixed assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of purchase and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is ready to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future beneﬁt / functioning capability from / of such assets. Depreciation is charged over the estimated useful life of the ﬁxed asset on a straight-line basis. The Bank, pursuant to the Companies Act, 2013, has carried out a technical assessment of the useful life of its assets taking into account changes in HDFC Bank Limited Annual Report 2015-16 162 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 environment, changes in technology, the utility and efﬁcacy of the asset in use. The estimated useful lives of key ﬁxed assets are given below: Asset Estimated useful life as assessed by the Bank Owned premises Automated Teller Machines (‘ATMs’) Electrical equipment and installations Ofﬁce equipment Computers Modems, routers, switches, servers, network and related IT equipment Motor cars Furniture and ﬁttings 61 years 10 years 6 to 10 years 3 to 6 years 3 years 3 to 6 years 4 years 16 years Estimated useful life speciﬁed under Schedule II of the Companies Act, 2013 60 years 15 years 10 years 5 years 3 years 6 years 8 years 10 years (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:69)(cid:0)(cid:72)(cid:79)(cid:76)(cid:68)(cid:0)(cid:80)(cid:82)(cid:69)(cid:77)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:71)(cid:69)(cid:68)(cid:0)(cid:79)(cid:70)(cid:70)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:77)(cid:65)(cid:73)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:82)(cid:73)(cid:77)(cid:65)(cid:82)(cid:89)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:69)(cid:14) (cid:51)(cid:79)(cid:70)(cid:84)(cid:87)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:78)(cid:68)(cid:73)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:65)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:21)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:83)(cid:14) (cid:48)(cid:79)(cid:73)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:78)(cid:65)(cid:76)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:70)(cid:85)(cid:76)(cid:76)(cid:89)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:14) (cid:38)(cid:79)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:79)(cid:76)(cid:68)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:12)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:83)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:13)(cid:82)(cid:65)(cid:84)(cid:65)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:14) (cid:55)(cid:72)(cid:69)(cid:78)(cid:69)(cid:86)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:85)(cid:83)(cid:69)(cid:70)(cid:85)(cid:76)(cid:0)(cid:76)(cid:73)(cid:70)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:85)(cid:78)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:71)(cid:69)(cid:68)(cid:0) over the revised remaining useful life of the said asset. (cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0) (cid:79)(cid:78)(cid:0) (cid:83)(cid:65)(cid:76)(cid:69)(cid:0) (cid:79)(cid:70)(cid:0) (cid:73)(cid:77)(cid:77)(cid:79)(cid:86)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) (cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:84)(cid:89)(cid:0) (cid:78)(cid:69)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:65)(cid:88)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:70)(cid:69)(cid:82)(cid:0) (cid:84)(cid:79)(cid:0) (cid:83)(cid:84)(cid:65)(cid:84)(cid:85)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0) (cid:82)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:12)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) (cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0) (cid:84)(cid:79)(cid:0) (cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0) (cid:82)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:0) account. HDFC Securities Limited Tangible assets are stated at acquisition cost, net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises purchase price and expenses directly attributable to bringing the asset to its working condition for the intended use. Subsequent expenditure related to an item of ﬁxed asset are added to its book value only if it increases the future beneﬁts from the existing asset beyond its previously assessed standard of performance. Items of ﬁxed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the ﬁnancial statements. Gains or losses arising from disposal or retirement of tangible ﬁxed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised net, within “Other Income” or “Other Expenses”, as the case maybe, in the Statement of Proﬁt and Loss in the year of disposal or retirement. Capital work-in-progress are ﬁxed assets which are not yet ready for their intended use. Such assets are carried at cost comprising direct cost and related incidental expenses. Depreciation is provided on a pro-rata basis to fully depreciate the assets using the straight-line method over the estimated useful lives of the assets. For the following categories of assets, depreciation on tangible ﬁxed assets has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013: Asset Computer hardware Ofﬁce equipment Furniture and ﬁxtures Leasehold improvements Electricals Ofﬁce premises Estimated useful life 3 years 5 years 10 years Over the remaining period of the lease 10 years 60 years HDFC Bank Limited Annual Report 2015-16 163 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 For the following categories of assets, the Company has assessed useful life based on technical advice, taking into account the nature of the asset, the estimates usage of asset, the operating condition of asset, anticipated technological changes and utility in the business, as below: Asset Vehicles Network & servers Estimated useful life 4 years 4 years (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:33)(cid:76)(cid:76)(cid:0)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:76)(cid:69)(cid:83)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0)` 5,000 individually are fully depreciated in the year of purchase. (cid:53)(cid:83)(cid:69)(cid:70)(cid:85)(cid:76)(cid:0)(cid:76)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:69)(cid:68)(cid:0)(cid:65)(cid:84)(cid:0)(cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:68)(cid:74)(cid:85)(cid:83)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:70)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:14) (cid:41)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:84)(cid:0)(cid:65)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:12)(cid:0)(cid:78)(cid:69)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:67)(cid:67)(cid:85)(cid:77)(cid:85)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:67)(cid:67)(cid:85)(cid:77)(cid:85)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:77)(cid:80)(cid:65)(cid:73)(cid:82)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:69)(cid:83)(cid:12)(cid:0) if any. (cid:35)(cid:79)(cid:83)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:0)(cid:80)(cid:82)(cid:73)(cid:67)(cid:69)(cid:12)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13)(cid:82)(cid:69)(cid:70)(cid:85)(cid:78)(cid:68)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:84)(cid:65)(cid:88)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:68)(cid:85)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:76)(cid:89)(cid:0)(cid:65)(cid:84)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset is charged to the Statement of Proﬁt and Loss as an expense unless it is probable that such expenditure will enable the intangible asset increase the future beneﬁts from the existing asset beyond its previously assessed standard of performance and such expenditure can be measured and attributed to the intangible asset reliably, in which case, such expenditure is capitalised. (cid:37)(cid:88)(cid:80)(cid:69)(cid:78)(cid:68)(cid:73)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0) (cid:79)(cid:78)(cid:0) (cid:83)(cid:79)(cid:70)(cid:84)(cid:87)(cid:65)(cid:82)(cid:69)(cid:0) (cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:69)(cid:76)(cid:73)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) (cid:67)(cid:65)(cid:82)(cid:82)(cid:73)(cid:69)(cid:68)(cid:0) (cid:65)(cid:83)(cid:0) (cid:73)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0) (cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0) (cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) where such assets are not yet ready for their intended use. (cid:41)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0) (cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) (cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) (cid:79)(cid:78)(cid:0) (cid:65)(cid:0) (cid:83)(cid:84)(cid:82)(cid:65)(cid:73)(cid:71)(cid:72)(cid:84)(cid:13)(cid:76)(cid:73)(cid:78)(cid:69)(cid:0) (cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0) (cid:79)(cid:86)(cid:69)(cid:82)(cid:0) (cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0) (cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) (cid:85)(cid:83)(cid:69)(cid:70)(cid:85)(cid:76)(cid:0) (cid:76)(cid:73)(cid:86)(cid:69)(cid:83)(cid:14)(cid:0) (cid:33)(cid:0) (cid:82)(cid:69)(cid:66)(cid:85)(cid:84)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) (cid:80)(cid:82)(cid:69)(cid:83)(cid:85)(cid:77)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use is considered by the management. The amortisation period and the amortisation method are reviewed at least at each reporting date. If the expected useful life of the asset is signiﬁcantly different from previous estimates, the amortisation period is changed accordingly. (cid:39)(cid:65)(cid:73)(cid:78)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:84)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:82)(cid:0)(cid:68)(cid:73)(cid:83)(cid:80)(cid:79)(cid:83)(cid:65)(cid:76)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:68)(cid:69)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:73)(cid:70)(cid:70)(cid:69)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:66)(cid:69)(cid:84)(cid:87)(cid:69)(cid:69)(cid:78)(cid:0) the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Proﬁt and Loss in the year of disposal. The estimated useful lives of intangible assets used for amortisation are: Asset Computer software licenses Electronic trading platform (Website) Bombay Stock Exchange card HDB Financial Services Limited Estimated useful life 5 years 5 years 10 years Fixed assets are stated at cost less accumulated depreciation and impairment, if any. The cost of ﬁxed assets comprise purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future beneﬁt / functioning capability from / of such assets. Depreciation is charged over the estimated useful life of the ﬁxed assets on a straight-line basis in the manner prescribed in Schedule II of the Companies Act, 2013, except for assets as under: Asset Motor cars Estimated useful life as assessed by the Company Estimated useful life under Schedule II of Companies Act, 2013 5 years 8 years (cid:115)(cid:0) Improvements to lease hold premises are charged off over the primary period of lease or its useful life, whichever is lower. HDFC Bank Limited Annual Report 2015-16 164 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:76)(cid:69)(cid:83)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0)` 5,000 are fully depreciated in the year of purchase. (cid:52)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:46)(cid:73)(cid:76)(cid:0)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:0)(cid:86)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:78)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:85)(cid:83)(cid:69)(cid:70)(cid:85)(cid:76)(cid:0)(cid:76)(cid:73)(cid:70)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:66)(cid:76)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:14) (cid:38)(cid:79)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:79)(cid:76)(cid:68)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:12)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:83)(cid:0)(cid:66)(cid:69)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:13)(cid:82)(cid:65)(cid:84)(cid:65)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:14) Software and system development expenditure are capitalised at cost of acquisition including cost attributable to bring the same in working condition and the useful life of the same is estimated of 3 years with zero residual value. Any expenses on such software for support and maintenance payable annually are charged to the Statement of Proﬁt and Loss. 5 Impairment of assets Group The Group assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Statement of Proﬁt and Loss to the extent the carrying amount of assets exceeds their estimated recoverable amount. 6 Transactions involving foreign exchange HDFC Bank Limited Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing on the date of the transaction. Income and expenditure items of integral foreign operations (representative ofﬁces) are translated at the weekly average closing rates and of non-integral foreign operations (foreign branches) at the monthly average closing rates. Foreign currency monetary items of domestic and integral foreign operations are translated at the closing exchange rates notiﬁed by Foreign Exchange Dealers’ Association of India (‘FEDAI’) as at the Balance Sheet date and the resulting net valuation proﬁt or loss arising due to a net open position in any foreign currency is recognised in the Statement of Proﬁt and Loss. Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated at closing exchange rates notiﬁed by FEDAI at the Balance Sheet date and the resulting proﬁt / loss arising from exchange differences are accumulated in the Foreign Currency Translation Account until remittance or the disposal of the net investment in the non-integral foreign operations in accordance with AS - 11, The Effects of Changes in Foreign Exchange Rates. Foreign exchange spot and forward contracts outstanding as at the Balance Sheet date and held for trading, are revalued at the closing spot and forward rates respectively as notiﬁed by FEDAI and at interpolated rates for contracts of interim maturities. The USD-INR rate for valuation of contracts having longer maturities i.e. greater than one year is implied from MIFOR and LIBOR curves. For other currency pairs, the forward points (for rates / tenors not published by FEDAI) are obtained from Reuters for valuation of the FX deals. As directed by FEDAI to consider P&L on present value basis, the forward proﬁt or loss on the deals are discounted till the valuation date using the discounting yields. The resulting proﬁt or loss on valuation is recognised in the Statement of Proﬁt and Loss. Foreign exchange contracts are classiﬁed as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract is amortised as expense or income over the life of the contract. Currency future contracts are marked to market daily using settlement price on a trading day, which is the closing price of the respective future contracts on that day. While the daily settlement price is computed on the basis of the last half an hour weighted average price of such contract, the ﬁnal settlement price is taken as the RBI reference rate on the last trading day of the future contract or as may be speciﬁed by the relevant authority from time to time. All open positions are marked to market based on the settlement price and the resultant marked to market proﬁt / loss is daily settled with the exchange. Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. HDFC Bank Limited Annual Report 2015-16 165 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 7 Derivative contracts HDFC Bank Limited The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the derivative contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting dates. Derivatives are classiﬁed as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Changes in the fair value of derivatives other than those designated as hedges are recognised in the Statement of Proﬁt and Loss. Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market. In respect of derivative contracts that are marked to market, changes in the market value are recognised in the Statement of Proﬁt and Loss in the relevant period. The Bank identiﬁes the hedged item (asset or liability) at the inception of the transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically thereafter. Gains or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Proﬁt and Loss. Contingent liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. 8 Revenue recognition HDFC Bank Limited (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0) (cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0) (cid:73)(cid:83)(cid:0) (cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) (cid:73)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:44)(cid:79)(cid:83)(cid:83)(cid:0) (cid:79)(cid:78)(cid:0) (cid:65)(cid:78)(cid:0) (cid:65)(cid:67)(cid:67)(cid:82)(cid:85)(cid:65)(cid:76)(cid:0) (cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:12)(cid:0) (cid:69)(cid:88)(cid:67)(cid:69)(cid:80)(cid:84)(cid:0) (cid:73)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:67)(cid:65)(cid:83)(cid:69)(cid:0) (cid:79)(cid:70)(cid:0) (cid:78)(cid:79)(cid:78)(cid:13) performing assets where it is recognised upon realisation as per RBI norms. (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:48)(cid:52)(cid:35)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:76)(cid:79)(cid:65)(cid:78)(cid:83)(cid:0)(cid:66)(cid:79)(cid:85)(cid:71)(cid:72)(cid:84)(cid:0)(cid:79)(cid:85)(cid:84)(cid:0)(cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:0)(cid:65)(cid:83)(cid:83)(cid:73)(cid:71)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:82)(cid:79)(cid:85)(cid:84)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0) effective interest rate. (cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0) (cid:79)(cid:78)(cid:0) (cid:78)(cid:79)(cid:78)(cid:13)(cid:67)(cid:79)(cid:85)(cid:80)(cid:79)(cid:78)(cid:0) (cid:66)(cid:69)(cid:65)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:68)(cid:73)(cid:83)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0) (cid:73)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:73)(cid:83)(cid:0) (cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) (cid:79)(cid:86)(cid:69)(cid:82)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:84)(cid:69)(cid:78)(cid:79)(cid:82)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:73)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:79)(cid:78)(cid:0) (cid:65)(cid:0) (cid:67)(cid:79)(cid:78)(cid:83)(cid:84)(cid:65)(cid:78)(cid:84)(cid:0) effective yield basis. (cid:44)(cid:79)(cid:65)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:69)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:87)(cid:72)(cid:69)(cid:78)(cid:0)(cid:68)(cid:85)(cid:69)(cid:14)(cid:0)(cid:51)(cid:89)(cid:78)(cid:68)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:15)(cid:0)(cid:33)(cid:82)(cid:82)(cid:65)(cid:78)(cid:71)(cid:69)(cid:82)(cid:0)(cid:70)(cid:69)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:87)(cid:72)(cid:69)(cid:78)(cid:0)(cid:65)(cid:0) signiﬁcant act / milestone is completed. (cid:39)(cid:65)(cid:73)(cid:78)(cid:0)(cid:15)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:83)(cid:69)(cid:76)(cid:76)(cid:0)(cid:68)(cid:79)(cid:87)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:76)(cid:79)(cid:65)(cid:78)(cid:83)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:76)(cid:73)(cid:78)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:84)(cid:65)(cid:78)(cid:84)(cid:0)(cid:50)(cid:34)(cid:41)(cid:0)(cid:71)(cid:85)(cid:73)(cid:68)(cid:69)(cid:76)(cid:73)(cid:78)(cid:69)(cid:83)(cid:14) (cid:36)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:69)(cid:81)(cid:85)(cid:73)(cid:84)(cid:89)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:12)(cid:0)(cid:80)(cid:82)(cid:69)(cid:70)(cid:69)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:77)(cid:85)(cid:84)(cid:85)(cid:65)(cid:76)(cid:0)(cid:70)(cid:85)(cid:78)(cid:68)(cid:0)(cid:85)(cid:78)(cid:73)(cid:84)(cid:83)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:87)(cid:72)(cid:69)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0) the dividend is established. (cid:39)(cid:85)(cid:65)(cid:82)(cid:65)(cid:78)(cid:84)(cid:69)(cid:69)(cid:0) (cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0) (cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:78)(cid:0) (cid:76)(cid:69)(cid:84)(cid:84)(cid:69)(cid:82)(cid:0) (cid:79)(cid:70)(cid:0) (cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:12)(cid:0) (cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0) (cid:76)(cid:79)(cid:67)(cid:75)(cid:69)(cid:82)(cid:0) (cid:82)(cid:69)(cid:78)(cid:84)(cid:0) (cid:70)(cid:69)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0) (cid:70)(cid:69)(cid:69)(cid:83)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:0) (cid:67)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) recognised on a straight-line basis over the period of contract. Other fees and commission income are recognised when due, except in cases where the Bank is uncertain of ultimate collection. HDFC Securities Limited (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:82)(cid:69)(cid:78)(cid:68)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:66)(cid:82)(cid:79)(cid:75)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:85)(cid:80)(cid:79)(cid:78)(cid:0)(cid:82)(cid:69)(cid:78)(cid:68)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:14) (cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:84)(cid:82)(cid:65)(cid:68)(cid:69)(cid:0)(cid:68)(cid:65)(cid:84)(cid:69)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:67)(cid:67)(cid:85)(cid:82)(cid:83)(cid:14) (cid:38)(cid:69)(cid:69)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:83)(cid:85)(cid:66)(cid:83)(cid:67)(cid:82)(cid:73)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:73)(cid:67)(cid:65)(cid:76)(cid:76)(cid:89)(cid:0)(cid:66)(cid:85)(cid:84)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:69)(cid:65)(cid:82)(cid:78)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:80)(cid:82)(cid:79)(cid:13)(cid:82)(cid:65)(cid:84)(cid:65)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) term of the contract. (cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:68)(cid:73)(cid:83)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:85)(cid:80)(cid:79)(cid:78)(cid:0)(cid:65)(cid:76)(cid:76)(cid:79)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:78)(cid:84)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:83)(cid:0) the case may be, issue of the insurance policy to the applicant. (cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:70)(cid:69)(cid:69)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:70)(cid:79)(cid:82)(cid:69)(cid:83)(cid:65)(cid:73)(cid:68)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:69)(cid:88)(cid:67)(cid:76)(cid:85)(cid:83)(cid:73)(cid:86)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:84)(cid:65)(cid:88)(cid:12)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:65)(cid:88)(cid:12)(cid:0)(cid:83)(cid:84)(cid:65)(cid:77)(cid:80)(cid:0)(cid:68)(cid:85)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) other levies by SEBI and stock exchanges. (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:65)(cid:82)(cid:78)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:68)(cid:69)(cid:76)(cid:65)(cid:89)(cid:69)(cid:68)(cid:0)(cid:80)(cid:65)(cid:89)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:67)(cid:76)(cid:73)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0)(cid:70)(cid:85)(cid:78)(cid:68)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:77)(cid:0)(cid:65)(cid:83)(cid:0)(cid:87)(cid:69)(cid:76)(cid:76)(cid:0)(cid:65)(cid:83)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:0)(cid:68)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:66)(cid:65)(cid:78)(cid:75)(cid:83)(cid:14) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:84)(cid:65)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:73)(cid:78)(cid:84)(cid:79)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0) on the ﬁnancial instrument and the rate applicable. (cid:36)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:87)(cid:72)(cid:69)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:83)(cid:84)(cid:65)(cid:66)(cid:76)(cid:73)(cid:83)(cid:72)(cid:69)(cid:68)(cid:14) HDFC Bank Limited Annual Report 2015-16 166 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 HDB Financial Services Limited (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:44)(cid:79)(cid:83)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:67)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:46)(cid:79)(cid:78)(cid:0)(cid:48)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:73)(cid:78)(cid:71)(cid:0)(cid:33)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (NPA) interest income is recognised upon realisation as per the RBI guidelines. Interest accrued and not realised before the classiﬁcation of the asset as an NPA is reversed and credited to the interest suspense account. (cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:34)(cid:48)(cid:47)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:71)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:12)(cid:0)(cid:69)(cid:88)(cid:67)(cid:69)(cid:80)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:67)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:72)(cid:69)(cid:81)(cid:85)(cid:69)(cid:0) bouncing charges, late payment charges, foreclosure charges and application money, which are accounted as and when received. (cid:53)(cid:80)(cid:70)(cid:82)(cid:79)(cid:78)(cid:84)(cid:0)(cid:15)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:69)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:86)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:68)(cid:73)(cid:83)(cid:66)(cid:85)(cid:82)(cid:83)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:76)(cid:79)(cid:65)(cid:78)(cid:14) (cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:44)(cid:79)(cid:83)(cid:83)(cid:0)(cid:87)(cid:72)(cid:69)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:83)(cid:84)(cid:65)(cid:66)(cid:76)(cid:73)(cid:83)(cid:72)(cid:69)(cid:68)(cid:14) HDB Employees Welfare Trust (cid:115)(cid:0) (cid:0)(cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:14) 9 Employee beneﬁts HDFC Bank Limited Employee Stock Option Scheme (‘ESOS’) The Employee Stock Option Scheme (‘the Scheme’) provides for the grant of options to acquire equity shares of the Bank to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a speciﬁed period. The Bank follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume on the working day immediately preceding the date of grant. Compensation cost, if any is amortised over the vesting period. Gratuity The Bank provides for gratuity to all employees. The beneﬁt vests upon completion of ﬁve years of service and is in the form of lump sum payment to employees on resignation, retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service. The Bank makes contributions to funds administered by trustees and managed by insurance companies for amounts notiﬁed by the said insurance companies. In respect of erstwhile Lord Krishna Bank (‘eLKB’) employees, the Bank makes contribution to a fund set up by eLKB and administered by the Board of Trustees. The deﬁned gratuity beneﬁt plans are valued by an independent actuary as at the Balance Sheet date using the projected unit credit method as per the requirement of AS-15, Employee Beneﬁts, to determine the present value of the deﬁned beneﬁt obligation and the related service costs. Under this method, the determination is based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognised in the Statement of Proﬁt and Loss. Superannuation Employees of the Bank, above a prescribed grade, are entitled to receive retirement beneﬁts under the Bank’s Superannuation Fund. The Bank contributes a sum equivalent to 13% of the employee’s eligible annual basic salary (15% for the Whole Time Directors and for certain eligible erstwhile Centurion Bank of Punjab (‘eCBoP’) staff) to insurance companies, which administer the fund. The Bank has no liability for future superannuation fund beneﬁts other than its contribution, and recognises such contributions as an expense in the year incurred, as such contribution is in the nature of deﬁned contribution. Provident fund In accordance with law, all employees of the Bank are entitled to receive beneﬁts under the provident fund. The Bank contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary). Of this, the Bank contributes an amount equal to 8.33% of employee’s basic salary up to a maximum salary level of ` 15,000/- per month, to the Pension Scheme administered by the Regional Provident Fund Commissioner (‘RPFC’). The balance amount is contributed to a fund set up by the Bank and administered by a Board of Trustees. In respect of eCBoP employees, employer’s and employee’s HDFC Bank Limited Annual Report 2015-16 167 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 share of contribution to Provident Fund till March 2009, was administered by RPFC and from April 2009 onwards, the same is transferred to the fund set up by the Bank and administered by the Board of Trustees. In respect of eLKB employees, the Bank contributes to a fund set up by eLKB and administered by a Board of Trustees. The Bank recognises such contributions as an expense in the year in which it is incurred. Interest payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Bank. The guidance note on implementing AS-15, Employee Beneﬁts, states that beneﬁts involving employer established provident funds, which require interest shortfalls to be provided, are to be considered as deﬁned beneﬁt plans. Actuarial valuation of this Provident Fund interest shortfall is done as per the guidance note issued in this respect by the The Institute of Actuaries of India (IAI) and provision towards this liability is made. The overseas branches of the Bank makes contribution to the respective relevant government scheme calculated as a percentage of the employees’ salaries. The Bank’s obligations are limited to these contributions, which are expensed when due, as such contribution is in the nature of deﬁned contribution. Leave encashment / Compensated absences The Bank does not have a policy of encashing unavailed leave for its employees, except for certain eLKB employees under Indian Banks’ Association (‘IBA’) structure. The Bank provides for leave encashment / compensated absences based on an independent actuarial valuation at the Balance Sheet date, which includes assumptions about demographics, early retirement, salary increases, interest rates and leave utilisation. Pension In respect of pension payable to certain eLKB employees under IBA structure, which is a deﬁned beneﬁt scheme, the Bank contributes 10% of basic salary to a pension fund set up by the Bank and administered by the Board of Trustees and the balance amount is provided based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary. In respect of certain eLKB employees who had moved to a Cost to Company (‘CTC’) driven compensation structure and had completed less than 15 years of service, the contribution which was made until then, is maintained as a fund and will be converted into annuity on separation after a lock-in-period of two years. For this category of employees, liability stands frozen and no additional provision is required except for interest as applicable to Provident Fund, which is provided for. In respect of certain eLKB employees who moved to a CTC structure and had completed service of more than 15 years, pension would be paid on separation based on salary applicable as on the date of movement to CTC structure. Provision thereto is made based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary. HDFC Securities Limited Short term Short term employee beneﬁts include salaries and performance incentives. A liability is recognised for the amount expected to be paid under short term cash bonus or proﬁt sharing plans if the Company has a present legal or informal obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. These costs are recognised as an expense in the Statement of Proﬁt and Loss at the undiscounted amount expected to be paid over the period of services rendered by the employees to the Company. Long term The Company offers its employees long term beneﬁts by way of deﬁned-contribution and deﬁned-beneﬁt plans, of which some have assets in special funds or securities. The plans are ﬁnanced by the Company and in the case of some deﬁned contribution plans by the Company along with its employees. Deﬁned-contribution plans These are plans in which the Company pays pre-deﬁned amounts to separate funds and does not have any legal or informal obligation to pay additional sums. These comprise of contributions to the National Pension Scheme, Employees’ Provident Fund, Family Pension Fund and Superannuation Fund. The Company’s payments to the deﬁned-contribution plans are reported as expenses during the period in which the employees perform the services that the payment covers. HDFC Bank Limited Annual Report 2015-16 168 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Deﬁned-beneﬁt plans Expenses for deﬁned-beneﬁt gratuity plan are calculated as at the Balance Sheet date by an independent actuary in a manner that distributes expenses over the employee’s working life. These commitments are valued at the present value of the expected future payments, with consideration for calculated future salary increases, using a discount rate corresponding to the interest rate estimated by the actuary having regard to the interest rate on government bonds with a remaining term that is almost equivalent to the average balance working period of employees. The fair values of the plan assets are deducted in determining the net liability. When the fair value of plan assets exceeds the commitments computed as aforesaid, the recognised asset is limited to the net total of any cumulative past service costs and the present value of any economic beneﬁts available in the form of reductions in future contributions to the plan. Actuarial losses or gains are recognised in the Statement of Proﬁt and Loss in the year in which they arise. Other employee beneﬁts Compensated absences which accrue to employees and which can be carried to future periods but are expected to be availed in twelve months immediately following the year in which the employee has rendered service are reported as expenses during the year in which the employees perform the services that the beneﬁt covers and the liabilities are reported at the undiscounted amount of the beneﬁts. Where there are restrictions on availment of such accrued beneﬁt or where the availment is otherwise not expected to wholly occur in the next twelve months, the liability on account of the beneﬁt is actuarially determined using the projected unit credit method. Share-based payment transactions Equity settled stock options granted under the Company’s Employee Stock Option Schemes are accounted for as per the accounting treatment prescribed by the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India. The intrinsic value of the option being excess of fair value of the underlying share immediately prior to date of grant over its exercise price is recognised as deferred employee compensation with a credit to employee stock option outstanding account. The deferred employee compensation is charged to Statement of Proﬁt and Loss on straight line basis over the vesting period of the option. The options that lapse are reversed by a credit to employee compensation expense, equal to the amortised portion of value of lapsed portion and credit to deferred employee compensation expense equal to the unamortised portion. HDB Financial Services Limited Long term employee beneﬁts Gratuity The Company provides for gratuity to all employees. The beneﬁt is in the form of lump sum payments to vested employees on resignation, retirement or death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service. Vesting occurs upon completion of ﬁve years of service. The Company makes annual contributions to fund administered by trustees and managed by insurance companies for amounts notiﬁed by the said insurance companies. The deﬁned beneﬁt plan are valued by an independent external actuary as at the Balance Sheet date using the projected unit credit method to determine the present value of deﬁned beneﬁt obligation and the related service costs. Under this method, the determination is based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognised in the Statement of Proﬁt and Loss. Provident fund In accordance with the applicable law, all employees of the Company are entitled to receive beneﬁts under the Provident Fund Act, 1952. The Company contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary) to the Pension Scheme administered by the Regional Provident Fund Commissioner (RPFC) and the Company has no liability for future provident fund beneﬁts other than its annual contribution. Since it is a deﬁned contribution plan, the contributions are accounted for on an accrual basis and recognised in the Statement of Proﬁt and Loss. HDFC Bank Limited Annual Report 2015-16 169 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Compensated absences The Company does not have a policy of encashment of unavailed leaves for its employees but are permitted to carry forward subject to a prescribed maximum days. The Company provides for compensated absences in accordance with AS-15 (revised 2005) Employee Beneﬁts issued by Insititute of Chartered Accountants of India. The provision is based on an independent external actuarial valuation at the Balance Sheet date. 10 Debit and credit cards reward points HDFC Bank Limited The Bank estimates the probable redemption of debit and credit card reward points and cost per point using an actuarial method by employing an independent actuary, which includes assumptions such as mortality, redemption and spends. Provisions for liabilities on said reward points are made based on the actuarial valuation report as furnished by the said independent actuary and included in other liabilities. 11 Bullion HDFC Bank Limited The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale and retail customers. The imports are typically on a back-to-back basis and are priced to the customer based on an estimated price quoted by the supplier. The Bank earns a fee on such wholesale bullion transactions. The fee is classiﬁed under commission income. The Bank also sells bullion to its retail customers. The difference between the sale price to customers and actual price paid to the supplier is recorded under commission income. The Bank also deals in bullion on a borrowing and lending basis and the interest paid / received thereon is classiﬁed as interest expense / income respectively. 12 Lease accounting Group Lease payments including cost escalation for assets taken on operating lease are recognised in the Statement of Proﬁt and Loss over the lease term on a straight-line basis in accordance with the AS-19, Leases. 13 Income tax Group Income tax expense comprises current tax provision (i.e. the amount of tax for the period determined in accordance with the Income Tax Act, 1961, the rules framed there under and considering the material principles set out in Income Computation and Disclosure Standards) and the net change in the deferred tax asset or liability during the year. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences between the carrying values of assets and liabilities and their respective tax bases, and operating loss carried forward, if any. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates as at the Balance Sheet date. Current tax assets and liabilities and deferred tax assets and liabilities are off-set when they relate to income taxes levied by the same taxation authority, when the Bank has a legal right to off-set and when the Bank intends to settle on a net basis. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. In case of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and appropriately adjusted to reﬂect the amount that is reasonably / virtually certain to be realised. 14 Earnings per share Group The Group reports basic and diluted earnings per equity share in accordance with AS-20, Earnings per Share. Basic earnings per equity share has been computed by dividing net proﬁt for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reﬂect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted to equity during the year. Diluted earnings per equity share are computed using the weighted average number of equity shares and the dilutive potential equity shares outstanding during the period except where the results are anti-dilutive. HDFC Bank Limited Annual Report 2015-16 170 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 15 Share issue expenses HDFC Bank Limited Share issue expenses are adjusted from Share Premium Account in terms of Section 52 of the Companies Act, 2013. 16 Segment information Group The disclosure relating to segment information is in accordance with AS-17, Segment Reporting and as per guidelines issued by RBI. 17 Accounting for provisions, contingent liabilities and contingent assets Group In accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets, the Group recognises provisions when it has a present obligation as a result of a past event, it is probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Provisions are determined based on management estimate required to settle the obligation at the Balance Sheet date, supplemented by experience of similar transactions. These are reviewed at each Balance Sheet date and adjusted to reﬂect the current management estimates. A disclosure of contingent liability is made when there is: (cid:115) (cid:115) a possible obligation arising from a past event, the existence of which will be conﬁrmed by the 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, if any, are not recognised in the ﬁnancial statements since this may result in the recognition of income that may never be realised. Onerous contracts Provisions for onerous contracts are recognised when the expected beneﬁts to be derived by the Bank from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Bank recognises any impairment loss on the assets associated with that contract. 18 Cash and cash equivalents Group Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short notice. 19 Corporate social responsibility Group Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013, are recognised in the Statement of Proﬁt and Loss. HDFC Bank Limited Annual Report 2015-16 171 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 SCHEDULE 18 - Notes forming part of the consolidated ﬁnancial statements for the year ended March 31, 2016 Amounts in notes forming part of the ﬁnancial statements for the year ended March 31, 2016 are denominated in rupee crore to conform to extant RBI guidelines. 1 Change in classiﬁcation Pursuant to RBI circular dated July 16, 2015, deposits placed with NABARD, SIDBI and NHB aggregating to ` 13,719.68 crore (previous year: ` 14,818.19 crore), arising out of the shortfall in meeting the priority sector lending targets / sub-targets, have been included under ‘Other Assets’ and interest thereon aggregating to ` 861.15 crore (previous year: ` 847.12 crore) under ‘Interest Earned - Others’. Hitherto, these were included under ‘Investments’ and ‘Interest Earned - Income on Investments’ respectively. Figures for the previous year have been regrouped / reclassiﬁed to conform to current year’s classiﬁcation. The above change in classiﬁcation has no impact on the proﬁt of the Bank for the years ended March 31, 2016 and March 31, 2015. 2 Capital Infusion During the year ended March 31, 2016, the Bank allotted 2,16,91,200 equity shares (previous year: 2,27,00,740 equity shares) aggregating to face value ` 4.34 crore (previous year: ` 4.54 crore) in respect of stock options exercised. Accordingly, share capital increased by ` 4.34 crore (previous year: ` 4.54 crore) and share premium increased by ` 1,218.56 crore (previous year: ` 990.88 crore). Pursuant to the shareholder and regulatory approvals, the Bank on February 10, 2015, concluded a Qualiﬁed Institutions Placement (QIP) of 1,87,44,142 equity shares at a price of ` 1,067 per equity share aggregating ` 2,000 crore and an American Depository Receipt (ADR) offering of 2,20,00,000 ADRs (representing 6,60,00,000 equity shares) at a price of USD 57.76 per ADR, aggregating USD 1,271 million. Pursuant to these issuances, the Bank allotted 8,47,44,142 additional equity shares. Accordingly, share capital increased by ` 16.95 crore and share premium increased by ` 9,705.84 crore, net of share issue expenses of ` 151.03 crore. Details of movement in the paid-up equity share capital of the Bank are given below: (` crore) Particulars Opening balance Addition pursuant to QIP/ADR offering Addition pursuant to stock options exercised Closing balance 3 Earnings per equity share March 31, 2016 March 31, 2015 501.30 - 4.34 505.64 479.81 16.95 4.54 501.30 Basic and diluted earnings per equity share have been calculated based on the consolidated proﬁt attributable to the Group of ` 12,801.33 crore (previous year: ` 10,688.89 crore) and the weighted average number of equity shares outstanding during the year of 2,51,74,29,120 (previous year: 2,42,37,77,245). Following is the reconciliation between basic and diluted earnings per equity share: Particulars Nominal value per share Basic earnings per share Effect of potential equity shares (per share) Diluted earnings per share For the year ended (`) March 31, 2016 March 31, 2015 2.00 50.85 (0.61) 50.24 2.00 44.10 (0.50) 43.60 Basic earnings per equity share have been computed by dividing net proﬁt for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share have been computed by dividing the net proﬁt for the year attributable to the equity shareholders by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive. The dilutive impact is on account of stock options granted to employees by the Bank. There is no impact of dilution on the proﬁts in the current year and previous year. HDFC Bank Limited Annual Report 2015-16 172 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Following is the reconciliation of weighted average number of equity shares used in the computation of basic and diluted earnings per share: Particulars Weighted average number of equity shares used in computing basic earnings per equity share Effect of potential equity shares outstanding Weighted average number of equity shares used in computing diluted earnings per equity share For the year ended March 31, 2016 March 31, 2015 2,51,74,29,120 2,42,37,77,245 3,04,43,320 2,54,78,72,440 2,77,45,406 2,45,15,22,651 4 Reserves and Surplus Drawdown from reserves Share Premium The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2016 and March 31, 2015, except towards share issue expenses of ` 151.03 crore incurred for the equity raised through the Qualiﬁed Institutions Placement (QIP) and American Depository Receipt (ADR) routes during the year ended March 31, 2015, which have been adjusted in that year against the share premium account in terms of Section 52 of the Companies Act, 2013. Statutory Reserve The Group has made an appropriation of ` 3,180.93 crore (previous year: ` 2,623.87 crore) out of proﬁts for the year ended March 31, 2016 to Statutory Reserve pursuant to the requirements of Section 17 of the Banking Regulation Act, 1949 and RBI guidelines dated September 23, 2000. Capital Reserve During the year ended March 31, 2016, the Bank appropriated ` 222.15 crore (previous year: ` 224.92 crore), being the proﬁt from sale of investments under HTM category and proﬁt on sale of immovable properties, net of taxes and transfer to statutory reserve, from Proﬁt and Loss Account to Capital Reserve Account. General Reserve The Group has made an appropriation of ` 1,229.62 crore (previous year: ` 1,038.59 crore) out of proﬁts for the year ended March 31, 2016 to General Reserve pursuant to provisions of the Companies Act, 2013. Investment Reserve Account During the year ended March 31, 2016, the Bank has transferred ` 8.52 crore (net) from Investment Reserve Account to Proﬁt and Loss Account and in the previous year the Bank appropriated ` 27.54 crore (net) from Proﬁt and Loss Account to Investment Reserve Account as per RBI guidelines. 5 Dividend on shares allotted pursuant to exercise of stock options The Bank may allot equity shares after the Balance Sheet date but before the book closure date pursuant to the exercise of any employee stock options. These equity shares will be eligible for full dividend for the year ended March 31, 2016, if approved at the ensuing Annual General Meeting. 6 Accounting for employee share based payments HDFC Bank Limited The shareholders of the Bank approved grant of equity share options under Plan “C” in June 2005, Plan “D” in June 2007, Plan “E” in June 2010 and Plan “F” in June 2013. Under the terms of each of these Plans, the Bank may issue Equity Stock Options (‘ESOPs’) to employees and Whole Time Directors of the Bank, each of which is convertible into one equity share. All the plans were framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time and as applicable at the time of grant. Accounting for the stock options has been in accordance with the SEBI (Share Based Employee Beneﬁts) Regulations, 2014 to the extent applicable. HDFC Bank Limited Annual Report 2015-16 173 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Plans C, D, E and F provide for the issuance of options at the recommendation of the Nomination & Remuneration Committee at the closing price on the working day immediately preceding the date when options are granted. The price being the closing price of the share on an Indian stock exchange with the highest trading volume as of the working day preceding the date of grant. Vesting conditions applicable to the options are at the discretion of the Nomination & Remuneration Committee. These options are exercisable on vesting, for a period as set forth by the Nomination & Remuneration Committee at the time of grant. The period in which options may be exercised cannot exceed ﬁve years. During the years ended March 31, 2016 and March 31, 2015, no modiﬁcations were made to the terms and conditions of ESOPs as approved by the Nomination & Remuneration Committee. Activity in the options outstanding under the Employee Stock Options Plans (cid:0) (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:26) Particulars Options outstanding, beginning of year Granted during the year Exercised during the year Forfeited / Lapsed during the year Options outstanding, end of year Options exercisable Options 10,90,33,000 4,48,36,200 2,16,91,200 35,23,700 12,86,54,300 4,96,81,000 Weighted average exercise price (`) 683.16 1,092.65 563.78 895.09 840.19 661.84 (cid:0) (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:26) Particulars Options outstanding, beginning of year Granted during the year Exercised during the year Forfeited / Lapsed during the year Options outstanding, end of year Options exercisable Options 9,24,76,600 4,16,59,000 2,27,00,740 24,01,860 10,90,33,000 4,18,71,400 Weighted average exercise price (`) 556.06 835.50 438.50 744.09 683.16 537.99 (cid:0) (cid:115)(cid:0) (cid:38)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:26) Plan Plan C Plan D Plan E Plan F Range of exercise price (`) Number of shares arising out of options Weighted average life of options (in years) Weighted average exercise price (`) 680.00 to 835.50 680.00 440.16 to 680.00 835.50 to 1,097.80 57,40,800 51,33,900 3,78,50,200 7,99,29,400 3.34 3.32 2.49 4.80 693.00 680.00 598.71 975.41 (cid:0) (cid:115)(cid:0) (cid:38)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:26) Plan Plan C Plan D Plan E Plan F Range of exercise price (`) Number of shares arising out of options Weighted average life of options (in years) Weighted average exercise price (`) 680.00 to 835.50 680.00 440.16 to 680.00 835.50 67,78,000 64,02,300 5,59,39,700 3,99,13,000 4.32 4.26 3.05 5.22 692.50 680.00 573.70 835.50 HDFC Bank Limited Annual Report 2015-16 174 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Fair value methodology The fair value of options used to compute proforma net income and earnings per equity share have been estimated on the dates of each grant using the binomial option-pricing model. The Bank estimates the volatility based on the historical share prices. 4,48,36,200 options were granted during the year ended March 31, 2016 (previous year: 4,16,59,000). The various assumptions considered in the pricing model for the ESOPs granted during the years ended March 31, 2016 and March 31, 2015 were: Particulars Dividend yield Expected volatility Risk - free interest rate Expected life of the options March 31, 2016 March 31, 2015 0.73% 0.82% 23.29% to 26.46% 24.30% to 32.00% 7.71% to 8.07% 8.42 % to 8.63 % 1 to 7 years 1 to 7 years Impact of fair value method on net proﬁt and earnings per share (‘EPS’) Had the compensation cost for the Bank’s stock option plans been determined based on the fair value approach, the Bank’s net proﬁt and earnings per share would have been as per the proforma amounts indicated below: Particulars Net proﬁt (as reported) (` crore) March 31, 2016 March 31, 2015 12,296.23 10,215.92 Add: Stock-based employee compensation expense included in net income - - Less: Stock based compensation expense determined under fair value based method (proforma) Net proﬁt (proforma) Basic earnings per share (as reported) Basic earnings per share (proforma) Diluted earnings per share (as reported) Diluted earnings per share (proforma) HDFC Securities Limited 1,265.93 944.47 11,030.30 9,271.45 (`) 48.84 43.82 48.26 43.29 (`) 42.15 38.25 41.67 37.82 The Shareholders of the Company approved a stock option scheme (viz. ESOS-001) in February 2010 (“Company Options”). Under the terms of the scheme, the Company issues stock options to employees, whole time director, managing director and directors of the Company, each of which is convertible into one equity share. Scheme ESOS-001 provides for the issuance of options at the recommendation of the Compensation Committee of the Board of Directors (the “Compensation Committee”) at a price of ` 135/- per share, being the fair market value of the share arrived by a category 1 merchant banker. Such options vest at deﬁnitive dates, save for speciﬁc incidents, prescribed in the scheme as framed / approved by the Compensation Committee. Such options are exercisable for a period following the vesting at the discretion of the Compensation Committee, subject to a maximum of two years from the date of vesting. Method used for accounting for shared based payment plan The Company uses the Intrinsic Value method to account for the compensation cost of stock options to employees of the Company. HDFC Bank Limited Annual Report 2015-16 175 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Activity in the options outstanding under the Employee Stock Options Plan (cid:0) (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:0)(cid:51)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:47)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:26) Particulars Options outstanding, beginning of year Granted during the year Exercised during the year Forfeited / Lapsed during the year Options outstanding, end of year Options exercisable Company options Weighted average exercise price (`) - - - - - - - - - - - - There were no stock options outstanding as at March 31, 2016 as well as at March 31, 2015. (cid:0) (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:0)(cid:51)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:47)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:26) Particulars Options outstanding, beginning of year Granted during the year Exercised during the year Forfeited / Lapsed during the year Options outstanding, end of year Options exercisable Impact of fair value method on net proﬁt and EPS Company options 8,700 - 8,000 700 - - Weighted average exercise price (`) 135.00 - 135.00 135.00 - - Had compensation cost for the Company’s stock option plans been determined based on the fair value approach, the Company’s net proﬁt and earnings per share would have been as per the proforma amounts indicated below: Particulars Net Proﬁt (as reported) Add: Stock-based employee compensation expense included in net income (Less) / Add: Stock-based compensation expense determined under fair value based method (proforma) Net Proﬁt (proforma) Basic and diluted earnings per share (as reported) Basic and diluted earnings per share (proforma) HDB Financial Services Limited March 31, 2016 March 31, 2015 133.34 164.97 - - 133.34 (`) 86.16 86.16 - - 164.97 (`) 106.60 106.60 In accordance with resolution approved by the shareholders, the Company has reserved shares, for issue to employees through ESOP Scheme. On the approval of Nomination and Remuneration Committee (NRC), each ESOP scheme is issued. The NRC has approved stock option schemes ESOS-4 in October, 2010 and ESOS-5 on July 27, 2011 and ESOS-6 on June 11, 2012, ESOS-7 on July 19, 2013 and ESOS-8 on July 14, 2015. Under the term of the schemes, the Company may issue stock options to employees and directors of the Company, each of which is convertible into one equity share. Such options vest at a deﬁnitive date, save for speciﬁc incidents, prescribed in the scheme as framed / approved by the NRC. Such options are exercisable for a period following vesting at the discretion of the NRC, subject to a maximum of two years from the date of vesting. HDFC Bank Limited Annual Report 2015-16 176 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Method used for accounting for shared based payment plan The Company uses intrinsic value to account for the compensation cost of stock options to employees of the Company. Activity in the options outstanding under the Employee Stock Option Plans (cid:0) (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0)(cid:51)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:47)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:26) Particulars Options outstanding, beginning of year Granted during the year Exercised during the year Forfeited / Lapsed during the year Options outstanding, end of year Options 14,37,250 44,13,000 7,02,550 3,04,750 48,42,950 Weighted average exercise price (`) 50.62 88.00 48.25 76.22 88.41 (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0)(cid:51)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:47)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:26) Particulars Options outstanding, beginning of year Granted during the year Exercised during the year Forfeited / Lapsed during the year Options outstanding, end of year Options Weighted average exercise price (`) 21,51,700 - 5,65,800 1,48,650 14,37,250 49.17 - 46.42 45.54 50.62 (cid:115)(cid:0) (cid:38)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:26) Plan ESOS - 5 ESOS - 6 ESOS - 7 ESOS - 8 Range of exercise price (`) Number of shares arising out of options Weighted average remaining contractual life of options (in years) Weighted average exercise price (`) 25.00 31.00 56.00 88.00 4,000 70,650 5,60,300 42,08,000 0.50 1.30 1.35 1.40 25.00 31.00 56.00 88.00 (cid:115)(cid:0) (cid:38)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0)(cid:83)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:19)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:26) Plan ESOS - 4 ESOS - 5 ESOS - 6 ESOS - 7 Fair Value methodology Range of exercise price (`) Number of shares arising out of options Weighted average remaining contractual life of options (in years) Weighted average exercise price (`) 17.50 25.00 31.00 56.00 6,400 7,000 2,90,650 11,33,200 0.50 1.07 2.16 2.28 17.50 25.00 31.00 56.00 The fair value of options used to compute proforma net income and earnings per equity share have been estimated on the dates of each grant using the Black-Scholes model. The shares of Company are not listed on any stock exchange. Accordingly, the Company has considered the volatility of the Company’s stock price as zero, since historical volatility of similar listed enterprise was not available. The various assumptions considered in the pricing model for the stock options granted by the Company during the year ended March 31, 2016 are: Particulars Dividend yield Expected volatility Risk-free interest rate Expected life of the option March 31, 2016 March 31, 2015 0.80% Nil 7.70% 2.21 years Nil Nil Nil Nil HDFC Bank Limited Annual Report 2015-16 177 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Impact of fair value method on net proﬁt and EPS Had compensation cost for the Company’s stock option plans been determined based on the fair value approach, the Company’s net proﬁt and earnings per share would have been as per the proforma amounts indicated below: Particulars Net Proﬁt (as reported) Add: Stock-based employee compensation expense included in net income Less: Stock-based compensation expense determined under fair value based method (proforma) Net Proﬁt (proforma) Basic earnings per share (as reported) Basic earnings per share (proforma) Diluted earnings per share (as reported) Diluted earnings per share (proforma) Group March 31, 2016 March 31, 2015 (` crore) 534.41 - 4.87 529.54 (`) 7.64 7.57 7.64 7.57 349.45 - 1.45 348.00 (`) 6.63 6.60 6.63 6.60 Impact of fair value method on net proﬁt and EPS of the Group Had compensation cost for the stock option plans outstanding been determined based on the fair value approach, the Group’s net proﬁt and earnings per share would have been as per the proforma amounts indicated below: Particulars Net Proﬁt (as reported) Less: Stock-based compensation expense determined under fair value based method (proforma) Net Proﬁt (proforma) Basic earnings per share (as reported) Basic earnings per share (proforma) Diluted earnings per share (as reported) Diluted earnings per share (proforma) 7 Other liabilities March 31, 2016 March 31, 2015 (` crore) 12,801.33 1,270.80 11,530.53 (`) 50.85 45.80 50.24 45.26 10,688.89 945.92 9,742.97 (`) 44.10 40.20 43.60 39.74 (cid:115)(cid:0) (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:80)(cid:82)(cid:69)(cid:83)(cid:69)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:71)(cid:82)(cid:79)(cid:83)(cid:83)(cid:0)(cid:85)(cid:78)(cid:82)(cid:69)(cid:65)(cid:76)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:71)(cid:65)(cid:73)(cid:78)(cid:0)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:69)(cid:73)(cid:71)(cid:78)(cid:0)(cid:69)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:68)(cid:69)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) gross unrealised loss on foreign exchange and derivative contracts under other liabilities. Accordingly, other liabilities as on March 31, 2016 include unrealised loss on foreign exchange and derivative contracts of ` 7,524.88 crore (previous year: ` 6,914.10 crore). (cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0) (cid:44)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0) (cid:68)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0) (cid:84)(cid:65)(cid:88)(cid:0) (cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0) (cid:8)(cid:78)(cid:69)(cid:84)(cid:9)(cid:0) (cid:79)(cid:70)(cid:0) ` 0.45 crore as on March 31, 2015 relating to HDFC Securities (` crore) Limited. The breakup of the same is as follows: Particulars Deferred tax asset arising out of: Employee Beneﬁts Others Deferred tax liability arising out of: Depreciation Deferred tax (liability) / asset, net March 31, 2015 1.04 0.17 1.21 (1.66) (1.66) (0.45) Total (a) Total (b) HDFC Bank Limited Annual Report 2015-16 178 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 8 Investments (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0) (cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) (cid:38)(cid:65)(cid:67)(cid:69)(cid:0)(cid:54)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0) (cid:8)(cid:38)(cid:54)(cid:9)(cid:0) (cid:65)(cid:71)(cid:71)(cid:82)(cid:69)(cid:71)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) ` 1,520.00 crore (previous year: FV ` 1,563.00 crore) which are kept as margin for clearing of securities, of FV ` 13,729.30 crore (previous year: FV ` 16,249.30 crore) which are kept as margin for Collateralised Borrowing and Lending Obligation (CBLO) and of FV aggregating ` 56.00 crore (previous year: FV ` 63.25 crore) which are kept as margin for Forex Forward segment - Default Fund with the Clearing Corporation of India Ltd. (cid:41)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0) (cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) (cid:38)(cid:54)(cid:0) (cid:65)(cid:71)(cid:71)(cid:82)(cid:69)(cid:71)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) ` 16.00 crore (previous year: FV ` 16.00 crore) which are kept as margin with National Securities Clearing Corporation of India Ltd. (‘NSCCIL’), of FV aggregating ` 13.00 crore (previous year: FV ` 13.00 crore) which are kept as margin with MCX - SX Clearing Corporation Ltd., and of FV aggregating ` 1.00 crore (previous year: ` 2.00 crore) which are kept as margin with Indian Clearing Corporation Limited in the BSE currency derivatives segment. (cid:41)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:38)(cid:54)(cid:0)(cid:65)(cid:71)(cid:71)(cid:82)(cid:69)(cid:71)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)` 35,937.22 crore (previous year: FV ` 34,127.16 crore) are kept as margin towards Real Time Gross Settlement (RTGS) and those having FV aggregating ` 13,091.46 crore (previous year: ` 19,077.83 crore) are kept as margin towards repo transactions with the RBI. 9 Other ﬁxed assets Other ﬁxed assets includes amount capitalised relating to software, Bombay Stock Exchange card and electronic trading (` crore) platform. Summary regarding the same is tabulated below: Particulars Cost As at March 31 of the previous year Additions during the year Deductions during the year Depreciation As at March 31 of the previous year Charge for the year On deductions during the year March 31, 2016 March 31, 2015 1,609.52 165.31 (0.01) 1,774.82 1,049.45 199.27 (0.01) 1,248.71 526.11 1,311.52 298.06 (0.06) 1,609.52 881.25 168.26 (0.06) 1,049.45 560.07 Total (a) Total (b) Net value (a-b) 10 Other assets (cid:115)(cid:0) (cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:68)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:65)(cid:88)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:8)(cid:78)(cid:69)(cid:84)(cid:9)(cid:0)(cid:79)(cid:70)(cid:0)` 2,227.23 crore (previous year: ` 2,031.98 crore). Deferred tax asset (net) also includes deferred tax asset (net) of ` 0.13 crore (previous year: Nil) relating to HDFC Securities Limited. (` crore) The break-up of the same is as follows: Particulars Deferred tax asset arising out of: Loan loss provisions Employee beneﬁts Others Deferred tax liability arising out of: Depreciation Deferred tax asset (net) (a-b) March 31, 2016 March 31, 2015 1,856.51 150.77 314.47 2,321.75 (94.52) (94.52) 2,227.23 1,679.06 115.18 310.09 2,104.33 (72.35) (72.35) 2,031.98 Total (a) Total (b) HDFC Bank Limited Annual Report 2015-16 179 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 11 Provisions, contingent liabilities and contingent assets Given below is the movement in provisions and a brief description of the nature of contingent liabilities recognised by the Bank. a) Provision for credit card and debit card reward points (` crore) Particulars Opening provision for reward points Provision for reward points made during the year Utilisation / write back of provision for reward points Closing provision for reward points b) Provision for legal and other contingencies Particulars Opening provision Movement during the year (net) Closing provision c) Description of contingent liabilities Sr. No. Contingent liability* Brief description March 31, 2016 March 31, 2015 200.07 179.50 (73.21) 306.36 150.91 112.92 (63.76) 200.07 (` crore) March 31, 2016 March 31, 2015 354.91 (10.35) 344.56 352.61 2.30 354.91 1 2 3 4 5 Claims against the Group not acknowledged as debts-taxation The Group is a party to various taxation matters in respect of which appeals are pending. The Group expects the outcome of the appeals to be favorable based on decisions on similar issues in the previous years by the appellate authorities, based on the facts of the case and the provisions of Income Tax Act, 1961. Claims against the Group not acknowledged as debts-others The Group is a party to various legal proceedings in the normal course of business. The Group does not expect the outcome of these proceedings to have a material adverse effect on the Group’s ﬁnancial conditions, results of operations or cash ﬂows. Liability on account of forward exchange and derivative contracts Guarantees given on behalf of constituents, acceptances, endorsements and other obligations Other items for which the Group is contingently liable The Bank enters into foreign exchange contracts, currency options, forward rate agreements, currency swaps and interest rate swaps with inter-bank participants 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 one currency against another, based on predetermined rates. Interest rate swaps are commitments to exchange ﬁxed and ﬂoating interest rate cash ﬂows. The notional amounts of ﬁnancial instruments such as foreign exchange contracts and derivatives provide a basis for comparison with instruments recognised on the Balance Sheet but do not necessarily indicate the amounts of future cash ﬂows involved or the current fair value of the instruments and therefore, do not indicate the Bank’s exposure to credit or price risks. The derivative instruments become favorable (assets) or unfavorable (liabilities) as a result of ﬂuctuations in market rates or prices relative to their terms. As a part of its commercial banking activities the Bank issues documentary credit and guarantees on behalf of its customers. Documentary credits such as letters of credit enhance the credit standing of the Bank’s customers. Guarantees generally represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulﬁll its ﬁnancial or performance obligations. These include: a) Credit enhancements in respect of securitised-out loans; b) Bills rediscounted by the Bank; c) Capital commitments; d) Underwriting commitments. *Also refer Schedule 12 - Contingent Liabilities HDFC Bank Limited Annual Report 2015-16 180 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 12 Commission, exchange and brokerage income Commission, exchange and brokerage income is net of correspondent bank charges. 13 Provisions and contingencies The break-up of ‘Provisions and Contingencies’ included in the Statement of Proﬁt and Loss is given below: Particulars Provision for income tax - Current - Deferred Provision for wealth tax Provision for NPAs Provision for diminution in value of non-performing investments Provision for standard assets Other provisions and contingencies* (` crore) March 31, 2016 March 31, 2015 5,492.37 (112.97) 0.77 1,868.20 (3.82) 310.35 91.25 7,646.15 6,889.36 (195.70) - 2,344.37 14.65 464.89 136.86 9,654.43 Total *Includes provisions for tax, legal and other contingencies ` 37.33 crore (previous year: ` 36.52 crore), ﬂoating provisions ` 115.00 crore (previous year: ` 32.20 crore), provisions / (write back) for securitised-out assets ` (2.85) crore (previous year: ` 4.60 crore) and standard restructured assets ` (12.62) crore (previous year: `17.93 crore). 14 Employee beneﬁts Gratuity Particulars March 31, 2016 March 31, 2015 (` crore) Reconciliation of opening and closing balance of the present value of the deﬁned beneﬁt obligation Present value of obligation as at April 1 Interest cost Current service cost Beneﬁts paid Actuarial (gain) / loss on obligation: Experience adjustment Assumption change Present value of obligation as at March 31 Reconciliation of opening and closing balance of the fair value of the plan assets Fair value of plan assets as at April 1 Expected return on plan assets Contributions Beneﬁts paid Actuarial gain / (loss) on plan assets: Experience adjustment Assumption change Fair value of plan assets as at March 31 Amount recognised in Balance Sheet Fair value of plan assets as at March 31 318.37 22.98 56.53 (24.88) 16.27 12.66 401.93 248.13 21.72 64.10 (24.88) (13.61) - 295.46 242.71 18.68 52.21 (16.31) 4.84 16.24 318.37 176.20 16.97 50.00 (16.31) 21.27 - 248.13 295.46 248.13 HDFC Bank Limited Annual Report 2015-16 181 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Particulars Present value of obligation as at March 31 Asset / (liability) as at March 31 Expenses recognised in Statement of Proﬁt and Loss Interest cost Current service cost Expected return on plan assets Net actuarial (gain) / loss recognised in the year Net Cost Actual return on plan assets Estimated contribution for the next year Assumptions (HDFC Bank Limited) Discount rate Expected return on plan assets Salary escalation rate Assumptions (HDFC Securities Limited) Discount rate Expected return on plan assets Salary escalation rate Assumptions (HDB Financial Services Limited) March 31, 2016 March 31, 2015 (401.93) (106.47) 22.98 56.53 (21.72) 42.54 100.33 8.11 53.08 (318.37) (70.24) 18.68 52.21 (16.59) (0.20) 54.10 38.25 66.17 7.5% per annum 7.9% per annum 8.0% per annum 8.0% per annum 8.0% per annum 8.0% per annum 7.6% per annum 8.0% per annum 7.6% per annum 8.0% per annum 9.0% per annum 7.0% per annum 7.8% per annum 7.8% per annum 8.0% per annum 8.0% per annum 6.0% per annum 5.0% per annum (` crore) Discount rate Expected return on plan assets Salary escalation rate Experience adjustment Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Experience adjustment gain / (loss) on plan assets Experience adjustment (gain) / loss on plan liabilities 2016 295.46 401.93 (106.47) (13.61) 16.27 Years ended March 31, 2015 2014 2013 2012 248.13 318.37 (70.24) 21.27 4.84 176.20 242.71 (66.51) 1.82 6.30 132.60 209.82 (77.22) 2.00 2.61 93.32 168.60 (75.28) (0.95) 1.22 Expected rate of return on investments is determined based on the assessment made by the Group at the beginning of the year with regard to its existing portfolio. Major categories of plan assets as a percentage of fair value of total plan assets as of March 31, 2016 are given below: Category of plan assets Government securities Debenture and bonds Equity shares Others HDFC Bank Limited HDFC Securities Limited HDB Financial Services Limited 33.3% 23.1% 37.2% 6.4% 100.0% 54.0% 31.0% 9.0% 6.0% 100.0% 52.0% 39.6% - 8.4% 100.0% Total HDFC Bank Limited Annual Report 2015-16 182 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Pension Particulars (` crore) March 31, 2016 March 31, 2015 Reconciliation of opening and closing balance of the present value of the deﬁned beneﬁt obligation Present value of obligation as at April 1 Interest cost Current service cost Beneﬁts paid Actuarial (gain) / loss on obligation: Experience adjustment Assumption change Present value of obligation as at March 31 Reconciliation of opening and closing balance of the fair value of the plan assets Fair value of plan assets as at April 1 Expected return on plan assets Contributions Beneﬁts paid Actuarial gain / (loss) on plan assets: Experience adjustment Assumption change Fair value of plan assets as at March 31 Amount recognised in Balance Sheet Fair value of plan assets as at March 31 Present value of obligation as at March 31 Asset / (liability) as at March 31 Expenses recognised in Statement of Proﬁt and Loss Interest cost Current service cost Expected return on plan assets Net actuarial (gain) / loss recognised in the year Net cost Actual return on plan assets Estimated contribution for the next year Assumptions Discount rate Expected return on plan assets Salary escalation rate HDFC Bank Limited Annual Report 2015-16 183 57.45 3.92 1.12 (10.18) 17.35 1.22 70.88 41.91 3.21 2.01 (10.18) 1.43 - 38.38 38.38 (70.88) (32.50) 3.92 1.12 (3.21) 17.14 18.97 4.64 14.00 58.89 4.37 1.02 (7.94) (0.19) 1.30 57.45 47.99 3.60 0.64 (7.94) (2.38) - 41.91 41.91 (57.45) (15.54) 4.37 1.02 (3.60) 3.48 5.27 1.22 15.70 7.5% per annum 7.9% per annum 8.0% per annum 8.0% per annum 8.0% per annum 8.0% per annum Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Experience adjustment Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Experience adjustment gain / (loss) on plan assets Experience adjustment (gain) / loss on plan liabilities 2016 38.38 70.88 (32.50) 1.43 17.35 Years ended March 31, 2014 2013 2015 41.91 57.45 (15.54) (2.38) (0.19) 47.99 58.89 (10.90) 3.45 3.62 48.88 58.19 (9.31) (1.58) 6.12 (` crore) 2012 51.14 56.85 (5.71) (1.29) 1.36 Expected rate of return on investments is determined based on the assessment made by the Bank at the beginning of the year with regard to its existing portfolio. Major categories of plan assets as a percentage of fair value of total plan assets as of March 31, 2016 are given below: Category of plan assets Government securities Debenture and bonds Others Total Provident fund % of fair value to total plan assets 6.6% 83.3% 10.1% 100.0% The guidance note on AS-15, Employee Beneﬁts, states that employer established provident funds, where interest is guaranteed are to be considered as deﬁned beneﬁt plans and the liability has to be valued. The Institute of Actuaries of India (IAI) has issued a guidance note on valuation of interest rate guarantees on exempt provident funds. The actuary has accordingly valued the same and the Bank held a provision of Nil as on March 31, 2016 (previous year: ` 0.52 crore) towards the present value of the guaranteed interest beneﬁt obligation. The actuary has followed deterministic approach as prescribed by the guidance note. Assumptions: Particulars Discount rate (GOI security yield) Expected guaranteed interest rate March 31, 2016 7.5% per annum 9.0% per annum March 31, 2015 7.9% per annum 9.0% per annum The Bank does not have any unfunded deﬁned beneﬁt plan. The Group contributed ` 206.93 crore (previous year: ` 172.49 crore) to the provident fund. The Bank contributed ` 56.54 crore (previous year: ` 53.68 crore) to the superannuation plan. Compensated absences The actuarial liability of compensated absences of accumulated privileged and sick leaves of the employees of the Group as (` crore) of March 31, 2016 is given below: Particulars Privileged leave Sick leave Total actuarial liability Assumptions (HDFC Bank Limited) Discount rate Salary escalation rate Assumptions (HDFC Securities Limited) Discount rate Salary escalation rate Assumptions (HDB Financial Services Limited) Discount rate Salary escalation rate March 31, 2016 227.40 47.88 275.28 March 31, 2015 189.68 38.66 228.34 7.5% per annum 8.0% per annum 7.9% per annum 8.0% per annum 7.6% per annum 9.0% per annum 8.0% per annum 7.0% per annum 7.8% per annum 6.0% per annum 7.8% per annum 5.0% per annum HDFC Bank Limited Annual Report 2015-16 184 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 15 Segment Reporting Business segments Business segments have been identiﬁed and reported taking into account, the target customer proﬁle, the nature of products and services, the differing risks and returns, the organisation structure, the internal business reporting system and the guidelines prescribed by RBI. The Group operates in the following segments: (a) Treasury The treasury segment primarily consists of net interest earnings from the Bank’s investments portfolio, money market borrowing and lending, gains or losses on investment operations and on account of trading in foreign exchange and derivative contracts. (b) Retail banking The retail banking segment of the Bank serves retail customers through a branch network and other delivery channels. This segment raises deposits from customers and provides loans and other services to customers with the help of specialist product groups. Exposures are classiﬁed under retail banking taking into account the status of the borrower (orientation criterion), the nature of product, granularity of the exposure and the quantum thereof. Revenues of the retail banking segment are derived from interest earned on retail loans, interest earned from other segments for surplus funds placed with those segments, subvention received from dealers and manufacturers, fees from services rendered, foreign exchange earnings on retail products etc. Expenses of this segment primarily comprise interest expense on deposits, commission paid to retail assets sales agents, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses of specialist product groups, processing units and support groups. (c) Wholesale banking The wholesale banking segment provides loans, non-fund facilities and transaction services to large corporates, emerging corporates, public sector units, government bodies, ﬁnancial institutions and medium scale enterprises. Revenues of the wholesale banking segment consist of interest earned on loans made to customers, interest / fees earned on the cash ﬂoat arising from transaction services, earnings from trade services and other non-fund facilities and also earnings from foreign exchange and derivative transactions on behalf of customers. 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 of delivery channels, specialist product groups, processing units and support groups. (d) Other banking business This segment includes income from para banking activities such as credit cards, debit cards, third party product distribution, primary dealership business and the associated costs. This segment also includes Bank’s subsidiaries. (e) Unallocated All items which are reckoned at an enterprise level are classiﬁed under this segment. This includes capital and reserves, debt classiﬁed as Tier I or Tier II capital and other unallocable assets and liabilities such as deferred tax, prepaid expenses, etc. Segment revenue includes earnings from external customers plus earnings from funds transferred to other segments. Segment result includes revenue less interest expense less operating expense and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Interest income is charged by a segment that provides funding to another segment, based on yields benchmarked to an internally approved yield curve or at a certain agreed transfer price rate. Transaction charges are levied by the retail banking segment to the wholesale banking segment for the use by its customers of the retail banking segment’s branch network or other delivery channels. Such transaction costs are determined on a cost plus basis. Segment capital employed represents the net assets in that segment. HDFC Bank Limited Annual Report 2015-16 185 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Geographic segments The geographic segments of the Bank are categorised as domestic operations and foreign operations. Domestic operations comprise branches in India and foreign operations comprise branches outside India. Segment reporting for the year ended March 31, 2016 is given below: Business segments: Sr. No. Particulars 1 Segment revenue 2 Unallocated revenue 3 4 Less: Inter-segment revenue Income from operations (1) + (2) - (3) 5 Segment results 6 Unallocated expenses 7 Income tax expense (including deferred tax) 8 Net proﬁt (5) - (6) - (7) (net proﬁt before minority interest and earnings from associates) (` crore) Treasury Retail banking Wholesale banking Other banking operations Total 18,264.88 59,252.34 27,162.39 10,954.46 115,634.07 1,489.21 7,522.30 8,219.93 3,705.31 20,936.75 0.01 41,260.86 74,373.22 1,425.76 6,693.66 12,817.33 9 Segment assets 10 Unallocated assets 11 Total assets (9) + (10) 12 Segment liabilities 13 Unallocated liabilities 14 Total liabilities (12) + (13) 203,381.47 252,690.65 226,242.65 43,049.31 725,364.08 45,389.87 448,313.40 120,425.52 22,085.58 636,214.37 4,897.74 730,261.82 19,562.70 655,777.07 15 Capital employed (9) - (12) 157,991.60 (195,622.75) 105,817.13 20,963.73 89,149.71 (Segment Assets - Segment Liabilities) 16 Unallocated (10) - (13) 17 Total (15) + (16) 18 Capital expenditure 19 Depreciation Geographic segments: Particulars Revenue Assets Capital expenditure (14,664.96) 74,484.75 5.09 6.16 729.46 540.47 134.59 101.67 135.72 1,004.86 89.73 738.03 (` crore) Domestic International 73,216.82 1,156.40 694,304.94 35,956.88 1,003.97 0.89 HDFC Bank Limited Annual Report 2015-16 186 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Segment reporting for the year ended March 31, 2015 is given below: Business segments: Sr. No. Particulars 1 Segment revenue 2 Unallocated revenue 3 4 Less: Inter-segment revenue Income from operations (1) + (2) - (3) 5 Segment results 6 Unallocated expenses 7 Income tax expense (including deferred tax) 8 Net proﬁt (5) - (6) - (7) (net proﬁt before minority interest and earnings from associates) (` crore) Treasury Retail banking Wholesale banking Other banking operations Total 12,903.89 48,814.18 23,152.60 8,946.94 93,817.61 8.63 33,614.06 60,212.18 618.30 6,228.83 7,471.83 3,237.61 17,556.57 1,477.12 5,379.40 10,700.05 9 Segment assets 10 Unallocated assets 11 Total assets (9) + (10) 12 Segment liabilities 13 Unallocated liabilities 14 Total liabilities (12) + (13) 190,609.16 197,144.15 181,325.74 33,588.91 602,667.96 36,352.78 371,355.13 98,250.45 16,825.11 522,783.47 4,428.56 607,096.52 20,997.36 543,780.83 15 Capital employed (9) - (12) 154,256.38 (174,210.98) 83,075.29 16,763.80 79,884.49 (Segment Assets - Segment Liabilities) 16 Unallocated (10) - (13) 17 Total (15) + (16) 18 Capital expenditure 19 Depreciation Geographic segments: Particulars Revenue Assets Capital expenditure (16,568.80) 63,315.69 6.02 5.91 587.72 214.09 521.71 79.44 93.46 73.39 901.29 680.45 (` crore) Domestic International 59,239.01 973.17 575,346.47 31,750.05 899.05 2.24 HDFC Bank Limited Annual Report 2015-16 187 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 16 Related party disclosures As per AS-18 on Related Party Disclosures, the Group’s related parties are disclosed below: Promoter Housing Development Finance Corporation Limited Associates Atlas Documentary Facilitators Company Private Limited HBL Global Private Limited International Asset Reconstruction Company Private Limited Key management personnel Aditya Puri, Managing Director Paresh Sukthankar, Deputy Managing Director Kaizad Bharucha, Executive Director Related parties to key management personnel Salisbury Investments Private Limited, Tanaksh Innovations Private Limited, Anita Puri, Amit Puri, Amrita Puri, Adishwar Puri, Aarti Sood, Sangeeta Sukthankar, Dattatraya Sukthankar, Shubhada Sukthankar, Akshay Sukthankar, Ankita Sukthankar, Madhavi Lad, Havovi Bharucha, Huzaan Bharucha, Danesh Bharucha, Daraius Bharucha. In accordance with paragraph 5 of AS - 18, the Bank has not disclosed certain transactions with relatives of key management personnel as they are in the nature of banker-customer relationship. The signiﬁcant transactions between the Bank and related parties for year ended March 31, 2016 are given below. A speciﬁc related party transaction is disclosed as a signiﬁcant related party transaction wherever it exceeds 10% of all related party transactions in that category: (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0) (cid:80)(cid:65)(cid:73)(cid:68)(cid:26)(cid:0) (cid:40)(cid:79)(cid:85)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0) (cid:36)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) (cid:35)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0) ` 7.25 crore (previous year: ` 7.60 crore); Atlas Documentary Facilitators Company Private Limited ` 3.84 crore (previous year: ` 4.25 crore). (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:26)(cid:0)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:33)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:50)(cid:69)(cid:67)(cid:79)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:48)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:69)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 2.27 crore (previous year: ` 4.53 crore). (cid:50)(cid:69)(cid:78)(cid:68)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:26)(cid:0)(cid:40)(cid:79)(cid:85)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:36)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:35)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 178.83 crore (previous year: ` 144.37 crore). (cid:50)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:26)(cid:0)(cid:40)(cid:34)(cid:44)(cid:0)(cid:39)(cid:76)(cid:79)(cid:66)(cid:65)(cid:76)(cid:0)(cid:48)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:69)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 702.20 crore (previous year: ` 589.50 crore); Atlas Documentary Facilitators Company Private Limited ` 471.44 crore (previous year: ` 449.50 crore); Housing Development Finance Corporation Limited ` 247.21 crore (previous year: ` 139.83 crore). (cid:115)(cid:0) (cid:36)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:80)(cid:65)(cid:73)(cid:68)(cid:26)(cid:0)(cid:40)(cid:79)(cid:85)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:36)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:35)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)` 314.57 crore (previous year: ` 269.35 crore). HDFC Bank Limited Annual Report 2015-16 188 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 The Group’s related party balances and transactions for the year ended March 31, 2016 are summarised as follows: Items / related party Promoter Associates Deposits taken Deposits placed Advances given Fixed assets purchased from Fixed assets sold to Interest paid to Interest received from Income from services rendered to Expenses for receiving services from Equity investments Dividend paid to Dividend received from Receivable from Payable to Guarantees given Remuneration paid Loans purchased from 4,405.56 (4,405.56) 0.15 (0.15) - - - - 7.25 - 178.83 247.21 - - 314.57 - 16.30 (28.42) 26.93 (26.93) 0.14 (0.14) - 12,773.37 100.02 (100.02) 0.10 (7.10) 0.22 (36.95) - - 3.89 2.27 6.07 1,173.64 31.19 (31.19) - 0.01 - (0.38) 39.85 (102.70) - - - - (` crore) Key management personnel Total 10.12 4,515.70 (11.50) (4,517.08) 2.51 (2.51) 0.95 (0.99) - - 0.84 0.02 - 0.76 - - 3.37 - - - - - - - 18.34 - 2.76 (9.76) 1.17 (37.94) - - 11.98 2.29 184.90 1,421.61 31.19 (31.19) 317.94 0.01 16.30 (28.80) 66.78 (129.63) 0.14 (0.14) 18.34 12,773.37 Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding balances at each quarter-end. Remuneration paid excludes value of employee stock options exercised during the year. The Bank being an authorised dealer, deals in foreign exchange and derivative transactions with parties which include its promoter. The foreign exchange and derivative transactions are undertaken in line with the RBI guidelines. The notional principal amount of foreign exchange and derivative contracts transacted with the promoter that were outstanding as on March 31, 2016 is ` 491.21 HDFC Bank Limited Annual Report 2015-16 189 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 crore (previous year: ` 100.00 crore). The contingent credit exposure pertaining to these contracts computed in line with the extant RBI guidelines on exposure norms is ` 18.90 crore (previous year: ` 2.80 crore). During the year ended March 31, 2016, the Bank purchased debt securities from Housing Development Finance Corporation Limited ` 1,415.00 crore (previous year: Nil) issued by it. During the year ended March 31, 2016, the Bank paid rent of ` 0.66 crore (previous year: ` 0.66 crore) to parties related to the Bank’s key management personnel in relation to residential accommodation. As at March 31, 2016, the security deposit outstanding was ` 3.50 crore (previous year: ` 3.50 crore). The Group’s related party balances and transactions for the year ended March 31, 2015 are summarised as follows: (` crore) Items / related party Promoter Associates Key management personnel Total Deposits taken Deposits placed Advances given Fixed assets purchased from Fixed assets sold to Interest paid to Interest received from Income from services rendered to Expenses for receiving services from Equity investments Dividend paid to Dividend received from Receivable from Payable to Guarantees given Remuneration paid Loans purchased from 2,203.45 (2,203.45) 0.15 (0.15) - - - - 7.60 - 144.37 139.83 - - 269.35 - 14.89 (14.89) 19.25 (19.25) 0.11 (0.11) - 8,249.21 113.06 (113.06) 13.35 (33.45) 25.67 (46.55) - - 4.27 4.53 12.25 1,039.00 31.19 (31.19) - 0.01 - (1.30) 5.99 (92.45) - - - - 12.68 (12.68) 2.51 (2.51) 0.95 (0.95) - - 0.99 0.02 - 0.71 - - 2.95 - - - - 2,329.19 (2,329.19) 16.01 (36.11) 26.62 (47.50) - - 12.86 4.55 156.62 1,179.54 31.19 (31.19) 272.30 0.01 14.89 (16.19) 25.24 (0.03) (111.73) - - 15.10 - 0.11 (0.11) 15.10 8,249.21 Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding balances at each quarter-end. Remuneration paid excludes value of employee stock options exercised during the year. HDFC Bank Limited Annual Report 2015-16 190 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 17 Leases Operating leases primarily comprise ofﬁce premises, staff residences and Automated Teller Machines (‘ATM’s), which are renewable at the option of the Bank. The details of maturity proﬁle of future operating lease payments are given below: Particulars Not later than one year Later than one year and not later than ﬁve years Later than ﬁve years (` crore) March 31, 2016 March 31, 2015 925.82 807.72 2,947.21 2,676.05 2,564.32 2,023.02 Total 6,437.35 5,506.79 The total of minimum lease payments recognised in the Statement of Proﬁt and Loss for the year 1,038.00 889.93 Total of future minimum sub-lease payments expected to be received under non-cancellable subleases Sub-lease amounts recognised in the Statement of Proﬁt and Loss for the year Contingent (usage based) lease payments recognised in the Statement of Proﬁt and Loss for the year 37.13 38.07 10.67 180.53 16.02 169.44 The Bank has sub-leased certain of its properties taken on lease. The terms of renewal and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements. 18 Penalties levied by the RBI During the year ended March 31, 2016, RBI has not imposed any penalties on the Bank. During the previous year ended March 31, 2015, RBI levied on the Bank a penalty of ` 0.05 crore on the grounds that the Bank failed to exchange information about the conduct of a corporate borrower’s account with other banks at intervals as prescribed in the RBI guidelines on ‘Lending under Consortium Arrangement / Multiple Banking Arrangements’ and the same was paid by the Bank. 19 Small and micro industries HDFC Bank Limited Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. HDFC Securities Limited On the basis of the information available with the Company and the intimation received from ‘suppliers’ regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 the amount unpaid as at March 31, 2016 was ` 0.02 crore (previous year: ` 0.02 crore). HDFC Bank Limited Annual Report 2015-16 191 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 HDB Financial Services Limited As per the conﬁrmation received from the suppliers covered under the Micro, Small and Medium Enterprises Development Act, 2006, the amount unpaid as at March 31, 2016 was Nil (previous year: Nil). 20 Corporate social responsibility Operating expenses include ` 197.10 crore (previous year: ` 119.02 crore) for the year ended March 31, 2016 towards Corporate Social Responsibility (CSR), in accordance with the Companies Act, 2013. The details of amount spent during the respective years towards CSR are as under: (` crore) Sr. No. Particulars March 31, 2016 March 31, 2015 Amount spent Amount unpaid / provision Total Amount spent Amount unpaid / provision Total (i) Construction / acquisition of any asset - - - - - - (ii) On purpose other than (i) above 188.75 8.35 197.10 112.01 7.01 119.02 21 Additional disclosure Additional statutory information disclosed in the separate ﬁnancial statements of the Bank and subsidiaries have no material bearing on the true and fair view of the Consolidated Financial Statements and the information pertaining to the items which are not material have not been disclosed in the Consolidated Financial Statements. 22 Comparative ﬁgures Figures for the previous year have been regrouped and reclassiﬁed wherever necessary to conform to the current year’s presentation. (cid:41)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71) Shyamala Gopinath Chairperson Aditya Puri Managing Director Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors Mumbai, April 22, 2016 HDFC Bank Limited Annual Report 2015-16 192 Statement pursuant to Section 129 of the Companies Act, 2013 Schedules to the Consolidated Financial Statements For the year ended March 31, 2016 Form AOC - 1: Pursuant to the ﬁrst proviso to sub-section (3) of Section 129 of the Companies Act, 2013 read with rule 5 of Companies (Accounts) Rules, 2014 Statement containing salient features of the ﬁnancial statements of subsidiaries, associate companies and joint ventures Sr. No. Name of the subsidiary HDFC Securities Limited (` crore) HDB Financial Services Limited Part A: Subsidiaries 1. Reporting period for the subsidiary concerned, if different from the holding company’s reporting period Reporting period of the subsidiary is the same as that of the holding company i.e. April 1, 2015 to March 31, 2016 Reporting period of the subsidiary is the same as that of the holding company i.e. April 1, 2015 to March 31, 2016 2. Reporting currency and exchange rate as on the last date of the relevant ﬁnancial year in the case of foreign subsidiaries Not applicable as this is a domestic subsidiary Not applicable as this is a domestic subsidiary 3. Share capital 4. Reserves & surplus 5. 6. 7. 8. Total assets Total liabilities Investments Turnover 9. Proﬁt before taxation 10. Provision for taxation 11. Proﬁt after taxation 12. Proposed dividend (including tax thereon)* 13. % of shareholding * Includes interim dividend on equity shares paid during the year. Notes: 1. 2. There are no subsidiaries that are yet to commence operations. No subsidiaries were liquidated or sold during the year. 15.48 650.56 1,054.52 388.48 149.79 401.60 201.89 68.55 133.34 37.27 97.9% 700.17 2,861.63 25,189.07 21,627.27 348.42 3,302.02 817.81 283.40 534.41 101.13 97.1% HDFC Bank Limited Annual Report 2015-16 193 Schedules to the Consolidated Financial Statements Statement pursuant to Section 129 of the Companies Act, 2013 For the year ended March 31, 2016 Part B: Associate Companies and Joint Ventures (` crore) Sr. No. Name of Associates / Joint Ventures Atlas Documentary Facilitators Company Private Limited (ADFC) International Asset Reconstruction Company Private Limited 1. Latest audited Balance Sheet Date March 31, 2016 March 31, 2015* 2. Shares of Associate / Joint Ventures held by the company on the year end: Number of shares Amount of investment in associates / joint venture Extent of holding % 3. Description of how there is signiﬁcant inﬂuence 1,30,500 0.02 29.0% 1,61,75,507 31.17 29.4% Extent of equity holding in the associate company exceeds 20% Extent of equity holding in the associate company exceeds 20% 4. Reason why the associate / joint venture is not Not applicable Not applicable consolidated 5. Net worth attributable to the Bank’s shareholding 6. Proﬁt / Loss for the year: i. Considered in consolidated ﬁnancial statements ii. Not considered in consolidated ﬁnancial statements 23.88** 2.69** 6.59** 36.72* 1.04* 3.55* * Unaudited ﬁnancial statements drawn up to March 31, 2016 have been considered for the purpose of the Consolidated Financial Statements for the year ended March 31, 2016. **Includes proportionate share in HBL Global Private Limited, which is a subsidiary of ADFC. Notes: 1. 2. 3. There are no joint ventures as per Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures. There are no Associates or Joint Ventures that are yet to commence operations. No Associates or Joint Ventures were liquidated or sold during the year. (cid:41)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71) Shyamala Gopinath Chairperson Aditya Puri Managing Director Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad Umesh Sarangi Directors Mumbai, April 22, 2016 HDFC Bank Limited Annual Report 2015-16 194 Corporate Governance CERTIFICATE OF COMPLIANCE OF CONDITIONS OF CORPORATE GOVERNANCE To The Members of HDFC Bank Limited We have examined the compliance of conditions of corporate governance by HDFC Bank Limited (‘the Bank’) for the year ended 31 March 2016, as stipulated in Clause 49 of the Listing Agreement executed by the Bank with the BSE Limited (‘BSE’) and the National Stock Exchange of India Limited (‘NSE’) for the period from 1st April 2015 to 30th November 2015; and as prescribed in regulations 17 to 27, 46 (2) (b) to (i) and para C, D and E of Schedule V of Chapter IV of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) for the period from 1st December 2015 to 31st March 2016. We state that the compliance of conditions of Corporate Governance is the responsibility of the management, and 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 / LODR. 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. This certiﬁcate is issued solely for the purposes of complying with the aforesaid Regulations and may not be suitable for any other purpose. Place: Mumbai Date: May 19, 2016 For BNP Associates Company Secretaries Keyoor Bakshi FCS 1844 / CP no. 2720 HDFC Bank Limited Annual Report 2015-16 195 Corporate Governance the [Report on Corporate Governance pursuant Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 {“the SEBI Listing Regulations”} and forming a part of the report of the Board of Directors] to PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE The Bank believes in adopting and adhering to the best recognized corporate governance practices and continuously benchmarking itself against each such practice. The Bank understands and respects its ﬁduciary role and responsibility towards its shareholders and strives hard to meet their expectations. The Bank believes that best board practices, transparent disclosures and shareholder empowerment are necessary for creating shareholder value. The Bank has infused the philosophy of corporate governance into all its activities. The philosophy on corporate governance is an important tool for shareholder protection and maximization of their long term values. The cardinal principles such as independence, accountability, timely disclosures, credibility, sustainability etc. serve as the means for implementing the philosophy of corporate governance in letter and in spirit. responsibility, transparency, fair and BOARD OF DIRECTORS The composition of the Board of Directors of the Bank (“Board”) is governed by the provisions of the Companies Act, 2013, the Banking Regulation Act, 1949 and the listing requirements of the Indian Stock Exchanges where the securities issued by the Bank are listed. The Board has eleven (11) Directors as on March 31, 2016. Composition of the Board of Directors of the Bank as on March 31, 2016: Executive Directors: Mr. Aditya Puri (Managing Director), Mr. Paresh Sukthankar (Deputy Managing Director) and Mr. Kaizad Bharucha (Executive Director) None of the Directors is related to each other. (* Only Audit Committee and Stakeholders’ Relationship Committee are considered for the purpose of this limit) Details of directorship, memberships and chairmanships of the committees of other companies for each Director of the Bank are as follows: Name of Director Directorships on the Board of other companies * Chairmanships on the Board of other companies Memberships of Committees of other companies * Chairmanships of Committees of other companies Mrs. Shyamala Gopinath Mr. Partho Datta Mr. Bobby Parikh Mr. A. N. Roy Mr. Malay Patel Mr. Keki Mistry Mrs. Renu Karnad Mr. Aditya Puri Mr. Paresh Sukthankar Mr. Kaizad Bharucha Mr. Umesh Chandra Sarangi $ 3 3 4 3 - 8 9 - - 1 - - - - - - 1 - - - - - 1 1 - - - 5 5 - - - - 2 1 3 1 - 3 1 - - - - * Chairmanships not counted $ Mr. Umesh Chandra Sarangi was appointed as an Additional Director w.e.f March 1, 2016. Note: For the purpose of considering the limit of the Directorships and limits of Committees on which the directors are members / Chairmanships, all public limited companies, whether listed or not, are included. Private Limited companies, foreign companies and companies under Section 8 of the Companies Act, 2013 are excluded. Further , Chairmanships/ Memberships of only the Audit Committee and the Stakeholders’ Relationship Committee have been considered. Non-Executive Directors: Mr. Keki Mistry and Mrs. Renu Karnad PROFILE OF BOARD OF DIRECTORS Independent Directors: Mrs. Shyamala Gopinath (Chairperson), Mr. Partho Datta, Mr. Bobby Parikh, Mr. A. N. Roy and Mr. Malay Patel The proﬁles of the Directors of the Bank as on March 31, 2016 are as under: Mr. Umesh Chandra Sarangi has been appointed as an Additional Director of the Bank with effect from March 1, 2016, to hold ofﬁce till the conclusion of the ensuing Annual General Meeting of the Bank. Mr. Keki Mistry and Mrs. Renu Karnad represent Housing Development Finance Corporation Limited (HDFC Limited) on the Board of the Bank. None of the Directors on the Board is a member of more than ten (10) Committees* and Chairman of more than ﬁve (5) Committees* across all the companies in which he / she is a Director. All the Directors have made necessary disclosures regarding Committee positions occupied by them in other companies. Mrs. Shyamala Gopinath Mrs. Shyamala Gopinath, aged 66 years, holds a Master’s Degree in Commerce and is a CAIIB. Mrs. Gopinath has over 40 years of experience in ﬁnancial sector policy formulation in different capacities at RBI. As Deputy Governor of RBI for seven years, Mrs. Gopinath had been guiding and inﬂuencing the national policies in the diverse areas of ﬁnancial sector regulation and supervision, development of ﬁnancial markets, capital account management, management of government borrowings, forex reserves management and payment and settlement systems. HDFC Bank Limited Annual Report 2015-16 196 Corporate Governance During 2001-03, Mrs. Gopinath worked as senior ﬁnancial sector expert in the then Monetary Affairs and Exchange Department of the International Monetary Fund (Financial Institutions Division). She was responsible for preparing the accompanying document to the Guidelines on Foreign Exchange Reserve Management detailing country practices. Mrs. Gopinath was a member of the FSAP (Financial Sector Assessment Program) missions to Tanzania, Nigeria, Hungary and Poland and the Foreign Exchange and Reserve Management team to Turkey and Kosovo. Mrs. Gopinath was actively involved in managing India’s balance of payments crisis in 1991, the fall out of the Asian and the Russian crisis, nuclear sanctions against India, Kargil war with Pakistan and the transmission of the recent ﬁnancial crisis to Indian ﬁnancial system and the markets. Mrs. Gopinath does not hold any shares in the Bank as on March 31, 2016. Mr. Aditya Puri Mr. Aditya Puri, aged 65 years, holds a Bachelor’s degree in Commerce from Punjab University and is an Associate Member of the Institute of Chartered Accountants of India. Mr. Puri’s vision and strategy have been the driving force behind the Bank’s foray into the world of “Digital Banking” resulting in the roll out of several digital banking products like 10 - second loans, PayZapp, Chillr, etc. Mr. Puri, along with his relatives, holds 30,69,044 equity shares in the Bank as on March 31, 2016. Mr. Keki Mistry Mr. Keki Mistry, aged 61 years, holds a Bachelor’s Degree in Commerce from the Mumbai University. Mr. Mistry is a Fellow Member of the Institute of Chartered Accountants of India. Mr. Mistry brings with him over three decades of varied experience in banking and ﬁnancial services domain. Mr. Mistry started his career with AF Ferguson & Co, a renowned Chartered Accountancy ﬁrm, followed by stints at Hindustan Unilever Limited and Indian Hotels Company Limited. In the year 1981, Mr. Mistry joined Housing Development Finance Corporation Limited (HDFC Ltd). Mr. Mistry was inducted on to the Board of Directors of HDFC Ltd as an Executive Director in the year 1993 and was elevated to the post of Managing Director in November 2000. In October 2007, Mr. Mistry was appointed as Vice Chairman & Managing Director of HDFC Ltd and became the Vice Chairman & CEO in January 2010. Prior to joining the Bank, Mr. Puri was the Chief Executive Ofﬁcer of Citibank, Malaysia from 1992 to 1994. Mr. Mistry, along with his relatives, holds 2,96,130 equity shares in the Bank as on March 31, 2016. Mr. Puri has been the Managing Director of the Bank since September 1994. Mr. Puri has over 40 years of experience in the banking sector in India and abroad. Mr. Puri has provided outstanding leadership as the Managing Director and has contributed signiﬁcantly to enable the Bank scale phenomenal heights under his stewardship. During the year, Mr. Puri was named amongst the best 30 CEOs in the world in the Barron’s list. The numerous awards won by Mr. Puri and the Bank are a testimony to the tremendous credibility that Mr. Puri has built for himself and the Bank over the years. The Bank has made good and consistent progress on key parameters like balance sheet size, total deposits, net revenues, earnings per share and net proﬁt during Mr. Puri’s tenure. The rankings achieved by the Bank amongst all Indian banks with regard to market capitalization, proﬁt after tax and balance sheet size remain amongst the top 10. During his tenure Mr. Puri has led the Bank through two major mergers in the Indian banking industry i.e. merger of Times Bank Limited and Centurion Bank of Punjab Limited with HDFC Bank Limited. The subsequent integrations have been smooth and seamless under his inspired leadership. Mrs. Renu Karnad Mrs. Renu Karnad, aged 63 years, is a law graduate and also holds a Master’s Degree in Economics from Delhi University. Mrs. Karnad is a Parvin Fellow-Woodrow Wilson School of International Affairs, Princeton University, U.S.A. Mrs. Karnad joined HDFC Ltd in 1978. After spending two decades in various positions, Mrs. Karnad was inducted on to the Board as Executive Director in 2000 and was further elevated to the post of Managing Director with effect from January 1, 2010. Over the years, Mrs. Karnad has to her credit, numerous awards and accolades. Known for her wit and diplomacy, Mrs. Karnad has always had a humane approach towards solving complex issues. Mrs. Karnad ﬁrmly believes that people are key to an organization’s success, especially in the service domain and propagates self-belief as the strongest weapon in achieving excellence. Mrs. Karnad, along with her relatives, holds 2,94,620 equity shares in the Bank as on March 31, 2016. Mr. Partho Datta Mr. Partho Datta, aged 67 years, is an Associate Member of the Institute of Chartered Accountants of India. Mr. Datta joined Indian Aluminum Company Limited (INDAL) and was with INDAL and HDFC Bank Limited Annual Report 2015-16 197 Corporate Governance its parent company in Canada for 25 years and held positions as Treasurer, Chief Financial Ofﬁcer and Director Finance during his tenure. Mr. Datta joined the Chennai based Murugappa Group thereafter as the head of Group Finance and was a member of the Management Board of the Group, as well as Director in several Murugappa Group companies. Post retirement from the Murugappa Group, Mr. Datta was an advisor to the Central Government appointed Board of Directors of Satyam Computers Services Limited during the restoration process and has also been engaged in providing business / strategic and ﬁnancial consultancy on a selective basis. Mr. Datta has rich and extensive experience in various ﬁnancial and accounting matters including ﬁnancial management, mergers and amalgamations and capital markets strategy. Mr. Datta is one of the ﬁnancial experts on the Audit Committee of the Board. Mr. Datta does not hold any equity shares in the Bank as on March 31, 2016. Mr. Bobby Parikh Mr. Bobby Parikh, aged 52 years, holds a Bachelor’s degree in Commerce from the Mumbai University and has qualiﬁed as a Chartered Accountant in 1987. Mr. Parikh is a Senior Partner with BMR & Associates LLP and leads its ﬁnancial services practice. Prior to joining BMR & Associates LLP, Mr. Parikh was the Chief Executive Ofﬁcer of Ernst & Young in India and held that responsibility until December 2003. Mr. Parikh worked with Arthur Andersen for over 17 years and was its Country Managing Partner until the Andersen practice combined with that of Ernst & Young in June 2002. Over the years, Mr. Parikh has had extensive experience in advising clients across a range of industries. India has witnessed signiﬁcant deregulation and a progressive transformation of its policy framework. An area of focus for Mr. Parikh has been to work with businesses, both Indian and multinational, in interpreting the implications of the deregulation as well as the changes to India’s policy framework, to help businesses better leverage opportunities that have become available and to address challenges that resulted from such changes. Mr. Parikh has led teams that have advised clients in the areas of entry strategy (MNCs into India and Indian companies into overseas markets), business model identiﬁcation, structuring a business presence, mergers, acquisitions and other business reorganizations. Mr. Parikh works closely with regulators and policy formulators, in providing inputs to aid in the development of new regulations and policies, and in assessing the implications and efﬁcacy of these and providing feedback for action. Mr. Parikh led the Financial Services industry practice at Arthur Andersen and then also at Ernst & Young and has advised a number of banking groups, investment banks, brokerage houses, fund managers and other ﬁnancial services intermediaries in establishing operations in India, mergers and acquisitions and in developing structured ﬁnancial products, besides providing tax and business advisory and tax reporting services. Mr. Parikh has been a member of a number of trade and business associations and their management or other committees, as well as on the advisory or executive boards of non-Governmental and not-for-proﬁt organizations. Mr. Parikh, along with his relatives, holds 7,375 equity shares in the Bank as on March 31, 2016. Mr. A. N. Roy Mr. A. N. Roy, aged 66 years, is an M. A., M. Phil and is a distinguished retired civil servant. During his long career of 38 years in the Indian Police Service (IPS), Mr. Roy held with great distinction a range of assignments, including some of the most prestigious, challenging and sensitive ones, both in the state of Maharashtra and Government of India, including Commissioner of Police, Mumbai and DGP, Maharashtra before retiring in the year 2010. Mr. Roy’s areas of specialization include policy planning, budget, recruitment, training and other ﬁnance and administration functions in addition to all operational matters. A ﬁrm believer in technology in Police for providing solutions to a variety of complex problems or citizen facilitation and as ‘force-multiplier’, Mr. Roy brought in technology in a very big way in the Police department with full co-operation and support of the entire IT Industry. Mr. Roy also held the position of Director General of the Anti-Corruption Bureau, in which capacity Mr. Roy initiated a policy document on vigilance matters for Government of Maharashtra. Mr. Roy has wide knowledge and experience of security and intelligence matters at the state and national level. Having handled multifarious ﬁeld and staff assignments, Mr. Roy has a rich and extensive experience of functioning of the government at various levels and of problem solving. Mr. Roy does not hold equity shares in the Bank as on March 31, 2016. Mr. Paresh Sukthankar Mr. Paresh Sukthankar, aged 53 years, completed his graduation from Sydenham College, Mumbai and holds a Bachelor of Commerce (B.Com) degree from University of Mumbai. He has done his Masters in Management Studies (MMS) from Jamnalal Bajaj Institute (Mumbai). Mr. Sukthankar has also completed the Advanced Management Program (AMP) from the Harvard Business School. HDFC Bank Limited Annual Report 2015-16 198 Corporate Governance Mr. Sukthankar has been associated with the Bank since its inception in 1994 and has rich experience in areas such as Risk Management, Finance, Human Resources, Investor Relations and Corporate Communications, etc. Prior to joining the Bank, Mr. Sukthankar worked in Citibank for around 9 years, in various departments including corporate banking, risk management, ﬁnancial control and credit administration. Mr. Sukthankar has been a member of various Committees formed by Reserve Bank of India and Indian Banks’ Association. At present, Mr. Sukthankar is the Deputy Managing Director of the Bank. Mr. Sukthankar, along with his relatives, holds 8,45,905 equity shares in the Bank as on March 31, 2016. Mr. Kaizad Bharucha Mr. Kaizad Bharucha, aged 51 years, holds a Bachelor of Commerce degree from University of Mumbai. He has been associated with the Bank since 1995. In his current position as Executive Director, he is responsible for Wholesale Banking covering areas of Corporate Banking, Emerging Corporate Group, Business Banking, Capital Markets & Commodities Business, Agri Lending, Investment Banking, Financial Institutions & Government Business and Department for Special Operations. In his previous position as Group Head - Credit & Market Risk, he was responsible for the Risk Management activities in the Bank viz., Credit Risk, Market Risk, Debt Management, Risk Intelligence and Control functions. Mr. Bharucha has been a career banker with over 29 years of banking experience. Prior to joining the Bank, he worked in SBI Commercial and International Bank in various areas including Trade Finance and Corporate Banking. He has represented HDFC Bank as a member of the working group constituted by the Reserve Bank of India to examine the role of Credit Information Bureau and on the sub-committee with regard to adoption of the Basel II guidelines. Mr. Bharucha, along with his relatives, holds 8,84,955 equity shares in the Bank as on March 31, 2016. Mr. Malay Patel Mr. Malay Patel, aged 39 years, is a Major in Engineering (Mechanical) from Rutgers University, Livingston, NJ, USA, and an A.A.B.A. in business from Bergen County College, Fairlawn, NJ, USA. He is a director on the Board of Eewa Engineering Company Private Limited, a company in the plastics / packaging industry with exports to more than 50 countries. He has been involved in varied roles such as export/ import, procurement, sales and marketing, etc in Eewa Engineering Company Private Limited. Mr. Malay Patel has special knowledge and practical experience in matters relating to small scale industries in terms of Section 10-A (2)(a) of the Banking Regulation Act, 1949. Mr. Malay Patel does not hold any shares in the Bank as on March 31, 2016. Mr. Umesh Chandra Sarangi Mr. Umesh Chandra Sarangi, aged 64 years, has been appointed as an Additional Director on the Board of the Bank with effect from March 1, 2016 to hold ofﬁce till the conclusion of the ensuing Annual General Meeting of the Bank. Mr. Sarangi holds a Master’s Degree in Science (Botany) from the Utkal University (gold medalist). Mr. Sarangi has 35 years of experience in the Indian Administrative Services and brought in signiﬁcant reforms in modernization of agriculture, focus on agro processing and export. As the erstwhile Chairman of the National Bank for Agricultural and Rural Development (NABARD) from December 2007 to December 2010, Mr. Sarangi focused on rural infrastructure, accelerated initiatives such as microﬁnance, ﬁnancial inclusion, watershed development and tribal development. Mr. Sarangi has been appointed as a Director having specialized knowledge and experience in agriculture and rural economy pursuant to Section 10-A (2)(a) of the Banking Regulation Act, 1949. Mr. Sarangi does not hold any shares in the Bank as on March 31, 2016. BOARD MEETINGS During the year under review, seven (7) Board Meetings were held. The meetings were held on April 23, 2015, July 21, 2015, August 27, 2015, September 29, 2015, October 21, 2015, January 25, 2016 and February 17, 2016. Details of attendance at the Board Meetings held during the year under review, are as follows: 1. Mrs. Shyamala Gopinath, Mr. Bobby Parikh, Mr. Malay Patel, Mr. Keki Mistry and Mr. Paresh Sukthankar attended 7 Board meetings each 2. Mr. Partho Datta, Mr. A. N. Roy, Mr. Aditya Puri and Mr. Kaizad Bharucha attended 6 Board meetings each. 3. Mrs. Renu Karnad attended 5 Board meetings. 4. Dr. Pandit Palande attended 1 Board meeting. (Dr. Palande ceased to be a Director w.e.f close of business hours on April 23, 2015) 5. Mr. Umesh Chandra Sarangi has not attended any Board Meetings as he was appointed as an Additional Director w.e.f March 1, 2016. ATTENDANCE AT LAST AGM All the directors of the Bank who were on the Board of the Bank as on the date of previous Annual General Meeting held on July 21, 2015 attended the meeting. HDFC Bank Limited Annual Report 2015-16 199 Corporate Governance REMUNERATION OF DIRECTORS Managing Director and other Executive Directors: The details of the remuneration paid to Mr. Aditya Puri, Managing Director; Mr. Paresh Sukthankar, Deputy Managing Director and Mr. Kaizad Bharucha, Executive Director during the year 2015-16 (Amount in `) are as under: Particulars Basic Mr. Aditya Puri Mr. Paresh Sukthankar Mr. Kaizad Bharucha 32,846,400 18,273,960 10,500,000 Allowances and Perquisites 30,434,539 13,251,279 14,733,614 Provident Fund Superannuation 3,941,568 2,192,880 1,260,000 4,926,960 2,741,094 1,575,000 Performance Bonus # 25,154,778 15,000,411 6,542,610 Number of Stock Options granted * 639,000 390,000 335,000 # Bonus belonging to FY 14-15 paid out in FY 2015-16 Deferred Bonus tranches for earlier ﬁnancial years 19,650,725 11,716,054 6,542,610 5,504,053 3,284,357 0 * The stock options granted to Mr. Aditya Puri, Mr. Paresh Sukthankar and Mr. Kaizad Bharucha have not been issued at discount. The vesting schedule for the stock options is - 40% of options after expiry of 1 year from date of grant, 30% options after expiry of 2 years from date of grant and 30% options after expiry of 3 years from date of grant. The options so vested are to be exercised within 4 years from the respective dates of vesting. The criteria for evaluation of performance of Whole-Time Directors include performance vis-à-vis business plans, performance vis-à-vis banking system, and performance in relation to regulatory and compliance requirements. All the Whole-Time Directors of the Bank have been appointed for a period of three years each. The notice period for each of them, as speciﬁed in their terms of appointments, is three months. The remuneration, including grant of stock options, of Mr. Aditya Puri, Mr. Paresh Sukthankar and Mr. Kaizad Bharucha as above has been approved by the Reserve Bank of India (RBI). The Bank provides for gratuity in the form of lump-sum payment on retirement or on death while in employment or on termination of employment of an amount equivalent to 15 (Fifteen) days basic salary payable for each completed year of service. Perquisites (evaluated as per Income Tax Rules, 1962 wherever applicable and at actual cost to the Bank otherwise) such as the beneﬁt of the Bank’s furnished accommodation, gas, electricity, water and furnishings, club fees, personal accident insurance, use of car and telephone at residence, medical reimbursement, leave and leave travel concession and other beneﬁts like provident fund, superannuation and gratuity are provided in accordance with the rules of the Bank in this regard. No sitting fees are paid to Mr. Puri, Mr. Sukthankar and Mr. Bharucha for attending meetings of the Board and / or its Committees. DETAILS OF REMUNERATION / SITTING FEES PAID TO DIRECTORS All the non-executive directors other than the Chairperson receive remuneration only by way of sitting fees for each meeting of the Board and its various committees. No stock options are granted to any of the non-executive directors. During the year, Mrs. Shyamala Gopinath was paid remuneration of ` 30,00,000. Mrs. Gopinath is also paid sitting fees for attending Board and Committee meetings. The remuneration of the Chairperson has been approved by the Reserve Bank of India. Pursuant to the provisions of Companies Act, 2013, Directors are paid sitting fees @ ` 50,000 and ` 100,000 for attending Committee & Board meetings respectively. The details of sitting fees paid to non-executive directors during the year for attending meetings of the Board and its various Committees are as under: Name of the Director Sitting Fees (`) Mrs. Shyamala Gopinath Mr. Partho Datta Mr. Bobby Parikh Mr. A. N. Roy Mr. Malay Patel Mr. Keki Mistry Mrs. Renu Karnad Dr. Pandit Palande * Mr. Umesh Chandra Sarangi $ 25,00,000 20,00,000 24,00,000 21,00,000 13,00,000 16,00,000 11,00,000 3,50,000 NIL The Bank makes annual contributions to funds administered by trustees and managed by insurance companies for amounts notiﬁed by the said insurance companies. The Bank accounts for the liability for future gratuity beneﬁts based on an independent external actuarial valuation carried out annually. * Dr. Pandit Palande ceased to be a director of the Bank w.e.f close of business hours on April 23, 2015 $ Mr. Umesh Chandra Sarangi was appointed as Additional Director of the Bank w.e.f March 1, 2016 HDFC Bank Limited Annual Report 2015-16 200 Corporate Governance COMPOSITION OF COMMITTEES OF DIRECTORS AND ATTENDANCE AT THE MEETINGS The Board has constituted various Committees of Directors to take informed decisions in the best interest of the Bank. These Committees monitor the activities falling within their terms of reference. The Board’s Committees are as follows: Audit Committee: The Audit Committee of the Bank comprises Mrs. Shyamala Gopinath, Mr. Bobby Parikh, Mr. Partho Datta and Mr. A. N. Roy. During the year, Dr. Pandit Palande ceased to be a member of the Audit Committee, pursuant to his cessation as Director, and Mr. A. N. Roy was appointed as a member on the Committee during the year. The Committee is chaired by Mrs. Shyamala Gopinath. All the members of the Committee are independent directors. Mr. Sanjay Dongre, Company Secretary of the Bank, acts as the Secretary of the Committee. The Committee met nine (9) times during the year on April 22, 2015; May 6, 2015; July 20, 2015; August 28, 2015; October 20, 2015; November 20, 2015; January 22, 2016; February 26, 2016 and March 16, 2016. The brief terms of reference of the Audit Committee include, inter-alia, the following: a) Overseeing the Bank’s ﬁnancial reporting process and ensuring correct, adequate and credible disclosure of ﬁnancial information; b) Recommending appointment and removal of external auditors and ﬁxing of their fees; c) Reviewing with management the annual ﬁnancial statements before submission to the Board with special emphasis on accounting policies and practices, compliance with accounting standards and other legal requirements concerning ﬁnancial statements; d) Reviewing the adequacy of the Audit and Compliance functions, including their policies, procedures, techniques and other regulatory requirements; and e) Any other terms of reference as may be included from the Companies Act, 2013, SEBI Listing Regulations, 2015, including any amendments/ re-enactments thereof from time to time. time time to in Nomination and Remuneration Committee: The brief terms of reference of the Nomination and Remuneration Committee includes scrutinizing the nominations of the directors with reference to their qualiﬁcations and experience, for identifying ‘Fit and Proper’ persons, assessing competency of the persons and reviewing compensation levels of the Bank’s employees vis-à-vis other banks and the banking industry in general. The following are the criteria to assess competency of the persons nominated: (cid:115)(cid:0) (cid:65)(cid:67)(cid:65)(cid:68)(cid:69)(cid:77)(cid:73)(cid:67)(cid:0)(cid:81)(cid:85)(cid:65)(cid:76)(cid:73)(cid:108)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0) (cid:115)(cid:0) (cid:80)(cid:82)(cid:69)(cid:86)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:12)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:84)(cid:82)(cid:65)(cid:67)(cid:75)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:73)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:65)(cid:78)(cid:68)(cid:73)(cid:68)(cid:65)(cid:84)(cid:69)(cid:83)(cid:14) For assessing the integrity and suitability, features like criminal records, ﬁnancial position, civil actions undertaken to pursue personal debts, refusal of admission to and expulsion from professional bodies, sanctions applied by regulators or similar bodies and previous questionable business practices are considered. The Bank’s compensation policy provides a fair and consistent basis for motivating and rewarding employees appropriately according to their job proﬁle / role size, performance, contribution, skill and competence. The Committee also formulates criteria for evaluation of performance of individual directors, the Board of Directors and its Committees. The criteria for evaluation of performance of directors include personal attributes such as attendance at meetings, communication skills, leadership skills and adaptability and professional attributes such as understanding of the Bank’s core business and strategic objectives, industry knowledge, independent judgment, adherence to the Bank’s Code of Conduct, Ethics and Values, etc. Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh and Mr. A. N. Roy are the members of the Committee. During the year, Dr. Pandit Palande ceased to be a member of the Committee, pursuant to his cessation as Director. Mr. A. N. Roy was appointed as a member of the Committee during the year. Mr. Bobby Parikh is the Chairman of the Committee. All the members of the Committee are independent directors. The Board has also adopted a Charter for the Audit Committee in accordance with certain United States regulatory standards as the Bank’s securities are also listed on the New York Stock Exchange. the year on The Committee met nine (9) April 22, 2015; May 6, 2015; May 11, 2015; July 20, 2015; August 1, 2015; October 20, 2015; November 20, 2015; January 22, 2016 and March 16, 2016. times during HDFC Bank Limited Annual Report 2015-16 201 Corporate Governance Stakeholders’ Relationship Committee: The Stakeholders’ Relationship Committee approves and monitors transfer, transmission, splitting and consolidation of shares and considers requests for dematerialization of shares. Allotment of shares to the employees on exercise of stock options granted under the various Employees Stock Option Schemes which are made in terms of the powers delegated by the Board in this regard, are placed before the Committee for ratiﬁcation. The Committee also monitors redressal of complaints from shareholders relating to transfer of shares, non-receipt of Annual Report, dividends etc. The Committee is comprised of Mr. A. N. Roy, Mrs. Renu Karnad, Mr. Aditya Puri and Mr. Paresh Sukthankar. The Committee is chaired by Mr. A. N. Roy, who is an independent director. The powers to approve share transfers and dematerialization requests have been delegated to executives of the Bank to avoid delays that may arise due to non-availability of the members of the Committee. Mr. Sanjay Dongre, Executive Vice - President (Legal) & the Company Secretary of the Bank is the Compliance Ofﬁcer responsible for expediting the share transfer formalities. for treasury operations and reviews its risk monitoring system. The Committee also ensures that the Bank’s credit exposure to any one group or industry does not exceed the internally set limits and that the risk is prudentially diversiﬁed. The Committee consists of Mrs. Renu Karnad, Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Aditya Puri and Mr. Paresh Sukthankar. The Committee is chaired by Mrs. Renu Karnad. The Committee met ﬁve (5) times during the year on April 23, 2015; June 25, 2015; July 21, 2015; October 21, 2015 and January 22, 2016. Credit Approval Committee: The Credit Approval Committee approves credit exposures, which are beyond the powers delegated to executives of the Bank. This facilitates quick response to the needs of the customers and speedy disbursement of loans. The Committee consists of Mr. Bobby Parikh, Mr. Keki Mistry, Mr. Aditya Puri and Mr. Kaizad Bharucha. As on March 31, 2016, seven (7) instruments of transfer for 3,300 equity shares were pending for transfer and these have since been processed. The details of the transfers are reported to the Board from time to time. The Committee met eight (8) times during the year on April 23, 2015; July 16, 2015; August 25, 2015; September 19, 2015; October 14, 2015; December 1, 2015; January 25, 2016 and March 22, 2016. During the year ended March 31, 2016, 2668 complaints were received from the shareholders. The Bank had attended to all the complaints. 10 complaints remained pending and 4 complaints have not been solved to the satisfaction of the shareholders as on March 31, 2016. Besides, 5671 letters were received from the shareholders relating to change of address, nomination requests, email id and contact details updation, IFSC / MICR code updation, ECS / NECS Mandates, claim of shares from Unclaimed Suspense account, queries relating to the annual reports, sub-division of shares of face value of ` 10/- each to ` 2/- each, amalgamation, request for revalidation of dividend warrants and other investor related matters. These letters have also been responded to. The Committee met four (4) times during the year on April 23, 2015; July 21, 2015; October 19, 2015 and January 22, 2016. Premises Committee: The Premises Committee approves purchases and leasing of premises for the use of Bank’s branches, back ofﬁces, ATMs and residence of executives in accordance with the guidelines laid down by the Board. The Committee consists of Mrs. Renu Karnad, Mr. Aditya Puri and Mr. Malay Patel. During the year, Dr. Pandit Palande ceased to be a member of the Committee pursuant to his cessation as Director. Mr. Malay Patel was appointed as a member of the Committee during the year. The Committee met four (4) times during the year on April 23, 2015; July 21, 2015; October 19, 2015 and January 25, 2016. Fraud Monitoring Committee: Risk Policy and Monitoring Committee: The Risk Policy and Monitoring Committee has been formed as per the guidelines of Reserve Bank of India on Asset Liability Management / Risk Management Systems. The Committee develops Bank’s credit and market risk policies and procedures, veriﬁes adherence to various risk parameters and prudential limits Pursuant to the directions of the RBI, the Bank has constituted a Fraud Monitoring Committee, exclusively dedicated to the monitoring and following up of cases of fraud involving amounts of ` 1 crore and above. The objectives of this Committee are the effective detection of frauds and immediate reporting of the frauds and actions taken HDFC Bank Limited Annual Report 2015-16 202 Corporate Governance against the perpetrators of frauds to the concerned regulatory and enforcement agencies. The terms of reference of the Committee are as under: a. Identify the systemic lacunae, if any, that facilitated perpetration of the fraud and put in place measures to plug the same; b. Identify the reasons for delay in detection, if any and report to top management of the Bank and RBI; Corporate Social Responsibility Committee: The Board has constituted a Corporate Social Responsibility (CSR) Committee with the following terms of reference: (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:70)(cid:79)(cid:82)(cid:77)(cid:85)(cid:76)(cid:65)(cid:84)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:7)(cid:83)(cid:0)(cid:35)(cid:51)(cid:50)(cid:0)(cid:51)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:89)(cid:12)(cid:0)(cid:48)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:39)(cid:79)(cid:65)(cid:76)(cid:83) (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:7)(cid:83)(cid:0)(cid:35)(cid:51)(cid:50)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69) (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:51)(cid:50)(cid:0)(cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:83)(cid:0)(cid:15)(cid:0)(cid:73)(cid:78)(cid:73)(cid:84)(cid:73)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69) c. Monitor progress of Central Bureau of Investigation / Police Investigation and recovery position; (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) (cid:76)(cid:69)(cid:71)(cid:65)(cid:76)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0) (cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:0) (cid:65)(cid:0) (cid:35)(cid:51)(cid:50)(cid:0) viewpoint d. Ensure that staff accountability is examined at all levels in all the cases of frauds and staff side action, if required, is completed quickly without loss of time; e. Review the efﬁcacy of the remedial action taken to prevent recurrence of frauds, such as strengthening of internal controls; and f. Put in place other measures as may be considered relevant to strengthen preventive measures against frauds. The members of the Committee are Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. A. N. Roy, Mr. Keki Mistry, Mr. Malay Patel and Mr. Aditya Puri. During the year, Dr. Pandit Palande ceased to be a member of the Committee pursuant to his cessation as Director. Mr. Malay Patel was appointed as a member of the Committee during the year. The Committee met ﬁve (5) times during the year on April 22, 2015; July 17, 2015; August 28, 2015; October 19, 2015 and January 25, 2016. Customer Service Committee: The Customer Service Committee monitors the quality of services rendered to the customers and also ensures implementation of directives received from the RBI in this regard. The terms of reference of the Committee are to formulate comprehensive deposit policy incorporating the issues arising out of the demise of a depositor for operation of his account, the product approval process, annual survey of depositor satisfaction and the triennial audit of such services. The members of the Committee are Mrs. Shyamala Gopinath, Mr. A. N. Roy, Mr. Keki Mistry, Mr. Malay Patel and Mr. Aditya Puri. During the year, Dr. Pandit Palande ceased to be a member of the Committee pursuant to his cessation as Director. Mr. Malay Patel was appointed as a member of the Committee during the year. The Committee met ﬁve (5) times during the year on April 22, 2015; July 17, 2015; October 19, 2015; January 25, 2016 and February 8, 2016. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) (cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:67)(cid:79)(cid:77)(cid:77)(cid:85)(cid:78)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:84)(cid:79)(cid:0) (cid:83)(cid:84)(cid:65)(cid:75)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0) (cid:79)(cid:78)(cid:0) the Bank’s CSR The members of the CSR Committee are Mrs. Renu Karnad, Mr. Partho Datta, Mr. Bobby Parikh, Mr. Aditya Puri and Mr. Paresh Sukthankar. The Committee met three (3) times during the year on July 21, 2015; October 19, 2015; and January 22, 2016 Review Committee for Willful Defaulters’ Identiﬁcation: The Board has constituted a Review Committee for Willful Defaulters’ Identiﬁcation to review the orders passed by the Committee of Executives for Identiﬁcation of Willful Defaulters and provide the ﬁnal decision with regard to identiﬁed willful defaulters. Mrs. Shyamala Gopinath, Mr. Aditya Puri, Mr. Bobby Parikh, Mr. Partho Datta and Mr. A. N. Roy are the members of the Committee. The Committee is chaired by Mrs. Shyamala Gopinath or Mr. Aditya Puri in her absence. The Committee met twice during the year on August 28, 2015 and January 25, 2016. Review Committee for Non-Cooperative Borrowers: The Board has constituted a Review Committee to review matters related to Non-Co-operative Borrowers which are handled by the Internal Committee of Executives appointed for this purpose. Mrs. Shyamala Gopinath, Mr. Aditya Puri, Mr. Bobby Parikh, Mr. Partho Datta and Mr. A. N. Roy are the members of the Committee. The Committee is chaired by Mrs. Shyamala Gopinath or Mr. Aditya Puri in her absence. No meetings of the Committee were held during the year. Meeting of the Independent Directors: The Independent Directors of the Bank held a meeting on March 16, 2016 without the presence of the non-independent Directors and Senior management team of the Bank. All the Independent Directors attended the meeting. The Independent Directors discussed matters as required under the relevant provisions of the Companies Act, 2013 and the SEBI Listing Regulations, 2015. HDFC Bank Limited Annual Report 2015-16 203 Corporate Governance COMPOSITION OF COMMITTEES OF DIRECTORS AND ATTENDANCE AT THE COMMITTEE MEETINGS Audit Committee [Total nine meetings held] Credit Approval Committee [Total eight meetings held] Name Mrs. Shyamala Gopinath Mr. Bobby Parikh Mr. A. N. Roy # Mr. Partho Datta Dr. Pandit Palande * No. of meetings attended 9 9 8 8 1 Name Mr. Bobby Parikh Mr. Keki Mistry Mr. Aditya Puri Mr. Kaizad Bharucha No. of meetings attended 8 8 6 8 Stakeholders’ Relationship Committee [Total four meetings held] Nomination and Remuneration Committee [Total nine meetings held] Name Mr. A. N. Roy Mrs. Renu Karnad Mr. Aditya Puri Mr. Paresh Sukthankar No. of meetings attended 3 3 4 4 Customer Service Committee [Total ﬁve meetings held] Name Mrs. Shyamala Gopinath Mr. Aditya Puri Mr. A. N. Roy Mr. Keki Mistry Mr. Malay Patel $ Dr. Pandit Palande * No. of meetings attended 5 5 4 5 4 1 Fraud Monitoring Committee [Total ﬁve meetings held] Name Mrs.Shyamala Gopinath Mr. Aditya Puri Mr. Partho Datta Mr. A. N. Roy Mr. Keki Mistry Mr. Malay Patel $ Dr. Pandit Palande * No. of meetings attended 5 4 3 4 5 4 1 Risk Policy & Monitoring Committee [Total ﬁve meetings held] Name No. of meetings attended Mrs. Renu Karnad Mrs. Shyamala Gopinath Mr. Paresh Sukthankar Mr. Partho Datta Mr. Aditya Puri 3 4 5 4 5 Name Mrs. Shyamala Gopinath Mr. Partho Datta Mr. A. N. Roy # Mr. Bobby Parikh Dr. Pandit Palande * No. of meetings attended 9 8 8 9 1 Premises Committee [Total four meetings held] Name Mrs. Renu Karnad Mr. Malay Patel $ Mr. Aditya Puri Dr. Pandit Palande * No. of meetings attended 3 3 4 1 Corporate Social Responsibility Committee [Total three meetings held] Name Mrs. Renu Karnad Mr. Partho Datta Mr. Bobby Parikh Mr. Aditya Puri Mr. Paresh Sukthankar No. of meetings attended 3 2 3 3 3 Review Committee for Willful Defaulters’ Identiﬁcation [Total two meetings held] Name Mrs. Shyamala Gopinath No. of meetings attended 2 Mr. Aditya Puri Mr. Bobby Parikh Mr. Partho Datta Mr. A. N. Roy 0 0 2 2 # Mr. A. N. Roy was appointed as a member of the Committee w.e.f April 23, 2015. * Dr. Pandit Palande ceased to be a member of the Committee, pursuant to his cessation as Director of the Bank w.e.f. close of business hours on April 23, 2015. $ Mr. Malay Patel was appointed as a member of the Committee w.e.f April 23, 2015. HDFC Bank Limited Annual Report 2015-16 204 Corporate Governance OWNERSHIP RIGHTS Certain rights that a shareholder in a company enjoys: (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:70)(cid:69)(cid:82)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0) (cid:67)(cid:69)(cid:82)(cid:84)(cid:73)(cid:108)(cid:67)(cid:65)(cid:84)(cid:69)(cid:83)(cid:0) upon transfer within the period prescribed in the SEBI Listing Regulations, as amended from time to time. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0) (cid:78)(cid:79)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0) (cid:79)(cid:70)(cid:0) (cid:71)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:76)(cid:0) (cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:12)(cid:0) (cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0) (cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) balance sheet and proﬁt and loss account and the auditors’ report. To attend and speak in person, at general meetings. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:0)(cid:80)(cid:82)(cid:79)(cid:88)(cid:89)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:84)(cid:84)(cid:69)(cid:78)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:86)(cid:79)(cid:84)(cid:69)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:71)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:76)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:14)(cid:0) In case the member is a body corporate, to appoint a representative to attend and vote at the general meetings of the company on its behalf. (cid:115)(cid:0) (cid:48)(cid:82)(cid:79)(cid:88)(cid:89)(cid:0)(cid:67)(cid:65)(cid:78)(cid:0)(cid:86)(cid:79)(cid:84)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:80)(cid:79)(cid:76)(cid:76)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:67)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:86)(cid:79)(cid:84)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:79)(cid:76)(cid:76)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:85)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0) of votes of a shareholder is proportionate to the number of equity shares held by him. (cid:115)(cid:0) (cid:41)(cid:78)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:51)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:17)(cid:18)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:33)(cid:67)(cid:84)(cid:12)(cid:0)(cid:17)(cid:25)(cid:20)(cid:25)(cid:0)(cid:65)(cid:83)(cid:0) amended with effect from January 18, 2013 vide the Banking Laws Amendment Act, 2012, no person holding shares in a banking company shall, in respect of any shares held by him, exercise voting rights on poll in excess of ten per cent of the total voting rights of all the shareholders of the banking company, provided that RBI may increase, in a phased manner, such ceiling on voting rights from ten per cent to twenty-six per cent. The Master Direction - Ownership in Private Sector Banks, Directions, 2016 issued by RBI on May 12, 2016, states that the current level of ceiling on voting rights is at ﬁfteen per cent. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:88)(cid:84)(cid:82)(cid:65)(cid:79)(cid:82)(cid:68)(cid:73)(cid:78)(cid:65)(cid:82)(cid:89)(cid:0)(cid:71)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:76)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:66)(cid:89)(cid:0) shareholders who collectively hold not less than 1/10th of the total paid-up capital of the company. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:77)(cid:79)(cid:86)(cid:69)(cid:0) (cid:65)(cid:77)(cid:69)(cid:78)(cid:68)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:84)(cid:79)(cid:0) (cid:82)(cid:69)(cid:83)(cid:79)(cid:76)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:80)(cid:82)(cid:79)(cid:80)(cid:79)(cid:83)(cid:69)(cid:68)(cid:0) (cid:65)(cid:84)(cid:0) (cid:71)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:76)(cid:0) meetings. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0) (cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0) (cid:67)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:69)(cid:0) (cid:66)(cid:69)(cid:78)(cid:69)(cid:108)(cid:84)(cid:83)(cid:0) (cid:76)(cid:73)(cid:75)(cid:69)(cid:0) (cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:83)(cid:12)(cid:0) bonus shares etc. as and when declared / announced. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:73)(cid:78)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:82)(cid:69)(cid:71)(cid:73)(cid:83)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:12)(cid:0)(cid:77)(cid:73)(cid:78)(cid:85)(cid:84)(cid:69)(cid:0)(cid:66)(cid:79)(cid:79)(cid:75)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0) general meetings and to receive copies thereof after complying with the procedure prescribed in the Companies Act, 2013 as amended from time to time. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:77)(cid:65)(cid:75)(cid:69)(cid:0) (cid:78)(cid:79)(cid:77)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:73)(cid:78)(cid:0) (cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0) (cid:72)(cid:69)(cid:76)(cid:68)(cid:0) (cid:66)(cid:89)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) shareholder. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:73)(cid:67)(cid:73)(cid:80)(cid:65)(cid:84)(cid:69)(cid:0)(cid:73)(cid:78)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:66)(cid:69)(cid:0)(cid:83)(cid:85)(cid:70)(cid:108)(cid:67)(cid:73)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:69)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:69)(cid:67)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) concerning fundamental corporate changes. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:69)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:85)(cid:76)(cid:69)(cid:83)(cid:12)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:86)(cid:79)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:68)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0) govern general shareholder meetings. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:65)(cid:68)(cid:69)(cid:81)(cid:85)(cid:65)(cid:84)(cid:69)(cid:0)(cid:77)(cid:69)(cid:67)(cid:72)(cid:65)(cid:78)(cid:73)(cid:83)(cid:77)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:68)(cid:68)(cid:82)(cid:69)(cid:83)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:71)(cid:82)(cid:73)(cid:69)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) shareholders. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) (cid:80)(cid:82)(cid:79)(cid:84)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:77)(cid:73)(cid:78)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0) (cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:0) (cid:65)(cid:66)(cid:85)(cid:83)(cid:73)(cid:86)(cid:69)(cid:0) actions by, or in the interest of, controlling shareholders acting either directly or indirectly, and effective means of redress. Special Resolutions passed, if any One special resolution passed The rights mentioned above are prescribed in the Companies Act, 2013, the SEBI Listing Regulations and Banking Regulation Act, 1949, wherever applicable, and should be followed only after careful reading of the relevant sections. These rights are not necessarily absolute. GENERAL BODY MEETINGS (During the previous three ﬁnancial years) Sr. No. Particulars of meeting Date, time and venue of the meeting 1 2 3 19th Annual General Meeting June 27, 2013 at 2.30 P.M. Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400 020 20th Annual General Meeting June 25, 2014 at 2.30 P.M. Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400 020 Eight special resolutions passed 21st Annual General Meeting July 21, 2015 at 2.30 P.M. Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400 020 Three special resolutions passed POSTAL BALLOT During the year, no resolutions were passed by means of postal ballot. DISCLOSURES Material Subsidiary The Bank has 2 subsidiaries namely- HDB Financial Services Limited and HDFC Securities Limited, neither of which qualiﬁes to be a material subsidiary within the meaning of the SEBI Listing Regulations. However, as a good corporate governance practice, the Bank has formulated a policy for determining material subsidiary. The policy is available on the Bank’s website at http://www.hdfcbank.com/htdocs/common/pdf/Policy-for- determining-material-subsidiary.pdf. Related Party Transactions transactions with the promoters, directors, During the year the Bank has not entered into any materially signiﬁcant the management, subsidiaries or relatives of the Directors, which could lead to a potential conﬂict of interest between the Bank and these parties, other than the transactions entered into in the normal course of business. Transactions with related parties entered into by the Bank in the normal course of business were placed before the Audit Committee. There were no material individual transactions with related parties, which were not in HDFC Bank Limited Annual Report 2015-16 205 Corporate Governance the normal course of business, nor were there any material transactions with related parties or others, which were not at an arm’s length basis. Details of related party transactions entered into during the year ended March 31, 2016 are given in Schedule 18, Note No. 27 forming part of ‘Notes to Accounts’. The Bank has put in place a policy to deal with related party transactions and the same has been uploaded on the Bank’s web-site at http:// www.hdfcbank.com/htdocs/common/pdf/policy_for_dealing_with_ related_party_transactions.pdf Commodity Price Risks and Foreign Exchange Risks and hedging activities future contracts or as may be speciﬁed by the relevant authority from time to time. All open positions are marked to market based on the settlement price and the resultant marked to market proﬁt / loss is settled daily with the exchange. Foreign exchange forward contracts outstanding on the balance sheet date that are not intended for trading and are entered into to establish the amount of reporting currency required or available on the settlement date of a transaction, to meet a balance sheet transaction, are effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract is amortised as expense or income over the life of the contract. Being in the banking business, the Bank does not deal in any “commodity”. The Bank may, however, be exposed to the commodity price risks of its customers in its capacity as lender/ banker. Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. The Bank being an authorised dealer, deals in foreign exchange and derivative transactions with various counterparties, both interbank and customers, in accordance with the RBI guidelines. Thus, as part of foreign exchange trading, the Bank enters into foreign exchange contracts such as spot, outright forwards, forex swaps, currency options, long term forwards, currency and interest rate swaps and exchange traded products in speciﬁc currency pairs. These contracts are managed in the trading portfolio within the forex trading risk limits viz. Net overnight open position limit, Intraday open position limit, Gap limits, Value-at-Risk limit, Stop Loss Trigger Level, Sensitivity limit and Delta stipulated as part of the Bank’s Treasury Limits Package. In addition, Bank also enters into foreign exchange contracts to hedge the currency risk in the balance sheet on account of foreign currency deposits and loans, which are managed as hedge positions as per extant guidelines. The Foreign exchange spot, forward and swap contracts outstanding as on the Balance Sheet date, that are held for trading, are revalued at the closing spot and forward rates respectively as notiﬁed by FEDAI (Foreign Exchange Dealers’ Assocation of India) and at interpolated rates for contracts of interim maturities. The USD-INR rate for valuation of contracts having longer maturities i.e. greater than one year, is implied from MIFOR and LIBOR curves. For other currency pairs, where the rates / tenors are not published by FEDAI, the forward points are obtained from Reuters for valuation of the Foreign Exchange deals. The forex proﬁt or loss is arrived on present value basis thereafter, as directed by FEDAI, whereby the forward proﬁts or losses on the deals, as computed above, are discounted till the valuation date using the discounting yields. The resulting proﬁt or loss on valuation is recognised in the Statement of Proﬁt and Loss. Currency future contracts are marked to market daily using settlement price on a trading day, which is the closing price of the respective futures contracts on that day. The daily settlement price is computed on the basis of the last half an hour weighted average price of such contract, while, the ﬁnal settlement price is taken as the RBI reference rate on the last trading day of the Accounting Treatment The ﬁnancial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India (‘GAAP’), statutory requirements prescribed under the Banking Regulation Act 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time, Accounting Standards (‘AS’) speciﬁed under section 133 of the Companies Act, 2013, in so far as they apply to banks and current practices prevailing within the banking industry in India. There are no deviations from the statutory provisions. Whistle Blower Policy/ Vigil Mechanism The details of establishment of whistle blower policy/ vigil mechanism are furnished in the Directors’ Report. None of the Bank’s personnel have been denied access to the Audit Committee. Remuneration and Selection criteria for Directors The relevant details are furnished in the Directors’ Report. Appointment / Resignation of Director During the year, Dr. Pandit Palande ceased to be a Director of the Bank at the close of business hours on April 23, 2015, on completing eight years as Director, the maximum term permitted for directorship as per the Banking Regulation Act, 1949. Mr. Umesh Chandra Sarangi was appointed as Additional Director with effect from March 1, 2016 to hold ofﬁce till the conclusion of the ensuing Annual General Meeting of the Bank. Mr. Sarangi has been appointed as Director having specialized knowledge and experience in agriculture and rural economy pursuant to the Banking Regulation Act, 1949. Familiarization of Independent Directors The details of familiarization programmes imparted to Independent Directors are available on the website of the Bank at http://www. hdfcbank.com/aboutus/cg/Familiarization.htm. HDFC Bank Limited Annual Report 2015-16 206 Corporate Governance Strictures and Penalties COMPLIANCE WITH MANDATORY REQUIREMENTS During the current year there were no penalties imposed on the Bank. During the ﬁnancial year 2014-15, the RBI carried out a scrutiny of a corporate borrower’s accounts maintained with 12 banks, including HDFC Bank. The RBI had issued show cause notices to these banks in March 2014 and based on its assessment, the RBI in its press release dated July 25, 2014, levied penalties totalling ` 1.5 crore on the 12 banks. The RBI levied a penalty of ` 0.05 crore on HDFC Bank on the grounds that the Bank failed to exchange information about the conduct of the corporate borrower’s account with other banks at intervals as prescribed in the RBI guidelines on ‘Lending under Consortium Arrangement / Multiple Banking Arrangements’. The penalty has since been paid. reporting attempted suspicious During the previous year 2014-15, FIU had imposed a penalty of Rs 26 lakhs in 26 cases reported by Cobrapost.com, stating that there was a failure in the Bank’s internal mechanism for detecting transactions. The Bank and has ﬁled an appeal before the Appellate Tribunal, Prevention of Money Laundering Act at New Delhi against the impugned order stating that there were only roving enquiries made by the reporters of Cobrapost. com and there were no instances of any attempted suspicious transactions. The hearing of the appeal is still in progress. During 2013-14 a www.Cobrapost.com release claimed to have carried out a sting operation named “Operation Red Spider” on banks over a period of several months. The allegations made in the release indicated that banks including HDFC Bank could assist in channelizing vast amounts of black money into the regular banking system as laundered white money. The Bank had immediately engaged the services of M/s Amarchand & Mangaldas and Suresh A. Shroff & Co., to coordinate and advise the Bank on legal issues in respect of the potential allegations posted by Cobrapost.com. M/s Deloitte Touche Tohmatsu India Pvt. Ltd was appointed by the said ﬁrm to carry out an independent forensic investigation. Further, the RBI had also conducted a special scrutiny into the matter. The scrutiny did not bring out any incident of money laundering. However certain irregularities/ violations were found by the RBI with respect to adherence to KYC for walk-in customers for sale of third party insurance products, arrangement of at-par payments of cheques drawn by co-operative banks, exceptions in risk proﬁling in some cases, sale of gold coins against cash in excess of INR 50,000/- in few cases etc. Based on its assessment, the RBI imposed a monetary penalty of INR 4.5 crore on the Bank in June 2013, which has since been paid. In the light of the observations / violations reported by RBI, the Bank has taken steps to further strengthen its controls and processes in the said areas including discontinuation of sale of third party products and gold to non-customers and further tightening the process with respect to arrangement with co-operative banks and risk proﬁling of customers. Other than the above, no penalties or strictures were imposed on the Bank by any of the Stock Exchanges or any statutory authority on any matter relating to capital markets, during the last three (3) years. The Bank has complied with all the applicable mandatory requirements of the Code of Corporate Governance as prescribed under the SEBI Listing Regulations. PERFORMANCE EVALUATION The Bank has put in place a mechanism for performance evaluation of the Directors. The details of the same have been included in the Directors’ Report. COMPLIANCE WITH NON-MANDATORY REQUIREMENTS a) Board of Directors The Bank maintains the expenses relating to the ofﬁce of non-executive Chairperson of the Bank and reimburses all the expenses incurred in performance of her duties. Pursuant to Section 10-A (2)(a) of the Banking Regulation Act, 1949, none of the directors, other than the Chairman and/or whole-time directors, is permitted to hold ofﬁce continuously for a period exceeding 8 (eight) years. All the independent directors of the Bank possess requisite qualiﬁcations and experience which enable them to contribute effectively to the Bank. b) Shareholder’s Rights its results on The Bank publishes its website at www.hdfcbank.com which is accessible to the public at large. The same are also available on the websites of the Stock Exchanges on which the Bank’s shares are listed. A half-yearly declaration of ﬁnancial performance including summary of the signiﬁcant events is presently not being sent separately to each household of shareholders. The Bank’s results for each quarter are published in an English newspaper having a wide circulation and in a Marathi newspaper having a wide circulation in Maharashtra. Hence, half-yearly results are not sent to the shareholders individually. c) Audit Qualiﬁcations During the period under review, is no audit qualiﬁcation in the Bank’s ﬁnancial statements. The Bank continues to adopt best practices to ensure regime of unqualiﬁed ﬁnancial statements. there d) Separate posts of Chairman and Managing Director/ CEO Mrs. Shyamala Gopinath is the Chairperson of the Bank and Mr. Aditya Puri is the Managing Director of the Bank. e) Reporting of Internal Auditor The Internal Auditor of the Bank reports directly to the Audit Committee of the Bank. HDFC Bank Limited Annual Report 2015-16 207 Corporate Governance SHAREHOLDERS HOLDING MORE THAN 1 % OF THE SHARE CAPITAL OF THE BANK AS AT MARCH 31, 2016 Sr No. Name of the Shareholder 1 2 3 4 5 6 7 8 9 JP Morgan Chase Bank, NA * Housing Development Finance Corporation Limited HDFC Investments Limited Euro Paciﬁc Growth Fund Life Insurance Corporation of India ICICI Prudential Life Insurance Company Ltd Capital World Growth and Income Fund ICICI Prudential Focused Bluechip Equity Fund Government of Singapore No. of Shares held 473003409 393211100 150000000 98038464 61303025 41523802 36585126 28708163 28474691 % to share capital 18.71 15.55 5.93 3.88 2.43 1.64 1.45 1.14 1.13 * One (1) American Depository Share (ADS) represents three (3) underlying equity shares of the Bank. DISTRIBUTION OF SHAREHOLDING AS AT MARCH 31, 2016 Share Range From Share Range To 1 2501 5001 10001 15001 20001 25001 50001 100001 TOTAL 2500 5000 10000 15000 20000 25000 50000 100000 and above No. of Shares 101873903 18383106 15914496 10342329 7853285 7466213 25377051 33137429 2307838705 2528186517 % To Capital 4.03 0.73 0.63 0.41 0.31 0.30 1.00 1.31 91.28 100.00 No. of Holders % To No. Of Holders 97.68 1.06 0.47 0.17 0.09 0.07 0.15 0.10 0.21 100.00 468716 5112 2242 832 446 331 713 460 1017 479869 416,010 Folios comprising of 251,04,91,247 equity shares forming 99.30 % of the share capital are in Demat Form. 63,859 Folios comprising of 1,76,95,270 equity shares forming 0.70 % of the share capital are in physical form. CATEGORIES OF SHAREHOLDERS AS AT MARCH 31, 2016 Promoters (*) ADS and GDRs (#) Foreign Institutional Investors Overseas Corporate Bodies, Foreign Bodies, Foreign National and Non Resident Indians Financial Institutions, Banks, Mutual Funds and Central Government Life Insurance Corporation and its subsidiaries Other Insurance Corporations Indian Companies Others TOTAL (*) None of the equity shares held by the Promoter Group are under pledge. No of shares 543216100 473003409 814463688 7282473 217209910 61303025 6843958 185621370 219242584 2528186517 % to capital 21.49 18.71 32.21 0.29 8.59 2.43 0.27 7.34 8.67 100.00 # JP Morgan Chase Bank is the Depository for both the ADS (461557764 underlying equity shares) & GDRs (11445645 underlying equity shares). GLOBAL DEPOSITORY RECEIPTS (“GDRs”)* The monthly high and low quotation of the Bank’s GDRs traded on Luxembourg Stock Exchange are as under: (in US$) Month High Low Apr-15 May-15 Jun-15 8.377 8.228 8.469 7.822 7.421 7.777 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 8.084 8.281 8.765 7.277 7.929 8.343 8.156 7.369 8.596 7.629 8.574 8.158 7.817 6.877 8.047 7.493 8.182 7.792 * 2 GDRs represent one underlying equity share of the Bank HDFC Bank Limited Annual Report 2015-16 208 Corporate Governance SHARE PRICE / CHART The monthly high and low quotation of Bank’s equity shares traded on BSE Ltd (BSE) and National Stock Exchange of India Ltd (NSE) during FY 2015-16 and its performance vis-à-vis BSE SENSEX and S&P CNX NIFTY respectively is as under: BSE Limited Month High (`) Low (`) April 2015 May 2015 June 2015 July 2015 August 2015 September 2015 October 2015 November 2015 December 2015 January 2016 February 2016 March 2016 1058.00 1054.50 1072.10 1127.90 1117.90 1074.00 1124.45 1097.90 1090.90 1090.00 1066.95 1078.70 979.35 944.70 990.25 1055.05 1007.05 977.60 1060.20 1040.50 1040.00 1008.35 928.80 972.50 National Stock Exchange of India Limited Month High (`) Low (`) April 2015 May 2015 June 2015 July 2015 August 2015 September 2015 October 2015 November 2015 December 2015 January 2016 February 2016 March 2016 1059.00 1054.00 1072.00 1128.00 1117.50 1073.90 1124.00 1098.10 1092.70 1108.00 1067.00 1078.90 979.05 944.20 990.15 1054.05 1005.70 977.00 1059.35 1041.00 1040.10 1007.90 928.00 971.85 Sensex Closing 27011.31 27828.44 27780.83 28114.56 26283.09 26154.83 26656.83 26145.67 26117.54 24870.69 23002.00 25341.86 Nifty Closing 8181.50 8433.65 8368.50 8532.85 7971.30 7948.90 8065.80 7935.25 7946.35 7563.55 6987.05 7738.40 The monthly high and low quotation and the volume of Bank's American Depository Shares (ADS) traded on New York Stock Exchange (NYSE) during FY 2015-16. New York Stock Exchange Limited Month April 2015 May 2015 June 2015 July 2015 August 2015 September 2015 October 2015 November 2015 December 2015 January 2016 February 2016 March 2016 Highest (US$) Lowest (US$) 60.92 59.91 61.79 64.12 64.13 61.44 65.44 62.24 61.91 60.86 60.48 61.95 56.09 54.20 56.03 59.58 51.64 55.51 60.42 56.57 56.12 53.13 51.11 53.14 Monthly Volume 19247427 14218588 18023483 16943214 16757351 18394324 17977013 13000162 14002234 15224958 16376608 16100585 i m o c . a d n e s b . w w w i : e c r u o S i m o c . a d n e s n . w w w i : e c r u o S m o c . e s y n . w w w : e c r u o S Note: Other than the stock options granted to the employees of the Bank which will result in an addition to the equity capital of the Bank on the exercise of the stock options and subsequent allotment of equity shares, the Bank has no outstanding warrants or other convertible instruments as on March 31, 2016 which could have an impact on the equity capital of the Bank. HDFC Bank Limited Annual Report 2015-16 209 Corporate Governance FINANCIAL CALENDAR [April 1, 2016 to March 31, 2017] Board Meeting for Consideration of accounts Dispatch of Annual Reports Record date for purpose of determining eligibility of dividend Last date for receipt of proxy forms Date, Time and Venue of 22nd AGM Dividend Declaration Date Probable date of payment of dividend Board Meeting for considering unaudited results for ﬁrst three quarters of FY 2016-17 CODE OF CONDUCT April 22, 2016 June 22, 2016 to June 27, 2016 Electronic and physical: June 30, 2016 July 19, 2016 July 21, 2016 at 02:30 pm: Birla Matushri Sabhagar 19, New Marine lines, Mumbai - 400020 July 22, 2016 Electronic : July 22, 2016 onwards Physical: July 27, 2016 onwards Within 25 days from the end of each quarter The Bank has framed and adopted a Code of Conduct, which is approved by the Board. The Code is applicable to all directors and senior management personnel of the Bank. This Code has been posted on the Bank’s website www.hdfcbank.com. All the Directors and senior management personnel have afﬁrmed compliance with the Code of Conduct/Ethics as approved and adopted by the Board. LISTING Listing on Indian Stock Exchanges : The equity shares of the Bank are listed at the following Stock Exchanges and the annual fees for 2016-17 have been paid : Sr. No. NAME AND ADDRESS OF THE STOCK EXCHANGE 1. 2. BSE Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai 400 023. The National Stock Exchange of India Limited, Exchange Plaza, 5th Floor, Bandra Kurla Complex, Mumbai 400 051. Names of Depositories in India for dematerialisation of equity shares (ISIN No. INE040A01026) STOCK CODE 500180 HDFCBANK (cid:115)(cid:0) (cid:115)(cid:0) (cid:46)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:36)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:8)(cid:46)(cid:51)(cid:36)(cid:44)(cid:9) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76)(cid:0)(cid:36)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:8)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:9)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:8)(cid:35)(cid:36)(cid:51)(cid:44)(cid:9) International Listing : Sr. No. 1 Security description The American Depository Shares (ADS) (CUSIP No. 40415F101) 2 Global Depository Receipts (GDRs) (ISIN/ Trading Code : US40415F2002) Name & Address of the International Stock Exchange The New York Stock Exchange (Ticker - HDB) 11, Wall Street, New York, N.Y. 10005 Luxembourg Stock Exchange Postal Address : Societe De La Bourse De Luxembourg Societe Anonyme, 35A Boulevard Joseph II L-1840 Luxembourg. Mailing Address : B.P. 165, L - 2011, Luxembourg Name & Address of Depository J P Morgan Chase Bank, N.A. 4, New York Plaza, 12th Floor, New York, NY 10004 J P Morgan Chase Bank, N.A. 4, New York Plaza, 12th Floor, New York, NY 10004 The Depository for ADS and GDRs is represented in India by: J. P. Morgan Chase Bank N.A., India Sub Custody, J P Morgan Chase Bank NA, 6th Floor, Paradigm “B” Wing, Behind Toyota Showroom, Mindspace, Malad (West), Mumbai - 400 064. SHARE TRANSFER PROCESS The Bank’s shares which are in compulsory dematerialised (demat) list are transferable through the depository system. Shares in physical form are processed by the Registrars and Share Transfer Agents, Datamatics Financial Services Limited and approved by the Stakeholders’ Relationship Committee of the Bank or authorised ofﬁcials of the Bank. The share transfers are generally processed within a period of ﬁfteen (15) days from the date of receipt of the transfer documents by Datamatics Financial Services Limited. HDFC Bank Limited Annual Report 2015-16 210 Corporate Governance MEANS OF COMMUNICATION The quarterly and half-yearly unaudited / audited ﬁnancial results are published in Business Standard in English and Mumbai Sakal / Navshakti in Marathi (regional language). The results are also displayed on the Bank’s web-site at www.hdfcbank.com. The shareholders can visit the Bank’s web-site for ﬁnancial information, policy, key shareholders’ agreements, if any, Memorandum and Articles of Association of the Bank, etc. The web-site also gives a link to www.sec.gov where the investors can view statutory ﬁlings of the Bank with the Securities and Exchange Commission, USA. shareholding information, dividend information results The and shareholding pattern are displayed on the websites of the Stock Exchanges on which the Bank’s shares are listed. the Bank’s ﬁnancial relating to Other information such as press releases, stock exchange disclosures and presentations made to investors and analysts etc. are regularly displayed on the Bank’s web-site. CODE FOR PREVENTION OF INSIDER TRADING The Bank has adopted a share dealing code for the prevention of insider trading in the shares of the Bank as well as in other listed companies. The share dealing code, inter-alia, prohibits purchase / sale of shares of the Bank by insiders while in possession of unpublished price sensitive information in relation to the Bank. For lodgement of transfer deeds and any other documents or for any grievances / complaints, shareholders / investors may contact at the following address : Mr. C. R. Rao / Ms. Manisha Parkar / Mr. Tukaram Thore Datamatics Financial Services Ltd, Plot No. B 5, Part B Crosslane, MIDC, Marol, Andheri (East), Mumbai 400 093, Tel : +91-022- 66712213-14 Fax : +91-022 - 66712011; E-mail : hdinvestors@dfssl.com Counter Timings : 10:00 a.m. to 4:30 p.m. (Monday to Friday except public holidays) For the convenience of investors, transfers up to 500 shares and complaints from investors are accepted at the Bank’s Ofﬁce at 2nd Floor, Trade House, Senapati Bapat Marg, Kamala Mills Compound, Lower Parel (West), Mumbai 400 013. Shareholders’ Helpdesk Timings : 10:30 a.m. to 3.30 p.m. Between Monday to Friday (except on Bank holidays) Telephone : +91-022-2498 8484 Extn : 3458, 3463 & 3621 DEBENTURE TRUSTEES Fax : +91-022-2496 5235 SEBI vide circular number CIR/IMD/CDF/18/2013 dated October 29, 2013 requires companies, which have listed their debt securities, to disclose the names of their debenture trustees with contact details in their Annual Report. The following are the debenture trustees for the privately placed bonds of the Bank: Email : shareholder.grievances@hdfcbank.com Queries relating to the Bank’s operational and ﬁnancial performance may be addressed to : shareholder.grievances@hdfcbank.com 1. IDBI Trusteeship Services Ltd, Asian Building, Ground Floor, 17 R Kamani Marg, Ballard Estate, Mumbai 400001. Tel : 022-40807000 Name of the Compliance Ofﬁcer of the Bank : Mr. Sanjay Dongre, Executive Vice President (Legal) & Company Secretary 2. Axis Trustee Services Limited, Axis House, 2nd Floor, Wadia International Centre, Pandurang Budhkar Marg, Worli Mumbai 400025. Tel : 022-24255215/16 Telephone : +91-022-2498 8484 Extn : 3473 BANKING CUSTOMER HELPDESK 3. IL&FS Trust Company Limited, The IL&FS Financial Centre, Plot C-22/G Block, Bandra Kurla Complex, Bandra East Mumbai 400051. Tel : 022-26593112 SHAREHOLDERS’ HELPDESK In the event of any queries / complaints, banking customers can directly approach the Branch Manager or can call/write to the Bank using the following contact details : Call at: Our customer care (Phone Banking) numbers. Share transfers, dividend payments and all other investor related activities are attended to and processed at the ofﬁce of Registrars and Transfer Agents. Location wise list of customer care numbers are available at: http://www.hdfcbank.com/personal/find-your-nearest/ ﬁnd-phone-banking HDFC Bank Limited Annual Report 2015-16 211 Corporate Governance Write to: PLANT LOCATIONS HDFC Bank Ltd., New Building, “A” Wing, 2nd Floor, 26-A Narayan Property, Chandivali Farm Road, Off Saki Vihar Road, Chandivali, Andheri (East), Mumbai - 400 072. Email : support@hdfcbank.com Contact us online: Fill up the “Complaint Form” available at the following website link : https://leads.hdfcbank.com/applications/webforms/apply/ complaint_form.asp For grievances other than Shareholder grievances please send your communication to the following email addresses: 1) Depository Services: dphelp@hdfcbank.com 2) Retail Banking / ATM / Debit Cards / Mutual Fund: support@hdfcbank.com 3) Loans, Advances / Advance against shares: loansupport@hdfcbank.com Being in the banking business, the Bank does not have plants. However, the Bank has 4,520 branches in 2,587 cities / towns as on March 31, 2016. The locations of the branches are also displayed on the Bank’s website. COMPLIANCE CERTIFICATE OF THE AUDITORS The Secretarial Auditors have certiﬁed that the Bank has complied with the conditions of Corporate Governance as stipulated in the listing requirements of the Indian Stock Exchanges where the Bank’s securities are listed. The same is annexed to the Annual Report. The Certiﬁcate from the Secretarial Auditors will be sent to the Stock Exchanges along with the Annual Report of the Bank. Mumbai, May 19, 2016 On behalf of the Board of Directors Shyamala Gopinath Chairperson DECLARATION I conﬁrm that for the year under review, all directors and senior management have afﬁrmed their adherence to the provisions of the Code of Conduct of Directors and senior management personnel. Aditya Puri Managing Director 4) Credit Cards : customerservices.cards@hdfcbank.com Mumbai, May 19, 2016 HDFC Bank Limited Annual Report 2015-16 212 Shareholder Information A) DIVIDENDS: Receipt of Dividends through Electronic mode : The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 have directed that listed companies shall mandatorily make all payments to investors including dividend to shareholders, by using any RBI approved electronic mode of payment viz. ECS, LECS (Local ECS), RECS (Regional ECS), NECS (National ECS), direct credit, RTGS, NEFT, etc. In order to receive the dividend without loss of time, all the eligible shareholders holding shares in demat mode are requested to update with their respective Depository Participants before June 30, 2016, their correct Bank Account Number, including 9 Digit MICR Code and 11 digit IFSC Code, E- Mail ID and Mobile No(s). This will facilitate the remittance of the dividend amount as directed by SEBI in the Bank Account electronically. Updation of E - Mail IDs and Mobile No(s) will enable sending communication relating to credit of dividend, unencashed dividend etc. Shareholders holding shares in physical form may communicate details relating to their Bank Account, 9 Digit MICR Code, 11 digit IFSC Code, E- Mail ID and Mobile No(s) to the Registrar and Share Transfer Agents viz. Datamatics Financial Services Limited, having address at Plot No. B 5, Part B Crosslane, MIDC, Marol, Andheri (E), Mumbai-400 093, before June 30, 2016 by quoting the reference folio number and attaching a photocopy of the Cheque leaf of their Active Bank account and a self attested copy of their PAN card. Various modes for making payment of Dividends under Electronic mode: In case the shareholder has updated the complete and correct Bank account details (including 9 digit MICR Code and 11 digit IFSC code) before the record date ﬁxed for the purpose of payment of dividend, then the Bank shall make the payment of dividend to such shareholder under any one of the following modes: 1. National Automated Clearing House (NACH) 2. National Electronic Fund Transfer (NEFT) 3. Direct credit in case the bank account is with HDFC Bank Limited. In case dividend payment by electronic mode is returned or rejected by the corresponding bank due to some reason, then the Bank will issue a dividend warrant and print the Bank account details available on its records on the said dividend warrant to avoid fraudulent encashment of the warrants. Unclaimed Dividends As per the applicable provisions of the Companies Act, the Bank is statutorily required to transfer to the Investor Education & Protection Fund (IEPF) all dividends remaining unclaimed for a period of 7 (Seven) years from the date they became due for payment. Once such amounts are transferred to IEPF, no claim of the shareholder shall lie against the Bank or the IEPF. Dividends for and up to the ﬁnancial year ended March 31, 2008 have already been transferred to the IEPF and the dividend for the ﬁnancial year ended March 31, 2009 will be transferred to IEPF after July 13, 2016. The details of unclaimed dividends for the ﬁnancial year 2009-10 onwards and the last date for claiming such dividends are given below: Dividend for the year ended March 31, 2009 March 31, 2010 March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 Date of Declaration of dividend July 14, 2009 June 30, 2010 July 6, 2011 July 13, 2012 June 27, 2013 June 25, 2014 July 21, 2015 Last date for claiming dividend July 13, 2016 June 29, 2017 July 5, 2018 July 12, 2019 June 26, 2020 June 24, 2021 July 20, 2022 B) SHARES LYING IN UNCLAIMED SUSPENSE ACCOUNT Particulars Opening Balance as on April 1, 2015 Add: Transfer during the year 2015-16 Less: Claims received and shares transferred Closing Balance as on March 31, 2016* Records / Shares No of shareholders 13328 0 253 13075 2272015 0 83870 2188145 * Voting rights on these shares shall remain frozen till the rightful owners of such shares claim these shares. HDFC Bank Limited Annual Report 2015-16 213 Route Map Route Map to Venue of the 22nd AGM of HDFC Bank Limited Venue : Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400020 Date : July 21, 2016 Day and Time : Thusday, 2.30 p.m. Land Mark : Next to Bombay Hospital Distance from Churchgate Station : 1 km Distance from Chhatrapati Shivaji Terminas : 1.2 km Distance from Marine Lines Station : 0.8 km HDFC Bank Limited Annual Report 2015-16 214 Mandate for Electronic Communication and Direct Credit of dividend in Bank account Shares held in Physical mode Mandate for Electronic Communication and Direct Credit of dividend in Bank account I / We ........................................................................................................................ hereby authorize you to update the following e-mail ID for receipt of communication in electronic mode and for crediting the dividend amount directly in my Bank account. E- mail ID : …......….………………...............………………………………………………………................................................... 1. 2. 3. 4. 5. 6. 7. 8. Folio No against holding in HDFC Bank Ltd. : ……….……….………........................…........……......................... Name of the Bank : ……….……….………........................…........……......................... Name of the Branch : ……….……….………........................…........……......................... Account No. : ……….……….………....................…........……............................. Account Type (Saving / Current) : ……….……….………........................…........……......................... 9 Digit Code No. IFSC Code : ……….……….………........................…........……......................... : ……….……….………........................…........……......................... STD Code & Phone No. of Branch : ……….……….………........................…........……......................... I / We shall keep the Bank's Registrar and Transfer Agent viz Datamatics Financial Services Ltd. informed as and when there is a change in my e-mail address. I am also enclosing the photocopy of a cheque / blank cancelled cheque issued by the Bank for verifying the accuracy of the details furnished hereinabove and a self-attested copy of PAN Card of the holder(s). MAIL TO (cid:13) Datamatics Financial Services Ltd, Unit : HDFC Bank, Plot No. B 5, Part B Crosslane, MIDC, Marol, Andheri (East), Mumbai 400 093. E-mail : hdinvestors@dfssl.com ……….………………….…………… Signature of all the Shareholder(s) …......….………………...............………………………………………………………........................................................................... Shares held in Demat mode (cid:122) Shareholders to obtain form from their Depository Participant by providing original PAN card(s) for veriﬁcation by all the holder(s). (cid:122) Shareholders to submit required proof like cancelled cheque as advised by their Depository Participant along with duly signed form and self attested copy of PAN card(s). HDFC Bank Limited Annual Report 2015-16 215

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