76373332 indusind-bank-annual-report-2008-2009

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  • 1. The Core Executive Team(Standing from L to R): S. V. Parthasarathy (Head - Consumer Finance),Zubin Mody (Head - Human Resources), Paul Abraham (Chief Operating Officer),Suhail Chander (Head - Corporate & Commercial Banking),Moses Harding (Head - Global Markets Group), K. Sridhar (Chief Risk Officer).(Seated from L to R): Ramesh Ganesan (Head - Transaction Banking),Sumant Kathpalia (Head - Consumer Banking), Romesh Sobti (Managing Director & CEO),Suresh Pai (Head - Corporate Services & Communication),S. V. Zaregaonkar (CFO & Investor Relations).
  • 2. Board of Directors (As on March 31, 2009)Mr. R. Seshasayee, ChairmanMr. R. SundararamanMr. T. Anantha NarayananDr. T. T. Ram Mohan Contents PageMrs. Pallavi Shroff Notice ……………………………… 4Mr. Premchand GodhaMr. Ajay Hinduja Directors Report …………………. 8Mr. S. C. TripathiMr. Ashok Kini Management Discussion & Analysis 13Mr. Romesh Sobti, Managing Director & CEO Corporate Governance …………….. 26Mr. Y. M. Kale (Alternate Director to Mr. Ajay Hinduja) Auditors Report …………………… 38Company SecretaryMr. Haresh Gajwani Balance Sheet ……………………… 40Auditors Profit & Loss Account ……………... 41M/s. M. P. Chitale & Co.Hamam House, 1st Floor Schedules ………………………….. 42Ambalal Doshi Marg Principal Accounting Policies ……… 47Fort, Mumbai 400001 Notes on Accounts …………………. 51SolicitorsM/s. Crawford Bayley & Co. Cash Flow Statement ………………. 67Solicitors & AdvocatesState Bank Building Balance Sheet in US Dollars ………. 84NGN Vaidya Marg Subsidiary - Directors Report,Mumbai - 400023 Auditors Report and Accounts…….. 85Registrar & Share Transfer Agent Branch Network …………………… 88Link Intime India Pvt. Ltd.C-13, Pannalal Silk Mills CompoundL.B.S. Marg, Bhandup (West)Mumbai - 400078Tel: 022 25963838 / 25946980Fax: 022 25946969Registered Office Corporate Office Consumer Finance Division (Chennai)2401, Gen. Thimmayya Road 701 Solitaire Corporate Park 115, 116, G. N. Chetty Road(Cantonment) 167 Guru Hargovindji Marg T. Nagar, Chennai - 600017Pune - 411001 Chakala, Andheri (East) Mumbai - 400093 The inner pages of this Annual Report are made from eco-friendly paper. Save Paper. Save the Environment. Spread the message.
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  • 4. NOTICE is hereby given that the Fifteenth Annual General Meeting of the Members of IndusInd Bank Limited will be held at Hotel Sun-n-Sand, 262, Bund Garden Road, Pune – 411001, India, on Friday, July 3, 2009, at 2.00 p.m. to transact the following business: Ordinary Business 1. To consider and adopt the Balance Sheet as at March 31, 2009 and the Profit and Loss Account for the year ended March 31, 2009 together with the Reports of the Directors and Auditors thereon. 2. To declare Dividend for the year. 3. To appoint a Director in place of Mr. T. Anantha Narayanan, who retires by rotation and, being eligible, offers himself for re- appointment. 4. To appoint a Director in place of Mr. Premchand Godha, who retires by rotation and, being eligible, offers himself for re- appointment. 5. To appoint a Director in place of Mr. Ajay Hinduja, who retires by rotation and, being eligible, offers himself for re- appointment. 6. To appoint M/s. M. P. Chitale & Co., Chartered Accountants, as Statutory Central Auditors for the Bank to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting, and to authorise the Board of Directors to fix the remuneration of the Statutory Auditors, and to appoint branch auditors, if any, in consultation with the Statutory Auditors and to fix their remuneration. Special Business 7. Authority for further issue / placement of securities including American Depository Receipts / Global Depository Receipts / Qualified Institutions Placement, etc. To consider and, if thought fit, to pass with or without modification(s) the following resolution as a Special Resolution: “RESOLVED THAT pursuant to the provisions of Section 81 and other applicable provisions, if any, of the Companies Act, 1956 [including any amendment thereto or modification(s) or re-enactment(s) thereof] and in accordance with the provisions of the Memorandum and Articles of Association of the Bank, the Listing Agreements entered into by the Bank with the respective Stock Exchanges where the equity shares of the Bank are listed, and subject to the Regulations / Guidelines, if any, prescribed by Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), financial institutions and all other concerned and relevant authorities from time to time, to the extent applicable and subject to such approvals, consents, permissions and sanctions of the Government of India, SEBI, RBI and all other appropriate authorities, institutions or bodies and subject to such conditions and modifications as may be prescribed by any of them while granting such approvals, consents, permissions and sanctions, and agreed to by the Board of Directors of the Bank (hereinafter referred to as ‘the Board’, which term shall be deemed to include any Committee(s) constituted / to be constituted by the Board to exercise its powers including the powers conferred by this Resolution) which the Board be and is hereby authorised to accept, if it thinks fit in the interest of the Bank, to create, issue, offer and / or allot, in the course of one or more public or private offerings by way of public issue, rights issue, preferential allotment including Qualified Institutional Placement pursuant to Chapter XIII-A of the SEBI (Disclosure and Investor Protection) Guidelines, 2000 as amended from time to time, or otherwise, in the domestic or one or more international markets, equity shares and / or equity shares through depository receipts and / or convertible bonds and / or securities convertible into equity shares at the option of the Bank and / or the holder(s) of such securities, American Depository Receipts (ADRs) / Global Depository Receipts (GDRs) representing equity shares or convertible securities and / or securities with or without detachable / non-detachable warrants with a right exercisable by the warrant-holder to subscribe for the equity shares and / or warrants with an option exercisable by the warrant-holder to subscribe for equity shares, and / or any instrument or securities representing either equity shares and / or convertible securities linked to equity shares (all of which are hereinafter collectively referred to as ‘securities’) subscribed in Indian / foreign currency(ies) to investors (whether resident and / or non-resident and / or strategic investors and / or institutions or banks and / or incorporated bodies and / or trustees or otherwise, and whether or not such investors are Members of the Bank) / Foreign Institutional Investors (FIIs) / Mutual Funds / Pension Funds / Venture Capital Funds / Banks and such other persons or entities excluding promoters in case of preferential allotment, whether or not such investors are members of the Bank, to all or any of them jointly or severally, through prospectus(es) and / or placement documents(s) or offer letter(s) or circular(s) and / or on private placement basis for, (or which upon conversion of all securities so created, issued, offered and / or allotted could give rise to the issue of) an aggregate face value of equity shares not exceeding 25 per cent of the Authorised Equity Share Capital of the Bank at such time or times with or without voting rights in general meetings / class4
  • 5. meetings, at such price or prices, at such interest or additional interest, at a discount or at the premium to market price orprices and in such form and manner and on such terms and conditions or such modifications thereto, including the numberof securities to be issued, face value, rate of interest, redemption period, manner of redemption, amount of premium onredemption / prepayment, number of equity shares, to be allotted on conversion / redemption / extinguishments of debt(s),exercise of rights attached to the warrants and / or any other financial instrument, period of conversion, fixing of recorddate or book closure and all other related or incidental matters as the Board may in its absolute discretion think fit anddecide according to the directives / guidelines issued by the appropriate authority(ies) and in consultation with the MerchantBanker(s) and / or Lead Manager(s) and / or Underwriter(s) and / or Advisor(s) and / or such other person(s), but withoutrequiring any further approval or consent from the shareholders and also subject to the applicable guidelines for the timebeing in force;RESOLVED FURTHER THAT, without prejudice to the generality of the above, the aforesaid issue of the securities may haveall or any terms or combinations of terms in accordance with prevalent market practice including but not limited to termsand conditions relating to payment of interest, dividend, premium on redemption at the option of the Bank and / or holdersof any securities, including terms for issue of additional equity shares or variations of the price or period of conversion ofsecurities into equity shares or issue of equity shares during the period of the securities or terms pertaining to voting rightsor option(s) for early redemption of securities;RESOLVED FURTHER THAT, without prejudice to the generality of the above, the preferential allotment of such securities,the relevant date on the basis of which the price of the resultant shares shall be determined, shall be the date of the meetingin which the Board of the company or the Committee of Directors duly authorised by the Board of the company decidesto open the proposed issue and that the allotment of such securities shall be made in the form of Qualified InstitutionalPlacement to Qualified Institutional Buyers, in accordance with the provisions of Chapter XIII-A of the SEBI (Disclosure andInvestor Protection) Guidelines, 2000 as amended from time to time;RESOLVED FURTHER THAT the Board be and is hereby authorised to enter into and execute all such agreements andarrangements with any Lead Manager(s), Co-Lead Manager(s), Manager(s), Advisor(s), Underwriter(s), Guarantor(s),Depository(ies), Custodian(s) and all such agencies as may be involved or concerned in such offerings of securities andto remunerate all such agencies by way of commission, brokerage, fees or the like, and also to seek the listing of suchSecurities in one or more Indian / International Stock Exchanges;RESOLVED FURTHER THAT the Bank and / or any agencies or bodies authorised by the Board may issue depositoryreceipts or certificates representing the underlying equity shares in the capital of the Bank or such other securities in bearer,negotiable, or registered form with such features and attributes as may be required and are prevalent in the Indian and / orInternational Capital Markets for the instruments of this nature and to provide for the tradability and free transferability thereofas per market practices and regulations (including listing on one or more stock exchanges in or outside India);RESOLVED FURTHER THAT the Board be and is hereby authorised to create, issue, offer and allot such number of equityshares as may be required to be issued and allotted upon conversion of any securities referred to above or as may benecessary in accordance with the terms of the offer, all such shares ranking in all respects pari passu inter se and with thethen existing equity shares of the Bank in all respects, save and except that such equity shares or securities or instrumentsrepresenting the same may be without voting rights, if permitted by law and / or, shall carry the right to receive pro ratadividend from the date of allotment, as may be decided by the Board, declared for the financial year in which the allotmentof shares shall become effective;RESOLVED FURTHER THAT the Board be and is hereby authorised to create such mortgage and / or charge on theimmovable and movable assets of the Company or on the whole or any part of the undertaking/s of the Company underSection 293(1)(a) of the Companies Act, 1956, in respect of any Security(ies) issued by the Bank pursuant to this Resolutionand in the event such security(ies) is / are required to be secured and for that purpose to accept such terms and conditionsand to execute such documents and writings as the Board may consider necessary or proper;RESOLVED FURTHER THAT, for the purpose of giving effect to any creation, issue, offer or allotment of equity shares orsecurities or instruments representing the same, as described above, the Board be and is hereby authorised, on behalf ofthe Bank, to do all such acts, deeds, matters and things as it may, in its absolute discretion, deem necessary or desirable forsuch purpose, including without limitation, entering into arrangements for managing, underwriting, marketing, listing, trading,acting as depository, custodian, registrar, paying and conversion agent, trustee and to issue any offer document(s) and signall applications, filings, deeds, documents and writings and to pay any fees, commissions, remuneration, expenses relatingthereto and with power on behalf of the Bank to settle all questions, difficulties or doubts, that may arise in regard to such 5
  • 6. issue(s) or allotment(s) as it may, in its absolute discretion deem fit; RESOLVED FURTHER THAT the Board be and is hereby authorised to delegate all or any of the powers herein conferred to any Committee or any one or more whole-time directors of the Bank; RESOLVED FURTHER THAT this resolution shall be in vogue for a period of 12 months from the date passing by the members or till the next Annual General Meeting, whichever is less.” Notes: 1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF / HERSELF AND THE PROXY NEED NOT BE A MEMBER OF THE BANK. The proxy form should be lodged with the Bank at its Registered Office at least 48 hours before the time of the meeting. 2. The relative Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956, in respect of the Special Businesses is annexed hereto. 3. All documents referred to in the Notice and Explanatory Statement are open for inspection at the Registered Office of the Bank during office hours on all working days except public holidays between 11.00 a.m. and 1.00 p.m. upto the date of the Annual General Meeting (AGM). 4. The Register of Members and Share Transfer Books of the Bank will remain closed from Wednesday, June 24, 2009 to Friday, July 3, 2009 (both days inclusive). 5. The Dividend would be made payable on or after Monday, July 6, 2009 to the shareholders whose names stand in the Register of Members on Tuesday, June 23, 2009. 6. Shareholders are requested to furnish contact details such as e-mail IDs, cell phone numbers and telephone numbers to the Company Secretary or to the Registrars to enable the Bank to communicate to shareholders more frequently the information about developments in the Bank. 7. Members / proxies should bring the attendance slip duly filled in for attending the AGM. 8. A brief profile of the Directors retiring by rotation and eligible for re-appointment is furnished in the Report on Corporate Governance. 9. Members are requested to kindly bring their copies of the Annual Report to the AGM. EXPLANATORY STATEMENT UNDER SECTION 173(2) OF THE COMPANIES ACT, 1956 Item No. 7 Resolution set out in Item No.7 is an enabling Resolution conferring authority on the Board to cover all corporate requirements and contingencies to issue securities of appropriate nature at opportune time, including the size, structure, price and timing of the issue(s) at the appropriate time(s). The Board will fix the detailed terms of the final size of the offering, exact timing, and other related aspects after careful analysis and discussions with lead managers, prevailing market conditions and in line with the extant guidelines issued by SEBI, RBI or any other statutory and / or other regulatory authorities either in India or overseas, in this regard. The Resolution also enables the Bank to place equity capital with Qualified Institutional Buyers in accordance with ‘Guidelines for Qualified Institutions Placement’ forming part of SEBI (Disclosure and Investor Protection) Guidelines 2000 as amended from time to time. Section 81 of the Companies Act, 1956 provides, inter alia, that whenever it is proposed to increase the subscribed capital of a company by a further issue and allotment of shares, such shares shall be offered to the existing shareholders of the company in the manner laid down in the said Section, unless the shareholders decide otherwise in a general meeting. The listing agreement/s with the stock exchanges provide, inter alia, that a listed company in the first instance should offer all the shares and debentures to be further issued for subscription pro rata to the equity shareholders unless the shareholders decide otherwise in a general meeting. Members are requested to pass the resolution under Item No. 7 as a special resolution. None of the Directors of the Bank is in any way concerned or interested in the passing of the Resolution. By Order of the Board Company Secretary Mumbai, May 28, 20096
  • 7. DIRECTORS’ REPORT: 2008-09 To all Members, Your Bank’s Directors have pleasure in presenting the Fifteenth Annual Report covering business and operations of your Bank, together with the audited accounts for the year ended March 31, 2009. The financial performance for the year ended March 31, 2009 is summarized as under: (Rs. in crores) As on As on March 31, 2009 March 31, 2008 Deposits 22110.25 19037.42 Advances 15770.64 12795.31 Operating Profit (before depreciation and provisions and contingencies) 412.42 236.35 Net Profit 148.34 75.05 Your Bank’s deposits grew by 16.14% and advances rose by 23.25%, despite the unsettled situation in the international financial markets coupled with slowdown in economic growth in India. The focus during the year continued to be on earnings from core banking business and to augment the fee-based income. The Operating Profit (before depreciation and provisions and contingencies) during the year under review improved to Rs.412.42 crores as against Rs.236.35 crores in the previous year, a rise of 74.50%. Your Bank’s Net Profit, after considering necessary provisions and contingencies and all expenses, was higher by 97.65% at Rs.148.34 crores as against Rs.75.05 crores in the previous year. Appropriations Your Directors recommend appropriation of profit as under: (Rs. in crores) Operating Profit before Depreciation and Provisions and Contingencies 412.42 Less: Depreciation on Fixed Assets 44.17 Less: Provisions and Contingencies 219.91 Net Profit 148.34 Profit Brought Forward 242.99 Amount available for Appropriation 391.33 Transfer to Statutory Reserve 37.09 Transfer to Capital Reserve 53.40 Transfer to Investment Reserve Account 1.53 Proposed Dividend 44.71 Tax on Dividend 7.60 Balance carried over to Balance Sheet 247.00 Total Appropriations 391.33 Dividend The Earning Per Share (EPS) of your Bank has risen to Rs.4.28 during the year 2008-09 from Rs.2.35 in the previous year. Looking to the overall improvement in performance and the growth outlook for the current year, your Directors recommend a dividend of Rs.1.20 per equity share of Rs.10/- each for the year ended March 31, 2009. (Dividend for the year 2007-08 was Re.0.60 per equity share of Rs.10 each). The Bank shall pay tax on the amount of dividend paid, which will be tax-free in the hands of the shareholders. The ‘Proposed Dividend’ amount of Rs.44.71 crores includes the amount of Rs.2.11 crores, being the dividend paid, as per applicable guidelines, for the year 2007-08 on 3,51,92,064 shares issued in June 2008. Financial Performance During the year 2008-09, your Bank leveraged its business on the three planks of Productivity, Profitability and Efficiency, which brought about a sea change in the year-on-year performance. There has been substantial and all-round improvement in various financial parameters during the year.8
  • 8. Your Bank’s Total Income grew by 26.97% to Rs.2765.73 crores from Rs.2178.24 crores. The sharp rise in profitability arose froma healthy increase in core interest streams. Net Interest Income improved by 52.60% to Rs.459.03 crores from Rs.300.80 crores.Non-Interest Income rose to Rs.456.25 crores from Rs.297.58 crores, a rise of 53.32%.Yield on advances rose during the year to 13.23%, as against the yield of 11.76% in 2007-08. Cost of deposits for the year2008-09 was 8.22% as against 7.84% last year. Net Interest Margin (NIM) pre-amortisation improved substantially, to 1.96% in2008-09 compared with 1.53% last year.Higher revenue growth and better cost management resulted in Cost / Income Ratio improving to 59.77% in 2008-09 as against67.21% last year. Revenue per employee during the year improved to Rs.21.53 lakhs from Rs.20.86 lakhs last year.Quality of your Bank’s assets also witnessed rapid improvement, with Non-Performing Assets falling to 1.14% as at March 31,2009 from 2.27% last year.On the liabilities side, the emphasis was on retailising the deposit franchise and reduction in the overall cost of deposits. Thistask was accomplished by leveraging on the expanded branch network, the pan-India marketing set-up and through alternatechannels like ATMs, Internet Banking, etc. The strengthened infrastructure was extensively used for maximizing cross-selling ofproducts.Your Bank introduced several new products and services in various segments, including in the newly set up Transaction Bankingsegment, which gave impetus to Trade and Cash Management products as well as electronic financial services.Your Bank’s focus on fee-based income has paid rich dividends. Moving forward, your Bank plans to upscale Non-Interest Incomethrough lucrative revenue streams like foreign exchange business, investment banking, high-end treasury products, distributionof third-party products like mutual funds and insurance, international remittances, bullion operations and transaction bankingactivities, including depository business, commodity market business, etc.Share CapitalOn June 24, 2008, your Bank issued 3,51,92,064 equity shares of Rs.10/- each in the form of Global Depository Receipts (GDR),each representing one equity share, at a price of US$ 1.47 per GDR. Accordingly, the Paid-up Share Capital and Share PremiumAccount stand increased by Rs.35.19 crores and Rs.187.00 crores respectively. As at March 31, 2009, the Paid-up Equity Capitalof the Bank consisted of 35,50,00,000 shares of Rs.10 each, apart from the value of forfeited shares.Tier II CapitalOn March 31, 2009, your Bank issued 1000 Unsecured, Non-Convertible, Redeemable, Subordinated bonds (Tier II Bonds) ofRs.10,00,000 each aggregating to Rs.100 crores for a tenure of 63 months at a coupon of 10.50% p.a. payable annually, toaugment the capital base.Capital AdequacyIn terms of its guidelines for implementation of new Capital Adequacy Framework issued on 27th April 2007, RBI has directedbanks not having operational presence outside India to migrate to the Revised Framework for Capital Computation (under BaselII) with effect from March 31, 2009.The migration is proposed in a phased manner over a three-year period, during which banks are required to compute theircapital requirements in terms of both Basel I and Basel II. The minimum capital to be maintained by your Bank under the revisedFramework is subject to a prudential floor of 100%, 90% and 80% of the capital requirement under Basel I over the year March2009, 2010 and 2011 respectively.The capital adequacy ratio of the Bank, calculated as per RBI guidelines, is set out below:Items March 31, 2009 March 31, 2009 (Basel I) (Basel II)i) Capital Adequacy Ratio (CRAR) 12.33% 12.55%ii) CRAR – Tier I Capital (%) 7.52% 7.65%iii) CRAR – Tier II Capital (%) 4.81% 4.90%RatingYour Bank has received the highest rating “A1+” for Certificate of Deposits from ICRA Ltd., while CRISIL Ltd. has assigned thehighest rating of “P1+” for Certificate of Deposits as well as for Fixed Deposits (upto 1 year contracted maturity). Your Bank’sLower Tier II bonds have also been rated “LA+” and Upper Tier II bonds as “LA” by ICRA Ltd., while Fitch Ratings India Pvt. Ltd.has rated the said instruments as “A (ind)” and “BBB+ (ind)” respectively. 9
  • 9. Directors Mr. T. Anantha Narayanan, Mr. Premchand Godha and Mr. Ajay Hinduja, Directors, retire by rotation, and being eligible, have offered themselves for re-appointment. Mr. Y. M. Kale was appointed as ‘Alternate Director’ to Mr. Ajay Hinduja by the Board at its meeting held on January 15, 2009. Auditors M/s. M. P. Chitale & Co., Chartered Accountants, the Statutory Central Auditors of the Bank, who have audited the accounts of the Bank for the year 2008-09, will retire at the ensuing Annual General Meeting and are eligible for re-appointment. Members are requested to consider their re-appointment and authorise the Board to fix their remuneration. The appointment of the Statutory Auditors will be subject to the approval of Reserve Bank of India. The members are further requested to authorise the Board to appoint branch auditors, if any, in consultation with the Statutory Auditors and to fix their remuneration. Auditors’ Report M/s. M. P. Chitale & Co., Chartered Accountants, the Statutory Central Auditors of the Bank, have audited the accounts of the Bank for the year 2008-09 and their Report is annexed. There are no qualifications in the Auditors’ Report. Statutory Disclosures Information, wherever required under the Banking Regulation Act, 1949 or the Companies Act, 1956 as applicable to a banking company, has been laid out in the schedules attached and forms part of the Balance Sheet and Profit and Loss Account. There are no material changes and commitments affecting the financial position of your Bank, which have occurred between the end of the financial year 2008-09 to which the Balance Sheet relates and the date of this Report. Considering the nature of activities as an entity in the financial services sector, the provisions of Section 217(1)(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to your Bank. Your Bank has, however, made optimum use of information technology in its operations. Your Bank had 4251 employees on its rolls as on March 31, 2009. The information required under Section 217(2A) of the Companies Act, 1956 and the rules made thereunder is given in the annexure appended hereto and forms part of this Report. In terms of section 219(1)(b)(iv) of the Companies Act, this Report and the Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Bank. Employee Stock Option Scheme Your Bank had instituted an Employee Stock Option Scheme to enable its employees, including Whole-time Directors, to participate in the future growth of the Bank. Under the Scheme, options which upon exercise or conversion could give rise to the issue of a number of shares not exceeding in the aggregate 7% of the issued equity capital of your Bank from time to time can be granted. The Employee Stock Option Scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee are determined on the basis of criteria laid down in the Scheme and is approved by the Compensation Committee of the Board of Directors. An aggregate of 1,56,21,000 options have been granted under the Scheme. Statutory disclosures as required by the revised SEBI Guidelines on ESOS are given in the Annexure to this Report. Corporate Governance Your Bank continues its endeavour to adopt the best prevalent Corporate Governance practices. A separate report on the status of implementation of Corporate Governance guidelines, as required under Clause 49 (as applicable from January 1, 2006) of the Listing Agreements with the relevant Stock Exchanges, is included in the section on ‘Corporate Governance’ which forms part of this Report. M/s. Bhandari & Associates, Company Secretaries, have certified that the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreements with the Stock Exchanges have been complied with by the Bank. A copy of their Certificate is also attached to the Section on ‘Corporate Governance’. Directors’ Responsibility Statement Pursuant to the provisions of section 217(2AA) of the Companies Act, 1956, your Directors hereby certify and confirm that: (i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;10
  • 10. (ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31, 2009 and of the profit of the Bank for the year ended on that date;(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and Banking Regulation Act, 1949 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities; and(iv) the Annual Accounts have been prepared on a ‘going concern’ basis.AcknowledgementYour Directors place on record their appreciation for the contribution made by the employees during the year towards the growthof your Bank.The Directors are grateful to the shareholders of the Bank for their continued trust and confidence reposed in the Bank. TheDirectors are also grateful to the Reserve Bank of India, the Ministry of Corporate Affairs, the Securities and Exchange Board ofIndia and the Stock Exchanges for their guidance and support extended to the Bank.The Board thanks its valued customers for their support and confidence, and looks forward to the continuance of this mutuallysupportive relationship in future. For and on behalf of the Board of Directors R. SeshasayeeMumbai, May 28, 2009 Chairman 11
  • 11. ANNEXURE TO THE DIRECTORS’ REPORT STATUTORY DISCLOSURES REGARDING ESOPs (FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2009) Sr. Particulars ESOP 2007 ESOP 2007 ESOP 2007 ESOP 2007 No. (Granted to (Granted (Granted Key Managerial to other to other Personnel on employees on employees on 18/07/2008) 18/07/2008) 17/12/2008) 1) No. of Options granted during the year 1,00,00,000 1,00,00,000 21,65,000 34,56,000 2) No. of Options issued during the year 1,00,00,000 1,00,00,000 21,65,000 34,56,000 2A) No of options surrendered during the year 1,00,00,000 NIL NIL NIL (Refer note no. 1 & 2 below) 3) Pricing Formula INTRINSIC INTRINSIC INTRINSIC INTRINSIC VALUE VALUE VALUE VALUE 4) No. of Options vested NIL NIL NIL NIL 5) No. of Options exercised NIL NIL NIL NIL 6) No. of shares arising as a result of exercise NIL 1,00,00,000 21,65,000 34,56,000 of options 7) Options lapsed NIL NIL NIL NIL 8) Variation in terms of Option NIL NIL NIL NIL 9) Money realised by exercise of option N.A. N.A. N.A. N.A. 10) Total number of options in force NIL 1,00,00,000 21,65,000 34,56,000 11) Employeewise details of options granted to: a) Key Managerial Personnel (Refer Table A as mentioned below) 1,00,00,000 1,00,00,000 NIL NIL b) Any other employee who receives a grant in any one year of option amounting None None None None to 5% or more of options granted during the year. c) Identified employees who were granted Options, during any one year, equal None None None None or exceeding 1% of the issued Capital (excluding outstanding warrants and conversions) of the company at the time of the grant. 12) Diluted Earnings per share (EPS) pursuant to issue of shares on exercise of option, Not applicable Not applicable Not applicable Not applicable calculated as per Accounting Standard (AS) 20- “Earning Per Share” 13) FAIR VALUE RELATED DISCLOSURE Increase in the employee compensation cost computed at fair value over the cost 0.16 0.34 0.34 0.53 computed using intrinsic cost method. (Rs in crore) Net Profit, if the employee compensation cost has been computed at fair value 74.89 147.47 147.47 147.47 (Rs. in crore) Basic EPS if the employee compensation cost had been computed at fair value (Rs.) 2.34 4.28 4.28 4.28 Diluted EPS if the employee compensation cost had been computed at fair value (Rs.) 2.34 4.25 4.25 4.25 SIGNIFICANT ASSUMPTIONS USED TO ESTIMATE FAIR VALUE Risk Free Interest Rate 7.48% to 7.60% 5.12% to 6.39% 5.12% to 6.39% 5.12% to 6.39% Expected Life 1 year to 3 years 1 year to 3 years 1 year to 3 years 1 year to 3 years Expected Volatility 7.80% 10.49% 10.49% 11.01% Dividend Yield 14.30% 13.70% 13.70% 13.70% Price of the underlying share in the market at the time of option grant. 71.55 50.60 50.60 38.95 Table “A” Options to Key Managerial Personnel who were granted options in excess of 5% of the total options granted during the year. Name No. of Options 1) Mr. Romesh Sobti, Managing Director NIL 20,00,000 NIL NIL 2) Mr. Paul Abraham, Chief Operating Officer NIL 20,00,000 NIL NIL 3) Mr. Sumant Kathpalia, Head (Consumer Banking) NIL 20,00,000 NIL NIL 4) Mr. Suhail Chander, Head (Corporate & Commercial Banking) NIL 20,00,000 NIL NIL 5) Mr. K. S. Sridhar, Chief Risk Officer NIL 20,00,000 NIL NIL Notes to Table A 1) 33% of these options will vest on Not applicable 18-07-2009 18-07-2009 17-12-2009 33% of these options will vest on 18-07-2010 18-07-2010 17-12-2010 34% of these options will vest on 31-01-2011 18-07-2011 17-12-2011 Note (1) - Pursuant to the Special Resolution passed by the shareholders in the Annual General Meeting held on September 22, 2008, fresh Options were granted under the Employee Stock Options Scheme 2007 to such of those employees, who had surrendered the options granted earlier. Note (2) - Accordingly, stock-based compensation expense of Rs.051 crore accounted for in earlier year is reversed.12
  • 12. MANAGEMENT DISCUSSION & ANALYSISMacro Economic Scenario and Banking EnvironmentThe year 2008-09 was characterized by the global financial crisis that originated in the US sub-prime sector and broader financialmarkets and spread throughout the world, turning into a full-blown global economic crisis of a proportion not seen in the recent past.The global financial environment has been in a crisis phase since mid-September 2008, following the growing distress amonggiant international financial institutions. As a result of the sharp slowdown, exports fell, liquidity dried down in the global marketsand investment plans were put on hold. Notwithstanding several challenges, particularly from the global economy, the Indianeconomy remained relatively resilient, and its financial institutions have remained sound and solvent.The forecasts of the various international agencies point to recessionary conditions during the remainder of 2009 as well.Reflecting the impact of global developments on the Indian economy as well as the domestic cyclical factors, various surveys ofeconomic activity point towards moderation in economic activity in the current year. The estimates of India’s GDP growth duringfiscal 2009-10 have been lowered to between 6.5% to 7%.With the increasing integration of the Indian economy with the global economy, the slump in exports has hit domestic demand,particularly since several export segments are employment-intensive. The demand slowdown, which has led to inventory build-ups and strained cash flows, has led to concerns about potential defaults on bank loans and consequently the need for debtrestructuring.Although the economic condition of major developed economies is not expected to improve in 2009, there is a belief in somequarters that the worst may be over. In India, there is a distinct improvement in sentiment due to the decisive results in therecently concluded parliamentary elections. Your Bank shall continue its pursuit of building its business upon strong customerfranchises supported by technology-backed banking products. The outlook for your Bank’s performance during the current yearremains strong.Bank’s Performance during 2008-09Business PerformanceThe salient features of your Bank’s operating performance during the year 2008-09 are summarized in the table below: (Rs. in crores) 2008-09 2007-08 YOY Growth Interest Earned 2309.47 1880.66 22.80% Interest Expended 1850.44 1579.86 17.13% Net Interest Income 459.03 300.80 52.60% Other income: 456.25 297.58 53.32% Fee & Misc. Income 427.36 255.28 67.41% Bad Debts Recovery 28.89 42.30 -31.70% Total Operating Income 915.28 598.38 52.96% Operating Expenses excluding Depreciation 502.86 362.03 38.90% Operating Profit before depreciation and provisions 412.42 236.35 74.50% Less: Provisions & Contingencies 219.91 121.13 81.55% Net Profit 148.34 75.05 97.65%In spite of a turbulent market environment, your Bank’s Net Profit, after considering necessary provisions and contingencies andall expenses, rose by 97.65% to Rs.148.34 crores, as against Rs.75.05 crores in the previous year. The Operating Profit (beforedepreciation and provisions and contingencies) was higher at Rs.412.42 crores as against Rs.236.35 crores in the previous year,a rise of 74.50%.The core earnings of your Bank through Net Interest Income improved by 52.60% to Rs.459.03 crores from Rs.300.80 crores.Yield on advances rose during the year to 13.23%, as against the yield of 11.76% in 2007-08. Cost of deposits for the year 2008-09 was 8.22% as against 7.84% last year. Net Interest Margin (NIM) improved, pre-amortisation, to 1.96% in 2008-09 comparedwith 1.53% last year.Non-Interest Income rose to Rs.456.25 crores from Rs.297.58 crores, recording a y-o-y rise of 53.33%.Higher revenue growth and better cost management resulted in Cost / Income Ratio improving to 59.76% in 2008-09 as against67.2% last year. Revenue per employee during the year improved to Rs.21.53 lakhs from Rs.20.86 lakhs last year. 13
  • 13. Quality of your Bank’s assets also witnessed rapid improvement, with Non-Performing Assets falling to 1.14% as at March 31, 2009 from 2.27% last year. Your Bank had opened for subscription on June 17, 2008, the issue of 3,51,92,064 Global Depository Receipts (GDRs) to be listed in the Luxembourg Stock Exchange, each GDR representing one equity share of the Bank of the face value of Rs.10/-, fully paid. On the successful conclusion of the issue, your Bank’s Paid-up Capital has risen to Rs.355.19 crores. During the year, your Bank has issued on private placement basis 1000 Unsecured, Redeemable, Non-convertible, Subordinated bonds of Rupees Ten lakhs each aggregating to Rs.100 crores. These bonds qualify for classification as Tier II Capital. Operational / Product Performance Retail / Consumer Banking During 2008-09, your Bank’s Retail (Consumer) Banking business showed a healthy growth in revenue. Savings book grew at 9%, Fixed Deposits grew at 20% and Current Account book grew at over 24% on y-o-y basis. Your Bank launched various new products and services which were targeted at building wealth management capabilities as well as enhancing the existing banking channels. Your Bank launched the Gold and Investment verticals, which contributed in excess of Rs.5 crores of revenue in the first year of operations. Your Bank also launched two new channels – Wealth Relationship Managers and the Central Acquisition Team (CAT). The new CAT introduced more than 1,50,000 clients and mobilised Rs.250 crores of retail CASA balance in FY 2008-09. With constant technology upgradation and launch of customized products and services, your Bank was able to retain and deepen the profitable client base. The tie-ups with Aviva and Cholamandalam MS help your Bank offer a wider array of Life Insurance and General Insurance products to the customers. Your Bank launched innovative products like ‘Indus Money’ and ‘Indus Young Saver’ along with several service enhancements. The ‘Sales through Service’ model was implemented across all branches. In the Current Accounts space, your Bank launched products and services like ‘Indus Edge’, ‘Indus Prestige’, ‘Indus Escrow’ and ‘Indus Collect’ to enhance the business banking experience. With RBI releasing to your Bank licences for 30 new branches, 50 ATMs and 6 mobile ATMs, your Bank’s strategy of expanding banking operations to different locations in the country and into new growth markets will gain further momentum during the current year. Your Bank has since launched 5 ‘new look’ model branches across the country. The Branch governance model implemented has tighter controls on processes and compliance. Your Bank focused on key initiatives like client engagement, compliance and operating process management to enhance the quality of delivery of banking products and services. Consumer Finance Consumer Finance Division (CFD) of your Bank extends asset-backed financing for a wide range of vehicles spanning across heavy commercial vehicles, three-wheelers, cars, two-wheelers, etc. Besides, speciality Construction Equipments like Tippers, Cranes, Excavators, and Loaders are also financed. The thrust product during the year was three-wheelers, as this product line yielded high returns. Disbursements during the current year were, however, affected by the general industry slowdown and lower offtake of vehicles and sales recorded by the automobile sector. The total disbursements made during the year 2008-09 was Rs.4269 crores (2007-08: Rs.4358 crores) to new loan accounts numbering 3.77 lakhs (2007-08: 3.38 lakhs). The focus during the year was to optimize the product mix to maximize yields and at the same time maintain portfolio quality. Disbursements for Commercial Vehicles were of the order of Rs. 2608 crores as against Rs.2521 crores in 2007-08. Disbursements for construction equipment loans were at Rs.617 crores, as against Rs.798 crores in the previous year. The disbursements for two-wheeler loans were Rs.767 crores, as against Rs.770 crores in 2007-08. Disbursement for car loans was Rs.241 crores as compared to Rs.269 crores in the previous year. Disbursements in the three-wheeler segment grew by Rs.166 crores to Rs.522 crores from Rs.356 crores. Your Bank’s CFD is the lead financier in this segment and holds a market share of 12% in the three-wheeler segment, apart from 10% market share in the passenger segment and 16% in the goods segment. CFD also earned a fee-based income of about Rs.26.91 crore, primarily through distribution of various third-party insurance products, including ‘Credit Shield’, which is a personal accident cover offered to your Bank’s customers through Cholamandam MS General Insurance, being the strategic partner of your Bank for bancassurance in the General Insurance segment. Cross selling to the existing customer base and offering them value-added products resulted in the launch of ‘Top-up loans’.14
  • 14. ‘Top-up loans’ is a finance product offered to existing prompt-paying customers on the unencumbered portion of their mother loancontract. The product was launched during the second quarter and the disbursement was Rs.36 crores.CFD operations are efficiently supported by state-of-the-art document storage and retrieval facility at your Bank’s Karapakkamunit (near Chennai) that handles loan document processing and record maintenance.CFD’s data centre, also located at Karapakkam, has state-of-the-art facilities in terms of data / equipment protection mechanismsand access rights with sensors to monitor movement within the data centre.Corporate & Commercial BankingKeeping in view the objective of creating a client-centric organization, the Corporate and Commercial Banking Group (CCBG)moved from a branch-based banking model to a business unit model during the year.In its new form, CCBG comprises four Strategic Business Units, viz., Corporate & Investment Banking, Commercial Banking,Business Banking and Financial Institutions & Public Sector. CCBG has also rationalized its geographic coverage by movingpeople to centres where its clients are located. Each strategic business unit is tasked with maximizing revenue from its clientsby deepening relationships and acquiring additional quality relationships from its focus area.Corporate & Investment Banking GroupThis segment covers large corporate clients, i.e., generally corporates with a turnover in excess of Rs.1000 crores. This Groupalso houses the Investment Banking Team that executes Investment Banking mandates for your Bank’s clients. This businessunderwent a substantial change in 2009, with the hiring of a new Relationship Management Team and changes in your Bank’sclient profile.During the year, a client-focused 40-member strong Relationship Team was built and it brought about 50 large new clients fromIndia’s leading business houses to your Bank, achieving an aggressive asset growth of more than 100% during the year.Highlights of the year:• Upgraded the overall credit quality of your Bank’s asset portfolio by a gradual phasing out of weaker credits and replacing this portfolio with better credits;• Enhanced the overall client profitability by targeting better-structured deals and active cross-sell of trade and global market products such as Interest Rate Swaps and Option Contracts;• Concluded a complex and structured international trade transaction worth about USD 600 mln with large reputed corporates, giving your Bank the necessary fillip in terms of fees and market profile;• The Investment Banking product team in the C&I business, with delivery capability in Corporate Debt Restructuring, Rupee Debt Syndication and Structured Acquisition Financing / Corporate Finance transactions with special focus on high growth mid-cap companies, successfully concluded relationship-led Rupee and foreign currency debt syndication deals and structured corporate finance mandates in a short span of six months from launch. This group acquired 62 new connections during the year.Commercial Banking GroupSet up with a view to target the sweet spot of the Indian corporate space, Commercial Banking Group focuses on companieswith turnover ranging from Rs.25 crores to Rs.1000 crores. These would typically be companies in the fast growing SME andmid-market segment. The Group today operates out of 26 cities, in four zones.The broad business theme of the Group is centred around the following:• Increased cross-sell through better alignment of Relationship Managers (RMs) with the product groups in Transaction Banking and Global Markets Groups;• Developing a strong risk management culture by proactive account monitoring and client-call programmes;• Emphasis on improvements in RM productivity by measuring revenue and relationship per RM. The non-productive relationships were exited & RM productivity on relationship had been increased at 19 clients per RM, with their revenue productivity at Rs.8 crores each.• This group acquired 139 new relationships during the year.Business Banking GroupThe Business Banking Group (BBG) covers small business with turnover below Rs.25 crores. The entire country has beendivided into 5 Zones, each being headed by a Zonal Head. The zones are further divided in 19 Regions which cover 79 citiesacross the country. 15
  • 15. The core product range includes working capital facilities (cash credit, export finance, WCDL etc.) contributing to 60% of book size. Besides this, the BBG team also focuses on various allied products viz., warehousing finance, inventory finance, etc. Business Banking has now increased focus on Fee Income by way of higher processing fee, fee on non-funded facilities and forex business (remittances, derivatives, etc.) Business Banking is targeting higher productivity and profitability at employee and client level, by way of aggressive new client acquisitions and regular portfolio monitoring. Proactive management of existing portfolio includes timely renewals, regular follow up in sensitive cases, exit strategy, etc. The highlights of the year are: • Repricing of the loan book, which is now benchmarked to the market; • Warehouse financing portfolio was quickly ramped up to Rs.250 crores in the segment of Priority Sector Lending; • Aggressive acquisition of priority sector assets, primarily through Warehouse Receipt financing; • This group acquired about 1100 clients during the year, and the book grew by 67%. Financial Institutions & Public Sector Group The Financial Institutions & Public Sector (FIPS) Group was created to provide customized solutions to the banking needs of Public Sector Undertakings (PSUs), both Central and State, as well as to Government Bodies and Financial Institutions like banks, insurance companies and mutual funds. The Group is structured as under: • The ‘Public Sector Group’, which manages the PSU and Government relationships and caters to the banking needs of PSUs and Government Bodies; • The ‘FI Group’, which manages correspondent banking relationships with domestic and international banks and provides banking solutions for cooperative banks and domestic commercial banks. The relationships of both the Groups are managed through 4 Zonal Heads along with a team of 30 Relationship Managers (RMs). Presently, the team is based at 18 locations. The highlights of the year are: • A large part of your Bank’s deposits are managed by this group. Their strategy substantially improved your Bank’s liquidity, despite adverse market conditions. • Implementation of a focused product strategy for cooperative banks resulted in acquiring several new relationships in this segment. • The FIPS Group acquired 56 new relationships during 2008-09. Global Markets Group The Global Markets Group (GMG) is a multi-task unit of your Bank comprising functions such as: • Support to all Business Units in sale of international business products including derivatives, bullion import, etc; • Conduct proprietary trading in fixed income, currencies, equity markets within the set policy framework; and • Management of Balance Sheet and ALM, including maintenance of SLR / CRR as well as resources of your bank with the objective of achieving cost reduction and yield maximization with effective control over the market and interest rate risks. Thus, the GMG functions primarily pertain to Corporate Forex, Proprietary Trading and Money and Capital Market activities. The contribution of GMG includes income from forex operations and trading activity, which grew to Rs.206.56 crores from Rs.99.17 crores in 2007-08, a year-on-year growth of 137%. Exchange income from forex operations grew by over 170% to Rs.73.20 crores from Rs.27 crores. As part of the corporate forex activity, your Bank rolled out GMG sales infrastructure on pan-India basis, divided into three zones, with Product Managers located at major centers, thereby giving geographical reach to GMG for better customer engagement. Further, a dedicated ‘Structured Products Desk’ has been created in the Dealing Room in Mumbai to offer various risk management / derivative products. GMG provides market information and advisory services through SMS alerts, daily newsletters and direct one-on-one interaction with customers. Your Bank took full advantage of the prevailing volatility in the market and capitalized on the proprietary trading opportunities.16
  • 16. The Forex Proprietary Desk contributed Rs.40.56 crores and emerged as one of the important players in the Currency FuturesMarket. Your Bank has commenced dealing on all major Currency Future Exchanges in India.The investment portfolio of your Bank mainly comprises core SLR investments as prescribed by the Reserve Bank of India.Investment in Non-SLR instruments and RIDF bonds amounting to Rs.8088.34 crores gave an overall yield of 6.88% p.a., whileyield from core SLR investments was 7.50% p.a.In view of the then prevailing market conditions, your Bank resorted to running a near-zero Bond Trading book in the wake ofthe rising yields in the first half of FY 2008-09. However, in the second half, with policy rate cuts, your Bank focused on tradingactivity. Money and Capital Markets Desk undertakes proprietary trading activity that covers Fixed Income Bonds, Equity andInterest Rate Swaps. This activity contributed Rs.121.55 crores for the year.Your Bank has reduced its cost of funds through accessing the Call Money Market with an average borrowing of Rs.660.14crores. Overall, the liquidity management of your Bank was well under control. The Money & Capital Markets Desk effectivelymanaged the ALM and Balance Sheet and deployed surplus funds at profitable yields.Transaction Banking GroupThe Transaction Banking Group was set up in your Bank in 2008-09, with a vision to provide new innovative product offeringsacross the client segments of Corporate as well as Consumer Banking. This Group was broadly aligned under the product linesof Cash Management Services, Trade Services & Financing, Supply Chain Financing, Global Remittances, Commodity Financing,Electronic Banking and Capital & Commodity Markets, so as to have a highly focused approach to each of these businesses.During the year under review, your Bank rolled out its complete suite of Cash Management products. These products weredesigned to leverage your Bank’s wide reach and the extensive distribution network. The collection and payments productslaunched by your Bank are best in class, supported by robust electronic banking delivery capabilities. Your Bank has receivednotable mandates, including the function of ‘settlement banking’ for the Tea trade at four auction centers in India. Going forward,your Bank proposes to launch a new state-of-the-art electronic banking portal that would enable corporate customers toseamlessly interact with your Bank for a wide range of their banking requirements.Your Bank is introducing an integrated Electronic Banking platform through which next-generation banking innovations shallbe made available to its customers. The thrust is on enhancing the customer’s banking experience by shifting controls into hishands, enabling the participation of all stakeholders, setting up an environment of transparency and easy access to informationand resources, and creating an online platform that is responsive enough to meet the ever changing customer needs. YourBank’s ‘Corporate Internet Banking’ platform is the first of these offerings, planned to be rolled out shortly. It will enable yourBank’s customers to conduct transactions in a secure and efficient environment and facilitate business by offering host-to-hostconvenience and flexibility to meet the entire range of banking requirements under Cash Management, Trade Services andSupply Chain Financing.The Global Remittances business at the Bank saw a significant thrust during the year, with the addition of seven new ExchangeHouse partners across GCC countries. In addition to this, your Bank also launched the new “Indus Fast Remit” platform for capturingonline remittances from the US to India. This facility is being offered in association with The Bank of New York Mellon, who are theclearing partners. Going forward, it is proposed to extend the online offering to countries in Europe and South East Asia.Over 7 lakh global remittance transactions were handled during the year 2008-09, a volume increase of about 125% over theprevious year. The value of remittances processed in 2008-09 was higher by 163% over the value of transactions processed in2007-08.The Capital and Commodity Markets Division of your Bank focuses on serving Capital and Commodity Exchanges and brokers.Your Bank has the unique distinction of being a Clearing-cum-Settlement Banker to all the major Exchanges viz., NSE, BSE,NCDEX, MCX and NMCE. During the year under review, your Bank enlarged its empanelment with the addition of the CurrencyDerivatives Segment of NSE, BSE and MCXSX.Your Bank has also acquired Trading-cum-Clearing membership on these Exchanges. Your Bank became Clearing Bank to thefirst Energy Exchange of India, the Indian Energy Exchange to cover participants in the Energy Segment. Your Bank’s FortBranch is the all-India nodal branch for this purpose and offers ‘12 hours a day’ banking services to capital and commoditiesmarket participants. Your Bank has also been empanelled with major Bond Issuers like REC, NHAI (for Capital Gain Bonds) andwith NABARD (for Bhavishya Nirman Bonds) to enlarge its bouquet of third-party products offerings.While the year under review was a challenging one for the capital markets which witnessed high volatility and saw indicesfalling up to 40% off the peak, your Bank managed not only to protect its exposure but also selectively expand its portfolio whileensuring that there were no NPAs in this business during the year. 17
  • 17. Your Bank’s Capital Market Exposure which as at March 31, 2008 constituted 33.20% of your Bank’s net worth stood at 26.27% of the net worth as at March 31, 2009, well in compliance with the revised RBI guidelines. The Commodity Financing business of the Bank was extended to 10 states and marked the addition of a number of new commodities, leading to a significant growth in the asset book. Your Bank has become one of the leading players in this business today. Your Bank has managed to spread its counterparty risk in this business by enlisting new Collateral Managers as well, apart from following a prudent process of due diligence. The outstandings under this head as at March 31, 2009 stood at about Rs.260 crores, higher by 67% over the previous year. The Trade Services and Supply Chain Groups focus on providing end-to-end trade solutions to customers, across their value chain. Besides providing all the vanilla trade solutions such as LCs, Guarantees as well as export and domestic trade credits, your Bank aims at helping clients enhance their cash flow and balance sheet management and improve working capital flows by unlocking funds in the working capital cycle, apart from supporting sales efforts and generating strong customer-supplier loyalty. The supply side financing solutions that have been launched recently are highly effective tools for negotiating preferential purchase terms and strengthening relationships with strategic partners and core suppliers. For suppliers, the solutions provide assured and cost-effective financing of trade receivables, thereby improving Days’ Sales Outstanding (DSO) and in some cases potential balance sheet advantages from converting accounts receivable to cash. On the receivables side, your Bank has structured unique solutions providing competitive source of funding and working capital advantages. Taking its supply chain capabilities a step further, your Bank is also looking at establishing a financing solution for suppliers of select corporates offering competitively priced pre-shipment loans. Your Bank is developing a supply chain portal enabling further efficiencies and cost saving through process automation and electronic document management. Financial Restructuring and Reconstruction Group All activities related to recovery of non-performing loans and restructuring of stressed assets are handled by the Financial Restructuring and Reconstruction Group (FRRG). The role of FRRG has become crucial given the challenging credit environment faced by banks in India. Your Bank has actively utilized the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act (SARFAESI) for enforcing securities charged to the Bank in the case of defaulting borrowers as well as to take appropriate portfolio intervention like sale of non-performing loans to specialized asset reconstruction companies. Wherever considered necessary, the Bank has restructured the loans given to otherwise viable businesses which have faced cash flow problems causing them to delay or default in servicing their loan obligations. Your Bank has recovered an amount of Rs.28.90 crores (previous year Rs.42.30 crores) in written off accounts. Net NPAs of your Bank stood at 1.14% (Previous year 2.27%). The figures for NPAs include accounts aggregating Rs.27.35 crores for which applications for restructuring have been received during the year. Such accounts, if restructured, may get upgraded as standard assets. Priority Sector Lending Your Bank has earned the distinction of achieving the RBI-prescribed target as well as sub-targets for Priority Sector Advances. Priority Sector Advances aggregated Rs.6298.79 crores at the end of March 2009 and represented 49.23% of your Bank’s Net Bank Credit (NBC), compared with 52.75% at the end of March 2008. During the year, your Bank financed over 2,67,668 agriculturists and the aggregate Direct Agricultural Advances stood at Rs.2039.44 crores representing 15.94% of your Bank’s NBC at the end of March 2009 compared with 9.70% at the end of March 2008. During the year, your Bank’s finance to ‘Weaker Sections’ stood at Rs.1274.86 crores representing 9.96% of your Bank’s NBC at the end of March 2009 compared to 0.31% at the end of March 2008. Other priority sector advances such as finance to small enterprises represented 25.38% of your Bank’s NBC at the end of March 2009, compared with 35.56% at the end of March 2008. Enterprise-wide Risk Management Banking business is exposed to a wide spectrum of risks, and it is imperative that the various risks faced by the Bank are effectively monitored, measured and managed. A strong Enterprise-wide Risk Management (ERM) framework, a cornerstone of prudent banking, enables effective and pro-active management of various risks while supporting rapid business growth, helps reduce volatility in earnings and enhances shareholder value. The ERM framework provides a single-window view of the risks faced by the Bank and facilitates integration and coordination in management and monitoring of risks. Your Bank has set up an integrated Risk Management Department, independent of business functions, covering Credit Risk, Market Risk, Operational Risk and Asset-Liability Management (ALM) functions. The risk management practices adopted by your Bank are akin to the best in the industry and are adaptable to a dynamic operating environment.18
  • 18. Basel II – Reinforcement of Risk ManagementYour Bank has adopted New Capital Adequacy framework under Basel-II w.e.f. 31.03.2009 for measurement and maintenanceof capital adequacy. The New Capital Adequacy framework has enabled the Bank in moving towards allocation of capital basedon risk sensitivity. As a prudent measure, your Bank has been undertaking computation of capital requirement under Basel-IIsince June 2006 under a parallel run.Your Bank has implemented a highly sophisticated system to enable automated computation of capital requirements underBasel-II. The system also supports adoption of advanced approaches under New Capital Adequacy framework for computationof capital charge towards Credit Risk, Market Risk and Operational Risk.Your Bank, in addition to compliance with Pillar-I requirements under Basel-II, has also adopted and implemented the Policy onInternal Capital Adequacy Assessment Process (ICAAP), which facilitates identification and measurement of other material risks(other than the risks covered under Pillar-I).Credit RiskCredit risk is managed both at the Transaction level and Portfolio level. The key objective of credit risk management is to achieveappropriate reward in relation to risks assumed whilst maintaining the credit quality within the defined risk appetite.The various measures adopted by your Bank for managing credit risk are outlined hereunder:• Gauging credit risk at the time of credit approval by means of risk rating models designed and implemented for different segments of obligors.• Credit Portfolio Management analysis to manage composition of portfolio, its quality and concentration risk.• Stress testing of portfolios to measure its shock absorbing capacity and its impact on profitability and capital adequacy.• Measurement and monitoring of credit quality regularly by means of Weighted Average Credit Rating (WACR) of the Portfolios.• Prudential internal limits for assuming exposures on counterparty.• Monitoring of prescribed portfolio level limits.• Management of Bank Risk and Country Risk by setting structural limits on the basis of risk profile.Market RiskMarket risk arises from changes in interest rates, exchange rates, equity prices and risk related factors such as marketvolatilities.Market risk is actively managed and aligned with the Bank’s risk appetite. The Bank manages market risk in the trading portfoliosusing a robust market risk management framework prescribed in its Market Risk Management policy. The framework includesValue-at-Risk (VaR) limits (for foreign exchange portfolio) and sensitivity limits (for Investments and Derivatives Portfolios) besidesvarious operational limits such as Stop-Loss limits, Exposure limits, Deal-size limits, etc.The market risk management function is independent of the Bank’s Treasury business and is responsible for:• Ensuring compliance with Bank’s Market Risk Management Policy and monitoring market risk exposures to be in line with the risk limits set by the Board of Directors;• Identification, measurement, monitoring, analysis and reporting of the market risks arising out of various trading portfolios; and• Determination of appropriate policies and methodologies for measurement and controlling the market risks.The prime objective of the Bank’s trading activities is client facilitation and providing products to Bank’s client base at competitiveprices. Further, the Bank also takes positions for proprietary activities. Financial instruments held in the Bank’s trading portfolioinclude debt securities, equities, foreign exchange currencies and derivative financial instruments (forwards, swaps and optionsetc).Interest Rate Risk in the Banking Book (IRRBB)Interest rate risk in the Banking Book arises from the Bank’s non-trading activities in four principal forms:• Repricing Risk - Arises from differences in the repricing terms of the Bank’s assets and liabilities.• Optionality - Arises where a customer has an option to exit a deal early.• Basis Risk - Arises where offsetting investments do not experience price changes in entirely opposite directions from each other.• Yield Curve Risk - Arises as a result of non-parallel changes in the yield curve. 19
  • 19. From an economic perspective, it is the Bank’s policy to minimise the sensitivity to changes in interest rates on assets and liabilities. Interest rate risk is calculated on the basis of its repricing behaviour of each asset, liability and off-Balance Sheet product. Bank’s ‘Assets and Liabilities Management Policy’ has laid down limits as per the Bank’s risk appetite on the impact on NII for a change in the interest rate. Liquidity Risk and Asset Liability Management (ALM) Liquidity management within the Bank addresses the risk arising from mismatches in maturities across the balance sheet. The Asset and Liability Management Committee (ALCO) of your Bank is chaired by the Managing Director and includes Chief Operating Officer, Chief Risk Officer, CFO, Heads of Business Units and Functional Heads. ALCO meetings were convened frequently during the year, wherein analytical presentations were made providing detailed analysis of liquidity position, interest rate risks, product mix, business growth versus budgets and interest rate outlook, which helped to review the business strategies regularly and undertake new initiatives. In order to adopt more advanced and sophisticated techniques of assets-liabilities management, your Bank has acquired a state- of-the-art ALM system. The Bank’s ALM system supports effective management of liquidity risk and interest rate risk, covering 100% of its assets and liabilities. • Liquidity Risk is monitored through Structural Liquidity Gaps, Dynamic Liquidity position, Liquidity Ratios analysis and Behavioral analysis, with prudential limits for negative gaps in various time buckets. • Interest Rate Sensitivity is monitored through prudential limits for Rate Sensitive Gaps and other risk parameters. • Interest Rate Risk on the Investment portfolio is monitored through Modified Duration on a daily basis. Optimum risk is assumed through duration to balance between risk containment and profit generation from market movements. Your Bank is also in the process of implementing an advanced system for Funds Transfer Pricing (FTP), which shall reinforce the pricing mechanism and enhance performance management framework. Stress Testing Your Bank performs stress tests regularly to simulate as to how the stressed events may impact its funding and liquidity position. The stress tests help the Bank to be better equipped to meet the stressed situations, if they arise, and also to overcome them and prevent them from becoming a serious threat. Contingency Planning Contingency funding plans have been developed to anticipate and respond to approaching or actual material deterioration in market conditions. Your Bank reviews its contingency plans in the light of evolving market conditions. The contingency funding plan covers the available sources for contingent funding to supplement cash flow shortages, the roles and responsibilities of those involved in the contingency plans and the Contingency Triggers. Operational Risk Operational risk is the potential for incurring loss due to failure of employees, technology, systems or processes, projects, disasters, external factors, frauds, etc., including legal and regulatory risks. Your Bank seeks to ensure that key operational risks are managed in a timely and effective manner through a framework of policies, procedures and tools to identify, assess, monitor, control and report such inherent risks in its business. Operational risk occurs on account of fraud, human error, failed processes, inadequate systems, damage to physical assets, improper behavior or external events, etc. Your Bank’s Risk Management Department provides necessary direction and undertakes meaningful initiatives for implementation of Operational Risk Management framework within the Bank. The Operational Risk Framework comprises Policy guidelines, KRIs, Loss Data collection, Risk & Control Self Assessment (RCSA) and risk profiling of branches. The various products launched by your Bank are approved by Operational Risk Management Committee (ORMC), which identifies the risks inherent in the product and prescribes controls to mitigate the risks. Systems Risk Your Bank has taken various initiatives such as establishment of Disaster Recovery Site, IT Security framework, In-house Data Centre, Business Continuity Plan, etc. towards mitigation of systems risks.20
  • 20. Branch NetworkAs at the end of the financial year 2008-09, your Bank had a total of 180 branches and 184 off-site ATMs spread across 147geographical locations. Your Bank has received authorization from Reserve Bank of India for opening of 30 new branches and56 off-site ATMs.Your Bank has presence in 28 States and Union Territories. In addition, your Bank also has representative offices in London andDubai.InfrastructureYour Bank has commenced the process of opening “new look branches” to enhance the banking experience of customers andto provide personal attention to their needs. Five branches with the new look have already been opened at Bandra, Kolkata,Ludhiana, Vadodara and Lucknow.During the year, Consumer Banking opened its new Administrative Office in Gurgaon. Your Bank’s Consumer Finance Divisionmoved into its own four-storey building at G. N. Chetty Road in Chennai.Your Bank has installed Close Circuit TVs (CCTVs) at select branches and ATMs as a security measure during the year. Thisexercise will be continued in the year 2009-10 so as to cover other select branches and all off-site ATMs.Banking OperationsYour Bank has strengthened the policy framework on “Know Your Customer” (KYC) norms and “Anti Money Laundering” (AML)measures from time to time, in line with the policies of Reserve Bank of India. Your Bank has implemented a simplified procedureof “Know Your Customer” which will benefit lower income group persons to open accounts with minimal documentation.In compliance with RBI directives, your Bank has undertaken review of risk categorization of all customers’ accounts.Your Bank is a member of Banking Codes and Standards Board of India (BCSBI), which was set up to ensure that banks inIndia adhere to a voluntary Code, which suggests minimum standards for fair treatment to customers availing bank services. YourBank has made a commitment to adhere to all the provisions of the Code prescribed by BCSBI. Your Bank has implementedalmost all provisions of the Code. The Code is displayed at all branches of your Bank and is also hosted on your Bank’s websitein thirteen languages.In June 2008, the Hon’ble Finance Minister released the “Code of Commitment to Micro and Small Enterprises” (MSE Code).MSE Code is a voluntary Code, which sets minimum standards of banking practices for banks to follow when they are dealingwith micro and small enterprises as defined in the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. Itprovides protection to MSE customers and explains how banks are expected to deal with customers in day-to-day operations andin times of financial difficulty. As a member of BCSBI, your Bank has adopted the MSE Code in full.More metro centres were brought under centralized clearing for quicker and efficient process. Accordingly, clearing wascentralized at Kolkata, Chennai, Bangalore, Chandigarh and Ludhiana. It will be your Bank’s endeavour to bring more centresunder centralized clearing in the near future. Automated ECS has been implemented at major centres.Cheque Truncation System (CTS), which was implemented in New Delhi by RBI, was operationalised in March 2008 and hasfully stabilized. Your Bank is participating in clearing through CTS.Your Bank has implemented various system upgrades which include the Teller Module, Expenses Management, etc. Your Bankhas strengthened its branch processes and monitoring capability to ensure smooth functioning of day-to-day activities.Your Bank has improved internal controls and compliance through the following:• Separate and independent Compliance function has been set up for Bank-wide compliance;• Vigilance function has also been set up;• Expense management software has been deployed at all branches for facilitating cost control;• Branch Monitoring Unit is operative for regular monitoring of branch operations;• Voucher verification process has also been operationalised during the year for checking all the entries posted by the branches; and• Process adherence and Quality function has been operationalised for attaining uniformity in processes followed by branches, to minimize operational risk.Your Bank has revised and adopted a comprehensive policy, in pursuance of RBI advices, on settlement of claims in respect ofdeceased depositors. The Policy covers all types of deposits, and has simplified the procedure for settlement. 21
  • 21. Your Bank has adopted the “Best Practice Code”, relating to transaction processing, with the objective of documenting the procedures in line with national and international best practices. Your Bank has also put in place a “Deposit Policy” and a “Fair Practice Code”. While the former outlines the guiding principles in respect of various deposit products of the Bank, terms and conditions governing the operations of these accounts and the rights of depositors, the Fair Practice Code is a voluntary code establishing standards to be followed by all our branches in their dealings with the customers. Your Bank has also framed “Citizen’s Charter” to promote fair banking practices and to give information in respect of various activities relating to customer service. Your Bank has put in place the “Compensation Policy” as a part of commitment to its customers to compensate them in case of your Bank being unable to meet the service levels committed to the customers. The main objective of the Policy is to establish a system whereby Bank shall compensate the customer for any direct and actual loss by way of internal loss / payment of charges by customer due to deficiency in service of the Bank, to the extent mentioned in the policy. The Policy is based on the principle of transparency and fairness in the treatment of customers. Prompt, efficient and courteous service is a key to success for any service organization and your Bank has recognized it and has formulated the “Grievance Redressal Policy”. The Policy aims to minimize the instances of customer complaints through effective service delivery, a review mechanism and prompt redressal of customer grievances. Internal Control Systems and their adequacy Operational Controls Your Bank has laid down the policy framework related to “Know Your Customer” (KYC) norms and “Anti Money Laundering Measures” (AML). The policy has been framed on the basis of recommendations of the Financial Action Task Force and the paper on Customer Due Diligence for Banks issued by the Basel Committee on Banking Supervision. The AML software that has been implemented has effectively brought the operational risk under control. In accordance with RBI’s recommendations, a Committee on Procedures and Performance Audit on Public Service in Banks (CPPAPS), comprising senior functional heads of the Bank and a few customers, has been established. The performance of the CPPAPS is also reviewed by the Customer Service Committee of the Board of Directors. Customer Service Your Bank has constituted a Branch Level Customer Service Committee (CSC) at all branches comprising employees and customers of the Branch. CSC meetings are convened every month to examine complaints / suggestions, cases of delay, difficulties faced / reported by customers/ members of the Committee. Feedbacks and suggestions are submitted to CPPAPS. CPPAPS examines and provides relevant feedback to the Customer Service Committee of the Board for necessary policy / procedural action. Grievance Redressal Mechanism Your Bank has designed an escalation process for all customer complaints received at branches and Corporate Office. A quarterly report related to complaints received and redressed is placed before the Board of Directors. Based on the recurrence of complaints in specific area, causative factors are identified and necessary remedial measures are initiated. Your Bank maintains a dedicated page for lodging of complaints and complaint redressal mechanism on its website www.indusind.com where information on the escalation process and the details of the nodal officer to receive complaints has been furnished. These details are also displayed at the Bank’s Branches. Details of the Banking Ombudsman Scheme 2006 are also displayed at branches and provided on the website. Your Bank has also created a link on its website for a “Complaint Form”, which gives opportunity to all our customers to air their grievances in a simplified way and get their complaints redressed without delay. With a view to enhance customer interface your Bank has initiated specific measures such as: • Upgradation of Contact Centre and bringing more functions under the ambit of the same; • Deployment of special software at all branches for logging in customer complaints as also requests, mainly to track their status at any point of time with the ultimate objective of ensuring that the customers’ requirements are met on priority. This software will also equip your Bank to get a complete view of the issues raised by every customer over a period of time, and facilitate identification of repeat instances so as to take corrective action to improve service quality; • Evaluation of software for Relationship Management to ensure that all customer contacts are recorded and tracked for final closure as also to ensure that the customers’ requirements are evaluated and factored in new product lines.22
  • 22. Inspection and AuditYour Bank’s Internal Audit function is sufficiently geared to make an independent and objective evaluation of the adequacy andeffectiveness of internal controls on an ongoing basis to ensure that business units adhere to compliance requirements andinternal guidelines. To achieve this end, comprehensive processes have been established for the internal auditors to ensure thatall facets of your Bank’s operations are subjected to scrutiny.Your Bank’s Internal Audit function undertakes a comprehensive risk based audit of all its business units. An Audit Plan is drawnup on the basis of a risk profiling of auditee units. Accordingly, your Bank undertakes internal audit of its business units at afrequency synchronized to the risk profile of each unit in line with the spirit of Risk-Based Internal Audit. The scope of risk-basedinternal audit besides examining the adequacy and effectiveness of Internal Control Systems and external compliance alsoevaluates the risk residing at the auditee units. Credit quality assurance audit is also undertaken.To complement the Bank’s Internal Audit function, we have strong concurrent audit system in place. Further, in order to effectivelyaddress business concerns and to react with speed, your Bank’s Internal Audit function is decentralized, and has been functioningas an integrated unit to cover all its operational activities. Regional Auditors at different locations are equipped to evaluate allaspects of the Bank’s business.Your Bank has developed an effective online surveillance system by using its fully networked Core Banking Software, well-defined and strong internal controls, need-based access to computer systems and clear audit trails which have helped to mitigateoperational risks.To facilitate ownership of the quality control mindset, all exception reports are now available on the system, for viewing and useby business units. There is a constant push to automate audit activities in order to enhance transparency and standardization,as well as to speed up the availability of MIS to Top Management.To ensure independence of the audit function and in line with best corporate governance practices, the Internal Audit function hasa reporting line to the Audit Committee of the Board, which oversees the performance and reviews the effectiveness of controlslaid down by the Bank and compliance with regulatory guidelines, besides rendering effective guidance to ensure conformity withbest practices in the area of Internal Audit.Human Resources / Industrial RelationsHuman capital is the key resource that the company creates, develops and nurtures. Human Resource function’s focus is toensure employee satisfaction and retention by creating a performance enabling work culture within the organization.In the year 2008-09, the manpower strength of your Bank grew from 2,869 employees in 2007-08 to 4,251 employees. Despitethe prevailing economic slowdown and recessionary market trends, your Bank hired aggressively to match its business expansioninitiatives. This year witnessed higher intake of quality professionals from peer banks and other reputed corporates, reinforcingthe belief that your Bank has become a preferred employer.In order to improve the knowledge base and skills of employees, your Bank intensified focus on learning and developmentactivities. During the year, the Bank conducted more than 60,000 learning man-hours covering 5,500 participants in areas ofProduct, Process, soft skills and specialized domain-based training programs. E-learning initiatives comprising online coursemodules and online assessment tests were launched across the Bank to provide scalability of learning and to reduce turnaroundtime of disseminating learning.With a view to nourishing a performance-oriented culture, the concept of ‘SMART Goals’, comprising defined goals and targetswas launched across your Bank. Performance reviews on SMARTs were conducted periodically to track progress on goalachievements. ESOP scheme was launched for critical employees to make them key stakeholders in the growth of the Bank. Newmarket-aligned designations in synchronization with business realities were launched for employees across your Bank. In order toimprove end-user satisfaction, there is a concerted effort to automate all HR processes and launch of Online Leave ApplicationProcessing System, Learning Management System and HRIS Implementation in progress are steps in that direction.During the year, creating of avenues for employee recreation was focused upon by organizing get-togethers and participation invarious sports tournaments to make workplace a fun place and improve employee productivity and commitment.Employee Stock Option SchemeYour Bank had instituted an Employee Stock Option Scheme to enable its employees, including Whole-time Directors, toparticipate in the future growth of the Bank. Under the Scheme, options which upon exercise or conversion could give rise to theissue of a number of shares not exceeding in the aggregate 7% of the issued equity capital of your Bank from time to time canbe granted. The Employee Stock Option Scheme is in accordance with the Securities and Exchange Board of India (EmployeeStock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to begranted to an employee is determined on the basis of criteria laid down in the Scheme and is approved by the CompensationCommittee of the Board of Directors.An aggregate of 1,56,21,000 options have been granted under the Scheme. Statutory disclosures as required by the revisedSEBI Guidelines on ESOS are given in the Annexure to the Directors’ Report. 23
  • 23. Other Initiatives underway Quality Quality is a critical differentiator in the service industry, and IndusInd Bank has had the unique distinction of getting its entire Branch Network certified as compliant with ISO 9001:2000. However, with the passage of time, it was necessary to move beyond this, and to embed quality in every aspect of the Bank’s activities. Your Bank’s corporate ambition is to reposition itself as a ‘Top 3’ performer among new generation private sector banks in 3 years, measured by Profitability, Productivity & Efficiency. This calls for tripling revenues in 3 years, and to meet this challenge, a six-pronged strategy was spelt out at the commencement of the last financial year. In tandem with this strategy, it was decided to initially concentrate efforts on raising quality in 6-7 identified areas. Teams with relevant skills are working on each such project under the leadership of a Top Executive. Each team is working on specific actions within its project brief, and progressively, new activities will be taken up as possibilities and ‘payoffs’ from actions underway are exhausted. This movement shall progressively cover larger aspects of the Bank’s operations, products, people, the way of relating by employees with clients and colleagues, communication with the external environment, etc. The Bank has tied up with the Confederation of Indian Industry’s Institute of Quality (CII-IQ), Bangalore, for the implementation of a Quality Management Program. This initiative was kicked off with a series of workshops facilitated by CII-IQ faculty across the country, where Managers were sensitized to the need for quality, and practiced converting quality concepts into definite action steps for regular implementation. Shareholder delight With a view to promoting transparency and promoting shareholder delight, apart from frequent interaction by your Bank with the Registrar & Transfer Agent, steps have been taken to obtain contact details such as e-mail IDs, cell phone numbers and telephone numbers of all shareholders so as to communicate to shareholders information about developments in the Bank. This direct communication would be in addition to the regular dissemination of information through usual channels such as the Stock Exchanges, Press, etc. Going forward, your Bank’s shareholders shall receive best-of-class shareholder services and be the best informed about developments in the Bank. Information Technology Any organisation has a primary goal to increase year-on-year profitability, without losing focus on its customers. Value additions to customers and rendering of courteous and efficient customer service have to be ensured at all times for customer acquisition and retention. Information Technology plays a major role in realizing this goal. Your Bank has always been at the fore front in deploying the latest, state-of-the art technology, a fact which has been endorsed by a prestigious Banking Association like the IBA and IT organizations like MiSYS International, IBM, etc. Earlier initiatives are stable and running smoothly like the robust infrastructure with fall-back communication links (MPLS & VSAT), Server & Storage Consolidation on AS/400 machine with multi-operating system deployment to reap benefits of virtualization & on-demand Technologies, critical systems hosted at a ‘Suntone’ certified data center at Mumbai, comprehensive and robust DR (at Chennai) for Core Banking (running Mimix solution for on-line replication) and ATM switch with annual drills, STP for RTGS & NEFT, SMS-based Mobile banking, VISA Gold Card, Gift Card, Sunday banking, 8-to-8 banking, Contact Centre, etc. The Bank’s Core Banking Software - Equation from Misys U.K. - has been upgraded to support new functionality, enhance security & efficient processing, to satisfy new business requirements and to help launch new and sophisticated banking products. A major customer delivery channel, the Internet Banking was upgraded with the DataBase on Oracle to support new functionality and cater to a larger customer base. With a view to improve processes and minimize manual intervention, centralisation and automation of TDS System, automation of ECS processing, etc. are in place. Besides adding new channels of communication and banking, for customer delight, the Bank has deployed an Internet Payment Gateway, a Contact Centre and the 3-in-1 account. The Payment Gateway enables your Bank’s customers to transact on-line with various merchants such as IRCTC (Indian Railways – Ticket Booking) and Bill Desk (On-Line Utility Bill Payments) to name a few. The Contact Centre provides Bank’s Customers an Automated Interactive Voice Response System, besides interaction with the Agents, through which customers can execute transactions such as Funds Transfer, Stop Cheque Request, Cheque Book Request, Balance Enquiry, Account Statement, etc. The 3-in-1 account, i.e., movement account and DP account from your Bank along with the share trading account from Religare has enabled our customers to do on-line trading with ease. Your Bank has also developed an effective MIS system, Analytical CRM system and Data Warehouse. Apart from ensuring regulatory compliance, these devices enable the Bank’s Management to measure and closely monitor performance in various business spheres and on several parameters such as efficiency, expenses, customer profitability, etc.24
  • 24. Apart from ensuring very high availability (business-as-usual status), some of the new initiatives taken up during 2008-09 areas follows:• Upgrade of various solutions for efficiency and providing new functionalities like Equation (core banking solution), Opics Plus (Treasury system) Swift Alliance Access, Cash Management Solution, Anti Money Laundering, etc.• Implementation of new solutions for better control and efficiency like the front-end Teller system (GUI-based, user-friendly), e-mail archiving, Fax server, Active Directory, etc.• Project undertaken for network backbone strengthening, security enhancement, consolidation of data center and servers and shifting DR from Hyderabad to Chennai.• Initiated the project for setting up an infrastructure for document management & workflow with twin objective of improving efficiency and TAT (turnaround time). Account opening process will be totally electronic with minimal paper movement.• Talisma, a CRM solution for contact centre, was upgraded for better management of customer requests and complaints.• Three modules (Business Solution Packs) namely, Basel-II, ALM & FTP went live on Reveleus platform purchased from Oracle Financial Services.Legal• There has been no significant change in the relevant laws affecting the banking industry during the year 2008-09.• The Bank has developed Legal Cases Management Module for online database of legal cases filed by the Bank and against the Bank. Status of legal cases is updated by branches. With the introduction of this module, details of various legal cases are available by click of the mouse.• The Bank has revised and streamlined the existing procedure of credit documentation which has reduced the turnaround time for credit disbursement to borrowers.Corporate CommunicationsThe major focus of your Bank during the year 2008-09 was on increase of visibility and to reposition itself as a bank withvalue-added products and services. In order to achieve the set objectives and to remain competitive in the market, a numberof new initiatives have been taken and optimum use is made of both internal and external communication channels to achievethe ambitious goals. Signages have been changed across the country: your Bank’s name was earlier written against a whitebackground and in two lines, which was not creating an impact in terms of visibility. Hence, without changing the colours and thename of the Bank, a new format has been created in which the base colour of the signage is burgundy and the Bank’s name isshown in white, in a single line. In a phased manner, all the signages of the branches and offsite ATMs were changed. Thisimproved the visibility of the Brand and the Bank has witnessed a continuous rise in footfalls.During the year, there were also launches of new products and services and along with it a series of new collaterals like posters,banners, fliers and tent cards were introduced, donning a new look. Apart from a pan-India print campaign through vernacularand local dailies at regular intervals, this year, other media channels like radio, SMS services and TV channels were alsoconsidered for boosting resource mobilization and product campaigns. Your Bank also advertised on Airport Trolleys at selectlocations, with a focus on creating better awareness of the brand.In the pursuit of enhancing the overall brand visibility and repositioning it as a smart, energetic, young and pleasand brandpersonality, your Bank conceptualized a new positioning statement “Makes you feel richer.” The new campaign has been rolledout in all news channels, general entertainment channels and in leading regional channels.On the sponsorship front, your Bank participated in multi-dimensional issues ranging from sports, philanthropy, Indian music withservice organizations / NGOs and corporate bodies to gain effective visibility. Some of the major events which your Bankassociated with were Pravasi Bharatiya Divas, Mumbai Football League, Priyadarshani Academy, Pandit Chaturlal MemorialMusic Concert and many other events at various branches.Recognitions and Awards - Year 2008-09• Your Bank bagged The Economic Times Acer Intel Smart Workplace Award, in the ‘Financial Services’ category. These awards were instituted with the objective of recognizing companies, which have used technology to enhance productivity in their workplace. Awards were announced in various categories like financial services, industrial markets, consumer markets, infrastructure, entertainment and information / communication.• Your Bank ranked 7th in a cluster of 15 similar member banks based on size (number of branches / offices, employee strength, deposits and number of customers) in a Customer Satisfaction Survey conducted by Indian Banks’ Association (IBA) through Gallup Consulting to establish industry benchmarks for key aspects of customer service and evaluate individual banks against this benchmark. 25
  • 25. CORPORATE GOVERNANCE Certificate on Compliance with the conditions of Corporate Governance under Clause 49 of the Listing Agreement(s) To the members of IndusInd Bank Limited: We have examined the compliance of conditions of Corporate Governance by IndusInd Bank Limited (“the Bank”) for the year ended 31st March, 2009 as stipulated in Clause 49 of the Listing Agreement of the said Bank with the Stock Exchanges. The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to procedures and implementation thereof adopted by the Bank for ensuring compliance with the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Bank. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Bank has complied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Bank nor the efficiency or effectiveness with which the Management has conducted the affairs of the Bank. For Bhandari & Associates Company Secretaries S. N. Bhandari Proprietor Mumbai, May 5, 2009 C. P. 366 Certification by the Chief Financial Officer and the Managing Director In terms of the revised Clause 49 of the Listing Agreement, the Certification by the Managing Director & CEO and the Chief Financial Officer of the Bank, on the financial statements and the internal controls relating to financial reporting has been obtained and submitted to the Board. The Bank’s Philosophy on the Code of Corporate Governance • Your Bank believes that consistent implementation of good Corporate Governance practices contributes towards developing and sustaining the best operating systems and procedures. • The systems which have evolved allow sufficient freedom to the Board and the Management to make decisions and take actions towards the growth of the Bank, and simultaneously remain within the framework of effective accountability. To maintain high standards of good Corporate Governance, your Directors have formed various Committees of the Board. The Committees meet regularly to achieve their specific objectives. • Your Bank is committed to operate on commercial principles ensuring, at the same time, the need to remain accountable, transparent and responsive to its stakeholders. • Your Bank acknowledges the need to uphold the integrity of every transaction it enters into and believes that honesty and integrity in its internal conduct would be judged by its external behaviour. In this context, your Directors have adopted a ‘Code of Conduct for Directors and Senior Management’. This Code attempts to set forth the guiding principles on which the Bank shall operate and conduct its daily business with its multitudinous stakeholders, government and regulatory agencies, media, and anyone else with whom it is connected. Code of Conduct for Directors and Senior Management The Board of Directors has laid down a code of conduct for all Board Members and Senior Management1 of the Bank. The said code of conduct has been uploaded on the website of the Bank (www.indusind.com) under the ‘Shareholder-related Matters’ section. The same is available for reference in the following URL: http://www.indusind.com/downloads/codeofconduct06.pdf Declaration by the Managing Director: All members of the Board and Senior Management have affirmed to the Board, of having complied with the ‘Code of Conduct’ during the year ended March 31, 2009 and no violation of the ‘Code of Conduct’ has been reported during the year. 1 For this purpose, the term ‘Senior Management’ means personnel of the Bank who are members of its core management team, excluding Board of Directors. This comprises members of management who are of the level of functional heads. QUALITY POLICY “IndusInd Bank is committed to meet and strive to exceed customer requirements through timely, error-free and courteous service. We shall continually improve the effectiveness of our work process through training, customer feedback and review of systems.” THE MISSION “To position IndusInd Bank Limited as a Top 3 performer in the new private bank space in 3 years measured by the 3 parameters of Profitability, Productivity and Efficiency.”26
  • 26. Board of Directorsi. Composition The Board comprises Directors who have specialised knowledge and professional experience in diverse fields. Information in respect of each Director is given below: Name of Director Date of Nature of Directorship Special Knowledge / Occupation Birth Practical Experience Mr. R. Seshasayee 1-6-1948 Part-time Non-executive Finance and General Managing Director of Ashok Chairman Management Leyland Ltd. Mr. R. Sundararaman 12-5-1942 Independent Non-executive Banking Retired as Dy. Managing Director of State Bank of India Mr. T. Anantha 9-4-1945 Independent Non-executive Agriculture & Rural Retired as Executive Narayanan Economy (Practical Director (Finance) of Ashok experience), Finance Leyland Ltd. (Special Knowledge) Dr. T.T. Ram Mohan 28-1-1956 Independent Non-executive Banking & Finance Professor - Finance & Accounting, IIM Ahmedabad Mrs. Pallavi Shroff 22-4-1956 Independent Non-executive Law Practising Advocate Mr. Premchand 8-1-1947 Independent Non-executive Finance & SSI Industrialist Godha (Practical experience) Mr. Ajay Hinduja 12-12-1967 Non-executive Director Banking & Finance Industrialist (Director, IndusInd International Holdings Ltd., Mauritius, a promoter company.) Mr. S. C. Tripathi 1-1-1946 Independent Non-executive Rural Economy & I.A.S. (Retd.), Advocate Cooperation Mr. Ashok Kini 12-12-1945 Independent Non-executive Banking Retired as Managing Director of State Bank of India Mr. Romesh Sobti 24-3-1950 Whole-time Director Banking Managing Director & CEOii. Meetings During the year ended March 31, 2009, 6 meetings of the Board were held on, June 24, 2008, July 25, 2008, September 22, 2008, October 16, 2008, January 15, 2009 and March 24, 2009. Details of attendance at the Board Meetings and the previous Annual General Meeting, other Directorships and Membership of Committees pertaining to each Director are as follows: Name of the Director No. of Board No. of other Public No. of Committees Whether Meetings Limited Companies of the Bank in which attended last attended in which Director2 member AGM Mr. R. Seshasayee 6 10 4 Yes Mr. R. Sundararaman 5 0 5 Yes Mr. T. Anantha Narayanan 5 6 9 Yes Dr. T. T. Ram Mohan 6 2 5 Yes Mrs. Pallavi S. Shroff 0 6 3 No Mr. Premchand Godha 4 3 3 Yes Mr. Ajay Hinduja 2* 1 1 Yes Mr. S. C. Tripathi 6 9 3 Yes Mr. Ashok Kini 6 3 2 Yes Mr. Y. M. Kale1 2 5 0 No Mr. Romesh Sobti 6 0 9 Yes 1. Inducted on the Board as Alternate Director to Mr. Ajay Hinduja w.e.f. January 15, 2009. *Two other meetings were attended by Mr. Y. M. Kale in the capacity of Alternate Director to Mr. Ajay Hinduja. 2. Excludes Foreign Companies, Private Limited Companies, Trusts, etc. 27
  • 27. iii. Remuneration Non-executive Directors’ compensation: The members of the Bank, at the 11th Annual General Meeting held on September 3, 2005, passed a resolution authorising the Board of Directors of the Bank to fix the sitting fee payable to Non-executive Directors in accordance with Rule 10B of the Companies (Central Government’s) General Rules & Forms, 1956 as amended from time to time read with section 310 of the Companies Act, 1956, or any other rule, regulation, notification issued by any competent authority from time to time as may be applicable. Subsequently, SEBI, vide circular No.SEBI/CFD/DIL/CG/1/2006/13 dated January 13, 2006 has clarified that the requirement of obtaining prior approval of shareholders at a general meeting shall not apply to the payment of sitting fees to Non- executive Directors, if made within the limits prescribed under the Companies Act, 1956. The Bank has not granted stock options to any of the Non-executive Directors. The details of sitting fees paid to the Non- executive Directors for attending the Board and Committee meetings held during the year 2008-09 are as under: Name of Director Salary *(including Sitting Fee (Rs.) Total (Rs.) perquisites & allowances) Mr. R. Seshasayee – 2,70,000 2,70,000 Mr. R. Sundararaman – 4,70,000 4,70,000 Mr. T. Anantha Narayanan – 4,70,000 4,70,000 Dr. T. T. Ram Mohan – 3,20,000 3,20,000 Mrs. Pallavi S. Shroff – 20,000 20,000 Mr. Premchand Godha – 1,00,000 1,00,000 Mr. Ajay P. Hinduja – 40,000 40,000 Mr. S. C. Tripathi – 2,60,000 2,60,000 Mr. Ashok Kini – 2,40,000 2,40,000 Mr. Y. M. Kale – 40,000 40,000 The criteria for making payment of remuneration to the Non-executive Directors are as follows: a. An amount of Rs.20,000/- per meeting is being paid towards sitting fee for attending meetings of the Board, Committee of Directors and the Audit Committee, to the Non-executive Directors in accordance with Rule 10B of the Companies (Central Government’s) General Rules & Forms, 1956. b. With effect from May 2, 2006, the Board has decided that an amount of Rs.10,000/- per meeting be paid as Sitting Fee to the Non-executive Directors for attending meetings of Committees other than those mentioned in (a) above. Whole-time Director’s compensation: The appointment of Whole-time Director is made with the approval of the Reserve Bank of India. Mr. Romesh Sobti, Managing Director: The details of the terms of appointment as approved by the Reserve Bank of India in respect of Mr. Romesh Sobti, Managing Director & CEO of the Bank w.e.f. February 1, 2008, comprise the following: Salary of Rs.100.80 lakhs p.a., Other Allowances of Rs.122.95 lakhs p.a., facility of company-leased and furnished accommodation, Provident Fund at 12% of Salary, Gratuity at one month’s Salary, Pension at two months’ Salary, Medical Expenses of upto Rs.1 lakh p.a., Mediclaim for self and family members, Personal Accident Insurance, Performance-based Bonus, membership of two clubs and two official cars with drivers. The appointment is for a period of 3 years commencing from February 1, 2008. Stock Options amounting to 20,00,000 shares at Rs.48/- per share have been offered as part of the remuneration package. iv. Shareholding The Equity shares held by Directors as on March 31, 2009 are (i) Mr. T. Anantha Narayanan – 580 (0.0002%); (ii) Mr. Premchand Godha – 100 (0.0000%) and (iii) Dr. T.T. Ram Mohan – 2,300 (0.0006%). No Director of the Bank holds shares in your Bank for other person/s on a beneficial basis. No Director holds any other security issued by the Bank. Details of Directors to be re-appointed at the AGM Mr. T. Anantha Narayanan, Mr. Premchand Godha and Mr. Ajay Hinduja, Directors, retire by rotation at the forthcoming Annual General Meeting, in accordance with Article 112 of the Articles of Association of your Bank and the applicable provisions of the Companies Act, 1956.28
  • 28. Mr. T. Anantha Narayanan, Mr. Premchand Godha and Mr. Ajay Hinduja, being eligible, have offered themselves for re-appointmentas Directors of the Bank.A brief profile of the Directors seeking re-appointment is given below:Director Qualification and Expertise Date of Name of companies in which Number of Shareholding Experience in specific Appointment Director Committees (of (No. of functional other companies in shares) areas which member)Mr. T. Anantha B. Com, ACA, AICWA. Agriculture & 18.03.2004 Ashley Holdings Limited 5 580Narayanan Rural Economy Finance professional Allsec Technologies Limited with 40 years Ashley Investments Limited experience. Also, involved in general Ashok Leyland Project Services Limited industrial matters Sanco Trans Limited through CII; also an organic farmer. Sundaram BNP Paribas Asset Management Co. Ltd.Mr. Premchand B. Com., A.C.A. Finance and 31.10.2006 Ipca Laboratories Limited 3 100Godha SSI (Practical A first generation Vasant Investments Corporation Limited experience) entrepreneur, having Brescon Corporate Advisors Limited over 35 years of experience, including Kaygee Investments Private Limited 31 years in the Gudakesh Investments & Traders Pharmaceuticals Private Limited industry. Initial 4 years, practised as a Paranthapa Investments & Traders Chartered Accountant. Private Limited Kaygee - Loparex India Private Limited Ipca Traditional Remedies Pvt. Limited Cognizant Finance Pvt. Limited Makers Laboratories Limited Exon Laboratories Pvt. Limited Paschim Chemicals Pvt. Limited Mexin Medicaments Pvt. Limited Sea Mist Properties Pvt. LimitedMr. Ajay Hinduja Degree in Economics Banking & 31.10.2006 Hinduja Group India Limited Nil Nil (with specialisation in Finance Finance)Committees of the BoardThe Board has constituted several Committees of Directors to take decisions and monitor the activities falling within their termsof reference. The Board’s Committees are as follows:Committee of DirectorsTerms of Reference: The Committee of Directors exercises powers delegated to it by the Board, for managing the affairs of your Bank; for efficient control over operational areas; and for ensuring speedy disposal of matters requiring immediate approval.Composition: The Committee comprises six members viz., Mr. R. Seshasayee (Chairman), Mr. R. Sundararaman, Mr. T. Anantha Narayanan, Mrs. Pallavi Shroff, Dr. T. T. Ram Mohan and Mr. Romesh Sobti.Meetings: The Committee met eight times during the financial year 2008-09, viz., on May 15, 2008 (Mr. T. Anantha Narayanan and Mrs. Pallavi Shroff were unable to attend), June 24, 2008 (Mrs. Pallavi Shroff and Mr. Romesh Sobti were unable to attend); August 14, 2008 (Mrs. Pallavi Shroff and Mr. Romesh Sobti were unable to attend), November 11, 2008 (Dr. T. T. Ram Mohan, Mrs. Pallavi Shroff and Mr. Romesh Sobti were unable to attend), November 26, 2008 (Mrs. Pallavi Shroff was unable to attend), January 5, 2009 (Mr. R. Seshasayee, Mrs. Pallavi Shroff and Mr. Romesh Sobti were unable to attend), February 3, 2009 (Mr. R. Seshasayee, Dr. T. T. Ram Mohan and Mrs. Pallavi Shroff were unable to attend), and March 12, 2009 (Mr. R. Seshasayee, Mrs. Pallavi Shroff and Mr. Romesh Sobti were unable to attend). Except as indicated within the brackets, all the members had attended these meetings. 29
  • 29. Audit Committee of the Board Terms of reference: The role of the Audit Committee includes, inter alia, (1) Oversight of the Bank’s financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible, (2) Recommending to the Board, the appointment / re-appointment of auditors and fixation of audit fees, (3) Reviewing with the management, the quarterly and annual financial statements before submission to the Board for approval, with particular reference to:- (i) Changes, if any, in accounting policies and practices and reasons for the same; (ii) Major accounting entries involving estimates based on the exercise of judgment by the management; (iii) Significant adjustments made in the financial statements arising out of audit findings; (iv) Disclosure of related party transactions, if any; (v) Qualifications in the draft Audit Report; and (vi) Management discussion and analysis of financial condition and results of operations. The specialised functions of the Audit Committee include (1) Reviewing with the management, the performance of statutory and internal auditors and the adequacy of the internal control systems, (2) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature. Composition: The Committee comprises four members viz., Mr. T. Anantha Narayanan (Chairman), Mr. R. Sundararaman (term concluded on March 24, 2009), Mr. S. C. Tripathi, Mr. Ashok Kini and Mr. Premchand Godha (inducted on March 24, 2009). Meetings: The Committee met six times during the financial year 2008-09, viz., on June 23, 2008, July 25, 2008, August 14, 2008, October 15, 2008, January 15, 2009 (Mr. R. Sundararaman was unable to attend) and March 2, 2009 (Mr. Ashok Kini was unable to attend). Except as indicated within the brackets, all the members had attended these meetings. Nomination Committee Terms of reference: The Committee conducts due diligence as to the credentials of any Director before his / her appointment, and makes appropriate recommendations to the Board, in consonance with the Dr. Ganguly Committee recommendations and the requirements of RBI. The Committee also discharges the functions of the Remuneration Committee envisaged in Clause 49 of the Listing Agreement. Composition: The Committee comprises five members viz., Mr. R. Seshasayee (Chairman), Mr. R. Sundararaman, Mr. T. Anantha Narayanan, Mr. Ajay Hinduja and Mr. Romesh Sobti. Meetings: The Committee met twice during the financial year 2008-09, viz., on November 26, 2008 (Mr. Ajay Hinduja was unable to attend) and on March 24, 2009 (Mr. T. Anantha Narayanan and Mr. Ajay Hinduja were unable to attend). Except as indicated within the brackets, all the members had attended these meetings. Stakeholders Relations Committee Terms of Reference: The objective of the Stakeholders Relations Committee is the redressal of stakeholders’ complaints. The Company Secretary discharges the responsibilities of a Compliance Officer. Composition: The Committee comprises two members viz., Mr. T. Anantha Narayanan and Mr. Romesh Sobti. Meetings of the Committee are chaired by Mr. T. Anantha Narayanan, a Non-executive Director. Meetings: The Committee met twice during the financial year, viz., on October 16, 2008 and March 2, 2009. Special Committee for monitoring large value frauds Terms of reference: In accordance with the directives of Reserve Bank of India, a Special Committee has been set up for monitoring and follow-up of cases of frauds involving amounts of Rs.1 crore and above. Composition: The Committee comprises five members viz., Mr. R. Sundararaman (term concluded on March 24, 2009), Mr. T. Anantha Narayanan, Dr. T. T. Ram Mohan, Mrs. Pallavi Shroff, Mr. Premchand Godha (inducted on March 24, 2009) and Mr. Romesh Sobti. A Non-executive Director is elected the Chairman by the members present at the meeting. Meetings: The Committee met twice during the financial year, viz., on October 16, 2008 (Mrs. Pallavi Shroff and Mr. Romesh Sobti were unable to attend) and March 23, 2009 (Mr. T. Anantha Narayanan and Mrs. Pallavi Shroff were unable to attend). Except as indicated within the brackets, all the members had attended the meeting.30
  • 30. Customer Service CommitteeTerms of reference: The Committee’s function is to monitor the customer service extended by your Bank and to attend to the needs of customers.Composition: The Committee comprises three members viz., Dr. T. T. Ram Mohan, Mr. Premchand Godha and Mr. Romesh Sobti. A Non-executive Director is elected Chairman by the members present at the meeting.Meetings: The Committee met twice during the financial year, viz., on October 16, 2008 (Mr. Romesh Sobti was unable to attend) and March 24, 2009. Except as indicated within the brackets, all the members had attended the meetings.Risk Management CommitteeTerms of reference: The Committee’s role is to examine risk policies and procedures developed by your Bank and to monitor adherence to various risk parameters and prudential limits by the various operating departments.Composition: The Committee comprises four members, viz., Mr. R. Sundararaman, Mr. T. Anantha Narayanan, Dr. T. T. Ram Mohan, and Mr. Romesh Sobti. A Non-executive Director is elected Chairman by the members present at the meeting.Meetings: The Committee met twice during the financial year, viz., on October 16, 2008 and March 23, 2009 (Mr. T. Anantha Narayanan was unable to attend). Except as indicated within the brackets, all the members had attended these meetings.Finance CommitteeTerms of reference: The Committee’s role is to decide on the appropriate mode of issue of capital; to finalise, settle, approve or agree to terms and conditions including the pricing for the said capital-raising programme; finalise, settle, approve, and authorise the executing of any document, deed, writing, undertaking, guarantee or other papers (including any modification thereof) in connection with the capital-raising programme and authorise the affixing of the Common Seal of the Company, if necessary thereto in accordance with the provisions of Articles of Association of the Company; to appoint and to fix terms and conditions of merchant bankers, investment bankers, lead or other managers, advisors, solicitors, agents or such other persons or intermediaries as may be deemed necessary for the capital-raising programme; to do all such things and deal with all such matters and take all such steps as may be necessary to give effect to the resolution for raising of capital and to settle / resolve any question or difficulties that may arise with regard to the said programme.Composition: The Committee comprises four members viz., Mr. R. Seshasayee (Chairman), Mr. T. Anantha Narayanan, Mr. S. C. Tripathi and Mr. Romesh Sobti.Meetings: The Committee met once during the financial year, viz., on June 24, 2008 (Mr. S. C. Tripathi and Mr. Romesh Sobti were unable to attend).Compensation CommitteeTerms of reference: The Committee’s role is to make recommendations on the issues of augmentation of capital and the issuance of the Bank’s shares to its employees under the ESOP Scheme.Composition: The Committee comprises four members viz., Mr. R. Seshasayee (Chairman), Mr. R. Sundararaman, Mr. T. Anantha Narayanan, and Mrs. Pallavi Shroff.Meetings: The Committee met thrice during the financial year, viz., on May 2, 2008 (Mrs. Pallavi Shroff was unable to attend), July 18, 2008 (Mrs. Pallavi Shroff was unable to attend) and December 17, 2008 (Mr. R. Seshasayee and Mrs. Pallavi Shroff were unable to attend). Except as indicated within the brackets, all the members had attended these meetings.Vigilance CommitteeTerms of reference: The Committee conducts overview of cases of lapses of vigilance nature on the part of employees of the Bank.Composition: The Committee comprises three members viz., Dr. T. T. Ram Mohan, Mr. S. C. Tripathi and Mr. Romesh Sobti.Meetings: The Committee met twice during the financial year, viz., on January 15, 2009 (Mr. Romesh Sobti was unable 31
  • 31. to attend) and March 24, 2009. Except as indicated within the brackets, all the members had attended these meetings. Information Technology Committee Terms of reference: The Committee conducts Board-level overview of aligning Information Technology with the business strategy of the Bank aimed at offering better service to customers, improved risk management and superior performance. Composition: The Committee comprises four members, viz., Mr. Ashok Kini (Chairman - inducted w.e.f. June 24, 2008), Mr. T. Anantha Narayanan, Mr. R. Sundararaman, and Mr. Romesh Sobti. Meetings: The Committee met twice during the financial year, viz., on July 24, 2008 and December 17, 2008. All members had attended the meetings. Details of the three previous Annual General Meetings AGM Day and Date Time Venue Whether Special Resolution Passed 12th Thursday, September 28, 2006 10.30 a.m. Hotel Sun-n-Sand Yes 262 Bund Garden Road, Pune - 411001 13th Tuesday, September 18, 2007 12.00 noon Hotel Taj Blue Diamond Yes 11, Koregaon Road, Pune - 411001 14th Monday, September 22, 2008 2.00 p.m. Hotel Sun-n-Sand, Yes 262, Bund Garden Road, Pune – 411001 Special Resolution The details of Special Resolutions passed at the General Meetings of shareholders in the last three years are given below: General Body Meeting Date Resolution Twelfth Annual General Meeting September 28, 2006 • Authority for further issue / placement of securities including ADRs/GDRs, and Qualified Institutions Placement. Thirteenth Annual General September 18, 2007 • Alteration to Articles of Association consequent upon RBI’s Meeting directive that private sector banks have a Part-time Chairman of the Board of Directors and a separate Chief Executive Officer / Managing Director who would be responsible for day- to-day management. • Authority for further issue / placement of securities including ADRs, GDRs and Qualified Institutions Placement. • Authority for Employee Stock Options Scheme (ESOS). Fourteenth Annual General September 22, 2008 • Authority for further issue / placement of securities including Meeting ADRs, GDRs and Qualified Institutions Placement. • Variation in terms of options granted to employees. • Enhancement of Authorised Capital. Postal Ballot No Resolutions were passed through postal ballot during the last financial year. Material Disclosures Related Party Transactions: During the year, there were no materially significant related party transactions that could have had any potential for conflict with the interests of your Bank at large. Details are available in Schedule XVIII (Notes on Accounts) forming part of the Audited Financial Statements for the year. Penalties, etc.: In the matter of irregularities observed in the opening of a demat account in October 2000, Securities and Exchange Board of India (SEBI) vide its Order dated August 10, 2006, had suspended the Bank’s registration as Depository Participant of NSDL for a period of fifteen days. The Bank complied with the Order, and accordingly no new depository accounts were opened from August 31, 2006 to September 14, 2006.32
  • 32. Disqualification of Directors: As on March 31, 2009, none of the Directors of your Bank was disqualified under section 274(1)(g) of the Companies Act, 1956.Mandatory requirements of Clause 49: Your Bank has complied with all the mandatory requirements of Corporate Governancestipulated under Clause 49 of the Listing Agreement. A certificate to this effect has been issued by M/s. Bhandari & Associates,Company Secretaries, and the same has been incorporated elsewhere in this document.Accounting Standards: In the preparation of financial statements for the year 2008-2009, the treatment prescribed in theAccounting Standards issued by the Institute of Chartered Accountants of India from time to time and as required in terms ofRBI guidelines has been followed by your Bank.Non-Mandatory requirements of Clause 49 of the Listing AgreementThe status of compliance with the non-mandatory requirements of Clause 49 of the Listing Agreement is given below.The Chairman’s Office: The Chairman (Non-executive) has been provided with an office at the Corporate Office of the Bank.Tenure of Independent Directors: While Clause 49 puts forth a non-mandatory requirement that the tenure of a Director maybe restricted to nine years, according to Section 10A (2A) of the Banking Regulation Act 1949 “no director of a banking company,other than its Chairman or whole-time Director, by whatever name called, shall hold office continuously for a period exceedingeight years.” This requirement has been complied with by your Bank.Remuneration Committee: In accordance with the requirements stipulated by RBI, pursuant to the Ganguly Committee Report,your Board of Directors has constituted a Nomination Committee comprising two Non-executive Independent Directors, two Non-executive Directors and one Whole-time Director. The Committee conducts due diligence as to the credentials of any Directorbefore his appointment and makes appropriate recommendations to the Board. This Committee also discharges the functions ofthe Remuneration Committee envisaged in Clause 49 of the Listing Agreement.Shareholder Rights: All information pertaining to business and developmental activities are intimated to the Stock Exchangeson a continuous basis. The Stock Exchanges in turn announce the corporate information on their respective websites. Thequarterly financial results are published in the newspapers, apart from being reported on the websites of the Stock Exchanges.Therefore, your Bank does not find it expedient to send individual communications to the shareholders regarding significantevents and financial performance every half-year.Audit qualifications: There are no qualifications in the Auditors’ Report.Training of Board Members: Your Directors are being provided with opportunities to attend seminars and workshops in orderto equip themselves with relevant inputs for effective discharge of their responsibilities as Directors.Mechanism for evaluating Non-executive Board Members: Your Bank does not have a mechanism for evaluating theperformance of Non-executive Directors.Whistleblower Policy: In line with RBI regulations towards strengthening financial stability and enhancing public confidencein the robustness of the financial sector, your Bank has instituted the “Protected Disclosures Scheme”. Your Bank has alsooperatonalised a ‘Whistle Blower Policy’.Means of CommunicationBesides communicating to the Stock Exchanges where your Bank’s shares are listed, the financial results of the Bank are alsopublished on a quarterly basis in leading financial publications, viz., Economic Times, Financial Express, Business Standard andBusiness Line.The information related to the financial results are also hosted under the “Media Room” and “Investor Relations” sections onBank’s website (www.indusind.com <http://www.indusind.com) The said sections are updated regularly.Quarterly Press meets are organized during which the results are formally announced to the media and press releases are issuedfor publication. Regular interviews with the electronic channels on the awareness of results and other available opportunities areheld by the Managing Director and the Chief Operating Officer.Analyst Meets and Press Conferences are also held periodically.Subsidiary Company – ALF Insurance Services Private LimitedYour Bank does not have a “material non-listed Indian subsidiary” as defined in Clause 49 of the Listing Agreement. However,ALF Insurance Services Private Limited is a wholly-owned subsidiary of your Bank. The Company was set up to do the businessof Insurance Corporate Broking, but has not commenced operations as yet.The Audit Committee of your Bank has reviewed the financial statements and investments of the subsidiary, ALF InsuranceServices Private Limited. The minutes of the Board meetings of this subsidiary company have been placed before the Board ofyour Bank. 33
  • 33. Corporate Social Responsibility (CSR) CSR has always been close to your Bank’s business strategy. Your Bank took the opportunity of launching the Green Banking project. As a part of this project, a campaign “Hum aur Hariyali” has been launched to increase awareness about environmental issues; and through this awareness, achieve the goal of Sustainable Development during the year which was declared as the “International Year of Planet Earth, 2008” by the UN General Assembly. Through the “Hum aur Hariyali” campaign, your Bank has delved into different aspects of Green Banking and has reached out to both staff and customers, encouraging them to make sustainable choices and changes. Through this campaign, your Bank endeavours to ‘green’ the office spaces, reduce resource consumption, minimize carbon footprint and support environmental initiatives. General Information for Shareholders Registration No. : 11-76333 Financial Year : 2008-2009 Board meeting for adoption of audited financial accounts : May 5, 2009 Day, Date and Time of 15th Annual General Meeting : Friday, July 3, 2009 at 2.00 p.m. Venue : Hotel Sun-n-Sand, Pune Financial Calendar : April 1 to March 31 Book Closure : Wednesday, June 24, 2009 to Friday, July 3, 2009 Date of Dividend Payment : On or after July 6, 2009 Bank’s Website : www.indusind.com Distribution of shareholding of IndusInd Bank as at March 31, 2009 Range – Shares No. of Folios % No. of shares % Upto 1,000 112814 92.79 26049094 7.34 1,001 - 5,000 7348 6.04 15336676 4.32 5,001 - 10,000 748 0.62 5618026 1.58 10,001 – 50,000 524 0.43 10911433 3.07 50,001 & above 141 0.12 297084771 83.69 TOTAL 121575 100.00 355000000 100.00 Outstanding GDRs/ADRs/Warrants or any Convertible Debentures, conversion date and likely impact on equity Your Bank has 64,682,364 GDRs (equivalent to 64,682,364 equity shares) outstanding, which constituted 18.22% of your Bank‘s equity capital as at March 31, 2009. Shareholding as at March 31, 2009 i. Distribution Category No. of shares held % of shareholding A. Promoters’ holding 90999984 25.63 B. Non-Promoters’ Holding 264000016 74.37 1 Institutional Investors a Mutual Funds and UTI 288075 0.08 b Banks, Financial Institutions, Insurance Companies (Central/State Gov. Institutions/Non-government Institutions) 3254089 0.92 c FIIs 66523764 18.74 Sub Total 70065928 19.74 2 Global Depository Receipts 64682364 18.22 3 Others a Private Corporate Bodies 52010061 14.65 b Indian Public* 55843739 15.73 c NRIs/OCBs* 12195530 3.44 d Clearing Members 9202394 2.59 Sub Total 129251724 36.41 GRAND TOTAL 355000000 100.00 * ‘Indian Public’ includes 2980 shares held by Resident Independent Directors.34
  • 34. ii. Major Shareholders (with more than 1 percent shareholding) S. No. Name of Shareholder No. of shares held % of shareholding 1 IndusInd International Holdings Ltd. 68499984 19.30 2 The Bank Of New York (GDR-Depository). 64682364 18.22 3 Ashok Leyland Ltd. 19215698 5.41 4 Lotus Global Investments Ltd. 16261166 4.58 5 IndusInd Limited 15500000 4.37 6 Societe Bancaire Privee Sa 12439868 3.50 7 Arisaig Partners (Asia) Pte Ltd A/c Arisaig India Fund Ltd. 10358876 2.92 8 Hinduja Ventures Limited 10077391 2.84 9 KII Limited 8306663 2.34 10 De Five (Mauritius ) Holdings Ltd. 7000000 1.97 11 Sital K Motwani 5652120 1.59iii. Total foreign shareholding No. of shares held No. of shares held % of shareholding Total foreign shareholding 234401642 66.03 Of which GDRs 64682364 18.22 Details of complaints received and resolved from April 1, 2008 to March 31, 2009 Complaints Received Attended to Pending Non-Receipt of Share Certificate 78 78 0 Non-Receipt of Dividend Warrants 333 333 0 Non-Receipt of Endorsement Stickers 1 1 0 Non-Receipt of Annual Report 7 7 0 Non-Receipt of Demat Credit/ Remat Certificate 47 47 0 Non-Receipt of Rejected DRF 10 10 0 Non-Receipt of Exchanged Certificate 1 1 0 Non-Receipt of Split / Duplicate/ Replacement Certificate 21 21 0 Others 40 40 0 Total 538 538 0 Listing details of the Bank’s Equity Shares Name of the Stock Address of the Stock Stock Code No. Annual Listing Fee Exchange Exchange Bombay Stock Exchange Phiroz Jeejeebhoy Towers, 532187 Rs.3,10,219/- Limited Dalal Street, Mumbai 400001. paid upto March 2010. National Stock Exchange of Exchange Plaza, 5th Floor INDUSINDBK Rs.3,08,840/- India Limited Bandra-Kurla Complex, Plot Normal – EQ (physical) paid upto March No. C/1, G Block, Bandra (E), Depository – AE (manual lots) 2010. Mumbai - 400 051. Depository – BE (odd lots) Luxembourg Stock Exchange Société de la Bourse de 111202 Euro 3,750.00 (Global Depository Receipts) Luxembourg paid upto December Societe Anonyme 31, 2009. RC Luxembourg B 6222 35
  • 35. Market Price Data of the Bank’s shares i. National Stock Exchange of India Limited Date Price of Shares Turnover in Nifty Bank Nifty Open (Rs.) High (Rs.) Low (Rs.) Close (Rs.) Rs. Lakhs 1-Apr-08 80.00 80.30 76.30 77.95 240.71 4739.55 6608.10 2-May-08 91.00 103.50 91.00 102.35 5456.90 5228.20 7871.90 2-Jun-08 80.25 80.25 70.00 71.85 1053.67 4739.60 6347.15 1-Jul-08 53.00 56.40 52.00 52.95 553.25 3896.75 4732.85 1-Aug-08 56.00 58.85 55.60 58.45 321.65 4413.55 5961.90 1-Sep-08 59.20 60.90 58.25 60.45 166.85 4348.65 6128.85 1-Oct-08 56.00 59.80 54.30 57.80 294.18 3950.75 5982.40 3-Nov-08 42.00 44.00 41.50 42.45 111.38 3043.85 4875.70 1-Dec-08 32.90 33.00 30.15 30.50 68.04 2682.90 4124.30 1-Jan-09 38.00 39.60 37.50 39.25 82.97 3033.45 5116.55 2-Feb-09 32.75 33.95 32.05 32.70 68.44 2766.65 4238.15 2-Mar-09 30.00 30.10 28.30 28.60 33.28 2674.60 3718.35 31-Mar-09 32.00 32.95 31.10 32.10 1227.77 3020.95 4133.20 ii. Bombay Stock Exchange Limited Date Price of Shares Turnover in SENSEX BANKEX Open (Rs.) High (Rs.) Low (Rs.) Close (Rs.) Rs. Lakhs 1-Apr-08 79.40 80.25 76.55 78.00 97.39 15626.62 7643.55 2-May-08 92.80 103.25 91.50 102.25 2542.07 17600.12 9142.18 2-Jun-08 79.90 79.90 70.15 72.40 394.79 16063.18 7454.33 1-Jul-08 53.25 56.30 52.00 53.35 289.83 12961.68 5583.59 1-Aug-08 55.30 58.90 55.30 58.45 104.73 14656.69 6728.65 1-Sep-08 59.70 60.75 58.10 60.30 69.29 14498.51 7021.35 1-Oct-08 55.60 58.70 54.40 57.70 96.85 13055.67 6688.28 3-Nov-08 43.00 43.90 41.65 42.40 35.14 10337.68 5387.39 1-Dec-08 31.50 33.00 30.35 30.80 21.88 8839.87 4465.82 1-Jan-09 37.30 39.50 37.30 39.15 28.30 9903.46 5585.01 2-Feb-09 33.75 34.00 31.50 32.55 24.06 9066.70 4649.58 2-Mar-09 29.70 30.15 28.35 28.70 10.02 8607.08 4033.99 31-Mar-09 32.10 33.25 31.10 32.30 691.74 9708.50 4490.9736
  • 36. Dematerialisation of shares and liquidityYour Bank’s shares are tradable (in electronic form only) at the Bombay Stock Exchange Limited and the National Stock Exchangeof India Limited. 95.13% of the Bank’s shares are dematerialised and the rest remain in physical form. The volume of trades andshare price information is provided elsewhere in this document.In view of the numerous advantages offered by the depository system, members holding shares of the Bank in physical form arerequested to get the same dematerialised and converted to the electronic form.Share Transfer SystemA Share Transfer Committee comprising the Bank’s executives has been formed to deal with matters relating to transfer of shares,issue of duplicate share certificates in lieu of mutilated share certificates or those which are misplaced / lost, and other relatedmatters. The approvals granted by the Share Transfer Committee are confirmed at subsequent Board meetings. With a view toexpediting the process of physical share transfers, the Share Transfer Committee meets on the first and third Friday of everymonth.Trading in the Bank’s shares now takes place compulsorily in dematerialised form. However, members holding share certificatesin physical form are entitled to transfer their shareholding by forwarding the share certificates along with valid, duly executed andstamped transfer deed signed by the member (or on his/her behalf) and the transferee to the Bank or to the Bank’s Registrar &Share Transfer Agent, Link Intime India Pvt. Ltd.Registrar & Share Transfer AgentLink Intime India Pvt. LimitedC-13, Pannalal Silk Mills CompoundL.B.S. Marg, Bhandup (West)Mumbai – 400078Contact Person: Mr. Kirtikumar KanchanTel. No.: 25963838 / 25946980 Fax: 25946969Email: kirtikumar.kanchan@linkintime.co.inRedressal of Investors’ GrievancesIn order to service the investors in an efficient manner and to attend to their grievances, your Bank has constituted an ‘InvestorServices Cell’ at its Corporate Office at Mumbai. Members are welcome to contact:Mr. Lalit DalviInvestor Services CellIndusInd Bank Ltd.Solitaire Corporate Park167, Guru Hargovindji MargAndheri (East), Mumbai - 400093Tel: 022 66412487 Fax: 022 66412347Email: investor@indusind.comUnclaimed DividendsIn accordance with the provisions of Section 205A of the Companies Act, 1956, read with Investor Education and Protection Fund(Awareness and Protection of Investors), Rules 2001, the dividends that remain unclaimed for a period of seven years from thedate of transfer of the dividend to ‘unpaid dividend account’, shall be transferred to the ‘Investor Education and Protection Fund’(IEPF). The table below gives the due dates for such transfers that are required to be effected during the period August 2009 –October 2010. Members are requested to take note of the due dates for such transfers.Year Type of Date of Payment of Name of Company Due date for transfer to IEPF dividend Dividend2001-02 Final 25 July 2002 Ashok Leyland Finance Ltd. 23 August 20092001-02 Final 28 September 2002 IndusInd Bank Ltd. 30 October 20092002-03 Final 22 July 2003 Ashok Leyland Finance Ltd. 20 August 20102002-03 Final 29 September 2003 IndusInd Bank Ltd. 30 October 2010Pursuant to Section 205C of the Companies Act, 1956, it is clarified that no claims shall lie against IEPF or the Bank in respectof individual amounts which have remained unclaimed or unpaid for a period of seven years from the dates that they first becamedue for payment, and no payment shall be made in respect of any such amounts. 37
  • 37. AUDITORS’ REPORT To the Members of IndusInd Bank Limited 1. We have audited the attached Balance Sheet of IndusInd Bank Limited (the Bank) as at March 31, 2009 and also the Profit and Loss Account and Cash Flow Statement annexed thereto for the year ended on that date in which are incorporated the returns of 122 branches & 2 representative offices overseas audited by us and 59 branches audited by branch auditors. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. The Balance Sheet and Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Third Schedule to the Banking Regulation Act, 1949, read with section 211 of the Companies Act, 1956 (the ‘Companies Act’). 4. We report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit and have found them to be satisfactory; b) In our opinion, the transactions of the Bank, which have come to our notice, have been within its powers; c) The returns received from the branches of the Bank have been found adequate for the purposes of our audit. 5. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 in so far they apply to the Bank. 6. We further report that: (i) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns received from the branches; (ii) in our opinion, proper books of accounts as required by law have been kept by the Bank so far as appears from our examination of those books; (iii) the reports on account of the branches audited by branch auditors have been dealt with in preparing our report in the manner considered necessary by us; (iv) on the basis of written representations received from the directors, as on March 31, 2009, and taken on record by the Board of Directors, we report that none of the directors are disqualified from being appointed as director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. 7. In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the notes thereon give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956, in the manner so required for banking companies, and give a true and fair view in conformity with the accounting principles generally accepted in India. (i) in case of the Balance Sheet, of the state of affairs of the Bank as at March 31, 2009; (ii) in case of Profit and Loss Account, of the profit for the year ended on that date; and (iii) in case of Cash Flow Statement, of the cash flows for the year ended on that date. For M P Chitale & Co. Chartered Accountants Ashutosh Pednekar Mumbai, Partner May 5, 2009 ICAI M No.4104738
  • 38. 39
  • 39. BALANCE SHEET AS AT MARCH 31, 2009 Rupees in 000s SCHEDULE As at 31.03.09 As at 31.03.08 CAPITAL AND LIABILITIES Capital I 355,19,21 320,00,00 Employee Stock Options Outstanding XVIII (9) 1,15,10 50,68 Reserves and Surplus II 1308,05,11 1029,20,66 Deposits III 22110,25,27 19037,42,27 Borrowings IV 1856,45,53 1095,43,46 Other Liabilities and Provisions V 1983,58,03 1779,31,12 TOTAL 27614,68,25 23261,88,19 ASSETS Cash and Balances with Reserve Bank of India VI 1190,78,98 1526,26,14 Balances with Banks and Money at Call and Short Notice VII 732,90,49 651,77,18 Investments VIII 8083,40,55 6629,69,61 Advances IX 15770,63,59 12795,30,76 Fixed Assets X 623,19,34 625,14,84 Other Assets XI 1213,75,30 1033,69,66 TOTAL 27614,68,25 23261,88,19 Contingent Liabilities XII 44299,17,33 30981,93,07 Bills for Collection 2937,73,35 1761,20,60 Principal Accounting Policies XVII Notes on Accounts XVIII The schedules referred to above form an integral part of Balance Sheet. The Balance Sheet has been prepared in conformity with Form "A" of the Third Schedule to the Banking Regulation Act, 1949. As per our report of even date. For INDUSIND BANK LTD. For M.P. Chitale & Co. R. Seshasayee T. Anantha Narayanan Chartered Accountants Chairman Director Ashutosh Pednekar Romesh Sobti Partner Managing Director Place : Mumbai S. V. Zaregaonkar Haresh Gajwani Date : May 5, 2009 Chief Financial Officer Company Secretary40
  • 40. PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009 Rupees in 000s SCHEDULE Year ended Year ended 31.03.09 31.03.08I. INCOME Interest Earned XIII 2309,47,44 1880,66,09 Other Income XIV 456,25,35 297,57,77 TOTAL 2765,72,79 2178,23,86II. EXPENDITURE Interest Expended XV 1850,44,14 1579,85,97 Operating Expenses XVI 547,03,41 402,19,28 Provisions and Contingencies 219,91,36 121,13,23 TOTAL 2617,38,91 2103,18,48III. PROFIT 148,33,88 75,05,38 Profit brought forward 242,99,07 211,39,12 AMOUNT AVAILABLE FOR APPROPRIATION TOTAL 391,32,95 286,44,50IV. APPROPRIATIONS Transfer to a) Statutory Reserve 37,08,47 18,76,35 b) Capital Reserve 53,40,29 2,24,13 c) Investment Reserve Account 1,53,23 – d) Dividend (Proposed) 44,71,15 19,18,85 e) Corporate Dividend Tax 7,59,87 3,26,10 144,33,01 43,45,43Balance transferred to Balance Sheet 246,99,94 242,99,07 TOTAL 391,32,95 286,44,50Earnings per share (basic)(Rupees) XVIII(10.6) 4.28 2.35Earnings per share (diluted)(Rupees) XVIII(10.6) 4.27 2.35Principal Accounting Policies XVIINotes on Accounts XVIIIThe schedules referred to above form an integral part of Profit & Loss Account.The Profit & Loss Account has been prepared in conformity with Form "B" of the Third Schedule to the Banking RegulationAct, 1949.As per our report of even date. For INDUSIND BANK LTD.For M.P. Chitale & Co. R. Seshasayee T. Anantha NarayananChartered Accountants Chairman DirectorAshutosh Pednekar Romesh SobtiPartner Managing DirectorPlace : Mumbai S. V. Zaregaonkar Haresh GajwaniDate : May 5, 2009 Chief Financial Officer Company Secretary 41
  • 41. SCHEDULES Rupees in 000s As at 31.03.09 As at 31.03.08 SCHEDULE - I CAPITAL Authorised Capital 50,00,00,000 (Previous year 40,00,00,000) equity shares of Rs.10/- each 500,00,00 400,00,00 Issued, Subscribed and Called Up Capital 35,50,00,000 (Previous year 31,98,07,936) equity shares of Rs.10/- each 355,00,00 319,80,79 Paid up Capital 35,50,00,000 (Previous year 31,98,07,936) equity shares of Rs.10/- each 355,00,00 319,80,79 Add : Forfeited 3,84,200 (Previous year 3,84,200) equity shares of Rs.10/- each 19,21 19,21 On June 24, 2008, Bank issued 3,51,92,064 equity shares of Rs.10/- in the form of Global Depository Receipts each representing one share at a price of US $ 1.47 per GDR. Accordingly as at March 31, 2009, the paid-up share capital and share premium account under reserves of the Bank stand increased by Rs.35,19,21 and Rs.186,99,83 respectively. TOTAL 355,19,21 320,00,00 SCHEDULE - II RESERVES AND SURPLUS 1 Statutory Reserve Opening balance 98,80,84 80,04,49 Additions during the year 37,08,47 18,76,35 135,89,31 98,80,84 2 Capital Reserve Opening balance 32,27,37 30,03,24 Additions during the year 53,40,29 2,24,13 85,67,66 32,27,37 3 Share Premium Account Opening balance 412,96,39 412,96,39 Additions during the year 186,99,83 – 599,96,22 412,96,39 4 General Reserve Opening balance 1,35,57 1,35,57 1,35,57 1,35,57 5 Investment Allowance Reserve Opening balance 1,00,00 1,00,00 1,00,00 1,00,00 6 Investment Reserve Account Opening Balance – – Additions during the year 1,53,23 – 1,53,23 – 7 Balance in Profit & Loss Account 246,99,94 242,99,07 8 Revaluation Reserve Opening balance 239,81,42 – Addition during the year – 240,77,98 Deduction during the year 4,18,24 96,56 235,63,18 239,81,42 TOTAL (1-8) 1308,05,11 1029,20,6642
  • 42. SCHEDULES (Contd.) Rupees in 000s As at 31.03.09 As at 31.03.08SCHEDULE - III DEPOSITSA 1 Demand Deposits i) From Banks 40,25,02 36,89,17 ii) From Others 2914,71,51 1765,00,44 2 Savings Bank Deposits 1299,93,56 1186,42,50 3 Term Deposits i) From Banks 2378,21,93 1409,07,49 ii) From Others 15477,13,25 14640,02,67 TOTAL (1, 2 & 3) 22110,25,27 19037,42,27B Deposits of Branches 1 In India 22110,25,27 19037,42,27 2 Outside India – – TOTAL 22110,25,27 19037,42,27SCHEDULE - IV BORROWINGS1 Borrowings in India i) Reserve Bank of India 200,00,00 19,00,00 ii) Other Banks 59,09,31 64,77,75 iii) Other Institutions and Agencies 846,70,62 562,66,012 Borrowings outside India 750,65,60 448,99,70 TOTAL (1 & 2) 1856,45,53 1095,43,46 Secured borrowings included in 1 & 2 above – –SCHEDULE - V OTHER LIABILITIES AND PROVISIONS1 Inter-office Adjustments (Net) 13,65,44 2,70,602 Bills Payable 274,96,64 317,36,873 Interest Accrued 208,69,77 177,20,324 Unsecured Non-Convertible Redeemable Debentures/Bonds 651,60,00 587,10,00 (Subordinated for Tier-II Capital)5 Unsecured Non-Convertible Redeemable Non-Cumulative Subordinated Upper Tier II Bonds 308,90,00 308,90,006 Others (including Provisions and proposed dividend) 525,76,18 386,03,33 TOTAL 1983,58,03 1779,31,12SCHEDULE - VI CASH AND BALANCES WITH RESERVE BANK OF INDIA1 Cash in hand (including foreign currency notes) 141,87,78 108,07,792 Balances with Reserve Bank of India i) In Current Accounts 1048,91,20 1418,18,35 ii) In Other Accounts – – TOTAL (1 & 2) 1190,78,98 1526,26,14 43
  • 43. SCHEDULES (Contd.) Rupees in 000s As at 31.03.09 As at 31.03.08 SCHEDULE - VII BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE 1 In India i) Balances with Banks a) In Current Accounts 227,05,62 317,52,19 b) In Other Deposit Accounts 383,30,10 216,78,46 ii) Money at Call and Short Notice with banks – – TOTAL (i & ii) 610,35,72 534,30,65 2 Outside India i) In Current Accounts 26,17,97 21,97,97 ii) In Other Deposit Accounts – 67,40,16 iii) Money at Call and Short Notice 96,36,80 28,08,40 TOTAL (i, ii & iii) 122,54,77 117,46,53 GRAND TOTAL (1 & 2) 732,90,49 651,77,18 Schedule - VIII INVESTMENTS 1 Investments in India Gross Value 8088,33,99 6645,79,83 Less : Provision for Depreciation 4,93,44 16,10,22 Net value of Investments in India 8083,40,55 6629,69,61 Comprising : i) Government securities 6294,35,91 5435,71,27 ii) Other approved securities 3,75,31 3,76,18 iii) Shares 35,71,92 39,05,62 iv) Debentures and bonds 14,25,04 40,21,21 v) Subsidiaries and/ or Joint Ventures 50,00 50,00 vi) Others - Deposits under RIDF scheme with NABARD 1656,69,98 1102,51,33 Security Receipt and Others 78,12,39 7,94,00 2 Investments Outside India – – TOTAL (1 & 2) 8083,40,55 6629,69,61 SCHEDULE - IX ADVANCES A i) Bills Purchased and Discounted 1385,88,15 446,00,55 ii) Cash Credits, Overdrafts and Loans Repayable on Demand 5089,48,33 3709,98,56 iii) Term Loans 9295,27,11 8639,31,65 TOTAL 15770,63,59 12795,30,76 B i) Secured by Tangible Assets (includes advances against book debts) 13747,76,32 11687,88,04 ii) Covered by Bank / Government Guarantees (includes advances against L/Cs issued by Banks) 789,41,71 172,74,72 iii) Unsecured 1233,45,56 934,68,00 TOTAL 15770,63,59 12795,30,76 C i) Advances in India a) Priority Sector 5568,78,57 5005,53,11 b) Public Sector 174,06,39 138,56,76 c) Banks 7,73,15 4,89,04 d) Others 10020,05,48 7646,31,85 TOTAL 15770,63,59 12795,30,76 ii) Advances Outside India – – TOTAL ( i & ii) 15770,63,59 12795,30,7644
  • 44. SCHEDULES (Contd.) Rupees in 000s As at 31.03.09 As at 31.03.08SCHEDULE - X FIXED ASSETS1 PREMISES i) At cost as at the beginning of the year 402,37,57 156,31,74 ii) Revaluation during the year - 240,77,98 iii) Additions during the year 4,51,95 5,27,85 406,89,52 402,37,57 iv) Less : Deductions during the year 83,18 - v) Less : Depreciation to date 22,79,22 17,05,77 TOTAL 383,27,12 385,31,802 Other Fixed Assets (including furniture & fixtures) i) At cost as at the beginning of the year 567,55,21 518,75,65 ii) Additions during the year 42,18,78 50,96,80 [includes Assets given on lease Rs.225,71,92 609,73,99 569,72,45 (Previous year Rs.225,71,92)] iii) Less : Deductions during the year 9,14,96 2,17,24 iv) Less : Depreciation to date 374,61,83 337,34,73 TOTAL 225,97,20 230,20,483 Capital Work in Progress 13,95,02 9,62,56 TOTAL (1, 2 & 3) 623,19,34 625,14,84SCHEDULE - XI OTHER ASSETS1 Interest Accrued 208,61,80 194,44,202 Tax Paid in Advance / tax deducted at source (net of provision) 243,66,77 220,17,153 Stationery & Stamps 1,56,81 1,17,754 Non-banking assets acquired in satisfaction of claims 60,13,46 56,54,415 Others [includes Deposits with banks Rs.98,35,54 being credit enhancement against Securitised Assets (Previous year Rs.210,07,81)] 699,76,46 561,36,15 TOTAL 1213,75,30 1033,69,66SCHEDULE - XII CONTINGENT LIABILITIES1 Claims against the Bank not acknowledged as debts 247,76,61 236,62,002 Liability on account of outstanding Forward Exchange Contracts 30453,66,88 17112,85,043 Liability on account of outstanding Derivative Contracts 9830,87,30 9148,99,524 Guarantees given on behalf of constituents a) In India 1746,77,44 1803,13,70 b) Outside India - -5 Acceptances, Endorsements and Other Obligations 2020,09,10 2680,32,816 Other Items for which the Bank is contingently liable - - TOTAL 44299,17,33 30981,93,07 45
  • 45. SCHEDULES (Contd.) Rupees in 000s Year ended Year ended 31.03.09 31.03.08 SCHEDULE - XIII INTEREST EARNED 1 Interest / Discount on Advances / Bills 1793,31,12 1425,32,94 2 Income on Investments 483,24,01 403,47,01 3 Interest on Balances with RBI and Other Inter-Bank Funds 15,77,27 21,91,63 4 Others 17,15,04 29,94,51 TOTAL 2309,47,44 1880,66,09 SCHEDULE - XIV OTHER INCOME 1 Commission, Exchange and Brokerage 139,10,18 100,98,09 2 Profit on Sale of Investments / Derivatives (Net) 121,55,48 19,44,23 3 Profit / (Loss) on Sale of Land, Buildings and Other Assets (30,62,76) (67,09) 4 Profit on exchange transactions (Net) 71,87,66 28,89,35 5 Income earned by way of dividend from companies in India 2,87,95 37,35 6 Miscellaneous Income 151,46,84 148,55,84 TOTAL 456,25,35 297,57,77 SCHEDULE - XV INTEREST EXPENDED 1 Interest on Deposits 1575,96,94 1401,15,44 2 Interest on Reserve Bank of India / Inter-Bank Borrowings 119,96,96 55,83,52 3 Others including interest on Subordinate Debts and Upper Tier II bonds 154,50,24 122,87,01 TOTAL 1850,44,14 1579,85,97 SCHEDULE - XVI OPERATING EXPENSES 1 Payments to and Provisions for Employees 187,14,44 121,89,66 2 Rent, Taxes and Lighting (includes operating lease rentals) 49,63,62 36,58,88 3 Printing and Stationery 13,09,01 11,23,73 4 Advertisement and Publicity 15,51,16 2,10,68 5 Depreciation on Banks Property 44,16,82 40,15,86 6 Directors Fees, Allowances and Expenses 55,19 60,83 7 Auditors Fees and Expenses (includes branch auditors) 99,76 98,39 8 Law Charges 12,87,46 13,16,42 9 Postage, Telegrams, Telephones, etc. 27,47,14 23,20,76 10 Repairs and Maintenance 41,70,49 30,84,84 11 Insurance 20,22,34 17,34,79 12 Service Provider Fees 57,45,06 46,35,57 13 Other Expenditure 76,20,92 57,68,87 TOTAL 547,03,41 402,19,2846
  • 46. Schedule No. XVIIPRINCIPAL ACCOUNTING POLICIES1) General: 1.1 The accompanying financial statements have been prepared on the historical cost convention, except where otherwise stated, and in accordance with the accounting standards referred to in Section 211(3C) of the Companies Act, 1956, and notified by the Companies (Accounting Standards) Rules, 2006, read with guidelines issued by the Reserve Bank of India (‘RBI’) and conform to the statutory provisions and practices prevailing within the banking industry in India. 1.2 The preparation of the financial statements, in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent liabilities in the financial statements. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in current and future periods.2) Transactions involving Foreign Exchange: 2.1 Monetary assets and liabilities denominated in foreign currency are translated at the balance sheet date at the exchange rates notified by the Foreign Exchange Dealers’ Association of India (‘FEDAI’) and the resulting gains or losses are recognised in the profit and loss account. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. 2.2 All Foreign Exchange contracts outstanding at the balance sheet date are re-valued at the rates of exchange notified by the FEDAI for specified maturities and the resulting gains or losses are recognised in the profit and loss account. 2.3 The Swap Cost arising on account of foreign currency swap contracts to convert foreign currency funded liabilities into rupee liability is charged to Profit and loss account as ‘Interest –Others’ by amortizing over the underlying swap period. 2.4 Income and Expenditure items are translated at the rates of exchange prevailing on the date of the transaction. 2.5 Contingent liability at the balance sheet date on account of outstanding forward foreign exchange contracts, guarantees, acceptances, endorsements and other obligations denominated in foreign currency is stated at the closing rates of exchange notified by FEDAI.3) Investments: The significant accounting policies in accordance with the RBI guidelines and subsequent circulars issued by the RBI are as follows: 3.1 Categorisation of investments: In accordance with the guidelines issued by RBI, the Bank classifies its investment portfolio into the following three categories: i) ‘Held to Maturity’ (HTM) – Securities acquired by the Bank with the intention to hold till maturity. ii) ‘Held for Trading’ (HFT) – Securities acquired by the Bank with the intention to trade. iii) ‘Available for Sale’ (AFS) – Securities which do not fall within the above two categories are classified as ‘available for sale’. 3.2 Classification of Investments: For the purpose of disclosure in the Balance Sheet, investments have been classified under six groups as required under RBI guidelines - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries/ Joint Ventures and Other Investments. 3.3 Valuation of Investments: (i) ‘Held to Maturity’ – These investments are carried at their acquisition cost. Any premium on acquisition is amortised over the balance period to maturity. The amortised amount is deducted from Interest earned – Income on investments (Item 2 of Schedule XIII). The book value of security is reduced to the extent of amount amortised during the relevant accounting period. Diminution other than temporary, if any, in the value of such investments is determined and provided for on each investment individually. 47
  • 47. (ii) ‘Held for Trading’ – Each scrip in this category is re-valued at the market price or fair value and the resultant depreciation of each scrip in this category is recognised in the Profit and Loss account. Appreciation, if any, is ignored. Market value of government securities is determined on the basis of the prices/ YTM published by RBI or the prices/ YTM periodically declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association (FIMMDA) for valuation at year-end. In case of unquoted government securities, market price or fair value is determined as per the prices/ YTM published by FIMMDA. (iii) ‘Available for Sale’ – Each scrip in this category is re-valued at the market price or fair value and the resultant depreciation of each scrip in this category is recognised in the Profit and Loss account. Appreciation, if any, is ignored. Market value of government securities (excluding treasury bills) is determined on the basis of the price list published by RBI or the prices periodically declared by PDAI jointly with FIMMDA for valuation at year-end. In case of unquoted government securities market price or fair value is determined as per the rates published by FIMMDA. Market value of other debt securities is determined based on the yield curve and spreads provided by FIMMDA. Equity shares are valued at cost or the closing quotes on a recognised stock exchange, whichever is lower. Treasury bills are valued at carrying cost, which includes discount amortised over the period to maturity. Units of mutual funds are valued at the lower of cost and net asset value provided by the respective mutual funds. (iv) Investments in Equity Shares held as Long-term investments by erstwhile IndusInd Enterprises & Finance Ltd. and Ashok Leyland Finance Ltd. (since merged) are valued at cost. Provision towards diminution in the value of such Long-term investments is made only if the diminution in value is not temporary in the opinion of management. (v) Broken period interest on debt instruments is treated as a revenue item. Brokerage, commission, etc. pertaining to investments paid at the time of acquisition is charged to revenue. (vi) Repurchase (REPO) and reverse repurchase (reverse REPO) transactions are considered and accounted for on an outright sale and purchase basis. REPO interest Income/ Expenditure is accounted based on the RBI guidelines. However, depreciation in their value, if any, compared to their original book value, in case of reverse REPO is recognised in the Profit & Loss Account. (vii) Profit in respect of investments sold from “HTM” category is included in Profit on Sale of Investments and equal amount is transferred out of P & L Appropriation account after tax and Statutory Reserve, to Capital Reserve account. (viii) Security Receipts (SR) are valued at the lower of redemption value of the security or the Net Asset Value (NAV) obtained from Securitization Company/ Reconstruction Company. (ix) In the event, provisions created on account of depreciation in the ‘AFS’ or ‘HFT’ categories are found to be in excess of the required amount in any year, the excess is credited to Profit and Loss account and an equivalent amount (net of taxes, if any and net of transfer to Statutory Reserves as applicable to such excess provision) is appropriated to an Investment Reserve account (IRA) in Schedule II – “Reserves & Surplus” under the head ‘Revenue & Other reserves’. The balance in IRA account is included under Tier II within the overall ceiling of 1.25% of total Risk Weighted Assets prescribed for General Provisions / Loss reserves. The balance in IRA account is used to meet provision on account of depreciation in AFS and HFT categories by transferring an equivalent amount to Profit and Loss account as and when required. 4) Derivatives: Derivative contracts are designated as hedging or trading and accounted for as follows: (i) The hedging contracts comprise interest rate swaps and currency swaps undertaken to hedge interest rate risk on certain assets and liabilities. The net interest receivable/ payable is accounted on an accrual basis over the life of the swaps. However, where the hedge is designated with an asset or liability that is carried at market value or lower of cost and market value in the financial statements, then the hedging is also marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated assets or liabilities. (ii) The trading contracts comprise proprietary trading in interest rate swaps and currency futures. The gain/ loss arising on unwinding or termination of the contracts, is accounted for in the Profit and Loss account. Trading contracts outstanding as at the balance sheet date are re-valued at their fair value and resulting gains / losses are recognised in the Profit and Loss account.48
  • 48. (iii) Premium paid and received on currency options is accounted up-front in the Profit and Loss account as all options are undertaken on a back-to-back basis. (iv) Provisioning of overdue customer receivable on derivative contracts, if any, is made as per RBI guidelines.5) Advances: 5.1 Advances are classified as per the RBI guidelines into standard, sub-standard, doubtful and loss assets after considering subsequent recoveries to date. 5.2 Provision for non-performing assets is made in conformity with the RBI guidelines. 5.3 In accordance with RBI guidelines, general provision on standard assets has been made at 0.40% of the outstanding amount on a portfolio basis except in the case of direct advances to agricultural and SME sectors, where the provision has been made at 0.25%. 5.4 Advances are disclosed in the Balance Sheet, net of provisions and interest suspended for non-performing advances. Provision made against standard assets is included in ‘Other Liabilities and Provisions’. 5.5 Advances include the Bank’s participation in / contributions to Pass Through Certificates (PTCs) and /or to the asset- backed assignment of loan assets of other banks / financial institutions where the Bank has participated on risk- sharing basis. 5.6 Advances exclude derecognised securitised advances, inter-bank participation and bills rediscounted. 5.7 Amounts recovered against bad debts written off in earlier years and, provisions no longer considered necessary in context of the current status of the borrower are written back / recognised to the Profit and Loss account to the extent such write-offs / provisions were charged to the Profit and Loss account. 5.8 Restructured / rescheduled accounts: In case of restructured / rescheduled accounts provision is made for the sacrifice against erosion/ diminution in fair value of restructured loans, in accordance with the general framework of restructuring of advances issued by RBI vide circular dated August 27, 2008 and subsequently modified vide circular dated April 09, 2009. The erosion in fair value of the advances is computed as difference between fair value of the loan before and after restructuring. Fair value of the loan before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal, discounted at a rate equal to the Bank’s BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring. Fair value of the loan after restructuring is computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to Bank’s BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring. The restructured accounts have been treated as standard where the restructuring package has been implemented during the year.6) Securitisation Transactions: 6.1 The Bank transfers loans through securitisation transactions. The Bank securitises its loan receivables both through Bilateral Direct Assignment route as well as transfer to Special Purpose Vehicles (‘SPV’) in securitisation transactions. 6.2 The securitisation transactions are without recourse to the Bank. The transferred loans and such securitised-out receivables are de-recognised in the balance sheet as and when these are sold (true sale criteria being fully met) and the consideration has been received by the Bank. Gains / losses are recognised only if the Bank surrenders the rights to the benefits specified in the loan contracts. 6.3 In respect of certain transactions, the Bank provides credit enhancements in the form of cash collaterals / guarantee and/or by subordination of cashflows to senior Pass Through Certificates (PTC). Retained interest and subordinated PTCs are disclosed under “Advances” in the balance sheet. 6.4 Recognition of gain or loss arising out of Securitisation of Standard Assets : In terms of RBI guidelines issued on February 1, 2006, profit/premium arising on account of sale of standard assets, being the difference between the sale consideration and book value, is amortised over the life of the securities issued by the Special Purpose Vehicles (‘SPV’). Any loss arising on account of the sale is recognized in the Profit and Loss Account in the period in which the sale occurs. 49
  • 49. 7) Fixed Assets: 7.1 Fixed assets (including assets given on operating lease) have been stated at cost (except in the case of premises which were re-valued based on values determined by approved valuers) less accumulated depreciation and impairment, if any. Cost includes incidental expenditure incurred on the assets before they are ready for intended use. The carrying amount of fixed assets is reviewed at each balance sheet date if there are any indications of impairment based on internal / external factors. 7.2 The appreciation on revaluation is credited to Revaluation Reserve. Depreciation relating to revaluation is adjusted against the Revaluation Reserve. 7.3 Depreciation has been provided pro rata for the period of use, on Straight Line Method as per the rates prescribed under Schedule XIV to the Companies Act, 1956, except in respect of computers, which are depreciated at the rate of 33.33%. These rates are reflective of management’s estimate of the useful life of the related fixed assets. 8) Revenue Recognition: 8.1 Income by way of interest and discount on performing assets is recognised on accrual basis and on non-performing assets the same is accounted for on realisation. 8.2 Interest on Government securities, debentures and other fixed income securities is recognised on accrual basis. Income on discounted instruments is recognised over the tenor of the instrument on a straight-line basis. 8.3 Dividend income is accounted on accrual basis when the right to receive payment is established. 8.4 Commission (except for commission on Deferred Payment Guarantees which is recognised on accrual basis), exchange and brokerage are recognised on realisation. 8.5 Lease income and service charges earned by the Consumer Finance Division are recognised on accrual basis. 8.6 Income from distribution of insurance products is recognised on the basis of business booked. 9) Operating Leases: Lease rental obligations in respect of assets taken on operating lease are charged to profit and loss account on straight-line basis over the lease term. Initial direct costs are charged to profit and loss account. Assets given under leases in respect of which all the risks and benefits of ownership are effectively retained by the Bank are classified as operating leases. Lease rentals received under operating leases are recognized in the profit and loss account on accrual basis as per contracts. 10) Retirement and Other Employee Benefits: 10.1 Payments under the Group Gratuity policies of the Bank are made to Life Insurance Corporation of India (for Consumer Finance Division (CFD)) and Aviva Life Insurance Company India Limited (other than CFD) on the basis of actuarial valuation as at the balance sheet date and considered as a defined benefit scheme. 10.2 Provident fund contributions are made under trust separately established for the purpose and the scheme administered by Regional Provident Fund Commissioner (RPFC), as applicable. 10.3 Provision for compensated absences has been made in the accounts on the basis of actuarial valuation as at the balance sheet date. The actuarial valuation is carried out as per the projected unit credit method. 10.4 The Bank has applied the intrinsic value method to account for the compensation cost of ESOP to the employees of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying shares on the grant date exceeds the exercise price of the options. Accordingly, the compensation cost is amortized over the vesting period. 11) Segment Reporting: In accordance with the guidelines issued by RBI, effective April 1, 2007, Bank has adopted Segment Reporting as under: 1. Treasury includes all investment portfolio, profit/ loss on sale of investments, profit/loss on foreign exchange transactions, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation / amortisation of premium on Held to Maturity category investments. 2. Corporate/ Wholesale Banking includes lending and deposits from corporate customers and identified earnings and expenses of the segment. 3. Retail Banking includes lending and deposits from retail customers and identified earnings and expenses of the segment. 4. Other Banking Operations includes all other operations not covered under Treasury, Wholesale Banking and Retail Banking.50
  • 50. 12) Income-tax: Tax expenses comprise current, deferred and fringe benefit taxes. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Unrecognized deferred tax assets of earlier years are re-assessed and recognised to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realized.13) Earnings per Share: Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at end of the year.14) Provisions: A provision is recognised when there is an obligation as a result of past event. It is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.15) Others: Cash and cash equivalents in the cash flow statement comprise cash and balances with RBI (Schedule VI) and balances with banks and money at call and short notice (Schedule VII).Schedule No. XVIIINOTES ON ACCOUNTS1. Capital Adequacy Ratio: In terms of its guidelines for implementation of new capital adequacy framework issued on 27th April 2007, RBI has directed banks not having operational presence outside India to migrate to the revised frame work for capital computation (under Basel II) with effect from March 31, 2009. The migration is proposed in phased manner over a three-year period during which banks are required to compute their capital requirements in terms of both Basel I and Basel II. The minimum capital to be maintained by Bank under the revised frame work is subject to a prudential floor of 100%, 90% and 80% of the capital requirement under Basel I over the year March 2009, 2010 and 2011 respectively. The capital adequacy ratio of the Bank, calculated as per RBI guidelines (Basel I requirement being higher) is set out below : Items March 31, March 31, 2009 2008 i) Capital Adequacy Ratio (CRAR) 12.33% 11.91% ii) CRAR – Tier I Capital (%) 7.52% 6.70% iii) CRAR – Tier II Capital (%) 4.81% 5.21% iv) Amount of subordinated debt raised as Tier-II capital (Rs. in crores) 100.00 50.002. Investments: (Rs. in crores) 2008-2009 2007-2008 (1) Value of Investments : (i) Gross Value of Investments 8088.34 6645.80 (a) In India 8088.34 6645.80 (b) Outside India – – (ii) Provision for Depreciation 4.93 16.10 (a) In India 4.93 16.10 (b) Outside India – – (iii) Net Value of Investments 8083.41 6629.70 (a) In India 8083.41 6629.70 (b) Outside India – – 51
  • 51. (2) Movements in provision held towards depreciation on Investments : (i) Opening Balance 16.10 12.78 (ii) Add: Provision made during the year 0.01 6.37 (iii) Less: Write-off / write-back of excess provision during the year 11.18 3.05 (iv) Closing Balance 4.93 16.10 Category wise details of Investments (Net): (Rs. in crores) 31/03/2009 31/03/2008 HTM AFS HFT HTM AFS HFT i) Government securities 5493.95 800.41 – 4677.88 579.39 178.44 ii) Other approved securities – 3.75 – – 3.76 – iii) Shares 5.35 30.37 – 5.35 33.71 – iv) Debentures and bonds – 14.25 – – 40.21 – v) Subsidiaries and/ or Joint Ventures 0.50 – – 0.50 – – vi) Others – Deposits under RIDF scheme 1656.70 78.13 – 1102.52 7.94 – with NABARD, SR/PTC, etc. Total 7156.50 926.91 – 5786.25 665.01 178.44 2.1 Details of Repo / Reverse Repo (including liquidity adjustment facility) deals done during the year ended March 31, 2009 : (Rs. in crores) Minimum Maximum Daily average As on March outstanding outstanding outstanding 31, 2009 during the during the year during the year year Securities sold under repos 30.37 724.50 93.00 40.00 (0.95) (430.00) (53.77) (390.00) Securities purchased under reverse repos – – – – (2.00) (175.00) (2.81) – Note: Amounts in brackets represent previous year figures 2.2 a) Issuer composition of Non-SLR investments as at March 31, 2009: (Rs. in crores) No. Issuer Amount Extent of Extent of Extent of Extent of private ‘below ‘unrated’ ‘unlisted’ placement investment Securities* securities** grade’ securities 1 PSUs – – – – – 2 FIs *** 1657.22 0.52 – – 0.52 3 Banks 14.04 14.04 – – – 4 Private corporates 38.15 – – – – 5 Subsidiaries/ Joint Ventures 0.50 – – – – 6 Others 79.49 79.49 – 26.06 1.36 7 Provision held towards depreciation (4.10) – – – – Total 1785.30 94.05 – 26.06 1.88 *Excludes investments in NABARD RIDF and equity shares **Excludes investments in NABARD RIDF *** Includes deposits placed with NABARD RIDF. Note: Central government 8.07 GOI 2017 Security pledged with CCIL is not considered as Non SLR investment holding52
  • 52. b) Issuer composition of Non-SLR investments as at March 31, 2008: (Rs. in crores) No. Issuer Amount Extent of Extent of Extent of Extent of private ‘below ‘unrated’ ‘unlisted’ placement investment Securities* securities** grade’ securities 1 PSUs 0.01 – – 0.01 0.01 2 FIs *** 1103.04 0.52 – – 0.52 3 Banks 41.65 41.65 – 5.00 5.00 4 Private corporates 42.41 – – – 7.22 5 Subsidiaries/ Joint Ventures 0.50 – – – 0.50 6 Others 59.34 9.30 – 1.36 1.36 7 Provision held towards depreciation (7.20) – – – – Total 1239.75 51.47 – 6.37 14.61 *Excludes investments in NABARD RIDF, Oil Bonds, and equity shares **Excludes investments in NABARD RIDF, and Oil Bonds. *** Includes deposits placed with NABARD RIDF. Note: 1. Security pledged with CCIL have not been considered as Non- SLR investment holding. 2. 06.96 OIL SP 09 have been considered in the above disclosure. c) Non-performing Non-SLR investments: (Rs. in crores) Particulars 2008-2009 2007-2008 Opening balance – 3.88 Additions during the year since 1st April – – Reductions during the above period – 3.88 Closing balance – – Total provisions held – –3. Derivatives: 3.1 Forward Rate Agreement/Interest Rate Swap: (Rs. in crores) Items March 31, March 31, 2009 2008 1) The notional principal of swap agreements 9724.36 8950.00 2) Losses which would be incurred if counter-parties failed to fulfill their 167.36 83.93 obligations under the agreements. 3) Collateral required by the bank upon entering into swaps - - 4) Concentration of credit risk arising from the swaps (with banks) 70.92% 73% 5) The fair value of the swap book (2.25) 0.06 3.2 Exchange Traded Interest Rate Derivatives: The Bank has not undertaken exchange traded interest rate derivative transactions during the year. 3.3 Disclosures on Risk Exposure in Derivatives Qualitative disclosure The Bank has entered into interest rate swap contracts to hedge on-balance sheet assets & liabilities and for trading purposes. The Bank has also offered currency option contracts, interest rate swaps and forward rate agreements to customers and covered it on back-to-back basis. • The Bank’s Funds & Investments Policy and Market Risk Management Policy, approved by the Board, provides for using derivative products in an efficient manner as tools for mitigating market risk. The Policies cover dealing guidelines and prescribes exposure limits for derivative products. 53
  • 53. • Risk Management Department independently monitors the derivative position of the Bank, and reports Marked to Market position of Derivative Portfolio to top management on a daily basis. • The Basis Present Value (PV01) of the derivative portfolio is also computed on a daily basis and reported to top management. Derivative contracts transacted during the current year were in accordance with the prescribed Market Risk Policy and the Funds & Investment Policy approved by the Board. The Nature and Terms of the IRS (excluding IRS denominated in foreign currency and done on back to back basis) is set out below: (Rs. in crores) Nature Nos. Notional Benchmark Terms Principal Hedging 5 125 MIBOR Fixed receivable v/s floating payable Trading 137 4675 MIBOR Fixed payable v/s floating receivable Trading 139 4375 MIBOR Fixed receivable v/s floating payable Quantitative Disclosures (Rs. in crores) March 31, 2009 March 31, 2008 Sr. No Particulars Currency Interest rate Currency Interest rate Derivatives Derivatives Derivatives Derivatives 1 Derivatives (Notional Principal Amount) – 9724.36 – 8950.00 a) For hedging – 125.00 – 125.00 b) For trading – 9599.36 – 8825.00 2 Marked to Market Positions a) Asset (+) – – – – b) Liability (-) – 2.25 – 1.43 3 Credit Exposure – 247.36 – 83.93 4 Likely impact of one percentage change in interest rate (100*PV01) (Note 1) a) on hedging derivatives – 0.25 – 1.34 b) on trading derivatives – (0.50) – 0.01 5 Maximum and Minimum of 100*PV01 observed during the year (Note 2) a) on hedging – Max: 1.34 Max: 2.41 – Min: 0.24 Min : 1.34 b) on trading – Max: 4.28 – Max:18.37 Min: 0.01 Min : 0.00 Note 1: Based on the PV01 of the outstanding derivatives as at March 31, 2009. Note 2: Based on the absolute value of PV01 of the derivatives outstanding during the year. Derivative contracts that are “back-to-back” have not been included herein. Note 3: Mark to Market positions above includes interest accrued on the swaps. Note 4: Forward Exchange Contracts are not included in the Currency derivates above. Note 5: There were no outstanding currency futures as on March 31, 2009. Foreign Currency exposure not hedged by derivative instruments Rs. (0.56) crores (Net Open position as on March 31, 2009) (previous year Rs. (6.83) crores).54
  • 54. 4. Asset Quality: 4.1 Non-Performing Assets: (Rs. in crores) Items 2008-2009 2007-2008 (i) Net NPAs to Net Advances (%) 1.14% 2.27% (ii) Movement in NPAs (Gross) a) Opening Balance 392.31 342.73 b) Additions during the year 219.00 155.49 c) Reductions during the year 356.29 105.91 d) Closing Balance 255.02 392.31 (iii) Movement in Net NPAs a) Opening Balance 291.02 273.75 b) Additions during the year 81.04 102.45 c) Reductions during the year 192.93 85.18 d) Closing Balance 179.13 291.02 (iv) Movement in provisions for NPAs (excluding provisions on standard assets) a) Opening Balance 101.29 68.98 b) Provisions made during the year 137.96 53.04 c) Write-off/write-back of excess provisions 163.36 20.73 d) Closing Balance 75.89 101.29 4.2 Details of Loan Assets subjected to Restructuring during the year ended March 31, 2009 (Rs. in crores) CDR Mechanism SME Debt *Others Restructuring (Consumer/ Vehicle loans) No. of Borrowers 2 – 106 (–) – (18) Standard Amount Outstanding 29.18 – 13.64 Advances Restructured (–) – (1.72) Sacrifice (diminution in the fair value) 4.17 0.41 (–) – (–) Substandard No. of Borrowers – – – Advances Amount Outstanding – – – Restructured Sacrifice (diminution in the fair value) – – – Doubtful No. of Borrowers – – – Advances Amount Outstanding – – – Restructured Sacrifice (diminution in the fair value) – – – No. of Borrowers 2 – 106 (–) – (18) Amount Outstanding 29.18 – 13.64 TOTAL (–) – (1.72) Sacrifice (diminution in the fair value) 4.17 – 0.41 (–) – (–) * includes consumer/ vehicle loans – 105 borrowal accounts involving Rs.7.29 crores Note: Amounts in brackets represent previous year figures 55
  • 55. As per RBI Circular No. 124/21.04.132/2008-09 dated 17th April 2009 following are additional disclosures regarding restructured accounts: Sr. Disclosures Number Amount No. (Rs in crore) 1 Application received up to March 31, 2009 for restructuring, in respect of *110 70.17 accounts which were standard as on September 1, 2008. 2 Of (1), proposals approved and implemented as on March 31, 2009 and thus *108 42.82 became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet. 3 Of (1), proposals approved and implemented as on March 31, 2009 but could – – not be upgraded to the standard category. 4 Of (1), proposals under process/ implementation which were standard as on – – March 31, 2009. 5 Of (1), proposals under process/ implementation which turned NPA as on 2 27.35 March 31, 2009 but are expected to be classified as standard assets on full implementation of the package. * includes consumer/ vehicle loans – 105 borrowal accounts involving Rs.7.29 crores 4.3 Details of financial assets sold to Securitisation / Reconstruction Company for asset reconstruction: (Rs. in crores) Items 2008-2009 2007-2008 1) No. of accounts 35 – 2) Aggregate value (net of provisions) of accounts sold to SC/ RC 40.00 – 3) Aggregate consideration 26.00 – 4) Additional consideration realized in respect of accounts transferred in earlier years – 10.70 5) Aggregate gain/ (loss) over net book value (14.00) – 4.4 Bank has not purchased/sold non-performing financial assets from /to other banks. 4.5 Assets Securitised: Items 2008–2009 2007–2008 1) Number of deals concluded – – 2) Total number of loans securitised – – 3) Book Value of Loans securitised (Rs. crores) – – 4) Sale consideration received for the securitised assets (Rs. crores) – – 5) Gain/loss on sale on account of securitisation (Rs. crores)* – – Outstanding value of services provided: (Rs. in crores) (Rs. in crores) Outstanding value of credit enhancement ** 99.34 137.25 Outstanding value of First Loss Facility – 62.98 Outstanding value of Second Loss Facility (Guarantee) *** – 80.46 Outstanding value of Liquidity facility – 17.13 * Net of securitisation expenses and finance charges for the month in which the assets were securitised. ** Represents credit enhancement provided for securitisation deals undertaken prior to issue of RBI circular on draft guidelines on securitisation of standard assets where bifurcation into first loss and second loss facility is not available *** Second loss facility has been provided in the form of a Guarantee by a third party (second loss facility provider) The Bank is the servicing agent for all the securitisation deals undertaken.56
  • 56. 4.6 Provision on Standard Assets: (Rs. in crores) Items March 31, 2009 March 31, 2008 Cumulative Provision held for Standard Assets 59.12 52.26 Provision towards Standard assets has been shown separately as Contingent Provisions against standard asset under ‘Other liabilities and Provisions – Others’ in Schedule V of the Balance Sheet.5. Business ratios: March 31, 2009 March 31, 2008 i) Interest income as a percentage to working funds 9.09% 8.63% ii) Non-interest income as a percentage to working funds 1.80% 1.16% iii) Operating profit as a percentage to working funds 1.45% 0.88% iv) Return on assets 0.58% 0.34% v) Business (deposits plus gross advances) per employee including 836.00 1062.67 trainees (Rs. in lakhs) vi) Profit per employee including trainees (Rs. in lakhs) 3.49 2.62 Note: (1) Working funds are calculated at the average of working funds as per the Bank’s monthly returns (Form X) filed with the RBI. (2) Business per employee (deposits plus gross advances) is computed excluding Inter bank deposits.6. Asset Liability Management: Maturity Pattern of Assets and Liabilities : (a) As at March 31, 2009: (Rs. in crores) Next 2–7 8 – 14 15-28 29 days Over 3 Over 6 Over 1 Over 3 Over 5 Total Day Days Days Days to 3 months months year to years to years months to 6 to 1 3 years 5 years months year Deposits 84.81 583.10 494.28 697.80 2478.16 1755.45 2374.02 8175.24 2747.42 2719.97 22110.25 Loans & Advances 476.46 834.61 587.19 675.21 2435.80 1489.94 4695.26 3593.44 745.87 236.86 15770.64 Investment Securities 0.50 264.60 199.62 14.94 83.92 49.29 511.56 881.00 1041.73 5036.25 8083.41 Borrowings 7.50 39.49 11.98 257.23 539.41 76.36 127.80 76.45 664.61 55.63 1856.46 Foreign currency assets 5.69 – – – – – – – – 62.14 67.83 Foreign currency liabilities 62.61 – – – – – – – – – 62.61 b) As at March 31, 2008: (Rs. in crores) Next 2 – 7 8 – 14 15–28 29 days Over 3 Over 6 Over 1 Over 3 Over 5 Total Day Days Days Days to 3 months months year to years to years months to 6 to 1 3 years 5 years months year Deposits 80.28 647.44 354.25 366.29 2699.21 1369.21 1995.82 6685.41 2468.72 2370.79 19037.42 Loans & Advances 289.01 353.61 386.92 606.48 1353.69 1258.34 3476.05 4364.17 416.16 290.88 12795.31 Investment Securities – – – – 42.48 245.74 392.42 766.38 1764.60 3418.08 6629.70 Borrowings 1.19 56.49 18.48 30.07 155.65 314.87 21.47 – 497.21 – 1095.43 Foreign currency assets 1.64 – – – – – – – – 37.45 39.09 Foreign currency liabilities 15.33 – – – – – – – – – 15.33 57
  • 57. 7. Exposures: 7.1 Exposure to Real Estate Sector : (Rs. in crores) Items March 31, March 31, 2009 2008 a) Direct Exposure (i) Residential Mortgages 172.48 179.61 [of which individual housing loans upto Rs.20 lakhs is Rs. 120.41 crores (previous year Rs.132.11 crores)] (ii) Commercial Real Estate * 448.64 153.69 (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 44.69 134.72 Housing Finance Companies (HFCs) Total Real Estate Exposure 665.81 468.02 * Does not include corporate lending backed by mortgage of land and building. 7.2 Exposure to Capital Market: (Rs. in crores) Items March 31, March 31, 2009 2008 (i) direct investment in equity shares, convertible bonds, convertible debentures and 7.15 11.41 units of equity oriented mutual funds the corpus of which is not exclusively invested in corporate debt; (ii) advances against shares/bonds/ debentures or other securities or on clean basis 83.69 93.34 to individuals for investment in shares (including IPOs/ESOPs), convertible bonds, convertible debentures, and units of equity-oriented mutual funds; (iii) advances for any other purposes where shares or convertible bonds or convertible NIL NIL debentures or units of equity oriented mutual funds are taken as primary security; (iv) advances for any other purposes to the extent secured by the collateral security of NIL NIL 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; (v) secured and unsecured advances to stockbrokers and guarantees issued on behalf of 284.43 246.12 stockbrokers and market makers; (vi) loans sanctioned to corporates against the security of shares / bonds/debentures or NIL NIL other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources; (vii) bridge loans to companies against expected equity flows/issues; NIL NIL (viii) underwriting commitments taken up by the banks in respect of primary issue of NIL NIL shares or convertible bonds or convertible debentures or units of equity oriented mutual funds; (ix) financing to stockbrokers for margin trading; NIL NIL (x) all exposures to Venture Capital Funds (both registered and unregistered) will be NIL NIL deemed to be on par with equity and hence will be reckoned for compliance with the capital market exposure ceilings (both direct and indirect) Total Exposure to Capital Market 375.27 350.8758
  • 58. 7.3. Exposure to Country Risk: a) In terms of Reserve Bank of India circular No. DBOD BP.BC.No.3/21.04.018/ 2008-09 dated July 1, 2008, the exposure of the Bank to country risk is as under: (Rs. in crores) Risk category Exposure (net) as Provision held as Exposure (net) as Provision held as at March 31, 2009 at March 31, 2009 at March 31, 2008 at March 31, 2008 Insignificant 374.98 – 211.09 – Low 340.32 – 19.07 – Moderate 2.52 – 71.63 – High 0.81 – 7.18 – Very High 3.73 – 2.31 – Restricted 0.32 – 2.36 – Off Credit – – 0.27 – Total 722.68 – 313.91 – 7.4 Single Borrower limit and Group Borrower Limit: During the year the Bank has not exceeded the prudential credit exposure limit in respect of Single Borrower and Group Borrowers.8. Miscellaneous: 8.1 Amount of Provisions for taxation during the year : (Rs. in crores) Particulars 2008-09 2007-08 Provision for Income Tax /deferred tax 76.20 36.83 Fringe Benefits tax 2.60 2.10 Wealth tax 0.35 0.30 Total 79.15 39.23 8.2 Disclosure of penalties imposed by RBI : The Reserve Bank of India has not imposed any penalty on the Bank u/s 46(4) of the Banking Regulation Act, 1949. 8.3 Fixed Assets : Cost of premises includes Rs.4.02 crores (previous year Rs.4.02 crores) in respect of properties for which execution of documents and registration formalities are in progress. Of these properties, the Bank has not obtained full possession of one property having WDV of Rs.1.85 crores (previous year Rs.1.89 crores) and has filed a suit for the same. 8.3 Other Assets: i) ‘Non-banking assets acquired in satisfaction of claims’ includes vehicles repossessed by the Bank, which are readily saleable, aggregating to Rs.60.13 crores (previous year Rs.56.54 crores). ii) Other assets include cash collateral (including liquidity facility) of Rs.98.36 crores (previous year Rs.210.08 crores) and stock of gold on consignment basis of Rs.32.27 crores (previous year Rs.28.97 crores). 8.5 Other Liabilities and Provisions: Included in ‘Other Liabilities – Others’ are credit balances in nostro accounts aggregating Rs.113.85 crores (previous year Rs.59.04 crores). 8.6 Contingent Liabilities: Claims against the Bank not acknowledged as debts comprise tax demands in respect of which the Bank is in appeal of Rs.167.53 crores (previous year Rs.148.07 crores) and the cases sub-judice Rs.80.23 crores (previous year Rs.88.55 crores). The above are based on the management’s estimate, and no significant liability is expected to arise out of the same. 8.7 Other Income 8.7.1 Commission, Exchange and Brokerage includes commission on insurance business of Rs.63.84 crores (previous year Rs.38.62 crores). 59
  • 59. 8.7.2 Miscellaneous income includes recovery from bad debts written off Rs.28.89 crores (previous year Rs.42.30 crores), lease rentals Rs.18.80 crores (previous year Rs.19.69 crores) and others (processing charges, cheque return charges and depository services charges, etc.) Rs.103.78 crores (previous year Rs.86.57 crores). 9. Employee Stock Option Scheme (“ESOS”): The shareholders of the Bank had approved Employee Stock Option Scheme (ESOS) on September 18, 2007, enabling the Board and /or the Compensation Committee to grant such number of equity shares, including Options, of the Bank not exceeding 7% of the aggregate number of issued and paid up equity shares of the Bank, in line with the guidelines of the Securities & Exchange Board of India (SEBI). Pursuant thereto, the Compensation Committee of the Bank granted 1,56,21,000 options on various dates as follows : Sr. No Date of grant No. of options 1. 18/07/2008 1,21,65,000 2. 17/12/2008 34,56,000 The ESOS scheme is equity settled wherein the employees will receive equity shares. Stock option activity under the scheme during the year ended March 31, 2009 : Options Outstanding Options Outstanding 2008-09 2007-08 Outstanding at the beginning of the year 1,00,00,000 Nil Surrendered during the year 1,00,00,000 Nil Granted during the year 1,56,21,000 1,00,00,000 Exercised during the year Nil Nil Forfeited / lapsed during the year Nil Nil Outstanding at the end of the year 1,56,21,000 1,00,00,000 Options exercisable Nil Nil The Options are vested over a period of 3 years Pursuant to the special resolution passed by the shareholders in the AGM held on September 22, 2008, fresh options were granted under the Employee Stock Options Scheme 2007 to such of those employees who surrendered the options granted earlier. Accordingly stock based compensation expense accounted for in earlier year of Rs.0.51 crores is reversed. Fair value methodology: The fair value of options used to compute proforma net income and earnings per equity share have been estimated using the Black-Scholes-Merton option pricing model. The Bank estimated the volatility based on historical share prices. The various assumptions considered in the Pricing model for ESOSs granted during the year ended March 31, 2009 are: Options Granted on Options Granted on 18/07/2008 17/12/2008 Average Dividend yield 13.70% 13.70% Expected Volatility 10.49% 11.01% Risk free Interest Rates 5.12% to 6.39% 5.12% to 6.39% Expected life of options 1 year to 3 years 1 year to 3 years Expected forfeiture NIL NIL60
  • 60. Impact of fair value method on net profit and EPS: Had the compensation cost for the Bank’s Employee Stock Option Scheme (ESOS) outstanding been determined based on the fair value approach, the Bank’s net profit and earnings per share would have been as per the proforma amounts indicated below: (Rs. in crores) Year ended Year ended March 31, 2009 March 31, 2008 Profit attributable to Equity Shareholders (Rs. in crores) (Net profit after tax) 148.34 75.05 Add : Stock based compensation expense accounted 1.15 0.51 Less: Stock based compensation expense determined under fair value based 2.02 0.67 method (Proforma) Net Profit (Proforma) 147.47 74.89 Weighted average number of equity shares outstanding during the year 34,69,01,004 31,98,07,936 Nominal value of Equity Shares (Rs.) 10 10 Basic Earnings per Share (Rs.) 4.28 2.35 Basic Earnings per Share (Rs.) (Proforma) 4.25 2.34 Diluted Earnings per Share (Rs.) (Reported) 4.27 2.35 Diluted Earnings per Share (Rs.) (Proforma) 4.24 2.3410. Disclosures - Accounting Standards : 10.1 Net Profit or Loss for the period, prior period items and changes in accounting policies (AS-5) : There has been no material change in Accounting Policies adopted during the year ended March 31, 2009 from those followed for the year ended March 31, 2008. 10.2 Employee Benefits (AS-15): Gratuity: The benefit of Gratuity is funded defined benefit plan. For this purpose the company has obtained a qualifying insurance policy from LIC of India (for Consumer Finance Division (CFD)) and Aviva Life Insurance Company India Limited (other than CFD) on the basis of actuarial valuation as at the balance sheet date. (Rs. in crores) Particulars Gratuity Gratuity (Funded) (Funded) March 31, March 31, 2009 2008 Changes in the present value of the obligation 1 Present Value of obligation 01/04/2008 8.82 7.16 2 Interest Cost 0.63 0.52 3 Current Service Cost 1.79 1.69 4 Past Service Cost – – 5 Benefits Paid (1.46) (3.74) 6 Actuarial (gain) / loss on Obligation 0.46 3.19 7 Present Value of obligation 31/03/2009 10.24 8.82 Reconciliation of opening and closing balance of the fair value of the Plan Assets 1 Fair value of Plan Assets 01/04/2008 6.05 5.04 2 Expected Return on Plan assets 0.64 0.47 3 Contributions 5.77 4.24 4 Benefits Paid (1.46) (3.74) 5 Actual Return on Plan Assets (0.03) 0.04 6 Fair Value of Plan Assets as at March 31, 2009 10.97 6.05 61
  • 61. Particulars Gratuity Gratuity (Funded) (Funded) March 31, March 31, 2009 2008 Profit & Loss – Expenses 1 Current Service Cost 1.79 1.69 2 Interest Cost 0.63 0.52 3 Expected Return on Plan assets (0.64) (0.47) 4 Net Actuarial gain (loss) recognised in the year 0.49 3.15 5 Expenses Recognised in the statement of Profit & Loss 2.27 4.89 Actuarial Assumptions 1 Discount Rate 8.00% 8.00% and 7.50%* 2 Expected Rate of Return on Plan Assets 8.00% 8.00% 3 Expected Rate of Salary Increase 4.00% & 4.00% & 5.00%* 3.50%* * Pertains to the employees of Consumer Finance Division. Leave Encashment : The company provides benefits to its employees under the Leave Encashment pay plan, which is a non-contributory defined benefit plan. The employees of the company during the tenure of their employment are entitled to carry forward unutilized balance of Privilege Leave upto 180 days. Provision for Leave Encashment has been made in the accounts on the basis of actuarial valuation as at the balance sheet date. (Rs. in crores) Particulars March 31, 2009 March 31, 2008 1 Actuarial Value of Present Value of Obligation (PVO) Opening 8.39 8.14 Balance 2 Interest Cost 0.59 0.65 3 Service Cost 1.69 0.91 4 Benefits paid (2.62) (1.43) 5 Actuarial (gain) loss on Obligation (0.08) 0.12 6 Present Value of Obligation 31/03/2009 7.97 8.39 Balance Sheet Statement 1 Present Value of Obligation as at 31.03.09 7.97 8.39 2 Un-funded Liability as at 31.03.09 7.97 8.39 3 Un-funded Liability recognised in Balance Sheet 7.97 8.39 Profit & Loss Account 1 Interest Cost 0.59 0.65 2 Service Cost 1.69 0.91 3 Gain (loss) recognised in the year 0.08 0.12 4 Net Gain / Loss 2.20 1.68 Actuarial Assumptions 1 Discount Rate 7.00% 8.00% & 8.20%* 2 Expected Rate of Salary Increase 4.00% 5.00% & 6.00%* * Pertains to the employees of Consumer Finance Division62
  • 62. 10.3 Segment Reporting (AS-17): The Bank operates in four business segments, viz. Treasury, Corporate/ Wholesale Banking, Retail Banking and Other Banking Operations. There are no significant residual operations carried by the Bank. Summary: Part A: Business Segments (Rs. in crores)Business Segment Treasury Corporate/ Retail Banking Other Banking Total Wholesale Banking OperationParticulars 31/03/09 31/03/08 31/03/09 31/03/08 31/03/09 31/03/08 31/03/09 31/03/08 31/03/09 31/03/08Revenue 689.38 491.09 1122.41 1040.68 1498.22 1244.11 22.47 24.40 3332.48 2800.28Inter-Segment Revenue (566.76) (622.04)Total Income 2765.72 2178.24Result 72.48 (86.67) 90.97 60.15 245.29 271.66 3.69 2.17 412.43 247.31Unallocated Expenses 44.18 51.12Operating Profit 368.25 196.19Income Taxes and Other 219.91 121.14ProvisionsExtraordinary profit/ loss 0.00 0.00Net Profit 148.34 75.05Other Information:Segment Assets 9260.66 8242.34 6726.08 3619.44 10682.94 10082.15 0.00 0.00 26669.68 21943.93Unallocated Assets 945.00 1317.95Total Assets 27614.68 23261.88Segment Liabilities 1877.35 1045.66 11522.05 11084.34 11064.63 8435.72 0.00 0.00 24464.03 20565.72Unallocated Liabilities 3150.65 2696.16Total Liabilities 27614.68 23261.88 Geographic Segments: (Rs. in crores) Domestic International Total 31/03/09 31/03/08 31/03/09 31/03/08 31/03/09 31/03/08 Revenue 2765.72 2178.24 NIL NIL 2765.72 2178.24 Assets 27614.68 23261.88 NIL NIL 27614.68 23261.88 The business operations of the Bank are largely concentrated in India. Activities outside India are restricted to resource mobilization in the international markets. Since the Bank does not have material earnings emanating from foreign operations, the Bank is considered to operate only in domestic segment.10.4 Related party transactions (AS-18): The following is the information on transactions with related parties : Key Management Personnel : Mr. Romesh Sobti, Managing Director Associates: IndusInd Information Technology Limited IndusInd Marketing and Financial Services Private Limited Allfin Marketing Services Private Limited (upto Nov. 08, 2008) Allfin Distribution Private Limited (upto Nov. 08, 2008) IBL Services & Solutions Private Limited Allfin Insurance Specialities Private Limited (upto Nov. 08, 2008) Allfin Insurance Services Private Limited (upto Nov. 08, 2008) Subsidiaries: ALF Insurance Services Private Limited 63
  • 63. Summarized transactions with related parties for the year ended March 31, 2009: (Rs. in crores) Items / Related Party Subsidiaries Associates/ Key Relatives Total Joint Management of key ventures personnel Management Personnel Deposits 0.61 2.40 1.60 – 4.61 (0.62) (6.46) (1.64) – (8.72) Advances – 8.76 – – 8.76 – (10.21) – – (10.21) Investments 0.50 0.60 – – 1.10 (0.50) (0.60) – – (1.10) Interest Paid 0.05 0.08 0.01 – 0.14 Rendering of Services – 2.55 – – 2.55 Receiving of services – 47.96 – – 47.96 Receiving of services- Capitalised – – – – – Management Contracts – – 2.58 – 2.58 Other Liabilities (creditors for expenses, security – 0.97 – – 0.97 deposits etc.) Receivable of Services – 5.26 – – 5.26 – (5.68) – – (5.68) Note: Figures in bracket represent maximum outstanding during the year. Summarised Transactions with related parties for the year ended March 31, 2008: (Rs. in crores) Items / Related Party Subsidiaries Associates/ Key Relatives Total Joint ventures Management of key personnel Management Personnel Deposits 0.60 2.99 0.13 – 3.72 (0.60) (11.48) (1.00) (13.08) Advances – 5.01 – – 5.01 (–) (8.55) (0.15) (–) (8.70) Investments 0.50 0.60 – – 1.10 (0.50) (0.60) (–) (–) (1.10) Interest Paid 0.05 0.09 0.02 – 0.16 Rendering of Services – 17.53 – – 17.53 Receiving of services – 43.87 – 0.02 43.89 Receiving of services- Capitalised – 5.26 – – 5.26 Management Contracts – – 2.14 – 2.14 Other Liabilities (creditors for expenses, security deposits etc) – 15.08 – – 15.08 Receivable of Services – 5.95 – – 5.95 (7.43) (–) (–) (7.43) Note: Figures in bracket represent maximum outstanding during the year.64
  • 64. 10.5 The Bank does not have any non-cancelable operating leases during the year, where it is the lessee. The details of other operating leases are as under: Operating leases: Transaction – I (Rs. in crores) Particulars 2008-09 2007-08 Description of the asset Wind Turbine Generator–37 Nos. Gross carrying amount 25.68 25.68 Accumulated depreciation 8.15 6.79 Depreciation recognized during the current year 1.36 1.36 Contingent Rent recognized during the year 4.03 4.37 Minimum Lease Payments (MLP) MLP based on the actual consumption of electricity at the contracted rates by the lessee. Accordingly, future minimum lease payments are indeterminate. Transaction – II (Rs. in crores) Particulars 2008-09 2007-08 Description of the asset Wind Turbine Generator – 88 Nos. Gross carrying amount 72.45 72.45 Accumulated depreciation 17.95 14.12 Depreciation recognized during the current year 3.83 3.83 Minimum Lease Payments (MLP) Not later than one year 12.00 12.00 Later than one year and not later than five years 24.25 36.25 Later than five years – –10.6 Earnings per share (AS 20): The numerators and denominators used to calculate the earning per share as per AS-20 are as under: Year ended Year ended March 31, 2009 March 31, 2008 Net Profit as Reported (Rs. in crores) 148.34 75.05 Net Profit (Proforma) 147.47 74.89 Weighted average number of equity shares outstanding during the year 34,69,01,004 31,98,07,936 Nominal value of Equity Shares (Rs.) 10 10 Basic Earnings per Share (Rs.) 4.28 2.35 Basic Earnings per Share (Rs.) (Proforma) 4.25 2.34 Diluted Earnings per Share (Rs.) (Reported) 4.27 2.35 Diluted Earnings per Share (Rs.) (Proforma) 4.24 2.3410.7 Consolidated Financial Statements – Subsidiary (AS 21): ALF Insurance Services Pvt. Ltd., subsidiary of the Bank, is yet to commence operations for want of necessary regulatory approvals. Accordingly, no consolidated financial statements have been drawn up as per AS-21 “Consolidated Financial Statements”.10.8 Taxation (AS 22): (a). Provision for tax has been made after considering contingency provision as admissible deduction. 65
  • 65. (b). Deferred Tax (AS-22): The major components of deferred tax assets/ liabilities as on March 31, 2009 are as under: (Rs. in crores) 31.03.2009 31.03.2008 Deferred Tax Deferred Tax Timing difference on account of : Assets Liabilities Assets Liabilities Difference between book depreciation and depreciation – 31.30 – 34.81 under the Income Tax Act, 1961 Difference between Provisions for doubtful debts and 53.32 – 55.62 – advances and amount allowable under Section 36(1)(viia) of the Income Tax Act, 1961 Interest on securities – 30.22 – 26.88 Income Recognition 0.01 – 0.01 – Others 2.38 – 1.82 – Sub-total 55.71 61.52 57.45 61.69 Net closing balance carried to Balance Sheet 5.81 4.24 (included in Sch. V – Others) 10.9 In the opinion of the Bank there is no impairment of its Fixed Assets to any material extent as at March 31, 2009 requiring recognition in terms of Accounting Standard 28. 11. Additional Disclosures: 11.1 Provisions and Contingencies charged to Profit and Loss account for the year consist of: (Rs. in crores) Break up of ‘Provisions and Contingencies’ shown under the head Expenditure in March 31, March 31, Profit and Loss account 2009 2008 Depreciation on Investments (3.09) 3.63 Provision for non-performing assets including bad debts written off 125.29 60.90 Provision towards Standard Assets 6.86 7.45 Income Tax / Wealth Tax / Deferred Tax/ Fringe Benefit Tax 79.15 39.23 Other provisions and contingencies Repossessed Assets 7.47 4.35 Others 4.23 5.58 Total 219.91 121.14 11.2 Disclosure of Complaints: A. Customer Complaints No. Particulars 2008-09 2007-08 (a) No. of complaints pending at the beginning of the year 44 39 (b) No. of complaints received during the year 303 182 (c) No. of complaints redressed during the year 287 177 (d) No. of complaints pending at the end of the year 60 44 B. Awards passed by the Banking Ombudsman No. Particulars 2008-09 2007-08 (a) No. of unimplemented Awards at the beginning of the year Nil Nil (b) No. of Awards passed by the Banking Ombudsmen during the year Nil Nil (c) No. of Awards implemented during the year Nil Nil (d) No. of unimplemented Awards at the end of the year Nil Nil (Compiled by management and relied by auditors) 11.3 Letters of Comfort Bank has not issued any letter of comfort during the year. 12. Bank does not carry any floating provision in the books. 13. Suppliers / service providers covered under Micro, Small, Medium Enterprises Development Act, 2006, have not furnished the information regarding filing of necessary memorandum with the appropriate authority. Hence, information required to be disclosed under section 22 of the said Act is not given. 14. Previous year’s figures have been regrouped/ reclassified wherever necessary.66
  • 66. CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009 (Rs. in crores) For the year For the year ended 31.3.2009 ended 31.3.2008A. Cash Flow from Operating Activities Net Profit after taxes 148.34 75.05 Adjustments for non-cash charges : Depreciation on Fixed Assets 44.17 40.16 Provision on Investments (3.09) 3.63 Tax Provisions (Income Tax/ Wealth Tax/ Deferred Tax) 79.15 39.23 Employees Stock Option Expenses 0.64 0.51 Loan loss and Other Provisions 143.85 37.29 Interest on Tier II / Upper Tier II bonds (treated separately) 77.27 76.58 (Profit) / Loss on sale of fixed assets 2.60 (14.70) Operating Profit before Working Capital changes 492.93 257.75 Adjustments for : Increase in trade and Other Receivables (Advances and Other Assets) (3311.17) (1769.75) Increase in Inventories (Investments) (1450.62) (741.67) Increase in Trade Payables (Deposits, Borrowings and Other Liabilities) 3946.23 1991.82 Cash generated from Operations (322.63) (261.85) Direct taxes paid (67.22) (65.26) Net Cash from Operating Activities (389.85) (327.11)B. Cash Flow from Investing Activities Purchase of Fixed Assets (51.05) (56.98) Sale of Fixed Assets (Proceeds) 2.06 15.75 Net Cash used in Investing Activities (48.99) (41.23)C. Cash Flow from Financing Activities Proceeds from GDR issue – Capital 35.19 – – Premium 187.00 – Dividends paid (24.92) (22.45) Proceeds from Issue of Unsecured Non-Convertible Redeemable Subordinated Tier II Bonds 100.00 50.00 Proceeds from Unsecured Non-convertible Redeemable Non-Cumulative Subordinated Upper Tier II Bonds – – Redemption of Sub-ordinated Tier II capital (35.50) – Interest on Tier II / Upper Tier II bonds (77.27) (76.58) Net Cash used in Financing Activities 184.50 (49.03)Net increase in Cash and Cash Equivalents (254.34) (417.37)Cash and Cash Equivalents as on the first day of the year 2178.03 2595.40Cash and Cash Equivalents as on the last day of the year 1923.69 2178.03Notes :1. The above Cash Flow Statement has been prepared under the indirect method as set out in Accounting Standard 3 on Cash Flow Statement issued by the Institute of Chartered Accountants of India (ICAI).2. Figures in brackets indicate cash outflow.3. Refer to note 15 under Schedule No. XVII.4. Previous year’s figures have been regrouped and recast to conform to the current year’s classification.As per our report of even date. For INDUSIND BANK LTD.For M.P. Chitale & Co. R. Seshasayee T. Anantha NarayananChartered Accountants Chairman DirectorAshutosh Pednekar Romesh SobtiPartner Managing DirectorPlace : Mumbai S. V. Zaregaonkar Haresh GajwaniDate : May 5, 2009 Chief Financial Officer Company Secretary 67
  • 67. DISCLOSURES UNDER THE NEW CAPITAL ADEQUACY FRAMEWORK (BASEL II GUIDELINES) I. Scope of Application IndusInd Bank Limited (‘the Bank’) is a commercial bank, which was incorporated on January 31, 1994. The Bank has only one subsidiary - Alfin Insurance Services Ltd. The financials of the subsidiary are not consolidated with the Bank’s financials as the said company could not commence business and CRAR is computed on the financial position of the Bank alone. The amount of capital held in this subsidiary is deducted from Capital funds, i.e. 50% Tier I and 50% Tier II. II. Capital Structure Equity Capital : The Bank has authorised share capital of Rs.500.00 crores comprising 50,00,00,000 equity share of Rs.10/- each. As on March 31, 2009, the Bank has issued, subscribed and paid-up capital of Rs.355.19 crores, constituting 35,50,00,000 shares of Rs.10/- each. The Bank’s shares are listed on the National Stock Exchange and the Bombay Stock Exchange. The GDRs issued by the Bank are listed on the Luxembourg Stock Exchange. During the year, the Bank has raised capital in the form of equity shares through offerings of overseas Global Depository Receipts (GDRs), each GDR representing one equity share of the Bank of the face value of Rs.10/- issued at US$ 1.47 per share fully paid. The provisions of the Companies Act, 1956 and other applicable laws and regulations govern the rights and obligations of the equity share capital of the Bank. Debt Capital Instruments : The Bank has raised capital through subordinated bonds (Unsecured Redeemable Non-convertible Bonds) eligible as Tier 2 capital, details of which are given below. Upper Tier 2 Capital : The aggregate value of Upper Tier 2 capital as on March 31, 2009 was Rs.308.90 crores as per the table below : Sr. Date of Amount Coupon (%) Redemption No. Placement (Rs. in crs.) Date 1. 31.03.2006 100.00 Payable semi-annually @ 9.60% p.a for first 10 years and @ 10% 30.03.2021 p.a. from 11th year till redemption 2. 30.09.2006 80.20 Payable semi-annually @ 10.25% p.a for first 10 years and 30.09.2021 @ 10.75% p.a. from 11th year till redemption 3 23.12.2006 128.70 Payable semi-annually @ 9.75% p.a for first 10 years and @ 10.25% 23.12.2021 p.a. from 11th year till redemption Total 308.90 Subordinated Debt As on March 31, 2009, the Bank had an outstanding subordinated debt (Unsecured Redeemable Non-convertible Bonds) aggregating Rs.651.60 crores the details of which are stated below: Sr. Date of Amount Coupon (%) Redemption No. Placement (Rs. in crs.) Date 1. 31.03.2004 66.50 @7.00% p.a. payable annually 30.06.2009 2. 30.06.2004 48.00 @6.80% p.a payable annually 30.04.2010 50.00 @7.00% p.a. payable annually 30.04.2014 3. 31.03.2005 82.00 @8.10% pa. payable annually 30.06.2010 11.04.2005 15.00 @ 1 year Gsec (INBMK) + 190 bps payable semi-annually 30.06.2010 11.04.2005 75.10 @8.50% p.a payable annually 30.06.2014 4. 30.12.2005 115.00 @8.40% p.a. payable annually 30.05.2015 5. 30.03.2007 50.00 @10% p.a. payable semi-annually 30.06.2012 6. 29.09.2007 50.00 @10.35% p.a. payable semi-annually 29.04.2013 7. 31.03.2009 100.00 @10.50% p.a. payable annually 30.06.2014 Total 651.60 Of this, Rs.439.10 crores qualified as Tier 2 capital.68
  • 68. Composition of the Capital – Tier I and Tier II as on March 31, 2009 (Rs. in crores) Tier I Capital Paid up Share Capital 355.19 Reserves 1,072.04 Innovative Instruments - Other Capital Instruments - Gross Tier I Capital 1,427.23 Deductions Investments in Subsidiaries and Associates 0.55 Credit enhancements under Securitisation 0.45 Net Tier I Capital 1,426.23 Tier II Capital Upper Tier II Bonds 308.90 Sub-ordinated debts 439.10 General Provisions / IRA and Revaluation Reserves 166.69 Gross Tier II Capital 914.69 Deductions Investments in Subsidiaries and Associates 0.55 Credit enhancements under Securitisation 0.45 Net Tier II Capital 913.69 Total eligible capital 2,339.92 Debt Capital instruments eligible for inclusion in Upper Tier 2 Capital 308.90 Total amount outstanding 308.90 Of which amount raised during the current year - Amount eligible to be reckoned as Capital funds 308.90 Subordinated debt eligible for inclusion in Lower Tier 2 Capital Total amount outstanding 651.60 Of which amount raised during the current year 100.00 Amount eligible to be reckoned as Capital funds 439.10 Tier I Capital Funds 1,426.23 Tier II Capital Funds 913.69 Total Eligible Capital Funds 2,339.92III. Capital Adequacy Capital requirements for Credit Risk, Market Risk and Operational Risk as on March 31, 2009 Risk Type Rs. in crores Capital requirements for Credit Risk 1,548.44 Portfolio Subject to Standardised approach 1,547.99 Securitisation exposures 0.45 Capital requirements for Market Risk 30.98 Standardised Duration Approach Interest Rate Risk 15.02 Foreign Exchange Risk (including gold) 9.00 Equity Risk 6.96 Capital requirements for Operational Risk 98.53 Basic Indicator Approach 98.53 Total Capital requirements at 9% 1,677.95 Total Capital Funds 2,339.92 CRAR 12.55% 69
  • 69. Under Basel II, Bank’s CRAR works out to be 12.55% as on March 31, 2009, which is higher by 0.22% as compared to 12.33% under Basel I. Integrated Risk Management: Objectives and Organisation Structure : The Bank has established an Enterprise-wide Risk Management Department responsible for Bank-wide risk management covering Credit risk, Market risk (including ALM) and Operational risk, independent of the Business segments. The Risk Management Department focuses on identification, measurement, monitoring and controlling of risks across various segments. The Bank has been progressively adopting the best International practices so as to continually reinforce its Risk Management functions. Objectives and Policies: The set up of Risk Management Department is hereunder: Managing Director Chief Risk Officer Head – Risk Mgmt Credit Risk Management Market Risk Management Operational Risk Asset Liability Management Management Separate Committees are set up to manage and control various risks as specified below : • Risk Management Committee (RMC) • Asset Liability Management Committee (ALCO) • Credit Risk Management Committee (CRMC) • Market Risk Management Committee (MRMC) • Operational Risk Management Committee (ORMC) Bank has articulated various risk policies which specify the risks, controls and measurement techniques. The policies are framed keeping risk appetite as the central objective. Against this background, the Bank identifies a number of key risk components. For each of these components, the Bank determines a target that represents the Bank’s perception of the component in question. The risk policies are vetted by the sub-committees, viz. CRMC, MRMC, etc. and are put forth to RMC, which is a sub- committee of the Board. Upon vetting of the policies by RMC, the same is placed for the approval of the Board and implemented. Bank has put in place a comprehensive policy on ICAAP, which presents a holistic view of the material risks faced, control environment, risk management processes, risk measurement techniques, capital adequacy and capital planning. Policies are periodically reviewed and revised to address the changes in the economy / banking sector and Bank’s risk profile. Monitoring of various risks is undertaken at periodic intervals and a report is submitted to Top management / Board. Credit Risk The Bank manages credit risk comprehensively; both at Transaction level and at Portfolio level. Some of the major initiatives taken are listed below. • Bank uses a robust Risk rating framework for evaluating credit risk of the borrowers. The Bank uses segment-specific rating models which are equipped with transition matrix capabilities. • Risks on various counter-parties such as corporates, banks, are monitored through counter-party exposure limits, governed by country risk exposure limits also in case of international trades. • The Bank manages risk at the portfolio level too, with portfolio level prudential exposure limits to mitigate concentration risk. • The Bank has a well-diversified portfolio across various industries and segments, as illustrated by the following data. o Retail and schematic exposures (which provide wider diversification benefits) account for as much as 45% of the total fund-based advances.70
  • 70. o The Bank’s corporate exposure is fully diversified across 85 industries, thus insulated from individual industry cycles.The above initiatives support qualitative business growth while managing inherent risks within the risk appetite.Market RiskKey sources of Market Risk are Liquidity Risk, Interest Rate Risk, Price Risk and Foreign Exchange Risk. The Bank hasimplemented a state-of-the-art Treasury system which supports robust risk management capabilities and facilitates Straight-through Processing.Market Risk is effectively managed through comprehensive policy framework which provides various tools such as Mark-to-Market, Duration analysis, Value-at-Risk, besides through operational limits such as stop-loss limits, exposure limits,deal-size limits, maturity ladder, etc.Asset Liability Management (ALM)The Bank’s ALM system supports effective management of liquidity risk and interest rate risk, covering 100% of its assetsand liabilities.• Liquidity Risk is monitored through Structural Liquidity Gaps, Dynamic Liquidity position, Liquidity Ratios analysis and Behavioral analysis, with prudential limits for negative gaps in various time buckets.• Interest Rate Sensitivity is monitored through prudential limits for Rate Sensitive Gaps and other risk parameters.• Interest Rate Risk on the Investment portfolio is monitored through Modified Duration on a daily basis. Optimum risk is assumed through duration, to balance between risk containment and profit generation from market movements.ALCO meetings were convened frequently during the financial year, wherein analytical presentations were made providingdetailed analysis of liquidity position, interest rate risks, product mix, business growth v/s budgets, interest rate outlook,which helped to review the business strategies regularly and undertake new initiatives.The interest rate outlook projected in ALCO meetings during the last two years have largely been in line with the actualinterest rate trend taking place.Operational RiskOperational Risk is managed by addressing People Risk, Process Risk, Systems Risk as well as risks arising out ofexternal environment.The Bank has efficient audit mechanism, involving periodical on-site audit, concurrent audits, on the spot and off-sitesurveillance enabled by the Bank’s advanced technology and Core Banking System.The Bank has initiated the process of putting in place Operational Risk Management Framework, using sophisticated tools,such as:• Key Risks Indicators• Score Cards• Risk Events• Loss Data• Near Miss EventsThe framework would help in mitigation of operational risks and optimization of capital requirement towards operationalrisks under Basel II norms.Systems RiskAs part of Systems-related Operational Risk Management initiatives, the Bank has achieved the following.• The Bank has formulated and implemented a comprehensive Business Continuity Plan (BCP) to ensure continuity of its critical business functions and extension of banking services to its customers.• The Bank has established an effective Disaster Recovery site at a distant location, with on-line, real-time replication of data, both in Mumbai and Chennai.• Comprehensive IT security framework has been put in place to ensure complete data security and integrity.• The Bank has housed its data center in a professionally managed environment, with sophisticated and fool-proof security features and assured supply of utilities.The robust Risk Management framework created in the Bank supports rapid and qualitative growth with optimization of risksand maximization of shareholder value. 71
  • 71. IV. Credit Risk Exposures “Credit Risk” is defined as the probability / potential that the borrower or counter-party may fail to meet its obligations in accordance with agreed terms. It involves inability or unwillingness of a borrower or counter-party to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions. Credit Risk is made up of two components: 1. Transaction Risk (or Default Risk), which represents the risk arising from individual credit exposures and 2. Portfolio Risk, which represents the risk inherent in the portfolio of credit assets (concentration of assets, correlation among portfolios, etc.). Credit risk is found in a variety of transactions across the Bank’s portfolio including not only loans, off balance sheet exposures, investments and financial guarantees, but also the risk of a counterparty in a derivative transaction becoming unable to meet its obligations. Credit risk constitutes the largest risk to which the Bank is exposed. The Bank has adequate system support which facilitates credit risk management and measurement across its portfolio. The system support is strengthened and expanded as and when new exposures are added to the Bank’s portfolio. The Bank has articulated comprehensive guidelines for managing credit risk as outlined in Credit Policy, Credit Risk and related Policies framework, Bank Risk Policy, Country Risk Policy and Recovery Policy. The Credit Risk Management systems used at the Bank have been implemented in accordance with these guidelines and best market practices. The credit risk management process focuses on both specific transactions and on groups of specific exposures as portfolios. The Bank’s credit risk and related policies and systems focus are framed to achieve the following key objectives: • Monitoring concentration risk in particular products, segments, geographies etc. thereby avoiding concentration risk from excessive exposures to any particular product, segment, geography etc. • Assisting in building quality credit portfolio and balancing risks and returns in line with Bank’s risk appetite • Tracking Credit quality migration • Determining how much capital to hold against each class of the assets • Undertaking Stress testing to evaluate the credit portfolio strength • To develop a greater ability to recognize and avoid potential problems • Alignment of Risk Strategy with Business Strategy • Adherence to regulatory guidelines Credit Risk Management at specific transaction level The central objective for managing credit risk at each transaction level is development of evaluation and monitoring system that covers the entire life cycle of the exposure, i.e. opportunity for transaction, assessing the credit risk, granting of credit, disbursement and subsequent monitoring, identifying the obligors with emerging credit problems, remedial action in event of credit quality deterioration and repayment or termination of the obligation. The Credit Policy of the Bank stipulates for applicability of various norms for managing credit risk at a specific transaction level and more relevant to the target segment of the obligors. The Credit Policy covers all the types of obligors, viz. Corporate, SME, Trader, Business Banking and Schematic Loans such as Home Loan, Personal Loan, etc. The major components of Credit Policy are mentioned below : • The transaction with the customer/ prospective customer is undertaken with an aim to build long term relationship. • All the related internal and regulatory guidelines such as KYC norms, RBI prudential norms, etc. are adhered to while assessing the credit request of the borrower. • The credit is granted with due diligence and detailed insight into the customer’s circumstances and of specific assessments that provide a context for such credits. • The facility is granted based on the customer’s creditworthiness, capital base or assets to assure that the customer is able to substantiate the repayment. Due regard is also given to the industry in which the customer is operating, the business specific risks and management capability and their risk appetite. • Regular follow-up in the overall health of the borrower is undertaken to assess whether the basis of granting credit has changed. • When loans and credits are granted to borrowers falling outside preferred credit rating, the Bank normally considers sufficient collateral. However, collaterals are not the sole criteria for lending, which is generally done based on assessing the adequacy of the cash flows.72
  • 72. • The Bank has defined exposures limit on the basis of internal risk rating of the borrower.• The Bank is particularly cautious when granting credits to businesses in affected or seasonal industries.• In terms of Bank’s country risk management, due caution is exercised when assuming risk in countries with an unstable economic or political scenario.Credit Approval CommitteeThe Bank has put in place the principle of ‘Committee’ or ‘Approval Grids’ approach while according sanctions to the creditproposals. This provides for an unbiased, objective assessment/evaluation of credit proposals. Such Committees consistsof one or more officials from an independent department, which has no volume or profit targets to achieve. The spirit ofthe credit approving system is that no credit proposals are approved or recommended to higher authorities unless allthe members of the ‘Committee’ or ‘Approval Grids’ agree on the acceptability of the proposal in all respects. In case ofdisagreement the proposal is referred to next higher Committee whose decision to approve or decline with conditions isthen final.The following ‘Approval Grids’ are constituted:• Corporate & Commercial Banking Segment Branch Credit Committee (BCC) Zonal Credit Committee (ZCC) Corporate Office Credit Committee (COCC) – I Corporate Office Credit Committee (COCC) – II Executive Credit Committee (ECC)• Consumer Banking Segment : The scheme of delegation under Consumer Banking Segment includes Vehicle financing, personal loans, housing loans and other schematic loans under multi-tier Committee based approach as under: Branch Credit Committee – Consumer Banking (BCC – CB) Regional Credit Committee – Consumer Banking (RCC-CB) Corporate Office Credit Committee – Consumer Banking (COCC- CB I & II)The credit proposals which are beyond the delegated powers of ECC are placed to Committee of Directors (COD) or Boardof Directors (BOD) for approval.Risk ClassificationThe Bank monitors the overall health of its customers on an on-going basis to ensure that any weakening of a customer’searnings or liquidity is detected as early as possible. As part of the credit process, customers are classified according to thecredit quality in terms of internal rating, and the classification is regularly updated on receipt of new information/ changesin the factors affecting the position of the customer.The Bank has operationalised the following risk rating/scoring models depending on the target segment of theborrower:• Large Corporate, Small & Medium Enterprises, NBFC, Business Banking• Trading entities, Capital Market Broker and Commodity Exchange Broker• Financial Institutions/Primary Dealers and Banks• Retail customers (Schematic Loans) – which are assigned credit scoringRating grades in each rating model is on a scale of 1 to 8. The model-specific rating grades are named distinctly. Eachmodel-specific rating grade reflects the relative ratings of the borrowers under that particular segment. For instance, L4indicates a superior risk profile of a Large Corporate, when compared to another Large Corporate rated L5.In order to have a common risk language across the Bank, these model specific ratings are mapped to common scaleratings which facilitate measurement of risk profile of different segments of borrower by means of common risk ladder.The various purposes for which the rating models are used are mentioned hereunder:• Risk based pricing i.e. higher premium for higher risk• Capital allocation (under Basel II – IRB approaches)• Portfolio Management• Efficiency in lending decision 73
  • 73. • To assess the quality of the borrower – single point reference of credit risk of the borrower • Minimum rating norms for assuming exposures • Prudential ceiling for single borrower exposures – linked to rating • Frequency of review of exposures. • Frequency of internal auditing of exposures • To measure the portfolio quality • Target for quality of advances portfolio is monitored by way of Weighted Average Credit Rating (WACR). Credit Quality Assurance: Bank has also adopted Loan Review Mechanism (LRM), which involves independent assessment of the quality of an advance, effectiveness of loan administration, compliance with internal policies of bank and regulatory framework, adequacy of loan loss provisions (for NPAs) and portfolio quality. It also helps in tracking weaknesses developing in the account for initiating corrective measures in time. LRM is carried out by Credit Quality Assurance team, which is independent of Credit and Business functions. Credit Risk Management at Portfolio level: The accumulation of individual exposures leads to portfolio, which creates the possibility of concentration risk. The concentration risk, ideally on account of borrowers/ products with similar risk profile, may arise in various forms such as Single Borrower, Group of Borrowers, Sensitive Sector, Industry – wise Exposure, Unsecured Exposure, Rating wise Exposure, Off Balance sheet Exposure, Product wise Exposure, etc. The credit risk concentration is addressed by means of structural and prudential limits stipulated in the Credit Risk Policy and other related policies. Concentration risk on account of exposures to counter-parties (both single borrower and group of borrowers), Industry-wise, Rating-wise, Product-wise, etc. is being monitored by Risk Management Dept (RMD). For this purpose, exposures in all business units, viz. branches, treasury, investment banking, etc. by way of all instruments (loans, equity/debt investments, derivative exposures, etc.) are being considered. Such monitoring is carried out at monthly intervals. Besides, respective business units are monitoring the exposure on continuous real-time basis. The concentration risk is further evaluated in terms of statistical measures and benchmarks. A comprehensive Stress Testing framework based on several factors and risk drivers assessing the impact of stressed scenario on Credit quality, its resultant after effect on Bank’s profitability and capital adequacy, is placed to Top Management /Board every quarter/ annually. The framework highlights the Bank’s credit portfolio under 3 different levels of intensity across default, i.e. mild, medium and severe, and analyses its impact on the portfolio quality and solvency level. Impaired credit - Non Performing Assets (NPAs): The guidelines as laid down by RBI Master Circular No. DBOD.No.BP.BC.20/21.04.048/2008-09 dated July 1, 2008, on Asset classification, Income Recognition and Provisioning to Advances portfolio are followed while classifying Non-performing Assets (NPAs). The guidelines are as under: a) An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank b) A non performing asset (NPA) is a loan or an advance where; i. interest and / or installment of principal remains overdue for a period of more than 90 days in respect of a term loan, ii. the account remains ‘out of order’, in respect of an Overdraft / Cash Credit (OD/ CC), iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, iv. the installment of principal or interest thereon remains overdue for two crop seasons for short duration crops, v. the installment of principal or interest thereon remains overdue for one crop season for long duration crops, vi. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction undertaken in terms of RBI guidelines on Securitisation dated February 1, 2006. Out of Order status: An account should be treated as ‘out of order’ if the outstanding balance remains continuously in excess of the sanctioned limit / drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit / drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as ‘out of order’. Overdue: Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid on the due date fixed by the bank.74
  • 74. (i) Total Gross Credit Risk Exposure Rs. in crores Fund Based* 26,680 Non Fund Based** 5,240 Total Exposures 31,920* Includes all exposures such as Cash Credit, Overdrafts, Term Loan, Cash, SLR securities, etc., which are held in banking book** Off-Balance items such as LC, BG and credit exposure equivalent of Inter-bank forwards, merchant forward contracts and derivatives, etc.(ii) Geographical Distribution of Exposures (Rs. in crores) Domestic Overseas Fund Based 26,680 – Non Fund Based 5,240 – Total Exposures 31,920 –Industry-Wise Distribution of Exposures (Rs. in crores) Industries Fund Based Non Fund Based Steel Steel-Long Products 183 77 Steel Flats-CR,GP/GC 113 112 Steel - Alloy 200 16 Sponge Iron 25 29 Iron and Steel Rolling Mills 19 0 Stainless Steel 6 0 Textiles Textiles - Readymade Garments 196 23 Textiles - Cotton fibre / yarn 99 5 Textiles - Cotton fabrics 94 6 Textiles - Synthetic Fabrics 9 0 Textiles - Manmade fibres / yarn 9 0 Cotton ginning, Cleaning, Baling 1 0 Textile - Jute 1 0 Textile Machinery 1 0 Real Estate - Commercial Lease Rental Discounting 143 0 Commercial Property 1 0 Land & Buildings Developers 254 28 Others 3 Telecom Telecom Equipments 117 113 Telecom - Cellular 32 4 Telecom Cables 18 1 Pharmaceuticals Pharmaceuticals - Bulk Drugs 173 12 Pharmaceuticals - Formulations 156 0 Chemicals Chemicals - Organic 98 41 Chemicals - Inorganic 17 53 75
  • 75. Automobiles Automobiles-Passenger Cars 6 0 Automobiles-2/3 wheelers 5 0 Automobiles-Commercial Vehicle 2 0 Infrastructure Project Construction (Turnkey) 149 269 Other Infrastructure 215 16 Petroleum & Products 400 0 NBFCs (other than HFCs) 309 0 Gems and Jewellery 236 66 Microfinance Institution 238 0 Engineering & Machinery 153 24 Capital Market Broker 46 130 Contract Construction 121 6 Food Credit 99 0 Plastic & Plastic Products 63 25 Power 64 12 Coal 14 55 Fast Moving Consumer Goods 68 1 Electronic components 52 7 Tyres 41 15 Paper - Writing and Printing 49 4 Fertilizers - Nitrogenous 2 205 Electric Equipment 18 30 SME - Miscellaneous-Mfng 31 10 Sugar 36 6 Petrochemicals 1 40 Mining, Quarrying & Minerals 26 11 Other Food processing 36 0 Beverage, Breweries, Distileries 32 1 Auto Ancillaries 93 16 Aluminum 30 0 Diversified 12 10 Paper - Industrial 20 0 Tiles/Sanitaryware 12 0 Consumer Finance Division 7127 0 Other Industries 3996 3761 Residual assets 10910 0 Total Exposures 26680 5240 Residual Contractual Maturity break down of assets (Rs. in crores) Next 2–7 8– 14 15 – 28 29 days 3 – 6 6 mths 1–3 3 – 5 Above 5 Total Day Days Days days – 3mths mths – 1 year year years years Cash 141.88 – – – – – – – – – 141.88 Balances with RBI – – – 20.96 52.45 31.47 31.47 283.21 178.32 451.03 1048.91 Balances with other 352.86 71.62 54.18 111.98 131.82 2.45 – 7.99 – – 732.90 Banks Investments 0.50 264.60 199.62 14.94 83.92 49.29 511.56 881.00 1041.73 5036.25 8083.41 Advances (excl NPAs) 476.46 834.61 587.19 675.21 2435.80 1489.94 4695.26 3593.44 745.87 236.86 15770.64 Fixed Assets – – – – – – – – – 623.19 623.19 Other Assets 5.69 – 6.73 6.73 18.60 25.33 140.99 209.17 – 800.51 1213.75 Total 977.39 1170.83 847.72 829.82 2722.59 1598.48 5379.28 4974.81 1965.92 7147.84 27614.6876
  • 76. Movement of NPAs and Provision for NPAs as on 31.03.09 (Rs. in crores) A Amount of NPAs (Gross) Sub-standard 137.16 Doubtful 1 78.58 Doubtful 2 32.43 Doubtful 3 6.64 Loss 0.21 B Net NPAs 179.13 C NPA ratios Gross NPA to Gross advances (%) 1.61% Net NPA to Net advances (%) 1.14% D Movement of NPAs (Gross) Opening Balance as on 01.04.08 392.31 Additions during the year 219.00 Reductions during the year 356.29 Closing Balance as on 31.03.09 255.02 E Movement of provision for NPAs Opening as on 01.04.08 101.29 Provision made in 2008-09 137.96 Write off / Write back of excess provisions 163.36 Closing as on 31.03.09 75.89 Non Performing Investments and Movement of provision for depreciation on Non Performing Investments (Rs. in crores) A Amount of Non-Performing Investments 0 B Amount of provision held for non-performing investments 0 C Movement of provision for depreciation on investments Opening as on 01.04.08 16.10 Add: Provision made in 2008-09 0.01 Less: Write-off/ write-back of excess provision 11.18 Closing Balance as on 31.3.09 4.93V. Credit risk : Disclosures for portfolios under the standardised approach As per the Basel II guidelines on Standardised approach, the risk weight on the certain categories of domestic counter parties is determined on the external rating assigned by any one of the accredited rating agencies, i.e. CRISIL, ICRA, CARE and Fitch. For Foreign counterparties and banks, rating assigned by S&P, Moody’s and Fitch are used. The Bank computes risk weight on the basis of external rating assigned, both Long Term and Short Term, for the facilities availed by the borrower. The external ratings assigned are generally facility specific. The Bank follows the procedures laid down in the Basel II guidelines for usage of external ratings as under: • Ratings assigned by one rating agency are used for all the types of claims on the borrowing entity. • Long term ratings are used for facilities with contractual maturity of one year & above. Short term ratings are applied for facilities with contractual maturity of less than one year. • If either the short term or long term ratings attracts 150% risk weight on any of the claims on the borrower, the Bank assigns uniform risk weight of 150% on all the unrated claims, both short term and long term. • In case of multiple ratings, if there are two ratings assigned to the facility that maps to different risk weights, the rating that maps to higher risk weight is used. In case of three or more ratings, the ratings corresponding to the two lowest risk weights is referred to and the higher of those two risk weights is be applied. i.e., the second lowest risk weight. • For securitised transactions, SO ratings assigned by the rating agency are applied for arriving at the risk weights. 77
  • 77. Presently, the banks do not assign any risk weight on the basis of proxy ratings. Risk weight-wise distribution of credit Exposures. Category Rs. in crores Below 100% Risk Weights 17,218 100% Risk Weights 13,186 More than 100% Risk Weights 1,516 Deducted - Investments in subsidiaries (1.10) VI. Credit risk mitigation: Disclosures for standardised approach The Bank mitigates credit exposure with eligible collateral and guarantees to reduce the credit risk of obligors as stipulated under Basel II. In principle with mitigating credit risk, Bank has put in place a comprehensive policy on Credit Risk Mitigants and Collaterals for recognizing the eligible collaterals and guarantors for netting the exposures and reducing the credit risk of obligors. Basic procedures and descriptions of controls as well as types of standard collateral, guarantees necessary in granting credit, evaluation methods for different types of credit and collateral, applicable “haircuts” to collateral and revaluation of collateral are stipulated in the Bank’s credit policy and credit risk mitigant policy. The Bank uses net exposure for capital calculations after netting deposit and eligible collaterals. All collateral and guarantees are recorded and the details are linked to individual accounts. Perfection of security interest, date, currency and correlation between collateral and counterparty are also considered. As lending is confined to default risk, Bank accepts collateral securities to minimize the impact of loss and consequently reducing the credit risk. The type of collateral is determined based on the nature of facility, product type, counter party risk and its credit quality. However, as explained earlier, collateral is not the sole criteria for granting credit. For Corporate, SME and Business Banking clients, working capital facility is generally secured by charge on floating assets and Term loan is secured by fixed assets. In case of project financing, Bank stipulates for escrow of receivables along with the underlying project assets. The credit risk policy clearly defines the type of secondary securities and minimum percentage of it to the total exposures is to be obtained in case of credit to obligors falling outside the preferred rating grade. The credit facilities are secured by secondary collaterals such as cash deposits, KVP, NSC, IVP, guarantee, mortgages, etc. Bank also grants unsecured credit to the borrowers with high standing and low credit risk profile. In case of schematic products such as Home Loan, Auto Loan, etc., Loan to value ratio, margin and valuation/revaluation of collaterals is defined in the product programme. The valuation is generally carried out by the empanelled valuer of the Bank. Bank has also put in place approved product paper on loan against warehouse receipts, shares and other securities. The margin, valuation and revaluation of the assets is specified in the product note. The credit approving authorities decides on the type and amount of collaterals for each type of facility on a case-to-case basis. For schematic loans and facilities offered under product programme, securities are obtained as defined in the product notes. Eligible financial asset collateral and guarantor For the purpose of credit risk mitigation, i.e. offsetting the amount of collateral against the individual/ pool of exposures to which the collaterals are assigned, financial asset collateral types are defined by the Bank as per the New Capital Adequacy Framework to include Fixed deposits, KVP, IVP, NSC, Life Insurance Policies, Gold, Securities issued by Central and State Governments and units of Mutual Fund. On a similar note, the eligible guarantors are classified into the following categories: • Sovereigns, Sovereign entities, Banks and Primary Dealers with lower risk weights than the counterparty. • Other entities rated AA(-) or better including guarantee cover provided by parent, subsidiary and affiliate companies when they have lower risk weight than the obligor. Particulars Rs. in crores Exposure before applying eligible mitigants 3,035 Exposure after applying eligible mitigants 693 VII. Securitisation: Disclosure for standardised approach Securitisation “means a process by which a single performing asset or a pool of performing assets are sold to a bankruptcy remote SPV and transferred from the balance sheet of the originator to the SPV in return for an immediate cash payment.78
  • 78. SPV” means any company, trust, or other entity constituted or established for a specific purpose - (a) activities of whichare limited to those for accomplishing the purpose of the company, trust or other entity as the case may be; and (b) whichis structured in a manner intended to isolate the corporation, trust or entity as the case may be, from the credit risk of anoriginator to make it bankruptcy remote.The securitization of assets generally being undertaken by the Bank is on the basis of ‘True Sale’, which provides 100%protection to the Bank from the default. All risks in the securitised portfolio are transferred to the Special Purpose Vehicle(SPV). Post-securitisation, Bank continues to service the loans transferred under securitization. Bank also provides forcredit enhancements in the form of cash collaterals.Gains on securitisation are recognized over the period of underlying securities issued by the SPV. Loss on securitization isaccounted for immediately.The Bank, in the past, had securitized its assets with the objectives of managing its funding requirements, improvingliquidity, diversifying the portfolio risk, managing interest rate risk and capital adequacy. The Bank has not securitised anyof its portfolio for the past 3 years. Bank has bought back exposure on securitization originated by it, the outstanding ofwhich as of March 31, 2009 was Rs.26.14 crores.The Bank has also purchased securitized exposures of highest credit quality AAA (SO) and equivalent.The securitized assets, both the purchased and transferred, have been progressively declining on account of scheduledrecoveries.Roles played by the BankIn the securitization transaction, the Bank has taken up the following roles:• Originator: The Bank disburses the credit, after detailed appraisal. The individual accounts are repacked into a pool for transferring credit risk to the third party. The Bank has securitised its Commercial vehicles, Utility vehicles, Car Loans and Construction Equipment exposures. The securitised tranches have been assigned highest credit quality rating AAA (SO) and equivalent by the rating agencies reflecting superior quality of the underlying assets.• Investor: Investing in the securitised pool originated by the other Bank/FIs, having highest credit quality for the purpose of Balance sheet management and diversifying credit profile.• Servicer: The Bank acts as a servicer when loans which were originated by the Bank are used as underlying assets in securitization. As the exposures are booked by the Bank, it emphasises on continuing and enriching the relationship with the clients.• Provider of Credit enhancement: To manage the issue of delinquencies in the underlying assets by effectively addressing the repayment obligation, under the transaction, of the investors.• Provider of Liquidity facilities: To bridge the timing gap in collection of recoveries from the underlying pool and transferring the cash flows, as per the schedule, to the investors.Regulatory framework for Capital Requirement against Securitisation:Treatment of credit enhancements provided by an originator :Credit enhancement facilities include all arrangements provided to the SPV that could result in a bank absorbing losses ofthe SPV or its investors. Such facilities are provided by both originators and third parties.Bank is required to hold capital against the credit risk assumed when it provides credit enhancement, either explicitly orimplicitly, to a special purpose vehicle or its investors.Treatment of First Loss Facility:The first loss credit enhancement provided by the originator is reduced from capital funds and the deduction is capped atthe amount of capital that the bank would have been required to hold for the full value of the assets, had they not beensecuritised. The deduction is made 50% from Tier 1 and 50% from Tier 2 capital.Treatment of Second Loss Facility:The second loss credit enhancement provided by the originator is reduced from capital funds to the full extent. The deductionis made 50% from Tier 1 and 50% from Tier 2 capital.Treatment of credit enhancements provided by third party :Treatment of First Loss Facility:The first loss credit enhancement provided by third party service providers is reduced from capital to the full extent asmentioned in paragraph above. 79
  • 79. Treatment of Second Loss Facility: The second loss credit enhancement is treated as a direct credit substitute with a 100 per cent credit conversion factor and a 100% risk weight covering the amount of the facility. Names of ECAIs used for securitisations and the types of securitisation exposure for which each agency is used: The Bank uses the ratings assigned by the accredited rating agencies, viz., CRISIL and ICRA for the purpose of the following securitised transactions: • Investment in securitised pools/ Pass through certificates (PTC) • Underlying assets in the tranches. • Liquidity support (i) Break up of Exposures securitised by the Bank (Rs. in crores) Exposure Type Amount (O/s Principal amount) Commercial Vehicles 1.40 Utility Vehicles 0.29 Four Wheeler 8.07 Construction Equipments 0.24 Personal Loan - Home Loan - Total Securitised Exposure 10.00 (ii) Amount of impaired or past due assets securitised Exposure Type Commercial Vehicles Utility Vehicles Four Wheeler NA Construction Equipments Personal Loan Home Loan (iii) Break up of aggregate amount of securitisation exposure purchased by exposure type Exposure Type Rs. in crores Commercial Vehicles – Utility Vehicles – Four Wheeler 18.71 Used Cars 5.51 Personal Loan 2.34 Two Wheelers 0.10 Others – Liquidity Facilities – Credit Enhancements 10.00 Other Commitments – Total 36.6680
  • 80. (iv) Risk Weight wise break up of amount of securitisation exposure retained or purchased by exposure typeRisk Weight Category Rs. in croresLess than 100% 26.66100% –More than 100% –Deductions –Liquidity Facilities –Credit Enhancements 10.00Other Commitments –Total 36.66(v) Break up of securitised exposures deducted by exposure type (Rs. in crores)Exposure Type Deducted from Tier I Credit Enhancement Other deductions deducted from Tier I and Tier II capitalCommercial Vehicles – 1.40 –Utility Vehicles – 0.29 –Four Wheeler – 8.07 –Construction Equipments – 0.24 –Personal Loan – – –Home Loan – – –Total – 10.00 –(vi) Total number and book value of loans asset securitised- by type of underlying assets Exposure Type FY 2008-09 FY 2007-08 Total no, Amount Total no, Amount of assets of assets securitised securitised Commercial Vehicles Utility Vehicles Four Wheeler NA NA Construction Equipments Personal Loan Home Loan(vii) Summary of Securitised activity Particulars FY 2008-09 FY 2007-08 Sale consideration received for securitised assets NA NA Net gain/Loss on account of securitisation(viii) Summary of form and quantum of services providedParticulars FY 2008-09 FY 2007-08Outstanding Credit enhancementsFundedNon Funded NA NAOutstanding Liquidity FacilityNet outstanding servicing assets/liabilitiesOutstanding subordinate contributions 81
  • 81. VIII. Market Risk in Trading book Market Risk may be defined as the possibility of loss to a bank caused by changes in the market variables. The market risk for the Bank is governed by the Market Risk Policy and Funds and Investment policy which are approved by the Board. These policies serve to outline the Bank’s risk appetite and risk philosophy in respect of Treasury / Forex / Equity / Derivatives / Bullion operations, and the controls that are considered essential for the management of market risks. The policies are reviewed periodically to update it with changed business requirements, economic environment and revised regulatory guidelines. Sources of Market Risk: Market risks arise from the following risk factors: • Price risk for bonds, forex, equities and bullion • Interest rate risk for investments, derivatives, etc • Exchange rate risk for currencies; and • Trading / liquidity risk. Objectives of Market Risk Management: The broad objectives of Market Risk management are: • Management of interest rate risk and currency risk of the trading portfolio. • Adequate control and suitable reporting of investments, Forex, Equity and Derivative portfolios • Compliance with regulatory and internal guidelines. • Monitoring and Control of transactions of market related instruments. Scope and nature of Risk Reporting and Measurement Systems : Reporting The Bank reports on the various investments, Foreign exchange positions and derivatives position with their related risk measures to the top management and the committees of the Board on a periodic basis. The Bank periodically reports the related positions to the regulators in compliance with regulatory requirements. Measurement The Bank monitoring its risks through risk management tools and techniques such as are Value-at-Risk, Modified Duration, PV01, Stop Loss, amongst others. Based on the risk appetite of the Bank, various risk limits are placed which is monitored on a daily basis. Capital requirements for Market Risks @ 9% (Rs. in crores) Market Risk elements Amount of capital required Interest Rate Risk 15.02 Foreign Exchange Risk (including gold) 9.00 Equity Risk 6.96 Operational Risk The Bank has framed operational Risk Management Policy duly approved by the board. Other policies adopted by the Board that deals with management of operational risk are (a) Information System Security Policy (b) Policy on Know Your Customer (KYC) and Anti Money Laundering Policy (AML) process (c) IT business continuity and Disaster Recovery Plan and (d) Business Continuity Plan (BCP). The Operational Risk Management Policy adopted by the Bank outlines organization structure and detailed process for management of Operational Risk. The basic objective of the policy is to closely integrate Operational Management System to risk management processes of the Bank by clearly assigning roles for effectively identifying, assessing, monitoring and controlling / mitigating operational risk exposures, including material operational losses. Operational risks in the Bank are managed through comprehensive and well-articulated internal control frameworks. The Bank has initiated process of capturing, reporting and assessing risk events at the process level using RCSA framework. IX. Interest Rate Risk in the Banking Book (IRRBB) Interest Rate Risk is the risk of loss in the Bank’s net income and net equity value arising out of a change in level of interest rates and / or their implied volatility. Interest rate risk arises from holding assets and liabilities with different principal amounts, maturity dates and re-pricing dates. The Bank holds assets, liabilities and off balance sheet items across various markets with different maturity or re-pricing dates and linked to different benchmark rates, thus creating exposure to unexpected changes in the level of interest rates in such markets. Interest rate risk in the banking book refers to the risk associated with interest rate sensitive instruments that are not held in the trading book of the Bank.82
  • 82. Risk Management FrameworkThe Board of the Bank has overall responsibility for management of risks and it decides the risk management policy ofthe Bank and sets limits for liquidity, interest rate, foreign exchange and equity price risks. The Asset Liability ManagementCommittee (ALCO) consisting of the Bank’s senior management including Managing Director is responsible for ensuringadherence to the limits set by the Board as well as for deciding the business strategy of the Bank (for the assets andliabilities) in line with the Bank’s budget and decided risk management objectives. ALCO decides strategies and specifiesprudential limits for management of interest rate risk in the banking book within the broad parameters laid down by Boardof Directors. These limits are monitored periodically and the breaches, if any, are reported to ALCO.Monitoring and ControlThe Board of Directors has approved the Asset-Liability Management policy. The policy is intended to be flexible to deal withrapidly changing conditions; any variations from policy should be reported to the Board of Directors with recommendationsand approval from the ALCO.The Bank has put in place a mechanism for regular computation and monitoring of prudential limits and ratios for liquidityand interest rate risk management. The Bank uses its system capability for limits and ratio monitoring. The ALCO supportgroup generates periodic reports for reporting these to ALCO and senior management of the Bank. The ALM support groupcarries out various analysis related to assets and liabilities, forecast of financial market outlook, computes liquidity ratiosand interest rate risk values based on the earnings and economic value perspective.Risk Measurement and Reporting Framework:The estimation of interest rate risk involves interest rate sensitive assets (RSAs) and interest rate sensitive liabilities(RSLs).The techniques for managing interest rate risk include:• Interest rate sensitivity gap Analysis• Earning at Risk Analysis• Stress TestingInterest Rate Sensitivity Gap: The gap or mismatch risk as at a given date, is measured by calculating gaps overdifferent time intervals. Gap analysis measures mismatches between Rate Sensitive Liabilities (RSL) and Rate SensitiveAssets (RSA) (including off-balance sheet positions). The report is prepared by grouping liabilities, assets and off-balancesheet positions into time buckets according to residual maturity or next re-pricing period, whichever is earlier. The differencebetween RSA and RSL for each time bucket signifies the gap in that time bucket. The gap report provides a good frameworkfor determining the earnings impact.Earning at Risk: Any change in interest rate would impact Bank’s net interest income (NII) and the value of its fixedincome portfolio (price risk). The interest rate risk is measured by EaR, that is the sensitivity of the NII to a 100 basis pointsadverse change in the level of interest rates.Stress Testing: The Bank measures the impact on net interest margin (NIM) / EaR after taking into account variouspossible movement in interest rates across tenor and their impact on the earnings and economic value of the Bank iscalculated for each of these scenarios. These reports are prepared on a monthly basis for measurement of interest raterisk.With an upward rate shock of 1% across the curve, as per Rate Sensitive Gaps in INR as on 26.03.2009, the earningshows a decline of Rs. 45.45 crores.The impact of change in interest rate by 100 bps and 50 bps has been computed on open positions (as on March 31, 2009)and shown hereunder against the respective currencies: Change in interest rates (in bps)Currency Impact on NII (Rupees in crores) (100) (50) 50 100INR 45.44 22.72 -22.72 -45.44USD 0.02 0.01 -0.01 -0.02JPY 0.00 0.00 0.00 0.00GBP 0.00 0.00 0.00 0.00EUR 0.00 0.00 0.00 0.00Others -0.01 0.00 0.00 0.01Total 45.45 22.72 -22.72 -45.45 83
  • 83. US DOLLARS DENOMINATED BALANCE SHEET AS AT MARCH 31, 2009 (Millions of US$) 1 USD = 50.72 As at 31.03.09 As at 31.03.08 CAPITAL AND LIABILITIES Capital 70.03 63.09 Employee Stock Options Outstanding 0.23 0.10 Reserves and Surplus 257.90 202.92 Deposits 4359.28 3753.43 Borrowings 366.02 215.98 Other Liabilities & Provisions 391.08 350.81 TOTAL 5444.54 4586.33 ASSETS Cash and Balances with Reserve Bank of India 234.78 300.92 Balances with Banks and Money at Call and Short Notice 144.50 128.50 Investments 1593.73 1307.12 Advances 3109.35 2522.73 Fixed Assets 122.87 123.26 Other Assets 239.31 203.80 TOTAL 5444.54 4586.33 Contingent Liabilities 8734.06 6108.42 Bills for Collection 579.21 347.24 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009 (Millions of US$) 1 USD = Rs.50.72 Year ended Year ended 31.03.09 31.03.08 I INCOME Interest Earned 455.34 370.79 Other Income 89.96 58.67 TOTAL 545.30 429.46 II EXPENDITURE Interest Expended 364.84 311.49 Operating Expenses 107.85 79.30 Provisions and Contingencies 43.36 23.88 TOTAL 516.05 414.67 III PROFIT 29.25 14.79 Add: Profit brought forward 47.91 41.68 AMOUNT AVAILABLE FOR APPROPRIATION 77.16 56.47 IV APPROPRIATIONS Transfer to a) Statutory Reserve 7.31 3.70 b) Capital Reserve 10.53 0.44 c) Investment Reserve Account 0.30 – d) Dividend (Proposed) 8.82 3.78 e) Corporate Dividend Tax 1.50 0.64 28.46 8.56 Balance carried over to Balance Sheet 48.70 47.91 TOTAL 77.16 56.4784
  • 84. SUBSIDIARY COMPANY (iii) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account;ALF Insurance Services Private Limited (iv) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by thisDIRECTORS’ REPORT report comply with the accounting standards referred to in sub-section (3C) ofYour Directors are pleased to present the Sixth Annual Report along with the audited accounts section 211 of the Companies Act, 1956;for the year ended March 31, 2009. (v) On the basis of written representations received from the Directors, as on 31stFinancial Performance (In Rupees) March 2009 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2009 from being appointed as aParticulars Year ended Year ended Director in terms of clause (g) of sub-section (1) of section 274 of the Companies March 31, 2009 March 31, 2008 Act, 1956;Interest Income 5,48,926 5,61,847 (vi) In our opinion and to the best of our information and according to the explanationsTotal Income 5,48,926 5,61,847 given to us, the said accounts give the information required by the CompaniesAdministrative and Other Expenses 91,801 51,534 Act, 1956, in the manner so required and give a true and fair view in conformityTotal Expenditure 91,801 51,534 with the accounting principles generally accepted in India:Net Profit Before Tax 4,57,125 5,10,313 (a) in the case of the Balance Sheet, of the state of affairs of the Company asProvision for Taxation 1,31,431 1,75,316 at 31st March 2009,Profit After Tax 3,25,694 3,34,997 (b) in the case of the Profit and Loss Account of the Profit for the year endedProfit brought forward from previous year 8,42,635 5,07,638 on that date.Profit carried to Balance Sheet 11,68,330 8,42,635Business For PRASAD & SRINATH Chartered AccountantsYour Company is in the business of Insurance Corporate Broking.Outlook for the future S.PRASAD PartnerUpon getting license from IRDA, your Company will be doing business with all the public sector Place: Chennai M.No.12847companies namely, New India Assurance Company Limited, Oriental Insurance CompanyLimited, United India Insurance Company Limited and National Insurance Company Limited. Date : April 15, 2009Board of Directors ANNEXUREMr. C M Sambasivam, Director, retires by rotation and he being eligible, offers himself forreappointment. Referred to in paragraph 3 of our report of even date, 1) The Company does not have any Fixed Asset and hence maintenance of register andDirectors’ Responsibility Statement physical verification does not arise.a) In the preparation of the annual accounts for the period ended March 31, 2009 the 2) The Company does not have any stock of inventory and hence reporting on physical applicable accounting standards have been followed by the Company. verification does not arise.b) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a 3) a) The Company has neither granted nor taken any loans, secured or unsecured to/ true and fair view of the state of affairs of the Company as at March 31, 2009 and the from companies, firms, or other parties covered in the register maintained under profit of the Company for the period ended on that date. section 301 of the Companies Act, 1956.c) The Directors have taken proper and sufficient care for the maintenance of adequate 4) In our opinion and according to the information and explanations given to us, there is accounting records in accordance with the provisions of the Companies Act, 1956 for an adequate internal control system commensurate with the size of the company and safeguarding the assets of the company and for preventing and detecting fraud and the nature of its business. During the course of our audit, we have not observed any other irregularities. continuing failure to correct major weaknesses in internal system.d) The accounts of the company have been prepared on a going concern basis. 5) a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered into the register maintained under sectionAuditors 301 of the Companies Act, 1956 have been so entered.M/s. Prasad and Srinath, Chartered Accountants, Chennai, retire at the ensuing Annual b) None of the said transactions have exceeded Rs.5 Lakhs in value in respect of anyGeneral Meeting and are eligible for re-appointment. party in one financial year.Secretarial Compliance Certificate 6) The company has not accepted deposits from the Public during the year.Secretarial Compliance Certificate pursuant to Section 383A of the Companies Act issued 7) The company does not have separate internal audit system. However in our opinionby Mr. G. Ramachandran, Company Secretary in Practice is attached and the same forms the existing internal control procedures are sufficient considering the size and nature ofpart of this report. business of the company.Particulars of employees 8) The Central Government has not prescribed maintenance of any cost records underNone of the employees are covered under Section 217 (2A) of the Companies Act read with Section 209 (1) (d) of the Companies Act, 1956.Companies (Particulars of Employees) Rules, 1975. 9) a) The Company is regular in depositing applicable undisputed statutory dues withConservation of Energy, Technology absorption and Foreign Exchange Earning/Outgo appropriate statutory authorities.Your Company has no activities relating to Conservation of Energy or Technology Absorption. b) According to the information and explanations given to us, there were no disputedYour Company did not have any foreign earnings or outgo. amounts payable in respect of Income tax, Wealth tax, Sales tax, Customs duty, Excise duty, Service tax and Cess as at 31.03.2009 for a period of more than sixAcknowledgement months from the date they became payable.Your Directors wish to place on record their deep appreciation for the whole-hearted and 10) The Company does not have accumulated losses. The company has not incurred cashsincere co-operation from its Bankers and other associates. losses during the year covered by our audit and the immediately preceding year. On behalf of the Board of Directors 11) The Company does not have any dues to a bank or to a financial institutions or to C. M. Sambasivam Debenture holders. S. T. Krishnekumaar 12) The Company has not granted any loans and advances on the basis of security by wayChennai Directors of pledge of shares, debentures and other securities.April 15, 2009 13) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 are notAUDITORS’ REPORT applicable to the company.Auditors’ Report to the members of ALF Insurance Services Private Limited 14) The Company is not dealing in or trading in shares, securities, debentures and other1. We have audited the attached balance sheet of ALF Insurance Services Private Limited investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor’s as at 31st March 2009, and the Profit and Loss Account for the year ended on that date Report) Order, 2003 are not applicable to the company. annexed thereto. These financial statements are the responsibility of the company’s 15) The Company has not given any guarantee for loans taken by others from banks or management. Our responsibility is to express an opinion on these financial statements financial institutions. based on our audit. 16) The Company does not have any term loan.2. We conducted our audit in accordance with the auditing standards generally accepted in 17) The Company has not raised funds on short-term basis. India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 18) The Company has not made any preferential allotment of shares to parties and An audit includes examining, on a test basis, evidence supporting the amounts and companies covered in the register maintained under section 301 of the Act. disclosures in the financial statements. An audit also includes assessing the accounting 19) The Company has not issued any debentures. principles used and significant estimates made by management, as well as evaluating 20) The Company has not raised money by way of public issues. the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 21) During the course of our examination of the books of account carried out in accordance with the generally accepted auditing practices in India, we have neither come across3. As required by the Companies (Auditor’s Report) Order, 2003 as amended by the any instance of fraud on or by the company, noticed or reported during the year, nor Companies (Auditor’s Report) (Amendment) Order, 2004, issued by the Government have we been informed of such case by the management. of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of For PRASAD & SRINATH the said Order. Chartered Accountants4. Further to our comments in the Annexure referred to above, we report that: S.PRASAD (i) We have obtained all the information and explanations, which to the best of our Partner knowledge and belief were necessary for the purposes of our audit; M.No.12847 (ii) In our opinion, proper books of account as required by law have been kept by the Place: Chennai company so far as appears from our examination of those books; Date : April 15, 2009 85
  • 85. BALANCE SHEET AS AT MARCH 31, 2009 SCHEDULES TO ACCOUNTS SOURCE OF FUNDS SCH March 31, 2009 March 31, 2008 March 31, 2009 March 31, 2008 Rs. Rs. Rs. Rs. 1. SHARE CAPITAL Rs. Rs. Rs. Rs. Shareholders Funds Authorised 5,00,000 Equity Shares of Rs.10/- Share Capital 1 5,000,000 5,000,000 each 5,000,000 5,000,000 Reserves and Surplus 2 1,168,330 842,635 Issued, Subscribed and Paid up 5,00,000 equity shares of Rs.10/- TOTAL 6,168,330 5,842,635 each 5,000,000 5,000,000 [The entire capital is held by APPLICATION OF FUNDS IndusInd Bank Ltd. and it’s nominees] Current Assets Loans and Advances 3 6,727,057 6,228,889 2. RESERVES AND SURPLUS Less: Current Liabilities and Provisions 4 558,727 386,254 Profit and Loss Account 1,168,330 842,635 Net Current Assets 6,168,330 5,842,635 TOTAL 1,168,330 842,635 Preliminary Expenses – – 3. CURRENT ASSETS, LOANS AND ADVANCES TOTAL 6,168,330 5,842,635 Interest Receivable 377,584 388,733 Tax Deducted at source 350,762 237,683 Schedules and Notes to the Accounts form part of this Balance Sheet Advance Tax Paid 59,640 11,206 As per our Report of even date Bank Balance (with Scheduled Bank) For and on behalf of For and on behalf of the Board In current Account 133,639 32,832 Prasad & Srinath In Fixed Deposit Account 5,805,431 5,939,070 5,558,435 5,591,267 Chartered Accountants TOTAL 6,727,057 6,228,889 S. Prasad C.M.SAMBASIVAM S.T.KRISHNEKUMAAR 4. Current Liabilities & Partner Director Director Provisions M.No.12847 a) Current liabilities Place : Chennai Sundry Creditors 56,345 15,303 Date : April 15, 2009 b) Provisions Provision for Taxation 502,382 370,951 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009 SCH March 31, March 31, TOTAL 558,727 386,254 2009 2008 5. Administrative Expenses Rs. Rs. Rates & Taxes 41,300 13,956 INCOME Professional Charges 39,171 21,766 Interest On Fixed Deposit 548,926 561,847 Audit Fees(including service tax) (TDS Rs.113079 ; previous year Rs.114072) Statutory Audit Fees 11,030 11,236 TOTAL INCOME (A) 548,926 561,847 Certification - 1,124 Bank Charges 300 242 EXPENDITURE Administration 5 91,801 48,324 TOTAL 91,801 48,324 Preliminary Expenses written - off – 3,210 ACCOUNTING POLICIES TOTAL EXPENDITURE (B) 91,801 51,534 1. Revenue Recognition Profit Before Tax (A-B) 457,125 510,313 1.1 Interest on Fixed Deposit is accounted on accrual basis. Less: Provision for Taxation 131,431 173,454 1.2 Retirement Benefits Less: Provision for Taxation (for Prior Period) – 1,862 The Company does not have any employees and hence provision towards gratuity and Profit after Tax 325,694 334,997 encashment of leave has not been made in accounts. Profit brought forward from previous year 842,635 507,638 2. The Company does not have any deferred tax liability. Profit carried to Balance Sheet 1,168,330 842,635 3. The figures have been rounded to nearest Rupee. Schedules and Notes to the Accounts form part of this Balance Sheet 4. Previous year figure have been regrouped wherever necessary. As per our Report of even date For and on behalf of For and on behalf of the Board PRASAD & SRINATH For and on behalf of For and on behalf of the Board Chartered Accountants Prasad & Srinath Chartered Accountants S.PRASAD C.M. SAMBASIVAM S.T. KRISHNEKUMAAR S. Prasad C.M.SAMBASIVAM S.T.KRISHNEKUMAAR Partner Director Director Partner Director Director M. No.12847 M.No.12847 Place : Chennai Place : Chennai Date : April 15, 2009 Date : April 15, 200986
  • 86. STATEMENT PURSUANT TO SEC.212 (1) (E) OF THE COMPANIES ACT, 1956RELATING TO SUBSIDIARY COMPANY AS ON MARCH 31, 20091 Name of Subsidiary Company : ALF Insurance Services Pvt. Ltd.2 Financial Year ending : March 31, 20093 Holding Company’s Interest : 4,99,998 Equity Shares of Rs.10/- face value4 Extent of holding : 100%5 Profit (Loss) for the financial year of the subsidiary so far as it concerns : Rs.3,25,694 the member of the holding company and not dealt with in the books of accounts of the holding company6 Profit (Loss) for the financial year of the subsidiary so far as it concerns : Rs. Nil the member of the holding company and dealt with in the books of accounts of the holding company7 Profit (Loss) for the previous financial year of the subsidiary so far as it : Rs.3,34,997 concerns the member of the holding company and not dealt with in the books of accounts of the holding company8 Profit (Loss) for the previous financial year of the subsidiary so far as : Rs. Nil it concerns the member of the holding company and dealt with in the books of accounts of the holding company INDUSIND BANK - LAST 10 YEARS (Rs. in crores) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Deposits 5018 6546 7187 8400 8598 11200 13114 15006 17645 19037 22110Advances 2662 3677 4237 5574 5348 7812 9000 9310 11084 12795 15771Capital 159 159 159 159 219 290 291 291 320 320 355Reserves & Surplus 370 374 385 403 383 510 539 576 737 1029 1308Borrowings 41 55 41 87 237 2310 611 535 593 1095 1856Investments 2095 2731 2494 2485 2535 3972 4069 5410 5892 6630 8083Interest Income 594 637 729 710 743 986 1134 1188 1500 1881 2309Other Income 83 145 116 184 258 345 251 189 244 298 456Interest Expenses 479 501 569 547 558 669 719 873 1229 1580 1850Operating Expenses (excluding depreciation) 66 68 75 74 93 180 220 281 310 362 503Operating Profit (before depreciation) 132 213 201 273 350 482 446 223 205 236 412Provisions & Contingencies (including depreciation) 95 157 160 222 260 220 236 186 137 161 264Net Profit 37 56 41 51 90 262 210 37 68 75 148Number of branches 26 27 32 40 53 61 115 137 170 180 180Number of Extn.Counters 3 4 4 7 10 12 9 8 0 0 0Number of OSAs 0 0 0 30 64 80 80 83 99 173 184 87
  • 87. Chandigarh Haryana Kerala Chembur Branch Network Chandgarh Gurgaon Alappuzha Email ID: boch@indusind.com Email ID: chss1@indusind.com Email ID: guud@indusind.com Email ID: alke@indusind.com Tel.: (022) 25260881 / 82 / 85 Andhra Pradesh Tel.: (0172) 500 1872 / 3 / 4 Tel.: (0124) 2388883 - 5 Tel.: (0477) 2230888 / 0997 / 8442 Dadar Ananthapur Email ID: boda@indusind.com Mohali Hissar Kakkanad Email ID: anap@indusind.com Tel.: (022) 24167911 / 17 Email ID: moha@indusind.com Email ID: hiha@indusind.com Email ID: koka@indusind.com Tel.: (08554) 244955, 249373, 651286 Tel.: (0172) 502 0821 / 832 Tel.: (01662) 226340 / 2 Tel.: (0484) 2413252 / 3211 / 3266 Fort Banjara Hills Karnal Kannur Email ID: boms@indusind.com Email ID: hyme@indusind.com Chattisgarh Email ID: kaha@indusind.com Email ID: kake@indusind.com Tel.: (022) 66366580 - 83 Tel.: (040) 2354 5274 / 47 Ambikapur Tel.: (0184) 226 8955 / 56 / 57 /58 Tel.: (0497) 2705944 / 45, 3259660 Kandivali Chittoor Email ID: amch@indusind.com Email ID: boka@indusind.com Email ID: chap@indusind.com Tel.: (07774) 231802 / 3 Panchkula Kattappana Tel.: (08572) 221166 / 230044 Email ID: panc@indusind.com Email ID: ktke@indusind.com Tel.: (022) 28022079 / 80 Jagdalpur Gajuwaka Email ID: jgch@indusind.com Tel.: (0172) 5024380 / 4389 Tel.: (04868) 252470/71/72 Kolhapur Email ID: gaju@indusind.com Tel.: (07782) 22 2039 / 6091 / 3540 Rohtak Kazhakuttom Email ID: komh@indusind.com Tel.: (0891) 2514125 / 133, 2758223, Raipur Email ID: roha@indusind.com Email ID: katc@indusind.com Tel.: (0231) 6512007 / 8 / 9 2512720, 2512724, 2729537 Email ID: raja@indusind.com Tel.: (01262)645715 / 645669 / 327890 Tel.: (0471) 2527 550 / 1 / 2 Lokhandwala Tel.: (0771) 403 3401 / 02 / 03 Gudivada Email ID: bolo@indusind.com Kochi Email ID: gdap@indusind.com Tel.: (022) 66951107 - 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  • 89. Notes
  • 90. PROXY FORM Folio No. Registered Office: 2401, General Thimmayya Road. DPID-Client ID No. (Cantonment), Pune 411 001 No. of shares heldI/We................................................................... of .................. in the district of ........................ being a member / members of theabove named Bank, hereby appoint .......................................... of .......................in the district of.......................or failing him ..................................... of ......................... in the district of .............................. as my / our proxy to vote for me / us on my / our behalfat the Fifteenth Annual General Meeting of the Bank to be held at Hotel Sun-n-Sand, 262, Bund Garden Road, Pune - 411001on Friday, July 3, 2009 at 2.00 p.m. and at any adjournment thereof.Signed this ....................................day of...................................., 2009 Revenue StampSignatureNOTE: This proxy form, in order to be effective and valid, should be duly stamped, completed and signed and must be depositedat the Registered Office of the Bank not less than 48 hours before the time of the Meeting. ATTENDANCE SLIP Folio No. Registered Office: DPID-Client ID No. 2401, General Thimmayya Road. No. of shares held (Cantonment), Pune 411 00115th Annual General Meeting, Friday, July 3, 2009 at 2.00 p.m. at Hotel Sun-n-Sand, 262, Bund Garden Road, Pune - 411001I hereby record my presence at the 15th Annual General Meeting of the Bank to be held on Friday, July 3, 2009 at 2.00 p.m. atHotel Sun-n-Sand, 262, Bund Garden Road, Pune - 411001.Name of the shareholder / proxy (in block letters)............................................................................................................................Signature of the shareholder I proxy ................................................................................................................................................NOTE: Shareholders attending the meeting in person or by proxy are requested to complete the attendance slip and hand it overto the Bank officials at the entrance of the meeting hall. BANK ACCOUNT PARTICULARS / ECS MANDATE FORMFolio No. No. of shares heldI/We.................................................................................................... do hereby authorise Induslnd Bank Limited to* Print the following details on my / our Dividend Warrant* Credit my dividend account directly to my Bank account by Electronic Clearing Services (ECS).(* Strike out whichever is not applicable.)Particulars of Bank Account:A. Bank Name : ...................................................................................................................B. Branch Name : ................................................................................................................... Address with PIN code (for ECS Mandate only)C. 9 Digit Code Number of the Bank and Branch (as appearing on the MICR Cheque) : ...................................................................................................................D. Account Type (Saving/Current/NRE/NRO) : ...................................................................................................................E. Account No. (as appearing on the cheque Book) : ...................................................................................................................I/We shall not hold the bank responsible if the ECS could not be implemented or the Bank discontinues the ECS, for anyreason. Link Intime India Pvt. Ltd.MAIL TO Unit: Induslnd Bank Ltd., C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup (W), Mumbai 400 078 ............................................................. Signature of the ShareholderNOTE: Please attach the photocopy of a cheque or a blank cancelled cheque issued by your Bank relating to your above accountfor verifying the accuracy of the 9 digit code number.In case you are holding shares in demat form, kindly advise your Depository Participant to take note of your Bankaccount particulars I ECS Mandate.