HDFC Bank Limited Annual Report 2018

Plain-text annual report

Experiential Leadership Enabling Personalized Customer Journeys Through Technology Annual Report 2017-18 HIGHLIGHTS Net Proﬁt 17,487 crore An increase of 20.2% compared to the previous year. Balance Sheet Size 1,063,934 crore An increase of 23.2% compared to the previous year. Total Deposits 788,771 crore An increase of 22.5% compared to the previous year. Total Advances 658,333 crore An increase of 18.7% compared to the previous year. Capital Adequacy Ratio 14.8% Tier I Capital Ratio 13.2% Gross Non-performing Assets 1.30% of Gross Advances Network Banking outlets: 4,787 ATMs: 12,635 Cities/Towns: 2,691 TABLE OF CONTENTS Board and Management AGM and Record Date Details Evolving into an Experience Business, Digitally Parivartan – A Step towards Progress Working with the Government Graphical Highlights Financial Highlights Directors’ Report Independent Auditors’ Report Financial Statements 2 5 6 10 12 14 18 20 77 80 Basel III- Pillar 3 Disclosures 155 Independent Auditors’ Report for 156 Consolidated Financial Statements Consolidated Financial Statements 160 Secretarial Auditor’s Certiﬁcate 209 on Corporate Governance Corporate Governance 210 Shareholder Information 234 BOARD AND MANAGEMENT BOARD OF DIRECTORS Shyamala Gopinath Chairperson Bobby Parikh Partho Datta Malay Patel Umesh Chandra Sarangi Srikanth Nadhamuni Keki Mistry Aditya Puri Managing Director Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director KEY MANAGERIAL PERSONS Aditya Puri Managing Director Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sashidhar Jagdishan Chief Financial Ofﬁcer Sanjay Dongre Executive Vice-President (Legal) & Company Secretary 2 BOARD AND MANAGEMENT SENIOR MANAGEMENT TEAM Abhay Aima Arvind Kapil Ashima Bhat Ashish Parthasarthy Ashok Khanna Bhavesh Zaveri Chakrapani Venkatachari Jimmy M Tata Munish Mittal Navin Puri Neil Francisco Nirav Shah Nitin Chugh Parag Rao Philip Mathew Rahul Shukla Rajesh Kumar R Rakesh K Singh Ravi Narayanan Sashidhar Jagdishan 02 Smita Bhagat 3 BOARD AND MANAGEMENT STATUTORY AUDITORS Deloitte Haskins & Sells Chartered Accountants REGISTERED OFFICE HDFC Bank House, Senapati Bapat Marg, Lower Parel, Mumbai 400 013 Tel: + 91 22 6652 1000 Fax: + 91 22 2496 0737 CORPORATE IDENTIFICATION NO. L65920MH1994PLC080618 REGISTRARS & TRANSFER AGENTS Datamatics Business Solutions Limited (Formerly Datamatics Financial Services Limited) Plot No. B 5, Part B, Crosslane, MIDC, Marol, Andheri (East), Mumbai- 400 093 Tel: + 91 22 6671 2213/14 Fax: + 91 22 6671 2011 e-mail: hdinvestors@datamaticsbpm.com 4 24TH ANNUAL GENERAL MEETING DATE June 29, 2018 DAY Friday TIME 2.30 p.m. PLACE Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400 020 RECORD DATE FOR DETERMINING ELIGIBILITY OF DIVIDEND June 1, 2018 (both physical and electronic) 5 EVOLVING INTO AN EXPERIENCE BUSINESS, DIGITALLY At HDFC Bank, customers are at the core of our digital evolution. Our suite of personalised products, services and digital experiences, redeﬁne our commitment to provide an enhanced experience for our customers. Intuitive products, platform agnostic solutions and a holistic sophistication across devices enable us to create unique experiences for our customers. Importantly, they are for everyone - both customers who have a relationship with us as well as those who do not. Shifting from transactional optimisation to experience differentiation We believe that shifting our focus from transactional interactions to experience differentiation will give us a competitive advantage. In today’s age of multiple devices, it is imperative that we provide a cohesive and seamless experience to our customers. It is also important that we anticipate customer requirements and provide solutions with a ﬁrst-time-right approach. Integrating existing systems with newer technology platforms can help us design more satisfying customer experiences. With these objectives in mind, we are well on our way to revamping all our digital solutions – our website, including the NetBanking experience, the MobileBanking app, our digital wallet PayZapp and our compare-and-shop portal SmartBuy, to offer a consistent, seamless, intuitive and contextual journey across all platforms. For customers who prefer to explore by themselves, we have designed experiences, which enable them to select and purchase our most relevant solutions with ease. Our customers can select products ranging from loans to forex cards, and everything else that the bank can offer them, in an effortless and intuitive manner. Creating a conversational experience We endeavor to humanize conversations and transform how customers interact with us. Through meaningful exchanges with over four crore customers, we take every opportunity to improve the quality of interactions across touch-points and enhance customer experience by making interactions more friendly, familiar and relevant. Our AI-based chatbot EVA (Electronic Virtual Assistant) is available on all digital platforms including the website, mobile site, and SmartBuy. EVA helps customers ﬁnd information in a matter of seconds, eliminating the need to talk to a customer service agent. EVA amiably responds to both audio and text queries with élan. Today, EVA works in tandem with Google Assistant and Alexa. Our customers can simply say, "Ok Google, talk to HDFC Bank" or, “Alexa, what is the interest rate on an FD for a year?” to let EVA answer queries. Voice-activated banking automation is another key innovation that reiterates our commitment to high quality customer experience 24X7. 6 EVOLVING INTO AN EXPERIENCE BUSINESS, DIGITALLY HDFC Bank is the ﬁrst bank to provide bot-based social media banking services to its customers. The country’s ﬁrst social media banking bot, OnChat, helps customers transact on Facebook Messenger. Fast, easy and secure, OnChat enables our customers to search, discover, conﬁrm, and pay for services, all within the same chat box. Using OnChat, customers can pay bills, check stock prices, recharge, book cabs, hotels, movie tickets and more. Our DCC (Digital Command Centre) helps understand our customers better by learning from their preferences and concerns. Whether it is a complaint, a grievance, or an acknowledgement for our services, we respond immediately through our traditional and social media channels to ensure we are with and for our customers on a real time basis. Experience differentiation through personalisation Hyper-personalisation is another major step towards facilitating an enhanced customer experience and creating customized consumer journeys. This is done by offering customers the option to create a Customer ID of their own choice and real-time expense tracking. We were the ﬁrst to offer customers the ability to personalize their most frequent transactions on an ATM over a decade ago. We collaborate with leading technology providers to enable us to understand our customer requirements. As a result, our customer conversations are now more relevant and contextual. Using a combination of personalised interfaces like intelligent notiﬁcations, personalised banner displays etc., and digital apps, we are able to customize experiences through our virtual channels as well as offer it to more customers. Our Insta Alerts enable customers to remain aware of every account-related activity, anytime, anywhere. Each innovation is an attempt at enhancing our customers’ experience. Our mission is to script bespoke customer journeys in this age of experience. Our approach of ‘Experience differentiation’ aims to fulﬁl the needs of our customers, at every life stage, so that when they think about money, they think of HDFC Bank. 7 EVOLVING INTO AN EXPERIENCE BUSINESS, DIGITALLY Setting the benchmark for effortless banking It is our aim to customize our products and services to meet the unique needs and preferences of every HDFC Bank customer. We are aware of the need for a completely effortless interface and experience, which customers can navigate with ease, in an unassisted manner. Our 10 Second Loans have redeﬁned the rules of the game. Forget cumbersome loan processes; today, when a pre-approved HDFC Bank customer requires a loan he enjoys the beneﬁt of having the funds in his account within seconds. This paperless service is available to him 24X7, at the touch of a button. Similarly, when a bank customer applies for a Credit Card, he has the option of receiving a virtual InstaCard that is instantly activated and ready for immediate use. PayZapp – our digital wallet has empowered customers to make instant digital payments through more convenient options like Scan-to-Pay. Using an industry-ﬁrst approach, we have implemented a self-sustained accelerated rewards program. Our SmartBuy platform leverages the power of the bank to bring the best merchant offers to customers. It provides those searching online for products and services with a list of options, including offers from the most preferred retailers, as well as the cheapest deals available. Over 1.5 million users visit SmartBuy, every month. To help customers unlock the value of their investments, without liquidating them during exigencies, we have created Digital Loans against Securities and Mutual Funds. Customers can now pledge their securities and mutual fund assets online and get an overdraft limit set in under three minutes. All of this happens in three easy steps through the HDFC Bank website. 8 EVOLVING INTO AN EXPERIENCE BUSINESS, DIGITALLY HDFC Bank SmartHub solutions provide existing and prospective customers with assistance to manage a host of activities like payments, admissions, appointments, donations and more. Over 8,000 educational institutions and 2,500 government departments are active users on this platform. The SmartHub Merchant App, a counterpart of our smart banking solution, is a single merchant platform that customers use to make payments, monitor services and related servicing needs. Innovating our way to the future HDFC Bank is a trusted name in the banking sector today only because of the trust that our customers place in us. The passion to excel is in our DNA and every innovation intends to deliver an excellent digital banking experience to our customers. We ensure that we are truly the pioneers of experiential leadership in the banking sector, bringing the bank closer to the customer every day. 9 HDFC BANK PARIVARTAN – A STEP TOWARDS PROGRESS At HDFC Bank, we believe the real development of a country is possible only when its communities are empowered. It is this belief that drives us to encourage the holistic growth of communities through our CSR Promotion of Education Create a conducive learning environment in communities across the country and promote learning. initiative, HDFC Bank Parivartan. Learning made fun HDFC Bank Parivartan addresses the need for socioeconomic distinct areas of intervention:.................................... empowerment through ﬁve its Rural Development Promotion of Education Skill Development and Livelihood Enhancement Healthcare and Hygiene Financial Literacy and Inclusion Rural Development Promoting holistic growth and development of rural communities. Fighting the Maharashtra drought, one drop at a time The continuing urbanization of India has indeed expanded opportunities for people..However, one cannot overlook the great decline that our agricultural sector has suffered. One of the many millions that had fallen victim to this hardship is Tukojirao Patil, a farmer from Jalgaon, Maharashtra. The lack of rainfall was plaguing his village with acute water shortage. The soil, deprived of moisture, caused crop failure year after year thereby plummeting Patil to extreme poverty. Determined to bring about change, HDFC Bank Parivartan along with a local NGO partner, KVGPS, developed the village under its Holistic Rural Development Program (HRDP). Measures to tackle the drought by constructing 31 ground water recharge structures were implemented, improving the water levels and helping the village get back the water it was once rich with. Total impact in the area of Rural Development Households covered: 2,98,066 Villages impacted: 870 10 Learning is as much a matter of the heart as it is of the mind. While our education system strives to impart the right knowledge to the young minds of our country, at times, the individual needs of some are ignored. Shamshad Qureshi, a class 7 student, was one of these individuals. He lacked interest in studies and this was apparent from his poor attendance. This disinterest was largely because he lacked understanding of what was being taught in school. Project Disha, supported by HDFC Bank, helped teachers start using innovative methods and activity-based teaching to address this challenge. Equipped with these new ways to learn, Shamshad and his friends have now started looking forward to school and we hope in time, these innovative techniques will usher in a new perspective on education in India............................................... Total impact in the area of Promotion of Education Teachers oriented: 10,47,250 Schools covered: 1,47,021 Skill Development and Livelihood Enhancement To up-skill people in their occupations and train them for placements. Ponsara girls create history India has experienced rapid growth and development in the past years across various domains. Unfortunately, gender equality is not one of them. No nation can progress unless its women are given equal access to opportunities. HDFC Bank Parivartan is devoting its energies to overcome this hurdle by initiating skill development programmes across the nation. Under this initiative, the SWADHAAR Computer Training Course at Ponsara Centre equips women to join the workforce with core skill training development. PARIVARTAN STORY The programme recently succeeded in helping three women secure a job. Mamta Bhargav, Pavita Bijore and Radhika Yadav cleared the written test and interview of most women in rural India. Sulochana’s story is no different. Her journey began in a small tailoring institute in Tamil Nadu where she used conducted at a campus selection organized by SWADHAAR. They are now all set to take up their ﬁrst Tele-calling job at Raipur. Total impact in the area of Skill Development and Livelihood Enhancement Farmers up-skilled and youth trained: 82,121 Women empowered: 7,45,127 Healthcare and Hygiene Focuses on improving sanitation facilities, and promoting good and safe hygiene practices across several communities. Raswanti brings open defecation to a close As India enters a new era of leadership on the world stage, the nation, as a whole, has realized that change at home has a signiﬁcant impact on this progress. Raswanti Rai, having followed the age-old practice of open defecation, was no longer willing to risk the safety and dignity of her daughter or herself. Facilitated by HDFC Bank’s construction of Individual Household Latrines (IHHL) under the Swachh Bharat Mission, Raswanti pledged to use and maintain the toilet. She is now a key open village motivator defecation.................................................................... eradicate the to in Total impact in the area of Healthcare and Hygiene Sanitation units constructed: 23,254 Health camps conducted: 5,669 Financial Literacy and Inclusion to attend sewing classes regularly. She was one of the brightest students in her class and was always willing to teach her peers who needed help. Soon, she mastered the art of dressmaking and started her own sewing institution with just two machines. HDFC Bank Parivartan enabled her to buy more machines that helped her grow her business. From the money earned, she renovated her house and is currently supporting her family of four. Today, Sulochana is a source of inspiration to many and is on a mission to empower women in her locality with just two machines. ...................................................... Total impact in the area of Financial Literacy and Inclusion Participants covered under FLPs: 59,17,272 Financial Literacy Programmes (FLPs) conducted: 6,83,319 With such efforts, we hope for HDFC Bank Parivartan to inspire communities to be self-reliant and make them equal partners in the growth of our nation. We are realizing this dream through our core value of sustainability—that enables families to break out of the vicious cycle of poverty and draws them into a cycle of growth, development and empowerment, while simultaneously maintaining the ecological balance. These small steps will pave the way for a giant transformation. HDFC Bank’s Parivartan has impacted 8 million lives, nationwide... With HDFC Bank Parivartan, we aim to inspire people and empower communities by working with them and walking with them - one step at a time, towards a Educate people to make informed ﬁnancial decisions. brighter future. Sulochana empowers herself, inspires others Women all over the world have proved that they can do great things if they are given a chance. Unfortunately, opportunities don’t always come knocking at the doors 11 WORKING WITH THE GOVERNMENT We, at HDFC Bank, have always believed that the role of any corporate/company is to assist in furthering the government’s developmental agenda for the country. We understand and acknowledge that it is not merely our role but also our responsibility as corporate citizens. Over the years, we have collaborated with the government to deliver key changes that are critical to India’s growth. Here are some of the more recent initiatives that HDFC Bank has worked on in conjunction with the Government of India. Digital India Initiative The Ministry of Electronics & Information Technology (MeitY) has ranked HDFC Bank as the Number 1 bank for supporting several initiatives executed by the Ministry. We are proud to be one of the few banks that achieved the targets to install Point of Sale (PoS) units, integrate the Bharat QR payment system and promote the BHIM mobile app based on the Uniﬁed Payment Interface (UPI) following demonetization. ............................................... Banking on Bharat Our vision is aligned to that of our government’s to provide world-class services to everyone. We are actively working with panchayats across the country to provide them all banking solutions and have already opened over 60,000 panchayat accounts. ......................... Startup India with various state governments and accelerators and promote entrepreneurship: MoUs signed with three state governments to enable proper execution of their start-up policy. We provide start-ups with an opportunity to work with us and evaluate their need for funding. We collaborate with seven incubators certiﬁed by the Department of Science and Technology, including various IITs and IIMs, to identify social start-ups that require ﬁnancial and advisory support. Partnering on PFMS (Public Fund Management System) and e-Governance projects HDFC Bank also plays an active role in the development of large projects like GeM and PFMS. Dedicated teams from the bank work closely with government authorities and play a critical role by providing real-time, on-ground feedback for reﬁnement of project architectures. In addition, the bank enables automation and digitization for various government departments to help generate time and cost efﬁciencies. For example, we are developing end to end technology solutions for state governments to manage large impact schemes like National Health Mission, PMAY, MGNREGA, etc. more efﬁciently. The bank has been working on various e-Governance initiatives by running projects like MahaOnline (Maharashtra), Mee Seva (Andhra Pradesh) HDFC Bank has created its own start-up fund to work and currently evaluating a project for West Bengal. 12 WORKING WITH THE GOVERNMENT Smart City and Urban Mobility projects Government e-Marketplace (GeM) HDFC Bank has collaborated with Thane city to launch the ﬁrst ‘One-City-One-Card’ solution as a part of the Smart City initiative. A similar solution has also been created for Panaji Smart City. A customized mobile app is in service in Kanpur to further support the Smart City initiative. To promote the government’s agenda to address the need to improve urban mobility, HDFC Bank has collaborated with various state governments including Rajasthan and U.P. to provide Transit Cards and payment solutions. Customized Banking Solution for Government Employees HDFC Bank has designed a customized banking package for government employees at both the state and central levels. This includes an overdraft secured by their salary account, complimentary insurance covers, zero-cost HDFC Bank has collaborated with the Government for its e-Marketplace (GeM) platform to provide banking solutions for online buyers and sellers on the e-Procurement platform. ...................... Customized Collection and Payment Services HDFC Bank has designed a customized Collection and Payment Services solution that conforms to various departments and schemes of the Government of India. For instance, the Uttar Pradesh State Industrial Development Corporation (UPSIDC), the Naya Raipur Development Authority (NRDA) Scheme and the National Health Mission (NHM) currently use made-to-order solutions from HDFC consumer durable offers on premium brands and the best Bank................ pricing on loans. .............................................................. HDFC Bank has signed an MoU with the Indian Army to offer them salary accounts and a host of banking products and services. HDFC Bank has signed an MoU with the Government of Maharashtra in their endeavour to make Mumbai a Fintech hub. Smita Bhagat, Group Head - Branch Banking, Government and Institutional Business, E-commerce with Shri Devendra Fadnavis, Hon'ble CM of Maharashtra. 13 (cid:40)(cid:51)(cid:34)(cid:49)(cid:41)(cid:42)(cid:36)(cid:34)(cid:45)(cid:1)(cid:41)(cid:42)(cid:40)(cid:41)(cid:45)(cid:42)(cid:40)(cid:41)(cid:53)(cid:52) (cid:49)(cid:51)(cid:48)(cid:39)(cid:42)(cid:53)(cid:1)(cid:34)(cid:39)(cid:53)(cid:38)(cid:51)(cid:1)(cid:53)(cid:34)(cid:57)(cid:1)(cid:9)(cid:67)(cid:1)(cid:68)(cid:83)(cid:80)(cid:83)(cid:70)(cid:10) (cid:18)(cid:24)(cid:13)(cid:21)(cid:25)(cid:24) (cid:18)(cid:21)(cid:13)(cid:22)(cid:22)(cid:17) (cid:18)(cid:19)(cid:13)(cid:19)(cid:26)(cid:23) (cid:18)(cid:17)(cid:13)(cid:19)(cid:18)(cid:23) (cid:25)(cid:13)(cid:21)(cid:24)(cid:25) (cid:19)(cid:13)(cid:26)(cid:21)(cid:26) (cid:20)(cid:13)(cid:26)(cid:19)(cid:23) (cid:23)(cid:13)(cid:24)(cid:19)(cid:23) (cid:22)(cid:13)(cid:18)(cid:23)(cid:24) (cid:19)(cid:17)(cid:18)(cid:17) (cid:19)(cid:17)(cid:18)(cid:18) 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(cid:53)(cid:83)(cid:66)(cid:79)(cid:84)(cid:71)(cid:70)(cid:83)(cid:1)(cid:85)(cid:80)(cid:1)(cid:51)(cid:70)(cid:84)(cid:70)(cid:83)(cid:87)(cid:70)(cid:84) (cid:49)(cid:83)(cid:80)(cid:87)(cid:74)(cid:84)(cid:74)(cid:80)(cid:79)(cid:84) (cid:49)(cid:83)(cid:80)(cid:81)(cid:80)(cid:84)(cid:70)(cid:69)(cid:1)(cid:37)(cid:74)(cid:87)(cid:74)(cid:69)(cid:70)(cid:79)(cid:69)(cid:1)(cid:7)(cid:1)(cid:53)(cid:66)(cid:89)(cid:1)(cid:85)(cid:73)(cid:70)(cid:83)(cid:70)(cid:80)(cid:79) (cid:19)(cid:25) 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 2008-2009 2009-2010 2010-2011 16,584.01 16,467.92 20,380.77 8,911.10 7,786.30 9,385.08 7,672.91 8,681.62 10,995.69 3,700.65 4,573.63 4,945.23 11,373.56 13,255.25 15,940.92 5,950.54 5,423.02 2,123.78 1,970.35 153.43 3,299.24 1,054.31 2,244.93 6,475.71 6,779.54 2,490.40 2,288.74 201.66 4,289.14 1,340.44 2,948.70 7,780.02 8,160.90 2,342.24 1,198.55 1,143.69 5,818.66 1,892.26 3,926.40 142,811.58 167,404.44 208,586.41 8,738.58 6,353.10 7,393.05 14,646.33 21,519.58 25,376.35 183,270.77 222,458.57 283,634.24 98,883.05 125,830.59 159,982.67 53,309.31 51,013.32 67,952.59 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 17.00 16.52% 12.23% 16.22% 3.30 22.72% 109.09 469.17 27.59 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 HDFC Bank Limited Annual Report 2017-18 18 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 (` crore) 2017-2018 27,874.19 35,064.87 41,135.53 48,469.91 60,221.45 69,305.96 80,241.35 14,989.58 19,253.75 22,652.90 26,074.23 32,629.93 36,166.74 40,146.49 12,884.61 15,811.12 18,482.63 22,395.68 27,591.52 33,139.22 40,094.86 5,783.62 6,852.62 7,919.64 8,996.34 10,751.72 12,296.49 18,668.23 22,663.74 26,402.28 31,392.02 38,343.24 45,435.71 9,277.64 11,236.11 12,042.20 13,987.55 16,979.69 19,703.32 9,390.59 11,427.63 14,360.08 17,404.47 21,363.55 25,732.39 1,877.44 1,091.77 785.67 7,513.15 2,346.08 5,167.07 1,677.01 1,234.21 442.80 1,588.03 1,632.58 (44.56) 2,075.75 1,723.58 352.17 2,725.61 2,133.63 591.98 3,593.30 3,145.30 448.00 9,750.62 12,772.05 15,328.72 18,637.94 22,139.09 3,024.34 6,726.28 4,293.67 5,112.80 6,341.71 7,589.43 8,478.38 10,215.92 12,296.23 14,549.66 15,220.31 55,315.17 22,690.36 32,624.81 5,927.49 4,910.43 1,017.06 26,697.32 9,210.57 17,486.75 246,706.45 296,246.98 367,337.48 450,795.65 546,424.19 643,639.66 788,770.64 11,105.65 16,586.75 16,643.05 16,254.90 15,090.45 13,182.00 21,107.00 29,924.37 36,214.15 43,478.63 62,009.42 72,677.77 89,462.38 106,295.03 345,248.26 421,327.31 491,599.50 595,695.13 740,796.07 863,840.19 1,063,934.32 195,420.03 239,720.64 303,000.27 365,495.04 464,593.96 554,568.20 658,333.09 89,967.10 111,303.21 100,111.88 156,833.82 195,836.29 214,463.34 242,200.24 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 57.18 18.04% 12.79% 14.55% 11.00 23.32% 349.12 1,022.70 1,071.15 1,442.55 24.26 21.93 25.23 67.76 18.22% 13.25% 14.82% 13.00 *** 23.26% 409.60 1,929.00 28.47 HDFC Bank Limited Annual Report 2017-18 19 19 Directors' Report Dear Shareholders, Your Directors take great pleasure in presenting the 24th Annual Report on the business and operations of your Bank, together with the audited accounts for the year ended March 31, 2018. It has been a challenging but historic year for India’s economy, especially for the banking sector, with heightened asset quality stress levels and operating risks. While the effects of demonetisation spilled over into the ﬁrst quarter, the second quarter marked the rollout of the much awaited Goods and Services Tax (GST). The introduction of this composite tax saw many levies being done away with and marked a huge step towards transforming India into a giant common market. In the long run, GST is expected to give a ﬁllip to the economy as a whole; in the short term, however, this led to initial growth pangs, particularly in the cash-dependent sectors of the industry such as Small and Medium Enterprises (SMEs). In the year under review, your Bank: (cid:115)(cid:0) (cid:55)(cid:73)(cid:84)(cid:78)(cid:69)(cid:83)(cid:83)(cid:69)(cid:68)(cid:0) (cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:84)(cid:0) (cid:73)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:73)(cid:78)(cid:0) (cid:65)(cid:0) (cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0) (cid:79)(cid:70)(cid:0) (cid:73)(cid:84)(cid:83)(cid:0) (cid:75)(cid:69)(cid:89)(cid:0) end, your Bank has chosen to bring about a holistic change in the lives of people. You will be happy to know that for the second consecutive year it met the mandatory 2 per cent Corporate Social Responsibility (CSR) expenditure with a spend of ` 374 crore. Parivartan, the new umbrella CSR brand, is expected to lend a sharper focus to these efforts. To put matters in perspective, (cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:7)(cid:83)(cid:0)(cid:83)(cid:79)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:74)(cid:79)(cid:85)(cid:82)(cid:78)(cid:69)(cid:89)(cid:0)(cid:66)(cid:69)(cid:71)(cid:65)(cid:78)(cid:0)(cid:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0)(cid:65)(cid:0)(cid:68)(cid:69)(cid:67)(cid:65)(cid:68)(cid:69)(cid:0)(cid:65)(cid:71)(cid:79)(cid:0)(cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0) board mandated Sustainable Livelihood Initiative (SLI) to make a difference to the lives of 1 crore households. SLI helps people improve their lives by upgrading their skillsets and, thus, enabling them to break out of the cycle of poverty. Under its Holistic Rural Development Programme (HRDP), the Bank transforms lives in rural India and thus helps bridge the gap with urban India. Awards and Recognition The Bank continues to be awarded and win laurels. Notably, it was named India’s most valuable brand for the fourth year in a row in the BrandZ survey of Top 50 Most Valuable Indian Brands. (cid:38)(cid:79)(cid:82)(cid:66)(cid:69)(cid:83)(cid:0)(cid:33)(cid:83)(cid:73)(cid:65)(cid:0)(cid:83)(cid:65)(cid:73)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:82)(cid:84)(cid:73)(cid:67)(cid:76)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:89)(cid:79)(cid:85)(cid:82)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:65)(cid:77)(cid:79)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:86)(cid:69)(cid:0) companies that shaped Asia and the world. ﬁnancial parameters (cid:115)(cid:0) (cid:51)(cid:65)(cid:87)(cid:0)(cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:68)(cid:73)(cid:71)(cid:73)(cid:84)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:115)(cid:0) (cid:51)(cid:84)(cid:69)(cid:80)(cid:80)(cid:69)(cid:68)(cid:0)(cid:85)(cid:80)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:83)(cid:79)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:65)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83) (cid:115)(cid:0) (cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0)(cid:77)(cid:79)(cid:82)(cid:69)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(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:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:115)(cid:0) (cid:38)(cid:73)(cid:82)(cid:77)(cid:69)(cid:68)(cid:0)(cid:85)(cid:80)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:70)(cid:85)(cid:78)(cid:68)(cid:0)(cid:82)(cid:65)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:83) Financial Parameters (cid:57)(cid:79)(cid:85)(cid:82)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:69)(cid:68)(cid:0) (cid:65)(cid:78)(cid:0) (cid:73)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:73)(cid:78)(cid:0) (cid:65)(cid:0) (cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0) (cid:79)(cid:70)(cid:0) (cid:73)(cid:84)(cid:83)(cid:0) (cid:75)(cid:69)(cid:89)(cid:0) ﬁnancial parameters. At ` 17,486.8 crore, Net Proﬁt went up by 20.2 per cent. Similarly, at ` 40,094.9 crore, Net Interest Income rose by almost 21 per cent. Core Net Interest Margin remained stable at 4.3 per cent. Net Non-Performing Assets (NPAs) at 0.4 per cent is among the lowest in the industry. This was largely due to the Bank’s prudent credit evaluation of the targeted customer proﬁle and having a diversiﬁed loan book spread across customer segments, products, sectors and managing risk-return decisions with discipline. Fund Raising The Bank is awaiting the receipt of relevant approvals for raising of additional capital up to an aggregate sum of ` 24,000 crore, of which such number of equity shares of face value of ` 2/- each aggregating up to ` 8,500 crore are proposed to be allotted to (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:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:7)(cid:83)(cid:0) promoter, on a preferential basis and the balance amount by issue of equity shares and / or convertible securities / depository receipts pursuant to a Qualiﬁed Institutions Placement / American Depository Receipts / Global Depository Receipts program. This additional capital proposed to be raised is intended to support growth over the next few years. Notably, your Bank has been (cid:68)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:70)(cid:89)(cid:73)(cid:78)(cid:71)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:70)(cid:85)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:14)(cid:0)(cid:38)(cid:79)(cid:82)(cid:0)(cid:69)(cid:88)(cid:65)(cid:77)(cid:80)(cid:76)(cid:69)(cid:12)(cid:0)(cid:73)(cid:84)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:82)(cid:83)(cid:84)(cid:0)(cid:66)(cid:65)(cid:78)(cid:75)(cid:0) in the country to issue ` 2,300 crore worth of masala bonds in the international markets. It also raised Additional Tier I capital by issuing Perpetual bonds of ` 8,000 crore and Tier II capital of ` 2,000 crore. Increased Digitisation Summary Your Bank today caters to more than 4.36 crore customers. Although it has 4,787 banking outlets, what is noteworthy is that an overwhelming 85 per cent of transactions are through digital channels. This has led to a larger distribution footprint and a superior customer experience resulting in higher market share at lower cost. Greater Social Commitment The Bank’s guiding force is the belief that businesses cannot prosper if the communities in which they operate fail. Towards this In another development in the year under review, the Reserve Bank of India (RBI) has identiﬁed your Bank as a Domestic Systemically Important Bank (D-SIB). This means that its continued functioning is critical for the uninterrupted availability of essential banking services to the economy. To sum up, your Bank is geared up for the next phase of growth, given the looming market opportunities (cid:65)(cid:78)(cid:68)(cid:0) (cid:73)(cid:84)(cid:83)(cid:0) (cid:83)(cid:84)(cid:82)(cid:79)(cid:78)(cid:71)(cid:0) (cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0) (cid:73)(cid:78)(cid:0) (cid:69)(cid:65)(cid:67)(cid:72)(cid:0) (cid:79)(cid:70)(cid:0) (cid:73)(cid:84)(cid:83)(cid:0) (cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:0) (cid:70)(cid:82)(cid:65)(cid:78)(cid:67)(cid:72)(cid:73)(cid:83)(cid:69)(cid:83)(cid:14)(cid:0) This, of course, would not have been possible without the contribution of over 88,000 employees across the country, who represent the brand and take it forward every day. HDFC Bank Limited Annual Report 2017-18 20 Directors' Report Summary of Financial Performance Particulars (` crore) For the year ended / As on March 31, 2018 March 31, 2017 Deposits and Other Borrowings 9,11,875.6 7,17,668.5 Advances 6,58,333.1 5,54,568.2 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 Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits * 95,461.7 27,603.6 17,486.8 32,668.9 50,155.7 4,371.7 1,748.7 235.5 (44.2) 3,390.6 81,602.5 22,972.2 14,549.7 23,527.7 38,077.3 3,637.4 1,455.0 313.4 4.3 (1.7) Balance carried over to Balance Sheet 40,453.4 32,668.9 * 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 had not appropriated the proposed dividend from the Statement of Proﬁt and Loss for the year ended March 31, 2017. Hence, the same has been appropriated basis actual payout. The Bank’s Total Income rose to ` 95,461.7 crore for the year under review from ` 81,602.5 crore in the previous year. Net Proﬁt increased by 20.2 per cent to ` 17,486.8 crore from ` 14,549.7 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 fund future growth. It has a consistent track record of steady increase in dividend distribution, with the Dividend Payout Ratio ranging between 20 per cent and 25 per cent - a range that the Board endeavours to maintain. 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 ` 13 per equity share of ` 2 as against ` 11 per equity share in the previous year. As you are aware, this dividend will be subject to tax to be paid by the Bank. 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, 2018. However, the effect of the proposed dividend, including tax on dividend aggregating to ` 4,067.07 crore, has been reckoned in determining capital funds in the computation of capital adequacy ratio as at March 31, 2018. HDFC Bank Limited Annual Report 2017-18 21 Directors' Report Ratings Instrument Fixed Deposit Programme Rating (cid:35)(cid:33)(cid:50)(cid:37)(cid:0)(cid:33)(cid:33)(cid:33)(cid:0)(cid:8)(cid:38)(cid:36)(cid:9) CARE Ratings Rating Agency Comments IND Taaa India Ratings Certiﬁcate of Deposits Programme CARE A1+ CARE Ratings IND A1+ India Ratings Long Term Unsecured, Subordinated (Lower Tier 2) Bonds CARE AAA CARE Ratings IND AAA India Ratings Tier I Perpetual Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL Upper Tier 2 Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL Infrastructure Bonds CARE AAA CARE Ratings CRISIL AAA CRISIL Additional Tier I Bonds (Under Basel III) CARE AA+ CARE Ratings CRISIL AA+ CRISIL IND AA+ India Ratings Tier II Bonds (Under Basel III) CARE AAA CARE Ratings CRISIL AAA CRISIL Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the 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 the 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 the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the 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. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of ﬁnancial obligations. Such instruments carry the lowest credit risk. HDFC Bank Limited Annual Report 2017-18 22 Directors' Report Issuance of Equity Shares and Employee Stock Options (ESOP) As on March 31, 2018, the issued, subscribed and paid up capital of your Bank stood at ` 519,01,80,534 comprising 259,50,90,267 equity shares of ` 2 each. During the year under review, 3,25,44,550 equity shares were allotted to employees in respect of the equity stock options. The information pertaining to ESOPs is given in ANNEXURE 1 to this report. Capital Adequacy Ratio (CAR) As on March 31, 2018 your Bank’s total CAR, calculated in line with Basel III capital regulations, stood at 14.8 per cent, well above the regulatory minimum of 10.875 per cent including the Capital Conservation Buffer of 1.875 per cent. Of this, Tier I CAR was 13.2 per cent. The effect of the proposed dividend has been taken into account in computing these ratios. MANAGEMENT DISCUSSION AND ANALYSIS Macroeconomic and Industry Developments Over the last two years, the Government has taken some key policy decisions including a recapitalisation plan of ` 2,10,000 crore for public sector banks and introduction of the GST. As mentioned earlier, the growth pangs are only short-term and in the long run, GST is expected to give a ﬁllip to the economy as a whole. The slowdown in growth witnessed during 2016-17 (compared with 2015-16) intensiﬁed in the ﬁrst quarter of 2017-18; GDP growth slowed to a 13-quarter low of 5.7 per cent, sharply lower than 7.9 per cent expansion in the same quarter of the preceding year. But, as the transitory impact of both GST and the demonetisation shock is on the wane, the economy appears to be gradually regaining momentum. GDP growth rebounded to 6.5 per cent in the second quarter of 2017-18, and further to 7.2 per cent in the third quarter of 2017-18 after slowing down in the past ﬁve quarters. Going by the 2018 Union Budget, the focus of ﬁscal policy in the coming year will be on revival of the rural economy and infrastructure expenditure. Notwithstanding some positive uptake in private investment growth in the second quarter, we believe incremental pick-up in private capital expenditure is likely to be sector and sub-sector speciﬁc and gradual. We expect a more formidable recovery in private capital expenditure cycle by the ﬁrst half of the year ending March 31, 2019. Overall, on the back of the assumption of a pick-up in private consumption, gradual recovery in private capital expenditure and continued support from Government-led capital spending we expect the real GDP growth for 2018-19 to rise to 7.3 per cent from 6.6 per cent in 2017-18. The moderation in inﬂation which was seen in 2016-17 continued in the early part of 2017-18 as well, with the CPI falling to a series low of 1.5 per cent in June 2017 driven by both lower food and core inﬂation. Having averaged 2.6 per cent in the ﬁrst half of 2017-18, inﬂation inched up slightly in the second half (average close to 4.4 per cent in second half of 2017-18). Going ahead in (cid:38)(cid:57)(cid:17)(cid:25)(cid:12)(cid:0)(cid:35)(cid:48)(cid:41)(cid:0)(cid:73)(cid:78)(cid:109)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:85)(cid:76)(cid:68)(cid:0)(cid:73)(cid:78)(cid:67)(cid:72)(cid:13)(cid:85)(cid:80)(cid:0)(cid:84)(cid:79)(cid:0)(cid:21)(cid:14)(cid:17)(cid:0)(cid:80)(cid:69)(cid:82)(cid:0)(cid:67)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:82)(cid:83)(cid:84)(cid:0)(cid:72)(cid:65)(cid:76)(cid:70)(cid:0)(cid:79)(cid:70)(cid:0)(cid:38)(cid:57)(cid:17)(cid:25)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:77)(cid:85)(cid:67)(cid:72)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:73)(cid:83)(cid:69)(cid:0)(cid:76)(cid:73)(cid:75)(cid:69)(cid:76)(cid:89)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(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:65)(cid:78)(cid:0)(cid:65)(cid:68)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:82)(cid:69)(cid:65)(cid:70)(cid:84)(cid:69)(cid:82)(cid:12)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:67)(cid:79)(cid:78)(cid:68)(cid:0)(cid:72)(cid:65)(cid:76)(cid:70)(cid:0)(cid:79)(cid:70)(cid:0)(cid:38)(cid:57)(cid:17)(cid:25)(cid:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:76)(cid:69)(cid:0) the base effect could be favourable and lead to some moderation in inﬂation, a lot would depend on how other risks like rising oil prices, higher minimum support prices impact of housing rent allowance increase by several state governments pan out. Given the recent softer inﬂation prints while the RBI can afford to wait longer and maintain status quo, eventually, we believe, that elevation of some of the upside risks along with the revival in rural demand could lead to a rate hike by the last quarter of 2018-19. (cid:39)(cid:79)(cid:73)(cid:78)(cid:71)(cid:0) (cid:70)(cid:79)(cid:82)(cid:87)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0) (cid:65)(cid:0) (cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:0) (cid:82)(cid:73)(cid:83)(cid:75)(cid:0) (cid:84)(cid:79)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:69)(cid:67)(cid:79)(cid:78)(cid:79)(cid:77)(cid:89)(cid:0) (cid:67)(cid:79)(cid:85)(cid:76)(cid:68)(cid:0) (cid:66)(cid:69)(cid:0) (cid:65)(cid:0) (cid:83)(cid:72)(cid:65)(cid:82)(cid:80)(cid:0) increase in oil prices, which could adversely affect inﬂation, ﬁscal deﬁcit and the current account deﬁcit. Risks on the external front continue to loom on account of monetary policy uncertainty in the developed nations (particularly on rate hikes’ side), Brexit related uncertainty in the UK and rising protectionist tendencies, especially in the US. Mission and Strategic Focus Your Bank’s mission is to be a ‘World-Class Indian Bank.’ Its business philosophy is based on ﬁve core values: Customer (cid:38)(cid:79)(cid:67)(cid:85)(cid:83)(cid:12)(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:37)(cid:88)(cid:67)(cid:69)(cid:76)(cid:76)(cid:69)(cid:78)(cid:67)(cid:69)(cid:12)(cid:0) (cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:0) (cid:44)(cid:69)(cid:65)(cid:68)(cid:69)(cid:82)(cid:83)(cid:72)(cid:73)(cid:80)(cid:12)(cid:0) (cid:48)(cid:69)(cid:79)(cid:80)(cid:76)(cid:69)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0)(cid:51)(cid:85)(cid:83)(cid:84)(cid:65)(cid:73)(cid:78)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:14)(cid:0)(cid:52)(cid:72)(cid:73)(cid:83)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:84)(cid:79)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(cid:69)(cid:0) building sound customer franchises across distinct businesses so as to be a preferred banking services provider to achieve healthy growth in proﬁtability consistent with the Bank’s risk appetite. In line with the above, your Bank’s business strategy was to take digitisation to the next level to achieve the following: (cid:115)(cid:0) (cid:36)(cid:69)(cid:76)(cid:73)(cid:86)(cid:69)(cid:82)(cid:0) (cid:83)(cid:85)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:82)(cid:0) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:71)(cid:82)(cid:69)(cid:65)(cid:84)(cid:69)(cid:82)(cid:0) (cid:67)(cid:79)(cid:78)(cid:86)(cid:69)(cid:78)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0) (cid:84)(cid:79)(cid:0) customers (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:37)(cid:88)(cid:80)(cid:65)(cid:78)(cid:68)(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) (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:84)(cid:72)(cid:69)(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:115)(cid:0) (cid:51)(cid:85)(cid:83)(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: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) 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 has to afﬁrm annually that he / she will abide by. HDFC Bank Limited Annual Report 2017-18 23 Directors' Report Financial Performance The ﬁnancial performance of your Bank during the year ended March 31, 2018, remained healthy with Total Net Revenue (Net Interest Income Plus Other Income) rising by 21.7 per cent to ` 55,315.2 crore from ` 45,435.7 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 21 per cent to ` 40,094.9 crore due to acceleration in loan growth coupled with Core Net Interest Margin (CNIM) of 4.3 per cent. Other Income grew by 23.8 per cent to ` 15,220.3 crore. The largest component was Fees and Commissions, which increased by 29.3 per cent to ` 11,393.9 crore. Foreign Exchange and Derivatives revenue was ` 1,523.5 crore, gain on revaluation and sale of investments was ` 924.7 crore and recoveries from written-off accounts was ` 1,093.8 crore. Operating (Non-Interest) Expenses rose to ` 22,690.4 crore from ` 19,703.3 crore. During the year, your Bank has set up 72 new banking outlets and 375 ATMs. This, along with strong growth in retail asset and card products, resulted in higher infrastructure and stafﬁng expenses. Staff expenses also went up due to annual wage revisions. Despite higher infrastructure expenses, the Cost to Income Ratio improved to 41 per cent from 43.4 per cent. Total Provisions and Contingencies were ` 5,927.5 crore as compared to ` 3,593.3 crore the preceding year. Your Bank’s provisioning policies remain more stringent than regulatory requirements. The Coverage Ratio based on speciﬁc provisions alone excluding Write-offs is 70 per cent; including General and Floating provisions, it is 121 per cent. Your Bank made General Provisions of ` 597.4 crore during the year. Proﬁt Before Tax grew by 20.6 per cent to ` 26,697.3 crore. After providing for Income Tax of ` 9,210.6 crore, Net Proﬁt increased by 20.2 per cent to ` 17,486.8 crore from ` 14,549.7 crore. The Return on Average Net Worth was 18 per cent while the Basic Earnings Per Share was ` 67.8, up from ` 57.2. As on March 31, 2018, your Bank’s Total Balance Sheet stood at ` 1,063,934 crore, an increase of 23.2 per cent over ` 8,63,840 crore on March 31, 2017. Total Deposits rose by 22.5 per cent to ` 7,88,771 crore from ` 6,43,640 crore. The Current Account and Savings Account (CASA) Deposit growth also increased. Savings Account Deposits grew by 15.6 per cent to ` 2,23,810 crore while Current Account Deposits rose by 3.2 per cent to ` 1,19,283 crore. Time Deposits stood at ` 4,45,678 crore, representing an increase of 33.2 per cent. CASA Deposits accounted for 43.5 per cent of Total Deposits. Advances stood at ` 6,58,333 crore, an increase of 18.7 per cent. The Bank’s domestic loan portfolio of ` 6,43,794 crore grew by 19.5 per cent over March 31, 2017. The Bank had a share of approximately 6.7 per cent in Total Domestic Deposits and 7.4 per cent in Total Domestic Advances. Its Credit Deposit (CD) Ratio stood at 83 per cent on March 31, 2018. BUSINESS OPERATIONS Our Bank’s operations are split into domestic and international, albeit small. DOMESTIC BUSINESS Our domestic business comprises the following: A) Retail Banking Your Bank’s Retail Banking Business registered robust growth in the year under review. Total Retail Deposits grew by 14.4 per cent to ` 5,80,006 crore from ` 5,06,843 crore in the preceding year while Retail Advances rose by 27.4 per cent to ` 3,76,167 crore from ` 2,95,161 crore. Growth in Retail Assets was led by Personal Loans, Auto Loans and, Credit Cards. The Bank is a leader in the Auto Loans Segment with a strong presence in commercial vehicle and two-wheeler ﬁnancing. Four-wheeler ﬁnancing registered a strong 22.8 per cent growth. In Two-Wheeler Financing, your Bank is the ﬁrst in the country to cross the 10 lakh vehicles milestone. In the Commercial Vehicle Segment, your Bank was able to ward off intense competition and log robust proﬁtable growth using its strong brand equity and service. It chose not to compete on price. The Personal Loan Business also surged to ` 71,876 crore on the back of strong product offerings and speedy disbursals. The Bank is a pioneer in various digital loans. Your Bank’s 10 second Personal Loan and Digital Loan Against Shares were industry ﬁrsts. In the credit card business, your Bank achieved yet another milestone during the ﬁscal by becoming the ﬁrst bank in the country to issue one crore cards. Existing customers accounted for 82 per cent of the new cards issued. In addition to this, the Bank operates in the Home Loan business in conjunction with HDFC Limited. As per this arrangement, the Bank sells HDFC Home Loans while HDFC Ltd approves and disburses them. 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, ` 2,000 crore of Home Loans every month in the year under review. The Bank also distributes Life Insurance, General Insurance and Mutual Funds, often referred to as Third-Party Products. HDFC Bank Limited Annual Report 2017-18 24 Directors' Report Income from this business grew by 51 percent from ` 1,381 crore to ` 2,091 crore and accounted for 18 per cent of total fee income in the year ended March 31, 2018 , compared with 16 per cent in the preceding year. This was primarily on account of distribution of mutual funds of the top asset management companies in the country. Mutual Fund industry saw an unprecedented ﬂow of household savings into the mutual funds. In the system the AUM of the individual investors grew by 36.8 per cent to about ` 11.7 lakh crore* as of March 31, 2018. Your bank has adopted an open architecture model by entering into multiple corporate agency agreements in life, general and health insurance distribution. During the year under review your Bank tied up with two life insurance, two general insurance and three health insurance service providers in addition to the existing tie-ups. *Source for Industry numbers (AMFI India) As regards physical distribution network the Bank also added 72 banking outlets during the year taking the total to 4,787 spread across 2,691 cities / towns. The share of semi-urban and rural outlets in the total network is 53 per cent, reﬂecting our continued focus on them. The number of ATMs also increased, to 12,635 from 12,260. The number of customers your Bank catered to as on March 31, 2018 was over 4.36 crore from 4.05 crore in the previous year. The Payments Business where your Bank has a dominant presence merits a special mention. With 2.43 crore debit cards, 1.07 crore credit cards and 4.04 lakh POS terminals and m-PoS installations, it is among the largest facilitators of cashless payments using plastic in the country. The Bank has made rapid strides in adopting other aspects of digitisation as well. The Bank’s payments business has launched digital offerings such as Bharat QR Code, UPI, Aadhaar and SMS pay solutions. It has also pioneered path-breaking products such as the SmartHub app for small merchants and DigiPos, which enables traditional PoS machines to accept digital payments. Merchants and customers alike have found these solutions useful. review, the year under In the Virtual Relationship Management (VRM) programmme gained substantial traction. Through this, relationship managers reach out to customers through remote and digital platforms, leading to deeper engagement in a cost-effective manner. These managers are a single point of contact for customers banking and ﬁnancial needs. This programme which offers tailor-made solutions, using carefully drawn customer level plans has been well received in the 18 months since its launch. The number of customers has trebled during this period. B) Wholesale Banking This business focuses on institutional customers such as the Government, Large and Emerging Corporates, and SMEs. Your Bank’s offerings in this segment include Working Capital and Term Loans as well as Trade Credit, Cash Management, Supply Chain Financing, Foreign Exchange, and Investment Banking services. The Wholesale Banking business recorded healthy growth, ending the year with a loan book size of approximately ` 2,88,000 crore constituting about 43 per cent of the Bank’s total book. This was an increase of about 9.5 per cent over approximately ` 2,63,000 crore recorded in the previous year. The performance in this segment must be seen in the wider context of an otherwise subdued credit environment and excess liquidity in the banking system, which exercised a downward pressure on interest rates for much of the year. The Bank was able to expand its share of the customer wallet, primarily using sharper customisation and cross-selling. Corporate Banking, which focuses on large, well-rated companies, continued to remain the biggest contributor to Wholesale Banking in terms of asset size. Despite a subdued credit environment, the Emerging Corporates Group, which focuses on the mid-market segment, too witnessed signiﬁcant growth. Your Bank leveraged its vast geographical reach, technology backbone, automated processes, suite of ﬁnancial products and quick turnaround times to offer a differentiated service, which has resulted in new customer acquisition as well as a higher share of the wallet from existing customers. The business continues to have a diversiﬁed portfolio in terms of both industry and geography. The year under review has been a challenging but deﬁning one for Micro, Small and Medium Enterprises (MSMEs). The sector faced temporary challenges arising from clarity and compliance issues in the implementation of GST. Your Bank ﬁne-tuned its strategy and capitalised on new opportunities to grow the business. The Bank’s advances to MSMEs amounted to ` 89,042.1 crore as on March 31, 2018. The Investment Banking business cemented its already prominent position in the Debt Capital Markets. For three consecutive years now, your Bank has been ranked 2nd in the Bloomberg rankings of Rupee Bond book runners. In the Government business, the Bank sustained its focus on tax collections, collecting direct tax of ` 2.61 lakh crore and indirect tax of ` 0.85 lakh crore during the year. In addition to the taxes / duties collected on behalf of several state governments, the Bank also collected ` 1.01 lakh crore in the form of GST. We continue to enjoy a pre-eminent position among the country’s major stock and commodity exchanges in both Cash Management Services and Cash Settlement Services. HDFC Bank Limited Annual Report 2017-18 25 Directors' Report The Bank has, as part of its digitisation drive, ensured a larger conversion of cash payments into electronic ones. The ‘Trade- on-Net’ offering, which gives clients access to a host of services such as Remittances, Letters of Credit and Guarantees, has gained acceptance. SM@Bank, our online solution for SME customers, also continued to gather momentum. Your Bank’s pre-eminent position in the Wholesale Business was recognised in a survey conducted by Greenwich Associates, a leading global provider of market and intelligence services. It rated your Bank as number one in India in the middle market segment in terms of market penetration and number two in the large corporate segment. C) Treasury The Treasury is the custodian of the Bank’s cash / liquid assets and handles its investments in securities, foreign exchange and cash instruments. It manages the liquidity and interest rate risks on the balance sheet and is also responsible for meeting reserve requirements. The vertical also helps manage the treasury needs of customers and earns a substantial part of its revenues through fee income generated from transactions customers undertake with the Bank while managing their foreign exchange and interest rate risks. Revenue accrues from spreads on customer transactions based on trade and remittance ﬂows and demonstrated hedging needs. The Bank recorded revenue of ` 1,523.5 crore from foreign exchange and derivative transactions in the year under review. While plain vanilla forex products were in demand across all customer segments, the demand for derivative products came mostly from large and emerging corporates. As a part of prudent risk management, the Bank enters into foreign exchange and derivative deals with counterparties after it has set up appropriate credit limits based on its evaluation of the ability of the counterparty to meet its obligations. Where the Bank enters into foreign currency derivative contracts not involving the Indian Rupee with its customers, it typically lays them off in the inter-bank market (cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:77)(cid:65)(cid:84)(cid:67)(cid:72)(cid:69)(cid:68)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:14)(cid:0)(cid:38)(cid:79)(cid:82)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:70)(cid:79)(cid:82)(cid:69)(cid:73)(cid:71)(cid:78)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:67)(cid:89)(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:12)(cid:0) the Bank primarily carries the counterparty credit risk (where the customer has crystallised payables or mark-to-market losses) and may carry only residual market risk if any. The Bank also deals in derivatives on its own account, including for the purpose of its own balance sheet risk management. The Bank maintains a portfolio of Government Securities, in line with regulatory norms governing the Statutory Liquidity Ratio (SLR). A signiﬁcant portion of these SLR securities are held in the ‘Held-to-Maturity’ (HTM) category, while (cid:83)(cid:79)(cid:77)(cid:69)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) (cid:72)(cid:69)(cid:76)(cid:68)(cid:0) (cid:73)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:64)(cid:33)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:51)(cid:65)(cid:76)(cid:69)(cid:7)(cid:0) (cid:8)(cid:33)(cid:38)(cid:51)(cid:9)(cid:0) (cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:89)(cid:14)(cid:0) The Bank is also a Primary Dealer for Government Securities. As a part of this business, as well as otherwise, the Bank holds ﬁxed income securities in the ‘Held for (cid:52)(cid:82)(cid:65)(cid:68)(cid:73)(cid:78)(cid:71)(cid:7)(cid:0)(cid:8)(cid:40)(cid:38)(cid:52)(cid:9)(cid:0)(cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:89)(cid:14) The Bank is in the process of implementing a new Treasury solution provided by Murex. The ﬁrst phase of implementation went live this year and full implementation will be completed in the next 12-18 months. This will be an integrated solution for front-ofﬁce, mid-ofﬁce and back-ofﬁce and will replace many existing software / systems. D) Partnering with the Government You will be happy to know that your Bank has been closely working with the Government both at the Central and State levels primarily in the following three areas: 1) Digitisation and Digital India a) Ministry of Electronics & Information Technology (MeitY) has ranked your Bank as the Number 1 Bank for supporting many of its initiatives. Your Bank is proud to be one of the few banks that was able to meet the targets in installing Point of Sale (PoS) units, Bharat QR and BHIM app following demonetisation. b) The Bank partnered with Thane city to launch the ﬁrst one-city-one-card as part of the Smart City initiative. A similar solution has also been created (cid:70)(cid:79)(cid:82)(cid:0) (cid:48)(cid:65)(cid:78)(cid:65)(cid:74)(cid:73)(cid:0) (cid:51)(cid:77)(cid:65)(cid:82)(cid:84)(cid:0) (cid:35)(cid:73)(cid:84)(cid:89)(cid:14)(cid:0) (cid:41)(cid:78)(cid:0) (cid:43)(cid:65)(cid:78)(cid:80)(cid:85)(cid:82)(cid:12)(cid:0) (cid:65)(cid:0) (cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) mobile app has been created to further support the Smart City initiative. To further the government’s (cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:73)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:0)(cid:85)(cid:82)(cid:66)(cid:65)(cid:78)(cid:0)(cid:77)(cid:79)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:12)(cid:0)(cid:89)(cid:79)(cid:85)(cid:82)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0) (cid:80)(cid:65)(cid:82)(cid:84)(cid:78)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0) (cid:87)(cid:73)(cid:84)(cid:72)(cid:0) (cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0) (cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:83)(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:65)(cid:74)(cid:65)(cid:83)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0) and Uttar Pradesh to provide transit cards and payment solutions. c) Your Bank is working to ensure that funds under a host of schemes including Direct Beneﬁt Transfer (DBT) and Mahatma Gandhi National Rural Employee Guarantee Act reach the intended beneﬁciaries. Towards this end, it has partnered with various Panchayats across the country for (cid:84)(cid:72)(cid:69)(cid:0) (cid:48)(cid:85)(cid:66)(cid:76)(cid:73)(cid:67)(cid:0) (cid:38)(cid:85)(cid:78)(cid:68)(cid:0) (cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:51)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:0) (cid:8)(cid:48)(cid:38)(cid:45)(cid:51)(cid:9)(cid:14)(cid:0) Dedicated teams from the Bank work closely with government authorities and play a critical role by providing real-time, on-ground feedback for reﬁning (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0) (cid:65)(cid:82)(cid:67)(cid:72)(cid:73)(cid:84)(cid:69)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:65)(cid:76)(cid:83)(cid:79)(cid:0) (cid:69)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:83)(cid:0) automation and digitisation in various government departments to help improve both time and cost (cid:69)(cid:70)(cid:108)(cid:67)(cid:73)(cid:69)(cid:78)(cid:67)(cid:73)(cid:69)(cid:83)(cid:14)(cid:0)(cid:38)(cid:79)(cid:82)(cid:0)(cid:69)(cid:88)(cid:65)(cid:77)(cid:80)(cid:76)(cid:69)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:73)(cid:83)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:0) technology solution in partnership with a software company to manage the National Health Mission (Madhya Pradesh scheme) more efﬁciently. It has also been working on various on e-Governance initiatives such as MahaOnline (Maharashtra) and Mee Seva (Andhra Pradesh). HDFC Bank Limited Annual Report 2017-18 26 Directors' Report 2) Customised Banking Solution for Government Employees Your Bank has designed a banking package to suit the needs of government employees, at the state and central levels. The offering includes an overdraft secured by their salary account, complimentary insurance covers and ﬁne pricing on loans. 3) Start-Up Fund and SmartUp Banking Through its SmartUp Programme for Start-ups and Start-Up Fund, your Bank is working with various state governments and incubators / accelerators to promote entrepreneurship. Memoranda of Understanding have already been signed with three state governments to enable execution of varied aspects of their respective start-up policies. Your Bank also works with seven incubators certiﬁed by the Department of Science and Technology, including various Indian Institutes of Technology and Indian Institutes of Management, to identify Social Start-ups that require ﬁnancial and advisory support. E) Rural 1) Agriculture and Allied Activities Your Bank’s credit to Agriculture and Allied activities stood at ` 1,13,160.6 crore on March 31, 2018, representing an increase of 45.2 per cent over ` 77,921.0 crore in the previous year. Over half of India’s population depends on agriculture for livelihood. The key to the Bank’s success here has been its ability to tap the opportunities herein through the following: (cid:115)(cid:0) (cid:55)(cid:73)(cid:68)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:0)(cid:82)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:0) (cid:115)(cid:0) (cid:38)(cid:65)(cid:83)(cid:84)(cid:69)(cid:82)(cid:0)(cid:84)(cid:85)(cid:82)(cid:78)(cid:65)(cid:82)(cid:79)(cid:85)(cid:78)(cid:68)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69) (cid:115)(cid:0) (cid:36)(cid:73)(cid:71)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:83)(cid:79)(cid:76)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) Our product range includes Pre and Post-Harvest Crop Loans, Two-Wheeler and Auto Loans and Loans against Gold Jewellery, Personal Loans and other mortgage loans. Consequently, the Bank has established a strong footprint in the rural hinterland with Crop Loans. Apart from advising the farmers on their ﬁnancial needs, your Bank is increasingly focusing on them on beneﬁts of various government / regulatory schemes such as crop insurance and interest subvention. facilitating The Bank has also designed a range of crop and geography- speciﬁc products keeping in mind the harvest cycles and the local needs of farmers spread across diverse agro climatic zones. Using technology, we are able to disburse some loans within three working days (in select geographies) and loan enhancements in a few seconds through ATMs and mobile HDFC Bank Limited Annual Report 2017-18 27 phones. Our products such as Post-Harvest Cash Credit and Warehouse Receipt Financing enable faster cash ﬂows to the farmer. Credit is also disbursed to allied agricultural activities such as Dairy, Pisciculture, and Sericulture. Twelve farmer centres or Kisan Dhan Vikas Kendras have been rolled out in Punjab, Maharashtra, Uttar Pradesh and Madhya Pradesh. At these centres, 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. The Bank also provides advisory on weather, cropping, and harvesting through SMS. Digitising Payments, Easing Cash Flow: This is our effort to facilitate transparency in the milk procurement and payment process. 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, including the quality of milk, 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 that can then be used as the basis for accessing bank credit. Apart from 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. Replacing the Moneylender: Loans against Gold Jewellery grew to over ` 5,500 crore from over ` 4,800 crore the preceding year. Your Bank is slowly making inroads into a market traditionally dominated by the unorganised sector and pawn brokers. The entry of organised players into the sector has increased both awareness and transparency. The Bank has been able to serve the section of people who would traditionally rely on the moneylender through faster turnaround times. Helping Farmers: Farm yield and income are subject to the vagaries of the weather. Factors like soil health, input quality (seeds and fertilizers), availability of water and government policy also impact this. So do price realisation and storage facilities. Your Bank has launched a variety of products to ease the stress on farm income and rural households. Over the last few years, several parts of the country have been severely impacted by natural calamities such as drought, unseasonal rains, hailstorms, and ﬂoods. Within regulatory guidelines, the Bank has been providing relief to impacted farmers. It also has systems designed to enable Direct Beneﬁt Transfers in a time-bound manner. Directors' Report Lending to the agriculture sector, including to the small and marginal farmers is a regulatory mandate as part of priority sector lending requirements. This has inherent credit risks. Your Bank has built policies and product programmes and engages closely with farmers to mitigate risks and protect portfolio quality. The Bank is also exploring the use of remote sensing technologies and analytics to strengthen crop and farm level assessment. 2) Micro, Small and Medium Enterprises (MSME) Advances to the MSME segment as on March 31, 2018 stood at ` 89,042.1 crore as against ` 85,166.6 crore a year ago. Its advances to the Micro Enterprises alone stood at ` 40,644.7 crore. The Emerging Enterprises and Business Banking Groups cater to the Micro Enterprises and SME segments respectively. The MSME sector serves as an important engine for economic growth. It contributes 33 per cent to India’s to exports. manufacturing output and 45 per cent With 12 crore people employed across ﬁve crore MSME units, it is the second largest employer after agriculture accounting for 40 per cent of the workforce. This is the fastest growing segment in the commercial lending space and constituted 23 per cent of credit outstanding in the year under review. Credit to Micro Enterprises grew at a faster clip of 20 per cent as against nine per cent for SMEs. The year ended March 31, 2018 was a challenging one for the MSME business due to the introduction of GST in terms of clarity and compliance. It also led to temporary increase in working capital requirement for customers. GST implementation is seen as a positive in the long run as it is expected to lead to further formalisation of the informal sector and thus open up new and safer opportunities for bank ﬁnancing. Needless to say, in the case of existing ﬁrms too, greater transparency will lead to better credit quality. Implementation of GST, demonetisation, the Government push and the advent of the next-generation of entrepreneurs have all driven a steady shift towards digital transactions. In what could be a potential game changer for the business, Your Bank’s complete online solution the SM@Bank for SME customers, is seeing greater customer adoption across geographies. Through this, customers can access credit facility information, request temporary overdraft facilities, ask for new facilities and submit documents to the Bank for straight through processing on a 24*7 basis. This is now poised to gain further momentum. Like in every other business unit, increasing use of analytics is giving your Bank an edge. 3) Taking Banking to the Unbanked Your Bank is fully committed to taking banking to the remotest parts of the country through the combination of an extensive physical network and a robust digital suite of products and services. Today, over 53 per cent of the Bank’s outlets are located in rural and semi-urban areas. The Bank also offers last mile access through mobile applications such as BHIM, UPI, USSD, Scan and Pay, Aadhaar, and RuPay enabled Micro-ATMs. To bring more under-banked sections of the population into formal ﬁnancial channels, your Bank has opened over 17.72 lakh accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and enrolled over 29.37 lakh customers in social security schemes since their inception. We now rank among the leading private sector banks in this regard. In the year under review, loans to the tune of ` 6,621.41 crore were extended under the Pradhan Mantri Mudra Yojana (PMMY) and nearly ` 134.24 crore under the ‘Stand Up India’ scheme to Scheduled Caste / Scheduled Tribe and women borrowers. 4) Sustainable Livelihood Initiative This is primarily a social initiative with elements of business. It entails skill training, livelihood ﬁnancing, and creating (cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:76)(cid:73)(cid:78)(cid:75)(cid:65)(cid:71)(cid:69)(cid:83)(cid:14)(cid:0)(cid:38)(cid:85)(cid:82)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:68)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(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:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) below on Parivartan. INTERNATIONAL BUSINESS As on March 31, 2018, the balance sheet size of this business was US $ 4.13 billion. Advances constituted close to 3.1 per cent of the Bank’s gross advances. The total income of the overseas branches constituted 0.86 per cent of the Bank’s total income for the year. Though the number is small, what is signiﬁcant is that your Bank is able to cater to a large and growing Indian diaspora. As you would know, your Bank has overseas branches in Bahrain, (cid:40)(cid:79)(cid:78)(cid:71)(cid:0)(cid:43)(cid:79)(cid:78)(cid:71)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:36)(cid:85)(cid:66)(cid:65)(cid:73)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:69)(cid:0)(cid:8)(cid:36)(cid:41)(cid:38)(cid:35)(cid:9)(cid:14)(cid:0) These branches cater to the needs of our overseas clients both (cid:67)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:69)(cid:12)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:73)(cid:78)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:89)(cid:0) (cid:79)(cid:70)(cid:70)(cid:69)(cid:82)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:12)(cid:0) (cid:52)(cid:82)(cid:65)(cid:68)(cid:69)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) and Wealth Management (primarily for non-resident individual customers). In addition, the Bank has Representative Ofﬁces in Abu Dhabi, Dubai and Nairobi. You will be happy to know that your Bank now has a presence (cid:73)(cid:78)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid: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:0)(cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:69)(cid:0)(cid:8)(cid:41)(cid:38)(cid:51)(cid:35)(cid:9)(cid:0)(cid:65)(cid:84)(cid:0)(cid:39)(cid:41)(cid:38)(cid:52)(cid:0)(cid:35)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0) (cid:39)(cid:65)(cid:78)(cid:68)(cid:72)(cid:73)(cid:78)(cid:65)(cid:71)(cid:65)(cid:82)(cid:12)(cid:0)(cid:39)(cid:85)(cid:74)(cid:65)(cid:82)(cid:65)(cid:84)(cid:14)(cid:0)(cid:52)(cid:72)(cid:73)(cid:83)(cid:0)(cid:85)(cid:78)(cid:73)(cid:84)(cid:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:79)(cid:80)(cid:69)(cid:78)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:17)(cid:23)(cid:12)(cid:0)(cid:73)(cid:83)(cid:0) akin to a foreign branch. Customers can avail of products such as (cid:52)(cid:82)(cid:65)(cid:68)(cid:69)(cid:0)(cid:35)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:83)(cid:12)(cid:0)(cid:38)(cid:79)(cid:82)(cid:69)(cid:73)(cid:71)(cid:78)(cid:0)(cid:35)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:67)(cid:89)(cid:0)(cid:52)(cid:69)(cid:82)(cid:77)(cid:0)(cid:44)(cid:79)(cid:65)(cid:78)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:37)(cid:88)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:76)(cid:0) Commercial Borrowings (ECB), and derivatives to hedge loans. NON -BUSINESS OPERATIONS / SOCIAL COMMITMENT Parivartan - A Step Towards Progress Parivartan is your Bank’s umbrella brand for all its social initiatives. Parivartan or ‘Change’ as it means in English seeks to bring about change in the lives of people making them self-reliant and part of the national mainstream. Working largely through communities, Parivartan focuses on the following HDFC Bank Limited Annual Report 2017-18 28 Directors' Report fundamental areas: (cid:115)(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:115)(cid:0) (cid:51)(cid:75)(cid:73)(cid:76)(cid:76)(cid:0)(cid:52)(cid:82)(cid:65)(cid:73)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:44)(cid:73)(cid:86)(cid:69)(cid:76)(cid:73)(cid:72)(cid:79)(cid:79)(cid:68)(cid:0)(cid:37)(cid:78)(cid:72)(cid:65)(cid:78)(cid:67)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:115)(cid:0) (cid:48)(cid:82)(cid:79)(cid:77)(cid:79)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:37)(cid:68)(cid:85)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:115)(cid:0) (cid:40)(cid:69)(cid:65)(cid:76)(cid:84)(cid:72)(cid:67)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:40)(cid:89)(cid:71)(cid:73)(cid:69)(cid:78)(cid:69)(cid:0) (cid:115)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:44)(cid:73)(cid:84)(cid:69)(cid:82)(cid:65)(cid:67)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:41)(cid:78)(cid:67)(cid:76)(cid:85)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0) As noted before, Sustainability is one of your Bank’s core values. Your Bank’s belief is that businesses should support the communities in which they operate. We are happy to report that your Bank, through its several social initiatives (including SLI) has made a difference to the lives of over 3.5 crore Indians. Rural Development The Holistic Rural Development Programme (HRDP) is born out of the conviction that the nation will progress only when rural India grows. Over half the country’s population lives in rural areas and is primarily dependent on agriculture for their livelihood. Our efforts here are focused on areas of soil, water and natural resource management and sanitation, issues that rural India is often plagued by. These are often multi-pronged interventions. Soil conservation for instance will typically cover educating people about use of organic fertilisers. Water management will entail construction, renovation and maintenance of water harvesting structures for improving surface and ground water availability. Likewise educating people on renewable energy often forms part of our natural resource management efforts. Spread over 16 states, the programme covers over 2.9 lakh households across 870 villages. Over 18,000 acres of arable land have been treated to enhance productivity. Umpathaw in Meghalaya, became the 750th village to be covered under the programme in the year under review. Promoting Education There is no better gift to humanity than education. Improving the quality of education is a focus area under Parivartan. Your Bank’s efforts in this area include teacher training, scholarships and career guidance. It also includes providing infrastructure support, such as building toilets in schools and improving classrooms. At the community level, this entails educating people on the importance of Water, Sanitation and Hygiene (WaSH) and creating awareness on issues related to road safety and healthy ﬁnancial practices. The ﬂagship programme here is Zero Investment Innovations for Education Initiatives (ZIIEI). This ‘Teaching The Teacher’ programme (3T) seeks to transform education in government schools across India. This is a unique programme which is committed to improving the skills of teachers, which in turn beneﬁts the pupils. of (cid:65)(cid:0) (cid:80)(cid:73)(cid:76)(cid:79)(cid:84)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0) (cid:73)(cid:78)(cid:0) (cid:53)(cid:84)(cid:84)(cid:65)(cid:82)(cid:0) (cid:48)(cid:82)(cid:65)(cid:68)(cid:69)(cid:83)(cid:72)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:73)(cid:83)(cid:0) (cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:68)(cid:0) (cid:84)(cid:79)(cid:0) train 15 lakh teachers in 6.2 lakh government schools across (cid:17)(cid:18)(cid:0) (cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:17)(cid:0) (cid:53)(cid:78)(cid:73)(cid:79)(cid:78)(cid:0)(cid:52)(cid:69)(cid:82)(cid:82)(cid:73)(cid:84)(cid:79)(cid:82)(cid:89)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0) (cid:73)(cid:83)(cid:0) (cid:66)(cid:69)(cid:73)(cid:78)(cid:71)(cid:0) (cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:69)(cid:68)(cid:0) (cid:74)(cid:79)(cid:73)(cid:78)(cid:84)(cid:76)(cid:89)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:65)(cid:0)(cid:76)(cid:69)(cid:65)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13)(cid:71)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:65)(cid:76)(cid:0)(cid:79)(cid:82)(cid:71)(cid:65)(cid:78)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:14) Skills Training and Livelihood Enhancement (cid:38)(cid:79)(cid:82)(cid:77)(cid:65)(cid:76)(cid:0) (cid:69)(cid:68)(cid:85)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:82)(cid:69)(cid:77)(cid:65)(cid:73)(cid:78)(cid:83)(cid:0) (cid:65)(cid:0) (cid:68)(cid:82)(cid:69)(cid:65)(cid:77)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:76)(cid:65)(cid:75)(cid:72)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) (cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:78)(cid:83)(cid:14)(cid:0) Your Bank under Skills Training and Livelihood Enhancement targets people in this section of society in rural India and imparts income generating skills, primarily in agriculture and allied areas (cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:65)(cid:83)(cid:0)(cid:68)(cid:65)(cid:73)(cid:82)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:79)(cid:85)(cid:76)(cid:84)(cid:82)(cid:89)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:72)(cid:69)(cid:76)(cid:80)(cid:0)(cid:84)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:80)(cid:69)(cid:79)(cid:80)(cid:76)(cid:69)(cid:0) (cid:108)(cid:78)(cid:68)(cid:0)(cid:74)(cid:79)(cid:66)(cid:83)(cid:0)(cid:76)(cid:79)(cid:67)(cid:65)(cid:76)(cid:76)(cid:89)(cid:12)(cid:0)(cid:69)(cid:78)(cid:72)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0)(cid:72)(cid:79)(cid:85)(cid:83)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:82)(cid:69)(cid:86)(cid:69)(cid:78)(cid:84)(cid:0) migration. The nationwide programme has beneﬁtted over 51,000 individuals. The programme also has another leg where placement-linked training is provided to youth and career counselling is provided to young school students. So far over 3,000 have received skill development training. The ﬂagship programme under Skills Training and Livelihood Enhancement is the Sustainable Livelihood Initiative (SLI). Sustainable Livelihood Initiative This initiative aims at ‘Creating Sustainable Communities’. It does so by empowering women and helping them break the vicious circle of poverty. Empowering women, we believe, means empowering families. Women form Self Help Groups (SHGs) or Joint Liability Groups (JLGs). The women under the programme are given occupational skills training, ﬁnancial literacy, credit counselling and livelihood ﬁnance and market linkage. The Bank is mandated by its Board to cover 1 crore households and so far 81.8 lakh have been covered. It’s a unique programme with perhaps no parallel globally. What makes it so are the following: 1) It’s an all-women programme 2) It covers womenfolk across the length and breadth of a country as vast as India. It is present in 27 states and over 400 districts 3) With 81 lakh women or households (81.8 X 4 = 3.27 crore individuals) impacted, this is one of the world’s largest such programmes 4) Over 9,000 dedicated, passionate Bank employees are running the programme Healthcare and Hygiene Your Bank’s initiatives in the area of Healthcare and Hygiene, focusing on both schools as well as the community, have made a substantial difference to the lives of students in rural India. (cid:52)(cid:72)(cid:73)(cid:83)(cid:0)(cid:19)(cid:52)(cid:0)(cid:80)(cid:82)(cid:79)(cid:71)(cid:82)(cid:65)(cid:77)(cid:77)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:76)(cid:65)(cid:85)(cid:78)(cid:67)(cid:72)(cid:69)(cid:68)(cid:0)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:76)(cid:89)(cid:0)(cid:65)(cid:84)(cid:0)(cid:42)(cid:65)(cid:73)(cid:80)(cid:85)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:50)(cid:65)(cid:74)(cid:65)(cid:83)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0) during the year under review, after the successful completion At the heart of these programmes are community-led sanitation campaigns that promote hygienic conditions in rural areas HDFC Bank Limited Annual Report 2017-18 29 Directors' Report through appropriate wastewater disposal. These initiatives are supplemented by construction of toilets and provision of clean drinking water. Over 16,521 households and 924 schools in rural India have been covered under the toilet programme so far. Your Bank also organises health camps, nutrition programmes, and vaccination drives. The ﬂagship programme under this pillar is the Annual Blood Donation Drive. In the 11th edition in 2017, your Bank collected 2.2 lakh units of blood in a single day. This was almost 30 per cent higher than the previous year. What started off as a small initiative in 2007 with the participation (cid:79)(cid:70)(cid:0)(cid:74)(cid:85)(cid:83)(cid:84)(cid:0)(cid:20)(cid:12)(cid:16)(cid:16)(cid:16)(cid:0)(cid:86)(cid:79)(cid:76)(cid:85)(cid:78)(cid:84)(cid:69)(cid:69)(cid:82)(cid:83)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:78)(cid:79)(cid:87)(cid:0)(cid:71)(cid:82)(cid:79)(cid:87)(cid:78)(cid:0)(cid:73)(cid:78)(cid:84)(cid:79)(cid:0)(cid:65)(cid:0)(cid:77)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0) 2.5 lakh people from all walks of life participated. This included those from schools, colleges, employees of private and public sector, both State and Central Governments and the defence establishment. While bank employees are central to this effort, of the 3,045 (cid:67)(cid:65)(cid:77)(cid:80)(cid:83)(cid:0) (cid:72)(cid:69)(cid:76)(cid:68)(cid:0) (cid:65)(cid:67)(cid:82)(cid:79)(cid:83)(cid:83)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:82)(cid:89)(cid:12)(cid:0) (cid:65)(cid:0) (cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0) (cid:87)(cid:69)(cid:82)(cid:69)(cid:0) (cid:72)(cid:69)(cid:76)(cid:68)(cid:0) (cid:79)(cid:70)(cid:70)(cid:83)(cid:73)(cid:84)(cid:69)(cid:14)(cid:0) Almost 1,100 camps in colleges and 475 in companies. Financial Literacy (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:76)(cid:73)(cid:84)(cid:69)(cid:82)(cid:65)(cid:67)(cid:89)(cid:0)(cid:73)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:82)(cid:83)(cid:84)(cid:0)(cid:83)(cid:84)(cid:69)(cid:80)(cid:0)(cid:84)(cid:79)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:82)(cid:69)(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:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:83)(cid:73)(cid:79)(cid:78)(cid:14)(cid:0) Lakhs of people have learnt about the fundamentals of savings, investment and organised ﬁnance from ﬁnancial literacy camps conducted by the Bank at its banking outlets as well as ﬁnancial literacy centres across the country. This is a multi-pronged programme where literacy is imparted at branches, through business units as well as through its NGO partners. Over 19 lakh participants have beneﬁtted in the year under review. The ﬂagship scheme under this pillar is Digidhan. Modelled on the Bank’s ﬁnancial literacy-on-wheels programme - Dhanchayat, Digidhan, criss-crosses the length and breadth of the country’s hinterland explaining the beneﬁts of digital banking. The medium is through ﬁlm and the location is often high-footfall pockets such as bazaars, mandis and bus-stands. The Bank is fully compliant with the requirements of the Companies Act 2013, having spent ` 374 crore on CSR and emerging as one of the highest spenders in this space in India. 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. Environmental Sustainability Maintaining a balance between natural capital and communities is now integral to our functioning. Towards this end, our ATMs have gone paperless, enabling a reduction of the carbon footprint. The Bank has given this effort a further ﬁllip by ensuring multi-channel delivery through Net Banking, Phone Banking, and Mobile Banking. This results in (cid:76)(cid:79)(cid:87)(cid:69)(cid:82)(cid:0) (cid:67)(cid:65)(cid:82)(cid:66)(cid:79)(cid:78)(cid:0) (cid:69)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0) (cid:78)(cid:79)(cid:84)(cid:0) (cid:74)(cid:85)(cid:83)(cid:84)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:0) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:66)(cid:85)(cid:84)(cid:0) (cid:65)(cid:76)(cid:83)(cid:79)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:0) reduced customer travel. Another source for reducing the environmental footprint is solar ATMs, which use rechargeable lithium ion batteries that reduce power consumption. BUSINESS ENABLERS 1) People, Culture, Integrity and Ethics ‘People’ is one of your Bank’s Core Values. It is extremely proud of them, the integrity and ethics that they demonstrate and, indeed, the culture that promotes these values. This culture ensures that the people with the right values are hired, groomed and encouraged. The Bank has an institutionalised, well-documented code of conduct, which every employee has to afﬁrm annually. The ﬁve pillars of our People strategy are as follows: Recruitment: Recruiting the right talent isn’t enough anymore in an industry like banking. What is critical is recruiting and deploying them fast. Your Bank has an agile hiring mechanism that ensures this. This often entails leveraging online portals and new age channels like social media. Campus hiring and internship programs enable us to expand the hiring base further. (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:65)(cid:76)(cid:83)(cid:79)(cid:0)(cid:83)(cid:84)(cid:65)(cid:82)(cid:84)(cid:69)(cid:68)(cid:0)(cid:83)(cid:67)(cid:65)(cid:76)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:80)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:68)(cid:73)(cid:71)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:74)(cid:79)(cid:66)(cid:13)(cid:82)(cid:69)(cid:65)(cid:68)(cid:89)(cid:0) model to attain scale and quality. The Bank also has a battery of assessment tools, like AMCAT, Assesshub and Talview to strengthen its selection process. Career Management: Core to your Bank’s career philosophy is to create opportunities for employees to develop and grow. The systematic investment of time in career discussion with employees, competency assessment and intensive functional and behavioural training, through Gurukul our in-house programme, are also aimed at achieving that result. (cid:52)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:65)(cid:76)(cid:83)(cid:79)(cid:0) (cid:70)(cid:65)(cid:67)(cid:73)(cid:76)(cid:73)(cid:84)(cid:65)(cid:84)(cid:69)(cid:83)(cid:0) (cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:13)(cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:65)(cid:76)(cid:0) (cid:74)(cid:79)(cid:66)(cid:0) (cid:83)(cid:87)(cid:73)(cid:84)(cid:67)(cid:72)(cid:69)(cid:83)(cid:0) to employees to help them stay motivated, productive and happy. Employee Engagement: Employee engagement has two planks, namely events and fun learning. The events are conducted at both local and national levels. While most of these events are open to employees, some are meant for families as well. These are some of the popular events: 1. Josh Unlimited: Pan-India sports event conducted in 29 cities, covering a population of more than 60,000 employees 2. Stepathlon: An Employee wellness initiative which witnessed participation of more than 550 employees 3. Hunar: Pan-India in-house talent competition 4. HDFC Bank Voice Hunt Contest: Talent search in association with Shankar Mahadevan Academy HDFC Bank Limited Annual Report 2017-18 30 Directors' Report 5. Corporate Photography Contest: An inter-corporate 2) Digital Innovation event. 6. Xpressions: Pan-India in-house drawing competition for the employees and their children 7. Corporate Online Library: A knowledge resource available to all employees for accessing nearly 1.5 lakh books On the learning side, ‘Kwiz Kat’, is a Banking quiz competition open to all employees. ‘There is also the (cid:44)(cid:69)(cid:65)(cid:82)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:38)(cid:69)(cid:83)(cid:84)(cid:7)(cid:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:70)(cid:79)(cid:67)(cid:85)(cid:83)(cid:69)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:80)(cid:69)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:0) (cid:83)(cid:75)(cid:73)(cid:76)(cid:76)(cid:83)(cid:0) (cid:79)(cid:78)(cid:0) (cid:83)(cid:85)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:83)(cid:0) (cid:83)(cid:85)(cid:67)(cid:72)(cid:0) (cid:65)(cid:83)(cid:0) (cid:40)(cid:65)(cid:80)(cid:80)(cid:89)(cid:0) (cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:12)(cid:0) (cid:45)(cid:65)(cid:71)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0) (cid:45)(cid:65)(cid:82)(cid:82)(cid:73)(cid:65)(cid:71)(cid:69)(cid:83)(cid:12)(cid:0)(cid:40)(cid:69)(cid:65)(cid:76)(cid:84)(cid:72)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:38)(cid:73)(cid:84)(cid:78)(cid:69)(cid:83)(cid:83)(cid:12)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) Team Building. Each of these work on the tenet that “If you manage your team at home, you can manage your team at the ofﬁce.” This is, of course, backed up by formal training. Training and Development: Training plans for businesses are developed based on needs identiﬁed in consultation with the business leaders. An extensive bouquet of training programmes are delivered, covering on-boarding, product and process training, advanced programmes and behavioural training. The on-boarding training ensures that new employees trained comprehensively and equipped with are functional and necessary know-how, as well as 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 online. The role-speciﬁc learning plan ensures effective use of blended learning method. The accent has now shifted to online training supplemented by ofﬂine support. In addition to this, to ensure that employees are assisted (cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:74)(cid:79)(cid:66)(cid:12)(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:72)(cid:69)(cid:76)(cid:80)(cid:13)(cid:76)(cid:73)(cid:78)(cid:69)(cid:0)(cid:64)(cid:33)(cid:83)(cid:75)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:52)(cid:82)(cid:65)(cid:73)(cid:78)(cid:69)(cid:82)(cid:83)(cid:7)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0) responds to any clariﬁcation on a banking query within 24 hours of its initiation. Rewards and Recognition: The Rewards and Recognition programs of the Bank is based on a sound performance management system. Your Bank has a pay-for-performance culture based on meritocracy. There is equal emphasis on recognition as well. Extraordinary commitment towards work is rewarded. So is at times going beyond the call of duty. ICON Awards was launched this year to recognise employees for demonstrating individual, leadership and collaborative excellence in driving customer focus and operational excellence. Innovation is the common thread that runs through the multiple businesses and functions in the Bank. Besides products, it manifests itself at levels of concepts and ideas. A testament to this is the fact that more than 85 per cent of the transactions in the year under review occurred over the Internet and Mobile. The Bank’s engagement with start-ups and ﬁntechs moved to the next level through the ‘Industry Academia Initiative’, which helps in mentoring them. The annual Digital Innovation Summit, continues to generate interest among the start-up community and beneﬁts the Bank through useful solutions. The Bank’s focus on leveraging Artiﬁcial Intelligence (AI) and Machine Learning (ML) has started yielding results. Eva, the virtual assistant on the Bank’s website; (cid:65)(cid:78)(cid:68)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:79)(cid:78)(cid:0) (cid:35)(cid:72)(cid:65)(cid:84)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:66)(cid:65)(cid:78)(cid:75)(cid:7)(cid:83)(cid:0) (cid:38)(cid:65)(cid:67)(cid:69)(cid:66)(cid:79)(cid:79)(cid:75)(cid:0) (cid:45)(cid:69)(cid:83)(cid:83)(cid:69)(cid:78)(cid:71)(cid:69)(cid:82)(cid:0) chat bot, have elicited encouraging response from (cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:83)(cid:14)(cid:0) (cid:38)(cid:79)(cid:82)(cid:0) (cid:73)(cid:78)(cid:83)(cid:84)(cid:65)(cid:78)(cid:67)(cid:69)(cid:12)(cid:0) (cid:37)(cid:86)(cid:65)(cid:0) (cid:72)(cid:65)(cid:78)(cid:68)(cid:76)(cid:69)(cid:68)(cid:0) (cid:79)(cid:86)(cid:69)(cid:82)(cid:0) (cid:19)(cid:16)(cid:0) (cid:76)(cid:65)(cid:75)(cid:72)(cid:0) queries on the website with an accuracy ratio of over (cid:24)(cid:21)(cid:0) (cid:80)(cid:69)(cid:82)(cid:0) (cid:67)(cid:69)(cid:78)(cid:84)(cid:14)(cid:0) (cid:41)(cid:78)(cid:0) (cid:74)(cid:85)(cid:83)(cid:84)(cid:0) (cid:17)(cid:18)(cid:0) (cid:77)(cid:79)(cid:78)(cid:84)(cid:72)(cid:83)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:38)(cid:65)(cid:67)(cid:69)(cid:66)(cid:79)(cid:79)(cid:75)(cid:0) (cid:65)(cid:80)(cid:80)(cid:0) garnered over three lakh users, who used it for making bill payments, movie / travel bookings and mobile recharges. To encourage digital payments, your Bank has launched all-in-one DigiPoS machines that enable UPI, Bharat QR, SMS, and PayZapp transactions on a single machine. Another innovative product the Bank has launched is the SmartHub, an umbrella digital platform for online payments to government departments, educational institutions and small merchants. Your Bank also introduced an Instant credit card, which is issued electronically within an hour and can be used by the customer to make purchases online. Over three lakh Instant credit cards were issued during the year. In the unsecured loan segment, the Bank’s digital acquisition solution, 10 seconds loans, continued to delight customers. To further enhance the customer experience and improve cost management, the Bank is now developing a platform for end-to-end digital acquisition of business. Your Bank has the distinction of being the ﬁrst bank in the country to introduce Digital Loan Against Shares (LAS). In the automobile segment customers continued to buy cars and two-wheelers through online services such as Zip Drive and Quick Money. To sum up, the year under review has seen ample demonstration of ‘Go Digital, Bank Aapki Muththi Mein’ strategy. Innovation is now embedded in the DNA of your Bank with digital innovation emerging as the prime driver across businesses. HDFC Bank Limited Annual Report 2017-18 31 Directors' Report 3) Information Technology In the technology space, your Bank is considered a leader. Both in terms of being able to identify the right technology solutions for the business and deploying them in a timely manner to create customer experience. The 10-second Personal Loan is a case in point. Missed call banking is another. These products were not only industry ﬁrsts but have also gone on to become extremely popular with customers. In the year under review, your Bank has gone further with the implementation of an Open API based Service Oriented Architecture Middleware platform. This enables different systems to talk to each other and thus ensures a seamless ﬂow of information. In the Bank’s context it facilitates over 2.5 crore digital banking transactions from its mobility and online platforms such as PayZapp Wallet, SmartBuy market place, enhanced Mobile Banking App and a dedicated Retail Lending App named LoanAssist. Another important development in the year under review has been the Digital Application (DAP) Platform which brings together process, digital technologies and lifecycle management efﬁciencies to deliver a better customer experience. This has seen a huge shift to digital channels be it applying for loans, credit cards or overdraft facilities. Over 95 per cent of the branch retail origination is now powered by DAP. Linkages for this have been established with search engines and ﬁntechs. This has been further supplemented with an assisted Savings Bank account opening App in the branch which relationship managers use to open digital savings accounts. The volumes have been doubling every month since the launch in the third quarter of the year under review. The other important innovations in the year under review have been: 1) A four click process for ‘Do Your Own Loan Against Shares’ 2) Creating a real time overdraft with Digital Loan (cid:33)(cid:71)(cid:65)(cid:73)(cid:78)(cid:83)(cid:84)(cid:0)(cid:45)(cid:85)(cid:84)(cid:85)(cid:65)(cid:76)(cid:0)(cid:38)(cid:85)(cid:78)(cid:68)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:18)(cid:20)(cid:10)(cid:23)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(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) bank’s website 3) Offering digital consumer loans 4) Tying up with social media platforms, e-commerce portals, and traditional retail stores to facilitate ordering products online. 5) Reducing turnaround time for ﬁrst time borrowers 6) Lowering transaction costs in Trade On Net / Trade (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) (cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0) (cid:65)(cid:78)(cid:0) (cid:33)(cid:48)(cid:41)(cid:0) (cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0) (cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:70)(cid:79)(cid:82)(cid:77)(cid:0) ﬁlling process 7) Using Artiﬁcial Intelligence and Neural Networks based deep learning ability to give stronger teeth to (cid:73)(cid:84)(cid:83)(cid:0)(cid:35)(cid:65)(cid:82)(cid:68)(cid:0)(cid:48)(cid:65)(cid:89)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:38)(cid:82)(cid:65)(cid:85)(cid:68)(cid:0)(cid:36)(cid:69)(cid:84)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89) 8) Implementing a state-of-the-art Core Banking System for both Retail and Wholesale Banking to process 4.5 crore transactions daily in an accurate, speedy and secure manner. 4) Cyber Security Your Bank has an effective framework in place to manage cyber security. This encompasses requisite manpower, machine and training. The Chief Information Security Ofﬁcer (CISO) is the person who is overall responsible for this. There is also a committee of the Board which dedicatedly looks into cyber security issues and preparedness. In the year under review, the Bank has enhanced its cyber security protocol by constituting a RED Team. The RED team is a designated group of individuals that test the security posture of the organisation. The Bank also widened coverage of Security Incident and Event Management (SIEM), which provides a comprehensive and centralised view of the security scenario of IT infrastructure. Deception Technology Solution was deployed to detect, analyse and defend against advanced attacks often in real-time. In the case of your Bank, it also covers emails and endpoints, besides the network. (cid:0) (cid:38)(cid:73)(cid:82)(cid:69)(cid:87)(cid:65)(cid:76)(cid:76)(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:85)(cid:80)(cid:71)(cid:82)(cid:65)(cid:68)(cid:69)(cid:68)(cid:0) (cid:84)(cid:79)(cid:0) (cid:46)(cid:69)(cid:88)(cid:84)(cid:0) (cid:39)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) with deep packet inspection (DPI) ability. DPI analyses ‘packets’ which are nothing but parcels of digital information transmitted across the web in a formatted piece of structured data. Protection against malware, ransomware and denial of service attacks have been strengthened further. Regular tests to assess the vulnerability of the IT infrastructure and applications and remedy where necessary are routine. As are anti-phishing services that help in shutting down phishing sites and protecting the customers from fraud. Risk engine and transaction monitoring systems monitor suspicious transactions on Internet Banking, ATM and e-commerce channels. The Bank has PCI DSS 3.0 and ISO 27001 certiﬁcations. PCI DSS is a proprietary information security standard for organisations that handle credit card information and transactions. It is meant to increase controls around cardholder data to reduce fraud. In layman’s terms the certiﬁcation is an assurance that your Bank’s (cid:67)(cid:65)(cid:82)(cid:68)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:83)(cid:0)(cid:69)(cid:78)(cid:74)(cid:79)(cid:89)(cid:0)(cid:65)(cid:0)(cid:86)(cid:69)(cid:82)(cid:89)(cid:0)(cid:72)(cid:73)(cid:71)(cid:72)(cid:0)(cid:76)(cid:69)(cid:86)(cid:69)(cid:76)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:65)(cid:70)(cid:69)(cid:84)(cid:89)(cid:0)(cid:87)(cid:72)(cid:73)(cid:76)(cid:69)(cid:0) transacting with it. The ISO 27001 certiﬁcation pertains to best practices with respect to information security. HDFC Bank Limited Annual Report 2017-18 32 Directors' Report On building awareness your bank has a regular programme for both employees and customers. 5) Service Quality Initiatives and Grievance Redressal Your Bank has various lines of businesses. In a highly competitive environment, ensuring product quality, and service delivery is vital for business growth. The Bank seeks to achieve this by regularly reviewing service levels and capturing feedback from customers. Moreover, in line with regulatory norms, the Bank has constituted three committees at different levels to monitor customer service - Branch Level Customer Service Committees, Standing Committee on Customer Service and Customer Service Committee of the Board. Against the backdrop of increasing digital frauds, RBI issued a circular during the year on ‘Customer Protection - Limiting Liability of Customers in Unauthorised Electronic Banking Transactions.’ In it, RBI deﬁned customer liability clearly so that customers feel secure while conducting digital transactions. The regulator also mandated banks to formulate a Board Approved Customer Protection Policy. Accordingly, your Bank has fortiﬁed its existing processes. It is also augmenting its training and skill development mechanism to empower employees to boost service quality. As a part of its efforts to enhance service quality, the Bank undertakes mystery shopping across branches and retail asset centres to continuously evaluate regulatory compliance, process adherence and quality of service delivery. The effectiveness is reviewed periodically at different levels including the Customer Service Committee of the Board. Lean and Six Sigma methodologies are used to improve processes. to the aforementioned measures, In addition in compliance with regulatory guidelines, your Bank has appointed a senior retired banker as Internal Ombudsman. Our sustained efforts to improve service delivery have been noted and the Bank has received written appreciation from many Banking Ombudsmen appointed by RBI across locations such as Andhra (cid:48)(cid:82)(cid:65)(cid:68)(cid:69)(cid:83)(cid:72)(cid:12)(cid:0) (cid:39)(cid:85)(cid:74)(cid:65)(cid:82)(cid:65)(cid:84)(cid:12)(cid:0) (cid:43)(cid:69)(cid:82)(cid:65)(cid:76)(cid:65)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:44)(cid:65)(cid:75)(cid:83)(cid:72)(cid:65)(cid:68)(cid:87)(cid:69)(cid:69)(cid:80)(cid:12)(cid:0) (cid:48)(cid:85)(cid:78)(cid:74)(cid:65)(cid:66)(cid:12)(cid:0) (cid:50)(cid:65)(cid:74)(cid:65)(cid:83)(cid:84)(cid:72)(cid:65)(cid:78)(cid:12)(cid:0)(cid:52)(cid:65)(cid:77)(cid:73)(cid:76)(cid:0)(cid:46)(cid:65)(cid:68)(cid:85)(cid:12)(cid:0)(cid:48)(cid:85)(cid:68)(cid:85)(cid:67)(cid:72)(cid:69)(cid:82)(cid:82)(cid:89)(cid:12)(cid:0)(cid:55)(cid:69)(cid:83)(cid:84)(cid:0)(cid:34)(cid:69)(cid:78)(cid:71)(cid:65)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) Sikkim. CHECKS, BALANCES AND REPORTING I. Risk Management and Portfolio Quality The Bank is exposed to risk by the very nature of its business. The key risks are Credit Risk, Market Risk, Liquidity Risk and Operational Risk. These risks not only have a bearing on the Bank’s ﬁnancial strength and operations but also its reputation. Keeping this in mind, your Bank has put in place a Board approved risk strategy and policy whose implementation is supervised by the Board’s Risk Policy and Monitoring Committee (RPMC). The committee periodically reviews risk levels and direction, portfolio composition, status of impaired credits and limits for treasury operations. The hallmark of the Bank’s risk management process function is its independence, with credit decisions being made by a credit underwriting vertical. The gamut of risks faced by the Bank which are dimensioned and managed include (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) (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) Credit Risk This is the risk of loss arising from a default and is, therefore, also known as default risk. Your Bank has distinct policies and processes for managing credit risk in both its retail and wholesale businesses. Wholesale lending is managed on an individual as well as portfolio basis. By contrast, retail lending, given the granularity of individual exposures, is managed largely on a portfolio basis across various products and customer (cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:14)(cid:0) (cid:38)(cid:79)(cid:82)(cid:0) (cid:66)(cid:79)(cid:84)(cid:72)(cid:0) (cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0) (cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) (cid:82)(cid:79)(cid:66)(cid:85)(cid:83)(cid:84)(cid:0) (cid:70)(cid:82)(cid:79)(cid:78)(cid:84)(cid:13)(cid:69)(cid:78)(cid:68)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) back-end systems in place to ensure credit quality and minimise loss from default. The factors considered while sanctioning retail loans include income, demographics, previous credit history of the borrower and the tenor of the loan. In wholesale loans, credit risk is managed by capping exposures on the basis of borrower group / industry / credit rating grades and country. This is backed by portfolio diversiﬁcation, stringent credit approval processes and periodic post-disbursement monitoring / remedial measures. Your Bank has been able to ensure strong asset quality even in an otherwise challenging business environment by stringently adhering to the aforementioned norms and institutionalising processes. HDFC Bank Limited Annual Report 2017-18 33 Directors' Report ratio of Gross As on March 31, 2018, your Bank’s Non-Performing Assets (GNPAs) to gross advances was 1.30 per cent. Net Non-Performing Assets (Gross Non-Performing Assets Less Speciﬁc Loan Loss provisions) was 0.4 per cent of Net Advances. Total restructured assets (including applications under process for restructuring) was 0.24 per cent of gross advances. The Bank has a conservative and prudent policy for speciﬁc provisions on NPAs. It provides more towards NPAs than the minimum regulatory requirements even while adhering to regulatory norms for the provision of Standard Assets. Digital Lending and Credit Risk Driven by rapid advances in technology, digitisation is increasingly becoming a key differentiator of customer retention and service delivery in the banking sector. Digital lending enables customers to secure loans at the click of a button in a matter of minutes, if not seconds. However, there are also attendant risks associated with it and your Bank has put in place appropriate checks and balances to manage these risks. Such loans are sanctioned primarily to the Bank’s pre-existing customers. Often, these clients are customers across multiple products so their credit history and risk proﬁle is already known. This makes it possible to evaluate and decide on their fresh requirements almost instantly. Besides, most of the credit checks and scores used by the Bank in traditional process underwriting are replicated in digital loans. (cid:38)(cid:73)(cid:78)(cid:65)(cid:76)(cid:76)(cid:89)(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:0) (cid:65)(cid:78)(cid:0) (cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0) (cid:77)(cid:79)(cid:68)(cid:69)(cid:76)(cid:0) (cid:86)(cid:65)(cid:76)(cid:73)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:85)(cid:78)(cid:73)(cid:84)(cid:0) that minutely assesses the models used to generate the credit scores for such loans. These models are monitored, reviewed periodically and back-tested; and corrective action is taken whenever needed. Market Risk Market risk arises largely from the Bank’s statutory reserve management and trading activity and is managed through a well-deﬁned Board-approved Investment Policy and Market Risk Policy that caps risk in different trading desks or various securities through trading risk limits / triggers. These include position limits, gap limits, tenor restrictions, sensitivity limits, namely, 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 supplemented by a Board approved stress testing policy and framework that simulates various market risk scenarios to measure losses and initiate remedial measures. Liquidity Risk Liquidity Risk is the risk that a bank may not be able to meet its short term ﬁnancial obligations due to an asset–liability mismatch or interest rate ﬂuctuations. Your Bank’s framework for liquidity and interest rate risk management is spelt out in its Asset Liquidity-Management policy that is implemented, monitored and periodically reviewed by the Asset Liability Committee (ALCO). As a part of this process, the Bank has established various Board approved limits to mitigate both liquidity and interest risks. While the maturity gap and stock ratio limits help manage liquidity risk, the income and market value impacts help mitigate interest rate risk. This is reinforced by a comprehensive Board approved stress testing programme covering both liquidity and interest rate risk. The Liquidity Coverage Ratio (LCR) is a global minimum standard used to measure a bank’s liquidity position. LCR seeks to ensure that the 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 under a 30-day calendar liquidity stress scenario. Based on Basel III norms, RBI has mandated a minimum LCR of 80 per cent on January 1, 2017; that limit progressively increases by 10 percentage points each year to 100 per cent on January 1, 2019. Your Bank’s LCR stood at 104.5 per cent on a consolidated basis for the year ended March 31, 2018. Operational Risk This is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Given below is a detailed explanation under four different (cid:72)(cid:69)(cid:65)(cid:68)(cid:83)(cid:26)(cid:0) (cid:38)(cid:82)(cid:65)(cid:77)(cid:69)(cid:87)(cid:79)(cid:82)(cid:75)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:48)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:12)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:76)(cid:0) (cid:35)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:12)(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:52)(cid:69)(cid:67)(cid:72)(cid:78)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0) (cid:48)(cid:82)(cid:65)(cid:67)(cid:84)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:38)(cid:82)(cid:65)(cid:85)(cid:68)(cid:0) (cid:45)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) Control. 1) Framework and Process To manage operational risks, the Bank has in place a comprehensive and operational risk management framework, whose implementation is supervised by the Operational Risk Management Committee (ORMC) and reviewed by the RPMC of the Board. An independent Operational Risk Management Department (ORMD) implements the framework. Under the framework, the Bank has three lines of defence. The ﬁrst layer of protection is provided by the Business line (including support and operations) management. These managers are primarily responsible for not only managing operational risk on a daily basis, but also for maintaining strict internal controls, designing and implementing internal control-related policies and procedures. The second line of defence is the ORMD, which develops and implements policies, procedures, tools and techniques to assess and monitor the adequacy and effectiveness of the Bank’s internal controls. Internal Audit is the last line of defence. The team reviews the effectiveness of governance, risk management, and internal controls within the Bank. 2) Internal Control Your Bank has implemented sound internal control practices across all processes, units and functions. The Bank has HDFC Bank Limited Annual Report 2017-18 34 Directors' Report well laid down policies and processes for management of its day-to-day activities. The Bank follows established, well-designed controls, which include traditional four eye principles, effective separation of functions, segregation of duties, call back processes, reconciliation, exception reporting and periodic MIS. Specialised risk control units function in risk prone products / functions to minimise operational risk. Controls are tested as part of the SOX control testing framework. 3) Information Technology and Security Practices The Bank operates in a highly automated environment and makes use of the latest technologies to support various operations. This throws up operational risks such as business disruption, risks related to information assets, data security, integrity, reliability and availability amongst others. The Bank has put in a governance framework, information security practices and business continuity plan to mitigate independent technology related risks. An information assurance team within Internal Audit provides assurance on the management of information technology related risks. The Bank has a robust Business Continuity and Disaster Recovery plan that is periodically tested to ensure that it can meet any operational contingencies. There is an independent Information Security Group that addresses information security related risks. A well-documented Board approved information security policy is put in place. In addition, employees mandatorily periodically undergo information security training and sensitisation exercises. 4) Fraud Monitoring and Control The Bank has put in a whistle blower policy, and a central vigilance team oversees implementation of fraud prevention (cid:77)(cid:69)(cid:65)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:14)(cid:0)(cid:38)(cid:82)(cid:65)(cid:85)(cid:68)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:73)(cid:71)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:70)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:79)(cid:79)(cid:84)(cid:0)(cid:67)(cid:65)(cid:85)(cid:83)(cid:69)(cid:0) and relevant corrective steps are taken to prevent recurrence. (cid:38)(cid:82)(cid:65)(cid:85)(cid:68)(cid:0) (cid:80)(cid:82)(cid:69)(cid:86)(cid:69)(cid:78)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:83)(cid:0) (cid:65)(cid:84)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0) (cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) and board level also deliberate on material fraud events and initiate preventive action. Periodic reports are submitted to the Board and senior management committees. Compliance Risk Compliance Risk is deﬁned as the risk of impairment of your Bank’s integrity, leading to damage to its reputation, legal or regulatory sanctions, or ﬁnancial loss, as a result of a failure (or perceived failure) to comply with applicable laws, regulations and standards. The Bank has a Compliance Policy to ensure (cid:72)(cid:73)(cid:71)(cid:72)(cid:69)(cid:83)(cid:84)(cid:0) (cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) (cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69)(cid:14)(cid:0) (cid:33)(cid:0) (cid:68)(cid:69)(cid:68)(cid:73)(cid:67)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) (cid:84)(cid:69)(cid:65)(cid:77)(cid:0) (cid:79)(cid:70)(cid:0) (cid:83)(cid:85)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0) matter experts in the Compliance department work with Business and Operations Teams to ensure active compliance risk management and monitoring. They also provide advisory services on regulatory matters. The focus is on identifying and reducing risk by rigorously testing products and also putting in place robust internal policies. Products that adhere to regulatory norms are tested after rollout, and shortcomings, if any, are fully addressed till the product stabilises on its own. Internal policies are reviewed regularly and updated as and when regulators issue fresh instructions. The Compliance team also seeks regular feedback on regulatory compliance from Product, Business and Operation teams through self-certiﬁcations and monitoring. ICAAP The Bank has a structured management framework in the Internal Capital Adequacy Assessment Process (ICAAP) to identify, assess and manage all risks that may have a material adverse impact on its business / ﬁnancial position / capital adequacy. The ICAAP framework is guided by the Bank’s Board approved ICAAP Policy. Additionally, the Board approved Stress Testing (cid:48)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:38)(cid:82)(cid:65)(cid:77)(cid:69)(cid:87)(cid:79)(cid:82)(cid:75)(cid:0)(cid:69)(cid:78)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:85)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:84)(cid:69)(cid:67)(cid:72)(cid:78)(cid:73)(cid:81)(cid:85)(cid:69)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0) assess potential vulnerability to extreme but plausible stressed business conditions. Changes in the Bank’s risk levels and in the on / off balance sheet positions are assessed under such assumed scenarios using sensitivity factors that generally relate to their impact on proﬁtability and capital adequacy. Group Risk (cid:57)(cid:79)(cid:85)(cid:82)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0) (cid:84)(cid:87)(cid:79)(cid:0) (cid:83)(cid:85)(cid:66)(cid:83)(cid:73)(cid:68)(cid:73)(cid:65)(cid:82)(cid:73)(cid:69)(cid:83)(cid:12)(cid:0) (cid:40)(cid:36)(cid:34)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0) (cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0) (cid:44)(cid:84)(cid:68)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:40)(cid:36)(cid:38)(cid:35)(cid:0) (cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:44)(cid:84)(cid:68)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0) (cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) (cid:69)(cid:65)(cid:67)(cid:72)(cid:0) (cid:83)(cid:85)(cid:66)(cid:83)(cid:73)(cid:68)(cid:73)(cid:65)(cid:82)(cid:89)(cid:0) (cid:73)(cid:83)(cid:0) responsible for managing their respective risks (credit risk, market risk, operational risk, liquidity risk, reputation risk etc.) within the ICAAP framework. Stress testing for the group as a whole is carried out by integrating the stress tests of (cid:84)(cid:72)(cid:69)(cid:0) (cid:83)(cid:85)(cid:66)(cid:83)(cid:73)(cid:68)(cid:73)(cid:65)(cid:82)(cid:73)(cid:69)(cid:83)(cid:14)(cid:0) (cid:51)(cid:73)(cid:77)(cid:73)(cid:76)(cid:65)(cid:82)(cid:76)(cid:89)(cid:12)(cid:0) (cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0) (cid:65)(cid:68)(cid:69)(cid:81)(cid:85)(cid:65)(cid:67)(cid:89)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) formulated for the group after incorporating the business / capital plans of the subsidiaries. II. Implementation of (IND-AS) Indian Accounting Standards The Ministry of Corporate Affairs, in its press release dated January 18, 2016, had 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 required 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 (cid:79)(cid:70)(cid:0) (cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0) (cid:8)(cid:50)(cid:34)(cid:41)(cid:9)(cid:12)(cid:0) (cid:86)(cid:73)(cid:68)(cid:69)(cid:0) (cid:73)(cid:84)(cid:83)(cid:0) (cid:67)(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:38)(cid:69)(cid:66)(cid:82)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0) (cid:17)(cid:17)(cid:12)(cid:0) (cid:18)(cid:16)(cid:17)(cid:22)(cid:0) required all scheduled commercial banks to comply with the Indian Accounting Standards (IND-AS) for ﬁnancial statements for the periods stated above. The RBI did 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 formed a steering committee comprising members from cross-functional areas for the purpose of implementation oversight. Under the guidance of the steering HDFC Bank Limited Annual Report 2017-18 35 Directors' Report committee, the Bank formed working groups, including external consultants, dedicated to speciﬁc functional areas. The objective of these working groups was 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. IND-AS, including the disclosure The Bank has undertaken a diagnostic analysis of the differences between the current accounting framework and requirements. Your Bank has reviewed the accounting policy options provided under IND-AS including the preparation of draft accounting policies under IND-AS subject to any RBI guidelines in this regard. 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 has also undertaken 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: 1) 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. 2) 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. 3) 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. 4) 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 recognize 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. 5) Accounting impact on the application of IND-AS at the transition date shall be recognised in Equity (Reserves and Surplus). The implementation of IND-AS by banks requires certain legislative changes in the format of ﬁnancial statements to comply with disclosures required by IND-AS. The change in format requires an amendment to the third schedule of the Banking Regulation Act, 1949 to make it compatible with the presentation of ﬁnancial statements under IND-AS. The RBI would issue necessary instructions / guidelines and clariﬁcations to facilitate the implementation the the new accounting standards. Considering of amendments needed to the Banking Regulation Act, 1949, as well as the level of preparedness of several banks, the RBI vide its Statement on Developmental and Regulatory HDFC Bank Limited Annual Report 2017-18 36 Directors' Report Policies dated April 5, 2018 deferred the implementation of IND-AS by one year by when the necessary legislative amendments are expected. Scheduled commercial banks in India will now be required to prepare IND-AS based ﬁnancial statements for the accounting periods beginning from April 1, 2019 onwards with comparatives for the periods beginning April 1, 2018. III. Internal Controls, Audit and Compliance The Bank has put in place extensive internal controls and processes to mitigate operational risks, including centralised operations and ‘segregation of duty’ between the front ofﬁce, mid-ofﬁce and back ofﬁce. The front-ofﬁce units usually act as customer touch-points and sales and service outlets. The entire processing, accounting and settlement of transactions is carried out by the back-ofﬁce in the bank’s Core banking system. The policy framework, deﬁnition and monitoring of limits is carried out by various mid-ofﬁce and risk management functions. The credit sanctioning and debt management units are also segregated and do not have any sales and operations responsibilities. The Bank has set up various executive-level committees, having participation from various business and control functions, that are designed to review and oversee matters pertaining to capital, assets and liabilities, business practices and customer service, operational risk, information security, internal risk-based business continuity planning and supervision amongst others. The control functions set standards and lay down policies and procedures by which the business functions manage risks including compliance with applicable laws, compliance with regulatory guidelines, adherence to operational controls and relevant standards of conduct. implemented At the ground-level, the Bank has a mix of preventive and through systems and detective controls processes ensuring a robust framework in the Bank to enable correct and complete accounting, identiﬁcation of outliers (if any) by the Management on a timely basis for corrective action and mitigate operational risks. The Bank has various Preventive controls viz, (a) Limited and need-based access to systems by users, (b) Dual custody over cash and near-cash items (c) Segregation of duty in processing of transactions vis-a-vis creation of user IDs (d) Segregation of duty in processing of transactions vis-a-vis monitoring and review of transactions / reconciliation (cid:8)(cid:69)(cid:9)(cid:0)(cid:38)(cid:79)(cid:85)(cid:82)(cid:0)(cid:69)(cid:89)(cid:69)(cid:13)(cid:80)(cid:82)(cid:73)(cid:78)(cid:67)(cid:73)(cid:80)(cid:76)(cid:69)(cid:0)(cid:8)(cid:77)(cid:65)(cid:75)(cid:69)(cid:82)(cid:13)(cid:67)(cid:72)(cid:69)(cid:67)(cid:75)(cid:69)(cid:82)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:9)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0) of transactions (f) Stringent password policy (g) Booking of transactions in Core Banking system mandates the earmarking of line / limit (fund as well as non-fund based) assigned to the customer (h) STP processes between Core Banking system and payment interface systems for HDFC Bank Limited Annual Report 2017-18 37 transmission of messages (h) Additional authorisation leg in payment interface systems in applicable cases (i) Audit (cid:76)(cid:79)(cid:71)(cid:83)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:76)(cid:89)(cid:0)(cid:69)(cid:88)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:69)(cid:68)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:8)(cid:74)(cid:9)(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:71)(cid:82)(cid:73)(cid:68)(cid:14)(cid:0)(cid:0) The Bank also has detective controls in place viz, (a) Periodic review of user IDs (b) Post transaction monitoring at the back-end by way of call back process (through daily log reports) by an independent person i.e.to ascertain that entries in the core-banking system / messages in payment interface systems are based on valid / authorised transactions and customer requests. (c) Daily tally of cash and near-cash items at End of day. (d) Reconciliation of Nostro accounts (by an independent team) to ascertain and match-off the Nostro credits and debits (External or Internal) regularly to avoid / identify any unreconciled / unmatched entries passing through the system (e) Reconciliation of all Suspense accounts and establishment of responsibility in case of outstandings (f) Independent and surprise checks periodically by Supervisors. Your Bank has an Internal Audit department which is responsible for independently evaluating the adequacy and effectiveness of all internal controls, risk management, governance systems and processes and is manned by appropriately qualiﬁed personnel. This department adopts a risk based audit approach and carries out audits across various businesses that is Retail, Wholesale and Treasury (for India and Overseas books), audit of Operations units, Management Audits, Information Security Audit, Revenue Audit and Concurrent Audit in order to independently evaluate the adequacy and effectiveness of internal controls on an ongoing basis and pro-actively recommending enhancements thereof. The Internal Audit department during the course of audit also ascertains the extent of adherence to regulatory guidelines, legal requirements and operational processes and provides timely feedback to the Management for corrective action. A strong oversight on the operations is also kept through off-site monitoring. The Internal Audit department also independently reviews the Bank’s implementation of Internal Rating Based (IRB) approach for calculation of capital charge for Credit Risk, the appropriateness of Bank’s Internal Capital Adequacy Assessment Process (ICAAP), as well as evaluates the quality and comprehensiveness of the Bank’s disaster recovery and business continuity plans and 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. Any new product / process introduced in the Bank is reviewed by Compliance function in order to ensure adherence to regulatory guidelines and also by Internal Audit from the perspective of existence of internal controls. The Audit function Directors' Report also pro-actively recommends improvements in operational processes and service quality wherever deemed ﬁt. Bank’s muster in terms of the EHS risk it entails, potential impact and mitigation measures in place or proposed. To ensure independence, the Internal Audit function has a reporting line to the Chairman of the Audit Committee of the Board and a dotted line reporting to the Managing Director. The Compliance function independently tracks, reviews and ensures compliance to regulatory guidelines and promotes a compliance culture in the Bank. The Bank has a comprehensive Know Your Customer, (cid:33)(cid:78)(cid:84)(cid:73)(cid:0) (cid:45)(cid:79)(cid:78)(cid:69)(cid:89)(cid:0) (cid:44)(cid:65)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:8)(cid:33)(cid:45)(cid:44)(cid:9)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:35)(cid:79)(cid:77)(cid:66)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0) (cid:79)(cid:70)(cid:0) (cid:52)(cid:69)(cid:82)(cid:82)(cid:79)(cid:82)(cid:73)(cid:83)(cid:77)(cid:0) (cid:8)(cid:35)(cid:38)(cid:52)(cid:9)(cid:0) (cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0) (cid:8)(cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0) (cid:79)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(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:0) (cid:15)(cid:0) provisions of the Prevention of Money Laundering Act, 2002) incorporating the key elements of Customer Acceptance policy, Risk Management, Customer Identiﬁcation Procedures and Monitoring of Transactions. The policy, duly (cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:83)(cid:85)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:76)(cid:89)(cid:14)(cid:0) The Bank has taken signiﬁcant measures in developing and (cid:69)(cid:78)(cid:72)(cid:65)(cid:78)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:85)(cid:83)(cid:84)(cid:65)(cid:73)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:43)(cid:57)(cid:35)(cid:0)(cid:33)(cid:45)(cid:44)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:38)(cid:52)(cid:0) Compliance Programme. The adherence to the guidelines prescribed in the policy is monitored by the Bank at various stages of the customer life-cycle. Bank has robust controls in place to ensure adherence to the KYC guidelines at the time of account opening. The Bank also has a continuous review process in the form of transaction monitoring (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0) (cid:65)(cid:0) (cid:68)(cid:69)(cid:68)(cid:73)(cid:67)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) (cid:33)(cid:45)(cid:44)(cid:0) (cid:35)(cid:38)(cid:52)(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:84)(cid:69)(cid:65)(cid:77)(cid:12)(cid:0) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0) carries out extensive transaction reviews for identiﬁcation of suspicious patterns / trends which acts as an early warning signal for the Bank to carry out enhanced due diligence and appropriate action thereafter. The status of adherence to (cid:84)(cid:72)(cid:69)(cid:0)(cid:43)(cid:57)(cid:35)(cid:12)(cid:0)(cid:33)(cid:45)(cid:44)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:38)(cid:52)(cid:0)(cid:71)(cid:85)(cid:73)(cid:68)(cid:69)(cid:76)(cid:73)(cid:78)(cid:69)(cid:83)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:76)(cid:83)(cid:79)(cid:0)(cid:80)(cid:76)(cid:65)(cid:67)(cid:69)(cid:68)(cid:0)(cid:66)(cid:69)(cid:70)(cid:79)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) Audit Committee of the Board for their review at quarterly intervals. The AML team undergoes regular training both in-house and external on a continuous basis in order to equip the team with the necessary know-how and expertise to carry out the function. The Audit Committee of the Board reviews the effectiveness of controls, compliance to regulatory guidelines as also the performance of the Audit and Compliance functions in the Bank and provides direction wherever deemed ﬁt. Your Bank has always adhered to the highest standards of compliance and has put in place appropriate controls and risk measurement and risk management tools in order to ensure a robust compliance and governance structure. IV. Responsible Financing (cid:0) (cid:57)(cid:79)(cid:85)(cid:82)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:73)(cid:83)(cid:0) (cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:68)(cid:0) (cid:84)(cid:79)(cid:0) (cid:50)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:82)(cid:69)(cid:70)(cid:82)(cid:65)(cid:73)(cid:78)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:70)(cid:85)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:68)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:0)(cid:73)(cid:77)(cid:80)(cid:65)(cid:67)(cid:84)(cid:0) on Environment, Health and Safety (EHS). EHS is an integral part of the bank’s overall credit risk assessment and (cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:14)(cid:0) (cid:37)(cid:86)(cid:69)(cid:82)(cid:89)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0) (cid:70)(cid:85)(cid:78)(cid:68)(cid:69)(cid:68)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0) (cid:84)(cid:79)(cid:0) (cid:80)(cid:65)(cid:83)(cid:83)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) The key aspects of the assessment process are: (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:38)(cid:79)(cid:82)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:76)(cid:79)(cid:65)(cid:78)(cid:83)(cid:0)(cid:69)(cid:88)(cid:67)(cid:69)(cid:69)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)` 10 crore in amount and ﬁve years in tenure, borrowers have to submit a declaration of compliance with EHS norms. (cid:41)(cid:78)(cid:0) (cid:83)(cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:0) (cid:76)(cid:65)(cid:82)(cid:71)(cid:69)(cid:13)(cid:84)(cid:73)(cid:67)(cid:75)(cid:69)(cid:84)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:83)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:83)(cid:0) (cid:65)(cid:0) Lender’s Independent Engineer (LIE) who conducts due diligence across several parameters including EHS. The ﬁndings of the LIE’s assessment report are then discussed with the client to ensure compliance. (cid:52)(cid:72)(cid:69)(cid:0) (cid:44)(cid:41)(cid:37)(cid:0) (cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:76)(cid:89)(cid:0) (cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0) (cid:83)(cid:85)(cid:67)(cid:72)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(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) construction period through site visits and reports progress which includes status of approvals and relief and rehabilitation measures undertaken. Your Bank ofﬁcials also conduct independent site inspections from (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: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)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:80)(cid:82)(cid:79)(cid:71)(cid:82)(cid:69)(cid:83)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:79)(cid:0) the Bank’s satisfaction. (cid:115)(cid:0) (cid:33)(cid:70)(cid:84)(cid:69)(cid:82)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0) (cid:66)(cid:69)(cid:67)(cid:79)(cid:77)(cid:69)(cid:83)(cid:0) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:66)(cid:79)(cid:82)(cid:82)(cid:79)(cid:87)(cid:69)(cid:82)(cid:0) has to submit an annual declaration of compliance with various national laws including those related to EHS. This is also followed up by onsite visits of bank executives. The Bank deals with the client primarily through its Relationship Manager (RM). The RM has to report compliance with EHS norms in the Credit Assessment Memorandum (CAM) both at the time of initial sanction and during the monitoring process. Such certiﬁcation is based on information / disclosures provided by the borrower at the time of initial appraisal and during periodic review of the facilities. The RM records outstanding EHS issues if any and follows them up with the client for prompt resolution. The Bank levies penal interest in case of deviations and, thus, ensures compliance with the agreed EHS norms. If there are signiﬁcant deviations that could (cid:65)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:86)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:82)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:83)(cid:0) the right to either reduce its exposure or recall the loan. Most signiﬁcantly, your Bank, as part of its credit (cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:12)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:83)(cid:0)(cid:80)(cid:69)(cid:82)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:67)(cid:65)(cid:82)(cid:82)(cid:89)(cid:73)(cid:78)(cid:71)(cid:0)(cid:72)(cid:73)(cid:71)(cid:72)(cid:0) or unusual EHS risk to be approved by an authority no less than the Head - Wholesale Credit Risk or Chief Risk Ofﬁcer or the Deputy Managing Director or the Managing Director as the case may be. V. Integrated Reporting (IR) Your Bank has been releasing Sustainability Reports in (cid:76)(cid:73)(cid:78)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:39)(cid:76)(cid:79)(cid:66)(cid:65)(cid:76)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:41)(cid:78)(cid:73)(cid:84)(cid:73)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:8)(cid:39)(cid:50)(cid:41)(cid:9)(cid:0)(cid:70)(cid:82)(cid:65)(cid:77)(cid:69)(cid:87)(cid:79)(cid:82)(cid:75)(cid:14)(cid:0)(cid:38)(cid:82)(cid:79)(cid:77)(cid:0) the current year, your Bank has started work on Integrated Reporting (IR). HDFC Bank Limited Annual Report 2017-18 38 Directors' Report IR aims at providing investors a compact communication about how strategy, governance, performance and prospect create value over time. IR today is a growing trend globally providing investors and interested stakeholders relevant information that an investor will ﬁnd useful in making his investment decision. As a leading responsible Indian corporation, it was only appropriate that we took the lead in this regard. Towards this end, the Bank has identiﬁed its value created for its stakeholders. Aspects identiﬁed as relevant for the Bank, under the capital heads are discussed below. Financial Capital: This capital refers to the pool of funds used by the Bank for providing its services. This also covers funds received through ﬁnancing or generated through (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:14)(cid:0) (cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0) (cid:35)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0) (cid:67)(cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:0) (cid:50)(cid:69)(cid:86)(cid:69)(cid:78)(cid:85)(cid:69)(cid:12)(cid:0) (cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0) (cid:33)(cid:70)(cid:84)(cid:69)(cid:82)(cid:0) Tax, Earnings Per Share, Lending Portfolio and CSR Spend amongst others. Manufactured Capital: This capital is an aggregation of all physical assets used by the Bank for delivering its products and services or are created by it. This includes Branch Network, IT Infrastructure, IT Security, Infrastructure Infrastructure through Portfolio Development (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:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0)(cid:35)(cid:51)(cid:50)(cid:0)(cid:48)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:83)(cid:14) and Intellectual Capital: This capital covers the knowledge- based intangibles of the Bank, which help it gain competitive advantage. This capital also includes the initiatives of the Bank for improving ﬁnancial inclusion. This capital can be substantiated by products for every section of the society, service orientation, risk management, innovation and digitisation approach, skilling communities through CSR, ﬁnancial inclusion initiatives, etc. Human Capital: This capital refers to the motivation, commitment and competency of the Bank’s employees. This reﬂects in employee retention rates, employee diversity, training, appraisals and career guidance, compensation and beneﬁts, grievance redressal, community skilling through (cid:35)(cid:51)(cid:50)(cid:0) (cid:48)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:83)(cid:14)(cid:0) (cid:33)(cid:76)(cid:83)(cid:79)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:12)(cid:0) (cid:84)(cid:72)(cid:73)(cid:83)(cid:0) (cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0) (cid:67)(cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) empowerment of communities. Social and Relationship Capital: This capital covers the approach adopted by the Bank for developing and maintaining its relationship with multiple institutions and stakeholders. The Bank’s performance on this capital can be understood through the processes of stakeholder engagement, employee satisfaction, customer satisfaction, compliance, CSR engagements, etc. Natural Capital: This capital refers to the environmental resources used by the Bank for delivering its products and services. The impact of this capital can be understood through energy consumption (fuel / electricity), energy efﬁciency / conservation, CO2 emissions, paper consumption, waste (cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:12)(cid:0)(cid:69)(cid:78)(cid:86)(cid:73)(cid:82)(cid:79)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:65)(cid:76)(cid:0)(cid:73)(cid:77)(cid:80)(cid:65)(cid:67)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(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:14) The elaborate discussion on the process and outcomes of Integrated Reporting will be discussed in the upcoming Sustainability Report. In the coming years, the Bank will endeavour to augment its integrated approach towards delivering value to stakeholders. Subsidiary Companies (cid:57)(cid:79)(cid:85)(cid:82)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:84)(cid:87)(cid:79)(cid:0)(cid:83)(cid:85)(cid:66)(cid:83)(cid:73)(cid:68)(cid:73)(cid:65)(cid:82)(cid:73)(cid:69)(cid:83)(cid:12)(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) (cid:8)(cid:40)(cid:36)(cid:34)(cid:38)(cid:51)(cid:44)(cid:9)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:40)(cid:36)(cid:38)(cid:35)(cid:0) (cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0) (cid:8)(cid:40)(cid:51)(cid:44)(cid:9)(cid:14)(cid:0) (cid:40)(cid:36)(cid:34)(cid:38)(cid:51)(cid:44)(cid:0) (cid:73)(cid:83)(cid:0) (cid:65)(cid:0) (cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:0) (cid:46)(cid:34)(cid:38)(cid:35)(cid:0) (cid:84)(cid:72)(cid:65)(cid:84)(cid:0) (cid:67)(cid:65)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0) (cid:80)(cid:82)(cid:73)(cid:77)(cid:65)(cid:82)(cid:73)(cid:76)(cid:89)(cid:0) (cid:84)(cid:79)(cid:0) (cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:78)(cid:79)(cid:84)(cid:0) (cid:67)(cid:79)(cid:86)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0) (cid:66)(cid:89)(cid:0) the Bank while HSL is among India’s largest retail broking ﬁrms. The detailed ﬁnancial performance of the companies is given below. 1) HDB Financial Services Limited - Reimagining Opportunities (cid:0) (cid:40)(cid:36)(cid:34)(cid:38)(cid:51)(cid:44)(cid:7)(cid:83)(cid:0) (cid:46)(cid:69)(cid:84)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0) (cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0) (cid:71)(cid:82)(cid:69)(cid:87)(cid:0) (cid:66)(cid:89)(cid:0) (cid:19)(cid:22)(cid:14)(cid:25)(cid:0) (cid:80)(cid:69)(cid:82)(cid:0) (cid:67)(cid:69)(cid:78)(cid:84)(cid:0) (cid:84)(cid:79)(cid:0) ` 2,788.9 crore for the year ended March 31, 2018 from ` 2,037.2 crore in the previous year. Net Proﬁt rose 39.1 per cent to ` 951.7 crore from ` 684.2 crore. Net NPA levels stood at about one per cent. The company caters to the growing needs of an aspirational India, serving both retail and commercial clients through a network of 1,165 branches across 831 cities / towns. Using a convergence of physical and digital channels enabled by a digital backbone, it offers ﬁnancial solutions to individuals, micro enterprises and emerging businesses across manufacturing, trading and services sectors. With a robust risk management framework backed by (cid:84)(cid:69)(cid:67)(cid:72)(cid:78)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89)(cid:12)(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:65)(cid:78)(cid:68)(cid:0)(cid:72)(cid:85)(cid:77)(cid:65)(cid:78)(cid:0)(cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:12)(cid:0)(cid:40)(cid:36)(cid:34)(cid:38)(cid:51)(cid:44)(cid:0)(cid:66)(cid:82)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0) in simplicity and efﬁciency in delivering ﬁnancial solutions to its customers. The underwriting process at HDB is customised to the needs of the customer segment, ranging from instant workﬂow- based loan approvals for consumer loans to personalised credit appraisal for large business loans. Additionally, the company provides Business Process (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:8)(cid:34)(cid:48)(cid:47)(cid:9)(cid:0) (cid:83)(cid:79)(cid:76)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:84)(cid:79)(cid:0) (cid:40)(cid:36)(cid:38)(cid:35)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:14)(cid:0) (cid:41)(cid:84)(cid:83)(cid:0) (cid:34)(cid:48)(cid:47)(cid:0) services division delivers back ofﬁce services such as forms processing, documents veriﬁcation, ﬁnance and accounting services and correspondence management. HDB also delivers front ofﬁce services such as contact centre management, outbound marketing and collection services. (cid:0) (cid:40)(cid:36)(cid:34)(cid:38)(cid:51)(cid:44)(cid:7)(cid:83)(cid:0) (cid:76)(cid:79)(cid:78)(cid:71)(cid:13)(cid:84)(cid:69)(cid:82)(cid:77)(cid:0) (cid:68)(cid:69)(cid:66)(cid:84)(cid:0) (cid:73)(cid:83)(cid:0) (cid:82)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) (cid:33)(cid:33)(cid:33)(cid:0) (cid:66)(cid:89)(cid:0) (cid:35)(cid:33)(cid:50)(cid:37)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:73)(cid:84)(cid:83)(cid:0) short-term debt is rated A1+ by CRISIL, indicating the highest degree of safety regarding timely servicing of ﬁnancial obligations. As on March 31, 2018, your Bank held 95.9 per cent stake in the company. 2) HDFC Securities Limited HSL’s Total Income rose by 42.5 per cent to ` 788.3 crore from ` 553.2 crore in the previous year. Net Proﬁt grew by 59.5 per cent to ` 344.4 crore from ` 215.9 crore. HDFC Bank Limited Annual Report 2017-18 39 Directors' Report The surge in capital markets (led by higher foreign institutional investor inﬂows and improved corporate performance) and focus on quality acquisition and activation boosted HSL’s performance. The company has a customer base of 19.35 lakh to whom it offers a large bouquet of ﬁnancial services. In the year under review, HSL had 6.87 lakh transacting customers, the second highest number of active (transacting) customers among all broking houses. In line with the thrust on digital channels within the bank, the percentage of customers accessing HSL’s services digitally increased to 70 per cent from 63 per cent in the previous year. In particular the percentage accessing it through the (cid:77)(cid:79)(cid:66)(cid:73)(cid:76)(cid:69)(cid:0)(cid:65)(cid:80)(cid:80)(cid:0)(cid:74)(cid:85)(cid:77)(cid:80)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:19)(cid:19)(cid:0)(cid:80)(cid:69)(cid:82)(cid:0)(cid:67)(cid:69)(cid:78)(cid:84)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:18)(cid:16)(cid:0)(cid:80)(cid:69)(cid:82)(cid:0)(cid:67)(cid:69)(cid:78)(cid:84)(cid:14)(cid:0) In a conscious effort to rationalise the distribution network with greater emphasis on digital offerings, HSL consolidated its existing branches to end with 259 branches at the end of the year. (cid:41)(cid:84)(cid:0)(cid:65)(cid:76)(cid:83)(cid:79)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0)(cid:77)(cid:65)(cid:78)(cid:89)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:14)(cid:0)(cid:41)(cid:84)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:65)(cid:68)(cid:74)(cid:85)(cid:68)(cid:71)(cid:69)(cid:68)(cid:0)(cid:34)(cid:69)(cid:83)(cid:84)(cid:0)(cid:34)(cid:82)(cid:79)(cid:75)(cid:69)(cid:82)(cid:0) in the Assocham Capital Market Intermediaries Excellence Awards 2017 and was also a winner in the Best Retail Broker category, at the Outlook Money Awards 2017. (cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:78)(cid:79)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:48)(cid:38)(cid:50)(cid:36)(cid:33)(cid:0)(cid:33)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:46)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0) Pension Scheme (NPS) namely, Best Point of Presence (POP) All Citizen, Best POP NPS Corporate and Best POP NPS Private Sector. HSL has been consistently improving its IT infrastructure and platforms. This has resulted it in being, recognised in the Enterprise Mobility and Enterprise (cid:33)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0) (cid:65)(cid:84)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:38)(cid:51)(cid:41)(cid:0) (cid:36)(cid:73)(cid:71)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0) (cid:41)(cid:78)(cid:78)(cid:79)(cid:86)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) Awards, Express Computers 2017. As on March 31, 2018, your Bank held 97.7 per cent stake in HSL. During the year, pursuant to approval received from the Reserve Bank of India, the Bank made an offer to acquire (cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(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: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:0)(cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0) respective shareholders (“Offer”), at a price per share of ` 261/- and ` 4,818/- respectively, determined on the basis of the valuation report submitted by two independent valuers engaged for this purpose. Pursuant to the Offer, the Bank acquired 29,749 equity shares of HSL from the eligible shareholders who had tendered equity shares in the Offer. (cid:46)(cid:79)(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:87)(cid:69)(cid:82)(cid:69)(cid:0) (cid:79)(cid:70)(cid:70)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:67)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0) (cid:73)(cid:78)(cid:0) (cid:40)(cid:36)(cid:34)(cid:38)(cid:51)(cid:44)(cid:0) pursuant to the Offer. (cid:52)(cid:72)(cid:69)(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:83)(cid:0) (cid:79)(cid:70)(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:0) (cid:65)(cid:82)(cid:69)(cid:0) (cid:65)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) (cid:79)(cid:78)(cid:0) the website of the Bank (www.hdfcbank.com). Shareholders who wish to have a copy of the annual accounts and detailed (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:77)(cid:65)(cid:89)(cid:0) (cid:87)(cid:82)(cid:73)(cid:84)(cid:69)(cid:0) (cid:84)(cid:79)(cid:0) (cid:40)(cid:36)(cid:38)(cid:35)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0) (cid:68)(cid:79)(cid:67)(cid:85)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) will also be available for inspection by shareholders at the registered ofﬁces of the Bank and its two subsidiaries. Other Statutory Disclosures Number of Meetings of the Board 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: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: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)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:74)(cid:85)(cid:68)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0) 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, 2018 and of the proﬁt of the Bank for the year ended on that date (cid:115)(cid:0)(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 preventing and detecting fraud and other irregularities (cid:115)(cid:0)(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: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 ensure that such internal ﬁnancial controls were adequate and operating effectively (cid:115)(cid:0)(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, have been the Statutory Auditors of the Bank since the year ended March 31, 2015. As per regulations of the Reserve Bank of India (RBI), the same auditors cannot be re-appointed for a period beyond four years. It is proposed to appoint (cid:45)(cid:15)(cid:83)(cid:14)(cid:0) (cid:51)(cid:14)(cid:0) (cid:50)(cid:14)(cid:0) (cid:34)(cid:65)(cid:84)(cid:76)(cid:73)(cid:66)(cid:79)(cid:73)(cid:0) (cid:6)(cid:0) (cid:35)(cid:79)(cid:12)(cid:0) (cid:44)(cid:44)(cid:48)(cid:12)(cid:0) (cid:35)(cid:72)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0) (cid:33)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:65)(cid:78)(cid:84)(cid:83)(cid:0) (cid:8)(cid:38)(cid:73)(cid:82)(cid:77)(cid:0) Registration No. 301003E/E300005) as the new Statutory Auditors (cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:14)(cid:0)(cid:38)(cid:69)(cid:69)(cid:0)(cid:80)(cid:65)(cid:89)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:85)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:73)(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:0) (cid:17)(cid:14)(cid:25)(cid:0) (cid:67)(cid:82)(cid:79)(cid:82)(cid:69)(cid:0) (cid:80)(cid:76)(cid:85)(cid:83)(cid:0) (cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(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:79)(cid:85)(cid:84)(cid:76)(cid:65)(cid:89)(cid:83)(cid:12)(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) approval of the members and the RBI. Members are requested to consider the appointment of M/s. S. R. Batliboi & Co, LLP as the Statutory Auditors of the Bank for ﬁnancial year 2018-19. (cid:0) (cid:0) HDFC Bank Limited Annual Report 2017-18 40 Directors' Report Your Directors place on record their sincere appreciation of the professional services rendered by M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Bank. During the year under review, fees paid to the auditors viz. M/s. Deloitte Haskins & Sells were as follows: (cid:38)(cid:69)(cid:69)(cid:83)(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:84)(cid:65)(cid:88)(cid:69)(cid:83)(cid:9)(cid:0) Statutory audit Certiﬁcation & other attest services Non-audit services Outlays and Taxes Total (` in crore) 1.90 0.41 - 0.32 2.63 Disclosure under Foreign Exchange Management Act, 1999 (cid:52)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:73)(cid:83)(cid:0) (cid:73)(cid:78)(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) (cid:84)(cid:72)(cid:69)(cid:0) (cid:38)(cid:79)(cid:82)(cid:69)(cid:73)(cid:71)(cid:78)(cid:0) (cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0) (cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:33)(cid:67)(cid:84)(cid:12)(cid:0)(cid:17)(cid:25)(cid:25)(cid:25)(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:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:8)(cid:104)(cid:38)(cid:37)(cid:45)(cid:33)(cid:0) provisions”) with respect to downstream investments made in its (cid:83)(cid:85)(cid:66)(cid:83)(cid:73)(cid:68)(cid:73)(cid:65)(cid:82)(cid:73)(cid:69)(cid:83)(cid:14)(cid:0)(cid:38)(cid:85)(cid:82)(cid:84)(cid:72)(cid:69)(cid:82)(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:0)(cid:79)(cid:66)(cid:84)(cid:65)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:65)(cid:0)(cid:67)(cid:69)(cid:82)(cid:84)(cid:73)(cid:108)(cid:67)(cid:65)(cid:84)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0) statutory auditors certifying that the Bank is in compliance with (cid:84)(cid:72)(cid:69)(cid:0) (cid:38)(cid:37)(cid:45)(cid:33)(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:87)(cid:73)(cid:84)(cid:72)(cid:0) (cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:0) (cid:84)(cid:79)(cid:0) (cid:68)(cid:79)(cid:87)(cid:78)(cid:83)(cid:84)(cid:82)(cid:69)(cid:65)(cid:77)(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) made in its subsidiary in the year under review. Related Party Transactions Particulars of transactions with related parties referred to in (cid:51)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:17)(cid:24)(cid:24)(cid:0) (cid:8)(cid:17)(cid:9)(cid:12)(cid:0) (cid:65)(cid:83)(cid:0) (cid:80)(cid:82)(cid:69)(cid:83)(cid:67)(cid:82)(cid:73)(cid:66)(cid:69)(cid:68)(cid:0) (cid:73)(cid:78)(cid:0) (cid:38)(cid:79)(cid:82)(cid:77)(cid:0) (cid:33)(cid:47)(cid:35)(cid:13)(cid:18)(cid:0) (cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0) (cid:50)(cid:85)(cid:76)(cid:69)(cid:0) (cid:24)(cid:0) (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 or any investment made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 (cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(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:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:80)(cid:69)(cid:82)(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)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0) Banking Regulation Act, 1949. Whistle Blower Policy / Vigil Mechanism The Bank encourages an open and transparent system of working and dealing amongst its stake holders. While the Bank’s “Code of Conduct & Ethics Policy” directs employees to uphold company values and conduct business with integrity and highest ethical standards, the Bank has also adopted a “Whistle Blower Policy” which encourages its employees and various stake holders to bring to the notice of the Bank any issue involving compromise / violation of ethical norms, legal or regulatory provisions, actual or suspected fraud etc., without any fear of reprisal, discrimination, harassment or victimization of any kind. All such concerns / complaints are received by the Chief of Internal Vigilance of the Bank and / or by the Whistle Blower Committee through a dedicated email ID or by way of letters etc. All such complaints are enquired into by the appropriate authority within the Bank while ensuring conﬁdentiality of the identity of such complainants. On the basis of their investigation, if the allegations are proved be correct, then the Competent Authority shall recommend to the appropriate Disciplinary Authority to take suitable action against the responsible ofﬁcial. The decision of the Whistle Blower Committee is ﬁnal and binding on all. Preventive measures or any other action considered necessary is also taken by the Competent Authority. Details of Whistle Blower complaints received and subsequent action taken and the functioning of the Whistle Blower mechanism are reviewed periodically by the Audit Committee of the Board. During the ﬁnancial year 2017-18, a total of 46 such complaints were received and taken up for investigation. Declaration by Independent Directors Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh, Mr. Malay Patel and Mr. Umesh Chandra Sarangi are Independent Directors on the Board of the Bank as on March 31, 2018. 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. Financial Statements of Subsidiaries and Associates Board Performance Evaluation 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. During the year, International Asset Reconstruction Company Private Limited (“IARC”) ceased to be an associate of the Bank since the percentage of paid-up equity capital held by the Bank in IARC has been diluted to less than 20 per cent due to further issue of equity shares made by IARC during the ﬁnancial year, in which the Bank did not participate. As of March 31, 2018, the Bank held 19.22 per cent of the share capital of IARC. 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 (including the Chairperson), which is reviewed annually by the NRC. A questionnaire for the evaluation of the Board, its Committees and the individual members of the Board (including the Chairperson), 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 HDFC Bank Limited Annual Report 2017-18 41 Directors' Report 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 RBI guidelines. 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 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 same is available at the weblink https://www.hdfcbank.com/aboutus/cg/codes- and-policies.htm. The compensation policy of the Bank, duly reviewed and recommended by the NRC has been articulated in line with the relevant 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 (cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:0)(cid:65)(cid:0)(cid:70)(cid:65)(cid:73)(cid:82)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:80)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:72)(cid:69)(cid:76)(cid:80)(cid:83)(cid:0) 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 such as roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the compensation policy are also included in Schedule 18 Notes forming part of the Accounts - Note no. 24. 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. (cid:38)(cid:85)(cid:82)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:78)(cid:83)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:77)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:65)(cid:84)(cid:84)(cid:69)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(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) Board and Committees are reimbursed at actuals. Pursuant to the relevant RBI guidelines and approval of the shareholders, the Non-Executive Directors, other than the Chairperson, are paid proﬁt-related commission of ` 10,00,000 (Rupees Ten Lakh Only) per annum for each Non-Executive Director. (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:73)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:79)(cid:70)(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) Services Limited, subsidiary of the Bank. 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, 2018. Succession Planning The Bank’s Nomination and Remuneration Committee (NRC) also oversees matters of succession planning of its Directors, Senior Management and Key executives of the Bank. With respect to the tenure of the current Managing Director ending in October 2020, the Board will identify a successor and work to ensure that this is done in a manner that will allow appropriate time for an effective transition of responsibilities. Signiﬁcant and Material Orders Passed By Regulators During the current ﬁnancial year 2017-18, pursuant to the media reports, SEBI has issued directions to the Bank (“SEBI Directions”) in relation to leakage of unpublished price sensitive information (“UPSI”) pertaining to the ﬁnancial results of the Bank for the quarter ended December 31, 2015 and the quarter ended June 30, 2017 in various private WhatsApp groups ahead of Bank’s ofﬁcial announcement to the relevant stock exchanges. SEBI has directed the Bank to observe the following: (i) to strengthen its processes / systems / controls forthwith to ensure that such instances of leakage of unpublished price sensitive information do not recur in future, (ii) to submit a report on: (a) the present systems and controls and how the present systems and controls have been strengthened, (b) details of persons who are responsible for monitoring such (cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:8)(cid:67)(cid:9)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:73)(cid:67)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:73)(cid:78)(cid:71)(cid:14)(cid:0)(cid:38)(cid:85)(cid:82)(cid:84)(cid:72)(cid:69)(cid:82)(cid:12)(cid:0)(cid:51)(cid:37)(cid:34)(cid:41)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0) directed the Bank to conduct an internal inquiry into the leakage of UPSI relating to its ﬁnancial ﬁgures including Non-Performing Assets (NPAs) results and take appropriate action against those responsible for the same, in accordance with the applicable law. The scope of such inquiry will need to include determination of the possible role of following persons in relation to the aforesaid leakage of UPSI: (i) persons / members of committees involved in generation of the original data for the purpose of determination of key ﬁgures pertaining to ﬁnancial ﬁgures including gross NPAs, (ii) persons involved in the consolidation of the ﬁgures for the ﬁnancial results, (iii) persons involved in the preparation of board notes and presentations, (iv) persons involved in dissemination of information relating to ﬁnancial results in the public domain and (v) any other persons who had access to the information. HDFC Bank Limited Annual Report 2017-18 42 Directors' Report SEBI has directed the Bank to complete the inquiry within a period of three months from the date of the SEBI Directions and thereafter, ﬁle a report with SEBI in this regard within a further period of seven days. Directors and Key Managerial Personnel In compliance with Section 152 of the Companies Act, 2013, Mr. Keki Mistry will retire by rotation at the ensuing Annual General Meeting and is eligible for re-appointment. the year, after serving as Board members for During close to seven years each, Mrs. Renu Karnad and Mr. A. N. Roy resigned from the Board of the Bank with effect from January 20, 2018 and January 31, 2018 respectively. Mrs. Karnad and Mr. Roy resigned due to other commitments and personal considerations respectively. The Board places on record its sincere appreciation of the contribution made by Mrs. Karnad and Mr. Roy during their tenure with the Bank and wishes them well in future endeavours. The brief resume / details regarding the Director proposed to be re-appointed as above is 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. 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 (A) Conservation of Energy 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) ofﬁces 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) 10 p. m. (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) lights and other electrical equipment (cid:115)(cid:0) (cid:50)(cid:69)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:0) (cid:68)(cid:69)(cid:77)(cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:84)(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:40)(cid:85)(cid:66)(cid:12)(cid:0) resulting in energy savings (cid:115)(cid:0) (cid:50)(cid:69)(cid:80)(cid:76)(cid:65)(cid:67)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:35)(cid:38)(cid:44)(cid:0) (cid:44)(cid:65)(cid:77)(cid:80)(cid:83)(cid:0) (cid:87)(cid:73)(cid:84)(cid:72)(cid:0) (cid:44)(cid:37)(cid:36)(cid:0) (cid:108)(cid:88)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0) (cid:65)(cid:84)(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:40)(cid:85)(cid:66) (cid:115)(cid:0) (cid:48)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:44)(cid:37)(cid:36)(cid:0)(cid:76)(cid:65)(cid:77)(cid:80)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:66)(cid:82)(cid:65)(cid:78)(cid:67)(cid:72)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:115)(cid:0) (cid:48)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:79)(cid:76)(cid:65)(cid:82)(cid:0)(cid:80)(cid:65)(cid:78)(cid:69)(cid:76)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:67)(cid:65)(cid:80)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:80)(cid:79)(cid:87)(cid:69)(cid:82)(cid:0)(cid:71)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) at our ofﬁces in Pune and Bhubaneswar Monitoring and energy saving initiative for 100 branches resulting in power saving of over 10 per cent. The Bank won an award in National Energy Efﬁciency Circle Competition 2017 - Winner Best Energy Efﬁcient Case study held by CII in May 2017. Considering the beneﬁts accrued, we have further extended the monitoring programme to an additional 500 branches across the country (B) Technology Absorption innovative Your Bank has been at the forefront of using technology absorption and evaluates technology with multiple ﬁntech partners. It has launched a formal Consumer Durable Loans portfolio and product with on-line real-time Digital API based collaboration with third party and ﬁntech application sourcing platforms. Your Bank is leveraging API based Service Oriented Architecture and Middleware for enabling digital initiatives and empowering relationship managers at branches with digital products and services platforms. 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 ` 1,523.5 crore (on account of net gains arising on all exchange /derivative transactions) and the total foreign exchange outgo was ` 192.9 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 2017-18. The report of the Secretarial Auditors is enclosed as ANNEXURE 8 to this Report. With regard to the observation made by the Secretarial Auditors in the Secretarial Audit Report in connection with the directions (cid:73)(cid:83)(cid:83)(cid:85)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:51)(cid:37)(cid:34)(cid:41)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:79)(cid:78)(cid:0)(cid:38)(cid:69)(cid:66)(cid:82)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:19)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:24)(cid:0)(cid:84)(cid:79)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:0)(cid:65)(cid:76)(cid:73)(cid:65)(cid:12)(cid:0) (a) strengthen the Bank’s processes / systems / controls forthwith to ensure that instances of leakage of unpublished price sensitive information (“UPSI”) does not recur in future, and submit a report to SEBI on inter alia, the present systems and controls and how they have been strengthened (“Report”); and (b) conduct an internal inquiry into the leakage of UPSI relating to its ﬁnancial ﬁgures including non-performing assets during the quarter ended December 2015 and June 2017, and submit a report to SEBI (“Internal Inquiry Report”), the Bank has appointed: 1. Cyril Amarchand Mangaldas to assist the Bank in inter alia reviewing and conducting an assessment of the policies, systems and processes of the Bank in relation to storing, handling and communication of UPSI in terms of the SEBI (Prohibition of Insider Trading) Regulations, 2015, HDFC Bank Limited Annual Report 2017-18 43 Directors' Report speciﬁcally, the information ﬂow and process steps involved in preparation and ﬁnalization of ﬁnancial results by the Bank, and in preparation of the Report; and 2. Haribhakti & Co., LLP for the purposes of preparing the Internal Inquiry Report. The preparation of the aforementioned reports is underway and the same will be submitted to SEBI within the timelines speciﬁed in its directions. Corporate Governance In compliance with Regulation 34 and other applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate report on Corporate Governance along with a certiﬁcate of compliance from the Secretarial Auditors, forms an integral part of this Report. Business Responsibility Report The Bank’s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its 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 2017-18. 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 It has been a challenging year for the global as well as Indian economy. The global economy is facing risks from the increasing tide of protectionism, uncertainty regarding Brexit and the forthcoming elections in Italy. The US-North Korea relationship, notwithstanding recent signs of a rapprochement, will continue to cast a shadow on the geopolitical situation till it settles down one way or the other. On the positive side, India continues to remain among the two fastest growing economies in the world. The transitory impact of the GST too appears to be over. Private capital expenditure is expected to pick up in the ﬁrst half of the current ﬁnancial year. Your Bank has continued to grow faster than the system. It now plans to raise capital of ` 24,000 crore to fund growth for the next few years. (cid:33)(cid:83)(cid:0)(cid:65)(cid:76)(cid:87)(cid:65)(cid:89)(cid:83)(cid:12)(cid:0)(cid:89)(cid:79)(cid:85)(cid:82)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0)(cid:74)(cid:85)(cid:68)(cid:73)(cid:67)(cid:73)(cid:79)(cid:85)(cid:83)(cid:14)(cid:0)(cid:41)(cid:84)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(cid:69)(cid:0) to leverage its distribution strength and digital platforms to offer a similar experience to customers across urban, semi-urban and rural India. Needless to say, the Bank will continue to focus on its ﬁve core (cid:86)(cid:65)(cid:76)(cid:85)(cid:69)(cid:83)(cid:12)(cid:0) (cid:78)(cid:65)(cid:77)(cid:69)(cid:76)(cid:89)(cid:12)(cid:0) (cid:35)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0) (cid:38)(cid:79)(cid:67)(cid:85)(cid:83)(cid:12)(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:37)(cid:88)(cid:67)(cid:69)(cid:76)(cid:76)(cid:69)(cid:78)(cid:67)(cid:69)(cid:12)(cid:0) Product Leadership, People and Sustainability. Its commitment to the highest possible standards of corporate governance remains unwavering even as it embarks on the next stage of its evolution, increasingly leveraging artiﬁcial intelligence and analytics, to continue delivering sustainable growth to all stakeholders. On behalf of the Board of Directors Mrs. Shyamala Gopinath Chairperson Mumbai, May 22, 2018 HDFC Bank Limited Annual Report 2017-18 44 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, 2018 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 XVIII 30th June, 2010 100,000,000 468.40 2,139,400 Plan E-ESOS XIX 30th June, 2010 100,000,000 680.00 12,955,200 Plan D-ESOS XX 16th June, 2007 75,000,000 680.00 3,334,300 Plan C-ESOS XXI 17th June, 2005 50,000,000 680.00 4,318,400 Plan C-ESOS XXIII 17th June, 2005 50,000,000 835.50 326,000 - - - - - - - - - 2,136,000 6,730,300 1,698,600 1,176,900 - - - - 3,400 - - - - 6,224,900 1,635,700 3,141,500 126,300 196,100 5,100 4,800 120,000 Plan F-ESOS XXIV 27th June, 2013 100,000,000 835.50 28,671,900 - 10,581,900 11,483,750 137,100 18,700 17,032,350 Plan F ESOS XXV 27th June, 2013 100,000,000 1,092.65 40,408,100 - 12,396,400 9,122,900 844,600 36,300 30,404,300 Plan F -ESOS XXVI 27th June, 2013 100,000,000 1,097.80 3,000 - 900 Plan F -ESOS XXVII 27th June, 2013 100,000,000 1,433.20 Plan F -ESOS XXVIII 27th June, 2013 100,000,000 1,462.15 - - 16,865,850 16,200 - - - - - - - - - 3,000 - 16,865,850 - 16,200 TOTAL 92,156,300 16,882,050 23,105,500 32,544,550 986,800 63,200 75,443,800 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: 32,544,550 65,089,100 27,194,008,660 10,383,882,817 37,642,980,577 One (1) share of the face value of ` 2/- each would arise on exercise of One (1) Equity Stock Option. 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 HDFC Bank Limited Annual Report 2017-18 45 Directors' Report i. DETAILS OF OPTIONS GRANTED TO CURRENT DIRECTORS AND SENIOR MANAGERIAL PERSONNEL Sr. No. Employee Name Grade No. of options 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Aditya Puri Paresh Sukthankar Kaizad Bharucha Abhay Aima Ashish Parthasarthy Ashima Bhat Ashok Khanna Arvind Kapil Bhavesh Zaveri Chakrapani Venkatachari Dhiraj Relli (on deputation to HDFC Securities Limited, the Bank’s subsidiary) Jimmy Tata Munish Mittal Navin Puri Neil Francisco Nitin Chugh Nirav Shah Parag Rao Philip Mathew Rahul Shukla Rakesh K Singh Rajesh Kumar R Ravi Narayanan Smita Bhagat Sashidhar Jagdishan Sanjay Dongre Managing Director Deputy Managing Director Executive Director Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head Group Head CFO (KMP) Executive Vice-President (Legal) & Company Secretary 701,600 319,000 232,000 180,000 180,000 126,000 126,000 126,000 180,000 153,000 126,000 180,000 126,000 180,000 126,000 126,000 126,000 126,000 126,000 - 153,000 126,000 126,000 67,500 180,000 11,900 ii. Other employees who receive a grant in any one year of options amounting to 5 % or more of options granted during that year None iii. Identiﬁed employees who were granted options, during any one year, equal to or exceeding 1 percent of the issued capital (excluding outstanding warrants and conversions) None Diluted Earnings Per Share (EPS) pursuant to the issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) - 20 (Earnings Per Share) The diluted EPS of the Bank calculated after considering the effect of potential equity shares arising on account of exercise of options is ` 66.8 HDFC Bank Limited Annual Report 2017-18 46 Directors' Report Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on proﬁts and on EPS of the company shall also be disclosed Had the Bank followed fair value method for accounting, the stock option compensation expense would have been higher by ` 650.4 crore. Consequently proﬁt after tax would have been lower by ` 650.4 crore and the basic EPS of the Bank would have been ` 65.2 per share (lower by ` 2.5 per share) and the diluted EPS would have been ` 64.4 per share (lower by ` 2.4 per share) Weighted average exercise prices and weighted average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock options A description of the method and signiﬁcant assumptions used during the year to estimate the fair value of options, at the time of grant including the following weighted average information: The weighted average price of the stock options exercised is ` 837.6 and the weighted average fair value is ` 299.5 The Securities and Exchange Board of India (SEBI) has prescribed two methods to account for stock grants; (i) the intrinsic value method; (ii) the fair value method. The Bank adopts the intrinsic value method to account for the stock options it grants to the employees. The Bank also calculates the fair value of options at the time of grant, using internally developed and tested model with the following assumptions I. Risk-free interest rate 6.73 percent to 7.20 percent II. Expected life III. Expected volatility IV. Expected dividends 1 to 7.25 years 19.94 per cent to 21.65 percent 0.65 percent to 0.66 percent V. The price of the underlying share in the market at the time of option grant The market price per share was ` 1433.20 and ` 1462.15 at the time of grant of options under ESOS XXVII and ESOS XXVIII respectively. vi. The weighted average market price of Bank’s shares on NSE at the time of option grant ` 1433.35 and ` 1461.72 at the time of grant of options under ESOS XXVII and ESOS XXVIII respectively. Method used and assumptions made to incorporate effects of expected early exercise The exercise multiple, which is based on historical data of early 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 of the extent to which expected volatility was based on historical volatility Stock expected volatility is completely based on GARCH volatility forecasting model using historical stock prices from the market. Whether and how any other features of the option grant were incorporated into the measurement of fair value, such as a market condition Stock price and risk free interest rate are variables based on actual market data at the time of ESOP valuation. HDFC Bank Limited Annual Report 2017-18 47 Directors' Report ANNEXURE 2 to the Directors’ Report 1. Brief outline of the CSR Policy HDFC Bank Annual CSR Report 2017–2018 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, 2013 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 2017-18, 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 https://www.hdfcbank.com/csr/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 present composition of the Committee is as follows: (cid:115)(cid:0) (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:12)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(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:34)(cid:79)(cid:66)(cid:66)(cid:89)(cid:0)(cid:48)(cid:65)(cid:82)(cid:73)(cid:75)(cid:72)(cid:0)(cid:8)(cid:41)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:9) (cid:115)(cid:0) (cid:45)(cid:82)(cid:14)(cid:0)(cid:48)(cid:65)(cid:82)(cid:84)(cid:72)(cid:79)(cid:0)(cid:36)(cid:65)(cid:84)(cid:84)(cid:65)(cid:0)(cid:8)(cid:41)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:9) (cid:115)(cid:0) (cid:45)(cid:82)(cid:14)(cid:0)(cid:33)(cid:68)(cid:73)(cid:84)(cid:89)(cid:65)(cid:0)(cid:48)(cid:85)(cid:82)(cid:73) (cid:115)(cid:0) (cid:45)(cid:82)(cid:14)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:83)(cid:72)(cid:0)(cid:51)(cid:85)(cid:75)(cid:84)(cid:72)(cid:65)(cid:78)(cid:75)(cid:65)(cid:82) (cid:115)(cid:0) (cid:45)(cid:82)(cid:14)(cid:0)(cid:45)(cid:65)(cid:76)(cid:65)(cid:89)(cid:0)(cid:48)(cid:65)(cid:84)(cid:69)(cid:76)(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:13)(cid:0)(cid:41)(cid:78)(cid:68)(cid:85)(cid:67)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:18)(cid:23)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:24) (Mrs. Renu Karnad ceased to be the Chairperson and member of the Committee pursuant to her resignation as Director of the Bank with effect from January 20, 2018) 3. Average net proﬁt of the company for last three ﬁnancial years INR 18,246 CR 4. Prescribed CSR Expenditure (two percent of the amount as in item 3 above) INR 365 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:23)(cid:20)(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:46)(cid:41)(cid:44) HDFC Bank Limited Annual Report 2017-18 48 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 41.29 17.31 15.19 0.73 4.18 Rural Development Rural Development Projects Pan India 295.85 1 2 3 4 5 6 Amount spent (INR Cr) 1.Direct expenditure 2.Overheads 7.56 0.33 1. 2. 1. 2. 1. 2. 1. 2. 4.41 0.14 15.07 0.12 0.72 0.01 1. 2. 0.00 0.03 1. 2. 174.79 2.34 Cumulative expenditure up to reporting period (INR Cr)* Amount spent: Direct or through *implementing agency (INR Cr) 99.92 78.24 54.29 3.41 11.00 737.80 Implementing Agency – 33.40 Implementing Agency – 12.76 Direct Direct Implementing Agency – 4.15 Implementing Agency – 118.71 *Details of the implementing agencies are listed below: Promotion of Education: Banasthali Vidyapith, Bangalore Oniyavara Seva Coota, Bodh Shiksha Samiti , Isha Education, K.C. Mahindra Education Trust, Katha, Magic Bus India Foundation, Meljol, Moinee Foundation, Participatory Action for Community Empowerment, Pratham Education Foundation, Shree Shantadurga Shikshan Samiti, Society for Action in Community Health, Sri Aurobindo Society, Sri Sathya Sai Trust, Teach To Lead, United way of Mumbai; Rural Development : Abhinav, Abhyuday Sanstha, Action For Food Production, Action for Social Advancement, Aga Khan Rural Support Programme (India), Ambuja Cement Foundation, Anarde Foundation, Aroh Foundation, BAIF Development Research Foundation, Centre for Advance Research and Development, Community Advancement & Rural Development Society, Family Health India, FXB India Suraksha, Gram Vikas, Gramalaya Trust, Gram Vikas Trust, Gramya Vikash Mancha, Haritika, Indo Global Social Service Society, Integrated Development Foundation, Kalptaru Vikas Samiti, KGVK, Krushi Vikas Va Gramin Prashikshan Sanstha, MYRADA, Nav Bharat Jagriti Kendra, Navrachna Mahila Vikas Trust, Network for Enterprise Enhancement and Development Support (NEEDS), Participatory Action for Community Empowerment, Peoples Action for National Integration, S.M. Sehgal Foundation, Sahbagi Shikshan Kendra, Sai Jyoti Gramodoyog Samaj Seva Samiti, Sanjeevani Institute for Empowerment & Development, Share Society to Heal Aid Restore Educate, Shikhar Yuva Manch, Shramik Bharti, Society for Action in Community Health, Vikalp, Voluntary Association for People Service, Vrutti, Watershed Organisation Trust, Yuva Rural Association, Yuva Unstoppable; Skills Training & Livelihood Enhancement: Access Development Services, Antarang Foundation, Aroh Foundation, Dr M L Dhawale Memorial Trust, End Poverty, Friends Union for Energizing Lives, FXB India Suraksha, Incubation Centres, Indo Global Social Service Society, Jan Jagran Sanstha, Pune City Connect Development Foundation, SIFE India, Tata Institute of Social Sciences, Voluntary Association for People Service; Eradicating poverty / Other Donations: Chetana Foundation, Commissioner of Municipal Administration, CSC Academy, GiveIndia, Mandya Institute of Medical Sciences, National Sports Development Fund, Rotary Club of Panaji, Sneha Society for Nutrition Education and Health Action, The Aagan Trust 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: The CSR Committee conﬁrms that the implementation and monitoring of the CSR activities of the Bank are in compliance with the CSR objectives and CSR Policy of the Company Mr. Aditya Puri Managing Director Date: April 18, 2018 Mr. Umesh Chandra Sarangi Chairman - CSR Committee HDFC Bank Limited Annual Report 2017-18 49 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, 2018 [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 3976 0000 vi. Whether listed: Yes vii. Name, Address and contact details of Registrar and Transfer Agent: Datamatics Business Solutions Limited (Formerly known as Datamatics Financial Services Limited) Plot No. B5, Part B, Cross Lane, MIDC, Marol, Andheri East, Mumbai 400 093. Tel: 022- 6671 2213/14, E-mail: hdinvestors@datamaticsbpm.com II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY: All the business activities contributing 10 percent or more of the total turnover of the Company shall be stated: Name and Description of the main products / services NIC Code Percent 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 U65993GJ2007PLC051028 Subsidiary 95.87 Radhika, 2nd Floor, Law Garden Road, Navrangpura, Ahmedabad - 380 009. 2 HDFC Securities Limited U67120MH2000PLC152193 Subsidiary 97.67 I Think, Techno Campus, Building-B, “Alpha” ofﬁce, 8th Floor, opposite Crompton Greaves, Kanjurmarg (East), Mumbai - 400 042. Sec 2(87) of Companies Act, 2013 Sec 2(87) of Companies Act, 2013 * During the year, International Asset Reconstruction Company Limited (“IARC”) ceased to be an associate company of the Bank since the percentage of paid-up equity capital held by the Bank in IARC has been diluted to less than 20% due to further issue of equity shares made by IARC during the ﬁnancial year in which the Bank did not participate. As of March 31, 2018, the Bank held 19.22% of the share capital of IARC. HDFC Bank Limited Annual Report 2017-18 50 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 Percentage Change during the year 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 21.20# 543,216,100 0 0 0.00 0.00 0 0 543,216,100 21.20# 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 21.20# 543,216,100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 543,216,100 20.93# (0.27) 0 0 0.00 0.00 0.00 0.00 543,216,100 20.93# (0.27) 0 0 0 0 0 0 0 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 0.00 543,216,100 20.93# (0.27) 206,150,669 33,185 206,183,854 8.05 256,405,086 2,000 256,407,086 2,308,514 17,390 2,325,904 Central Government 2,767,437 State Government(s) Venture Capital Funds 0 0 Insurance Companies 61,511,040 0 0 0 0 2,767,437 0 0 61,511,040 0.09 0.11 0.00 0.00 2.40 2,965,413 2,784,112 0 0 56,983,145 8,115 2,973,528 0 0 0 0 2,784,112 0 0 56,983,145 FIIs 880,321,745 15,170 880,336,915 34.35 857,886,518 2,000 857,888,518 Foreign Venture Capital Funds Qualiﬁed Foreign Investor 0 0 Alternate Investment Funds 313,796 Other (specify) 0 0 0 0 0 0 0 313,796 0 0.00 0.00 0.01 0.00 0 0 1,443,123 0 0 0 0 0 0 0 1,443,123 0 9.88 0.11 0.11 0.00 0.00 2.20 33.06 0.00 0.00 0.06 0.00 1.83 0.02 0.00 0.00 0.00 (0.20) (1.30) 0.00 0.00 0.04 0.00 0.40 Sub Total (B)(1) 1,153,373,201 65,745 1,153,438,946 45.01 1,178,467,397 12,115 1,178,479,512 45.41 HDFC Bank Limited Annual Report 2017-18 51 Promoters 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 Foreign NRIs - Individuals Other - Individuals Bodies Corporate Banks / FI Qualiﬁed Foreign Investor Any Other (specify) Sub Total (A)(2) Total Shareholding of Promoter and Promoter Group (A)=(A)(1)+(A)(2) Public shareholding Institutions Mutual Funds Banks / FI (I) (A) (a) (b) (c) (d) (e) (f) 2 (a) (b) (c) (d) (e) (f) (B) 1 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) Directors' Report Category code (I) 2 (a) Non-institutions Bodies Corporate (a)(i) Indian (a)(ii) Overseas (b) Individuals (b)(i) (b)(ii) (c) (d) d-i d-ii d-iii d-iv Individuals - 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) 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 0 165,798,090 181,005 165,979,095 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 0 0 152,990,372 121,430 153,111,802 0 0 270 0 270 0 158,476,509 13,810,769 172,287,278 0.00 5.90 0.00 0.00 6.64 0.00 (0.58) 0.00 0.00 0.25 56,969,465 191,000 57,160,465 2.23 61,550,251 191,000 61,741,251 2.38 0.15 0 0 2,308,878 3,756,747 21,000 1,068 0 0 0 0 41,295 2,350,173 2,265 3,759,012 0 0 21,000 1,068 0.00 0.00 0.09 0.15 0.00 0.00 0 2,762,224 1,990,585 8,471,200 0 1,588 0 0 0 2,762,224 38,385 2,028,970 1,925 8,473,125 0 0 0 1588 376,250,767 16,636,495 392,887,262 15.33 386,242,729 14,163,779 400,406,508 15,296,23,968 16,702,240 1,546,326,208 60.34 1,564,710,126 14,175,894 1,578,886,020 0.00 0.11 0.08 0.33 0.00 0.00 15.43 60.84 81.77 18.23 0.00 0.11 (0.01) 0.18 0.00 0.00 0.10 0.50 0.23 (0.23) Total (A+B) 2,072,840,068 16,702,240 2,089,542,308 81.54 2,107,926,226 14,175,894 2,122,102,120 (C) Custodians for GDRs and ADRs 473,003,409 0 473,003,409 18.46 472,988,147 0 472,988,147 GRAND TOTAL (A)+(B)+(C) 2,545,843,477 16,702,240 2,562,545,717 100.00 2,580,914,373 14,175,894 2,595,090,267 100.00 0.00 # Promoters are Indian Companies incorporated under the Indian Companies Act 1956 and are managed 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 percentage of share capital held by the promoters has been calculated after including the equity shares underlying the depository receipts of the Bank in the total number of equity shares. Pursuant to the Circular No. CIR/CFD/CMD/13/2015 dated November 30, 2015 issued by the Securities and Exchange Board of India (“SEBI”), the percentage of promoter shareholding after excluding the equity shares underlying depository receipts from the total number of shares would be 25.60% of Bank’s share capital. (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 Percentage of Shares Pledged / encumbered to total shares No.of Shares Percentage of total Shares Percentage of Shares Pledged / encumbered to total shares Percentage change in shareholding during the year** 1 HOUSING DEVELOPMENT FINANCE 393,211,100 15.35 0.00 393,211,100 15.15 CORPORATION LIMITED 2 HDFC INVESTMENTS LIMITED 150,000,000 3 HDFC HOLDINGS LIMITED Total 5,000 543,216,100 5.85 0.00 21.20 0.00 0.00 150,000,000 5,000 0.00 543,216,100 5.78 0.00 20.93 0.00 0.00 0.00 0.00 (0.20) (0.07) 0.00 (0.27) HDFC Bank Limited Annual Report 2017-18 52 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 No.of Shares Percentage of total Shares At the beginning of the year 543,216,100 21.20 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 20.93 ** During the year under review, there was 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 2017-18. (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 Cumulative shareholding during the year No. of shares Percentage of total shares No. of shares Percentage of total shares 1 Europaciﬁc Growth Fund At the beginning of the Year 31-MAR-2017 100,311,759 3.92 Increase Increase Decrease Decrease 12-MAY-2017 23-JUN-2017 676,700 240,000 0.03 100,988,459 0.01 101,228,459 06-OCT-2017 (1,839,189) (0.07) 99,389,270 13-OCT-2017 (523,396) (0.02) 98,865,874 At the END of the Year 31-MAR-2018 - - 98,865,874 2 Life Insurance Corporation Of India At the beginning of the Year 31-MAR-2017 55,457,815 2.16 Decrease 07-APR-2017 (302,533) (0.01) 55,155,282 Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease 14-APR-2017 (476,098) (0.02) 54,679,184 21-APR-2017 (1,080,747) (0.04) 53,598,437 28-APR-2017 (1,266,569) (0.05) 52,331,868 05-MAY-2017 (384,084) (0.02) 51,947,784 12-MAY-2017 (117,000) (0.01) 51,830,784 19-MAY-2017 (19,090) 02-JUN-2017 09-JUN-2017 09-MAR-2018 16-MAR-2018 23-MAR-2018 30-MAR-2018 (500) (800) (58,000) (93,890) (71,986) (51,500) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 51,811,694 51,811,194 51,810,394 51,752,394 51,658,504 51,586,518 51,535,018 At the END of the Year 31-MAR-2018 - - 51,535,018 3 SBI-Etf Nifty 50 At the beginning of the Year 31-MAR-2017 30,660,186 Increase Increase Increase Increase Increase Decrease 07-APR-2017 1,184,347 14-APR-2017 21-APR-2017 228,371 50,754 28-APR-2017 2,163,001 05-MAY-2017 536,490 12-MAY-2017 (77,339) 1.20 0.05 0.01 0.00 0.08 0.02 0.00 31,844,533 32,072,904 32,123,658 34,286,659 34,823,149 34,745,810 HDFC Bank Limited Annual Report 2017-18 53 3.94 3.94 3.85 3.83 3.81 2.15 2.13 2.09 2.04 2.03 2.02 2.02 2.02 2.02 2.00 1.99 1.99 1.99 1.99 1.24 1.25 1.25 1.34 1.36 1.35 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares Increase Increase Increase Decrease Increase Decrease Decrease Increase Increase Increase Increase Increase Increase Increase Decrease Increase Decrease Increase Decrease Increase Increase Increase Increase Increase Increase Increase Decrease Decrease Increase Increase Increase Increase Increase Increase Decrease Increase Increase Increase Decrease Decrease Decrease Increase Decrease Increase 19-MAY-2017 26-MAY-2017 02-JUN-2017 153,998 44,365 378,917 0.01 0.00 0.02 34,899,808 34,944,173 35,323,090 09-JUN-2017 (140,755) (0.01) 35,182,335 16-JUN-2017 23-JUN-2017 30-JUN-2017 07-JUL-2017 14-JUL-2017 17-JUL-2017 21-JUL-2017 28-JUL-2017 139,607 (115,023) (197,221) 211,139 281,763 28,759 118,439 354,574 04-AUG-2017 1,222,500 11-AUG-2017 18-AUG-2017 25-AUG-2017 01-SEP-2017 08-SEP-2017 15-SEP-2017 22-SEP-2017 29-SEP-2017 06-OCT-2017 13-OCT-2017 20-OCT-2017 27-OCT-2017 31-OCT-2017 332,122 (14,098) 211,410 (5,031) 152,392 (97,064) 252,058 148,541 838,061 41,307 224,969 214,071 56,163 03-NOV-2017 (115,452) 10-NOV-2017 (109,662) 17-NOV-2017 24-NOV-2017 01-DEC-2017 08-DEC-2017 15-DEC-2017 22-DEC-2017 639,432 716,636 657,782 832,787 277,746 248,136 29-DEC-2017 (11,264) 05-JAN-2018 12-JAN-2018 19-JAN-2018 26-JAN-2018 02-FEB-2018 09-FEB-2018 16-FEB-2018 23-FEB-2018 02-MAR-2018 243,407 421,655 684,767 (236,736) (256,140) (159,102) 335,480 (81,209) 192,055 0.01 0.00 35,321,942 35,206,919 (0.01) 35,009,698 0.01 0.01 0.00 0.01 0.01 0.05 0.01 0.00 0.01 0.00 0.01 0.00 0.01 0.01 0.03 0.00 0.01 0.01 0.00 0.00 0.00 0.03 0.03 0.03 0.03 0.01 0.01 0.00 0.01 0.02 0.03 (0.01) (0.01) (0.01) 0.01 0.00 0.01 35,220,837 35,502,600 35,531,359 35,649,798 36,004,372 37,226,872 37,558,994 37,544,896 37,756,306 37,751,275 37,903,667 37,806,603 38,058,661 38,207,202 39,045,263 39,086,570 39,311,539 39,525,610 39,581,773 39,466,321 39,356,659 39,996,091 40,712,727 41,370,509 42,203,296 42,481,042 42,729,178 42,717,914 42,961,321 43,382,976 44,067,743 43,831,007 43,574,867 43,415,765 43,751,245 43,670,036 43,862,091 1.36 1.36 1.38 1.37 1.38 1.37 1.36 1.37 1.38 1.38 1.39 1.40 1.45 1.46 1.46 1.47 1.46 1.47 1.47 1.47 1.48 1.51 1.51 1.52 1.53 1.53 1.53 1.52 1.55 1.57 1.60 1.63 1.64 1.65 1.65 1.66 1.68 1.70 1.69 1.68 1.68 1.69 1.68 1.69 HDFC Bank Limited Annual Report 2017-18 54 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares Increase Increase Increase Decrease 09-MAR-2018 16-MAR-2018 23-MAR-2018 240,745 248,224 690,340 30-MAR-2018 (47,397) 0.01 0.01 0.03 0.00 44,102,836 44,351,060 45,041,400 44,994,003 At the END of the Year 31-MAR-2018 - - 44,994,003 4 HDFC Trustee Company Limited A/C At the beginning of the Year 31-MAR-2017 20,125,387 HDFC Balanced Fund Increase Decrease Decrease Decrease Increase Decrease Increase Increase Increase Decrease Increase Increase Increase Increase Increase Decrease Increase Increase Increase Decrease Decrease Increase Increase Increase Increase Increase Decrease Increase Increase Decrease Decrease Increase Decrease Decrease Decrease Increase Increase Increase 07-APR-2017 3,445,051 14-APR-2017 21-APR-2017 28-APR-2017 05-MAY-2017 12-MAY-2017 19-MAY-2017 26-MAY-2017 02-JUN-2017 (709) (13,887) (18,250) 2,173 (3,167) 49,408 298,610 401,614 0.79 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.02 23,570,438 23,569,729 23,555,842 23,537,592 23,539,765 23,536,598 23,586,006 23,884,616 24,286,230 09-JUN-2017 (120,610) (0.01) 24,165,620 16-JUN-2017 23-JUN-2017 30-JUN-2017 07-JUL-2017 14-JUL-2017 17-JUL-2017 21-JUL-2017 28-JUL-2017 849,625 275,726 353,156 15,571 54,083 (136) 244,001 230,331 04-AUG-2017 1,227,119 11-AUG-2017 (125,730) 18-AUG-2017 (228,485) 25-AUG-2017 01-SEP-2017 08-SEP-2017 15-SEP-2017 22-SEP-2017 216,398 349,040 214,909 486,072 114,055 0.03 0.01 0.01 0.00 0.00 0.00 0.01 0.01 0.05 (0.01) (0.01) 0.01 0.01 0.01 0.02 0.00 25,015,245 25,290,971 25,644,127 25,659,698 25,713,781 25,713,645 25,957,646 26,187,977 27,415,096 27,289,366 27,060,881 27,277,279 27,626,319 27,841,228 28,327,300 28,441,355 29-SEP-2017 (151,670) (0.01) 28,289,685 06-OCT-2017 1,929,259 13-OCT-2017 20-OCT-2017 49,950 (295) 0.08 0.00 0.00 30,218,944 30,268,894 30,268,599 27-OCT-2017 (186,002) (0.01) 30,082,597 31-OCT-2017 03-NOV-2017 10-NOV-2017 17-NOV-2017 24-NOV-2017 01-DEC-2017 08-DEC-2017 91,816 (1,038) (89,302) (96,809) 637,492 338,128 281,986 0.00 0.00 0.00 0.00 0.03 0.01 0.01 30,174,413 30,173,375 30,084,073 29,987,264 30,624,756 30,962,884 31,244,870 1.70 1.71 1.74 1.73 1.73 0.92 0.92 0.92 0.92 0.92 0.92 0.92 0.93 0.95 0.94 0.97 0.99 1.00 1.00 1.00 1.00 1.01 1.02 1.07 1.06 1.05 1.06 1.07 1.08 1.10 1.10 1.10 1.17 1.17 1.17 1.16 1.17 1.17 1.16 1.16 1.18 1.20 1.21 HDFC Bank Limited Annual Report 2017-18 55 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares Increase Decrease Decrease Increase Increase Increase Decrease Decrease Decrease Decrease Decrease Increase Increase Increase Increase Decrease 15-DEC-2017 22-DEC-2017 29-DEC-2017 05-JAN-2018 12-JAN-2018 19-JAN-2018 26-JAN-2018 02-FEB-2018 09-FEB-2018 16-FEB-2018 23-FEB-2018 02-MAR-2018 09-MAR-2018 411,178 (4,553) (3,535) 705,717 1,536 296,119 (10,919) (11,663) (329,177) (184,463) (62,967) 6,841 54,049 16-MAR-2018 449,850 23-MAR-2018 30-MAR-2018 4,940 (9,970) - 0.02 0.00 0.00 0.03 0.00 0.01 0.00 0.00 (0.01) (0.01) 0.00 0.00 0.00 0.02 0.00 0.00 31,656,048 31,651,495 31,647,960 32,353,677 32,355,213 32,651,332 32,640,413 32,628,750 32,299,573 32,115,110 32,052,143 32,058,984 32,113,033 32,562,883 32,567,823 32,557,853 - 32,557,853 At the END of the Year 31-MAR-2018 5 ICICI Prudential Life Insurance Company Limited At the beginning of the Year 31-MAR-2017 35,864,792 1.40 Decrease Increase Decrease Increase Increase Increase Decrease Decrease Increase Decrease Decrease Decrease Decrease Decrease Increase Increase Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease 07-APR-2017 (224,277) (0.01) 35,640,515 14-APR-2017 100,134 0.00 35,740,649 21-APR-2017 (503,387) (0.02) 35,237,262 28-APR-2017 05-MAY-2017 12-MAY-2017 644,429 194,099 125,112 19-MAY-2017 (122,105) 26-MAY-2017 (630,703) 02-JUN-2017 09-JUN-2017 16-JUN-2017 23-JUN-2017 30-JUN-2017 07-JUL-2017 14-JUL-2017 17-JUL-2017 21-JUL-2017 3,127 (621) (586,657) (178,752) (709,274) (72,243) 450,189 78 (58,593) 28-JUL-2017 (523,190) 04-AUG-2017 (410,475) 11-AUG-2017 (216,394) 18-AUG-2017 (152,330) 25-AUG-2017 (230,243) 01-SEP-2017 (336,456) 0.03 0.01 0.01 (0.01) (0.03) 0.00 0.00 (0.02) (0.01) (0.03) 0.00 0.02 0.00 0.00 (0.02) (0.02) (0.01) (0.01) (0.01) (0.01) 35,881,691 36,075,790 36,200,902 36,078,797 35,448,094 35,451,221 35,450,600 34,863,943 34,685,191 33,975,917 33,903,674 34,353,863 34,353,941 34,295,348 33,772,158 33,361,683 33,145,289 32,992,959 32,762,716 32,426,260 08-SEP-2017 (33,144) 0.00 32,393,116 15-SEP-2017 (295,604) (0.01) 32,097,512 22-SEP-2017 (88,542) 0.00 32,008,970 HDFC Bank Limited Annual Report 2017-18 56 1.22 1.22 1.22 1.25 1.25 1.26 1.26 1.26 1.25 1.24 1.24 1.24 1.24 1.25 1.25 1.25 1.25 1.39 1.40 1.38 1.40 1.41 1.41 1.41 1.38 1.38 1.38 1.36 1.35 1.32 1.32 1.34 1.34 1.33 1.31 1.30 1.29 1.28 1.27 1.26 1.26 1.24 1.24 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares Decrease Increase Decrease Increase Decrease Decrease Increase Decrease Decrease Decrease Decrease Increase Increase Increase Increase Decrease Increase Decrease Decrease Decrease Increase Increase Decrease Increase Increase Decrease Increase Increase 29-SEP-2017 (722,967) (0.03) 31,286,003 06-OCT-2017 13-OCT-2017 20-OCT-2017 27-OCT-2017 31-OCT-2017 03-NOV-2017 10-NOV-2017 211,821 (57,147) 18,441 (12,647) (52,941) 37,231 (5,744) 0.01 0.00 0.00 0.00 0.00 0.00 0.00 31,497,824 31,440,677 31,459,118 31,446,471 31,393,530 31,430,761 31,425,017 17-NOV-2017 (145,162) (0.01) 31,279,855 24-NOV-2017 (48,496) 0.00 31,231,359 01-DEC-2017 (125,823) (0.01) 31,105,536 08-DEC-2017 15-DEC-2017 22-DEC-2017 29-DEC-2017 05-JAN-2018 12-JAN-2018 19-JAN-2018 26-JAN-2018 02-FEB-2018 09-FEB-2018 16-FEB-2018 23-FEB-2018 02-MAR-2018 09-MAR-2018 228,340 360,721 240,097 233,826 (82,820) 344,060 (282,314) (105,107) (330,710) 1,806 27,066 (22,144) 95,559 21,716 16-MAR-2018 (21,890) 23-MAR-2018 30-MAR-2018 229,432 119,200 - 0.01 0.01 0.01 0.01 0.00 0.01 31,333,876 31,694,597 31,934,694 32,168,520 32,085,700 32,429,760 (0.01) 32,147,446 0.00 32,042,339 (0.01) 31,711,629 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.01 31,713,435 31,740,501 31,718,357 31,813,916 31,835,632 31,813,742 32,043,174 32,162,374 - 32,162,374 1.18 (0.01) (0.02) (0.03) 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 29,977,572 29,451,924 28,689,394 28,696,684 28,701,688 28,673,766 28,709,117 28,758,951 28,896,974 28,894,897 28,919,962 28,967,897 29,012,099 29,067,070 1.21 1.22 1.22 1.22 1.22 1.21 1.22 1.22 1.21 1.21 1.20 1.21 1.23 1.23 1.24 1.24 1.25 1.24 1.24 1.22 1.22 1.23 1.22 1.23 1.23 1.23 1.24 1.24 1.24 1.17 1.15 1.12 1.12 1.12 1.11 1.12 1.12 1.12 1.12 1.12 1.12 1.12 1.13 At the END of the Year 31-MAR-2018 6 Government Of Singapore At the beginning of the Year 31-MAR-2017 30,115,330 Decrease Decrease Decrease Increase Increase Decrease Increase Increase Increase Decrease Increase Increase Increase Increase 07-APR-2017 (137,758) 14-APR-2017 (525,648) 21-APR-2017 (762,530) 26-MAY-2017 09-JUN-2017 07-JUL-2017 14-JUL-2017 17-JUL-2017 08-SEP-2017 15-SEP-2017 29-SEP-2017 06-OCT-2017 13-OCT-2017 20-OCT-2017 7,290 5,004 (27,922) 35,351 49,834 138,023 (2,077) 25,065 47,935 44,202 54,971 HDFC Bank Limited Annual Report 2017-18 57 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares Decrease Increase Increase Increase Increase Decrease Decrease Decrease Decrease Increase Increase Decrease Increase Decrease Decrease 27-OCT-2017 (158,935) (0.01) 28,908,135 31-OCT-2017 10-NOV-2017 24-NOV-2017 01-DEC-2017 184,369 424,968 21,467 19,570 0.01 0.02 0.00 0.00 29,092,504 29,517,472 29,538,939 29,558,509 08-DEC-2017 (193,845) (0.01) 29,364,664 15-DEC-2017 29-DEC-2017 (22,009) (7,272) 0.00 0.00 29,342,655 29,335,383 05-JAN-2018 (274,846) (0.01) 29,060,537 12-JAN-2018 19-JAN-2018 77,850 10,418 16-FEB-2018 (20,802) 02-MAR-2018 28,385 0.00 0.00 0.00 0.00 29,138,387 29,148,805 29,128,003 29,156,388 09-MAR-2018 (497,540) (0.02) 28,658,848 23-MAR-2018 (33,544) 0.00 28,625,304 At the END of the Year 31-MAR-2018 - - 28,625,304 7 Capital World Growth And Income At the beginning of the Year 31-MAR-2017 37,636,610 Fund Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease A/C-Reliance Regular Savings Fund- Balanced Option Increase Increase Increase Decrease Decrease Increase Increase 05-MAY-2017 (865,000) 26-MAY-2017 (1,005,000) 16-JUN-2017 14-JUL-2017 17-JUL-2017 21-JUL-2017 (690,000) (699,740) (428,260) (563,000) 04-AUG-2017 (133,010) 11-AUG-2017 (431,892) 18-AUG-2017 (527,784) 1.47 (0.03) (0.04) (0.03) (0.03) (0.02) (0.02) (0.01) (0.02) (0.02) 36,771,610 35,766,610 35,076,610 34,376,870 33,948,610 33,385,610 33,252,600 32,820,708 32,292,924 25-AUG-2017 (49,495) 0.00 32,243,429 01-SEP-2017 (1,437,507) (0.06) 30,805,922 08-SEP-2017 (36,687) 0.00 30,769,235 15-SEP-2017 (1,179,625) 22-SEP-2017 29-SEP-2017 01-DEC-2017 08-DEC-2017 (348,290) (171,710) (173,000) (520,000) 09-MAR-2018 (3,038,000) (0.05) (0.01) (0.01) (0.01) (0.02) (0.12) 29,589,610 29,241,320 29,069,610 28,896,610 28,376,610 25,338,610 07-APR-2017 1,145,032 14-APR-2017 21-APR-2017 411,316 437,569 0.83 0.05 0.02 0.02 22,502,492 22,913,808 23,351,377 28-APR-2017 (2,160,487) (0.08) 21,190,890 05-MAY-2017 (42,037) 12-MAY-2017 19-MAY-2017 126,484 473,649 0.00 0.01 0.02 21,148,853 21,275,337 21,748,986 8 Reliance Capital Trustee Co Ltd At the beginning of the Year 31-MAR-2017 21,357,460 At the END of the Year 31-MAR-2018 - - 25,338,610 1.12 1.13 1.14 1.14 1.14 1.14 1.13 1.13 1.12 1.13 1.13 1.12 1.12 1.11 1.10 1.10 1.43 1.39 1.37 1.34 1.32 1.30 1.29 1.28 1.25 1.25 1.19 1.19 1.15 1.13 1.13 1.12 1.10 0.98 0.98 0.88 0.89 0.91 0.83 0.83 0.83 0.85 HDFC Bank Limited Annual Report 2017-18 58 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares Increase Increase Increase Decrease Decrease Decrease Increase Increase Decrease Decrease Increase Increase Decrease Decrease Increase Increase Increase Decrease Decrease Decrease Decrease Decrease Decrease Increase Increase Increase Decrease Decrease Decrease Decrease Increase Increase Decrease Decrease Increase Increase Decrease Decrease Increase Decrease Decrease Increase Increase Increase 26-MAY-2017 02-JUN-2017 09-JUN-2017 16-JUN-2017 23-JUN-2017 30-JUN-2017 07-JUL-2017 14-JUL-2017 17-JUL-2017 21-JUL-2017 28-JUL-2017 04-AUG-2017 539,104 869,157 266,411 (581,500) (443,168) (273,934) 774,887 12,058 (39,287) (83,692) 192,039 440,766 0.02 0.03 0.01 (0.02) (0.02) (0.01) 0.03 0.00 0.00 0.00 0.01 0.02 22,288,090 23,157,247 23,423,658 22,842,158 22,398,990 22,125,056 22,899,943 22,912,001 22,872,714 22,789,022 22,981,061 23,421,827 11-AUG-2017 (230,418) (0.01) 23,191,409 18-AUG-2017 (29,186) 25-AUG-2017 01-SEP-2017 08-SEP-2017 15-SEP-2017 22-SEP-2017 29-SEP-2017 06-OCT-2017 13-OCT-2017 85,394 323,100 220,072 (18,502) (390,296) (439,042) (258,229) (52,243) 20-OCT-2017 (102,764) 27-OCT-2017 31-OCT-2017 03-NOV-2017 177,336 166,007 155,691 10-NOV-2017 (50,981) 0.00 0.00 0.01 0.01 0.00 (0.02) (0.02) (0.01) 0.00 0.00 0.01 0.01 0.01 0.00 23,162,223 23,247,617 23,570,717 23,790,789 23,772,287 23,381,991 22,942,949 22,684,720 22,632,477 22,529,713 22,707,049 22,873,056 23,028,747 22,977,766 17-NOV-2017 (240,754) (0.01) 22,737,012 24-NOV-2017 01-DEC-2017 08-DEC-2017 15-DEC-2017 (62,628) (68,231) 54,726 82,429 0.00 0.00 0.00 0.00 22,674,384 22,606,153 22,660,879 22,743,308 22-DEC-2017 (130,223) (0.01) 22,613,085 29-DEC-2017 (61,522) 05-JAN-2018 12-JAN-2018 19-JAN-2018 26-JAN-2018 02-FEB-2018 208,156 117,441 (556,086) (106,690) 602,300 0.00 0.01 0.01 22,551,563 22,759,719 22,877,160 (0.02) 22,321,074 0.00 0.02 22,214,384 22,816,684 09-FEB-2018 (129,419) (0.01) 22,687,265 16-FEB-2018 23-FEB-2018 02-MAR-2018 09-MAR-2018 (77,323) 73,916 764,524 156,083 0.00 0.00 0.03 0.01 22,609,942 22,683,858 23,448,382 23,604,465 0.87 0.90 0.91 0.89 0.87 0.86 0.89 0.89 0.89 0.89 0.89 0.91 0.90 0.90 0.90 0.91 0.92 0.92 0.91 0.89 0.88 0.88 0.87 0.88 0.88 0.89 0.89 0.88 0.88 0.87 0.88 0.88 0.87 0.87 0.88 0.88 0.86 0.86 0.88 0.88 0.87 0.88 0.90 0.91 HDFC Bank Limited Annual Report 2017-18 59 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares 9 ICICI Prudential Balanced Advantage Fund Increase Increase Increase 16-MAR-2018 23-MAR-2018 30-MAR-2018 At the END of the Year 31-MAR-2018 79,354 731,626 657,021 - 0.00 0.03 0.03 23,683,819 24,415,445 25,072,466 - 25,072,466 At the beginning of the Year 31-MAR-2017 29,700,967 1.16 Decrease Decrease Decrease Decrease Decrease Increase Decrease Decrease Decrease Decrease Increase Decrease Decrease Decrease Decrease Increase Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Increase Decrease Increase Increase Increase Increase Increase Decrease Increase Increase Increase 07-APR-2017 (705,796) (0.03) 28,995,171 14-APR-2017 21-APR-2017 (16,435) (83,910) 28-APR-2017 (403,146) 05-MAY-2017 (374,481) 0.00 0.00 (0.02) (0.02) 28,978,736 28,894,826 28,491,680 28,117,199 12-MAY-2017 61,599 0.00 28,178,798 19-MAY-2017 (859,558) 26-MAY-2017 (389,892) 02-JUN-2017 09-JUN-2017 16-JUN-2017 (498,496) (733,554) 195,489 (0.03) (0.02) (0.02) (0.03) 27,319,240 26,929,348 26,430,852 25,697,298 0.01 25,892,787 23-JUN-2017 (202,518) (0.01) 25,690,269 30-JUN-2017 07-JUL-2017 14-JUL-2017 17-JUL-2017 21-JUL-2017 (11,038) (905,836) (471,906) 217,383 (75,313) 28-JUL-2017 (523,527) 04-AUG-2017 (648,357) 11-AUG-2017 (296,657) 0.00 25,679,231 (0.04) (0.02) 0.01 0.00 (0.02) (0.03) (0.01) 24,773,395 24,301,489 24,518,872 24,443,559 23,920,032 23,271,675 22,975,018 18-AUG-2017 (10,190) 0.00 22,964,828 25-AUG-2017 (761,447) 01-SEP-2017 (303,941) 08-SEP-2017 15-SEP-2017 22-SEP-2017 29-SEP-2017 06-OCT-2017 13-OCT-2017 20-OCT-2017 (83,896) (131,702) (398,720) (33,836) (88,207) 175,208 (2,281) 27-OCT-2017 1,064,247 31-OCT-2017 1,664,956 03-NOV-2017 10-NOV-2017 17-NOV-2017 367,903 974,895 888,721 (0.03) (0.01) 22,203,381 21,899,440 0.00 21,815,544 (0.01) (0.02) 0.00 0.00 0.01 0.00 0.04 0.06 0.01 0.04 0.03 21,683,842 21,285,122 21,251,286 21,163,079 21,338,287 21,336,006 22,400,253 24,065,209 24,433,112 25,408,007 26,296,728 24-NOV-2017 (418,363) (0.02) 25,878,365 01-DEC-2017 08-DEC-2017 15-DEC-2017 82,137 586,157 213,925 0.00 0.02 0.01 25,960,502 26,546,659 26,760,584 0.91 0.94 0.97 0.97 1.13 1.13 1.13 1.11 1.10 1.10 1.07 1.05 1.03 1.00 1.01 1.00 1.00 0.96 0.94 0.95 0.95 0.93 0.90 0.89 0.89 0.86 0.85 0.85 0.84 0.83 0.82 0.82 0.83 0.83 0.87 0.93 0.95 0.98 1.02 1.00 1.00 1.03 1.03 HDFC Bank Limited Annual Report 2017-18 60 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares 10 Aditya Birla Sun Life Trustee Private Limited A/C Aditya Birla Sun Life Frontline Equity Fund Decrease Decrease Decrease Increase Decrease Decrease Increase Increase Increase Decrease Increase Decrease Decrease Decrease Increase 22-DEC-2017 (965,932) 29-DEC-2017 (90,811) 05-JAN-2018 (369,638) 12-JAN-2018 19-JAN-2018 26-JAN-2018 02-FEB-2018 09-FEB-2018 16-FEB-2018 636,817 (538,553) (746,219) 648,691 107,041 37,712 (0.04) (0.00) (0.01) 25,794,652 25,703,841 25,334,203 0.03 25,971,020 (0.02) (0.03) 0.03 0.00 0.00 25,432,467 24,686,248 25,334,939 25,441,980 25,479,692 23-FEB-2018 (354,946) (0.01) 25,124,746 02-MAR-2018 172,816 0.01 25,297,562 09-MAR-2018 (1,339,691) 16-MAR-2018 (869,127) 23-MAR-2018 (631,212) (0.05) (0.03) (0.02) 23,957,871 23,088,744 22,457,532 30-MAR-2018 274,417 0.01 22,731,949 At the END of the Year 31-MAR-2018 - - 22,731,949 At the beginning of the Year 31-MAR-2017 12,774,852 Increase Increase Decrease Decrease Decrease Increase Increase Increase Decrease Increase Increase Decrease Increase Increase Increase Increase Increase Increase Increase Increase Decrease Decrease Increase Increase Decrease Increase Decrease 28-APR-2017 441,995 05-MAY-2017 1,147,500 0.50 0.02 0.05 13,216,847 14,364,347 12-MAY-2017 (190,000) (0.01) 14,174,347 19-MAY-2017 26-MAY-2017 02-JUN-2017 16-JUN-2017 23-JUN-2017 (15,000) (57,342) 103,266 75,000 28,143 30-JUN-2017 (30,000) 28-JUL-2017 04-AUG-2017 11-AUG-2017 18-AUG-2017 25-AUG-2017 01-SEP-2017 08-SEP-2017 15-SEP-2017 964,524 558,572 (650) 3,061 84,547 50,381 496,822 779,400 22-SEP-2017 1,046,187 29-SEP-2017 1,205,878 06-OCT-2017 13-OCT-2017 20-OCT-2017 27-OCT-2017 31-OCT-2017 224,500 (20,500) (20,000) 65,790 995,000 0.00 0.00 0.00 0.00 0.00 0.00 0.04 0.02 0.00 0.00 0.00 0.00 0.02 0.03 0.04 0.05 0.01 0.00 0.00 0.00 0.04 14,159,347 14,102,005 14,205,271 14,280,271 14,308,414 14,278,414 15,242,938 15,801,510 15,800,860 15,803,921 15,888,468 15,938,849 16,435,671 17,215,071 18,261,258 19,467,136 19,691,636 19,671,136 19,651,136 19,716,926 20,711,926 10-NOV-2017 (231,000) (0.01) 20,480,926 17-NOV-2017 01-DEC-2017 4,803 (265) 0.00 0.00 20,485,729 20,485,464 1.00 0.99 0.98 1.00 0.98 0.95 0.98 0.98 0.98 0.97 0.98 0.92 0.89 0.87 0.88 0.88 0.52 0.56 0.55 0.55 0.55 0.55 0.56 0.56 0.56 0.59 0.61 0.61 0.61 0.62 0.62 0.64 0.67 0.71 0.75 0.76 0.76 0.76 0.76 0.80 0.79 0.79 0.79 HDFC Bank Limited Annual Report 2017-18 61 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares Decrease Decrease Decrease Decrease Increase Increase Increase Decrease Decrease Increase Increase Decrease Decrease Decrease 15-DEC-2017 29-DEC-2017 05-JAN-2018 (49,257) (80,280) (34,000) 0.00 0.00 0.00 20,436,207 20,355,927 20,321,927 12-JAN-2018 (150,177) (0.01) 20,171,750 19-JAN-2018 26-JAN-2018 02-FEB-2018 09-FEB-2018 16-FEB-2018 02-MAR-2018 09-MAR-2018 562 554,600 378,900 (1,715) (46,082) 265,231 135,660 0.00 0.02 0.02 0.00 0.00 0.01 0.01 20,172,312 20,726,912 21,105,812 21,104,097 21,058,015 21,323,246 21,458,906 16-MAR-2018 (252,218) (0.01) 21,206,688 23-MAR-2018 30-MAR-2018 (11,842) (61,655) 0.00 0.00 21,194,846 21,133,191 - 21,133,191 0.79 0.79 0.79 0.78 0.78 0.80 0.81 0.81 0.81 0.82 0.83 0.82 0.82 0.81 0.81 At the END of the Year 31-MAR-2018 - *** 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 Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares 1 Aditya Puri At the beginning of the Year 31-MAR-2017 Decrease Increase At the END of the Year 29-DEC-2017 26-JAN-2018 31-MAR-2018 2 Bobby Kanubhai Parikh At the beginning of the Year 31-MAR-2017 Increase $ Increase $ At the END of the Year 12-MAY-2017 29-SEP-2017 31-MAR-2018 Jointly With Relatives At the beginning of the Year 31-MAR-2017 At the END of the Year 31-MAR-2018 3 Kaizad Maneck Bharucha At the beginning of the Year 31-MAR-2017 Decrease Decrease Increase Decrease Increase Decrease Increase At the END of the Year 23-JUN-2017 28-JUL-2017 01-SEP-2017 15-SEP-2017 27-OCT-2017 02-FEB-2018 23-MAR-2018 31-MAR-2018 Jointly With Relatives At the beginning of the Year 31-MAR-2017 At the END of the Year 31-MAR-2018 3,441,544 (100,000) 225,000 - 6,263 950 445 - 3,538 - 938,051 (10,000) (10,000) 22,000 (20,000) 20,000 (10,000) 20,000 - 500 - 0.13 0.00 0.01 3,341,544 3,566,544 - 3,566,544 0.00 0.00 0.00 - 0.00 - 0.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - 0.00 - 7,213 7,658 7,658 3,538 928,051 918,051 940,051 920,051 940,051 930,051 950,051 950,051 500 0.13 0.14 0.14 0.00 0.00 0.00 0.00 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.00 HDFC Bank Limited Annual Report 2017-18 62 Directors' Report Name Sl. No. Remarks Date *** Shareholding at the beginning of the year No. of shares Percentage of total shares Cumulative shareholding during the year No. of shares Percentage of total shares 4 Keki Minoo Mistry At the beginning of the Year 31-MAR-2017 291,915 Jointly With Relatives At the beginning of the Year 31-MAR-2017 At the END of the Year 31-MAR-2018 At the END of the Year 31-MAR-2018 - 4,215 - 5 Paresh D Sukthankar At the beginning of the Year 31-MAR-2017 811,155 Decrease Decrease Decrease Increase Decrease Decrease Decrease Decrease Decrease Increase Decrease Increase Decrease Increase Increase 19-MAY-2017 16-JUN-2017 23-JUN-2017 30-JUN-2017 04-AUG-2017 11-AUG-2017 (15,000) (15,000) (15,000) 17,500 (7,000) (8,000) 15-SEP-2017 (10,000) 22-SEP-2017 29-SEP-2017 22-DEC-2017 (8,000) (2,000) 20,000 29-DEC-2017 (40,000) 26-JAN-2018 69,000 02-FEB-2018 (19,000) 23-FEB-2018 23-MAR-2018 25,000 20,000 - 3,250 - 651,594 (24,000) 46,000 - Jointly With Relatives At the beginning of the Year 31-MAR-2017 At the END of the Year 31-MAR-2018 At the END of the Year 31-MAR-2018 6 Sashidhar Jagdishan At the beginning of the Year 31-MAR-2017 Decrease Increase 29-DEC-2017 26-JAN-2018 At the END of the Year 31-MAR-2018 7 Sanjay Dongre At the beginning of the Year 31-MAR-2017 130,750 Decrease Increase Decrease Decrease Decrease Decrease 15-DEC-2017 22-DEC-2017 29-DEC-2017 30-DEC-2017 26-JAN-2018 02-FEB-2018 At the END of the Year 31-MAR-2018 (1,000) 65,000 (2,500) (1,000) (15,886) (9,114) - 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 - 0.03 0.00 0.00 - 0.01 0.00 0.00 0.00 0.00 0.00 0.00 - 291,915 4,215 4,215 796,155 781,155 766,155 783,655 776,655 768,655 758,655 750,655 748,655 768,655 728,655 797,655 778,655 803,655 823,655 823,655 3,250 627,594 673,594 673,594 129,750 194,750 192,250 191,250 175,364 166,250 166,250 0.01 0.00 0.00 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 0.03 0.03 0.01 0.01 0.01 0.01 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 = Allotment of equity shares on exercise of equity stock options Decrease = Sale of shares of the Bank during the year $ Market purchase HDFC Bank Limited Annual Report 2017-18 63 Directors' Report V. INDEBTEDNESS Indebtedness of the Bank including interest outstanding / accrued but not due for payment: (` crore) Secured Loans excluding deposits (1) Unsecured Loans (2) Deposits (3) Total Indebtedness - - - - 14,242.4 - 14,242.4 74,028.9 - 918.8 74,947.7 37,830.0 (2,075.0) 35,755.0 74,028.9 - 918.8 74,947.7 52,072.4 (2,075.0) 49,997.4 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) 123,105.0 - 1,840.1 124,945.1 (1) Secured borrowings represent borrowings under collateralized borrowing and lending obligations and transactions under liquidity 108,865.0 - 1,837.7 110,702.7 14,240.0 - 2.4 14,242.4 adjustment facility and marginal standing facility. (2) Movement in long-term subordinated debt is shown on a gross basis. (3) 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. 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 Kaizad Bharucha (Deputy Managing Director) Aditya Puri (Managing Director) (Executive Director) (`) Total Amount 72,655,583 42,136,068 34,533,068 149,324,719 18,254,678 7,777,620 6,681,521 32,713,819 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 314,122,500 - - 206,087,825 - - 78,095,100 598,305,425 - - - - - as per cent of proﬁts - others, specify 5 Others * Total (A) ** Ceiling as per the Act^ 5,589,360 96,499,621 3,097,223 53,010,911 2,125,680 10,812,263 43,340,269 192,850,801 ^ 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 2017-18 64 Directors' Report * 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. B. Remuneration to other Directors: Sr. no. Name of Director Independent Directors 1 Mrs. Shyamala Gopinath 2 Mr. Partho Datta 3 Mr. Bobby Parikh Particulars of Remuneration Fees for attending Board / committee meetings Commission# Others (`) Total Amount 2,350,000 - 3,123,662 5,473,662 1,950,000 1,000,000 2,250,000 1,000,000 4 Mr. A.N. Roy (resigned w.e.f. January 31, 2018) 1,950,000 1,000,000 5 Mr. Malay Patel 6 Mr. Umesh Chandra Sarangi 1,650,000 1,000,000 1,450,000 1,000,000 Sub total (i) 11,600,000 5,000,000 3,123,662 19,723,662 Other Non-Executive Directors 1 Mrs. Renu Karnad (resigned w.e.f. January 20, 2018) 1,400,000 1,000,000 2 Mr. Keki Mistry 3 Mr. Srikanth Nadhamuni Sub total (ii) Total (i+ii) Ceiling as per the Act^ 1,450,000 1,000,000 1,350,000 1,000,000 4,200,000 3,000,000 15,800,000 8,000,000 3,123,662 26,923,662 - - - - - 2,950,000 3,250,000 2,950,000 2,650,000 2,450,000 - - - - 2,400,000 2,450,000 2,350,000 7,200,000 # 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 2017-18 pertains to the FY 2016-17. Total Managerial Remuneration = (A)+(B) = ` 219,774,463 ^ 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 2017-18 65 Directors' Report C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MANAGING DIRECTOR / WHOLE TIME DIRECTOR (`) / MANAGER Sr. no. Particulars of Remuneration 1 Gross salary Key Managerial Personnel Mr. Sanjay Dongre Mr. Sashidhar Jagdishan (Company Secretary) (Chief Financial Ofﬁcer) Total (a) Salary as per provisions contained in section 17(1) of 10,036,774 19,878,305 2,99,15,079 the Income-tax Act, 1961 (b) Value of perquisites u/s 17(2) of Income-tax Act, 1961 211,042 1,586,613 1,797,655 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*** 73,370,700 64,153,900 137,524,600 3 Sweat Equity 4 Commission - as percent of proﬁts - others, specify 5 Others* Total** - - - - - - 339,312 519,588 858,900 10,587,128 21,984,506 32,571,634 * 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 2017-18 66 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 a e r h t i l 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 l f o s r a u c i t r a p f o e r u s o c s d r o i l f m r o F o t e r e h t o s v o r p d r i h t i r e d n u s n o i t c a s n a r t h t g n e l ’ s m r a n a t r e c i i g n d u c n l i 3 1 0 2 i , t c A s e n a p m o C e h t f o 8 8 1 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 l f o ) 2 ( 8 e u R d n a t c A e h t f o 4 3 1 n o i t c e s f o ) 3 ( n o i t c e s - b u s f o ) h ( e s u a c l o t 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 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 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 t a e D s l i t a e D . 1 . 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 f o y r a i d i s b u S k n a B e h t d e t i m L i s e c i v r e S l a i i c n a n F B D H d e t i i m L C F D H y t r a p d e t a l e r e h t f o ) s ( e m a N ) a ( k n a B e h t f o i i y r a d s b u S k n a B e h t f o r e t o m o r P i p h s n o i t a l e r f o e r u t a N 7 9 . 0 5 2 : e u l a V : e u l a V 0 0 . 5 8 8 , 1 i g n d n a t s t u O t n e m t s e v n I : e u l a V 3 8 . 4 0 1 i g n d n a t s t u O 9 8 . 3 8 9 : e u a V l 7 4 . 0 4 6 l : e u a V 4 4 . 3 3 1 : e u a V l i g n d n a t s t u O t n e m t s e v n I i g n d n a t s t u O s n a o l e m o H 0 1 . 5 4 2 : e u l a V i g n d n a t s t u O : e u l a V 1 9 . 0 9 5 , 1 2 3 . 4 1 1 : e u a V l : e u a V l 0 0 . 5 0 1 , 2 : e r u s o p x E 6 7 . 0 8 4 9 . 3 2 6 , 5 g n i c i v r e S t i d e r C : d e s a h c r u p 7 6 . 6 8 3 : s e e f : e u l a V 7 7 . 0 5 2 , 3 s e u n i t n o c f o g n i c i v r e s d e n g i s s a e h t o i l o f t r o p h c i h w r o f s y a p k n a B g n i c i v r e s . s e e f f o t p i e c e R s t i s o p e D / r o t a c i d n y S & r e g n a r r A t s e r e t n I d e n r a e t i d e r C y t i l i c a f t r o p p u S s e l a S e c ﬁ f O k c a B f o t n e m y a P f o t n e m y a P r o t s e v n I t i d e r C n o d e d i v o r p s e e F e c i v r e S t r o p p u S y t i l i c a F d e d i v o r p s e e F e c i v r e S t n e m y a P s d r a w o t n o i t c e l l o c i s e c v r e s d e l i a v a s n o i t c a s n a r t i g n c i v r e s f o s e e f f o i t p e c e R s t i s o p e D r o t s e v n I e g n a h c x e t n e m y a p d n a s n a o l e m o h & r e g n a r r A i n g e r o F d n a s n a o l e m o h f o g n i c r u o s s t i s o p e D / s t n e m e g n a r r a / s n o i t c a s n a r t / i r o t a c d n y S e v i t a v i r e D f o e s a h c r u P m o r f e m o c n I f o t p i e c e R s t c a r t n o c f o e r u t a N ) b ( g n i y r a V s e i t i r u t a m g n i y r a V s e i t i r u t a m - 2 4 o t p U s h t n o m s r a e y 2 s r a e y 5 l i t n U i g n y r a V i g n y r a V i g n y r a V r a e y 1 r a e y 1 n o i t a n m r e t i s e i t i r u t a m s e i t i r u t a m s e i t i r u t a m . k n a B e h t d n a m r e T d n a m e d s t i s o p e d / r o t a c i d n y S & r e g n a r r A r o f r o t s e v n I h t i w d e c a l p . s d n o B / s D C N t s e r e t n I . d e n r a e s n a o L m r e T t r o p p u s l s e a S e c ﬁ f o k c a B . d e d i v o r p 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 s e c i 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 / i r o t a c d n y S & r e g n a r r A r o f r o t s e v n I e v i t a v i r e D s a h k n a B e h T k n a B e h T i n g e r o f d n a n o i t p o n a e m o h s e c r u o s e g n a h c x e e s a h c r u p o t r o f s n a o l s t c u d o r p y t r a p a t a d s a h c u s n o i t c e l l o c h t i w d e c a p l . s d n o B / s D C N s n o i t c a s n a r t % 0 7 o t p u . k n a B e h t e h t y b d e l i a v a . s e u d y b i d e d v o r p i g n s s e c o r p r e m o t s u c f o . k n a B e h t e h t h t i w . k n a B s n a o l e h t f o y b d e c r u o s . d t L C F D H s t i h g u o r h t / s e h c n a r b . k n a B . d t L C F D H . t i . s l e n n a h c g n i 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 ( d n a m r e T d n a m e d s t i s o p e d h t i w d e c a l p 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 f o r o s t c a r t n o c e h t s m r e t t n e i l a S ) d ( . k n a B e h t , e u l a v e h t i g n d u l c n i : y n a f i . . 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HDFC Securities Limited 2. HDB Financial Services Limited Minority Interest in all subsidiaries 0.91% 5.66% 0.33% 1,000.78 6,202.23 356.33 1.86% 5.14% 0.28% 344.42 952.00 51.34 *The subsidiaries are domestic entities **Consolidated net assets are total assets minus total liabilities including minority interest ***Amounts are before inter-company adjustments. (` crore) Name of entity Investment as per equity method as of March 31, 2018 Share of proﬁt or loss for the year ended March 31, 2018 As % of consolidated net assets Amount As % of consolidated proﬁt or loss Amount 19.20% Refer Note 0.003% 0.52 Associate*: International Asset Reconstruction Company Private Limited ** *The associate is a domestic entity **During the year ended March 31, 2018, the Bank’s stake in IARC, hitherto at 29.4%, reduced to 19.2% due to further issue of equity shares made by IARC in which the Bank did not participate. Accordingly, IARC ceased to be an associate company of the Bank with effect from March 9, 2018. HDFC Bank Limited Annual Report 2017-18 68 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 209:1 118:1 98:1 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 15.00 12.00 12.00 3.50 2.00 *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 11.17 per cent. 4. The number of permanent employees on the rolls of the Bank As of March 31, 2018 the number of permanent employees on the rolls of the Bank was 88,253. 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. The average percentage increase for Key Managerial Personnel : 8.90 per cent The average percentage increase for Non Managerial Staff : 8.97 per cent 6. Afﬁrmation that the remuneration is as per the remuneration policy of the company: YES HDFC Bank Limited Annual Report 2017-18 69 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, 2018 Sr. No. Name of the Employee Designation Date of joining the Bank Qualiﬁcations Age Exp. Total (`) Last Employment Persons in service for the whole year and drawing emoluments more than ` 1,02,00,000/- per annum Details of top ten employees in terms of remuneration drawn 1 Aditya Puri Managing Director 12-Sep-94 B.Com, CA. 67 45.0 96,499,621 Citibank 2 Paresh Sukthankar Deputy Managing Director 1-Sep-94 B.Com, M.M.S, A.M.P (Harvard 55 32.9 53,010,911 Citibank Business School) 3 Kaizad M. Bharucha Executive Director 4-Oct-95 B.Com 53 32.3 43,340,269 SBI Commercial & Intl. Bank Ltd. 4 Abhay Aima Group Head 2-Jan-95 Grad. from National Defence 56 31.2 26,269,979 INDSEC Securities & Finance Ltd. Academy 5 Roli Jamthe* Dy. Vice President 5-Apr-11 MBA, B.Sc, PGDSM 41 16.8 25,957,720 Royal Bank Of Scotland 6 Rakesh Singh Group Head 11-Apr-11 MBA, B.Sc 49 25.0 23,747,990 Roth Child 7 Ashish Parthasarthy Group Head 1-Nov-94 B.E, PGDM 50 28.8 22,878,088 INDSEC Investments Ltd. 8 Navin Puri Group Head 1-Feb-99 B.Com, MBA, CA. 60 35.3 22,437,897 ANZ Grindlays Bank 9 Sashidhar Jagdishan Group Head 5-Feb-96 B.Sc, ACA., M.A. (Economics) 53 28.6 21,984,506 Deutsche Bank 10 Bhavesh Zaveri Group Head 13-Apr-98 M.Com, CAIIB 52 29.0 21,797,245 Barclays Bank Persons in service for the whole year and drawing emoluments more than ` 1,02,00,000/- per annum, other than above 1 Abhishek Bhuwalka Sr Vice President-I 10-Jun-99 MBA, CWA, B.Com 41 22.5 13,398,871 Matchless Packaging Industries (P) Ltd. 2 Aditya Dhananjai Kumat Senior Manager 1-Jun-12 MBA, B.Tech 29 5.9 10,722,540 Fresher 3 Ajay Kumar Kapoor Sr Exe Vice President 9-Oct-95 M.Sc. 54 32.1 13,420,136 Times Bank Ltd. 4 Ajit Cherian Kuruvilla Sr Vice President-II 23-Aug-99 Diploma, CA, B.Com 51 24.7 12,090,266 Global Trust Bank 5 Akshat Lakhera Sr Vice President-I 9-Sep-10 PGDM, B.Sc 41 16.7 16,766,987 BNP Paribas 6 Ameya Shekhar Shenoy Sr Vice President-I 20-Mar-06 MBA, CA, B.Com 39 13.8 10,831,509 Tionale Enterprises Pvt Ltd 7 Amit Dayal Exe. Vice President 19-Dec-94 B.Sc, DBM 51 26.9 17,054,750 SBI Commercial & Intl. Bank Ltd 8 Amit Prakash Kapadia Dy. Vice President 6-Sep-06 PGDBM, M.Com 39 12.7 12,026,855 Citibank N A 9 Anand Dusane Exe. Vice President 1-Jan-96 CAIIB, M.Com 46 25.3 10,311,744 State Bank Of Travancore 10 Anil L. Bhavnani Exe. Vice President 16-Jun-03 CS, B.Com 45 23.9 12,213,324 CitiCorp Finance I Ltd. 11 Ankush Pitale Exe. Vice President 28-Jul-14 MMS 46 22.4 11,797,299 Religare Capital Markets Pvt. Limited 12 Anupama Rajesh Munagekar Sr Vice President-I 14-Feb-07 LLB, B.Com 50 26.4 17,774,821 Strategic Capital Corporation Pvt Ltd 13 Arun Mohanty Sr Exe Vice President 9-Nov-05 BA 60 35.6 16,789,065 Reserve Bank Of India 14 Arup Kumar Rakshit Sr Exe Vice President 1-Aug-06 PGDM, BE 49 25.8 21,572,908 ABN Amro Bank 15 Arvind Kapil Group Head 18-Dec-98 MMS, B.E 47 24.1 14,581,309 GE Countrywide Consumer Financial Services Ltd. 16 Ashima Khanna Bhat Group Head 7-Nov-94 B. Bus, MMS 47 25.3 16,181,625 A F Ferguson & Co 17 Ashok Khanna Group Head 19-Jun-02 MA 61 36.8 16,534,435 Centurion Bank 18 Ashtosh Raina Sr Vice President-I 3-Sep-07 CAIIB, B.Sc. 50 27.5 12,601,001 State Bank Of India 19 Atul Sadashiv Barve Sr Exe Vice President 28-Feb-07 MMS, MA, B.Sc 55 33.6 11,562,195 IDBI Ltd 20 Bardan Sharma Sr Vice President-II 23-Nov-11 Master's Degree / Dip, B.Com 44 18.5 10,402,830 Diageo India Pvt Ltd HDFC Bank Limited Annual Report 2017-18 70 Directors' Report Sr. No. Name of the Employee Designation Date of joining the Bank Qualiﬁcations Age Exp. Total (`) Last Employment 21 Beena Shah Dy. Vice President 26-May-15 MBA, B.Com 40 14.0 17,122,400 Kotak Mahindra Bank 22 Benjamin Frank Sr Exe Vice President 5-Apr-04 MBA, B.Sc 54 31.9 13,763,821 IDBI Bank Ltd. 23 Benson Benadict Dy. Vice President 27-Nov-13 MBA, B.Tech 39 13.5 12,282,119 Standard Chartered Bank 24 Bharat Badhwar Sr Vice President-II 28-Sep-02 BA 45 23.7 10,285,665 Bharti Telenet Ltd 25 Bhaskar C. Panda Sr Vice President-II 21-Nov-97 BA 56 32.7 15,972,742 Times Bank Ltd. 26 Charmaine Pereira Sr Vice President-II 1-Nov-94 DBM, BA 45 23.4 14,146,458 Fresher 27 Cheshta Chopra Sharma Vice President 22-Aug-00 PGDBA, BA 45 18.7 10,274,140 N S E of India Ltd 28 Debajeet Das Exe. Vice President 6-Aug-96 MA 46 22.6 18,214,557 Texport syndicate 29 Deepak Kumar Mohanty Sr Exe Vice President 24-Dec-03 M.Sc, MBA 55 24.6 10,593,359 ICICI Bank Ltd 30 Dolreich D'Mello* Dy. Vice President 9-Jan-97 B.Com 42 21.5 11,998,920 ANZ Grindlays Bank 31 Fayaz Ainodin Patel* Asst. Vice President 2-Aug-10 MBA, B.Com 39 11.3 11,613,706 Sharekhan Ltd 32 Gourab Roy Exe. Vice President 1-Mar-96 M.Com 51 25.2 11,881,467 UTI Bank Ltd 33 Harrish Mahadevan Dy. Vice President 6-Apr-11 BCA 34 13.1 14,533,128 Citibank 34 Harsh S Gupta* Sr Vice President-II 4-Sep-00 PGDBA, B.Sc 42 20.1 18,385,111 ICICI Cap Ltd 35 Jay Prakash Chandrashekar* Dy. Vice President 5-Jul-04 MBA, B.Com 40 16.8 14,565,480 Global Trust Bank 36 Jay Sonawala Sr Vice President-II 12-Aug-99 MMS, B.Com 42 18.6 13,104,168 Fresher 37 Jimmy Tata Group Head 15-Dec-94 B.Com., M.F.M., CFA 52 30.2 19,601,483 Apple Industries Ltd. 38 K. Manohara Raj Sr Exe Vice President 6-Dec-96 CAIIB, B.Com 60 38.1 12,062,687 Times Bank Ltd. 39 Kapil Bansal Sr Vice President-I 30-Sep-04 PGPM, B.Com 40 18.8 12,907,772 ICICI Bank Ltd. 40 Kartik Hirachand Nagda Sr Vice President-II 29-Nov-04 MBA, B.Sc 42 16.4 10,507,796 GE Countrywide Consumer Financial Services Ltd 41 Kinjul Sharma* Asst. Vice President 22-Sep-08 Master's Degree/Dip, B.Com 37 13.1 10,933,376 Citiﬁnancial 42 Madhusoodan Hegde Sr Exe Vice President 11-Feb-97 CAIIB, B.Sc. 57 33.3 12,775,234 Times Bank Ltd. 43 Mahesh Kumar Jugal Sr Vice President-I 11-Jun-05 LLB, CS, CA, B.Com 41 16.1 10,913,216 UTI Bank Ltd Kishoretaparia 44 Maheswara P Reddy Sr Vice President-II 6-May-02 MBA, BA 47 22.2 14,269,272 American Express Bank 45 Manu Joseph* Dy. Vice President 13-Nov-11 MMS, BE 41 15.6 13,550,155 Citibank 46 Mathew Varghese* Asst. Vice President 15-Jul-10 MMS, BE 39 15.9 10,353,503 Citibank 47 Mayuresh Vasant Apte Sr Vice President-II 6-Nov-00 MMS, B.Tech 49 24.8 11,770,418 Centurion Bank Ltd 48 Meghna Atul Vaidya Sr Vice President-II 1-Aug-08 MMS, B.Com 44 20.8 10,502,253 Barclays Bank PLC 49 Mohammed Hannan Abdul * Asst. Vice President 1-Jul-09 MBA, B.Sc 39 15.3 16,130,352 Barclays Bank PLC 50 Mohammed Mansoor Azher* Dy. Vice President 10-Feb-03 MBA, B.Com 39 15.2 10,727,031 Fresher 51 Munish Mittal Group Head 17-Aug-96 PGDM, B.Sc. 50 30.7 14,632,802 Bank Of Punjab 52 N. Srinivasan Sr Exe Vice President 11-Nov-96 CA, CWA, CS., B.Com 50 27.7 12,959,878 Credential Finance 53 Neil Percy Francisco Group Head 20-May-02 MBA, M.Sc, BE 56 27.3 13,235,464 Standard Chartered bank 54 Niloy Dey Dy. Vice President 1-Apr-05 CFA, MBA, B.Com 42 14.1 12,024,702 ING Vysya Financial Services Ltd 55 Nirav Shah Group Head 15-Jul-99 MMS, B.Com 46 22.8 21,542,762 Global Trust Bank 56 Nitin Chugh Group Head 16-Apr-01 PGDM, B.Tech 47 23.1 17,064,842 Standard Chartered Bank HDFC Bank Limited Annual Report 2017-18 71 Directors' Report Sr. No. Name of the Employee Designation Date of joining the Bank Qualiﬁcations Age Exp. Total (`) Last Employment 57 Nitish Nagori Exe. Vice President 1-Jun-10 PG Diploma, B.Sc 47 15.2 11,028,563 ICICI Bank Ltd 58 Pallava Rathore* Vice President 27-Jun-08 B.Sc 42 17.2 15,826,571 IDBI Bank Ltd 59 Parag Rao Group Head 15-Apr-02 MMS, B.E. 53 28.6 14,791,387 IBM Global Services 60 Payal Mandhyan* Vice President 18-Jan-05 PGDBM 40 14.5 18,761,708 India Bulls Securities Ltd. 61 Philip Mathew Group Head 3-Apr-02 MA, B.Sc. 55 28.6 12,107,445 SSKI Investor Services 62 Pranav Bharat Shah Dy. Vice President 21-Jul-11 PGDBM, B.Com 37 11.8 11,294,161 Citibank N A 63 Pratap Luthra Dy. Vice President 13-Aug-05 MBA, BA 36 15.1 13,747,206 ABN Amro Bank Ltd 64 Prem Chand Exe. Vice President 13-Aug-07 BA 59 40.5 10,206,461 UTI Bank Ltd 65 Pushkar Raghavan Surendran Dy. Vice President 11-Jan-11 MBA, B.Com 39 15.4 13,965,721 HSBC 66 Rahul Bhandari* Vice President 5-Feb-02 PGDBM, B.Com 40 16.2 13,901,833 Fresher 67 Rajeev Sengupta Sr Exe Vice President 21-Sep-07 PG (Gen Mgmt), BE 57 34.7 11,291,157 Hutchison Essar Ltd 68 Rajeev Wariar* Vice President 15-Apr-10 PGDBA, BE 43 18.8 15,677,840 Citi Bank 69 Rajesh Kumar Rathanchand Group Head 22-May-00 PGDM, B.Sc. 47 28.7 13,937,695 Trans America Apple Finance Ltd. 70 Rajesh Sharma Sr Vice President-II 15-Nov-00 CA, CS, B.Com 42 23.6 12,661,663 LCC Infotech Ltd 71 Rajinder Babbar Exe. Vice President 16-Jan-01 LLB, B.Sc 51 30.5 14,707,546 Centurion Bank Ltd 72 Rashmi Singh Dy. Vice President 29-Mar-10 MBA, B.Sc 34 10.1 11,528,932 Religare Macquarie Wealth Management Ltd 73 Raveesh Kumar Bhatia Sr Exe Vice President 3-May-10 PGDM, B.Com 52 27.4 14,762,920 Fore Consultants Pvt Ltd 74 Ravi Narayan Group Head 3-May-99 MBA, B.Tech 49 24.8 15,004,158 Bank Of America 75 Ravi Santhanam Exe. Vice President 1-Mar-17 PG Diploma, BE 48 25.0 13,881,196 Vodafone India 76 Ravi Ssn 77 Reji John* Sr Vice President-II 26-Nov-10 B.Com 50 25.3 11,987,760 Deutsche Bank Senior Manager 30-Aug-10 PG Diploma, MA 37 13.7 11,571,927 Aviva India Life Insurance Co Ltd 78 Resham A. Mahtani Sr Vice President-I 1-May-01 PGPIM, PGDBM, BA 42 19.9 13,207,273 Mecklai Financial & Commercial Services Ltd. 79 Rheetu Karthik* Vice President 15-Mar-05 MBA, MA 47 19.5 12,257,331 MetLife India Insurance Co Ltd 80 Ritesh Sampat Sr Vice President-II 3-Jan-12 CA, B.Com 42 17.9 16,996,885 Standard Chartered Bank 81 Roopesh H. Patil Sr Vice President-I 28-Feb-00 MBA, B.Com 44 22.2 14,980,550 Dalal & Broacha Stock Broking Pvt Ltd 82 Samrat Bose Sr Vice President-II 17-May-02 Master's Degree/Dip - Others, 42 18.0 15,030,397 Parasmoney Investments B.Com 83 Sanjay Dongre Exe. Vice President 2-May-95 B.Com, ACS, CWAINT, LLB. 60 35.8 10,587,128 Boehringer Mannheim Ltd. 84 Sanjay K.Singla Sr Vice President-II 10-Nov-07 PGDM, B.Com 59 36.3 14,703,083 State Bank of India 85 Sanmoy Chakrabarti Sr Exe Vice President 15-Jun-10 MS, B.Sc 43 19.2 14,491,077 Bank Danamon 86 Saroj Kumar Swain Sr Vice President-I 25-Aug-04 MBA, B.Com 41 16.8 14,882,797 Jaquar& Co Ltd 87 Sathyamurthy Sampath Kumar Sr Exe Vice President 7-Aug-00 B.Com 46 27.6 15,987,458 Integrated Finance Co. Ltd. 88 Satish Chandra Sr Vice President-I 16-Dec-04 B.Com 51 28.4 10,415,407 Global Trust Bank (Merged into Oriental Bank of Commerce) 89 Sharad Kourani* Senior Manager 10-Aug-08 B.Com 39 21.8 13,732,483 HDFC Bank Ltd 90 Sharad Rungta Sr Vice President-II 2-Jun-12 CFA, CA, B.Com 41 17.4 18,726,875 Credit Suisse AG 91 Sharad Vijay Goenka Sr Vice President-I 27-Jan-11 CA, B.Com 39 15.3 10,821,247 HSBC HDFC Bank Limited Annual Report 2017-18 72 Directors' Report Sr. No. Name of the Employee Designation Date of joining the Bank Qualiﬁcations Age Exp. Total (`) Last Employment 92 Sheetal Garg Dy. Vice President 5-Sep-11 MMS, B.Com 39 12.7 10,269,397 DBS Bank Ltd 93 Sheetal Kapadia* Dy. Vice President 6-May-09 PGDMS, B.Com 41 18.0 14,466,555 ICICI Bank Ltd 94 Silvestre Anthony Pereira Vice President 15-Sep-06 MBA, PG Diploma, B.Com 40 15.8 12,013,317 UTI Bank Ltd 95 Sitanshu Mitra Sr Exe Vice President 1-Sep-95 MBA, B.Sc 50 30.2 10,247,031 ABN Amro Bank Ltd. 96 Smita Bhagat Group Head 12-Jul-99 M.Com, MBA 53 29.8 12,192,885 PDCOR Ltd. 97 Steven Noronha* Dy. Vice President 19-Jul-11 B.Com 42 10.8 10,953,694 Al Maha Financial Services Ltd 98 Sudesh Puthran Exe. Vice President 28-Dec-15 Master's Degree/Dip-Others, BE 49 25.3 13,214,215 CIBIL 99 Sukarm Bali* Sr Vice President-I 23-Jul-99 CA, B.Com 51 25.9 16,225,128 Times Bank Ltd. 100 Sumant Rampal Exe. Vice President 10-Aug-99 MBA, B.Com 43 20.8 13,099,459 Walchand Capital Ltd. 101 Sundaresan M. Exe. Vice President 2-May-02 BE (Mechanical), PSG, MBA 47 24.0 10,809,507 GE Countrywide Consumer Financial Services Ltd. 102 Umashankar Gopalan* Dy. Vice President 13-Dec-12 B.Com 50 24.0 18,622,028 ICICI Bank 103 V S Unnikrishnan* Vice President 12-Apr-03 MBA, B.Sc, PUC 43 20.2 12,889,601 Global Trust Bank Ltd 104 V. Chakrapani Group Head 24-Nov-94 B.Com, CAIIB, ACS 54 33.9 16,857,723 Standard Chartered Bank 105 Veeresh Hiremath* Asst. Vice President 28-Apr-08 B.Com 37 12.0 11,854,058 RAK Bank 106 Vijay Krishna Mulbagal Exe. Vice President 2-Jan-07 PGPM, B.Sc 47 23.1 14,569,441 Diamond Management & Technology Consultants 107 Vikas Rathore Dy. Vice President 16-Jun-08 MMS, B.Tech 34 9.9 16,890,785 Fresher 108 Vitthal Mangesh Kulkarni Sr Vice President-II 22-Sep-07 M.Sc, BE 47 24.1 11,863,078 Barclays Capital Employed for part of the year 109 Aseem Dhru Group Head 2-May-15 CA,CWA, B.Com 48 22.5 11,613,839 HDFC Securities Ltd 110 Deepak Dnyandeo Koyande Vice President 27-Sep-10 LLB, M.Com 61 36.7 5,985,949 SPA Securities Ltd 111 Deepam Sanghi Sr Vice President-II 10-Jul-17 PGDBM, B.Tech 43 20.9 8,987,922 Rothschild (India) Private Limited 112 Govind Pandey Sr Exe Vice President 5-Aug-98 M.Sc 61 35.3 4,547,115 State Bank of Saurashtra 113 K Balasubramanian Group Head 3-May-16 CA, ICWA, B.Com 47 21.6 15,985,965 Citibank 114 Nishikant Das Exe. Vice President 23-Apr-12 PGDM, B.Tech 46 20.0 18,318,036 Standard Chartered Bank 115 Nitin Subramanya Rao Group Head 25-Jul-02 BE, MBA 51 27.0 17,838,796 BNP Paribas 116 Rahul Shukla Group Head 1-Mar-18 MBA, B.Tech 49 26.2 1,620,891 Citibank NA 117 Rajender Sehgal Group Head 23-Feb-98 B.Sc., MBA 63 40.4 4,543,755 Times Bank Ltd. 118 Sonit Singh Sr Vice President-I 5-Mar-18 PG Diploma, MBA, B.Com 40 14.2 757,587 Standard Chartered Bank 119 Unmesh Sharma Sr Vice President-I 4-Dec-17 CFA, MBA, BE 38 14.4 3,395,109 Macquarie Capital Securities 120 Vivek Nigam Sr Vice President-II 3-Apr-17 MBA, B.Tech 49 27.0 10,739,975 ICICI BANK Notes: 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, 2018. 6. Other than Mr. Aditya Puri, Managing Director who holds 0.14% 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, 2018. 7. None of the employees listed above is a relative of any director of the Bank. HDFC Bank Limited Annual Report 2017-18 73 Directors' Report ANNEXURE 8 to the Directors’ Report Form No. MR-3 SECRETARIAL AUDIT REPORT For the ﬁnancial year ended 31st March 2018 [Pursuant to section 204 (1) of the Companies Act, 2013 and Rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014] To The Members HDFC Bank Limited HDFC Bank House, Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013 We have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to corporate practices by HDFC Bank Limited (hereinafter called the ‘Bank’) for the audit period covering the ﬁnancial year from 01st April 2017 to 31st March 2018 (‘the audit period’). 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 Audit, we hereby report that in our opinion, the Bank has, during the audit period complied with the statutory provisions listed hereunder and also that the Bank has proper Board processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter. We have examined the books, papers, minute books, forms and returns ﬁled and other records maintained by the Bank for the ﬁnancial year ended on 31st March, 2018 according to the provisions of: (i) The Companies Act, 2013 (‘the Act’) and the Rules made there under; (ii) The Securities Contracts (Regulation) Act, 1956 and the Rules made there under; (iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under; (iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Overseas Direct Investment and External Commercial Borrowings; (v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992: (a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; (b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 except that SEBI has vide its Directions dated 23rd February,2018 came to prima facie inference that the Unpublished Price Sensitive Information relating to ﬁnancials of the Bank for the ﬁrst quarter of 2017-18 was leaked due to inadequacy of the processes, controls, systems put in place by the Bank to prohibit Insider Trading and hence, inter alia, directed the Bank to strengthen the same so that the same do not recur in the future and to conduct an internal inquiry into the said leakage and take action against those responsible for the same; (c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009; (d) The Securities and Exchange Board of India (Share Based Employee Beneﬁts) Regulations, 2014; (e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008; (f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client; (g) The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015; (h) The Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992; (i) (j) The Securities and Exchange Board of India (Bankers to an Issue) Regulation, 1994; The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014; (k) The Securities and Exchange Board of India (Custodian of Securities) Regulations, 1996. (vi) The Banking Regulation Act, 1949 as speciﬁcally applicable to the Bank. HDFC Bank Limited Annual Report 2017-18 74 Directors' Report We have also examined compliance with the applicable clauses of the Secretarial Standards issued by The Institute of Company Secretaries of India related to Board meetings and General Meetings; 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: (i) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; (ii) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998; (iii) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment; 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. Decisions at the meetings of the Board of Directors of the Bank were carried through on the basis of majority. There were no dissenting views by any member of the Board of Directors during the period under review. We further report that there are adequate systems and processes in the Bank commensurate with the size and operations of the Bank to monitor and ensure compliance with the applicable laws, rules, regulations and guidelines. We further report that during the audit period, the Bank has following speciﬁc events: a) b) c) d) The Bank has issued and allotted on May 12, 2017 on a private placement basis 8.85% Unsecured, Subordinated, Fully Paid-Up, Non-Convertible, Basel III compliant, Perpetual Debt Instruments in the nature of debentures for inclusion in Additional Tier I Capital amounting to ` 8,000 Crores (80000 Bonds of face value ` 10,00,000/- each. The Bank has issued and allotted on June 29, 2017 on a private placement basis 7.56% Unsecured, Subordinated, Fully Paid-Up, Non-Convertible, Basel III compliant, Tier 2 Bonds for inclusion in Tier 2 Capital for capital adequacy purpose amounting to ` 2,000 Crores (20000 Bonds of face value ` 10,00,000/- each. The Bank has obtained the consent of the members on July 24, 2017 for borrowing/raising funds in Indian currency by issue of perpetual Debt Instruments (parts of Additional Tier I capital), Tier II Capital Bonds and Senior Long Term Infrastructure Bonds in domestic market on a private placement basis in one or more tranches of an amount not exceeding Rs 50,000 crore. The Bank has obtained the consent of the Members at Extraordinary General Meeting dated January 19, 2018 to raise additional funds aggregating up to ` 24,000 Crores, of which such number of Equity Shares aggregating upto ` 8,500 Crores by way of preferential issue of equity shares of face value of ` 2/- each are proposed to be issued to Housing Development Finance Corporation Limited (the Bank’s promoters) and the balance shall be through the issuance of equity shares / convertible securities / depository receipts pursuant to a Qualiﬁed Institutions Placement (QIP) / American Depository Receipts (ADR) / Global Depository Receipt (GDR) program. e) The Bank has issued INR 23 billion rupee denominated bonds on 15th March, 2018, which are in the nature of external commercial borrowings and the Reserve Bank of India approval received for the same. For BNP & Associates Company Secretaries [Firm Regn. No. P2014MH037400] B Narasimhan Partner FCS No.: 1303 C P No.: 10440 Place: Mumbai Date: May 22, 2018 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 2017-18 75 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 procedures 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 responsibility 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 regulations and major events during the audit period. 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 Place: Mumbai Date: May 22, 2018 HDFC Bank Limited Annual Report 2017-18 76 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, 2018, 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 Standards prescribed under section 133 of the Act read with the Companies (Accounting Standards) Rules, 2006, as amended, in so far as applicable to banks (“Accounting Standards”), other accounting principles generally accepted in India 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 irregularities; selection and detecting 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 Standards and other accounting principles generally accepted in India, of the state of affairs of the Bank as at 31st March, 2018, 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 2017-18 77 f) g) h) i) In our opinion, the aforesaid standalone ﬁnancial statements comply with the Accounting Standards prescribed under section 133 of the Act, as applicable to Banks. On the basis of the written representations received from the Directors of the Bank as at 31st March, 2018 taken on record by the Board of Directors, none of the Directors is disqualiﬁed as at 31st March, 2018 from being appointed as a Director in terms of Section 164 (2) of the Act. 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. 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: The Bank has disclosed the impact of pending its litigations on standalone ﬁnancial statements; its ﬁnancial position in i. ii. 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 111 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) The Bank has made provision, as required under law or accounting standards, for material foreseeable losses, if the applicable Mumbai April 21, 2018 HDFC Bank Limited Annual Report 2017-18 78 ANNEXURE “A” TO THE REPORT INDEPENDENT AUDITOR’S (Referred to in paragraph 1.h under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date) Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”) for Internal Financial We have audited the internal ﬁnancial controls over ﬁnancial reporting of HDFC BANK LIMITED (“the Bank”) as at 31st March, 2018 in conjunction with our audit of the standalone ﬁnancial statements of the Bank for the year ended on that date. Management’s Responsibility 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. An audit involves performing procedures to obtain audit internal ﬁnancial evidence about 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, the adequacy of the the reliability of ﬁnancial reporting and whether due to fraud or error. 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 the regarding preparation of ﬁnancial statements for external purposes in accordance with generally accepted accounting principles and other applicable regulations. A company’s internal ﬁnancial control over ﬁnancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the ﬁnancial statements. Inherent Limitations of Internal Financial Controls Over Financial Reporting Because of the inherent limitations of internal ﬁnancial controls over ﬁnancial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal ﬁnancial controls over ﬁnancial reporting to future periods are subject to the risk that the internal ﬁnancial control over ﬁnancial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Opinion In our opinion, to the best of our information and according to the explanations given to us, the Bank has, in all material respects, an adequate internal ﬁnancial controls system over ﬁnancial reporting and such internal ﬁnancial controls over ﬁnancial reporting were operating effectively as at 31st March, 2018, 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, 2018 Porus B. Pardiwalla Partner (Membership No. 40005) HDFC Bank Limited Annual Report 2017-18 79 Balance Sheet As at March 31, 2018 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-18 ` in ‘000 As at 31-Mar-17 1 2 3 4 5 5,190,181 5,125,091 1,057,759,776 889,498,416 7,887,706,396 6,436,396,563 1,231,049,700 740,288,666 457,637,181 567,093,181 Total 10,639,343,234 8,638,401,917 6 7 8 9 10 11 1,046,704,730 378,968,755 182,446,097 110,552,196 2,422,002,416 2,144,633,366 6,583,330,908 5,545,682,021 36,072,045 36,267,379 368,787,038 422,298,200 Total 10,639,343,234 8,638,401,917 12 8,754,882,292 8,178,695,893 427,538,250 308,480,352 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, 2018 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors HDFC Bank Limited Annual Report 2017-18 80 Statement of Proﬁt and Loss For the year ended March 31, 2018 I II INCOME Interest earned Other income 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(1)] Tax (including cess) on dividend [Refer Schedule 18(1)] 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-18 ` in ‘000 Year ended 31-Mar-17 13 14 Total 15 16 802,413,550 152,203,042 954,616,592 693,059,578 122,964,990 816,024,568 401,464,913 226,903,821 151,380,575 361,667,334 197,033,442 111,827,380 Total 779,749,309 670,528,156 174,867,283 326,689,434 501,556,717 145,496,412 235,276,891 380,773,303 Total 43,716,821 - - 36,374,103 - - 33,905,804 (16,909) 17,486,728 2,355,227 (442,018) 404,534,155 501,556,717 ` 14,549,641 3,134,100 42,934 326,689,434 380,773,303 ` 67.76 66.84 57.18 56.43 V EARNINGS PER EQUITY SHARE (Face value ` 2 per share) Basic Diluted Signiﬁcant accounting policies and notes to the ﬁnancial statements The schedules referred to above form an integral part of the Statement of Proﬁt and Loss. Total 17 & 18 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, 2018 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors HDFC Bank Limited Annual Report 2017-18 81 Cash Flow Statement For the year ended March 31, 2018 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-18 ` in ‘000 Year ended 31-Mar-17 266,972,951 221,390,750 9,063,418 8,331,247 1,570,448 (87,543) 3,599,102 1,756,569 3,102 14,735 51,784,408 33,443,592 304,543 - (76,417) 250,000 5,974,259 3,921,811 Dividend from subsidiaries / associates / joint ventures (2,416,454) (1,628,640) Contingency provisions Adjustments for: (Increase) / decrease in investments (Increase) / decrease in advances Increase / (decrease) in deposits (Increase) / decrease in other assets 3,891,829 384,640 340,747,606 267,700,744 (282,699,813) (177,259,533) (1,089,405,183) (933,161,021) 1,451,309,833 972,154,643 63,297,493 (38,752,713) Increase / (decrease) in other liabilities and provisions (120,347,372) 223,763,890 Direct taxes paid (net of refunds) Net cash ﬂow from operating activities Cash ﬂows used in investing activities Purchase of ﬁxed assets Proceeds from sale of ﬁxed assets Investment in subsidiaries / associates / joint ventures Dividend from subsidiaries / associates / joint ventures Net cash used in investing activities HDFC Bank Limited Annual Report 2017-18 82 362,902,564 314,446,010 (102,161,907) (78,591,989) 260,740,657 235,854,020 (7,699,194) (10,681,751) 95,089 94,269 (143,331) (10,603,674) 2,416,454 1,628,640 (5,330,982) (19,562,516) Cash Flow Statement For the year ended March 31, 2018 Cash ﬂows from ﬁnancing activities Money received on exercise of stock options by employees Increase / (decrease) in borrowings (excluding subordinate debt, perpetual debt and upper Tier II instruments) ` in ‘000 Year ended 31-Mar-18 Year ended 31-Mar-17 27,259,099 22,615,161 411,511,034 (90,316,657) Proceeds from issue of Additional Tier I and Tier II Capital Bonds 100,000,000 - Redemption of subordinated debt Dividend paid during the year Tax on dividend Net cash (used in) / from ﬁnancing activities Effect of exchange ﬂuctuation on translation reserve Net increase in cash and cash equivalents Cash and cash equivalents as at April 1st Cash and cash equivalents as at March 31st (20,750,000) (19,084,500) (28,312,716) (24,083,093) (5,593,088) (4,807,223) 484,114,329 (115,676,312) 105,872 (282,622) 739,629,876 100,332,571 489,520,951 389,188,380 1,229,150,827 489,520,951 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, 2018 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors HDFC Bank Limited Annual Report 2017-18 83 Schedules to the Financial Statements As at March 31, 2018 SCHEDULE 1 - CAPITAL Authorised capital 3,25,00,00,000 (31 March, 2017: 3,25,00,00,000) Equity Shares of ` 2/- each Issued, subscribed and paid-up capital 2,59,50,90,267 (31 March, 2017: 2,56,25,45,717) 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-18 ` in ‘000 As at 31-Mar-17 6,500,000 6,500,000 Total 5,190,181 5,190,181 5,125,091 5,125,091 183,758,858 147,384,755 43,716,821 36,374,103 Total 227,475,679 183,758,858 71,669,150 57,119,509 17,486,728 14,549,641 Total 89,155,878 71,669,150 III Balance in proﬁt and loss account 404,534,155 326,689,434 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 2017-18 84 284,263,301 261,716,858 27,194,009 22,546,443 Total 311,457,310 284,263,301 10,635,564 10,635,564 - - Total 10,635,564 10,635,564 12,000,683 8,866,583 2,355,227 3,134,100 Total 14,355,910 12,000,683 442,018 45,086 (487,104) - 39,408 105,872 145,280 399,084 109,506 (66,572) 442,018 322,030 (282,622) 39,408 1,057,759,776 889,498,416 Total Total Total Schedules to the Financial Statements As at March 31, 2018 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 As at 31-Mar-18 ` in ‘000 As at 31-Mar-17 27,237,788 20,806,377 1,165,587,962 1,134,932,192 Total 1,192,825,750 1,155,738,569 2,238,102,098 1,935,786,335 72,775,645 53,520,609 4,384,002,903 3,291,351,050 Total 4,456,778,548 3,344,871,659 Total 7,887,706,396 6,436,396,563 7,847,886,299 6,396,405,854 39,820,097 39,990,709 Total 7,887,706,396 6,436,396,563 138,000,000 - 47,848,399 21,202,156 342,299,500 224,500,000 211,070,000 131,820,000 126,750,000 126,750,000 Total 865,967,899 504,272,156 365,081,801 236,016,510 Total 1,231,049,700 740,288,666 Secured borrowings included in I and II above: Nil (March 31, 2017: Nil) except borrowings of ` 14,239.95 crore (March 31, 2017: Nil) under Collateralised Borrowing and Lending Obligation and transactions under Liquidity Adjustment Facility and Marginal Standing Facility. SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS I Bills payable II Interest accrued III Others (including provisions) IV Contingent provisions against standard assets 82,217,908 166,670,863 56,278,541 38,488,877 289,244,562 338,011,290 29,896,170 23,922,151 Total 457,637,181 567,093,181 HDFC Bank Limited Annual Report 2017-18 85 Schedules to the Financial Statements As at March 31, 2018 SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA I Cash in hand (including foreign currency notes) II Balances with Reserve Bank of India: (a) In current accounts (b) In other accounts SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE I In India (i) Balances with banks: (a) In current accounts (b) In other deposit accounts (ii) Money at call and short notice: (a) With banks (b) With other institutions II Outside India (i) In current accounts (ii) In deposit accounts (iii) Money at call and short notice SCHEDULE 8 - INVESTMENTS A Investments in India in (i) Government securities (ii) Other approved securities (iii) Shares (iv) Debentures and bonds (v) Subsidiaries / joint ventures (vi) Others (Units, CDs / CPs, PTCs and security receipts) B Investments outside India in As at ` in ‘000 As at 31-Mar-18 31-Mar-17 75,323,281 42,635,945 364,381,449 284,332,810 607,000,000 52,000,000 971,381,449 336,332,810 1,046,704,730 378,968,755 Total Total Total Total Total 8,369,114 1,169,512 9,538,626 5,107,980 6,686,831 11,794,811 - 45,018,623 45,018,623 - - - 54,557,249 11,794,811 26,124,304 36,772,777 6,191,625 2,529,150 95,572,919 59,455,458 Total Total 127,888,848 98,757,385 182,446,097 110,552,196 1,883,648,036 1,624,186,994 - - 1,197,947 1,113,742 347,873,284 194,698,472 38,264,875 38,433,239 135,541,438 275,020,773 Total 2,406,525,580 2,133,453,220 (i) Government securities (including Local Authorities) 4,218,786 - (ii) Other investments (a) Shares (b) Debentures and bonds 28,375 28,375 11,229,675 11,151,771 15,476,836 11,180,146 2,422,002,416 2,144,633,366 Total Total HDFC Bank Limited Annual Report 2017-18 86 Schedules to the Financial Statements As at March 31, 2018 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 2017-18 87 As at ` in ‘000 As at 31-Mar-18 31-Mar-17 2,408,997,713 2,134,071,702 15,606,451 11,206,487 Total 2,424,604,164 2,145,278,189 2,472,133 129,615 Total 2,601,748 618,482 26,341 644,823 2,406,525,580 2,133,453,220 15,476,836 11,180,146 Total 2,422,002,416 2,144,633,366 216,592,055 287,159,641 1,681,643,640 1,336,174,162 4,685,095,213 3,922,348,218 Total 6,583,330,908 5,545,682,021 4,712,405,892 3,988,893,240 191,682,760 227,526,268 1,679,242,256 1,329,262,513 Total 6,583,330,908 5,545,682,021 1,728,666,886 1,625,180,583 137,708,318 157,741,065 8,357,208 9,092,668 4,505,343,473 3,555,635,492 Total 6,380,075,885 5,347,649,808 33,046,352 6,500,391 1,052,278 2,560,707 18,265,990 17,845,564 150,890,403 171,125,551 203,255,023 198,032,213 6,583,330,908 5,545,682,021 Total Total Schedules to the Financial Statements As at March 31, 2018 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 2017-18 88 As at 31-Mar-18 ` in ‘000 As at 31-Mar-17 16,110,799 15,511,704 978,572 669,442 (77,395) (70,347) Total 17,011,976 16,110,799 4,778,473 4,246,842 592,562 590,691 (74,579) (59,060) Total 5,296,456 4,778,473 11,715,520 11,332,326 80,918,907 72,467,567 7,988,185 10,604,552 (1,140,239) (2,153,212) Total 87,766,853 80,918,907 55,983,854 50,300,856 8,471,338 7,738,599 (1,044,864) (2,055,601) Total 63,410,328 55,983,854 24,356,525 24,935,053 4,546,923 4,546,923 - - Total 4,546,923 4,546,923 Schedules to the Financial Statements As at March 31, 2018 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 Security deposit for commercial and residential property Others* As at 31-Mar-18 ` in ‘000 As at 31-Mar-17 4,104,467 4,104,467 - - Total 4,104,467 4,104,467 442,456 442,456 - - Total 442,456 442,456 - - Total 36,072,045 36,267,379 90,737,523 83,095,335 18,456,556 17,442,504 333,306 267,871 - - 5,004,128 4,934,536 254,255,525 316,557,954 Total 368,787,038 422,298,200 *Includes deferred tax asset (net) of ` 3,344.02 crore (previous year: ` 2,447.34 crore) and deposits placed with NABARD / SIDBI / NHB on account of shortfall in lending to priority sector of ` 13,357.25 crore (previous year: ` 11,882.37 crore) SCHEDULE 12 - CONTINGENT LIABILITIES I II Claims against the bank not acknowledged as debts - taxation Claims against the bank not acknowledged as debts - others 11,359,333 10,721,500 1,042,772 1,081,701 III Liability on account of outstanding forward exchange contracts 4,344,675,713 4,699,301,366 IV Liability on account of outstanding derivative contracts 3,482,687,822 2,723,068,634 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 448,741,092 366,232,012 557,296 953,405 395,452,699 359,613,744 70,365,565 17,723,531 Total 8,754,882,292 8,178,695,893 HDFC Bank Limited Annual Report 2017-18 89 Schedules to the Financial Statements For the year ended March 31, 2018 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-18 31-Mar-17 626,617,888 520,552,624 162,223,679 159,443,391 5,238,842 8,333,141 5,320,205 7,743,358 Total 802,413,550 693,059,578 113,938,744 88,115,530 10,817,025 11,306,936 (1,570,448) (3,102) 87,543 (14,735) 15,234,978 12,633,895 2,416,454 1,628,640 11,369,391 9,207,181 Total 152,203,042 122,964,990 327,713,471 313,314,571 72,903,298 46,727,790 848,144 1,624,973 Total 401,464,913 361,667,334 68,057,439 64,836,646 14,197,682 13,373,647 4,803,103 1,652,205 9,063,418 29,596 26,301 1,648,413 4,456,040 4,757,998 1,475,165 8,331,247 32,021 25,758 1,249,095 4,149,947 12,933,744 12,562,041 8,273,244 6,906,612 101,762,636 79,333,265 Total 226,903,821 197,033,442 *Includes professional fees, commission to sales agents, card and merchant acquiring expenses and system management fees. HDFC Bank Limited Annual Report 2017-18 90 Schedules to the Financial Statements For the year ended March 31, 2018 SCHEDULE 17 - Signiﬁcant accounting policies appended to and forming part of the ﬁnancial statements for the year ended March 31, 2018 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, Dubai and Offshore Banking Unit at International Financial Service Centre (IFSC), at GIFT City, Gandhinagar in Gujarat. 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. Use of estimates The preparation of ﬁnancial statements in conformity with GAAP requires the management to make estimates and necessary assumptions 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. HDFC Bank Limited Annual Report 2017-18 91 Schedules to the Financial Statements For the year ended March 31, 2018 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. 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. Investment in unquoted Venture Capital Fund (VCF) are categorised under HTM category for the initial period of three years and valued at cost. Such investment are required to be transferred to AFS thereafter. Pass Through Certiﬁcates (PTC) including Priority Sector-PTCs are valued by using FIMMDA credit spread as applicable for the NBFC category, based on the credit rating of the respective PTC over the YTM rates for government securities published by FIMMDA. 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. HDFC Bank Limited Annual Report 2017-18 92 Schedules to the Financial Statements For the year ended March 31, 2018 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. 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. 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 addition to 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. HDFC Bank Limited Annual Report 2017-18 93 Schedules to the Financial Statements For the year ended March 31, 2018 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 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 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 the Statement of Proﬁt and Loss. These are amortised over the period of the Certiﬁcate. HDFC Bank Limited Annual Report 2017-18 94 Schedules to the Financial Statements For the year ended March 31, 2018 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 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. HDFC Bank Limited Annual Report 2017-18 95 Schedules to the Financial Statements For the year ended March 31, 2018 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. Foreign exchange spot and forward contracts outstanding as at the Balance Sheet date and held for trading, are revalued at the closing spot and forward rates respectively as notiﬁed by FEDAI and at interpolated rates for contracts of interim maturities. The USD-INR rate for valuation of contracts having longer maturities i.e. greater than one year, is implied from MIFOR and LIBOR curves. For other currency pairs, the forward points (for rates / tenors not published by FEDAI) are obtained from Reuters for valuation of the FX deals. As directed by FEDAI to consider P&L on present value basis, the forward proﬁt or loss on the deals are discounted till the valuation date using the discounting yields. The resulting proﬁt or loss on valuation is recognised in the Statement of Proﬁt and Loss. Foreign exchange contracts are classiﬁed as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction, and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract is amortised as expense or income over the life of the contract. Currency future contracts are marked to market daily using settlement price on a trading day, which is the closing price of (cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:70)(cid:85)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:68)(cid:65)(cid:89)(cid:14)(cid:0)(cid:55)(cid:72)(cid:73)(cid:76)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:65)(cid:73)(cid:76)(cid:89)(cid:0)(cid:83)(cid:69)(cid:84)(cid:84)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:80)(cid:82)(cid:73)(cid:67)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:85)(cid:84)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:76)(cid:65)(cid:83)(cid:84)(cid:0)(cid:72)(cid:65)(cid:76)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:72)(cid:79)(cid:85)(cid:82)(cid:0) weighted average price of such contract, the ﬁnal settlement price is taken as the RBI reference rate on the last trading day of the future contract or as may be speciﬁed by the relevant authority from time to time. All open positions are marked to market based on the settlement price and the resultant marked to market proﬁt / loss is daily settled with the exchange. Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. 7 Derivative contracts The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the derivative contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting dates. Derivatives are classiﬁed as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Changes in the fair value of derivatives other than those designated as hedges are recognised in the Statement of Proﬁt and Loss. Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market. In respect of derivative contracts that are marked to market, changes in the market value are recognised in the Statement of Proﬁt and Loss in the relevant period. The Bank identiﬁes the hedged item (asset or liability) at the inception of the transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically thereafter. Gains or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Proﬁt and Loss. Contingent liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. HDFC Bank Limited Annual Report 2017-18 96 Schedules to the Financial Statements For the year ended March 31, 2018 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. Also in case of domestic advances, where interest is collected on rear end basis, such interest is accounted on receipt basis in accordance with the RBI guidelines. Interest income on investments in PTCs and loans bought out through the direct assignment route is recognised at their effective interest rate. Income on non-coupon bearing discounted instruments is recognised over the tenor of the instrument on a constant effective yield basis. Loan processing fee is recognised as income when due. Syndication / Arranger fee is recognised as income when a signiﬁcant act / milestone is completed. Gain / loss on sell down of loans is recognised in line with the extant RBI guidelines. Dividend on equity shares, preference shares and on mutual fund units is recognised as income when the right to receive the dividend is established. Guarantee commission, commission on letter of credit, annual locker rent fees and annual fees for credit cards are recognised on a straight-line basis over the period of contract. Other fees and commission income are recognised when due, 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. HDFC Bank Limited Annual Report 2017-18 97 Schedules to the Financial Statements For the year ended March 31, 2018 Provident fund: In accordance with law, all employees of the Bank are entitled to receive beneﬁts under the provident fund. The Bank contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary). Of this, the Bank contributes an amount equal to 8.33% of employee’s basic salary up to a maximum salary level of ` 15,000/- per month, to the Pension Scheme administered by the Regional Provident Fund Commissioner (‘RPFC’). The balance amount is contributed to a fund set up by the Bank and administered by a Board of Trustees. In respect of eCBoP employees, employer’s and employee’s share of contribution to Provident Fund till March 2009, was administered by RPFC and from April 2009 onwards, the same is transferred to the fund set up by the Bank and administered by the Board of Trustees. In respect of eLKB employees, the Bank contributes to a fund set up by eLKB and administered by a Board of Trustees. The Bank recognises such contributions as an expense in the year in which it is incurred. Interest payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Bank. The guidance note on implementing AS-15, Employee Beneﬁts, states that beneﬁts involving employer established provident funds, which require interest shortfalls to be provided, are to be considered as deﬁned beneﬁt plans. Actuarial valuation of this Provident Fund interest shortfall is done as per the guidance note issued in this respect by The Institute of Actuaries of India (IAI) and provision towards this liability is made. The overseas branches of the Bank 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. The imports are typically on a back-to-back basis and are priced to the customer based on the price quoted by the supplier. The difference between the price recovered from customers and cost of bullion 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. HDFC Bank Limited Annual Report 2017-18 98 Schedules to the Financial Statements For the year ended March 31, 2018 12 Lease accounting Lease payments including cost escalation for assets taken on operating lease are recognised in the Statement of Proﬁt and Loss over the lease term on a straight-line basis in accordance with the AS-19, Leases. 13 Income tax Income tax expense comprises current tax provision (i.e. the amount of tax for the period determined in accordance with the Income Tax Act, 1961, the rules framed there under and considering the material principles set out in Income Computation and Disclosure Standards) and the net change in the deferred tax asset or liability during the year. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences between the carrying values of assets and liabilities and their respective tax bases, and operating loss carried forward, if any. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates as at the Balance Sheet date. Current tax assets and liabilities and deferred tax assets and liabilities are off-set when they relate to income taxes levied by the same taxation authority, when the Bank has a legal right to off-set and when the Bank intends to settle on a net basis. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. In case of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and appropriately adjusted to reﬂect the amount that is reasonably / virtually certain to be realised. 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:0) (cid:0) (cid:115)(cid:0) (cid:65)(cid:0)(cid:80)(cid:79)(cid:83)(cid:83)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:66)(cid:76)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:82)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:65)(cid:0)(cid:80)(cid:65)(cid:83)(cid:84)(cid:0)(cid:69)(cid:86)(cid:69)(cid:78)(cid:84)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:66)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:108)(cid:82)(cid:77)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:67)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:82)(cid:0)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13)(cid:79)(cid:67)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0) of one or more uncertain future events not within the control of the Bank; or (cid:115)(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: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)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0) be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. HDFC Bank Limited Annual Report 2017-18 99 Schedules to the Financial Statements For the year ended March 31, 2018 (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 2017-18 100 Schedules to the Financial Statements For the year ended March 31, 2018 SCHEDULE 18 - Notes forming part of the ﬁnancial statements for the year ended March 31, 2018 Amounts in notes forming part of the ﬁnancial statements for the year ended March 31, 2018 are denominated in rupee crore to conform to extant RBI guidelines, except where stated otherwise. 1 Proposed dividend The Board of Directors, at their meeting held on April 21, 2018 have proposed a dividend of ` 13.00 per equity share (previous year: ` 11.00) aggregating ` 4,067.07 crore (previous year: ` 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 the 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 the proposed dividend from the Statement of Proﬁt and Loss. However, the effect of the proposed dividend has been reckoned in determining capital funds in the computation of the capital adequacy ratios. 2 Capital adequacy The Bank’s capital to risk-weighted asset ratio (‘Capital Adequacy Ratio’) as at March 31, 2018 is calculated in accordance with the RBI 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 1 (CET1) Tier I capital Total capital (% of RWAs) As at March 31, 2017 6.750 8.250 2018 7.375 8.875 2019 8.000 9.500 10.250 10.875 11.500 The above minimum CET1, tier I and total capital ratio requirements include the capital conservation buffer. During the year, the RBI identiﬁed the Bank as a Domestic-Systemically Important Bank (D-SIB) under the bucketing structure as provided in the D-SIB framework. As an identiﬁed D-SIB, the Bank will be required to maintain additional CET1 of 0.15% effective April 1, 2018 and 0.20% effective April 1, 2019. The Bank’s capital adequacy ratio computed under Basel III is given below: Particulars Tier I capital Of which CET1 capital Tier II capital Total capital Total risk weighted assets Capital adequacy ratios under Basel lII Tier I Of which CET1 Tier II March 31, 2018 106,004.90 98,004.90 12,535.47 118,540.37 800,125.98 13.25% 12.25% 1.57% 14.82% (` crore) March 31, 2017 81,829.30 81,829.30 11,302.66 93,131.96 640,029.93 12.79% 12.79% 1.76% 14.55% Total During the year ended March 31, 2018, the Bank raised debt capital instruments eligible for inclusion in Additional Tier I capital and Tier II capital under the Basel III capital regulations amounting to ` 8,000.00 crore (previous year: Nil) and ` 2,000.00 crore (previous year: Nil) respectively. As on March 31, 2018, the Bank’s subordinated and perpetual debt capital instruments amounted to ` 13,107.00 crore (previous year: ` 13,182.00 crore) and ` 8,000.00 crore (previous year: Nil) respectively. HDFC Bank Limited Annual Report 2017-18 101 Schedules to the Financial Statements For the year ended March 31, 2018 In accordance with RBI guidelines, banks are required to make Pillar 3 disclosures under the 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, 2018, the Bank allotted 3,25,44,550 equity shares (previous year: 3,43,59,200 equity shares) aggregating to face value ` 6.51 crore (previous year: ` 6.87 crore) in respect of stock options exercised. Accordingly, the share capital increased by ` 6.51 crore (previous year: ` 6.87 crore) and the share premium increased by ` 2,719.40 crore (previous year: ` 2,254.64 crore). The Board of Directors of the Bank, at their meeting held on December 20, 2017 approved the raising of funds aggregating up to ` 24,000.00 crore, of which an amount up to a maximum of ` 8,500.00 crore shall be through the issuance of equity shares of face value of ` 2/- each pursuant to a preferential issue to Housing Development Finance Corporation Limited (the Bank’s promoters) and the balance shall be through the issuance of equity shares/ convertible securities/ depository receipts pursuant to a Qualiﬁed Institutions Placement (QIP)/ American Depository Receipts (ADR)/ Global Depository Receipt (GDR) program. The said raising of funds was approved by the shareholders of the Bank at its Extra Ordinary General meeting held on January 19, 2018 and is subject to the receipt of all relevant regulatory approvals. The details of the 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 3 Earnings per equity share March 31, 2018 March 31, 2017 512.51 6.51 519.02 505.64 6.87 512.51 Basic and diluted earnings per equity share of the Bank have been calculated based on the net proﬁt after tax of ` 17,486.75 crore (previous year: ` 14,549.66 crore) and the weighted average number of equity shares outstanding during the year of 2,58,05,38,505 (previous year: 2,54,43,33,609). Following is the reconciliation between the 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, 2018 March 31, 2017 2.00 67.76 (0.92) 66.84 2.00 57.18 (0.75) 56.43 Basic earnings per equity share of the Bank has been computed by dividing the net proﬁt for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding during 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, 2018 March 31, 2017 2,58,05,38,505 2,54,43,33,609 3,55,30,885 3,40,55,428 2,61,60,69,390 2,57,83,89,037 HDFC Bank Limited Annual Report 2017-18 102 Schedules to the Financial Statements For the year ended March 31, 2018 4 Reserves and Surplus Draw down from reserves Share Premium The Bank has not undertaken any drawdown from share premium during the years ended March 31, 2018 and March 31, 2017. Statutory Reserve The Bank has made an appropriation of ` 4,371.68 crore (previous year: ` 3,637.41 crore) out of proﬁts for the year ended March 31, 2018 to the 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, 2018, the Bank appropriated ` 235.52 crore (previous year: ` 313.41 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 the Proﬁt and Loss Account to the Capital Reserve. General Reserve The Bank has made an appropriation of ` 1,748.67 crore (previous year: ` 1,454.96 crore) out of proﬁts for the year ended March 31, 2018 to the General Reserve. Investment Reserve Account During the year ended March 31, 2018, the Bank has transferred ` 44.20 crore (net) from the Investment Reserve Account to the Proﬁt and Loss Account as per the RBI guidelines. In the previous year, the Bank had appropriated ` 4.29 crore (net) from the Proﬁt and Loss Account to the Investment Reserve Account as per RBI guidelines. 5 Dividend on shares allotted pursuant to exercise of stock options The Bank may allot equity shares after the Balance Sheet date but before the book closure date pursuant to the exercise of any employee stock options. These equity shares will be eligible for full dividend for the year ended March 31, 2018, if approved at the ensuing Annual General Meeting. 6 Accounting for employee share based payments The shareholders of the Bank approved the 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 the grant. The 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 and Remuneration Committee of the Board (‘NRC’) 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. The vesting conditions applicable to the options are at the discretion of the NRC. These options are exercisable on vesting, for a period as set forth by the NRC at the time of grant. The period in which the options may be exercised cannot exceed ﬁve years. During the years ended March 31, 2018 and March 31, 2017, no modiﬁcations were made to the terms and conditions of ESOPs as approved by the NRC. HDFC Bank Limited Annual Report 2017-18 103 Schedules to the Financial Statements For the year ended March 31, 2018 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:24)(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 (`) 9,21,56,300 1,68,82,050 3,25,44,550 10,50,000 7,54,43,800 4,68,10,250 904.97 1,433.23 837.59 1,050.05 1,050.22 901.44 (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:115)(cid:0)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(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:24)(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 835.50 680.00 680.00 835.50 to 1,462.15 32,61,500 16,35,700 62,24,900 6,43,21,700 1.32 1.43 1.51 3.59 685.72 680.00 680.00 1,113.95 (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(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 2017-18 104 Schedules to the Financial Statements For the year ended March 31, 2018 Fair value methodology The fair value of options used to compute the proforma net proﬁt 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 prices of its equity shares. The Bank granted 1,68,82,050 options during the year ended March 31, 2018 (previous year: Nil). The various assumptions considered in the pricing model for the ESOPs granted during the year ended March 31, 2018 are: Particulars Dividend yield Expected volatility Risk-free interest rate Expected life of the options March 31, 2018 0.65% to 0.66% 19.94% to 21.65% 6.73% to 7.20% 1 to 7.25 years Impact of the fair value method on the net proﬁt and earnings per share 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 for the year 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) 7 Other liabilities March 31, 2018 March 31, 2017 17,486.75 14,549.66 - 650.41 16,836.34 (`) 67.76 65.24 66.84 64.36 - 812.75 13,736.91 (`) 57.18 53.99 56.43 53.28 (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) ` 2,989.62 crore as at March 31, 2018 (previous year: ` 2,392.22 crore). These are included under other liabilities. (cid:57) (cid:57) (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 is maintained at rates higher than the regulatory minimum, on standard advances based on evaluation of the risk and stress in various sectors as per the policy approved by the Board of the Bank. 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. 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%. HDFC Bank Limited Annual Report 2017-18 105 Schedules to the Financial Statements For the year ended March 31, 2018 (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, 2018 include unrealised loss on foreign exchange and derivative contracts of ` 5,093.04 crore (previous year: ` 13,880.38 crore). 8 Unhedged foreign currency exposure The Bank has in place a policy and process for managing currency induced credit risk. The credit appraisal memorandum prepared at the time of origination and review of a credit facility 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 is encouraged to enter into appropriate risk hedging mechanisms with the Bank. Alternatively, the Bank satisﬁes 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 Earnings Before Interest and Depreciation (‘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. In accordance with RBI guidelines, as at March 31, 2018 the Bank holds standard asset provisions of ` 180.30 crore (previous year: ` 108.31 crore) and maintains capital (including capital conservation buffer) of ` 723.08 crore (previous year: ` 396.86 crore) in respect of the unhedged foreign currency exposure of its customers. 9 Investments (cid:0)(cid:115)(cid:0) (cid:54)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26)(cid:0) Particulars Gross value of investments - In India - Outside India Provisions for depreciation on investments - In India - Outside India Net value of investments - In India - Outside India (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, 2018 March 31, 2017 240,899.77 213,407.17 1,560.65 1,120.65 247.21 12.96 61.85 2.63 240,652.56 213,345.32 1,547.69 1,118.02 (` crore) March 31, 2018 March 31, 2017 64.48 204.91 9.22 260.17 119.54 37.33 92.39 64.48 Movement in provisions held towards depreciation on investments has been reckoned on a yearly basis. HDFC Bank Limited Annual Report 2017-18 106 Schedules to the Financial Statements For the year ended March 31, 2018 (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, 2018: (` crore) (cid:23) Details of repo / reverse repo deals (in face value terms) done during the year ended March 31, 2017: Particulars Securities sold under repo 1. Government securities 2. Corporate debt securities Securities purchased under reverse repo 1. Government securities 2. Corporate debt securities Particulars Securities sold under repo 1. Government securities 2. Corporate debt securities Securities purchased under reverse repo 1. Government securities 2. Corporate debt securities Minimum outstanding during the year Maximum outstanding during the year Daily average outstanding during the year Outstanding as at March 31, 2018 - - - - 20,557.80 - 1,433.97 - 13,454.44 - 62,745.05 - 8,672.06 - 62,745.05 - (` crore) 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 - 31,413.37 132.00 7,445.30 - 6,900.12 30.74 - - 4,690.56 - (` crore) (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, 2018: Sr. No. Issuer 1 Public sector undertakings Financial institutions 2 3 Banks 4 Private corporate 5 Subsidiaries / Joint ventures 6 Others 7 Provision held towards depreciation Total Extent of private placement# 100.00 1,414.21 80.00 29,475.13 3,826.49 2,113.15 Extent of “below investment grade” securities# - - - - - - Extent of “unrated” securities# (2) Extent of “unlisted” securities# (3) - - 270.94 39.46 - - - - 270.94 5,106.35 - - 37,008.98 - 310.40 5,377.29 Amount(1) 225.31 4,723.31 839.15 33,929.42 3,826.49 10,128.88 (258.99) 53,413.57 # Amounts reported under these columns above are not mutually exclusive. (1) Excludes investments in non-Indian government securities by overseas branches amounting to ` 421.88 crore. (2) Excludes investments in equity shares and units of equity oriented mutual funds and venture capital funds in line with extant RBI guidelines. (3) Excludes investments in equity shares, units of equity oriented mutual funds and venture capital funds, pass through certiﬁcates, security receipts, commercial paper, certiﬁcate of deposits and convertible debentures in line with extant RBI guidelines. HDFC Bank Limited Annual Report 2017-18 107 Schedules to the Financial Statements For the year ended March 31, 2018 (cid:23) Issuer-wise composition of non-SLR investments as at March 31, 2017: (` crore) Sr. No. Issuer 1 Public sector undertakings 2 Financial institutions 3 Banks 4 Private corporate Amount Extent of private placement# 2,225.18 2,174.65 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 # Amounts reported under these columns above are not mutually exclusive. Extent of “below investment grade” securities# Extent of “unrated” securities# (1) Extent of “unlisted” securities# (2) - - - - - - - - - - - - - 33.51 3,793.61 - - - - 33.51 3,793.61 (1) Excludes investments in equity shares and units of equity oriented mutual funds in line with extant RBI guidelines. (2) 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: (` crore) Particulars Opening balance Additions during the year Reductions during the year Closing balance Total provisions held March 31, 2018 March 31, 2017 51.57 41.00 0.50 92.07 76.67 87.02 34.61 70.06 51.57 38.02 (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) The details of investments held under the three categories viz. Held for Trading (HFT), Available for Sale (AFS) and (` crore) Held to Maturity (HTM) are as under: Particulars As at March 31, 2018 As at March 31, 2017 HFT AFS HTM Total HFT AFS HTM Total Government securities 2,471.38 49,272.32 137,042.98 188,786.68 1,736.34 35,614.27 125,068.09 162,418.70 Other approved securities Shares - - - 122.63 - - - 122.63 - - - 114.21 - - - 114.21 Debentures and bonds 5,023.15 29,466.48 1,420.67 35,910.30 1,734.61 17,550.42 1,300.00 20,585.03 Subsidiary / Joint ventures - - 3,826.49 3,826.49 Others 8,005.72 5,544.68 3.75 13,554.15 - - - 3,843.32 3,843.32 27,502.08 - 27,502.08 Total 15,500.25 84,406.11 142,293.89 242,200.25 3,470.95 80,780.98 130,211.41 214,463.34 HDFC Bank Limited Annual Report 2017-18 108 Schedules to the Financial Statements For the year ended March 31, 2018 (cid:115)(cid:0) Securities kept as margin The details of securities that are kept as margin are as under: (` crore) Sr. No. Particulars Face value as at March 31, 2018 2017 I. Securities kept as margin with Clearing Corporation of India towards: a) Collateral and funds management - Securities segment b) Collateral and funds management - Collateralised Borrowing 1,520.00 25,770.78 1,520.00 24,488.31 and Lending Obligation (CBLO) segment c) Default fund - Forex Forward segment d) Default fund - Forex Settlement segment e) Default fund - Rupee Derivatives (Guaranteed Settlement) segment f) Default fund - Securities segment g) Default fund - CBLO segment II. Securities kept as margin with the RBI towards: a) Real Time Gross Settlement (RTGS) b) Repo transactions c) Reverse repo transactions III. IV. V. Securities kept as margin with National Securities Clearing Corporation of India (NSCCIL) towards NSE Currency Derivatives segment. Securities kept as margin with Indian Clearing Corporation Limited towards BSE Currency Derivatives segment. Securities kept as margin with Metropolitan Clearing Corporation of India towards MCX Currency Derivatives segment. 100.00 41.05 41.00 65.00 25.00 90,130.65 16,307.49 58,341.00 16.00 241.00 13.00 100.00 11.05 41.00 65.00 25.00 42,730.27 41,473.92 4,690.56 16.00 5.00 13.00 (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (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)` 3,357.99 crore (previous year: ` 24,494.53 crore). (cid:52)(cid:72)(cid:69)(cid:0)(cid:50)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:12)(cid:0)(cid:86)(cid:73)(cid:68)(cid:69)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:67)(cid:73)(cid:82)(cid:67)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:82)(cid:69)(cid:70)(cid:69)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:36)(cid:34)(cid:50)(cid:14)(cid:46)(cid:79)(cid:14)(cid:34)(cid:48)(cid:14)(cid:34)(cid:35)(cid:14)(cid:17)(cid:16)(cid:18)(cid:15)(cid:18)(cid:17)(cid:14)(cid:16)(cid:20)(cid:14)(cid:16)(cid:20)(cid:24)(cid:15)(cid:18)(cid:16)(cid:17)(cid:23)(cid:13)(cid:17)(cid:24)(cid:0)(cid:68)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:33)(cid:80)(cid:82)(cid:73)(cid:76)(cid:0)(cid:18)(cid:12)(cid:0)(cid:18)(cid:16)(cid:17)(cid:24)(cid:0) granted banks an option to spread provisioning for mark to market losses on investments held in AFS and HFT for the quarters ended December 31, 2017 and March 31, 2018. The circular states that the provisioning for each of these quarters may be spread equally over up to four quarters, commencing with the quarter in which the loss was incurred. The Bank has recognised the entire net mark to market loss on investments in the year ended March 31, 2018 and has not availed of the said option. (cid:52)(cid:72)(cid:69)(cid:0) (cid:34)(cid:65)(cid:78)(cid:75)(cid:0) (cid:72)(cid:65)(cid:68)(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:69)(cid:76)(cid:68)(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 did 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 was thus not applicable. However, pursuant to RBI guidelines, the Bank had classiﬁed and disclosed these investments as joint ventures as of March 31, 2017. There were no such investments outstanding as of March 31, 2018. (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:24)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:78)(cid:79)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(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:0)(cid:84)(cid:79)(cid:0)(cid:15)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:40)(cid:52)(cid:45)(cid:0)(cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:69)(cid:88)(cid:67)(cid:69)(cid:83)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0) 5% of the book value of investments held in the HTM category at the beginning of the year. During the year ended March 31, 2017, the aggregate book value of investment sold from, and transferred to / from, HTM category was in excess of 5% of the book value of investments held in the HTM category at the beginning of the year. The market value of investments (excluding investments in subsidiaries / joint ventures) under HTM category as at March 31, 2017 was ` 130,187.42 crore and was higher than the book value thereof as at that date. HDFC Bank Limited Annual Report 2017-18 109 Schedules to the Financial Statements For the year ended March 31, 2018 In accordance with the RBI guidelines, sales from, and transfers to / from, HTM category exclude the following from the 5% cap: (cid:57)(cid:3) one-time transfer of securities permitted to be undertaken by banks at the beginning of the accounting year with approval of the Board of Directors; (cid:57)(cid:3) sales to the RBI under pre-announced open market operation auctions; (cid:57)(cid:3) repurchase of Government securities by Government of India from banks. (cid:57) additional shifting of securities explicitly permitted by the RBI from time to time; and (cid:57)(cid:3) direct sales from HTM for bringing down SLR holdings in the HTM category. 10 Derivatives (cid:115)(cid:0) (cid:38)(cid:79)(cid:82)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:50)(cid:65)(cid:84)(cid:69)(cid:0)(cid:33)(cid:71)(cid:82)(cid:69)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:8)(cid:38)(cid:50)(cid:33)(cid:9)(cid:0)(cid:15)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:50)(cid:65)(cid:84)(cid:69)(cid:0)(cid:51)(cid:87)(cid:65)(cid:80)(cid:83)(cid:0)(cid:8)(cid:41)(cid:50)(cid:51)(cid:9)(cid:10)(cid:26)(cid:0) (cid:0) (cid:0)(cid:8)` crore) Sr. No. i) ii) Particulars March 31, 2018 March 31, 2017 The total notional principal of swap agreements 308,463.47 238,644.16 Total losses which would be incurred if counter parties failed to fulﬁll their obligations under the agreements iii) Collateral required by the Bank upon entering into swaps iv) Concentration of credit risk arising from swaps** v) The fair value of the swap book 1,063.13 - 60.62% 113.36 917.35 - 69.96% 45.32 * 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, 2018 and March 31, 2017. The nature and terms of Rupee IRS outstanding as at March 31, 2018 are set out below: (` crore, except numbers) Nature Trading Trading Trading Trading Trading Trading Trading Nos. Notional principal Benchmark Terms 6 5 4 1,764 1,737 272 200 225.00 INBMK 275.00 INBMK Fixed receivable v/s ﬂoating payable Floating receivable v/s ﬁxed payable 1,250.00 INCMT Floating receivable v/s ﬁxed payable 119,743.42 119,993.50 OIS OIS Fixed receivable v/s ﬂoating payable Floating receivable v/s ﬁxed payable 18,590.00 MIFOR Fixed receivable v/s ﬂoating payable 11,499.00 MIFOR Floating receivable v/s ﬁxed payable Total 271,575.92 The nature and terms of foreign currency IRS as on March 31, 2018 are set out below: (` crore, except numbers) Nature Trading Trading Trading Trading Nos. Notional principal Benchmark Terms 2 2 92 191 808.08 EURIBOR Fixed receivable v/s ﬂoating payable 808.10 EURIBOR Floating receivable v/s ﬁxed payable 13,236.99 USD Libor Fixed receivable v/s ﬂoating payable 21,827.06 USD Libor Floating receivable v/s ﬁxed payable Total 36,680.23 HDFC Bank Limited Annual Report 2017-18 110 Schedules to the Financial Statements For the year ended March 31, 2018 The nature and terms of foreign currency FRA as on March 31, 2018 are set out below: (` crore, except numbers) Nature Trading Trading Nos. Notional principal Benchmark Terms 6 6 103.66 USD Libor Payable FRA 103.66 USD Libor Receivable FRA Total 207.32 The nature and terms of rupee IRS as on March 31, 2017 are set out below: (` crore, except numbers) Nature Nos. Notional principal Benchmark Terms Trading Trading Trading Trading Trading Trading Trading Trading 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 450.00 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: (` crore, except numbers) Nature Trading Trading Trading Trading Trading Trading Hedging Nos. Notional principal 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. (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, 2018 March 31, 2017 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’ HDFC Bank Limited Annual Report 2017-18 111 Nil Nil N.A. N.A. Nil Nil N.A. N.A. Schedules to the Financial Statements For the year ended March 31, 2018 (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 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 the 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. 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. 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 2017-18 112 Schedules to the Financial Statements For the year ended March 31, 2018 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 hedging instruments, the Bank documents, at inception of the hedge, 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 2017-18 113 Schedules to the Financial Statements For the year ended March 31, 2018 (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, 2018 March 31, 2017 March 31, 2018 March 31, 2017 1 Derivatives (notional principal amount) a) Hedging b) Trading 2 Marked to market positions 3 4 a) Asset (+) b) Liability (-) Credit exposure Likely impact of one percentage change in interest rate (100*PV01) a) On hedging derivatives b) On trading derivatives 5 Maximum of 100*PV01 observed during the year a) On hedging b) On trading 6 Minimum of 100*PV01 observed during the year a) On hedging b) On trading - 156.95 - 3,242.50 39,591.46 32,999.13 308,677.32 235,908.28 684.79 (722.09) 2,740.20 649.32 (571.42) 2,487.65 1,064.77 (951.41) 3,509.79 918.74 (857.33) 2,941.53 - 7.62 0.24 31.32 - 0.88 0.08 25.70 0.09 35.47 0.02 21.27 - 33.94 15.93 80.86 - 26.92 15.79 19.11 43.06 79.70 15.79 19.11 (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) As at March 31, 2018, the notional principal amount of outstanding foreign exchange contracts classiﬁed as hedging and trading amounted to ` 14,070.60 crore (previous year: ` 6,302.40 crore) and ` 420,396.97 crore (previous year: ` 463,627.74 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 swaps. Interest rate derivatives include interest rate swaps, forward rate agreements and interest rate caps and ﬂoors. The Bank has computed the maximum and minimum of PV01 for the year based on the balances as at the end of every month. In respect of derivative contracts, the Bank evaluates the credit exposure arising therefrom, in line with RBI guidelines. Credit exposure has been computed using the current exposure method which is the sum of: (a) the current replacement cost (marked to market value including accruals) of the contract or zero whichever is higher; and (b) the Potential Future Exposure (PFE) is a product of the notional principal amount of the contract and a factor that is based on the grid of credit conversion factors prescribed in RBI guidelines, which is applied on the basis of the residual maturity and the type of contract. HDFC Bank Limited Annual Report 2017-18 114 Schedules to the Financial Statements For the year ended March 31, 2018 11 Asset quality (cid:115)(cid:0) (cid:45)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:46)(cid:48)(cid:33)(cid:83)(cid:0)(cid:8)(cid:70)(cid:85)(cid:78)(cid:68)(cid:69)(cid:68)(cid:9)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) Particulars (i) Net NPAs to net advances (ii) Movement of NPAs (Gross) (a) Opening balance (b) Additions (fresh NPAs) during the year (c) Reductions during the year: - Upgradation - Recoveries (excluding recoveries made from upgraded accounts) - Write-offs (d) Closing balance (iii) Movement of net NPAs (a) Opening balance (b) Additions during the year (c) Reductions during the year (d) Closing balance (iv) Movement of provisions for NPAs (excluding provisions on standard assets) (a) Opening balance (b) Additions during the year (c) Write-offs (d) Write-back of excess provisions (e) Closing balance (cid:0)(cid:8)` crore) March 31, 2018 March 31, 2017 0.33% 0.40% 5,885.66 12,958.99 10,237.68 4,163.60 2,808.25 3,265.83 8,606.97 1,843.99 4,917.84 4,160.81 2,601.02 4,041.67 8,041.15 3,265.83 2,811.04 6,005.95 4,392.83 7,126.17 5,633.34 1,519.42 1,727.98 2,385.94 5,885.66 1,320.37 2,357.87 1,834.25 1,843.99 3,072.46 4,768.30 2,385.94 1,413.15 4,041.67 NPAs include all loans, investments and foreign exchange and derivatives that are classiﬁed as non-performing by the Bank. (cid:115)(cid:0) (cid:52)(cid:69)(cid:67)(cid:72)(cid:78)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:79)(cid:82)(cid:0)(cid:80)(cid:82)(cid:85)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0)(cid:87)(cid:82)(cid:73)(cid:84)(cid:69)(cid:13)(cid:79)(cid:70)(cid:70)(cid:83) Technical or prudential write-offs refer to the amount of non-performing assets which are outstanding in the books of the branches, but have been written-off (fully or partially) at the head ofﬁce level. The ﬁnancial accounting systems of the Bank are integrated and there are no write-offs done by the Bank which remain outstanding in the books of the branches. (` crore) Movement in the stock of technically or prudentially written-off accounts is given below: Particulars Opening balance of technical / prudential write-offs Technical / Prudential write-offs during the year Recoveries made from previously technically / prudentially written-off accounts during the year Closing balance of technical / prudential write-offs March 31, 2018 March 31, 2017 - - - - - - - - (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 ` 1,451.28 crore (previous year: ` 1,248.01 crore) have been included under “Other Liabilities”. (` crore) Movement in ﬂoating provision is given below: Particulars Opening balance Provisions made / reinstated during the year Draw down made during the year Closing balance March 31, 2018 March 31, 2017 1,335.64 25.00 (112.63) 1,248.01 1,248.01 523.99 (320.72) 1,451.28 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. HDFC Bank Limited Annual Report 2017-18 115 Schedules to the Financial Statements For the year ended March 31, 2018 (cid:0)(cid:115)(cid:0) Divergence in the asset classiﬁcation and provisioning As part of its supervisory process for the year ended March 31, 2017, the RBI had pointed out certain modiﬁcations in (` crore) respect of the Bank’s asset classiﬁcation of three accounts as on March 31, 2017, as per the table below: Sr. No. Particulars (1) (2) (3) (4) (5) (6) (7) (8) (9) Gross NPAs as at March 31, 2017 as reported by the bank Gross NPAs as at March 31, 2017 as assessed by RBI Divergence in Gross NPAs (2-1) Net NPAs as at March 31, 2017, as reported by the bank Net NPAs as at March 31, 2017, as assessed by RBI Divergence in Net NPAs (5-4) Provisions for NPAs as at March 31, 2017, as reported by the bank Provisions for NPAs as at March 31, 2017, as assessed by RBI Divergence in provisioning (8-7) (10) Reported Net Proﬁt after Tax (PAT) for the year ended March 31, 2017 (11) Adjusted (notional) Net Proﬁt after Tax (PAT) for the year ended March 31, 2017 after taking into account the divergence in provisioning Amount 5,885.66 7,937.42 2,051.76 1,843.99 3,102.36 1,258.37 4,041.67 4,835.06 793.39 14,549.66 14,028.24 In respect of each of these accounts, the Bank was a member of the Joint Lenders’ Forum (JLF) formed under the then prevailing regulatory framework for revitalizing distressed assets in the economy. The Bank classiﬁed these accounts as NPAs during the year ended March 31, 2018 and made adequate provisions for the said accounts. In relation to one of the above accounts, the Bank had participated in a project loan which underwent ﬂexible structuring under the then prevailing regulatory framework as approved by the JLF in February 2016. Pursuant to a regulatory communication, in October 2017 the said customer account was classiﬁed by the Bank as non-performing with effect from March 2016. The JLF in its meeting on December 30, 2017 received conﬁrmations from all lenders, including the Bank, regarding satisfactory performance of the account during the speciﬁed period (post February 2016) including conﬁrmation of nil overdues as on December 30, 2017. Hence, in terms of para 17.2.3 of the RBI Master Circular DBR. No.BP.BC.2/21.04.048/2015-16 dated July 1, 2015, the JLF decided to upgrade the account classiﬁcation to ‘standard’. The Bank accordingly upgraded the account classiﬁcation to ‘standard’ in its books. The account continues to remain standard at March 31, 2018. The position as at March 31, 2018 in relation to the divergence is as follows: Sr. No. Particulars 1. 2. 3. 4. 5. 6. Gross NPAs as at March 31, 2017 Upgraded based on JLF decision Net reductions Balance Gross NPAs as at March 31, 2018 Speciﬁc provisions held for balance Gross NPAs as at March 31, 2018 Net NPAs as at March 31, 2018 (4-5) (` crore) Amount 2,051.76 (1,707.18) (45.61) 298.97 269.07 29.90 HDFC Bank Limited Annual Report 2017-18 116 Schedules to the Financial Statements For the year ended March 31, 2018 ) s r e b m u n t p e c x e , e r o r c ` ( (cid:26) (cid:24) (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:67) (cid:83) (cid:36) (cid:73) (cid:76) 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 (cid:5) n o i t a c ﬁ i s s a l C t e s s A (cid:7) s l i a t e D 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:0) (cid:115) . r S . o N 1 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 3 1 1 1 5 . 8 6 7 , 1 1 5 . 1 * * 4 8 . 4 6 7 , 1 6 1 . 2 3 1 1 1 4 9 . 9 6 7 , 1 1 5 . 1 4 8 . 4 6 7 , 1 9 5 . 3 - - - - 1 - . 6 3 0 1 - - - - - - 1 - - . 8 1 7 0 7 , 1 - - - - - - - - - 3 1 + 1 - 1 + 1 + 1 - 2 + 3 - 1 9 9 1 . . 2 4 3 6 1 3 6 3 3 . . 6 9 6 1 2 - - - 1 2 0 5 . 1 0 5 . 2 - - 1 3 - - - 1 + - 1 - - . 6 3 0 1 - 8 1 . 7 0 7 , 1 - - - - - - - - - - - - - - - 1 - - 8 1 . 7 0 7 , 1 - 1 + 1 - 1 + 1 9 . 9 1 2 7 . 9 4 1 - - - 2 - - - 1 - - - - - - - - - 2 6 4 . 2 7 1 0 5 . 0 - - - 1 + - - - - - - - 8 1 . 7 0 7 , 1 - - - - - 1 - 3 6 . 9 6 1 - - 1 0 6 . 9 0 4 - - - - - - - - - - . 5 0 9 5 4 3 6 3 . 6 5 1 4 . 6 2 . 4 . 0 6 9 0 4 6 7 . 4 5 4 3 6 . 3 3 5 . 1 4 4 1 5 5 3 1 9 5 2 1 1 7 0 . 2 1 6 , 1 5 9 4 2 . 5 0 . 0 4 2 6 6 . 6 4 1 4 . 0 0 3 , 1 . 2 9 6 2 5 , 1 5 9 . 4 2 0 4 . 9 9 1 6 1 . 2 1 4 . 0 0 3 , 1 - 5 8 4 . 6 0 1 . 9 2 1 . 0 5 2 . - 6 5 . 1 6 0 . 1 0 5 . 0 - - - i . t h g e w k s i r - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 6 7 3 . 8 9 4 9 . 3 - 3 4 . 1 - - - - 1 - 6 3 . 0 1 - - - - - - 5 9 2 . 4 5 1 . 5 8 9 2 . 3 - - - - - - - - - - - - - - - - - 2 1 3 8 9 . 6 2 0 7 . 3 1 9 6 . 7 5 4 4 . 0 0 0 . 1 0 5 . 2 - - - - - - - 3 4 . 1 - - - - - - - - - - 1 - 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 n o i s i v o r P n o e r e h t 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 n o i s i v o r P n o e r e h t 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 n o i s i v o r P n o e r e h t s r e w o r r o b f o . o N 6 3 . 0 1 - i g n d n a t s t u o t n u o m 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 * 7 1 0 2 g n i r u t c u r t s e r h s e r F 2 e h t g n i r u d # r a e y n o i t a d a r g p U 3 d e r u t c u r t s e r o t 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 s a s e c n a v d A n w o h s t o n d e r u t c u r t s e r d r a d n a t s 4 r a e y i g n n n g e b i e h t t a s e c n a v d a t x e n e h t f o 1 + 1 - 2 + 2 - 0 7 . 3 1 3 6 . 3 3 3 3 . 7 4 - - 1 - - 0 5 . 1 0 5 . 2 - 3 2 3 0 . 0 6 2 . 4 5 6 . 0 4 0 5 . 4 4 9 7 . 0 0 5 . 2 - - - - - n o i s i v o r P n o e r e h t 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 n o i s i v o r P n o e r e h t 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 i g n d n a t s t u o t n u o m A i i n o s v o r P n o e r e h t ^ r a e y f o n o i t a d a r g n w o D 5 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 f o s f f o - e t i r W d e r u t c u r t s e r s t n u o c c a 6 e h t g n i r u d # # r a e y s a , 1 3 s t n u o c c a h c r a M t a * 8 1 0 2 d e r u t c u r t s e R 7 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 f i 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 4 5 . 0 ` i i n o s v o r p d n a s t n u o c c a 3 ( e r o r c 3 4 . 2 1 ` d n a ; e a s l / 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 n o i t c u d e r f o ) e r o r c 8 4 3 . ` i i n o s v o r p d n a s t n u o c c a 5 ( e r o r c . 0 6 6 4 4 . e g a k c a p r e h t o d n a R D C n i s t n u o c c a d e r u t c u r t s e r i g n i t s x e o t ) e r o r c 1 ` n o s v o r p i i d n a s t n u o c c a 3 ( 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 6 1 . 7 2 ` ` s e d u c n l i s e d u c n l i . d e r u t c u r t s e r s a d e t r o p e r e b o t d e r i u q e r r e g n o l o n e r a i h c h w ) e r o r c . ) 1 1 e t o n r e f e R ( . r a e y e h t g n i r u d d e v e c e r i i n o i t a c n u m m o c y r o t a u g e r l o t i t n a u s r u p g n m r o f r e p - n o n s a r a e y e h t g n i r u d k n a B e h t y b i d e ﬁ s s a c l t n u o c c a n a s 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 * ^ * * # # # HDFC Bank Limited Annual Report 2017-18 117 Schedules to the Financial Statements For the year ended March 31, 2018 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 - - - 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 e h t g n i r u d # r a e y 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 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 - - - 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 s e c n a v d A n w o h s t o n d e r u t c u r t s e r d r a d n a t s t a 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 i g n n n g e b e h t - - - 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 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 s t n u o c c a 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 e h t g n i r u d # # r a e y 4 4 . 0 0 0 . 1 0 5 . 2 n o e r e h t n o i s i v o r P 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 d e r u t c u r t s e R s a , 1 3 s t n u o c c a h c r a M t a * 7 1 0 2 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 (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 * 6 1 0 2 1 6 7 * ^ # # # HDFC Bank Limited Annual Report 2017-18 118 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:67) (cid:83) (cid:36) (cid:73) (cid:76) (cid:0) (cid:115) 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 . d e r u t c u r t s e r s a d e t r o p e r e b o t d e r i u q e r 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 n i i ) e r o r c 3 5 . 4 ` n o s v o r p i i d n a s t n u o c c a 5 1 ( e r o r c 1 9 . 5 5 ` e d u c n l 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 0 5 . 1 ` n o s v o r p i i d n a s t n u o c c a 2 ( n o i t c n a s l a n o i t i d d a f o e r o r c 0 7 . 0 ` e d u c n l i . r a e y t x e n e h t f o i r o g n n o s v o r p i i i r e h g h t c a r t t a t o n 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 - - - - - - - - - - - - - - (` crore) Total March 31, 2018 Schedules to the Financial Statements For the year ended March 31, 2018 (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, 2018 March 31, 2017 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) 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 190.90 - 9.72 - Total 200.62 SRs issued more than 5 years ago but within past 8 years SRs issued more than 8 years ago - - 3.15 - 3.15 - - - - - 190.90 - 12.87 - 203.77 * During the year ended March 31, 2018, contingent provision of ` 76.36 crore was made towards investment in security receipts backed by NPAs sold by the Bank. 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 SRs issued more than 5 years ago but within past 8 years SRs issued more than 8 years ago Total March 31, 2017 0.52 - 10.12 - 10.64 - - - - - 195.86 - 27.29 - 223.15 (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:24)(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:23)(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:24)(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:23)(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, 2018 and as at March 31, 2017. (cid:33)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:67)(cid:72)(cid:69)(cid:77)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:51)(cid:85)(cid:83)(cid:84)(cid:65)(cid:73)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:51)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(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:8)(cid:51)(cid:20)(cid:33)(cid:9)(cid:12)(cid:0)(cid:65)(cid:83)(cid:0)(cid:79)(cid:78)(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:24)(cid:26)(cid:0)(cid:46)(cid:73)(cid:76)(cid:0)(cid:8)(cid:80)(cid:82)(cid:69)(cid:86)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0) year: Nil). HDFC Bank Limited Annual Report 2017-18 119 Schedules to the Financial Statements For the year ended March 31, 2018 (cid:115)(cid:0) Disclosure on Stressed Assets (i) Disclosures on Flexible Structuring of Existing Loans (` crore, except numbers) Financial year ended No. of borrowers taken up for ﬂexible structuring March 31, 2018 March 31, 2017 - 1 Amount of loans taken up for ﬂexible structuring Classiﬁed as Standard - 39.12 Classiﬁed as NPA - - Exposure weighted average duration of loans taken up for ﬂexible structuring Before applying ﬂexible structuring - 8 years After applying ﬂexible structuring - 9.5 years (ii) Disclosures on Strategic Debt Restructuring Scheme (accounts which are currently under the stand-still period) Financial year ended No. of accounts where SDR has been invoked March 31, 2018 March 31, 2017 - 1 Amount outstanding Amount outstanding with respect to accounts where conversion of debt to equity is pending Classiﬁed as standard - 73.06 Classiﬁed as NPA - - Classiﬁed as standard - - Classiﬁed as NPA - - *of which ` 32.87 crore of loans where conversion to equity has taken place. (` crore, except numbers) Amount outstanding with respect to accounts where conversion of debt to equity has taken place Classiﬁed as standard - 73.06* Classiﬁed as NPA - - (iii) Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period) as at March 31, 2018: Nil (previous year: Nil). (iv) Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period) as at March 31, 2018 : Nil (previous year: Nil). 12 Details of exposures to real estate and capital market sectors, risk category-wise country exposures, factoring (cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:12)(cid:0) (cid:83)(cid:73)(cid:78)(cid:71)(cid:76)(cid:69)(cid:0) (cid:15)(cid:0) (cid:71)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0) (cid:66)(cid:79)(cid:82)(cid:82)(cid:79)(cid:87)(cid:69)(cid:82)(cid:0) (cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:12)(cid:0) (cid:85)(cid:78)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0) (cid:65)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:67)(cid:79)(cid:78)(cid:67)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:68)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:83)(cid:12)(cid:0) (cid:65)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:12)(cid:0) exposures and NPAs (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:65)(cid:76)(cid:0)(cid:69)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:0)(cid:83)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) Exposure is higher of limits sanctioned or the amounts outstanding as at the year end. (` crore) Category a) Direct exposure (i) Residential mortgages* March 31, 2018 March 31, 2017 73,654.38 41,460.65 65,289.89 42,401.22 (of which housing loans eligible for inclusion in priority sector advances) (16,475.22) (18,951.24) (ii) Commercial real estate 32,185.51 22,877.26 (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) 8.21 - 22,249.51 22,249.51 11.41 - 17,832.36 17,832.36 *includes loans purchased under the direct loan assignment route Of the above, exposure to real estate developers as at March 31, 2018 is 0.6% (previous year: 0.5%) of total advances. Total exposure to real estate sector 95,903.89 83,122.25 HDFC Bank Limited Annual Report 2017-18 120 Schedules to the Financial Statements For the year ended March 31, 2018 (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, 2018 March 31, 2017 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 90.61 90.97 158.96 186.94 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 5,421.51 3,604.58 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 232.66 169.59 Secured and unsecured advances to stock brokers and guarantees issued on behalf of stock brokers and market makers 10,915.99 8,165.08 Loans sanctioned to corporates against the security of shares / bonds / debentures or other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources 2,262.75 1,390.31 (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) 4.10 0.25 Total exposure to capital market 19,086.58 13,607.72 (cid:115)(cid:0) (cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:67)(cid:65)(cid:84)(cid:69)(cid:71)(cid:79)(cid:82)(cid:89)(cid:0)(cid:87)(cid:73)(cid:83)(cid:69)(cid:0)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:82)(cid:89)(cid:0)(cid:69)(cid:88)(cid:80)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0)(cid:0)(cid:0)(cid:8)` crore) Risk Category Insigniﬁcant Low Moderately low Moderate Moderately high High Very high March 31, 2018 March 31, 2017 Exposure (net) Provision held Exposure (net) Provision held 18,538.08 9,103.81 486.54 350.17 37.20 - 0.18 Total 28,515.98 - - - - - - - - 17,177.70 9,653.78 247.75 164.44 9.48 - - 27,253.15 - - - - - - - - HDFC Bank Limited Annual Report 2017-18 121 • • Details of factoring exposure The factoring exposure of the Bank as at March 31, 2018 is ` 2,334.53 crore (previous year: ` 2,036.11 crore). Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank The RBI has prescribed single and group borrower exposure limits linked to a bank’s capital funds. These 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, 2018 and March 31, 2017 the Bank was within the limits prescribed by the RBI. • Unsecured advances Advances for which intangible collaterals such as rights, licenses, authority, trademarks, patents, 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, 2018 (previous year: Nil). • Inter-bank Participation with risk sharing The aggregate amount of participation issued by the Bank and reduced from advances as per regulatory guidelines as at March 31, 2018 was ` 24,454.84 crore (previous year: ` 7,500.00 crore). • Concentration of deposits, advances, exposures and NPAs a) Concentration of deposits (` crore, except percentages) Particulars Total deposits of twenty largest depositors Percentage of deposits of twenty largest depositors to total deposits of the Bank March 31, 2018 March 31, 2017 50,066.89 35,562.76 6.3% 5.5% b) Concentration of advances (` crore, except percentages) Particulars Total advances to twenty largest borrowers Percentage of advances of twenty largest borrowers to total advances of the Bank March 31, 2018 March 31, 2017 92,114.45 83,962.09 9.0% 9.4% 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, except percentages) Particulars March 31, 2018 March 31, 2017 Total exposure to twenty largest borrowers / customers 1,04,796.59 90,046.09 Percentage of exposure of twenty largest borrowers / customers to total exposure of the Bank on borrowers / customers 9.7% 9.5% 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, 2018 March 31, 2017 Total gross exposure to top four NPA accounts 708.09 588.99 122 HDFC Bank Limited Annual Report 2017-18Schedules to the Financial StatementsFor the year ended March 31, 2018 Schedules to the Financial Statements For the year ended March 31, 2018 e) Sector-wise advances Sector Sr. No. (` crore) March 31, 2018 March 31, 2017 Gross advances Gross non- performing loans Gross advances % of gross non-performing loans to gross advances in that sector Gross non- performing loans % of gross non-performing loans to gross advances in that sector A Priority sector 1 Agriculture and allied activities 73,513.50 2,514.60 3.42% 63,186.16 1,279.98 2 Advances to industries eligible 28,405.11 483.71 1.70% 26,209.92 480.78 as priority sector lending 3 Services 52,995.58 990.26 1.87% 52,361.67 678.46 4 Personal loans 20,514.50 19.26 0.09% 22,350.27 14.43 Sub-total (A) 175,428.69 4,007.83 2.28% 164,108.02 2,453.65 B Non Priority sector 1 Agriculture and allied activities 14,131.18 149.41 1.06% 6,905.78 74.89 2 Industry 3 Services 141,126.81 1,783.60 1.26% 127,366.08 1,243.07 155,844.46 1,114.86 0.72% 127,937.51 1,037.87 4 Personal loans 177,723.19 1,451.16 0.82% 132,249.25 1,016.40 Sub-total (B) 488,825.65 4,499.03 0.92% 394,458.62 3,372.23 Total (A) + (B) 664,254.34 8,506.86 1.28% 558,566.64 5,825.88 (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) 2.03% 1.83% 1.30% 0.06% 1.50% 1.08% 0.98% 0.81% 0.77% 0.85% 1.04% (cid:8)` crore) Type of PSLCs For the year ended March 31, 2018 For the year ended March 31, 2017 PSLC bought during the year PSLC sold during the year PSLC bought during the year PSLC sold during the year Agriculture Small and Marginal farmers Micro Enterprises General - 22,251.00 5,520.00 - Total 27,771.00 - - - 730.75 730.75 - 3,269.50 - - 3,269.50 500.00 21.25 - 1,000.00 1,521.25 13 Other ﬁxed assets Other ﬁxed assets includes amount capitalised relating to software having useful life of ﬁve years. Details regarding the same (` crore) are tabulated below: Particulars Cost As at March 31 of the previous year Additions during the year Deductions during the year March 31, 2018 March 31, 2017 2,139.70 251.89 - 1,737.09 402.61 - Total (a) 2,391.59 2,139.70 HDFC Bank Limited Annual Report 2017-18 123 Schedules to the Financial Statements For the year ended March 31, 2018 Particulars Depreciation As at March 31 of the previous year Charge for the year On deductions during the year March 31, 2018 March 31, 2017 (` crore) 1,473.76 274.85 - 1,748.61 642.98 1,218.53 255.23 - 1,473.76 665.94 Total (b) Net value (a-b) 14 Other assets (cid:115)(cid:0) (cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:68)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:65)(cid:88)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:8)(cid:78)(cid:69)(cid:84)(cid:9)(cid:0)(cid:79)(cid:70)(cid:0)` 3,344.02 crore (previous year: ` 2,447.34 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, 2018 March 31, 2017 2,780.22 2,079.97 177.65 439.88 167.38 321.47 Total (a) 3,397.75 2,568.82 Total (b) (53.73) (53.73) Deferred tax asset (net) (a-b) 3,344.02 (121.48) (121.48) 2,447.34 (cid:0)(cid:0)(cid:0)(cid:0)(` crore) (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) Particulars March 31, 2018 March 31, 2017 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 Residual items 13,357.25 5,091.67 3,344.02 1,802.24 1,827.87 2.50 11,882.37 14,014.05 2,447.34 1,740.75 1,568.79 2.50 *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 25,425.55 31,655.80 HDFC Bank Limited Annual Report 2017-18 124 Schedules to the Financial Statements For the year ended March 31, 2018 ) e r o r c ` ( . I B R e h t y b d e u s s i s e n i l i e d u g e h t r e p s a s t e k c u b y t i r u t a m e h t n i i d e ﬁ s s a c l e r a s e i t i l i b a i l d n a s t e s s A s e i t i l i b a i l d n a s t e s s a y e k f o n r e t t a p y t i r u t a M 5 1 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 8 1 0 2 , 1 3 9 0 . 3 3 3 , 8 5 6 1 2 . 7 5 6 , 3 5 1 3 . 0 5 7 , 7 6 8 0 . 5 7 5 , 9 0 3 8 4 . 5 3 8 , 3 7 0 8 . 0 8 1 , 4 5 4 0 . 9 7 4 , 4 2 2 1 . 3 2 9 , 5 2 5 3 . 1 6 7 , 6 1 8 0 . 8 9 9 , 8 . 5 8 5 9 5 , 5 1 7 7 . 6 7 5 7 , s e c n a v d a & s n a o L 4 2 . 0 0 2 , 2 4 2 4 5 . 7 6 6 , 0 3 9 2 . 1 6 9 , 9 7 0 . 7 5 5 , 0 7 6 3 . 4 0 2 , 4 2 2 6 . 9 0 4 , 6 1 3 3 . 1 6 1 , 1 1 5 5 . 8 6 6 , 6 7 4 . 1 9 9 , 4 4 1 . 8 0 0 , 5 4 3 . 0 5 0 , 0 2 3 5 . 0 2 5 2 4 , s t n e m t s e v n I 4 6 . 0 7 7 , 8 8 7 6 2 . 6 7 5 , 0 3 1 3 7 . 3 3 7 , 4 1 4 5 . 4 5 2 , 0 1 3 4 0 . 9 6 5 , 1 1 1 1 6 . 8 8 9 , 3 7 8 0 . 6 6 9 , 0 3 7 3 . 5 6 8 , 9 3 9 7 . 8 8 2 , 0 2 5 3 . 4 8 8 , 9 1 0 2 . 9 7 8 , 7 2 7 6 . 4 6 7 8 , s t i s o p e D 8 9 . 4 0 1 , 3 2 1 0 0 . 5 7 9 , 6 1 5 4 . 8 7 1 , 7 1 4 6 . 4 9 3 , 8 1 3 1 . 5 6 6 , 7 1 3 9 . 1 2 8 , 9 1 4 6 . 8 6 7 , 3 0 7 . 7 4 3 , 3 1 6 . 7 6 3 , 3 7 5 . 0 0 7 , 3 3 4 . 4 0 3 , 8 1 8 8 . 0 8 5 i s g n w o r r o B 9 0 . 9 9 7 , 8 4 2 3 . 7 9 4 5 4 . 1 0 6 , 1 9 6 . 7 4 8 , 3 8 5 . 5 8 1 , 2 0 1 . 1 4 7 , 5 2 1 . 6 0 1 , 4 8 1 . 9 2 7 , 3 4 4 . 3 1 0 , 7 7 2 . 7 9 6 , 3 3 7 . 8 7 1 , 4 1 . 1 2 1 0 2 , 2 8 0 . 0 8 7 , 9 5 3 6 . 1 8 1 , 9 1 3 . 0 3 9 , 1 2 5 . 2 7 3 , 6 1 6 . 8 8 1 , 0 1 0 5 . 0 6 9 , 0 1 8 0 . 0 1 9 , 4 5 0 . 5 0 1 , 5 4 1 . 9 5 3 , 4 6 8 . 2 6 2 , 2 . 0 0 3 1 4 , 3 8 3 . 6 9 0 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 7 1 0 2 , 1 3 HDFC Bank Limited Annual Report 2017-18 125 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 , 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 , 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 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 , 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 , 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 5 4 8 0 5 1 , . 6 0 9 3 5 6 , . 9 2 5 8 7 5 , . 7 5 3 3 9 6 2 , . 4 3 4 9 3 1 4 , . 0 5 6 3 3 0 1 , s e c n a v d a & s n a o L s t n e m t s e v n I s t i s o p e D . 1 7 8 4 2 3 , . 1 3 3 1 3 i s g n w o r r o B . 8 4 1 2 5 9 , . 2 4 8 8 5 4 , . 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 . I B R 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 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 i t a c ﬁ s s a C l . m e t i t e e h S e c n a a B l - f f o s d u c x e l 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 Schedules to the Financial Statements For the year ended March 31, 2018 16 Provisions and contingent liabilities 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) d) Description of contingent liabilities March 31, 2018 March 31, 2017 431.24 261.95 (222.07) 471.12 306.36 334.24 (209.36) 431.24 (` crore) March 31, 2018 March 31, 2017 311.90 2.11 314.01 344.56 (32.66) 311.90 March 31, 2018 March 31, 2017 3,612 146.55 119.02 119.02 - 2,319 165.20 20.83 20.83 - Sr. No. (cid:35)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:69)(cid:78)(cid:84)(cid:0)(cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:10) 1 2 3 4 5 Claims against the Bank not acknowledged as debts - taxation Claims against the Bank not acknowledged as debts - others 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 Bank is contingently liable Brief description 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 taxation laws. 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. 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 HDFC Bank Limited Annual Report 2017-18 126 Schedules to the Financial Statements For the year ended March 31, 2018 (cid:17)(cid:23)(cid:0) (cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:83)(cid:0)(cid:15)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) Particulars March 31, 2018 March 31, 2017 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 8.86% 4.43% 1.68% 3.60% 1.93% 15.08 0.20 1.30% 1.28% 0.40% 8.95% 4.28% 1.59% 3.32% 1.88% 12.36 0.16 1.05% 1.04% 0.33% Provision coverage ratio8 69.78% 68.67% 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 speciﬁc provisions, ECGC claims received, provisions for funded interest term loans classiﬁed as NPAs and provisions in lieu of diminution in the fair value of restructured assets classiﬁed as NPAs. Net advances are equivalent to gross advances net of speciﬁc loan loss provisions, ECGC claims received, provision for funded interest term loans classiﬁed as NPA and provisions in lieu of diminution in the fair value of restructured assets. 8. Provision coverage ratio does not include assets written-off. 18 Interest income Interest income under the sub-head Income from Investments includes dividend on units of mutual funds and equity and preference shares received during the year ended March 31, 2018 amounting to ` 160.59 crore (previous year: ` 256.64 crore). 19 Earnings from standard assets securitised-out There are no Special Purpose Vehicles (‘SPV’s) sponsored by the Bank for securitisation transactions. During the years ended March 31, 2018 and March 31, 2017, 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 in 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, 2018 was ` 223.25 crore (previous year: ` 224.31 crore) and outstanding servicing liability was ` 0.05 crore (previous year: ` 0.07 crore). HDFC Bank Limited Annual Report 2017-18 127 Schedules to the Financial Statements For the year ended March 31, 2018 20 Other income (cid:115)(cid:0) (cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:69)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:66)(cid:82)(cid:79)(cid:75)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69) (cid:57) (cid:57) Commission, exchange and brokerage income is net of correspondent bank charges. Commission income for the year ended March 31, 2018 includes fees of ` 1,192.34 crore (previous year: ` 798.35 crore) in respect of life insurance business, of which ` 406.77 crore (previous year: ` 228.63 crore) is for displaying publicity materials at the Bank’s branches / ATMs and ` 203.43 crore (previous year: ` 157.58 crore) is 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 ` 1,093.84 crore (previous year: ` 864.31 crore). 21 Other expenditure Other expenditure includes commission paid to sales agents amounting to ` 2,427.96 crore (previous year: ` 1,906.80 crore), exceeding 1% of the total income of the Bank. 22 Provisions and contingencies The break-up of provisions and contingencies included in the Statement of Proﬁt and Loss is given below: (` crore) Particulars Provision for income tax - Current - Deferred Provision for NPAs Provision for diminution in value of non-performing investments Provision for standard assets Other provisions and contingencies* March 31, 2018 March 31, 2017 10,107.25 (896.68) 4,910.43 30.45 597.43 389.18 7,916.97 (327.54) 3,145.30 (7.64) 392.18 63.46 Total 15,138.06 11,182.73 *Includes provisions for tax, legal and other contingencies ` 390.04 crore (previous year: ` 38.34 crore), ﬂoating provisions Nil (previous year: ` 25.00 crore), provisions / (write-back) for securitised-out assets ` 2.14 crore (previous year: ` 2.62 crore) and standard restructured assets ` (3.00) crore (previous year: ` (2.50) crore). 23 Employee beneﬁts Gratuity Particulars Reconciliation of opening and closing balance of the present value of the deﬁned beneﬁt obligation Present value of obligation as at April 1 Interest cost Current service cost Beneﬁts paid (` crore) March 31, 2018 March 31, 2017 488.00 35.12 65.19 (39.53) 390.47 26.36 62.57 (38.49) HDFC Bank Limited Annual Report 2017-18 128 Schedules to the Financial Statements For the year ended March 31, 2018 Particulars 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 March 31, 2018 March 31, 2017 10.44 (16.25) 542.97 355.57 27.02 73.21 (39.53) 0.13 - 416.40 416.40 (542.97) (126.57) 35.12 65.19 (27.02) (5.94) 67.35 27.15 88.29 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 7.5% per annum 7.1% per annum 7.0% per annum 7.0% per annum 8.0% per annum 8.0% per annum (cid:0) (cid:37)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:68)(cid:74)(cid:85)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Experience adjustment gain / (loss) on plan assets 0.13 Experience adjustment (gain) / loss on plan liabilities 10.44 32.44 35.48 (13.69) 16.24 HDFC Bank Limited Annual Report 2017-18 129 Years ended March 31, 2018 416.40 542.97 2017 355.57 488.00 2016 287.93 390.47 (126.57) (132.43) (102.54) (cid:8)` crore) 2014 172.60 237.43 (64.83) 1.87 5.87 2015 242.88 310.59 (67.71) 21.35 4.59 Schedules to the Financial Statements For the year ended March 31, 2018 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, 2018 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, 2018 25.2% 28.9% 43.1% 2.8% 100.0% Total March 31, 2018 March 31, 2017 (` crore) Reconciliation of opening and closing balance of the present value of the deﬁned beneﬁt obligation Present value of obligation as at April 1 Interest cost Current service cost Beneﬁts paid Actuarial (gain) / loss on obligation: Experience adjustment Assumption change Present value of obligation as at March 31 Reconciliation of opening and closing balance of the fair value of the plan assets Fair value of plan assets as at April 1 Expected return on plan assets Contributions Beneﬁts paid Actuarial gain / (loss) on plan assets: Experience adjustment Assumption change Fair value of plan assets as at March 31 Amount recognised in Balance Sheet Fair value of plan assets as at March 31 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 73.55 5.19 0.74 (8.75) 3.95 (1.62) 73.06 36.16 2.36 0.94 (8.75) 0.59 - 31.30 31.30 (73.06) (41.76) 5.19 0.74 (2.36) 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) 4.80 1.23 (2.61) HDFC Bank Limited Annual Report 2017-18 130 Schedules to the Financial Statements For the year ended March 31, 2018 Particulars 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 March 31, 2018 March 31, 2017 (` crore) 1.74 5.31 2.95 13.79 2.50 5.92 3.37 7.18 7.5% per annum 7.1% per annum 7.0% per annum 7.0% per annum 8.0% per annum 8.0% per annum (cid:0)(cid:0)(cid:0)(cid:0)(cid:8)` crore) (cid:0) (cid:37)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:68)(cid:74)(cid:85)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Years ended March 31, 2018 2017 2016 2015 2014 31.30 73.06 36.16 73.55 38.38 70.88 41.91 57.45 47.99 58.89 (41.76) (37.39) (32.50) (15.54) (10.90) Experience adjustment gain / (loss) on plan assets 0.59 Experience adjustment (gain) / loss on plan liabilities 3.95 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, 2018 are given below: Category of plan assets Government securities Debenture and bonds Others Provident fund % of fair value to total plan assets as at March 31, 2018 5.9% 78.9% 15.2% 100.0% Total The guidance note on AS-15, Employee Beneﬁts, states that employer established provident funds, where interest is guaranteed are to be considered as deﬁned beneﬁt plans and the liability has to be valued. The Institute of Actuaries of India (IAI) has issued a guidance note on valuation of interest rate guarantees on exempt provident funds. The actuary has accordingly valued the same and the Bank held a provision of Nil as at March 31, 2018 (previous year: Nil), towards the present value of the guaranteed interest beneﬁt obligation. The actuary has followed the deterministic approach as prescribed by the guidance note. Assumptions Particulars Discount rate (GOI security yield) Expected guaranteed interest rate March 31, 2018 March 31, 2017 7.5% per annum 7.1% per annum 8.6% per annum 8.7% per annum The Bank does not have any unfunded deﬁned beneﬁt plan. The Bank contributed ` 222.84 crore (previous year: ` 216.86 crore) to the provident fund and ` 67.68 crore (previous year: ` 78.67 crore) to the superannuation plan. HDFC Bank Limited Annual Report 2017-18 131 Schedules to the Financial Statements For the year ended March 31, 2018 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 24 Disclosures on remuneration (cid:49)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83) March 31, 2018 March 31, 2017 259.46 61.91 321.37 237.24 52.95 290.19 7.5% per annum 7.1% per annum 8.0% per annum 8.0% per annum 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 three independent directors as of March 31, 2018. 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 Mrs. Shyamala Gopinath, Mr. Partho Datta and Mr. Bobby Parikh. Further, Mrs. Shyamala Gopinath and Mr. Partho Datta are also members of the RPMC. Mr. Bobby Parikh is the chairperson of the NRC. During the year ended March 31, 2018, Mr. A. N. Roy ceased to be a member of the NRC pursuant to his resignation from the Board of Directors of the Bank. Mandate of the NRC The primary mandate of the NRC is to oversee the implementation of compensation policies of the Bank. The NRC periodically reviews the overall compensation policy of the Bank with a view to attract, retain and motivate employees. In this capacity it is required to review and approve the design of the total compensation framework, including compensation strategy programs and plans, on behalf of the Board of Directors. The compensation structure and pay revision for Whole Time Directors is also approved by the NRC. The NRC co-ordinates with the RPMC to ensure that compensation is aligned with prudent risk taking. External Consultants The Bank employed the services of the following consulting ﬁrms in the area of compensation and beneﬁts and human resources: AON: 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. Cedar Consulting: The Bank employed the services of Cedar Consulting to review and recommend key scorecard measures for the Whole Time Directors. (cid:0) (cid:51)(cid:67)(cid:79)(cid:80)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:7)(cid:83)(cid:0)(cid:50)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:48)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:26) The Remuneration Policy of the Bank includes within its scope all business lines, all permanent staff in its domestic as well as international ofﬁces. Further the principles articulated in the compensation policy are universal, however in the event there are any statutory provisions in overseas locations the same take precedence over the remuneration policy of the Bank. All permanent employees of the Bank except those covered under the long term wage agreement are covered by the said compensation policy. The number of employees covered under the compensation policy was 87,983 as at March 31, 2018 (previous year: 84,041). HDFC Bank Limited Annual Report 2017-18 132 Schedules to the Financial Statements For the year ended March 31, 2018 (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 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. HDFC Bank Limited Annual Report 2017-18 133 Schedules to the Financial Statements For the year ended March 31, 2018 (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 does 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 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. HDFC Bank Limited Annual Report 2017-18 134 Schedules to the Financial Statements For the year ended March 31, 2018 (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 which factors not just quantitative, but also qualitative measures, such as quality of business sourced, customer complaints etc., 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. Review of Remuneration Policy of the Bank The Compensation Policy of the Bank was reviewed by the NRC during the year ended March 31, 2018 and the following material changes were incorporated therein: (cid:57) Inclusion of deﬁnition of inadequacy of proﬁts as per section 197 of the Companies Act, 2013 (cid:57) With effect from April 1, 2017, the Bank has 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. 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 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 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. HDFC Bank Limited Annual Report 2017-18 135 Schedules to the Financial Statements For the year ended March 31, 2018 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. 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. HDFC Bank Limited Annual Report 2017-18 136 Schedules to the Financial Statements For the year ended March 31, 2018 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 bonus payout 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. 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; HDFC Bank Limited Annual Report 2017-18 137 Schedules to the Financial Statements For the year ended March 31, 2018 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. Achievement against the plans of the Bank; and B. Achievement against the performance of peers. Apart from the factors related to business growth there is also a key qualitative factor such as regulatory compliance. Compliance is the key qualitative factor that acts as the moderator in the entire organisation evaluation process. A low score on compliance can signiﬁcantly moderate the other performance measures and depending on severity may even nullify their impact. While the above parameters form the core evaluation parameters for the Bank each of the business units are measured on the following from a remuneration standpoint: 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. 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. HDFC Bank Limited Annual Report 2017-18 138 Schedules to the Financial Statements For the year ended March 31, 2018 (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. Employees other than Whole Time Directors The Bank has formulated the following variable pay plans: HDFC Bank Limited Annual Report 2017-18 139 Schedules to the Financial Statements For the year ended March 31, 2018 (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 2017-18 140 Schedules to the Financial Statements For the year ended March 31, 2018 (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, 2018 March 31, 2017 Number of meetings: 7 Number of meetings: 10 Remuneration paid: ` 0.13 crore Remuneration paid: ` 0.20 crore 34 employees 33 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 ` 2.80 crore. Total amount of outstanding deferred remuneration (cash bonus) was ` 4.62 crore. ` 1.82 crore ` 1.45 crore ` 55.43 crore (Fixed*) ` 11.76 crore (variable pay pertaining to ﬁnancial year ended March 31, 2017, in relation to employees where there was no deferment of pay). the RBI on The approval of the variable pay of the Bank’s Whole Time Directors for the year ended March 31, 2017 is awaited. There were no other employees where there was deferment of pay. Number of stock options granted during the ﬁnancial year: 47,11,100 Total amount of outstanding deferred remuneration (cash bonus) was ` 2.80 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. Number of stock options granted during the ﬁnancial year: Nil Total amount of outstanding deferred remuneration (cash bonus) was ` 4.62 crore. Nil Nil Nil Nil * Excludes gratuity beneﬁts, since the same is computed at Bank level. HDFC Bank Limited Annual Report 2017-18 141 Schedules to the Financial Statements For the year ended March 31, 2018 25 Segment reporting Business segments Business segments have been identiﬁed and reported taking into account, the target customer proﬁle, the nature of products and services, the differing risks and returns, the organisation structure, the internal business reporting system and the guidelines prescribed by RBI. The Bank operates in the following segments: a) Treasury The treasury segment primarily consists of net interest earnings from the Bank’s investment portfolio, money market borrowing and lending, gains or losses on investment operations and on account of trading in foreign exchange and derivative contracts. b) Retail banking The retail banking segment serves retail customers through a branch network and other delivery channels. This segment raises deposits from customers and provides loans and other services to customers with the help of specialist product groups. Exposures are classiﬁed under retail banking taking into account the status of the borrower (orientation criterion), the nature of product, granularity of the exposure and the quantum thereof. Revenues of the retail banking segment are derived from interest earned on retail loans, interest earned from other segments for surplus funds placed with those segments, subvention received from dealers and manufacturers, fees from services rendered, foreign exchange earnings on retail products etc. Expenses of this segment primarily comprise interest expense on deposits, commission paid to retail assets sales agents, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses of specialist product groups, processing units and support groups. c) Wholesale banking The wholesale banking segment provides loans, non-fund facilities and transaction services to large corporates, emerging corporates, public sector units, government bodies, ﬁnancial institutions and medium scale enterprises. Revenues of the wholesale banking segment consist of interest earned on loans made to customers, interest / fees earned on the cash ﬂoat arising from transaction services, earnings from trade services and other non-fund facilities and also earnings from foreign exchange and derivative transactions on behalf of customers. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses of delivery channels, specialist product groups, processing units and support groups. d) Other banking business This segment includes income from para banking activities such as credit cards, debit cards, third party product distribution, primary dealership business and the associated costs. e) Unallocated All items which are reckoned at an enterprise level are classiﬁed under this segment. This includes capital and reserves, debt classiﬁed as Tier I or Tier II capital and other unallocable assets and liabilities such as deferred tax, prepaid expenses, etc. Segment revenue includes earnings from external customers plus earnings from funds transferred to other segments. Segment result includes revenue less interest expense less operating expense and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Interest income is charged by a segment that provides funding to another segment, based on yields benchmarked to an internally approved yield curve or at a certain agreed transfer price rate. Transaction charges are levied by the retail banking segment to the wholesale banking segment for the use by its customers of the retail banking segment’s branch network or other delivery channels. Such transaction costs are determined on a cost plus basis. Segment capital employed represents the net assets in that segment. 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. HDFC Bank Limited Annual Report 2017-18 142 Schedules to the Financial Statements For the year ended March 31, 2018 Segment reporting for the year ended March 31, 2018 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 19,841.37 73,843.05 41,504.13 12,259.14 147,447.69 - 51,986.03 95,461.66 1,540.00 9,971.72 11,720.51 5,487.90 28,720.13 2,022.81 9,210.57 17,486.75 350,894.38 371,906.59 297,040.57 37,595.49 1,057,437.03 55,349.70 598,785.46 270,287.20 4,081.50 928,503.86 6,497.28 1,063,934.31 29,135.42 957,639.28 15 Capital employed (9) - (12) 295,544.68 (226,878.87) 26,753.37 33,513.99 128,933.17 (Segment assets - Segment liabilities) Unallocated (10) - (13) Total (15) + (16) Capital expenditure Depreciation (22,638.14) 106,295.03 5.77 729.47 11.58 723.91 73.05 92.36 88.39 78.49 896.68 906.34 Provisions for non - performing assets / others* 35.36 3,539.06 1,565.79 773.10 5,913.31 16 17 18 19 20 21 Unallocated other provisions* *Represents material non-cash charge other than depreciation and taxation. (cid:0) (cid:39)(cid:69)(cid:79)(cid:71)(cid:82)(cid:65)(cid:80)(cid:72)(cid:73)(cid:67)(cid:0)(cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) 14.18 (cid:8)` crore) Particulars Revenue Assets Capital expenditure Domestic International 94,643.54 818.12 1,036,987.78 26,946.53 896.33 0.35 HDFC Bank Limited Annual Report 2017-18 143 Schedules to the Financial Statements For the year ended March 31, 2018 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) (cid:0) Particulars Sr. No. 1 Segment revenue 2 Unallocated revenue 3 4 Less: Inter-segment revenue Income from operations (1) + (2) - (3) 5 Segment results 6 Unallocated expenses 7 Income tax expense (including deferred tax) 8 Net proﬁt (5) - (6) - (7) 9 Segment assets 10 Unallocated assets 11 Total assets (9) + (10) 12 Segment liabilities 13 Unallocated liabilities 14 Total liabilities (12) + (13) Treasury Retail banking Wholesale banking Other banking operations (cid:8)` crore) Total 20,326.18 66,147.50 32,587.85 9,046.69 128,108.22 - 46,505.77 81,602.45 1,659.11 8,432.16 10,123.04 3,365.33 23,579.64 1,440.55 7,589.43 14,549.66 263,356.40 295,828.92 272,148.83 27,205.88 858,540.03 5,300.18 863,840.21 38,732.49 525,792.90 191,254.90 3,142.74 758,923.03 15,454.80 774,377.83 15 Capital employed (9) - (12) 224,623.91 (229,963.98) 80,893.93 24,063.14 99,617.00 (Segment assets - Segment liabilities) 16 Unallocated (10) - (13) 17 Total (15) + (16) 18 Capital expenditure 19 Depreciation (10,154.62) 89,462.38 32.85 10.15 846.56 659.66 150.30 90.78 97.69 1,127.40 72.53 833.12 20 Provisions for non - performing assets / others* (7.64) 2,159.35 841.13 605.17 3,598.01 21 Unallocated other provisions* *Represents material non-cash charge other than depreciation and taxation. (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 (4.71) (cid:8)` crore) Domestic International 80,578.80 1,023.65 839,928.73 23,911.48 1,125.94 1.46 HDFC Bank Limited Annual Report 2017-18 144 Schedules to the Financial Statements For the year ended March 31, 2018 26 Liquidity coverage ratio Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2018 is given below: (` crore) Particulars 1 Total High Quality Liquid Assets (HQLA) (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, 2018 (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, 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) September 30, 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) June 30, 2017 Total unweighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total weighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total unweighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total weighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total unweighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total weighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total unweighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total weighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) 159,124.53 144,640.70 139,746.99 129,486.04 2 Retail deposits and deposits 451,439.43 41,543.33 437,781.88 40,242.17 424,604.50 39,008.20 416,803.77 38,258.84 from small business customers, of which: (i) Stable deposits 72,012.25 3,600.61 70,720.40 3,536.02 69,044.92 3,452.25 68,430.67 3,421.53 (ii) Less stable deposits 379,427.18 37,942.72 367,061.48 36,706.15 355,559.58 35,555.95 348,373.10 34,837.31 3 Unsecured wholesale funding, of which: 217,228.50 108,512.17 218,185.05 108,548.59 208,551.94 103,584.62 193,071.47 97,650.85 (i) Operational deposits (all 30,439.14 7,531.20 32,391.28 8,019.39 27,759.15 6,860.56 26,283.04 6,494.60 counterparties) (ii) Non-operational deposits (all 177,618.56 91,810.17 176,441.84 91,177.28 172,534.99 88,466.26 156,271.16 80,638.98 counterparties) (iii) Unsecured debt 9,170.80 9,170.80 9,351.92 9,351.92 8,257.80 8,257.80 10,517.27 10,517.27 4 Secured wholesale funding 8,812.39 4,075.92 2,629.35 1,109.89 5 Additional requirements, of 100,425.78 66,017.10 89,779.68 61,816.62 97,874.66 65,983.77 86,528.11 56,903.77 which: (i) Outﬂows related to derivative 55,868.70 55,868.70 52,671.96 52,671.96 57,282.24 57,282.24 48,362.71 48,362.71 exposures and other collateral requirement (ii) Outﬂows related to loss of funding on debt products - - - - - - - - (iii) Credit and liquidity facilities 44,557.08 10,148.40 37,107.72 9,144.66 40,592.42 8,701.53 38,165.40 8,541.06 6 Other contractual funding 18,406.90 18,406.90 16,645.61 16,645.61 16,735.66 16,735.66 22,232.29 22,232.29 obligation 7 Other contingent funding 59,074.58 1,772.24 57,544.60 1,726.34 53,170.78 1,595.12 55,532.12 1,870.86 obligations 8 Total Cash Outﬂows 245,064.13 233,055.25 229,536.72 218,026.50 9 Secured lending (e.g. reverse repo) 60.11 - 685.87 - 457.78 - 1,158.69 - 10 Inﬂows from fully performing 51,397.30 27,229.36 48,750.21 25,705.12 42,881.46 22,698.40 41,246.92 21,944.76 exposures 11 Other cash inﬂows 72,083.27 66,513.09 66,728.00 61,994.69 69,006.74 63,779.42 59,786.42 55,149.29 12 Total Cash Inﬂows 123,540.68 93,742.45 116,164.08 87,699.81 112,345.98 86,477.82 102,192.03 77,094.05 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 (%) Total Adjusted Value 159,124.53 151,321.68 105.16% Total Adjusted Value 144,640.70 145,355.44 99.51% Total Adjusted Value 139,746.99 143,058.90 97.68% Total Adjusted Value 129,486.04 140,932.45 91.88% * The average weighted and unweighted amounts are calculated taking simple average based on daily observation for the respective quarters. HDFC Bank Limited Annual Report 2017-18 145 Schedules to the Financial Statements For the year ended March 31, 2018 Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2017 is given below: (` crore) Particulars 1 Total High Quality Liquid Assets (HQLA) (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 Total unweighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total weighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total unweighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total weighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total unweighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total weighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total unweighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) Total weighted value (cid:8)(cid:65)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:9)(cid:10) 137,711.74 149,957.35 128,702.05 109,539.23 2 Retail deposits and deposits 417,330.77 38,198.75 415,071.84 37,863.08 373,552.53 34,159.65 359,804.34 32,862.93 from small business customers, of which: (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 wholesale funding, of which: 184,624.84 91,871.70 184,555.12 93,303.55 173,841.76 87,591.52 157,036.26 80,630.67 (i) Operational deposits (all 27,567.30 6,814.73 26,530.40 6,556.63 24,314.59 6,008.20 21,290.21 5,262.08 counterparties) (ii) Non-operational deposits (all 147,686.64 75,686.06 148,806.54 77,528.74 142,196.70 74,252.85 130,159.94 69,782.48 counterparties) (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 requirements, of 85,739.97 54,644.47 94,703.09 61,891.19 90,930.14 57,181.27 93,163.68 57,797.70 which: (i) Outﬂows related to derivative 44,943.06 44,943.06 51,903.36 51,903.36 47,316.91 47,316.91 46,907.18 46,907.18 exposures and other collateral requirement (ii) Outﬂows related to loss of funding on debt products - - - - - - - - (iii) Credit and liquidity facilities 40,796.91 9,701.41 42,799.73 9,987.83 43,613.23 9,864.36 46,256.50 10,890.52 6 Other contractual funding 24,420.02 24,420.02 20,914.62 20,914.62 17,944.34 17,944.34 15,940.48 15,940.48 obligation 7 Other contingent funding 52,591.16 2,596.66 50,409.16 1,512.27 49,183.26 1,475.50 47,915.37 1,437.46 obligations 8 Total Cash Outﬂows 211,892.71 215,484.71 200,502.28 188,669.24 9 Secured lending (e.g. reverse repo) - - 1,333.33 - 5,033.33 - 1,355.17 3.28 10 Inﬂows from fully performing 39,276.52 21,397.60 36,889.88 19,466.20 35,305.32 18,815.99 33,897.47 18,070.68 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 15 Liquidity Coverage Ratio (%) Total Adjusted Value 137,711.74 137,333.40 100.28% Total Adjusted Value 149,957.35 136,512.99 109.85% Total Adjusted Value 128,702.05 120,602.55 106.72% Total Adjusted Value 109,539.23 113,304.67 96.68% * 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. HDFC Bank Limited Annual Report 2017-18 146 Schedules to the Financial Statements For the year ended March 31, 2018 (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 one of the Basel Committee’s key reforms to develop a more resilient banking sector. The objective of the LCR is to promote the short-term resilience of the liquidity risk proﬁle of banks. It does this by ensuring that banks have an adequate stock of unencumbered High Quality Liquid Assets (HQLA) that can be converted easily and immediately into cash to meet their liquidity needs for a 30 calendar day liquidity stress scenario. The LCR is expected to improve the banking sector’s ability to absorb shocks arising from ﬁnancial and economic stress, whatever the source, thus reducing the risk of spillover from the ﬁnancial sector to the real economy. The LCR is calculated by dividing a bank’s stock of HQLA by its total net cash outﬂows over a 30-day stress period. The guidelines for LCR were effective January 1, 2015, with the minimum requirement at 60%, which would rise in equal annual steps to reach 100% on January 1, 2019. This graduated approach was designed to ensure that the LCR could be introduced without material disruption to the orderly strengthening of banking systems or the ongoing ﬁnancing of economic activity. The present requirement, as on March 31, 2018 is 90%. In the Indian context, the run-off factors for the stressed scenarios are prescribed by the RBI, for various categories of liabilities (viz., deposits, unsecured and secured wholesale borrowings), as well as for undrawn commitments and derivative-related exposures, and which partially offset with inﬂows emanating from assets maturing within the same time period. Given below is the average LCR maintained by the Bank quarter-wise over the past two years: (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, 2018 December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 LCR Maintained (Average) LCR Required 105.16% 99.51% 97.67% 91.88% 100.28% 109.85% 106.72% 96.68% 90.00% 80.00% 80.00% 80.00% 80.00% 70.00% 70.00% 70.00% The average LCR for the quarter ended March 31, 2018 was at 105.16% as against 100.28% for the quarter ended March 31, 2017, and well above the present prescribed minimum requirement of 90%. The average HQLA for the quarter ended March 31, 2018 was ` 159,124.53 crore, as against ` 137,711.74 crore for the quarter ended March 31, 2017. During the same period the composition of government securities and treasury bills in the HQLA increased from 75% to 87%. For the quarter ended March 31, 2018, derivative exposures (net of cash inﬂows) / collateral requirements and undrawn commitments constituted just about 0.3% and 4% respectively of average cash outﬂow, in line earlier periods. A strong and diversiﬁed liabilities proﬁle has been at the helm of the Bank’s growth strategy. The Bank has consistently maintained a robust funding proﬁle with a signiﬁcant portion of funding through deposits. As of March 31, 2018 the top 20 depositors comprised of 6% of total deposits, as against 5% as of March 31, 2017. 27 Related party disclosures As per AS-18, Related Party Disclosure, the Bank’s related parties are disclosed below: Promoter Housing Development Finance Corporation Limited Subsidiaries HDFC Securities Limited HDB Financial Services Limited Associate International Asset Reconstruction Company Private Limited (ceased to be an associate with effect from March 9, 2018) HDFC Bank Limited Annual Report 2017-18 147 Schedules to the Financial Statements For the year ended March 31, 2018 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, 2018 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:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0) (cid:80)(cid:65)(cid:73)(cid:68)(cid:26)(cid:0) (cid:40)(cid:36)(cid:38)(cid:35)(cid:0) (cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0) (cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0) ` 11.65 crore (previous year: ` 25.03 crore); HDB Financial Services Limited ` 2.47 crore (previous year: ` 7.17 crore); Housing Development Finance Corporation Limited ` 5.96 crore (previous year: ` 5.57 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)` 136.61 crore (previous year: ` 139.21 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) ` 264.27 crore (previous year: ` 207.45 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) ` 1,759.67 crore (previous year: ` 1,453.54 crore); Housing Development Finance Corporation Limited ` 405.17 crore (previous year: ` 343.10 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)` 432.53 crore (previous year: ` 373.55 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) ` 112.59 crore (previous year: ` 102.22 crore); HDFC Securities Limited ` 129.06 crore (previous year: ` 60.64 crore). The Bank’s related party balances and transactions for the year ended March 31, 2018 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 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 3,250.77 (3,250.77) 0.47 (0.47) - - - - 5.96 13.28 264.27 405.17 - - 365.55 (811.29) 10.62 (10.62) 1,590.92 (1,590.92) - - 14.12 136.62 28.96 1,768.09 3,826.49 (3,826.49) - - - - - - - - 1.70 - - - - - 14.10 (37.45) 2.51 (2.51) 3.16 (3.45) - - 1.05 0.12 - 0.76 - - Total 3,630.42 (4,099.51) 13.60 (13.60) 1,594.08 (1,594.37) - - 22.83 150.02 293.23 2,174.02 3,826.49 (3,826.49) HDFC Bank Limited Annual Report 2017-18 148 Schedules to the Financial Statements For the year ended March 31, 2018 (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 Other investments Dividend paid to Dividend received from Receivable from Payable to Guarantees given Remuneration paid Loans purchased from 1,603.88 (1,603.88) 432.53 - 28.34 (60.79) 32.78 (36.17) 0.25 (0.27) - 5,623.94 1,120.04 (1,165.58) - 241.65 1.40 (7.74) 72.04 (175.20) - - - - - - - - - - - - - - - - Key management personnel (` crore) Total - - 2,723.92 (2,769.46) 5.67 - - - - - - - 19.29 - 438.20 241.65 29.74 (68.53) 104.82 (211.37) 0.25 (0.27) 19.29 5,623.94 Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding balances at each quarter-end. Remuneration paid excludes value of employee stock options exercised during the year. The Bank being an authorised dealer, deals in foreign exchange and derivative transactions with parties which include its promoter. The foreign exchange and derivative transactions are undertaken in line with the RBI guidelines. The notional principal amount of foreign exchange and derivative contracts transacted with the promoter that were outstanding as at March 31, 2018 is ` 5,972.14 crore (previous year: ` 665.77 crore). The contingent credit exposure pertaining to these contracts computed in line with the extant RBI guidelines on exposure norms is ` 80.76 crore (previous year: ` 40.18 crore). During the year ended March 31, 2018, the Bank purchased debt securities from Housing Development Finance Corporation Limited ` 2,105.00 crore (previous year: ` 2,320.00 crore) and from HDB Financial Services Limited `1,885.00 crore (previous year: ` 1,427.00 crore) issued by these entities. During the year ended March 31, 2018, the Bank paid rent of ` 0.66 crore (previous year: ` 0.66 crore) to party related to the Bank’s key management personnel in relation to residential accommodation. As at March 31, 2018, 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, 2018 was ` 49.26 crore (previous year: ` 48.52 crore). The Bank also paid interest on deposit from HDB Employees Welfare Trust aggregating to ` 3.21 crore (previous year: ` 3.68 crore). 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 2,500.25 (2,500.25) 0.15 (0.15) - - - - 5.57 - 207.45 343.10 597.93 (816.14) 10.62 (10.65) 1,180.15 (1,588.18) 0.23 - 32.20 139.21 28.37 1,456.69 25.05 (25.05) - - 0.05 (0.05) - - 0.51 - - - 13.61 (60.14) 2.51 (2.51) 3.44 (3.44) - - 1.02 0.03 - 0.76 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 HDFC Bank Limited Annual Report 2017-18 149 Schedules to the Financial Statements For the year ended March 31, 2018 (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 Equity investments Other Investments Dividend paid to Dividend received from Receivable from Payable to Guarantees given Remuneration paid Loans purchased from - - - (126.48) 373.55 - 23.16 (23.16) 33.67 (33.67) 0.12 (0.14) - 13,845.65 3,812.15 (3,812.15) 675.00 (675.00) - 162.86 2.05 (2.38) 103.25 (137.18) - (0.05) - - 31.17 (31.17) - - - - - - - - - - - - - - - - 4.49 - - - - - - - 20.79 - (` crore) Total 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. 28 Intra-Group exposure Intra-Group exposures in accordance with RBI guidelines are as follows: (` crore) Particulars 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 Details of breach of limits on intra-group exposures and regulatory action thereon, if any March 31, 2018 March 31, 2017 7,137.13 7,137.13 0.67% 4,502.47 4,502.47 0.48% Nil Nil 29 Leases Operating leases primarily comprise ofﬁce premises, staff residences and Automated Teller Machines (‘ATM’s), which are renewable at the option of the Bank. The details of maturity proﬁle of future operating lease payments are given below: Particulars Not later than one year Later than one year and not later than ﬁve years Later than ﬁve years Total The total of minimum lease payments recognised in the Statement of Proﬁt and Loss for the year Total of future minimum sub-lease payments expected to be received under non-cancellable sub-leases Sub-lease amounts recognised in the Statement of Proﬁt and Loss for the year Contingent (usage based) lease payments recognised in the Statement of Proﬁt and Loss for the year March 31, 2018 March 31, 2017 (` crore) 958.85 3,107.95 3,540.07 7,606.87 1,166.50 6.33 7.77 174.87 939.53 2,980.22 3,043.98 6,963.73 1,094.86 25.33 11.31 138.79 HDFC Bank Limited Annual Report 2017-18 150 Schedules to the Financial Statements For the year ended March 31, 2018 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. 30 Transfers to Depositor Education and Awareness Fund (DEAF) The details of amount transferred during the respective year to DEAF are as under: (` crore) Particulars March 31, 2018 March 31, 2017 Opening balance of amounts transferred to DEAF Add: Amounts transferred to DEAF during the year Less: Amounts reimbursed by DEAF towards claims Closing balance of amounts transferred to DEAF 31 Penalties levied by the RBI 230.50 139.93 (2.75) 367.68 136.85 95.10 (1.45) 230.50 During the year ended March 31, 2018, RBI did not impose any penalty on the Bank (previous year ` 2.00 crore). (cid:19)(cid:18)(cid:0) (cid:36)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:65)(cid:73)(cid:78)(cid:84)(cid:83)(cid:0)(cid:15)(cid:0)(cid:85)(cid:78)(cid:73)(cid:77)(cid:80)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:47)(cid:77)(cid:66)(cid:85)(cid:68)(cid:83)(cid:77)(cid:65)(cid:78) (cid:115)(cid:0) (cid:35)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:65)(cid:73)(cid:78)(cid:84)(cid:83) (A) Customer complaints other than ATM transaction disputes Particulars March 31, 2018 March 31, 2017 (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 2,349 1,20,439 1,18,724 4,064 651 96,454 94,756 2,349 (B) ATM transaction disputes relating to the Bank’s customers on the Bank’s ATMs Particulars March 31, 2018 March 31, 2017 (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 145 19,105 19,025 225 1.00 101 12,703 12,659 145 0.62 (C) ATM transaction disputes relating to the Bank’s customers on other banks’ ATMs Particulars March 31, 2018 March 31, 2017 (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 1,464 1,27,307 1,26,218 2,553 4.98 1,118 95,415 95,069 1,464 3.69 HDFC Bank Limited Annual Report 2017-18 151 Schedules to the Financial Statements For the year ended March 31, 2018 (D) Total customer complaints and ATM transaction disputes [total of tables (A), (B) and (C) above] Particulars March 31, 2018 March 31, 2017 (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 3,958 2,66,851 2,63,967 6,842 1,870 2,04,572 2,02,484 3,958 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, 2018 March 31, 2017 (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 4.7 per month during the year ended March 31, 2018 (previous year: 3.7 per month). For the year ended March 31, 2018, retail liability segment accounted for 76.46% of the total complaints (previous year: 74.61%), followed by credit cards at 17.14% of the total complaints (previous year: 18.15%), retail assets at 5.57% of the total complaints (previous year: 6.08%), while other segments accounted for 0.83% of total complaints (previous year: 1.16%). The top 10 areas of customer complaints for the year ended March 31, 2018, including ATM transaction disputes, aggregated 2,03,045 complaints (previous year: 1,48,462 complaints) and accounted for 76.09% of total complaints (previous year: 72.57%). 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’s and Sales related - credit cards. (cid:115) Position of BO complaints as per RBI annual report As per a report published by the RBI for the year ended June 30, 2017, the number of BO complaints per branch for the Bank was 2.07 (previous year: 1.68). The number of BO complaints other than credit cards per 1,000 accounts was at 0.14 (previous year: 0.13).The number of BO complaints (credit card related) per 1,000 cards was at 0.08 (previous year: 0.08) for the Bank. 33 Disclosure of Letters of Comfort (LoC) issued by the Bank The Bank has not issued any Letter of Comfort during the years ended March 31, 2018 and March 31, 2017. HDFC Bank Limited Annual Report 2017-18 152 Schedules to the Financial Statements For the year ended March 31, 2018 34 Small and micro industries Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments during the years ended March 31, 2018 and March 31, 2017. The above is based on the information available with the Bank which has been relied upon by the auditors. 35 Overseas assets, NPAs and revenue (` crore) Particulars Total Assets Total NPAs Total Revenue (cid:19)(cid:22)(cid:0) (cid:47)(cid:70)(cid:70)(cid:13)(cid:34)(cid:65)(cid:76)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:51)(cid:72)(cid:69)(cid:69)(cid:84)(cid:0)(cid:51)(cid:48)(cid:54)(cid:83) March 31, 2018 March 31, 2017 26,946.53 23,911.48 134.64 818.12 121.59 1,023.65 There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms. 37 Credit default swaps The Bank has not transacted in credit default swaps during the year ended March 31, 2018 (previous year: Nil). 38 Corporate social responsibility Operating expenses include ` 374.54 crore (previous year: ` 305.42 crore) for the year ended March 31, 2018 towards Corporate Social Responsibility (CSR), in accordance with Companies Act, 2013. The Bank has spent 2.04 % (previous year: 2.01%) of its average net proﬁt for the last three ﬁnancial years as part of its CSR for the year ended March 31, 2018. 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, 2018 March 31, 2017 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 - 374.54 - - - - 374.54 305.42 - - - 305.42 39 Investor education and protection fund There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank during the years ended March 31, 2018 and March 31, 2017. HDFC Bank Limited Annual Report 2017-18 153 Schedules to the Financial Statements For the year ended March 31, 2018 40 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, 2018 amounted to ` 1.58 crore (previous year: ` 1.67 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, 2018 amounted to ` 0.80 crore (previous year: ` 0.80 crore). 41 Comparative ﬁgures Figures for the previous year have been regrouped and reclassiﬁed wherever necessary to conform to the current year’s presentation. For and on behalf of the Board Shyamala Gopinath Chairperson Aditya Puri Managing Director Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director (cid:51)(cid:65)(cid:78)(cid:74)(cid:65)(cid:89)(cid:0)(cid:36)(cid:79)(cid:78)(cid:71)(cid:82)(cid:69) Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors Mumbai, April 21, 2018 HDFC Bank Limited Annual Report 2017-18 154 Basel III - Pillar 3 Disclosures As at March 31, 2018 The Reserve Bank of India (RBI) vide its circular under reference DBR.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:14) (cid:44)(cid:73)(cid:81)(cid:85)(cid:73)(cid:68)(cid:73)(cid:84)(cid:89)(cid:0)(cid:67)(cid:79)(cid:86)(cid:69)(cid:82)(cid:65)(cid:71)(cid:69)(cid:0)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:14) HDFC Bank Limited Annual Report 2017-18 155 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”) which includes the Group’s share of proﬁt in its associate, comprising the Consolidated Balance Sheet as at 31st March, 2018, 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, Accounting Standards prescribed under Section 133 of the Act read with the Companies (Accounting Standards) Rules, 2006, as amended (“Accounting Standards”), the other accounting principles generally accepted in India, 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 consolidated 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, as aforesaid. 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. 3. 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 applicable Accounting Standards and other accounting principles generally accepted in India, of the consolidated state of affairs of the Group as at 31st March, 2018, 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 two subsidiaries whose financial statements reﬂect total assets of ` 46,391.72 crores as at 31st March, 2018, total revenues of ` 7,829.17 crores and net cash (outflows) amounting to ` 63.52 crores for the year ended on that date, as considered in the consolidated financial statements. These ﬁnancial statements have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the consolidated ﬁnancial statements, in so far as it relates to the amounts and disclosures HDFC Bank Limited Annual Report 2017-18 156 b) included in respect of these subsidiaries, and our report in terms of subsection (3) of Section 143 of the Act, in so far as it relates to the aforesaid subsidiaries is based solely on the reports of the other auditors. The consolidated ﬁnancial statements also include the Group’s share of net proﬁt of ` 0.52 crores for the period from 1st April 2017 to 9th March 2018, 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 above 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 reports of the other auditors on separate ﬁnancial statements of subsidiaries 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 reports 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, 2018 taken on record by the Board of Directors of the Holding Company and the reports of the statutory auditors of the subsidiary companies not audited by us, none of the directors of the Group companies is disqualiﬁed as at 31st March, 2018 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” which is based on the auditor’s report of the Bank and its subsidiary companies incorporated in India. Our report expresses an unmodiﬁed opinion on the adequacy and operating effectiveness of the Group’s internal ﬁnancial controls over ﬁnancial reporting of those companies, for the reasons stated therein. (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) Mumbai April 21, 2018 Porus B. Pardiwalla Partner (Membership No. 40005) HDFC Bank Limited Annual Report 2017-18 157 ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S REPORT and maintained and if such controls operated effectively in all material respects. (Referred to in paragraph 6.f under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date) Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”) In conjunction with our audit of the consolidated ﬁnancial statements of the Holding Company as of and for the year ended 31st March, 2018 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, its subsidiary companies and its associate company, which are companies incorporated in India, 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, as applicable. 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 were established 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 reports 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 HDFC Bank Limited Annual Report 2017-18 158 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 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, 2018, 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. Our opinion is not modiﬁed in respect of the matters referred to in paragraph 5 of our Report on the Consolidated Financial Statements. For Deloitte Haskins & Sells Chartered Accountants (Firm’s Registration No. 117365W) Porus B. Pardiwalla Partner (Membership No. 40005) Mumbai April 21, 2018 HDFC Bank Limited Annual Report 2017-18 159 Consolidated Balance Sheet As at March 31, 2018 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-18 31-Mar-17 1 2 2A 3 4 5 5,190,181 5,125,091 1,090,801,062 912,814,397 3,563,322 2,914,389 7,883,751,419 6,431,342,479 1,564,420,848 984,156,439 484,134,863 587,088,812 Total 11,031,861,695 8,923,441,607 6 7 8 9 10 11 1,046,882,074 379,105,485 183,733,488 114,005,711 2,384,609,240 2,107,771,120 7,000,338,363 5,854,809,871 38,105,583 38,146,997 378,192,947 429,602,423 Total 11,031,861,695 8,923,441,607 12 8,757,769,674 8,182,842,892 427,538,250 308,480,352 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. 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, 2018 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors HDFC Bank Limited Annual Report 2017-18 160 Consolidated Statement of Proﬁt and Loss For the year ended March 31, 2018 Schedule Year ended 31-Mar-18 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 13 14 Total 15 16 Total Total IV APPROPRIATIONS Transfer to Statutory Reserve Proposed dividend [Refer Schedule 18(2)] 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 As per our report of even date. For and on behalf of the Board Total 17 & 18 852,878,437 160,566,041 1,013,444,478 423,814,803 239,272,220 164,749,045 827,836,068 185,608,410 513,389 5,221 185,100,242 - 345,323,284 530,423,526 45,620,310 - 507,653 33,905,804 17,486,728 2,355,227 (442,018) 430,989,822 530,423,526 ` 71.73 70.76 ` in ‘000 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 For Deloitte Haskins & Sells Chartered Accountants Shyamala Gopinath Chairperson Aditya Puri Managing Director P. B. Pardiwalla Partner Membership No.: 40005 Mumbai, April 21, 2018 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors HDFC Bank Limited Annual Report 2017-18 161 Consolidated Cash Flow Statement For the year ended March 31, 2018 Cash ﬂows from operating activities Consolidated proﬁt before income tax 284,131,068 233,311,478 ` in ‘000 Year ended Year ended 31-Mar-18 31-Mar-17 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: 9,667,819 8,861,876 1,570,448 (87,543) 3,599,102 1,756,569 11,833 16,229 57,553,339 37,024,296 308,075 - (76,417) 250,000 6,575,746 4,312,322 3,961,191 (5,221) 388,440 (23,393) 367,373,400 285,733,857 (Increase) / decrease in investments (excluding investments in subsidiaries) (282,310,524) (173,257,700) (Increase) / decrease in advances Increase / (decrease) in deposits (Increase) / decrease in other assets (1,203,053,719) (1,018,904,990) 1,452,408,940 972,609,590 52,336,433 (44,855,329) Increase / (decrease) in other liabilities and provisions (114,511,772) 228,337,692 Direct taxes paid (net of refunds) Net cash from operating activities Cash ﬂows used in investing activities Purchase of ﬁxed assets Proceeds from sale of ﬁxed assets Investment in subsidiaries and / or joint ventures Net cash used in investing activities HDFC Bank Limited Annual Report 2017-18 162 272,242,758 249,663,120 (100,098,994) (76,847,189) 172,143,764 172,815,931 (8,477,746) (11,577,570) 99,204 100,768 (143,331) - (8,521,873) (11,476,802) Consolidated Cash Flow Statement For the year ended March 31, 2018 Cash ﬂows from ﬁnancing activities Increase in minority interest ` in ‘000 Year ended Year ended 31-Mar-18 31-Mar-17 666,553 818,605 Money received on exercise of stock options by employees 27,259,098 22,615,161 Increase / (decrease) in borrowings (excluding subordinate debt, perpetual debt and upper Tier II instruments) 501,014,409 (33,898,658) Proceeds from issue of Additional Tier I and Tier II Capital Bonds 100,000,000 - Redemption of subordinated debt Dividend paid during the year Tax on dividend Net cash (used in) / from ﬁnancing activities (20,750,000) (19,084,500) (28,312,716) (24,083,093) (6,100,741) (5,297,258) 573,776,603 (58,929,743) Effect of exchange ﬂuctuation on translation reserve 105,872 (282,622) Cash and cash equivalents on amalgamation [Refer Schedule 18(1)] - 295,617 Net increase in cash and cash equivalents Cash and cash equivalents as at April 1st 737,504,366 102,422,381 493,111,196 390,688,815 Cash and cash equivalents as at March 31st 1,230,615,562 493,111,196 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, 2018 Paresh Sukthankar Deputy Managing Director Kaizad Bharucha Executive Director Sanjay Dongre Executive Vice President (Legal) & Company Secretary Sashidhar Jagdishan Chief Financial Ofﬁcer Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors HDFC Bank Limited Annual Report 2017-18 163 Schedules to the Consolidated Financial Statements As at March 31, 2018 SCHEDULE 1 - CAPITAL Authorised capital 3,25,00,00,000 (31 March, 2017: 3,25,00,00,000) Equity Shares of ` 2/- each Issued, subscribed and paid-up capital 2,59,50,90,267 (31 March, 2017: 2,56,25,45,717) 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-18 31-Mar-17 6,500,000 6,500,000 Total 5,190,181 5,190,181 5,125,091 5,125,091 187,703,201 149,931,567 45,620,310 37,771,634 Total 233,323,511 187,703,201 71,919,150 17,486,728 89,405,878 57,369,509 14,549,641 71,919,150 Total III Balance in proﬁt and loss account 430,989,822 345,323,284 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 2017-18 164 284,751,089 262,204,646 27,194,008 22,546,443 Total 311,945,097 284,751,089 10,635,564 10,635,564 - - Total 10,635,564 10,635,564 12,000,683 2,355,227 8,866,583 3,134,100 Total 14,355,910 12,000,683 442,018 45,086 (487,104) - 39,408 105,872 145,280 399,084 109,506 (66,572) 442,018 322,030 (282,622) 39,408 1,090,801,062 912,814,397 Total Total Total Schedules to the Consolidated Financial Statements As at March 31, 2018 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 ` 76.78 crore (previous year ` 70.83 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 Secured borrowings included in I & II above: ` 27,269.82 crore (previous year: ` 20,606.90 crore) except borrowings of ` 14,239.95 crore (March 31, 2017: Nil) under Collateralised Borrowing and Lending Obligation and transactions under Liquidity Adjustment Facility and Marginal Standing Facility. SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS I II III IV Bills payable Interest accrued Others (including provisions) Contingent provisions against standard assets HDFC Bank Limited Annual Report 2017-18 165 As at 31-Mar-18 ` in ‘000 As at 31-Mar-17 276,029 276,029 Total 3,287,293 3,563,322 2,638,360 2,914,389 27,237,788 1,162,864,325 1,190,102,113 2,237,968,679 20,806,377 1,132,892,089 1,153,698,466 1,935,786,271 72,775,645 4,382,904,982 4,455,680,627 7,883,751,419 53,520,609 3,288,337,133 3,341,857,742 6,431,342,479 7,843,931,322 39,820,097 7,883,751,419 6,391,351,770 39,990,709 6,431,342,479 Total Total Total Total 138,000,000 168,280,179 371,460,868 231,070,000 290,528,000 Total 1,199,339,047 365,081,801 1,564,420,848 Total - 97,371,546 249,710,383 149,020,000 252,038,000 748,139,929 236,016,510 984,156,439 82,217,908 66,759,768 303,545,722 31,611,465 484,134,863 166,670,863 45,914,476 349,467,514 25,035,959 587,088,812 Total Schedules to the Consolidated Financial Statements As at March 31, 2018 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) In current accounts (b) In other accounts SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE I In India (i) Balances with banks: (a) (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) In current accounts 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) Investment in associates (vi) Others (Units, CDs / CPs, PTCs and security receipts) As at ` in ‘000 As at 31-Mar-18 31-Mar-17 75,500,625 42,772,675 364,381,449 284,332,810 607,000,000 52,000,000 971,381,449 336,332,810 1,046,882,074 379,105,485 Total Total 8,734,805 2,091,212 5,531,745 9,716,581 Total 10,826,017 15,248,326 Total Total - 45,018,623 45,018,623 - - - 55,844,640 15,248,326 26,124,304 36,772,777 6,191,625 2,529,150 95,572,919 59,455,458 Total Total 127,888,848 98,757,385 183,733,488 114,005,711 1,883,648,036 - 1,396,772 1,624,186,994 - 1,219,538 336,681,684 187,965,272 - 402,955 147,405,912 282,816,215 Total 2,369,132,404 2,096,590,974 B Investments outside India in (i) Government securities (including Local Authorities) 4,218,786 - (ii) Other investments (a) Shares (b) Debentures and bonds 28,375 28,375 11,229,675 11,151,771 15,476,836 11,180,146 2,384,609,240 2,107,771,120 Total Total HDFC Bank Limited Annual Report 2017-18 166 Schedules to the Consolidated Financial Statements As at March 31, 2018 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 2017-18 167 As at 31-Mar-18 ` in ‘000 As at 31-Mar-17 2,371,618,039 2,097,219,426 15,606,451 11,206,487 Total 2,387,224,490 2,108,425,913 2,485,635 129,615 Total 2,615,250 628,452 26,341 654,793 2,369,132,404 2,096,590,974 15,476,836 11,180,146 Total 2,384,609,240 2,107,771,120 216,592,055 287,159,641 1,681,643,640 1,336,174,162 5,102,102,668 4,231,476,068 Total 7,000,338,363 5,854,809,871 5,042,641,201 4,232,238,514 191,682,760 227,526,268 1,766,014,402 1,395,045,089 Total 7,000,338,363 5,854,809,871 1,765,302,486 1,646,022,483 137,708,318 157,741,065 8,357,208 9,092,668 4,885,715,328 3,843,921,442 Total 6,797,083,340 5,656,777,658 33,046,352 6,500,391 1,052,278 2,560,707 18,265,990 17,845,564 150,890,403 171,125,551 203,255,023 198,032,213 7,000,338,363 5,854,809,871 Total Total Schedules to the Consolidated Financial Statements As at March 31, 2018 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 2017-18 168 As at 31-Mar-18 ` in ‘000 As at 31-Mar-17 16,384,648 15,785,543 978,572 669,452 (77,395) (70,347) Total 17,285,825 16,384,648 4,798,856 4,262,700 597,187 595,216 (74,579) (59,060) Total 5,321,464 4,798,856 11,964,361 11,585,792 84,574,310 74,900,241 - 377,694 8,752,421 11,525,792 (1,216,788) (2,229,417) Total 92,109,943 84,574,310 58,013,105 51,626,108 - 245,859 9,071,123 8,264,659 (1,115,507) (2,123,521) Total 65,968,721 58,013,105 26,141,222 26,561,205 4,546,923 4,546,923 - - Total 4,546,923 4,546,923 Schedules to the Consolidated Financial Statements As at March 31, 2018 As at ` in ‘000 As at 31-Mar-18 31-Mar-17 4,104,467 4,104,467 - - Total 4,104,467 4,104,467 442,456 442,456 - - Total 442,456 442,456 - - Total 38,105,583 38,146,997 90,775,781 83,177,119 18,304,321 17,270,130 333,306 267,871 - - 5,167,669 5,095,162 263,611,870 323,792,141 Total 378,192,947 429,602,423 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 Security deposit for commercial and residential property Others * *Includes deferred tax asset (net) of ` 3,532.07 crore (previous year: ` 2,587.06 crore), goodwill of ` 197.57 crore (previous year: ` 185.00 crore) and deposits placed with NABARD / SIDBI / NHB on account of shortfall in lending to priority sector of ` 13,357.25 crore (previous year: ` 11,882.37 crore) SCHEDULE 12 - CONTINGENT LIABILITIES Claims against the bank not acknowledged as debts - taxation Claims against the bank not acknowledged as debts - others 11,359,710 10,724,100 1,985,622 2,010,238 Liability on account of outstanding forward exchange contracts 4,344,675,713 4,699,301,366 Liability on account of outstanding derivative contracts 3,482,687,822 2,723,068,634 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 2017-18 169 448,741,092 366,232,012 557,296 953,405 395,452,699 359,613,744 72,309,720 20,939,393 Total 8,757,769,674 8,182,842,892 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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-18 31-Mar-17 676,589,047 559,861,841 162,297,863 159,515,563 5,406,186 5,448,567 8,585,341 7,887,558 Total 852,878,437 732,713,529 122,935,083 94,767,987 11,005,345 11,447,093 (1,570,448) 87,543 (11,833) (16,229) 15,234,978 12,633,895 12,972,916 9,856,040 Total 160,566,041 128,776,329 327,540,435 312,955,921 95,426,124 65,834,950 848,244 1,624,973 Total 423,814,803 380,415,844 91,939,035 85,047,014 15,231,599 14,305,273 4,821,103 4,773,398 1,719,205 1,523,765 9,667,819 8,861,876 32,496 26,301 35,221 25,758 1,648,413 1,249,095 4,850,740 4,491,632 13,149,745 12,717,968 8,286,960 6,914,913 87,898,804 67,564,794 Total 239,272,220 207,510,707 *Includes professional fees, commission to sales agents, card and merchant acquiring expenses and system management fees. HDFC Bank Limited Annual Report 2017-18 170 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 SCHEDULE 17 - Signiﬁcant accounting policies appended to and forming part of the consolidated ﬁnancial statements for the year ended March 31, 2018 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, Dubai and Offshore Banking Unit at International Financial Service Centre (IFSC), at GIFT City, Gandhinagar in Gujarat. 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 in an associate. 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. Use of estimates The preparation of consolidated ﬁnancial statements in conformity with GAAP requires the management to make estimates and necessary assumptions 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 Subsidiary Subsidiary Associate * Country of incorporation Ownership interest** India India India India 97.7% 95.9% 19.2% * 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 2017-18 171 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 *** The un-audited ﬁnancial statements of an associate have been drawn for the period ended December 31, 2017. International Asset Reconstruction Company Private limited ceased to be an associate with effect from March 9, 2018 on account of reduction in ownership interest from 29.4% to 19.2%. During the year ended March 31, 2018 the Bank’s shareholding in HDB Financial Services Limited decreased from 96.2% to 95.9% on account of the stock options exercised by minority stakeholders. During the year ended March 31, 2018 the Bank’s shareholding in HDFC Securities Limited decreased from 97.9% to 97.7% on account of the stock options exercised by minority stakeholders and additional stake purchased from minority. 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. The audited ﬁnancial statements of the subsidiary companies, entity controlled by the Bank have been drawn up to the same reporting date as that of the Bank, i.e. March 31, 2018. 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 the 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. HDFC Bank Limited Annual Report 2017-18 172 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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. Investment in unquoted Venture Capital Fund (VCF) are categorised under HTM category for the initial period of three years and valued at cost. Such investment are required to be transferred to AFS thereafter. Pass Through Certiﬁcates (PTC) including Priority Sector-PTCs are valued by using FIMMDA credit spread as applicable for the NBFC category, based on the credit rating of the respective PTC over the YTM rates for government securities published by FIMMDA. 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, HDFC Bank Limited Annual Report 2017-18 173 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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 investments are recognised as short term / current investments and are valued at lower of cost and net realisable value. Interest on borrowings is recognised in the 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. 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. 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 addition to 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. HDFC Bank Limited Annual Report 2017-18 174 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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 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 0.40% on standard assets as stipulated by RBI master direction (RBI/DNBR/2016-17/45 Master Direction DNBR PD 008/03.10.119/2016-17) issued on September 1, 2016 Non-Banking Financial Company – Systematically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions 2016 as amended. Loan origination costs: Brokerage, commission, incentive to employee, etc. paid at the time of acquisition of loans are charged to expenses. 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 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. HDFC Bank Limited Annual Report 2017-18 175 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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. These are amortised over the period of the Certiﬁcate. 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:0)(cid:0) (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: HDFC Bank Limited Annual Report 2017-18 176 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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 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 (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:69)(cid:0)(cid:72)(cid:79)(cid:76)(cid:68)(cid:0)(cid:80)(cid:82)(cid:69)(cid:77)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:71)(cid:69)(cid:68)(cid:0)(cid:79)(cid:70)(cid:70)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:77)(cid:65)(cid:73)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:82)(cid:73)(cid:77)(cid:65)(cid:82)(cid:89)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:69)(cid:14) (cid:51)(cid:79)(cid:70)(cid:84)(cid:87)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:78)(cid:68)(cid:73)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:65)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:21)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:83)(cid:14) (cid:48)(cid:79)(cid:73)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:78)(cid:65)(cid:76)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:70)(cid:85)(cid:76)(cid:76)(cid:89)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:14) (cid:38)(cid:79)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:79)(cid:76)(cid:68)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:12)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:83)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:13)(cid:82)(cid:65)(cid:84)(cid:65)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:14) (cid:55)(cid:72)(cid:69)(cid:78)(cid:69)(cid:86)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:85)(cid:83)(cid:69)(cid:70)(cid:85)(cid:76)(cid:0)(cid:76)(cid:73)(cid:70)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:85)(cid:78)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:68)(cid:69)(cid:80)(cid:82)(cid:69)(cid:67)(cid:73)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:71)(cid:69)(cid:68)(cid:0) over the revised remaining useful life of the said asset. (cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:77)(cid:77)(cid:79)(cid:86)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:84)(cid:89)(cid:0)(cid:78)(cid:69)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:65)(cid:88)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:70)(cid:69)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:85)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:82)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:12)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:0) account. HDFC Securities Limited Tangible assets are stated at acquisition cost, net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises purchase price and expenses directly attributable to bringing the asset to its working condition for the intended use. Subsequent expenditure related to an item of ﬁxed asset are added to its book value only if it increases the future beneﬁts from the existing asset beyond its previously assessed standard of performance. Items of ﬁxed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the ﬁnancial statements. Gains or losses arising from disposal or retirement of tangible ﬁxed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised net, within “Other Income” or “Other Expenses”, as the case maybe, in the Statement of Proﬁt and Loss in the year of disposal or retirement. Capital work-in-progress are ﬁxed assets which are not yet ready for their intended use. Such assets are carried at cost comprising direct cost and related incidental expenses. Depreciation is provided on a pro-rata basis to fully depreciate the assets using the straight-line method over the estimated useful lives of the assets. For the following categories of assets, depreciation on tangible ﬁxed assets has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013: Asset Computer hardware Ofﬁce equipment Furniture and ﬁxtures Leasehold improvements Electricals Ofﬁce premises Estimated useful life 3 years 5 years 10 years Over the remaining period of the lease 10 years 60 years HDFC Bank Limited Annual Report 2017-18 177 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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 estimate 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: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:115)(cid:0)(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: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:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:14) (cid:41)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:84)(cid:0)(cid:65)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:12)(cid:0)(cid:78)(cid:69)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:67)(cid:67)(cid:85)(cid:77)(cid:85)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:67)(cid:67)(cid:85)(cid:77)(cid:85)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:77)(cid:80)(cid:65)(cid:73)(cid:82)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:69)(cid:83)(cid:12)(cid:0) if any. (cid:35)(cid:79)(cid:83)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:0)(cid:80)(cid:82)(cid:73)(cid:67)(cid:69)(cid:12)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13)(cid:82)(cid:69)(cid:70)(cid:85)(cid:78)(cid:68)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:84)(cid:65)(cid:88)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:68)(cid:85)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:76)(cid:89)(cid:0)(cid:65)(cid:84)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset is charged to the Statement of Proﬁt and Loss as an expense unless it is probable that such expenditure will enable the intangible asset increase the future beneﬁts from the existing asset beyond its previously assessed standard of performance and such expenditure can be measured and attributed to the intangible asset reliably, in which case, such expenditure is capitalised. (cid:37)(cid:88)(cid:80)(cid:69)(cid:78)(cid:68)(cid:73)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0) (cid:79)(cid:78)(cid:0) (cid:83)(cid:79)(cid:70)(cid:84)(cid:87)(cid:65)(cid:82)(cid:69)(cid:0) (cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:69)(cid:76)(cid:73)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0) (cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) (cid:67)(cid:65)(cid:82)(cid:82)(cid:73)(cid:69)(cid:68)(cid:0) (cid:65)(cid:83)(cid:0) (cid:73)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0) (cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0) (cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) where such assets are not yet ready for their intended use. (cid:41)(cid:78)(cid:84)(cid:65)(cid:78)(cid:71)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:83)(cid:84)(cid:82)(cid:65)(cid:73)(cid:71)(cid:72)(cid:84)(cid:13)(cid:76)(cid:73)(cid:78)(cid:69)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0)(cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:85)(cid:83)(cid:69)(cid:70)(cid:85)(cid:76)(cid:0)(cid:76)(cid:73)(cid:86)(cid:69)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(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:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) 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 4 years Estimated useful life under Schedule II of Companies Act, 2013 8 years (cid:115)(cid:0)(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) HDFC Bank Limited Annual Report 2017-18 178 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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 at 3 years with zero residual value. Any expenses on such software for support and maintenance payable annually are charged to the Statement of Proﬁt and Loss. 5 Impairment of assets Group The Group assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Statement of Proﬁt and Loss to the extent the carrying amount of assets exceeds their estimated recoverable amount. 6 Transactions involving foreign exchange HDFC Bank Limited Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing on the date of the transaction. Income and expenditure items of integral foreign operations (representative ofﬁces) are translated at the weekly average closing rates and of non-integral foreign operations (foreign branches) at the monthly average closing rates. Foreign currency monetary items of domestic and integral foreign operations are translated at the closing exchange rates notiﬁed by Foreign Exchange Dealers’ Association of India (‘FEDAI’) as at the Balance Sheet date and the resulting net valuation proﬁt or loss arising due to a net open position in any foreign currency is recognised in the Statement of Proﬁt and Loss. Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated at closing exchange rates notiﬁed by FEDAI at the Balance Sheet date and the resulting proﬁt / loss arising from exchange differences are accumulated in the Foreign Currency Translation Account until remittance or the disposal of the net investment in the non-integral foreign operations in accordance with AS - 11, The Effects of Changes in Foreign Exchange Rates. Foreign exchange spot and forward contracts outstanding as at the Balance Sheet date and held for trading, are revalued at the closing spot and forward rates respectively as notiﬁed by FEDAI and at interpolated rates for contracts of interim maturities. The USD-INR rate for valuation of contracts having longer maturities i.e. greater than one year is implied from MIFOR and LIBOR curves. For other currency pairs, the forward points (for rates / tenors not published by FEDAI) are obtained from Reuters for valuation of the FX deals. As directed by FEDAI to consider P&L on present value basis, the forward proﬁt or loss on the deals are discounted till the valuation date using the discounting yields. The resulting proﬁt or loss on valuation is recognised in the Statement of Proﬁt and Loss. Foreign exchange contracts are classiﬁed as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract is amortised as expense or income over the life of the contract. Currency future contracts are marked to market daily using settlement price on a trading day, which is the closing price of the respective future contracts on that day. While the daily settlement price is computed on the basis of the last half an hour weighted average price of such contract, the ﬁnal settlement price is taken as the RBI reference rate on the last trading day of the future contract or as may be speciﬁed by the relevant authority from time to time. All open positions are marked to market based on the settlement price and the resultant marked to market proﬁt / loss is daily settled with the exchange. Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. HDFC Securities Limited Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any, arising out of transactions settled during the year are recognized in the Statement of Proﬁt and Loss. Monetary assets and liabilities denominated in foreign currencies as at the Balance Sheet date are translated at the closing exchange rate on that date. The exchange differences, if any, are recognised in the Statement of Proﬁt and Loss and related assets and liabilities are accordingly restated in the Balance Sheet. HDFC Bank Limited Annual Report 2017-18 179 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 7 Derivative contracts HDFC Bank Limited The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the derivative contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting dates. Derivatives are classiﬁed as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Changes in the fair value of derivatives other than those designated as hedges are recognised in the Statement of Proﬁt and Loss. Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market. In respect of derivative contracts that are marked to market, changes in the market value are recognised in the Statement of Proﬁt and Loss in the relevant period. The Bank identiﬁes the hedged item (asset or liability) at the inception of the transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically thereafter. Gains or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Proﬁt and Loss. Contingent liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of exchange notiﬁed by FEDAI as at the Balance Sheet date. 8 Revenue recognition HDFC Bank Limited (cid:115)(cid:0)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0) (cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0) (cid:73)(cid:83)(cid:0) (cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) (cid:73)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:44)(cid:79)(cid:83)(cid:83)(cid:0) (cid:79)(cid:78)(cid:0) (cid:65)(cid:78)(cid:0) (cid:65)(cid:67)(cid:67)(cid:82)(cid:85)(cid:65)(cid:76)(cid:0) (cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:12)(cid:0) (cid:69)(cid:88)(cid:67)(cid:69)(cid:80)(cid:84)(cid:0) (cid:73)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:67)(cid:65)(cid:83)(cid:69)(cid:0) (cid:79)(cid:70)(cid:0) (cid:78)(cid:79)(cid:78)(cid:13) performing assets. Also in case of domestic advances, where interest is collected on rear end basis, such interest is accounted on receipt basis in accordance with the RBI guidelines. (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. 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(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: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: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: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. 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(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:65)(cid:82)(cid:78)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:68)(cid:69)(cid:76)(cid:65)(cid:89)(cid:69)(cid:68)(cid:0)(cid:80)(cid:65)(cid:89)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:67)(cid:76)(cid:73)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0)(cid:70)(cid:85)(cid:78)(cid:68)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:77)(cid:0)(cid:65)(cid:83)(cid:0)(cid:87)(cid:69)(cid:76)(cid:76)(cid:0)(cid:65)(cid:83)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:0)(cid:68)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:66)(cid:65)(cid:78)(cid:75)(cid:83)(cid:14) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:84)(cid:65)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:73)(cid:78)(cid:84)(cid:79)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0) on the ﬁnancial instrument and the rate applicable. (cid:36)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:87)(cid:72)(cid:69)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:83)(cid:84)(cid:65)(cid:66)(cid:76)(cid:73)(cid:83)(cid:72)(cid:69)(cid:68)(cid:14) HDFC Bank Limited Annual Report 2017-18 180 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 HDB Financial Services Limited (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:44)(cid:79)(cid:83)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:67)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:46)(cid:79)(cid:78)(cid:0)(cid:48)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:73)(cid:78)(cid:71)(cid:0)(cid:33)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0) (NPA) interest income is recognised upon realisation as per the RBI Guidelines. Interest accrued and not realised before the classiﬁcation of the asset as an NPA is reversed and credited to the interest suspense account. (cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:34)(cid:48)(cid:47)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:71)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:12)(cid:0)(cid:69)(cid:88)(cid:67)(cid:69)(cid:80)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:67)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:72)(cid:69)(cid:81)(cid:85)(cid:69)(cid:0) bouncing charges, late payment charges, foreclosure charges and application money, which are accounted as and when received. (cid:53)(cid:80)(cid:70)(cid:82)(cid:79)(cid:78)(cid:84)(cid:0)(cid:15)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:83)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:69)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:86)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:68)(cid:73)(cid:83)(cid:66)(cid:85)(cid:82)(cid:83)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:76)(cid:79)(cid:65)(cid:78)(cid:14) (cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:48)(cid:82)(cid:79)(cid:108)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:44)(cid:79)(cid:83)(cid:83)(cid:0)(cid:87)(cid:72)(cid:69)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:83)(cid:84)(cid:65)(cid:66)(cid:76)(cid:73)(cid:83)(cid:72)(cid:69)(cid:68)(cid:14) HDB Employees Welfare Trust (cid:115)(cid:0) (cid:0)(cid:41)(cid:78)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:14) 9 Employee beneﬁts HDFC Bank Limited Employee Stock Option Scheme (‘ESOS’) The Employee Stock Option Scheme (‘the Scheme’) provides for the grant of options to acquire equity shares of the Bank to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a speciﬁed period. The Bank follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume on the working day immediately preceding the date of grant. Compensation cost, if any is amortised over the vesting period. Gratuity: The Bank provides for gratuity to all employees. The beneﬁt vests upon completion of ﬁve years of service and is in the form of lump sum payment to employees on resignation, retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service. The Bank makes contributions to funds administered by trustees and managed by insurance companies for amounts notiﬁed by the said insurance companies. In respect of erstwhile Lord Krishna Bank (‘eLKB’) employees, the Bank makes contribution to a fund set up by eLKB and administered by the Board of Trustees. The deﬁned gratuity beneﬁt plans are valued by an independent actuary as at the Balance Sheet date using the projected unit credit method as per the requirement of AS-15, Employee Beneﬁts, to determine the present value of the deﬁned beneﬁt obligation and the related service costs. Under this method, the determination is based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognised in the Statement of Proﬁt and Loss. Superannuation: Employees of the Bank, above a prescribed grade, are entitled to receive retirement beneﬁts under the Bank’s Superannuation Fund. The Bank contributes a sum equivalent to 13% of the employee’s eligible annual basic salary (15% for the whole time directors and for certain eligible erstwhile Centurion Bank of Punjab (‘eCBoP’) staff) to insurance companies, which administer the fund. The Bank has no liability for future superannuation fund beneﬁts other than its contribution, and recognises such contributions as an expense in the year incurred, as such contribution is in the nature of deﬁned contribution. Provident fund: In accordance with law, all employees of the Bank are entitled to receive beneﬁts under the provident fund. The Bank contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary). Of this, the Bank contributes an amount equal to 8.33% of employee’s basic salary up to a maximum salary level of ` 15,000/- per month, to the Pension Scheme administered by the Regional Provident Fund Commissioner (‘RPFC’). The balance amount is contributed to a fund set up by the Bank and administered by a Board of Trustees. In respect of eCBoP employees, employer’s and employee’s HDFC Bank Limited Annual Report 2017-18 181 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 share of contribution to Provident Fund till March 2009, was administered by RPFC and from April 2009 onwards, the same is transferred to the fund set up by the Bank and administered by the Board of Trustees. In respect of eLKB employees, the Bank contributes to a fund set up by eLKB and administered by a Board of Trustees. The Bank recognises such contributions as an expense in the year in which it is incurred. Interest payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Bank. The guidance note on implementing AS-15, Employee Beneﬁts, states that beneﬁts involving employer established provident funds, which require interest shortfalls to be provided, are to be considered as deﬁned beneﬁt plans. Actuarial valuation of this Provident Fund interest shortfall is done as per the guidance note issued in this respect by The Institute of Actuaries of India (IAI) and provision towards this liability is made. The overseas branches of the Bank 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 target based incentives 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 re-ported as expenses during the period in which the employees perform the services that the payment covers. HDFC Bank Limited Annual Report 2017-18 182 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Deﬁned-beneﬁt plans Expenses for deﬁned-beneﬁt gratuity plan are calculated as at the Balance Sheet date by an independent actuary in a manner that distributes expenses over the employee’s working life. These commitments are valued at the present value of the expected future payments, with consideration for calculated future salary increases, using a discount rate corresponding to the interest rate estimated by the actuary having regard to the interest rate on government bonds with a remaining term that is almost equivalent to the average balance working period of employees. The fair values of the plan assets are deducted in determining the net liability. When the fair value of plan assets exceeds the commitments computed as aforesaid, the recognised asset is limited to the net total of any cumulative past service costs and the present value of any economic beneﬁts available in the form of reductions in future contributions to the plan. Actuarial losses or gains are recognised in the Statement of Proﬁt and Loss in the year in which they arise. Other employee beneﬁts Compensated absences which accrue to employees and which can be carried to future periods but are expected to be availed in twelve months immediately following the year in which the employee has rendered service are reported as expenses during the year in which the employees perform the services that the beneﬁt covers and the liabilities are reported at the undiscounted amount of the beneﬁts. 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, 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 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 recognized 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 The Institute of Chartered Accountants of India. The provision is based on an independent external actuarial valuation at the Balance Sheet date. HDFC Bank Limited Annual Report 2017-18 183 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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. 11 Bullion HDFC Bank Limited The Bank imports bullion including precious metal bars on a consignment basis. The imports are typically on a back-to-back basis and are priced to the customer based on the price quoted by the supplier. The difference between the price recovered from customers and cost of bullion 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. HDFC Bank Limited Annual Report 2017-18 184 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 16 Segment information Group The disclosure relating to segment information is in accordance with AS-17, Segment Reporting and as per guidelines issued by RBI. 17 Accounting for provisions, contingent liabilities and contingent assets Group In accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets, the Group recognises provisions when it has a present obligation as a result of a past event, it is probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Provisions are determined based on management estimate required to settle the obligation at the Balance Sheet date, supplemented by experience of similar transactions. These are reviewed at each Balance Sheet date and adjusted to reﬂect the current management estimates. A disclosure of contingent liability is made when there is: (cid:115)(cid:0)(cid:0) (cid:115)(cid:0) (cid:65)(cid:0) (cid:80)(cid:79)(cid:83)(cid:83)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0) (cid:79)(cid:66)(cid:76)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:65)(cid:82)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:0) (cid:65)(cid:0) (cid:80)(cid:65)(cid:83)(cid:84)(cid:0) (cid:69)(cid:86)(cid:69)(cid:78)(cid:84)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:69)(cid:88)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0) (cid:79)(cid:70)(cid:0) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0) (cid:87)(cid:73)(cid:76)(cid:76)(cid:0) (cid:66)(cid:69)(cid:0) (cid:67)(cid:79)(cid:78)(cid:108)(cid:82)(cid:77)(cid:69)(cid:68)(cid:0) (cid:66)(cid:89)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:79)(cid:67)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0) (cid:79)(cid:82)(cid:0) (cid:78)(cid:79)(cid:78)(cid:13) occurrence of one or more uncertain future events not within the control of the 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 2017-18 185 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 SCHEDULE 18 - Notes forming part of the consolidated ﬁnancial statements for the year ended March 31, 2018 Amounts in notes forming part of the consolidated ﬁnancial statements for the year ended March 31, 2018 are denominated in rupee crore to conform to extant RBI guidelines, except where stated otherwise. 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. 2 Proposed dividend The Board of Directors of the Bank, at their meeting held on April 21, 2018, have proposed a dividend of ` 13.00 per equity share (previous year: ` 11.00) aggregating ` 4,067.07 crore (previous year: ` 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 the 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 the proposed dividend from the Statement of Proﬁt and Loss. However, the effect of the proposed dividend has been reckoned in determining consolidated capital funds in the computation of the capital adequacy ratios. 3 Capital infusion During the year ended March 31, 2018, the Bank allotted 3,25,44,550 equity shares (previous year: 3,43,59,200 equity shares) aggregating to face value ` 6.51 crore (previous year: ` 6.87 crore) in respect of stock options exercised. Accordingly, the share capital increased by ` 6.51 crore (previous year: ` 6.87 crore) and the share premium increased by ` 2,719.40 crore (previous year: ` 2,254.64 crore). The Board of Directors of the Bank, at their meeting held on December 20, 2017 approved the raising of funds aggregating up to ` 24,000 crore, of which an amount up to a maximum of ` 8,500 crore shall be through the issuance of equity shares of face value of ` 2/- each pursuant to a preferential issue to Housing Development Finance Corporation Limited (the Bank’s promoters) and the balance shall be through the issuance of equity shares / convertible securities / depository receipts pursuant to a Qualiﬁed Institutions Placement (QIP) / American Depository Receipts (ADR) / Global Depository Receipt (GDR) program. The said raising of funds was approved by the shareholders of the Bank at its Extra Ordinary General meeting held on January 19, 2018 and is subject to the receipt of all relevant regulatory approvals. The details of the 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, 2018 March 31, 2017 512.51 6.51 519.02 505.64 6.87 512.51 Basic and diluted earnings per equity share have been calculated based on the consolidated net proﬁt after tax attributable to the Group of ` 18,510.02 crore (previous year: ` 15,253.03 crore) and the weighted average number of equity shares outstanding during the year of 2,58,05,38,505 (previous year: 2,54,43,33,609). Following is the reconciliation between the 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, 2018 March 31, 2017 2.00 71.73 (0.97) 70.76 2.00 59.95 (0.79) 59.16 HDFC Bank Limited Annual Report 2017-18 186 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Basic 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 outstanding during 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 the 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, 2018 March 31, 2017 2,58,05,38,505 2,54,43,33,609 3,55,30,885 3,40,55,428 2,61,60,69,390 2,57,83,89,037 5 Reserves and Surplus Drawdown from reserves Share Premium The Bank has not undertaken any drawdown from share premium during the years ended March 31, 2018 and March 31, 2017. Statutory Reserve The Bank and a subsidiary has made an appropriation of ` 4,562.03 crore (previous year: ` 3,777.16 crore) out of proﬁts for the year ended March 31, 2018 to the 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, 2018, the Bank appropriated ` 235.52 crore (previous year: ` 313.41 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 the Proﬁt and Loss Account to the Capital Reserve. General Reserve The Bank has made an appropriation of ` 1,748.67 crore (previous year: ` 1,454.96 crore) out of proﬁts for the year ended March 31, 2018 to the General Reserve. Investment Reserve Account During the year ended March 31, 2018, the Bank has transferred ` 44.20 crore (net) from the Investment Reserve Account to the Proﬁt and Loss Account as per the RBI guidelines. In the previous year, the Bank had appropriated ` 4.29 crore (net) from the Proﬁt and Loss Account to the Investment Reserve 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, 2018, if approved at the ensuing Annual General Meeting. 7 Accounting for employee share based payments HDFC Bank Limited The shareholders of the Bank approved the 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 the grant. The accounting for the stock options has been in accordance with the SEBI (Share Based Employee Beneﬁts) Regulations, 2014 to the extent applicable. HDFC Bank Limited Annual Report 2017-18 187 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Plans C, D, E, F and G provide for the issuance of options at the recommendation of the Nomination and Remuneration Committee of the Board (‘NRC’) 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. The vesting conditions applicable to the options are at the discretion of the NRC. These options are exercisable on vesting, for a period as set forth by the NRC at the time of grant. The period in which the options may be exercised cannot exceed ﬁve years. During the years ended March 31, 2018 and March 31, 2017, no modiﬁcations were made to the terms and conditions of ESOPs as approved by the NRC. 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:24)(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 9,21,56,300 1,68,82,050 3,25,44,550 10,50,000 7,54,43,800 4,68,10,250 Weighted average exercise price (`) 904.97 1,433.23 837.59 1,050.05 1,050.22 901.44 (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:52)(cid:72)(cid:69)(cid:0)(cid:70)(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:24)(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 835.50 680.00 680.00 32,61,500 16,35,700 62,24,900 835.50 to 1,462.15 6,43,21,700 1.32 1.43 1.51 3.59 685.72 680.00 680.00 1,113.95 (cid:0) (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(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 2017-18 188 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Fair value methodology The fair value of options used to compute the proforma net proﬁt 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 prices of its equity shares. The Bank granted 1,68,82,050 options during the year ended March 31, 2018 (previous year: Nil). The various assumptions considered in the pricing model for the ESOPs granted during the year ended March 31, 2018 are: Particulars Dividend yield Expected volatility Risk - free interest rate Expected life of the options March 31, 2018 0.65% to 0.66% 19.94% to 21.65% 6.73% to 7.20% 1 - 7.25 years Impact of the fair value method on the 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 for the year 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, 2018 March 31, 2017 17,486.75 14,549.66 - 650.41 - 812.75 16,836.34 13,736.91 (`) 67.76 65.24 66.84 64.36 (`) 57.18 53.99 56.43 53.28 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. Method of settlement of this options are equity shares of the Company. Weighted average remaining contractual life of these options is 22 months. 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 2017-18 189 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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: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:24)(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 - 69,550 9,000 2,01,450 2,01,450 1,136 - 1,136 1,136 1,136 1,136 (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 Company options Weighted average exercise price (`) - 2,80,000 - - 2,80,000 - - 1,136 - - 1,136 - (cid:0) (cid:0) (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(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:24)(cid:26) Plan Range of exercise price (`) Number of shares arising out of options Weighted average remaining contractual life of options (in years) Weighted average exercise price (`) Company Options 1,136 201,450 1.8 Years 1,136 (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(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 Range of exercise price (`) Number of shares arising out of options Weighted average remaining contractual life of options (in years) Weighted average exercise price (`) Company Options 1,136 2,80,000 4.1 years 1,136 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 its 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. Particulars Dividend yield Expected volatility Risk - free interest rate Expected life of the options March 31, 2017 3.52% 43.53% to 42.48% 6.60% to 6.90% 3 to 5 years HDFC Bank Limited Annual Report 2017-18 190 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Impact of the fair value method on the net proﬁt and earning per share 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) HDB Financial Services Limited March 31, 2018 March 31, 2017 (` crore) 344.42 - 2.64 341.78 (`) 222.40 220.69 221.84 220.14 215.90 - 0.78 215.12 (`) 139.45 138.95 139.45 138.95 In accordance with resolution approved by the shareholders, the Company has reserved shares, for issue to employees through ESOS Scheme. On the approval of Nomination and Remuneration Committee (NRC), each ESOS 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, ESOS-9 on October 18, 2016 and ESOS-10 on October 13, 2017. 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 and ESOS-10. 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:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(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:24)(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 58,78,660 33,40,250 26,91,960 2,57,000 62,69,950 Weighted average exercise price (`) 112.46 213.00 106.74 114.01 168.41 (cid:115)(cid:0) (cid:33)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(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 HDFC Bank Limited Annual Report 2017-18 191 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(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:24)(cid:26) Plan ESOS - 8 ESOS - 9 ESOS- 10 Range of exercise price (`) Number of shares arising out of options Weighted average remaining contractual life of options (in years) Weighted average exercise price (`) 88.00 137.00 213.00 11,15,000 18,44,200 33,10,750 2.47 5.02 5.69 88.00 137.00 213.00 (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(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 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 its 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, 2018 are: Particulars Dividend yield Expected volatility Risk-free interest rate Expected life of the option March 31, 2018 March 31, 2017 0.70% Nil 6.44% 3.05 years 0.88% Nil 6.54% 3 years Impact of the fair value method on the net proﬁt and earning per share 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, 2018 March 31, 2017 (` crore) 951.74 - 12.03 939.71 (`) 12.18 12.03 12.16 12.01 684.21 - 8.36 675.85 (`) 9.64 9.52 9.64 9.52 HDFC Bank Limited Annual Report 2017-18 192 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Group Impact of the fair value method on the net proﬁt and earning per share 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) 8 Other liabilities March 31, 2018 March 31, 2017 18,510.02 665.08 17,844.94 (`) 71.73 69.15 70.76 68.21 15,253.03 821.89 14,431.14 (`) 59.95 56.72 59.16 55.97 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. Accordingly, other liabilities as at March 31, 2018 include unrealised loss on foreign exchange and derivative contracts of ` 5,093.04 crore (previous year: ` 13,880.38 crore). 9 Investments HDFC Bank Limited The details of securities that are kept as margin are as under: (` crore) Sr. No. I. II. III. IV. V. Particulars Face value as at March 31, 2018 2017 Securities kept as margin with Clearing Corporation of India towards: a) Collateral and funds management - Securities segment b) Collateral and funds management - Collateralised Borrowing and Lending 1,520.00 25,770.78 1,520.00 24,488.31 Obligation (CBLO) segment c) Default fund - Forex Forward segment d) Default fund - Forex Settlement segment e) Default fund - Rupee Derivatives (Guaranteed Settlement) segment f) Default fund - Securities segment g) Default fund - CBLO segment Securities kept as margin with the RBI towards: a) Real Time Gross Settlement (RTGS) b) Repo transactions c) Reverse repo transactions Securities kept as margin with National Securities Clearing Corporation of India (NSCCIL) towards NSE Currency Derivatives segment. Securities kept as margin with Indian Clearing Corporation Limited towards BSE Currency Derivatives segment. Securities kept as margin with Metropolitan Clearing Corporation of India towards MCX Currency Derivatives segment. 100.00 41.05 41.00 65.00 25.00 90,130.65 16,307.49 58,341.00 16.00 241.00 13.00 100.00 11.05 41.00 65.00 25.00 42,730.27 41,473.92 4,690.56 16.00 5.00 13.00 HDFC Bank Limited Annual Report 2017-18 193 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 HDFC Securities Limited (` crore) Sr. No. Particulars March 31, 2018 March 31, 2017 I. Mutual funds marked as lien with stock exchange for margin requirement 599.06 182.56 10 Other ﬁxed assets Other ﬁxed assets includes amount capitalised relating to software, Bombay Stock Exchange card and electronic trading (` crore) platform. Details regarding the same are 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, 2018 March 31, 2017 2,188.08 266.40 - 1,774.82 413.26 - Total (a) 2,454.48 2,188.08 1,509.12 282.61 - 1,791.73 662.75 1,248.71 260.41 - 1,509.12 678.96 Total (b) Net value (a-b) 11 Other assets Other assets include deferred tax asset (net) of ` 3,532.07 crore (previous year: ` 2,587.06 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) 12 Provisions and contingent liabilities March 31, 2018 March 31, 2017 (` crore) 2,945.98 2,207.53 186.11 446.58 175.39 322.66 Total (a) 3,578.67 2,705.58 Total (b) (46.60) (46.60) 3,532.07 (118.52) (118.52) 2,587.06 Given below is the movement in provisions and a brief description of the nature of contingent liabilities recognised by the Bank. HDFC Bank Limited Annual Report 2017-18 194 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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) March 31, 2018 March 31, 2017 431.24 261.95 (222.07) 471.12 306.36 334.24 (209.36) 431.24 (` crore) March 31, 2018 March 31, 2017 311.90 2.11 314.01 344.56 (32.66) 311.90 March 31, 2018 March 31, 2017 3,612 146.55 119.02 119.02 2,319 165.20 20.83 20.83 - Amount of unamortised provision debited from “other reserves” as at the end of the year (` crore) - d) Description of contingent liabilities Contingent liability* Brief description Sr. No. 1 Claims against the Group The Group is a party to various taxation matters in respect of which appeals are not acknowledged as pending. The Group expects the outcome of the appeals to be favourable based on debts - taxation decisions on similar issues in the previous years by the appellate authorities, based on the facts of the case and taxation laws. 2 Claims against the Group The Group is a party to various legal proceedings in the normal course of business. not acknowledged as The Group does not expect the outcome of these proceedings to have a material debts - others adverse effect on the Group’s ﬁnancial conditions, results of operations or cash ﬂows. HDFC Bank Limited Annual Report 2017-18 195 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Sr.No. Contingent liability* Brief description 3 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. 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 Group 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 13 Commission, exchange and brokerage income Commission, exchange and brokerage income is net of correspondent bank charges. 14 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, 2018 March 31, 2017 10,848.11 (945.03) 5,487.32 30.80 657.58 396.12 8,424.16 (346.04) 3,503.37 (7.64) 431.23 63.85 Total 16,474.90 12,068.93 *Includes provisions for tax, legal and other contingencies ` 396.98 crore (previous year: ` 38.72 crore), ﬂoating provisions Nil (previous year: ` 25.00 crore), provisions / (write back) for securitised-out assets ` 2.14 crore (previous year: ` 2.62 crore) and standard restructured assets ` (3.00) crore (previous year: ` (2.50) crore). HDFC Bank Limited Annual Report 2017-18 196 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 15 Employee beneﬁts Gratuity Particulars Reconciliation of opening and closing balance of the present value of the deﬁned beneﬁt obligation March 31, 2018 March 31, 2017 (` 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 548.50 - 39.12 78.58 (48.11) 13.69 (17.72) 614.06 390.23 - 29.87 87.71 (48.11) (2.35) - 457.35 457.35 (614.06) (156.71) 39.12 78.58 (29.87) (1.68) 86.15 27.52 114.31 401.93 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 7.5% per annum 7.0% per annum 8.0% per annum 7.1% per annum 7.0% per annum 8.0% per annum 7.4% per annum 8.0% per annum 6.8% per annum 7.6% per annum 11.0% per annum 12.0% per annum 7.2% per annum 6.4% - 6.5% per annum 7.5 % per annum 7.5% per annum 5.0% - 7.0% per annum 5.0% - 7.5% per annum HDFC Bank Limited Annual Report 2017-18 197 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Experience adjustment Particulars Plan assets Deﬁned beneﬁt obligation Surplus / (deﬁcit) Experience adjustment gain / (loss) on plan assets Experience adjustment (gain) / loss on plan liabilities 2018 457.35 614.06 (156.71) (2.35) 13.69 Years ended March 31, 2016 2015 2017 390.23 548.50 (158.27) 31.19 39.69 295.46 401.93 (106.47) (13.61) 16.27 248.13 318.37 (70.24) 21.27 4.84 (` crore) 2014 176.20 242.71 (66.51) 1.82 6.30 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, 2018 are given below: Category of plan assets Government securities Debenture and bonds Equity shares Others Pension HDFC Bank Limited HDFC Securities Limited 25.2% 28.9% 43.1% 2.8% 100.0% 43.0% 43.0% 11.0% 3.0% 100.0% HDB Financial Services Limited 93.1% 4.1% - 2.8% 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, 2018 March 31, 2017 73.55 5.19 0.74 (8.75) 3.95 (1.62) 73.06 36.16 2.36 0.94 (8.75) 0.59 - 31.30 31.30 (73.06) (41.76) 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) HDFC Bank Limited Annual Report 2017-18 198 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Particulars Expenses recognised in Statement of Proﬁt and Loss March 31, 2018 March 31, 2017 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) 5.19 0.74 (2.36) 1.74 5.31 2.95 13.79 4.80 1.23 (2.61) 2.50 5.92 3.37 7.18 7.5% per annum 7.0% per annum 8.0% per annum 7.1% per annum 7.0% per annum 8.0% per annum (` crore) Years ended March 31, 2018 2017 2016 2015 2014 31.30 73.06 (41.76) 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 Experience adjustment gain / (loss) on plan assets 0.59 Experience adjustment (gain) / loss on plan liabilities 3.95 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, 2018 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, 2018 5.9% 78.9% 15.2% 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, 2018 (previous year: Nil) towards the present value of the guaranteed interest beneﬁt obligation. The actuary has followed the deterministic approach as prescribed by the guidance note. Assumptions: Particulars Discount rate (GOI security yield) Expected guaranteed interest rate March 31, 2018 March 31, 2017 7.5% per annum 7.1% per annum 8.6% per annum 8.7% per annum The Bank does not have any unfunded deﬁned beneﬁt plan. The Group contributed ` 308.21 crore (previous year: ` 292.00 crore) to the provident fund. The Bank contributed ` 67.68 crore (previous year: ` 78.67 crore) to the superannuation plan. HDFC Bank Limited Annual Report 2017-18 199 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Compensated absences The actuarial liability of compensated absences of accumulated privileged and sick leaves of the employees of the Group is (` crore) 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 16 Segment Reporting Business segments March 31, 2018 March 31, 2017 283.08 62.67 345.75 254.28 56.12 310.40 7.5% per annum 8.0% per annum 7.1% per annum 8.0% per annum 7.4% per annum 6.8% per annum 11.0% per annum 12.0% per annum 7.2% per annum 6.4% - 6.5% per annum 5.0% - 7.0% per annum 5.0% - 7.5% 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 2017-18 200 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 (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, 2018 is given below: Less: Inter-segment revenue Income from operations (1) + (2) - (3) Income tax expense (including deferred tax) Business segments: Sr. No. Particulars 1 Segment revenue 2 Unallocated revenue 3 4 5 Segment results 6 Unallocated expenses 7 8 Net proﬁt (5) - (6) - (7) 9 Segment assets 10 Unallocated assets 11 Total assets (9) + (10) 12 Segment liabilities 13 Unallocated liabilities 14 Total liabilities (12) + (13) 15 Capital employed (9) - (12) (Segment assets - Segment liabilities) 16 Unallocated (10) - (13) 17 Total (15) + (16) 18 Capital expenditure 19 Depreciation 20 Provisions for non - performing assets / others* 21 Unallocated other provisions* Treasury Retail banking Wholesale banking 19,841.37 73,843.05 41,504.13 1,540.00 9,971.72 11,720.51 350,894.38 371,906.59 297,040.57 55,349.70 598,785.46 270,287.20 295,544.68 (226,878.87) 26,753.37 5.77 729.47 73.05 11.58 723.91 92.36 1,565.79 3,539.06 35.36 (` crore) Total Other banking operations 18,141.93 153,330.48 - 51,986.03 101,344.45 7,254.51 30,486.74 2,022.81 9,903.08 18,560.85 76,847.35 1,096,688.89 6,497.28 1,103,186.17 39,672.93 964,095.29 29,135.42 993,230.71 37,174.42 132,593.60 (22,638.14) 109,955.46 164.81 973.10 138.93 966.78 6,557.64 14.18 1,417.43 *Represents material non-cash charge other than depreciation and taxation HDFC Bank Limited Annual Report 2017-18 201 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Geographic segments: Particulars Revenue Assets Capital expenditure (` crore) Domestic International 100,526.33 818.12 1,076,239.64 26,946.53 972.75 0.35 Segment reporting for the year ended March 31, 2017 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) 9 Segment assets 10 Unallocated assets 11 Total assets (9) + (10) 12 Segment liabilities 13 Unallocated liabilities 14 Total liabilities (12) + (13) Treasury Retail banking Wholesale banking Other banking operations (` crore) Total 20,326.18 66,147.50 32,587.85 13,593.23 132,654.76 1,659.11 8,432.16 10,123.04 4,591.77 24,806.08 - 46,505.77 86,148.99 1,440.55 8,078.12 15,287.41 263,356.40 295,828.92 272,148.83 55,709.83 887,043.98 5,300.18 892,344.16 38,732.49 525,792.90 191,254.90 29,023.68 784,803.97 15,454.80 800,258.77 15 Capital Employed (9) - (12) 224,623.91 (229,963.98) 80,893.93 26,686.15 102,240.01 (Segment Assets - Segment Liabilities) 16 Unallocated (10) - (13) 17 Total (15) + (16) 18 Capital expenditure 19 Depreciation 32.85 846.56 150.30 227.58 1,257.29 10.15 659.66 90.78 125.60 886.19 (10,154.62) 92,085.39 20 Provisions for non - performing assets / others* (7.64) 2,159.35 841.13 1,002.68 3,995.52 21 Unallocated other provisions* * Represents material non-cash charge other than depreciation and taxation Geographic segments: Particulars Revenue Assets Capital expenditure (4.71) (` crore) Domestic International 85,125.34 1,023.65 868,432.68 23,911.48 1,255.83 1.46 HDFC Bank Limited Annual Report 2017-18 202 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 17 Related party disclosures As per AS-18 Related Party Disclosures, the Group’s related parties are disclosed below: Promoter Housing Development Finance Corporation Limited Associates International Asset Reconstruction Company Private Limited (ceased to be an associate with effect from March 9, 2018) 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. A speciﬁc related party transaction is a signiﬁcant transaction wherever it exceeds 10% of all related party transactions in that category. Transactions between the Bank and Housing Development Finance Corporation Limited exceed 10% of all related party transactions in that category. The Group’s related party balances and transactions for the year ended March 31, 2018 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 3,250.77 (3,250.77) 0.47 (0.47) - - - - 5.96 13.28 - - - - - - - - 1.70 - Key management personnel Total 14.10 3,264.87 (37.45) (3,288.22) 2.51 (2.51) 3.16 (3.45) - - 1.05 0.12 2.98 (2.98) 3.16 (3.45) - - 8.71 13.40 HDFC Bank Limited Annual Report 2017-18 203 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Items / related party Promoter Associates Key management personnel Total 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 264.27 405.17 - - - - - - 1,603.88 - (1,603.88) - 432.53 - - - - - 28.34 (60.79) 32.78 (36.17) 0.25 (0.27) - 5,623.94 - - - - - - - - - 19.29 - 0.76 - - - - 5.67 - - - 264.27 405.93 - - 1,603.88 (1,603.88) 438.20 - 28.34 (60.79) 32.78 (36.17) 0.25 (0.27) 19.29 - - 5,623.94 Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding balances at each quarter-end. Remuneration paid excludes value of employee stock options exercised during the year. The Bank being an authorised dealer, deals in foreign exchange and derivative transactions with parties which include its promoter. The foreign exchange and derivative transactions are undertaken in line with the RBI guidelines. The notional principal amount of foreign exchange and derivative contracts transacted with the promoter that were outstanding as at March 31, 2018 is ` 5,972.14 crore (previous year: ` 665.77 crore). The contingent credit exposure pertaining to these contracts computed in line with the extant RBI guidelines on exposure norms is ` 80.76 crore (previous year: ` 40.18 crore). During the year ended March 31, 2018, the Bank purchased debt securities from Housing Development Finance Corporation Limited ` 2,105.00 crore (previous year: ` 2,320.00 crore) issued by it. During the year ended March 31, 2018, the Bank paid rent of ` 0.66 crore (previous year: ` 0.66 crore) to party related to the Bank’s key management personnel in relation to residential accommodation. As at March 31, 2018, 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, 2017 are summarised as follows: (` crore) Items / related party Promoter Associates Key management personnel Deposits taken Deposits placed Advances given Fixed assets purchased from Fixed assets sold to Interest paid to 2,500.25 (2,500.25) 0.15 (0.15) - - - - 5.57 25.05 (25.05) - - 0.05 (0.05) - - 0.51 13.61 (60.14) 2.51 (2.51) 3.44 (3.44) - - 1.02 Total 2,538.91 (2,585.44) 2.66 (2.66) 3.49 (3.49) - - 7.10 HDFC Bank Limited Annual Report 2017-18 204 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 Items / related party Promoter Associates Key management personnel Total 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 - 207.45 343.10 - - - (126.48) 373.55 - 23.16 (23.16) 33.67 (33.67) 0.12 (0.14) - 13,845.65 - - - 31.17 (31.17) - - - - - - - - - - - - 0.03 - 0.76 - - - - 4.49 - - - - - - - 20.79 - 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. 18 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, 2018 March 31, 2017 1,016.13 3,303.45 3,626.31 7,945.89 1,231.87 995.56 3,185.49 3,154.93 7,335.98 1,150.97 7.08 25.33 8.06 174.87 11.31 138.79 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. 19 Penalties levied by the RBI During the year ended March 31, 2018, RBI did not impose any penalty on the Bank (previous year: ` 2.00 crore). HDFC Bank Limited Annual Report 2017-18 205 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 20 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 during the years ended March 31, 2018 and March 31, 2017. The above is based on the information available with the Bank which has been relied upon by the auditors. 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, 2018 was ` 0.03 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, 2018 was Nil (previous year: Nil). 21 Corporate social responsibility Operating expenses include ` 391.92 crore (previous year: ` 313.31 crore) for the year ended March 31, 2018 towards Corporate Social Responsibility (CSR), in accordance with Companies Act, 2013. The details of amount spent by the Group during the respective years towards CSR are as under: (` crore) Sr. No Particulars March 31, 2018 March 31, 2017 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 391.92 - - - - 391.92 313.31 - - - 313.31 22 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 such items which are not material have not been disclosed in the Consolidated Financial Statements. 23 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 Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors Mumbai, April 21, 2018 HDFC Bank Limited Annual Report 2017-18 206 Statement pursuant to Section 129 of the Companies Act, 2013 Schedules to the Consolidated Financial Statements For the year ended March 31, 2018 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, 2017 to March 31, 2018 Reporting period of the subsidiary is the same as that of the holding company i.e. April 1, 2017 to March 31, 2018 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) 15.55 985.24 1,637.80 637.01 743.95 788.25 524.16 179.74 344.42 205.91 97.7% 782.94 5,419.29 44,753.92 38,551.69 430.71 7,061.99 1,464.52 512.78 951.74 150.78 95.9% * 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, 2018. 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 2017-18 207 Schedules to the Consolidated Financial Statements Statement pursuant to Section 129 of the Companies Act, 2013 For the year ended March 31, 2018 Part B: Associate Companies and Joint Ventures (` crore) Sr. No. Name of Associates or Joint Ventures International Asset Reconstruction Company Private Limited (‘IARC’) 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 period: i. Considered in consolidated ﬁnancial statements ii. Not considered in consolidated ﬁnancial statements March 31, 2017* May 23, 2008 16,175,507 31.17 19.2% Not Applicable (Refer Note 4) Not Applicable (Refer Note 4) 39.58* 0.52* 3.07* * Unaudited ﬁnancial statements drawn up to December 31, 2017 have been considered for the purpose of the Consolidated Financial Statements for the year ended March 31, 2018. Notes: 1. 2. 3. 4. There are no joint ventures as per Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures. There are no associates or joint ventures that are yet to commence operations. No associates or joint ventures were liquidated or sold during the year. During the year ended March 31, 2018, the Bank’s stake in IARC, hitherto at 29.4%, reduced to 19.2% due to further issue of equity shares made by IARC in which the Bank did not participate. Accordingly, IARC ceased to be an associate company of the Bank with effect from March 9, 2018. 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 Bobby Parikh Keki Mistry Malay Patel Partho Datta Umesh Sarangi Directors Mumbai, April 21, 2018 HDFC Bank Limited Annual Report 2017-18 208 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, 2018, as prescribed in Regulations 17 to 27, clauses (b) to (i) of sub-regulation (2) of regulation 46 and Para 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 COP No.: 10440 Place: Mumbai Date: May 22, 2018 HDFC Bank Limited Annual Report 2017-18 209 Corporate Governance [Report on Corporate Governance pursuant to the 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] CORPORATE GOVERNANCE FRAMEWORK Shareholders Regulators Board of Directors Audit Committee Stakeholders’ Relationship Committee Nomination & Remuneration Committee Risk Policy and Monitoring Committee Other Committees External and Internal Auditors Managing Director Deputy Managing Director Executive Director The Board of Directors of the Bank are the ultimate custodians of governance. The Board of Directors are accountable to various stakeholders such as- shareholders and regulatory authorities such as Reserve Bank of India, Securities and Exchange Board of India, Ministry of Corporate Affairs, etc. The Board of Directors has constituted various committees under it, each with deﬁned roles and responsibilities - such as Audit Committee, Stakeholders’ Relationship Committee, Nomination and Remuneration Committee, Risk Policy and Monitoring Committee, and other committees. The Statutory Auditors have a reporting responsibility to the Audit Committee. The Managing Director is responsible for the overall affairs of the Bank, under the superintendence, guidance and control of the Board of Directors. The Deputy Managing Director and the Executive Director, under the guidance of the Managing Director, have over-sight over important functions such as credit, risk management, ﬁnance, wholesale banking, etc. 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. HDFC Bank Limited Annual Report 2017-18 210 Corporate Governance BOARD OF DIRECTORS LENGTH OF SERVICE OF DIRECTORS - No. of years (Y) 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 ten (10) Directors as on March 31, 2018. Composition of the Board of Directors of the Bank as on March 31, 2018: 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 Mr. Srikanth Nadhamuni Mr. Keki Mistry represents Housing Development Finance Corporation Limited (HDFC Limited) on the Board of the Bank. Independent Directors: Mrs. Shyamala Gopinath (Part-time Non Executive Chairperson), Mr. Partho Datta, Mr. Bobby Parikh, Mr. Malay Patel and Mr. Umesh Chandra Sarangi. None of the Directors on the Board is a member of more than ten (10) Committees and Chairperson of more than ﬁve (5) Committees across all public companies in which he / she is a Director. All the Directors have made necessary disclosures regarding Committee positions occupied by them in other companies. None of the Directors are related to each other. Mrs. Renu Karnad and Mr. A. N. Roy resigned as directors of the Bank with effect from January 20, 2018 and January 31, 2018 respectively. BOARD COMPOSITION Independent Directors Executive Directors Non-Independent, Non-Executive Directors *Pursuant to Banking Regulation Act, 1949, only the Chairperson and Wholetime directors may hold ofﬁce for a period exceeding eight years. AGE GROUP OF DIRECTORS Details of directorships, memberships and chairpersonships of the committees of other companies for the current Directors of the Bank are as follows: Name of Director Directorships on the Board of other companies* Memberships of Committees of other companies * Mrs. Shyamala Gopinath Mr. Partho Datta Mr. Bobby Parikh Mr. Malay Patel Mr. Keki Mistry Mr. Aditya Puri Mr. Paresh Sukthankar Mr. Kaizad Bharucha Mr. Umesh Chandra Sarangi Mr. Srikanth Nadhamuni 5 2 5 - 8 (1) (1) - - - - 4 (1) 2 (1) 4 (1) - 8 (4) - - - - - * The ﬁgures in brackets indicate Chairpersonships. Note: For the purpose of considering the limit of the Directorships and limits of Committees on which the directors are members / Chairperson, 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, Chairpersonships/ Memberships of only the Audit Committee and the Stakeholders’ Relationship Committee have been considered. HDFC Bank Limited Annual Report 2017-18 211 Corporate Governance PROFILE OF BOARD OF DIRECTORS The proﬁle of the Directors of the Bank as on March 31, 2018 is as under: Mrs. Shyamala Gopinath Mrs. Shyamala Gopinath, aged 68 years, holds a Master’s Degree in Commerce and is a CAIIB. Mrs. Shyamala 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, and a member of the RBI’s Board of Directors, she guided and inﬂuenced national policies in diverse areas such as regulation and supervision, development of ﬁnancial markets, capital account management, management of government borrowings, forex reserves management and payment and settlement system. She has served on several Committees while with the RBI. During 2001-03, she worked as senior ﬁnancial sector expert in the then Monetary Affairs and Exchange Department of the International Monetary Fund (Financial Institutions Division). She was on the Corporate Bonds and Securitisation Advisory Committee (CoBoSAC), a Sub-Committee of SEBI. She served as the Chairperson on the Advisory Board on Bank, Commercial and Financial Frauds for two years from 2012 to 2014. She was an Independent Director on the Boards of Clearing Corporation of India Limited, Indian Oil Corporation Limited and GAIL (India) Limited. Apart from HDFC Bank, she is an Independent Director on few other companies including not for proﬁt entities. She is also Chairperson of the Board of Governors of Indian Institute of Management, Raipur. Mrs. Gopinath does not hold any shares in the Bank as on March 31, 2018. Mr. Aditya Puri Mr. Aditya Puri, aged 67 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 Director and has contributed signiﬁcantly to enable the Bank scale phenomenal heights under his stewardship. During the year, Mr. Puri was awarded the Lifetime Achievement Award by Businessworld magazine for his contribution to banking. The numerous awards won by Mr. Puri and the Bank are a testimony to the tremendous credibility that Mr. Puri has built for himself and the Bank over the years. The Bank has made good and consistent progress on key parameters like balance sheet size, total deposits, net revenues, earnings per share and net proﬁt during Mr. Puri’s tenure. The rankings achieved by the Bank amongst all Indian banks with regard to market capitalization, proﬁt after tax and balance sheet size remain amongst the top 10. During his tenure, Mr. Puri has led the Bank through two major mergers in the Indian banking industry i.e. merger of Times Bank Limited and Centurion Bank of Punjab Limited with HDFC Bank Limited. The subsequent integrations have been smooth and seamless under his inspired leadership. 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. Puri, along with his relatives, holds 3,566,544 equity shares in the Bank as on March 31, 2018. Mr. Keki Mistry Mr. Keki Mistry, aged 63 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, 2018. Mr. Partho Datta Mr. Partho Datta, aged 69 years, is an Associate Member of the Institute of Chartered Accountants of India. Mr. Datta joined Indian Aluminium 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 HDFC Bank Limited Annual Report 2017-18 212 Corporate Governance 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, 2018. Mr. Bobby Parikh Mr. Bobby Parikh, aged 54 years, holds a Bachelor’s degree in Commerce from the Mumbai University and has qualiﬁed as a Chartered Accountant in 1987. Mr. Parikh was a Senior Partner with BMR & Associates LLP and led its ﬁnancial services practice. Mr. Parikh was also 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, along with his relatives, holds 11,196 equity shares in the Bank as on March 31, 2018. Mr. Paresh Sukthankar Mr. Paresh Sukthankar, aged 55 years, completed his graduation from Sydenham College, Mumbai and holds a Bachelor of Commerce (B.Com) degree from University of Mumbai. He has done his Masters in Management Studies (MMS) from Jamnalal Bajaj Institute (Mumbai). Mr. Sukthankar has also completed the Advanced Management Program (AMP) from the Harvard Business School. 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 various key areas including Credit, Risk Management, Finance, Human Resources, Investor Relations, Corporate Communications, Corporate Social Responsibility and Information Security. 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. Prior to joining the Bank, Mr. Sukthankar worked in Citibank for around 9 years, in various departments including corporate banking, risk management, ﬁnancial control and credit administration. Mr. Sukthankar has been a member of various Committees formed by Reserve Bank of India and Indian Banks’ Association. Mr. Sukthankar, along with his relatives, holds 826,905 equity shares in the Bank as on March 31, 2018. Mr. Kaizad Bharucha Mr. Kaizad Bharucha, aged 53 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, Healthcare Finance, Agri Lending 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. 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. 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. HDFC Bank Limited Annual Report 2017-18 213 Corporate Governance Mr. Bharucha, along with his relatives, holds 950,551 equity shares in the Bank as on March 31, 2018. Mr. Malay Patel Mr. Malay Patel, aged 41 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, 2018. Mr. Umesh Chandra Sarangi incubator. He has also been a co-founder of start-up 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. 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). Mr. Nadhamuni spent 14 years in the Silicon Valley (California, US) working for several global companies such as 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. Umesh Chandra Sarangi, aged 66 years, holds a Master’s Degree in Science (Botany) from the Utkal University (gold medalist). Mr. Nadhamuni does not hold any shares in the Bank as on March 31, 2018. in the Mr. Sarangi has 35 years of experience 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 Agriculture 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, 2018. Mr. Srikanth Nadhamuni Mr. Srikanth Nadhamuni, aged 54 years, 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. 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 ATTENDANCE AT BOARD MEETINGS & LAST ANNUAL GENERAL MEETING (AGM) The Board/Committee Meetings are convened by giving appropriate notice well in advance of the meetings. The Directors / Members are provided with appropriate information in the form of agenda items in a timely manner, to enable them to deliberate on each agenda item and make informed decisions and provide appropriate directions to the Management in this regard. Video-conferencing facility is also provided at the Board / Committee meetings in case any director is unable to attend but wishes to participate in the meetings. the Board/Committee meetings, presentations and At deep-dive sessions are made covering important areas of the Bank such as annual plans and strategies, investment banking, ﬁnancial inclusion, Basel framework, digital banking, cyber security, etc. The Managing Director gives a commentary on the current state of affairs of the Bank and macro-economic outlook, so as to give an insight to the Board of Directors on industry trends and developments. During the ﬁnancial year under review, eight (8) Board Meetings were held. The meetings were held on April 21, 2017, May 29, 2017, July 24, 2017, September 8, 2017, October 24, 2017, December 20, 2017, January 19, 2018 and March 7, 2018. HDFC Bank Limited Annual Report 2017-18 214 Corporate Governance Details of attendance at the Board Meetings held during the ﬁnancial year under review and attendance at the last AGM are as follows: Name of the Director Independent Directors Mrs. Shyamala Gopinath Mr. A.N. Roy* Mr. Partho Datta Mr. Bobby Parikh Mr. Malay Patel Mr. Umesh Chandra Sarangi Non-executive Directors Mr. Keki Mistry# Mrs. Renu Karnad* Mr. Srikanth Nadhamuni Executive Directors Mr. Aditya Puri Mr. Paresh Sukthankar Mr. Kaizad Bharucha Board Meetings attended during the year Attendance at last AGM (July 24, 2017) 7 7 7 7 8 8 6 7 8 8 7 8 Present Present Present Present Present Present Absent Present Present Present Present Present *Mrs. Renu Karnad and Mr. A.N. Roy resigned as Directors of the Bank with effect from January 20, 2018 and January 31, 2018 respectively. # Mr. Mistry could not attend 2 board meetings held in the FY 2017-18 i.e. on January 19, 2018 and March 7, 2018. Mr. Mistry had prior commitments on January 19, 2018 and he was travelling abroad on March 7, 2018. Further, he could not attend the last AGM of the Bank held on July 24, 2017 since he was not well. (Mr. Mistry has attended all the Board meetings of the Bank held during FY 2016-17, as well as the AGM of the Bank held for FY 2016-17.) 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 (Amount in `) Mr. Kaizad Bharucha, Executive Director during the ﬁnancial year 2017-18 are as under: Particulars Basic Allowances and Perquisites Provident Fund Superannuation Performance Bonus (refers to the deferred bonus tranches for earlier ﬁnancial years) # Bonus pertaining to FY 2016-17 paid out in FY 2017-18 Number of stock options granted * Mr. Aditya Puri 45,328,032 29,701,519 5,439,360 6,799,205 9,231,505 Mr. Paresh Sukthankar Mr. Kaizad Bharucha 16,464,000 18,952,529 1,975,680 2,469,600 3,478,460 24,560,202 16,315,495 2,947,223 3,684,031 5,503,960 - - - 701,600 319,000 232,000 # At present, the bonus pertaining to the year 2016-17 proposed to be paid out in FY 2017-18 is pending RBI approval. Therefore, after RBI approval is obtained, the approved amounts, if any, will be paid and disclosed in the Corporate Governance Report for the next ﬁnancial year. * The stock options granted to Mr. Aditya Puri, Mr. Paresh Sukthankar and Mr. Kaizad Bharucha have not been issued at discount and the same have been granted at the closing market price prevailing on the day prior to the date of grant on the National Stock Exchange of India Ltd. The Bank follows a method of conditional vesting, i.e. vesting of each tranche is subject to performance. The vesting schedule for the stock options is - 40% of options after expiry of ﬁfteen months from date of grant, 30% options after expiry of twenty seven months from the date of grant and the balance options after expiry of thirty nine months from date of grant, subject to performance. The options so vested are to be exercised within 4 years from the respective dates of vesting. HDFC Bank Limited Annual Report 2017-18 215 Corporate Governance 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 RBI. The Bank provides for gratuity in the form of lump-sum payment on retirement or on death while in employment or on termination of employment of an amount equivalent to 15 (ﬁfteen) days basic salary payable for each completed year of service. 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. 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 NON-EXECUTIVE 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. Non-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 ` 3,123,662. 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 of ` 50,000 and ` 100,000 per meeting for attending Committee & Board meetings respectively. Pursuant to RBI guidelines dated June 1, 2015 on Compensation to Non-executive Directors of Private Sector Banks and read with the relevant shareholders’ resolution in this regard, non- executive directors, 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, the Non-executive directors were paid proﬁt related commission of ` 1,000,000 each during the ﬁnancial year 2017-18 pertaining to ﬁnancial year 2016-17. This is in addition to the sitting fees paid to them for attending Committee & Board Meetings. The details of sitting fees and commission paid to non-executive directors during the ﬁnancial year 2017-18 is as under: Name of the Director Mrs. Shyamala Gopinath 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 Sitting Fees Commission # 2,350,000 1,950,000 2,250,000 1,950,000 1,650,000 1,450,000 1,400,000 1,450,000 1,350,000 (Amount in `) - 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 * Mrs. Renu Karnad and Mr. A.N. Roy resigned as Directors of the Bank with effect from January 20, 2018 and January 31, 2018 respectively. # Refers to commission for FY 2016-17, paid out in FY 2017-18. 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 2017-18. HDFC Bank Limited Annual Report 2017-18 216 Corporate Governance COMPOSITION OF COMMITTEES OF DIRECTORS, TERMS OF REFERENCE 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: Classiﬁcation Director's Name Audit Nomination & Remuneration Stakeholders' Relationship Corporate Social Responsibility Risk & Policy Monitoring Fraud Monitoring Customer Service Credit Approval Premises Review: Wilful Defaulters' Identiﬁcation Review: Non Cooperative Borrowers Digital Transactions Monitoring IT Strategy* Non Executive Directors Executive Directors Mrs. Shyamala Gopinath Mr. Bobby Parikh Mr. Partho Datta Mr. Malay Patel Mr. Srikanth Nadhamuni Mr. Keki Mistry Mr. Umesh Chandra Sarangi Mr. Aditya Puri Mr. Paresh Sukthankar Mr. Kaizad Bharucha * Not a Board level Committee Audit Committee: Chairperson Member Brief Terms of Reference / Roles and responsibilities: 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. HDFC Bank Limited Annual Report 2017-18 217 Corporate Governance Composition: Mr. Bobby Parikh (Chairman), Mrs. Shyamala Gopinath, Mr. Partho Datta and Mr. Umesh Chandra Sarangi. All members are independent directors. Mr. Bobby Parikh and Mr. Partho Datta are the members of Audit Committee having ﬁnancial expertise. (During the year, Mr. A. N. Roy ceased to be a member of the Committee pursuant to his resignation as director of the Bank.) Mr. Sanjay Dongre, Company Secretary of the Bank, acts as the Secretary of the Committee. Meetings: The Committee met eight (8) times during the year on April 20, 2017; July 21, 2017; August 7, 2017; September 8, 2017, October 23, 2017; December 20, 2017; January 18, 2018 and March 6, 2018. Nomination and Remuneration Committee: Brief Terms of Reference / Roles and responsibilities: a. Scrutinizing the nominations of the directors with reference to their qualiﬁcations and experience, for identifying ‘Fit and Proper’ persons, assessing competency of the persons and reviewing compensation levels of the Bank’s employees vis-à-vis other banks and the banking industry in general. The following are the criteria to assess competency of the persons nominated: (cid:115)(cid:0) (cid:65)(cid:67)(cid:65)(cid:68)(cid:69)(cid:77)(cid:73)(cid:67)(cid:0)(cid:81)(cid:85)(cid:65)(cid:76)(cid:73)(cid:108)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0) (cid:115)(cid:0) (cid:80)(cid:82)(cid:69)(cid:86)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:12)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:84)(cid:82)(cid:65)(cid:67)(cid:75)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:73)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:65)(cid:78)(cid:68)(cid:73)(cid:68)(cid:65)(cid:84)(cid:69)(cid:83)(cid:14) For assessing the integrity and suitability, features like criminal records, ﬁnancial position, civil actions undertaken to pursue personal debts, refusal of admission to and expulsion from professional bodies, sanctions applied by regulators or similar bodies and previous questionable business practices are considered. The Bank’s compensation policy provides a fair and consistent basis for motivating and rewarding employees appropriately according to their job proﬁle / role size, performance, contribution, skill and competence. b. The Committee also formulates criteria for evaluation of performance of individual directors including independent 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. Composition: Mr. Bobby Parikh (Chairman), Mrs. Shyamala Gopinath and Mr. Partho Datta. (During the year, Mr. A. N. Roy ceased to be a member of the Committee pursuant to his resignation as director of the Bank.) All the members are independent directors. Meetings: The Committee met seven (7) times during the year on April 20, 2017; May 11, 2017; July 21, 2017; August 7, 2017; October 23, 2017; February 15, 2018 and March 27, 2018. HDFC Bank Limited Annual Report 2017-18 218 Corporate Governance Stakeholders’ Relationship Committee: Brief Terms of Reference / Roles and responsibilities: Composition: The 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 powers to approve share transfers and dematerialization requests have been delegated to executives of the Bank to avoid delays that may arise due to non-availability of the members of the Committee. Mr. Sanjay Dongre, Executive Vice President (Legal) & Company Secretary of the Bank is the Compliance Ofﬁcer responsible for expediting the share transfer formalities. As on March 31, 2018, ﬁve (5) instruments of transfer for 1535 equity shares were pending for transfer, which have since been processed. The details of the transfers are reported to the Board from time to time. During the year ended March 31, 2018, the Bank received 2620 complaints from the shareholders. The Bank attended to all the complaints. 12 complaints remained pending and 2 complaints have not been solved to the satisfaction of the shareholders as on March 31, 2018. Besides, 7082 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. Mr. Umesh Chandra Sarangi (Chairman), Mr. Aditya Puri, Mr. Malay Patel and Mr. Paresh Sukthankar. (During the year, Mr. A. N. Roy and Mrs. Renu Karnad ceased to be members of the Committee pursuant to their resignation as directors of the Bank and Mr. Umesh Chandra Sarangi and Mr. Malay Patel were appointed as members of the Committee.) Meetings: The Committee met four (4) times during the year on April 21, 2017; May 29, 2017; October 24, 2017 and January 19, 2018. Risk Policy and Monitoring Committee: Brief Terms of Reference / Roles and responsibilities: Composition: Meetings: The 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. Mr. Srikanth Nadhamuni (Chairman), Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Aditya Puri and Mr. Paresh Sukthankar. (During the year, Mrs. Renu Karnad ceased to be a member of the Committee pursuant to her resignation from the Bank and Mr. Srikanth Nadhamuni was appointed as a member of the Committee.) The Committee met ﬁve (5) times during the year on April 13, 2017; June 28, 2017; July 14, 2017; October 12, 2017 and January 12, 2018. HDFC Bank Limited Annual Report 2017-18 219 Corporate Governance Credit Approval Committee: Brief Terms of Reference / Roles and responsibilities: Composition: Meetings: Premises Committee: Brief Terms of Reference / Roles and responsibilities: Composition: Meetings: Fraud Monitoring Committee: Brief Terms of Reference / Roles and responsibilities: Composition: Meetings: The Committee evaluates and 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 timely disbursement of loans. Mr. Keki Mistry, Mr. Malay Patel, Mr. Aditya Puri and Mr. Kaizad Bharucha. (Mr. Bobby Parikh ceased to be a member of the Committee and Mr. Malay Patel was appointed as a member of the Committee with effect from May 22, 2018.) The Committee met nine (9) times during the year on April 21, 2017; May 29, 2017; July 24, 2017; August 29, 2017; October 24, 2017; November 21, 2017; December 12, 2017; January 12, 2018 and March 1, 2018. The 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. Mr. Keki Mistry, Mr. Aditya Puri and Mr. Malay Patel. (During the year, Mrs. Renu Karnad ceased to be a member of the Committee pursuant to her resignation from the Bank and Mr. Keki Mistry was appointed as a member of the Committee.) The Committee met ﬁve (5) times during the year on April 21, 2017; May 29, 2017; July 24, 2017; October 17, 2017; and January 19, 2018. 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 lacunae, if any, that facilitated perpetration of the fraud and put in place measures to plug the same; b. Identify the reasons for delay in detection, if any and report to top management of the Bank and RBI; c. Monitor progress of Central Bureau of Investigation / Police Investigation and recovery position; d. Ensure that staff accountability is examined at all levels in all the cases of frauds and staff side action, if required, is completed quickly without loss of time; e. Review the efﬁcacy of the remedial action taken to prevent recurrence of frauds, such as strengthening of internal controls; and f. Put in place other measures as may be considered relevant to strengthen preventive measures against frauds. Mrs. Shyamala Gopinath (Chairperson), Mr. Partho Datta, Mr. Keki Mistry, Mr. Malay Patel, Mr. Umesh Chandra Sarangi and Mr. Aditya Puri. (During the year, Mr. A. N. Roy ceased to be a member of the Committee pursuant to his resignation from the Bank and Mr. Umesh Chandra Sarangi was appointed as a member of the Committee.) The Committee met four (4) times during the year on April 21, 2017; July 21, 2017; October 24, 2017 and January 12, 2018. HDFC Bank Limited Annual Report 2017-18 220 Corporate Governance Customer Service Committee: Brief Terms of Reference / Roles and responsibilities: Composition: The 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. Mrs. Shyamala Gopinath (Chairperson), Mr. Keki Mistry, Mr. Malay Patel, Mr. Srikanth Nadhamuni and Mr. Aditya Puri. (During the year, Mr. A. N. Roy ceased to be a member of the Committee pursuant to his resignation from the Bank.) Meetings: The Committee met ﬁve (5) times during the year on April 21, 2017; July 21, 2017; August 7, 2017, October 24, 2017 and January 12, 2018. Corporate Social Responsibility Committee: Brief Terms of Reference / Roles and responsibilities: The Board has constituted a Corporate Social Responsibility (CSR) Committee with the following terms of reference: Composition: (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)(cid:86)(cid:73)(cid:69)(cid:87)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84) (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)(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) Mr. Umesh Chandra Sarangi (Chairman), Mr. Partho Datta, Mr. Bobby Parikh, Mr. Malay Patel, Mr. Aditya Puri and Mr. Paresh Sukthankar. (During the year, Mrs. Renu Karnad ceased to be a member of the Committee pursuant to her resignation from the Bank and Mr. Malay Patel was appointed as a member of the Committee.) Meetings: The Committee met four (4) times during the year on April 13, 2017; July 14, 2017; October 17, 2017; and January 12, 2018. Review Committee for Wilful Defaulters’ Identiﬁcation: Brief Terms of Reference / Roles and responsibilities: 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. Composition: Mrs. Shyamala Gopinath, Mr. Aditya Puri, Mr. Bobby Parikh and Mr. Partho Datta. The Committee is chaired by Mrs. Shyamala Gopinath or Mr. Aditya Puri in her absence. (During the year, Mr. A. N. Roy ceased to be a member of the Committee pursuant to his resignation from the Bank.) Meetings: No meetings of the Committee were held during the year. HDFC Bank Limited Annual Report 2017-18 221 Corporate Governance Review Committee for Non-Cooperative Borrowers: Brief Terms of Reference / Roles and responsibilities: The Board has constituted a Review Committee to Non-Co-operative Borrowers which are handled by the Internal Committee of Executives appointed for this purpose. to review matters related Composition: Mrs. Shyamala Gopinath, Mr. Aditya Puri, Mr. Bobby Parikh and Mr. Partho Datta. The Committee is chaired by Mrs. Shyamala Gopinath or Mr. Aditya Puri in her absence. (During the year, Mr. A. N. Roy ceased to be a member of the Committee pursuant to his resignation from the Bank.) Meetings: No meetings of the Committee were held during the year. Digital Transaction Monitoring Committee: Brief Terms of Reference / Roles and responsibilities: In order to promote digital transactions of the Bank and to provide directions in terms of strategy and action plans including monitoring the progress of achievement in the digital transactions space, the Bank has constituted the Digital Transaction Monitoring Committee during the year. The terms of reference to the Committee, inter-alia include the following: a. Framing of the Bank-level strategy and action plans for achieving the target of digital transactions in an organized manner, as may be set by the Government, regulatory authorities, IBA, etc. from time to time. b. Monitoring the progress of achievement in digital transactions in line with the Bank’s strategy and action plans. c. To review and explore new opportunities for increasing the digital transactions of the Bank from time to time and give the necessary directions in implementing and improving high level of digitalization in Bank. d. Any other terms of reference as may be speciﬁed by the Government, regulatory authorities, IBA, etc. from time to time. Composition: Mr. Srikanth Nadhamuni, Mr. Malay Patel, Mr. Aditya Puri and Mr. Paresh Sukthankar. Meetings: The Committee met two (2) times during the year on September 8, 2017 and March 7, 2018. IT Strategy Committee: Brief Terms of Reference / Roles and responsibilities: The Bank has in place, an IT Strategy Committee to look into various technology related aspects. Composition: Meetings: 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 met four (4) times during the year on April 13, 2017; July 14, 2017; October 17, 2017 and February 26, 2018. Meeting of the Independent Directors: The Independent Directors of the Bank held a meeting on March 6, 2018 without the presence of the non-independent Directors and senior management team of the Bank. All the Independent Directors attended the meeting. The Independent Directors discussed matters as required under the relevant provisions of the Companies Act, 2013 and the SEBI Listing Regulations, 2015. HDFC Bank Limited Annual Report 2017-18 222 Corporate Governance ATTENDANCE AT THE COMMITTEE MEETINGS HELD DURING FINANCIAL YEAR 2017-18 Audit Committee [Total eight meetings held] Credit Approval Committee [Total nine meetings held] Name No. of meetings attended Name No. of meetings attended Mrs. Shyamala Gopinath Mr. Bobby Parikh Mr. A. N. Roy # Mr. Partho Datta Mr. Umesh Chandra Sarangi Mr. Bobby Parikh Mr. Keki Mistry Mr. Aditya Puri Mr. Kaizad Bharucha 8 8 7 6 8 Stakeholders’ Relationship Committee [Total four meetings held] Customer Service Committee [Total ﬁve meetings held] Name Mr. A. N. Roy # Mrs. Renu Karnad* Mr. Aditya Puri Mr. Paresh Sukthankar Mr. Umesh Chandra Sarangi** Mr. Malay Patel*** No. of meetings attended Name No. of meetings attended 4 4 4 4 - - Mrs. Shyamala Gopinath Mr. Aditya Puri Mr. A. N. Roy # Mr. Keki Mistry Mr. Malay Patel Mr. Srikanth Nadhamuni Nomination and Remuneration Committee [Total seven meetings held] Premises Committee [Total ﬁve meetings held] Name No. of meetings attended Name No. of meetings attended Mrs. Shyamala Gopinath Mr. Partho Datta Mr. A. N. Roy # Mr. Bobby Parikh 7 7 5 7 Mrs. Renu Karnad* Mr. Malay Patel Mr. Aditya Puri Mr. Keki Mistry$ Fraud Monitoring Committee [Total four meetings held] Risk Policy & Monitoring Committee [Total ﬁve meetings held] Name No. of meetings attended Name No. of meetings attended Mrs.Shyamala Gopinath Mr. Aditya Puri Mr. Partho Datta Mr. A. N. Roy # Mr. Keki Mistry Mr. Malay Patel Mr. Umesh Chandra Sarangi ** Mrs. Renu Karnad* Mrs. Shyamala Gopinath Mr. Paresh Sukthankar Mr. Partho Datta Mr. Aditya Puri Mr. Srikanth Nadhamuni@ 4 4 4 4 4 4 - 7 8 8 9 5 5 5 5 5 5 4 5 5 - 3 4 5 4 5 - HDFC Bank Limited Annual Report 2017-18 223 Corporate Governance Corporate Social Responsibility Committee Digital Transactions Monitoring Committee [Total four meetings held] [Total two 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 Name No. of meetings attended Mr. Srikanth Nadhamuni Mr. Malay Patel Mr. Aditya Puri Mr. Paresh Sukthankar 3 4 4 4 4 4 2 2 2 2 # Mr. A. N. Roy resigned as director of the Bank with effect from January 31, 2018. * Mrs. Renu Karnad resigned as director of the Bank with effect from January 20, 2018. ** Mr. Umesh Chandra Sarangi was appointed as a member with effect from March 27, 2018. *** Mr. Malay Patel was appointed as a member with effect from March 27, 2018. $ Mr. Keki Mistry was appointed as member with effect from March 27, 2018 @ Mr. Srikanth Nadhamuni was appointed as a member with effect from March 27, 2018. 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)(cid:65)(cid:83)(cid:0) amended with effect from January 18, 2013 vide the Banking Laws Amendment Act, 2012, no person holding shares in a banking company shall, in respect of any shares held by him, exercise voting rights on poll in excess of ten per cent of the total voting rights of all the shareholders of the banking company, provided that RBI may increase, in a phased manner, such ceiling on voting rights from ten 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: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:12)(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. (cid:115)(cid:0) (cid:52)(cid:79)(cid:0) (cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:0) (cid:80)(cid:82)(cid:79)(cid:84)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:79)(cid:70)(cid:0) (cid:77)(cid:73)(cid:78)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0) (cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:0) (cid:65)(cid:66)(cid:85)(cid:83)(cid:73)(cid:86)(cid:69)(cid:0) actions by, or in the interest of, controlling shareholders acting either directly or indirectly, and effective means of redress. 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. HDFC Bank Limited Annual Report 2017-18 224 Corporate Governance 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 Day & Date Number of Special Resolutions passed, if any Nature of Special Resolutions 1 21st Annual General Meeting Tuesday, July 21, 2015 3 (Three) 1. Increase in approved borrowing limits under Section 180 (1)(c) of Companies Act, 2013 2 22nd Annual General Meeting Thursday, July 21, 2016 3 (Three) 1. Alternation of Memorandum of Association on account of increase in authorized share capital 2. Approval of related party transactions with Housing Development Finance Corporation Limited 3. Approval of related party Financial Services Limited transactions with HDB 2. Issue of perpetual debt instruments, Tier II capital bonds and senior long-term infrastructure bonds on private placement basis 3. Grant of equity stock options 3 4 23rd Annual General Meeting Monday, July 24, 2017 2 (Two) 1. Re-appointment of Mrs. Shyamala Gopinath as Part- Time Non-Executive Chairperson of the Bank Extra-Ordinary General Meeting Friday, January 19, 2018 2. Issue of perpetual debt instruments, Tier II capital bonds and senior long-term infrastructure bonds on private placement basis 1. Raising of funds through issue of equity shares and/ or equity shares through depository receipts and/ or convertible securities 2. Preferential issue of equity shares to Housing Development Finance Corporation Limited Total 3 (Three) special businesses transacted, out of which 2 (Two) were special resolutions POSTAL BALLOT During the ﬁnancial year 2017-18, 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, 2018 are given in Schedule 18, Note No. 27 forming part of ‘Notes to Accounts’. The Bank has put in place a policy to deal with related party transactions and the same has been uploaded on the Bank’s web-site at http://www.hdfcbank.com/htdocs/common/pdf/ policy_for_dealing_with_related_party_transactions.pdf HDFC Bank Limited Annual Report 2017-18 225 Corporate Governance Commodity Price Risks and Foreign Exchange Risks and hedging activities Being in the banking business, currently 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’ Association 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. 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 provided by the exchange 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 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 and Accounting Standards (‘AS’) speciﬁed under Section 133 of the Companies Act, 2013, in so far as they apply to banks. in 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 which may be referred to. 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, which may be referred to. Appointment / Resignation of Director the year, after serving as Board members for During to seven years each, Mrs. Renu Karnad and close Mr. A. N. Roy resigned from the Board of the Bank with effect from January 20, 2018 and January 31, 2018 respectively. Mrs. Karnad and Mr. Roy resigned due to other commitments and personal considerations respectively. The Board places on record its sincere appreciation of the contribution made by Mrs. Karnad and Mr. Roy during their tenure with the Bank and wishes them well in future endeavours. Familiarization of Independent Directors The details of to Independent Directors are available on the website of the Bank at http://www.hdfcbank.com/aboutus/cg/Familiarization.htm familiarization programmes imparted HDFC Bank Limited Annual Report 2017-18 226 Corporate Governance Strictures and Penalties for last three ﬁnancial years: During the current ﬁnancial year 2017-18, pursuant to the media reports, SEBI has issued directions to the Bank (“SEBI Directions”) in relation to leakage of unpublished price sensitive information (“UPSI”) pertaining to the ﬁnancial results of the Bank for the quarter ended December 31, 2015 and the quarter ended June 30, 2017 in various private WhatsApp groups ahead of Bank’s ofﬁcial announcement to the relevant stock exchanges. SEBI has directed the Bank to observe the following: (i) to strengthen its processes / systems / controls forthwith to ensure that such instances of leakage of unpublished price sensitive information do not recur in future, (ii) to submit a report on: (a) the present systems and controls and how the present systems and controls have been strengthened, (b) details of persons who are responsible for monitoring such systems, and (c) the periodicity of monitoring. Further, SEBI has directed HDFC Bank Limited to conduct an internal inquiry into the leakage of UPSI relating to its ﬁnancial ﬁgures including Non- Performing Assets (NPAs) results and take appropriate action against those responsible for the same, in accordance with the applicable law. The scope of such inquiry will need to include determination of the possible role of following persons in relation to the aforesaid leakage of UPSI: (i) persons / members of committees involved in generation of the original data for the purpose of determination of key ﬁgures pertaining to ﬁnancial ﬁgures including gross NPAs, (ii) persons involved in the consolidation of the ﬁgures for the ﬁnancial results, (iii) persons involved in the preparation of board notes and presentations, (iv) persons involved in dissemination of information relating to ﬁnancial results in the public domain, and (v) any other persons who had access to the information. SEBI has directed the Bank to complete the inquiry within a period of three months from the date of the SEBI Directions and thereafter, ﬁle a report with SEBI in this regard within a further period of seven days. 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, 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 (“PMLA”) 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. On June 28, 2017, Appellate Tribunal, Prevention of Money Laundering Act passed the judgment that the prescribed matter was covered u/s 13(2)(a) and not u/s 13(2)(d) of the PMLA, 2002 and accordingly, the penalty of ` 26 lakhs in 26 cases was not sustainable as on merit. The Appellate Tribunal further ordered that the Fixed Deposit Receipt (“FDR”) deposited by the Bank as per the interim order of the Appellate Tribunal be released forthwith and the appeal was disposed of accordingly. The Bank had communicated to FIU-IND requesting their consent for liquidation of the FDR of ` 26 lakhs. FIU-IND, in response, has informed the Bank that the FIU-IND has challenged the order of the Appellate Tribunal before the Hon’ble High Court of Delhi, with regard to the direction to release the FDR u/s 42 of the PMLA. The FIU-IND further advised that the appeal, including application for stay, is to be listed before the Hon’ble High Court of Delhi in due course and accordingly, at this stage the Bank’s request to liquidate the FDR is premature. The Bank has received notice of summons in this regard and the matter is pending before the Hon’ble High Court of Delhi as on date. Other than the above, no penalties or strictures were imposed on the Bank by any of the Stock Exchanges or SEBI or any statutory authority on any matter relating to capital markets, during the last three (3) years. 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. 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 Chairperson 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 to qualiﬁcations and experience which enable contribute effectively to the Bank. them HDFC Bank Limited Annual Report 2017-18 227 Corporate Governance b) Shareholder’s Rights c) Audit Qualiﬁcations The Bank publishes its results on its website at www. hdfcbank.com which is accessible to the public at large. The same are also available on the websites of the Stock Exchanges on which the Bank’s shares are listed. 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. 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. d) Separate posts of Chairperson 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. GENERAL SHAREHOLDER INFORMATION: SHAREHOLDERS HOLDING MORE THAN 1% OF THE SHARE CAPITAL OF THE BANK AS AT MARCH 31, 2018 Sr No. Name of the Shareholder No. of Shares held % to share capital 1 2 3 4 5 6 7 8 9 JP Morgan Chase Bank, NA Housing Development Finance Corporation Limited HDFC Investments Limited Euro Paciﬁc Growth Fund Life Insurance Corporation of India SBI- ETF Nifty 50 HDFC Trustee Company Limited A/c HDFC Balanced Fund ICICI Prudential Life Insurance Company Ltd Government of Singapore 472988147* 393211100 150000000 98865874 51535018 44994003 32557853 32162374 28625304 18.23 15.15 5.78 3.81 1.99 1.73 1.25 1.24 1.10 * One (1) American Depository Share (ADS) represents three (3) underlying equity shares of the Bank. Two (2) GDRs represent one (1) underlying equity share of the Bank. DISTRIBUTION OF SHAREHOLDING AS AT MARCH 31, 2018 Share Range From 1 2501 5001 10001 15001 20001 25001 50001 100001 TOTAL :- Share Range To 2500 5000 10000 15000 20000 25000 50000 100000 and above No. of Shares 100919731 19305672 18830285 11118315 8486116 9319220 29271496 38777714 2359061718 2595090267 % To Capital 3.89 0.74 0.73 0.43 0.33 0.36 1.13 1.49 90.91 100.00 No. of Holders % To No. Of Holders 97.68 1.01 0.50 0.17 0.09 0.08 0.16 0.10 0.22 100.00 520007 5397 2656 890 486 412 824 549 1147 532368 481,259 Folios comprising of 2,580,914,373 equity shares forming 99.45 % of the share capital are in demat form. 51,109 Folios comprising of 14,175,894 equity shares forming 0.55 % of the share capital are in physical form. 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, 2018 which could have an impact on the equity capital of the Bank. HDFC Bank Limited Annual Report 2017-18 228 Corporate Governance SHARE PRICE / CHART The monthly high and low quotation of Bank’s equity shares traded on BSE Ltd (BSE) and The National Stock Exchange of India Ltd (NSE) during FY 2017-18 and its performance vis-à-vis BSE SENSEX and S&P CNX NIFTY respectively is as under: BSE Ltd MONTH HIGH LOW Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 1572.30 1648.00 1715.60 1797.85 1810.00 1868.00 1876.95 1875.00 1905.00 2011.90 2014.00 1910.30 1425.00 1524.35 1623.00 1646.00 1732.80 1740.00 1685.00 1791.30 1797.45 1832.95 1837.00 1830.00 SENSEX Closing 29918.40 31145.80 30921.61 32514.94 31730.49 31283.72 33213.13 33149.35 34056.83 35965.02 34184.04 32968.68 LOW HIGH MONTH The National Stock Exchange of India Ltd NIFTY closing 9304.05 9621.25 9520.90 10077.10 9917.90 9788.60 10335.30 10226.55 10530.70 11027.70 10492.85 10113.70 1573.95 1648.00 1716.00 1798.80 1809.15 1868.00 1879.60 1875.50 1903.10 2013.50 2015.00 1900.00 1425.05 1522.60 1620.55 1645.00 1731.15 1738.00 1757.85 1788.00 1799.00 1850.50 1836.30 1828.50 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 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 2017-18 New York Stock Exchange MONTH Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 HIGHEST (US$) 81.69 87.85 89.84 97.20 99.77 100.26 99.29 98.81 101.98 109.68 110.16 100.11 LOWEST (US$) 75.03 79.30 85.90 87.10 92.84 92.08 89.07 92.41 92.69 100.28 96.27 95.05 MONTHLY VOLUME 15604624 15270303 17214400 10185046 13308000 10621668 17211742 8465100 10811200 12892200 12651300 14749700 Share Price (`) HDFC BankÊs share price on BSE 2000 1900 1800 1700 1600 1500 1400 1300 Apr Ê17 May Ê17 Jun Ê17 Jul Ê17 Aug Ê17 Sep Ê17 Oct Ê17 Nov Ê17 Dec Ê17 Jan Ê18 FebÊ18 Mar Ê18 High Low Sensex Sensex 35000 30000 25000 20000 15000 10000 5000 0 Share Price (`) HDFC BankÊs share price on NSE S&P CNX Nifty 2000 1900 1800 1700 1600 1500 1400 1300 Apr Ê17 May Ê17 Jun Ê17 Jul Ê17 Aug Ê17 Sep Ê17 Oct Ê17 Nov Ê17 Dec Ê17 Jan Ê18 FebÊ18 Mar Ê18 High Low S&P CNX Nifty 10000 8000 6000 4000 2000 0 ADS Price (US$) HDFC BankÊs ADS price on NYSE Volume (No. of ADS) 100 80 60 40 20 0 20000000 15000000 10000000 5000000 0 Apr Ê17 May Ê17 Jun Ê17 Jul Ê17 Aug Ê17 Sep Ê17 Oct Ê17 Nov Ê17 Dec Ê17 Jan Ê18 FebÊ18 Mar Ê18 High Low Volume HDFC Bank Limited Annual Report 2017-18 229 Corporate Governance CATEGORIES OF SHAREHOLDERS AS AT MARCH 31, 2018 No of shares % to Capital Promoters (*) ADS and GDRs (#) Foreign Institutional Investors Overseas Corporate Bodies, Foreign Bodies, Foreign National and Non Resident Indians Financial Institutions, Banks, Mutual Funds and Central Government Life Insurance Corporation and its subsidiaries Other Insurance Corporations Indian Companies Others TOTAL Categories of shareholders as on March 31, 2018 9.18% Details of Shareholding 0.21% 5.90% 20.93% Promoters* ADS & GDRs# 543216100 472988147 857888518 10503953 262164726 51535018 5448127 153111802 238233876 20.93 18.23 33.06 0.40 10.10 1.99 0.21 5.90 9.18 2595090267 100.00 10.10% 1.99% 0.40% Foreign Institutional Investors Overseas Corporate Bodies, NRIs, Foreign Bodies LIC of India and its Subsiidaries Banks, Mutual Funds, Financial Institutions and Central Government 18.23% Indian Companies Other Insurance Corporations 33.06% (*) None of the equity shares held by the Promoter Group are under pledge. Others (#) JP Morgan Chase Bank is the Depository for both the ADS (461557764 underlying equity shares) & GDRs (11430383 underlying equity shares). GLOBAL DEPOSITORY RECEIPTS (“GDRs”)* The monthly high and low quotation of the Bank’s GDRs traded on Luxembourg Stock Exchange are as under: (in US$) Month Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 High Low 12.27 11.02 12.67 11.86 13.17 12.62 13.94 12.69 14.09 13.60 14.49 13.51 14.36 13.73 14.57 13.76 14.74 13.95 15.70 14.63 15.60 14.30 14.60 14.10 * 2 GDRs represent one underlying equity share of the Bank MONTHLY VOLUMES OF THE BANK’S SHARES TRADED ON NSE AND BSE Month Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 NSE BSE 33404392 25075665 23376096 31346795 25634365 39056437 33680354 25459963 29716571 35760436 27602788 28352209 3024629 1789092 1482822 2280179 1110570 1567786 1908447 3203117 5687868 2938260 1404268 2027874 HDFC Bank Limited Annual Report 2017-18 230 Corporate Governance FINANCIAL CALENDAR [April 1, 2018 to March 31, 2019] Board Meeting for consideration of accounts April 21, 2018 Dispatch of Annual Reports May 28, 2018 to June 2, 2018 Record date for purpose of determining eligibility of dividend Electronic and physical: June 1, 2018 Last date for receipt of proxy forms June 27, 2018 (up to 2.30 p.m.) Date, Time and Venue of the 24th AGM Dividend declaration date Probable date of payment of dividend June 29, 2018 at 2.30 p.m. Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400020 June 29, 2018 Electronic: July 2, 2018 Physical: July 3, 2018 Board Meeting for considering unaudited results for ﬁrst three quarters of FY 2018-19 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. LISTING Listing on Indian Stock Exchanges : The equity shares of the Bank are listed at the following Stock Exchanges and the annual fees for 2018-19 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, Bandra (East), Mumbai 400 051. Names of Depositories in India for dematerialization of equity shares (ISIN No. INE040A01026) STOCK CODE 500180 HDFCBANK (cid:115)(cid:0) (cid:115)(cid:0) (cid:46)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:51)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:36)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:8)(cid:46)(cid:51)(cid:36)(cid:44)(cid:9) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76)(cid:0)(cid:36)(cid:69)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:8)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:9)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:8)(cid:35)(cid:36)(cid:51)(cid:44)(cid:9) International Listing : Sr. No. Security description Name & Address of the International Stock Exchange Name & Address of Depository 1 2 The American Depository Shares (ADS) (CUSIP No. 40415F101) Global Depository Receipts (GDRs) (ISIN/ Trading Code : US40415F2002) The New York Stock Exchange (Ticker - HDB) 11, Wall Street, New York, NY 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 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. HDFC Bank Limited Annual Report 2017-18 231 Corporate Governance SHARE TRANSFER PROCESS AND SYSTEM 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 Registrar and Share Transfer Agents, Datamatics Business Solutions Limited (Formerly known as 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 Business Solutions Limited. MEANS OF COMMUNICATION The quarterly and half-yearly unaudited / audited ﬁnancial results are normally published in the newspapers, viz., the 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 Exchanges on which the Bank’s shares are listed. 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 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 Registrar 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 Business Solutions Ltd, (Formerly known as 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@datamaticsbpm.com Counter Timings : 10:00 a. m. to 4:30 p. m. (Monday to Friday except public holidays) HDFC Bank Limited Annual Report 2017-18 232 Corporate Governance For the convenience of investors, transfers up to 500 shares and complaints from investors are accepted at the Bank’s Ofﬁce at 2nd Floor, Zenith House, Keshavrao Khadye Marg, opposite Race Course Gate no. 5 & 6, Mahalaxmi (West), Mumbai 400 034. Shareholders’ Helpdesk Timings : 10:30 a.m. to 3:30 p.m. Between Monday to Friday (except on Bank holidays) Telephone : +91-022-3976 0000 Extn : 0012 & 0556 Email : shareholder.grievances@hdfcbank.com Queries relating to the Bank’s operational and ﬁnancial performance may be addressed to: shareholder.grievances@hdfcbank.com Name of the Compliance Ofﬁcer of the Bank: Mr. Sanjay Dongre, Executive Vice President (Legal) & Company Secretary Telephone : +91-022-3976 0000 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: http://www.hdfcbank.com/personal/ﬁnd-your-nearest/ﬁnd-phone-banking 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 4787 branches in 2691 cities / towns as on March 31, 2018. The locations of the branches are also displayed on the Bank’s website. COMPLIANCE CERTIFICATE OF THE AUDITORS The Secretarial Auditors have certiﬁed that the Bank has complied with the conditions of Corporate Governance as stipulated in the listing requirements of the Indian Stock Exchanges where the Bank’s securities are listed. The same is annexed to the Annual Report. The Certiﬁcate from the Secretarial Auditors will be sent to the Stock Exchanges along with the Annual Report of the Bank. Mumbai, May 22, 2018 DECLARATION On behalf of the Board of Directors Shyamala Gopinath Chairperson 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. Mumbai, May 22, 2018 Aditya Puri Managing Director HDFC Bank Limited Annual Report 2017-18 233 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 01, 2018, their correct core banking 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 Business Solutions Limited (formerly Datamatics Financial Services Limited,) having address at Plot No. B 5, Part B Crosslane, MIDC, Marol, Andheri (E), Mumbai - 400 093, before June 01, 2018 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 a utility payment (not more than six month old) / Bank Pass Book / Passport to validate the present address of the shareholder. Various modes for making payment of Dividends under Electronic mode: In case the shareholder has updated the complete and correct core banking account details (including 9 digit MICR Code and 11 digit IFSC code) before the record date, i.e. June 01, 2018, 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. 2. 3. National Automated Clearing House (NACH) National Electronic Fund Transfer (NEFT) Direct credit in case the bank account is with HDFC Bank Limited. In case dividend paid by electronic mode is returned or rejected by the corresponding bank due to any reason then the Bank will issue a dividend warrant and print the bank account details available on its records on the said dividend warrant to avoid fraudulent encashment of the warrants. Transfer of Shares to Investors Education and Protection Fund (IEPF) account Pursuant to the applicable provisions of Section 124 (6) of the Companies Act, 2013 all shares in respect of which dividend has / have remained unpaid or unclaimed for consecutive seven years the corresponding shares have to be transferred in the name of IEPF Account which is being notiﬁed by the Ministry of Corporate Affairs, Government of India (MCA). The MCA has also notiﬁed the applicability of Section 124 (6) along with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund ) Rules, 2016 with effect from September 7, 2016 and Notiﬁcation dated 28.02.2017 issued in this regard (Collectively the “IEPF Rules”). As per said IEPF Rules, Companies are required to transfer the shares in IEPF Account where seven years as provided under Section 124 (5) have been completed and upon completion of 3 months from the date of the notiﬁcation as stated hereinabove. In compliance with the aforesaid provision your Bank on 30th November, 2017 has transferred, 2762224 shares to the INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY MINISTRY OF CORPORATE AFFAIRS account (IEPF) bearing demat account no 12047200 13676780 which is opened with Central Depository Services Limited (CDSL) with Depository Participant at SBI CAP Securities Ltd. As required under the said provisions all subsequent corporate beneﬁts that will be accrue in relation to the above shares will also be credited to the said IEPF Account. As per the terms of Section 124(6) of the Companies Act, 2013 the Rule 7 of the IEPF Rules the share holders can claim the shares from IEPF Account by making an online application in Form IEPF 5 which is available at http://www.iepf.gov.in. Guidelines to ﬁle your claim: Download the IEPF - 5 form from the website of IEPF (http://www.iepf.gov.in) for ﬁling the claim for refund of shares Read the instructions provided on the website / instructions kit along with the e-form carefully before ﬁlling the form. After ﬁlling the form save it on your computer and submit the duly ﬁlled form by following the instructions given in the upload link on the website. On successful uploading the acknowledgment will be generated indicating the SRN. This SRN is to be used for future tracking of the form. HDFC Bank Limited Annual Report 2017-18 234 Shareholder Information Printout of the duly ﬁlled IEPF - 5 and the acknowledgment issued after uploading the form will have to be submitted. together with an Indemnity Bond in original, Copy of acknowledgment and self attested copy of e-Form along with the other documents as mentioned in the Form IEPF-5 to Nodal Ofﬁcer (IEPF) of the Bank in a envelope marked “Claim for refund from IEPF Authority”. In the process general information about the Bank which have to be provided are as under. (a) Corporate Identiﬁcation Number (CIN) of company:- L65920MH1994PLC080618 (b) Name of the company:- HDFC Bank Limited (c) Address of registered ofﬁce of the company:- HDFC Bank House, Senapati Bapat Marg, Lower Parel (W), Mumbai 400013 (d) email ID of the company:- shareholder.grievances@hdfcbank.com 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, 2010 have already been transferred to the IEPF and the dividend for the ﬁnancial year ended March 31, 2011 will be transferred to IEPF after July 05, 2018. The details of unclaimed dividends for the ﬁnancial year 2011-12 onwards and the last date for claiming such dividends are given below: Dividend for the year ended Date of Declaration of dividend Last date for claiming dividend March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017 July 6, 2011 July 13, 2012 June 27, 2013 June 25, 2014 July 21, 2015 July 21, 2016 July 24, 2017 B) SHARES LYING IN UNCLAIMED SUSPENSE ACCOUNT July 5, 2018 July 12, 2019 June 26, 2020 June 24, 2021 July 20, 2022 July 20, 2023 July 23, 2024 Particulars Opening Balance as on April 1, 2017 Add: Transfer during the year 2017-18 Less: Claims received and shares transferred* Less: Shares transferred to IEPF account** Closing Balance as on March 31, 2018*** Records / No of shareholders Shares 12861 2116465 0 179 10759 1923 0 61870 1652815 401780 *Number of shareholders who approached the Bank for the transfer of shares from the suspense account. **This shares are transferred pursuant to the applicable provisions of Section 124 (6) of the Companies Act, 2013 ***Voting rights on these shares shall remain frozen till the rightful owners of such shares claim these shares. HDFC Bank Limited Annual Report 2017-18 235 Nomination Form (applicable for the shareholders holding shares in physical mode) Nomination Form [Pursuant to section 72 of the Companies Act, 2013 and rule 19(1) of the Companies (Share Capital and Debentures) Rules 2014J To Datamatics Business Solutions Limited Unit HDFC Bank Limited, Plot No B-5, Part B Crosslane, MIDC, Andheri (East), Mumbai 400093 Dear Sir I/We......................................................................................................................... the holder(s) of the ……………. Shares against Folio No HB ………………………….. bearing share certiﬁcate no …………………………………………. and having distinctive nos from ……………………… to ……………………… wish to make nomination and do hereby nominate the persons whose details are as under in whom shall vest all my / our rights in respect of the aforesaid shares in the event of my / our death. My email address is ………………………..……………………………………...................................................................................... my contact no is …………………………………………………………………………………… my active bank account particulars is as per the copy of the unsigned cheque leaf attached herewith and I am also attaching the self attested copy(ies) of my / our PAN Card Name, address and signatures of all the shareholder(s) 1 2 3 Name, address, signature and contact number of the Witness 1 2 Name Date of Birth Father / Mother / Spouse Name Occupation Nationality Address of the Nominee Email Id of the Nominee Relationship with the shareholder Date of attending majority Name of the Guardian Address of the Guardian Email Id of the Guardian Contact details of the Guardian PARTICULARS OF NOMINEE Applicable only if the Nominee is minor HDFC Bank Limited Annual Report 2017-18 236 Nomination Form (applicable for the shareholders holding shares in physical mode) Shareholders holding shares in Physical mode are requested to submit the Nomination Form (in duplicate), duly ﬁlled and signed after attaching the required documents, at the address provided in the form, so that the shares would get transferred in the name of the person nominated upon the demise of the holder of shares. Nomination Form is provided for your convenience at page no 236. HDFC Bank Limited Annual Report 2017-18 237 Mandate Form (applicable for the shareholders holding shares in physical mode) Mandate for Electronic Communication and Direct Credit of dividend in Bank account I / We ........................................................................................................................ hereby authorize you to update the following e-mail ID / Contact details / Bank Account details for receipt of communication in electronic mode and for crediting the dividend amount directly in my Bank account. E-mail ID 1. Folio No. 2. Name of the Bank 3. Name of the Branch : …......….……………...............……………………………………………………….... 4. Account No. : …......….……………...............……………………………………………………….... 5. Account Type (Saving / Current) : …......….……………...............……………………………………………………….... : …......….……………...............……………………………………………………….... : …......….……………...............……………………………………………………….... : …......….……………...............……………………………………………………….... s a t a m a ti c a r e a l S s i c h s 9 digit Code No. : …......….……………...............……………………………………………………….... 11 digit IFSC Code : …......….……………...............……………………………………………………….... d t o D n y h o r P 9. My Telephone No. (Incl. STD Code) : …......….……………...............……………………………………………………….... 8. My Mobile No. : …......….……………...............……………………………………………………….... 6. 7. S e F I / We shall keep the Bank’s Registrar and Transfer Agent Viz Datamatics Business Solutions Ltd. informed as and when there is a change in my e-mail address. I am also enclosing the unsigned photocopy of a cheque / blank cancelled cheque issued by the Bank for verifying the accuracy of the details furnished above and the self attested copy of my PAN Card. MAIL TO (cid:40) Datamatics Business Solutions Ltd, Unit: HDFC Bank, Plot No. B 5, Part B Crosslane, MIDC, Marol, Andheri (East), Mumbai 400 093. E-mail : hdinvestors@datamaticsbpm.com ……….………………….…………… Signature of the Shareholder HDFC Bank Limited Annual Report 2017-18 238 Mandate Form (applicable for the shareholders holding shares in physical mode) Shareholders holding shares in Physical form and whose complete active bank account details are not updated on the Registrars records, are requested to submit the Mandate Form duly ﬁlled and signed after attaching the required documents, to take advantage of getting the dividend amount directly credited in their bank account. This can avoid interception of dividend warrant during its postal transit and can also avoid fraudulent encashment of dividend warrant. Bank Mandate Form is provided for your convenience at page no 238. HDFC Bank Limited Annual Report 2017-18 239 NOTES 240 ACCOLADES Asiamoney Best Brands in Finance Survey 2017 Best Banking Brand in India 10th BW Businessworld-PwC Best Banks' 2017 Survey Fastest Growing Large Bank Best Large Bank Lifetime Achievement Award - Aditya Puri Euromoney Private Banking and Wealth Management Survey 2018 Net-worth-speciﬁc services (High - Net Worth Clients US$ 5-30 MN) Asset Management SRI/Social Impact Investing International Clients BrandZ Top 50 Most Valuable Indian Brands India's Most Valuable Brand for the 4th year in a row Forbes Asia 13th Fab 50 Companies List HDFC Bank in Forbes Asia's Top 50 List for 10 years Businessworld Digital Leadership and CIO Awards 2017 Best Analytics Implementation Fortune Aditya Puri on ‘Businessperson of the Year’ list Business India 19th Best Bank Survey Best Bank of the Year Business Today Best Bank Awards 2017 Bank of the Year Best Large Bank Best in Innovation Fastest Growing Large Bank CNBC-TV18 Financial Advisor Awards 2016-17 Best Performing Bank - Private Sector Euromoney Awards for Excellence 2017 India's Best Bank Forbes' List of 5 Companies that have shaped Asia, and the world Greenwich Associates Survey No. 1 in large corporate relationships, mid-market penetration IDRBT Banking Technology Excellence Awards 2016-17 Best Bank - Cyber Security and Defense (Large Banks) Best Bank - Innovative Use of Technology (Large Banks) Best Bank - Use of Technology for Fraud Prevention (Large Banks) The Asian Banker Technology Innovation Awards 2017 Best HR System Project Best Lending Systems Project HDFC Bank in Top 5 companies that have shaped Asia, and the world Best Bank of the Year The Financial Express India's Best Banks 2017 800 trees were saved by using recycled paper for printing the HDFC Bank Annual Report 2017-18.

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