HDFC Bank Limited Annual Report 2017

Plain-text annual report

Highlights Net Profit ` 14,550 crore An increase of 18.3% compared to the previous year. Balance Sheet Size ` 863,840 crore An increase of 16.6% compared to the previous year. Total Deposits ` 643,640 crore An increase of 17.8% compared to the previous year. Total Advances ` 554,568 crore An increase of 19.4% compared to the previous year. Capital Adequacy Ratio 14.6% Tier I Capital Ratio 12.8% Gross Non-performing Assets 1.05% of Gross Advances Network (cid:116)(cid:1)(cid:35)(cid:83)(cid:66)(cid:79)(cid:68)(cid:73)(cid:70)(cid:84)(cid:27)(cid:1)(cid:21)(cid:13)(cid:24)(cid:18)(cid:22) (cid:116)(cid:1)(cid:34)(cid:53)(cid:46)(cid:84)(cid:27)(cid:1)(cid:18)(cid:19)(cid:13)(cid:19)(cid:23)(cid:17) (cid:116)(cid:1)(cid:36)(cid:74)(cid:85)(cid:74)(cid:70)(cid:84)(cid:16)(cid:53)(cid:80)(cid:88)(cid:79)(cid:84)(cid:27)(cid:1)(cid:19)(cid:13)(cid:23)(cid:22)(cid:24) Engineering Change: Banking on Bharat Banking in rural areas has not been able to keep up with the growth in urban banking. But we have strived to create a responsive, sustainable, and all-encompassing ecosystem, which is key to India’s economic upliftment. More than half of the bank’s branches are in semi-urban and rural areas, demonstrating our commitment to promote rural banking. Rural Banking Group Farmers are the backbone of our country’s economy, integral to its eventual growth and development. The bank’s principal objective is to empower rural India. The bank has penetrated several remote geographies through its flagship product, the Kisan Gold Card. It has covered approximately 60,000 villages so far. The bank has designed a range of crop and geography-specific products based on respective harvest cycles and the local needs of farmers based in diverse agro-climatic zones across India. Exclusive products ensure credit for activities allied to agriculture such as dairy, pisciculture and sericulture. The bank has established a footprint in the hinterlands leveraging its extensive know-how of rural customers and delivering the right products at affordable prices with rapid turnaround times. Technology and deep branch penetration have enabled the bank to deliver agricultural loans within three to four working days in certain geographies. Additionally, an eligible farmer can avail of an enhancement to a loan in a few seconds using ATMs or mobile phones. The bank also offers many other credit products such as two-wheeler loans, car loans, and mortgage loans to bolster financial inclusion in rural areas. Specific needs are addressed with individualised offerings to manage multiple consumption requirements. The bank has shifted from a product-centric approach to a customer-centric one to expand its presence in rural territories in a cost-effective manner. With a sound knowledge of the rural ecosystem, the bank endeavors to augment penetration of the liability base in rural geographies. The bank has a symbiotic relationship with rural customers and is making efforts to empower them by providing technical support, besides offering financial products. Kisan Dhan Vikas Kendras, launched across the country as a part of these efforts, can help a farmer with free Soil Health Cards, Mandi prices, financial literacy, digital literacy, information on various government initiatives, etc. Farmers can avail the benefits of these services online on the bank’s website at Kisan Dhan Vikas e-Kendras. This service is available in multiple vernacular languages. The bank is constantly striving to improve the platform to make it more user-friendly considering the requirements of the rural population. The bank, through various collaborative efforts, provides free SMS advice on weather, cropping and harvesting. Further, HDFC Bank digitized payments at over 1,200 milk cooperatives across the nation. The move is part of the bank's Milk to Money (M2M) program, benefitting 3.2 lakh dairy farmers in 16 states. M2M aims to bring dairy farmers into the organized banking system by digitizing the supply chain, with specific and customized products targeted at satisfying their banking and financial needs. M2M ATMs at large collection centers are equipped with cash have business dispensers. Smaller correspondents who operate micro ATMs allowing dairy farmers to withdraw cash from their accounts. collection points The program has enunciated greater transparency in the milk collection process impacting society at large by eradicating cash management worries. A credit history is also generated which helps farmers take out loans or avail other banking products. Further, the society functioning as a business correspondent is able to distribute the bank’s products to all households in the catchment area. HDFC Bank’s Sustainable Livelihood Initiative (SLI) aims to include and uplift households at the bottom of the pyramid. The bank has adopted a holistic approach that encompasses occupational training, financial literacy, and credit counselling to empower people. Self-Help Groups and Joint-Liability Groups have been instrumental in helping the bank accelerate its direct linkage program. The bank aims to reach out to 1 crore households with the initiative, for which it has hired thousands of employees. important institutions. The National Bank The SLI program has been hugely successful, which has been noted by for Agriculture and Rural Development has commended the bank’s SLI program in its publication, The Status of Microfinance in India 2014-15. It recommended that HDFC Bank’s SLI model be studied for adoption by other banks. The bank has also been at the centre of crafting innovations in retail banking. It offers recharge facilities through missed calls. The move is targeted at semi-urban and rural customers. The idea has been extended to include fixed deposits and fund transfers. A larger proportion of the bank’s business is expected to accrue from rural banking in the years to come. With rural household incomes on the rise, the bank is well poised to participate in the expanding demand in financial services and products. Pradhan Mantri Jan Dhan Yojana At HDFC Bank, we believe in ensuring financial transactions HDFC Bank feels that financial literacy is at the core of are more personal, inclusive, and far-reaching. This mandate efficient fiscal inclusion, smart digital transactions, and is in alignment with the Pradhan Mantri Jan Dhan Yojana reliable customer protection. The bank’s model for the same (PMJDY) launched on August 28, 2014, by the Honorable brings together financial inclusion and financial literacy – as Prime Minister of India and Jan Dhan-Aadhaar-Mobile (JAM), two concurrent pillars operating seamlessly towards a underlining a steadfast commitment to welfare and upliftment composite whole. Financial literacy helps customers make for all. These vibrant and unique notions are actively propagated by the Indian government in its quest to empower and transform the nation’s social fabric for the better. Aadhaar pivots the bank’s financial inclusion strategy where every bank mitra (business correspondent) is equipped with Aadhaar and e-KYC enabled micro-ATMs. The micro-ATMs allow customers to effectively action basic banking activities using the “power of the thumb”. Each micro-ATM is fully compliant with contemporary regulatory standards and enlightened fiscal choices, imbibing the benefits of a strong linkage with the banking system and its various digital pipelines for transactions. Educational material for financial literacy is printed in 13 regional languages, simplifying the dissemination of information among attendees. Till date, HDFC Bank has carried out 1.29 lakh financial literacy camps through its various educational centers spread across schools, gram panchayats, self-help groups, and the like. A total of 11.68 lakh people have benefited from these programs. ensures that customers can perform Rupay card-based The road to a sustainable and financially enriched future for transactions. As of March 31, 2017, HDFC Bank has opened the nation has several milestones. At HDFC Bank, we believe 17.33 lakh PMJDY accounts (since inception). these are some of our proudest achievements - and we remain committed toward the creation of a secure and thriving tomorrow for all of India’s populace. The bank firmly believes in the importance of Aadhaar-linked accounts, particularly in the scenario of direct benefit transfers (DBT), and has pledged to educate and inform its customers on the same. Our plan enables all its digital channels to become Aadhaar-seeding vehicles. Customers can use a variety of options — NetBanking, PhoneBanking, MobileBanking, SMS, and ATM – to seed Aadhaar. The bank has consistently been a part of several social security schemes launched by the government, and is now recognized as a leader among the private sector banks involved in Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana. For FY 2016-17, HDFC Bank disbursed a total amount of Rs. 5,522 crore to 14.78 lakh customers - thereby achieving 104% of the target fixed for the bank. Further, Rs. 147 crore was also disbursed by the bank under the Stand-Up India Program- facilitating loans between Rs. 10 lakh and Rs. 1 crore for Scheduled Caste (SC) or Scheduled Tribe (ST) women borrowers involved in the development of greenfield enterprises. 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 1 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 2007-2008 2008-2009 2009-2010 10,530.43 16,584.01 16,467.92 4,887.12 8,911.10 7,786.30 5,643.31 7,672.91 8,681.62 2,495.94 3,700.65 4,573.63 8,139.25 11,373.56 13,255.25 4,311.03 5,950.54 6,475.71 3,828.22 5,423.02 6,779.54 1,547.59 2,123.78 2,490.40 1,278.84 1,970.35 2,288.74 268.75 153.43 201.66 2,280.63 3,299.24 4,289.14 690.45 1,054.31 1,340.44 1,590.18 2,244.93 2,948.70 100,768.60 142,811.58 167,404.44 3,249.10 8,738.58 6,353.10 11,497.23 14,646.33 21,519.58 138,027.78 183,270.77 222,458.57 63,426.90 98,883.05 125,830.59 53,607.57 53,309.31 51,013.32 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 13.51 16.80% 13.26% 17.44% 2.40 21.72% 94.02 386.70 28.62 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 2016-17 12 (` crore) 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 20,380.77 27,874.19 35,064.87 41,135.53 48,469.91 60,221.45 9,385.08 14,989.58 19,253.75 22,652.90 26,074.23 32,629.93 10,995.69 12,884.61 15,811.12 18,482.63 22,395.68 27,591.52 4,945.23 5,783.62 6,852.62 7,919.64 8,996.34 10,751.72 15,940.92 18,668.23 22,663.74 26,402.28 31,392.02 38,343.24 7,780.02 9,277.64 11,236.11 12,042.20 13,987.55 16,979.69 8,160.90 9,390.59 11,427.63 14,360.08 17,404.47 21,363.55 2,342.24 1,877.44 1,677.01 1,588.03 2,075.75 2,725.61 1,198.55 1,091.77 1,234.21 1,632.58 1,723.58 2,133.63 1,143.69 785.67 442.80 (44.56) 352.17 591.98 69,305.96 36,166.74 33,139.22 12,296.49 45,435.71 19,703.32 25,732.39 3,593.30 3,145.30 448.00 5,818.66 7,513.15 9,750.62 12,772.05 15,328.72 18,637.94 22,139.09 1,892.26 2,346.08 3,024.34 4,293.67 5,112.80 6,341.71 7,589.43 3,926.40 5,167.07 6,726.28 8,478.38 10,215.92 12,296.23 14,549.66 208,586.41 246,706.45 296,246.98 367,337.48 450,795.65 546,424.19 643,639.66 7,393.05 11,105.65 16,586.75 16,643.05 16,254.90 15,090.45 25,376.35 29,924.37 36,214.15 43,478.63 62,009.42 72,677.77 13,182.00 89,462.38 283,634.24 345,248.26 421,327.31 491,599.50 595,695.13 740,796.07 863,840.19 159,982.67 195,420.03 239,720.64 303,000.27 365,495.04 464,593.96 554,568.20 67,952.59 89,967.10 111,303.21 100,111.88 156,833.82 195,836.29 214,463.34 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 48.84 17.97% 13.22% 15.53% 9.50 23.51% 287.47 1,022.70 1,071.15 24.26 21.93 57.18 18.04% 12.79% 14.55% 11.00 *** 23.32% 349.12 1,442.55 25.23 HDFC Bank Limited Annual Report 2016-17 13 BOARD OF DIRECTORS STATUTORY AUDITORS Mrs. Shyamala Gopinath, Chairperson Mr. A. N. Roy Mr. Bobby Parikh Mr. Partho Datta Mr. Keki Mistry Mrs. Renu Karnad Mr. Malay Patel Mr. Umesh Chandra Sarangi Mr. Srikanth Nadhamuni (Appointed as Additional Director w.e.f. September 20, 2016) Mr. Aditya Puri, Managing Director Mr. Paresh Sukthankar, Deputy Managing Director Mr. Kaizad Bharucha, Executive Director 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 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 SENIOR MANAGEMENT TEAM 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 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. Dhiraj Relli (on deputation to HDFC Securities Limited, the Bank’s subsidiary) Mr. Jimmy M Tata Mr. K Balasubramanian Mr. Munish Mittal Mr. Navin Puri Mr. Neil Francisco Mr. Nitin Chugh Mr. Nitin Rao Mr. Nirav Shah Mr. Parag Rao Mr. Philip Mathew Mr. Rajender Sehgal Mr. Rakesh K. Singh Mr. Rajesh Kumar R Mr. Ravi Narayanan HDFC Bank Limited Annual Report 2016-17 14 23rd ANNUAL GENERAL MEETING Date Day Time Place July 24, 2017 : : Monday : : Birla Matushri Sabhagar, 19, New Marine Lines, 2.30 p.m. Mumbai 400 020 Record date for determining eligibility of dividend : June 30, 2017 (both physical and electronic) Contents Directors’ Report Independent Auditor's Report Financial Statements 16 - 64 65 - 67 68 - 143 Independent Auditor's Report for Consolidated Financial Statements 144 - 147 Consolidated Financial Statements Basel III - Pillar 3 Disclosures Secretarial Auditor's Certiﬁcate on Corporate Governance Corporate Governance Shareholder Information 148 - 196 197 198 199 - 215 216 HDFC Bank Limited Annual Report 2016-17 15 Directors' Report To the Members, Introduction: Your Directors take great pleasure in presenting the 23rd Annual Report on the business and operations of your Bank, together with the audited accounts for the year ended March 31, 2017. The year under review has been extremely satisfying with your Bank witnessing an increase in asset size, revenues and proﬁtability. What is more, it was able to manage the bad loans much better than the industry. The metric that best captures performance is the domestic loan growth which stood at about 23.7 per cent against the overall banking system loan growth of around 5 per cent. The other key performance indicators are Balance Sheet size (up 16.6 per cent), Total Deposits (up 17.8 per cent), Net Proﬁt (up 18.3 per cent) and Net Interest Income (up 20.1 per cent). Cost to Income Ratio improved to 43.4 per cent. This assumes even more signiﬁcance as it came in the face of demonetisation which led to growth pangs in the third quarter. The performance is a reﬂection of the following: 1) Leveraging digitization to improve customer experience, productivity and Cost to Income Ratio 2) Consolidation of its lead over peers as India’s top Digital Bank in metro, urban, semi urban and rural markets 3) Establishing itself as India’s leading rural focused bank with unmatched reach, product range and innovation 4) Unique use of artiﬁcial intelligence and data analytics to sharpen product offering It is also an outcome of a strong brand built on the twin engines of customer and community centricity. As you are aware, your Bank has been ‘Creating Sustainable Communities’ through its social initiatives which help people break out of the vicious circle of poverty and enable them to lead a better life. In pursuance of the Board mandate to make 1 crore families economically self-reliant, we are happy to report that 68 lakh families at the bottom of the pyramid have already been covered. We are also proud to state that during the year, your Bank has crossed the mandatory 2 per cent CSR spend. Last but not the least, words cannot be enough to thank our employees who made all this possible. Especially during demonetisation when they were faced with chaos and crises by the day and went beyond the call of duty. Summary of Financial Performance Particulars (` crore) For the year ended / As on March 31, 2017 March 31, 2016 6,31,393.2 4,64,594 70,973.2 19,343.8 12,296.2 18,627.8 30,924 7,17,668.5 5,54,568.2 81,602.5 22,972.2 14,549.6 23,527.7 38,077.3 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 cess) on Dividend* Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits Balance carried over to Balance Sheet *The Board of Directors, at the meeting held on April 21, 2017 has proposed a dividend of ` 11.00 per equity share aggregating ` 3,392.7 crore, inclusive of tax on dividend. The proposal is subject to the approval of shareholders at the Annual General Meeting. In terms of revised Accounting Standard (AS) 4-Contingencies and Events Occurring after the Balance Sheet date as notiﬁed by 3,074.1 1,229.6 222.2 (8.5) 2,401.8 488.9 3,637.4 1,455 313.4 4.3 - - 32,668.9 23,527.6 (11.7) (1.7) HDFC Bank Limited Annual Report 2016-17 16 Directors' Report the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend from Statement of Proﬁt and Loss for the year ended March 31, 2017. However, the effect of the proposed dividend has been reckoned in determining capital funds in the computation of the Capital Adequacy Ratio as on March 31, 2017. The Bank’s Total Income rose to ` 81,602.5 crore for the year under review from ` 70,973.2 crore in the previous year. Its Net Proﬁt increased by 18.3 per cent to ` 14,549.7 crore from ` 12,296.2 crore. Appropriations from Net Proﬁt have been effected as per the table given above. Dividend Your Bank has a dividend policy that, inter alia, balances the objectives of appropriately rewarding shareholders and retaining capital in order to maintain a healthy Capital Adequacy Ratio. 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 to 25 per cent. The dividend policy of your Bank is available on the Bank’s website at the following link: http://www.hdfcbank.com/htdocs/common/pdf/corporate/Dividend-Distribution-Policy.pdf Consistent with this policy and in recognition of the overall performance during the year under review, your Directors are pleased to recommend a dividend of ` 11 per equity share of ` 2 as against ` 9.50 in the previous year. As you are aware, this dividend shall be subject to tax to be paid by the Bank. Ratings Instrument Fixed Deposit Programme Rating Rating Agency Comments CARE AAA (FD) CARE Ratings IND Taaa India Ratings Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. 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 I Perpetual Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL Upper Tier 2 Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL HDFC Bank Limited Annual Report 2016-17 17 Directors' Report Infrastructure Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL Tier I Bonds (Under Basel III) CARE AA+ CARE Ratings CRISIL AA+ CRISIL IND AA+ India Ratings Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have high degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry very low credit risk. Instruments with this rating are considered to have high degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry very low credit risk. Instruments with this rating are considered to have high degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry very low credit risk. Issuance of Equity Shares During the year under review, 3,43,59,200 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, 2017, the issued, paid up and authorised capital of your Bank stood at ` 512,50,91,434 comprising 256,25,45,717 equity shares of ` 2 each. Employee Stock Options The information pertaining to Employee Stock Options is given in ANNEXURE 1 to this report. Capital Adequacy Ratio Your Bank’s total Capital Adequacy Ratio (CAR) calculated in line with Basel III capital regulations stood at 14.6 per cent as on March 31, 2017, well above the regulatory minimum of 10.25 per cent including Capital Conservation Buffer of 1.25 per cent. Of this, Tier I CAR was 12.8 per cent. The effect of the proposed dividend has been taken into account in computing these ratios. Subsidiary Companies Your Bank has two subsidiaries, HDB Financial Services Limited (HDBFSL) and HDFC Securities Limited (HSL). The detailed ﬁnancial performance of the companies is given below. HDB Financial Services Limited HDBFSL is a leading Non-Banking Financial Company that caters to segments not covered by the Bank through a network of 1,151 branches in 22 states and 3 Union Territories. Using both physical and digital channels, the company offers loan and asset ﬁnance products to individuals, emerging businesses, and micro enterprises across manufacturing, trading and services sectors. Additionally, the company provides Business Process Outsourcing (BPO) solutions to HDFC Bank. In the year under review, HDBFSL’s Net Interest Income grew by 41 per cent to ` 2,037.2 crore from ` 1,444.5 crore in the previous year. Net Proﬁt rose 28 per cent to ` 684.2 crore from ` 534.4 crore. HDBFSL is rated AAA for its long-term debt and A1+ for its short- term debt facilities by CARE & CRISIL respectively indicating the highest degree of safety regarding timely servicing of ﬁnancial obligations. Under the scheme of amalgamation approved by the Bombay and Gujarat High Courts, two associate companies, Atlas Documentary Facilitators Company Private Limited (ADFC) and HBL Global Private Limited (HBL) have been amalgamated with HDBFSL with effect from December 1, 2016. The appointed date of the merger was April 1, 2014. The scheme has accordingly been given effect to in these ﬁnancial statements. HBL provided marketing and promotion services while ADFC was in the BPO business. In the year under review, HDBFSL raised ` 1,099.4 crore through a rights issue. This resulted in a higher capital base and Capital Adequacy Ratio (CAR) of 20.8 per cent, well beyond the mandatory requirement of 15 per cent. The proceeds of this issue will be utilised for capital expenditure, working capital and business growth. As on March 31, 2017, your Bank held 96.2 per cent stake in the company. HDFC Securities Limited HDFC Securities Limited (HSL) is among India’s largest retail broking ﬁrms offering its 18 lakh customers a large bouquet of services. The company had the second highest number of active (transacting) customers among all broking houses. HDFC Bank Limited Annual Report 2016-17 18 Directors' Report In the year under review, the capital markets surged on the back of a good monsoon, higher FII inﬂows, improved corporate performance and the passing of the Goods and Services Tax Bill. This is reﬂected in the company’s performance. HSL’s Total Income grew by 37.7 per cent to ` 553.2 crore from ` 401.6 crore in the previous year. Net Proﬁt grew by 61.9 per cent to ` 215.9 crore from ` 133.3 crore. Digital channels remain a core focus with more than 20 per cent of customers transacting through the mobile app and overall 68 per cent of customers being serviced digitally. In line with its increased thrust on digitisation, HSL added 11 branches in the year under review as against 12 in the previous year. As on March 31, 2017, it had 273 branches. During the year under review, HSL won three prestigious PFRDA Awards for National Pension Scheme (NPS), viz. Best Point of Presence (POP) All Citizen, Best POP NPS Corporate and Best POP NPS Private Sector. It was adjudged runner up in the Best e-Brokerage category at the Outlook Money Awards 2016. As on March 31, 2017, your Bank held 97.9 per cent stake in HSL. The annual reports of HDBFSL and HSL are available on the website of the Bank (www.hdfcbank.com). Shareholders who wish to have a copy of the annual accounts and detailed information may write to the Bank. These documents shall also be available for inspection by shareholders at the registered ofﬁces of the Bank and its two subsidiaries. MANAGEMENT DISCUSSION AND ANALYSIS Macroeconomic and Industry Developments India’s economy recorded a growth rate of 7.1 per cent in terms of real Gross Domestic Product (GDP) in 2016-17. While agriculture growth rose to 4.4 per cent in 2016-17 from 0.8 per cent in 2015-16, services sector growth declined to 7.9 per cent from 9.8 per cent during the same period. Inﬂation moderated, with the average level of Consumer Price Inﬂation declining to an estimated level of 4.6 per cent in 2016-17 from 4.9 per cent in 2015-16. Foreign Direct Investment inﬂows (FDI) increased by 12 per cent in the April–December period of 2016 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 led to the decline in inﬂation. Meanwhile, a close to normal monsoon, liberalisation of FDI rules and higher government capital expenditure supported domestic economic growth in 2016-17. While the cash-squeeze in the third quarter of the year under review had an impact on private consumption, there has been a speedy recovery in consumer demand since then. 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 on account of policy uncertainty in the US and a slew of impending elections in Europe. The growth inﬂation mix should continue to remain broadly unchanged in 2017-18. 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 7th Central Pay Commission Awards should boost consumer spending. Going forward, headline GDP growth is likely to increase to 7.5 per cent in 2017-18 from 7.1 per cent in 2016-17. 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, 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 has been based on 5 core values: Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Based on these cornerstones, it is your Bank’s aim to build an Indian Bank that meets the ﬁnancial needs of, and provides services of a high quality to its customers across the country. Your Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. This is articulated through a well-documented Code of Conduct that every employee, including senior management, has to afﬁrm annually that he/she will abide by. Consistent with the mission and approach, your Bank’s business strategy emphasises the following: (cid:115)(cid:0) (cid:41)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:0) (cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0) (cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0) (cid:73)(cid:78)(cid:0) (cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:7)(cid:83)(cid:0) (cid:69)(cid:88)(cid:80)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) ﬁnancial services industry (cid:115)(cid:0) (cid:41)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:0)(cid:71)(cid:69)(cid:79)(cid:71)(cid:82)(cid:65)(cid:80)(cid:72)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:65)(cid:67)(cid:72) HDFC Bank Limited Annual Report 2016-17 19 Directors' Report (cid:115)(cid:0) (cid:35)(cid:82)(cid:79)(cid:83)(cid:83)(cid:13)(cid:83)(cid:69)(cid:76)(cid:76)(cid:0)(cid:66)(cid:82)(cid:79)(cid:65)(cid:68)(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:0)(cid:80)(cid:79)(cid:82)(cid:84)(cid:70)(cid:79)(cid:76)(cid:73)(cid:79)(cid:0)(cid:65)(cid:67)(cid:82)(cid:79)(cid:83)(cid:83)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0) base (cid:115)(cid:0) (cid:35)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(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:84)(cid:69)(cid:67)(cid:72)(cid:78)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89)(cid:0) (cid:84)(cid:79)(cid:0) (cid:83)(cid:85)(cid:80)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0) (cid:68)(cid:73)(cid:71)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0) strategy (cid:115)(cid:0) (cid:45)(cid:65)(cid:73)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:83)(cid:84)(cid:82)(cid:79)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:81)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:73)(cid:80)(cid:76)(cid:73)(cid:78)(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:0) management (cid:115)(cid:0) (cid:45)(cid:65)(cid:73)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:65)(cid:0)(cid:76)(cid:79)(cid:87)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:70)(cid:85)(cid:78)(cid:68)(cid:83) Financial Performance The ﬁnancial performance of your Bank during the year ended March 31, 2017 remained healthy with Total Net Revenues (Net Interest Income plus Other Income) increasing by 18.5 per cent to ` 45,435.7 crore from ` 38,343.2 crore in the previous year. Revenue growth was driven by an increase in both Net Interest Income and Other Income. Net Interest Income grew by 20.1 per cent due to acceleration in loan growth coupled with a core Net Interest Margin (NIM) of 4.3 per cent in the year ended March 31, 2017. Other Income grew 14.4 per cent to ` 12,296.5 crore. The largest component was fees and commissions, which increased by 13.6 per cent to ` 8,812 crore. Foreign exchange and derivatives revenue was ` 1,263.4 crore, gain on revaluation and sale of investments was ` 1,139.4 crore and recoveries from written-off accounts was ` 864.3 crore in the year under review. Operating (Non-Interest) Expenses increased to ` 19,703.3 crore from ` 16,979.7 crore. During the year under review, your Bank opened 195 new branches and 260 ATMs. This, along with strong growth in retail asset and card products 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’s Cost to Income Ratio improved to 43.4 per cent. Total Provisions & Contingencies was ` 3,593.3 crore as to ` 2,725.6 crore. Your Bank’s provisioning compared policies remain more stringent than regulatory requirements. The Coverage Ratio based on speciﬁc provisions alone excluding write-offs stood at around 69 per cent and including general and ﬂoating provisions around 130 per cent as on March 31, 2017. Your Bank made General Provisions of ` 392.2 crore during the year. In the year under review, your Bank’s Proﬁt Before Tax grew by 18.8 per cent to ` 22,139.1 crore. After providing for Income Tax of ` 7,589.4 crore, the Net Proﬁt increased by 18.3 per cent to ` 14,549.7 crore from ` 12,296.2 crore. Return on Average Net Worth was 18 per cent while the Basic Earnings Per Share was ` 57.2 up from ` 48.8. As on March 31, 2017, your Bank’s Total Balance Sheet stood at ` 8,63,840 crore, an increase of 16.6 per cent over ` 7,40,796 crore on March 31, 2016. Total Deposits increased by 17.8 per cent to ` 6,43,640 crore from ` 5,46,424 crore. This was after considering maturities of about US $ 3 billion of Foreign Currency Non-Resident (FCNR) deposits raised (and swapped into rupees with RBI at a concessional rate) during the year ended March 31, 2014. Current Account and Savings Account (CASA) Deposit growth witnessed a spurt during the year under review largely attributable to the demonetisation exercise. Savings Account Deposits grew by 30.9 per cent to ` 1,93,579 crore while Current Account Deposits grew by 30.7 per cent to ` 1,15,574 crore. Time Deposits stood at ` 3,34,487 crore representing an increase of 7.9 per cent. CASA Deposits accounted for 48 per cent of the Total Deposits as against 43 per cent earlier. Advances stood at ` 5,54,568 crore, an increase of 19.4 per cent. This was after considering repayments during the year of about US $ 2 billion of overseas loans linked to FCNR deposits. The Bank’s domestic loan portfolio of ` 5,38,642 crore grew by 23.7 per cent over March 31, 2016. The Bank had a share of 5.9 per cent in Total Domestic Deposits and 6.8 per cent in Total Domestic Advances. Its Credit Deposit (CD) Ratio stood at 86 per cent on March 31, 2017. Business Segments Update Retail Banking Your Bank follows a multi-channel strategy to reach out to its customers bringing to them choice, convenience and a superior experience. Innovation has been the springboard of growth in this segment. So has a strong focus on analytics and Customer Relationship Management (CRM) which has helped the Bank know the customer better and offer tailor-made solutions. This leads to deeper customer engagement in a cost effective manner. The growth in your Bank’s retail banking business was robust during the year under review. Total Retail Deposits grew by 17.7 per cent to ` 5,06,843 crore on the back of a higher than usual CASA which, thanks to demonetisation, grew at 32.9 per cent. Auto Loans, Personal Loans and Credit Cards accounted for a bulk of the retail business revenues. Your Bank is a leader in the Auto Loans segment with a strong presence in commercial vehicle and two wheeler ﬁnancing. The Bank’s Retail Advances grew by 18.9 per cent to ` 2,95,161 crore. During the year under review, your Bank added 195 branches taking its physical distribution network to 4,715 branches in 2,657 cities/towns. Number of ATMs increased to 12,260 from HDFC Bank Limited Annual Report 2016-17 20 Directors' Report 12,000 during the same period. The Bank grew its customer base to 4.05 crore from 3.77 crore with a continued focus on semi-urban and rural markets that accounted for more than 52 per cent of its branches. In Credit Cards, the Bank’s focus on existing customers continued, who accounted for about 75 per cent of the new cards issued with the number of Point-of-Sale (PoS) terminals crossing 4.25 lakh. What is more, the transactions on these witnessed a sharp spurt in the third quarter due to demonetisation. In addition to this, the Bank operates in the Home Loan business in conjunction with HDFC Limited. As per this arrangement, the former sells loans provided by the latter through its branches, while the latter approves and disburses it. The Bank receives sourcing fee for these loans and has the option to purchase up to 70 per cent of the fully disbursed loans 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. Your Bank originated, on an average, ` 1,500 crore of Home Loans every month in the year under review. It also purchased loans worth ` 13,146 crore under the ‘Loan Assignment’ route during the year ended March 31, 2017. 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 16 per cent of total fee income for the year ended March 31, 2017, compared to 14 per cent in the previous year. Wholesale Banking Like in retail, the Wholesale Banking business logged a strong growth ending the year under review with a loan book of about ` 2,63,000 crore constituting 47 per cent of the Bank’s total book. It grew 20.1 per cent in the year under review catering to institutional customers like large and emerging corporates, and SMEs. Government business is another major contributor. The breadth of offering includes Working Capital and Term Loans as well as Trade, Cash Management, Foreign Exchange and Investment Banking services. Growth came primarily on the back of impeccable execution of your Bank’s time-tested strategy of offering customers a wide range of products and services, customisation and cross selling. Dedicated Relationship Managers helped in the customisation and cross selling process. Technology further aided to improve the customer experience. All this led to higher share of customer wallet. Corporate Banking, which focuses on large and well rated companies was the biggest contributor with its asset size growing by over 20 per cent to cross ` 1,25,000 crore in the year under review. This growth was achieved, in an otherwise subdued credit environment, through securing a higher share of the customer wallet, addition of new clients, introduction of differentiated product offerings in the market place and gaining market share from competition. It pioneered in creating products and services to match the changing market dynamics and customer behaviour. focuses on Emerging Corporates Group, which the mid-market segment, recorded a 34 per cent growth in asset size to cross ` 65,000 crore on March 31, 2017. The strength of this business lies in its diversiﬁed portfolio in terms of both industry and geography. Its success was due to its ability to acquire a higher share of wallet from existing clients as well as securing new ones on the strength of a strong product offering plus a solution based approach. The Investment Banking business cemented its prominent position in Debt Capital Markets. A testimony to this is the Bloomberg rankings of INR Bond book runners where your Bank was placed 2nd for two consecutive years. In Government business, your Bank’s focus on tax collections continued to gather pace. In the year under review, the direct tax collected by your Bank was about ` 2.16 lakh crore and indirect tax ` 1.19 lakh crore. Apart from the several state Governments for which your Bank has been collecting taxes/duties, the Bank has also been authorised to collect GST. Your Bank continues to enjoy its eminent position in both Cash Management Services (CMS) and Cash Settlement Services for major stock and commodity exchanges in the country. In line with the Bank’s drive towards digitisation, it has further ensured a larger conversion of cash payments into electronic ones. The ‘Trade-on-Net’ offering which provides customers access to a host of services like Remittances, Letters of Credit and Guarantees gained even greater acceptance. International Operations Your Bank currently has branches at three locations outside India. These are at Bahrain, Hong Kong and Dubai International Finance Centre (DIFC) in Dubai. The DIFC branch offers advisory services to High Net Worth Individuals and Corporates. Your Bank also has Representative Ofﬁces in Abu Dhabi, Dubai and Nairobi which are engaged in promotional and marketing activities of the Bank’s brand name among the Non-Resident Indians. As on March 31, 2017, the combined balance sheet size of overseas branches was around US $ 4 billion. Advances at these branches constituted close to 4 per cent of the Bank’s gross advances as on March 31, 2017. The total income of the HDFC Bank Limited Annual Report 2016-17 21 Directors' Report overseas branches constituted over 1.2 per cent of the Bank’s total income for the year. Your Bank had mobilised US $ 3.4 billion in special FCNR (B) deposits from NRI clients under RBI swap window in 2013. As a major portion of these deposits were for a 3-year tenor, they came up for redemption during September-November 2016. US $ 3.02 billion of these ﬂowed out and US $ 355.67 million was outstanding for the year ended March 31, 2017. 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 accrue from spreads on customer transactions based on trade ﬂows and their demonstrated hedging needs. Your Bank recorded revenues of ` 1,263.4 crore from foreign exchange and derivative transactions in the year under review. 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. Your 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 crystallisation 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 crystallised 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 the Statutory Liquidity Ratio Given the regulatory requirement of holding government (SLR) securities 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. Your 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. Implementation of Indian Accounting Standards (IND-AS) The Ministry of Corporate Affairs, in its press release dated January 18, 2016, issued a roadmap for implementation of Indian Accounting Standards (IND-AS) for scheduled commercial banks, insurers/insurance companies and non-banking ﬁnancial companies. This roadmap requires these institutions to prepare IND-AS based ﬁnancial statements for the accounting periods beginning from April 1, 2018 onwards with comparatives for the periods beginning April 1, 2017 and thereafter. The Reserve Bank of India (RBI), vide its circular dated February 11, 2016 requires all scheduled commercial banks to comply with the Indian Accounting Standards (IND-AS) for ﬁnancial statements for the periods stated above. RBI does not permit banks to adopt IND-AS earlier than the timelines stated above. The said guidelines also state that RBI shall issue necessary instructions/ guidance/clariﬁcations on the relevant aspects for implementation of IND-AS as and when required. Your Bank has formed a steering committee comprising members from cross-functional areas for the purpose of implementation oversight. Under the guidance of the steering committee, the Bank has formed working groups, including external consultants, dedicated to speciﬁc functional areas. The objective of these working groups is to undertake a review of the diagnostic analysis of the differences between the current accounting framework and IND-AS, review the accounting policy options provided under IND-AS 101-First Time Adoption, determine the methodologies for each accounting treatment, ﬁnalise process and system changes, review and update policies and incorporate in business planning any speciﬁc action points over the transition period. In addition, the Audit Committee of the Board of Directors oversees the progress of the IND-AS implementation process. The Bank has undertaken a diagnostic analysis of the differences between the current accounting framework and IND-AS, including the disclosure requirements.The Bank is currently in the process of ﬁnalising its accounting policies under IND-AS. The Bank has evaluated the systems requiring signiﬁcant changes and identiﬁed additional system and process requirements for implementation of IND-AS. The Bank is engaging with vendors for technology solutions for implementation of IND-AS. The Bank undertakes training programs for its personnel in business and support functions. The implementation of IND-AS is expected to result in signiﬁcant changes to the way the Bank prepares and presents its ﬁnancial statements. The areas that are expected to have signiﬁcant accounting impact on the application of IND-AS are summarised below: HDFC Bank Limited Annual Report 2016-17 22 Directors' Report a) Financial assets (which include advances and investments) shall be classiﬁed under amortised cost, fair value through other comprehensive income (a component of Reserves and Surplus) or fair value through proﬁt/loss categories on the basis of the nature of the cash ﬂows and the intention of holding the ﬁnancial assets. b) Interest will be recognised in the income statement using the effective interest method, whereby the coupon, fees net of transaction costs and all other premiums or discounts will be amortised over the life of the ﬁnancial instrument. c) Stock options will be required to be fair valued on the date of grant and be recognised as staff expense in the income statement over the vesting period of the stock options. d) The impairment requirements of IND-AS 109, Financial Instruments, are based on an Expected Credit Loss (ECL) model that replaces the incurred loss model under the extant framework. The Bank will be generally required to recognise either a 12-Month or Lifetime ECL, depending on whether there has been a signiﬁcant increase in credit risk since initial recognition. IND-AS 109 will change the Bank’s current methodology for calculating the provision for standard assets and non-performing assets (NPAs). The Bank will be required to apply a three-stage approach to measure ECL on ﬁnancial instruments accounted for at amortised cost or fair value through other comprehensive income. Financial assets will migrate through the following three stages based on the changes in credit quality since initial recognition: Stage 1: 12 Months ECL For exposures which have not been assessed as credit-impaired or where there has not been a signiﬁcant increase in credit risk since initial recognition, the portion of the ECL associated with the probability of default events occurring within the next twelve months will need to be recognised. Stage 2: Lifetime ECL-Not Credit Impaired For credit exposures where there has been a signiﬁcant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL will need to be recognised. Stage 3: Lifetime ECL- Credit Impaired Financial assets will be assessed as credit impaired when one or more events having a detrimental impact on the estimated future cash ﬂows of that asset have occurred. For ﬁnancial assets that have become credit impaired, a lifetime ECL will need to be recognised. Interest revenue will be recognised at the original effective interest rate applied on the gross carrying amount for assets falling under stages 1 and 2 and on written down amount for the assets falling under stage 3. e) Accounting impact on the application of IND-AS at the transition date shall be recognised in Equity (Reserves and Surplus). Information Technology A pioneer in digital banking among private banks in India, your Bank has a following ﬁrsts to its credit: (cid:115)(cid:0) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76)(cid:73)(cid:90)(cid:69)(cid:68)(cid:0)(cid:35)(cid:79)(cid:82)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:51)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:0) (cid:115)(cid:0) (cid:37)(cid:78)(cid:84)(cid:69)(cid:82)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69)(cid:0)(cid:68)(cid:65)(cid:84)(cid:65)(cid:0)(cid:87)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:85)(cid:83)(cid:69)(cid:0) (cid:115)(cid:0) (cid:47)(cid:78)(cid:76)(cid:73)(cid:78)(cid:69)(cid:0)(cid:82)(cid:69)(cid:65)(cid:76)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:0)(cid:67)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:33)(cid:52)(cid:45)(cid:0)(cid:83)(cid:87)(cid:73)(cid:84)(cid:67)(cid:72) (cid:115)(cid:0) (cid:36)(cid:69)(cid:66)(cid:73)(cid:84)(cid:0)(cid:67)(cid:65)(cid:82)(cid:68)(cid:83) (cid:115)(cid:0) (cid:33)(cid:78)(cid:65)(cid:76)(cid:89)(cid:84)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:35)(cid:50)(cid:45)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) (cid:115)(cid:0) (cid:51)(cid:79)(cid:76)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:79)(cid:0)(cid:67)(cid:72)(cid:69)(cid:67)(cid:75)(cid:0)(cid:82)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:0)(cid:76)(cid:79)(cid:65)(cid:78)(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:0)(cid:70)(cid:82)(cid:65)(cid:85)(cid:68) (cid:115)(cid:0) (cid:45)(cid:79)(cid:66)(cid:73)(cid:76)(cid:69)(cid:0)(cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:80)(cid:80)(cid:0) (cid:115)(cid:0) (cid:51)(cid:45)(cid:51)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:77)(cid:79)(cid:66)(cid:73)(cid:76)(cid:69)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:82)(cid:67)(cid:69) The list has only been growing. The recent ones being the ‘10 Second Loan’ and ‘Digital Loan Against Securities’ (Digital LAS). Technology has enabled your Bank to improve process and system efﬁciencies, scale up and offer customer convenience across the country. To address the infrastructure limitations in deep geographies, branches and ATMs have been commissioned using both ﬁxed line and mobile broadband telecom networks. Bandwidth acceleration and compression technology has been implemented to improve telecom network speeds in rural/semi urban branches. QuickBanking, a mobile app catering to the off-line Internet has been further enhanced this year to incorporate Uniﬁed Payment Interface (UPI) which rides on the USSD 2.0 platform of National Payments Corporation of India and enables fund transfer to beneﬁciaries across banks on a 24*7 basis. Cyber Security Your Bank has set up an effective governance framework to manage cyber security. A suitable organisational structure has been put in place to monitor various cyber security threats and minimize them. In order to protect critical assets from cyber attacks, the Cyber Security Operations Center (SoC) operates on a 24*7 basis. In the year under review, your Bank further enhanced SoC to manage, respond and resolve cyber security incidents in an effective/timely manner. HDFC Bank Limited Annual Report 2016-17 23 Directors' Report Further your Bank conducts: (cid:115)(cid:0) (cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0) (cid:86)(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:65)(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:80)(cid:69)(cid:78)(cid:69)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:84)(cid:69)(cid:83)(cid:84)(cid:83)(cid:0) to assess/ remedy vulnerabilities in applications and IT infrastructure (cid:115)(cid:0) (cid:33)(cid:78)(cid:84)(cid:73)(cid:13)(cid:80)(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)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0) the phishing sites are shutdown in a timely manner and customers prevented from being lured to fraudulent sites (cid:115)(cid:0) (cid:50)(cid:73)(cid:83)(cid:75)(cid:0) (cid:69)(cid:78)(cid:71)(cid:73)(cid:78)(cid:69)(cid:0) (cid:65)(cid:78)(cid:68)(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:77)(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 channels (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:67)(cid:89)(cid:66)(cid:69)(cid:82)(cid:0) (cid:83)(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 3.0 certiﬁcation and ISO 27001 certiﬁcation for its critical information assets. Its efforts have been further recognized through awards from IDRBT, DSCI-NASSCOM for various cyber security initiatives. Particularly in the year under review, your Bank made signiﬁcant investments in strengthening protection against Distributed Denial of Service (DDoS) attacks and Web Application Firewall (WAF). Various simulation exercises were carried out to learn from techniques like ethical hacking and smoke screen & decoy testing. The Bank also participated in IDBRT’s cyber security drills to identify weak links and strengthen defence. It will continue to invest further in the coming years in the areas of cyber security to take it to the next level. During the year under review, it implemented a 3-way disaster recovery solution for its Core Banking platform. This ensured that Core Banking Systems went without any prolonged outage. In addition, your Bank has a well-rehearsed disaster recovery set-up, so as to ensure 99.5 per cent up-time of important applications. Service Quality Initiatives feedback the service levels and A regular process of reviewing capturing for from customers continuous improvement in product, processes and services. The multi-channel strategy of the Bank necessitates real-time monitoring of customer experience, securing feedback and response. This process is critical as the customer can now access the Bank’s services across traditional touchpoints like is undertaken branches, ATMs as well as the digital ones like the Internet and Mobile. 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. Mystery shopping activities using decoy customers are also undertaken across branches and retail asset centres to continuously evaluate regulatory compliance, process adherence and quality of service delivery to customers. The ﬁndings are worked upon using Lean and Six Sigma methodologies to bring in process improvements. The effectiveness of these measures is reviewed periodically at different levels including the Customer Service Committee of the Board. In addition to the aforementioned measures, in compliance with regulatory guidelines, your Bank has appointed a senior retired banker as Internal Ombudsman. As a result of the continued focus on customer service, your Bank has received written appreciation from many Banking Ombudsmen appointed by Reserve Bank of India across locations such as Andhra Pradesh, Chhattisgarh, Goa, Gujarat, Himachal Pradesh, Kerala, Lakshadweep, Madhya Pradesh, Maharashtra, Odisha, Puducherry, Punjab, Sikkim, Tamil Nadu and West Bengal. Risk Management and Portfolio Quality The Bank is exposed to risk by the very nature of its business. These can be classiﬁed as: (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: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) HDFC Bank Limited Annual Report 2016-17 24 Directors' Report (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:47)(cid:85)(cid:84)(cid:83)(cid:79)(cid:85)(cid:82)(cid:67)(cid:73)(cid:78)(cid:71)(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:38)(cid:51)(cid:44)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:40)(cid:51)(cid:44)(cid:9) These material risks are factored in while determining the capital requirements. The most important of these are Credit Risk, Market Risk, Liquidity Risk and Operational Risk which are explained below. Identifying, measuring, monitoring and managing these are critical to balancing the risk-return trade off and determining the ultimate success of the Bank. Your Bank has a Board approved risk strategy and policy in place. The implementation of this well-deﬁned policy is supervised by the Risk Policy and Monitoring Committee of the Board. The committee periodically reviews risk level and direction, portfolio composition, status of impaired credits as well as limits for treasury operations. Credit Risk The Bank has a comprehensive centralised risk management function, independent of 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 business, 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 continued to be under severe pressure due to macroeconomic factors as well as sector speciﬁc issues. The banking industry on an overall basis saw a sharp increase in stress and non-performing assets. 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. As on March 31, 2017, your Bank’s ratio of Gross Non-Performing to gross advances was 1.05 per cent. Assets (NPAs) Net Non-Performing Assets (Gross Non-Performing Assets less Speciﬁc Loan Loss provisions) was 0.3 per cent of Net Advances as on March 31, 2017. Total restructured assets (including applications under process for restructuring) was 0.06 per cent of gross advances as on March 31, 2017. As a matter of abundant caution, the Bank provides more than regulatory requirements for its NPAs while adhering to regulatory norms for the provision of Standard Assets. Market Risk This arises out of the Bank’s trading portfolio and is managed through a well-deﬁned Board approved investment policy which caps exposures to various securities through stringent trading risk limits/triggers. These include position limits, gap limits, tenor restrictions, sensitivity limits viz. PV01, Modiﬁed Duration of Hold To Maturity Portfolio and Option Greeks, Value-at-Risk (VaR) Limit, Stop Loss Trigger Level (SLTL) and Potential Loss Trigger Level (PLTL). This is backed up further by a Board approved stress testing policy and framework which simulates various market risk scenarios in order to measure losses and initiate control measures. Liquidity Risk The framework for liquidity and interest rate risk management is established in the Bank’s Asset Liquidity-Management policy which is in line with regulatory requirements. Your Bank has established various Board approved limits like 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-day calendar liquidity stress scenario. In June 2014, RBI released Basel III Framework on Liquidity Standards- Liquidity Coverage Ratio (LCR), Liquidity 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 80 per cent on January 1, 2017. This was to increase by 10 percentage points every year to touch 100 per cent on January 1, 2019. The Bank’s average LCR was in excess of this stipulation and was 99.52 per cent on a consolidated basis for the quarter ended March 31, 2017. HDFC Bank Limited Annual Report 2016-17 25 Directors' Report In accordance with RBI’s guidelines, the Bank is currently on the Standardized Approach for Credit as well as Market Risk and the Basic Indicator Approach for Operational Risk. It is at the same time progressing towards migrating to an advanced approach for these risks when permitted by the regulator. 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 and the adequacy of capital to cover these risks. Its Board approved Stress Testing Policy and Framework entails the use of various techniques to assess 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 such assumed scenarios and sensitivity factors which generally relate to the impact on its proﬁtability and capital adequacy. Operational Risk A Board approved Operational Risk Management Framework has been put in place which is implemented by a dedicated team within the Risk Management function. A bottom up risk control self-assessment process identiﬁes high risk areas, potential gaps and serves as an early warning system so that remedial measures can be initiated in a timely manner. 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 internal audit 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. Corporate Social Responsibility (CSR)-Creating Sustainable Communities ‘Creating Sustainable Communities’ is the underlying philosophy that drives your Bank’s CSR initiatives and it springs from one of its Core Values: Sustainability. The objective is to enable families break the vicious circle of poverty and draw them into a cycle of growth, development and empowerment without disturbing the ecological balance. Your Bank is committed to identifying and supporting outreach programmes aimed at developing and advancing the community in this manner. The Bank works through partnerships with Non-Governmental Organisations (NGOs) as well as directly through its various businesses to create social value through its products and services. Your Bank’s Holistic Rural Development Programme (HRDP) is its ﬂagship CSR initiative. This programme aims to improve the economic and social conditions of the villages where it operates. The focus areas of HRDP are Promoting Education; Skills Training and Livelihood Enhancement; Natural Resources Management; Healthcare and Hygiene; Financial Literacy and Inclusion. Under the programme, the Bank is working in over 500 villages across 14 states in the country. Promoting Education Your Bank’s education programmes are structured to create a conducive and effective learning environment in schools. This includes providing basic infrastructure, teacher training, learning improvements, scholarships and career guidance programmes. The programmes are spread across a wide geography and close to 900 schools are being covered. The distinctiveness of these programmes is the focus on improving the skills of teachers, which in turn beneﬁts the students. More than 65,000 students have beneﬁtted through these programmes. the Zero Innovation Investment Through for Educational Initiatives (ZIIEI), your Bank has reached out to more than 5.5 lakh school teachers. ZIIEI is a unique platform to implement best practices in education across more than 75,000 schools in Uttar Pradesh. The project has been executed jointly with a leading NGO for the state government. HDFC Bank Limited Annual Report 2016-17 26 Directors' Report Skills Training and Livelihood Enhancement Financial Literacy To create a sustainable community, your Bank believes that people must have a steady source of income which will contribute to a thriving economy. To this end, the Bank provides skills training and development to enable beneﬁciaries to earn a living, with a special focus on women and youth. Your Bank addresses this need through multiple projects ranging from competency-based skill-oriented training and placement, capacity building, promoting entrepreneurial activities and upskilling for agricultural and allied practices. These initiatives are tailor-made programmes that focus on addressing the speciﬁc needs of a community. Nearly 16,000 individuals have beneﬁted through the Bank’s efforts in skills based training. It has supported more than 1,100 individuals to become entrepreneurs. The projects are spread across varied geographies from Jammu & Kashmir in the North, Meghalaya in the North East, Tamil Nadu in the South to Gujarat in the West. One of the projects to provide job-based skills training in Uttar Pradesh, has beneﬁtted more than 5,000 individuals. Natural Resource Management While working on issues such as livelihood and water, your Bank makes a concerted effort towards managing local natural resources. The multi-focused interventions include the areas of soil and water conservation, water management, construction, renovation and maintenance of water harvesting structures for improving surface and ground water availability as well as for promoting organic fertilisers and renewable energy. Your Bank has planted more than 67,000 trees, with the twin objectives of developing horticulture and ensuring top soil retention for better agriculture yield. A little over 3,800 acres of agricultural land has been treated for enhanced agricultural produce. In order to provide proper irrigation support more than 200 water harvesting structures have been constructed or renovated. Crop diversiﬁcation has been carried out in over 840 acres for higher output as well as enriched fertility of the soil. Healthcare & Hygiene Your Bank promotes the cause of good hygiene and sanitation practices in the community. Towards this end, the Bank supports construction of toilets and provision of clean drinking water facilities. Close to 7,500 households and 900 schools in rural India have been covered under the toilet programme so far. A primary healthcare centre was set up in the ﬂood affected regions of Uttarakhand, which beneﬁted around 50,000 people. Financial literacy is the ﬁrst step towards real ﬁnancial inclusion. With this belief, the Bank conducts ﬁnancial literacy workshops for communities to enable them to make smart ﬁnancial decisions and sustain themselves. These workshops are executed through the Bank’s business units as well as its NGO partners. Dhanchayat, is the Bank’s ﬁnancial literacy programme on wheels and this has been running successfully, making more and more people in the rural areas aware of the perils of informal banking. Your Bank also disseminates information on general banking, credit counselling and digital banking across a wider society such as schools, colleges, pensioners and senior citizens. Over 40 lakh households have beneﬁted from the Bank’s ﬁnancial literacy drive. Financial Inclusion Your Bank is fully committed to digital transactions and the recent push given to it by the Union Government. It now offers last mile access through mobile applications like BHIM, UPI, USSD, Scan & Pay as well as Aadhaar and RuPay enabled Micro-ATMs. In another ongoing effort to bring more of the under-banked sections of the population into formal ﬁnancial channels, your Bank has opened over 17 lakh accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and enrolled over 26 lakh customers in social security schemes since inception. It now ranks among the leading private sector banks in this regard. Loans to the tune of ` 5,522.5 crore were extended under the Pradhan Mantri Mudra Yojana (PMMY) and nearly ` 143.5 crore under the ‘Stand Up India’ scheme to Scheduled Caste/Scheduled Tribe women borrowers in the year under review. Environment Sustainability integral the natural capital and Maintaining a balance between communities functioning. the Bank’s to is now Towards this end, your Bank’s ATMs have gone paperless, enabling reduction of carbon footprint. The Bank has given this effort a further ﬁllip by ensuring multi-channel 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 reduce power consumption. Blood Donation Campaign The year 2016 was a milestone year for the campaign for two reasons. One, it was its 10th year. Two, it witnessed record participation in terms of cities, camps and colleges resulting in over 1.7 lakh blood units being collected from more than 2 lakh HDFC Bank Limited Annual Report 2016-17 27 Directors' Report people. The tie up with corporate and defence establishments to organise camps at their premises also helped in the unprecedented collection. Sustainable Livelihood Initiative (SLI) Your Bank’s Sustainable Livelihood Initiative (SLI) is about ‘Creating Sustainable Communities’ by empowering people, and helping them break the vicious circle of poverty. The Bank takes immense pride in stating that through its Board mandated SLI, it has made a difference in the lives of lakhs of women at the bottom of the pyramid by creating long-term sustainable solutions rather than just providing short-term relief. The basic premise of the SLI model is that empowering women means empowering families. Women participants form Self Help Groups (SHGs) or Joint Liability Groups (JLGs) that are nurtured by the Bank’s employees. The approach under SLI covers occupational skills training, ﬁnancial literacy, credit counselling, livelihood ﬁnance and market linkage. Today, SLI is harnessing the collective power of women’s groups to make an impact in village communities by implementing health and sanitation programmes. Apart from the holistic approach, what makes this programme one-of-its-kind in the world is its scale. Sample this; 8,000 dedicated bank employees working with millions of people at the bottom of the pyramid in trying conditions driven purely by a passion to transform lives. The SLI programme is being accelerated further through digitisation notwithstanding hurdles like poor awareness and telecom infrastructure. These are being overcome by using platforms like USSD which work on feature phones. Furthermore, to facilitate card-based transactions, the Bank has installed PoS machines in more than 200 villages. At the end of the year under review, 68 lakh households in 25 states were covered through this programme. These include Assam, Bihar, Chhattisgarh, Meghalaya, Madhya Pradesh, Odisha, Rajasthan, Sikkim, Tripura, Uttar Pradesh and Uttarakhand. The disclosures pertaining to CSR as required under Rule 8 of the Companies (Accounts) Rules, 2014 have been given in ANNEXURE 2 to this report. Agriculture & Allied Activities Your Bank’s credit to Agriculture & Allied activities stood at ` 77,921 crore on March 31, 2017 representing an increase of about 17 per cent over the March 31, 2016 ﬁgure of ` 66,890.4 crore. With about half of India’s population living on agriculture, this is an important business segment for the Bank. The suite of products offered include the Kisan Gold Card, Tractor and Cattle Loans. Apart from loans directly linked to agriculture, the Bank offers other credit products such as two-wheeler loans, car loans, loans against gold jewellery and mortgage loans. The Kisan Gold Card is now being offered in 60,000 villages. Your Bank has designed a range of crop and geography speciﬁc products keeping in mind the harvest cycles and local needs of farmers spread across diverse agro climatic zones. Credit is targeted at allied agricultural activities like dairy, pisciculture and sericulture through speciﬁc products. Using technology, your Bank is able to deliver some loans within three working days in select geographies, and loan enhancements in a few seconds through ATMs or mobile phones. The Bank also enables faster cash ﬂows to the farmer through products like post-harvest Cash Credit and Warehouse Receipt Financing. HDFC Bank’s focus in the rural markets has not just been on increasing credit off-take but also on cementing relationships with customers by empowering them. As a part of these efforts, 11 Kisan Dhan Vikas Kendras have been rolled out across Punjab, Maharashtra, Uttar Pradesh and Madhya Pradesh where farmers secure information on soil health, mandi prices, various government initiatives and expert advice. These services are also available on the Bank’s website in vernacular languages. Advisories on weather, cropping and harvesting are also shared through SMS. Milk-to-Money (MTM) The Bank’s MTM footprint (including Micro ATMs) crossed the landmark of 1,000 in the year under review. Approximately 3.17 lakh farmers are covered across 16 states including Gujarat, Maharashtra, Punjab and Rajasthan. Farmers receive Direct Beneﬁt Transfers from the Government in the same account. Under this initiative, Multi-function Terminals (MFTs), popularly known as Milk-to-Money ATMs, are deployed in dairy societies. The MFTs link the milk procurement system of the dairy society to the farmers’ account to enable faster payments. MFTs have cash dispensers that function as standard ATMs. The transparency in the milk collection process beneﬁts both farmers and society. Payments are credited without the difﬁculties associated with the cash distribution process. What is more, this creates a credit history which can then be used as the basis for accessing bank credit. Apart from the Dairy and Cattle Loans, customers gain access to all bank products including digital offerings such as 10 Second Personal Loans, Kisan Credit Card, Bill Pay and Missed Call Mobile Recharge. HDFC Bank Limited Annual Report 2016-17 28 Directors' Report Loans against Gold Jewellery As on March 31, 2017, Loans against Gold Jewellery stood at ` 4,800 crore as against ` 4,531 crore on March 31, 2016. Banks have started making inroads in a market traditionally dominated by the unorganised sector and pawn brokers. The entry of such players has resulted in increased awareness, and at the same time provided greater transparency by substituting the money lenders. The availability of the asset and the ease of securing a loan have made this a convenient and viable credit option. Micro, Small and Medium Enterprises (MSME) The year under review has been a challenging but deﬁning one for the MSME business. Demonetisation was a temporary setback for a business whose customers traditionally transact in cash. Your Bank was able to overcome this in the last quarter. The Bank’s advances to MSMEs grew by 14.4 per cent to touch ` 85,166.6 crore on March 31, 2017 from ` 74,657.3 crore on March 31, 2016. Demonetisation and the next-generation the advent of of entrepreneurs has seen a steady shift towards digital transactions. In what could be a potential game changer for the business, the Bank launched a complete online solution-the ‘SM@Bank’. Through this, customers can access-credit facility information, request adhoc/temporary overdraft facilities, ask for new facilities and submit documents to the Bank for straight through processing on a 24*7 basis. This gained signiﬁcant traction in the very ﬁrst year and is now poised to gain further momentum. Within this segment, the Bank continued its approach of targeting the manufacturing, retailing, wholesale, trading, and services sectors. Innovation Your Bank has embarked on a ‘Mobile First’ digital strategy that builds on the last two decades of investment in technology. This strategy enables your Bank to offer an entire spectrum of banking products which can now be accessed not only on high-end smart phones and tablets, but also on feature phones that require little or no Internet connectivity. As you are aware, digital innovation has been the prime driver across businesses for the last two years. It has got further impetus with emphasis on artiﬁcial intelligence, chatbots and machine learning enabling your Bank to offer a superior customer experience. The Bank hosted the 2nd Digital Innovation Summit in February 2017 to tap into the ﬁn-tech and start-up ecosystem and harness the emerging technological trends. In the 2nd Digital Innovation Summit, the Bank invited entries in rural ﬁn-tech category as well along with submissions in other categories. Five companies have been chosen as winners, whose solutions the Bank is evaluating for potential application. These companies are in Artiﬁcial Intelligence, Marketing, Mobile Payments, Quality Assurance and Biometric Payments domains with special focus on solutions that will help semi-urban and rural customers. Some of the major digital innovations introduced in the year ended March 31, 2017 are: (cid:115) Interactive Humanoid ‘IRA’: HDFC Bank now has a humanoid, IRA, which is a technology demonstrator in the ﬁeld of artiﬁcial intelligence and robotics. It can support customer service. (cid:115) HDFC Bank’s Virtual Assistant ‘EVA’: An Artiﬁcial Intelligence based customer service chatbot deployed on your Bank’s website that responds to customer queries and provides product information. (cid:115) HDFC Bank OnChat: Your Bank has forayed into social media banking to reach out to the millennial customers. At present, customers and non-customers can complete e-commerce transactions on Facebook Messenger. (cid:115) Expense Tracker: This personal ﬁnancial management tool gives customers a snapshot of their income, expenses, and investments and helps them secure control over their ﬁnances. This enhancement in your Bank’s MobileBanking app has received encouraging customer response. (cid:115) Other innovations like PayZapp, SmartBuy and the 10 second personal loan continued to gather momentum in the year under review. People Your Bank believes that the key to building an organization is People. The philosophy of the Bank can be summarised as: Hiring right talent and retaining them by creating a conducive environment through a combination of ﬁnancial and non-ﬁnancial incentives. Besides innovation, the organization also fosters a culture of empowerment and ownership. This paid-off during demonetisation, when our employees went well beyond the call-of-duty to make customers comfortable. In an extremely chaotic environment with crises erupting by the day, they came up with creative solutions. HDFC Bank Limited Annual Report 2016-17 29 Directors' Report To reiterate the ﬁve broad pillars of HDFC Bank’s People Strategy are: (cid:115)(cid:0) Resourcing and Hiring: 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 84,000 plus work force that is well motivated and trained to deliver value to the customer. Increased digitisation, improved process efﬁciencies and rebalancing capacities over the years has led to a small decrease in the employee base. (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 as well as behavioural training through the Gurukul programmes reiterate 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. Role-based scorecards at the employee level coupled with managerial feedback provide clarity and support to help employees excel. In addition, your Bank strives to strengthen its connect with employees. The Bank conducted an employee survey to understand various aspects of their experience and followed through with appropriate interventions spanning from the local to pan-Bank level. The Bank also conducts several employee engagement events, both at local and national levels. (cid:190) Josh Unlimited: Pan-India Sports event conducted in 27 cities (cid:190) Stepathlon: An Employee Wellness initiative that saw the participation rise by 1,000 to about 3,500 (cid:190) Hunar: Pan-India in-house talent competition (cid:190) Corporate Online Library: A knowledge resource available to all employees for accessing nearly 1.5 lakh books (cid:190) Employees can also participate in the ‘HDFC Bank Voice Hunt Contest’ in association with Shankar Mahadevan Academy and ‘Corporate Photography Contest’ which is an inter-corporate event. The Bank encourages employees to participate in community and social work. Through your Bank’s Employee Payroll Giving’ programme, personnel can choose to donate a certain amount from their salary each month towards speciﬁc social causes. The other ﬂagship programmes are the Blood Donation Drive and the Bank’s volunteering programme which entails employees imparting ﬁnancial literacy and contributing to relief efforts in case of natural calamities. ‘HDFC Bank Cares’ is an initiative to address healthcare needs of employees. Beneﬁts under this programme include health mailers, doctor on call, health check-up camps and talks on wellness by experts. The Bank runs an on-site crèche at Kanjurmarg, Mumbai. These initiatives 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 organisation policies. training ensures (cid:115) Training and Development: Training plans are developed based on analysis of training needs identiﬁed 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 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. The training methodology has evolved to application based training including simulations, case studies and games. Leveraging technology, many of the class room programmes are now being delivered through online mode. The role speciﬁc learning plan ensures effective use of blended learning method. (cid:115) Rewards: Merit is the driving force in the organisation and objectivity the watchword while rewarding employees on a ﬁnancial and non-ﬁnancial basis. This fair and equitable approach encourages people to give their best. The compensation policy ensures that remuneration is not only competitive but also includes wealth creation opportunities through long-term rewards like ESOPs. Your Bank’s comprehensive compensation policy is aligned with the guidelines of the Reserve Bank of India. The ‘Star Awards’ is an institutionalised recognition programme that periodically recognizes performers. The ‘Tejaswini Awards’ is a special category to recognize women achievers. HDFC Bank Limited Annual Report 2016-17 30 Directors' Report Other Statutory Disclosures Board and Board Committees 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. 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 to this report. 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 judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2017 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) by 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. During the year under review, fees paid to the auditors were as follows: Fees (including taxes) Statutory Audit (` 1,90,00,000 plus taxes) Certiﬁcation & other services provided as statutory auditors Total ` lacs 218.50 39.08 257.58 Members are requested to consider their re-appointment for ﬁnancial year 2017-18. Disclosure under Foreign Exchange Management Act, 1999 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 obtained a certiﬁcate from its statutory auditors certifying that the Bank is in compliance with the FEMA provisions with respect to downstream investments made in its subsidiaries in the year under review. Related Party Transactions Particulars of transactions with related parties referred to in Section 188 (1), as prescribed in Form AOC-2 under Rule 8 (2) of the Companies (Accounts) Rules, 2014 is enclosed as ANNEXURE 4. 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, except Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited, associates of the Bank, which amalgamated with the Bank’s subsidiary HDB Financial Services Limited, pursuant to the approval of the Honourable HDFC Bank Limited Annual Report 2016-17 31 Directors' Report High Court of Gujarat and Bombay with effect from December 1, 2016. The appointed date of the merger as per the scheme of amalgamation was April 1, 2014. 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 Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh, Mr. A. N. Roy, Mr. Malay Patel and Mr. Umesh Chandra Sarangi are Independent Directors on the Board of the Bank as on March 31, 2017. 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. 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 Independent Directors on the performance of the Board and its Committees was subsequently discussed by the Board at its meeting. 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. It 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 the persons identiﬁed before recommending their appointment to the Board. 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 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. 25. 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 on applicable regulatory prescriptions. Non-Executive Directors are also reimbursed expenses incurred by them for attending meetings of the Board and its Committees at actuals. The remuneration payable to is the Non-Executive Directors and Independent Directors HDFC Bank Limited Annual Report 2016-17 32 Directors' Report 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. In terms of the guidelines issued by RBI for compensation of Non-Executive Directors of private sector banks dated June 1, 2015 and the approval of shareholders at the 22nd Annual General Meeting, Non-Executive Directors of the Bank, other than the Chairperson, are paid proﬁt-related commission of ` 10,00,000/- (Rupees Ten Lakh only) per annum for each Non-Executive Director. Mr. Aditya Puri is the Non-Executive Chairman of HDB Financial Services Limited, Bank’s subsidiary. Mr. Puri does not receive any remuneration from the subsidiary. None of the Directors of your Bank other than Mr. Puri is a director of the Bank’s subsidiaries as on March 31, 2017. Signiﬁcant and Material Orders Passed By Regulators During the ﬁnancial year 2016-17, further to the media reports in October 2015 about irregularities in advance import remittances in various banks, the Reserve Bank of India (RBI) had conducted a scrutiny of the transactions carried out by the Bank under Section 35 (1A) of the Banking Regulation Act, 1949. The RBI issued a Show Cause notice to which the Bank had submitted its detailed response. After considering the Bank’s submission, the RBI imposed a penalty of ` 2 crore on the Bank vide its letter dated July 19, 2016 on account of pendency in receipt of bill of entry relating to advance import remittances made and lapses in adhering to KYC/AML guidelines in this respect. The penalty has since been paid. The Bank has implemented a comprehensive corrective action plan, to strengthen its internal control mechanisms so as to ensure that such incidents do not recur. a period of three years commencing from January 2, 2018 till January 1, 2021 or till such other earlier or later date(s) as may be approved by Reserve Bank of India, and as subsequently extended by the Reserve Bank of India from time to time. During the year, Mr. Srikanth Nadhamuni was appointed as an Additional Director of the Bank with effect from September 20, 2016 to hold ofﬁce till the conclusion of the ensuing Annual General Meeting. Mr. Nadhamuni has been appointed as a director having expertise in the ﬁeld of Information Technology. In terms of Section 152 of the Companies Act, 2013, it is proposed to appoint Mr. Nadhamuni as a Director of the Bank at the ensuing Annual General Meeting. The Bank has received a notice from a member proposing his candidature as Director of the Bank. Mr. Nadhamuni shall be liable to retire by rotation. 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. Familiarisation Programme for Independent Directors The various programmes undertaken familiarising Independent Directors with the functions and procedures of the Bank are disclosed in the Corporate Governance Report. for Particulars of Employees The information in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in ANNEXURE 6 and ANNEXURE 7 to this report. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Directors and Key Managerial Personnel (A) Conservation of Energy The Bank proposes to re-appoint Mr. Paresh Sukthankar and Mr. Kaizad Bharucha as Deputy Managing Director and Executive Director of the Bank, respectively, for a period of three years each with effect from June 13, 2017, subject to the approval of the Reserve Bank of India and the shareholders at the ensuing Annual General Meeting. In compliance with Section 152 of the Companies Act, 2013, Mr. Sukthankar and Mr. Bharucha will also retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment. The Bank also proposes to re-appoint Mrs. Shyamala Gopinath at the ensuing Annual General Meeting as the Part Time Non-Executive Chairperson of the Bank for Your Bank has undertaken several initiatives in this area such as (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:83)(cid:84)(cid:65)(cid:76)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:71)(cid:82)(cid:69)(cid:69)(cid:78)(cid:0) (cid:76)(cid:79)(cid:67)(cid:75)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:33)(cid:35)(cid:0) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:76)(cid:69)(cid:82)(cid:83)(cid:0) (cid:73)(cid:78)(cid:0) (cid:65)(cid:73)(cid:82)(cid:0) conditioning machines in order to save energy and support go-green initiative (cid:41)(cid:78)(cid:83)(cid:84)(cid:65)(cid:76)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(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: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) to control the power factor and to reduce energy consumption (cid:115)(cid:0) (cid:33)(cid:76)(cid:76)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:0)(cid:83)(cid:73)(cid:71)(cid:78)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:66)(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:80)(cid:79)(cid:83)(cid:84)(cid:0)(cid:17)(cid:16)(cid:0)(cid:80)(cid:14)(cid:77)(cid:14) (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:76)(cid:73)(cid:70)(cid:84)(cid:83)(cid:12)(cid:0)(cid:33)(cid:35)(cid:83)(cid:12)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:79)(cid:78)(cid:0)(cid:80)(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 HDFC Bank Limited Annual Report 2016-17 33 Directors' Report (B) Technology Absorption Business Responsibility Report Your Bank has been at the forefront of using technology absorption and evaluates innovative technology with multiple ﬁntech partners. In the year under review, it organised its 2nd ‘Digital Innovation Summit’ and shortlisted several ﬁntech startups to carry out multiple proof of concepts in both customer facing and internal processes. Your Bank uses advanced analytics to create a 360 degree view of all 4.05 crore customers. The analytics engine uses machine learning to analyze structured and unstructured data which help in offering relevant product/ recommendations using advanced algorithms. service These are delivered via personalized campaigns through an omni-channel approach. Your Bank has also begun using robotics and artiﬁcial intelligence in digital commerce, corporate supply chain and payment settlement systems to reduce time to market and turnaround time. (C) Foreign Exchange Earnings and Outgo During the year, the total foreign exchange earned by the Bank was ` 1,263.4 crore (on account of net gains arising on all exchange/derivative transactions) and the total foreign exchange outgo was about ` 221 crore towards the operating and capital expenditure requirements. Secretarial Audit In terms of Section 204 of the Companies Act, 2013 and the Rules made thereunder, M/s. BNP & Associates, Practising Company Secretaries have been appointed as Secretarial Auditors of the Bank for the ﬁnancial year 2016-17. The report of the Secretarial Auditors is enclosed as ANNEXURE 8 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. 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 web site www.hdfcbank.com Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 The relevant information is included in Section E-Principle 3 of the Business Responsibility Report for 2016-17. 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 The global economy is facing risks emanating from policy uncertainty in the US, imminent elections in several European countries and rising protectionism. The Indian economy seems better placed. And so is your Bank which is on course to continue to outgrow the system, as it has in the year under review. Like in the past, the Bank will continue to leverage its distribution strength and digital platforms especially in the rural and semi-urban parts of the country for sustainable growth. Needless to say, the Bank will continue to focus on its 5 core values namely Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Its commitment to the highest possible standards of corporate governance remains unwavering. 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 Mumbai, May 29, 2017 HDFC Bank Limited Annual Report 2016-17 34 Directors' Report ANNEXURE 1 to the 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, 2017 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 1,674,000 Plan E- ESOS XVII 30th June, 2010 100,000,000 508.23 111,600 Plan E- ESOS XVIII 30th June, 2010 100,000,000 468.40 12,552,500 Plan E- ESOS XIX 30th June, 2010 100,000,000 680.00 23,512,100 Plan D- ESOS XX 16th June, 2007 75,000,000 680.00 5,133,900 Plan C- ESOS XXI 17th June, 2005 50,000,000 680.00 5,260,800 Plan E- ESOS XXII 30th June, 2010 100,000,000 664.45 - Plan C- ESOS XXIII 17th June, 2005 50,000,000 835.50 480,000 Plan F- ESOS XXIV 27th June, 2013 100,000,000 835.50 36,442,200 Plan F- ESOS XXV 27th June, 2013 100,000,000 1092.65 43,484,200 Plan F- ESOS XXVI 27th June, 2013 100,000,000 1097.80 3,000 Total - - - 128,654,300 - - - - - - - - - - - - - - - 1,674,000 111,600 10,413,000 - - - - - - - 100 2,139,400 8,878,500 10,449,800 86,100 21,000 12,955,200 1,835,400 1,748,800 30,000 20,800 3,334,300 1,719,300 942,400 - - - - - - 4,318,400 - 142,200 122,600 24,000 7,400 326,000 11,282,900 7,059,900 651,400 59,000 28,671,900 17,291,600 1,837,100 1,201,000 38,000 40,408,100 1,200 - - - 3,000 411,51,100 343,59,200 1,992,500 146,300 92,156,300 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 (`) Note: 1. One (1) share of the face value of ` 2/- each would arise on exercise of One (1) Equity Stock Option. 2. No Stock Options were granted during the year 2016-17. HDFC Bank Limited Annual Report 2016-17 35 34,359,200 68,718,400 22,546,443,173 7,074,356,786 29,689,518,359 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 Diluted Earnings Per Share (EPS) pursuant to the issue of shares The diluted EPS of the Bank calculated after considering the on exercise of option calculated in accordance with Accounting Standard (AS) - 20 (Earnings Per Share) effect of potential equity shares arising on account of exercise of options is ` 56.4 Where the company has calculated the employee compensation Had the Bank followed fair value method for accounting, the 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 stock option compensation expense would have been higher by ` 812.7 crore. Consequently proﬁt after tax would have been lower by ` 812.7 crore and the basic EPS of the Bank would have been ` 54.0 per share (lower by ` 3.2 per share) and the diluted EPS would have been `53.3 per share (lower by ` 3.2 per share) Weighted average exercise prices and weighted average fair values of options shall be disclosed separately for options whose The weighted average price of the stock options exercised is `658.2 and the weighted average fair value is `235.3 exercise price either equals or exceeds or is less than the market price of the stock options Method used and assumptions made to incorporate effects of The exercise multiple, which is based on historical data of early expected early exercise option exercise decisions of the employees, incorporates early exercise price 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. How expected volatility was determined, including explanation Stock expected volatility is completely based on GARCH of the extent to which expected volatility was based on historical volatility forecasting model using historical stock prices from volatility the market. Whether and how any other features of the option grant were Stock price and risk free interest rate are variables based on incorporated into the measurement of fair value, such as a market actual market data at the time of ESOP valuation. condition HDFC Bank Limited Annual Report 2016-17 36 Directors' Report ANNEXURE 2 to the Directors’ Report 1. Brief outline of the CSR Policy HDFC Bank Annual CSR Report 2016–2017 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 2016-17, the Bank has undertaken CSR Programmes aligned to the CSR Policy in the below focus areas - 1. Promoting Education 2. Skill Training and Livelihood Enhancement 3. Health Care 4. Environmental Sustainability 5. Eradicating Poverty 6. 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: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:0) (cid:0) (cid:0) (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:0) (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:53)(cid:0)(cid:35)(cid:0)(cid:51)(cid:65)(cid:82)(cid:65)(cid:78)(cid:71)(cid:73)(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:0) (cid:0) (cid:0) (cid:0) (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:0) (cid:0) (cid:0) (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 INR 15,200 CR 4. Prescribed CSR Expenditure (two percent of the amount as in item 4 above) INR 304 CR 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:0)(cid:26)(cid:0)(cid:41)(cid:46)(cid:50)(cid:0)(cid:0)(cid:19)(cid:16)(cid:21)(cid:14)(cid:20)(cid:18)(cid:0)(cid:35)(cid:50) (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)(cid:0)(cid:41)(cid:46)(cid:50)(cid:0)(cid:16)(cid:0)(cid:35)(cid:50) HDFC Bank Limited Annual Report 2016-17 37 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 Amount outlay (project-wise) (INR Cr) Promoting Education Promotion of Education others 2. State and district Pan India Skill Training and Livelihood Enhancement Skill development and Vocational Training Health Care Preventive and Curative Healthcare Environmental Sustainability Environment Pan India Pan India Pan India Eradicating Poverty Eradicating poverty Pan India 25.48 30.41 23.56 1.01 4.46 Rural Development Rural Development Projects Pan India 220.50 1 2 3 4 5 6 Amount spent (INR Cr) 1.Direct expenditure 2.Overheads 7.10 0.37 1. 2. 1. 2. 1. 2. 18.03 0.37 23.19 0.37 1. 2. 1.01 0.00 1. 2. 0.00 0.00 1. 2. 126.71 0.37 Cumulative expenditure up to reporting period (INR Cr)* Amount spent: Direct or through *implementing agency (INR Cr) 58.63 60.93 39.10 2.68 6.82 441.95 Implementing Agency - 18.01 Implementing Agency - 12.01 Direct Direct Implementing Agency - 4.46 Implementing Agency - 93.42 *Details of the implementing agencies are listed below: Promotion of Education(cid:26)(cid:0) (cid:34)(cid:79)(cid:68)(cid:72)(cid:0) (cid:51)(cid:72)(cid:73)(cid:75)(cid:83)(cid:72)(cid:65)(cid:0) (cid:51)(cid:65)(cid:77)(cid:73)(cid:84)(cid:73)(cid:12)(cid:0) (cid:35)(cid:72)(cid:65)(cid:84)(cid:85)(cid:82)(cid:65)(cid:78)(cid:71)(cid:0) (cid:48)(cid:82)(cid:65)(cid:84)(cid:73)(cid:83)(cid:84)(cid:72)(cid:65)(cid:78)(cid:12)(cid:0) (cid:38)(cid:82)(cid:73)(cid:69)(cid:78)(cid:68)(cid:83)(cid:0) (cid:53)(cid:78)(cid:73)(cid:79)(cid:78)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:37)(cid:78)(cid:69)(cid:82)(cid:71)(cid:73)(cid:90)(cid:73)(cid:78)(cid:71)(cid:0) (cid:44)(cid:73)(cid:86)(cid:69)(cid:83)(cid:12)(cid:0) (cid:41)(cid:83)(cid:72)(cid:65)(cid:0) (cid:37)(cid:68)(cid:85)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0) (cid:43)(cid:65)(cid:84)(cid:72)(cid:65)(cid:12)(cid:0)(cid:45)(cid:65)(cid:71)(cid:73)(cid:67)(cid:0)(cid:34)(cid:85)(cid:83)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:45)(cid:69)(cid:76)(cid:74)(cid:79)(cid:76)(cid:12)(cid:0)(cid:45)(cid:79)(cid:73)(cid:78)(cid:69)(cid:69)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:46)(cid:73)(cid:83)(cid:86)(cid:65)(cid:82)(cid:84)(cid:72)(cid:65)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:48)(cid:82)(cid:65)(cid:84)(cid:72)(cid:65)(cid:77)(cid:0)(cid:37)(cid:68)(cid:85)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:78)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:85)(cid:78)(cid:73)(cid:84)(cid:89)(cid:0)(cid:40)(cid:69)(cid:65)(cid:76)(cid:84)(cid:72)(cid:12)(cid:0)(cid:51)(cid:82)(cid:73)(cid:0)(cid:33)(cid:85)(cid:82)(cid:79)(cid:66)(cid:73)(cid:78)(cid:68)(cid:79)(cid:0)(cid:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:12)(cid:0)(cid:51)(cid:82)(cid:73)(cid:0)(cid:51)(cid:65)(cid:84)(cid:72)(cid:89)(cid:65)(cid:0)(cid:51)(cid:65)(cid:73)(cid:0)(cid:52)(cid:82)(cid:85)(cid:83)(cid:84)(cid:12)(cid:0)(cid:52)(cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:52)(cid:79)(cid:0)(cid:44)(cid:69)(cid:65)(cid:68)(cid:12)(cid:0)(cid:57)(cid:85)(cid:86)(cid:65)(cid:0)(cid:53)(cid:78)(cid:83)(cid:84)(cid:79)(cid:80)(cid:80)(cid:65)(cid:66)(cid:76)(cid:69)(cid:27)(cid:0)Rural Development : (cid:33)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:38)(cid:79)(cid:82)(cid:0)(cid:38)(cid:79)(cid:79)(cid:68)(cid:0)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:33)(cid:71)(cid:65)(cid:0)(cid:43)(cid:72)(cid:65)(cid:78)(cid:0)(cid:50)(cid:85)(cid:82)(cid:65)(cid:76)(cid:0)(cid:51)(cid:85)(cid:80)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:48)(cid:82)(cid:79)(cid:71)(cid:82)(cid:65)(cid:77)(cid:77)(cid:69)(cid:0)(cid:8)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:9)(cid:12)(cid:0)(cid:33)(cid:82)(cid:79)(cid:72)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:33)(cid:83)(cid:72)(cid:87)(cid:65)(cid:77)(cid:69)(cid:71)(cid:72)(cid:0)(cid:39)(cid:82)(cid:65)(cid:77)(cid:73)(cid:78)(cid:0)(cid:48)(cid:65)(cid:78)(cid:76)(cid:79)(cid:84)(cid:0)(cid:43)(cid:83)(cid:72)(cid:69)(cid:84)(cid:82)(cid:65)(cid:0) Vikas Va Shaikshanik Sanstha, BAIF Development Research Foundation, Community Advancement & Rural Development (cid:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:12)(cid:0)(cid:38)(cid:56)(cid:34)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:51)(cid:85)(cid:82)(cid:65)(cid:75)(cid:83)(cid:72)(cid:65)(cid:12)(cid:0)(cid:39)(cid:82)(cid:65)(cid:77)(cid:0)(cid:53)(cid:78)(cid:78)(cid:65)(cid:84)(cid:73)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:40)(cid:73)(cid:84)(cid:69)(cid:83)(cid:72)(cid:73)(cid:0)(cid:51)(cid:65)(cid:77)(cid:65)(cid:74)(cid:0)(cid:51)(cid:69)(cid:86)(cid:65)(cid:0)(cid:51)(cid:65)(cid:78)(cid:83)(cid:84)(cid:72)(cid:65)(cid:12)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:65)(cid:84)(cid:69)(cid:68)(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:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:43)(cid:39)(cid:54)(cid:43)(cid:12)(cid:0) (cid:43)(cid:82)(cid:85)(cid:83)(cid:72)(cid:73)(cid:0)(cid:54)(cid:73)(cid:75)(cid:65)(cid:83)(cid:0)(cid:54)(cid:65)(cid:0)(cid:39)(cid:82)(cid:65)(cid:77)(cid:73)(cid:78)(cid:0)(cid:48)(cid:82)(cid:65)(cid:83)(cid:72)(cid:73)(cid:75)(cid:83)(cid:72)(cid:65)(cid:78)(cid:0)(cid:51)(cid:65)(cid:78)(cid:83)(cid:84)(cid:72)(cid:65)(cid:12)(cid:0)(cid:45)(cid:57)(cid:50)(cid:33)(cid:36)(cid:33)(cid:12)(cid:0)(cid:46)(cid:65)(cid:86)(cid:0)(cid:34)(cid:72)(cid:65)(cid:82)(cid:65)(cid:84)(cid:0)(cid:42)(cid:65)(cid:71)(cid:82)(cid:73)(cid:84)(cid:73)(cid:0)(cid:43)(cid:69)(cid:78)(cid:68)(cid:82)(cid:65)(cid:12)(cid:0)(cid:46)(cid:65)(cid:86)(cid:82)(cid:65)(cid:67)(cid:72)(cid:78)(cid:65)(cid:0)(cid:45)(cid:65)(cid:72)(cid:73)(cid:76)(cid:65)(cid:0)(cid:54)(cid:73)(cid:75)(cid:65)(cid:83)(cid:0)(cid:52)(cid:82)(cid:85)(cid:83)(cid:84)(cid:12)(cid:0)(cid:48)(cid:65)(cid:82)(cid:84)(cid:73)(cid:67)(cid:73)(cid:80)(cid:65)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0) Action for Community Empowerment, Peoples Action for National Integration, Professional Assistance for Development Action, (cid:51)(cid:65)(cid:72)(cid:66)(cid:65)(cid:71)(cid:73)(cid:0)(cid:51)(cid:72)(cid:73)(cid:75)(cid:83)(cid:72)(cid:65)(cid:78)(cid:0)(cid:43)(cid:69)(cid:78)(cid:68)(cid:82)(cid:65)(cid:12)(cid:0)(cid:51)(cid:65)(cid:78)(cid:74)(cid:69)(cid:69)(cid:86)(cid:65)(cid:78)(cid:73)(cid:0)(cid:41)(cid:78)(cid:83)(cid:84)(cid:73)(cid:84)(cid:85)(cid:84)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:37)(cid:77)(cid:80)(cid:79)(cid:87)(cid:69)(cid:82)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:6)(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:12)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0)(cid:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:0)(cid:84)(cid:79)(cid:0)(cid:40)(cid:69)(cid:65)(cid:76)(cid:0)(cid:33)(cid:73)(cid:68)(cid:0)(cid:50)(cid:69)(cid:83)(cid:84)(cid:79)(cid:82)(cid:69)(cid:0)(cid:37)(cid:68)(cid:85)(cid:67)(cid:65)(cid:84)(cid:69)(cid:12)(cid:0) Shikhar Yuva Manch, Shramik Bharti, Society for Action in Community Health, Vikalp, Watershed Organisation Trust, Yuva Rural (cid:33)(cid:83)(cid:83)(cid:79)(cid:67)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:33)(cid:71)(cid:82)(cid:65)(cid:83)(cid:65)(cid:82)(cid:12)(cid:0)(cid:57)(cid:85)(cid:86)(cid:65)(cid:0)(cid:53)(cid:78)(cid:83)(cid:84)(cid:79)(cid:80)(cid:80)(cid:65)(cid:66)(cid:76)(cid:69)(cid:12)(cid:0)(cid:51)(cid:72)(cid:65)(cid:75)(cid:84)(cid:73)(cid:83)(cid:72)(cid:65)(cid:76)(cid:73)(cid:0)(cid:45)(cid:65)(cid:72)(cid:73)(cid:76)(cid:65)(cid:0)(cid:51)(cid:65)(cid:78)(cid:71)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0)(cid:51)(cid:65)(cid:77)(cid:73)(cid:84)(cid:73)(cid:12)(cid:0)(cid:54)(cid:79)(cid:76)(cid:85)(cid:78)(cid:84)(cid:65)(cid:82)(cid:89)(cid:0)(cid:33)(cid:83)(cid:83)(cid:79)(cid:67)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:48)(cid:69)(cid:79)(cid:80)(cid:76)(cid:69)(cid:0)(cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:12)(cid:0)(cid:43)(cid:65)(cid:76)(cid:80)(cid:84)(cid:65)(cid:82)(cid:85)(cid:0) (cid:54)(cid:73)(cid:75)(cid:65)(cid:83)(cid:0)(cid:51)(cid:65)(cid:77)(cid:73)(cid:84)(cid:73)(cid:12)(cid:0)(cid:41)(cid:78)(cid:68)(cid:79)(cid:0)(cid:39)(cid:76)(cid:79)(cid:66)(cid:65)(cid:76)(cid:0)(cid:51)(cid:79)(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:0)(cid:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:12)(cid:0)(cid:33)(cid:82)(cid:79)(cid:72)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:85)(cid:78)(cid:73)(cid:84)(cid:89)(cid:0)(cid:33)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:6)(cid:0)(cid:50)(cid:85)(cid:82)(cid:65)(cid:76)(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:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:12)(cid:0)(cid:51)(cid:33)(cid:43)(cid:51)(cid:40)(cid:41)(cid:27)(cid:0) Skills Training & Livelihood Enhancement(cid:26)(cid:0)(cid:33)(cid:82)(cid:79)(cid:72)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:36)(cid:82)(cid:0)(cid:45)(cid:0)(cid:44)(cid:0)(cid:36)(cid:72)(cid:65)(cid:87)(cid:65)(cid:76)(cid:69)(cid:0)(cid:45)(cid:69)(cid:77)(cid:79)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:52)(cid:82)(cid:85)(cid:83)(cid:84)(cid:12)(cid:0)(cid:38)(cid:82)(cid:73)(cid:69)(cid:78)(cid:68)(cid:83)(cid:0)(cid:53)(cid:78)(cid:73)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:37)(cid:78)(cid:69)(cid:82)(cid:71)(cid:73)(cid:90)(cid:73)(cid:78)(cid:71)(cid:0) Lives, FXB India Suraksha, Indo Global Social Service Society, Navrachna MahilaVikas Trust, Pune City Connect Development (cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:51)(cid:65)(cid:77)(cid:86)(cid:69)(cid:68)(cid:78)(cid:65)(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:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:12)(cid:0)(cid:51)(cid:39)(cid:34)(cid:51)(cid:0)(cid:53)(cid:78)(cid:78)(cid:65)(cid:84)(cid:73)(cid:0)(cid:38)(cid:79)(cid:85)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:51)(cid:41)(cid:38)(cid:37)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:12)(cid:0)(cid:52)(cid:65)(cid:84)(cid:65)(cid:0)(cid:41)(cid:78)(cid:83)(cid:84)(cid:73)(cid:84)(cid:85)(cid:84)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:51)(cid:79)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:51)(cid:67)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:83)(cid:12)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:44)(cid:69)(cid:80)(cid:82)(cid:79)(cid:83)(cid:89)(cid:0) (cid:45)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:52)(cid:82)(cid:85)(cid:83)(cid:84)(cid:0) (cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:12)(cid:0)(cid:54)(cid:79)(cid:76)(cid:85)(cid:78)(cid:84)(cid:65)(cid:82)(cid:89)(cid:0) (cid:33)(cid:83)(cid:83)(cid:79)(cid:67)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:48)(cid:69)(cid:79)(cid:80)(cid:76)(cid:69)(cid:0) (cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:27)(cid:0) Other Donations under different projects(cid:26)(cid:0) (cid:34)(cid:72)(cid:65)(cid:74)(cid:65)(cid:78)(cid:68)(cid:65)(cid:83)(cid:0) (cid:34)(cid:65)(cid:74)(cid:65)(cid:74)(cid:0) Foundation, Chetana Foundation, GiveIndia, Helpage India, Commissioner of Municipal Administration 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. NA 7. A responsibility statement of CSR committee: (cid:0) (cid:47)(cid:85)(cid:82)(cid:0)(cid:35)(cid:51)(cid:50)(cid:0)(cid:65)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:71)(cid:85)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(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)(cid:65)(cid:83)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:35)(cid:51)(cid:50)(cid:0)(cid:48)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:14)(cid:0)(cid:55)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:65)(cid:76)(cid:83)(cid:79)(cid:0)(cid:80)(cid:85)(cid:84)(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:82)(cid:79)(cid:66)(cid:85)(cid:83)(cid:84)(cid:0) monitoring and reporting mechanism to ensure effective implementation of our CSR activities, in line with the requirements of Companies Act 2013. (cid:0) (cid:33)(cid:0)(cid:68)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:69)(cid:68)(cid:0)(cid:68)(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:79)(cid:85)(cid:82)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:83)(cid:0)(cid:73)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:14) (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:0) Managing Director Date: April 13, 2017 (cid:0) (cid:0) (cid:0) (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) Chairperson, CSR Committee HDFC Bank Limited Annual Report 2016-17 38 Directors' Report ANNEXURE 3 to the Directors’ Report Form No. MGT-9 Extract of the Annual Return as on the ﬁnancial year ended March 31, 2017 [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 Limited Plot no. B 5, Part B, Cross Lane, MIDC, Marol, Andheri East, Mumbai - 400 093 Tel: 022-66712213/14, 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 Limited (cid:53)(cid:22)(cid:21)(cid:25)(cid:25)(cid:19)(cid:39)(cid:42)(cid:18)(cid:16)(cid:16)(cid:23)(cid:48)(cid:44)(cid:35)(cid:16)(cid:21)(cid:17)(cid:16)(cid:18)(cid:24) Subsidiary 96.20 Radhika, 2nd Floor, Law Garden Road, Navrangpura, Ahmedabad - 380 009. 2 HDFC Securities Limited (cid:53)(cid:22)(cid:23)(cid:17)(cid:18)(cid:16)(cid:45)(cid:40)(cid:18)(cid:16)(cid:16)(cid:16)(cid:48)(cid:44)(cid:35)(cid:17)(cid:21)(cid:18)(cid:17)(cid:25)(cid:19) Subsidiary 97.91 I Think, Techno Campus, Building-B, “Alpha” ofﬁce, 8th Floor, opposite (cid:35)(cid:82)(cid:79)(cid:77)(cid:80)(cid:84)(cid:79)(cid:78)(cid:0)(cid:39)(cid:82)(cid:69)(cid:65)(cid:86)(cid:69)(cid:83)(cid:12)(cid:0)(cid:43)(cid:65)(cid:78)(cid:74)(cid:85)(cid:82)(cid:77)(cid:65)(cid:82)(cid:71)(cid:0)(cid:8)(cid:37)(cid:65)(cid:83)(cid:84)(cid:9)(cid:12)(cid:0) Mumbai - 400 042. 3 International Asset Reconstruction Company Private Limited 709, 7th Floor, Ansal Bhavan, (cid:17)(cid:22)(cid:12)(cid:0)(cid:43)(cid:65)(cid:83)(cid:84)(cid:85)(cid:82)(cid:66)(cid:65)(cid:0)(cid:39)(cid:65)(cid:78)(cid:68)(cid:72)(cid:73)(cid:0)(cid:45)(cid:65)(cid:82)(cid:71)(cid:12)(cid:0) New Delhi - 110 001 (cid:53)(cid:23)(cid:20)(cid:25)(cid:25)(cid:25)(cid:36)(cid:44)(cid:18)(cid:16)(cid:16)(cid:18)(cid:48)(cid:52)(cid:35)(cid:17)(cid:17)(cid:23)(cid:19)(cid:21)(cid:23) Associate 29.41 Sec 2(87) of Companies Act, 2013 Sec 2(87) of Companies Act, 2013 Sec 2(6) of Companies Act, 2013 Note: Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited ceased to be associates of the Bank consequent to their amalgamation with HDB Financial Services Limited, with effect from December 1, 2016. HDFC Bank Limited Annual Report 2016-17 39 Directors' Report IV. SHAREHOLDING PATTERN: (EQUITY SHARE CAPITAL BREAKUP AS PERCENTAGE OF TOTAL EQUITY) (i) Category-wise Share Holding Category code Category of shareholder No. of Shares held at the beginning of the year No. of Shares held at the end of the year (II) Demat Physical Total Percentage of total shares Demat Physical Total Percentage of total shares Promoters Indian Individuals/HUF Central Government State Government(s) 0 0 0 Bodies Corporate (#) 543,216,100 Banks / FI Any Other (specify) 0 0 Sub Total (A)(1) 543,216,100 0 0 0 0 0 0 0 543,216,100 (f) Any Other (specify) Foreign NRIs - Individuals Other - Individuals Bodies Corporate Banks / FI Qualiﬁed Foreign Investor Sub Total (A)(2) Total Shareholding of Promoter and Promoter Group (A)=(A)(1)+(A)(2) Public shareholding Institutions Mutual Funds Banks / FI Central Government State Government(s) Venture Capital Funds (I) (A) 1 (a) (b) (c) (d) (e) (f) 2 (a) (b) (c) (d) (e) (B) 1 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.00 0.00 0.00 0 0 0 543,216,100 21.49 543,216,100 0 0 0.00 0.00 0 0 543,216,100 21.49 543,216,100 0 0 0 0 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0 0 0 0 0 0 543,216,100 21.49 543,216,100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 543,216,100 0 0 543,216,100 0 0 0 0 0 0 0 543,216,100 211,659,875 33,185 211,693,060 8.37 206,150,669 33,185 206,183,854 2,822,510 2,676,950 0 0 17,390 2,839,900 0 0 0 0 2,676,950 0 0 68,146,983 0.11 0.11 0.00 0.00 2.70 2,308,514 2,767,437 0 0 61,511,040 17,390 2,325,904 0 0 0 0 2,767,437 0 0 61,511,040 Insurance Companies 68,146,983 FIIs 814,448,518 15,170 814,463,688 32.22 880,321,745 15,170 880,336,915 Foreign Venture Capital Funds Qualiﬁed Foreign Investor Alternate Investment Funds (k) Other (specify) 0 0 0 0 0 0 0 0 0 0 0 0 0.00 0.00 0 0 0.00 313,796 0.00 0 0 0 0 0 0 0 313,796 0 Sub Total (B)(1) 1,099,754,836 65,745 1,099,820,581 43.50 1,153,373,201 65,745 1,153,438,946 HDFC Bank Limited Annual Report 2016-17 40 Percentage Change during the year 0.00 0.00 0.00 21.20 0.00 0.00 21.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 21.20 8.05 0.09 0.11 0.00 0.00 2.40 34.35 0.00 0.00 0.01 0.00 45.01 0.00 0.00 0.00 (0.29) 0.00 0.00 (0.29) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.29) (0.33) (0.02) 0.00 0.00 0.00 (0.30) 2.14 0.00 0.00 0.01 0.00 1.51 Directors' Report Category code (I) 2 (a) (a)(i) (a)(ii) (b) (b)(i) (b)(ii) (c) (d) d-i d-ii d-iii d-iv Non-institutions Bodies Corporate Indian Overseas Individuals Individual shareholders holding nominal share capital up to ` 1 Lakh Individual shareholders holding nominal share capital in excess of ` 1 Lakh Qualiﬁed Foreign Investor Other (specify) NRI Rep NRI Non -Rept Foreign Bodies Foreign National Sub Total (B)(2) Total Public Shareholding (B) = (B) (1)+(B)(2) (C) Custodians for GDRs and ADRs GRAND TOTAL (A)+(B)+(C) Category of shareholder No. of Shares held at the beginning of the year No. of Shares held at the end of the year (II) Demat Physical Total Percentage of total shares Demat Physical Total Percentage of total shares Percentage Change during the year 0 0 0 185,438,125 183,245 185,621,370 1,248 0 10,075 11,323 0 0 146,520,140 17,200,720 163,720,860 0.00 7.34 0.00 0.00 6.48 0 0 0 165,798,090 181,005 165,979,095 1,248 0 10,075 11,323 0 0 147,394,271 16,210,855 163,605,126 0.00 6.48 0.00 0.00 6.38 0.00 (0.86) 0.00 0.00 (0.09) 55,330,724 191,000 55,521,724 2.20 56,969,465 191,000 57,160,465 2.23 0.03 0 0 2,360,398 4,833,762 31,000 1,505 0 0 41,720 2,765 0 0 0 0 2,402,118 4,836,527 31,000 1,505 0.00 0.00 0.10 0.19 0.00 0.00 0 0 2,308,878 3,756,747 21,000 1,068 0 0 41,295 2,265 0 0 0 0 2,350,173 3,759,012 21,000 1,068 394,516,902 17,629,525 412,146,427 16.30 376,250,767 16,636,495 392,887,262 1,494,271,738 17,695,270 1,511,967,008 59.80 1,529,623,968 16,702,240 1,546,326,208 0.00 0.00 0.09 0.15 0.00 0.00 15.33 60.34 81.54 18.46 0.00 0.00 0.00 (0.04) 0.00 0.00 (0.97) 0.54 0.25 (0.25) Total (A+B) 2,037,487,838 17,695,270 2,055,183,108 81.29 2,072,840,068 16,702,240 2,089,542,308 473,003,409 0 473,003,409 18.71 473,003,409 0 473,003,409 2,510,491,247 17,695,270 2,528,186,517 100.00 2,545,843,477 16,702,240 2,562,545,717 100.00 0.00 # 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 15.55 2 HDFC Investments Ltd 3 HDFC Holdings Ltd 150,000,000 5,000 5.93 0 Total 543,216,100 21.49 0 0 0 0 393,211,100 15.35 150,000,000 5,000 5.85 0 543,216,100 21.20 0 0 0 0 0 0 0 0 HDFC Bank Limited Annual Report 2016-17 41 Directors' Report (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 21.49 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 21.20 (**) ** 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 2016-17. (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 Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank 1 EUROPACIFIC GROWTH FUND At the beginning of the Year 31-MAR-2016 98,038,464 Increase Increase Increase Increase 29-APR-2016 06-MAY-2016 03-JUN-2016 8,257 370,190 789,848 3.88 0.00 0.02 0.03 98,046,721 98,416,911 99,206,759 13-JAN-2017 1,105,000 0.04 100,311,759 2 LIFE INSURANCE CORPORATION OF INDIA At the beginning of the Year 31-MAR-2016 61,303,525 Decrease 27-MAY-2016 (5,000) At the END of the Year 31-MAR-2017 100,311,759 2.43 0.00 61,298,525 Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Increase 03-JUN-2016 (2,612,303) (0.10) 58,686,222 10-JUN-2016 (2,282,968) (0.09) 56,403,254 17-JUN-2016 (880,816) (0.04) 55,522,438 24-JUN-2016 (480,363) (0.02) 55,042,075 30-JUN-2016 (50,000) 0.00 54,992,075 08-JUL-2016 (370,825) (0.02) 54,621,250 14-JUL-2016 (1,375,005) (0.05) 53,246,245 15-JUL-2016 (460,000) (0.02) 52,786,245 26-AUG-2016 (516,330) (0.02) 52,269,915 02-SEP-2016 09-SEP-2016 16-SEP-2016 23-SEP-2016 30-SEP-2016 07-OCT-2016 28-OCT-2016 (509,927) (104,221) (36,000) (453,600) (234,356) (20,000) 46,855 (0.02) 51,759,988 0.00 0.00 51,655,767 51,619,767 (0.02) 51,166,167 (0.01) 50,931,811 0.00 0.00 50,911,811 50,958,666 HDFC Bank Limited Annual Report 2016-17 42 3.88 3.89 3.92 3.93 3.92 2.42 2.32 2.23 2.19 2.17 2.17 2.16 2.10 2.08 2.06 2.04 2.03 2.03 2.01 2.00 2.00 2.00 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank Increase Increase Increase Increase Increase Increase Decrease Decrease Decrease Decrease Decrease Decrease Decrease 04-NOV-2016 11-NOV-2016 18-NOV-2016 30-DEC-2016 06-JAN-2017 13-JAN-2017 17-FEB-2017 24-FEB-2017 03-MAR-2017 10-MAR-2017 17-MAR-2017 24-MAR-2017 31-MAR-2017 1,388,247 2,110,648 454,250 596,695 923,327 627,943 (7,775) (1,000) (42,000) (383,600) (560,412) (551,014) (56,160) 3 CAPITAL WORLD GROWTH AND At the beginning of the Year 31-MAR-2016 36,585,126 At the END of the Year 31-MAR-2017 INCOME FUND 4 ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED Increase Increase Increase 09-DEC-2016 24-FEB-2017 03-MAR-2017 499,000 336,620 215,864 At the END of the Year 31-MAR-2017 At the beginning of the Year 31-MAR-2016 41,523,802 0.05 0.08 0.02 0.02 0.04 0.03 0.00 0.00 0.00 (0.02) (0.02) (0.02) 52,346,913 54,457,561 54,911,811 55,508,506 56,431,833 57,059,776 57,052,001 57,051,001 57,009,001 56,625,401 56,064,989 55,513,975 0.00 55,457,815 55,457,815 1.45 0.02 0.01 0.01 1.64 37,084,126 37,420,746 37,636,610 37,636,610 Decrease Increase Increase Increase Decrease Decrease Decrease Decrease Decrease Increase Decrease Increase Decrease Decrease Increase Decrease Decrease Decrease Decrease Decrease Increase Decrease 08-APR-2016 (119,872) (0.01) 41,403,930 15-APR-2016 22-APR-2016 29-APR-2016 06-MAY-2016 13-MAY-2016 20-MAY-2016 27-MAY-2016 03-JUN-2016 10-JUN-2016 17-JUN-2016 24-JUN-2016 90,888 21,800 238,410 (143,296) (172,416) (127,732) (510,048) (28,822) 206,566 (18,843) 29,954 0.00 0.00 0.01 (0.01) (0.01) (0.01) (0.02) 0.00 0.01 0.00 0.00 41,494,818 41,516,618 41,755,028 41,611,732 41,439,316 41,311,584 40,801,536 40,772,714 40,979,280 40,960,437 40,990,391 30-JUN-2016 (859,052) (0.03) 40,131,339 01-JUL-2016 08-JUL-2016 14-JUL-2016 15-JUL-2016 22-JUL-2016 29-JUL-2016 05-AUG-2016 12-AUG-2016 19-AUG-2016 (2,100) 819,945 (141,613) (30,677) (291,424) (66,419) (100,763) 332,202 (46,444) 0.00 0.03 40,129,239 40,949,184 (0.01) 40,807,571 0.00 40,776,894 (0.01) 40,485,470 0.00 0.00 0.01 0.00 40,419,051 40,318,288 40,650,490 40,604,046 2.05 2.14 2.15 2.17 2.21 2.23 2.23 2.23 2.23 2.21 2.19 2.17 2.16 2.16 1.45 1.46 1.47 1.47 1.64 1.64 1.64 1.65 1.65 1.64 1.63 1.61 1.61 1.62 1.62 1.62 1.58 1.58 1.62 1.61 1.61 1.60 1.59 1.59 1.60 1.60 HDFC Bank Limited Annual Report 2016-17 43 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank Decrease Increase Increase Decrease Decrease Decrease Increase Increase Increase Increase Increase Decrease Decrease Increase Increase Decrease Decrease Decrease Increase Decrease Decrease Decrease Decrease Increase Increase Increase Decrease Increase Increase Decrease Increase Decrease 26-AUG-2016 (1,249,468) (0.05) 39,354,578 02-SEP-2016 09-SEP-2016 16-SEP-2016 23-SEP-2016 30-SEP-2016 07-OCT-2016 14-OCT-2016 21-OCT-2016 28-OCT-2016 04-NOV-2016 11-NOV-2016 18-NOV-2016 25-NOV-2016 02-DEC-2016 09-DEC-2016 16-DEC-2016 23-DEC-2016 30-DEC-2016 06-JAN-2017 13-JAN-2017 20-JAN-2017 27-JAN-2017 03-FEB-2017 10-FEB-2017 17-FEB-2017 166,966 270,918 (455,385) (606,008) (82,983) 12,018 306,875 567,503 180 84,161 (817,487) (252,113) 293,609 45,996 (1,821) (43,019) (11,103) 90,350 (584,328) (138,675) (653,020) (625,450) 275,392 194,701 153,125 0.01 0.01 (0.02) (0.02) 0.00 0.00 0.01 0.02 0.00 0.00 (0.03) (0.01) 0.01 0.00 0.00 0.00 0.00 0.00 (0.02) (0.01) (0.03) (0.02) 0.01 0.01 0.01 39,521,544 39,792,462 39,337,077 38,731,069 38,648,086 38,660,104 38,966,979 39,534,482 39,534,662 39,618,823 38,801,336 38,549,223 38,842,832 38,888,828 38,887,007 38,843,988 38,832,885 38,923,235 38,338,907 38,200,232 37,547,212 36,921,762 37,197,154 37,391,855 37,544,980 24-FEB-2017 (1,494,486) (0.06) 36,050,494 03-MAR-2017 10-MAR-2017 133,629 15,775 0.01 0.00 36,184,123 36,199,898 17-MAR-2017 (240,824) (0.01) 35,959,074 24-MAR-2017 138,824 0.01 36,097,898 31-MAR-2017 (233,106) (0.01) 35,864,792 5 SBI-ETF NIFTY 50 At the beginning of the Year 31-MAR-2016 21,028,634 At the END of the Year 31-MAR-2017 Increase Increase Increase Increase Increase Increase Increase Increase 08-APR-2016 15-APR-2016 22-APR-2016 29-APR-2016 06-MAY-2016 13-MAY-2016 20-MAY-2016 27-MAY-2016 211,633 242,220 28,876 205,474 281,396 7,903 488,992 169,314 35,864,792 21,240,267 21,482,487 21,511,363 21,716,837 21,998,233 22,006,136 22,495,128 22,664,442 0.83 0.01 0.01 0.00 0.01 0.01 0.00 0.02 0.01 HDFC Bank Limited Annual Report 2016-17 44 1.55 1.56 1.57 1.55 1.52 1.52 1.52 1.53 1.55 1.55 1.55 1.52 1.51 1.52 1.52 1.52 1.52 1.52 1.52 1.50 1.50 1.47 1.45 1.45 1.46 1.47 1.41 1.41 1.41 1.41 1.41 1.40 1.40 0.84 0.85 0.85 0.86 0.87 0.87 0.89 0.90 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank Decrease Decrease Increase Increase Decrease Decrease Increase Increase Increase Increase Decrease Increase Decrease Increase Increase Increase Increase Increase Increase Increase Increase Decrease Increase Increase Increase Increase Increase Decrease Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Decrease Increase Increase 03-JUN-2016 10-JUN-2016 17-JUN-2016 24-JUN-2016 30-JUN-2016 01-JUL-2016 08-JUL-2016 14-JUL-2016 15-JUL-2016 22-JUL-2016 29-JUL-2016 05-AUG-2016 12-AUG-2016 19-AUG-2016 26-AUG-2016 02-SEP-2016 09-SEP-2016 16-SEP-2016 23-SEP-2016 30-SEP-2016 07-OCT-2016 14-OCT-2016 21-OCT-2016 28-OCT-2016 04-NOV-2016 11-NOV-2016 18-NOV-2016 (182,651) (0.01) 22,481,791 (8,956) 9,456 225,573 (116,294) (217,366) 7,047 155,816 443 86,694 0.00 0.00 0.01 (0.01) (0.01) 0.00 0.01 0.00 0.00 22,472,835 22,482,291 22,707,864 22,591,570 22,374,204 22,381,251 22,537,067 22,537,510 22,624,204 (269,570) (0.01) 22,354,634 486,892 (5,489) 129,450 338,444 1,788,415 992,506 221,590 235,147 656,519 478,658 0.02 0.00 0.01 0.01 0.07 0.04 0.01 0.01 0.03 0.02 22,841,526 22,836,037 22,965,487 23,303,931 25,092,346 26,084,852 26,306,442 26,541,589 27,198,108 27,676,766 (748,280) (0.03) 26,928,486 260,328 140,057 217,199 310,428 567,176 0.01 0.01 0.01 0.01 0.02 27,188,814 27,328,871 27,546,070 27,856,498 28,423,674 25-NOV-2016 (815,434) (0.03) 27,608,240 02-DEC-2016 09-DEC-2016 16-DEC-2016 23-DEC-2016 30-DEC-2016 06-JAN-2017 13-JAN-2017 20-JAN-2017 27-JAN-2017 03-FEB-2017 10-FEB-2017 17-FEB-2017 747,891 173,896 665,065 628,940 552,115 727,054 229,910 119,075 144,954 507,978 319,845 92,124 0.03 0.01 0.03 0.03 0.02 0.03 0.01 0.01 0.01 0.02 0.01 0.00 28,356,131 28,530,027 29,195,092 29,824,032 30,376,147 31,103,201 31,333,111 31,452,186 31,597,140 32,105,118 32,424,963 32,517,087 24-FEB-2017 (2,647,573) (0.10) 29,869,514 03-MAR-2017 10-MAR-2017 135,299 345,751 0.01 0.01 30,004,813 30,350,564 0.89 0.89 0.89 0.90 0.89 0.88 0.88 0.89 0.89 0.89 0.88 0.90 0.90 0.91 0.92 0.99 1.03 1.04 1.04 1.07 1.09 1.06 1.07 1.07 1.08 1.09 1.12 1.08 1.11 1.12 1.14 1.17 1.19 1.22 1.23 1.23 1.24 1.26 1.27 1.27 1.17 1.17 1.19 HDFC Bank Limited Annual Report 2016-17 45 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank Increase Decrease Increase 17-MAR-2017 24-MAR-2017 31-MAR-2017 103,860 (327,170) 532,932 At the END of the Year 31-MAR-2017 6 GOVERNMENT OF SINGAPORE At the beginning of the Year 31-MAR-2016 28,474,691 Increase Decrease Decrease Decrease Decrease Decrease Increase Decrease Increase Increase Increase Increase Increase Increase Increase Decrease Increase Increase Increase Increase Increase Decrease Increase Increase Increase Increase Decrease Decrease 08-APR-2016 22-APR-2016 13-MAY-2016 20-MAY-2016 03-JUN-2016 10-JUN-2016 17-JUN-2016 24-JUN-2016 30-JUN-2016 01-JUL-2016 08-JUL-2016 14-JUL-2016 15-JUL-2016 22-JUL-2016 29-JUL-2016 12-AUG-2016 21-OCT-2016 28-OCT-2016 04-NOV-2016 11-NOV-2016 18-NOV-2016 16-DEC-2016 27-JAN-2017 24-FEB-2017 03-MAR-2017 10-MAR-2017 24-MAR-2017 31-MAR-2017 338,037 (75,098) (53,503) (2,432) (169,242) (75,734) 56,676 (8,067) 21,628 2,785 69,534 23,572 1,083 2,134 8,567 (59,283) 85,229 3,232 6,215 17,243 13,737 (68,252) 58,096 654,662 852,556 97,472 (148,008) (12,200) At the END of the Year 31-MAR-2017 0.00 3,045,4424 (0.01) 30,127,254 0.02 30,660,186 30,660,186 1.13 0.01 0.00 0.00 0.00 28,812,728 28,737,630 28,684,127 28,681,695 (0.01) 28,512,453 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.03 0.03 0.00 28,436,719 28,493,395 28,485,328 28,506,956 28,509,741 28,579,275 28,602,847 28,603,930 28,606,064 28,614,631 28,555,348 28,640,577 28,643,809 28,650,024 28,667,267 28,681,004 28,612,752 28,670,848 29,325,510 30,178,066 30,275,538 (0.01) 30,127,530 0.00 30,115,330 30,115,330 7 ICICI PRUDENTIAL VALUE DISCOVERY FUND At the beginning of the Year 31-MAR-2016 28,708,163 1.14 Decrease Increase Increase Increase Decrease Decrease Increase Increase Increase 08-APR-2016 15-APR-2016 22-APR-2016 29-APR-2016 06-MAY-2016 13-MAY-2016 20-MAY-2016 27-MAY-2016 03-JUN-2016 (290,104) (0.01) 28,418,059 53,274 58,627 296,922 (208,630) (496,056) 164,011 44,359 312,721 0.00 0.00 0.01 (0.01) (0.02) 0.01 0.00 0.01 28,471,333 28,529,960 28,826,882 28,618,252 28,122,196 28,286,207 28,330,566 28,643,287 HDFC Bank Limited Annual Report 2016-17 46 1.19 1.18 1.20 1.20 1.14 1.14 1.13 1.13 1.13 1.12 1.13 1.13 1.13 1.13 1.13 1.13 1.13 1.13 1.13 1.13 1.13 1.13 1.12 1.13 1.13 1.12 1.12 1.15 1.18 1.18 1.18 1.18 1.18 1.12 1.13 1.13 1.14 1.13 1.11 1.12 1.12 1.13 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank Decrease Decrease Decrease Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Decrease Increase Increase Decrease Increase Increase Increase Increase Decrease Decrease Increase Decrease Decrease Decrease Increase Increase Increase Decrease Increase Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Increase At the END of the Year 10-JUN-2016 17-JUN-2016 24-JUN-2016 30-JUN-2016 01-JUL-2016 08-JUL-2016 14-JUL-2016 15-JUL-2016 22-JUL-2016 29-JUL-2016 05-AUG-2016 12-AUG-2016 19-AUG-2016 26-AUG-2016 02-SEP-2016 09-SEP-2016 16-SEP-2016 23-SEP-2016 30-SEP-2016 07-OCT-2016 14-OCT-2016 21-OCT-2016 28-OCT-2016 04-NOV-2016 11-NOV-2016 18-NOV-2016 25-NOV-2016 02-DEC-2016 09-DEC-2016 16-DEC-2016 23-DEC-2016 30-DEC-2016 06-JAN-2017 13-JAN-2017 20-JAN-2017 27-JAN-2017 03-FEB-2017 10-FEB-2017 17-FEB-2017 24-FEB-2017 03-MAR-2017 10-MAR-2017 17-MAR-2017 24-MAR-2017 31-MAR-2017 31-MAR-2017 (124,126) (54,359) (7,310) 413,292 598,896 1,894,309 1,255,349 694,063 5,021 1,440,642 309,035 633,866 980,866 3,073,721 1445835 (174,239) 204,282 11,214 (97,499) 405,230 431,693 82,656 137,588 (104,359) (292,130) 13,187 (137,872) (1,021,148) (181,156) 707,813 85,679 8,242 (295,053) 575,783 (343,773) (1,740,249) (1,802,625) (1,125,875) (119,547) (5,270,140) (6,985) (502,860) (536,984) (626,159) 213,866 (0.01) 0.00 0.00 0.02 0.02 0.08 0.05 0.03 0.00 0.06 0.01 0.03 0.04 0.12 0.06 (0.01) 0.01 0.00 0.00 0.02 0.02 0.00 0.01 0.00 (0.01) 0.00 (0.01) (0.04) (0.01) 0.03 0.00 0.00 (0.01) 0.02 (0.01) (0.07) (0.07) (0.04) (0.01) (0.21) 0.00 (0.02) (0.02) (0.02) 0.01 28,519,161 28,464,802 28,457,492 28,870,784 29,469,680 31,363,989 32,619,338 33,313,401 33,318,422 34,759,064 35,068,099 35,701,965 36,682,831 39,756,552 41,202,387 41,028,148 41,232,430 41,243,644 41,146,145 41,551,375 41,983,068 42,065,724 42,203,312 42,098,953 41,806,823 41,820,010 41,682,138 40,660,990 40,479,834 41,187,647 41,273,326 41,281,568 40,986,515 41,562,298 41,218,525 39,478,276 37,675,651 36,549,776 36,430,229 31,160,089 31,153,104 30,650,244 30,113,260 29,487,101 29,700,967 29,700,967 1.13 1.12 1.12 1.14 1.16 1.24 1.29 1.31 1.31 1.37 1.38 1.41 1.45 1.57 1.62 1.61 1.62 1.62 1.62 1.63 1.65 1.65 1.66 1.65 1.64 1.64 1.64 1.59 1.59 1.61 1.62 1.62 1.60 1.63 1.61 1.55 1.47 1.43 1.42 1.22 1.22 1.20 1.18 1.15 1.16 1.16 HDFC Bank Limited Annual Report 2016-17 47 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank 8 MORGAN STANLEY MAURITIUS COMPANY LIMITED At the beginning of the Year 31-MAR-2016 08-APR-2016 15-APR-2016 22-APR-2016 29-APR-2016 06-MAY-2016 20-MAY-2016 27-MAY-2016 03-JUN-2016 10-JUN-2016 17-JUN-2016 24-JUN-2016 30-JUN-2016 01-JUL-2016 08-JUL-2016 14-JUL-2016 15-JUL-2016 22-JUL-2016 29-JUL-2016 05-AUG-2016 12-AUG-2016 19-AUG-2016 26-AUG-2016 02-SEP-2016 09-SEP-2016 16-SEP-2016 23-SEP-2016 30-SEP-2016 07-OCT-2016 21-OCT-2016 28-OCT-2016 04-NOV-2016 11-NOV-2016 18-NOV-2016 25-NOV-2016 02-DEC-2016 09-DEC-2016 16-DEC-2016 23-DEC-2016 06-JAN-2017 13-JAN-2017 20-JAN-2017 27-JAN-2017 03-FEB-2017 10-FEB-2017 17-FEB-2017 24-FEB-2017 03-MAR-2017 Decrease Increase Increase Decrease Decrease Increase Increase Increase Increase Increase Increase Decrease Decrease Decrease Increase Increase Decrease Decrease Increase Decrease Decrease Increase Increase Increase Increase Increase Increase Increase Decrease Decrease Decrease Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase 1,754,601 (12) 97,817 15,231 (3,864) (153,311) 184,500 40,538 100,585 56,069 155,563 346,501 (68,200) (50,000) (250,470) 21 1,968 (12,000) (82,034) 14,771 (59,821) (188,299) 13,900 9 6,526 390,060 784,500 95,373 14,000 (184,374) (966) (30,501) 27,000 354,195 182,126 131,099 131,117 408,330 919,700 24,747 390,472 2,370,428 1,822,194 1,127,144 463,112 199,000 9,019,226 1,668,702 0.07 0.00 0.00 0.00 0.00 (0.01) 0.01 0.00 0.00 0.00 0.01 0.01 0.00 0.00 (0.01) 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00 0.00 0.00 0.02 0.03 0.00 0.00 (0.01) 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.02 0.04 0.00 0.02 0.09 0.07 0.04 0.02 0.01 0.35 0.07 1,754,589 1,852,406 1,867,637 1,863,773 1,710,462 1,894,962 1,935,500 2,036,085 2,092,154 2,247,717 2,594,218 2,526,018 2,476,018 2,225,548 2,225,569 2,227,537 2,215,537 2,133,503 2,148,274 2,088,453 1,900,154 1,914,054 1,914,063 1,920,589 2,310,649 3,095,149 3,190,522 3,204,522 3,020,148 3,019,182 2,988,681 3,015,681 3,369,876 3,552,002 3,683,101 3,814,218 4,222,548 5,142,248 5,166,995 5,557,467 7,927,895 9,750,089 10,877,233 11,340,345 11,539,345 20,558,571 22,227,273 0.07 0.07 0.07 0.07 0.07 0.08 0.08 0.08 0.08 0.09 0.10 0.10 0.10 0.09 0.09 0.09 0.09 0.08 0.09 0.08 0.08 0.08 0.08 0.08 0.09 0.12 0.13 0.13 0.12 0.12 0.12 0.12 0.13 0.14 0.14 0.15 0.17 0.20 0.20 0.22 0.31 0.38 0.43 0.44 0.45 0.80 0.87 HDFC Bank Limited Annual Report 2016-17 48 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank 9 FRANKLIN TEMPLETON MUTUAL FUND A/C FRANKLIN INDIA PRIMA PLUS Increase Increase Increase Decrease At the END of the Year 10-MAR-2017 17-MAR-2017 24-MAR-2017 31-MAR-2017 31-MAR-2017 At the beginning of the Year 31-MAR-2016 08-APR-2016 15-APR-2016 22-APR-2016 29-APR-2016 06-MAY-2016 13-MAY-2016 20-MAY-2016 27-MAY-2016 03-JUN-2016 10-JUN-2016 17-JUN-2016 24-JUN-2016 30-JUN-2016 08-JUL-2016 14-JUL-2016 22-JUL-2016 05-AUG-2016 12-AUG-2016 19-AUG-2016 26-AUG-2016 02-SEP-2016 09-SEP-2016 16-SEP-2016 23-SEP-2016 07-OCT-2016 14-OCT-2016 21-OCT-2016 28-OCT-2016 04-NOV-2016 11-NOV-2016 18-NOV-2016 25-NOV-2016 02-DEC-2016 09-DEC-2016 16-DEC-2016 23-DEC-2016 30-DEC-2016 13-JAN-2017 27-JAN-2017 03-FEB-2017 10-FEB-2017 Decrease Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Decrease Increase Increase Increase Decrease Increase Decrease Increase Increase Decrease Decrease Increase Increase Decrease Increase Decrease Increase Decrease Decrease Increase Increase Increase Increase Increase Increase Increase Decrease Increase Decrease 1,044,741 38,272 31,946 (113,945) 19,482,226 (4,123) 78,926 4,699 388,599 311,037 346,483 101,025 1,184 100,668 101,067 2,622 50,000 (342) 532 43 150,448 (190) 100,000 (6,142) 598,422 227,830 (310) (10,448) 67,346 180,678 (940) 125,000 (313) 119,621 (834) (359,952) 549 93,757 340 80,000 100,669 286,619 148,799 (447) 99,339 (242,350) 0.04 0.00 0.00 0.00 0.77 0.00 0.00 0.00 0.02 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 0.00 0.00 0.02 0.01 0.00 0.00 0.00 0.01 0.00 0.01 0.00 0.01 0.00 (0.01) 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.00 0.00 (0.01) 23,272,014 23,310,286 23,342,232 23,228,287 23,228,287 19,478,103 19,557,029 19,561,728 19,950,327 20,261,364 20,607,847 20,708,872 20,710,056 20,810,724 20,911,791 20,914,413 20,964,413 20,964,071 20,964,603 20,964,646 21,115,094 21,114,904 21,214,904 21,208,762 21,807,184 22,035,014 22,034,704 22,024,256 22,091,602 22,272,280 22,271,340 22,396,340 22,396,027 22,515,648 22,514,814 22,154,862 22,155,411 22,249,168 22,249,508 22,329,508 22,430,177 22,716,796 22,865,595 22,865,148 22,964,487 22,722,137 0.91 0.91 0.91 0.91 0.91 0.77 0.77 0.77 0.79 0.80 0.82 0.82 0.82 0.82 0.83 0.83 0.83 0.83 0.83 0.83 0.83 0.83 0.84 0.84 0.86 0.87 0.87 0.87 0.87 0.88 0.88 0.88 0.88 0.88 0.88 0.87 0.87 0.87 0.87 0.88 0.88 0.89 0.90 0.90 0.90 0.89 HDFC Bank Limited Annual Report 2016-17 49 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank 10 RELIANCE CAPITAL TRUSTEE CO LTD A/C-RELIANCE VISION FUND Decrease Decrease Decrease Decrease Decrease Decrease Decrease At the END of the Year 17-FEB-2017 24-FEB-2017 03-MAR-2017 10-MAR-2017 17-MAR-2017 24-MAR-2017 31-MAR-2017 31-MAR-2017 At the beginning of the Year 31-MAR-2016 08-APR-2016 15-APR-2016 22-APR-2016 29-APR-2016 06-MAY-2016 13-MAY-2016 20-MAY-2016 27-MAY-2016 03-JUN-2016 10-JUN-2016 17-JUN-2016 24-JUN-2016 30-JUN-2016 01-JUL-2016 08-JUL-2016 14-JUL-2016 15-JUL-2016 22-JUL-2016 29-JUL-2016 05-AUG-2016 12-AUG-2016 19-AUG-2016 26-AUG-2016 02-SEP-2016 09-SEP-2016 16-SEP-2016 23-SEP-2016 30-SEP-2016 07-OCT-2016 14-OCT-2016 21-OCT-2016 28-OCT-2016 04-NOV-2016 11-NOV-2016 18-NOV-2016 25-NOV-2016 02-DEC-2016 09-DEC-2016 16-DEC-2016 23-DEC-2016 Increase Decrease Decrease Increase Increase Decrease Decrease Decrease Increase Increase Increase Decrease Decrease Decrease Increase Decrease Increase Decrease Decrease Decrease Increase Decrease Decrease Increase Decrease Decrease Increase Decrease Decrease Decrease Decrease Increase Decrease Increase Decrease Increase Increase Increase Increase Increase (98,279) (130,280) (428) (172,076) (420) (23,391) (152,111) 25,085,373 347,322 (14,000) (157,783) 178,453 322,848 (99,538) (276) (59,000) 47,782 19,138 97,400 (226,811) (200,000) (30,000) 13,877 (290,482) 3,375 (349,473) (122,625) (311,591) 5,827 (58,394) (21,054) 256,501 (66,429) (162,127) 28,996 (171,800) (148,943) (113,150) (421,988) 403,629 (682,896) 2,369,372 (231,715) 89,789 533,220 261,242 247,872 318,737 0.00 (0.01) 0.00 (0.01) 0.00 0.00 (0.01) 0.99 0.01 0.00 (0.01) 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) (0.01) 0.00 0.00 (0.01) 0.00 (0.01) (0.01) (0.01) 0.00 0.00 0.00 0.01 0.00 (0.01) 0.00 (0.01) (0.01) 0.00 (0.02) 0.02 (0.03) 0.09 (0.01) 0.00 0.02 0.01 0.01 0.01 22,623,858 22,493,578 22,493,150 22,321,074 22,320,654 22,297,263 22,145,152 22,145,152 25,432,695 25,418,695 25,260,912 25,439,365 25,762,213 25,662,675 25,662,399 25,603,399 25,651,181 25,670,319 25,767,719 25,540,908 25,340,908 25,310,908 25,324,785 25,034,303 25,037,678 24,688,205 24,565,580 24,253,989 24,259,816 24,201,422 24,180,368 24,436,869 24,370,440 24,208,313 24,237,309 24,065,509 23,916,566 23,803,416 23,381,428 23,785,057 23,102,161 25,471,533 25,239,818 25,329,607 25,862,827 26,124,069 26,371,941 26,690,678 0.88 0.88 0.88 0.87 0.87 0.87 0.86 0.86 1.01 1.01 1.00 1.01 1.02 1.02 1.02 1.01 1.01 1.01 1.02 1.01 1.00 1.00 1.00 0.99 0.99 0.97 0.97 0.96 0.96 0.95 0.95 0.96 0.96 0.95 0.95 0.95 0.94 0.94 0.92 0.93 0.91 1.00 0.99 0.99 1.01 1.02 1.03 1.05 HDFC Bank Limited Annual Report 2016-17 50 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank Decrease Decrease Increase Increase Increase Increase Decrease Decrease Decrease Increase Increase Decrease Increase Decrease At the END of the Year 30-DEC-2016 06-JAN-2017 13-JAN-2017 20-JAN-2017 27-JAN-2017 03-FEB-2017 10-FEB-2017 17-FEB-2017 24-FEB-2017 03-MAR-2017 10-MAR-2017 17-MAR-2017 24-MAR-2017 31-MAR-2017 31-MAR-2017 (477,654) (463,276) 3,275 260,992 85,347 705,947 (7,682) (183,837) (8,678,520) 3,103,896 587,459 (96,151) 1,031,778 (1,204,792) (0.02) (0.02) 0.00 0.01 0.00 0.03 0.00 (0.01) (0.34) 0.12 0.02 0.00 0.04 (0.05) 26,213,024 25,749,748 25,753,023 26,014,015 26,099,362 26,805,309 26,797,627 26,613,790 17,935,270 21,039,166 21,626,625 21,530,474 22,562,252 21,357,460 21,357,460 1.03 1.01 1.01 1.02 1.02 1.05 1.05 1.04 0.70 0.82 0.85 0.84 0.88 0.83 0.83 *** 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. 1 Aditya Puri 2 Bobby Parikh Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank At the beginning of the Year Increase in shareholding during the year Decrease in shareholding during the year Increase in shareholding during the year At the END of the Year At the beginning of the Year Increase At the END of the Year Jointly With Relatives At the beginning of the Year 3 Kaizad Bharucha At the END of the Year At the beginning of the Year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Increase in shareholding during the year Decrease in shareholding during the year Increase in shareholding during the year Increase in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year At the END of the Year Jointly With Relatives At the beginning of the Year 4 Keki Minoo Mistry At the END of the Year 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 31-MAR-2016 02-DEC-2016 23-DEC-2016 03-FEB-2017 31-MAR-2017 31-MAR-2016 13-MAY-2016 31-MAR-2017 31-MAR-2016 31-MAR-2017 31-MAR-2016 29-JUL-2016 05-AUG-2016 12-AUG-2016 02-SEP-2016 30-SEP-2016 04-NOV-2016 02-DEC-2016 24-MAR-2017 31-MAR-2017 31-MAR-2017 31-MAR-2016 31-MAR-2017 31-MAR-2016 31-MAR-2017 31-MAR-2016 31-MAR-2017 3,069,044 112,500 (415,000) 675,000 0.12 0.00 (0.02) 0.03 3,837 875 3,538 884,455 (35,000) (25,000) (20,000) 136,000 (16,000) 28,000 28,000 (30,000) (12,404) 500 291,915 4,215 0.00 0.00 0.00 0.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 3,181,544 2,766,544 3,441,544 3,441,544 4,712 4,712 3,538 849,455 824,455 804,455 940,455 924,455 952,455 980,455 950,455 938,051 938,051 500 291,915 4,215 0.12 0.11 0.13 0.13 0.00 0.00 0.00 0.03 0.03 0.03 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.00 0.01 0.00 HDFC Bank Limited Annual Report 2016-17 51 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares of the Bank Cumulative shareholding during the year No. of shares Percentage of total shares of the Bank 5 Renu Sud Karnad 6 Paresh Sukthankar At the beginning of the Year Decrease in shareholding during the year At the END of the Year At the beginning of the Year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Increase in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Increase in shareholding during the year Increase in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Increase in shareholding during the year Increase in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year Decrease in shareholding during the year At the END of the Year Jointly With Relatives At the beginning of the Year At the END of the Year 7 Sashidhar Jagdishan At the beginning of the Year 8 Sanjay Dongre Decrease in shareholding during the year Decrease in shareholding during the year Increase in shareholding during the year Increase in shareholding during the year Decrease in shareholding during the year At the END of the Year At the beginning of the Year Decrease in shareholding during the year Decrease in shareholding during the year Increase in shareholding during the year Increase in shareholding during the year Increase in shareholding during the year Decrease in shareholding during the year At the END of the Year 31-MAR-2016 10-MAR-2017 31-MAR-2017 31-MAR-2016 06-MAY-2016 20-MAY-2016 27-MAY-2016 03-JUN-2016 30-JUN-2016 29-JUL-2016 05-AUG-2016 12-AUG-2016 19-AUG-2016 26-AUG-2016 02-SEP-2016 30-SEP-2016 04-NOV-2016 02-DEC-2016 09-DEC-2016 16-DEC-2016 23-DEC-2016 30-DEC-2016 03-FEB-2017 10-FEB-2017 17-FEB-2017 10-MAR-2017 17-MAR-2017 24-MAR-2017 31-MAR-2017 31-MAR-2016 31-MAR-2017 31-MAR-2016 09-DEC-2016 23-DEC-2016 30-DEC-2016 03-FEB-2017 10-MAR-2017 31-MAR-2017 31-MAR-2016 29-APR-2016 06-MAY-2016 30-SEP-2016 04-NOV-2016 02-DEC-2016 24-FEB-2017 31-MAR-2017 294,620 (7,000) 842,655 (25,000) (8,900) (36,100) (10,000) 10,000 (30,000) (25,000) (9,500) (15,500) (29,000) (1,000) (4,000) 30,000 72,500 (10,000) (24,000) (36,000) 110,000 110,000 (15,000) (20,000) (15,000) (30,000) (20,000) 3,250 582,594 (30,000) (65,195) 30,195 138,000 (4,000) 85,250 (19,000) (2,000) 10,000 7,500 64,000 (15,000) 0.01 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 287,620 287,620 817,655 808,755 772,655 762,655 772,655 742,655 717,655 708,155 692,655 663,655 662,655 658,655 688,655 761,155 751,155 727,155 691,155 801,155 911,155 896,155 876,155 861,155 831,155 811,155 811,155 3,250 552,594 487.399 517,594 655,594 651,594 651,594 66,250 64,250 74,250 81,750 145,750 130,750 130,750 0.01 0.01 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.00 0.02 0.02 0.02 0.03 0.03 0.03 0.00 0.00 0.00 0.00 0.01 0.01 0.01 *** Date of transfer has been considered as the date on which the beneﬁciary position was provided by the Depositories to the Bank. Increase in shareholding during the year = Allotment of equity shares on exercise of equity stock options Decrease in shareholding during the year = Sale of shares of the Bank during the year HDFC Bank Limited Annual Report 2016-17 52 Directors' Report 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. - - - - - - - - - - - 84,969.0 - 438.0 85,407.0 480.8 (10,940.1) (10,459.3) 74,028.9 - 918.8 74,947.7 84,969.0 - 438.0 85,407.0 480.8 (10,940.1) (10,459.3) 74,028.9 - 918.8 74,947.7 (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 preparation and presentation of the ﬁnancial statements of the Bank. (3) Figures for the previous years have been adjusted to reﬂect the effect of reclassiﬁcation as mentioned in point no. 1 of Sch 18 - Notes to accounts. 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 Paresh Sukthankar (cid:43)(cid:65)(cid:73)(cid:90)(cid:65)(cid:68)(cid:0)(cid:34)(cid:72)(cid:65)(cid:82)(cid:85)(cid:67)(cid:72)(cid:65) (Deputy Managing Director) Aditya Puri (Managing Director) (Executive Director) (`) Total Amount 81,204,425 50,114,058 38,618,286 169,936,769 14,487,838 7,912,926 6,078,549 28,479,313 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 574,256,250 - - 310,810,225 - - 149,017,994 1,034,084,469 - - - - - as per cent of proﬁts - others, specify 5 Others * Total (A) ** Ceiling as per the Act^ 4,879,884 100,572,147 2,781,456 60,808,440 1,914,000 9,575,340 46,610,835 207,991,422 ^ 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. *** This includes stock options granted and vested over several previous years, but exercised during the last ﬁnancial year. HDFC Bank Limited Annual Report 2016-17 53 Directors' Report B. Remuneration to other Directors: Sr. no. Name of Director Independent Directors Particulars of Remuneration Fees for attending Board / committee meetings Commission# Others (`) Total Amount 1 Mrs. Shyamala Gopinath 2,700,000 - 3,000,000 5,700,000 2 Mr. Partho Datta 3 Mr. Bobby Parikh 4 Mr. A.N. Roy 5 Mr. Malay Patel Sub total (i) 2,300,000 1,000,000 2,750,000 1,000,000 2,500,000 1,000,000 1,450,000 1,000,000 3,300,000 3,750,000 3,500,000 2,450,000 11,700,000 4,000,000 3,000,000 18,700,000 Other Non-Executive Directors - 1 (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) 2 (cid:45)(cid:82)(cid:14)(cid:0)(cid:43)(cid:69)(cid:75)(cid:73)(cid:0)(cid:45)(cid:73)(cid:83)(cid:84)(cid:82)(cid:89) 1,500,000 1,000,000 1,750,000 1,000,000 3 (cid:45)(cid:82)(cid:14)(cid:0)(cid:53)(cid:77)(cid:69)(cid:83)(cid:72)(cid:0)(cid:35)(cid:72)(cid:65)(cid:78)(cid:68)(cid:82)(cid:65)(cid:0)(cid:51)(cid:65)(cid:82)(cid:65)(cid:78)(cid:71)(cid:73)(cid:0)(cid:8)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:87)(cid:14)(cid:69)(cid:14)(cid:70)(cid:0) 1,200,000 March 01, 2016) 4 Mr. Srikanth Nadhamuni (appointed w.e.f 550,000 - - 2,500,000 2,750,000 1,200,000 - 550,000 September 20, 2016) Sub total (ii) Total (i+ii) Overall ceiling as per the Act ^ 5,000,000 2,000,000 7,000,000 1,670,0000 6,000,000 3,000,000 25,700,000 # Pursuant to RBI Guidelines on Compensation To Non-Executive Directors of Private Sector Banks dated June 1, 2015 and the resolution passed by the shareholders at the 22nd Annual General Meeting of the Bank held on July 21, 2016, the non-executive directors, including the independent directors, other than the Chairperson, were paid proﬁt-related commission of ` 10,00,000/- each. The commission paid during FY 2016-17 pertains to the FY 2015-16. Total Managerial Remuneration = (A)+(B) = ` 233,691,422 ^ 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 2016-17 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 94,13,304 1,93,28,104 2,87,41,408 (b) Value of perquisites u/s 17(2) of Income-tax 859,587 3,299,469 4,159,056 Act, 1961 except stock options (c) Proﬁts in lieu of salary under section 17(3) - - - of Income-tax Act, 1961 2 Stock options exercised during the year*** 63,472,275 138,076,540 201,548,815 3 Sweat Equity 4 Commission - as percent of proﬁts - others, specify 5 Others* Total** - - - - - - 335,592 10,608,483 507,096 842,688 23,134,669 33,743,152 * Includes Provident Fund and tax exempted portion of superannuation. ** Does not include the value of stock options exercised during the year. *** This includes stock options granted and vested over several previous years, but exercised during the last ﬁnancial 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 2016-17 55 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 o l ) 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 ’ i s m r a n a t r e c g n d u c n l i i 3 1 0 2 , t c A s e n a p m o C e h t i 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 ` ( 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 f o i i y r a d s b u S k n a B e h t f o i i y r a d s b u S i i a c n a n F B D H d e t a e r l e h t f o ) s ( e m a N ) a ( i p h s n o i t l a e r y t r a p f o e r u a N t k n a B e h t f o i t p e c e R s t i s o p e D i d e d v o r p / i r o t a c d n y S & r e g n a r r A t s e r e t n I n o d e n r a e r o t s e v n I y t i l i c a F t i d e r C y t i l i c a f t i d e r C f o t n e m y a P i d e d v o r p t r o p p u S s e a S l s e e F e c v r e S i 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 s e e F e c v r e S i 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 f o i t p e c e R s t i s o p e D / s t c a r t n o c f o e r u t a N ) b ( / s t n e m e g n a r r a s n o i t c a s n a r t i g n y r a V s e i t i r u t a m i g n y r a V s e i t i r u t a m - (cid:0) (cid:18) (cid:20) (cid:0) (cid:79) (cid:84) (cid:0) (cid:80) (cid:53) s h t n o m s r a e y 2 s r a e y 5 (cid:0) (cid:76) (cid:73) (cid:84) (cid:78) (cid:53) n o i t a n m r e t i i g n y r a V s e i t i r u t a m / 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 ( k n a B e h t h t i w d e c a p l s d n o B d n a m r e T d n a m e d s t i s o p e d / i r o t a c d n y S s e e F r e g n a r r A / s D C N r o f 3 8 . 0 : e u a V l t s e r e t n I d e n r a e m r e T d n a s n a o L i d e d v o r p t i d e r C h s a C t r o p p u s l s e a S e c ﬁ f o k c a B r o f i s e c v r e s d r i h t d n a s n a o l t r o p p u s i s e c v r e s 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 d n a m r e T d n a m e d s t i s o p e d 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 e h t f o s m r e t t n e i l a S ) d ( s t c u d o r p y t r a p a t a d s a h c u s f o n o i t c e l l o c e h t h t i w d e c a p l i g n d u c n l i s n o i t c a s n a r t k n a B e h t e h t y b d e l i a v a s m a c l i d n a y b i d e d v o r p i g n s s e c o r p s e u d r e m o t s u c k n a B : y n a f i , e u a v l e h t i g n d n a t s t u O t n e m t s e v n I 2 2 . 1 7 4 : l e u a V 0 0 . 7 2 4 1 : e u a V l : e u a V l 1 2 . 9 3 1 i g n d n a t s t u O 5 1 . 0 8 1 1 : e u a V l : e u a V l 1 1 . 6 8 7 : e u a V l 2 5 . 1 6 5 : e u a V l 3 1 . 3 0 1 i g n d n a t s t u O 4 4 . 6 2 1 : e u a V l . . A N . . A N . . A N . . A N . . A N . . A N . . A N . . 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HDFC Securities Limited 2. HDB Financial Services Limited Minority Interest in all subsidiaries *The subsidiaries are domestic entities 0.88% 5.84% 0.32% 807.41 5,362.90 291.44 1.42% 4.49% 0.24% 215.90 684.21 36.72 **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, 2017 Share of proﬁt or loss for the year ended March 31, 2017 As percentage of consolidated net assets Amount As percentage of consolidated proﬁt or loss Amount 0.04% 40.30 0.02% 2.34 Associate*: International Asset Reconstruction Company Private Limited *The associate is a domestic entity HDFC Bank Limited Annual Report 2016-17 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 187:1 113:1 93:1 a. We have considered ﬁxed pay for the computation of ratios as the performance bonus for the previous year for Whole time Directors is subject to RBI approval. b. c. 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. 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 40.00 5.00 7.00 *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 median remuneration of employees in the ﬁnancial year was 11.12 per cent. The percentage movement in the median remuneration of the employees for the ﬁnancial year was 1.51 per cent. 4. The number of permanent employees on the rolls of the Bank As of March 31, 2017 the number of permanent employees on the rolls of the Bank was 84,325. 5. 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. (cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:67)(cid:69)(cid:78)(cid:84)(cid:65)(cid:71)(cid:69)(cid:0)(cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:43)(cid:69)(cid:89)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:48)(cid:69)(cid:82)(cid:83)(cid:79)(cid:78)(cid:78)(cid:69)(cid:76)(cid:0)(cid:0)(cid:0)(cid:0)(cid:26)(cid:0)(cid:17)(cid:24)(cid:14)(cid:20)(cid:16)(cid:0)(cid:80)(cid:69)(cid:82)(cid:0)(cid:67)(cid:69)(cid:78)(cid:84) The average percentage increase for Non Managerial Staff : 9.69 per cent 6. Afﬁrmation that the remuneration is as per the remuneration policy of the company: YES HDFC Bank Limited Annual Report 2016-17 58 Directors' Report ANNEXURE 7 to the Directors’ Report Statement under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 for year ended March 31, 2017 Sr. No. Name of the Employee Designation Date of joining the Bank Details of top ten employees in terms of remuneration drawn Qualiﬁcations Age Exp. Total (`) Last Employment 1 Aditya Puri Managing Director 12-Sep-94 B.Com, CA. 2 Paresh Sukthankar Deputy Managing Director 01-Sep-94 B.Com, M.M.S, A.M.P 66 54 44 100,572,147 Citibank 32 60,808,440 Citibank (Harvard Business School) 3 Kaizad M. Bharucha Executive Director 04-Oct-95 B.Com 52 31 46,610,835 SBI Commercial & International Bank Ltd. 4 Abhay Aima Group Head 02-Jan-95 Grad. from National Defence 55 30 26,264,867 INDSEC Securities & Finance 5 Rakesh Singh 6 Navin Puri Group Head Group Head 7 Ashish Parthasarthy Group Head 8 Bhavesh Zaveri Group Head 9 Sashidhar Jagdishan Group Head Academy 11-Apr-11 MBA, B.Sc 01-Feb-99 B.Com, MBA, CA 01-Nov-94 B.E., PGDM 13-Apr-98 M.Com., CAIIB 05-Feb-96 B.Sc., ACA., M.A (Economics) 48 59 49 51 52 24 34 28 28 25 Ltd. 24,476,625 Roth Child 24,090,454 ANZ Grindlays Bank 23,523,385 INDSEC Investments Ltd. 23,389,168 Barclays Bank 23,134,669 Deutsche Bank 10 Payal Mandhyan* Vice President 18-Jan-05 PGDBM 39 13 22,684,467 India Bulls Securities Ltd. Persons in service for the whole year and drawing emoluments more than ` 10,200,000/- per annum, other than the above 1 Abhishek Bhuwalka Sr Vice President-I 10-Jun-99 MBA, CWA, B.Com 40 21 13,784,220 Matchless Packaging 2 Ajay Kumar Kapoor Sr Exe Vice President 09-Oct-95 M.Sc. 3 Akshat Lakhera Sr Vice President-I 09-Sep-10 PGDM, B.Sc 4 Ameya Shekhar Vice President 20-Mar-06 MBA, CA, B.Com Shenoy 53 40 38 31 16 13 Industries (P) Ltd. 12,955,221 Times Bank Ltd. 15,567,571 BNP Paribas 11,499,582 Tionale Enterprises Pvt Ltd 5 Amit Dayal Exe. Vice President 19-Dec-94 B.Sc., DBM 50 26 16,814,052 SBI Commercial & International Bank Ltd 6 Anil L. Bhavnani Exe. Vice President 7 Ankush Pitale Exe. Vice President 16-Jun-03 CS, B.Com 28-Jul-14 MMS 44 45 23 21 11,082,765 CitiCorp Finance I Ltd. 13,324,739 Religare Capital Markets Pvt. Limited Sr Vice President-I 14-Feb-07 LL.B, B.Com 49 25 13,680,448 Strategic Capital Corporation 8 Anupama Rajesh Munagekar 9 Arun Mohanty Exe. Vice President 09-Nov-05 BA 10 Arup Kumar Rakshit Sr Exe Vice President 11 Arvind Kapil Group Head 01-Aug-06 PGDM, B.E 18-Dec-98 MMS, B.E 12 Aseem Dhru Group Head 13 Ashima Khanna Bhat Group Head 14 Ashok Khanna Group Head 15 Ashtosh Raina Sr Vice President-I 16 Atul Sadashiv Barve Exe. Vice President 02-May-15 CA,CWA, B.Com 07-Nov-94 B. Bus, MMS 19-Jun-02 MA 03-Sep-07 CAIIB, B.Sc 28-Feb-07 MMS, MA, B.Sc 17 Benjamin Frank Sr Exe Vice President 05-Apr-04 MBA, B.Sc 18 Bhaskar C. Panda Sr Vice President-II 19 Charmaine Pereira Sr Vice President-II 20 Debajeet Das Sr Vice President-II 21 Dolreich D'Mello* Dy. Vice President 22 Farid Ahmed* Asst. Vice President 23 Fayaz Ainodin Patel* Asst. Vice President 24 Gopalkrishnan Santosh Exe. Vice President 25 Govind Pandey Sr Exe Vice President 21-Nov-97 BA 01-Nov-94 DBM, BA 06-Aug-96 MA 09-Jan-97 B.Com 07-May-07 MBA, B.Sc 02-Aug-10 MBA, B.Com 17-Jan-01 B.Com 05-Aug-98 MSC 26 Gulzar Singh Sr Exe Vice President 28-Oct-96 PGDM, BA 27 Harsh S Gupta* Sr Vice President-I 04-Sep-00 PGDBA, B.Sc HDFC Bank Limited Annual Report 2016-17 59 59 48 46 47 46 60 49 54 53 55 44 45 41 39 38 47 60 46 41 35 31 23 22 24 36 26 33 31 32 22 22 20 17 14 25 34 23 19 Pvt Ltd 12,791,009 Reserve Bank Of India 21,287,305 ABN Amro Bank 15,214,374 GE Countrywide Consumer Financial Services Ltd. 18,399,069 HDFC Securities Ltd 17,617,273 A F Ferguson & Co 15,977,850 Centurion Bank 13,352,345 State Bank Of India 11,704,496 IDBI Ltd 12,044,784 IDBI Bank Ltd. 17,049,345 Times Bank Ltd. 13,759,774 Fresher 18,032,347 Texport Syndicate 12,406,545 ANZ Grindlays Bank 11,767,196 Kotak Mahindra Bank Ltd 10,303,038 Sharekhan Ltd 10,882,803 American Express Bank 13,312,806 State Bank of Saurashtra 12,895,189 Times Bank Ltd. 18,189,331 ICICI Cap Ltd Directors' Report Sr. No. Name of the Employee Designation Date of joining the Bank Qualiﬁcations Age Exp. Total (`) Last Employment 28 Imran Ali Baig* Vice President (cid:16)(cid:21)(cid:13)(cid:42)(cid:85)(cid:78)(cid:13)(cid:25)(cid:23) PGDBA, CFA-A, B.Sc 29 (cid:42)(cid:65)(cid:89)(cid:0)(cid:51)(cid:79)(cid:78)(cid:65)(cid:87)(cid:65)(cid:76)(cid:65)(cid:0)(cid:0) Sr Vice President-II 12-Aug-99 MMS, B.Com 30 (cid:42)(cid:73)(cid:77)(cid:77)(cid:89)(cid:0)(cid:52)(cid:65)(cid:84)(cid:65)(cid:0)(cid:0) Group Head 15-Dec-94 B.Com., M.F.M., CFA 31 (cid:43)(cid:14)(cid:0)(cid:45)(cid:65)(cid:78)(cid:79)(cid:72)(cid:65)(cid:82)(cid:65)(cid:0)(cid:50)(cid:65)(cid:74)(cid:0)(cid:0) Sr Exe Vice President 06-Dec-96 CAIIB, B.Com 32 (cid:43)(cid:65)(cid:80)(cid:73)(cid:76)(cid:0)(cid:34)(cid:65)(cid:78)(cid:83)(cid:65)(cid:76)(cid:0)(cid:0) Sr Vice President-I 30-Sep-04 PGPM, B.Com 44 41 51 59 39 33 (cid:43)(cid:73)(cid:78)(cid:74)(cid:85)(cid:76)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:77)(cid:65)(cid:10) Asst. Vice President 22-Sep-08 Master's Degree/Dip,B.Com 36 34 Madhusoodan Hegde Exe. Vice President 11-Feb-97 CAIIB, B.Sc. 35 (cid:45)(cid:65)(cid:72)(cid:69)(cid:83)(cid:72)(cid:0)(cid:43)(cid:85)(cid:77)(cid:65)(cid:82)(cid:0)(cid:42)(cid:85)(cid:71)(cid:65)(cid:76)(cid:0) (cid:43)(cid:73)(cid:83)(cid:72)(cid:79)(cid:82)(cid:69)(cid:84)(cid:65)(cid:80)(cid:65)(cid:82)(cid:73)(cid:65)(cid:0)(cid:0) Sr Vice President-I (cid:17)(cid:17)(cid:13)(cid:42)(cid:85)(cid:78)(cid:13)(cid:16)(cid:21) LLB, CS, CA, B.Com 36 Maheswara P Reddy Sr Vice President-I 06-May-02 MBA, BA 37 Makarand Shrikant Asst. Vice President 18-Mar-14 B.E (cid:43)(cid:72)(cid:65)(cid:78)(cid:68)(cid:69)(cid:75)(cid:65)(cid:82)(cid:0)(cid:0) 38 (cid:45)(cid:65)(cid:78)(cid:85)(cid:0)(cid:42)(cid:79)(cid:83)(cid:69)(cid:80)(cid:72)(cid:10) Dy. Vice President 39 Mathew Varghese* Asst. Vice President 13-Nov-11 MMS,B.E (cid:17)(cid:21)(cid:13)(cid:42)(cid:85)(cid:76)(cid:13)(cid:17)(cid:16) MMS,B.E 40 Mayuresh Vasant Apte Sr Vice President-II 06-Nov-00 MMS, B.TECH, C.H.S.E, C.B.S.E 41 Michael Andrade Exe. Vice President 01-Aug-97 MFA, DSM, B.Sc. 42 Mohammed Hannan Asst. Vice President (cid:16)(cid:17)(cid:13)(cid:42)(cid:85)(cid:76)(cid:13)(cid:16)(cid:25) MBA, BSc Abdul* 43 Munish Mittal Group Head 17-Aug-96 PGDM, B.Sc. 44 N. Srinivasan Exe. Vice President 11-Nov-96 CA, CWA, CS., B.Com 45 Neil Percy Francisco Group Head 46 Nirav Shah Group Head 20-May-02 MBA, M.Sc., BE (cid:17)(cid:21)(cid:13)(cid:42)(cid:85)(cid:76)(cid:13)(cid:25)(cid:25) MMS, B.Com 47 Nishant Nangia* Asst. Vice President 04-Apr-05 B.Com 48 Nishikant Das Exe. Vice President 23-Apr-12 PGDM, B.TECH 49 Nitin Chugh Group Head 16-Apr-01 PGDM, B.TECH 50 Nitin Subramanya Rao Group Head (cid:18)(cid:21)(cid:13)(cid:42)(cid:85)(cid:76)(cid:13)(cid:16)(cid:18) BE, MBA 51 Pallava Rathore* Vice President (cid:18)(cid:23)(cid:13)(cid:42)(cid:85)(cid:78)(cid:13)(cid:16)(cid:24) Master's Degree/Dip, BSc 52 Parag Rao Group Head 53 Philip Mathew Group Head 54 Pratap Luthra Dy. Vice President 15-Apr-02 MMS, B.E 03-Apr-02 MA, B.Sc 13-Aug-05 MBA,BA 55 Rahul Bhandari* Vice President 05-Feb-02 PGDBM, B.Com 56 (cid:50)(cid:65)(cid:74)(cid:69)(cid:69)(cid:86)(cid:0)(cid:0)(cid:51)(cid:69)(cid:78)(cid:71)(cid:85)(cid:80)(cid:84)(cid:65)(cid:0)(cid:0) Exe. Vice President 21-Sep-07 PG (Gen Mgmt), B.E 57 (cid:50)(cid:65)(cid:74)(cid:69)(cid:69)(cid:86)(cid:0)(cid:55)(cid:65)(cid:82)(cid:73)(cid:65)(cid:82)(cid:10) Vice President 58 (cid:50)(cid:65)(cid:74)(cid:69)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:51)(cid:69)(cid:72)(cid:71)(cid:65)(cid:76)(cid:0)(cid:0) Group Head 59 (cid:50)(cid:65)(cid:74)(cid:69)(cid:83)(cid:72)(cid:0)(cid:43)(cid:85)(cid:77)(cid:65)(cid:82)(cid:0) Rathanchand Group Head 15-Apr-10 PGDBA, B.E 23-Feb-98 B.Sc, MBA 22-May-00 PGDM, B.Sc 60 (cid:50)(cid:65)(cid:74)(cid:69)(cid:83)(cid:72)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:77)(cid:65)(cid:0)(cid:0) Sr Vice President-II 15-Nov-00 CA,CS, B.Com 61 (cid:50)(cid:65)(cid:74)(cid:73)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:34)(cid:65)(cid:66)(cid:66)(cid:65)(cid:82)(cid:0)(cid:0) Exe. Vice President (cid:17)(cid:22)(cid:13)(cid:42)(cid:65)(cid:78)(cid:13)(cid:16)(cid:17) LLB, B.Sc 62 (cid:50)(cid:65)(cid:86)(cid:69)(cid:69)(cid:83)(cid:72)(cid:0)(cid:43)(cid:85)(cid:77)(cid:65)(cid:82)(cid:0)(cid:34)(cid:72)(cid:65)(cid:84)(cid:73)(cid:65)(cid:0)(cid:0) Sr Exe Vice President 03-May-10 PGDM, B.Com 63 Ravi Narayan Group Head 03-May-99 MBA, B.TECH 64 Ravi Ssn 65 (cid:50)(cid:69)(cid:74)(cid:73)(cid:0)(cid:42)(cid:79)(cid:72)(cid:78)(cid:10) Sr Vice President-II 26-Nov-10 B.Com Manager 30-Aug-10 PG Diploma, MA, BA 56 40 46 42 40 38 48 49 38 49 49 55 45 35 45 46 50 41 52 54 35 39 56 42 62 46 41 50 51 48 49 36 20 18 29 37 18 12 32 15 21 19 15 15 24 29 14 30 27 26 22 14 19 22 27 16 28 28 14 15 34 18 40 28 23 30 26 24 17 13 11,440,147 Fresher 12,498,838 Fresher 20,012,753 Apple Industries Ltd. 11,579,370 Times Bank Ltd. 13,053,654 ICICI Bank Ltd. 11,004,904 Citiﬁnancial 12,095,216 Times Bank Ltd. 11,183,867 (cid:53)(cid:52)(cid:41)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:44)(cid:84)(cid:68)(cid:0) 14,042,294 American Express Bank 12,260,022 ICICI Securities Limited 12,467,442 Citibank 10,613,306 Citibank 11,889,576 Centurion Bank Ltd 10,359,492 Barclays Bank 12,313,621 Barclays Bank PLC 14,329,500 (cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:47)(cid:70)(cid:0)(cid:48)(cid:85)(cid:78)(cid:74)(cid:65)(cid:66)(cid:0) 11,349,866 Credential Finance 13,108,718 Standard Chartered bank 19,186,484 Global Trust Bank 12,816,723 E-Serve International Ltd 18,011,034 Standard Chartered Bank 17,069,362 Standered Chartered Bank 19,003,464 BNP Paribas 10,566,455 IDBI Bank Ltd 14,487,588 IBM Global Services 13,402,369 (cid:51)(cid:51)(cid:43)(cid:41)(cid:0)(cid:41)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:79)(cid:82)(cid:0)(cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0) 12,284,191 ABN Amro Bank Ltd 14,318,661 Fresher 11,452,865 Hutchison Essar Ltd 16,800,081 Citi Bank 17,558,390 Times Bank Ltd. 14,425,888 Trans America Apple Finance Ltd. 10,326,591 LCC Infotech Ltd 13,530,295 Centurion Bank Ltd 13,371,292 Fore Consultants Pvt Ltd 15,488,261 Bank Of America 11,133,605 Deutsche Bank 11,600,552 Aviva India Life Insurance Co Ltd 66 Resham A. Mahtani Sr Vice President-I 01-May-01 PGPIM, PGDBM, BA 41 19 12,978,555 Mecklai Financial & Commercial Services Ltd. HDFC Bank Limited Annual Report 2016-17 60 Directors' Report Sr. No. Name of the Employee Designation Date of joining the Bank Qualiﬁcations Age Exp. Total (`) Last Employment 67 Ritesh Sampat Sr Vice President-II (cid:16)(cid:19)(cid:13)(cid:42)(cid:65)(cid:78)(cid:13)(cid:17)(cid:18) CA, B.Com 68 (cid:50)(cid:79)(cid:76)(cid:73)(cid:0)(cid:42)(cid:65)(cid:77)(cid:84)(cid:72)(cid:69)(cid:10) Asst. Vice President 05-Apr-11 MBA, B.Sc, PGDSM 41 40 69 (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)(cid:0)(cid:0) Exe. Vice President 02-May-95 B.Com, ACS, CWAINT, LL.B. 59 70 (cid:51)(cid:65)(cid:78)(cid:74)(cid:65)(cid:89)(cid:0)(cid:43)(cid:14)(cid:51)(cid:73)(cid:78)(cid:71)(cid:76)(cid:65)(cid:0)(cid:0) Sr Vice President-II 10-Nov-07 PGDM, B.Com 71 Sanmoy Chakrabarti Exe. Vice President 72 Sathyamurthy Sampath Exe. Vice President (cid:17)(cid:21)(cid:13)(cid:42)(cid:85)(cid:78)(cid:13)(cid:17)(cid:16) MS, B.Sc 07-Aug-00 B.Com 58 42 45 17 16 35 35 18 27 15,096,463 Standard Chartered Bank 19,818,230 Royal Bank Of Scotland 10,608,483 Boehringer Mannheim Ltd. 14,887,359 State Bank of India 12,792,397 Bank Danamon 14,737,500 Integrated Finance Co. Ltd. (cid:43)(cid:85)(cid:77)(cid:65)(cid:82)(cid:0)(cid:0) 73 Shailesh B. Sukhthankar Exe. Vice President 01-Dec-94 MMS, B.Com 52 30 10,430,441 Citicorp Overseas s/w Ltd 74 Sharad Rungta Sr Vice President-II 75 (cid:51)(cid:72)(cid:69)(cid:69)(cid:84)(cid:65)(cid:76)(cid:0)(cid:43)(cid:65)(cid:80)(cid:65)(cid:68)(cid:73)(cid:65)(cid:10) Asst. Vice President (cid:16)(cid:18)(cid:13)(cid:42)(cid:85)(cid:78)(cid:13)(cid:17)(cid:18) CFA, CA, B.Com 06-May-09 PGDMS, B.Com 76 Silvestre Anthony Vice President 15-Sep-06 MBA, PG Diploma, B.Com Pereira 77 Sitanshu Mitra Exe. Vice President 01-Sep-95 MBA, B.Sc 78 Smita Bhagat Sr Exe Vice President 79 Sukarm Bali* Sr Vice President-I 80 Sumant Rampal Exe. Vice President (cid:17)(cid:18)(cid:13)(cid:42)(cid:85)(cid:76)(cid:13)(cid:25)(cid:25) M.Com, MBA (cid:18)(cid:19)(cid:13)(cid:42)(cid:85)(cid:76)(cid:13)(cid:25)(cid:25) CA, B.Com 10-Aug-99 MBA, B.Com 40 40 39 49 52 50 42 81 Sundaresan M. Exe. Vice President 02-May-02 B.E (Mechanical), PSG, MBA 46 82 (cid:53)(cid:77)(cid:65)(cid:83)(cid:72)(cid:65)(cid:78)(cid:75)(cid:65)(cid:82)(cid:0)(cid:39)(cid:79)(cid:80)(cid:65)(cid:76)(cid:65)(cid:78)(cid:10) Dy. Vice President 13-Dec-12 B.Com 83 (cid:54)(cid:0)(cid:51)(cid:0)(cid:53)(cid:78)(cid:78)(cid:73)(cid:75)(cid:82)(cid:73)(cid:83)(cid:72)(cid:78)(cid:65)(cid:78)(cid:10) Vice President 84 V. Chakrapani Group Head 12-Apr-03 (cid:45)(cid:34)(cid:33)(cid:12)(cid:0)(cid:34)(cid:14)(cid:51)(cid:67)(cid:12)(cid:0)(cid:48)(cid:53)(cid:35) 24-Nov-94 B.Com, CAIIB, ACS 85 Veerendra Rai* Asst. Vice President 23-Apr-11 PGDBA, BBA 86 (cid:54)(cid:73)(cid:74)(cid:65)(cid:89)(cid:0)(cid:0)(cid:43)(cid:82)(cid:73)(cid:83)(cid:72)(cid:78)(cid:65)(cid:0)(cid:45)(cid:85)(cid:76)(cid:66)(cid:65)(cid:71)(cid:65)(cid:76)(cid:0)(cid:0) Exe. Vice President (cid:16)(cid:18)(cid:13)(cid:42)(cid:65)(cid:78)(cid:13)(cid:16)(cid:23) PGPM, B.Sc 49 42 53 38 46 16 17 15 29 29 25 20 30 23 19 33 14 22 15,368,533 Credit Suisse AG 13,535,124 ICICI Bank Ltd 14,974,588 (cid:53)(cid:52)(cid:41)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:44)(cid:84)(cid:68)(cid:0) 10,609,777 ABN Amro Bank Ltd. 13,347,040 PDCOR Ltd. 18,515,532 Times Bank Ltd. 10,834,497 Walchnad Capital Ltd. 10,289,554 GE Countrywide Consumer Financial Services Ltd. 14,509,765 ICICI Bank 13,101,738 Global Trust Bank Ltd 17,244,662 Standard Chartered Bank 11,350,131 (cid:50)(cid:33)(cid:43)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0) 14,077,651 Diamond Management & Technology Consultants 87 Vitthal Mangesh Sr Vice President-I 22-Sep-07 M.Sc., B.E 46 23 12,147,623 Barclays Capital (cid:43)(cid:85)(cid:76)(cid:75)(cid:65)(cid:82)(cid:78)(cid:73)(cid:0)(cid:0) Persons employed for part of the year drawing emoluments more than ` 850,000 per month 88 Deepak Maheshwari Group Head 09-Feb-96 CAIIB, B.Com 62 42 12,429,522 Times Bank Ltd. 89 Harsh Dugar Executive Vice President 23-Oct-96 CFA, CWA, B.Com 90 (cid:43)(cid:0)(cid:34)(cid:65)(cid:76)(cid:65)(cid:83)(cid:85)(cid:66)(cid:82)(cid:65)(cid:77)(cid:65)(cid:78)(cid:73)(cid:65)(cid:78)(cid:0)(cid:0) Group Head 03-May-16 CA, ICWA, B.Com 91 (cid:43)(cid:65)(cid:82)(cid:84)(cid:73)(cid:75)(cid:0)(cid:42)(cid:65)(cid:73)(cid:78)(cid:0)(cid:0) Executive Vice President 09-May-11 PGDM, B.Tech 44 46 47 26 21 24 8,840,172 ICFAI Business School 15,479,725 Citibank 12,623,837 ICICI Lombard General Insurance Company Limited 92 (cid:46)(cid:73)(cid:84)(cid:73)(cid:78)(cid:0)(cid:42)(cid:65)(cid:73)(cid:78)(cid:0)(cid:0) Sr Vice President-II 29-Sep-14 PGDBM, B.E 52 29 2,818,964 Cipher Capital Advisors Pvt 93 Ravi Santhanam Exe. Vice President 01-Mar-17 PG Diploma, B.E 94 T V N Raghuram* Senior Vice President - I 09-Oct-98 B.Com Notes: Ltd 47 48 24 28 1,154,682 Vodafone India 9,989,208 Times Bank Ltd 1. Remuneration shown above includes basic salary, allowances, performance bonus, cash allowances in lieu of perquisites or taxable value of perquisites, if availed as computed as per Income-tax rules but excludes Gratuity, PF settlement, Super Annuation settlement, Perquisite on ESOP & Super Annuation perquisite. 2. All appointments are terminable by one / three months’ notice as the case may be on either side. 3. The above list does not include Employees sent on Deputation whose salary is reimbursed by the other company. 4. *Employee in overseas location. 5. None of the employees listed above hold 2% or more of the paid-up share capital of the Bank as at March 31, 2017. 6. Other than Mr. Aditya Puri, Managing Director who holds 0.13% of the paid up share capital of the Bank, the shareholding of the employees listed above does not exceed 0.05% of the paid up share capital of the Bank as at March 31, 2017. 7. None of the employees listed above is a relative of any director of the Bank. HDFC Bank Limited Annual Report 2016-17 61 Directors' Report ANNEXURE 8 to the Directors’ Report Form No. MR-3 SECRETARIAL AUDIT REPORT For the ﬁnancial year ended March 31, 2017 [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 from April 1, 2016 to March 31, 2017. 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 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 (cid:33)(cid:85)(cid:68)(cid:73)(cid:84)(cid:27)(cid:0)(cid:87)(cid:69)(cid:0)(cid:72)(cid:69)(cid:82)(cid:69)(cid:66)(cid:89)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:79)(cid:80)(cid:73)(cid:78)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:72)(cid:65)(cid:83)(cid:12)(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:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:33)(cid:80)(cid:82)(cid:73)(cid:76)(cid:0)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:0)(cid:84)(cid:79)(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:23)(cid:0)(cid:8)(cid:84)(cid:72)(cid:69)(cid:0)(cid:64)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0) period’), complied with the statutory provisions listed hereunder and also that the Bank has proper Board processes and compliance (cid:77)(cid:69)(cid:67)(cid:72)(cid:65)(cid:78)(cid:73)(cid:83)(cid:77)(cid:0)(cid:73)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:67)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:84)(cid:69)(cid:78)(cid:84)(cid:12)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:78)(cid:78)(cid:69)(cid:82)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:85)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(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:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:72)(cid:69)(cid:82)(cid:69)(cid:73)(cid:78)(cid:65)(cid:70)(cid:84)(cid:69)(cid:82)(cid:14) 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 March 31, 2017 according to the provisions of: (cid:8)(cid:73)(cid:9)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:73)(cid:69)(cid:83)(cid:0)(cid:33)(cid:67)(cid:84)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:19)(cid:0)(cid:8)(cid:64)(cid:84)(cid:72)(cid:69)(cid:0)(cid:33)(cid:67)(cid:84)(cid:7)(cid:9)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:50)(cid:85)(cid:76)(cid:69)(cid:83)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:27) (cid:8)(cid:73)(cid:73)(cid:9)(cid:0) (cid:52)(cid:72)(cid:69)(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:35)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:83)(cid:0)(cid:8)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:9)(cid:0)(cid:33)(cid:67)(cid:84)(cid:12)(cid:0)(cid:17)(cid:25)(cid:21)(cid:22)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:50)(cid:85)(cid:76)(cid:69)(cid:83)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:27) (cid:8)(cid:73)(cid:73)(cid:73)(cid:9)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:36)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:79)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0)(cid:33)(cid:67)(cid:84)(cid:12)(cid:0)(cid:17)(cid:25)(cid:25)(cid:22)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:34)(cid:89)(cid:69)(cid:13)(cid:76)(cid:65)(cid:87)(cid:83)(cid:0)(cid:70)(cid:82)(cid:65)(cid:77)(cid:69)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:27) (iv) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’): (cid:8)(cid:65)(cid:9)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:51)(cid:85)(cid:66)(cid:83)(cid:84)(cid:65)(cid:78)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0)(cid:33)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:52)(cid:65)(cid:75)(cid:69)(cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:17)(cid:27) (cid:8)(cid:66)(cid:9)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:48)(cid:82)(cid:79)(cid:72)(cid:73)(cid:66)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:83)(cid:73)(cid:68)(cid:69)(cid:82)(cid:0)(cid:52)(cid:82)(cid:65)(cid:68)(cid:73)(cid:78)(cid:71)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:27) (cid:8)(cid:67)(cid:9)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0)(cid:34)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:37)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0)(cid:34)(cid:69)(cid:78)(cid:69)(cid:108)(cid:84)(cid:83)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:20)(cid:27) (cid:8)(cid:68)(cid:9)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:41)(cid:83)(cid:83)(cid:85)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:44)(cid:73)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:36)(cid:69)(cid:66)(cid:84)(cid:0)(cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:27) (e) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 (cid:82)(cid:69)(cid:71)(cid:65)(cid:82)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:73)(cid:69)(cid:83)(cid:0)(cid:33)(cid:67)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:68)(cid:69)(cid:65)(cid:76)(cid:73)(cid:78)(cid:71)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:67)(cid:76)(cid:73)(cid:69)(cid:78)(cid:84)(cid:27) (cid:8)(cid:70)(cid:9)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:44)(cid:73)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:47)(cid:66)(cid:76)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(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:50)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:27) (cid:8)(cid:71)(cid:9)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:45)(cid:69)(cid:82)(cid:67)(cid:72)(cid:65)(cid:78)(cid:84)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:69)(cid:82)(cid:83)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:17)(cid:25)(cid:25)(cid:18)(cid:27) (h) The Securities and Exchange Board of India (Bankers to an Issue) Regulation, 1994 (v) The Banking Regulation Act, 1949 as speciﬁcally applicable to the Bank. We have also examined compliance with the applicable clauses of the following: (cid:17)(cid:14)(cid:0) (cid:51)(cid:69)(cid:67)(cid:82)(cid:69)(cid:84)(cid:65)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:51)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:73)(cid:83)(cid:83)(cid:85)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:41)(cid:78)(cid:83)(cid:84)(cid:73)(cid:84)(cid:85)(cid:84)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:51)(cid:69)(cid:67)(cid:82)(cid:69)(cid:84)(cid:65)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:73)(cid:78)(cid:85)(cid:84)(cid:69)(cid:83)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) 2. Listing Agreement entered into by the Bank with the Stock Exchanges. HDFC Bank Limited Annual Report 2016-17 62 Directors' Report During the period under review, the Bank has 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: (cid:8)(cid:73)(cid:9)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:41)(cid:83)(cid:83)(cid:85)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:35)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(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:50)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:27) (cid:8)(cid:73)(cid:73)(cid:9)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:36)(cid:69)(cid:76)(cid:73)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:37)(cid:81)(cid:85)(cid:73)(cid:84)(cid:89)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:27) (cid:8)(cid:73)(cid:73)(cid:73)(cid:9)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(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:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:8)(cid:34)(cid:85)(cid:89)(cid:66)(cid:65)(cid:67)(cid:75)(cid:0)(cid:79)(cid:70)(cid:0)(cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:9)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:17)(cid:25)(cid:25)(cid:24)(cid:27) (iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings. 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 sent at least seven days in advance and where the same were given at shorter notice than 7 (seven) days, proper consent thereof were obtained 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. (cid:36)(cid:69)(cid:67)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:65)(cid:84)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0) (cid:79)(cid:70)(cid:0) (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(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:87)(cid:69)(cid:82)(cid:69)(cid:0) (cid:67)(cid:65)(cid:82)(cid:82)(cid:73)(cid:69)(cid:68)(cid:0) (cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(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:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0) (cid:87)(cid:69)(cid:82)(cid:69)(cid:0) (cid:78)(cid:79)(cid:0) 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 following speciﬁc events: The Bank has obtained approval of members for issue of Perpetual Debt Instruments, Tier II Capital Bonds and Senior Long Term Infrastructure Bonds on a private placements basis of an amount in aggregate not exceeding Rs 50,000 Crore. (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:83)(cid:83)(cid:85)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:76)(cid:76)(cid:79)(cid:84)(cid:84)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:17)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:80)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:69)(cid:0)(cid:80)(cid:76)(cid:65)(cid:67)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:51)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:12)(cid:0)(cid:53)(cid:78)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:69)(cid:68)(cid:12)(cid:0)(cid:50)(cid:69)(cid:68)(cid:69)(cid:69)(cid:77)(cid:65)(cid:66)(cid:76)(cid:69)(cid:12)(cid:0)(cid:44)(cid:79)(cid:78)(cid:71)(cid:0)(cid:52)(cid:69)(cid:82)(cid:77)(cid:12)(cid:0) Non-Convertible Bonds in the nature of Debentures amounting to ` 6700 Crore (67000 Bonds of face value ` 10,00,000/- each). For BNP & Associates Company Secretaries [Firm Regn. No. P2014MH037400] B Narasimhan Partner FCS No.: 1303 C P No.: 10440 Place: Mumbai Date: May 15, 2017 Note: This report is to be read with our letter of even date which is annexed as Annexure A and forms an integral part of this report. HDFC Bank Limited Annual Report 2016-17 63 Directors' Report To The Members HDFC Bank Limited HDFC Bank House, Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013 Annexure A Secretarial Audit Report of even date is to be read along with this letter. 1. The compliance of provisions of all laws, rules, regulations, standards applicable to HDFC Bank Limited (hereinafter called ‘the Bank’) is the responsibility of the management of the Bank. Our examination was limited to the veriﬁcation of records and proce- dures on test check basis for the purpose of issue of the Secretarial Audit Report. 2. Maintenance of secretarial and other records of applicable laws is the responsibility of the management of the Bank. Our respon- sibility is to issue Secretarial Audit Report, based on the audit of the relevant records maintained and furnished to us by the Bank, along with explanations where so required. 3. We have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the secretarial and other legal records, legal compliance mechanism and corporate conduct. The veriﬁcation was done on test check basis to ensure that correct facts as reﬂected in secretarial and other records produced to us. We believe that the processes and practices we followed, provides a reasonable basis for our opinion for the purpose of issue of the Secretarial Audit Report. 4. We have not veriﬁed the correctness and appropriateness of ﬁnancial records and Books of Accounts of the Bank. 5. Wherever required, we have obtained the management representation about list of applicable laws, compliance of laws, rules and (cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:0)(cid:69)(cid:86)(cid:69)(cid:78)(cid:84)(cid:83)(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:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:14) 6. The Secretarial Audit Report is neither an assurance as to the future viability of the Bank nor of the efﬁcacy or effectiveness with which the management has conducted the affairs of the Bank. For BNP & Associates Company Secretaries [Firm Regn. No. P2014MH037400] B Narasimhan Partner FCS No.: 1303 C P No.: 10440 HDFC Bank Limited Annual Report 2016-17 64 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, 2017, 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 judgments 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 standalone 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. In conducting 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 standalone ﬁnancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone ﬁnancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone ﬁnancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal ﬁnancial controls relevant to the Bank’s preparation of the standalone 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 standalone ﬁnancial statements. We believe that the audit evidence obtained by us 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, 2017, 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, based on our audit, 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 and found them to be satisfactory. 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 2016-17 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 at 31st March, 2017 taken on record by the Board of Directors, none of the directors is disqualiﬁed as at 31st March, 2017 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 separate 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, as amended, in our opinion and to the best of our information and according to the explanations given to us: i. The Bank has disclosed the impact of pending litigations on its standalone ﬁnancial statements; its ﬁnancial position in ii. the applicable The Bank has made provision, as required under law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts; 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 performed select relevant procedures at 85 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 being made available to us. For Deloitte Haskins & Sells Chartered Accountants (Firm’s Registration No. 117365W) Porus B. Pardiwalla Partner (Membership No. 40005) Mumbai April 21, 2017 HDFC Bank Limited Annual Report 2016-17 66 ANNEXURE “A” TO THE REPORT INDEPENDENT AUDITOR’S (Referred to in paragraph 1.h under ‘Report on Other Legal and Regulatory Requirements’ section of the auditor’s 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, 2017 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 were established and maintained and if such controls operated effectively in all material respects. the the adequacy of An 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. regarding prevention or the reliability of ﬁnancial reporting and 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 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, 2017, 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 21, 2017 Porus B. Pardiwalla Partner (Membership No. 40005) HDFC Bank Limited Annual Report 2016-17 67 Balance Sheet As at March 31, 2017 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-17 ` in ‘000 As at 31-Mar-16 1 2 3 4 5 5,125,091 5,056,373 889,498,416 721,721,274 6,436,396,563 5,464,241,920 740,288,666 849,689,823 567,093,181 367,251,338 Total 8,638,401,917 7,407,960,728 6 7 8 9 10 11 378,968,755 300,583,087 110,552,196 88,605,293 2,144,633,366 1,958,362,768 5,545,682,021 4,645,939,589 36,267,379 33,431,573 422,298,200 381,038,418 Total 8,638,401,917 7,407,960,728 12 8,178,695,893 8,533,181,145 308,480,352 234,899,997 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 21, 2017 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 Srikanth Nadhamuni Umesh Sarangi Directors HDFC Bank Limited Annual Report 2016-17 68 Statement of Proﬁt and Loss For the year ended March 31, 2017 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 [Refer Schedule 18(2)] Tax (including cess) on dividend [Refer Schedule 18(2)] 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 Schedule Year ended 31-Mar-17 ` in ‘000 Year ended 31-Mar-16 13 14 693,059,578 602,214,451 122,964,990 107,517,233 Total 816,024,568 709,731,684 15 16 361,667,334 326,299,330 197,033,442 169,797,000 111,827,380 90,673,223 Total 670,528,156 586,769,553 145,496,412 122,962,131 235,276,891 186,277,944 Total 380,773,303 309,240,075 36,374,103 30,740,533 - - 24,017,772 4,889,453 (16,909) (117,135) 14,549,641 12,296,213 3,134,100 2,221,532 42,934 (85,184) 326,689,434 235,276,891 380,773,303 ` 309,240,075 ` 57.18 56.43 48.84 48.26 V EARNINGS PER EQUITY SHARE (Face value ` 2 per share) Total Basic Diluted 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 21, 2017 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 Srikanth Nadhamuni Umesh Sarangi Directors HDFC Bank Limited Annual Report 2016-17 69 Cash Flow Statement For the year ended March 31, 2017 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 Year ended 31-Mar-17 ` in ‘000 Year ended 31-Mar-16 221,390,750 186,379,247 8,331,247 7,058,390 (87,543) 173,689 1,756,569 1,002,801 14,735 626 33,443,592 22,963,803 (76,417) 151,722 250,000 1,150,000 3,921,811 4,399,962 Dividend from subsidiaries / associates / joint ventures (1,628,640) (1,490,542) Contingency provisions Adjustments for: (Increase) / decrease in investments (Increase) / decrease in advances Increase / (decrease) in deposits (Increase) / decrease in other assets 384,640 218,102 267,700,744 222,007,800 (177,259,533) (391,352,982) (933,161,021) (1,015,961,758) 972,154,643 956,285,495 (38,752,713) (37,562,160) Increase / (decrease) in other liabilities and provisions 223,763,890 32,720,884 Direct taxes paid (net of refunds) 314,446,010 (233,862,721) (78,591,989) (67,459,133) Net cash ﬂow (used in) / from operating activities 235,854,020 (301,321,854) Cash ﬂows used in investing activities Purchase of ﬁxed assets Proceeds from sale of ﬁxed assets (10,681,751) (8,159,133) 94,269 111,518 Investment in subsidiaries / associates / joint ventures (10,603,674) - Dividend from subsidiaries / associates / joint ventures 1,628,640 1,490,542 Net cash used in investing activities (19,562,516) (6,557,074) HDFC Bank Limited Annual Report 2016-17 70 Cash Flow Statement For the year ended March 31, 2017 ` in ‘000 Year ended 31-Mar-17 Year ended 31-Mar-16 Cash ﬂows from ﬁnancing activities Money received on exercise of stock options by employees 22,615,161 12,229,008 Increase / (decrease) in borrowings (excluding subordinate debt, perpetual debt and upper Tier II instruments) 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 Cash and cash equivalents as at April 1st Cash and cash equivalents as at March 31st (90,316,657) 357,278,283 (19,084,500) (12,020,000) (24,083,093) (20,091,666) (4,807,223) (3,925,269) (115,676,312) 333,470,356 (282,622) 282,433 100,332,571 25,873,862 389,188,380 363,314,518 489,520,951 389,188,380 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 21, 2017 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Srikanth Nadhamuni Umesh Sarangi Directors Anami Roy Bobby Parikh Keki Mistry Malay Patel Partho Datta Renu Karnad HDFC Bank Limited Annual Report 2016-17 71 Schedules to the Financial Statements As at March 31, 2017 SCHEDULE 1 - CAPITAL Authorised capital 3,25,00,00,000 (31 March, 2016: 2,75,00,00,000) Equity Shares of ` 2/- each Issued, subscribed and paid-up capital 2,56,25,45,717 (31 March, 2016: 2,52,81,86,517) 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 As at 31-Mar-17 ` in ‘000 As at 31-Mar-16 6,500,000 5,500,000 Total 5,125,091 5,125,091 5,056,373 5,056,373 147,384,755 116,644,222 36,374,103 30,740,533 Total 183,758,858 147,384,755 57,119,509 44,823,296 14,549,641 12,296,213 Total 71,669,150 57,119,509 III Balance in proﬁt and loss account 326,689,434 235,276,891 IV Share premium account Opening balance Additions during the year 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 VIII Foreign currency translation account Opening balance Additions / (deductions) during the year HDFC Bank Limited Annual Report 2016-17 72 261,716,858 249,531,232 22,546,443 12,185,626 Total 284,263,301 261,716,858 10,635,564 10,635,564 - - Total 10,635,564 10,635,564 8,866,583 6,645,051 3,134,100 2,221,532 Total 12,000,683 8,866,583 399,084 109,506 (66,572) 442,018 322,030 (282,622) 39,408 484,268 76 (85,260) 399,084 39,597 282,433 322,030 889,498,416 721,721,274 Total Total Total Schedules to the Financial Statements As at March 31, 2017 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 (v) Bonds and Debentures (excluding subordinated debt) II Borrowings outside India* *Includes Upper Tier II debt of Nil (previous year: ` 662.55 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) [Refer Schedule 18(2)] HDFC Bank Limited Annual Report 2016-17 73 As at 31-Mar-17 ` in ‘000 As at 31-Mar-16 20,806,377 22,017,200 1,134,932,192 862,229,501 Total 1,155,738,569 884,246,701 1,935,786,335 1,478,861,798 53,520,609 25,095,540 3,291,351,050 3,076,037,881 Total 3,344,871,659 3,101,133,421 Total 6,436,396,563 5,464,241,920 6,396,405,854 5,397,071,812 39,990,709 67,170,108 Total 6,436,396,563 5,464,241,920 - 319,505,077 21,202,156 15,792,856 224,500,000 - 131,820,000 144,279,000 126,750,000 59,750,000 Total 504,272,156 539,326,933 236,016,510 310,362,890 Total 740,288,666 849,689,823 166,670,863 73,784,974 38,488,877 35,987,631 338,011,290 208,559,451 23,922,151 20,012,057 - 28,907,225 Total 567,093,181 367,251,338 Schedules to the Financial Statements As at March 31, 2017 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 As at ` in ‘000 As at 31-Mar-17 31-Mar-16 42,635,945 55,694,577 284,332,810 242,888,510 52,000,000 2,000,000 Total Total 336,332,810 244,888,510 378,968,755 300,583,087 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 2016-17 74 5,107,980 6,686,831 Total 11,794,811 2,380,626 6,824,510 9,205,136 - 1,359,867 1,359,867 - - - Total Total Total Total 11,794,811 10,565,003 36,772,777 23,909,955 2,529,150 3,776,535 59,455,458 50,353,800 98,757,385 78,040,290 110,552,196 88,605,293 1,624,186,994 1,576,610,655 - - 1,113,742 739,032 194,698,472 48,873,774 38,433,239 27,829,565 275,020,773 290,582,987 Total 2,133,453,220 1,944,636,013 28,375 28,375 11,151,771 13,698,380 11,180,146 13,726,755 2,144,633,366 1,958,362,768 Total Total Schedules to the Financial Statements As at March 31, 2017 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 2016-17 75 As at ` in ‘000 As at 31-Mar-17 31-Mar-16 2,134,071,702 1,945,831,421 11,206,487 13,726,755 Total 2,145,278,189 1,959,558,176 618,482 26,341 644,823 1,195,408 - 1,195,408 Total 2,133,453,220 1,944,636,013 11,180,146 13,726,755 Total 2,144,633,366 1,958,362,768 287,159,641 185,136,903 1,336,174,162 1,242,774,115 3,922,348,218 3,218,028,571 Total 5,545,682,021 4,645,939,589 4,108,555,199 3,458,703,399 107,864,309 114,128,823 1,329,262,513 1,073,107,367 Total 5,545,682,021 4,645,939,589 1,625,180,583 1,417,909,585 157,741,065 134,556,082 9,092,668 4,659,631 3,555,635,492 2,767,906,764 Total 5,347,649,808 4,325,032,062 6,500,391 6,879,777 2,560,707 1,245,263 17,845,564 38,624,247 171,125,551 274,158,240 198,032,213 320,907,527 5,545,682,021 4,645,939,589 Total Total Schedules to the Financial Statements As at March 31, 2017 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 2016-17 76 As at 31-Mar-17 ` in ‘000 As at 31-Mar-16 15,511,704 14,756,943 669,442 839,927 (70,347) (85,166) Total 16,110,799 15,511,704 4,246,842 3,764,471 590,691 551,090 (59,060) (68,719) Total 4,778,473 4,246,842 11,332,326 11,264,862 72,467,567 65,329,178 10,604,552 8,548,465 (2,153,212) (1,410,076) Total 80,918,907 72,467,567 50,300,856 45,104,307 7,738,599 6,510,901 (2,055,601) (1,314,352) Total 55,983,854 50,300,856 24,935,053 22,166,711 4,546,923 4,546,923 - - Total 4,546,923 4,546,923 Schedules to the Financial Statements As at March 31, 2017 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-17 ` in ‘000 As at 31-Mar-16 4,104,467 4,104,467 - - Total 4,104,467 4,104,467 442,456 442,456 - - Total 442,456 442,456 - - Total 36,267,379 33,431,573 83,095,335 75,482,713 17,442,504 17,646,013 267,871 220,786 - - - - 4,934,536 4,626,811 316,557,954 283,062,095 Total 422,298,200 381,038,418 *Includes deferred tax asset (net) of ` 2,447.34 crore (previous year: ` 2,116.62 crore) and deposits placed with NABARD / SIDBI / NHB on account of shortfall in lending to priority sector of ` 11,882.37 crore (previous year: ` 13,719.68 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 2016-17 77 10,721,500 11,877,300 1,081,701 762,010 4,699,301,366 5,290,757,746 2,723,068,634 2,570,471,528 366,232,012 301,311,242 953,405 31,094,714 359,613,744 317,525,754 17,723,531 9,380,851 Total 8,178,695,893 8,533,181,145 Schedules to the Financial Statements For the year ended March 31, 2017 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* Year ended ` in ‘000 Year ended 31-Mar-17 31-Mar-16 520,552,624 448,278,559 159,443,391 141,200,321 5,320,205 7,743,358 3,616,100 9,119,471 Total 693,059,578 602,214,451 88,115,530 77,590,448 11,306,936 87,543 (14,735) 7,491,483 (173,689) (626) 12,633,895 12,277,267 1,628,640 1,490,542 9,207,181 8,841,808 Total 122,964,990 107,517,233 313,314,571 291,782,889 46,727,790 33,664,532 1,624,973 851,909 Total 361,667,334 326,299,330 64,836,646 57,021,980 13,373,647 12,326,423 4,757,998 2,046,418 8,331,247 32,021 25,758 1,249,095 4,149,947 4,234,603 2,483,938 7,058,390 25,761 19,331 998,702 3,997,235 12,562,041 10,287,303 6,906,612 5,613,318 78,762,012 65,730,016 *Includes professional fees, commission to sales agents, card and merchant acquiring expenses and system management fees. Total 197,033,442 169,797,000 HDFC Bank Limited Annual Report 2016-17 78 Schedules to the Financial Statements For the year ended March 31, 2017 SCHEDULE 17 - Signiﬁcant accounting policies appended to and forming part of the ﬁnancial statements for the year ended March 31, 2017 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: 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 the Statement of Proﬁt and Loss to “Capital Reserve” in accordance with the RBI Guidelines. HDFC Bank Limited Annual Report 2016-17 79 Schedules to the Financial Statements For the year ended March 31, 2017 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, repurchase and reverse repurchase transactions in government securities and corporate debt securities 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 is accounted for as interest income. HDFC Bank Limited Annual Report 2016-17 80 Schedules to the Financial Statements For the year ended March 31, 2017 2 Advances Classiﬁcation: Advances are classiﬁed as performing and non-performing based on the RBI guidelines and are stated net of bills rediscounted, inter-bank participation with risk, 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. Non-performing advances 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. 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 are 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. Provision for country risk is included under other liabilities. 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, of a 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 2016-17 81 Schedules to the Financial Statements For the year ended March 31, 2017 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. 3 Securitisation and transfer of assets The Bank securitises out its receivables 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 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’). 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 Bank amortises any proﬁt received for every individual securitisation or direct assignment transaction based on the method prescribed in these guidelines. 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. The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certiﬁcates (PSLCs). In the case of a sale transaction, the Bank sells the fulﬁllment of priority sector obligation and in the case of a purchase transaction the Bank buys the fulﬁllment of priority sector obligation through the RBI trading platform. There is no transfer of risks or loan assets. The fee received for the sale of PSLCs is recorded as ‘Miscellaneous Income’ and the fee paid for purchase of the PSLCs is recorded as ‘Other Expenditure’ in Statement of Proﬁt and Loss. 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 and 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 over the tenor of the loans. 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 HDFC Bank Limited Annual Report 2016-17 82 Schedules to the Financial Statements For the year ended March 31, 2017 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 management believes that the useful life of assets assessed by the Bank, pursuant to the Companies Act, 2013, taking into account changes in environment, changes in technology, the utility and efﬁcacy of the asset in use, fairly reﬂects its estimate of useful lives of the ﬁxed assets. 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 2016-17 83 Schedules to the Financial Statements For the year ended March 31, 2017 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 (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)(cid:87)(cid:69)(cid:73)(cid:71)(cid:72)(cid:84)(cid:69)(cid:68)(cid:0) 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 and loan accounts where restructuring has been approved by the RBI under Strategic Debt Restructuring (SDR) scheme 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. HDFC Bank Limited Annual Report 2016-17 84 Schedules to the Financial Statements For the year ended March 31, 2017 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, where the Bank is reasonably certain of ultimate collection. 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. HDFC Bank Limited Annual Report 2016-17 85 Schedules to the Financial Statements For the year ended March 31, 2017 The overseas branches of the Bank make 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. 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 the outstanding 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 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 HDFC Bank Limited Annual Report 2016-17 86 Schedules to the Financial Statements For the year ended March 31, 2017 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 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) non-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 and gold 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 2016-17 87 Schedules to the Financial Statements For the year ended March 31, 2017 SCHEDULE 18 - Notes forming part of the ﬁnancial statements for the year ended March 31, 2017 Amounts in notes forming part of the ﬁnancial statements for the year ended March 31, 2017 are denominated in rupee crore to conform to extant RBI guidelines. 1 Change in classiﬁcation Pursuant to RBI circular dated May 19, 2016, the Bank has, included its repurchase / reverse repurchase transactions under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) with RBI under ‘Borrowings from RBI’ / ‘Balances with RBI’, as the case may be. Hitherto, these transactions were netted from / included under ‘Investments’. Figures of 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, 2017 and March 31, 2016. 2 Proposed dividend The Board of Directors, at their meeting held on April 21, 2017 have proposed a dividend of ` 11.00 per equity share aggregating ` 3,392.71 crore, inclusive of tax on dividend. The proposal is subject to the approval of shareholders at the Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date’ as notiﬁed by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend from Statement of Proﬁt and Loss for the year ended March 31, 2017. Accordingly, the proposed dividend and the tax thereon, under Appropriations in the Statement of Proﬁt and Loss is lower by ` 2,818.80 crore and ` 573.91 crore respectively and the balance of Other Liabilities is lower by an equivalent amount as at March 31, 2017. However, the effect of the proposed dividend has been reckoned in determining capital funds in the computation of the capital adequacy ratio as at March 31, 2017. 3 Capital adequacy The Bank’s capital to risk-weighted asset ratio (‘Capital Adequacy Ratio’) as at March 31, 2017 is calculated in accordance with the RBI’s guidelines on Basel III capital regulations (‘Basel III’). The phasing in of the minimum capital ratio requirement under Basel III is as follows: Minimum ratio of capital to risk-weighted assets Common equity tier I Tier I capital Total capital (% of RWAs) 2016 6.125 7.625 9.625 As on March 31, 2017 6.750 8.250 10.250 2018 7.375 8.875 10.875 2019 8.000 9.500 11.500 The above minimum CET1, Tier I and Total capital ratio requirement includes capital conservation buffer. 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 (` crore) March 31, 2017 81,829.30 81,829.30 11,302.66 93,131.96 640,029.93 March 31, 2016 70,032.52 70,032.52 12,243.44 82,275.96 529,768.14 12.79% 12.79% 1.76% 14.55% 13.22% 13.22% 2.31% 15.53% Total The Bank has not raised any additional tier I and tier II capital during the years ended March 31, 2017 and March 31, 2016. HDFC Bank Limited Annual Report 2016-17 88 Schedules to the Financial Statements For the year ended March 31, 2017 Subordinated debt (lower Tier II capital), upper Tier II capital and innovative perpetual debt instruments outstanding as at March 31, 2017 are ` 10,402.00 crore (previous year: ` 10,812.00 crore), ` 2,780.00 crore (previous year: ` 4,078.45 crore) and nil (previous year: ` 200.00 crore) respectively. In accordance with RBI guidelines, banks are required to make Pillar 3 disclosures under Basel III capital regulations. The Bank’s Pillar 3 disclosures are available on its website at the following link: http://www.hdfcbank.com/aboutus/basel_ disclosures/default.htm. These Pillar 3 disclosures have not been subjected to audit or review by the statutory auditors. Capital infusion During the year ended March 31, 2017, the Bank allotted 3,43,59,200 equity shares (previous year: 2,16,91,200 equity shares) aggregating to face value ` 6.87 crore (previous year: ` 4.34 crore) in respect of stock options exercised. Accordingly, share capital increased by ` 6.87 crore (previous year: ` 4.34 crore) and share premium increased by ` 2,254.64 crore (previous year: ` 1,218.56 crore). Details of movement in the paid-up equity share capital of the Bank are given below: (` crore) Particulars Opening balance Addition pursuant to stock options exercised Closing balance 4 Earnings per equity share March 31, 2017 March 31, 2016 505.64 6.87 512.51 501.30 4.34 505.64 Basic and diluted earnings per equity share have been calculated based on the net proﬁt after taxation of ` 14,549.66 crore (previous year: ` 12,296.23 crore) and the weighted average number of equity shares outstanding during the year of 2,54,43,33,609 (previous year: 2,51,74,29,120). 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, 2017 March 31, 2016 2.00 57.18 (0.75) 56.43 2.00 48.84 (0.58) 48.26 Basic earnings per equity share has 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 has 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, 2017 March 31, 2016 2,54,43,33,609 2,51,74,29,120 3,40,55,428 3,04,43,320 2,57,83,89,037 2,54,78,72,440 HDFC Bank Limited Annual Report 2016-17 89 Schedules to the Financial Statements For the year ended March 31, 2017 5 Reserves and Surplus Draw down from reserves Share Premium The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2017 and March 31, 2016. Statutory Reserve The Bank has made an appropriation of ` 3,637.41 crore (previous year: ` 3,074.05 crore) out of proﬁts for the year ended March 31, 2017 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, 2017, the Bank appropriated ` 313.41 crore (previous year: ` 222.15 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 ` 1,454.96 crore (previous year: ` 1,229.62 crore) out of proﬁts for the year ended March 31, 2017 to General Reserve. Investment Reserve Account During the year ended March 31, 2017, the Bank has appropriated ` 4.29 crore (net) from Proﬁt and Loss Account to Investment Reserve Account as per RBI guidelines. In the previous year, the Bank had transferred ` 8.52 crore (net) from Investment Reserve Account to Proﬁt and Loss Account as per RBI guidelines. 6 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, 2017, if approved at the ensuing Annual General Meeting. 7 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, Plan “F” in June 2013 and Plan “G” in July 2016. Under the terms of each of these Plans, the Bank may issue to its employees and Whole Time Directors, Equity Stock Options (‘ESOPs’) 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, F and G 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. This closing price is the closing price of the Bank’s equity 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, 2017 and March 31, 2016, no modiﬁcations were made to the terms and conditions of ESOPs as approved by the Nomination & Remuneration Committee. HDFC Bank Limited Annual Report 2016-17 90 Schedules to the Financial Statements For the year ended March 31, 2017 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:23)(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 Number of options Weighted average exercise price (`) 12,86,54,300 - 3,43,59,200 21,38,800 9,21,56,300 5,63,14,000 840.19 - 658.20 972.97 904.97 835.06 (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 Number of 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: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:23)(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 835.50 680.00 468.40 to 680.00 835.50 to 1,097.80 46,44,400 33,34,300 1,50,94,600 6,90,83,000 2.34 2.33 2.18 3.90 690.91 680.00 650.01 985.92 (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 HDFC Bank Limited Annual Report 2016-17 91 Schedules to the Financial Statements For the year ended March 31, 2017 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. No stock options were granted during the year ended March 31, 2017 (previous year: 4,48,36,200). The various assumptions considered in the pricing model for the ESOPs granted during the year ended March 31, 2016 were: Particulars Dividend yield Expected volatility Risk-free interest rate Expected life of the options March 31, 2016 0.73% 23.29% to 26.46% 7.71% to 8.07% 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) 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) 8 Other liabilities March 31, 2017 March 31, 2016 (` crore) 14,549.66 - 812.75 13,736.91 (`) 57.18 53.99 56.43 53.28 12,296.23 - 1,265.93 11,030.30 (`) 48.84 43.82 48.26 43.29 (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) ` 2,392.22 crore as at March 31, 2017 (previous year: ` 2,001.21 crore). These are included under other liabilities. (cid:57) (cid:57) (cid:57) Provision for standard assets is made @ 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, @ 5% on restructured standard advances, @ 2% until after one year from the date on which the rates are reset at higher rates for housing loans offered at a comparatively lower rate of interest in the ﬁrst few years and @ 2% on all exposures to the wholly owned step down subsidiaries of the overseas subsidiaries of Indian companies, sanctioned / renewed after December 31, 2015. Provision towards standard advances under Strategic Debt Restructuring (SDR) scheme is made @ 15% till the outstanding loan / facilities in the account perform satisfactorily during the ‘speciﬁed period’ (as deﬁned in the scheme) and @ 5% for accounts classiﬁed under special mention account “SMA-2” category, 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. 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. HDFC Bank Limited Annual Report 2016-17 92 Schedules to the Financial Statements For the year ended March 31, 2017 (cid:57) (cid:57) Provision for standard assets of overseas branches is made at higher of rates prescribed by the overseas regulator or RBI. For all other loans and advances including credit exposures computed as per the current marked to market values of interest rate and foreign exchange derivative contracts, provision for standard assets is made @ 0.40%. (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 at March 31, 2017 include unrealised loss on foreign exchange and derivative contracts of ` 13,880.38 crore (previous year: ` 7,524.88 crore). 9 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:8)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0) (cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0) conservation buffer) by the Bank as at March 31, 2017 in respect of the unhedged foreign currency exposure of customers was ` 108.31 crore (previous year: ` 114.84 crore) and ` 396.86 crore (previous year: ` 294.57 crore) respectively. 10 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 (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) Particulars Opening balance Add: Provision made during the year Less: Write-off, write back of excess provision during the year Closing balance (cid:8)` crore) March 31, 2017 March 31, 2016 213,407.17 1,120.65 194,583.15 1,372.68 61.85 2.63 213,345.32 1,118.02 119.54 - 194,463.61 1,372.68 (` crore) March 31, 2017 March 31, 2016 119.54 37.33 92.39 64.48 113.99 36.51 30.96 119.54 Movement in provisions held towards depreciation on investments has been reckoned on a yearly basis. HDFC Bank Limited Annual Report 2016-17 93 Schedules to the Financial Statements For the year ended March 31, 2017 (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) (cid:23) Details of repo / reverse repo deals (in face value terms) done during the year ended March 31, 2017: (` 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, 2017 - - - - - - 32,620.54 7,445.30 132.00 30.74 - - - 31,413.37 6,900.12 4,690.56 (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 - - - - - - - 32,530.40 11,097.06 31,950.52 211.60 144.49 132.00 20,106.00 2,868.40 - (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, 2017: (` 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 2,225.18 2,174.65 2 Financial institutions 3 Banks 4 Private corporate 1,400.31 1,360.00 700.36 - 41,069.41 39,337.27 5 Subsidiaries / Joint ventures 3,843.32 3,843.32 6 Others 2,870.54 2,860.53 7 Provision held towards depreciation (64.48) Total 52,044.64 49,575.77 - - - - - - - - - - - - - 33.51 3,793.61 - - - - 33.51 3,793.61 # * 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. HDFC Bank Limited Annual Report 2016-17 94 Schedules to the Financial Statements For the year ended March 31, 2017 (cid:23) Issuer-wise composition of non-SLR investments as at March 31, 2016: (` crore) Sr. No. Issuer 1 Public sector undertakings 2 Financial institutions 3 Banks 4 Private corporate 5 Subsidiaries / Joint ventures 6 Others Amount Extent of private placement# 1,357.71 1,357.71 4,875.28 4,775.38 873.92 1.00 24,911.15 23,242.35 2,782.96 2,782.96 3,493.73 3,490.73 7 Provision held towards depreciation (119.54) Total 38,175.21 35,650.13 Extent of “below investment grade” securities# Extent of “unrated” securities# * Extent of “unlisted” securities# ** - - - - - - - - - - - - - 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)(cid:3) Non-performing non-SLR investments: 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)(cid:0) March 31, 2017 March 31, 2016 (` crore) 87.02 34.61 70.06 51.57 38.02 101.30 19.13 33.41 87.02 84.33 The details of investments held under the three categories viz. Held for Trading (HFT), Available for Sale (AFS) and Held (` crore) to Maturity (HTM) are as under: Particulars As at March 31, 2017 As at March 31, 2016 HFT AFS HTM Total HFT AFS HTM Total Government securities 1,736.34 35,614.27 125,068.09 162,418.70 5,444.11 46,212.83 106,004.14 157,661.08 Other approved securities Shares - - - 114.21 - - - 114.21 - - - 76.74 - - - 76.74 Debentures and bonds 1,734.61 17,550.42 1,300.00 20,585.03 1,474.90 4,282.31 500.00 6,257.21 Subsidiary / Joint ventures Others - - - 3,843.32 3,843.32 27,502.08 - 27,502.08 - - - 2,782.96 2,782.96 29,058.30 - 29,058.30 (cid:115)(cid:0) (cid:115)(cid:0) 195,836.29 (cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(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:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(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:68)(cid:65)(cid:84)(cid:69)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:82)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:80)(cid:65)(cid:80)(cid:69)(cid:82)(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)` 24,494.53 crore (previous year: ` 25,431.18 crore). 130,211.41 214,463.34 109,287.10 80,780.98 79,630.18 3,470.95 6,919.01 Total (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:0)(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 ` 1,520.00 crore) which are kept as margin for clearing of securities, of FV ` 24,488.31 crore (previous year: FV ` 13,729.30 crore) which are kept HDFC Bank Limited Annual Report 2016-17 95 Schedules to the Financial Statements For the year ended March 31, 2017 (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) as margin for Collateralised Borrowing and Lending Obligation (CBLO) and of FV aggregating ` 100.00 crore (previous year: FV ` 56.00 crore) which are kept as margin for Forex Forward segment - Default Fund with the Clearing Corporation of India Limited (CCIL). (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 Limited (NSCCIL), of FV aggregating ` 13.00 crore (previous year: FV ` 13.00 crore) which are kept as margin with Metropolitan Clearing Corporation of India Limited and of FV aggregating ` 5.00 crore (previous year: ` 1.00 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)` 42,730.27 crore (previous year: FV ` 35,937.22 crore) are kept as margin towards Real Time Gross Settlement (RTGS) and those having FV aggregating ` 41,473.92 crore (previous year: ` 13,091.46 crore) are kept as margin towards repo transactions with the RBI. (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: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)` 11.05 crore (previous year: FV ` 10.05 crore) are kept as margin for Forex Settlement Default Fund, of FV aggregating ` 75.40 crore (previous year: ` 85.40 crore) are kept as Cash Margin, of FV aggregating ` 65.00 crore (previous year: nil) are kept as margin for Securities Segment Default Fund, of FV aggregating ` 25.00 crore (previous year: nil) are kept as margin for CBLO Segment Default Fund and of FV aggregating ` 41.00 crore (previous year: ` 11.00 crore) are kept as margin for Rupee Derivatives Guaranteed Settlement Default Fund with CCIL. (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. (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:23)(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)(cid:40)(cid:52)(cid:45)(cid:0) 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 at March 31, 2017 was ` 128,886.02 crore and was higher than the book value thereof as at that date. In accordance with the RBI guidelines, sale from, and transfer to / from, HTM category excludes the: (cid:57)(cid:3) one-time transfer of the 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; and repurchase of Government securities by Government of India from banks. 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 2016, in addition to the shifting permitted at the beginning of the accounting year, i.e, April 2016. 11 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:26)(cid:0) (cid:0) (cid:0)(cid:8)` crore) Sr. No. i) ii) Particulars March 31, 2017 March 31, 2016 The total notional principal of swap agreements 238,644.16 220,137.21 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 917.35 69.96% - 45.32 912.36 83.02% - (48.40) * Interest Rate Swaps are comprised of INR Interest Rate Swaps and FCY Interest Rate Swaps. ** Concentration of credit risk arising from swaps is with banks as at March 31, 2017 and March 31, 2016. HDFC Bank Limited Annual Report 2016-17 96 Schedules to the Financial Statements For the year ended March 31, 2017 The nature and terms of rupee IRS as on March 31, 2017 are set out below: Nature Trading Trading Trading Trading Trading Trading Trading Trading Nos. Notional principal (` crore) Benchmark Terms 6 6 4 1,179 1,167 292 218 7 225.00 INBMK 375.00 INBMK Fixed receivable v/s ﬂoating payable Floating receivable v/s ﬁxed payable 1,250.00 INCMT Floating receivable v/s ﬁxed payable 78,502.69 76,008.42 OIS OIS 21,019.00 MIFOR 12,959.00 MIFOR Fixed receivable v/s ﬂoating payable Floating receivable v/s ﬁxed payable Fixed receivable v/s ﬂoating payable Floating receivable v/s ﬁxed payable 450 MIOIS Floating receivable v/s ﬁxed payable Total 190,789.11 The nature and terms of foreign currency IRS as on March 31, 2017 are set out below: Nature Trading Trading Trading Trading Trading Trading Hedging Nos. Notional principal (` crore) Benchmark Terms 1 1 2 2 110 194 3 17.80 GBP Libor Fixed receivable v/s ﬂoating payable 17.80 GBP Libor Floating receivable v/s ﬁxed payable 692.93 EURIBOR Fixed receivable v/s ﬂoating payable 692.93 EURIBOR Floating receivable v/s ﬁxed payable 18,404.28 USD Libor Fixed receivable v/s ﬂoating payable 24,786.81 USD Libor Floating receivable v/s ﬁxed payable 3,242.50 USD Libor Fixed receivable v/s ﬂoating payable Total 47,855.05 There were no foreign currencies FRA outstanding as at March 31, 2017. The nature and terms of rupee IRS as on March 31, 2016 are set out below: Nature Nos. Notional principal (` crore) Benchmark Terms Trading Trading Trading Trading Trading Trading Trading Trading 7 8 4 944 901 323 239 8 275.00 INBMK 450.00 INBMK Fixed receivable v/s ﬂoating payable Floating receivable v/s ﬁxed payable 1,250.00 INCMT Floating receivable v/s ﬁxed payable 67,667.84 61,759.95 OIS 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 2016-17 97 Schedules to the Financial Statements For the year ended March 31, 2017 The nature and terms of foreign currency IRS as on March 31, 2016 are set out below: Nature Nos. Notional principal (` crore) Benchmark Terms Trading Trading Trading Trading Trading Trading Hedging Hedging 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 Trading Trading Nos. Notional principal (` crore) Benchmark Terms 1 1 214.63 USD Libor Payable FRA 214.63 USD Libor Receivable FRA Total 429.26 (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, 2017 March 31, 2016 Sr. No. i) ii) iii) The total notional principal amount of exchange traded interest rate derivatives undertaken during the years reported 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. Nil 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 2016-17 98 Schedules to the Financial Statements For the year ended March 31, 2017 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. These instruments are carried at fair value, determined based on either FEDAI rates or 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 the trade 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 applicable 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 or 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 2016-17 99 Schedules to the Financial Statements For the year ended March 31, 2017 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, GAP limit, scenario based proﬁt and loss limit for option portfolio and value-at-risk limits that are recommended by the Risk Policy and Monitoring Committee (‘RPMC’) to the Board of Directors for approval. All methodologies used to assess market and credit risks for derivative transactions are speciﬁed by the credit and 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 and the Board of Directors. 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, is 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 2016-17 100 Schedules to the Financial Statements For the year ended March 31, 2017 (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, 2017 March 31, 2016 March 31, 2017 March 31, 2016 1 Derivatives (notional principal amount) a) Hedging b) Trading 2 Marked to Market positions 156.95 160.35 3,242.50 6,161.72 32,999.13 36,149.17 235,908.28 214,575.93 a) Asset (+) b) Liability (-) Credit Exposure 649.32 740.09 918.74 911.43 (571.42) (494.47) (857.33) (964.86) 2,487.65 2,114.96 2,941.53 2,355.78 3 4 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 0.08 25.70 0.09 35.47 0.02 21.27 0.09 35.06 0.21 39.41 0.02 0.21 15.79 19.11 43.06 79.70 15.79 19.11 32.24 30.84 44.04 116.25 30.02 30.84 (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 at March 31, 2017 amounted to ` 6,302.40 crore (previous year: ` 23,182.85 crore) and ` 463,627.74 crore (previous year: ` 505,892.93 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. HDFC Bank Limited Annual Report 2016-17 101 Schedules to the Financial Statements For the year ended March 31, 2017 (cid:57) 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. 12 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 March 31, 2017* March 31, 2016 0.33% 0.28% 4,392.83 3,438.38 (b) Additions (fresh NPAs) during the year 7,126.17 5,712.64 (c) Reductions during the year: - Upgradation 5,633.34 4,758.19 1,519.42 1,377.12 - Recoveries (excluding recoveries made from upgraded accounts) 1,727.98 1,438.65 - 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 2,385.94 1,942.42 5,885.66 4,392.83 1,320.37 896.28 2,357.87 1,968.39 1,834.25 1,544.30 1,843.99 1,320.37 3,072.46 2,542.10 4,768.30 3,744.25 2,385.94 1,942.42 1,413.15 1,271.47 4,041.67 3,072.46 NPAs include all loans, investments and foreign exchange and derivatives that are classiﬁed as non-performing by the Bank. HDFC Bank Limited Annual Report 2016-17 102 Schedules to the Financial Statements For the year ended March 31, 2017 *The RBI, vide its circulars dated November 21, 2016 and December 28, 2016, had given banks, in respect of certain eligible working capital accounts and loans of ` 1 crore or less, an additional 60 / 90 days for reckoning days past due for classiﬁcation as NPAs. Eligible accounts which were more than 90 days overdue as at March 31, 2017 have been classiﬁed as non-performing as at that date without the Bank availing of the said dispensation. These accounts otherwise would have been classiﬁed as NPAs subsequent to March 31, 2017. (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 is given below: Particulars March 31, 2017 March 31, 2016 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 - - - - - - - - (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 provision of ` 1,248.01 crore (previous year: ` 1,335.64 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, 2017 March 31, 2016 1,335.64 1,523.22 25.00 115.00 (112.63) (302.58) 1,248.01 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. (cid:0)(cid:115)(cid:0) Divergence in the asset classiﬁcation and provisioning There was no divergence observed by the RBI for the ﬁnancial year 2015-16 in respect of the Bank’s asset classiﬁcation and provisioning under the extant prudential norms on Income Recognition, Asset Classiﬁcation and Provisioning (IRACP). HDFC Bank Limited Annual Report 2016-17 103 Schedules to the Financial Statements For the year ended March 31, 2017 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 ) s r e b m u n t p e c x e , e r o r c ` ( (cid:26) (cid:23) (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) 9 1 6 6 . 6 9 4 6 4 . 9 - 0 7 . 0 - - - - - - - - - - - - - - - - - - - 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 - - 4 2 . 0 6 4 . 0 - 3 - 1 5 . 3 6 - 7 8 . 0 - - - - - - - - 3 + - 4 2 . 0 - 1 + 1 5 . 3 6 3 5 . 3 7 8 . 0 1 5 . 0 - - - - - - - - - - 4 2 . 0 - - - - - - - - - - 5 2 2 0 7 . 8 1 9 6 . 6 2 6 4 . 2 7 1 7 7 . 0 2 6 . 1 0 0 . 4 3 + 1 - 1 - 1 - 5 0 . 8 4 6 . 8 1 5 4 . 3 1 - 4 2 . 3 1 - 7 1 . 0 + 5 4 . 1 + 2 6 . 0 - 0 0 . 1 - - - - - - - - - - 3 + 3 - 2 + 2 - 5 0 . 8 + 4 6 . 8 1 + 9 6 . 6 2 - 7 1 . 0 + 5 4 . 1 + 2 6 . 1 - 4 - 2 1 1 1 - - 2 8 . 5 8 1 9 8 . 0 0 1 . 7 1 1 5 6 . 1 4 8 1 . 6 2 5 4 . 8 9 8 . 0 3 0 . 4 5 1 3 6 1 5 9 3 4 4 5 . 1 1 3 6 1 . 7 3 5 . 0 6 0 7 . 3 1 5 1 . 0 3 2 7 1 . 3 1 2 6 1 . 7 5 5 . 3 3 3 0 . 6 5 1 . 0 8 8 . 1 0 0 . 1 0 0 . 3 9 0 . 2 5 1 . 0 4 4 . 1 - - - - - - - - 1 + 3 5 . 3 1 5 . 0 - - - - - - 1 2 3 5 . 3 6 4 . 2 7 1 0 5 . 0 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - i . t h g e w k s i r - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0 1 1 8 . 8 7 2 7 0 . 3 - 6 4 . 0 - 1 - 3 5 . 3 - 1 5 . 0 - - - - - - - 3 7 3 . 7 7 1 6 7 3 . 8 9 4 9 . 3 - - - - - - - - - - - - - - - - - 7 1 2 s r e w o r r o b f o . o N 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 1 - 2 - 1 5 . 3 6 - 7 8 . 0 - - - 6 4 . 0 - - - - 0 5 . 1 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 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 8 9 . 9 5 i g n d n a t s t u o t n u o m A 6 3 . 0 n o e r e h t n o i s i v o r P 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 2 + 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 - - - 2 1 + 1 - s r e w o r r o b f o . o N 4 2 . 3 1 + 4 2 . 3 1 - i g n d n a t s t u o t n u o m A 0 0 . 1 + 0 0 . 1 - n o e r e h t n o i s i v o r P 1 - s r e w o r r o b f o . o N 7 0 . 3 1 1 5 6 . 1 4 5 6 . 2 2 i g n d n a t s t u o t n u o m A 2 1 3 s r e w o r r o b f o . o N 8 9 . 6 2 0 7 . 3 1 9 6 . 7 5 i g n d n a t s t u o t n u o m A 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 t a * 7 1 0 2 6 7 - - - 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 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 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 4 4 . 0 0 0 . 1 0 5 . 2 n o e r e h t n o s v o r P i i 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 t a * 6 1 0 2 (cid:7) s l i a t e D . r S . o N 1 HDFC Bank Limited Annual Report 2016-17 104 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 . 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 s a d e t r o p e r e b o t d e r i u q e r r e g n o l o n s i ) t n u o c c a 1 ( e r o r c 5 0 . 0 ` 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 3 5 . 4 ` i i n o s v o r p d n a s t n u o c c a 5 1 ( e r o r c 1 9 . 5 5 . 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 g n i t s x e i o t ) e r o r c 0 5 . 1 i i ` n o s v o r p 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 7 . 0 ` ` e d u c n l i e d u c n l i # # 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 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 . d e r u t c u r t s e r * ^ # Schedules to the Financial Statements For the year ended March 31, 2017 ) s r e b m u n t p e c x e , e r o r c ` ( (cid:26) (cid:22) (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 0 2 4 4 . 6 1 5 7 4 . 5 2 3 2 2 . 7 2 6 7 . 0 - - - - - - - - - 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 3 2 . 0 + 8 5 . 0 + 1 8 . 0 - 1 0 . 1 5 8 . 1 2 1 . 4 5 2 2 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 (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 t a * 5 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 - - - - - - - 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 t a * 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 i s i v o r P 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 . 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 g n i t s x e i o t ) e r o r c 1 1 . 6 ` n o s v o r p i i 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 . r a e y t x e n e h t f o 0 8 . 4 1 ` e d u c n l i s a d e t r o p e r e b o t d e r i u q e r 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 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 . d e r u t c u r t s e r i i i r o g n n o s v o r p r e h g h t c a r t t a t o n i 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 2016-17 105 Schedules to the Financial Statements For the year ended March 31, 2017 (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) March 31, 2017 March 31, 2016 Particulars 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 Provision made to meet shortfall in sale of NPA Amount of unamortised provision debited to ‘other reserve’ (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:8)(cid:51)(cid:50)(cid:83)(cid:9)(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) - - - - - - - 1 3.96 2.95 - (1.01) (1.01) - (` crore) Total March 31, 2017 Particulars (i) Backed by NPAs sold by the Bank as underlying Provision held against (i) (ii) Backed by NPAs sold by other banks / ﬁnancial institutions / non-banking ﬁnancial companies as underlying Provision held against (ii) SRs issued within past 5 years 195.34 - 17.17 - Total 212.51 Particulars (i) Backed by NPAs sold by the Bank as underlying Provision held against (i) (ii) Backed by NPAs sold by other banks / ﬁnancial institutions / non-banking ﬁnancial companies as underlying Provision held against (ii) SRs issued within past 5 years 202.92 - 28.91 - Total 231.83 SRs issued more than 5 years ago but within past 8 years SRs issued more than 8 years ago 0.52 - 10.12 - 10.64 - - - - - 195.86 - 27.29 - 223.15 SRs issued more than 5 years ago but within past 8 years SRs issued more than 8 years ago Total March 31, 2016 0.88 - 7.14 - 8.02 - - - - - 203.80 - 36.05 - 239.85 (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (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: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:23)(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:22)(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:83)(cid:79)(cid:76)(cid:68)(cid:12)(cid:0)(cid:69)(cid:88)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0) 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:23)(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:22)(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)(cid:84)(cid:72)(cid:69)(cid:0) 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, 2017 and as at March 31, 2016. (cid:33)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0)under the Scheme for Sustainable Structuring of Stressed Assets (S4A), as on March 31, 2017: Nil HDFC Bank Limited Annual Report 2016-17 106 Schedules to the Financial Statements For the year ended March 31, 2017 (cid:115)(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:79)(cid:78)(cid:0)(cid:51)(cid:84)(cid:82)(cid:69)(cid:83)(cid:83)(cid:69)(cid:68)(cid:0)(cid:33)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (cid:0) (i) Disclosures on Flexible Structuring of Existing Loans (` crore, except numbers) Financial year ended No. of borrowers taken up for ﬂexible structuring March 31, 2017 March 31, 2016 1 1 Amount of loans taken up for ﬂexible structuring Classiﬁed as Standard 39.12* 166.67 Classiﬁed as NPA - - Exposure weighted average duration of loans taken up for ﬂexible structuring Before applying ﬂexible structuring 8 years 5 years After applying ﬂexible structuring 9.5 years 20 years # * approval from Independent Evaluation Committee (IEC) is awaited. # reﬁnancing proposed at the end of 8 years. (ii) Disclosures on Strategic Debt Restructuring Scheme (accounts which are currently under the stand-still period) (` crore, except numbers) No. of accounts where SDR has been invoked 1 Amount outstanding as at March 31, 2017 Classiﬁed as standard 73.06 Classiﬁed as NPA - Amount outstanding as at March 31, 2017 with respect to accounts where conversion of debt to equity is pending Classiﬁed as standard - Classiﬁed as NPA - Amount outstanding as at March 31, 2017 with respect to accounts where conversion of debt to equity has taken place Classiﬁed as NPA - Classiﬁed as standard 73.06* *of which ` 32.87 crore of loans where conversion to equity has taken place. (iii) Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period): Nil (iv) Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period): Nil 13 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, 2017 March 31, 2016 65,289.89 42,401.22 49,428.76 32,245.03 (of which housing loans eligible for inclusion in priority sector advances) (18,951.24) (18,697.97) (ii) Commercial real estate 22,877.26 17,118.59 (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) 11.41 - 17,832.36 17,832.36 65.14 - 14,490.76 14,490.76 Total exposure to real estate sector 83,122.25 63,919.52 *includes loans purchased under the direct loan assignment route Of the above, exposure to real estate developers as at March 31, 2017 is 0.5% (previous year: 0.5%) of total advances. HDFC Bank Limited Annual Report 2016-17 107 Schedules to the Financial Statements For the year ended March 31, 2017 (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, 2017 March 31, 2016 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 90.97 86.50 186.94 158.75 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 3,604.58 3,133.85 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 169.59 48.31 Secured and unsecured advances to stock brokers and guarantees issued on behalf of stock brokers and market makers 8,165.08 6,881.17 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 1,390.31 2,576.32 (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) 0.25 0.20 Total exposure to capital market 13,607.72 12,885.10 (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, 2017 March 31, 2016 Exposure (net) Provision held Exposure (net) Provision held 17,177.70 9,653.78 247.75 164.44 9.48 - - Total 27,253.15 - - - - - - - - 13,857.28 8,222.23 370.13 143.82 20.23 5.25 - 22,618.94 - - - - - - - - HDFC Bank Limited Annual Report 2016-17 108 Schedules to the Financial Statements For the year ended March 31, 2017 (cid:115)(cid:0) (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 at March 31, 2017 is ` 2,036.11 crore (previous year: ` 3,515.98 crore). (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, 2017 and March 31, 2016 the Bank was within the limits prescribed by the RBI. (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 at March 31, 2017 (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 at March 31, 2017 was ` 7,500.00 crore (previous year: ` 6,450.00 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 Particulars Total deposits of twenty largest depositors Percentage of deposits of twenty largest depositors to total deposits of the Bank (` crore) March 31, 2017 March 31, 2016 35,562.76 28,890.12 5.5% 5.3% 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, 2017 March 31, 2016 83,962.09 81,781.38 9.4% 11.9% 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, 2017 March 31, 2016 Total exposure to twenty largest borrowers / customers 90,046.09 89,137.40 Percentage of exposure of twenty largest borrowers / customers to total exposure of the Bank on borrowers / customers 9.5% 12.3% Exposures comprise credit exposure (funded and non-funded credit limits) including derivative transactions and investment exposure in accordance with RBI guidelines. d) Concentration of NPAs (` crore) Particulars March 31, 2017 March 31, 2016 Total gross exposure to top four NPA accounts 588.99 497.16 HDFC Bank Limited Annual Report 2016-17 109 Schedules to the Financial Statements For the year ended March 31, 2017 e) Sector-wise advances Sector Sr. No. (` crore) March 31, 2017 March 31, 2016 Outstanding total advances Gross non- performing loans Percentage of gross non-performing loans to total advances in that sector Outstanding total advances Gross non- performing loans Percentage of gross non-performing loans to total advances in that sector A Priority sector 1 Agriculture and allied activities 63,186.16 1,279.98 2.03% 52,867.24 2 Advances to industries eligible 26,209.92 480.78 1.83% 24,059.96 764.18 386.90 as priority sector lending 3 Services 52,361.67 678.46 1.30% 44,202.22 431.43 4 Personal loans 22,350.27 14.43 0.06% 21,730.26 79.58 Sub-total (A) 164,108.02 2,453.65 1.50% 142,859.68 1,662.09 B Non Priority sector 1 Agriculture and allied activities 6,905.78 74.89 1.08% 7,303.08 2 Industry 3 Services 127,366.08 1,243.07 0.98% 98,854.02 127,937.51 1,037.87 0.81% 104,002.56 4 Personal loans 132,249.25 1,016.40 0.77% 114,560.04 85.77 793.83 967.17 788.74 Sub-total (B) 394,458.62 3,372.23 0.85% 324,719.70 2,635.51 Total (A) + (B) 558,566.64 5,825.88 1.04% 467,579.38 4,297.60 (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:48)(cid:82)(cid:73)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:51)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:44)(cid:69)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:35)(cid:69)(cid:82)(cid:84)(cid:73)(cid:108)(cid:67)(cid:65)(cid:84)(cid:69)(cid:83)(cid:0)(cid:8)(cid:48)(cid:51)(cid:44)(cid:35)(cid:83)(cid:9)(cid:0) (cid:0) 1.45% 1.61% 0.98% 0.37% 1.16% 1.17% 0.80% 0.93% 0.69% 0.81% 0.92% (cid:8)` crore) Type of PSLCs For the year ended March 31, 2017 PSLC bought during the year PSLC sold during the year Agriculture Small and Marginal farmers Micro Enterprises General 14 Other ﬁxed assets - 3,269.50 - - Total 3,269.50 500.00 21.25 - 1,000.00 1,521.25 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, 2017 March 31, 2016 1,737.09 402.61 - Total (a) 2,139.70 1,575.65 161.45 (0.01) 1,737.09 HDFC Bank Limited Annual Report 2016-17 110 Schedules to the Financial Statements For the year ended March 31, 2017 Particulars Depreciation As at March 31 of the previous year Charge for the year On deductions during the year March 31, 2017 March 31, 2016 (` crore) 1,218.53 255.23 - 1,473.76 665.94 1,022.83 195.71 (0.01) 1,218.53 518.56 Total (b) Net value (a-b) 15 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)` 2,447.34 crore (previous year: ` 2,116.62 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, 2017 March 31, 2016 2,079.97 1,748.18 167.38 321.47 148.17 314.12 Total (a) 2,568.82 2,210.47 (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) Total (b) Deferred tax asset (net) (a-b) (121.48) (121.48) 2,447.34 (93.85) (93.85) 2,116.62 (cid:0)(cid:0)(cid:0)(cid:0)(` crore) Particulars March 31, 2017 March 31, 2016 Deposit with NABARD / SIDBI / NHB - PSL shortfall 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 11,882.37 14,014.05 2,447.34 1,740.75 1,568.79 - 2.50 13,719.68 8,566.14 2,116.62 1,282.19 1,274.66 1,344.51 2.41 *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 31,655.80 28,306.21 HDFC Bank Limited Annual Report 2016-17 111 Schedules to the Financial Statements For the year ended March 31, 2017 l a t o T r e v O s r a e y 5 3 r e v O o t s r a e y s r a e y 5 1 r e v O o t r a e y s r a e y 3 o t s h t n o m o t s h t n o m o t o t 6 r e v O 3 r e v O s h t n o m 2 s y a d 1 3 r a e y 1 s h t n o m 6 s h t n o m 3 s h t n o m 2 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 7 1 0 2 , 1 3 0 2 . 8 6 5 , 4 5 5 0 2 . 4 1 3 , 4 4 9 6 . 4 1 1 , 5 5 8 8 . 4 7 0 , 6 4 2 6 9 . 9 0 9 , 3 6 9 4 . 3 8 6 , 4 4 0 9 . 0 9 7 , 2 2 2 1 . 0 0 1 , 3 2 6 1 . 7 8 4 , 3 2 8 1 . 9 6 4 , 9 6 5 . 4 8 0 , 5 1 6 0 . 9 3 5 , 6 s e c n a v d a & s n a o L 4 3 . 3 6 4 , 4 1 2 6 5 . 1 0 6 , 0 3 9 5 . 4 4 9 , 7 6 4 . 6 8 1 , 0 6 3 4 . 7 5 0 , 0 2 5 3 . 0 8 3 , 3 1 4 7 . 7 6 6 , 0 1 6 0 . 2 6 8 , 0 1 5 5 . 9 1 0 , 8 7 9 . 3 6 5 , 5 9 2 . 5 8 7 , 5 4 3 . 4 9 3 , 1 4 s t n e m t s e v n I 6 6 . 9 3 6 , 3 4 6 1 8 . 5 0 8 , 2 1 1 2 8 . 4 9 4 , 3 1 2 7 . 4 8 5 , 7 8 2 2 7 . 0 9 7 , 9 6 1 6 . 5 7 9 , 3 4 4 3 . 8 7 7 , 3 2 6 4 . 5 2 7 , 3 2 5 5 . 1 3 2 , 4 1 6 5 . 2 8 9 , 6 1 7 5 . 3 3 9 , 6 2 0 5 . 6 3 3 , 0 1 s t i s o p e D 7 8 . 8 2 0 , 4 7 0 0 . 5 6 1 , 6 1 0 9 . 9 1 3 , 6 0 5 . 3 4 5 , 2 1 3 3 . 8 7 1 , 6 1 4 7 . 1 3 4 , 6 9 2 . 8 8 5 , 2 5 8 . 2 7 0 , 5 6 1 . 5 4 5 , 3 8 0 . 2 2 6 , 1 1 7 . 8 4 2 , 3 1 3 . 3 1 3 i s g n w o r r o B 6 0 . 2 2 3 , 3 4 2 3 . 3 0 3 0 9 . 4 2 7 , 1 9 1 . 7 4 2 , 4 9 0 . 6 3 6 , 3 1 8 . 8 4 4 , 4 2 9 . 2 3 5 , 3 4 5 . 3 9 4 , 3 4 3 . 3 9 3 , 5 5 0 . 2 3 4 , 2 8 4 . 1 2 5 , 9 2 4 . 8 8 5 , 4 9 5 . 6 7 2 , 6 4 5 7 . 1 3 2 , 1 1 5 . 4 8 7 , 1 6 6 . 0 0 4 , 1 1 7 4 . 6 8 4 , 7 0 0 . 7 8 4 , 4 5 3 . 2 1 2 , 3 9 9 . 3 1 7 , 5 3 2 . 6 5 3 , 4 7 6 . 4 4 1 , 2 6 7 . 3 6 8 , 2 0 2 . 5 9 5 , 1 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 r e v O s r a e y 5 3 r e v O o t s r a e y s r a e y 5 1 r e v O o t r a e y s r a e y 3 o t s h t n o m o t s h t n o m o t o t 6 r e v O 3 r e v O s h t n o m 2 s y a d 1 3 r a e y 1 s h t n o m 6 s h t n o m 3 s h t n o m 2 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 9 2 . 6 3 8 , 5 9 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 0 3 . 2 0 3 , 9 3 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 9 9 . 8 6 9 , 4 8 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 3 9 . 4 4 0 , 4 3 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 ` ( . 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 6 1 HDFC Bank Limited Annual Report 2016-17 112 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 i l . 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, 2017 17 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) Provision pertaining to fraud accounts Particulars March 31, 2017 March 31, 2016 306.36 334.24 (209.36) 431.24 200.07 179.50 (73.21) 306.36 (` crore) March 31, 2017 March 31, 2016 344.56 (32.66) 311.90 354.91 (10.35) 344.56 No. of frauds reported during the year Amount involved in fraud (` crore) Amount involved in fraud net of recoveries / write-offs as at the end of the year (` crore) Provisions held as at the end of the year (` crore) Amount of unamortised provision debited from “other reserves” as at the end of the year (` crore) d) Description of contingent liabilities Sr. No. Contingent liability* Brief description March 31, 2017 2,319 165.20 20.83 20.83 - 1 2 3 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. HDFC Bank Limited Annual Report 2016-17 113 Schedules to the Financial Statements For the year ended March 31, 2017 Sr. No. Contingent liability* Brief description 4 5 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; e) Investment purchases pending settlement; f) Amount transferred to the RBI under the Depositor Education and Awareness Fund (DEAF). *Also refer Schedule 12 - Contingent liabilities (cid:17)(cid:24)(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 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 March 31, 2017 March 31, 2016 8.95% 4.28% 1.59% 3.32% 1.88% 12.36 0.16 1.05% 1.04% 0.33% 9.25% 4.24% 1.65% 3.28% 1.89% 11.39 0.15 0.94% 0.92% 0.28% Provision coverage ratio8 68.67% 69.94% 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 and proﬁt / (loss) on sale of building and other assets (net). 3. 4. “Business” is the total of average 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. 19 Interest income Interest income under the sub-head Income from Investments includes dividend received during the year ended March 31, 2017 on units of mutual funds, equity and preference shares amounting to ` 256.64 crore (previous year: ` 182.03 crore). HDFC Bank Limited Annual Report 2016-17 114 Schedules to the Financial Statements For the year ended March 31, 2017 20 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, 2017 and March 31, 2016, 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 at 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, 2017 was ` 224.31 crore (previous year: ` 225.65 crore) and outstanding servicing liability was ` 0.07 crore (previous year: ` 0.10 crore). 21 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, 2017 includes fees of ` 798.35 crore (previous year: ` 661.75 crore) in respect of life insurance business and ` 157.58 crore (previous year: ` 156.13 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 ` 864.31 crore (previous year: ` 807.99 crore). 22 Other expenditure Other expenditure includes commission paid to sales agents amounting to ` 1,906.80 crore (previous year: ` 1,671.88 crore), exceeding 1% of the total income of the Bank. 23 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 NPAs Provision for diminution in value of non-performing investments Provision for standard assets Other provisions and contingencies* March 31, 2017 March 31, 2016 7,916.97 (327.54) 3,145.30 (7.64) 392.18 63.46 6,507.59 (165.88) 2,133.63 15.17 440.00 136.81 Total 11,182.73 9,067.32 *Includes provisions for tax, legal and other contingencies ` 38.34 crore (previous year: ` 37.28 crore), ﬂoating provisions ` 25.00 crore (previous year: ` 115.00 crore), provisions / (write-back) for securitised-out assets ` 2.62 crore (previous year: ` (2.85) crore) and standard restructured assets ` (2.50) crore (previous year: ` (12.62) crore). HDFC Bank Limited Annual Report 2016-17 115 Schedules to the Financial Statements For the year ended March 31, 2017 24 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 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 HDFC Bank Limited Annual Report 2016-17 116 (` crore) March 31, 2017 March 31, 2016 390.47 26.36 62.57 (38.49) 35.48 11.61 488.00 287.93 22.52 47.95 (38.49) 32.44 3.22 355.57 355.57 (488.00) (132.43) 26.36 62.57 (22.52) 11.42 77.83 58.18 73.21 310.59 22.38 53.78 (24.30) 16.24 11.78 390.47 242.88 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 7.1% per annum 7.5% per annum 7.0% per annum 8.0% per annum 8.0% per annum 8.0% per annum Schedules to the Financial Statements For the year ended March 31, 2017 Experience adjustment 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, 2017 355.57 488.00 2016 287.93 390.47 (132.43) (102.54) 32.44 35.48 (13.69) 16.24 2015 242.88 310.59 (67.71) 21.35 4.59 2014 172.60 237.43 (64.83) 1.87 5.87 (` crore) 2013 130.22 206.28 (76.06) 2.00 2.72 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, 2017 are given below: Category of plan assets Government securities Debenture and bonds Equity shares Others Pension Particulars % of fair value to total plan assets as at March 31, 2017 28.0% 27.0% 40.8% 4.2% 100.0% Total March 31, 2017 March 31, 2016 (` 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 70.88 4.80 1.23 (6.62) 4.65 (1.39) 73.55 38.38 2.61 1.03 (6.62) 0.39 57.45 3.92 1.12 (10.18) 17.35 1.22 70.88 41.91 3.21 2.01 (10.18) 1.43 HDFC Bank Limited Annual Report 2016-17 117 Schedules to the Financial Statements For the year ended March 31, 2017 Particulars 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 Experience adjustment Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) March 31, 2017 March 31, 2016 (` crore) 0.37 36.16 36.16 (73.55) (37.39) 4.80 1.23 (2.61) 2.50 5.92 3.37 7.18 - 38.38 38.38 (70.88) (32.50) 3.92 1.12 (3.21) 17.14 18.97 4.64 14.00 7.1% per annum 7.5% per annum 7.0% per annum 8.0% per annum 8.0% per annum 8.0% per annum (` crore) Years ended March 31, 2017 2016 2015 2014 2013 36.16 73.55 38.38 70.88 41.91 57.45 47.99 58.89 (37.39) (32.50) (15.54) (10.90) 48.88 58.19 (9.31) (1.58) 6.12 Experience adjustment gain / (loss) on plan assets Experience adjustment (gain) / loss on plan liabilities 0.39 4.65 1.43 17.35 (2.38) (0.19) 3.45 3.62 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, 2017 are given below: Category of plan assets Government securities Debenture and bonds Others % of fair value to total plan assets as at March 31, 2017 6.9% 87.7% 5.4% 100.0% Total HDFC Bank Limited Annual Report 2016-17 118 Schedules to the Financial Statements For the year ended March 31, 2017 Provident fund 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 at March 31, 2017 (previous year: Nil), 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, 2017 March 31, 2016 7.1% per annum 7.5% per annum 8.7% per annum 9.0% per annum The Bank does not have any unfunded deﬁned beneﬁt plan. The Bank contributed ` 216.86 crore (previous year: ` 189.00 crore) to the provident fund and ` 78.67 crore (previous year: ` 56.54 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, 2017 March 31, 2016 237.24 52.95 290.19 222.07 47.40 269.47 7.1% per annum 7.5% per annum 8.0% per annum 8.0% per annum 25 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)(cid:36)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83) 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. HDFC Bank Limited Annual Report 2016-17 119 Schedules to the Financial Statements For the year ended March 31, 2017 External Consultants 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)(cid:0) 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: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) (cid:0) (cid:0) (cid:0) 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 84,041as at March 31, 2017 (previous year: 87,263). (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) 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 HDFC Bank Limited Annual Report 2016-17 120 Schedules to the Financial Statements For the year ended March 31, 2017 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. 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. The deferred bonus is paid out post review and approval by the NRC. 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 HDFC Bank Limited Annual Report 2016-17 121 Schedules to the Financial Statements For the year ended March 31, 2017 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: (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 during the year and there were no material changes. 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. 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 NRC grants options 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. With effect from April 1, 2017, the Bank has HDFC Bank Limited Annual Report 2016-17 122 Schedules to the Financial Statements For the year ended March 31, 2017 amended its policy for grant of ESOPs. Under this policy, ESOPs granted to eligible employees vest over three tranches spread over a period of 39 months vis-à-vis 36 months for the earlier grants. The ﬁrst tranche will vest after ﬁfteen months from the date of grant vis-à-vis twelve months for earlier grants. Vesting for all ESOPs granted subsequent to April 1, 2017 shall be based on the assessment of performance of the employee at the time of vesting. 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. 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. g) Statutory Bonus Some section of employees are also paid statutory bonus as per the Payment of Bonus Act (1965) as amended from time to time. III. Remuneration Processes Fitment at the time of Hire Pay scales 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. HDFC Bank Limited Annual Report 2016-17 123 Schedules to the Financial Statements For the year ended March 31, 2017 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 The Bank takes into account various types of risks in its remuneration processes. The Bank follows a comprehensive framework that includes within its ambit the key dimensions of remuneration such as ﬁxed pay, variable pay and long term incentives (i.e. Employee Stock Options). Fixed pay: The Bank conducts a comprehensive market benchmarking study to ensure that employees are competitively positioned in terms of ﬁxed pay. The Bank follows a robust salary review process wherein revisions in ﬁxed compensation are based on performance. The Bank also makes salary adjustments taking into consideration pay positioning of employees vis-à- vis market reference points. Through this approach the Bank endeavors to ensure that the talent risk due to attrition is mitigated as much as possible. Fixed Pay could be revised downwards as well in the event of certain proven cases of misconduct by an employee. Variable pay: The Bank has distinct types of variable pay plans as given below: (a) Quarterly / monthly performance-linked pay (PLP) plans: All quarterly / monthly PLP plans are based on the principle of balanced scorecard framework that includes within its ambit both quantitative and qualitative factors including key strategic objectives that ensure future competitive advantage for the Bank. PLP plans, by design, have deterrents that play a role of moderating payouts based on the non-fulﬁllment of established quantitative / qualitative risk factors. Deterrents also include risks arising out of non-compliance, mis-sell etc. Further, a portion of all payouts under the PLP plans is deferred till the end of the year to provide for any unforeseen performance risks. (b) Annual bonus plan: 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 framework developed by the Bank in order to arrive at the quantum of bonus pool is based on the performance of the Bank and proﬁtability. The annual bonus is distributed based on business unit and individual performance. The business unit performance is based on factors such as growth in revenue, growth in proﬁt, cost to income ratio and achievement vis-à-vis plans and key objectives. Bonus pay out for an individual employee in a particular grade is linked to the performance rating of the employee and subject to meeting the Bank’s standards of ethical conduct. The Bank has 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 for Whole Time Directors. 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 reference performance year. The deferred bonus is paid out post review and approval by the NRC. The bonus for Whole Time Directors is capped at 70% of the ﬁxed pay in a year. The variable pay for Whole Time Directors is approved by the NRC as well as the Board of Directors of the Bank and is subject to the approval of the RBI. The variable pay component is paid out subject to the following conditions: Where the variable pay constitutes 50% or more of the ﬁxed pay, a portion of the same would be 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. (c) Long term incentives (employee stock options): The Bank also grants employee stock options to employees in certain job bands. The grant is based on performance rating of the individual. HDFC Bank Limited Annual Report 2016-17 124 Schedules to the Financial Statements For the year ended March 31, 2017 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. B. Business Growth - This includes growth in advances and deposits; Proﬁtability - This includes growth in proﬁt after tax; C. Asset Quality - Gross NPA, Net NPA and % of Restructured assets to net advances; D. E. F. Financial Soundness - Capital Adequacy Ratio Position and Tier I capital; Shareholder value creation - Return on equity; and 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. B. Achievement against the plans of the Bank; and 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: A. B. Increase in plan over the previous year; Actual growth in revenue over previous year; C. Growth in net revenue (%); D. E. F. Achievement of net revenue against plan (%); Actual proﬁt before tax; 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. HDFC Bank Limited Annual Report 2016-17 125 Schedules to the Financial Statements For the year ended March 31, 2017 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 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. All PLP plans are based on balanced scorecard framework. (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 Whole Time Directors The bonus for Whole Time Directors does 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% 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)(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. The deferred bonus is paid out post review and approval by the NRC. (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 bonus payout received pertaining to the relevant performance year. The speciﬁc criteria on the applicability of malus and claw back arrangements are reviewed by the NRC annually. HDFC Bank Limited Annual Report 2016-17 126 Schedules to the Financial Statements For the year ended March 31, 2017 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. 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 2016-17 127 Schedules to the Financial Statements For the year ended March 31, 2017 (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) Number of meetings held by the NRC during the ﬁnancial year and remuneration paid to its members (b) (i) Number of employees having received a variable remuneration award during the ﬁnancial year March 31, 2017 March 31, 2016 Number of meetings: 10 Number of meetings: 9 Remuneration paid: ` 0.20 crore Remuneration paid: ` 0.17 crore 33 employees 30 employees (b) (ii) Number and total amount of sign-on awards made during the ﬁnancial year (b) (iii) Number and total amount of guaranteed bonuses awarded during the ﬁnancial year (b) (iv) Details of severance pay, in addition to accrued beneﬁts, if any (c) (i) Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms (c) (ii) Total of deferred the in amount remuneration paid out ﬁnancial year of Breakdown the remuneration awards ﬁnancial year to show ﬁxed and variable, deferred and non- deferred amount for of (d) (e) (i) Total amount of outstanding and deferred retained remuneration exposed to ex-post explicit and / or implicit adjustments remuneration (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 None None None None None None Total amount of outstanding deferred remuneration (cash bonus) was ` 4.62 crore. Total amount of outstanding deferred remuneration (cash bonus) was ` 3.13 crore. ` 1.45 crore ` 1.20 crore ` 54.75 crore (Fixed*) ` 12.90 crore (variable pay pertaining to ﬁnancial year ended March 31, 2016, in relation to employees where there was no deferment of pay). ` 7.34 crore (variable pay pertaining to ﬁnancial year ended March 31, 2016, in relation to employees where there was a deferment of pay), of which ` 4.41 crore was non-deferred variable pay and ` 2.93 crore was deferred variable pay. ` 46.04 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). ` 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. Number of stock options granted during the ﬁnancial year: Nil Total amount of outstanding deferred remuneration (cash bonus) was ` 4.62 crore. Number of stock options granted during the ﬁnancial year: 40,86,600 Total amount of outstanding deferred remuneration (cash bonus) was ` 3.13 crore. Nil Nil Nil Nil * Excludes gratuity beneﬁts, since the same is computed at Bank level. HDFC Bank Limited Annual Report 2016-17 128 Schedules to the Financial Statements For the year ended March 31, 2017 26 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 2016-17 129 Schedules to the Financial Statements For the year ended March 31, 2017 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, 2017 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 21,581.79 66,147.50 31,332.24 9,046.69 128,108.22 - 46,505.77 81,602.45 1,308.38 8,432.16 10,473.77 3,365.33 23,579.64 1,440.55 7,589.43 14,549.66 264,536.14 295,828.92 270,969.09 27,205.88 858,540.03 5,300.18 863,840.21 73,857.49 525,792.90 156,129.90 3,142.74 758,923.03 15,454.80 774,377.83 15 Capital employed (9) - (12) 190,678.65 (229,963.98) 114,839.19 24,063.14 99,617.00 (Segment assets - Segment liabilities) 16 17 18 19 Unallocated (10) - (13) Total (15) + (16) Capital expenditure Depreciation (10,154.62) 89,462.38 32.85 10.15 846.56 150.30 97.69 1,127.40 659.66 90.78 72.53 833.12 (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) (cid:8)` crore) Particulars Revenue Assets Capital expenditure Domestic International 80,578.80 1,023.65 839,928.73 23,911.48 1,125.94 1.46 HDFC Bank Limited Annual Report 2016-17 130 Schedules to the Financial Statements For the year ended March 31, 2017 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) (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) Treasury Retail banking Wholesale banking Other banking operations 18,264.88 59,252.34 27,162.39 7,554.42 112,234.03 - 41,260.86 70,973.17 5 Segment results 1,489.21 7,855.03 7,887.20 2,832.27 20,063.71 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) 1,425.77 6,341.71 12,296.23 235,331.98 252,690.65 226,242.65 21,633.06 735,898.34 4,897.74 740,796.08 12 Segment liabilities 77,340.38 448,313.40 120,425.52 2,476.31 648,555.61 13 Unallocated liabilities 14 Total liabilities (12) + (13) 19,562.70 668,118.31 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 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 5.09 6.16 729.46 134.59 540.47 101.67 69.70 57.54 (14,664.96) 72,677.77 938.84 705.84 (cid:8)` crore) Domestic International 69,816.77 1,156.40 704,839.20 35,956.88 937.95 0.89 HDFC Bank Limited Annual Report 2016-17 131 Schedules to the Financial Statements For the year ended March 31, 2017 27 Liquidity coverage ratio Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2017 is given below: (` crore) (cid:0)(cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) March 31, 2017 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) December 31, 2016 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) September 30, 2016 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) June 30, 2016 Particulars Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* (cid:40)(cid:73)(cid:71)(cid:72)(cid:0)(cid:49)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:44)(cid:73)(cid:81)(cid:85)(cid:73)(cid:68)(cid:0)(cid:33)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83) 1 Total High Quality Liquid Assets (HQLA) Cash Outﬂows 2 Retail deposits and deposits from small business customers, of which: 137,711.74 149,957.35 128,702.05 109,539.23 417,330.77 38,198.75 415,071.84 37,863.08 373,552.53 34,159.65 359,804.34 32,862.93 (i) Stable deposits 70,686.63 3,534.33 72,882.13 3,644.11 63,912.08 3,195.60 62,350.08 3,117.50 (ii) Less stable deposits 346,644.14 34,664.42 342,189.71 34,218.97 309,640.45 30,964.05 297,454.26 29,745.43 3 Unsecured 184,624.84 91,871.70 184,555.12 93,303.55 173,841.76 87,591.52 157,036.26 80,630.67 wholesale funding, of which: (i) Operational deposits (all counterparties) (ii) Non-operational deposits (all counterparties) 27,567.30 6,814.73 26,530.40 6,556.63 24,314.59 6,008.20 21,290.21 5,262.08 147,686.64 75,686.06 148,806.54 77,528.74 142,196.70 74,252.85 130,159.94 69,782.48 (iii) Unsecured debt 9,370.90 9,370.91 9,218.18 9,218.18 7,330.47 7,330.47 5,586.11 5,586.11 4 Secured wholesale funding 161.11 - 2,150.00 - 5 Additional 85,739.97 54,644.47 94,703.09 61,891.19 90,930.14 57,181.27 93,163.68 57,797.70 requirements, of which: (i) Outﬂows related to 44,943.06 44,943.06 51,903.36 51,903.36 47,316.91 47,316.91 46,907.18 46,907.18 derivative exposures and other collateral requirement (ii) Outﬂows related to loss of funding on debt products - - - - - - - - (iii) Credit and liquidity 40,796.91 9,701.41 42,799.73 9,987.83 43,613.23 9,864.36 46,256.50 10,890.52 facilities 6 Other contractual funding obligation 24,420.02 24,420.02 20,914.62 20,914.62 17,944.34 17,944.34 15,940.48 15,940.48 7 Other contingent 52,591.16 2,596.66 50,409.16 1,512.27 49,183.26 1,475.50 47,915.37 1,437.46 funding obligations 8 Total Cash Outﬂows 211,892.71 215,484.71 200,502.28 188,669.24 HDFC Bank Limited Annual Report 2016-17 132 Schedules to the Financial Statements For the year ended March 31, 2017 Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2017 is given below : (contd.) (` crore) (cid:0)(cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) March 31, 2017 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) December 31, 2016 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) September 30, 2016 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) June 30, 2016 Particulars Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Cash Inﬂows 9 Secured lending (e.g. reverse repo) - - 1,333.33 - 5,033.33 - 1,355.17 3.28 10 Inﬂows from 39,276.52 21,397.60 36,889.88 19,466.20 35,305.32 18,815.99 33,897.47 18,070.68 fully performing exposures 11 Other cash inﬂows 58,695.96 53,161.71 65,066.62 59,505.52 66,471.65 61,083.74 62,858.78 57,290.61 12 Total Cash Inﬂows 97,972.48 74,559.31 103,289.83 78,971.72 106,810.30 79,899.73 98,111.42 75,364.57 13 (cid:52)(cid:47)(cid:52)(cid:33)(cid:44)(cid:0)(cid:40)(cid:49)(cid:44)(cid:33) 14 Total Net Cash Outﬂows Total Adjusted Value 137,711.74 137,334.40 Total Adjusted Value 149,957.35 136,512.99 Total Adjusted Value 128,702.05 120,602.55 Total Adjusted Value 109,539.23 113,304.67 15 Liquidity Coverage 100.28% 109.85% 106.72% 96.68% Ratio (%) * In accordance with RBI guidelines, average weighted and unweighted amounts are calculated taking simple daily average for the quarter ended March 31, 2017 and simple average for the months in respective previous quarters in the ﬁnancial year ended March 31, 2017. (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:0)(cid:79)(cid:78)(cid:0)(cid:44)(cid:35)(cid:50) 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 for the quarter ended March 31, 2017 was at 100.28%, above the RBI prescribed minimum requirement of 80%. The average HQLA was ` 137,711.74 crore of which government securities constituted about 75%. The outﬂows related to derivative exposures (net of cash inﬂows) / collateral requirements and undrawn commitments constituted about 0.3% and 5% respectively of average cash outﬂow of ` 211,892.70 crore. Average inﬂows from assets were ` 74,559.31 crore. Average LCR compared to previous quarter ended December 31, 2016 has remained relatively stable with a slight decrease in the average HQLA position mainly on account of decrease in unencumbered SLR securities. Average LCR has been continuously increasing compared to that in the previous year ended March 31, 2016 primarily driven by increase in the average HQLA position on account of increase in liquid investments as well as additional FALLCR (1% of NDTL) permitted by RBI to be considered as HQLA from July 2016. A strong and diversiﬁed liabilities proﬁle has been at the helm on Bank’s growth strategy. The Bank has consistently maintained a robust funding proﬁle with a signiﬁcant portion of funding through deposits. As at March 31, 2017 the top 20 depositors comprised around 5% of total deposits. HDFC Bank Limited Annual Report 2016-17 133 Schedules to the Financial Statements For the year ended March 31, 2017 Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2016 is given below: (` crore) (cid:0)(cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) March 31, 2016 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) December 31, 2015 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) September 30, 2015 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) June 30, 2015 Particulars Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* (cid:40)(cid:73)(cid:71)(cid:72)(cid:0)(cid:49)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:44)(cid:73)(cid:81)(cid:85)(cid:73)(cid:68)(cid:0)(cid:33)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83) 1 Total High Quality Liquid Assets (HQLA) Cash Outﬂows 2 Retail deposits and deposits from small business customers, of which: 87,390.70 82,923.58 85,380.05 84,103.02 345,295.41 31,521.71 336,581.15 30,736.15 327,063.80 29,851.26 303,371.26 27,605.03 (i) Stable deposits 60,156.65 3,007.83 58,439.26 2,921.96 57,102.27 2,855.11 54,641.85 2,732.09 (ii) Less stable deposits 285,138.76 28,513.88 278,141.89 27,814.19 269,961.53 26,996.15 248,729.41 24,872.94 3 Unsecured wholesale funding, of which: (i) Operational deposits (all counterparties) (ii) Non-operational deposits (all counterparties) 152,346.46 77,310.79 150,761.23 78,144.79 143,971.45 76,153.26 132,334.88 67,639.08 25,513.50 6,310.16 21,315.02 5,260.88 20,460.39 5,067.45 21,646.72 5,345.21 120,422.61 64,590.28 120,973.12 64,410.82 117,518.89 65,093.64 105,628.67 57,234.38 (iii) Unsecured debt 6,410.35 6,410.35 8,473.09 8,473.09 5,992.17 5,992.17 5,059.49 5,059.49 4 Secured wholesale funding - - - - 5 Additional requirements, of which: (i) Outﬂows related to derivative exposures and other collateral requirement (ii) Outﬂows related to loss of funding on debt products (iii) Credit and liquidity facilities 6 Other contractual funding obligation 7 Other contingent funding obligations 97,373.97 61,003.46 104,680.45 57,231.91 167,835.96 111,671.11 185,435.72 129,455.26 49,752.81 49,752.81 46,028.74 46,028.74 101,182.99 101,182.99 118,889.35 118,889.35 - - - - - - - - 47,621.16 11,250.65 58,651.71 11,203.17 66,652.97 10,488.12 66,546.37 10,565.91 14,349.84 14,349.84 12,831.35 12,831.35 13,763.63 13,763.63 14,798.60 14,798.60 46,936.27 1,724.24 45,128.25 2,256.41 42,615.71 2,130.79 43,401.88 2,170.09 8 Total Cash Outﬂows 185,910.04 181,200.61 233,570.05 241,668.06 HDFC Bank Limited Annual Report 2016-17 134 Schedules to the Financial Statements For the year ended March 31, 2017 Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2016 is given below: (contd.) (` crore) (cid:0)(cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) March 31, 2016 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) December 31, 2015 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) September 30, 2015 (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68) June 30, 2015 Particulars Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Total unweighted value (average)* Total weighted value (average)* Cash Inﬂows 9 Secured lending (e.g. reverse repo) 10 Inﬂows from fully performing exposures 166.67 - 39.05 5.86 5,333.33 - 3,212.00 - 32,497.40 17,346.90 29,098.80 15,554.48 28,536.42 15,502.29 25,435.62 13,600.86 11 Other cash inﬂows 65,636.78 60,149.17 58,287.62 52,863.62 116,296.73 110,836.09 134,027.18 129,022.10 12 Total Cash Inﬂows 98,300.85 77,496.07 87,425.47 68,423.96 150,166.48 126,338.38 162,674.80 142,622.96 Total Adjusted Value Total Adjusted Value Total Adjusted Value Total Adjusted Value 13 (cid:52)(cid:47)(cid:52)(cid:33)(cid:44)(cid:0)(cid:40)(cid:49)(cid:44)(cid:33) 14 Total Net Cash Outﬂows 15 Liquidity Coverage Ratio (%) 87,390.70 108,413.96 80.61% 82,923.58 112,776.65 73.53% 85,380.05 107,231.67 79.62% 84,103.02 99,045.10 84.91% * The average weighted and unweighted amounts are calculated taking simple average for the months in the respective quarters 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 31, 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 31, 2016 was 80.61%, which was above the RBI prescribed minimum requirement of 70%. Major reasons for movement in average LCR as compared to the previous quarter ended December 31, 2015 are as follows: (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (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:19)(cid:17)(cid:12)(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:87)(cid:65)(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: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:68)(cid:69)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:68)(cid:14) (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:0)(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: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: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) HDFC Bank Limited Annual Report 2016-17 135 Schedules to the Financial Statements For the year ended March 31, 2017 A strong and diversiﬁed liabilities proﬁle has been at the helm on Bank’s growth strategy. The Bank has consistently maintained a robust funding proﬁle with a signiﬁcant portion of funding through deposits. As at March 31, 2016 the top 20 depositors comprised around 5% of total deposits. Note: CCIL guaranteed deals were netted for computing foreign exchange & derivative values with effect from quarter ended December 31, 2015. Hence, the numbers for serial number 5(i) and 11 are not strictly comparable with those of the previous quarters. 28 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 International Asset Reconstruction Company Private Limited Atlas Documentary Facilitators Company Private Limited* HBL Global Private Limited* *Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited amalgamated with HDB Financial Services Limited pursuant to the approval of the Honourable High courts of Gujarat and Bombay with effect from December 1, 2016. The appointed date of the merger as per the scheme of amalgamation was April 1, 2014. Accordingly, transactions entered into by the Bank with these entities during the ﬁnancial year ended March 31, 2017 have been disclosed under transactions with HDB Financial Services 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, Akuri by Puri, 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, 2017 are given below. A speciﬁc related party transaction is disclosed as a signiﬁcant transaction wherever it exceeds 10% of all related party transactions in that category: HDFC Bank Limited Annual Report 2016-17 136 Schedules to the Financial Statements For the year ended March 31, 2017 (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) Interest paid: HDFC Securities Limited ` 25.03 crore (previous year: ` 18.96 crore); HDB Financial Services Limited ` 7.17 crore (previous year: ` 4.52 crore); Housing Development Finance Corporation Limited ` 5.57 crore (previous year: ` 7.25 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)` 139.21 crore (previous year: ` 100.06 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)` 207.45 crore (previous year: ` 178.83 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: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)` 1,453.54 crore (previous year 79.87 crore); Housing Development Finance Corporation Limited ` 343.10 crore (previous year: ` 247.21 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)` 373.55 crore (previous year: ` 314.57 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) ` 102.22 crore (previous year: ` 88.40 crore); HDFC Securities Limited ` 60.64 crore (previous year: ` 60.64 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: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)` 0.23 crore (previous year: Nil). (cid:115)(cid:0) The Bank’s related party balances and transactions for the year ended March 31, 2017 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 Other investments Dividend paid to Dividend received from Receivable from Payable to Guarantees given Remuneration paid Loans purchased from 2,500.25 (2,500.25) 0.15 (0.15) - - - - 5.57 - 207.45 343.10 - - - (126.48) 373.55 - 23.16 (23.16) 33.67 (33.67) 0.12 (0.14) - 13,845.65 597.93 (816.14) 10.62 (10.65) 1,180.15 (1,588.18) 0.23 - 32.20 139.21 28.37 1,456.69 3,812.15 (3,812.15) 675.00 (675.00) - 162.86 2.05 (2.38) 103.25 (137.18) - (0.05) - - 25.05 (25.05) - - 0.05 (0.05) - - 0.51 - - - 31.17 (31.17) - - - - - - - - - - - - 13.61 (60.14) 2.51 (2.51) 3.44 (3.44) - - 1.02 0.03 - 0.76 - - - - 4.49 - - - - - - - 20.79 - 3,136.84 (3,401.58) 13.28 (13.31) 1,183.64 (1,591.67) 0.23 - 39.30 139.24 235.82 1,800.55 3,843.32 (3,843.32) 675.00 (801.48) 378.04 162.86 25.21 (25.54) 136.92 (170.85) 0.12 (0.19) 20.79 13,845.65 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 2016-17 137 Schedules to the Financial Statements For the year ended March 31, 2017 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 at March 31, 2017 is ` 665.77 crore (previous year: ` 491.21 crore). The contingent credit exposure pertaining to these contracts computed in line with the extant RBI guidelines on exposure norms is ` 40.18 crore (previous year: ` 18.90 crore). During the year ended March 31, 2017, the Bank purchased debt securities from Housing Development Finance Corporation Limited ` 2,320.00 crore (previous year: ` 1,415.00 crore) and from HDB Financial Services Limited ` 1,427.00 crore (previous year: ` 322.00 crore) issued by these entities. During the year ended March 31, 2017, the Bank has made no investment (previous year: ` 1,748.66 crore) in pass through certiﬁcates in respect of assets securitised out by HDB Financial Services Limited. During the year ended March 31, 2017, 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, 2017, the security deposit outstanding was ` 3.50 crore (previous year: ` 3.50 crore). The deposit outstanding from HDB Employees Welfare Trust as at March 31, 2017 was ` 48.52 crore (previous year: ` 46.46 crore). The Bank also paid interest on deposit from HDB Employees Welfare Trust aggregating to ` 3.68 crore (previous year: ` 3.88 crore). The Bank’s related party balances and transactions for the year ended March 31, 2016 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 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) - - - - (` crore) Key management personnel Total 10.12 (11.50) 2.51 (2.51) 0.95 (0.99) - - 0.84 0.02 - 0.76 - - 3.37 - - - - - - - 18.34 - 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 (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. HDFC Bank Limited Annual Report 2016-17 138 Schedules to the Financial Statements For the year ended March 31, 2017 29 Intra-Group exposure Intra-Group exposures in accordance with RBI guidelines are as follows: (` crore) Particulars March 31, 2017 March 31, 2016 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 4,502.47 4,502.47 0.48% 2,413.58 2,413.58 0.33% Details of breach of limits on intra-group exposures and regulatory action thereon, if any Nil Nil 30 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, 2017 March 31, 2016 939.53 2,980.22 3,043.98 6,963.73 1,094.86 887.30 2,805.03 2,481.82 6,174.15 1,005.70 25.33 37.13 11.31 138.79 10.67 180.53 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. 31 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, 2017 March 31, 2016 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 136.85 95.10 (1.45) 230.50 92.14 45.89 (1.18) 136.85 HDFC Bank Limited Annual Report 2016-17 139 Schedules to the Financial Statements For the year ended March 31, 2017 32 Penalties levied by the RBI Further to the media reports in October 2015 about irregularities in advance import remittances in various banks, the Reserve Bank of India (RBI) had conducted a scrutiny of the transactions carried out by the Bank under Section 35(1A) of the Banking Regulation Act, 1949. The RBI issued a Show Cause Notice to which the Bank had submitted its detailed response. After considering the Bank’s submission, the RBI imposed a penalty of ` 2.00 crore on the Bank vide its letter dated July 19, 2016 on account of pendency in receipt of bill of entry relating to advance import remittances made and lapses in adhering to KYC / AML guidelines in this respect. The penalty has since been paid. The Bank has implemented a comprehensive corrective action plan, to strengthen its internal control mechanisms so as to ensure that such incidents do not recur. The above matter does not constitute a material weakness or signiﬁcant deﬁciency in the framework of internal ﬁnancial controls over ﬁnancial reporting maintained by the Bank under Section 134(3)(q) of the Companies Act 2013. During the year ended March 31, 2016, RBI had not imposed any penalties on the Bank. (cid:19)(cid:19)(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, 2017 March 31, 2016 (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 651 96,454 94,756 2,349 496 62,224 62,069 651 (B) ATM transaction disputes relating to the Bank’s customers on the Bank’s ATMs Particulars March 31, 2017 March 31, 2016 (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 101 12,703 12,659 145 0.62 71 13,170 13,140 101 0.50 (C) ATM transaction disputes relating to the Bank’s customers on other banks’ ATMs Particulars March 31, 2017 March 31, 2016 (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 1,118 95,415 95,069 1,464 3.69 1,334 89,975 90,191 1,118 3.86 HDFC Bank Limited Annual Report 2016-17 140 Schedules to the Financial Statements For the year ended March 31, 2017 (D) Total customer complaints and ATM transaction disputes [total of tables (A), (B) and (C) above] Particulars March 31, 2017 March 31, 2016 (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 1,870 2,04,572 2,02,484 3,958 1,901 1,65,369 1,65,400 1,870 Note: ATM transaction disputes reported in the above tables are in accordance with RBI guidelines on disclosure of customer complaints. (cid:115)(cid:0) (cid:33)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:80)(cid:65)(cid:83)(cid:83)(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: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:0)(cid:8)(cid:34)(cid:47)(cid:9) Particulars March 31, 2017 March 31, 2016 (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) - - - - - - - - The average number of customer complaints per branch, including ATM transaction disputes, was 3.7 per month during the year ended March 31, 2017 (previous year: 3.3 per month). For the year ended March 31, 2017, retail liability segment accounted for 74.61% of the total complaints (a reduction from 82.60% for the previous year) followed by credit cards at 18.15% of the total complaints (an increase from 11.86% for the previous year), retail assets at 6.08% of the total complaints (an increase from 3.68% for the previous year), while other segments accounted for 1.16% of total complaints (as against 1.86% in the previous year). The top 10 areas of customer complaints for the year ended March 31, 2017, including ATM transaction disputes, accounted for 1,48,462 complaints and were 72.57% of total complaints as against 1,23,323 complaints which were 74.57% of the total complaints for the year ended March 31, 2016. 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’, phishing / unauthorized usage through debit card online, transaction dispute related – credit cards, phishing / unauthorized usage through debit card done at other bank’s ATM outlets and customer disputes relating to EMI / ROI / Tenor / Loan Amount. (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, 2016, the number of BO complaints per branch for the Bank was 1.68 (previous year: 1.36). The number of BO complaints other than credit cards per 1,000 accounts was at 0.13 (previous year: 0.10).The number of BO complaints (credit card related) per 1,000 cards was at 0.08 (previous year: 0.06) for the Bank. 34 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, 2017 and March 31, 2016. HDFC Bank Limited Annual Report 2016-17 141 Schedules to the Financial Statements For the year ended March 31, 2017 35 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. The above is based on the information available with the Bank which has been relied upon by the auditors. 36 Overseas assets, NPAs and revenue (` crore) Particulars Total Assets Total NPAs Total Revenue (cid:19)(cid:23)(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, 2017 March 31, 2016 23,911.48 35,956.88 121.59 1,023.65 124.23 1,156.39 There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms. 38 Credit default swaps The Bank has not transacted in credit default swaps during the year ended March 31, 2017 (previous year: Nil). 39 Corporate social responsibility Operating expenses include ` 305.42 crore (previous year: ` 194.81 crore) for the year ended March 31, 2017 towards Corporate Social Responsibility (CSR), in accordance with Companies Act, 2013. The Bank has spent 2.0% (previous year: 1.6%) of its average net proﬁt for the last three ﬁnancial years as part of its CSR for the year ended March 31, 2017. 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, 2017 March 31, 2016 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 (ii) On purpose other than (i) above - 305.42 - - - - - - 305.42 186.46 8.35 194.81 40 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. HDFC Bank Limited Annual Report 2016-17 142 Schedules to the Financial Statements For the year ended March 31, 2017 41 Disclosure on remuneration to Non-Executive Directors Remuneration by way of sitting fees to the Non-Executive Directors for attending meetings of the Board and its committees during the year ended March 31, 2017 amounted to ` 1.67 crore (previous year: ` 1.33 crore). Further, in accordance with RBI guidelines, proﬁt related commission to all Non-Executive Directors other than the Chairperson for the year ended March 31, 2017 amounted to ` 0.80 crore (previous year: ` 0.60 crore). 42 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 Srikanth Nadhamuni Umesh Sarangi Directors Mumbai, April 21, 2017 HDFC Bank Limited Annual Report 2016-17 143 Independent Auditor’s Report To the Members of HDFC Bank Limited Report on the Consolidated Financial Statements 1. We have audited the accompanying consolidated financial statements of HDFC BANK LIMITED (hereinafter referred to as “the Holding Company”) and its subsidiaries (the Holding Company and its subsidiaries together referred to as “the Group”) and its associate, comprising the Consolidated Balance Sheet as at 31st March, 2017, 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”) - [See paragraph 5 below] 2. Management’s Responsibility for the Consolidated Financial Statements The Holding Company’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 and its associate in accordance with provisions of Section 29 of the Banking Regulation Act, 1949, the accounting principles generally accepted in India, including the Accounting Standards prescribed under Section 133 of the Act, 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 the associate are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and the associate and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgments 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 Holding Company. 3. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated ﬁnancial statements based on our audit. In conducting 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 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 disclosures in the consolidated ﬁnancial statements. The procedures selected depend on the auditor’s judgment, 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 controls relevant to the Holding Company’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 Holding Company’s Board of Directors, and 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 report referred to in sub-paragraph (a) of paragraph 5 below, is sufﬁcient and appropriate to provide a basis for our audit opinion on the consolidated ﬁnancial statements. 4. Opinion In our opinion and to the best of our information and according to the explanations given to us and based on the matters referred to in paragraph 5 below, 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 associate as at 31st March, 2017, and the consolidated proﬁt and consolidated cash ﬂows for the year ended on that date. 5. Other Matters a) We did not audit the ﬁnancial statements of a subsidiary whose financial statements reflect total assets of ` 3,352,692 lacs as at 31st March, 2017, total revenues of ` 572,450 lacs and net cash (outﬂows) amounting to ` 2,032 lacs for the year ended on that date, as considered in the consolidated ﬁnancial statements. These ﬁnancial statements have been audited by other auditors whose report has been furnished to us by the HDFC Bank Limited Annual Report 2016-17 144 b) 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 subsidiary, and our report in terms of subsection (3) of Section 143 of the Act, in so far as it relates to the aforesaid subsidiary is based solely on the report of the other auditors. The consolidated ﬁnancial statements also include the Group’s share of net proﬁt of ` 234 lacs for the year ended 31st March, 2017, 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 Holding Company’s 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 of the associate. 6. Report on Other Legal and Regulatory Requirements As required by Section 143(3) of the Act, based on our audit and on the consideration of the report of the other auditors on separate ﬁnancial statements of a subsidiary referred to in paragraph 5 above 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) 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 report of the other auditors. (c) 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 at 31st March, 2017 taken on record by the Board of Directors of the Holding Company and the report of the statutory auditors of the subsidiary company not audited by us, none of the directors of the Group companies is disqualiﬁed as at 31st March, 2017 from being appointed as a director in terms of Section 164(2) of the Act. (f) With respect to the adequacy of the internal ﬁnancial controls over ﬁnancial reporting and the operating effectiveness of such controls, refer to our separate report in “Annexure A”. Our report expresses an unmodiﬁed opinion on the adequacy and operating effectiveness of the Group’s 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, as amended, 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; 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 Holding Company and its subsidiary companies. For Deloitte Haskins & Sells Chartered Accountants (Firm’s Registration No. 117365W) Porus B. Pardiwalla Partner (Membership No. 40005) Mumbai April 21, 2017 HDFC Bank Limited Annual Report 2016-17 145 ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S REPORT (Referred to in paragraph f under ‘Report on Other Legal and Regulatory Requirements’ section of the auditor’s 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”) In conjunction with our audit of the consolidated ﬁnancial statements of the Holding Company for the year as of and for the year ended 31st March, 2017 we have audited the internal ﬁnancial controls over ﬁnancial reporting of the Group [See paragraphs 1 and 5 of our Report on the Consolidated Financial Statements]. Management’s Responsibility for Internal Financial Controls The respective Board of Directors of the Holding company and its subsidiary companies and its associate company, are responsible for establishing and maintaining internal ﬁnancial controls 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 on Audit of Internal Financial Controls Over Financial Reporting (“the Guidance Note”) issued by the Institute of Chartered Accountants of India (“ICAI”). 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, 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. An 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 audit evidence obtained by the other auditors, in terms of their report referred to in paragraph 5 of our Report on the Consolidated Financial Statements, is sufﬁcient and appropriate to provide a basis for our audit opinion on the internal ﬁnancial controls system over ﬁnancial reporting of the Holding Company and its subsidiary companies, which are companies incorporated in India. 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 2016-17 146 over ﬁnancial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our opinion is not modiﬁed in respect of the matters referred to in paragraph 5 of our Report on the Consolidated Financial Statements. Opinion In our opinion to the best of our information and according to the explanations given to us and based on the matters referred to in paragraph 5 of our Report on the Consolidated Financial Statements, the Group 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, 2017, based on 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. Mumbai April 21, 2017 For Deloitte Haskins & Sells Chartered Accountants (Firm’s Registration No. 117365W) Porus B. Pardiwalla Partner (Membership No. 40005) HDFC Bank Limited Annual Report 2016-17 147 Consolidated Balance Sheet As at March 31, 2017 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 As at ` in ‘000 As at Schedule 31-Mar-17 31-Mar-16 1 2 2A 3 4 5 5,125,091 5,056,373 912,814,397 737,984,869 2,914,389 1,806,228 6,431,342,479 5,458,732,889 984,156,439 1,037,139,597 587,088,812 381,403,308 Total 8,923,441,607 7,622,123,264 6 7 8 9 10 11 379,105,485 300,765,846 114,005,711 89,922,969 2,107,771,120 1,936,338,475 5,854,809,871 4,872,904,174 38,146,997 34,796,976 429,602,423 387,394,824 Total 8,923,441,607 7,622,123,264 12 8,182,842,892 8,535,273,826 308,480,352 234,899,997 Signiﬁcant accounting policies and notes to the Consolidated ﬁnancial statements 17 & 18 The schedules referred to above form an integral part of the Consolidated Balance Sheet As per our report of even date. (cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:5)(cid:3)(cid:7)(cid:5)(cid:9)(cid:10)(cid:11)(cid:6)(cid:12)(cid:13)(cid:5)(cid:3)(cid:13)(cid:5)(cid:14)(cid:11)(cid:10)(cid:5)(cid:15)(cid:3)(cid:6)(cid:4)(cid:8) For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 21, 2017 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 Srikanth Nadhamuni Umesh Sarangi Directors HDFC Bank Limited Annual Report 2016-17 148 Consolidated Statement of Proﬁt and Loss For the year ended March 31, 2017 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 Impact on amalgamation [Refer Schedule 18(1)] Balance in Proﬁt and Loss account brought forward IV APPROPRIATIONS Transfer to Statutory Reserve Proposed dividend [Refer Schedule 18(3)] Tax (including cess) on interim / proposed 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-17 732,713,529 128,776,329 861,489,858 380,415,844 207,510,707 120,689,285 708,615,836 152,874,022 367,165 23,393 152,530,250 274,507 248,255,886 401,060,643 37,771,634 - 255,959 (16,909) 14,549,641 3,134,100 42,934 345,323,284 401,060,643 ` 59.95 59.16 ` in ‘000 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 As per our report of even date. (cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:5)(cid:3)(cid:7)(cid:5)(cid:9)(cid:10)(cid:11)(cid:6)(cid:12)(cid:13)(cid:5)(cid:3)(cid:13)(cid:5)(cid:14)(cid:11)(cid:10)(cid:5)(cid:15)(cid:3)(cid:6)(cid:4)(cid:8) For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 21, 2017 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 Srikanth Nadhamuni Umesh Sarangi Directors HDFC Bank Limited Annual Report 2016-17 149 Consolidated Cash Flow Statement For the year ended March 31, 2017 Cash ﬂows from operating activities Consolidated proﬁt before income tax 233,311,478 194,949,948 ` in ‘000 Year ended Year ended 31-Mar-17 31-Mar-16 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 Contingency provisions Share in current year's proﬁts of associates Adjustments for: 8,861,876 7,380,326 (87,543) 173,689 1,756,569 1,002,801 16,229 1,185 37,024,296 25,179,864 (76,417) 146,543 250,000 1,150,000 4,312,322 4,648,890 388,440 (23,393) 218,602 (37,278) 285,733,857 234,814,570 (Increase) / decrease in investments (excluding investments in subsidiaries) (173,257,700) (391,159,616) (Increase) / decrease in advances Increase / (decrease) in deposits (Increase) / decrease in other assets (1,018,904,990) (1,066,012,996) 972,609,590 955,896,412 (44,855,329) (38,485,747) Increase / (decrease) in other liabilities and provisions 228,337,692 31,324,658 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 249,663,120 (273,622,719) (76,847,189) (70,730,944) 172,815,931 (344,353,663) (11,577,570) (8,771,635) 100,768 116,125 - - Net cash used in investing activities (11,476,802) (8,655,510) HDFC Bank Limited Annual Report 2016-17 150 Consolidated Cash Flow Statement For the year ended March 31, 2017 Cash ﬂows from ﬁnancing activities Increase in minority interest Year ended 31-Mar-17 ` in ‘000 Year ended 31-Mar-16 818,605 189,954 Money received on exercise of stock options by employees 22,615,161 12,229,008 Increase / (decrease) in borrowings (excluding subordinate debt, perpetual debt and upper tier II instruments) Redemption of subordinated debt Dividend paid during the year Tax on dividend Net cash generated from ﬁnancing activities (33,898,658) 402,081,134 (19,084,500) (12,020,000) (24,083,093) (20,091,666) (5,297,258) (4,237,089) (58,929,743) 378,151,341 Effect of exchange ﬂuctuation on translation reserve (282,622) 282,433 Cash and cash equivalents on amalgamation [Refer Schedule 18(1)] 295,617 - Net increase / (decrease) in cash and cash equivalents 102,422,381 25,424,601 Cash and cash equivalents as at April 1st (Schedules 6 and 7) 390,688,815 365,264,214 Cash and cash equivalents as at March 31st (Schedules 6 and 7) 493,111,196 390,688,815 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 21, 2017 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 Srikanth Nadhamuni Umesh Sarangi Directors HDFC Bank Limited Annual Report 2016-17 151 Schedules to the Consolidated Financial Statements As at March 31, 2017 SCHEDULE 1 - CAPITAL Authorised capital 3,25,00,00,000 (31 March, 2016: 2,75,00,00,000) Equity Shares of ` 2/- each Issued, subscribed and paid-up capital 2,56,25,45,717 (31 March, 2016: 2,52,81,86,517) 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 As at ` in ‘000 As at 31-Mar-17 31-Mar-16 6,500,000 5,500,000 Total 5,125,091 5,125,091 5,056,373 5,056,373 149,931,567 118,122,222 37,771,634 31,809,345 Total 187,703,201 149,931,567 57,369,509 14,549,641 71,919,150 45,073,296 12,296,213 57,369,509 Total III Balance in proﬁt and loss account 345,323,284 248,255,886 IV Share premium account Opening balance Additions during the year 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 VIII Foreign currency translation account Opening balance Additions / (deductions) during the year HDFC Bank Limited Annual Report 2016-17 152 262,204,646 250,019,020 22,546,443 12,185,626 Total 284,751,089 262,204,646 10,635,564 10,635,564 - - Total 10,635,564 10,635,564 8,866,583 3,134,100 Total 12,000,683 399,084 109,506 (66,572) 442,018 322,030 (282,622) 39,408 Total Total Total 6,645,051 2,221,532 8,866,583 484,268 76 (85,260) 399,084 39,597 282,433 322,030 912,814,397 737,984,869 Schedules to the Consolidated Financial Statements As at March 31, 2017 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 ` 70.83 crore (previous year ` 63.85 crore) SCHEDULE 3 - DEPOSITS A I Demand deposits From banks (i) From others (ii) II III Savings bank deposits Term deposits (i) (ii) From banks From others B I II Deposits of branches in India Deposits of branches outside India Reserve Bank of India SCHEDULE 4 - BORROWINGS Borrowings in India I (i) (ii) Other banks (iii) Other institutions and agencies (iv) Upper and lower Tier II capital and innovative perpetual debts (v) Bonds and Debentures (excluding subordinated debt) II Borrowings outside India* As at 31-Mar-17 ` in ‘000 As at 31-Mar-16 276,029 276,029 Total 2,638,360 2,914,389 1,530,199 1,806,228 20,806,377 1,132,892,089 1,153,698,466 1,935,786,271 22,017,200 860,725,166 882,742,366 1,478,861,198 53,520,609 3,288,337,133 3,341,857,742 6,431,342,479 25,095,540 3,072,033,785 3,097,129,325 5,458,732,889 6,391,351,770 39,990,709 6,431,342,479 5,391,562,781 67,170,108 5,458,732,889 - 97,371,546 249,710,383 149,020,000 252,038,000 748,139,929 236,016,510 984,156,439 319,505,077 98,174,819 91,767,811 157,579,000 59,750,000 726,776,707 310,362,890 1,037,139,597 Total Total Total Total Total Total *Includes Upper Tier II debt of Nil crore (previous year: ` 662.55 crore) Secured borrowings included in I & II above: ` 20,606.90 crore (previous year: ` 15,781.77 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) [Refer Schedule 18(3) 166,670,863 45,914,476 349,467,514 25,035,959 - 587,088,812 73,784,974 40,976,952 216,913,280 20,735,354 28,992,748 381,403,308 Total HDFC Bank Limited Annual Report 2016-17 153 Schedules to the Consolidated Financial Statements As at March 31, 2017 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 Nil 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 2016-17 154 As at ` in ‘000 As at 31-Mar-17 31-Mar-16 42,772,675 55,877,336 284,332,810 52,000,000 336,332,810 379,105,485 242,888,510 2,000,000 244,888,510 300,765,846 Total Total 5,531,745 9,716,581 15,248,326 2,596,227 7,926,585 10,522,812 - - - 15,248,326 36,772,777 2,529,150 59,455,458 98,757,385 114,005,711 - 1,359,867 1,359,867 11,882,679 23,909,955 3,776,535 50,353,800 78,040,290 89,922,969 1,624,186,994 - 1,219,528 187,956,872 402,955 282,824,625 2,096,590,974 1,576,610,655 - 885,214 48,882,174 614,020 295,619,657 1,922,611,720 Total Total Total Total Total Total 28,375 11,151,771 11,180,146 2,107,771,120 28,375 13,698,380 13,726,755 1,936,338,475 Total Total Schedules to the Consolidated Financial Statements As at March 31, 2017 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 2016-17 155 As at 31-Mar-17 ` in ‘000 As at 31-Mar-16 2,097,219,426 1,923,817,098 11,206,487 13,726,755 Total 2,108,425,913 1,937,543,853 628,452 26,341 654,793 1,205,378 - 1,205,378 Total 2,096,590,974 1,922,611,720 11,180,146 13,726,755 Total 2,107,771,120 1,936,338,475 287,159,641 185,136,903 1,336,174,162 1,242,774,115 4,231,476,068 3,444,993,156 Total 5,854,809,871 4,872,904,174 4,351,900,473 3,648,290,355 107,864,309 114,128,823 1,395,045,089 1,110,484,996 Total 5,854,809,871 4,872,904,174 1,646,022,483 1,427,201,985 157,741,065 134,556,082 9,092,668 4,659,631 3,843,921,442 2,985,578,949 Total 5,656,777,658 4,551,996,647 6,500,391 6,879,777 2,560,707 1,245,263 17,845,564 38,624,247 171,125,551 274,158,240 198,032,213 320,907,527 5,854,809,871 4,872,904,174 Total Total Schedules to the Consolidated Financial Statements As at March 31, 2017 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 on amalgamation Additions during the year Deductions during the year Depreciation As at 31 March of the preceding year Additions on amalgamation 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 2016-17 156 As at 31-Mar-17 ` in ‘000 As at 31-Mar-16 15,785,543 15,030,782 669,452 839,927 (70,347) (85,166) Total 16,384,648 15,785,543 4,262,700 3,775,762 595,216 555,657 (59,060) (68,719) Total 4,798,856 4,262,700 11,585,792 11,522,843 74,900,241 67,150,536 377,694 - 11,525,792 9,208,628 (2,229,417) (1,458,923) Total 84,574,310 74,900,241 51,626,108 46,156,112 245,859 - 8,264,659 6,828,000 (2,123,521) (1,358,004) Total 58,013,105 51,626,108 26,561,205 23,274,133 4,546,923 4,546,923 - - Total 4,546,923 4,546,923 Schedules to the Consolidated Financial Statements As at March 31, 2017 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 ` 2,587.06 crore (previous year: ` 2,227.23 crore), goodwill of ` 185.00 crore (previous year: ` 187.16 crore) and deposits placed with NABARD / SIDBI / NHB on account of shortfall in lending to priority sector of ` 11,882.37 crore (previous year: ` 13,719.68 crore) SCHEDULE 12 - CONTINGENT LIABILITIES As at ` in ‘000 As at 31-Mar-17 31-Mar-16 4,104,467 4,104,467 - - Total 4,104,467 4,104,467 442,456 442,456 - - Total 442,456 442,456 - - Total 38,146,997 34,796,976 83,177,119 75,547,122 17,270,130 17,625,441 267,871 220,786 - - - - 5,095,162 4,791,869 323,792,141 289,209,606 Total 429,602,423 387,394,824 Claims against the bank not acknowledged as debts - taxation Claims against the bank not acknowledged as debts - others 10,724,100 11,879,900 2,010,238 777,310 Liability on account of outstanding forward exchange contracts 4,699,301,366 5,290,757,746 Liability on account of outstanding derivative contracts 2,723,068,634 2,570,471,528 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 2016-17 157 366,232,012 301,310,742 953,405 31,094,714 359,613,744 317,525,754 20,939,393 11,456,132 Total 8,182,842,892 8,535,273,826 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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-17 31-Mar-16 559,861,841 477,361,879 159,515,563 141,254,962 5,448,567 3,751,556 7,887,558 9,247,217 Total 732,713,529 631,615,614 94,767,987 83,067,577 11,447,093 7,525,247 87,543 (173,689) (16,229) (1,185) 12,633,895 12,277,267 9,856,040 9,421,324 Total 128,776,329 112,116,541 312,955,921 291,509,468 65,834,950 33,664,532 1,624,973 15,521,748 Total 380,415,844 340,695,748 85,047,014 63,061,367 14,305,273 12,740,606 4,773,398 4,251,803 2,095,018 2,584,338 8,861,876 7,380,326 35,221 25,758 28,861 19,331 1,249,095 998,702 4,491,632 4,217,982 12,717,968 10,417,860 6,914,913 5,618,738 66,993,541 66,998,894 Total 207,510,707 178,318,808 *Includes professional fees, commission to sales agents, card and merchant acquiring expenses and system management fees. HDFC Bank Limited Annual Report 2016-17 158 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 SCHEDULE 17 - Signiﬁcant accounting policies appended to and forming part of the consolidated ﬁnancial statements for the year ended March 31, 2017 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. HDB Financial Services Limited (HDBFSL) and HDFC Securities Limited (HSL) are subsidiaries of the Bank. HDBFSL is a non-deposit taking non-banking ﬁnance company. HSL is a ﬁnancial services provider along with broking as a core product. 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. Basis of consolidation The consolidated ﬁnancial statements present the accounts of HDFC Bank Limited with its following subsidiaries and associate: Name HDFC Securities Limited HDB Financial Services Limited International Asset Reconstruction Company Private Limited HDB Employee Welfare Trust Relation Country of incorporation Ownership interest** Subsidiary Subsidiary Associate * India India India India 97.9% 96.2% 29.4% * 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 2016-17 159 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 During the year ended March 31, 2017, Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited, associates of the Bank as at March 31, 2016, amalgamated with HDB Financial Services Limited, pursuant to the approval of the Honourable High courts of Gujarat and Bombay with effect from December 1, 2016. The appointed date of the merger as per the scheme of amalgamation was April 1, 2014. Accordingly, the consolidated ﬁnancial statements include the effect of the said amalgamation. During the year ended March 31, 2017 the Bank’s shareholding in HDB Financial Services Limited decreased from 97.1% to 96.2% on account of the said amalgamation and stock options exercised by minority stakeholders. The audited ﬁnancial statements of the subsidiary companies, entity controlled by the Bank 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, 2017. 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. HDFC Bank Limited Annual Report 2016-17 160 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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, repurchase and reverse repurchase transactions in government securities and corporate debt securities 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 is 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 2016-17 161 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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, inter-bank participation with risk, 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. Non-performing advances 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. 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 are 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. Provision for country risk is included under other liabilities. 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, of a 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 HDFC Bank Limited Annual Report 2016-17 162 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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, sub-standard 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 0.35% 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 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 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’). 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 Bank amortises any proﬁt received for every individual securitisation or direct assignment transaction based on the method prescribed in these guidelines. 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. The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certiﬁcates (PSLCs). In the case of a sale transaction, the Bank sells the fulﬁllment of priority sector obligation and in the case of a purchase transaction the Bank buys the fulﬁllment of priority sector obligation through the RBI trading platform. There is no transfer of risks or loan assets. HDFC Bank Limited Annual Report 2016-17 163 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 The fee received for the sale of PSLCs is recorded as ‘Miscellaneous Income’ and the fee paid for purchase of the PSLCs is recorded as ‘Other Expenditure’ in Statement of Proﬁt and Loss. 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 and 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 over the tenor of the loans. 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 for more than 90 days. 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 management believes that the useful life of assets assessed by the Bank, pursuant to the Companies Act, 2013, taking into account changes in environment, changes in technology, the utility and efﬁcacy of the asset in use, fairly reﬂects its estimate of useful lives of the ﬁxed assets. 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 Modems, routers, switches, servers, network and related IT equipment Motor cars Furniture and ﬁttings HDFC Bank Limited Annual Report 2016-17 164 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 3 to 6 years 4 years 16 years 60 years 15 years 10 years 5 years 3 years 6 years 8 years 10 years Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 (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 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: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) HDFC Bank Limited Annual Report 2016-17 165 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 (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: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) (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: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:0)(cid:79)(cid:82)(cid:0)(cid:73)(cid:84)(cid:83)(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:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:69)(cid:86)(cid:69)(cid:82)(cid:0)(cid:73)(cid:83)(cid:0) lower. (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. HDFC Bank Limited Annual Report 2016-17 166 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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. 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. HDFC Bank Limited Annual Report 2016-17 167 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:73)(cid:78)(cid:71)(cid:0) assets and loan accounts where restructuring has been approved by the RBI under Strategic Debt Restructuring (SDR) scheme 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, where the Bank is reasonably certain 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) HDB Financial Services Limited (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. HDFC Bank Limited Annual Report 2016-17 168 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 (cid:115)(cid:0) (cid:115)(cid:0) (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 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 HDFC Bank Limited Annual Report 2016-17 169 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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 make 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. 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. HDFC Bank Limited Annual Report 2016-17 170 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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. 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 Institute 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 the outstanding reward points are made based on the actuarial valuation report as furnished by the said independent actuary and included in other liabilities. HDFC Bank Limited Annual Report 2016-17 171 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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 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. 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. HDFC Bank Limited Annual Report 2016-17 172 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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: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) non-occurrence of one or more uncertain future events not within the control of the Group; 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. 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 and gold 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 2016-17 173 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 SCHEDULE 18 - Notes forming part of the consolidated ﬁnancial statements for the year ended March 31, 2017 Amounts in notes forming part of the consolidated ﬁnancial statements for the year ended March 31, 2017 are denominated in rupee crore to conform to extant RBI guidelines. 1 Amalgamation of Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited with HDB Financial Services Limited During the year ended March 31, 2017, Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited, associates of the Bank as at March 31, 2016, amalgamated with HDB Financial Services Limited, pursuant to the approval of the Honourable High courts of Gujarat and Bombay with effect from December 1, 2016. The appointed date of the merger as per the scheme of amalgamation was April 1, 2014. Accordingly, the consolidated ﬁnancial statements include the effect of the said amalgamation. In view of the amalgamation, the ﬁgures for the current year are not comparable with the corresponding ﬁgures of the previous year. 2 Change in classiﬁcation Pursuant to RBI circular dated May 19, 2016, the Bank has, included its repurchase / reverse repurchase transactions under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) with RBI under ‘Borrowings from RBI’ / ‘Balances with RBI’, as the case may be. Hitherto, these transactions were netted from / included under ‘Investments’. Figures of 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, 2017 and March 31, 2016. 3 Proposed dividend The Board of Directors of the Bank, at their meeting held on April 21, 2017, have proposed a dividend of ` 11.00 per equity share aggregating ` 3,392.71 crore, inclusive of tax on dividend. The proposal is subject to the approval of shareholders at the Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date’ as notiﬁed by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend from Statement of Proﬁt and Loss for the year ended March 31, 2017. Accordingly, the proposed dividend and the tax thereon, under Appropriations in the Statement of Proﬁt and Loss is lower by ` 2,818.80 crore and ` 573.91 crore respectively and the balance of Other Liabilities is lower by an equivalent amount as at March 31, 2017. However, the effect of the proposed dividend has been reckoned in determining consolidated capital funds in the computation of the capital adequacy ratio as at March 31, 2017. 4 Capital infusion During the year ended March 31, 2017, the Bank allotted 3,43,59,200 equity shares (previous year: 2,16,91,200 equity shares) aggregating to face value ` 6.87 crore (previous year: ` 4.34 crore) in respect of stock options exercised. Accordingly, share capital increased by ` 6.87 crore (previous year: ` 4.34 crore) and share premium increased by ` 2,254.64 crore (previous year: ` 1,218.56 crore). Details of movement in the paid-up equity share capital of the Bank are given below: (` crore) Particulars Opening balance Addition pursuant to stock options exercised Closing balance 5 Earnings per equity share March 31, 2017 March 31, 2016 505.64 6.87 512.51 501.30 4.34 505.64 Basic and diluted earnings per equity share have been calculated based on the consolidated proﬁt attributable to the Group of ` 15,253.03 crore (previous year: ` 12,801.33 crore) and the weighted average number of equity shares outstanding during the year of 2,54,43,33,609 (previous year: 2,51,74,29,120). HDFC Bank Limited Annual Report 2016-17 174 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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, 2017 March 31, 2016 2.00 59.95 (0.79) 59.16 2.00 50.85 (0.61) 50.24 Basic earnings per equity share has 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 has 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, 2017 March 31, 2016 2,54,43,33,609 2,51,74,29,120 3,40,55,428 2,57,83,89,037 3,04,43,320 2,54,78,72,440 6 Reserves and Surplus Drawdown from reserves Share Premium The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2017 and March 31, 2016. Statutory Reserve The Group has made an appropriation of ` 3,777.16 crore (previous year: ` 3,180.93 crore) out of proﬁts for the year ended March 31, 2017 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, 2017, the Bank appropriated ` 313.41 crore (previous year: ` 222.15 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 ` 1,454.96 crore (previous year: ` 1,229.62 crore) out of proﬁts for the year ended March 31, 2017 to General Reserve. Investment Reserve Account During the year ended March 31, 2017, the Bank has appropriated ` 4.29 crore (net) from Proﬁt and Loss Account to Investment Reserve Account as per RBI guidelines. In the previous year the Bank had transferred ` 8.52 crore (net) from Investment Reserve Account to Proﬁt and Loss Account as per RBI guidelines. 7 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, 2017, if approved at the ensuing Annual General Meeting. HDFC Bank Limited Annual Report 2016-17 175 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 8 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, Plan “F” in June 2013 and Plan “G” in July 2016. Under the terms of each of these Plans, the Bank may issue to its employees and Whole Time Directors, Equity Stock Options (‘ESOPs’) 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, F and G 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. This closing price is the closing price of the Bank’s equity 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, 2017 and March 31, 2016, 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:23)(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 Number of Options 12,86,54,300 Weighted average exercise price (`) 840.19 - 3,43,59,200 21,38,800 9,21,56,300 5,63,14,000 - 658.20 972.97 904.97 835.06 (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 Number of 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: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:23)(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 835.50 680.00 468.40 to 680.00 835.50 to 1,097.80 46,44,400 33,34,300 1,50,94,600 6,90,83,000 2.34 2.33 2.18 3.90 690.91 680.00 650.01 985.92 HDFC Bank Limited Annual Report 2016-17 176 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 (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 Fair value methodology 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 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. No stock options were granted during the year ended March 31, 2017 (previous year: 4,48,36,200). The various assumptions considered in the pricing model for the ESOPs granted during the year ended March 31, 2016 were: Particulars Dividend yield Expected volatility Risk - free interest rate Expected life of the options March 31, 2016 0.73% 23.29% to 26.46% 7.71% to 8.07% 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 (` crore) 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) HDFC Securities Limited March 31, 2017 March 31, 2016 14,549.66 - 812.75 13,736.91 (`) 57.18 53.99 56.43 53.28 12,296.23 - 1,265.93 11,030.30 (`) 48.84 43.82 48.26 43.29 The Shareholders of the Company approved a stock option scheme (viz. ESOS - II) in February 2017 (“Company Options”). Under the terms of the scheme, the Company issues stock options to employees, whole time director, managing director and directors (excluding Independent Directors) of the Company, each of which is convertible into one equity share. Scheme ESOS - II 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 ` 1,136/- per share, being the fair market value of the share arrived by considering the average price of the two independent valuation reports. 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. 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 2016-17 177 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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:23)(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 (`) - - 2,80,000 1,136 - - 2,80,000 - - - 1,136 - (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:23)(cid:26) Plan Company Options Range of exercise price (`) 1,136 Number of shares arising out of options 2,80,000 Weighted average remaining contractual life of options (in years) 4.1 years Weighted average exercise price (`) 1,136 There were no stock options outstanding as at 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 dates of each grant using the Black and Scholes model. The shares of the Company are not listed on any stock exchange. Accordingly, the Company has considered the volatility of the Company’s stock price as an average of the historical volatility of similar listed enterprises for the purpose of calculating the fair value to reduce any company speciﬁc variations. The various assumptions considered in the pricing model for the stock options granted by the Company during the year ended March 31, 2017 are: Particulars Dividend yield Expected volatility Risk - free interest rate Expected life of the options March 31, 2017 March 31, 2016 3.52% 43.53% to 42.48% 6.60% to 6.90% 3 to 5 years - - - - 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) March 31, 2017 March 31, 2016 (` crore) 215.90 - 0.78 215.12 (`) 139.45 138.95 139.45 138.95 133.34 - - 133.34 (`) 86.12 86.12 86.12 86.12 HDFC Bank Limited Annual Report 2016-17 178 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 HDB Financial Services Limited 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-5 on July 27, 2011, ESOS-6 on June 11, 2012, ESOS-7 on July 19, 2013, ESOS-8 on July 14, 2015 and ESOS-9 on October 18, 2016. 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 for ESOS-5, ESOS-6, ESOS-7 and ESOS-8 and maximum of four years from the date of vesting for ESOS-9. 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:23)(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 48,42,950 31,17,500 15,79,440 5,02,350 58,78,660 Weighted average exercise price (`) 88.41 137.00 77.86 93.46 112.46 (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: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:23)(cid:26) Plan ESOS - 6 ESOS - 7 ESOS - 8 ESOS - 9 Range of exercise price (`) Number of shares arising out of options Weighted average remaining contractual life of options (in years) Weighted average exercise price (`) 31.00 56.00 88.00 137.00 1,200 1,02,700 27,71,260 30,03,500 0.50 0.50 2.74 5.49 31.00 56.00 88.00 137.00 (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: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 HDFC Bank Limited Annual Report 2016-17 179 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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 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, 2017 are: Particulars Dividend yield Expected volatility Risk-free interest rate Expected life of the option March 31, 2017 March 31, 2016 0.88% Nil 6.54% 3 years 0.80% Nil 7.70% 2.21 years 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, 2017 March 31, 2016 (` crore) 684.21 - 8.36 675.85 (`) 9.64 9.52 9.64 9.52 534.41 - 4.87 529.54 (`) 7.64 7.57 7.64 7.57 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 (` crore) 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) March 31, 2017 March 31, 2016 15,253.03 821.89 14,431.14 (`) 59.95 56.72 59.16 55.97 12,801.33 1,270.80 11,530.53 (`) 50.85 45.80 50.24 45.26 HDFC Bank Limited Annual Report 2016-17 180 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 9 Other liabilities (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 at March 31, 2017 include unrealised loss on foreign exchange and derivative contracts of ` 13,880.38 crore (previous year: ` 7,524.88 crore) 10 Investments (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 ` 1,520.00 crore) which are kept as margin for clearing of securities, of FV ` 24,488.31 crore (previous year: FV ` 13,729.30 crore) which are kept as margin for Collateralised Borrowing and Lending Obligation (CBLO) and of FV aggregating ` 100.00 crore (previous year: FV ` 56.00 crore) which are kept as margin for Forex Forward segment - Default Fund with the Clearing Corporation of India Limited (CCIL). (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 Limited. (NSCCIL), of FV aggregating ` 13.00 crore (previous year: FV ` 13.00 crore) which are kept as margin with Metropolitan Clearing Corporation of India Limited and of FV aggregating ` 5.00 crore (previous year: ` 1.00 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) ` 42,730.27 crore (previous year: FV ` 35,937.22 crore) are kept as margin towards Real Time Gross Settlement (RTGS) and those having FV aggregating ` 41,473.92 crore (previous year: ` 13,091.46 crore) are kept as margin towards repo transactions with the RBI. (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: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)` 11.05 crore (previous year: FV ` 10.05 crore) are kept as margin for Forex Settlement Default Fund, of FV aggregating ` 75.40 crore (previous year: ` 85.40 crore) are kept as Cash Margin, of FV aggregating ` 65.00 crore (previous year: nil) are kept as margin for Securities Segment Default Fund, of FV aggregating ` 25.00 crore (previous year: nil) are kept as margin for CBLO Segment Default Fund and of FV aggregating ` 41.00 crore (previous year: ` 11.00 crore) are kept as margin for Rupee Derivatives Guaranteed Settlement Default Fund with CCIL. 11 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, 2017 March 31, 2016 1,774.82 413.26 - 1,609.52 165.31 (0.01) Total (a) 2,188.08 1,774.82 1,248.71 260.41 - 1,509.12 678.96 1,049.45 199.27 (0.01) 1,248.71 526.11 Total (b) Net value (a-b) HDFC Bank Limited Annual Report 2016-17 181 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 12 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)` 2,587.06 crore (previous year: ` 2,227.23 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, 2017 March 31, 2016 (` crore) 2,207.53 175.39 322.66 2,705.58 (118.52) (118.52) 2,587.06 1,856.51 150.77 314.47 2,321.75 (94.52) (94.52) 2,227.23 Total (a) Total (b) 13 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) Provision pertaining to fraud accounts Particulars No. of frauds reported during the year Amount involved in fraud (` crore) Amount involved in fraud net of recoveries / write-offs as at the end of the year (` crore) Provisions held as at the end of the year (` crore) Amount of unamortised provision debited from “other reserves” as at the end of the year (` crore) HDFC Bank Limited Annual Report 2016-17 182 March 31, 2017 March 31, 2016 306.36 334.24 (209.36) 431.24 200.07 179.50 (73.21) 306.36 (` crore) March 31, 2017 March 31, 2016 344.56 (32.66) 311.90 354.91 (10.35) 344.56 March 31, 2017 2,319 165.20 20.83 20.83 - Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 d) Description of contingent liabilities Sr. No. Contingent liability* Brief description 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 favourable 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; e) Investment purchases pending settlement; f) Amount transferred to the RBI under the Depositor Education and Awareness Fund (DEAF). *Also refer Schedule 12 - Contingent Liabilities 14 Commission, exchange and brokerage income Commission, exchange and brokerage income is net of correspondent bank charges. 15 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 NPAs Provision for diminution in value of non-performing investments Provision for standard assets Other provisions and contingencies* March 31, 2017 March 31, 2016 6,889.36 (195.70) 2,344.37 14.65 464.89 136.86 9,654.43 8,424.16 (346.04) 3,503.37 (7.64) 431.23 63.85 12,068.93 Total *Includes provisions for tax, legal and other contingencies ` 38.72 crore (previous year: ` 37.33 crore), ﬂoating provisions ` 25.00 crore (previous year: ` 115.00 crore), provisions / (write back) for securitised-out assets ` 2.62 crore (previous year: ` (2.85) crore) and standard restructured assets ` (2.50) crore (previous year: ` (12.62) crore). HDFC Bank Limited Annual Report 2016-17 183 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 16 Employee beneﬁts Gratuity Particulars Reconciliation of opening and closing balance of the present value of the deﬁned beneﬁt obligation March 31, 2017 March 31, 2016 (` crore) Present value of obligation as at April 1 Addition due to amalgamation 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 Addition due to amalgamation 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 (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) Discount rate Expected return on plan assets Salary escalation rate 401.93 33.48 29.11 74.76 (45.47) 39.69 15.00 548.50 295.46 20.76 24.83 60.10 (45.47) 31.19 3.36 390.23 390.23 (548.50) (158.27) 29.11 74.76 (24.83) 20.13 99.17 59.38 94.73 318.37 - 22.98 56.53 (24.88) 16.27 12.66 401.93 248.13 - 21.72 64.10 (24.88) (13.61) - 295.46 295.46 (401.93) (106.47) 22.98 56.53 (21.72) 42.54 100.33 8.11 53.08 7.1% per annum 7.5% per annum 7.0% per annum 8.0% per annum 8.0% per annum 8.0% per annum 6.8% per annum 7.6% per annum 7.6% per annum 7.6% per annum 12.0% per annum 9.0% per annum 6.4% - 6.5% per annum 7.8% per annum 7.5% per annum 8.0% per annum 5% - 7.5% per annum 6.0% per annum HDFC Bank Limited Annual Report 2016-17 184 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 Experience adjustment Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Experience adjustment gain / (loss) on plan assets Experience adjustment (gain) / loss on plan liabilities 2017 390.23 548.50 (158.27) 31.19 39.69 Years ended March 31, 2015 2014 2016 295.46 401.93 (106.47) (13.61) 16.27 248.13 318.37 (70.24) 21.27 4.84 176.20 242.71 (66.51) 1.82 6.30 (` crore) 2013 132.60 209.82 (77.22) 2.00 2.61 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 at March 31, 2017 are given below: Category of plan assets Government securities Debenture and bonds Equity shares Others Pension HDFC Bank Limited HDFC Securities Limited 28.0% 27.0% 40.8% 4.2% 100.0% 38.0% 44.0% 13.0% 5.0% 100.0% HDB Financial Services Limited 55.6% 43.2% - 1.2% 100.0% (` crore) Total 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 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 March 31, 2017 March 31, 2016 70.88 4.80 1.23 (6.62) 4.65 (1.39) 73.55 38.38 2.61 1.03 (6.62) 0.39 0.37 36.16 36.16 (73.55) (37.39) 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) HDFC Bank Limited Annual Report 2016-17 185 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 Particulars March 31, 2017 March 31, 2016 Expenses recognised in Statement of Proﬁt and Loss (` crore) 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 Experience adjustment Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Experience adjustment gain / (loss) on plan assets Experience adjustment (gain) / loss on plan liabilities 4.80 1.23 (2.61) 2.50 5.92 3.37 7.18 3.92 1.12 (3.21) 17.14 18.97 4.64 14.00 7.1% per annum 7.0% per annum 8.0% per annum 7.5% per annum 8.0% per annum 8.0% per annum (` crore) Years ended March 31, 2017 2016 2015 2014 2013 36.16 73.55 38.38 70.88 (37.39) (32.50) 0.39 4.65 1.43 17.35 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 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 at March 31, 2017 are given below: Category of plan assets Government securities Debenture and bonds Others Total Provident fund % of fair value to total plan assets as at March 31, 2017 6.9% 87.7% 5.4% 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 at March 31, 2017 (previous year: Nil) 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, 2017 March 31, 2016 7.1% per annum 7.5% per annum 8.7% per annum 9.0% per annum The Bank does not have any unfunded deﬁned beneﬁt plan. The Group contributed ` 292.00 crore (previous year: ` 206.99 crore) to the provident fund. The Bank contributed ` 78.67 crore (previous year: ` 56.54 crore) to the superannuation plan. HDFC Bank Limited Annual Report 2016-17 186 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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, 2017 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 17 Segment Reporting Business segments March 31, 2017 March 31, 2016 254.28 56.12 310.40 227.40 47.88 275.28 7.1% per annum 8.0% per annum 7.5% per annum 8.0% per annum 6.8% per annum 12.0% per annum 7.6% per annum 9.0% per annum 6.4% - 6.5% per annum 5% - 7.5% per annum 7.8% per annum 6.0% per annum 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 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 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. HDFC Bank Limited Annual Report 2016-17 187 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 (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. 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, 2017 is given below: Business segments: Sr. No. Particulars Less: Inter-segment revenue Income from operations (1) + (2) - (3) 1 Segment revenue 2 Unallocated revenue 3 4 5 Segment results 6 Unallocated expenses 7 8 Net proﬁt (5) - (6) - (7) (net proﬁt before Income tax expense (including deferred tax) Treasury Retail banking Wholesale banking 21,581.79 66,147.50 31,332.24 Other banking operations 13,593.23 1,308.38 8,432.16 10,473.77 4,591.77 minority interest and earnings from associates) 9 Segment assets 10 Unallocated assets 11 Total assets (9) + (10) 12 Segment liabilities 13 Unallocated liabilities 14 Total liabilities (12) + (13) 15 Capital employed (9) - (12) (Segment assets - Segment liabilities) 16 Unallocated (10) - (13) 17 Total (15) + (16) 18 Capital expenditure 19 Depreciation 264,536.14 295,828.92 270,969.09 55,709.83 73,857.49 525,792.90 156,129.90 29,023.68 190,678.65 (229,963.98) 114,839.19 26,686.15 32.85 10.15 846.56 659.66 150.30 90.78 227.58 125.60 HDFC Bank Limited Annual Report 2016-17 188 (` crore) Total 132,654.76 - 46,505.77 86,148.99 24,806.08 1,440.55 8,078.12 15,287.41 887,043.98 5,300.18 892,344.16 784,803.97 15,454.80 800,258.77 102,240.01 (10,154.62) 92,085.39 1,257.29 886.19 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 Geographic segments: Particulars Revenue Assets Capital expenditure (` crore) Domestic International 85,125.34 1,023.65 868,432.68 23,911.48 1,255.83 1.46 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) Treasury Retail banking Wholesale banking Other banking operations (` crore) Total 18,264.88 59,252.34 27,162.39 10,954.46 115,634.07 1,489.21 7,855.03 7,887.20 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) 235,331.98 252,690.65 226,242.65 43,049.31 757,314.59 77,340.38 448,313.40 120,425.52 22,085.58 668,164.88 4,897.74 762,212.33 19,562.70 687,727.58 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 5.09 6.16 729.46 540.47 134.59 101.67 135.72 1,004.86 89.73 738.03 (14,664.96) 74,484.75 (` crore) Domestic International 73,216.82 1,156.40 726,255.45 35,956.88 1,003.97 0.89 HDFC Bank Limited Annual Report 2016-17 189 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 18 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 International Asset Reconstruction Company Private Limited Atlas Documentary Facilitators Company Private Limited* HBL Global Private Limited* *Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited amalgamated with HDB Financial Services Limited pursuant to the approval of the Honourable High courts of Gujarat and Bombay with effect from December 1, 2016. The appointed date of the merger as per the scheme of amalgamation was April 1, 2014. Accordingly transactions entered into by the Bank with these entities during the ﬁnancial year ended March 31, 2017 have been classiﬁed under transactions with HDB Financial Services 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, Akuri by Puri, 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 the year ended March 31, 2017 are given below. A speciﬁc related party transaction is disclosed as a signiﬁcant transaction wherever it exceeds 10% of all related party transactions in that category: (cid:0) (cid:0) (cid:0) (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: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)` 5.57 crore (previous year: ` 7.25 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)` 207.45 crore (previous year: ` 178.83 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: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)` 343.10 crore (previous year: ` 247.21 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)` 373.55 crore (previous year: ` 314.57 crore). HDFC Bank Limited Annual Report 2016-17 190 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 The Group’s related party balances and transactions for the year ended March 31, 2017 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 Other investments Dividend paid to Dividend received from Receivable from Payable to Guarantees given Remuneration paid Loans purchased from 2,500.25 (2,500.25) 0.15 (0.15) - - - - 5.57 - 207.45 343.10 - - - (126.48) 373.55 - 23.16 (23.16) 33.67 (33.67) 0.12 (0.14) - 13,845.65 25.05 (25.05) - - 0.05 (0.05) - - 0.51 - - - 31.17 (31.17) - - - - - - - - - - - - 13.61 (60.14) 2.51 (2.51) 3.44 (3.44) - - 1.02 0.03 - 0.76 - - - - 4.49 - - - - - - - 20.79 - 2,538.91 (2,585.44) 2.66 (2.66) 3.49 (3.49) - - 7.10 0.03 207.45 343.86 31.17 (31.17) - (126.48) 378.04 - 23.16 (23.16) 33.67 (33.67) 0.12 (0.14) 20.79 13,845.65 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 2016-17 191 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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 at March 31, 2017 is ` 665.77 crore (previous year: ` 491.21 crore). The contingent credit exposure pertaining to these contracts computed in line with the extant RBI guidelines on exposure norms is ` 40.18 crore (previous year: ` 18.90 crore). During the year ended March 31, 2017, the Bank purchased debt securities from Housing Development Finance Corporation Limited ` 2,320.00 crore (previous year: ` 1,415.00 crore) issued by it. During the year ended March 31, 2017, 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, 2017, 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, 2016 are summarised as follows: (` crore) 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) - - - - 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. HDFC Bank Limited Annual Report 2016-17 192 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 19 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, 2017 March 31, 2016 995.56 925.82 3,185.49 2,947.21 3,154.93 2,564.32 Total 7,335.98 6,437.35 The total of minimum lease payments recognised in the Statement of Proﬁt and Loss for the year 1,150.97 1,038.00 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 25.33 37.13 11.31 138.79 10.67 180.53 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. 20 Penalties levied by the RBI Further to the media reports in October 2015 about irregularities in advance import remittances in various banks, the Reserve Bank of India (RBI) had conducted a scrutiny of the transactions carried out by the bank under Section 35(1A) of the Banking Regulation Act, 1949. The RBI issued a Show Cause Notice to which the Bank had submitted its detailed response. After considering the Bank’s submission, the RBI imposed a penalty of ` 2.00 crore on the Bank vide its letter dated July 19, 2016 on account of pendency in receipt of bill of entry relating to advance import remittances made and lapses in adhering to KYC / AML guidelines in this respect. The penalty has since been paid. The Bank has implemented a comprehensive corrective action plan, to strengthen its internal control mechanisms so as to ensure that such incidents do not recur. The above matter does not constitute a material weakness or signiﬁcant deﬁciency in the framework of internal ﬁnancial controls over ﬁnancial reporting maintained by the Bank under Section 134(3)(q) of the Companies Act 2013. During the year ended March 31, 2016, RBI had not imposed any penalties on the Bank. 21 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. The above is based on the information available with the Bank which has been relied upon by the auditors. HDFC Bank Limited Annual Report 2016-17 193 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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, 2017 was ` 0.02 crore (previous year: ` 0.02 crore). 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, 2017 was Nil (previous year: Nil). 22 Corporate social responsibility Operating expenses include ` 313.31 crore (previous year: ` 197.10 crore) for the year ended March 31, 2017 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, 2017 March 31, 2016 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 313.31 - - - - - - 313.31 188.75 8.35 197.10 23 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. 24 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 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 Srikanth Nadhamuni Umesh Sarangi Directors Mumbai, April 21, 2017 HDFC Bank Limited Annual Report 2016-17 194 Statement pursuant to Section 129 of the Companies Act, 2013 Schedules to the Consolidated Financial Statements For the year ended March 31, 2017 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 and Companies (Accounts) Amendment Rules, 2016 Statement containing salient features of the ﬁnancial statements of subsidiaries, associate companies and joint ventures Part A: Subsidiaries Sr. No. Name of the subsidiary HDFC Securities Limited (` crore) HDB Financial Services Limited 1. The date since when subsidiary was acquired September 28, 2005 August 31, 2007 2. 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, 2016 to March 31, 2017 Reporting period of the subsidiary is the same as that of the holding company i.e. April 1, 2016 to March 31, 2017 3. 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 4. Share capital 5. Reserves & surplus 6. 7. 8. 9. Total assets Total liabilities Investments Turnover 10. Proﬁt before taxation 11. Provision for taxation 12. Proﬁt after taxation 13. Proposed dividend (including tax thereon)* 14. Extent of shareholding (in percentage) 15.48 791.93 1,380.23 572.82 308.61 553.20 329.45 113.55 215.90 111.80 97.9% 780.24 4,582.66 33,456.09 28,093.19 465.06 5,714.54 1,058.59 374.38 684.21 133.18 96.2% * Includes interim dividend on equity shares paid during the year. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date’ as notiﬁed by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the subsidiaries have not appropriated their proposed dividend (including tax) from Statement of Proﬁt and Loss for the year ended March 31, 2017. Notes: 1. 2. There are no subsidiaries that are yet to commence operations. No subsidiaries were liquidated or sold during the year. HDFC Bank Limited Annual Report 2016-17 195 Schedules to the Consolidated Financial Statements Statement pursuant to Section 129 of the Companies Act, 2013 For the year ended March 31, 2017 Part B: Associate Companies and Joint Ventures (` crore) Sr. No. Name of Associates or Joint Ventures International Asset Reconstruction Company Private Limited 1. Latest audited Balance Sheet Date 2. Date on which the Associate or Joint venture was associated or acquired 3. Shares of Associate or Joint Ventures held by the company on the year end: Number of shares Amount of investment in associates or joint venture Extent of holding (in percentage) 4. Description of how there is signiﬁcant inﬂuence 5. Reason why the associate or joint venture is not consolidated 6. Net worth attributable to the Bank’s shareholding 7. Proﬁt / Loss for the year: i. Considered in consolidated ﬁnancial statements ii. Not considered in consolidated ﬁnancial statements March 31, 2016* May 23, 2008 1,61,75,507 31.17 29.4% Extent of equity holding in the associate company exceeds 20% Not applicable 39.06* 2.34* 5.70* * Unaudited ﬁnancial statements drawn up to March 31, 2017 have been considered for the purpose of the Consolidated Financial Statements for the year ended March 31, 2017. 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. During the year ended March 31, 2017, Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited, associates of the Bank as at March 31, 2016, amalgamated with HDB Financial Services Limited, pursuant to the approval of the Honourable High courts of Gujarat and Bombay with effect from December 1, 2016. The appointed date of the merger as per the scheme of amalgamation was April 1, 2014. For and on behalf of the Board 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 Srikanth Nadhamuni Umesh Sarangi Directors Mumbai, April 21, 2017 HDFC Bank Limited Annual Report 2016-17 196 Basel III - Pillar 3 Disclosures As at March 31, 2017 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 given below: 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: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) HDFC Bank Limited Annual Report 2016-17 197 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 ‘Company’) for the year ended March 31, 2017, as prescribed in Regulations 17 to 27, clauses (b) to (i) of sub-regulation (2) of regulation 46 and paras C, D and E of Schedule V to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR’). 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 Company 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 Company. In our opinion, and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the aforesaid provisions of LODR. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efﬁciency or effectiveness with which the management has conducted the affairs of the Company. For BNP & Associates Company Secretaries [Firm Regn. No. P2014MH037400] B Narasimhan Partner FCS No.: 1303 C P No.: 10440 Place: Mumbai Date: May 15, 2017 HDFC Bank Limited Annual Report 2016-17 198 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, responsibility, transparency, fair and timely disclosures, credibility, sustainability etc. serve as the means for implementing the philosophy of corporate governance in letter and in spirit. 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 twelve (12) Directors as on March 31, 2017. None of the Directors are 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 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 Mr. Srikanth Nadhamuni $ 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 3 3 4 2 - 8 9 - - - - - - 1 - 1 - 1 - 1 - - - - 2 3 - - - 4 4 - - - - - 1 1 3 1 - 5 1 - - - - - * Chairmanships not counted $ Mr. Srikanth Nadhamuni was appointed as an Additional Director Composition of the Board of Directors of the Bank as on March 31, 2017: w.e.f September 20, 2016. Executive Directors: Mr. Aditya Puri (Managing Director), Mr. Paresh Sukthankar (Deputy Managing Director) and Mr. Kaizad Bharucha (Executive Director) Non-Executive Directors: Mr. Keki Mistry and Mrs. Renu Karnad Independent Directors: Mrs. Shyamala Gopinath (Part-time Non Executive Chairperson), Mr. Partho Datta, Mr. Bobby Parikh, Mr. A. N. Roy, Mr. Malay Patel and Mr. Umesh Chandra Sarangi Mr. Srikanth Nadhamuni has been appointed as an Additional Director of the Bank with effect from September 20, 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. 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. PROFILE OF BOARD OF DIRECTORS The proﬁles of the Directors of the Bank as on March 31, 2017 are as under: Mrs. Shyamala Gopinath Mrs. Shyamala Gopinath, aged 67 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 HDFC Bank Limited Annual Report 2016-17 199 Corporate Governance supervision, development of ﬁnancial markets, capital account management, management of government borrowings, forex reserves management and payment and settlement systems. 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). 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. She also served as RBI representative on the Financial Stability Board. Mrs. Gopinath does not hold any shares in the Bank as on March 31, 2017. Mr. Aditya Puri Mr. Aditya Puri, aged 66 years, holds a Bachelor’s degree in Commerce from Punjab University and is an Associate Member of the Institute of Chartered Accountants of India. Prior to joining the Bank, Mr. Puri was the Chief Executive Ofﬁcer of Citibank, Malaysia from 1992 to 1994. Mr. Puri has been the Managing Director of the Bank since September 1994. Mr. Puri has over four decades of experience in the banking sector in India and abroad. Mr. Puri has provided outstanding leadership as the Managing the Director and has contributed signiﬁcantly 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. to enable 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. 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 EVA Webchat Bot, UPI, 10 - second loans, PayZapp, Chillr, etc. Mr. Keki Mistry Mr. Keki Mistry, aged 62 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 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. As a part of the management team, Mr. Mistry has played a critical role in the successful transformation of HDFC Ltd. into India’s leading Financial Services Conglomerate by facilitating formation of companies including HDFC Bank Ltd., HDFC Asset Management Company Ltd., HDFC Standard Life Insurance Company Ltd. and HDFC Ergo General Insurance Company Ltd. Mr. Mistry, along with his relatives, holds 296,130 equity shares in the Bank as on March 31, 2017. Mrs. Renu Karnad Mrs. Renu Karnad, aged 64 years, is a law graduate and also holds a Master’s Degree in Economics from University of Delhi. 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. Mrs. Karnad brings with her rich experience and enormous knowledge in the mortgage sector, having been part of the nascent real estate and mortgage sectors in India. Mrs. Karnad is in-charge of the lending operations of the HDFC Ltd. and is responsible for spearheading its expansion. 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. Mr. Puri, along with his relatives, holds 3,441,544 equity shares in the Bank as on March 31, 2017. Mrs. Karnad, along with her relatives, holds 287,620 equity shares in the Bank as on March 31, 2017. HDFC Bank Limited Annual Report 2016-17 200 Corporate Governance Mr. Partho Datta Mr. Partho Datta, aged 68 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 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, 2017. Mr. Bobby Parikh Mr. Bobby Parikh, aged 53 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 8,250 equity shares in the Bank as on March 31, 2017. Mr. A. N. Roy Mr. A. N. Roy, aged 67 years, is 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, 2017. Mr. Paresh Sukthankar Mr. Paresh Sukthankar, aged 54 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 HDFC Bank Limited Annual Report 2016-17 201 Corporate Governance Bajaj Institute (Mumbai). Mr. Sukthankar has also completed the Advanced Management Program (AMP) from the Harvard Business School. Mr. Sukthankar has been associated with the Bank since its inception in 1994 and has total banking experience of over three decades. At the Bank, he has contributed in and effectively steered the various key areas including Credit, Risk Management, Finance, Human Resources, Investor Relations, Corporate Communications, Corporate Social Responsibility and Information Security verticals of the Bank. He was appointed as Executive Director on the Bank’s Board in October 2007. In June 2014, Mr. Sukthankar was elevated to the post of Deputy Managing Director. in various departments Prior to joining the Bank, Mr. Sukthankar worked in Citibank for around 9 years, 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, and is doing a commendable job in maintaining the overall portfolio quality of the Bank. Mr. Sukthankar, along with his relatives, holds 814,405 equity shares in the Bank as on March 31, 2017. Mr. Kaizad Bharucha Mr. Kaizad Bharucha, aged 52 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. He has driven growth and proﬁtability in the aforesaid areas of the Wholesale banking segment of the Bank. 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 three decades 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 938,551 equity shares in the Bank as on March 31, 2017. Mr. Malay Patel Mr. Malay Patel, aged 40 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, 2017. Mr. Umesh Chandra Sarangi Mr. Umesh Chandra Sarangi, aged 65 years, holds a Master’s Degree the Utkal University (gold medalist). in Science (Botany) from 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, 2017. Mr. Srikanth Nadhamuni Mr. Srikanth Nadhamuni, aged 53 years, has been appointed as an Additional Director on the Board of the Bank with effect from September 20, 2016 to hold ofﬁce till the conclusion of the ensuing Annual General Meeting of the Bank. Mr. Srikanth Nadhamuni holds a Bachelor’s degree in Electronics and Communications from National Institute of Engineering and a Master’s degree in Electrical Engineering from Louisiana State University. Mr. Nadhamuni is a technologist and an entrepreneur with 28 years of experience in the areas of CPU design, Healthcare, e-Governance, National ID, Biometrics, Financial Technology and Banking sectors. HDFC Bank Limited Annual Report 2016-17 202 Corporate Governance Mr. Nadhamuni presently is the Chairman of Novopay Solutions Private Limited, a company involved in the area of mobile payments and is the CEO of Khosla Labs Private Limited, a start-up incubator. He has also been a co-founder of e-Governments Foundation with Mr. Nandan Nilekani which work on the objectives to improve governance in Indian cities, creation of Municipal ERP suite which improves service delivery of cities. 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 2016-17 are as under: (Amount in `) Mr. Aditya Puri Mr. Paresh Sukthankar Mr. Kaizad Bharucha 39,415,680 21,498,854 4,729,884 5,912,352 29,015,377 21,928,752 15,658,142 2,631,456 3,289,313 17,300,777 14,700,000 17,375,182 1,764,000 2,205,000 10,566,653 21,896,522 13,055,031 9,112,740 7,118,855 4,245,746 1,453,913 Mr. Nadhamuni was the Chief Technology Ofﬁcer of Aadhaar (UID Authority of India) during 2009-2012 where he participated in design and development of the world’s largest biometric based ID system. He was instrumental in development of Aadhaar technology, several banking and ﬁnancial protocols including MicroATM, Aadhaar Enabled Payment System (AEPS) and Aadhaar Payment Bridge (APB). Particulars Basic Allowances and Perquisites Provident Fund Superannuation Performance Bonus # Mr. Nadhamuni spent 14 years in the silicon valley (California, US) working for several global companies such Sun Microsystems (CPU design), Intel Corporation (CPU design), Silicon Graphics (Interactive TV) and WebMD (Internet Healthcare). Mr. Nadhamuni has been appointed as a Director having expertise in the ﬁeld of Information Technology. Mr. Nadhamuni does not hold any shares in the Bank. BOARD MEETINGS During the year under review, seven (7) Board Meetings were held. The meetings were held on April 22, 2016, May 19, 2016, July 21, 2016, October 25, 2016, December 16, 2016, January 24, 2017 and March 14, 2017. Details of attendance at the Board Meetings held during the year under review, are as follows: # Bonus pertaining to FY 2015-16 paid out in FY 2016-17 Deferred Bonus tranches for earlier ﬁnancial years No stock options were granted to the whole-time directors during ﬁnancial year 2016-17. 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 (3) years each. The notice period for each of them, as speciﬁed in their respective terms of appointments, is three months. The remuneration of Mr. Aditya Puri, Mr. Paresh Sukthankar and Mr. Kaizad Bharucha as above has been approved by the Reserve Bank of India (RBI). 1. Mrs. Shyamala Gopinath, Mr. A. N. Roy, Mr. Bobby Parikh, Mr. Malay Patel, Mr. Umesh Chandra Sarangi, Mr. Keki Mistry, Mr. Aditya Puri and Mr. Paresh Sukthankar attended seven (7) Board meetings each. 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. 2. Mrs. Renu Karnad and Mr. Partho Datta attended six (6) Board meetings each. 3. Mr. Kaizad Bharucha, Executive Director, attended ﬁve (5) Board meetings. 4. Mr. Srikanth Nadhamuni attended four (4) Board meetings. (Mr. Nadhamuni was appointed as Additional Director on the Board of the Bank w.e.f. September 20, 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, 2016 attended the meeting. 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. 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. HDFC Bank Limited Annual Report 2016-17 203 Corporate Governance 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 including the independent directors and the Chairperson receive remuneration by way of sitting fees for each meeting of the Board and its various committees. Executive directors including independent directors other than the Chairperson also receive proﬁt related commission as per the limits prescribed in the RBI guidelines. No stock options are granted to any of the non-executive directors. During the year, Mrs. Shyamala Gopinath was paid remuneration of ` 3,000,000. 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, the 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 Mrs. Shyamala Gopinath Sitting Fees (`) 2,700,000 Mr. Partho Datta Mr. Bobby Parikh Mr. A. N. Roy Mr. Malay Patel Mr. Keki Mistry Mrs. Renu Karnad Mr. Umesh Chandra Sarangi Mr. Srikanth Nadhamuni 2,300,000 2,750,000 2,500,000 1,450,000 1,750,000 1,500,000 1,200,000 550,000 to RBI guidelines dated June 1, 2015 on Pursuant Compensation to Non-executive Directors of Private Sector Banks and shareholders’ resolution in this regard, each non-executive director including the independent directors, other than the Chairperson, also receive proﬁt related commission as per the limits prescribed in the RBI guidelines. Pursuant to these guidelines and shareholders’ resolution passed at the 22nd Annual General Meeting of the Bank held on July 21, 2016, Mr. Partho Datta, Mr. A. N. Roy, Mr. Bobby Parikh, Mr. Malay Patel, Mr. Keki Mistry and Mrs. Renu Karnad were paid proﬁt related commission of `1,000,000 during the year 2016-17 pertaining to FY 2015-16. This is in addition to the sitting fees paid to them for attending Board and Committee Meetings. There were no other pecuniary relationships or transactions of Non-executive Directors vis-a-vis the Bank (except banking transactions in the ordinary course of business and on arm’s length basis) during FY 2016-17. 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 brief terms of reference of the Audit Committee include, inter-alia, the following: a) Overseeing the Bank’s ﬁnancial reporting process and disclosure of ﬁnancial information to ensure that the ﬁnancial statement is correct, sufﬁcient and credible; b) Recommending appointment and removal of external auditors and ﬁxing of their fees; c) Reviewing with management the annual ﬁnancial statements and auditor’s report before submission to the Board with special emphasis on accounting policies and practices, compliance with accounting standards, disclosure of related party transactions and other legal requirements relating to 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 time to time in the Companies Act, 2013, SEBI Listing Regulations, 2015, including any amendments / re-enactments thereof from time to time. 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 Audit Committee of the Bank comprises Mr. Bobby Parikh, Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. A. N. Roy and Mr. Umesh Chandra Sarangi. The Committee is chaired by Mr. Bobby Parikh with effect from January 24, 2017. Prior to this, it was 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. Mr. Bobby Parikh and Mr. Partho Datta are the members of Audit Committee having ﬁnancial expertise. HDFC Bank Limited Annual Report 2016-17 204 Corporate Governance The Committee met eight (8) times during the year on April 21, 2016; May 19, 2016; July 20, 2016; August 9, 2016; October 24, 2016; November 15, 2016; January 23, 2017 and March 14, 2017. 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:115)(cid:0) (cid:115)(cid:0) (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: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: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. including individual directors The Committee also formulates criteria for evaluation of independent performance of directors, the Board of Directors and its Committees. The criteria for evaluation of performance of directors (including independent 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. Mr. Bobby Parikh is the Chairman of the Committee. All the members of the Committee are independent directors. The Committee met ten (10) times during the year on April 5, 2016; April 21, 2016; May 13, 2016; May 18, 2016; July 20, 2016; August 9, 2016; September 9, 2016; October 25, 2016; January 23, 2017 and March 14, 2017. 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 grievances 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 to non-availability that may arise due 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. from As on March 31, 2017, one (1) instrument of transfer for 85 equity shares was pending for transfer and this has since been processed. The details of the transfers are reported to the Board from time to time. During the year ended March 31, 2017, 3087 complaints were the shareholders. received The Bank had attended to all the complaints. 8 complaints remained pending and 4 complaints have not been solved to the satisfaction of the shareholders as on March 31, 2017. Besides, 6255 letters were received from the shareholders relating to change of address, nomination requests, email id and contact details updation, IFSC / MICR code updation, National Automated Clearing House (NACH) 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 re-validation of dividend warrants and other investor related matters. These letters have also been responded to. The Committee met ﬁve (5) times during the year on April 22, 2016; July 20, 2016; October 24, 2016; January 24, 2017 and March 14, 2017. 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 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. HDFC Bank Limited Annual Report 2016-17 205 Corporate Governance 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. 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; The Committee met ﬁve (5) times during the year on April 21, 2016; June 20, 2016; July 20, 2016; October 24, 2016 and January 16, 2017. e. Review the efﬁcacy of the remedial action taken to prevent recurrence of frauds, such as strengthening of internal controls; and 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. The Committee met twelve (12) times during the year on April 22, 2016; May 5, 2016; June 28, 2016; July 21, 2016; August 29, 2016; September 22, 2016; October 25, 2016; November 18, 2016; December 15, 2016; January 24, 2017, March 1, 2017 and March 14, 2017. 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. The Committee met ﬁve (5) times during the year on April 22, 2016; July 20, 2016; October 24, 2016; January 24, 2017 and March 14, 2017. Fraud Monitoring Committee: 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 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 facilitated lacunae, perpetration of the fraud and put in place measures to plug the same; if any, that b. Identify the reasons for delay in detection, if any and report to top management of the Bank and RBI; 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. The Committee met ﬁve (5) times during the year on April 21, 2016; July 20, 2016; September 9, 2016; October 24, 2016 and January 24, 2017. 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, Mr. Srikanth Nadhamuni and Mr. Aditya Puri. During the year, Mr. Srikanth Nadhamuni was appointed as a member of the Committee. The Committee met four (4) times during the year on April 21, 2016; July 20, 2016; October 24, 2016 and January 24, 2017. 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) (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 (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, Mr. Umesh Chandra Sarangi and Mr. Paresh Sukthankar. During the year, Mr. Umesh Chandra Sarangi was appointed as a member of the Committee. c. Monitor progress of Central Bureau of Investigation / Police Investigation and recovery position; The Committee met four (4) times during the year on April 21, 2016; July 20, 2016; October 24, 2016; and January 16, 2017. HDFC Bank Limited Annual Report 2016-17 206 Corporate Governance Review Committee for Wilful Defaulters’ Identiﬁcation: IT Strategy Committee The Board has constituted a Review Committee for Wilful Defaulters’ Identiﬁcation to review the orders passed by the Committee of Executives for Identiﬁcation of Wilful Defaulters and provide the ﬁnal decision with regard to identiﬁed Wilful 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 thrice during the year on April 22, 2016; November 4, 2016 and March 30, 2017. 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. The Bank has in place, an IT Strategy Committee to look into various technology related aspects. This Committee is not a Board level Committee. However, Mr. Srikanth Nadhamuni, Mr. Bobby Parikh, Mrs. Shyamala Gopinath and Mr. Paresh Sukthankar are members of the Committee along with other executives of the Bank and an external expert. The Committee is chaired by Mr. Srikanth Nadhamuni with effect from January 24, 2017. Prior to this, the Committee was chaired by Mr. Bobby Parikh. The Committee met four times during the year on May 5, 2016; August 2, 2016; October 21, 2016 and January 16, 2017. Meeting of the Independent Directors: The Independent Directors of the Bank held a meeting on March 14, 2017 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. COMPOSITION OF COMMITTEES OF DIRECTORS AND ATTENDANCE AT THE COMMITTEE MEETINGS Audit Committee [Total eight meetings held] Name Mrs. Shyamala Gopinath Mr. Bobby Parikh Mr. A. N. Roy Mr. Partho Datta Mr. Umesh Chandra Sarangi * No. of meetings attended 8 8 8 8 6 Customer Service Committee [Total four meetings held] Name Mrs. Shyamala Gopinath Mr. Aditya Puri Mr. A. N. Roy Mr. Keki Mistry Mr. Malay Patel Mr. Srikanth Nadhamuni # No. of meetings attended 4 4 4 4 4 1 Credit Approval Committee [Total twelve meetings held] Name Mr. Bobby Parikh Mr. Keki Mistry Mr. Aditya Puri Mr. Kaizad Bharucha No. of meetings attended 12 12 4 12 Nomination and Remuneration Committee [Total ten meetings held] Name Mrs. Shyamala Gopinath Mr. Partho Datta Mr. A. N. Roy Mr. Bobby Parikh No. of meetings attended 10 9 10 10 Stakeholders’ Relationship Committee [Total ﬁve meetings held] Name Mr. A. N. Roy Mrs. Renu Karnad Mr. Aditya Puri Mr. Paresh Sukthankar No. of meetings attended 5 5 5 5 Name Mrs. Renu Karnad Mr. Malay Patel Mr. Aditya Puri Premises Committee [Total ﬁve meetings held] No. of meetings attended 5 5 5 HDFC Bank Limited Annual Report 2016-17 207 Corporate Governance COMPOSITION OF COMMITTEES OF DIRECTORS AND ATTENDANCE AT THE COMMITTEE MEETINGS (CONTD.) Fraud Monitoring Committee [Total ﬁve meetings held] Name Mrs.Shyamala Gopinath No. of meetings attended 5 Mr. Aditya Puri Mr. Partho Datta Mr. A. N. Roy Mr. Keki Mistry Mr. Malay Patel 5 5 5 5 5 Corporate Social Responsibility Committee [Total four meetings held] Name Mrs. Renu Karnad Mr. Partho Datta Mr. Bobby Parikh Mr. Aditya Puri Mr. Paresh Sukthankar Mr. Umesh Chandra Sarangi* No. of meetings attended 4 4 4 4 4 3 Risk Policy & Monitoring Committee [Total ﬁve meetings held] Review Committee for Wilful Defaulters’ Identiﬁcation [Total three meetings held] Name Mrs. Renu Karnad Mrs. Shyamala Gopinath Mr. Paresh Sukthankar Mr. Partho Datta Mr. Aditya Puri No. of meetings attended 4 5 5 4 5 Name Mrs. Shyamala Gopinath Mr. Bobby Parikh Mr. Partho Datta Mr. A. N. Roy Mr. Aditya Puri No. of meetings attended 3 2 3 3 0 *Mr. Umesh Chandra Sarangi was appointed as a member of the Committee with effect from June 28, 2016 # Mr. Srikanth Nadhamuni was appointed as a member of the Committee with effect from January 24, 2017. 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. (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 auditor’s 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) as 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 percent 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) by 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) of 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) the shareholders. HDFC Bank Limited Annual Report 2016-17 208 Corporate Governance (cid:115) To ensure protection of minority shareholders from abusive actions by, or in the interest of, controlling shareholders acting either directly or indirectly, and effective means of redress. 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 (Following are the details of general body meetings for the previous three ﬁnancial years held at Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400020 at 2.30 p. m.) Sr. No. Particulars of meeting Date Special Resolutions passed, if any 1 2 3 20th Annual General Meeting 21st Annual General Meeting 22nd Annual General Meeting June 25, 2014 Eight special resolutions passed July 21, 2015 Three special resolutions passed July 21, 2016 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 During the year the Bank has entered into transactions with the related parties in the ordinary course of business. The Bank has not entered into any materially signiﬁcant transactions with the related parties including promoters, directors, the management, subsidiaries or relatives of the Directors, which could lead to a potential conﬂict of interest between the Bank and these parties. Transactions with related parties were placed before the Audit Committee/Board for approval. There were no material transactions with related parties, which were not in the normal course of business, nor were there any material transactions, which were not at an arm’s length basis. Details of related party transactions entered into during the year ended March 31, 2017 are given in Schedule 18, Note No. 28 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 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. The Bank being an authorized dealer, deals in foreign exchange including Gold 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 and interest rate securities. 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 Option Greeks (viz. Delta / Gamma / Vega) 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. Also, the Bank has initiated acceptance of gold through gold monetization scheme and any exposures arising are accordingly hedged through the normal course of business or forward transactions. 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 spot and 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 recognized in the Statement of Proﬁt and Loss. HDFC Bank Limited Annual Report 2016-17 209 Corporate Governance 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 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 amortized as expense or income over the life of the contract. Contingent liabilities on account of foreign exchange contracts, derivative transactions, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange as notiﬁed by FEDAI as on the Balance Sheet date. 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 Familiarization of Independent Directors The details of familiarization programmes imparted to Independent Directors are available on the Bank at http://www.hdfcbank.com/aboutus/cg/Familiarization.htm the website of Strictures and Penalties During the ﬁnancial year 2016-17, further to the media reports in October 2015 about irregularities in advance import remittances in various banks, the Reserve Bank of India (RBI) had conducted a scrutiny of the transactions carried out by the Bank under Section 35(1A) of the Banking Regulation Act, 1949. The RBI issued a Show Cause Notice to which the Bank had submitted its detailed response. After considering the Bank’s submission, the RBI imposed a penalty of ` 2.00 crore on the Bank vide its letter dated July 19, 2016 on account of pendency in receipt of bill of entry relating to advance import remittances made and lapses in adhering to KYC / AML guidelines in this respect. The penalty has since been paid. The Bank has implemented a comprehensive corrective action plan, to strengthen its internal control mechanisms so as to ensure that such incidents do not recur. During the ﬁnancial year 2015-16, 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. During the year 2014-15, FIU had imposed a penalty of ` 26 lakhs in 26 cases reported by Cobrapost.com, stating that there was a failure in the Bank’s internal mechanism for detecting and reporting attempted suspicious transactions. The Bank 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. 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. During the year, Mr Srikanth Nadhamuni was appointed as Additional Director with effect from September 20, 2016 to hold ofﬁce till the conclusion of the ensuing Annual General Meeting of the Bank. Mr. Nadhamuni has been appointed as Director having expertise in Information Technology. COMPLIANCE WITH MANDATORY REQUIREMENTS The Bank has complied with all the applicable mandatory requirements of the Code of Corporate Governance as prescribed under the SEBI Listing Regulations. HDFC Bank Limited Annual Report 2016-17 210 Corporate Governance 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 eight (8) 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 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 results on its 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, there is no audit qualiﬁcation in the Bank’s ﬁnancial statements. The Bank continues to adopt best practices to ensure regime of unqualiﬁed ﬁnancial statements. 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. SHAREHOLDERS HOLDING MORE THAN 1 % OF THE SHARE CAPITAL OF THE BANK AS AT MARCH 31, 2017 Sr No. Name of the Shareholder 1 2 3 4 5 6 7 8 9 10 JP Morgan Chase Bank, NA * Housing Development Finance Corporation Limited HDFC Investments Limited Euro Paciﬁc Growth Fund Life Insurance Corporation of India Capital World Growth and Income Fund ICICI Prudential Life Insurance Company Ltd SBI- ETF Nifty 50 Government of Singapore ICICI Prudential Value Discovery Fund No. of Shares held 473003409 393211100 150000000 100311759 55457815 37636610 35864792 30660186 30115330 29700967 % to share capital 18.46 15.35 5.85 3.92 2.16 1.47 1.40 1.20 1.18 1.16 * One (1) American Depository Share (ADS) represents three (3) underlying equity shares of the Bank. DISTRIBUTION OF SHAREHOLDING AS AT MARCH 31, 2017 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 100449292 18736810 17021177 9966885 7784620 7519043 25758536 33366177 2341943177 2562545717 % To Capital 3.92 0.73 0.67 0.39 0.31 0.29 1.00 1.30 91.39 100.00 No. of Holders % To No. Of Holders 97.63 1.08 0.50 0.17 0.09 0.07 0.15 0.10 0.21 100.00 470576 5209 2389 797 447 330 730 472 1033 481983 420,902 Folios comprising of 254,58,43,477 equity shares forming 99.35 % of the share capital are in Demat Form. 61,081 Folios comprising of 1,67,02,240 equity shares forming 0.65 % of the share capital are in physical form. HDFC Bank Limited Annual Report 2016-17 211 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 2016-17 and its performance vis-à-vis BSE SENSEX and S&P CNX NIFTY respectively is as under: BSE Limited Month High (`) Low (`) April 2016 May 2016 June 2016 July 2016 August 2016 September 2016 October 2016 November 2016 December 2016 January 2017 February 2017 March 2017 1136.00 1194.80 1192.30 1250.00 1294.70 1318.20 1299.90 1288.00 1210.15 1300.00 1450.00 1478.00 1043.00 1110.05 1144.25 1161.00 1215.95 1265.50 1225.00 1159.30 1165.00 1181.75 1280.55 1369.25 National Stock Exchange of India Limited Month High (`) Low (`) April 2016 May 2016 June 2016 July 2016 August 2016 September 2016 October 2016 November 2016 December 2016 January 2017 February 2017 March 2017 1136.70 1195.00 1191.85 1251.25 1295.00 1318.45 1300.05 1289.00 1212.00 1300.00 1454.00 1479.95 1042.85 1113.15 1144.25 1160.90 1213.80 1265.40 1224.15 1158.00 1163.60 1183.10 1280.50 1369.00 Sensex Closing 25606.62 26667.96 26999.72 28051.86 28452.17 27865.96 27930.21 26652.81 26626.46 27655.96 28743.32 29620.50 Nifty Closing 7849.80 8160.10 8287.75 8638.50 8786.20 8611.15 8625.70 8224.50 8185.80 8561.30 8879.60 9173.75 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 2016-17 New York Stock Exchange Limited Month April 2016 May 2016 June 2016 July 2016 August 2016 September 2016 October 2016 November 2016 December 2016 January 2017 February 2017 March 2017 Highest (US$) Lowest (US$) 64.00 65.00 67.14 69.99 72.50 74.04 73.52 71.60 65.63 69.79 73.32 75.35 59.80 61.67 63.33 65.12 68.12 70.37 69.45 62.21 59.10 59.00 68.89 70.74 Monthly Volume 12972200 13123218 14217339 9409748 14046411 14884299 10635478 20325287 19204381 20953151 15618873 17303079 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, 2017 which could have an impact on the equity capital of the Bank. HDFC Bank Limited Annual Report 2016-17 212 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 Corporate Governance CATEGORIES OF SHAREHOLDERS AS AT MARCH 31, 2017 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 880336915 6142576 211277195 55457815 6053225 165979095 221079387 2562545717 % to capital 21.20 18.46 34.35 0.24 8.24 2.16 0.24 6.48 8.63 100.00 (#) 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-16 May-16 Jun-16 8.829 8.871 8.525 8.408 8.535 7.938 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 11.285 9.543 9.330 10.305 8.491 8.668 10.550 9.660 9.852 9.516 9.639 9.165 9.698 9.264 8.895 8.631 9.534 8.703 * 2 GDRs represent one underlying equity share of the Bank MONTHLY VOLUMES OF THE BANK'S SHARES TRADED ON NSE AND BSE Month BSE NSE May-16 Apr-16 1773754 1531540 2733826 2558930 2370643 2133759 1415832 3089054 1871409 8111762 7210020 7633392 24789397 27442206 29475908 29118968 29235419 26015242 19911162 38038267 23477472 32853352 132053238 36215227 Aug-16 Nov-16 Sep-16 Dec-16 Feb-17 Jun-16 Mar-17 Jan-17 Oct-16 Jul-16 FINANCIAL CALENDAR [April 1, 2017 to March 31, 2018] Board Meeting for Consideration of accounts April 21, 2017 Dispatch of Annual Reports June 24, 2017 to June 29, 2017 Record date for purpose of determining eligibility of dividend Electronic and physical: June 30, 2017 Last date for receipt of proxy forms Date, Time and Venue of 23rd AGM Dividend Declaration Date Probable date of payment of dividend July 22, 2017 July 24, 2017 at 2:30 p. m. Birla Matushri Sabhagar, 19, New Marine lines, Mumbai - 400020 July 25, 2017 Electronic: July 26, 2017 onwards Physical: July 27, 2017 onwards Board Meeting for considering unaudited results for ﬁrst three quarters of FY 2017-18 Within 25 days from the end of each quarter CODE OF CONDUCT 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. HDFC Bank Limited Annual Report 2016-17 213 Corporate Governance LISTING Listing on Indian Stock Exchanges : The equity shares of the Bank are listed at the following Stock Exchanges and the annual fees for 2017-18 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 dematerialization of equity shares (ISIN No. INE040A01026) STOCK CODE 500180 HDFCBANK (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) (cid:115)(cid:0) (cid:115)(cid:0) 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 Exchanges on which the Bank’s shares are listed. The Bank’s shares which are in compulsory dematerialized (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 authorized 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. 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, shareholding information, dividend 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. The information relating to the Bank’s ﬁnancial results and shareholding pattern are displayed on the websites of the Stock 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. DEBENTURE TRUSTEES The SEBI Listing Regulations require 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: 1. IDBI Trusteeship Services Ltd, Asian Building, Ground Floor, 17 R Kamani Marg, Ballard Estate, Mumbai 400001. Tel : 022-40807000 2. Axis Trustee Services Limited, Axis House, Ground Floor, Wadia International Centre, Pandurang Budhkar Marg, Worli Mumbai 400025. Tel : 022-62260054/50 HDFC Bank Limited Annual Report 2016-17 214 Corporate Governance 3. Vistra ITCL (India) Limited (Formerly known as IL&FS Trust Company Limited), The IL&FS Financial Centre, Plot C-22/G Block, 7th Floor, Bandra Kurla Complex, Bandra (East) Mumbai 400051. Tel : 022-26593535 SHAREHOLDERS’ HELPDESK Share transfers, dividend payments and all other investor related activities are attended to and processed at the ofﬁce of Registrars and Transfer Agents. For lodgment of transfer deeds and any other documents or for any grievances / complaints, shareholders / investors may contact at the following address: Mr. Sunny Abraham / 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 Fax : +91-022-2496 5235 Email : shareholder.grievances@hdfcbank.com Queries relating performance may be addressed to: to the Bank’s operational and ﬁnancial shareholder.grievances@hdfcbank.com Name of the Compliance Ofﬁcer of the Bank: Mr. Sanjay Dongre, Executive Vice President (Legal) & Company Secretary Telephone : +91-022-2498 8484 Extn : 3473 BANKING CUSTOMER 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. Location wise list of customer care numbers are available at: Write to: 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_new.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 4) Credit Cards : customerservices.cards@hdfcbank.com PLANT LOCATIONS Being in the banking business, the Bank does not have plants. However, the Bank has 4,715 branches in 2,657 cities / towns as on March 31, 2017. 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. On behalf of the Board of Directors Mumbai, May 29, 2017 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. http://www.hdfcbank.com/personal/ﬁnd-your-nearest/ﬁnd- phone-banking Mumbai, May 29, 2017 Aditya Puri Managing Director HDFC Bank Limited Annual Report 2016-17 215 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, 2017, 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, 2017 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 and Aadhaar 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, i.e. June 30, 2017, which is 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, 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. Dividends for and up to the ﬁnancial year ended March 31, 2009 have already been transferred to the IEPF and the dividend for the ﬁnancial year ended March 31, 2010 will be transferred to IEPF after June 29, 2017. The details of unclaimed dividends for the ﬁnancial year 2010-11 onwards and the last date for claiming such dividends are given below: Dividend for the year ended March 31, 2010 March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 Date of Declaration of dividend June 30, 2010 July 6, 2011 July 13, 2012 June 27, 2013 June 25, 2014 July 21, 2015 July 21, 2016 Last date for claiming dividend June 29, 2017 July 5, 2018 July 12, 2019 June 26, 2020 June 24, 2021 July 20, 2022 July 20, 2023 B) SHARES LYING IN UNCLAIMED SUSPENSE ACCOUNT Particulars Opening Balance as on April 1, 2016 Add: Transfer during the year 2016-17 Less: Claims received and shares transferred* Closing Balance as on March 31, 2017** Records / No of shareholders 13075 0 214 12861 Shares 2188145 0 71680 2116465 *Number of shareholders who approached the Bank for the transfer of shares from the suspense account. ** Voting rights on these shares shall remain frozen till the rightful owners of such shares claim these shares. HDFC Bank Limited Annual Report 2016-17 21(cid:22)

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