This Preliminary Placement Document is being issued for the sole purpose of inviting Bids from QIBs for

the Equity Shares being offered pursuant to this Issue and does not constitute
an offer to the public to purchase the Equity Shares of our Bank. This Preliminary Placement Document is not an offer to sell securities and is not soliciting an offer to buy securities, in
any jurisdiction where such offer or sale or solicitation is not permitted. The information in this Preliminary Placement Document is not complete and may be changed.

Preliminary Placement Document

Not for Circulation
Serial Number: ____
Strictly Confidential

YES BANK LIMITED

(A public company incorporated under the Companies Act, 1956 on November 21, 2003 and certified to commence business on January 21, 2004 and a scheduled commercial bank within
the meaning of the Reserve Bank of India Act, 1934 (RBI Act). Its CIN is L65190MH2003PLC143249.
YES Bank Limited (the Issuer or the Bank) is issuing up to [] equity shares of face value of ` 10 each (the Equity Shares) at a price of ` [] per Equity Share (the
Issue Price), including a premium of ` [] per Equity Share, aggregating up to ` [] million (the Issue).
ISSUE IN RELIANCE UPON CHAPTER VIII OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)
REGULATIONS, 2009, AS AMENDED (THE SEBI ICDR REGULATIONS) AND SECTION 42 OF THE COMPANIES ACT, 2013 AND THE RULES MADE
THEREUNDER
THIS ISSUE AND THE DISTRIBUTION OF THIS PRELIMINARY PLACEMENT DOCUMENT IS BEING MADE TO QUALIFIED INSTITUTIONAL BUYERS AS
DEFINED UNDER THE SEBI ICDR REGULATIONS (QIBs) IN RELIANCE UPON CHAPTER VIII OF THE SEBI ICDR REGULATIONS AND SECTION 42 OF THE
COMPANIES ACT, 2013 AND THE RULES MADE THEREUNDER. THIS PRELIMINARY PLACEMENT DOCUMENT IS PERSONAL TO EACH PROSPECTIVE
INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO THE PUBLIC, OR TO ANY OTHER PERSON OR
CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA OTHER THAN TO QIBs.
Invitations, offers and sales of Equity Shares shall be made only pursuant to this Preliminary Placement Document, the Application Form, the Placement Document and the Confirmation
of Allocation Note. For further information, see the section titled Issue Procedure on page 173. The distribution of this Preliminary Placement Document or the disclosure of its contents
without the prior consent of our Bank to any person, other than QIBs, and persons retained by QIBs to advise them with respect to their purchase of the Equity Shares, is unauthorised and
prohibited. Each prospective investor, by accepting delivery of this Preliminary Placement Document, agrees to observe the foregoing restrictions and not to make copies of this
Preliminary Placement Document or any documents referred to in this Preliminary Placement Document.
A copy of this Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4 (as defined hereinafter)) has been delivered to the Stock Exchanges. A copy of
the Placement Document (which will include disclosures prescribed under Form PAS-4) will also be delivered to the Stock Exchanges. Our Bank shall also make the requisite filings with
the RoC and the Securities and Exchange Board of India (SEBI) within the stipulated period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment
of Securities) Rules, 2014.
This Preliminary Placement Document has not been reviewed by the Securities and Exchange Board of India (the SEBI), the Reserve Bank of India (the RBI), the BSE
Limited (the BSE), the National Stock Exchange of India Limited (the NSE and together with the BSE, the Stock Exchanges) or any other regulatory or listing authority
and is intended for use by QIBs only. This Preliminary Placement Document is not, and will not be registered as, a prospectus with any registrar of companies in India, and will
not be circulated or distributed to the public in India or any other jurisdiction and will not constitute a public offer in India or any other jurisdiction. The placement of Equity
Shares proposed to be made pursuant to this Preliminary Placement Document is meant solely for QIBs on a private placement basis and is not an offer to the public or to any
other class of investors.
INVESTMENTS IN EQUITY SHARES AND EQUITY RELATED SECURITIES INVOLVE A DEGREE OF RISK, AND PROSPECTIVE INVESTORS SHOULD NOT
INVEST IN THIS ISSUE UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENT. PROSPECTIVE INVESTORS
ARE ADVISED TO READ THE SECTION TITLED RISK FACTORS ON PAGE 31 CAREFULLY BEFORE TAKING AN INVESTMENT DECISION RELATED TO
THIS ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS ADVISORS ABOUT THE CONSEQUENCES OF ITS INVESTMENT IN THE EQUITY
SHARES BEING ISSUED PURSUANT TO THIS PRELIMINARY PLACEMENT DOCUMENT AND THE PLACEMENT DOCUMENT.
The information on our website or any website directly or indirectly linked to our website does not form part of this Preliminary Placement Document and prospective investors should not
rely on such information contained in, or available through, such websites for their investment in this Issue.
Our Equity Shares are listed on the BSE and the NSE. Applications shall be made for the listing of the Equity Shares offered through this Preliminary Placement Document on the Stock
Exchanges. The Stock Exchanges assume no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Equity Shares to
trading on the Stock Exchanges should not be taken as an indication of the merits of our Bank or the Equity Shares.
YOU ARE NOT AUTHORISED TO AND MAY NOT (1) DELIVER THIS PRELIMINARY PLACEMENT DOCUMENT TO ANY OTHER PERSON; OR (2) REPRODUCE
THIS PRELIMINARY PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER. ANY DISTRIBUTION OR REPRODUCTION OF THIS PRELIMINARY
PLACEMENT DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION
OF THE SEBI ICDR REGULATIONS OR OTHER APPLICABLE LAWS OF INDIA AND OTHER JURISDICTIONS.
THIS PRELIMINARY PLACEMENT DOCUMENT HAS BEEN PREPARED BY OUR BANK SOLELY FOR PROVIDING INFORMATION IN CONNECTION WITH THE
PROPOSED ISSUE OF THE EQUITY SHARES DESCRIBED IN THIS PRELIMINARY PLACEMENT DOCUMENT.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933 (the Securities Act) or under the laws of any other jurisdictions outside India, and
subject to certain exceptions, may not be offered or sold within the United States (as defined in Regulation S under the Securities Act (Regulation S)) except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Equity Shares are being offered and sold (1) in the
United States to qualified institutional buyers (as defined in Rule 144A under the Securities Act) pursuant to Section 4(a)(2) of the Securities Act and (2) outside the United States in
reliance on Regulation S. See the sections titled Selling Restrictions and Transfer Restrictions on pages 183 and 188, respectively.
This Preliminary Placement Document is dated September 7, 2016.

GLOBAL CO-ORDINATORS AND BOOK RUNNING LEAD MANAGERS

Goldman Sachs (India) Securities Private Limited

Motilal Oswal Investment Advisors Private Limited

CLSA India Private Limited

JOINT BOOK RUNNING LEAD MANAGERS

Edelweiss Financial Services Limited

JM Financial Institutional
Securities Limited

HSBC Securities and Capital Markets

(India) Private Limited

Inga Capital Private Limited

Nomura Financial Advisory &

Religare Capital Markets
Securities (India) Private
Limited
Limited
* YES Securities (India) Limited shall be involved only in marketing of the Issue

Investec Capital Services (India) Private

Limited

SBI Capital Markets Limited

YES Securities (India) Limited*

TABLE OF CONTENTS
NOTICE TO INVESTORS ..................................................................................................................................................... 1
REPRESENTATIONS BY INVESTORS .............................................................................................................................. 3
OFFSHORE DERIVATIVE INSTRUMENTS ..................................................................................................................... 8
DISCLAIMER CLAUSE OF THE STOCK EXCHANGES ................................................................................................ 9
PRESENTATION OF FINANCIAL AND OTHER INFORMATION ............................................................................. 10
INDUSTRY AND MARKET DATA .................................................................................................................................... 11
FORWARD-LOOKING STATEMENTS............................................................................................................................ 12
ENFORCEMENT OF CIVIL LIABILITIES...................................................................................................................... 13
EXCHANGE RATES ............................................................................................................................................................ 14
CERTAIN DEFINITIONS AND ABBREVIATIONS ........................................................................................................ 15
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES ACT, 201321
SUMMARY OF BUSINESS ................................................................................................................................................. 23
SUMMARY OF THE ISSUE ................................................................................................................................................ 27
SELECTED FINANCIAL INFORMATION OF OUR BANK.......................................................................................... 28
RISK FACTORS ................................................................................................................................................................... 31
USE OF PROCEEDS ............................................................................................................................................................ 64
CAPITALISATION............................................................................................................................................................... 65
CAPITAL STRUCTURE ...................................................................................................................................................... 66
MARKET PRICE INFORMATION AND OTHER INFORMATION CONCERNING THE EQUITY SHARES ..... 69
DIVIDEND POLICY ............................................................................................................................................................. 71
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ....................................................................................................................................................................... 72
INDUSTRY OVERVIEW ................................................................................................................................................... 103
OUR BUSINESS .................................................................................................................................................................. 116
SELECTED STATISTICAL INFORMATION ................................................................................................................ 132
REGULATION AND POLICIES....................................................................................................................................... 148
BOARD OF DIRECTORS AND SENIOR MANAGEMENT ......................................................................................... 158
PRINCIPAL SHAREHOLDERS ....................................................................................................................................... 170
ISSUE PROCEDURE.......................................................................................................................................................... 173
PLACEMENT ...................................................................................................................................................................... 182
SELLING RESTRICTIONS ............................................................................................................................................... 183
TRANSFER RESTRICTIONS ........................................................................................................................................... 188
THE SECURITIES MARKET OF INDIA ........................................................................................................................ 191
DESCRIPTION OF THE EQUITY SHARES .................................................................................................................. 194
TAXATION .......................................................................................................................................................................... 197
LEGAL PROCEEDINGS ................................................................................................................................................... 209
OUR AUDITORS ................................................................................................................................................................ 213
GENERAL INFORMATION ............................................................................................................................................. 214
FINANCIAL STATEMENTS............................................................................................................................................. 215
DECLARATION ................................................................................................................................................................. 216

NOTICE TO INVESTORS
Our Bank has furnished and accepts full responsibility for the information contained in this Preliminary
Placement Document and to the best of our knowledge and belief, having made all reasonable enquiries, we
confirm that this Preliminary Placement Document contains all information with respect to our Bank and the
Equity Shares, which is material in the context of this Issue. The statements contained in this Preliminary
Placement Document relating to our Bank and the Equity Shares are, in all material respects, true and accurate
and not misleading, the opinions and intentions expressed in this Preliminary Placement Document with regard
to our Bank and the Equity Shares are honestly held, have been reached after considering all relevant
circumstances, are based on information presently available to us and are based on reasonable assumptions.
There are no other facts in relation to our Bank and the Equity Shares, the omission of which would, in the
context of the Issue, make any statement in this Preliminary Placement Document misleading in any material
respect. Further, all reasonable enquiries have been made by us to ascertain such facts and to verify the accuracy
of all such information and statements. The Managers have not separately verified all the information contained
in this Preliminary Placement Document (financial, legal or otherwise). Accordingly, neither the Managers nor
any of their respective members, employees, counsel, officers, directors, representatives, agents or affiliates
make any express or implied representation, warranty or undertaking, and no responsibility or liability is
accepted, by the Managers, as to the accuracy or completeness of the information contained in this Preliminary
Placement Document or any other information supplied in connection with the issue of Equity Shares or their
distribution. Each person receiving this Preliminary Placement Document acknowledges that such person has
neither relied on the Managers nor on any person affiliated with the Managers in connection with its
investigation of the accuracy of such information or its investment decision, and each such person must rely on
its own examination of our Bank and the merits and risks involved in investing in the Equity Shares issued
pursuant to the Issue.
No person is authorised to give any information or to make any representation not contained in this Preliminary
Placement Document and any information or representation not so contained must not be relied upon as having
been authorised by or on behalf of our Bank or the Managers. The delivery of this Preliminary Placement
Document at any time does not imply that the information contained in it is correct as at any time subsequent to
its date.
The Equity Shares have not been approved, disapproved or recommended by any regulatory authority in
any jurisdiction. No authority has passed on or endorsed the merits of this Issue or the accuracy or
adequacy of this Preliminary Placement Document.
The Equity Shares have not been recommended by any foreign federal or state securities commission or
regulatory authority. As such, this Preliminary Placement Document does not constitute, and may not be used
for or in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorised or to any person to whom it is unlawful to make such offer or solicitation. In particular, no
action has been taken by our Bank and the Managers which would permit an issue of the Equity Shares or
distribution of this Preliminary Placement Document in any jurisdiction, other than India, where action for that
purpose is required. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and
neither this Preliminary Placement Document nor any other Issue-related materials in connection with the
Equity Shares may be distributed or published in or from any country or jurisdiction, except under
circumstances that will result in compliance with any applicable rules and regulations of any such country or
jurisdiction. The Equity Shares are transferable only in accordance with the restrictions described in the section
titled Selling Restrictions. All purchasers will be required to make the applicable representations set forth in
the section titled Transfer Restrictions.
The information contained in this Preliminary Placement Document has been provided by our Bank and other
sources identified herein. Distribution of this Preliminary Placement Document to any person other than the
investor specified by the Managers or their representatives, and those persons, if any, retained to advise such
investor with respect thereto, is unauthorised, and any disclosure of its contents, without prior written consent of
our Bank, is prohibited. Any reproduction or distribution of this Preliminary Placement Document, in whole or
in part, and any disclosure of its contents to any other person is prohibited.
The distribution of this Preliminary Placement Document and the issue of the Equity Shares in certain
jurisdictions may be restricted by law. As such, this Preliminary Placement Document does not constitute, and
may not be used for or in connection with, an offer or solicitation by anyone in any jurisdiction in which such
offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation.

In particular, no action has been taken by our Bank and the Managers which would permit an issue of the Equity
Shares or distribution of this Preliminary Placement Document in any jurisdiction, other than India, where
action for that purpose is required. Accordingly, the Equity Shares in the Issue may not be offered or sold,
directly or indirectly, and neither this Preliminary Placement Document nor any other Issue-related materials in
connection with the Equity Shares may be distributed or published in or from any country or jurisdiction, except
under circumstances that will result in compliance with any applicable rules and regulations of any such country
or jurisdiction.
In making an investment decision, investors must rely on their own examination of our Bank and the terms of
this Issue, including the merits and risks involved. Investors should not construe the contents of this Preliminary
Placement Document as legal, tax, accounting or investment advice. Investors should consult their own counsel
and advisors as to business, investment, legal, tax, accounting and related matters concerning this Issue. In
addition, neither our Bank nor the Managers are making any representation to any investor, purchaser or
subscriber of the Equity Shares in relation to this Issue regarding the legality of an investment in the Equity
Shares in this Issue by such investor, subscriber or purchaser under applicable legal, investment or similar laws
or regulations. Each such investor, subscriber or purchaser of the Equity Shares in this Issue is deemed to have
acknowledged, represented and agreed that it is eligible to invest in India and in our Bank under Indian law,
including Chapter VIII of the SEBI ICDR Regulations and Section 42 of the Companies Act and is not
prohibited by SEBI or any other statutory, regulatory or judicial authority in India or any other jurisdiction from
buying, selling or dealing in securities.
This Preliminary Placement Document contains summaries of certain terms of certain documents, which
summaries are qualified in their entirety by the terms and conditions of such documents.
The information on our website, www.yesbank.in, the website of our Subsidiary, www.yesinvest.in or on the
website of the Managers, does not constitute or form part of this Preliminary Placement Document. Prospective
investors should not rely on the information contained in, or available through such websites.

REPRESENTATIONS BY INVESTORS
All references to you or your in this section are to the prospective investors in the Issue. By Bidding for and
subscribing to any of the Equity Shares under the Issue, you are deemed to have represented, warranted,
acknowledged and agreed to our Bank and the Managers, as follows:

you (i) are a QIB as defined under Regulation 2(1)(zd) of the SEBI ICDR Regulations not excluded
under Regulation 86 of the SEBI ICDR Regulations , (ii) have a valid and existing registration under
applicable laws and regulations of India, (iii) undertake to acquire, hold, manage or dispose of any
Equity Shares that are Allotted to you for the purposes of your business in accordance with Chapter
VIII of the SEBI ICDR Regulations, and (iv) undertake to comply with the SEBI ICDR Regulations,
the Companies Act and all other applicable laws, including in respect of reporting requirements, if any;

you confirm that if you are Allotted Equity Shares pursuant to the Issue, you shall not, for a period of
one year from the date of Allotment (hereinafter defined), sell the Equity Shares so acquired, except on
the floor of the Stock Exchanges;

you will make all necessary filings with appropriate regulatory authorities, including the RBI, as
required under applicable laws;

you are aware that the Equity Shares have not been and will not be registered under the Companies
Act, the SEBI ICDR Regulations or under any other law in force in India. This Preliminary Placement
Document has not been reviewed, verified or affirmed by the SEBI, the RBI, the Stock Exchanges or
any other regulatory or listing authority and is intended only for use by QIBs. This Preliminary
Placement Document has been filed with the Stock Exchanges and has been displayed on the websites
of our Bank and the Stock Exchanges;

you are aware that additional requirements would be applicable if you are in jurisdictions other than
India, as set forth under the sections titled Selling Restrictions and Transfer Restrictions on pages
183 and 188, respectively. You are permitted to subscribe to the Equity Shares under the laws of all
relevant jurisdictions which are applicable to you and that you have fully observed such laws and have
all necessary capacity and have obtained all necessary consents and authorities as may be required, to
enable you to commit to this participation in the Issue and to perform your obligations in relation
thereto (including, without limitation, in the case of any person on whose behalf you are acting, all
necessary consents and authorizations to agree to the terms set out or referred to in this Preliminary
Placement Document) and complied with all the necessary formalities and that you will honour such
obligations;

none of our Bank, any Managers or any of their respective shareholders, directors, officers, employees,
counsels, advisors, representatives, agents or affiliates is making any recommendations to you, or
advising you regarding the suitability of any transactions they may enter into in connection with the
Issue, and that your participation in the Issue is on the basis that you are not and will not be a client of
the Managers and that the Managers have no duties or responsibilities to you for providing the
protection afforded to their clients or customers or for providing advice in relation to the Issue and are
in no way acting in a fiduciary capacity;

all statements other than statements of historical fact included in this Preliminary Placement Document,
including, without limitation, those regarding our Banks financial position, business strategy, plans
and objectives of management for future operations (including development plans and objectives
relating to our Banks business), are forward-looking statements. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors that could cause actual
results to be materially different from future results, performances or achievements expressed or
implied by such forward-looking statements. Such forward-looking statements are based on numerous
assumptions regarding our Banks present and future business strategies and environment in which our
Bank will operate in the future. You should not place undue reliance on forward-looking statements,
which speak only as at the date of this Preliminary Placement Document. Our Bank or any of our
shareholders, Directors, officers, employees, counsel, advisors, representatives, agents or affiliates
assume no responsibility to update any of the forward-looking statements contained in this Preliminary
Placement Document;

you are aware and understand that the Equity Shares are being offered only to QIBs and are not being
offered to the general public and the Allotment of the same shall be on a discretionary basis, at the
discretion of our Bank in consultation with the Managers;

you have made, or been deemed to have made, as applicable, the representations, warranties,
acknowledgements and undertakings as set forth under the section titled Transfer Restrictions on
page 188;

you have been provided a serially numbered copy of this Preliminary Placement Document and have
read this Preliminary Placement Document in its entirety in particular the section titled Risk Factors,
on page 31;

that in making your investment decision, (i) you have relied on your own examination of our Bank and
the terms of the Issue, including the merits and risks involved, (ii) you have relied upon your own
investigations and resources in deciding to invest in the Equity Shares, (iii) you have consulted your
own independent advisors (including tax advisors) or otherwise have satisfied yourself concerning,
without limitation, the effects of local laws and taxation matters, (iv) you have relied solely on the
information contained in this Preliminary Placement Document and no other disclosure or
representation by our Bank or any other party and (v) you have received all information that you
believe is necessary or appropriate in order to make an investment decision in respect of our Bank and
the Equity Shares;

none of the Managers or their affiliates has provided you with any tax advice or otherwise made any
representations regarding the tax consequences of the Equity Shares (including, but not limited to, the
Issue and the use of the proceeds from the Equity Shares). You will obtain your own independent tax
advice from a reputable service provider and will not rely on the Managers when evaluating the tax
consequences in relation to the Equity Shares (including, but not limited to, the Issue and the use of the
proceeds from the Equity Shares). You waive and agree not to assert any claim against any of our
Managers or any of their respective shareholders, directors, officers, employees, counsel, advisors,
representatives, agents or affiliates with respect to the tax aspects of the Equity Shares or as a result of
any tax audits by tax authorities, wherever situated;

you have such knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of the investment in the Equity Shares, and you and any accounts for
which you are subscribing the Equity Shares (i) are each able to bear the economic risk of the
investment in the Equity Shares, (ii) will not look to our Bank or any of the Managers or any of their
respective shareholders, directors, officers, employees, counsels, advisors, representatives, agents or
affiliates for all or part of any such loss or losses that may be suffered, (iii) are able to sustain a
complete loss on the investment in the Equity Shares, and (iv) have no reason to anticipate any change
in your or their circumstances, financial or otherwise, which may cause or require any sale or
distribution by you or them of all or any part of the Equity Shares;

that where you are acquiring the Equity Shares for one or more managed accounts, you represent and
warrant that you are authorised in writing by each such managed account to acquire the Equity Shares
for each such managed account and to make (and you hereby make) the representations, warranties,
acknowledgements and undertakings herein for and on behalf of each such managed account, reading
the reference to you to include such accounts;

you are not a promoter (as defined under the SEBI ICDR Regulations) of our Bank or any of its
affiliates and are not a person related to the promoters, either directly or indirectly, and your Bid does
not directly or indirectly represent the promoter, or promoter group, (as defined under the SEBI
ICDR Regulations) of our Bank or persons related to the promoters.
For the purposes of this representation, a QIB who has any rights under a shareholders agreement or
voting agreement, veto rights or right to appoint any nominee director on our Board will be deemed to
be a person related to the promoters of our Bank. However, a QIB who not hold any shares in our Bank
and who has acquired such rights in the capacity of a lender shall not be deemed to be a person related
to the promoter;

you will have no right to withdraw your Bid after the Bid Closing Date;

you are eligible to Bid and hold the Equity Shares so Allotted to you pursuant to this Issue, together
with any Equity Shares held by you prior to the Issue. You further confirm that your holding, upon the
issue of the Equity Shares, shall not exceed the level permissible as per any applicable law;

the Bid submitted by you would not eventually result in triggering a tender offer under the Securities
and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as
amended (the Takeover Regulations);

you are aware of and acknowledge and represent the following in respect of your shareholding in our
Bank:
a.

if your aggregate holding in the paid-up share capital of our Bank, whether direct or indirect,
beneficial or otherwise held by you, your relatives, associate enterprises and persons acting in
concert exceeds 5.00% of the total paid-up share capital of our Bank or entitles you to
exercise 5.00% or more of the total voting rights of our Bank, you shall seek prior approval of
the RBI, in accordance with the terms of the Reserve Bank of India (Prior approval for
acquisition of shares or voting rights in private sector banks) Directions, 2015.

b.

if you are Allotted more than 5.00% of the total number of Equity Shares Allotted in this
Issue, we shall be required to disclose your name, the number of Equity Shares Allotted to
you, the pre and post issue shareholding pattern of our Bank, to the Stock Exchanges and the
Stock Exchanges will make the same available on their website and you consent to such
disclosure being made by us.

c.

to the best of your knowledge and belief, your aggregate holding, together with other QIBs in
the Issue that belong to the same group or are under common control as you, pursuant to the
Allotment under this Issue to you shall not exceed 50.00% of the Issue.
For the purposes of this representation: the expression belongs to the same group shall be
interpreted by applying the concept of companies under the same group as provided in subsection (11) of section 372 of the Companies Act, 1956; and control shall have the same
meaning as is assigned to it by clause (e) of sub-regulation 1 of regulation 2 of the Takeover
Regulations;

you agree that in terms of Section 42(7) of the Companies Act, 2013 and Rule 14(3) of the Companies
(Prospectus and Allotment of Securities) Rules, 2014, we shall file the list of QIBs to whom a copy of
this Preliminary Placement Document is circulated, along with other particulars with the RoC and
SEBI within 30 days of circulation of this Preliminary Placement Document, in addition to making
other filings required under the Companies Act, 2013.

you are aware that applications for in-principle approval, in terms of Regulation 28 of the SEBI Listing
Regulations, for listing and admission of the Equity Shares and for trading on the Stock Exchanges,
were made and approval has been received from each of the Stock Exchanges

you are aware that pursuant to the Allotment of the Equity Shares in the Issue, applications shall be
made by our Bank to the Stock Exchanges for listing approvals and that the applications for obtaining
the final listing and trading approvals will be made to the Stock Exchanges only after the credit of the
Equity Shares to the beneficiary account with the Depository Participant, and that there can be no
assurance that such approvals will be obtained on time or at all. Our Bank would not be responsible for
any delay or non-receipt of such final approvals or any loss arising from such delay or non-receipt;

you shall not undertake any trade in the Equity Shares credited to your beneficiary account with the
Depository Participant until such time that the final listing and trading approvals for the Equity Shares
under this Issue are granted by the Stock Exchanges;

you are aware and understand that the Managers will have entered into a Placement Agreement with
our Bank whereby the Managers have, subject to the satisfaction of certain conditions set out therein,
undertaken severally and not jointly to use their reasonable endeavours to seek to procure subscription

for the Equity Shares on the terms and conditions set forth therein;

the contents of this Preliminary Placement Document are exclusively the responsibility of our Bank
and none of the Managers nor any person acting on their behalf or any of the counsel, advisors, to the
Issue has or shall have any liability for any information, representation or statement contained in this
Preliminary Placement Document or any information previously published by or on behalf of our Bank
and will not be liable for your decision to participate in the Issue based on any information,
representation or statement contained in this Preliminary Placement Document or otherwise. By
accepting a participation in this Issue, you agree to the same and confirm that you have neither received
nor relied on any other information, representation, warranty or statement made by or on behalf of the
Managers or our Bank or any other person and that none of the Managers nor our Bank nor any other
person including their respective shareholders, directors, officers, employees, counsels, advisors,
representatives, agents or affiliates will be liable for your decision to participate in the Issue based on
any other information, representation, warranty or statement that you may have obtained or received;

that the only information you are entitled to rely on, and on which you have relied in committing
yourself to acquire the Equity Shares is contained in this Preliminary Placement Document, such
information being all that you deem necessary to make an investment decision in respect of the Equity
Shares and that you have neither received nor relied on any other information given or representations,
warranties or statements made by any of the Managers (including any view, statement, opinion or
representation expressed in any research published or distributed by any of the Managers or their
respective affiliates or any view, statement, opinion or representation expressed by any staff (including
research staff) of any of the Managers or their respective affiliates) or our Bank or any of their
respective shareholders, directors, officers, employees, counsels, advisors, representatives, agents or
affiliates and neither the Managers nor our Bank or any of their respective shareholders, directors,
officers, employees, counsels, advisors, representatives, agents or affiliates will be liable for your
decision to accept an invitation to participate in the Issue based on any other information,
representation, warranty, statement or opinion;

you agree to indemnify and hold our Bank and the Managers or its affiliates harmless from any and all
costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection
with any breach of the representations, warranties, acknowledgements and undertakings in this section.
You agree that the indemnity set forth in this paragraph shall survive the resale of the Equity Shares
Allotted under this Issue by or on behalf of the managed accounts;

you understand that none of the Managers or its affiliates have any obligation to purchase or acquire all
or any part of the Equity Shares purchased by you in the Issue or to support any losses, directly or
indirectly sustained or incurred by you for any reason whatsoever in connection with the Issue,
including non-performance by our Bank of any of our respective obligations or any breach of any
representations or warranties by our Bank, whether to you or otherwise;

that you are eligible to invest in India under applicable law, including the Foreign Exchange
Management (Transfer or Issue of Security by Person Resident Outside India) Regulations, 2000, as
amended from time to time, and have not been prohibited by the SEBI or any other regulatory
authority, statutory authority or otherwise, from buying, selling or dealing in securities;

any dispute arising in connection with the Issue will be governed and construed in accordance with the
laws of the Republic of India, and the courts in Mumbai, Maharashtra, India shall have the exclusive
jurisdiction to settle any disputes which may arise out of or in connection with this Preliminary
Placement Document;

that you are a sophisticated investor who is seeking to purchase the Equity Shares for your own
investment and not with a view to distribution. In particular, you acknowledge that (i) an investment in
the Equity Shares involves a high degree of risk and that the Equity Shares are, therefore, a speculative
investment, (ii) you have sufficient knowledge, sophistication and experience in financial and business
matters so as to be capable of evaluating the merits and risk of the purchase of the Equity Shares, and
(iii) you are experienced in investing in private placement transactions of securities of companies in a
similar stage of development and in similar jurisdictions and have such knowledge and experience in
financial, business and investment matters that you are capable of evaluating the merits and risks of
your investment in the Equity Shares;

you confirm that either (i) you have not participated in or attended any investor meetings or
presentations by our Bank or our agents with regard to our Bank or this Issue (Bank Presentations);
or (ii) if you have participated in or attended any Bank Presentations, (a) you understand and
acknowledge that the Managers may not have the knowledge of the statements that our Bank or our
agents may have made at such Bank Presentations and are therefore unable to determine whether the
information provided to you at such Bank Presentation may have included any material misstatements
or omissions, and, accordingly you acknowledge that the Managers have advised you not to rely in any
way on any such information that was provided to you at such Bank Presentations, and (b) confirm
that, to the best of your knowledge, you have not been provided any material information that was not
publicly available;

that each of the representations, warranties, acknowledgements and agreements set out above shall
continue to be true and accurate at all times up to and including the Allotment of the Equity Shares in
the Issue; and

that our Bank, the Managers, their respective affiliates and others will rely on the truth and accuracy of
the foregoing representations, warranties, acknowledgements and agreements which are given to the
Managers on their own behalf and on behalf of our Bank and are irrevocable.

OFFSHORE DERIVATIVE INSTRUMENTS

Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of
Regulation 22 of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014, as
amended (SEBI FPI Regulations), FPIs (other than Category III foreign portfolio investors and unregulated
broad based funds, which are classified as Category II FPI by virtue of their investment manager being
appropriately regulated) may issue, subscribe or otherwise deal in offshore derivative instruments (as defined
under the SEBI FPI Regulations as any instrument, by whatever name called, which is issued overseas by an FPI
against securities held by it that are listed or proposed to be listed on any recognised stock exchange in India, as
its underlying, and all such offshore derivative instruments are referred to herein as P-Notes), for which they
may receive compensation from the purchasers of such instruments. P-Notes may be issued only in favour of
those entities which are regulated by any appropriate foreign regulatory authorities subject to compliance with
know your client requirements. An FPI shall also ensure no further issue or transfer is made of any offshore
derivative instruments issued by or on behalf of it to any person other than a person regulated by an appropriate
foreign regulatory authority. P-Notes have not been and are not being offered or sold pursuant to this
Preliminary Placement Document. This Preliminary Placement Document does not contain any information
concerning P-Notes, including, without limitation, any information regarding any risk factors relating thereto.
Any P-Notes that may be issued are not securities of our Bank and do not constitute any obligation of, claims on
or interests in our Bank. Our Bank has not participated in any offer of any P-Notes, or in the establishment of
the terms of any P-Notes, or in the preparation of any disclosure related to any P-Notes. Any P-Notes that may
be offered are issued by, and are the sole obligations of, third parties that are unrelated to us. Our Bank does not
make any recommendation as to any investment in P-Notes and does not accept any responsibility whatsoever in
connection with the P-Notes. Any P-Notes that may be issued are not securities of the Managers and do not
constitute any obligations or claims on the Managers. Affiliates of the Managers which are Eligible FPIs may
purchase, to the extent permissible under law, the Equity Shares in the Issue, and may issue P-Notes in respect
thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosures as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes. Neither
SEBI nor any other regulatory authority has reviewed or approved any P-Notes or any disclosure related
thereto. Prospective investors are urged to consult with their own financial, legal, accounting and tax
advisors regarding any contemplated investment in P-Notes, including whether P-Notes are issued in
compliance with applicable laws and regulations.

DISCLAIMER CLAUSE OF THE STOCK EXCHANGES

As required, a copy of this Preliminary Placement Document has been submitted to the Stock Exchanges. The
Stock Exchanges do not in any manner:
1.

warrant, certify or endorse the correctness or completeness of any of the contents of this Preliminary
Placement Document;

2.

warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges; or

3.

take any responsibility for the financial or other soundness of our Bank, our management or any
scheme or project of our Bank; and

it should not for any reason be deemed or construed to mean that this Preliminary Placement Document has
been cleared or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquire
any Equity Shares may do so pursuant to an independent inquiry, investigation and analysis and shall not have
any claim against the Stock Exchanges whatsoever by reason of any loss which may be suffered by such person
consequent to or in connection with such subscription/acquisition whether by reason of anything stated or
omitted to be stated herein or for any other reason whatsoever.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this Preliminary Placement Document, unless the context otherwise indicates or implies, references to you,
offeree, purchaser, subscriber, recipient, investors and potential investor are to the prospective
investors in this Issue, references to our Bank, the Bank, or the Issuer are to YES Bank Limited and
references to our, us, or we are to YES Bank Limited together with the Subsidiary.
In this Preliminary Placement Document, references to (a) Rs., Rupees, INR or ` are to the legal
currency of the Republic of India and (b) U.S.$ and U.S. Dollars are to the legal currency of the United
States.
All references herein to the U.S. or the United States are to the United States of America and its territories
and possessions and all references to India are to the Republic of India and its territories and possessions. All
references herein to the Government of India are to the Central Government of India and all references to the
Government are to Government of India or an Indian state government as applicable. All the numbers in this
document, other than in sections titled Selected Financial Information of our Bank and Financial Statements
on pages 28 and 215, respectively, have been presented in million or in whole numbers where the numbers have
been too small to present in million, unless stated otherwise.
We publish our Financial Statements in Rupees. Our Financial Statements included herein have been prepared
in accordance with Indian GAAP as applicable to banks in India. Unless the context otherwise requires, all
financial data in this Preliminary Placement Document are derived from our Banks Financial Statements,
prepared in accordance with Indian GAAP, and accounting records of our Bank and schedules from such
accounting records. Unless otherwise specifically mentioned, the financial information presented in this PPD are
based on standalone financial statements of the Bank. Indian GAAP differs in certain significant respects from
International Financial Reporting Standards (IFRS) and U.S. GAAP. Our Bank does not provide a
reconciliation of its Financial Statements to IFRS or U.S. GAAP financial statements. See the section Risk
Factors Significant differences exist between Indian GAAP and other accounting principles, such as U.S.
GAAP and IFRS, which investors may be more familiar with and may consider material to their assessment of
our financial condition. on page 56. Accordingly, the degree to which the financial statements prepared in
accordance with Indian GAAP included in this Preliminary Placement Document will provide meaningful
information is entirely dependent on the readers level of familiarity with the respective accounting practices.
Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in
this Preliminary Placement Document should accordingly be limited.
Unless otherwise stated, references in this Preliminary Placement Document to a particular year are to the
calendar year ended on December 31 and to a particular financial year, fiscal year, Fiscal or FY are to
the financial year of our Bank ending on March 31 of a particular year.
Any discrepancies in the tables included herein between the amounts listed and the totals thereof are due to
rounding off.

10

INDUSTRY AND MARKET DATA

Information regarding market position, growth rates and other industry data pertaining to the businesses of our
Bank contained in this Preliminary Placement Document consists of estimates based on data reports compiled
by government bodies, professional organizations and analysts, data from other external sources and knowledge
of the markets in which our Bank competes. The statistical information included in this Preliminary Placement
Document relating to the various sectors in which our Bank operates has been reproduced from various trade,
industry and regulatory/government publications and websites, including that of the RBI.
This data is subject to change and cannot be verified with complete certainty due to limits on the availability and
reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. In many
cases, there is no readily available external information (whether from trade or industry associations,
government bodies or other organizations) to validate market-related analysis and estimates, so our Bank has
relied on internally developed estimates.
Neither our Bank nor any of the Managers have independently verified this data and neither our Bank nor any of
the Managers makes any representation regarding the accuracy or completeness of such data. Similarly, while
we believe that our internal estimates are reasonable, such estimates have not been verified by any independent
sources, and neither our Bank nor the Managers can assure potential investors as to their accuracy.

11

FORWARD-LOOKING STATEMENTS
Certain statements contained in this Preliminary Placement Document that are not statements of historical fact
constitute forward-looking statements. Investors can generally identify forward-looking statements by
terminology such as aim, anticipate, believe, continue, could, estimate, expect, intend, may,
objective, plan, potential, project, pursue, shall, should, will, would, or other words or
phrases of similar import. All statements regarding our Banks expected financial condition and results of
operations and business plans, including potential acquisitions, and prospects are forward-looking statements.
These forward-looking statements include statements as to our business strategy, revenue and profitability,
planned projects and other matters discussed in this Preliminary Placement Document that are not historical
facts. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other
factors that may cause our Banks actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such forward-looking statements or
other projections.
Important factors that could cause actual results, performance or achievements to differ materially include,
among others, the macroeconomic environment and regulatory intervention.
Additional factors that could cause actual results, performance or achievements to differ materially include, but
are not limited, to those discussed under the sections titled Risk Factors, Managements Discussion and
Analysis of Financial Condition and Results of Operations, Industry Overview and Business on pages 31,
72, 103 and 116 respectively.
The forward-looking statements contained in this Preliminary Placement Document are based on the beliefs of
our management, as well as the assumptions made by and information currently available to the management.
Although our Bank believes that the expectations reflected in such forward-looking statements are reasonable at
this time, it cannot assure investors that such expectations will prove to be correct. Given these uncertainties,
investors are cautioned not to place undue reliance on such forward-looking statements. If any of these risks and
uncertainties materialize, or if any of our Banks underlying assumptions prove to be incorrect, our Banks
actual results of operations, cash flows or financial condition could differ materially from that described herein
as anticipated, believed, estimated or expected. All subsequent written and oral forward-looking statements
attributable to our Bank are expressly qualified in their entirety by reference to these cautionary statements.

12

ENFORCEMENT OF CIVIL LIABILITIES

We are a limited liability company incorporated under the laws of India. All our Directors and key managerial
personnel are residents of India. A substantial portion of our assets are located in India. As a result, it may be
difficult for the investors to affect service of process upon our Bank or such persons outside India or to enforce
judgments obtained against such parties outside India.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.
Recognition and enforcement of foreign judgments and execution of a foreign judgment is provided for under
Sections 13 and 44A respectively, of the Code of Civil Procedure, 1908 (the Civil Procedure Code) on a
statutory basis.
Section 13 of the Civil Procedure Code provides that a foreign judgment shall be conclusive regarding any
matter directly adjudicated upon except: (i) where the judgment has not been pronounced by a court of
competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where it
appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or
a refusal to recognize the law of India in cases in which such law is applicable; (iv) where the proceedings in
which the judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained by
fraud, or (vi) where the judgment sustains a claim founded on a breach of any law in force in India.
Under Section 14 of the Civil Procedure Code, a court in India shall, upon the production of any document
purporting to be a certified copy of a foreign judgment, presume that the judgment was pronounced by a court of
competent jurisdiction, unless the contrary appears on record; but such presumption may be displaced by
proving want of jurisdiction.
A foreign judgment which is conclusive under Section 13 of the Civil Procedure Code can be enforced in India
(i) by instituting execution proceedings; or (ii) by instituting a suit on such judgment.
Foreign judgments may be enforced by proceedings in execution in certain cases. Section 44A of the Civil
Procedure Code provides that where a foreign judgment has been rendered by a superior court within the
meaning of that section in any country or territory outside India which the Government has by notification
declared to be in a reciprocating territory, it may be enforced in India by proceedings in execution as if the
judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Procedure Code
is applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or
other charges of a like nature or in respect of a fine or other penalties and does not include arbitration awards.
Furthermore, the execution of the foreign decree under Section 44A of the Civil Procedure Code is also subject
to the exceptions under Section 13 of the Civil Procedure Code, as mentioned above.
Each of the United Kingdom, Singapore and Hong Kong has been declared by the Government of India to be a
reciprocating territory for the purposes of Section 44A of the Civil Procedure Code but the United States has not
been so declared. A judgment of a court in a jurisdiction which is not a reciprocating territory may be enforced
only by a fresh suit upon the judgment and not by proceedings in execution. The suit must be filed in India
within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil
liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if
an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if
it viewed the amount of damages awarded as excessive or inconsistent with public policy. Further, any judgment
or award denominated in a foreign currency would be converted into Rupees on the date of such judgment or
award and not on the date of payment. A party seeking to enforce a foreign judgment in India is required to
obtain approval from the RBI to repatriate outside India any amount recovered pursuant to the execution of such
a judgement.

13

EXCHANGE RATES
Fluctuations in the exchange rate between the Rupee and the U.S. Dollar will affect the U.S. Dollar equivalent
of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the
conversion into U.S. Dollars of any cash dividends paid in Rupees on the Equity Shares. The exchange rate
between the Rupee and the U.S. Dollar has been volatile over the past year.
The following table sets forth, for the periods indicated, information with respect to the exchange rate between
the Rupee and the U.S. Dollar (in Rupees per U.S. Dollar) based on the reference rate released by the RBI. The
exchange rate as at September 6, 2016 was ` 66.5469 = U.S. Dollar 1.00. No representation is made that the
Rupee amounts actually represent such U.S. dollar amounts or could have been or could be converted into U.S.
Dollar at the rates indicated, any other rate, or at all.

Fiscal year 2016

Fiscal year 2015
Fiscal year 2014
Months ended:
August, 2016
July, 2016
June, 2016
Quarters ended:
June, 2016
March 31, 2016
December 31, 2015

Exchange Rate (` Per U.S. Dollar)

Period End
Average
66.33
65.46
62.59
61.15
60.10
60.50

High

Low
68.78
63.75
68.36

62.16
58.43
53.74

66.98
67.03
67.62

66.94
67.21
67.30

67.19
67.50
68.01

66.74
66.91
66.63

67.62
66.33
66.33

66.93
67.50
65.93

68.01
68.78
67.04

66.24
66.18
64.73

Source: www.rbi.org.in
Note: High, low and average are based on the RBI reference rates.

No representation is made that the Rupee amounts actually represent such U.S. Dollar amounts or could have
been or could be converted into U.S. Dollars at the rates indicated, or at all.

14

CERTAIN DEFINITIONS AND ABBREVIATIONS

Capitalised terms used in this Preliminary Placement Document shall have the meaning set forth below, unless
specified otherwise or the context indicates or requires otherwise, and references to any statute or regulations or
policies shall include amendments thereto, from time to time.
Terms Related to our Bank
Term
Our
Bank,
Bank or the Issuer

Description
the YES Bank Limited, a public limited company incorporated under the Companies Act, 1956
and having its registered office at Nehru Centre, 9th Floor, Discovery of India building, Dr.
A.B. Road, Worli, Mumbai 400 018, Maharashtra, India.
Articles or Articles of The articles of association of our Bank.
Association
Board of Directors
Board
Directors
Equity Shares or Shares
ESOS Schemes

Financial Statements

Memorandum or MoA
or Memorandum of
Association
Preference Shares

or Our board of directors or any duly constituted committee thereof.

Directors of our Bank.
Equity shares of our Bank of face value of ` 10.00 each.
The employee stock options of our Bank, namely the Employee Joining Stock Option Plan,
the Joining Employee Stock Option Plan II, the Joining Employee Stock Option Plan III,
the YBL Employee Stock Option Scheme, YBL Joining Employee Stock Option Plan V/
Performance Employee Stock Option Plan II, YBL Performance Employee Stock Option
Plan II 2010.
Our audited standalone and consolidated financial statements as of and for the financial
years ended March 31, 2014, 2015 and 2016, and our limited review unaudited standalone
financial information for the three months ended June 30, 2016 prepared in accordance with
Indian GAAP.
The memorandum of association of our Bank, as amended.
Preference shares of our Bank of face value of ` 100.00 each.

Registered Office

The registered office of our Bank located at Nehru Centre, 9th Floor, Discovery of India
building, Dr. A.B. Road, Worli, Mumbai 400 018, Maharashtra, India.
Registrar of Companies or Registrar of Companies, Maharashtra at Mumbai.
RoC
Statutory Auditors
The current statutory auditors of our Bank, M/s B.S.R. & Co. LLP., Chartered Accountants.
Subsidiary or YSIL
YES Securities (India) Limited, a wholly owned subsidiary of our Bank.

Issue Related Terms

Term
Allocated or Allocation

Description
The allocation of Equity Shares, in consultation with the Managers, following the
determination of the Issue Price to QIBs on the basis of the Application Forms submitted by
them in compliance with Chapter VIII of the SEBI ICDR Regulations.
Allotees
Persons to whom Equity Shares are Allotted pursuant to the Issue.
Allotment or Allotted
Unless the context otherwise requires, the issue and allotment of Equity Shares pursuant to
the Issue.
Application Form
The form, including any revisions thereof, pursuant to which a QIB shall submit a bid for
Equity Shares in the Issue.
Bid(s)
An indication of interest by a QIB, including all revisions and modifications of interest, as
provided in the Application Form, to subscribe for Equity Shares in the Issue.
Bidder
Any prospective investor, a QIB, who makes a Bid pursuant to the terms of this Preliminary
Placement Document and the Application Form.
Bidding Period
The period between the Bid Opening Date and Bid Closing Date, inclusive of both dates,
during which QIBs can submit their Bids.
Bid Closing Date
[], 2016, which is the date on which our Bank (or the Managers on behalf of our Bank)
shall cease acceptance of the Application Forms.
Bid Opening Date
September 7, 2016, which is the date on which our Bank (or the Managers on behalf of our
Bank) shall commence acceptance of the Application Forms.
CAN or Confirmation of Note or advice or intimation to QIBs confirming the Allocation of Equity Shares after
Allocation Note
discovery of the Issue Price and to pay the entire Issue Price for all the Equity Shares
allocated to such QIBs.

15

Term
Escrow Account

Description
A bank account opened by our Bank with the Escrow Agent into which application money
shall be deposited by the QIBs.
Escrow Agent
YES Bank Limited
Floor Price
The floor price of ` 1,371.84 per Equity Share which has been calculated in accordance
with Chapter VIII of the SEBI ICDR Regulations. Our Bank may offer a discount of not
more than 5.00% on the Floor Price in terms of Regulation 85(1) of the SEBI ICDR
Regulations.
Global Co-ordinators and Goldman Sachs (India) Securities Private Limited, Motilal Oswal Investment Advisors
Book
Running
Lead Private Limited and CLSA India Private Limited.
Managers or GCBRLMs
Issue
The offer and issuance of up to [] Equity Shares to QIBs, pursuant to Chapter VIII of the
SEBI ICDR Regulations.
Issue Price
` [] per Equity Share, which shall be equal to or more than the Floor Price, subject to a
discount of up to five per cent, in accordance with Regulation 85(1) of the SEBI ICDR
Regulations.
Issue Size
The issue of up to [] Equity Shares aggregating up to ` [].
Joint Book Running Lead Edelweiss Financial Services Limited, HSBC Securities and Capital Markets (India) Private
Managers or JBRLMs
Limited, Inga Capital Private Limited, Investec Capital Services (India) Private Limited, JM
Financial Institutional Securities Limited, Nomura Financial Advisory & Securities (India)
Private Limited, Religare Capital Markets Limited, SBI Capital Markets Limited and YES
Securities (India) Limited. YES Securities (India) Limited shall be involved only in
marketing of the Issue.
Managers
GCBRLMs and JBRLMs
Pay-In Date
The last date specified in the CAN for payment of subscription money in relation to the
Issue.
Placement Agreement
The placement agreement dated September 7, 2016 entered into between our Bank and the
Managers.
Placement Document
The placement document to be issued in accordance with Chapter VIII of the SEBI ICDR
Regulations.
Preliminary
Placement This preliminary placement document for the Issue issued in accordance with Chapter VIII
Document
of the SEBI ICDR Regulations.

Industry related terms

Term
Additional Tier I capital

AFS
ALCO
ALM
AML
ANBC
ATM
AUM
Base Rate
Basel Committee
Basel II
Basel III

BPLR
bps
BSM
BSMG
Business Banking
CAR
CAGR

Description
Comprises of Innovative perpetual debt instruments and perpetual non cumulative
preference shares eligible for inclusion in Tier I Capital which comply with the specified
current regulations as reduced by equity investments in subsidiaries, (under transition
provisions) reciprocal investments capital of banking, financial and insurance entities,
deferred tax assets (under transition provisions), intangible assets (under transition
provisions).
Available for sale.
Asset liability management committee.
Asset liability management.
Anti money laundering.
Adjusted net bank credit
Automatic teller machine.
Assets under management.
Minimum lending rate set by our Bank in accordance with applicable laws and regulations.
Basel Committee on Banking Supervision.
Revised framework on International Convergence of Capital Measurement and Capital
Standards by RBI for International Settlements.
A global regulatory framework for more resilient banks and banking systems (December
2010 (rev. June 2011)) published by the Bank for International Settlements. RBI issued
guidelines on the implementation of Basel III capital regulations in India on May 2, 2012
and revised as per notification issued by the RBI on March 27, 2014.
Benchmark prime lending rate.
Basis points.
Bank-subsidiary model.
Balance sheet management group.
Business banking.
Capital adequacy ratio.
Compounded annual growth rate (calculated by taking the nth root of the total percentage
growth rate, where n is the number of years in the period being considered).

16

Term
CASA
CBLO
CBS
CD
CDMAOSC
CDR
CET1
CP
CRAR
CRM
CRMC
CRR
CTS
Director FIU
DP
DRI
ECB
ECR
ECS
EEFC
EFT
EL
FCNR Account
FCNR(B)
FIMMDA
GIFT City
GNPAs
Gross NPA
HFT
HQLAs
HTM
IBA
IBU
IMF
IRDM
IST
KYC
LAF
LC
LCR
LFAR
MCLR
Moodys
MSE
MSF
MSME
NDTL
NEFT
Net NPA
Net interest income
Net Total Income
NOCs
Non Interest Income
NPA
NNPA
NPA provisioning coverage
NPI

NRNR
NSFR
OTS
PCR

Description
Current account (demand deposit) saving account.
Collateralised borrowing and lending obligations.
Core banking solutions.
Certificate of deposit.
Committee to decide and monitor augmentation of share capital.
Corporate debt restructuring.
Additional common equity tier 1
Commercial paper.
Capital to risk-weighted asset ratio.
Credit risk mitigation.
Credit risk management committee.
Cash reserve ratio.
Cheque truncation system.
Director, Financial Intelligence Unit, India
Counter-cyclical (dynamic) provisioning
Differential rate of interest.
Emerging corporate banking
Export credit refinance
Electronic clearing services.
Exchange earners' foreign currency.
Electronic funds transfer.
Expected loss
Foreign currency non resident account.
Foreign currency non resident (banks).
Fixed Income Money Market and Derivative Association
Gujarat International Finance Tec-City, Gujarat
Gross non-performing advances
Gross non-performing assets
Held for trading.
High quality liquid assets
Held to maturity.
Indian Banks Association.
International Financial Service Centre banking unit
International Monetary Fund
Integrated Risk Management Department of our Bank.
Indian Standard Time.
Know your customer.
Liquidity adjustment facility.
Letter of credit.
Liquidity coverage ratio.
Long form audit report.
Marginal cost of funds based lending rate
Moodys Investors Services Limited
Micro and small enterprises.
Marginal standing facility.
Micro, small and medium enterprises.
Net demand and time liabilities.
National electronic fund transfer.
NPAs (net of provisions).
Interest earned less interest expended.
Net interest income and other income.
National operating centers.
Non interest income is presented as Other Income in Financial Statements.
Non-performing assets.
Non performing advances.
Ratio of NPA provision to gross NPA.
Non performing investments as defined by the Master Circular on Prudential Norms for
Classification, Valuation and Operation of Investment Portfolio by Banks dated July 1,
2015.
Non resident non repatriable.
Net stable funding ratio.
One time settlement.
Provisioning coverage ratio.

17

Term
PFIC
PSBs
RAROC
RBI Basel III Capital
Regulations
Repo Rate
Retail Banking
Reverse Repo Rate
RFC Account
RMC
ROA
ROE
RoNW
RTGS
SCBs
SGL
SLBC
SLR
SMEs
S&P
SUCBs
Tier II bonds
Tier I capital

Tier II capital

VaR
Yield on advances
YTM

Description
Passive foreign investment company.
Public sector banks.
Risk adjusted return on capital.
Guidelines issued by RBI on the implementation of Basel III capital regulations in India on
May 2, 2012, as revised.
Re-purchase option rate; the annual rate at which RBI lends to other banks in India.
Retail banking.
The rate at which RBI borrows money from banks in India.
Resident foreign currency account.
Risk Management Committee
Return on assets.
Return on equity.
Return on net worth.
Real time gross settlement.
Scheduled commercial banks.
Subsidiary general ledger.
State Level Bankers Committee.
Statutory liquidity ratio.
Small and medium-sized enterprises.
Standard and Poors.
Scheduled urban co-operative banks.
Unsecured subordinated bonds issued for Tier II capital adequacy purposes.
The core capital of a bank which provides the most permanent and readily available support
against unexpected losses. It comprises paid up capital and reserves consisting of statutory
reserves, free reserves and capital reserves representing surplus arising out of sale of assets,
innovative capital instruments (like innovative perpetual debt instruments and perpetual non
cumulative preference shares eligible for inclusion in Tier I Capital which comply with the
specified regulatory requirements) as reduced by equity investments in subsidiaries,
deferred tax assets, intangible assets, and losses in the current period and those brought
forward from the previous period.
The undisclosed free reserves, investment reserves, hybrid debt capital instruments (like
perpetual cumulative preference shares, redeemable non cumulative preference shares,
redeemable cumulative preference shares eligible for inclusion in Tier II Capital which
comply with the specified regulatory requirements) & subordinated debt eligible for
inclusion in Tier II Capital which comply with the specified regulatory requirements,
revaluation reserves (at a discount of 55.0%), general provisions and loss reserves (allowed
up to a maximum of 1.2% of risk-weighted assets).
Value at risk.
Average interest income divided by average balance of advances.
Yield to maturity.

Conventional and General Terms/ Abbreviations

Term
AAIFR
AGM
AIF(s)
AMFI
AS
Bankers Books Evidence Act
Banking Regulation Act
BIFR
BSE
CAIIB
CAGR
CDSL
Civil Procedure Code, Civil
Code
Companies Act
Delisting Regulations
Depositories Act

Description
Appellate Authority for Industrial and Financial Reconstruction.
Annual general meeting.
Alternative investment funds, as defined and registered with SEBI under the Securities and
Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
Association of Mutual Funds in India.
Accounting Standards issued by the Institute of Chartered Accountants of India.
Bankers Books Evidence Act, 1891.
Banking Regulation Act, 1949.
Board of Industrial and Financial Reconstruction.
BSE Limited.
Certified Associate of the Indian Institute of Banking and Finance.
Compounded annual growth rate.
Central Depository Services (India) Limited.
The Code of Civil Procedure, 1908.
Companies Act, 2013 or Companies Act, 1956, as applicable.
The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations,
2009.
The Depositories Act, 1996.

18

Term
Depository
Depository Participant
DIPP
DTC
EBITDA
EGM
Eligible FPIs
EPS
FDI
FEDAI
FEMA
FEMA 20
FERA
FII
financial year, fiscal year,
Fiscal or FY
FVCI
GAAP
GDP
Government
Government of India
HUF
ICAI
IFRS
IND-AS
Indian GAAP
IT
IT Act
Listing Agreements
MAT
MFIs
MICR
MoU
Mutual Fund / MF
NABARD
NBFC
Negotiable Instruments Act
NPCI
NRI
NSDL
NSE
p.a.
PAN
PAT
PBT
PIO
Portfolio Investment Scheme
PMLA
PSU
QIBs
or
Qualified
Institutional Buyers
QIP
RBI
RBI Act or the Reserve Bank
of India Act

Description
A depository registered with SEBI under the Securities and Exchange Board of India
(Depositories and Participant) Regulations, 1996.
A depository participant as defined under the Depositories Act.
The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry,
Government of India.
The direct tax code.
Earnings before interest, tax, depreciation and amortisation.
Extra ordinary general meeting.
FPIs other than Category III foreign portfolio investor, registered with SEBI
Earnings per share.
Foreign direct investment.
Foreign Exchange Dealers Association of India.
The Foreign Exchange Management Act, 1999, as amended, and the regulations issued
thereunder.
The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2000 and amendments thereto.
Foreign Exchange Regulation Act, 1973.
Foreign Institutional Investor as defined under the SEBI FPI Regulations.
Unless stated otherwise, financial year of our Bank ending on March 31 of a particular year.
Foreign venture capital investors (as defined and registered with SEBI under the (Foreign
Venture Capital Investors) Regulations, 2000).
Generally Accepted Accounting Principles.
Gross domestic product.
Government of India or State Government, as applicable.
Central government of India.
Hindu undivided family.
Institute of Chartered Accountants of India.
International Financial Reporting Standards of the International Accounting Standards
Board.
Indian Accounting Standards.
Generally Accepted Accounting Principles in India, as applicable to a bank.
Information technology.
The Income Tax Act, 1961.
The agreements entered into between our Bank and each Stock Exchange in relation to
listing of the Equity Shares on such Stock Exchange.
Minimum alternate tax.
Micro finance institutions.
Magnetic ink character recognition.
Memorandum of understanding.
A mutual fund registered with SEBI under the Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996.
National Bank for Agriculture and Rural Development.
Non-banking financial company.
Negotiable Instruments Act, 1881.
National Payments Corporation if India.
Non resident Indian.
National Securities Depository Limited.
The National Stock Exchange of India Limited.
Per annum.
Permanent Account Number.
Profit after tax.
Profit before tax.
Persons of Indian origin.
Portfolio investment scheme under FEMA.
Prevention of Money Laundering Act, 2002
Public sector undertaking.
Qualified institutional buyers as defined in Regulation 2(1) (zd) of the SEBI ICDR
Regulations.
Qualified Institutions Placement under Chapter VIII of the SEBI ICDR Regulations.
Reserve Bank of India.
The Reserve Bank of India Act, 1934.

19

Term
Regulation S
Rs., Rupees, INR or
`
Rule 144A
SARFAESI Act
SAT
SCRA
SCRR
SCR (SECC) Rules
SEBI
SEBI Act
SEBI FPI Regulations
SEBI Listing Regulations
SEBI ICDR Regulations
Securities Act
SENSEX
State Government
Stock Exchanges
STT
Takeover Regulations
U.S.$, or U.S. Dollars
U.S. or United States
U.S. GAAP
VCF

Description
Regulation S under the Securities Act.
The legal currency of the Republic of India.
Rule 144A under the Securities Act
The Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002.
Securities Appellate Tribunal.
Securities Contracts (Regulation) Act, 1956.
Securities Contracts (Regulation) Rules, 1957.
Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations)
Regulations, 2012.
Securities and Exchange Board of India.
The Securities and Exchange Board of India Act, 1992.
Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014.
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015.
Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2009.
The U.S. Securities Act, 1933.
The index of a basket of 30 constituent stocks traded on the BSE representing a sample of
liquid securities of large and representative companies.
Government of a state of the Republic of India.
The BSE and the NSE.
Securities Transaction Tax.
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover)
Regulations 2011.
The legal currency of the United States.
United States of America.
Generally accepted accounting principles in the U.S.
A venture capital fund (as defined and registered with SEBI under the erstwhile Securities
and Exchange Board of India (Venture Capital Funds) Regulations, 1996).

20

DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES

ACT, 2013
The table below sets out the disclosure requirements as provided in PAS-4 and the relevant pages in this
Preliminary Placement Document where these disclosures, to the extent applicable, have been provided.
Sr.
No.
1.
a.
b.
c.
d.
e.
f.
g.
(i)
(ii)
(iii)
(iv)
h.
2.
a.
b.
c.
d.
e.
f.
g.
(i)
(ii)
(iii)
(iv)
(v)
h.
i.
j.
k.
3.
a.

b.

c.
d.

e.

f.

Disclosure Requirements

Relevant Page of this

Preliminary
Placement Document

GENERAL INFORMATION
Name, address, website and other contact details of the company indicating both
registered office and corporate office.
Date of incorporation of the company.
Business carried on by the company and its subsidiaries with the details of branches or
units, if any.
Brief particulars of the management of the company.
Names, addresses, DIN and occupations of the directors.
Managements perception of risk factors.
Details of default, if any, including therein the amount involved, duration of default and
present status, in repayment of:
Statutory dues;
Debentures and interest thereon;
Deposits and interest thereon; and
Loan from any bank or financial institution and interest thereon.
Names, designation, address and phone number, email ID of the nodal/ compliance officer
of the company, if any, for the private placement offer process.
PARTICULARS OF THE OFFER
Date of passing of board resolution.
Date of passing of resolution in the general meeting, authorising the offer of securities.
Kinds of securities offered (i.e. whether share or debenture) and class of security.
Price at which the security is being offered including the premium, if any, along with
justification of the price.
Name and address of the valuer who performed valuation of the security offered.
Amount which the company intends to raise by way of securities.
Terms of raising of securities:
Duration, if applicable;
Rate of dividend;
Rate of interest;
Mode of payment; and
Repayment.
Proposed time schedule for which the offer letter is valid.
Purposes and objects of the offer.
Contribution being made by the promoters or directors either as part of the offer or
separately in furtherance of such objects.
Principle terms of assets charged as security, if applicable.
DISCLOSURES WITH REGARD TO INTEREST OF DIRECTORS, LITIGATION ETC
Any financial or other material interest of the directors, promoters or key managerial
personnel in the offer and the effect of such interest in so far as it is different from the
interests of other persons.
Details of any litigation or legal action pending or taken by any Ministry or Department of
the Government or a statutory authority against any promoter of the offeree company
during the last three years immediately preceding the year of the circulation of the offer
letter and any direction issued by such Ministry or Department or statutory authority upon
conclusion of such litigation or legal action shall be disclosed.
Remuneration of directors (during the current year and last three financial years).
Related party transactions entered during the last three financial years immediately
preceding the year of circulation of offer letter including with regard to loans made or,
guarantees given or securities provided.
Summary of reservations or qualifications or adverse remarks of auditors in the last five
financial years immediately preceding the year of circulation of offer letter and of their
impact on the financial statements and financial position of the company and the corrective
steps taken and proposed to be taken by the company for each of the said reservations or
qualifications or adverse remark.
Details of any inquiry, inspections or investigations initiated or conducted under the

21

218
214
116 - 131
158 - 169
158 - 160
31 - 63
211
212
212
212
212
218

214
214
27
27
Not applicable
64
Not applicable
71
Not applicable
Not applicable
Not applicable
15
64
64
Not applicable
165

211

163 - 164
165

30

211

Sr.
No.

g.
4.
a.
(i)(a)
(b)
(c)
(A)
(B)
(d)
(ii)

b.
c.
d.
e.
f.
5.
a.
b.

c.

Disclosure Requirements

Companies Act or any previous company law in the last three years immediately preceding
the year of circulation of offer letter in the case of company and all of its subsidiaries. Also
if there were any prosecutions filed (whether pending or not) fines imposed, compounding
of offences in the last three years immediately preceding the year of the offer letter and if
so, section-wise details thereof for the company and all of its subsidiaries.
Details of acts of material frauds committed against the company in the last three years, if
any, and if so, the action taken by the company.
FINANCIAL POSITION OF THE COMPANY
The capital structure of the company in the following manner in a tabular form:
The authorised, issued, subscribed and paid up capital (number of securities, description
and aggregate nominal value);
Size of the present offer; and
Paid up capital:
After the offer; and
After conversion of convertible instruments (if applicable);
Share premium account (before and after the offer).
The details of the existing share capital of the issuer company in a tabular form, indicating
therein with regard to each allotment, the date of allotment, the number of shares allotted,
the face value of the shares allotted, the price and the form of consideration.
Provided that the issuer company shall also disclose the number and price at which each of
the allotments were made in the last one year preceding the date of the offer letter
separately indicating the allotments made for considerations other than cash and the details
of the consideration in each case.
Profits of the company, before and after making provision for tax, for the three financial
years immediately preceding the date of circulation of offer letter.
Dividends declared by the company in respect of the said three financial years; interest
coverage ratio for last three years (Cash profit after tax plus interest paid/interest paid).
A summary of the financial position of the company as in the three audited balance sheets
immediately preceding the date of circulation of offer letter.
Audited Cash Flow Statement for the three years immediately preceding the date of
circulation of offer letter.
Any change in accounting policies during the last three years and their effect on the profits
and the reserves of the company.
A DECLARATION BY THE DIRECTORS THAT
The company has complied with the provisions of the Act and the rules made thereunder.
The compliance with the Act and the rules does not imply that payment of dividend or
interest or repayment of debentures, if applicable, is guaranteed by the Central
Government.
The monies received under the offer shall be used only for the purposes and objects
indicated in the Offer letter.
I am authorised by the Board of Directors of the company vide resolution number
___________ dated ___________ to sign this form and declare that all the requirements of
Companies Act, 2013 and the rules made thereunder in respect of the subject matter of this
form and matters incidental thereto have been complied with. Whatever is stated in this
form and in the attachments thereto is true, correct and complete and no information
material to the subject matter of this form has been suppressed or concealed and is as per
the original records maintained by the promoters subscribing to the Memorandum of
Association and Articles of Association
It is further declared and verified that all the required attachments have been completely,
correctly and legibly attached to this form.
Signed:
Date:
Place:
Attachments:Copy of board resolution
Copy of shareholders resolution
Copy of _____
Optional attachments, if any

22

Relevant Page of this

Preliminary
Placement Document

211 - 212

66
66
66
66
Not applicable
66
66-68

Not Applicable

28 - 29
71
29 - 30
30
85 - 86
217

SUMMARY OF BUSINESS
Overview
We are a new generation private sector bank in India founded by Rana Kapoor and late Ashok Kapur. We were
incorporated as a public limited company in November 2003 and obtained our certificate of commencement of
business in 2004. In May 2004, the RBI granted us a license under Section 22(1) of the Banking Regulation Act
to commence banking operations in India, and we began banking operations in August 2004. We have been
recognized in India, as well as globally, with certain awards and recognitions, such as the Golden Peacock
National Quality Award in 2016, the Best Trade Finance Bank in India Bankers Choice Award by the Asian
Banker and the International Council of Advisors in 2015, and the India Domestic Cash Management Bank of
the Year ABF Wholesale Banking Award for the year 2015.
In October 2015, we commenced operation of our IBU at GIFT City.
We provide a knowledge-based approach to banking that we believe adds value for our customers by allowing
them to capitalize on our knowledge in specific business sectors as well as across products. We believe that this
approach also strengthens our relationships with our customers, by allowing us to develop those existing
relationships to cross sell our full range of product and service offerings.
Our total assets have increased from `1,090,157.90 million as of March 31, 2014 to `1,772,288.74 million as of
June 30, 2016 at a CAGR of 24.11%. Our total deposits have grown from `741,920.15 million as of March 31,
2014 to `1,225,810.54 million as of June 30, 2016 at a CAGR of 25.00%. Our CASA deposits increased from
`163,446.80 million as of March 31, 2014 to `362,883.09 million as of June 30, 2016 at a CAGR of 42.54%.
Our net profit increased from `16,177.80 million for the fiscal year 2014 to `25,394.47 million for the fiscal
year 2016 at a CAGR of 25.29% and our net profit increased from `5,511.98 million for the first quarter of
fiscal year 2016 to `7,318.02 million for the first quarter of fiscal year 2017 at a CAGR of 32.77%. In addition,
our number of branches has increased from 560 as of March 31, 2014 to 860 as of March 31, 2016.
Competitive Strengths
Our competitive strengths include the following:
Diverse revenue streams and strong execution capabilities
We offer a wide range of products that generate both interest and non-interest income, and we have
demonstrated sustained growth with respect to both sources of income. We provide diversified solutions to the
financial and banking needs of our customers, with a focus on cross-selling multiple products to them. We
believe that our combination of diverse product offerings and a relationship-driven approach has enabled us to
structure solutions to meet our customers needs, resulting in sustained revenue generation. Our non-interest
income has broadly grown in line with the growth in our total net income and accounted for 38.79%, 36.98%
and 37.26% of our total net income for the fiscal years 2014, 2015 and 2016, respectively and 40.62% of our
total net income for the first quarter of fiscal year 2017.
The tables below present our net interest income and non-interest income and the corresponding growth for each
of the periods indicated:
Income Statement

March 31, 2014

Net interest income

Non-interest income
Total net income

27,162.60
17,215.77
44,378.37

Increase(1)

March 31, 2015 Increase(1) March 31, 2016

(in ` million, except percentages)
22.42%
34,878.37
28.41%
45,667.23
36.91%
20,464.55
18.87%
27,121.47
27.66%
55,342.92
24.71%
72,788.70

Increase(1)
30.93%
32.53%
31.52%

Note:
(1) year-on-year comparison
Income Statement
Net interest income
Non-interest income

June 30, 2015

10,598.03
5,451.73

Increase(1)
June 30, 2016
(in ` million, except percentages)
42.19%
13,165.79
31.81%
9,005.17

23

Increase(1)
24.23%
65.18%

Income Statement

June 30, 2015

Total net income

16,049.76

Increase(1)
June 30, 2016
(in ` million, except percentages)
38.49%
22,170.96

Increase(1)
38.14%

Note:
(1) quarter-on-quarter comparison
We believe that our execution capabilities are reflected in the growth of our business across our various business
streams, including the increase in the proportion of our CASA and retail term deposits. Implementation of our
growth strategies with prudent risk management has resulted in a return on assets of 1.59%, 1.70% and 1.76% as
at March 31, 2014, 2015 and 2016 and 1.71% as at June 30, 2016. Our net interest margin (the ratio of interest
income less interest expense to average interest-earning assets) has expanded from 3.00% in the fiscal year 2014
to 3.43% in the fiscal year 2016 and witnessed a marginal decline to 3.34% in the first quarter of fiscal year
2017.
Robust risk management practices and healthy asset quality
We believe we have an independent risk management function covering enterprise risk management, credit risk,
market risk and operational risk that contribute to preserving our asset quality amongst other risk objectives. Our
risk management function is overseen by the Risk Monitoring Committee, an independent board-level subcommittee that strives to put in place specific policies, frameworks and systems for effectively managing the
various risks. These policies and procedures are constantly reviewed and updated. We have a dedicated
independent risk management department that comprises various units responsible for evaluating and
underwriting credit; formulating independent ratings and reviewing monitoring and reporting of all risk control
parameters, and recommending appropriate corrective actions where necessary; and ensuring compliance with
internal policies and regulatory guidelines.
We believe that the success of our risk management systems is reflected in the level of our gross and net NPAs,
which as of June 30, 2016 amounted to `8,445.59 million, or 0.79% of our total gross advances, and `3,023.92
million, or 0.29% of our total net advances, respectively. These figures reflect the implementation of the RBIs
asset quality review exercise, in early 2016, which resulted in the reclassification of certain accounts as NPAs
that were not previously considered as NPAs. Our risk management function is described in further detail under
Managements Discussion and Analysis of Financial Condition and Results of OperationsRisk
Management.
Knowledge-based approach to banking enabling cross-selling
We utilize a knowledge-based approach to banking that we believe differentiates us from our competitors and
enables us to provide our customers with well-informed, customized and risk-mitigated solutions. We deliver
sector-focused advice, products and services using teams of professionals with sector-specific knowledge, which
we believe has helped us to develop our corporate banking franchise. We believe that this approach also
solidifies our relationships with our customers, by allowing us to develop those existing relationships to crosssell our full range of product and service offerings.
Technology infrastructure
Our information technology (IT) strategy is divided into two parts: the first being Run the Bank, which
focuses on initiatives aimed at ensuring efficient and effective operations and the second our strategy entitled
Build the Bank, which focuses on transformative technologies that could further enhance our business. For
additional details on our IT achievements see sub-section titled Information Technology on page 128. As a
new generation bank unencumbered by legacy systems, we have been able to invest in technology infrastructure
and applications to significantly enhance customer experience across all service delivery channels, including
digital banking. For example, we offer online payment solutions supported by a reliable internet security
framework. Further, we have launched a new customer-centric interactive voice response system to enhance the
quality of our customer service. We are also focused on leveraging technology to deliver a reliable suite of cardbased products such as RuPay, MasterCard and Visa cards. More than 1.6 million Yes Bank co-branded virtual
prepaid cards have been issued on the MasterCard platform since its launch in January 2016.
Experienced and well-regarded leadership supported by high-quality personnel

24

Our management team has a successful track record of project management and execution and a history of
significant corporate as well as retail relationships. Prior to joining us, the members of our senior management
held key positions at leading Indian private sector and foreign banks. For additional details see section titled
Board of Directors and Senior Management on page 158.
We also believe that our management is supported by well-trained and qualified staff. We offer our employees
career growth opportunities in an entrepreneurial environment, along with attractive compensation and suitable
training programs. In recent years, we have hired a number of experienced professionals from other private
sector banks that have strengthened our retail banking team leadership.
We have made significant investments in our employees in the last three years. As a result of our investment and
commitment to our employees, we believe we have good relationships with our workforce, which numbered
more than 16,400 as of June 30, 2016. For further details, see sub-section titled Human Resources on page
129.
Award-winning quality of service
We aim to regularly monitor current processes, benchmark them against our competitors and incorporate best
practices. We also seek to disseminate knowledge across our workforce and to introduce robust mechanisms for
process improvement. Our process management function seeks to facilitate the ease of execution of transactions
through the automation of manual processes, and is also responsible for ensuring the effectiveness of training for
our employees. We have also implemented various customer satisfaction measures that enable us to monitor
compliance with service-level agreements across our relevant operational units and provide an efficient
information platform to support effective decision-making.
We have been recognized as World Class in the large organization service category by the Asia Pacific Quality
Organization in 2014. We have also won IMC Ramakrishna Bajaj National Quality Award in the services
category in 2014.
Business Strategy
We continuously evaluate our growth strategy, with the aim of expanding our operations, including the number
of branches, ATMs, employees, deposit base, loan book and balance sheet.
The objectives that form our near-to-medium term business strategies are described below:
Liabilities generation
We are committed to increasing the volume of our CASA and granular term deposits. Key elements of this
objective are the identification of current account corporate customers and offering them a range of customized
products, including wealth products targeted at their owners, promoters and directors, salary accounts and cash
management and liquidity management solutions.
Other steps that we have taken include:

expanding our distribution network to provide better access to our customers, evidenced by an increase in
our number of branches from 560 as of March 31, 2014 to 860 as of March 31, 2016 and an increase in our
number of ATMs from 1,139 as of March 31, 2014 to 1,609 as of March 31, 2016;

offering a higher savings rate to customers, following the RBIs deregulation of savings bank deposits rates
in October 2011, which has led to a significant improvement in and savings bank deposits balances and new
account openings; and

offering targeted products such as 3-in-1 accounts, family accounts, salary accounts and specialized
accounts for senior citizens and women with select privileges and relationship pricing on key banking
offerings.

Optimal risk management

25

We are actively focused on evaluating our enterprise, credit, market and operational risks and we intend to
optimize our capital needs for our growth to achieve high returns on capital while managing and mitigating risks
appropriately.
Sustainable and diversified revenue generation
We intend to increase our customer base in our Corporate Banking and Branch Banking segments through a
focused customer relationship management approach. In order to develop our retail liabilities business, we
incorporated a brokerage subsidiary, YES Securities (India) Limited, in March 2013. The brokerage business
complements our retail offering and wealth management proposition. We have also launched a full suite of retail
asset products, comprising car loans, commercial vehicle loans, inventory finance, personal loans, loans against
securities, education loans, gold loans and construction equipment loans, tractor finance loans, hospitality,
education and healthcare equipment finance loans and two-wheeler loans. Our goal is to increase the amount of
business we do with our existing customers by building on our existing customer relationships and cross-selling
our banking and advisory products. We expect these initiatives will further diversify our sources of revenue.
Enhancing brand value
We have built our brand around six key values: trust, growth, knowledge-driven human capital, technology,
transparency and responsible banking. We intend to develop our brand further and focus on improving customer
sentiment by engaging in various activities such as advertising across print media, radio, television and the
internet, domestically and abroad. Our marketing initiative abroad focuses on capturing market share from the
NRI market. We have also been one of the co-sponsors of the Indian Premier League 2013-2017.
Human capital management
We intend to continue hiring high-quality talent from leading financial institutions and business schools in India
and to focus on retaining our employees by offering career growth opportunities in an entrepreneurial
environment, along with attractive compensation and suitable training programs. For further details, see subsection titled Human Resources on page 129.
Effective cost management
We maintain a relatively low cost-to-income ratio compared to our peers in the Indian private banking sector.
We will continue to focus on effective cost management through the efficient use of resources, achieving
economies of scale, continuous benchmarking of our rate contracts, evaluating various cost-effective solutions
and implementing cost-effective technology solutions to increase productivity and eliminate costs. However, we
plan to continue investing in key strategic investment and expansion opportunities in retail assets and liabilities.
Strengthening of systems, controls, processes and procedures
We intend to continue developing technology-based solutions in conjunction with robust processes and controls
through centralized operations and investment in risk management. This is a key focus area in light of our
growth plans and the potential challenges in achieving them.

26

SUMMARY OF THE ISSUE

The following is a general summary of the terms of the Issue. This summary should be read in conjunction with,
and is qualified in its entirety by, more detailed information appearing elsewhere in this Preliminary Placement
Document, including under the sections titled Issue Procedure and Description of the Equity Shares on
pages 173 and 194, respectively.
YES Bank Limited.
Up to [] Equity Shares aggregating up to ` [] million.

Issuer
Issue Size

A minimum of 10.00% of the Issue Size, or at least [] Equity Shares, shall be available
for Allocation to Mutual Funds only, and the balance [] Equity Shares shall be available
for Allocation to all QIBs, including Mutual Funds.

Face Value
Issue Price
Floor Price

Eligible Investors

Equity Shares issued and

outstanding
immediately
prior to the Issue
Equity Shares issued and
outstanding
immediately
after the Issue
Listing

Lock-up
Pay-In Date
Transferability Restriction

Use of Proceeds

Risk Factors
Closing Date
Ranking

Security Codes
Equity Shares

for

the

In case of under-subscription in the portion available for Allocation only to Mutual Funds,
such portion or part thereof may be Allocated to other QIBs.
` 10.00 per Equity Share.
` [] per Equity Share.
The floor price for the Issue calculated on the basis of Chapter VIII of the SEBI ICDR
Regulations is ` 1,371.84 per Equity Share. Our Company may offer a discount of not
more than 5% on the Floor Price in terms of Regulation 85 of the SEBI ICDR Regulations.
QIBs as defined in Regulation 2(1)(zd) of the SEBI ICDR Regulations and not excluded
under Regulation 86 of the SEBI ICDR Regulations to whom this Preliminary Placement
Document and the Application Form is circulated and who are eligible to bid and
participate in the Issue. The list of QIBs to whom this Preliminary Placement Document
and Application Form is delivered shall be determined by the Managers in consultation
with our Bank, at their sole discretion.
421,345,275 Equity Shares
[] Equity Shares

Our Bank has received in principle approvals dated September 7, 2016 each from the NSE
and the BSE, respectively, under Regulation 28 of the SEBI Listing Regulations. Our Bank
shall apply to the Stock Exchanges for the listing approvals and the final listing and trading
approvals, after the Allotment and after the credit of Equity Shares to the beneficiary
account with the Depository Participant, respectively.
Please see the sub-section titled Placement-Lock-up on page 182 for a description of
restrictions on our Bank in relation to Equity Shares.
The last date specified in the CAN for payment of subscription money by QIBs in relation
to the Issue.
The Equity Shares being Allotted pursuant to this Issue shall not be sold for a period of one
year from the date of Allotment, except on the Stock Exchanges. For further transfer
restrictions, see the section titled Transfer Restrictions on page 188.
The net proceeds of the Issue, after deduction of fees, commissions and expenses in
relation to the Issue, are expected to total approximately ` [] million. Please see the
section titled Use of Proceeds on page 64.
Please see the section titled Risk Factors on page 31 for a discussion of factors that you
should consider before deciding whether to buy the Equity Shares.
The Allotment is expected to be made on or about [], 2016.
The Equity Shares being issued pursuant to the Issue shall be subject to the provisions of
the Memorandum and Articles of Association and shall rank pari passu in all respects with
the existing Equity Shares including rights in respect of dividends after the closing. The
holders of such Equity Shares will be entitled to participate in dividends and other
corporate benefits, if any, declared by our Bank after the Closing Date, in compliance with
the Companies Act. The holders of such Equity Shares may attend and vote in
shareholders meetings in accordance with the provisions of the Companies Act. Please see
the section titled Description of the Equity Shares on page 194.
ISIN
INE528G01019
BSE Code
532648
NSE Code
YESBANK

27

SELECTED FINANCIAL INFORMATION OF OUR BANK

The following summary financial information and other data should be read together with Management's
Discussion and Analysis of Financial Condition and Results of Operations and our financial statements,
including the notes thereto and the reports thereon, which appear in the section Financial Statements. The
summary financial information set forth below is derived from the audited standalone financial statements as of
and for the years ended March 31, 2014, 2015 and 2016, prepared in accordance with the Indian GAAP and
from the reviewed standalone financial information as of and for the three months ended June 30, 2015 and
2016, based on the listing requirement of the exchanges where the Equity Shares of the Bank have been listed
and other financial information recorded in the books of accounts by the company. The Bank has only one
subsidiary, YES Securities (India) Limited, incorporated in March 2013. This subsidiary had a loss of ` 79.39
million during Fiscal Year 2015 and a loss of ` 97.58 million during Fiscal Year 2016. Accordingly, we present
in this Preliminary Placement Document our standalone financial statements. Our audited consolidated
financial statements, which as of and for the years ended March 31, 2015 and March 31, 2016 are presented in
the section Financial Statements and have been provided for informational purposes only.
Solely for the convenience of the reader, the selected data set out below is presented in a format different from
our standalone financial statements and such data has been derived from our standalone financial statements.
Neither the information set forth below nor the format in which it is presented should be viewed as comparable
to information presented in accordance with Indian GAAP, IFRS or other accounting principles. For the
purposes of a comparative analysis in the discussion below, previous years figures have been reclassified
wherever necessary.
Solely for the convenience of the reader, Rupee amounts as of and for the year ended March 31, 2016 have been
translated into U.S. dollars at the selling exchange rate as reported by the RBI on March 31, 2016, of ` 66.33
per U.S.$1.00 and Rupee amounts as of and for the three months ended June 30, 2016 have been translated into
U.S. dollars at the selling exchange rate as reported by the RBI on June 30, 2016, of ` 67.53 per U.S.$1.00. The
U.S. dollar equivalent information should not be construed to imply that the real amounts represent, or could
have been or could be converted into, U.S. dollars at such rates or at any other rate.
Summary Income Statement Information

2014

Interest earned
Other income
Total
Expenditure
Interest expended
Operating expenses
Provision and contingencies
Total
Profit
Add: Profit brought forward from previous year
Amount available for appropriation
Appropriations
Transfer to
(a) Statutory Reserve
(b) Capital Reserve
(c) Investment Reserve
(d) Dividend (proposed)
(e) Corporate dividend tax
(f) Dividend and tax thereon paid for last year
Balance transferred to balance sheet
Total
Earnings per share (Rupees)
Basic (Annualized)
Diluted (Annualized)

Fiscal Year
2015
2016
(in ` million)

99,813.52
17,215.77
117,029.29

115,720.06
20,464.55
136,184.61

135,334.42
27,121.47
162,455.89

2016
(in U.S.$
million)
2,040.32
408.89
2,449.21

72,650.92
17,498.72
10,701.85
100,851.49
16,177.80
23,383.68
39,561.48

80,841.69
22,847.06
12,442.25
116,131.00
20,053.61
32,074.57
52,128.18

89,667.19
29,763.71
17,630.52
137,061.42
25,394.47
42,200.51
67,594.97

1,351.83
448.72
265.81
2,066.36
382.85
636.22
1,019.07

4,044.45
41.36
4.39
2,885.07
490.32
21.33
32,074.56
39,561.48

5,013.40
262.45
124.10
3,759.63
765.46
2.63
42,200.51
52,128.18

6,348.62
734.83
4,205.32
856.20
3.20
55,446.80
67,594.97

95.71
11.08
63.4
12.91
0.05
835.92
1,019.07

44.92
44.35

49.34
48.01

60.62
59.31

0.91
0.89

Three months ended June 30,

28

2015
Interest earned
Other income
Total
Expenditure
Interest expended
Operating expenses
Provision and contingencies
Total
Profit
Add: Profit brought forward from previous year
Amount available for appropriation
Appropriations
Transfer to
(a) Statutory Reserve
(b) Capital Reserve
(c) Investment Reserve
(d) Dividend (proposed)
(e) Corporate dividend tax
(f) Dividend and tax thereon paid for last
year
Balance transferred to balance sheet
Total
Earnings per share (Rupees)
Basic
Diluted

(in ` million)
32,518.47
5,451.73
37,970.20

2016
38,623.07
9,005.17
47,628.24

2016
(in U.S.$ million)
571.98
133.36
705.34

21,920.44
6,967.03
3,570.75
32,458.22
5,511.98
42,200.51
47,712.49

25,457.28
9,103.26
5,749.68
40,310.22
7,318.02
55,446.80
62,764.82

377.01
134.81
85.15
596.97
108.37
821.13
929.50

3.20

5.61

0.08

3.20

5.61

0.08

52.75
51.42

69.55
67.87

1.03
1.01

We appropriate net profit towards various reserves at year end. For the quarter ended June 30, 2016,
appropriations required by RBI guidelines was ` 1,829.51 million (compared to ` 1,377.99 million for the
quarter ended June 30, 2015) towards statutory reserves and ` 18.02 million (compared to ` 52.60 million for
the quarter ended June 30, 2015) towards capital reserve.
Summary Balance Sheet Information

2014

As of March 31,
2015
(in ` million)

2016

Capital and liabilities

Capital
3,606.34
4,177.36
4,205.32
Reserves and surplus
67,611.07
112,622.46 133,660.67
Deposits
741,920.15 911,758.48 1,117,195.33
Borrowings
213,142.86 262,204.01 316,589.77
Other liabilities and provisions
63,877.48
70,941.79
80,983.03
Total
1,090,157.90 1,361,704.10 1,652,634.12
Assets
Cash and balances with the
45,415.68
52,406.53
57,761.64
Reserve Bank of India
Balances with banks and money at
13,500.96
23,164.99
24,422.60
call and short notice
Investments(1)
384,250.33 432,284.93 488,384.66
Advances
556,329.62 755,498.16 982,099.27
Fixed assets
2,934.69
3,189.68
4,707.18
Other assets(1)
87,726.62
95,159.81
95,258.77
Total
1,090,157.90 1,361,704.10 1,652,634.12
Contingent liabilities
2,010,168.22 3,372,992.52 3,312,391.97
Bills for collection
9,970.63
13,739.45
15,588.74

As of June 30,
2016
2016
(in U.S.$ million)
(in ` million)
4,210.94
141,157.57
1,225,810.54
319,362.53
81,747.16
1,772,288.74

62.36
2,090.45
18,153.43
4,729.55
1,210.62
26,246.41

62,095.35

919.59

91,385.81

1,353.36

460,964.71
1,059,419.90
5,181.85
93,241.12
1,772,288.74
3,816,851.40
17,911.56

6,826.58
15,689.30
76.74
1,380.84
26,246.41
56,525.01
265.26

Note:
(1) In its audited standalone financial statements for fiscal years 2014 and 2015, we have classified
Investments in RIDF as a part of Investments based on the RBI Guidelines existing then. In fiscal year
2016, we classified Investment in RIDF as a part of Other Assets based on the RBI Circular

29

DBR.BP.BC.No.31/21.04.018/2015-16 dated July 16, 2015. In order to present the audited standalone
financial statements for fiscal years 2014, 2015 and 2016 in a comparable format, we have reclassified the
Investment and Other Assets for fiscal years 2014 and 2015 in the same manner as the adjustment
undertaken in the audited standalone financial statements for fiscal year 2016. The net impact of this
reclassification is that, in the table above, the Investments for fiscal years 2014 and 2015 have reduced by
` 25,253.30 million and ` 33,767.44 million, respectively, with a corresponding increase in Other Assets.
Summary cash flow information

2014
Cash flow generated from / (used in) operating activities
Cash flow generated from / (used in) investing activities
Cash flow from financing activities
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

38,067.89
(21,567.73)
1,758.88
40,657.60
58,916.64

Fiscal Year
2015
(in ` million)
(23,402.81)
(36,081.96)
75,739.65
58,916.64
75,571.52

2016
(3,631.49)
(40,352.75)
50,596.97
75,571.52
82,184.25

Three months ended June 30,

2016
2016
(in U.S.$ million)
(in ` million)
33,605.93
70,496.44
1,044.00
(21,562.16)
2,914.78
43.17
(13,799.33)
(2,114.31)
(31.31)
75,571.52
82,184.25
1,217.09
73,815.97
153,481.16
2,272.95

2015
Cash flow generated from / (used in) operating activities
Cash flow generated from / (used in) investing activities
Cash flow from financing activities
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

In accordance with RBI circular DBR.BP.BC.No.31/21.04.018/2015-16 dated July 16, 2015, we have classified
deposits placed with NABARD/SIDBI/NHB for meeting any shortfall in Priority Sector Lending under Other
Assets, which were earlier included under Investments. Accordingly, cash flow figures of such deposits for
the previous period has been reclassified as Operating Activity from Investment Activity.
Qualifications, Reservations and Adverse Remarks
There are no reservations, qualifications or matters of emphasis highlighted by the auditors in their reports to
our financial statements audited standalone and consolidated financial statements as of and for the financial
years ended March 31, 2014, 2015 and 2016.

30

RISK FACTORS
An investment in equity shares involves a high degree of risk. You should carefully consider each of the
following risk factors and all other information set forth in this Preliminary Placement Document, including the
risks and uncertainties described below, before making an investment in the Equity Shares. This section should
be read together with Industry Overview, Business, Selected Statistical Information and
Managements Discussion and Analysis of Financial Condition and Results of Operations as well as the
financial statements, including the notes thereto, and other financial information included elsewhere in this
Preliminary Placement Document.
The risks and uncertainties described below are not the only risks that we currently face. Additional risks and
uncertainties not presently known to us, or that we currently believe to be immaterial, may also adversely affect
our business, prospects, financial condition and results of operations and cash flow. If any or some combination
of the following risks, or other risks that are not currently known or believed to be material, actually occur, our
business, financial condition and results of operations and cash flow could suffer, the trading price of, and the
value of your investment in, Equity Shares could decline and you may lose all or part of your investment. In
making an investment decision you must rely on your own examination of us and the terms of this Issue,
including the merits and risks involved.
This Preliminary Placement Document also contains forward-looking statements that involve risks and
uncertainties. Our results could differ materially from such forward-looking statements as a result of certain
factors including the considerations described below and elsewhere in this Preliminary Placement Document.
Unless otherwise stated, references to we, us, our and similar terms are to YES Bank Limited on a
standalone basis.
Risks Relating to Our Business
There is no assurance that our growth will continue at a similar rate to what we have experienced in the past,
or at all. Our failure to manage growth effectively may adversely affect our business and we may be unable to
sustain our recent level of financial performance and/or further improvements in our results of operations.
We have experienced steady growth in our business in the last few years, for example, our total assets increased
from `1,090,157.90 million as of March 31, 2014 to `1,772,288.74 million as of June 30, 2016 at a CAGR of
24.11%, our total deposits have grown from `741,920.15 million as of March 31, 2014 to `1,225,810.54 million
as of June 30, 2016 at a CAGR of 25.00% and our current account, savings account (CASA) deposits
increased from `163,446.80 million as of March 31, 2014 to `362,883.09 million as of June 30, 2016 at a
CAGR of 42.54%. Similarly, our net profit has increased from `16,177.80 million for the fiscal year 2014 to
`25,394.47 million for the fiscal year 2016 at a CAGR of 25.29% and net profit increased from `5,511.98
million for the first quarter of fiscal year 2016 to `7,318.02 million for the first quarter of fiscal year 2017 an
increase of 32.77%. Certain other indicators of financial performance have also recorded growth or remained
generally stable over the past few years. For instance, the ratio of our CASA deposits to total deposits, expressed
as a percentage, was 29.60% as of June 30, 2016, compared to 28.05% as of March 31, 2016, 23.12% as of
March 31, 2015 and 22.03% as of March 31, 2014.
As part of our growth strategy, we are in the process of transitioning from a corporate-commercial relationshipled bank to a bank with more diversified corporate, commercial, business banking and retail banking portfolio.
We aspire to gain market share in strategically-selected customer segments, knowledge sectors and geographies
while improving our productivity, profitability and efficiency. We will continue to develop products and
services in order to become more competitive and develop a more balanced portfolio. Although our growth
initiatives have contributed to our financial results in recent years, there can be no assurance that we will be able
to continue to successfully implement this strategy. Any inability on our part to successfully diversify from a
corporate-commercial bank to a retail bank may increase the risk that we may face from corporate defaults or
any increases in NPAs as a result of such industry concentration. We have, in the past, set targets for our growth
and will continue to do so in the future; however, there can be no assurance that we will meet our current targets
or any future targets. While we have enjoyed significant growth in recent years, there is no assurance that such
growth will continue and, if it does continue, that it will continue at a similar rate. Our ability to execute our
growth strategies and sustain our financial performance is influenced by market growth and depends primarily
upon our ability to manage key issues such as selecting and retaining skilled personnel, establishing additional
branches, raising adequate capital, maintaining a secure and efficient technology platform that can be regularly

31

upgraded, developing a knowledge base to face emerging challenges and ensuring a high standard of customer
service. In addition, our growth and financial performance is dependent upon the implementation of a successful
risk management strategy. While we have a Risk Monitoring Committee that seeks to establish policies,
frameworks and systems to effectively manage various risks, there is no assurance that such policies,
frameworks and systems will adequately address the risks that we may face in the future, or that new risks will
not arise which have not been anticipated. Sustained growth may put pressure on our ability to effectively
manage and control historical and new risks, and our potential inability to effectively manage any of these issues
may materially and adversely affect our business growth and, as a result, impact our business, financial
condition and results of operations.
We also intend to continue to increase and diversify our customer base and delivery channels. In recent years,
we have significantly increased our branch network. Our number of branches has increased from 631 as of
March 31, 2015 to 860 as of March 31, 2016. We intend to continue to add new branches and ATMs. Such
expansion will increase the size of our business and the scope and complexity of our operations, and will
involve significant capital expenditure to establish such branches. We may not be able to effectively manage this
growth or achieve the desired profitability in the expected timeframe, or at all, or meet the expected increase in
our CASA percentage or improvement in other indicators of financial performance from the expansion. Some of
our newly added branches are currently operating at a lower efficiency level compared with our established
branches, and achieving our benchmark level of efficiency and productivity will depend on various internal and
external factors, some of which are not under our control.
We have opened a representative office in Abu Dhabi and we also intend to open branches in other major
international financial centers. In India, we established an International Finance Service Centre banking unit in
Gujarat International Finance Tec-City, Gujarat (GIFT City). We have received approval from the Reserve
Bank of India (RBI) and SEBI to sponsor a mutual fund and to set up an asset management company and a
trustee company as subsidiaries. We have also applied to the RBI for setting up a financial technology
subsidiary to harness innovative and disruptive technology in the financial services sector. We have also applied
to the RBI for setting up an Infrastructure Debt Fund through the NBFC route for the purposes of re-financing
infrastructure projects in a cost-effective manner. Our Subsidiary has also applied to the RBI to register as an
investor advisor. Introducing these new businesses and expanding into new jurisdictions may expose us to a
number of risks and challenges, including incurring capital expenditure, hiring and retaining skilled personnel,
and developing an adequate knowledge base. In particular, our International Finance Service Centre banking
unit in GIFT City is not a domestic banking branch and therefore is subject to different rules and regulations as
our domestic banking branches. Such businesses may not necessarily contribute to our business growth and
profitability and may adversely impact our business, financial condition, results of operations and cash flow.
Any increase in our portfolio of NPAs, RBI-mandated provisioning requirements or restructured advances
could materially and adversely affect our business.
For the fiscal years 2014, 2015 and 2016 and the first quarter 2016, our gross non-performing assets (Gross
NPA) represented 0.31%, 0.41%, 0.76% and 0.79% of our total gross advances respectively, and our NPAs
(net of provisions) (Net NPA) represented 0.05%, 0.12%, 0.29% and 0.29% of net advances respectively. As
of March 31, 2014, 2015 and 2016 and as of June 30, 2016, our provision coverage ratio was 85.10%, 72.01%,
62.02% and 64.20%, respectively. See sub-section titled Regulations and PoliciesMaster Circular on
Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances dated
July 1, 2015 (Prudential Norms) on page 150.
If there is any deterioration in the quality of our security or further ageing of the assets after being classified as
non-performing, an increase in provisions will be required. This increase in provisions may adversely impact
our financial performance. While we have already made provisions for non-performing assets (NPA) with
respect to 62.02% and 64.20% of our Gross NPAs as of March 31, 2016 and as of June 30, 2016, respectively,
we may need to make further provisions if recoveries with respect to such NPAs do not materialize in time or at
all. Our NPAs can be attributed to several factors, including inconsistent industrial growth, the high level of debt
in the financing of projects and capital structures of companies in India and the high interest rates in the Indian
economy during a period in which a large number of projects contracted their borrowings, which reduced the
profitability of some of our borrowers. The recent global economic slowdown and the impact of global and
Indian economic conditions on equity and debt markets may exacerbate the level of NPAs in our corporate loan
portfolio.

32

As the average size of corporate loans in our loan portfolio is substantially larger than the average size of our
retail loans, any major default in our corporate loan portfolio could significantly impact our overall portfolio of
assets. If we are unable to successfully monitor and manage our portfolio, including during economic
downturns, our asset quality and as a result, our financial condition and results of operation, could be materially
and adversely affected.
Further, our Retail Banking and Business Banking advances (to small and medium-sized enterprises (SMEs),
micro small and medium-sized enterprises (MSME) and retail) portfolio has grown from `266,551.51 million
as of March 31, 2015 to `343,211.74 million as of March 31, 2016 and `343,788.89 million as of June 30, 2016.
Given the nature of the targeted borrowers, Retail Banking and Business Banking advances may carry a higher
risk of delinquency if there is a prolonged recession or a sharp rise in interest rates. As a result, we may be
required to increase our provision for defaulted advances.
In addition, we are required by RBI regulations to extend a minimum aggregate of 40.00% of our adjusted net
bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure, whichever is higher, to certain
eligible priority sectors, such as agriculture, MSMEs, export credit, education, social infrastructure, renewable
energy; housing and economic difficulties may affect borrowers in priority sectors more severely. Economic
downturns experienced in priority sectors could further increase our level of NPAs. There can be no assurance
that the percentage of NPAs that we will be able to recover will be similar to our past experience of the
recoveries of NPAs. Any deterioration or significant increase in our NPA portfolio would adversely affect our
business, financial condition, results of operations and cash flows.
Our total gross standard restructured advances were `1,006.95 million, `4,049.22 million, `6,133.46 million and
`6,192.90 million as of March 31, 2014, 2015 and 2016 and as of June 30, 2016, respectively. We restructure
assets based on a borrowers potential to restore its financial health; however, there can be no assurance that
borrowers will be able to meet their obligations under restructured advances as per regulatory requirements and
certain assets classified as restructured may be classified as delinquent. Any resulting increase in delinquency
levels may adversely impact our business, financial condition and results of operations; for example, in January
2014, the RBI issued a framework and in March, 2014, a corrective action plan for early identification and
resolution of stressed assets. With effect from April 1, 2014, the guidelines introduced an asset classification
category of special mention accounts, which comprises cases that are not yet restructured or classified as nonperforming but which exhibit early signs of stress, as specified through various parameters. Banks in India are
also required to share data with each other on certain categories of special mention accounts, set up joint
lenders forums and formulate action plans for resolution of these accounts. Failure to do so may result in
accelerated provisioning for such cases. During the three months ended December 31, 2015, the Reserve Bank
of India articulated the objective of early and conservative recognition of stress and provisioning, and held
discussions with a number of Indian banks, including us, to review certain loan accounts and their classification
over the three months ended December 31, 2015 and the three months ending March 31, 2016. Our gross nonperforming loans increased from `1,749.26 million as of March 31, 2014 to `8,445.59 million as of June 30,
2016. The gross non-performing loans as of March 31, 2016 are also included in the accounts highlighted in the
RBI Asset Quality Review exercise. Further, guidelines issued by the RBI relating to the identification and
classification of NPAs may result in an increase in our loans classified as non-performing and provisioning
requirements. Any further review on asset quality by the regulator, during specific or general inspection, can
result in additional classification of our loans as NPAs thus increasing our provisioning requirements and
adversely impacting our profitability in the future
In March 2012, the RBI released a discussion paper on the dynamic loan loss provisioning framework, with the
objective of developing the necessary capabilities to have a dynamic loan loss provisioning framework in place
which would enable banks to build up Dynamic Provisioning Account during good times and utilize the same
during downturn. The framework proposes to replace existing general provisioning norms and recommends that
banks make provisions on their loan books every year based on their historical loss experience in various
categories of loans. In years where the specific provisions made are higher than the computed dynamic
provision requirement, the existing dynamic provision balance can be drawn down to the extent of the
difference, subject to a minimum level of dynamic provision balance being retained.
The Reserve Bank of India has also issued guidelines to facilitate the resolution of large stressed accounts in
June 2016 through the Scheme for Sustainable Structuring of Stressed Assets (S4A). Its objective is to
segregate the sustainable debt of the borrower to improve viability and resolve the remaining portion of the debt
through conversion into equity redeemable cumulative optionally convertible preference shares. This may result

33

in classification of our certain accounts as S4A thus increasing our provisioning requirement and could
adversely impact our profitability.
We also have investments in security receipts arising from the sale of non-performing assets by us to asset
reconstruction companies. There can be no assurance that asset reconstruction companies will be able to recover
these assets and redeem our investments in security receipts and that there will be no reduction in the value of
these investments.
There can be no assurance that the amount of non-performing assets that we will be able to recover will be
similar to our past experience of recoveries of non-performing assets. If we are not able to adequately control or
reduce the level of non-performing assets, or if the RBI continues to impose increasingly stringent requirements,
the overall quality of our loan portfolio could deteriorate, which may have a material adverse effect on our
business, financial condition and results of operations.
In the course of our business, we are exposed to loan concentrations with respect to specific borrowers and
also corporate borrowers in general and defaults by them would adversely affect our business.
As of March 31, 2014, 2015 and 2016, our top 20 advances totaled ` 200,355.13 million, ` 234,026.68 million
and ` 276,325.91 million, respectively, which represented 16.19%, 14.24% and 13.79%, respectively, of our
total advances. For this purpose, advances are calculated pursuant to the definition of Credit Exposure in RBI
Master Circular on Exposure Norms DBR.No.Dir.BC.12/13.03.00/2015-16 dated July 1, 2015. While our top 20
exposures totaled ` 229,680.40 million, ` 261,110.59 million and ` 287,740.91 million as of March 31, 2014,
2015 and 2016, respectively, which represented 16.10%, 14.35% and 13.24%, respectively, of our total
exposures. Any deterioration in the credit quality of these assets could have a significant adverse effect on our
credit portfolio quality, future financial performance.
In addition, as of March 31, 2014, 2015 and 2016 and June 30, 2016, advances to the corporate sector totaled `
352,143.31 million, ` 488,946.66 million, ` 638,887.53 million and ` 715,631.01 million, respectively, which
represented 63.30%, 64.72%, 65.05% and 67.55%, respectively, of our total advances. Several of our corporate
borrowers in the past suffered from low profitability because subdued demand conditions, a sharp decline in
commodity prices, a high debt burden, loan concentration in a few sectors and high interest rates in the Indian
economy at the time of their financing, among others. An economic slowdown and a general decline in business,
among other factors, could impose stress on these corporate borrowers financial soundness and profitability.
Therefore this concentration of lending to the corporate sector exposes us to increased credit risk to these
borrowers in particular and may lead to an increase in the level of our NPAs, which could in turn adversely
affect our business, including our ability to grow, the quality of our assets, the financial condition and the results
of operations.
Any non-compliance with mandatory AML and KYC policies could expose us to additional liability and harm
our business and reputation.
In accordance with the requirements applicable to banks, we are mandated to comply with applicable antimoney laundering (AML) and know your client (KYC) regulations in India. These laws and regulations
require us, among other things, to adopt and enforce AML and KYC policies and procedures. For further details,
see section titled Regulations and Policies on page 148. While we have adopted policies and procedures aimed
at collecting and maintaining all AML and KYC related information from our customers in order to detect and
prevent the use of our banking networks for illegal money-laundering activities, there may be instances where
we may be used by other parties in attempts to engage in money-laundering and other illegal or improper
activities.
For example, in July 2013, the RBI imposed a penalty of `20.00 million on us for non-adherence with certain
KYC policies and procedures, following a sting operation by an Indian online investigation website called
Cobrapost. Further, the Director, Financial Intelligence Unit, India (Director FIU) under the Prevention of
Money Laundering Act, 2002 (PMLA) and Prevention of Money Laundering (Maintenance of Records)
Rules, 2005 also imposed a penalty of `0.30 million for non-compliance with the provisions of Section 12 of the
PMLA for failure to file an attempted suspicious transaction report for attempted transactions in relation to the
Cobrapost sting operation against which we have filed an appeal. For further details, see section titled Legal
Proceedings on page 209. In July 2014, the RBI imposed a penalty of `1.00 million for failure to obtain a no
objection certificate from the lending banks that had granted credit facilities to Deccan Chronicle Holdings Ltd.

34

(Deccan Chronicle) and for failure to exchange information regarding the conduct of Deccan Chronicles
account with other banks in the prescribed form and stipulated frequency.
Although we believe that we have adequate internal policies, processes and controls in place to prevent and
detect AML activity and ensure KYC compliance, and have taken necessary corrective measures, there can be
no assurance that we will be able to fully control instances of any potential or attempted violation by other
parties and may accordingly be subject to regulatory actions including imposition of fines and other penalties by
the relevant government agencies to whom we report, including the FIU-IND. Our business and reputation could
suffer if any such parties use or attempt to use us for money-laundering or illegal or improper purposes and such
attempts are not detected or reported to the appropriate authorities in compliance with applicable
regulatory requirements.
We are currently involved in legal proceedings in relation to the composition of our Board, which may
adversely affect us.
Madhu Kapur and others (the Plaintiffs) filed a civil suit in 2013, and subsequently, several notices of motion
against our Bank, several of our directors, and others (the Defendants) before the Bombay High Court,
challenging the appointment of several directors on our Board, including the Managing Director and Chief
Executive Officer, and the Non-executive Non-independent Part-time Chairman. Further, the Plaintiffs also
sought reliefs to protect their alleged rights as Indian partner under the Articles of Association, their alleged
right to nominate directors on our Board, damages of `50 million and certain other reliefs.
The Bombay High Court passed a judgment dated June 4, 2015 (the Judgment) that, inter alia, (i) upheld the
decision of the Board of Directors of our Bank in rejecting the nomination, by the Plaintiffs, of Shagun Kapur
Gogia (daughter of Madhu Kapur) on the Board of the Bank and rejected their proposition to reserve a seat for
the Plaintiffs and their family members on our Board; (ii) upheld the appointment of Rana Kapoor as the
Managing Director and Chief Executive Officer of our Bank; (iii) observed certain procedural infirmities in the
appointment of (a) Diwan Arun Nanda; (b) Ajay Vohra; (c) M.R. Srinivasan and (d) Ravish Chopra to our
Board; (iv) observed that the proposed appointment of three Whole-time Directors, namely, Rajat Monga,
Sanjay Palve and Pralay Mondal, was not in terms of the AoA of the Bank; (v) observed that the rights of the
Indian partners under the AoA had to be jointly exercised by the Plaintiffs and Rana Kapoor; and (vi)
restrained the Defendants from initiating, taking, continuing any steps for declassifying or changing the category
of the Plaintiffs as promoter of our Bank.
Aggrieved by the Judgment, the Plaintiffs and the Defendants have filed separate appeals before the division
bench of the Bombay High Court, which are admitted and pending hearing. From among the current members of
our Board, the appointments/reappointments, as applicable, of Rana Kapoor, M.R. Srinivasan, Diwan Arun
Nanda, Radha Singh and Ajai Kumar form part of the subject matter of the above proceedings.
This litigation is currently sub judice and in the event it is decided against us, we may have to reconstitute our
Board, or comply with any other directions issued by the courts. For further details, see the sections titled Legal
Proceedings and Board of Directors and Senior Management on pages 209 and 158, respectively.
We are currently involved and in the future may be involved in legal proceedings, which may materially and
adversely affect us.
We are, and may in the future be, a party to various legal proceedings incidental to our business and operations.
For further details, see the section titled Legal Proceedings on page 209. We cannot assure investors that these
legal proceedings will be decided in our favour. Such litigation could divert management time and attention, and
consume financial resources in their defence or prosecution. In addition, should any new developments arise,
such as changes in Indian law or rulings against us by the regulators, appellate courts or tribunals, we may need
to make provisions in our financial statements, which could increase our expenses and current liabilities. If we
fail to successfully defend our claims or if our provisions prove to be inadequate, our business, financial
condition, reputation and results of operations could be adversely affected.
We face maturity and interest rate mismatches between our assets and liabilities.
We meet our funding requirements in part through short and long-term deposits from retail and corporate
depositors as well as inter-bank deposits, however, a significant portion of our assets (such as advances) have
maturities with longer terms than our liabilities (such as deposits). As of June 30, 2016, we had negative

35

liquidity gaps for certain maturity periods up to one year. For further information, see sub-section titled
Selected Statistical InformationAsset Liability Gap on page 141.
If a substantial number of our depositors do not roll over their funds upon maturity, or we do not receive new
deposits, our liquidity position could be adversely affected and we may be required to pay higher interest rates
in order to attract or retain further deposits, which may have a material adverse effect on our business, financial
condition and results of operations. See sub-section titled Selected Statistical InformationAsset Liability
Gap on page 141.
As of March 31, 2015 and 2016 and June 30, 2016, a substantial portion of our advances had tenors exceeding
one year. The long tenor of these advances may expose us to risks arising out of economic cycles. In addition,
some of these advances are project finance advances and there can be no assurance that these projects will
perform as anticipated or that such projects will be able to generate sufficient cash flows to service
commitments under the advances. We are also exposed to infrastructure projects that are still under development
and are open to risks arising out of delay in execution, the failure of borrowers to execute projects on time, delay
in getting approvals from necessary authorities and breach of contractual obligations by counterparties, all of
which may adversely impact our projected cash flows. There can also be no assurance that these projects, once
completed, will perform as anticipated. Risks arising out of a recession in the economy and/or a delay in project
implementation or commissioning could lead to a rise in delinquency rates and, in turn, may materially and
adversely affect our business, financial condition and results of operations.
A significant portion of our loan book is floating rate in nature which allows the bank to reprise the loan on the
back of deposit rate repricing. The bank, however, may not always be in a position to pass on the increased rates
to the borrowers which may result in a decline in net interest income and could materially and adversely affect
our business, financial condition and results of operations.
We face income volatility from our fixed income operations.
Income from our sale of investments comprised 3.74%, 2.57% and 3.58% of our total net income (which is
comprised of net interest income plus other income) for the fiscal years 2014, 2015 and 2016, respectively.
These figures include entering into trades for our own account, which exposes us to the risk that we may lose
money on these trades and on account of corporate and Government securities held by us in the regular course
of business.
Our income from these treasury operations is subject to volatility due to, among other things, changes in interest
rates and foreign currency exchange rates as well as other market fluctuations. For example, an increase in
interest rates may have a negative impact on the value of certain investments such as Government securities and
corporate bonds. Although we have risk and operational controls and procedures in place for our treasury
operations, such as sensitivity limits, value at risk (VaR) limits, position limits, stop loss limits and exposure
limits that are designed to mitigate the extent of such losses, there can be no assurance that we will not lose
money in the course of our proprietary trading on our fixed income book held for trading and available for sale
portfolio. Any such losses could adversely affect our business, financial condition and results of operations.
We also have a Primary Dealership business which involves underwriting of government securities and
therefore subjects us to interest rate risk
Our financial performance may be materially and adversely affected by fluctuating interest rates.
Our results of operations depend, to a great extent, on our net interest income. Net interest income comprised
61.21%, 63.02%, 62.74% and 59.38% of our total net income for the fiscal years 2014, 2015 and 2016 and the
first quarter 2016, respectively, where total net income comprises the sum of our net interest income and other
income. We could be materially and adversely impacted by a rise in generally prevailing interest rates on
deposits, especially if the rise were sudden or sharp. If such a rise in interest rates were to occur, our net interest
margin could be adversely affected because the interest paid by us on our deposits could increase at a higher rate
than the interest received by us on our advances and other investments. The requirement that we maintain a
portion of our assets in fixed income Government securities could also negatively impact our net interest income
and net interest margin because we typically earn interest on this portion of our assets at rates that are generally
less favorable than those typically received on our other interest-earning assets.

36

If the yield on our interest-earning assets does not increase at the same time or to the same extent as our cost of
funds, or if our cost of funds does not decline at the same time or to the same extent as the decrease in the yield
on our interest-earning assets, our net interest income and net interest margin would be adversely impacted. Any
systemic decline in low-cost funding available to banks in the form of current and savings account deposits
would adversely impact our net interest margin. In December 2015, the Reserve Bank of India released
guidelines on the computation of lending rates based on the marginal cost of funds methodology, which is
applicable on incremental lending from April 1, 2016. This change in the methodology for calculating the cost
of funds may lead to lower lending rates, and more frequent revisions in lending rates due to the prescribed
monthly review of cost of funds. This may impact the yield on our interest-earning assets, our net interest
income and net interest margin.
Interest rates are highly sensitive to factors beyond our control, including Indias GDP growth, inflation,
liquidity, the RBIs monetary policies and domestic and international economic and political conditions and
other factors. Our cost of funding is interest-rate sensitive and our ability to pass along any increase in interest
rates depends on our borrowers willingness to pay higher rates and the competitive landscape in which we
operate. Volatility and changes in interest rates could affect the interest rates we charge on our interest-earning
assets in a manner different from the interest rates we pay on our interest-bearing liabilities because of the
different maturity periods applying to our assets and liabilities and also because liabilities generally re-price
faster than assets. An increase in interest rates applicable to our liabilities, without a corresponding increase in
interest rates applicable to our assets, will result in a decline in net interest income.
Furthermore, in the event of rising interest rates, our borrowers may not be willing to pay correspondingly
higher interest rates on their borrowings and may choose to repay their advances with us if they are able to
switch to more competitively priced advances offered by other banks. In the event of falling interest rates, we
may face more challenges in retaining our customers if we are unable to switch to more competitive rates as
compared to other banks in the market. In addition, any volatility or increase in interest rates may also adversely
affect the rate of growth of certain sectors of the Indian economy. All these factors may have a material adverse
effect on our business and financial condition and results of operations.
Our financial performance may be materially and adversely affected by an inability to generate and sustain
other income.
We generated commission, exchange and brokerage income of `12,609.21 million, `19,764.80 million and
`24,591.69 million for the fiscal years 2014, 2015 and 2016, respectively.
We earn fee-based income from corporate banking and advisory services, which include origination and
syndication of loans, structured finance and loan processing fees, and are provided to large and medium-sized
companies. Our corporate banking activities are generally susceptible to sustained adverse economic conditions
in India or abroad. We also earn fee-based income from our foreign exchange and treasury operations business,
which include origination and syndication of debt, management of foreign currency and interest rate exposure of
our corporate and business banking customers. As part of our foreign exchange and treasury operations
business, we may from time to time hold assets on our balance sheet which may subject us to market risk and
credit risk. There can be no assurance that we will be able to sustain current levels of income from, or
effectively manage the risks associated with, these businesses in the future.
Further, as part of our growth strategy, we have been diversifying and expanding our product and service
offerings to retail customers in order to build a more balanced portfolio. New initiatives, products and services
entail a number of risks and challenges, including risks relating to execution, the failure to identify new
segments, the inability to attract customers and the inability to make competitive offerings. If we are unable to
successfully diversify our products and services while managing the related risks and challenges, returns on
such products and services may be less than anticipated, which may materially and adversely affect our
business, financial condition and results of operations.
Our access to liquidity is susceptible to adverse conditions in the global financial markets.
Since the U.S. Federal Reserves tapering initiatives in 2013, global financial markets have witnessed regular
bouts of volatility leading to episodes of risk-on and risk-off environment. While gradual strengthening of the
U.S. economy was a basis for the U.S. Federal Reserve to reduce the scale of its bond-buying program creating
expectations of an eventual rate hike, the relative weak performance of Eurozone and Japan led their respective
central banks to undertake quantitative and monetary easing. This divergent and asynchronous monetary policy

37

response in major advanced countries concomitantly has led to sharp swings in currency markets. Currencies of
most emerging market economies appreciated on real effective exchange rate basis leading to pressure on export
performance.
In addition, the Chinese stock market experienced significant volatility in 2015. This was amid a weakening
outlook for Chinas economy, which led to a contagion effect and heightened volatility in the global equity
markets. In 2015, the commodities market also experienced significant pricing pressure due to growth concerns,
a slow-down in the Chinese economy, excess supply and a strong U.S. dollar. The RBIs financial stability
report dated December 23, 2015 noted that the pace of further increase in the U.S. Federal Reserves funds rate
could have a significant bearing on market behavior and that sluggish global trade, along with developments in
China, would hamper the global economy going forward.
Regarding the United Kingdom, on June 23, 2016 it held a referendum to decide on the U.K.'s membership of
the European Union and the decision was to leave the European Union. There are a number of uncertainties in
connection with the future of the United Kingdom and its relationship with the European Union. The negotiation
of the U.K.s exit terms is likely to take a number of years. Until the terms and timing of the U.K.s exit from
the European Union are clearer, it is not possible to determine the impact that the referendum, the U.K.s
departure from the European Union and/or any related matters may have on the global economy.
These global developments adversely impacted Indian companies. The export-oriented sectors faced challenges
for topline growth due to subdued external demand and soft commodity prices. In addition, the appreciation of
the U.S. dollar raised concerns over debt repayments for few highly leveraged companies.
These and other related events can have a significant adverse impact on the availability of credit and the
confidence of the financial markets, as a whole, including reduced liquidity, greater volatility, widening of credit
spreads and a lack of price transparency in the global economy as well as Indian credit and financial markets. A
loss of investor confidence in other financial systems may cause volatility in Indian financial markets, including
with respect to the movement of exchange rates and interest rates in India and, indirectly, in the Indian economy
in general. There can be no assurance that a further economic downturn or financial crisis will not occur, or that
measures taken to overcome a crisis will be sufficient to restore stability in the global financial markets in the
short term or beyond.
In addition, we may have difficulty accessing the financial markets, which could make it more difficult or
expensive for us to maintain liquidity in the future. There can be no assurance that we will be able to secure
additional financing required by us on adequate terms or at all.
Indian banking regulation is extensive, and any change in regulations could materially affect our business.
The banking and financial sector in India is highly regulated and extensively supervised by authorities such as
the RBI. For further details, see section titled Regulations and Policies on page 148. Our business could be
directly affected by any changes in laws, regulations and policies for banks. For example, in October 2011, the
RBI deregulated interest rates on demand deposits and savings bank deposits, which resulted in certain banks
increasing their interest rates, leading to increased competition in this area. Further, we may be compelled to
increase lending to certain sectors or increase our reserves. We are also subject to regular financial inspection by
the RBI. In the event that we are unable to meet or adhere to the guidance or requirements of the RBI, the RBI
may impose strict enforcement of its observations on us, and we may be subject to monetary fines and other
penalties which may have an adverse effect on our business, financial condition and results of operations. For
example, in 2011, we were fined `1.5 million by the RBI for failing to comply with prescribed procedures for
selling currency derivative products. The laws and regulations governing the banking sector in India, including
those governing the products and services that we provide or propose to provide such as brokerage services,
could change in the future. Such changes may also affect foreign investment limits in the banking industry or
our ability to invest in certain businesses. Any such changes may require us to modify our business, which may
adversely affect our financial performance. The RBI guidelines and provisions of the Banking Regulation Act
also restrict our ability to pay dividends. The RBI also requires banks to maintain certain CRR and SLR, and
increases in such requirements could affect our ability to expand credit. Any requirements by the RBI that
specify changes in risk weighting and capital adequacy may adversely affect our business, financial condition
and results of operations. Further, any action by any regulator to curb fund inflows into India could negatively
affect our business.

38

The RBI specifies sub-allocation requirements, including a minimum 18% of the ANBC or equivalent credit
amount of off-balance sheet exposure, whichever is higher, to the agriculture sector (8% to small and marginal
farmers), 7.5% of the ANBC or equivalent credit amount of off-balance sheet exposure, whichever is higher, to
micro enterprises and 10% of the ANBC or equivalent credit amount of off-balance sheet exposure, whichever
is higher, to weaker sections. In the case of any shortfall by us in meeting lending requirements, we are required
to place the difference between the required lending level and our actual priority sector lending in an account
with the National Bank for Agriculture and Rural Development under the Rural Infrastructure Development
Fund Scheme, or funds with other financial institutions specified by the RBI, from which we earn lower levels
of interest as compared to loans made to the priority sector. Further, from April 1, 2016, banks in India are
required to comply with priority sector lending requirements on a quarterly basis which can also result in lower
levels of interest income and reduced profitability. Any requirements by the RBI that specify changes in priority
sector lending may adversely affect our business, financial condition and results of operations.
Further, the RBI is empowered to supersede any decision of the board of directors of a bank and appoint an
administrator to manage the bank for a period of up to 12 months. The RBI may exercise such power where it is
satisfied, in consultation with the Central Government that it is in the public interest to do so, to prevent the
affairs of any bank from being conducted in a manner that is detrimental to the interest of the depositors, or for
securing the proper management of any bank.
In November 2012 the RBI published guidelines in accordance with the Basel Committee on Banking
Supervisions document on Principles for Sound Liquidity Risk Management and Supervision. These
guidelines prescribe certain ratios to measure liquidity risk and are designed to measure, among others, the
extent to which volatile money supports a banks basic earning assets, the extent to which assets are funded
through a stable deposit base, the degree of illiquidity embedded in the balance sheet, and the extent of available
liquid assets. Banks are also required to adhere to certain prescribed limits to reduce the extent of concentration
of their liabilities.
In June 2014, the RBI issued guidelines in relation to Liquidity Coverage Ratio (LCR), liquidity risk
monitoring tools and LCR disclosure standards pursuant to the publication of the Basel III: The Liquidity
Coverage Ratio and liquidity risk monitoring tools in January 2013 and the Liquidity Coverage Ratio
Disclosure Standards in January 2014 by the Basel Committee on Banking Supervision. The LCR is intended
to ensure that banks maintain an adequate level of high quality liquid assets (HQLAs) to survive an acute
stress scenario lasting for 30 days. Pursuant to the guidelines, banks are required to maintain an LCR of 60%,
70%, 80%, 90% and 100% with effect from January 1, 2015, January 1, 2016, January 1, 2017, January 1, 2018
and January 1, 2019 respectively. Such requirement to maintain HQLA has adversely affected our profitability
and any increase in the requirement will further adversely affected our profitability.
The RBI has issued draft guidelines on Net Stable Funding Ratio (NSFR) on May 28, 2015, which proposes
to make NSFR applicable to banks in India from January 1, 2018. For compliance towards NSFR norms, we
may have to borrow long term to fund long-term assets resulting in an increase in interest expense.
Compliance with regulations by the RBI including the new liquidity risk management guidelines may result in
the incurrence of substantial compliance and monitoring costs and restrict our growth or the viability of certain
businesses, and there can be no assurance that we will be able to comply with such requirements or that any
breach of applicable laws and regulations will not adversely affect our reputation or our business, operations and
financial conditions.
We may not be able to renew or maintain our statutory and regulatory permits and approvals required to
operate our business.
We have a license from the RBI which requires us to comply with certain terms and conditions for us to
continue our banking operations. In the event that we are unable to comply with any or all of these terms and
conditions, or seek waivers or extensions of time for complying with these terms and conditions, it is possible
that the RBI may revoke this license or may place stringent restrictions on our operations. This may result in the
interruption of all or some of our operations and may have a material adverse effect on our business, financial
condition, results and cash flow.
We also have other statutory licenses including a license from SEBI, held by our Subsidiary, to operate in the
securities market and to act as a Merchant Category I banker, and a license from the Insurance Regulatory and
Development Authority of India to act as an agent to distribute life and general insurance products. We have

39

also received approval from the RBI and SEBI to sponsor a mutual fund and to set up an asset management
company and a trustee company as subsidiaries. Failure to renew or maintain such statutory licenses/approvals
or comply with applicable regulations may result in the interruption of all or some of our operations, imposition
of penalties and may have a material adverse effect on our business, financial results and results of operation.
We are required to maintain cash reserve ratios (CRRs) and statutory liquidity ratios (SLRs). Any
increase in these requirements could adversely affect our business.
Under RBI regulations, we are subject to a CRR requirement. The CRR is a banks balance held in a current
account with the RBI calculated as a specified percentage of its net demand and time liabilities, excluding
interbank deposits. The CRR currently applicable to banks in India is 4.00% and banks do not earn any interest
on those reserves.
In addition, under the Banking Regulation Act, all banks operating in India are required to maintain an SLR.
The SLR is a specified percentage of a banks net demand and time liabilities by way of liquid assets such as
cash, gold or approved unencumbered securities. Approved unencumbered securities consist of unencumbered
Government securities and other securities as may be approved from time to time by the RBI and would earn
lower levels of interest as compared to advances to customers or investments made in other securities. In the
fourth bi-monthly monetary policy statement of the RBI for the fiscal year 2016, the ceiling on securities
eligible for SLR under the held to maturity (HTM) securities was aligned with the SLR and was accordingly
brought down from 22% to 21.50% with effect from January 9, 2016. Further, it was decided that both the SLR
and HTM ceiling would be brought down by 25 basis points every quarter until March 31, 2017. Currently, the
RBI requires banks to maintain a SLR of 21.00%. For the fiscal year 2016, all Government securities held by us
comprised fixed income bonds. In an environment of rising interest rates, the value of Government securities
and other fixed income securities may depreciate. Our large portfolio of Government securities may limit our
ability to deploy funds into higher yielding investments. Further, a decline in the valuation of our trading book
as a result of rising interest rates may adversely affect our financial condition and results of operations. As a
result of the statutory requirements imposed on us, we may be more structurally exposed to interest rate risk as
compared to banks in other countries.
Further, the RBI may increase the CRR and SLR requirements to significantly higher proportions as a monetary
policy measure. Any increases in the CRR from the current levels could affect our ability to deploy our funds or
make investments, which could in turn have a negative impact on our results of operations. If we are unable to
meet the requirements of the RBI, the RBI may impose penal interest or prohibit us from receiving any further
fresh deposits, which may have a material adverse effect on our business, financial condition and results of
operations.
We are subject to capital adequacy norms and are required to maintain a CRAR at the minimum level
required by the RBI for domestic banks.
According to the terms and conditions of our banking license, the RBI requires us to maintain a minimum
CRAR of 10.00%.
In addition, the RBI issued the RBI Basel III Capital Regulations on May 2, 2012 pursuant to the Bank for
International Settlements Basel III international regulatory framework was implemented on April 1, 2013. The
RBI Basel III Capital Regulations require, among other things, higher levels of Tier I capital and common
equity, capital conservation buffers, maintenance of a minimum prescribed leverage ratio on a quarterly basis,
higher deductions from common equity and Tier I capital for investments in subsidiaries and changes in the
structure of non-equity instruments eligible for inclusion in Tier I capital. The RBI Basel III Capital Regulations
also set out elements of regulatory capital and the scope of the capital adequacy framework, including disclosure
requirements of components of capital and risk coverage. The transitional arrangements for the implementation
of Basel III capital regulations in India began on April 1, 2013 and the guidelines are required to be fully
implemented by March 31, 2019. In accordance with the Basel III capital regulations, we are required to
maintain a minimum CET-I capital ratio of 5.5%, a minimum Tier I CRAR of 7% and a capital conservation
buffer of 2.5% of our risk weighted assets. For a description of the RBIs capital adequacy guidelines, see
section titled Regulations and Policies on page 148 and sub-section titled Industry OverviewFuture
Developments in the Banking Sector and Expected Domestic ReformsImplementation of the Basel III Capital
Regulations on page 113. As of June 30, 2016, our capital adequacy ratio under the RBI Basel III Capital
Regulations was 15.1%, with a Tier I capital adequacy ratio of 9.9%, a Tier II capital adequacy ratio of 5.2%
and CET I capital adequacy ratio of 9.5%. As of March 31, 2016, our capital adequacy ratio under the RBI

40

Basel III Capital Regulations was 16.5%, with a Tier I capital adequacy ratio of 10.7%, a Tier II capital
adequacy ratio of 5.8% and CET I capital adequacy ratio of 10.3% and as of March 31, 2015, under the Basel II
guidelines, our CRAR, Tier I and Tier II capital adequacy ratios were 15.6%, 11.5% and 4.1% respectively.
Although we currently exceed the applicable capital adequacy requirements, certain adverse developments could
affect our ability to satisfy these requirements in the future, including deterioration in our asset quality, decline
in the value of our investments and our inability to meet any regulatory requirements or changes.
We are exposed to the risk of the RBI increasing the applicable risk weight for different asset classes from time
to time. In addition, with the approval of the RBI, banks in India may migrate to advanced approaches for
calculating risk-based capital requirements in the medium term. If we fail to meet capital adequacy
requirements, the RBI may take certain actions, including restricting our lending and investment activities, and
the payment of dividends by us.
Further, continued compliance requirements with Basel III or other capital adequacy requirements imposed by
the RBI may result in the incurrence of substantial compliance and monitoring costs. Moreover, if the Basel
Committee releases additional or more stringent guidance on capital adequacy norms which are given the effect
of law in India in the future, we may be forced to raise or maintain additional capital in a manner which could
materially adversely affect our business, financial condition and results of operations. There can be no assurance
that we will be able to comply with such requirements or that any breach of applicable laws and regulations will
not have a material adverse effect on our business, financial condition and results of operations.
There can be no assurance that we will be able to access capital as and when we need it for growth.
Unless we are able to access the necessary amounts of additional capital, any incremental capital requirement
may adversely impact our ability to grow our business and may even require us to curtail or withdraw from
some of our current business operations. There can also be no assurance that we will be able to raise adequate
additional capital in the future on terms favorable to us, or at all, and this may hamper our growth plans, apart
from those that can be funded by internal accruals.
Availability of funding and increases in funding costs could adversely affect our financial performance.
Our current sources of funding (other than equity share capital and share premium) are primarily institutional
and retail customer deposits, long-term Tier II debt, inter-bank borrowing and perpetual debt instruments.
Failure to obtain these sources of funding or replace them with fresh borrowings or deposits may materially and
adversely affect our business, financial condition and results of operations.
Our cost of funds is sensitive to interest rate fluctuations, which exposes us to the risk of reduction in spreads,
which is the difference between the returns that we earn on our advances as well as our investments and the
amounts that we must pay to fund them, on account of changing interest rates.
The pricing on our issuances of debt will also be negatively impacted by any downgrade or potential downgrade
in our credit ratings. This would increase our financing costs, and adversely affect our future issuances of debt
and our ability to raise new capital on a competitive basis. In addition, any adverse revisions to Indias credit
ratings for domestic and international debt by international rating agencies may have a similar effect on our
ability to raise additional financing and the terms at which such financing is available. This could have an
adverse effect on our business, profitability and the ability to fund our growth.
In addition, attracting customer deposits in the Indian market is competitive. If we fail to sustain or achieve the
growth rate of our deposit base, including our CASA base, our business may be adversely affected. The rates
that we must pay to attract deposits are determined by numerous factors, such as the prevailing interest rate
structure, competitive landscape, Indian monetary policy and inflation. For example, in October 2011, the RBI
deregulated interest rates on demand deposits and savings bank deposits, which resulted in certain banks
increasing their interest rates, leading to increased competition in this area. In the event that our spreads
decrease, it may have a material adverse effect on our business, financial condition, results and cash flow.
Our business and financial performance are dependent on maintaining and building a successful branch
network.
As part of our growth strategy, we seek to transition from a corporate-commercial relationship-led bank to a
bank with a diversified corporate, commercial, business banking and retail portfolio. As a result, we have

41

increased our branch network from 631 as of March 31, 2015 to 860 as of March 31, 2016. The expansion and
effectiveness of our retail banking business is dependent on further building our branch network. Pursuant to
changes in the RBIs licensing requirements, banks are now able to open branches in Tier 1 to Tier 6 cities
without obtaining prior licensing approval from the RBI, subject to reporting requirements.
Banks are required to open 25% of their proposed branches during a particular year in unbanked rural (Tier 5
and Tier 6) centers. See sub-section titled Regulations and PoliciesRegulations Relating to the opening of
branches on page 149. The opening of branches is subject to the delays and risks associated with obtaining
suitable real estate in the appropriate locations and setting up relevant infrastructure, including fitting-out
premises. Our inability to open branches or a significant delay in opening additional branches, or our inability to
optimize the operating performance of existing branches, may materially and adversely affect our branch
banking business and consequently our business, financial condition and results of operations.
We face significant challenges in developing new products and services.
As part of our growth strategy, we have been diversifying and expanding our products and services for retail and
SMEs to include retail asset products, prepaid cards, travel cards, gold distribution and a remittance platform. In
addition, we have expanded our network into semi-urban and rural areas. Such new initiatives and products and
services entail a number of risks and challenges, including but not limited to the following:

cost overhead including start-up expenditure;

insufficient knowledge of and expertise applicable to the new businesses, which may differ from those
required in our current operations, including management skills, risk management procedures, guidelines
and systems, credit appraisal, monitoring and recovery systems;

lower growth or profitability potential than we anticipate;

failure to identify new segments and offer attractive new products and services in a timely fashion, putting
us at a disadvantage to our competitors;

competition from similar offerings or products and services by our competitors in the banking and nonbanking financial services sectors;

inability to attract customers from our competitors in our new businesses, as they may have substantially
greater experience and resources in such businesses;

failure to appropriately value collateral, including property and infrastructure assets, in order to lend on a
secured basis;

failure to attain requisite approvals from any regulatory authority;

failure to accurately determine and monitor the creditworthiness of borrowers in our newer businesses and
increases in the rate of defaults, including in our unsecured loans businesses;

changes in regulations or Government policies that may restrict or cap the interest rates or fees and
commissions that we may charge customers in any of our new businesses or compel changes to our
business models that threaten the viability of our businesses;

any negative publicity arising due to regulatory or other actions against third parties with whom we are
associated and over whom we have no control;

inability to enhance our risk management, internal controls and information technology systems to support
a broader range of products and services, a higher scale of operations and an increased retail customer base;

inability to attract and retain personnel who are able to implement, supervise and conduct the new business
activities on commercially reasonable terms; and

42

inability to respond promptly to new technology developments and be in a position to dedicate resources to
upgrade our systems and compete with new players entering the market.

Even if we are able to successfully diversify our products and services while managing the associated risks and
challenges, our returns on such products and services may be less than anticipated. In addition, if our
competitors are able to better anticipate the needs of customers within our target market, our market share could
decrease.
There will also be increased expenditure as a result of our strategy to expand into new geographies, including
those planned for our branch network expansion, and newer businesses, such as retail assets, where our brand is
not well known in the market. There is no assurance that we will be able to increase awareness of our brand and
even if we are successful in our branding efforts, such efforts may not be cost-effective. If we are unable to
maintain or increase awareness of or otherwise enhance our brand in a cost-effective manner, this could
negatively impact our ability to expand our business or compete effectively, which may materially and
adversely affect our business, financial condition and results of operations.
We are vulnerable to deterioration in the performance of any industry sector in which we have significant
exposure.
We calculate customer and sector exposure, as required by the RBI. Our exposure to corporate borrowers is
dispersed throughout various industry sectors, the most significant sectors include electricity
(generation/transportation and distribution), construction, telecommunication, petroleum (non-infrastructure)
and nuclear fuels, and vehicles, vehicle parts and transport equipment, which represented 7.37%, 4.57%, 4.45%,
2.25% and 2.18%, respectively, of our outstanding total balances as of June 30, 2016.
Despite monitoring our level of exposure to sectors and borrowers, any significant deterioration in the
performance of a particular sector driven by events not within our control, such as natural calamities, regulatory
action or policy announcements by central or state government authorities, would adversely impact the ability of
borrowers within that industry to service their debt obligations to us. As a result, we would experience increased
delinquency risk which may have a material adverse effect on our business, financial condition, results and cash
flow.
Any decrease in the value of the collateral securing our advances to borrowers or our inability to foreclose on
collateral in the event of default may result in a failure to recover the expected value of the collateral.
As of June 30, 2016, 71.53% of our advances were secured by tangible assets, including advances secured by
fixed deposits and book debts and 0.21% of our advances were secured by standby letters of credit or bank
guarantees; in addition, for 13.21% of our advances, security creation was in progress as of the same date. In
certain cases, we obtain security by way of a first or second charge on fixed assets, such as real property,
moveable assets, and financial assets, such as marketable securities, corporate guarantees and personal
guarantees. In addition, project advances or long-term advances to corporate customers are secured by a charge
on fixed assets and other security. The value of the collateral securing our loans may significantly fluctuate or
decline due to factors beyond our control. Any decrease in the value of collateral at the time of recovery will
have an adverse impact on the amounts we recover.
In India, foreclosure on collateral generally requires filing a suit or an application in a court or tribunal.
Although special tribunals have been set up for expeditious recovery of debts due to banks, any proceedings
brought may be subject to delays and administrative requirements that may result in, or be accompanied by, a
decrease in the value of the collateral. The SARFAESI Act, the Recovery of Debts Due to Banks and Financial
Institutions Act 1993, as amended, and the RBIs corporate debt restructuring mechanism have strengthened the
ability of lenders to recover NPAs by granting them greater rights to enforce security and recover amounts owed
from secured borrowers. However, there can be no assurance that this legislation will have a favorable impact
on our efforts to recover NPAs as the full effect of such legislation is yet to be determined in practice. Any
failure to recover the expected value of collateral would expose us to potential loss.
In addition, pursuant to RBI prudential guidelines on restructuring of advances by banks, we may not be allowed
to initiate recovery proceedings against a corporate borrower where the borrowers aggregate total debt is `100
million or more and 60.00% of the lenders by number and holding at least 75.00% or more of the borrowers
debt by value decide to restructure their advances. In such a situation, we are restricted to a restructuring process

43

only as approved by the majority lenders. If we own 25.00% or less of the debt of a borrower, we could be
forced to agree to an extended restructuring of debt which may not be in our interests.
In addition, we may not be able to realize the full value of the collateral as a result of, among other factors:

defects or deficiencies in the perfection of collateral (including obtaining required approvals from third
parties);

fraud by borrowers;

depreciation in the value of the collateral, illiquid market for the disposal of and volatility in the market
prices of the collateral; and

current legislative provisions or changes thereto and future judicial pronouncements.

Such difficulties in realizing our collateral fully or at all, including if we are compelled to restructure our loans,
may have a material adverse effect on our business, financial condition, results and cash flow.
The level of restructured advances in our portfolio may increase and the failure of such restructured
advances to perform as expected could affect our business, financial condition and results of operations.
Our standard assets include total gross standard restructured advances. Our total gross standard restructured
advances amount to `6,192.90 million, or 0.58% of gross advances, as of June 30, 2016 and `6,133.46 million,
or 0.62% of gross advances, as of March 31, 2016. The quality of our long-term project finance loan portfolio
could be adversely impacted by several factors. Economic and project implementation challenges, in India and
overseas, could result in additions to restructured advances and we may not be able to control or reduce the level
of restructured advances in our project and corporate finance portfolio.
In November 2012, the RBI increased the general provisioning on restructured standard accounts from 2.00% to
2.75%. The RBI, through a notification issued on January 31, 2013, has mandated banks to disclose further
details on accounts restructured in their annual reports. This includes disclosing accounts restructured on a
cumulative basis, excluding the standard restructured accounts, which cease to attract higher provision and/or
higher risk weight, the provisions made on restructured accounts under various categories, and details
of movement of restructured accounts.
Further, in May 2013, the RBI issued guidelines on the restructuring of advances. Pursuant to those guidelines,
from April 1, 2015 advances that are restructured (other than certain exceptions) would be immediately
classified as sub-standard on restructuring and the non-performing assets, upon restructuring, would continue to
have the same asset classification as prior to restructuring and slip into further lower asset classification
categories as per the extant asset classification norms with reference to the pre-restructuring repayment
schedule. The general provision required on restructured standard accounts would be increased to 3.50%
from March 31, 2014, and further to 4.25% from March 31, 2015 and 5.00% from March 31, 2016. The
guidelines also prescribe measures with respect to the terms of restructuring that may be approved for
borrowers.
The combination of changes in regulations regarding restructured advances, provisioning, and any substantial
increase in the level of restructured assets and the failure of these structured advances to perform as expected
could adversely affect our business and future financial performance.
Our debenture and corporate bond portfolio is exposed to risks relating to mark-to-market valuation.
We have a debenture and corporate bond portfolio available for sale and held for trading of `95,154.14 million
as of March 31, 2016, which mainly comprises fixed rate bonds. We run VaR tests to manage risks in our
investments, but in the event interest rates rise, our portfolio will be exposed to the adverse impact of the markto-market valuation of such bonds. Any rise in interest rates leading to a fall in the market value of such
debentures or bonds may materially and adversely affect our business, financial condition and results of
operations.
We are exposed to fluctuations in foreign exchange rates.

44

As a financial intermediary, we are exposed to exchange rate risk in our foreign exchange transactions and
related derivative transactions. As of March 31, 2015 and 2016, our credit exposure on account of outstanding
gross forward exchange contracts amounted to `53,941.01 million and `54,081.82 million, respectively. Further,
as of June 30, 2016, we have foreign currency borrowings of `127,582.53 million, which constitutes 7.20% of
our total liabilities, thereby resulting in foreign currency risk in respect of our ability to service such debt. We
hedge these liabilities to mitigate the impact of fluctuations in foreign currency rates. However, we may
maintain unhedged foreign currency exposure up to the net overnight position limit that are exposed to foreign
currency rate fluctuations. Further, hedged exposures where the relevant counterparty fails to perform its
obligations are also exposed to foreign currency fluctuations. Volatility in foreign exchange rates may be further
accentuated due to upcoming maturity of U.S.$25.97 billion FCNR(B) deposits due in second half of the 2017
financial year and other global and domestic macroeconomic developments. These foreign-denominated
deposits were raised by banks in second-half 2014 (as a one-time deposit raising measure) under a special
borrowing scheme by the RBI. Adverse movements in foreign exchange rates may also affect our borrowers
negatively, which may in turn affect the quality of our exposure to these borrowers. Volatility in foreign
exchange rates may materially and adversely affect our business, financial condition and results of operations.
We operate in a highly competitive environment and our ability to grow depends on our ability to compete
effectively. The grant of new banking licenses to private sector entities may materially and adversely affect
our business, financial condition and results of operations.
The Indian banking industry is highly competitive. We face strong competition in all our lines of business from
much larger Indian and foreign commercial banks, non-banking financial companies, insurance companies,
mutual funds, financial service firms and other entities operating in the Indian financial sector. We compete
directly with large Government-controlled public sector banks, major private sector banks and foreign banks
with branches in India. As of March 31, 2016, there were 93 scheduled commercial banks in India, including 27
public sector banks, 23 private sector banks (including us) and 43 foreign banks with branches in India
Public sector banks, which generally have a much larger customer and deposit base, larger branch networks and
Government support for capital augmentation, pose strong competition to us. Mergers among public sector
banks may result in enhanced competitive strengths in pricing and delivery channels for the merged entities.
Further, a number of the private sector banks in India have a larger customer base and greater financial
resources than us, giving them a substantial advantage by enabling economies of scale and improving
organizational efficiencies.
The RBI has liberalized the licensing regime and intends to issue licenses on an on going basis, subject to the
RBIs qualification criteria. In April 2014, the RBI issued in-principle banking licenses to two non-banking
finance companies, IDFC Limited and Bandhan Financial Services Private Limited. Both of these non-banking
finance companies began operations during fiscal year 2016. On August 19, 2015 the RBI granted in-principle
approval to 11 applicants to set up payment banks. In September 2015, the RBI granted in-principle licenses to
10 applicants for small finance banks, most of which are microfinance non-banking finance companies. The RBI
has also released guidelines with respect to a continuous licensing policy for universal banks in August 2016.
We also compete with foreign banks with operations in India. These competitors include a number of large
multinational banks and financial institutions as well as non-banking financial companies and housing finance
companies. In November 2013, the RBI released a framework for the setting up of wholly-owned subsidiaries in
India by foreign banks. The framework encourages foreign banks to establish a presence in India by granting
rights similar to those received by Indian banks, subject to certain restrictions and safeguards. Under the
current framework, wholly owned subsidiaries of foreign banks are allowed to raise Rupee resources through
issue of non-equity capital instruments. Further, wholly owned subsidiaries of foreign banks may be allowed to
open branches in Tier 1 to Tier 6 centers (except at a few locations considered sensitive on security
considerations) without having the need for prior permission from the RBI in each case, subject to certain
reporting requirements.
Further, technology innovations in mobilization and digitization of financial services require banks to
continuously develop new and simplified models for offering banking products and services. This could increase
competitive pressures on banks, including us, to adapt to new operating models and upgrade back-end
infrastructure on an ongoing basis. There is no assurance that we will be able to continue to respond promptly to
new technology developments, and be in a position to dedicate resources to upgrade our systems and compete
with new players entering the market. Please see related risk factor We rely extensively on our information

45

technology systems and the telecommunications network in India which require significant investment and
expenditure for regular maintenance, upgrades and improvements.
In addition, we may face attrition and difficulties in hiring at senior management and other levels due to
competition from existing Indian and foreign banks, as well as new banks entering the market. Due to such
intense competition, we may be unable to execute our growth strategy successfully and offer competitive
products and services.
All of the information factors may result in a material adverse effect on our business, financial condition and
results of operations.
Any downgrade of our debt ratings or of Indias debt rating by international rating agencies could adversely
affect our business.
Our debt is rated by various agencies. Any downgrade in our credit ratings may increase interest rates for
refinancing our outstanding debt, which would increase our financing costs, and adversely affect our future
issuances of debt and our ability to raise new capital on a competitive basis, which may adversely affect our
profitability and future growth.
While Standard and Poors (S&P), Moodys Investors Service Limited (Moodys) and Fitch Ratings, Inc.
(Fitch) currently have stable outlooks on their sovereign rating for India, they may lower their sovereign
ratings for India or the outlook on such ratings, which would also impact our ratings. Further, rating agencies
may change their methodology for rating banks, which may impact us.
In September 2014, S&P, affirmed the BBB minus sovereign credit rating on India and revised the outlook on
Indias long-term rating from negative to stable, citing improvement in the Governments ability to
implement reforms and encourage growth, which in turn would lead to improving the countrys fiscal
performance. At the same time, S&P revised the rating outlooks on 11 Indian banks, including the Bank and
other financial institutions from negative to stable. In April 2015, Moodys revised Indias sovereign rating
outlook from stable to positive and retained the long-term rating at Baa3 as it expected actions of
policymakers to enhance Indias economic strength in the medium term. In line with the revision in outlook,
Moodys revised the outlook for 12 government-owned financial institutions from stable to positive. The
foreign currency deposit ratings of three private sector banks, including the Bank, were affirmed at Baa3 and
the outlook on the long-term ratings changed from stable to positive, while the local currency and senior
unsecured rating of three private sector banks, including the Bank, were downgraded to Baa3 with a
positive outlook. In July 2016, Fitch revised its outlook for the Indian banking sector to "Negative" from
"Stable" due to the increase in non-performing loans.
There can be no assurance that these ratings will not be further revised or changed by S&P, Fitch or Moodys or
that any of the other global rating agencies will not downgrade Indias credit rating. As our foreign currency
ratings are pegged to Indias sovereign ceiling, any adverse revision to Indias credit rating for international debt
will have a corresponding effect on our ratings. Therefore, any adverse revisions to Indias credit ratings for
domestic and international debt by international rating agencies may adversely impact our ability to raise
additional financing and the interest rates and other commercial terms at which such financing is available. Any
of these developments may materially and adversely affect our business, financial condition and results of
operations.
Our off-balance sheet liabilities could adversely affect our financial condition.
As of June 30, 2016 we had total contingent liabilities of `3,816,851.40 million, amounting to an equivalent
credit exposure of `453,300.90 million. Our off-balance sheet liabilities consist of, among other things, liability
on account of forward exchange and derivative contracts, guarantees and documentary credits given by us. In
case of derivative contracts, the notional principal amounts are significantly greater than the actual profit and
loss, mark-to-market impact on us. If any of these contingent liabilities materialize, our business, financial
condition and results of operations may be materially and adversely affected.
Regulations in India require us to extend a minimum level of advances to certain sectors, including
agriculture. These may subject us to higher delinquency rates. Our inability to comply with Indian priority
sector lending requirements may require us to invest in funds with a lower return than we would otherwise
obtain in the market.

46

The RBI mandates all banks that are operating in India to direct a certain portion of their lending to specified
Priority Sectors such as agriculture, MSEs, housing and education, and has specified a target for domestic
banks as a percentage of their previous fiscal years ANBC. For further details, see section titled Regulations
and Policies on page 148. RBI regulations specify that priority sector requirements should be met on the basis
of the credit equivalent of off-balance sheet exposure rather than ANBC, if such off-balance sheet exposure by a
bank is higher than its ANBC. For the fiscal year 2015, our priority sector lending accounted for 39.90% of our
ANBC and for the fiscal year 2016, our priority sector lending accounted for 39.37% of our ANBC. In the case
of any shortfall by us in meeting priority sector lending requirements, we would subsequently be required to
place the difference between the required lending level and our actual priority sector lending in an account with
the National Bank for Agriculture and Rural Development under the Rural Infrastructure Development Fund
Scheme, or with other financial institutions specified by the RBI, from which we would earn lower levels of
interest compared to advances made to the priority sector. Further, subsequent deposits placed by banks on
account of non-achievement of priority sector lending targets or sub-targets are not eligible for classification as
indirect finance to agriculture or MSEs, as the case may be. Moreover, the RBI is required to take into account
any shortfall in meeting specific priority sector lending targets, at the time of granting any approvals sought by a
bank, from time to time. Such circumstances could materially and adversely affect our business, financial
condition and results of operations.
Any change in RBI regulations may require us to increase our lending to relatively higher risk segments, which
may result in an increase in our NPAs under our directed lending portfolio. Any increase in our direct lending to
certain sectors will result in an increase in our exposure to the payment risks inherent in such sectors, which
could materially and adversely impact our business, financial condition and results of operations. Any
requirements by the RBI that specify changes in priority sector lending may adversely affect our business,
financial condition and results of operations. See sub-section titled Regulations and PoliciesPriority sector
lending on page 151.
We may face greater credit risks than banks in more developed countries.
Our principal business is to provide financing to our customers. We are subject to the credit risk that our
borrowers may not pay in a timely fashion or at all. Nevertheless, the credit risk of our borrowers may be higher
than that in more developed countries due to the higher uncertainty in the Indian political, economic and
industrial environment.
In addition, Indias system for gathering and publishing statistical information relating to the Indian economy
and the financial performance of companies is not as comprehensive as those of established market economies.
Although India has a credit bureau industry, adequate information regarding loan servicing histories, particularly
in respect of individuals and small businesses, is limited. As a result, the Banks credit risk exposure is higher
compared with banks operating in advanced markets. Since the Banks lending operations to the aforesaid
categories are limited to India, the Bank may be exposed to a greater potential for loss compared with banks
with lending operations in more developed countries. The Bank is subject to credit risk that the borrowers may
not pay the Bank in a timely fashion or at all. CIBIL does not presently report information from retailers, utility
companies and trade creditors and no other nationwide bureau of this nature presently exists. The difficulties
associated with the inability to accurately assess the value of collateral and to enforce rights in respect of
collateral, along with the absence of such accurate statistical, corporate and financial information, may decrease
the accuracy of our assessments of credit risk, thereby increasing the likelihood of borrower default on our loan
and decreasing the likelihood that we would be able to enforce any security in respect of such a loan. The
absence of reliable information, including audited financial statements, recognized debt rating reports and credit
histories relating to our present and prospective corporate borrowers or other customers makes the assessment of
credit risk, including the valuation of collateral, more difficult, especially for individuals and small businesses.
If our screening processes prove to be inadequate, we may experience an increase in impaired advances and may
be required to increase our provision for defaulted advances. As a result, higher credit risk may expose us to
greater potential losses, which may materially and adversely affect our business, prospects, financial condition
and results of operations.
We are highly dependent on our management team and key managerial personnel and our inability to retain
or replace key and talented personnel may have an adverse effect on our business.

47

Our future success is highly dependent on the services of our management team, including our Managing
Director and CEO, Rana Kapoor, as well as other key personnel. Our ability to maintain our strategic direction,
manage our current operations and meet future business challenges depends, among other things, on their
continued employment and our ability to attract and recruit talented and skilled personnel in key managerial
positions throughout our organization.
Our employment agreements with these personnel do not obligate them to work for us for any specified period
and do not contain non-compete or non-solicitation clauses in the event of termination of employment. Further,
we do not maintain any key man insurance. If one or more of these key personnel are unwilling or unable to
continue in their present positions, we may not be able to replace them promptly with persons of comparable
skills and expertise.
Additionally, should the banking industry move towards incentive-based pay schemes, we may not be as
competitive as other banks. This may increase the possibility of our skilled personnel moving to more attractive
employment opportunities. There is no assurance that we will be able to continue our successful hiring of
talented and key personnel in the future. The loss of key personnel or our inability to replace such personnel
effectively may materially and adversely affect our ability to grow and operate our various business functions in
an efficient manner.
We have purchased securitized pools of retail assets and any deterioration of a pools performance may
adversely impact our financial performance.
We have purchased securitized pools of retail assets, which are mostly credit enhanced and have been rated by
external rating agencies using pre-selection criteria. Any deterioration in the quality of these pools could trigger
an increase in our provisioning requirements and thus may materially and adversely affect our business,
financial condition and results of operations.
We are currently not in compliance with the RBIs guidelines on ownership in private sector banks.
As per the Reserve Bank of India (Ownership in Private Sector Banks) Directions, 2016 (Directions on
Ownership) dated May 12, 2016, the shareholding of the promoter/promoter group in a private sector bank
cannot be higher than 15.00% of its paid-up share capital. As of June 30, 2016, the promoter/promoter groups
shareholding in our Bank was 21.88%. Rana Kapoor, together with Yes Capital (India) Private Limited and
Morgan Credits Private Limited held 11.68% of our paid-up share capital and Madhu Kapur, together with
Mags Finvest Private Limited, held 10.20% of our paid-up share capital, as of June 30, 2016.
While we have had correspondence with the RBI in the past, in relation to bringing the shareholding of the
promoter/promoter group down to 10.00% as per the previously applicable guidelines, any further directives
from the RBI under the Directions on Ownership, may have an adverse effect on the market price of our Equity
Shares. In addition, the RBI may require the aforementioned reduction in shareholding as a prerequisite for any
future RBI approvals related to our business activities. Any failure to comply with RBI directives may adversely
affect our business, financial condition and results of operations.
We could be adversely affected by the inability of our vendors to perform their contractual obligations.
We are dependent on various vendors for certain non-core elements of our operations including implementing
IT infrastructure and hardware, branch roll-outs, networking, managing our data center, and back-up support for
disaster recovery. Further, as part of our recent expansion into retail products we have also outsourced certain
activities, including the installation and management of our ATMs. Generally, we have agreements with only
one or two service providers for each outsourced activity and such agreements are typically non-exclusive and
short term. However, if such agreements are terminated or not renewed or replaced in a timely manner, this may
result in a disruption of our operations. Failure to perform any of these functions by our vendors or service
providers may materially and adversely affect our business, financial condition and results of operations.
We could be adversely affected by operational risks, including cyber-threats that may disrupt our businesses.
Our businesses are highly dependent on our ability to process, on a daily basis, a large number of transactions
across numerous and diverse markets and our transactions and processes have become increasingly complex.
Consequently, we rely heavily on our financial, accounting and other data processing systems. We are therefore
directly and indirectly exposed to operational risks arising from errors made in the confirmation or settlement of

48

transactions not being properly recorded, evaluated or accounted for. For example, in January 2014, the RBI
imposed a penalty of `500,000 (which has been recorded in our books of account during the fiscal year 2014)
for a shortfall of security in our principal subsidiary general ledger (SGL) account. The shortfall was due to
operational errors during settlement. While we have tightened operational controls in response to this incident,
there can be no guarantee that such operational errors will not occur in the future. The potential inability of our
systems to accommodate an increasing volume of transactions could also constrain our ability to expand our
businesses. If any of our systems do not operate properly or are disabled, we could suffer financial loss, a
disruption of businesses, liability to clients, regulatory intervention or damage to reputation, which may
materially and adversely affect our business, financial condition and results of operations.
Further, we offer internet banking and other services to our customers. We are therefore directly and indirectly
exposed to various cyber-threats such as phishing and trojans (targeting our customers, wherein fraudsters send
unsolicited mails to our customers seeking account-sensitive information or to infect customer machines to
search and attempt exfiltration of account-sensitive information), hacking (wherein attackers seek to hack into
our website with the primary intention of causing reputational damage to us by disrupting services) and data
theft (wherein cyber-criminals may attempt to intrude into our network with the intention of stealing our data or
information). There is also the risk of our customers blaming us and terminating their accounts with us for a
cyber-incident that might have occurred on their own system or with that of an unrelated third party. The RBI
has, on June 2, 2016, issued a framework for cyber-security for banks, prescribing measures to be adopted by
banks to address security risks including putting in place a cyber-security policy and requiring banks to report
all unusual cyber-security incidents to the RBI. Any cyber-security breach could also subject us to additional
regulatory scrutiny and expose us to civil litigation and related financial liability.
Our risk management policies and procedures may not adequately address unidentified or unanticipated
risks.
We have devoted significant resources to develop our risk management policies and procedures and aim to
continue to do so in the future. See sub-section titled Managements Discussion and Analysis of Financial
Condition and Results of OperationsRisk Management on page 98. Despite this, our policies and procedures
to identify, monitor and manage risks may not be fully effective. Some of our methods of managing risks are
based upon the use of observed historical market behavior. As a result, these methods may not accurately predict
future risk exposures which could be significantly greater than those indicated by the historical measures.
Management of operations, legal and regulatory risks requires, among other things, policies and procedures to
properly record and verify a large number of transactions and events, and these policies and procedures may not
be fully effective. As we seek to expand the scope of our operations, we also face the risk that we will be unable
to develop risk management policies and procedures that are properly designed for new business areas or to
manage the risks associated with the growth of our existing businesses effectively. Implementation and
monitoring may prove particularly challenging with respect to businesses that we plan on developing, such as
retail banking. An inability to develop and implement effective risk management policies may materially and
adversely affect our business, financial condition and results of operations.
We rely extensively on our information technology systems and the telecommunications network in India,
which require significant investment and expenditure for regular maintenance, upgrades and improvements.
Our information technology systems are a critical part of our business that help us manage, among other things,
our risk management, deposit servicing and loan origination functions, as well as our increasing portfolio of
products and services. We are heavily reliant on our technology systems in connection with financial controls,
risk management and transaction processing. In addition, our delivery channels include ATMs, a call center and
the internet. Our offline and online business channel networks are dependent on a dense, comprehensive
telecommunications network in India. While deregulation and liberalization of telecommunications laws have
prompted the steady improvement in local and long-distance telephone services, telephone network coverage
and accessibility is still intermittent in many parts of India. Failure by the Indian telecommunications industry to
improve network coverage to meet the demands of the rapidly growing economy may affect our ability to
expand our customer base, acquire new customers or service existing customers by limiting access to our
services and products. This may materially and adversely affect our business, financial condition and results of
operations.
Our success will depend, in part, on our ability to respond to new technological advances and emerging banking,
capital markets, and other financial services industry standards and practices on a cost-effective and timely

49

basis. The development and implementation of such technology entails significant technical and business risks.
There can be no assurance that we will successfully implement new technologies or adapt our transaction
processing systems to customer requirements or improving market standards.
We use our information systems and the internet to deliver services to, and perform transactions on behalf of,
our customers and we may need to regularly upgrade our systems, including our software, back-up systems and
disaster recovery operations, at substantial cost so that it remains competitive. Our hardware and software
systems are also subject to damage or incapacitation by human error, natural disasters, power loss, sabotage,
computer viruses and similar events or the loss of support services from third parties such as internet backbone
providers. There is no warranty under our information technology license agreements that the relevant software
or system is free of interruptions, will meet our requirements or be suitable for use in any particular condition.
So far, we have not experienced widespread disruptions of service to our customers, but there can be no
assurance that we will not encounter disruptions in the future due to substantially increased numbers of
customers and transactions, or for other reasons. Any inability to maintain the reliability and efficiency of our
systems could adversely affect our reputation, and our ability to attract and retain customers. In the event we
experience system interruptions, errors or downtime (which could result from a variety of causes, including
changes in customer use patterns, technological failure, changes to systems, linkages with third-party systems
and power failures), we are unable to develop necessary technology or any other failure occurs in our systems,
this may materially and adversely affect our business, financial condition and results of operations.
Major fraud, lapses of control, system failures, security breaches or calamities could adversely affect our
business.
We are vulnerable to risks arising from the failure of our employees to adhere to approved procedures and
system controls, fraud, system failures, information system disruptions, communication systems failures,
computer break-ins, power disruptions and data interception during transmission through external
communication channels and networks. For details on past instances of material fraud, see section titled Legal
Proceedings on page 209. Whilst we employ security systems, use encrypted password-based protections and
firewalls and establish operational procedures to prevent break-ins, damages and failures, there can be no
assurance that such measures are adequate to prevent fraud, security breaches or the invasion or breach of the
network by intruders and theft of data. Failure to protect against fraud or breaches in security may adversely
affect our operations and future financial performance. Our reputation could be adversely affected by significant
fraud committed by our employees, agents, customers or third parties.
We maintain a disaster recovery center for our core banking applications at Bengaluru in the event that our main
computer center at Mumbai shuts down for any reason. The system in Bengaluru is configured to come into
operation if the Mumbai system is no longer operational. However, if for any reason the switch over to the backup system does not take place or if a calamity occurs in both Mumbai and Bengaluru such that our business is
compromised at both centers, our operations would be adversely affected.
Employee misconduct could harm us and is difficult to detect and deter.
There have been a number of highly publicized cases involving fraud, money laundering or other misconduct by
employees and executives in the financial services industry in recent years. Although we have a committee in
place dedicated to monitoring fraud, we run the risk that such misconduct could occur. Misconduct by
employees or executives could include binding us to transactions that exceed authorized limits or present
unacceptable risks or hiding unauthorized or unlawful activities from us, which may result in substantial
financial losses and damage to our reputation.
Employee or executive misconduct could also involve the improper use or disclosure of confidential
information, which could result in regulatory sanctions and serious reputational or financial harm, including
harm to our brand. It is not always possible to deter employee or executive misconduct and the precautions
taken and systems put in place to prevent and detect such activities may not be effective in all cases. Any
instances of such misconduct could adversely affect our reputation.
Our ability to pay dividends in the future will depend upon our future earnings, financial condition, cash
flows, capital expenditure, long-term target payout ratios, growth & investment opportunities, current capital
ratios, current & prospective financial performance and other macro & micro-economic factors.

50

Our ability to pay dividends in the future will depend on our earnings, financial condition and capital
requirements (as impacted by Basel III). Further, dividends distributed by us will attract dividend distribution
tax and may be subject to other requirements prescribed by the RBI. We have a board-approved dividend policy
to govern our dividend payout. We may not generate sufficient income to cover our operating expenses and
therefore may be unable to pay dividends to our shareholders. Further, we might be restricted from paying
Dividends as per our dividend stopper policy. In addition, dividends that we have paid in the past may not be
reflective of the dividends that we may be able to pay in the future. For details, see section titled Dividend
Policy on page 71.
Certain terms contained in our business agreements may be onerous and commercially restrictive.
Some of our agreements contain covenants that may be onerous and commercially restrictive in nature. For
example, some of our borrowing agreements impose a condition on us to inform the respective counterparties in
the case of any change in control or amalgamation, demerger/merger or payment of dividends. In addition,
certain of our borrowing agreements impose restrictive financial covenants. Further, some of our borrowing
agreements also require us to obtain prior written consent for certain acts such as amendments to constitutional
documents or to create any security. Violation of any of these covenants may amount to events of default, which
may result in breach of contract causing claims to be brought against us or termination of the agreements as well
as prepayment obligations.
We may breach third party intellectual property rights or be required to initiate claims against others
infringing our intellectual property rights.
We may be subject to claims by third parties, both inside and outside India, if we breach their intellectual
property rights by using slogans, names, designs, software or other such subjects, which are of a similar nature
to the intellectual property these third parties may have registered. Any legal proceedings that result in a finding
that we have breached third parties intellectual property rights, or any settlements concerning such claims, may
require us to provide financial compensation to such third parties or make changes to our marketing strategies or
to the brand names of our products, which may have a materially adverse effect on our brand, business,
prospects, financial condition and results of operations.
Our customers may engage in certain transactions in or with countries or persons that are subject to U.S. and
other sanctions.
U.S. law generally prohibits U.S. persons from directly or indirectly investing or otherwise doing business in or
with certain countries (such as Iran, Myanmar, North Korea Sudan, Syria and Crimea region of Ukraine) and
with certain persons or businesses that have been specially designated by the OFAC or other U.S. government
agencies. Other governments and international or regional organizations also administer similar economic
sanctions.
We provide transfer, settlement and other services to customers doing business with, or located in, countries
to which certain OFAC-administered and other sanctions apply, such as Iran. Although we believe we
have compliance systems in place that are sufficient to block prohibited transactions, there can be no assurance
that we will be able to fully monitor all of our transactions for any potential violation. Although we do not
believe that we are in violation of any applicable sanctions, if it were determined that transactions in which we
participate violate U.S. or other sanctions, we could be subject to U.S. or other penalties, and our reputation and
future business prospects in the United States or with U.S. persons, or in other jurisdictions, could be adversely
affected. Further, investors in the Equity Shares could incur reputational or other risks as the result of our
customers dealings in or with countries or with persons that are the subject of U.S. sanctions.
If more stringent labor laws become applicable to us or if our employees unionize, our profitability may be
adversely affected.
India has stringent labor legislation that protects employee interests, including legislation that prescribes
detailed procedures for dispute resolution, employee removal and imposes financial obligations on employers
upon retrenchment. If these labor laws become applicable to our employees or if our employees unionize, it may
become difficult for us to maintain flexible human resource policies and attract and employ the numbers of
sufficiently qualified candidates that we require. Equally, it may become difficult for us to discharge employees
and we may be required to raise wage levels or grant other benefits that could result in a significant increase in

51

our operating expenses, which may have a materially adverse effect on our business, financial condition and
results of operations.
Our offices are located on leased premises and the non-renewal or premature termination of the existing
lease agreements or their renewal on unfavorable terms, could adversely affect our business and results of
operations.
Our registered office, corporate headquarters and all of our branches, ATMs and marketing outlets are located
on premises leased from third parties, which require renewal from time to time. If we are unable to renew the
relevant lease agreements, or if such agreements are renewed on unfavorable terms and conditions, we may be
required to relocate operations. We may also face the risk of being evicted in the event that our landlords allege
a breach on our part of any terms under these lease agreements. This may cause a disruption in our operations or
result in increased costs, or both, which may materially and adversely affect our business, financial condition
and results of operations.
We depend on our brand recognition, and failure to maintain and enhance awareness of our brand would
adversely affect our ability to retain and expand our base of customers.
We have invested significantly in developing and promoting our brand, and we expect to continue maintaining
and increasing our brand awareness among our current and prospective customers. We believe that, as the
market becomes increasingly competitive, maintaining and enhancing our brand, in a cost-effective manner, will
become more important for our business. Further, we believe that continuing to develop awareness of our brand,
through focused and consistent branding and marketing initiatives, among customers is important in order to
establish our leadership in select markets. If we are unable to consistently manage our time and costs on brandbuilding initiatives, our ability to compete in the financial services sector may be negatively impacted and have
a material adverse effect on our business.
Negative publicity could damage our reputation and adversely impact our business and financial results.
Reputational risk, or the risk to our business, earnings and capital from negative publicity, is inherent in our
business. The reputation of the financial services industry in general has been closely monitored as a result of
the financial crisis and other matters affecting the financial services industry. Negative public opinion about the
financial services industry generally or us specifically, could adversely affect our ability to attract and retain
customers, and may expose us to litigation and regulatory action. Negative publicity can result from our actual
or alleged conduct in any number of activities, including lending practices, foreclosure practices, corporate
governance, regulatory compliance, mergers and acquisitions, and related disclosure, sharing or inadequate
protection of customer information, and actions taken by government regulators and community organizations
in response to that conduct. We distribute several third-party products, including life insurance, health
insurance, general insurance and mortgages. We also work in partnership with third parties, including business
correspondents in the micro-finance sector. We have no control over the actions of such third parties. Any
failure on the part of such third parties, including any failure to comply with applicable regulatory norms, any
regulatory action taken against such parties or any adverse publicity relating to such party could, in turn, result
in negative publicity about us and adversely impact our brand and reputation.
We may continue to incur significant expenditure as a result of significant increases in hiring and branch
infrastructure expansion to support our growth strategy recently.
In the fiscal year 2016, the number of our employees increased by 27.93%, or 4,190 employees, over the prior
fiscal year 2015, mainly due to increased hiring to support our retail banking expansion strategy. In the same
period, our payments to and provisions for employees increased by 32.37% from `9,796.64 million to
`12,968.02 million. Further, our branches increased by 36.39% or 229 branches in fiscal year 2016 to 860
branches. Our planned growth will require us to continue to significantly increase the number of employees at
various levels and branches and effectively implement and improve training programs. Such increasing
activities and investments in our employees, branches and other associated infrastructure will require substantial
expenditure and management effort and attention. If we are unable to manage the efficiency of our employees
and branches effectively, our operating expenses could increase disproportionately, which may have a material
adverse effect on our business, financial condition, results and cash flow.
Our internal financial controls may be insufficient or may leave the Bank exposed to unidentified or
unanticipated risks, which could negatively affect our business or result in losses.

52

Our management is responsible for establishing and maintaining internal financial controls based on the internal
control over financial reporting criteria established by us while taking into account the essential components of
internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting
issued by the Institute of Chartered Accountants of India. These responsibilities include the design,
implementation and maintenance of adequate internal financial controls to ensure the orderly and efficient
conduct of its business, including adherence to the our policies, the safeguarding of our assets, the prevention
and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely
preparation of reliable financial information, as required under the Companies Act, 2013. The proper
functioning of our internal financial control, risk management, accounting or other data collection and
processing systems is critical to our businesses and our ability to compete effectively. If our internal financial
controls are insufficient, our business, financial condition and results of operations could be materially and
adversely affected.
The implementation of the RBI Basel III Capital Regulations may adversely affect us and the position of the
equity shareholders.
On December 17, 2009, the Basel Committee proposed a number of fundamental reforms to the regulatory
capital framework in its consultative document entitled Strengthening the Resilience of the Banking Sector.
On December 16, 2010 and on January 13, 2011, the Basel Committee issued its final guidance on Basel III and
minimum requirements, respectively. The Basel Committee proposed that the guidelines be implemented from
January 1, 2013. These guidelines have been implemented in India through the RBI Basel III Capital
Regulations, which came into effect on April 1, 2013, and are subject to a series of transitional arrangements to
be phased in over a period of time and will be fully implemented on March 31, 2019. The RBI has indicated that
the capital requirements for the implementation of the RBI Basel III Capital Regulations may be lower during
the initial period and higher in later years. The RBI Basel III Capital Regulations require, among other things,
higher levels of Tier I capital, including common equity, capital conservation buffers, deductions from common
equity Tier I capital for investments in subsidiaries (with minority interest), changes in the structure of debt
instruments eligible for inclusion in Tier I and Tier II capital and preference shares in Tier II capital, criteria for
classification as common shares, methods to deal with credit risk and reputational risk, capital charges for credit
risks, introduction of a leverage ratio and criteria for investments in capital of banks, financial and insurance
entities (including where ownership is less than 10.00%). The RBI Basel III Capital Regulations also stipulate
that non-equity Tier I and Tier II capital should have loss absorbency characteristics, which require them to be
written down or be converted into common equity upon the occurrence of a pre-specified trigger event.
In addition, the Basel Committee published a guidance report titled Principles for Sound Liquidity Risk
Management and Supervision in September 2008 to address the deficiencies that were witnessed in liquidity
risk management during the recent global financial crisis. This was followed by the publication of Basel III:
International framework for liquidity risk measurement, standards and monitoring in December 2010 which
introduced two minimum global regulatory standards, namely the LCR and the NSFR and a set of monitoring
tools. The LCR promotes short-term resilience of banks to potential liquidity disruptions by ensuring that they
have sufficient high quality liquid assets to survive an acute stress scenario lasting for 30 days. The NSFR
promotes resilience over longer-term time horizons by creating additional incentives for banks to fund their
activities with more stable sources of funding on an ongoing structural basis.
In June 2014, the RBI issued guidelines in relation to LCR, liquidity risk monitoring tools and LCR disclosure
standards pursuant to the publication of the Basel III: The Liquidity Coverage Ratio and liquidity risk
monitoring tools in January 2013 and the Liquidity Coverage Ratio Disclosure Standards in January 2014 by
the Basel Committee on Banking Supervision. The LCR is intended to ensure that banks maintain an adequate
level of HQLAs to survive an acute stress scenario lasting for 30 days. Pursuant to the guidelines, banks are
required to maintain an LCR of 60%, 70%, 80%, 90% and 100% with effect from January 1, 2015, January 1,
2016, January 1, 2017, January 1, 2018 and January 1, 2019, respectively. Such requirement to maintain HQLA
has adversely affected our profitability and any increase in the requirement will further adversely affect our
profitability.
The RBI has issued draft guidelines on NSFR on May 28, 2015, which proposes to make NSFR applicable to
banks in India from January 1, 2018. For compliance towards NSFR norms, we may have to borrow long term
to fund long-term assets resulting in an increase in interest expense.

53

The RBI or any other relevant authority may implement the package of reforms, including the terms which
capital securities are required to have, in a manner that is different from that which is currently envisaged, or
may impose more onerous requirements. There can be no assurance that we will be able to comply with such
requirements or that any breach of applicable laws and regulations will not adversely affect our reputation,
business, financial condition and result of operations.
Risks Relating to India
Our risk profile is linked to the Indian economy and the banking and financial markets in India.
The credit risk we are exposed to may be higher than the credit risk of banks in some developed economies. The
absence of reliable information, including audited financial statements, recognized debt rating reports and credit
histories relating to our present and prospective corporate borrowers or other customers makes the assessment of
credit risk, including the valuation of collateral, more difficult, especially for individuals and small businesses.
In addition, the credit risk of our borrowers, particularly small and middle market companies, is higher than
borrowers in more developed economies due to the evolving Indian regulatory, political, economic and
industrial environment. The directed lending norms of the RBI require us to lend a certain proportion of our
advances to priority sectors, including agriculture and small enterprises, where our ability to control the
portfolio quality is limited and where economic difficulties are likely to affect our borrowers more severely.
Any shortfall may be required to be allocated to investments yielding sub-market returns.
In addition to credit risks, we also face additional risks in comparison to banks operating in
developed economies. We pursue our activities in India, a developing economy with all of the risks that come
with such an economy. Our activities in India are widespread and diverse and involve employees, contractors,
counterparties and customers with widely varying levels of education, financial sophistication and wealth.
Although we seek to implement policies and procedures to reduce and manage marketplace risks as well as risks
within our own organization, some risks remain inherent in doing business in a large, developing country. We
cannot eliminate these marketplace and operational risks, which may lead to legal or regulatory actions, negative
publicity or other developments that could reduce our profitability. In the aftermath of the financial crisis,
regulatory scrutiny of these risks is increasing.
Increased volatility or inflation of commodity prices in India could adversely affect our business.
Any increased volatility or rate of inflation of global commodity prices, particularly oil and steel prices, could
adversely affect our borrowers and contractual counterparties. Although the RBI has enacted certain policy
measures designed to curb inflation, these policies may not be successful. Any slowdown in the growth of the
manufacturing services or agricultural sectors could adversely impact our business, financial condition and
results of operations.
Trade deficits could have a negative effect on our business.
Indias trade relationships with other countries can influence conditions in the Indian economy. In fiscal year
2016, the merchandise trade deficit was U.S.$118.5 billion compared to U.S.$137.7 billion in fiscal year 2015.
This large merchandise trade deficit neutralizes the surpluses in Indias invisibles, which are comprised of
international trade in services, income from financial assets, labor and property and cross-border transfers of
mainly workers remittances in the current account, resulting in a current account deficit. If Indias trade deficits
increase or become unmanageable, the Indian economy and, therefore, our business, financial condition and
results of operations could be adversely affected.
Financial difficulty and other problems in certain long-term lending institutions and investment institutions
in India could have a negative impact on our business.
We are exposed to the risks prevailing in the Indian financial system which, in turn, may be affected by financial
difficulties and other problems faced by certain Indian financial institutions. As an emerging market economy,
the Indian economy faces risks not typically faced in developing countries, including the risk of deposit runs,
despite the existence of a national deposit insurance scheme. Certain Indian financial institutions have
experienced difficulties during recent years. Some cooperative banks have also faced serious financial and
liquidity crises. The problems faced by individual Indian financial institutions and any instability in or
difficulties faced by the Indian financial system generally could create adverse market perception about

54

financial institutions and banks in India. This, in turn, could adversely affect our business, financial condition
and results of operations.
A decline in Indias foreign exchange reserves may affect liquidity and interest rates in the Indian economy,
which could have an adverse impact on us. A rapid decrease in reserves would also create a risk of higher
interest rates and a consequent slowdown in growth.
Flows to foreign exchange reserves can be volatile, and past declines may have adversely affected the valuation
of the Rupee. There can be no assurance that Indias foreign exchange reserves will not decrease again in the
future. Further decline in foreign exchange reserves, as well as other factors, could adversely affect the valuation
of the Rupee and could result in reduced liquidity and higher interest rates that could adversely affect our
business, financial condition and results of operations.
The Bank is subject to risks relating to macroeconomic conditions in India. As reported by the RBI in its
financial stability report dated December 23, 2015, risks to Indias financial stability have worsened since
December 2011, primarily due to global risks, such as the delay in resolution of the Eurozone crisis and
domestic macroeconomic conditions. The RBIs financial stability report further noted that the pace of further
increase in the U.S. Federal Reserves funds rate could have a significant bearing on market behavior and that
sluggish global trade, along with developments in China, may hamper the global economy going forward. The
U.S. Federal Reserve ended the easing program in October 2014 and the raising of rates by the U.S. Federal
Reserve from December 2015 signaled the start of a shift to normal liquidity and credit conditions in the global
markets. The pace at which rates would be hiked and the market reaction and adjustment to the consequent
withdrawal of liquidity may lead to a repricing of certain assets with consequent volatility.
On the domestic front, risks arising from erratic climatic conditions, limited policy space, corporate
performance, asset quality of financial institutions and low investment growth, could pose challenges. The risks
to domestic growth are accentuated by fiscal and external sector imbalances. It was also observed that funding
strains coupled with sovereign risks have led to fears of a precipitous deleveraging process that could hurt global
financial market and the economy in general, through asset sales and contractions in credit. While the direct
impact of such deleveraging is not expected to be significant on domestic credit availability in India, specialized
types of financing like structured long-term finance, project finance and trade finance could be impacted.
The RBIs December 23, 2015 financial stability report noted that the CRAR of scheduled commercial banks
(SCBs) registered some deterioration during the first half of the fiscal year 2016 and the profitability of SCBs
also deteriorated. Further, though the stress tests revealed resilience, the banking system could become
vulnerable if macroeconomic conditions were to deteriorate sharply. The Gross NPA ratios of the banking sector
increased, whereas the restructured standard advances ratio declined between March and September 2015. The
total stressed advances (Gross NPA plus restructured standard advances) ratio increased to 11.30% of the total
advances in September 2015 from 11.10% in March 2015. The CRAR of the SCBs at the system level declined
to 12.70% from 13.00% between March and September 2015, whereas the Tier 1 leverage ratios increased to
6.50% from 6.4% during the same period.
We have little or no control over any of these risks or trends and may be unable to anticipate changes in
economic conditions. Adverse effects on the Indian banking system could impact our funding and adversely
affect our business, financial condition and results of operations.
Acts of terrorism and other similar threats to security could adversely affect our business, cash flows, results
of operations and financial condition.
Increased political instability, evidenced by the threat or occurrence of terrorist attacks, enhanced national
security measures, conflicts in several regions in which we operate, strained relations arising from these
conflicts and the related decline in customer confidence may hinder our ability to do business. For example, in
November 2008, several coordinated shooting and bombing attacks occurred across Mumbai, Indias financial
capital. In June 2011, a series of three coordinated bomb explosions occurred at different locations in Mumbai.
Both attacks resulted in loss of life, property and business. Any escalation in these events or similar future
events may disrupt our operations or those of our customers. These events have had, and may continue to have,
an adverse impact on the global economy and customer confidence, which could, in turn, adversely affect our
revenue, operating results and financial condition. The impact of these events on the volatility of global
financial markets could increase the volatility of the market price of our securities and may limit the capital
resources available to us and to our customers.

55

Natural disasters could have a negative impact on the Indian economy and damage our facilities.
Natural disasters such as floods, earthquakes or famines have in the past had a negative impact on the Indian
economy. If any such event were to occur, our business could be affected due to the event itself or due to our
inability to effectively manage the effects of the particular event. Potential effects include the damage to
infrastructure and the loss of business continuity or business information. In the event that our facilities are
affected by any of these factors, our operations may be significantly interrupted, which may materially and
adversely affect our business, financial condition and results of operations.
Political instability or significant changes in the economic liberalization and deregulation policies of the
Government or in the government of the states where we operate, could disrupt our business.
We are incorporated in India and derive a significant portion of our revenues in India. In addition, a significant
portion of our assets are located in India. Consequently, our performance and liquidity of the Equity Shares may
be affected by changes in exchange rates and controls, interest rates, Government policies, taxation, social and
ethnic instability and other political and economic developments affecting India.
The Indian Government has traditionally exercised and continues to exercise a significant influence over many
aspects of the Indian economy. Our businesses, and the market price and liquidity of our securities, may be
affected by changes in exchange rates and controls, interest rates, Government policies, taxation, social and
ethnic instability and other political and economic developments in or affecting India.
In recent years, India has been following a course of economic liberalization and our business could be
significantly influenced by economic policies followed by the Government. Further, our businesses are also
impacted by regulation and conditions in the various states in India where we operate. On May 17, 2014, the
Indian Election Commission released the results of the 2014 General Election and the Bharatiya Janata Party
won 282 districts out of 543, and will hold a majority of seats in the Lok Sabha, the lower house of the
Parliament of India. However, there is no majority government in the Rajya Sabha, the upper house of the
Parliament of India, which may impede the passing of key legislation. There can be no assurance as to the
policies the new government will follow or that it will continue the policies of the outgoing government.
Government corruption, scandals and protests against certain economic reforms, which have occurred in the
past, could slow the pace of liberalization and deregulation.
All this has impacted sentiments and the economy, the rate of economic liberalization could change, and
specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting
investment in India could change as well. A significant change in Indias economic liberalization and
deregulation policies, in particular, those relating to the businesses in which we operate, could disrupt business
and economic conditions in India generally and our business in particular.
Significant differences exist between Indian GAAP and other accounting principles, such as U.S. GAAP and
IFRS, with which investors may be more familiar and may consider material to their assessment of our
financial condition.
As stated in the reports of M/s SR Batliboi & Co. LLP, the previous statutory auditors of our Bank, included in
this Preliminary Placement Document, our financial statements for the fiscal year ended March 31, 2014, March
31, 2015 and March 31, 2016, are prepared and presented in conformity with Indian GAAP. No attempt has
been made to reconcile any of the information given in this Preliminary Placement Document to any other
principles or to base it on any other standards. Indian GAAP differs in certain significant respects from IFRS,
U.S. GAAP and other accounting principles with which prospective investors may be familiar in other countries.
If our financial statements were to be prepared in accordance with such other accounting principles, our results
of operations, cash flows and financial position may be substantially different. Prospective investors should
review the accounting policies applied in the preparation of our financial statements, and consult their own
professional advisors for an understanding of the differences between these accounting principles and those with
which they may be more familiar.
Investors in the Equity Shares may not be able to enforce a judgment of a foreign court against us, our
directors or executive officers.

56

We are a limited liability company incorporated under the laws of India. Substantially all of our Directors and
executive officers and key managerial personnel are residents of India, and a substantial portion of our assets
and such persons are located in India. As a result, it may not be possible for investors to effect service of process
upon us or such persons outside India, or to enforce judgments obtained against such parties in courts outside of
India.
Recognition and enforcement of foreign judgments are provided for under Section 13 and Section 44A of the
Civil Procedure Code on a statutory basis. Section 13 of the Civil Procedure Code provides that foreign
judgments shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or
between parties under whom they or any of them claim litigating under the same title except: (a) where it has
not been pronounced by a court of competent jurisdiction; (b) where it has not been given on the merits of the
case; (c) where it appears on the face of the proceedings to be founded on an incorrect view of international law
or a refusal to recognize the law of India in cases in which such law is applicable; (d) where the proceedings in
which the judgment was obtained are opposed to natural justice; (e) where it has been obtained by fraud; and (f)
where it sustains a claim founded on a breach of any law in force in India.
Under the Civil Procedure Code, a court in India shall presume, upon the production of any document
purporting to be a certified copy of a foreign judgment, that such judgment was pronounced by a court of
competent jurisdiction, unless the contrary appears on the record; but such presumption may be displaced by
proving want of jurisdiction.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.
However, Section 44A of the Civil Procedure Code provides that where a foreign judgment has been rendered
by a superior court, within the meaning of that Section, in any country or territory outside India which the
Government has by notification declared to be a reciprocating territory, it may be enforced in India by
proceedings in execution as if the judgment had been rendered by the relevant court in India. However, Section
44A of the Civil Procedure Code is applicable only to monetary decrees not being in the nature of any amounts
payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty and does not
include arbitration awards.
The United Kingdom, Singapore and Hong Kong, among others, have been declared by the Government of
India to be reciprocating territories for the purposes of Section 44A of the Civil Procedure Code, but the
United States has not been so declared. A judgment of a court of a country which is not a reciprocating territory
may be enforced only by a fresh suit resulting in a judgment or order and not by proceedings in execution. Such
a suit has to be filed in India within three years from the date of the judgment in the same manner as any other
suit filed to enforce a civil liability in India. A judgment of a superior court of a country which is a reciprocating
territory may be enforced by proceedings in execution, and a judgment not of a superior court, by a fresh suit
resulting in a judgment or order. The latter suit has to be filed in India within three years from the date of the
judgment in the same manner as any other suit filed to enforce a civil liability in India. Execution of a judgment
or repatriation outside India of any amounts received is subject to the approval of the RBI, wherever required. It
is unlikely that a court in India would award damages on the same basis as a foreign court if an action were to be
brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if that court
was of the view that the amount of damages awarded was excessive or inconsistent with public policy, and is
uncertain whether an Indian court would enforce foreign judgments that would contravene or violate Indian law.
Public companies in India, including us, will be required to prepare financial statements under IND-AS. We
have not determined with any degree of certainty the impact of such adoption on our financial reporting.
As stated in the reports of M/s SR Batliboi & Co. LLP, the previous statutory auditors of our Bank, included in
this Preliminary Placement Document, our financial statements for the financial years ended March 31, 2014,
2015 and 2016 are prepared and presented in conformity with Indian GAAP. The Institute of Chartered
Accountants of India has issued IND-AS (a revised set of accounting standards) which converges the Indian
accounting standards with International Financial Reporting Standards. The Ministry of Corporate Affairs has
confirmed the IND-AS for adoption.
The Ministry of Corporate Affairs, in its press release dated January 18, 2016, issued a roadmap for
implementation of IND-AS converged with IFRS for scheduled commercial banks, insurers, insurance
companies and non-banking financial companies. This roadmap requires these institutions to prepare IND-AS
based financial statements for the accounting periods beginning from April 1, 2018 onwards with comparatives
for the periods ending March 31, 2018. The RBI, by its circular dated February 11, 2016, requires all scheduled

57

commercial banks to comply with IND-AS for financial statements for the periods stated above. The RBI does
not permit banks to adopt IND-AS earlier than the above timeline and the guidelines also state that the RBI shall
issue necessary instruction, guidance, and clarification on the relevant aspects for implementation of the INDAS as and when required.
While we have been discussing, including with the RBI, the possible impact of IND-AS on our financial
reporting, the nature and extent of such impact is still uncertain. Further, the new accounting standards will
change, among other things, our methodology for estimating allowances for expected loan losses and for
classifying and valuing our investment portfolio and our revenue recognition policy. For estimation of expected
loan losses, the new accounting standards may require us to calculate the present value of the expected future
cash flows realizable from our advances, including the possible liquidation of collateral (discounted at the loans
effective interest rate). This may result in us recognizing allowances for expected loan losses in the future which
may be higher or lower than under current Indian GAAP. There can be no assurance, therefore, that our
financial condition, results of operations, cash flows or changes in shareholders equity will not appear
materially worse under IND-AS than under Indian GAAP. In our transition to IND-AS reporting, we may
encounter difficulties in the ongoing process of implementing and enhancing our management information
systems. Moreover, there is increasing competition for the small number of IFRS-experienced accounting
personnel available as more Indian companies begin to prepare IND-AS financial statements. Further, there is
no significant body of established practice on which to draw in forming judgments regarding the new systems
implementation and application. There can be no assurance that our adoption of IND-AS will not adversely
affect our reported results of operations or financial condition and any failure to successfully adopt IND-AS
could adversely affect our business, financial condition and results of operations.
The market value of the Equity Shares may fluctuate due to the volatility of the Indian securities markets.
Indian securities markets may be more volatile than and not comparable to, the securities markets in certain
countries with more developed economies and capital markets than India. Indian stock exchanges have, in the
past, experienced substantial fluctuations in the prices of listed securities. Indian stock exchanges (including the
BSE and the NSE) have experienced problems which, if such or similar problems were to continue or recur,
could affect the market price and liquidity of the securities of Indian companies, including the Equity Shares.
These problems have included temporary exchange closures, broker defaults, settlement delays and strikes by
brokers. In addition, the governing bodies of Indian stock exchanges have, from time to time, imposed
restrictions on trading in certain securities, limitations on price movements and margin requirements. Further,
from time to time, disputes have occurred between listed companies, stock exchanges and other regulatory
bodies, which in some cases may have a negative effect on market sentiment.
There may be less information available in the Indian securities markets than in more developed securities
markets in other countries.
There is a difference between the level of regulation and monitoring of the Indian securities markets and that of
the activities of investors, brokers and other participants in securities markets in more developed economies.
SEBI is responsible for monitoring disclosure and other regulatory standards for the Indian securities market.
SEBI has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There
may be, however, less publicly available information about Indian companies than is regularly made available
by public companies in more developed countries, which could adversely affect the market for the Equity
Shares. As a result, investors may have access to less information about our business, financial condition, cash
flows and results of operation, on an ongoing basis, than investors in companies subject to the reporting
requirements of other more developed countries.
Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.
Our Articles, the instructions issued by the RBI, and Indian law govern our corporate affairs. Legal principles
relating to these matters and the validity of corporate procedures, Directors fiduciary duties and liabilities, and
shareholders rights may differ from those that would apply to a bank or corporate entity in another jurisdiction.
Shareholders rights under Indian law may not be as extensive as shareholders rights under the laws of other
countries or jurisdictions. Investors may have more difficulty in asserting their rights as one of our shareholders
than as a shareholder of a bank or corporate entity in another jurisdiction.
The Companies Act, 2013 has effected significant changes to the existing Indian company law framework,
which may subject us to higher compliance requirements and increase our compliance costs.

58

A majority of the provisions and rules under the Companies Act, 2013 have recently been notified and have
come into effect from the date of their respective notifications, resulting in the corresponding provisions of the
Companies Act, 1956 ceasing to have effect. The Companies Act, 2013 has brought into effect significant
changes to the Indian company law framework, such as in the provisions related to issue of capital, disclosures,
corporate governance norms, audit matters, and related party transactions. Further, the Companies Act, 2013 has
also introduced additional requirements which do not have corresponding equivalents under the Companies Act,
1956, including the introduction of a provision allowing the initiation of class action suits in India against
companies by shareholders or depositors, a restriction on investment by an Indian company through more than
two layers of subsidiary investment companies (subject to certain permitted exceptions), and prohibitions on
advances to directors. We are also required to spend 2.0% of our average net profits during three immediately
preceding financial years on corporate social responsibility activities. Further, the Companies Act, 2013 imposes
greater monetary and other liability on our Directors and officers in default for any non-compliance. To ensure
compliance with the requirements of the Companies Act, 2013, we may need to allocate additional resources,
which may increase our regulatory compliance costs and divert management attention.
We may face challenges in anticipating the changes required by, interpreting and complying with such
provisions due to limited jurisprudence on them. For instance, as a result of the provisions of the Companies
Act, 2013, our Board of Directors presently does not have requisite number of directors liable to retire by
rotation to be in strict compliance with the requirements therein. In the event, our interpretation of such
provisions of the Companies Act, 2013 differs from, or contradicts with, any judicial pronouncements or
clarifications issued by the Government in the future, we may face regulatory actions or we may be required to
undertake remedial steps. Additionally, some of the provisions of the Companies Act, 2013 overlap with other
existing laws and regulations (such as the corporate governance norms and insider trading regulations). We may
face difficulties in complying with any such overlapping requirements. Further, we cannot currently determine
the impact of provisions of the Companies Act, 2013 which are yet to come in force. Any increase in our
compliance requirements or in our compliance costs may have an adverse effect on our business and results of
operations.
Our business and activities may be further regulated by the Competition Act and any adverse application or
interpretation of the Competition Act could materially and adversely affect our business, financial condition
and results of operations.
The Competition Act seeks to prevent business practices that have or are likely to have an appreciable adverse
effect on competition in India and has established the Competition Commission of India (the CCI). Under the
Competition Act, any arrangement, understanding or action, whether formal or informal, which has or is likely
to have an appreciable adverse effect on competition is void and attracts substantial penalties. Any agreement
among competitors which, directly or indirectly, determines purchase or sale prices, results in bid rigging or
collusive bidding, limits or controls the production, supply or distribution of goods and services, or shares the
market or source of production or providing of services by way of allocation of geographical area or type of
goods or services or number of customers in the relevant market or in any other similar way, is presumed to
have an appreciable adverse effect on competition and shall be void. Further, the Competition Act prohibits the
abuse of a dominant position by any enterprise. If it is proven that a breach of the Competition Act committed
by a company took place with the consent or connivance or is attributable to any neglect on the part of, any
director, manager, secretary or other officer of such company, that person shall be guilty of the breach
themselves and may be punished as an individual. If we, or any of our employees, are penalized under the
Competition Act, our business may be adversely affected. Further, the Competition Act also regulates
combinations and requires approval of the CCI for effecting any acquisition of shares, voting rights, assets or
control or mergers or amalgamations above the prescribed asset and turnover based thresholds.
It is difficult to predict the impact of the Competition Act on our growth and expansion strategies in the future.
If we are affected, directly or indirectly, by the application or interpretation of any provision of the Competition
Act or any enforcement proceedings initiated by the CCI or any adverse publicity that may be generated due to
scrutiny or prosecution by the CCI, it may adversely affect our business, financial condition and results of
operations.
The proposed new taxation system in India could adversely affect our business and the trading price of the
Equity Shares.

59

The Government has proposed three major reforms in Indian tax laws, namely the goods and services tax, the
direct taxes code and provisions relating to the General Anti-Avoidance Rule (the GAAR).
As regards the goods and service tax and the direct tax code, the Government has not specified any timeline for
their implementation. The goods and services tax would replace the indirect taxes on goods and services such as
central excise duty, service tax, customs duty, central sales tax, state VAT, surcharge and excise currently being
collected by the central and state governments. The direct taxes code aims to reduce distortions in tax structure,
introduce moderate levels of taxation, expand the tax base and facilitate voluntary compliance. It also aims to
provide greater tax clarity and stability to investors who invest in Indian projects and companies as well as
clarify the taxation provisions for international transactions. It aims to consolidate and amend laws relating to all
direct taxes like income tax, dividend distribution tax and wealth tax and facilitate voluntary compliance. As
regards GAAR, the provisions have been introduced in the Finance Act, 2012 to come into effect from April 1,
2017. The GAAR provisions intend to catch arrangements declared as impermissible avoidance arrangements,
which is any arrangement, the main purpose or one of the main purposes of which is to obtain a tax benefit and
which satisfy at least one of the following tests (i) creates rights or obligations which are not ordinarily created
between persons dealing at arms length; (ii) results, directly or indirectly, in misuse, or abuse, of the provisions
of the Income Tax Act, 1961; (iii) lacks commercial substance or is deemed to lack commercial substance, in
whole or in part; or (iv) is entered into, or carried out, by means, or in a manner, which are not ordinarily
employed for bona fide purposes. If GAAR provisions are invoked, then the tax authorities have wide powers,
including denial of tax benefit or a benefit under a tax treaty. As the taxation system is intended to undergo
significant overhaul, its consequent effects on the banking system cannot be determined at present and there can
be no assurance that such effects would not adversely affect our business, future financial performance and the
trading price of the Equity Shares.
Statistical, industry and financial data in this Preliminary Placement Document may be incomplete or
unreliable.
We have not independently verified data obtained from industry publications and other sources referred to in
this Preliminary Placement Document and, therefore, while we believe them to be true, we cannot assure you
that they are complete or reliable. Such data may also be produced on different bases from those used in the
industry publications we have referenced. Discussions of matters, therefore, relating to India, its economy and
the industries in which we currently operate, are subject to the caveat that the statistical and other data upon
which such discussions are based may be incomplete or unreliable. See section titled Industry Overview on
page 103.
Risks Relating to the Equity Shares and the Issue
After this Issue, the price of the Equity Shares may be volatile.
The Issue Price will be determined by us in consultation with the Managers, based on the Bids received in
compliance with Chapter VIII of the SEBI ICDR Regulations, and it may not necessarily be indicative of the
market price of the Equity Shares after this Issue is complete.
The price of the Equity Shares on the NSE and the BSE may fluctuate after this Issue as a result of several
factors, including:

volatility in the Indian and the global securities market or in the Rupees value relative to the U.S. dollar,
the Euro and other foreign currencies;

our profitability and performance;

perceptions about our future performance or the performance of Indian companies in general;

performance of our competitors and the perception in the market about investments in the banking and
finance sector;

adverse media reports about us or the Indian banking and finance sector;

a comparatively less active or illiquid market for Equity Shares;

60

changes in the estimates of our performance or recommendations by financial analysts;

significant developments in Indias economic liberalization and deregulation policies;

regulatory changes in the Banking sector;

inclusion or exclusion of YES Bank in indices;

significant developments in Indias fiscal and environmental regulations; and

any other political or economic factors.

There can be no assurance that an active trading market for the Equity Shares will be sustained after this Issue,
or that the price at which the Equity Shares have historically traded will correspond to the price at which the
Equity Shares are offered in this Issue or the price at which the Equity Shares will trade in the market
subsequent to this Issue.
Future issuances or sales of the Equity Shares could significantly affect the trading price of the Equity
Shares.
The future issuance of shares by us or the disposal of shares by any of our major shareholders, or the perception
that such issuance or sales may occur, may significantly affect the trading price of the Equity Shares. There can
be no assurance that we will not issue further shares or that the major shareholders will not dispose of, pledge or
otherwise encumber their shares.
There is no guarantee that the Equity Shares issued pursuant to this Issue will be listed on the BSE and the
NSE in a timely manner, or at all.
In accordance with Indian law and practice, permission for listing and trading of the Equity Shares issued
pursuant to this Issue will not be granted until after the Equity Shares have been issued and allotted. Approval
for listing and trading will require all relevant documents authorizing the issuing of Equity Shares to be
submitted. There could be a failure or delay in listing the Equity Shares on the BSE and the NSE. Any failure or
delay in obtaining the approval would restrict an investors ability to dispose of the Equity Shares.
An investor will not be able to sell any of the Equity Shares subscribed in this Issue other than across a
recognized Indian stock exchange for a period of 12 months from the date of the issue of the Equity Shares.
Pursuant to the SEBI ICDR Regulations, for a period of 12 months from the date of the issue of the Equity
Shares in this Issue, QIBs subscribing to the Equity Shares may only sell their Equity Shares on the NSE or the
BSE and may not enter into any off-market trading in respect of these Equity Shares. We cannot be certain that
these restrictions will not have an impact on the price of the Equity Shares. Further, allotments made to FVCIs,
VCFs and AIFs in the Issue are subject to the rules and regulations that are applicable to them, including in
relation to lock-in requirements. This may affect the liquidity of the Equity Shares purchased by investors and it
is uncertain whether these restrictions will adversely impact the market price of the Equity Shares purchased by
investors.
Investors may be subject to Indian taxes arising out of capital gains on the sale of the Equity Shares.
Under current Indian tax laws and regulations, capital gains arising from the sale of shares in an Indian company
are generally taxable in India. Any gain realized on the sale of listed equity shares on a stock exchange held for
more than 12 months will not be subject to capital gains tax in India if STT has been paid on the transaction.
STT will be levied on and collected by a domestic stock exchange on which the Equity Shares are sold. Any
gain realized on the sale of equity shares held for more than 12 months to an Indian resident, which are sold
other than on a recognized stock exchange and on which no STT has been paid, will be subject to long term
capital gains tax in India. Further, any gain realized on the sale of listed equity shares held for a period of 12
months or less will be subject to short term capital gains tax in India. Capital gains arising from the sale of the
Equity Shares will be exempt from taxation in India in cases where the exemption from taxation in India is
provided under a treaty between India and the country of which the seller is resident. Generally, Indian tax
treaties do not limit Indias ability to impose tax on capital gains. As a result, residents of other countries may be

61

liable for tax in India as well as in their own jurisdiction on a gain upon the sale of the Equity Shares. See subsection titled TaxationStatement of Possible Tax Benefits on page 197.
Anti-takeover provisions under Indian law could prevent or deter an entity from acquiring us.
The Takeover Regulations contains certain provisions that may delay, deter or prevent a future takeover or
change in control. These provisions may discourage a third party from attempting to take control over our
business, even if change in control would result in the purchase of our Equity Shares at a premium to the market
price or would otherwise be beneficial to the investor. For more information, see section titled The Securities
Market of India on page 191.
Any trading closures at the BSE and the NSE may adversely affect the trading price of our Equity Shares.
The regulation and monitoring of Indian securities markets and the activities of investors, brokers and other
participants differ, in some cases significantly, from those in Europe and the U.S. A closure of, or trading
stoppage on, either of the BSE and the NSE could adversely affect the trading price of the Equity Shares.
Historical trading prices, therefore, may not be indicative of the prices at which the Equity Shares will trade in
the future.
SEBI operates an index-based market-wide circuit breaker. Any operation of a circuit breaker may adversely
affect a shareholders ability to sell, or the price at which it can sell, the Equity Shares at a particular point in
time.
We are subject to an index-based market-wide circuit breaker generally imposed by SEBI on Indian stock
exchanges. This may be triggered by an extremely high degree of volatility in the market activity (among other
things). Due to the existence of this circuit breaker, there can be no assurance that shareholders will be able to
sell the Equity Shares at their preferred price or at all at any particular point in time.
You will not, without prior RBI approval, be able to acquire Equity Shares if such acquisition would result in
an individual or group holding 5.00% or more of our share capital or voting rights; you may not be able to
exercise voting rights in excess of 10.00% of the total voting rights.
The Banking Regulation Act, as amended on January 18, 2013, read with the Reserve Bank of India (Prior
Approvals for Acquisition of shares or voting rights in Private Sector Banks) Directions, 2015, requires any
person to seek prior approval of the RBI, to acquire or agree to acquire shares or voting rights of a bank, either
directly or indirectly, beneficial or otherwise, by himself or acting in concert with other persons, wherein such
acquisition (taken together with shares or voting rights held by him or his relative or associate enterprise or
persons acting in concert with him) results in the aggregate shareholding of such persons to be 5.00% or more of
the paid-up share capital of a bank or entitles him to exercise 5.00% or more of the voting rights in a bank.
The RBI, as per Master Direction Ownership in Private Sector Banks, Directions, 2016 released on May 12,
2016, laid out shareholding and voting rights limits in Private Sector Banks. It restricts ownership limits of
individuals and non-financial entities (other than the promoter and promoter group) at 10.00% of the paid-up
capital. In the case of entities from the financial sector, other than regulated or diversified or listed, the limit is
15.00% of the paid-up capital.
Further, any acquisition of shareholding/voting rights of 5.00% or more of the paid-up capital of the bank or
total voting rights of the bank shall be subject to obtaining prior approval from the Reserve Bank of India. Such
approval may be granted by the RBI if it is satisfied that the applicant meets certain fitness and propriety tests.
The RBI may require the proposed acquirer to seek further RBI approval for subsequent acquisitions. Further,
the RBI may, by passing an order, restrict any person holding more than 5.00% of our total voting rights from
exercising voting rights in excess of 5.00%, if such person is deemed to be not fit and proper by the RBI. For
further details, see section titled Regulations and Policies on page 148.
Applicants to the Issue are not allowed to withdraw their Bids after the Bid/Issue Closing Date.
In terms of the SEBI ICDR Regulations, applicants in the Issue are not allowed to withdraw their Bids after the
Bid/Issue Closing Date. The Allotment of Equity Shares in this Issue and the credit of such Equity Shares to the
applicants demat account with its depository participant could take approximately seven days and up to 10 days
from the Bid/Issue Closing Date. There is no assurance, however, that material adverse changes in the

62

international or national monetary, financial, political or economic conditions or other events in the nature of
force majeure, material adverse changes in our business, results of operation or financial condition, or other
events affecting the applicants decision to invest in the Equity Shares, would not arise between the Bid/Issue
Closing Date and the date of Allotment of Equity Shares in the Issue. Occurrence of any such events after the
Bid/Issue Closing Date could also impact the market price of the Equity Shares. The applicants shall not have
the right to withdraw their Bids in the event of any such occurrence without the prior approval of SEBI. We may
complete the Allotment of the Equity Shares even if such events may limit the applicants ability to sell the
Equity Shares after the Issue or cause the trading price of the Equity Shares to decline.
Investors will be subject to market risks until the Equity Shares credited to the investors demat account are
listed and permitted to trade.
Investors can start trading the Equity Shares allotted to them only after they have been credited to an investors
demat account, are listed and permitted to trade. Since our Equity Shares are currently traded on the BSE and
the NSE, investors will be subject to market risk from the date they pay for the Equity Shares to the date when
trading approval is granted for the same. Further, there can be no assurance that the Equity Shares allocated to
an investor will be credited to the investors demat account or that trading in the Equity Shares will commence
in a timely manner.
If we are classified as a passive foreign investment company (PFIC) for U.S. Federal income tax purposes,
U.S. investors may incur adverse tax consequences.
Under U.S. Federal income tax laws, U.S. investors are subject to special tax rules if they invest in passive
foreign investment companies, or PFICs. While we do not believe that we are, or will become in the foreseeable
future, a PFIC since the applicable PFIC rules are complex and, to a certain extent, unclear, there is a risk that
we are or may become a PFIC in the future. If we are or become a PFIC, U.S. investors generally will not be
subject to the regular U.S. federal income tax rules applicable to dividends and capital gains, but will be subject
to complex PFIC rules that could result in additional taxation upon certain distributions by us and/or upon a sale
or disposition of Equity Shares. See sub-section titled TaxationCertain U.S. Federal Income Tax
Considerations on page 205.
Holders of Equity Shares could be restricted in their ability to exercise pre-emptive rights under Indian law
and could thereby suffer future dilution of their ownership position.
Under the Companies Act, a company incorporated in India must offer holders of its equity shares pre-emptive
rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership
percentages prior to the issuance of any new equity shares, unless the pre-emptive rights have been waived by
the adoption of a special resolution by holders of three-fourths of the equity shares who have voted on such
resolution. However, if the law of the jurisdiction that you are in does not permit the exercise of such preemptive rights without us filing an offering document or registration statement with the applicable authority in
such jurisdiction, you will be unable to exercise such preemptive rights unless we make such a filing. We may
elect not to file a registration statement in relation to pre-emptive rights otherwise available by Indian law to
you. To the extent that you are unable to exercise pre-emptive rights granted in respect of the Equity Shares, you
may suffer future dilution of your ownership position and your proportional interests in us would be reduced.

63

USE OF PROCEEDS
The total gross proceeds of the Issue will be ` [] million. After deducting the estimated Issue expenses
(including fees, commission) of approximately ` [] million, the net proceeds of the Issue will be approximately
` [] million.
Purpose of Issue
Subject to compliance with applicable laws and regulations, we intend to use the Net Proceeds of the Issue for
meeting capital requirement under Basel III norms and ensuring adequate capital to support growth and
expansion, including enhancing our solvency and capital adequacy ratio and general corporate purposes.
Neither Rana Kapoor nor any of our other Directors are making any contribution either as part of the Issue or
separately in furtherance of the objects of the Issue.

64

CAPITALISATION
As on the date of this Preliminary Placement Document, our authorised share capital is ` 8,000 million
consisting of 600,000,000 Equity Shares of ` 10.00 each aggregating to ` 6,000 million and 20,000,000
preference shares of ` 100.00 each aggregating to ` 2,000 million. As on the date of this Preliminary Placement
Document, our Banks issued, subscribed and paid up capital is ` 4,213,452,750.00 divided into 421,345,275
fully paid up Equity Shares of ` 10.00 each.
The following table sets forth our Banks capitalization (including indebtedness) as at March 31, 2016 and at
June 30, 2016 on the basis of our audited standalone financial statements for the fiscal year 2016 and our limited
review unaudited standalone financial information for the three months ended June 30, 2016, prepared in
accordance with Indian GAAP and as adjusted to give effect to the receipt of the gross proceeds of the Issue and
the application thereof. This table should be read in conjunction with the sections titled Management
Discussion and Analysis of Financial Condition and Results of Operations and Financial Statements on
pages 72 and 215, respectively.

As at June 30, 2016

Shareholders funds
Equity share capital
Securities Premium
Reserve and surplus
Indebtedness
Short term debt:
Secured
Unsecured(3)
Long term debt:
Unsecured
Total debt
Total

(` in million)
As at March 31, 2016 As adjusted for the Issue

4,210.94
49,636.61
91,520.96

4,205.32
49,462.17
84,198.51

101,405.16

17,994.33
83,410.84

224,806.60
319,362.53
464,731.04

215,184.60
316,589.77
454,455.76

[](1)(2)
[]
[]
[]

[]
[]
[]
[]

Notes:
(1) After June 30, 2016 and up to the date of this Preliminary Placement Document, we have issued and allotted an aggregate of 251,534
Equity Shares pursuant to exercise of stock options under one or more of our ESOS Schemes.
(2) As on date of this Preliminary Placement Document, a total of 18,541,411 options are outstanding and a total of 4,872,961 employee
stock options are outstanding and vested but not exercised with the employees of our Bank.
(3) Consists of borrowing up to one year.

65

CAPITAL STRUCTURE
The equity share capital of our Bank as at the date of this Preliminary Placement Document is set forth below:
(In ` except share data)
Aggregate value at face
value
A

AUTHORISED SHARE CAPITAL

600,000,000 Equity Shares
20,000,000 Preference Shares

6,000,000,000.00
2,000,000,000.00
4,213,452,750.00 (1)

ISSUED, SUBSCRIBED AND PAID-UP CAPITAL BEFORE THE ISSUE

PRESENT ISSUE IN TERMS OF THIS PRELIMINARY PLACEMENT

DOCUMENT
[] Equity Shares aggregating to ` [](2)

[]

PAID-UP CAPITAL AFTER THE ISSUE

[] Equity Shares

[]

(1)
(2)

SECURITIES PREMIUM ACCOUNT

Before the Issue
After the Issue

49,723,585,013
[]

As on date of this Preliminary Placement Document, a total of 18,541,411 options are outstanding and a total of 4,872,961 employee
stock options are outstanding and vested but not exercised with the employees of our Bank.
The Issue has been authorised by the Board of Directors pursuant to their resolution passed on April 27, 2016 and the shareholders
pursuant to their resolution dated June 7, 2016. Further, the Issue, being a qualified institutions placement, has general permission
from the RBI pursuant to section 4(ii)(b) read with section 5 of the Reserve Bank of India (Issue and Pricing of Shares by Private
Sector Banks) Directions, 2016, subject to compliance with the conditions prescribed therein.

Equity Share Capital History of our Bank

The history of the equity share capital of our Bank is provided in the following table.
Date of Allotment

November 21, 2003

March 10, 2004
March 10, 2004
March 10, 2004
March 31, 2004
July 5, 2005
December 22, 2006
December 7, 2007
January 25, 2008
February 29, 2008
March 29, 2008
June 24, 2008
September 8, 2008
June 20, 2009
September 8, 2009
September 29, 2009
October 9, 2009
November 6, 2009
December 22, 2009
January 27, 2010
February 9, 2010
March 9, 2010
April 9, 2010
May 7, 2010
June 21, 2010
July 9, 2010
August 9, 2010

No. of Equity Shares

Allotted

Face Value
(In `)

50,000
143,950,000
20,000,000
30,000,000
6,000,000
70,000,000
10,000,000
14,700,000
974,400
115,350
302,500
639,200
197,230
102,000
50,250
1,089,420
1,186,200
285,610
623,956
38,362,709
751,345
287,099
527,596
292,800
532,540
1,346,560
1,406,205

10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00

66

Issue price per Equity

Share
(In `)*
10.00
10.00
12.50
14.00
10.00
45.00
120.00
225.00
10.00
10.00
10.00
10.00
10.00
67.17
62.45
69.65
39.83
75.99
67.57
269.50
89.18
64.49
59.58
89.16
107.78
131.02
99.40

Consideration

Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash

Date of Allotment

September 9, 2010
October 8, 2010
November 11, 2010
December 16, 2010
January 14, 2011
February 11, 2011
March 11, 2011
April 6, 2011
May 6, 2011
June 9, 2011
July 8, 2011
August 9, 2011
September 9, 2011
October 5, 2011
November 4, 2011
December 9, 2011
January 6, 2012
February 9, 2012
March 16, 2012
April 10, 2012
May 8, 2012
June 13, 2012
July 6, 2012
August 9, 2012
September 7, 2012
October 12, 2012
November 9, 2012
December 7, 2012
January 4, 2013
February 8, 2013
March 8, 2013
April 5, 2013
May 10, 2013
June 11, 2013
July 5, 2013
August 8, 2013
September 6, 2013
October 11, 2013
November 6, 2013
December 4, 2013
January 10, 2014
February 6, 2014
March 7, 2014
April 4, 2014
May 7, 2014
June 5, 2014
June 9, 2014
July 11, 2014
August 8, 2014
September 10, 2014
October 10, 2014
November 14, 2014
December 8, 2014
January, 12, 2015
February 9, 2015
March 9, 2015
April 20, 2015
May 12, 2015
June 23, 2015
August 10, 2015
August 22, 2015

No. of Equity Shares

Allotted

Face Value
(In `)

1,472,980
638,670
738,535
161,475
222,825
103,054
36,615
744,975
86,625
163,670
921,495
1,256,900
725,100
456,710
259,720
167,650
343,275
386,580
327,600
694,150
177,600
96,790
921,300
485,435
748,175
536,825
507,850
404,140
513,050
394,150
155,400
311,200
359,850
427,596
462,295
210,890
37,750
64,889
34,257
24,125
49,735
22,100
6,650
110,325
171,250
53,492,272
302,900
488,825
459,325
443,000
520,065
457,842
176,220
289,944
132,615
57,889
260,294
44,197
67,115
234,531
102,500

10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00

67

Issue price per Equity

Share
(In `)*
126.09
129.55
132.49
127.36
91.79
99.28
144.65
104.03
161.54
151.27
127.11
107.19
120.04
124.24
141.31
123.31
97.97
131.46
129.66
121.67
109.08
143.96
129.07
143.73
128.85
165.28
156.30
149.83
174.80
142.74
150.16
195.75
160.53
141.00
226.73
182.33
187.96
147.26
165.70
139.52
143.09
169.98
114.88
205.45
279.95
550.00
258.21
252.02
91.19
203.14
247.39
252.81
240.36
248.14
239.14
240.48
228.96
271.71
254.60
266.67
273.75

Consideration

Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash

Date of Allotment

No. of Equity Shares

Allotted

Face Value
(In `)

Issue price per Equity

Consideration
Share
(In `)*
September 5, 2015
201,704
10.00
248.03
Cash
September 21, 2015
123,255
10.00
277.13
Cash
October 7, 2015
195,546
10.00
275.98
Cash
October 19, 2015
115,125
10.00
289.48
Cash
November 9, 2015
81,300
10.00
268.55
Cash
November 25, 2015
56,700
10.00
253.51
Cash
December 11, 2015
103,080
10.00
260.41
Cash
December 23, 2015
177,750
10.00
166.93
Cash
January 11, 2016
216,895
10.00
338.69
Cash
January 22, 2016
226,746
10.00
170.08
Cash
February 11, 2016
293,775
10.00
319.25
Cash
February 24, 2016
105,050
10.00
327.74
Cash
March 9, 2016
98,880
10.00
397.55
Cash
March 23, 2016
91,100
10.00
185.55
Cash
April 8, 2016
223,150
10.00
335.50
Cash
May 2, 2016
68,200
10.00
299.88
Cash
May 12, 2016
101,300
10.00
322.93
Cash
May 25, 2016
73,800
10.00
307.49
Cash
June 14, 2016
43,350
10.00
322.75
Cash
June 24, 2016
52,300
10.00
293.47
Cash
July 9, 2016
69,646
10.00
340.26
Cash
July 20, 2016
53,160
10.00
364.53
Cash
August 10, 2016
56,300
10.00
379.09
Cash
August 24, 2016
72,428
10.00
346.15
Cash
* In instances where there have been multiple allotments on the same day, pursuant to exercise of options under the relevant
ESOS scheme, the Issue price is an average of the allotment price of the allotments made on that day.

In the last one year preceding the date of this Preliminary Placement Document, our Bank has not made any
allotments for consideration other than cash.
For details relating to the employee stock options issued by our Bank, see the sections titled Capitalization
and Board of Directors and Senior Management on page 65 and 158, respectively.

68

MARKET PRICE INFORMATION AND OTHER INFORMATION CONCERNING THE EQUITY

SHARES
The Equity Shares of our Bank are listed on the BSE and NSE. As on the date of this Preliminary Placement
Documents, our Banks issued, subscribed and paid up capital is ` 4,213,452,750.00. The closing price of the
Equity Shares on the BSE as of September 6, 2016 was ` 1,440.90 and on the NSE as of September 6, 2016 was
` 1,440.80.
The tables set forth below provide certain stock market data for the BSE and the NSE and is for the periods that
indicate the high and low closing prices of the Equity Shares and also the volume of trading activity.
1.
Fiscal
year

2014
2015
2016

The high, low and average market prices of the Equity Shares during the preceding three fiscal years:
High
(`)

Date of high

542.60
May 16, 2013
883.35 January 28, 2015
882.60
May 29, 2015

Number of
Equity
Shares
traded on
the date of
high
415,191
340,133
249,602

BSE
Total volume
Low
Date of low
Number of
of Equity
(`)
Equity
Shares traded
Shares
on date of
traded on the
high (in `
date of low
million)
224.26
225.90 August 28, 2013
3,564,604
300.69
407.75 April 16, 2014
732,530
218.75
629.10 August 24, 2015
1,039,374

Total volume
of Equity
Shares
traded on
date of low
(in ` million)
800.50
303.38
663.33

Average
price for
the year
(`)

Total volume of Equity

Shares traded in the
fiscal year
In number
(In `
million)

380.75
642.42
771.17

292,184,618
99,226,897
89,688,107

98,203
60,919
68,407

(Source: www.bseindia.com)
Notes:
1. High and low prices in the above tables are of the daily closing prices. In case of two days with the same closing price, the date with
higher volume has been used.
2. In the case of a year, the average price for the year represents the average of the closing prices on the last day of each month of each
year presented.

Fiscal
year

2014
2015
2016

High
(`)

Date of high

542.75
May 17, 2013
883.80 January 28, 2015
882.30
May 29, 2015

Number of
Equity
Shares
traded on
the date of
high
1,245,071
3,031,156
2,171,914

NSE
Total volume Low
Date of low
Number of
Total volume
of Equity
(`)
Equity Shares
of Equity
Shares
traded on the
Shares
traded on
date of low
traded on
date of high
date of low
(in ` million)
(in ` million)
673.75
225.85 August 28, 2013
17,627,901
3,964.56
2,678.14
407.55 April 16, 2014
7,594,258
3,149.30
1,904.85
629.70 August 24, 2015
9,807,304
6,253.22

Average
price for
the year
(`)

380.77
642.48
771.26

Total volume of Equity

Shares traded in the fiscal
year
In number
(In `
million)
1,780,685,044
915,624,871
851,916,473

603,986
567,623
650,966

(Source: www.nseindia.com)
Notes:
1. High and low prices in the above tables are of the daily closing prices. In case of two days with the same closing price, the date with
higher volume has been used.
2. In the case of a year, the average price for the year represents the average of the closing prices on the last day of each month of each
year presented.

2.

Month year

March, 2016
April, 2016
May, 2016
June, 2016
July, 2016
August, 2016

Monthly high and low prices of the Equity Shares for the six months preceding the date of filing of this
Preliminary Placement Document:
High
(`)

Date of high

865.90 March 30, 2016

944.95
April 28, 2016
1,031.95 May 31, 2016
1,111.75 June 23, 2016
1,220.55
July 28, 2016
1,362.80 August 31, 2016

Number of
Equity
Shares
traded on
date of high

Total volume
of Equity
Shares
traded on
date of high
(in ` million)

222,142
1,287,835
201,460
339,780
288,097
144,643

190.91
1,212.03
208.66
373.45
350.37
196.31

BSE
Low (`)
Date of low

718.50 March 1, 2016

829.45
April 5, 2016
910.05
May 6, 2016
1,017.15 June 1, 2016
1,112.20
July 7, 2016
1,221.45 August 1, 2016

Number of
Equity
Shares
traded on
date of low

419,975
471,858
228,361
172,572
94,491
99,418

Total
volume of
Equity
Shares
traded on
date of low
(in `
million)
298.18
398.48
208.29
175.68
105.58
121.37

Average
price for
the month
(`)

804.79
877.09
967.76
1,066.90
1,161.07
1,296.08

Total volume of
Equity Shares traded
in the month
In
(In `
number
million)

6,860,462
7,166,040
6,173,962
5,374,624
3,182,401
3,107,125

5,471
6,372
5,968
5,729
3,722
4,031

(Source: www.bseindia.com)
Notes:
1. High and low prices in the above tables are of the daily closing prices. In case of two days with the same closing price, the date with
higher volume has been used.
2. In the case of a month, the average price for the month represents the average of the closing prices on each day of each month
presented.

69

Month year

High
(`)

March, 2016
April, 2016
May, 2016
June, 2016
July, 2016
August, 2016

Date of high

866.30 March 30, 2016

945.55
April 28, 2016
1,033.00 May 31, 2016
1,110.80 June 23, 2016
1,223.50
July 28, 2016
1,366.10 August 31, 2016

Number of
Equity
Shares
traded on
date of high

Total volume
of Equity
Shares
traded on
date of high
(in ` million)

2,709,021
13,347,143
11,491,701
3,861,764
3,509,271
23,168,932

2,327.88
12,555.20
11,887.33
4,248.80
4,275.52
31,591.83

NSE
Low
Date of low
(`)

719.40 March 1, 2016

829.20
April 5, 2016
910.20
May 6,2016
1017.90 June 1, 2016
1112.10
July 7, 2016
1221.40 August 1, 2016

Number of
Equity
Shares
traded on
date of low

4,081,743
4,500,137
2,383,963
2,442,702
1,621,711
1,678,533

Total
volume of
Equity
Shares
traded on
date of low
(in `
million)
2,901.75
3,802.36
2,175.06
2,489.58
1,811.09
2,049.30

Average
price for
the
month (`)

804.90
877.04
968.08
1,067.21
1,161.32
1,296.52

Total volume of
Equity Shares traded
in the month
In number
(In `
million)

75,200,467
67,973,555
87,747,769
62,951,629
43,988,955
72,407,372

60,122
60,661
85,337
67,073
51,422
95,294

(Source: www.nseindia.com)
Notes:
1. High and low prices in the above tables are of the daily closing prices. In case of two days with the same closing price, the date with
higher volume has been used.
2. In the case of a month, the average price for the month represents the average of the closing prices on the each day of each month
presented.

3.

Market Price on April 28, 2016, being the first working day following the Board meeting approving the
Issue:

Date

April 28, 2016

Open

High

Low

BSE
Close

917.5

951.4

915

944.95

Open

High

Low

NSE
Close

916.35

951.7

916

945.55

Traded Volume
(No. of Equity
Shares)
1,287,835

Total Value of Equity

Shares traded
(` in million)
1212.02

Traded Volume
(No. of Equity
Shares)
13,347,143

Total Value of Equity

Shares traded
(` in million)
12,555.20

(Source: www.bseindia.com)

Date

April 28, 2016

(Source: www.nseindia.com)

70

DIVIDEND POLICY
The declaration and payment of dividends will be recommended by our Board of Directors and approved by our
shareholders at their discretion. Our Board may also, from time to time, pay interim dividends. All dividend
payments are made in cash to the shareholders of our Bank.
The details of the dividends declared by our Bank in respect of fiscal years 2016, 2015 and 2014 are set out
below:
Fiscal year

Dividend Per Equity

Share
(In `)
8.00
9.00
10.00

Total Amount of
Dividend (1)(2)
(In ` million)
2,885.07
3,759.63
4,205.32

2014
2015
2016
1. Dividends excluding corporate dividend tax.
2. Dividends exclude dividends paid on employee stock options exercised subsequent to year-end but before the record
date for declaration of dividend along with the applicable tax.

For a summary of certain Indian tax consequences of dividend distributions to shareholders, see the section
titled Taxation - Statement of Tax Possible Benefits on page 197.
Future dividends will depend on our Banks revenue, cash flows, financial condition (including capital position)
and other factors. For a description of regulation of dividends, see the section titled Regulations and Policies
Declaration of dividend by Banks on page 155.
We have a formal dividend policy, approved by the Board at its meeting held on October 30, 2014 whereby our
Bank would generally take into account the following while making a decision in relation to payment of
dividend: (i) the long term target payout ratio; (ii) growth and investment opportunities; (iii) current capital
ratios; (iv) current and prospective financial performance and (v) other macro and micro economic factors.
For a summary of some of the restrictions that may materially inhibit our ability to declare or pay dividends, see
the section titled Risk Factors Our ability to pay dividends in the future will depend upon our future earnings,
financial condition, cash flows and capital expenditure on page 50.

71

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations is based on our
standalone audited financial statements as of and for the fiscal years 2014, 2015 and 2016, including the
schedules and notes thereto and the reports thereon, which appear in the section titled Financial
Statementsand our unaudited standalone financial information as of and for the first quarters 2016 and 2017.
This discussion should be read together with the sections titled Selected Financial Information of our Bank,
Selected Statistical Information, Business and Financial Statements. Unless otherwise specified, all
financial information is presented on a standalone basis and does not include the financial information of YES
Securities (India) Limited. Our audited consolidated financial statements as of and for the fiscal years 2014,
2015 and 2016 appear in the section Financial Statements and have been provided for information purposes
only.
We prepare our financial statements in accordance with Indian GAAP. The financial statements reflect
applicable statutory requirements, regulatory guidelines and accounting practices in India. These requirements,
guidelines and practices change from time to time and, in accordance with Indian GAAP, adjustments to reflect
such changes are made on a prospective basis and the financial statements for earlier periods are not restated.
For the purposes of a comparative analysis in the discussion below, previous years figures have been
reclassified wherever necessary. I addition, the segments reported below are based on segments used for
internal management reporting which are different to those used in the financial statements which are mandated
by Indian GAAP.
Our fiscal year ends on March 31. Accordingly, all references to a particular fiscal year are to the 12-month
period ended on March 31 of that year. Our first quarter ends on June 30. Accordingly, all references to a
particular first quarter are to the 3-month period ended June 30 of that year. Unless otherwise specified, all
information regarding cost, yield and average balances are based on monthly average balances outstanding
during the relevant period.
This discussion contains forward-looking statements and reflects our current views with respect to future events
and financial performance. Actual results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under the section Forward-Looking
Statements, the section Risk Factors and elsewhere in this Preliminary Placement Document.
Unless otherwise stated, references to the Bank, we, us, our and similar terms are to YES Bank
Limited on a standalone basis.
Overview
We are a new generation private sector bank in India founded by Rana Kapoor and late Ashok Kapur. We were
incorporated as a public limited company in November 2003 and obtained our certificate of commencement of
business in 2004. In May 2004, the RBI granted us a license under Section 22(1) of the Banking Regulation Act
to commence banking operations in India, and we began banking operations in August 2004. We have been
recognized in India, as well as globally, with certain awards and recognitions, such as the Golden Peacock
National Quality Award in 2016, the Best Trade Finance Bank in India Bankers Choice Award by the Asian
Banker and the International Council of Advisors in 2015, and the India Domestic Cash Management Bank of
the Year ABF Wholesale Banking Award for the year 2015.
In October 2015, we commenced operation of our International Financial Service Centre banking unit (IBU)
at GIFT City.
We provide a knowledge-based approach to banking that we believe adds value for our customers by allowing
them to capitalize on our knowledge in specific business sectors as well as across products. We believe that this
approach also strengthens our relationships with our customers, by allowing us to develop those existing
relationships to cross sell our full range of product and service offerings.
Our total assets have increased from `1,090,157.90 million as of March 31, 2014 to `1,772,288.74 million as of
June 30, 2016 at a CAGR of 24.11%. Our total deposits have grown from `741,920.15 million as of March 31,
2014 to `1,225,810.54 million as of June 30, 2016 at a CAGR of 25.00%. Our CASA deposits increased from
`163,446.80 million as of March 31, 2014 to `362,883.09 million as of June 30, 2016 at a CAGR of 42.54%.

72

Our net profit increased from `16,177.80 million for the fiscal year 2014 to `25,394.47 million for the fiscal
year 2016 at a CAGR of 25.29% and our net profit increased from `5,511.98 million for the first quarter of
fiscal year 2016 to `7,318.02 million for the first quarter of fiscal year 2017 at a CAGR of 32.77%. In addition,
our number of branches has increased from 560 as of March 31, 2014 to 860 as of March 31, 2016.
Factors Affecting our Results of Operations
Our results of operations and financial condition are affected by numerous factors. The following factors are of
particular importance.
The Macroeconomic Environment and Regulatory Intervention
Macroeconomic environment
According to the International Monetary Fund (IMF), the global gross domestic product (GDP) growth rate
decreased from 3.4% in 2014 to 3.1% in 2015. Global economic activity weakened amid increasing financial
market volatility, especially during the second half of 2015. (Source: IMF data-www.imf.org) Moderation in
economic growth was primarily driven by slower economic activity in advanced countries. In Asia, despite
relatively high growth rates in most of the emerging countries, commodity-exporting countries performed
poorly as compared to other countries.
Global commodity prices weakened due to a combination of subdued growth conditions, including in China, and
a strong U.S. dollar, which contributed to the Commodity Research Bureaus Commodity Index benchmark
falling in 2015 by 23.4% from 2014. The decline was broadly in line with the decrease in the prices of crude oil,
commodity metals, and commodity agricultural raw materials, which fell by approximately 47%, 23%, 14%,
respectively.
The decrease in commodity prices also affected global trade volumes, which the IMF estimates to have fallen to
2.8% below the world GDP growth rate of 3.1% in 2015. The economic slowdown in China, declining
investments in commodity export countries including Brazil and Russia, and significant depreciation in the
exchange rate in many emerging markets (primarily triggered by the strengthening of the U.S. dollar and
devaluation of the Chinese Renminbi) resulted in the softening of global trade activity.
Subdued economic activity amid disinflation prompted many key central banks to further ease their monetary
policy through a combination of conventional and unconventional measures. While some central banks extended
their quantitative and credit easing measures, the European Central Bank and the Bank of Japan, among others,
adopted negative interest rates. In contrast, the U.S. Federal Reserve System, after concluding its quantitative
easing program in 2014, continued with the normalization process of its monetary policy by hiking the interest
rate by 25 basis points to 0.25% and to 0.50% in 2015. Global economic and financial conditions prompted the
U.S. Federal Reserve System to moderate its projected interest rate trajectory for 2016 to a 50 basis points
increase from a 100 basis points that increase it had projected earlier.(Source: Summary of U.S. Economic
Projects, March 2016)
During fiscal year 2015, India instituted various measures to consolidate and restore its macroeconomic stability
which continued over fiscal year 2016. Based on the Central Statistical Organizations estimates, Indias GDP
growth for fiscal year 2016 increased to 7.6% from 7.2% in the fiscal year 2015. This growth was led by
increases in private consumption demand of 7.4% in the fiscal year 2016, primarily in urban areas. Gross fixed
capital formation decelerated to 3.9% in the fiscal year 2016 from 4.9% in the fiscal year 2015.
Inflation
During fiscal year 2016, the inflation rate continued to moderate in India. Average Consumer Price Index
inflation in fiscal year 2016 decelerated to 4.9% from 6.0% in fiscal year 2015. Despite continued low rainfall
during monsoon season for the second consecutive year in India, food inflation rate declined, aided by a slight
increase in minimum support price for food grains and rural wage growth as well as the Governments timely
distribution of surplus food. The substantial drop in crude oil prices also helped moderate fuel inflation. The
Central Banks anti-inflationary approach and focus on fiscal consolidation helped contain core inflation, which
remained below 5.0% during the fiscal year 2016.The disinflationary effect was more pronounced in the case of
the Wholesale Price Index, which decreased by 2.5% for fiscal year 2016 as compared to an increase of 2.0% in
fiscal year 2015.

73

Indias economic position strengthened further during the fiscal year 2016. According to the Economic Survey
presented by the Finance Minister in February 2016, Indias current account deficit is expected to remain within
1.0% to 1.5% of Indias GDP. In addition, Indias U.S. foreign exchange reserves of U.S.$356 billion, as of
March 31, 2016, and robust net foreign direct investment inflow of U.S.$34 billion between April 2015 and
February 2016 have contributed to containing Indias current account deficit.
On the fiscal policy front, the Government is expected to meet its fiscal deficit target of 3.9% of Indias GDP for
fiscal year 2016. While the Government expects to see a 20.9% growth in its capital expenditure during fiscal
year 2016, its subsidy bill is expected to marginally reduce by 0.2%.On the monetary policy front, the RBI
reduced the repo rate by a cumulative of 75 basis points to 6.75% during fiscal year 2016, after reducing it by 50
basis points in the fourth quarter of fiscal year 2015. Given that the Consumer Price Index inflation in January
2016 was 31 basis points lower than the RBIs initial target of 6.0%, the Central Bank cut 25 basis points in the
repo rate to 6.50% in April 2016.
Money market liquidity conditions improved during the first half of fiscal year 2016, with average liquidity
being in surplus between July and September 2015, which was largely attributable to the front-loading of
government expenditure and U.S. dollar purchases by the RBI. Liquidity conditions deteriorated afterwards and
by March 31, 2016, the liquidity deficit was `2,145billion. The increases in Government cash balances with the
RBI, currency in circulation and U.S. dollar sales by the RBI contributed towards the tightening of liquidity
conditions during the second half of fiscal year 2016.
During fiscal year 2016, the Indian Rupee traded at between `62.19 and `68.71. The rupee was trading
predominantly between a range of `62 and `64 during April and July 2015 until the devaluation of the Renminbi
by China in August 2015. Thereafter, a stronger dollar against the backdrop of expectations that interest rates
would be hiked in the U.S. resulted in the weakening of emerging market currencies, including the rupee. While
the Indian Rupee lost 6.0% to the U.S. dollar in fiscal year 2016, it remained one of the outstanding performers
among other emerging market currencies.
Despite the volatility in the global financial markets, Indias 10-year government securities yield fell by 27 basis
points to 7.47% as of March 31, 2016, primarily due to RBIs monetary easing policies and various fiscal
consolidation measures of the Government.
Regulatory intervention
The financial services industry in India is subject to extensive regulation by Governmental and self-regulatory
organizations, including the RBI, SEBI, the Insurance Regulatory and Development Authority, BSE and NSE.
These regulations address issues such as foreign investment, corporate governance and market conduct,
customer protection, foreign exchange management, capital adequacy, margin requirements, anti-money
laundering and provisioning for NPAs. The RBI also prescribes required levels of lending to priority sectors
such as agriculture, which may expose us to higher levels of risk than we may otherwise face.
Monetary policy is heavily influenced by the condition of the Indian economy, and changes in the monetary
policy affect the interest rates of our advances and deposits. The RBI responds to fluctuating levels of economic
growth, liquidity concerns and inflationary pressures in the economy by adjusting its monetary policy. For
example, the RBIs recent decision to ease liquidity in the banking system is expected to help increase the
injection of liquidity through more open market operations, resulting in an increase in primary liquidity
injection, deposits and credits, which are likely to provide buffers against possible disruptions in the financial
market.
A monetary policy designed to combat inflation typically results in an increase in RBI lending rates. Further, in
addition to having gradually established more stringent capital adequacy requirements, the RBI has also
instituted several prudential measures to moderate credit growth, including an increase in risk weights for
capital adequacy computation and general provisioning for various asset classes. See sub-section titled
Regulation and PoliciesCapital and provisioning requirements for exposures to entities with unhedged
foreign currency exposure on page 155 and sub-section titled Regulation and PoliciesFramework for
revitalizing distressed assets in the economy on page 155.
Commercial banks in India are required to maintain statutory reserve requirements of Cash Reserve Ratio
(CRR) and Statutory Liquidity Ratio (SLR). As of the date of this Preliminary Placement Document, the

74

RBI requires a CRR of 4.0% of our net demand and time liabilities accounts. The RBI has the authority to
prescribe CRR without any ceiling limits and is not obliged to pay interest payments on CRR balances, which
has adversely impacted our profitability in recent years. The CRR on our net demand and time liabilities
accounts was 4.75% in April 2012, which was reduced to 4.50% in September 2012 and to 4.25% in February
2013. Subsequently, the CRR was reduced to the current level of 4.0% in March 2013. Any increases in the
CRR requirements could affect our ability to deploy our funds or make investments, which could in turn have a
negative impact on our results of operations.
In the fourth bi-monthly monetary policy statement of the RBI for the fiscal year 2016, the limits on securities
eligible for SLR under the held-to-maturity (HTM) securities was reduced from 22.00% to 21.50% with
effect from January 9, 2016. Further, it was decided that both the SLR and HTM limits would be reduced by 25
bps every quarter until March 31, 2017. Currently, the SLR requirement is 21.00%. Although the SLR is
intended to be a measure to maintain the banks liquidity, it has adverse implications for the banks ability to
expand its credit. Changes in interest rates also impact the valuation of our SLR portfolio and thereby affect our
profitability.
With effect from January 1, 2015, the RBI introduced a requirement for commercial banks in India to maintain
certain levels of Liquidity Coverage Ratio (LCR). The LCR measures a banks ability to manage and survive
for 30 days under a significant stress scenario that combines idiosyncratic as well as market-wide shock
situations that would result in accelerated withdrawal of deposits from retail as well as wholesale depositors,
partial loss of secured funding, increase in collateral requirements and unscheduled drawdown of unused credit
lines. At least 60% of the net cash outflows in the next 30 days, computed with these assumptions of a stressed
scenario, are required to be supported by High Quality Liquid Assets (HQLA). As of the date of this
Preliminary Placement Document, banks are required to maintain HQLA of 70% (effective from January 1,
2016), which will increase to 80% with effect from January 1, 2017, to 90% with effect from January 1, 2018,
and to 100% with effect from January 1, 2019. The requirement to maintain prescribed HQLA has adversely
impacted our profitability and the progressive increase in the requirement will further adversely impact our
profitability.
In recent years, existing rules and regulations have been modified, new rules and regulations have been enacted
and reforms have been implemented, which are intended to provide tighter control and more transparency in
Indias banking and securities sectors. We cannot assure you that further changes to the existing policies and
regulations will not occur in the future. Any changes in the regulatory environment pertaining to the Indian
financial services industry could have a significant impact on our operations and financial condition.
The Banking Regulation Act was amended in January 2013 to strengthen RBIs regulatory powers and to further
develop Indias banking sector. Pursuant to the amendment, private sector banks are permitted to issue
perpetual, redeemable and non-redeemable preference shares in addition to equity shares. The approval of RBI
is required for the acquisition or transfer of the shares of our private sector banks, which take the aggregate
holding (direct and indirect, beneficial or otherwise) of an individual, his relatives, associate enterprises and
persons acting in concert with him to 5.00% or more of the banks total paid up share capital or entitles him to
exercise 5.00% or more of the total voting rights of the bank, in accordance with the terms of the Reserve Bank
of India (Prior approval for acquisition of shares or voting rights in private sector banks) Directions, 2015.
Further, the RBI may restrict any person holding more than 5.0% of the total voting rights of a bank from
exercising voting rights in excess of 5.0% if such person is deemed to be not fit and proper by the RBI.
The Reserve Bank of India (Ownership in Private Sector Banks) Directions, 2016 (Directions on
Ownership) dated May 12, 2016, envisages diversified shareholding in private sector banks by a single
entity/corporate entity/group of related entities. Pursuant to the Directions on Ownership, ownership limits for
all shareholders in the private sector bank in the long run shall be stipulated under two broad categories: (i)
natural persons (individuals) and (ii) legal persons (entities/institutions). Further, separate limits are now
stipulated for (i) non-financial and (ii) financial institutions; and among financial institutions, for diversified and
non-diversified financial institutions. The voting rights are capped at 15.00% or as notified by the Reserve Bank
from time to time. For further details, see section titled Regulations and Policies on page 148.
The RBI (in consultation with the Government) is also empowered to supersede the board of directors of a
banking company for a period not exceeding a total period of 12 months, in the public interest or for preventing
the affairs of the bank from being conducted in a manner detrimental to the interest of the depositors of any
banking company or for securing the proper management of any banking company. For further information, see
sub-section titled Regulation and PoliciesBanking Regulation Act, 1949 on page 148.

75

Health of the Indian banking sector

The Indian banking sector is highly regulated and monitored, which contributes to the relative stability during
uncertain economic periods.
According to the RBIs financial stability report for December 2015, financial market stress in China and
monetary policy predicaments in advanced economies amid slow global economic recovery have led to
increased uncertainty in the global economy. While the strengthening U.S. dollar seems to accentuate its
importance in global financial market activity, weakening emerging market currencies have negatively affected
global trade and growth as well as corporate performance in emerging markets. In India, amid slowing global
growth and trade, output growth recovery is expected to be gradual with restrained growth in private final
consumption expenditure due to stagnant performance of its rural economy and low capacity utilization. In
Indias corporate sector, the level of profitability, leverage and debt servicing capacity continue to cause concern
with their associated adverse impacts on Indias industrial sector, notwithstanding some improvement observed
in corporate performance during the first half of fiscal year 2016.
The RBIs financial stability report for December 2015 noted that among financial institutions, asset quality of
scheduled urban co-operative banks (SUCBs) and non-banking financial companies (NBFCs) deteriorated
during the first half of the fiscal year 2016. The banking stability indicator showed that risks to the banking
sector increased mainly due to deteriorating asset quality and sluggish profitability. The gross non-performing
advances (GNPAs) ratio increased between March and September 2015, whereas the restructured standard
advances ratio declined during the same period. The CRAR of SCBs deteriorated during the first half of fiscal
year 2016 while public sector banks (PSBs) continued to record the lowest CRAR among banks. GNPAs of
SCBs as a percentage of gross advances increased to 5.1% in September 2015 from 4.6% in March 2015. The
restructured standard advances as a percentage of gross advances declined to 6.2% from 6.4%, while the
stressed advances ratio increased to 11.3% from 11.1% during the same period. PSBs recorded the highest level
of stressed assets of 14.1%. A further five sub-sectors, including mining, iron and steel, textiles, infrastructure
and aviation, which together constituted 24.2% of the total advances of SCBs as of June 30, 2015, contributed to
53.0% of the total stressed advances (GNPA plus Restructured Standard Advances).
In fiscal year 2015, bank credit growth rate was 9.0% and in fiscal year 2016 it increased to 11.3%. Non-food
credit growth was at 14.2% in fiscal year 2016. Deposit growth rate remained steady at 14.1% in fiscal year
2014 compared to the previous year, but declined sharply to 10.7% as of fiscal year 2015. Deposit growth rate
further slowed to 9.91% in fiscal year 2016. The deposits growth in fiscal year 2014 was supported by
U.S.$25.97 billion Foreign Currency Non Resident (Bank) (FCNR(B)) deposits raised by banks (as a onetime deposit-raising measure), wherein foreign currency deposits were swapped by banks with the RBI at the
concessional rate of 3.5% compounded semi-annually.
The Indian banking sector, as a whole, has maintained its CRAR above the regulatory requirement of 9.0%
under Basel III. However, the banking systems CRAR declined marginally to 12.7% as of September 30, 2015
from 13% as of March 31, 2015. The Tier I ratio improved to 6.5% from 6.4% during the same period. Financial
conditions in India have also put pressure on the asset quality of Indian banks. The gross NPAs as a percentage
of gross advances for Indian banks increased from 4.6% to 5.1% between March and September 2015. As a
result, loan loss provisions are increasing across the sector.
Provisioning
Our profits are affected by the amounts we provision against advances and the related recovery and litigation
costs. We make provisions in accordance with RBI guidelines. In October 2009, the RBI advised Indian banks
to increase their total provisioning coverage ratio, including floating provisions and prudential/technical writeoffs, to 70% by September 30, 2010. The RBI allowed banks to include prudential/technical write-offs in both
the gross NPAs and provisions held in the calculation of provisioning coverage ratio. In April 2011, the RBI
stipulated that banks would be required to maintain their provisioning coverage ratios with reference to their
gross non-performing assets position as of September 30, 2010 and not on an ongoing basis. The RBI further
clarified that any surplus provisioning should not be written back but should be segregated into a countercyclical provisioning buffer and that banks will be allowed to use this buffer to make specific provisions for
NPAs during a system-wide downturn. For instance, considering the slowdown in economic growth and rising
asset quality concerns during fiscal year 2014, as a counter-cyclical measure, the RBI allowed banks to utilize
up to 33.0% of the counter-cyclical provisioning buffer or floating provisions held as of March 31, 2013, for

76

making accelerated or additional provisions towards non-performing assets during fiscal year 2014. Further, in
March 2015, the RBI increased the limit to 50.0% of the counter-cyclical provisioning buffer or floating
provisions held as of December 31, 2014, for making accelerated or additional provisions towards nonperforming assets during fiscal year 2015.
The RBI also released a discussion paper on the dynamic loan loss provisioning framework in March 2012, with
the objective of limiting the volatility in loan loss provisioning requirements witnessed during an economic
cycle. The framework proposes to replace existing general provisioning norms and recommends that banks
make provisions on their loan books every year based on their historical loss experience in various categories of
loans. In years where the specific provision is higher than the computed dynamic provision requirement, the
existing dynamic provision balance can be drawn down to the extent of the difference, subject to a minimum
specified level of dynamic provision balance being retained.
Pursuant to the revised Prudential Guidelines on Restructuring of Advances by Banks and Financial
Institutions issued by the RBI on May 30, 2013, provisioning requirements on all new standard restructured
loans increased to 5.00% with effect from June 1, 2013. This increased requirement for existing restructured
standard loans has been gradually implemented, from provisioning of 3.5% with effect from March 31, 2014
(spread over the four quarters of 2013 and 2014), to provisioning of 4.25% with effect from March 31, 2015
(spread over the four quarters of 2014 and 2015) and to provisioning of 5.00% with effect from March 31, 2016
(spread over the four quarters of 2015 and 2016).
For further information, see sub-section titled Regulation and PoliciesFramework for revitalizing distressed
assets in the economy on page 155.
Capital Requirements
Since April 1, 2013, capital adequacy ratios prescribed by the RBI Basel III Capital Regulations have been
implemented in phases. Under the RBI Basel III Capital Regulations, banks are required to improve the
quantity, quality and transparency of their Tier I capital and to meet liquidity requirements. By March 2019,
when the Basel III norms are fully implemented, the minimum total capital adequacy ratio (including the capital
conservation buffer) will be required to be 11.5% of risk weighted assets. The table below summarizes the
capital requirements under RBI Basel III Capital Regulations for banks in India:

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)

Regulatory Capital
Minimum Common Equity Tier I Ratio
Capital Conservation Buffer (comprising Common Equity)
Minimum Common Equity Tier I Ratio plus Capital Conservation Buffer
[(i)+(ii)]
Additional Tier I capital
Minimum Tier I capital adequacy ratio [(i) +(iv)]
Tier II capital
Minimum Total Capital Ratio (MTC) [(v)+(vi)]
Minimum Total Capital Ratio plus Capital Conservation Buffer [(vii)+(ii)]

As % of Risk Weighted Assets

5.50
2.50
8.00
1.50
7.00
2.00
9.00
11.50

The capital adequacy requirements prescribed by Basel III guidelines are more stringent than the requirements
prescribed by the earlier guidelines and compliance with such requirements will have an impact on our financial
results, including certain key indicators of financial performance, such as the return on equity.
New banking licenses
The RBI released draft guidelines in August 2011 for the issuance of new banking licenses to private sector
entities, including NBFCs. On January 5, 2013, the President of India approved the Banking Laws
(Amendment) Act, 2012, which provides a foundation for the RBI to grant licenses to private sector entities to
establish banks. For further information, see section titled Regulation and Policies on page 148.
The RBI issued the New Banks Licensing Guidelines in February 2013 specifying that select entities or groups
in the private sector, entities in the public sector and NBFCs with a successful track record of at least ten years
would be eligible to become banks. The new banks can be established only through a non-operative financial
holding company registered with the RBI and the initial minimum capital requirement to become a bank is `5.0
billion, with the requirement that foreign shareholding does not exceed 49.0% for the first five years.

77

The RBI granted in-principle approval to two new private sector banks to set up banks under the New Banks
Licensing Guidelines in April 2016. Further, the RBI issued licenses to 11 payment banks and ten small finance
banks in September 2015. The RBI has also issued guidelines for on-tap Licensing of Universal Banks in the
Private Sector in August 2016.
Our initiatives
Our financial condition and results of operations in recent periods have been affected by the global and domestic
factors outlined above. However, we have undertaken a number of initiatives aimed at mitigating the effect of
the continued tough macroeconomic environment where certain sectors remain stressed, though with an
improving outlook, including the following:

continued focus on our liquidity management policy in order to continue to ensure diverse funding sources
and a high-quality, liquid asset base;

reviewing our pricing policies to reflect new liquidity and risk premiums;

maintaining strict risk management policies and adequate provisioning levels;

continuing to focus on improving productivity and efficiency with cost-optimization measures;

investing in the expansion of our distribution network to increase our low-cost liabilities such as CASA;

introducing retail assets and other products to build a more balanced and diversified loan portfolio and
expand our fee income potential;

building out a self-help group lending platform to create a sustainable model to meet directed lending
requirements;

continuing to diversify risk by sector and counterparty;

regular review of exposures across all credit customers, including proactive risk mitigation measures;

continuous investments in technology; and

commitment to a responsible banking ethos with a triple bottom-line approach.

Interest Rates, Allocation of Funds and Sources and Costs of Funding

Net interest income has historically been the most significant component of our total net income, accounting for
63.02% and 62.74% of total net income in fiscal years 2015 and 2016, respectively and 59.38% of total net
income in first quarter 2016. Our net interest income is determined by the amount of interest-earning assets and
interest-bearing liabilities, and on our spread, which is the difference between the average rate earned on our
interest-earning assets and the average rate payable on our interest-bearing liabilities. Our net interest income is
affected by a number of factors including interest rates, our ability to allocate funds to assets that provide high
interest rates, and cost of funding.
Interest Rates
Changes in interest rates affect our operations and over the last five years, movements in short and long-term
interest rates have affected our interest income and interest expense. The majority of our customers are
corporate entities (in terms of value) and the majority of our advances are priced at a floating rate linked to our
base rate or the Marginal Cost of Funds based Lending Rate (the MCLR) (computed in accordance with RBI
guidelines) or are short-term fixed rate advances, which has enabled us, in most instances, to pass on any
increase in interest rates to our customers and maintain our margins.
The following table sets forth the RBIs CRR, the reverse repo rate, the repo rate and marginal standing facility
as of the indicated periods:

78

CRR

Reverse Repo Rate

4.00
4.00
4.00
4.00

7.00
6.50
5.75
6.00

Repo Rate

Marginal Standing
Facility

(percentages)
As of March 31, 2014
As of March 31, 2015
As of March 31, 2016
As of September 5, 2016

8.00
7.50
6.75
6.50

9.00
8.50
7.75
7.00

Source: RBI
Indian banks generally follow the direction of interest rates set by the RBI and adjust both their deposit rates
and lending rates upwards or downwards accordingly. Decreases in the RBI policy rates would prompt Indian
banks to re-examine their lending rates. Adverse changes in prevailing interest rates may result in a decline in
net interest income due to increase in our costs of funds or deposits without a corresponding increase in our
yield on assets, and may also lead to a decline in demand for our loan products. See sub-section titled Risk
FactorsRisks Relating to Our BusinessOur financial performance may be materially and adversely affected
by fluctuating interest rates on page 36.
Allocation of Funds
In recent years, there has been increased demand for funding across many sectors of the Indian economy. The
growth of the Indian economy has enabled us to allocate our funds from Government securities to advances,
which offer us higher returns subject to maintaining minimum statutory requirements. Further, using our
knowledge-driven approach to banking, we diversify our net interest income portfolio by lending to a mix of
large corporate, emerging mid-size corporate, small and medium enterprises and retail customers across various
industry segments.
Sources and Cost of Funding
Recent macroeconomic conditions have restricted the ability of banks and financial institutions to raise funding
amid tight liquidity conditions, resulting in a renewed emphasis on customer deposits as a source of funding.
This has resulted in a high level of competition for deposits, leading to pricing pressures.
Our primary interest-bearing liability is our deposit base. To continue to source low-cost funding through
customer deposits, we must, among other things, further develop our rapidly expanding branch network,
increase brand recall and develop products and services to distinguish ourselves in an increasingly competitive
industry. However, increasing customer sophistication, competition for funding, any sharp increase in prevailing
interest rates and changes to the RBIs liquidity and reserve requirements may increase the rates that we pay on
our deposits.
In addition to a larger proportion of deposits in our portfolio, we have issued, and may continue to issue,
subordinated debt to further enhance our capital adequacy ratios and build long-term stable funding. As of
March 31, 2016, we had `99.88 billion of Tier II debt outstanding, which constituted 6.04% of our total
liabilities as of that date and as of June 30, 2016, we had `98.28 billion of Tier II debt outstanding, which
constituted 5.55% of our total liabilities as of that date.
Customer Relationships
The key drivers of our revenues from both our corporate and retail businesses are the number and quality of our
customer relationships, as well as the range of products and services we are able to cross sell to each customer.
We use a knowledge-based approach to banking by providing our customers with tailored solutions based on
our knowledge of specific business sectors. We believe that such a knowledge-based approach deepens our
relationships with our customers, allowing us to penetrate those relationships across our products and services.
We have also recently introduced a wide range of retail asset products in order to enhance our product offerings
to all our customers and compete more effectively with our peer banks. The number of customers we serve
depends on the success of our relationship managers, the reach and strength of our growing distribution
network, and the demand for, and competitiveness of, our products and services. We continue to increase our
number of corporate and retail customers, introduce more retail products, improve our technology offerings to
customers and enhance our distribution network. For our institutional business, revenues are driven primarily by
the number, as well as quality, of our institutional and corporate customers, and our ability to grow our share of
our customers business by providing multiple products and services, appropriate business solutions and
efficient execution.

79

Critical Accounting Policies

Critical accounting policies are those that are both: (a) relevant to the presentation of our financial condition and
results of operations; and (b) require our managements most difficult, subjective or complex judgments, often
as a result of the need to make estimates and assumptions about the effect of various matters. By their nature,
the assumptions, estimates and judgments that our management is required to make are inherently subject to a
degree of uncertainty. These judgments are based on our historical experience, our evaluation of accounting
practices that would be appropriate in respect of our business, our observation of trends in the banking sector,
information with respect to our customers, and information available from independent sources, as appropriate.
While we believe that these judgments have been exercised by our management in good faith and with due
consideration to all material effects on our Financial Statements, there can be no assurance that our
managements judgment will prove correct or that actual results reported in future periods will not differ from
our expectations reflected in the accounting treatment of certain items.
While we believe that all aspects of our financial statements should be reviewed when assessing our current and
expected financial condition and results of operations, we believe that the following critical accounting policies
warrant particular attention.
Revenue Recognition
Revenue is recognized to the extent it is probable that the economic benefits will flow to us and the revenue can
be reliably measured and in accordance with the following:

Interest income is recognized in the profit and loss account on accrual basis, except in the case of nonperforming assets. Interest on non-performing assets is recognized upon realization as per the prudential
norms of the RBI.

Revenue in certain structured transactions where interest income is partially receivable in advance is
recognized when due.

The loan processing fee is recognized when it becomes due.

Dividend income is recognized when the right to receive payment is established.

Commission on guarantees issued by us is recognized as income over the period of the guarantee.

Commission on Letters of Credit (LC) issued by us is recognized as income at the time of issue of the
LC.

Income on non-coupon bearing discounted instruments is recognized over the tenure of the instrument on a
straight-line basis. In the case of coupon bearing discounted instruments, discount income is recognized
over the tenure of the instrument on yield basis.

In case of bonds and pass through certificates, premium on redemption, if any, is recognized over the tenure
of the instrument on a yield basis.

Revenue from financial advisory services is recognized in accordance with milestones achieved pursuant to
the terms of agreement with clients, which is reflective of services rendered.

Other fees and commission income are recognized on an accrual basis.

Investments
Classification and valuation of our investments are carried out in accordance with RBI Circular
DBR.No.BP.BC.6/21.04.141/2015-16 dated July 1, 2015 and Fixed Income Money Market and Derivative
Association (FIMMDA) guidelines FIMCIR/2015-16/31/March 31, 2016.
Accounting and Classification

80

Investments are recognized by using the value date basis of accounting. In compliance with RBI guidelines, all
investments are categorized as held for trading (HFT), available for sale (AFS) or HTM at the time of their
purchase. On our balance sheet, investments are classified into six groups, namely (a) government securities, (b)
other approved securities, (c) shares, (d) bonds and debentures, (e) subsidiaries and joint ventures, and (f) others.
Cost of acquisition
Costs, such as brokerage pertaining to investments, which was paid at the time of acquisition, are charged to the
profit and loss account pursuant to RBI guidelines.
Basis of classification
Securities that are held principally for resale within 90 days from the date of purchase are classified under the
HFT category. Investments that we intend to hold until maturity are classified under the HTM category or as per
RBI guidelines. Securities that are not classified in the above categories are classified under the AFS category.
Transfer between categories
Reclassification of investments from one category to the other, if done, is in accordance with RBI guidelines.
Transfer of scrips from AFS or HFT category to HTM category is made at the lower of book value or market
value. In the case of a transfer of securities from HTM to AFS or HFT category, the investments held under
HTM at a discount are transferred to AFS or HFT category at the acquisition price and investments placed in the
HTM category at a premium are transferred to AFS or HFT at the amortized cost.
Transfer of investments from AFS to HFT or vice versa is done at the book value. Depreciation carried, if any,
on such investments is also transferred from one category to another.
Valuation
Investments categorized under AFS and HFT categories are marked-to-market on a periodic basis in accordance
with the relevant RBI guidelines. Net depreciation, if any, is recognized in the profit and loss account. The net
appreciation, if any, in the category under each classification is ignored except to the extent of depreciation
previously provided. The book value of individual securities is not changed as a result of periodic valuation of
investments.
Investments received in lieu of restructured advances are valued in accordance with relevant RBI guidelines.
Any diminution in value on these investments is provided for and is not used to set off against appreciation in
respect of other performing securities in that category.
Investments classified under the HTM category are carried at their acquisition cost and any premium over the
face value, paid on acquisition, is amortized on a straight-line basis over the remaining period to maturity.
Amortization expense of premium on investments in the HTM category is deducted from interest income in
accordance with RBI Circular DBR.No.BP.BC.6/21.04.141/2015-16 dated July 1, 2015. If in the managements
opinion, a diminution, other than a temporary one in the value of investments classified under HTM has taken
place, appropriate provisions are made.
Treasury bills, commercial paper and certificates of deposit, being discounted instruments, are valued at
carrying cost.
The market/fair value applied for the purpose of periodic valuations of quoted investments included in the AFS
and HFT categories is the market price of the scrip as traded/quoted on the stock exchanges and for subsidiary
general ledger account transactions, the prices as periodically declared by the Primary Dealers Association of
India jointly with FIMMDA.
The market/fair value of unquoted government securities included in the AFS and HFT categories is determined
as per the prices published by FIMMDA. Further, in the case of unquoted bonds, debentures, pass through
certificates and preference shares, valuation is carried out by applying an appropriate mark-up (reflecting
associated credit risk) over the yield-to-maturity rates of government securities. Such mark-up and YTM rates
are applied as per the relevant rates published by FIMMDA.

81

Units of Venture Capital Funds (VCF) held under the AFS category is valued using the net asset value shown
by VCF as per the financial statement. The VCFs are valued based on the audited results once per year. In case
the audited financials are not available for a period beyond 18 months, the investments are valued at `1 per
VCF.
Quoted equity shares are valued at their closing price on a recognized stock exchange. Unquoted equity shares
are valued at the book value if the latest balance sheet is available, or if not, at `1 per company, as per relevant
RBI guidelines.
At the end of each reporting period, security receipts issued by the asset reconstruction company are valued in
accordance with the guidelines applicable to such instruments, prescribed by RBI from time to time.
Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction company
are limited to the actual realization of the financial assets assigned to the instruments in the concerned scheme,
we realize the net asset value obtained from the asset reconstruction company from time to time, for valuation of
such investments at each reporting date.
Investments in quoted mutual fund units are valued as per Stock Exchange quotations. Investments in unquoted
mutual fund units are valued based on the latest repurchase price declared by the mutual fund in respect of each
particular scheme.
Accounting for repos / reverse repos
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell
(reverse repos) including LAF with the RBI are treated as collateralized borrowing and lending transactions
respectively, in accordance with RBI master circular No. DBR.No.BP.BC.6/21.04.141/2015-16 dated July 1,
2015. The first stage of the repo transaction is contracted at the prevailing market rates. The difference between
consideration amounts of first and second (reversal of first) stage reflects interest and is recognized as interest
income/expense over the period of the transaction.
Profit/loss on sale of investments
Profit/loss on sale of Investments in the HTM category is recognized in the profit and loss account, and profit
thereafter is appropriated (net of applicable taxes and statutory reserve requirements) to capital reserve.
Profit/loss on the sale of investments in HFT and AFS categories is recognized in the profit and loss account.
Accounting for RIDF
In accordance with RBI circular DBR.BP.BC.No.31/21.04.018/2015-16 dated July 16, 2015, we have classified
deposits placed with NABARD/SIDBI/NHB for meeting any shortfall in Priority Sector Lending under Other
Assets, which were earlier included under Investments. Similarly, interest income on such deposits has been
classified under Interest Earned Others, which had been included under Interest Earned Income on
Investments. Figures for the previous year have been re-grouped to conform to the current periods
classification. This classification had no impact on our profit for the fiscal years 2014, 2015 and 2016 and for
the first quarter 2016.
Advances
Advances are classified as performing and non-performing based on the relevant RBI guidelines. Advances are
stated net of specific loan loss provisions, interest in suspense, inter-bank participation certificates issued and
bills rediscounted. Specific loan loss provisions in respect of non-performing advances are made based on
managements assessment of the degree of impairment of the advances, subject to the minimum provisioning
level prescribed in the relevant RBI guidelines.
In accordance with RBI guidelines a general provision is made on all standard advances based on the category
of advances as prescribed in such guidelines. We also maintain additional general provisions on standard
exposure based on the internal credit rating matrix as approved by our Board.
In respect of restructured standard and non-performing advances, provision is made for the present value of
principal and interest components written-off at the time of restructuring the assets, based on RBI guidelines.

82

Amounts recovered against debts written off in earlier years and provisions no longer considered necessary
based on the current status of the borrower are recognized in the profit and loss account.
Transactions involving Foreign Exchange
Monetary foreign currency assets and liabilities are translated at the balance sheet date at rates notified by the
Foreign Exchange Dealers Association of India (FEDAI). Foreign exchange contracts are stated at net
present value using LIBOR/SWAP curves of the respective currencies. The resulting profits or losses are
recognized in the profit and loss account.
Premium/discounts on foreign exchange swaps that are used to hedge risks arising from foreign currency assets
and liabilities are amortized over the life of the swap.
Income and expenditure in foreign currency are accounted for at exchange rates prevalent on the date of the
transaction.
In accordance with Accounting Standards 11: The Effects of Changes in Foreign Exchange Rates, issued by
the ICAI, contingent liabilities in respect of outstanding foreign exchange forward contracts, derivatives,
guarantees, endorsements and other obligations are stated at the exchange rates notified by FEDAI as
corresponding to the balance sheet date.
Income and expenditure items of integral foreign operations (representative offices) are translated at daily
closing rates.
Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are
translated at closing exchange rates notified by FEDAI at the Balance Sheet date and the resulting profit/loss
arising from exchange differences are accumulated in the Foreign Currency Translation Account until
remittance or the disposal of the net investment in the non-integral foreign operations in accordance with
Accounting Standards 11.
Earnings per share
We report basic and diluted earnings per equity share in accordance with Accounting Standard 20, Earnings per
Share notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies
(Accounts) Rules 2014. Basic earnings per equity share have been computed by dividing net profit after tax for
the year by the weighted average number of equity shares outstanding for the period.
Diluted earnings per equity share have been computed using the weighted average number of equity shares and
dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.
Derivative Transactions
Derivative transactions comprise forward rate agreements, swaps and option contracts. We undertake derivative
transactions for market making/trading and hedging on-balance sheet assets and liabilities. All market
making/trading transactions are marked-to-market on a periodic basis and the resultant unrealized gains/losses
are recognized in the profit and loss account.
Derivative transactions that are undertaken for hedging are accounted for on an accrual basis except for the
transaction designated with an asset or liability that is carried at market value or at the lower of cost or market
value in the financial statements, which are accounted for similar to the underlying asset or liability.
We follow the option premium accounting framework prescribed by FEDAI SPL circular dated December 14,
2007. Premium on option transaction is recognized as income/expense on expiry or early termination of the
transaction. Mark-to-market gain/loss (adjusted for premium received/paid on option contracts) is recorded
under Other Income.
The amounts received/paid on cancellation of option contracts are recognized as realized gains/losses on
options. Charges receivable/payable on cancellation/termination of foreign exchange forward contracts and
swaps are recognized as income/expense on the date of cancellation/termination under Other Income.

83

The requirement for collateral and credit risk mitigation on derivative contracts is assessed based on internal
credit policy. Arrears, if any, on account of derivative transactions, are accounted for in accordance with RBI
guidelines.
Further, in accordance with RBI guidelines on Prudential Norms for Off-balance Sheet Exposures of Banks, a
general provision is made on the current gross mark-to-market gain of the contract for all outstanding interest
rate and foreign exchange derivative transactions.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation, amortization and accumulated impairment losses.
Cost comprises the purchase price and any cost attributable for bringing the asset to its working condition for its
intended use.
Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An assets recoverable amount is the higher of an assets
net selling price and its value in use. If such assets are considered to be impaired, the impairment is recognized
by debiting the profit and loss account and is measured as the amount by which the carrying amount of
the assets exceeds the fair value of the assets.
Depreciation
Depreciation on fixed assets is provided on a straight-line basis over estimated useful lives, as determined by the
management, at the rates illustrated in the table below.
Class of asset
Office equipment
Computer hardware
Computer software*
Vehicles
Furniture and Fixtures
Leasehold improvements to premises

Useful life of Assets

5 years
3 years
4 years
5 years
10 years
Over the lease period or 9 years, whichever is less

*As per RBI guidelines

Assets costing less than `5,000 are fully depreciated in the year of purchase.
Leave salary
Our employees are entitled to carry forward a part of their unutilized leave subject to a maximum limit but are
not allowed to trade unutilized leave for cash. We have computed the compensated absence provision as per
revised Accounting Standards 15Employee Benefits.
Gratuity
We provide for gratuity, a defined benefit retirement plan, covering eligible employees. The plan provides for
lump-sum payments to vested employees at retirement or upon death while in employment or on termination of
employment for an amount equivalent to 15 days eligible salary payable for each completed year of service if
such employees service is for more than five years. We account for the liability for future gratuity benefits
using the projected unit cost method based on annual actuarial valuation.
We recognize the actuarial gains and losses during the year in which they are incurred.
Provident fund
In accordance with law, all of our employees are entitled to receive benefits under the provident fund, a defined
contribution plan in which both we and the employee contribute monthly at a pre-determined rate. Contributions
to the provident fund are recognized as expenses as and when the services are rendered. We have no liability for
future provident fund benefits other than its annual contribution.
Leases

84

Leases under which the lessor effectively retains substantially all risks and benefits of ownership are classified
as operating leases. Operating lease payments are recognized as an expense in the profit and loss account on a
straight-line basis over the lease term.
Income Tax
Tax expense comprises current and deferred tax. Current tax comprises the amount of tax for the period
determined in accordance with the Income Tax Act, 1961 and the rules framed thereunder. 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 assets and liabilities are recognized for
the future tax consequences of timing differences between the carrying values of assets and liabilities and their
respective tax bases, and operating loss carry forwards. Deferred tax assets and liabilities are measured using the
enacted or substantively enacted tax rates at the balance sheet date.
Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized
in the future. In case of unabsorbed depreciation or carried forward loss under taxation laws, all deferred tax
assets are recognized only if there is virtual certainty of realization of such assets supported by convincing
evidence. Deferred tax assets are reviewed at each balance sheet date and appropriately adjusted to reflect the
amount that is reasonably/virtually certain to be realized.
Provisions and Contingent Liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by
the occurrence or non-occurrence of one or more uncertain future events beyond our control or a present
obligation that is not recognized because it is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. We do not recognize contingent liability but disclose its
existence in our financial statements.
We create a provision when there is a present obligation as a result of a past event that probably requires an
outflow of resources and a reliable estimate can be made of the amount of the obligation.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no
longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognized in the financial statements, however, contingent assets are assessed
continually and, if it is virtually certain that an inflow of economic benefits will arise, the asset and related
income are recognized in the period in which the change occurs.
Employee Stock Compensation Cost
The measurement of employee share-based payment plans is done in accordance with the Guidance Note on
Accounting for Employee Share-based Payments issued by Institute of Chartered Accountants of India and
SEBI (Share Based Employee Benefits) Regulations, 2014. We measure compensation cost relating to employee
stock options using the intrinsic value method. Compensation cost is measured by the excess, if any, of the fair
market price of the underlying stock (i.e. the last closing price on the stock exchange on the day preceding the
date of grant of stock options) over the exercise price. The exercise price of our stock option is the last closing
price on the stock exchange on the day preceding the date of grant of stock options and, accordingly, there is no
compensation cost under the intrinsic value method.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, balances with the RBI, balances with other banks and money at
call and short notice.
Summary of Changes to Significant Accounting Policies
In the fiscal year 2015 as compared to the fiscal year 2014 commission on guarantees issued by us was
recognized as income over the period of the guarantee. Until March 31, 2014 we had amortized commission

85

earned on yearly basis at each anniversary over the period of the guarantee. Had we followed the previous
method of amortization of guarantee commission, our profit after tax for fiscal year 2015 would have been
higher by `186.9 million. Except as disclosed, there has been no change in our significant accounting policy for
the year ended March 31, 2016 in comparison to year ended March 31, 2015.
Components of Income and Expenditure
Income
Our income consists of interest earned and other income.
Interest earned
Interest earned consists of interest on advances and discounts on bills, interest from investments and other interbank and RBI funds and other interest income. See sub-section titled Critical Accounting PoliciesRevenue
Recognition on page 80. Income from investments consists of interest on securities and other investments. Our
securities portfolio consists primarily of Government securities, corporate bonds and commercial paper. We
meet our SLR requirements through these investments. We also hold debentures and bonds issued by public
sector undertakings and other corporations, commercial paper, equity shares, mutual fund units, certificate of
deposits and pass-through certificates of asset-backed and mortgage-backed securities.
Other income
Our other income consists principally of income derived from non-interest sources, including income from
commission, exchange and brokerage which includes fees from opening and negotiating letters of credit,
financial and performance guarantees, investment banking, debt structuring, loan syndication, mergers and
acquisitions advisory services, underwriting, as well as profit on the sale of investments, profit on exchange
transactions and miscellaneous income. Miscellaneous income consists primarily of income from derivative
transactions, third-party sales of insurance and mutual fund products and charges and fees collected from
customers, among others.
Expenditure
Interest expended
Our interest expended consists of interest on deposits, interest on borrowing from the RBI and inter-bank for
call money and term money, interest on Tier I and Tier II borrowings and interest on other borrowings. Both our
interest income and expenditure are affected by fluctuations in interest rates as well as the volume of activity.
Our interest expenditure is also affected to the extent we fund our activities with low-interest or non-interest
deposits, and the extent to which we rely on borrowings.
Operating expenses
Our operating expenses consist principally of employee expenses, rent, taxes, lighting, IT outsourcing costs,
depreciation on fixed assets, printing and stationery, insurance, advertisement and publicity, communications,
repair and maintenance, legal fees and expenses, auditors fees and expenses, directors fees/allowances and
expenses, and other expenditure. Other expenditure consists primarily of information and technology expense,
stamp duty, security and housekeeping charges, travel expenses, and ATM expenses.
Provisions and contingencies
Our provisions and contingencies consist of provision for taxation, provision for investments, provision for nonperforming assets (including write-offs net of recoveries), provision for standard advances, and other provisions.
First quarter of fiscal year 2016 compared to first quarter of fiscal year 2017
Unless otherwise specified, all information regarding cost, yield and average balances is based on monthly
average balances outstanding during the relevant period.
Summary of Profit and Loss Account

86

First Quarter of Fiscal Year

2017
(in ` million, except percentages)
10,598.03
13,165.79
5,451.73
9,005.17
6,967.03
9,103.26
979.64
2,066.32
2,591.11
3,683.36
5,511.98
7,318.02

2016
Net Interest Income
Other Income
Operating Expense
Provisions and Contingencies (excluding tax)
Provision for Tax
Net Profit

% change
24.23%
65.18%
30.66%
110.93%
42.15%
32.77%

Net Interest Income

Our net interest income increased by 24.23% from `10,598.03 million in the first quarter of fiscal year 2016 to
`13,165.79 million in the first quarter of fiscal year 2017. The following table sets forth the components of our
net interest income.
First Quarter of Fiscal Year
2017
(in ` million, except percentages)
23,284.81
28,400.58
8,555.00
9,589.72
167.43
277.67
511.23
355.10
32,518.47
38,623.07
17,648.22
19,547.50

2016
Interest/discounts on advances/bills
Income on investments
Interest on balances with RBI and other inter-bank funds
Others
Interest Income
Interest on deposits
Interest on Reserve Bank of India/inter-bank
borrowings/Tier I and Tier II debt instruments
Others
Interest Expense
Net Interest Income

3,999.92
272.30
21,920.44
10,598.03

5,414.60
495.18
25,457.28
13,165.79

% change
21.97%
12.09%
65.84%
-30.54%
18.77%
10.76%
35.37%
81.85%
16.13%
24.23%

The increase in net interest income is primarily due to an increase in our interest bearing assets in line with the
growth of our business.
Interest Income
Our total interest income increased by 18.77%, from `32,518.47 million in the first quarter of fiscal year 2016 to
`38,623.07 million in the first quarter of fiscal year 2017. The increase in interest income was due to the
following:

our interest income on advances and discounts on bills increased by 21.97%. This increase was primarily
due to an increase in our average advances from `773,767.60 million to `1,031,899.53 million, despite a
decrease in yield on advances from 12.07% in the first quarter of fiscal year 2016 to 11.04% in the first
quarter of fiscal year 2017; and

our interest income on investments increased by 12.09%. These investments included investments in
Government securities (including investments held to meet SLR requirements), debentures and bonds, passthrough certificates, commercial papers and certificates of deposit. Our average investments increased by
13.14%, from `417,855.11 million in the first quarter of fiscal year 2016 to `472,764.19 million in the first
quarter of fiscal year 2017 while the yield on investments decreased from 8.21% in the first quarter of fiscal
year 2016 to 8.14% in the first quarter of fiscal year 2017, primarily due to a decrease in Government
securities yields.

Interest Expense
Our total interest expense increased by 16.13% from `21,920.44 million in the first quarter of fiscal year 2016 to
`25,457.28 million in the first quarter of fiscal year 2017. The increase in interest expense was due to an
increase in average deposits by 26.23% from `914,824.96 million in the first quarter of fiscal year 2016 to
`1,154,826.68 million in the first quarter of fiscal year 2017, which was partially offset by a decrease in the
average cost of deposits from 7.74% in the first quarter of fiscal year 2016 to 6.79% in the first quarter of fiscal

87

year 2017 due to a change in the deposit mix in favor of CASA, a reduction in saving account rates and general
decline in interest rates.
Our interest expense on borrowing from RBI, inter-bank, Tier I and Tier II debt instruments and others
increased by 35.37% from `4,272.22 million in the first quarter of fiscal year 2016 to `5,909.78 million in the
first quarter of fiscal year 2017, primarily due to an increase in our term borrowings and issuances of Tier II
capital. Our average borrowings increased from `252,581.74 million with an average cost of borrowing of
6.78% in the first quarter of fiscal year 2016 to `332,434.54 million with an average cost of borrowing of 7.13%
in the first quarter of fiscal year 2017.
Other Income
Our other income increased by 65.18% from `5,451.73 million in the first quarter of fiscal year 2016 to
`9,005.17 million in the first quarter of fiscal year 2017. This increase was primarily due to an increase in
commission, exchange and brokerage income, and profit on the sale of investments.
Operating Expense
Our operating expenses increased by 30.66% from `6,967.03 million in the first quarter of fiscal year 2016 to
`9,103.26 million in the first quarter of fiscal year 2017. The increase in operating expense was due to an
increase in employee costs (payments to and provisions for employees) to support branch expansion, which
increased by 41.18% from `2,885.37 million to `4,073.69 million. Employee costs accounted for 41.41% of our
operating expenses in the first quarter of fiscal year 2016 compared to 44.75% in the first quarter of fiscal year
2017. Rent, taxes and lighting costs also increased by 23.22% to `882.51 million on account of 238 branches
being added after the first quarter of fiscal year 2016. Other significant reasons for increases in operating
expenses were an increase in advertisement, information technology and asset outsourcing charges, electricity,
depreciation, maintenance charges and insurance premium paid to the DICGC for deposits insurance.
Provisions and Contingencies
Our provisions and contingencies increased by 61.02% from `3,570.76 million in the first quarter of fiscal year
2016 to `5,749.68 million in the first quarter of fiscal year 2017, primarily due to an increase in provision for
NPA, provision for standard assets and provision for taxation.
Our NPA provisions increased from `412.32 million in the first quarter of fiscal year 2016 to `945.17 million in
the first quarter of fiscal year 2017, largely due to an increase in gross NPAs. Our NPA provisioning coverage,
which is specific provision against gross NPA was 64.20% as of June 30,2016 and our gross and net NPAs were
0.79% and 0.29% of our gross advances and net advances, respectively.
Our provision for standard advances increased from `428.13 million for the first quarter of fiscal year 2016 to
`1,024.68 million for the first quarter of fiscal year 2017, due to the higher general provisions created on
standard exposure for the first quarter 2017 and due to significant loan growth in the first quarter of fiscal year
2017 as compared to first quarter of fiscal year 2016.
Our provision for taxation increased by 42.15% from `2,591.11 million in the first quarter of fiscal year 2016 to
`3,683.36 million in the first quarter of fiscal year 2017, primarily due to an increase in current income and the
growth of our operations.
Net profit
As a result of the above, our net profit increased by 32.77% from `5,511.98 million in the first quarter of fiscal
year 2016 to `7,318.02 million in the first quarter of fiscal year 2017.
Fiscal year 2015 compared to fiscal year 2016
Unless otherwise specified, all information regarding cost, yield and average balances is based on monthly
average balances outstanding during the relevant period.
Summary of Profit and Loss Account

88

Fiscal Year
2016
% change
(in ` million, except percentages)
34,878.37
45,667.23
30.93
20,464.55
27,121.47
32.53
22,847.06
29,763.71
30.27
3,394.78
5,363.01
57.98
9,047.47
12,267.51
35.59
20,053.61
25,394.47
26.63

2015
Net Interest Income
Other Income
Operating Expense
Provisions and Contingencies (excluding tax)
Provision for Tax
Net Profit

Net Interest Income

Our net interest income increased by 30.93% from `34,878.37 million in the fiscal year 2015 to `45,667.23
million in the fiscal year 2016. The following table sets forth the components of our net interest income.
Fiscal Year
2016
(in ` million, except percentages)
80,160.94
97,114.79
33,557.29
35,082.09
428.93
1,125.45
1,572.90
2,012.09
115,720.06
135,334.42
65,368.18
71,784.17

2015
Interest/discounts on advances/bills
Income on investments
Interest on balances with RBI and other inter-bank funds
Others
Interest Income
Interest on deposits
Interest on Reserve Bank of India/inter-bank
borrowings/Tier I and Tier II debt instruments
Others
Interest Expense
Net Interest Income

14,722.96
750.55
80,841.69
34,878.37

16,456.71
1,426.31
89,667.19
45,667.23

% change
21.15
4.54
162.38
27.92
16.95
9.82
11.78
90.03
10.92
30.93

The increase in net interest income is primarily due to an increase in our interest bearing assets in line with the
growth of our business and increase in our net interest margins.
Interest Income
Our total interest income increased by 16.95%, from `115,720.06 million in the fiscal year 2015 to `135,334.42
million in the fiscal year 2016. The increase in interest income was due to the following:

our interest income on advances and discounts on bills increased by 21.15%. This increase was primarily
due to an increase in our average advances from `632,735.09 million to `835,296.15 million, despite a
decrease in yield on advances from 12.67% in the fiscal year 2015 to 11.63% in the fiscal year 2016; and

our interest income on investments increased by 4.54%. These investments included investments in
Government securities (including investments held to meet SLR requirements), debentures and bonds, passthrough certificates, commercial papers and certificates of deposit. Our average investments increased by
5.96%, from `409,703.27 million in the fiscal year 2015 to `434,105.20 million in the fiscal year 2016
while the yield on investments decreased from 8.19% in the fiscal year 2015 to 8.08% in the fiscal yea
r2016, primarily due to an increase in Government securities with yield lower than yield on investments in
bonds and debentures.

Interest Expense
Our total interest expense increased by 10.92% from `80,841.69 million in the fiscal year 2015 to `89,667.19
million in the fiscal year 2016. The increase in interest expense was due to an increase in average deposits by
23.60% from `793,401.03 million in the fiscal year 2015 to `980,663.32 million in the fiscal year 2016, which
was partially offset by a decrease in the average cost of deposits from 8.24% in the fiscal year 2015 to 7.32% in
the fiscal year 2016 due to a change in the deposit mix in favor of CASA and a reduction in saving account
rates.
Our interest expense on borrowing from RBI, inter-bank, Tier I and Tier II debt instruments and others
increased by 11.78% from `14,722.96 million in the fiscal year 2015 to `16,456.71 million in the fiscal year

89

2016, primarily due to an increase in our term borrowings and issuances of Tier II capital. We increased our
borrowings for appropriate maturities that were better priced than our deposits, and our average borrowings
increased from `222,077.73 million with an average cost of borrowing of 6.97% in the fiscal year 2015 to
`266,364.38 million with an average cost of borrowing of 6.71% in the fiscal year 2016. We issued `38,992.00
million of Tier II capital in the fiscal year 2016.
Other Income
Our other income increased by 32.53% from `20,464.55 million in the fiscal year 2015 to `27,121.47 million in
the fiscal year 2016. This increase was primarily due to an increase in commission, exchange and brokerage
income, and profit on the sale of investments that were partially offset by a decline in profit on exchange
transactions and miscellaneous income.
Our commission, exchange and brokerage income mainly comprised of income from opening and negotiating
letters of credit, commission charged on financial guarantees and performance guarantees, cash management
services, financial advisory and underwriting services, transaction fees and fees for loan syndication. Income
from such sources increased by 24.42% from `19,764.80 million in the fiscal year 2015 to `24,591.69 million in
the fiscal year 2016.
Our net profit on the sale of investments increased substantially from `1,420.96 million in the fiscal year 2015
to `2,606.39 million in the fiscal year 2016.
Operating Expense
Our operating expenses increased by 30.27% from `22,847.06 million in the fiscal year 2015 to `29,763.71
million in the fiscal year 2016. The increase in operating expense was due to an increase in employee costs
(payments to and provisions for employees) to support branch expansion, which increased by 32.37% from
`9,796.64 million to `12,968.02 million. Employee costs accounted for 42.88% of our non-interest expenses in
the fiscal year 2015 compared to 43.57% in the fiscal year 2016. Rent, taxes and lighting costs also increased by
14.43% to `3,047.48 million on account of 230 branches being added in the fiscal year 2016. Other significant
reasons for increases in operating expenses were an increase in advertisement, information technology and asset
outsourcing charges, electricity, depreciation, maintenance charges and insurance premium paid to the DICGC
for deposits insurance.
Provisions and Contingencies
Our provisions and contingencies increased by 41.70% from `12,442.25 million in the fiscal year 2015 to
`17,630.52 million in the fiscal year 2016, primarily due to an increase in provision for investments, provision
for taxation and provision for NPAs.
Our NPA provisions increased from `1,300.10 million in the fiscal year 2015 to `4,979.02 million in the fiscal
year 2016, largely on due to an increase in gross NPAs. Our NPA provisioning coverage was 62.02% as of
March 31,2016 and our gross and net NPAs were 0.76% and 0.29% of our gross advances and net advances,
respectively.
Our provision for standard advances decreased from `2,440.32 million for the fiscal year 2015 to `381.56
million for the fiscal year 2016, due to the higher general provisions created on standard exposure for the fiscal
year 2015.
Our provision for taxation increased by 35.59% from `9,047.47 million in the fiscal year 2015 to `12,267.51
million in the fiscal year 2016, primarily due to an increase in current income and the growth of our operations.
Net profit
As a result of the above, our net profit increased by 26.63% from `20,053.61 million in the fiscal year 2015 to
`25,394.47 million in the fiscal year 2016.
Fiscal year 2014 compared to fiscal year 2015

90

Unless otherwise specified, all information regarding cost, yield and average balances are based on monthly
average balances outstanding during the relevant period.
Summary of Profit and Loss Account
Fiscal Year
2015
% change
(in ` million, except percentages)
27,162.60
34,878.37
28.41
17,215.77
20,464.55
18.87
17,498.72
22,847.06
30.56
3,616.83
3,394.78
(6.14)
7,085.02
9,047.47
27.70
16,177.80
20,053.61
23.96

2014
Net Interest Income
Other Income
Operating Expense
Provisions and Contingencies (excluding tax)
Provision for Tax
Net Profit

Net Interest Income

Our net interest income increased by 28.41% from `27,162.60 million in the fiscal year 2014 to `34,878.37
million in the fiscal year 2015. The following table sets forth the components of our net interest income.
Fiscal Year
2015
(in ` million, except percentages)
65,399.85
80,160.94
33,001.73
33,557.29

2014
Interest/discounts on advances/bills
Income on investments
Interest on balances with Reserve Bank of India
and other inter-bank funds
Others
Interest Income
Interest on deposits
Interest on Reserve Bank of India/inter-bank
borrowings/Tier I & Tier II debt instruments
Others
Interest Expense
Net Interest Income

% change
22.57
1.68

238.88
1,173.06
99,813.52
56,186.40

428.93
1,572.90
115,720.06
65,368.18

79.56
34.09
15.94
16.34

15,824.83
639.69
72,650.92
27,162.60

14,722.96
750.55
80,841.69
34,878.37

(6.96)
17.33
11.27
28.41

The increase in net interest income was due to growth in the size of our interest bearing assets.
Interest Income
Our total interest income increased by 15.94%, from `99,813.52 million in the fiscal year 2014 to `115,720.06
million in the fiscal year 2015. The increase in interest income was due to the following:

our interest income on advances and discounts on bills increased by 22.57%. This increase was primarily
due to an increase in our average advances from `492,621.71 million in the fiscal year 2014 to `632,735.09
million in the fiscal year 2015, despite an decrease in yield on advances from 13.28% in the fiscal year
2014 to 12.67% in the fiscal year 2015; and

our interest income on investments increased slightly by 1.68% during the fiscal year 2015. These
investments included investments in Government securities (including investments held to meet SLR
requirements), debentures and bonds, pass-through certificates, commercial papers and certificates of
deposit. Our average investments increased by 5.64%, from `387,824.73 million in the fiscal year 2014 to
`409,703.27 million in the fiscal year 2015. Our yield on investments decreased from 8.51% during the
fiscal year 2014 to 8.19% during the fiscal year 2015 primarily due to the reduction in yields on pass
through certificates which was subject to a 25.37% distribution tax.

Interest Expense
Our total interest expense increased by 11.27% from `72,650.92 million in the fiscal year 2014 to `80,841.69
million in the fiscal year 2015. The increase in interest expense was due to an increase in average deposits by
19.03% from `666,569.75 million in the fiscal year 2014 to `793,401.03 million in the fiscal year 2015, which

91

was partially offset by a decrease in the average cost of deposits from 8.43% in the fiscal year 2014 to 8.24% in
the fiscal year 2015 due to a change in the deposit mix in favor of CASA and due to reduction in term deposit
rates as a result of reduction in the interest rates in the economy.
Our interest expense on RBI, inter-bank, Tier I and Tier II debt instruments decreased by 6.96% from
`15,824.83 million in the fiscal year 2014 to `14,722.96 million in the fiscal year 2015, primarily due to an
increase in our foreign currency borrowings.
Our average borrowings increased from `206,415.93 million with an average cost of 7.98% in the fiscal year
2014 to `222,077.73 million with an average cost of 6.97% in the fiscal year 2015.
Other Income
Our other income increased by 18.87% from `17,215.77 million in the fiscal year 2014 to `20,464.55 million in
the fiscal year 2015. This increase was primarily due to an increase in commission, exchange and brokerage
income. Our commission, exchange and brokerage income comprised mainly of income from opening and
negotiating letters of credit, commission charged on financial guarantees and performance guarantees, financial
advisory and underwriting services, transaction fees, and fees for loan syndication. Income from such sources
increased by 56.75% from `12,609.21 million in the fiscal year 2014 to `19,764.80 million in the fiscal year
2015.
Operating Expense
Our operating expenses increased by 30.56% from `17,498.72 million in the fiscal year 2014 to `22,847.06
million in the fiscal year 2015. The increase in operating expense was due to an increase in employee costs
(payments to and provisions for employees) to support branch expansion, which increased by 24.89% from
`7,843.99 million to `9,796.64 million. Employee costs accounted for 44.83% of our non-interest expenses in
the fiscal year 2014 as compared to 42.88% in the fiscal year 2015. Rent, taxes and lighting costs also increased
by 16.20% to `2,663.22 million on account of our new corporate offices and 71 branches being added in the
fiscal year 2015. The increase in other expense from `5,087.40 million to `7,480.59 million is primarily due to
increases in information technology expenses, branch and ATM operational expenses, professional fees,
insurance premium paid to the DICGC for deposits insurance and fees paid to business channel partners.
Provisions and Contingencies
Our provisions and contingencies increased by 16.26% from `10,701.86 million in the fiscal year 2014 to
`12,442.25 million in the fiscal year 2015, primarily due to an increase in general provisions taken for loan
growth as per RBI norms, and provision for income tax.
Our NPA provisions decreased from `1,358.17 million in the fiscal year 2014 to `1,300.10 million in the fiscal
year 2015. As of March 31, 2015, our NPA provisioning coverage was 72.01% and our gross and net NPAs
were 0.41% and 0.12% of our gross advances and net advances respectively. For the fiscal year 2015, we had a
write-back of `584.29 million for provisions for depreciation on investments.
Our general provision for loan losses increased from `1,278.98 million for the fiscal year 2014 to `2,440.32
million for the fiscal year 2015 due to an increase in our loan book and additional provision based on our
internal credit rating matrix.
Our provision for taxation increased by 27.70% from `7,085.02 million in the fiscal year 2014 to `9,047.47
million in the fiscal year 2015, primarily due to an increase in current income and the growth of our operations.
Net Profit
As a result of the above, our net profit increased by 23.96% from `16,177.80 million in the fiscal year 2014 to
`20,053.61 million in the fiscal year 2015.
Financial Condition
Assets

92

The following table sets forth the principal components of our assets as of March 31, 2014, 2015 and 2016 and
as of June 30, 2016.

2014
Cash and balances with the RBI
Balance with banks and money at call and
short notice
Investments
Advances
Fixed assets
Other assets(1)
Total assets

45,415.68

As of March 31,
2015
2016
(in ` million)
52,406.53
57,761.64

As of June 30,
2016
62,095.35

13,500.96

23,164.99

24,422.60

91,385.81

384,250.33
556,329.62
2,934.69
87,726.62
1,090,157.90

432,284.93
755,498.16
3,189.68
95,159.81
1,361,704.10

488,384.66
982,099.27
4,707.18
95,258.77
1,652,634.12

460,964.71
1,059,419.90
5,181.85
93,241.12
1,772,288.74

Note:
1.

In our audited standalone financial statements for the fiscal years 2014 and 2015, we had classified
Investments in RIDF as a part of Investments in accordance with RBI Guidelines. For the fiscal year
2016, we classified investment in RIDF as a part of Other Assets in accordance with RBI guidelines. In
order to present the audited standalone financial statements for the fiscal years 2014, 2015 and 2016 in a
comparable format, we have reclassified the Investment and Other Assets for the fiscal years 2014 and
2015 in the same manner as the adjustment undertaken in the audited standalone financial statements for the
fiscal year 2016. As a result of this reclassification, Investments for the fiscal years 2014 and 2015 was
reduced by `25,253.30 million and `33,767.44 million respectively, with a corresponding increase in Other
Assets.

Our total assets increased by 24.91% from `1,090,157.90 million as of March 31, 2014 to `1,361,704.10 million
as of March 31, 2015, by 21.37% to `1,652,634.12 million as of March 31, 2016 and by 7.24% to `1,772,288.74
million as of June 30, 2016, primarily due to an increase in the size of our advances owing to the overall growth
of our business. Cash and balances with the RBI increased by 15.39% from `45,415.68 million as of March
31,2014 to `52,406.53 million as of March 31, 2015 by 10.22% to `57,761.64 million as of March 31, 2016 and
by 7.50% to `62,095.35 million as of June 30, 2016. Investments increased by 12.50% from `384,250.33
million as of March 31, 2014 to `432,284.93 million as of March 31, 2015, by 12.98% to `488,384.66 million as
of March 31,2016 and by 5.95% to `460,964.71 million as of June 30, 2016. Advances increased by 35.80%
from `556,329.62 million as of March 31, 2014 to `755,498.16 million as of March 31, 2015 by 29.99% to
`982,099.27 million as of March 31, 2016 and by 7.87% to `1,059,419.90 million as of June 30, 2016. Other
assets increased by 8.47% from `87,726.62 million as of March 31, 2014 to `95,159.81 million as of March 31,
2015, marginally by 0.10% to `95,258.77 million as of March 31, 2016 and declined slightly by 2.12% to
`93,241.12 million as of June 30, 2016 mainly due to mark to market derivative exposures.
Liabilities and Shareholders Funds
The following table sets forth the principal components of our liabilities and shareholders funds as of March
31, 2014, 2015 and 2016 and as of June 30, 2016.

2014
Capital
Reserves and surplus
Total shareholders funds
Deposits
Borrowings
Other liabilities and provisions
Total liabilities and shareholders funds

3,606.34
67,611.07
71,217.41
741,920.15
213,142.86
63,877.47
1,090,157.90

As of March 31,
2015
2016
(in ` million)
4,177.36
4,205.32
112,622.46
133,660.67
116,799.82
137,865.99
911,758.48
1,117,195.33
262,204.01
316,589.77
70,941.78
80,983.03
1,361,704.10
1,652,634.12

As of June 30,
2016
4,210.94
141,157.57
145,368.51
1,225,810.54
319,362.53
81,747.16
1,772,288.74

Our total liabilities and shareholders funds increased by 24.91% from `1,090,157.90 million as of March
31,2014 to `1,361,704.10 million as of March 31,2015, by 21.37% to `1,652,634.12 million as of March 31,
2016 and by 7.24% to `1,772,288.74 million as of June 30, 2016.

93

Capital increased by 15.83% from `3,606.34 million as of March 31, 2014 to `4,177.36 million as of March 31,
2015, and slightly to `4,205.32 million as of March 31, 2016 and by 0.13% to `4,210.94 million as of June 30,
2016. Further, our reserves and surplus increased by 66.57% from `67,611.07 million as of March 31, 2014 to
`112,622.46 million as of March 31, 2015, by 18.68% to `133,660.67 million as of March 31, 2016 and by
5.61% to `141,157.57 million as of June 30, 2016 mainly due to increase in net profit.
Deposits increased by 22.89% from `741,920.15 million as of March 31,2014 to `911,758.48 million as of
March 31,2015, by 22.53% to `1,117,195.33 million as of March 31,2016 and by 9.72% to `1,225,810.54
million as of June 30, 2016, due to our increased branch network and an increase in customers. Further, our
borrowings increased from `213,124.86 million as of March 31,2014 to `262,204.01 million as of March 31,
2015, by 20.74% to `316,589.77 million as of March 31, 2016 and by 0.88% to `319,362.53 million as of June
30, 2016. Other liabilities and provisions increased from `63,877.47 million as of March 31,2014 to `70,941.78
million as of March 31, 2015, by 14.15% to `80,983.03 million as of March 31,2016 and by 0.94% to
`81,747.16 million as of June 30, 2016.
Liquidity and Capital Resources
Capital Adequacy
The following table sets out our capital adequacy ratios as of March 31, 2014, 2015 and 2016 and as of June 30,
2016, calculated according to RBI guidelines.
As of March 31,
2015
2016
(in ` million, except percentages)
114,085.60
137,064.01
4,670.064
5,629.294
118,755.66
142,693.30
42,757.37
76,051.10
161,513.03
218,744.40
907,147.96
1,151,018.79
69,876.20
95,241.38
56,998.06
83,238.59
1,034,022.22
1,329,498.77
11.0%
10.3%
11.5%
10.7%
4.1%
5.8%
15.6%
16.5%

2014
Common Equity Tier I
Additional Tier I Capital
Tier I capital
Tier II capital
Total Capital
Credit Risk RWA
Market Risk RWA
Operational Risk RWA
Total risk weighted assets
Common Equity Capital Adequacy Ratio
Capital Adequacy Ratio Tier I capital
Capital Adequacy Ratio Tier II capital
Total Capital Adequacy Ratio

69,913.02
5,061.34
74,974.36
34,956.51
109,930.87
643,295.25
79,983.27
42,690.46
765,968.97
9.1%
9.8%
4.6%
14.4%

As of June 30,
2016
137,080.49
5,124.29
142,204.78
75,687.57
217,892.35
1,252,155.43
83,871.76
106,498.75
1,442,525.94
9.5%
9.9%
5.2%
15.1%

We have adopted a Board-approved policy on our internal capital adequacy and assessment process, which
defines and sets processes to review and improve the techniques used for identification, measurement and
assessment of all material risks and resultant capital requirements.
Tier I capital consists of equity capital, statutory reserves, other disclosed free reserves, capital reserves and
innovative perpetual debt instruments eligible for inclusion in Tier I capital. The Tier II capital consists of
general provision and loss reserves, upper Tier II instruments and subordinate debt instruments eligible for
inclusion in Tier II capital.
According to the terms and conditions of our banking license, the RBI requires us to maintain a minimum
CRAC of 10.00%. We moved to RBI Basel III Capital Regulations as implemented by RBI from April 1, 2013.
Indian banks have to comply with the regulatory limits and requirements as prescribed under RBI Basel III
Capital Regulations, on an ongoing basis, with full implementation of such regulations by March 31, 2019. For a
description of the RBIs capital adequacy guidelines, see section titled Regulation and Policies on page 148.
As of June 30, 2016, our capital adequacy ratio under the RBI Basel III Capital Regulations was 15.1%, with a
Tier I capital adequacy ratio of 9.9%, a Tier II capital adequacy ratio of 5.2% and a CET I capital adequacy ratio
of 9.5%.
As of March 31, 2016, our capital adequacy ratio under the RBI Basel III Capital Regulations was 16.5%, with a
Tier I capital adequacy ratio of 10.7%, a Tier II capital adequacy ratio of 5.8% and a CET I capital adequacy
ratio of 10.3%.

94

As of March 31, 2015, under the Basel III guidelines, our CRAR, Tier I and Tier II capital adequacy ratios were
15.6%, 11.5% and 4.1% respectively and as of March 31, 2014, under the Basel III guidelines, our CRAR, Tier I
and Tier II capital adequacy ratios were 14.4%, 9.8% and 4.6% respectively.
Going forward, we intend to finance our capital resource needs primarily through earnings, Tier I and Tier II
borrowings, and from the proceeds of this Issue as well as the issue of additional equity securities.
Our current sources of funding (other than equity capital) are term deposits and demand deposits from our retail
and corporate customers and borrowings (which include our Tier II subordinated debt and perpetual debt
issuances). The cost of funds obtained is sensitive to interest rate fluctuations, which expose us to the risk that
increasing interest rates will reduce our margins, if we are unable to pass on the increased rates to our
customers. The pricing on our issuances of debt will also be negatively impacted by any downgrade or potential
downgrade in our credit ratings. As of March 31, 2016, the rating by ICRA (an affiliate of Moodys) for our
`100,000.00 million certificate of deposit program was ICRA A1+ (highest possible rating). In addition,
attracting customer deposits in the Indian market is competitive. The rates that we must pay to attract deposits
will be determined by numerous factors such as interest rates, Indian monetary policy, inflation and demand. As
of June 30, 2016, we have `30,980.62 million of our `100,000.00 million certificate of deposit program
outstanding.
We issue certificates of deposit to mutual funds, banks and other investors for tenors between seven days and
one year.
We are subject to the capital adequacy guidelines stipulated by the RBI Tier I capital which consists of equity
capital, statutory reserves, other disclosed free reserves, capital reserves and innovative perpetual
debt instruments eligible for inclusion in Tier I capital. Tier II capital consists of general provision and loss
reserves, upper Tier II instruments and subordinated debt instruments eligible for inclusion in Tier II capital.
Capital Raising
During the fiscal year 2016, we issued 2,795,543 equity shares pursuant to the exercise of stock option
aggregating to `739.51 million. During the fiscal year 2015, we issued 53,492,272 equity shares of `10 each for
cash pursuant to a qualified institutional placement at `550 aggregating to `29,420.75 million. We accreted
`28,713.35 million (net of share issue expenses of `172.47 million) as premium as a result of the qualified
institutional placement. We also issued 3,610,200 equity shares pursuant to the exercise of stock option
aggregating to `808.24 million.
For a description of our capital raising since incorporation please see section titled Capital Structure on page
66.
Cash Flows

2014
Net cash flow from (used in) operating activities
Net cash flow from (used in) investing activities
Net cash flow from financing activities
Net increase/decrease in cash & cash equivalents
Cash &cash equivalents at the beginning of the year
Cash & cash equivalents at the end of the year

38,067.89
(21,567.73)
1,758.88
18,259.04
40,657.60
58,916.64

Fiscal Year
2015
(in ` million)
(23,402.81)
(36,081.96)
75,739.65
16,654.88
58,916.64
75,571.52

2016
(3,631.49)
(40,352.76)
50,596.97
6,612.73
75,571.52
82,184.25

First Quarter of Fiscal Year

2016
2017
(in ` million)
33,605.93
70,496.43
(21,562.16)
2,914.79
(13,799.33)
(2,114.31)
(1,755.55)
71,296.91
75,571.52
82,184.25
73,815.97
153,481.16

Net cash flow from (used in) operating activities

Net cash flow from (used in) investing activities
Net cash flow from (used in) financing activities
Net increase/decrease in cash & cash equivalents
Cash & cash equivalents at the beginning of the year
Cash & cash equivalents at the end of the year

95

In accordance with RBI circular DBR.BP.BC.No.31/21.04.018/2015-16 dated July 16, 2015, we have classified
deposits placed with NABARD/SIDBI/NHB for meeting any shortfall in Priority Sector Lending under Other
Assets, which were earlier included under Investments. Accordingly, cash flow figures of such deposits for
the previous period has been reclassified as Operating Activity from Investment Activity.
Cash Flows from (used in) Operating Activities
Net cash from operations in first quarter of fiscal year 2017 was `70,496.44 million as compared to net cash
from operations in the first quarter of fiscal year 2016 of `33,605.93 million. Net cash from operations in the
first quarter of fiscal year 2017 was primarily due to net profit before taxes of `11,001.39 million, adjusted for a
provision/write-off of non-performing advances of `945.17 million, a net increase in deposits of `108,615.20
million and a net increase in other liabilities of `3,656.70 million. This was offset by an increase in advances of
`78,265.80 million.
Net cash from operations in fiscal year 2016 resulted primarily from net profit before taxes of `37,661.98
million, adjusted for a provision/write-off of non-performing advances of `4,979.02 million, and a net increase
in deposits of `205,436.85 million and a net increase in other liabilities of `10,476.30 million. This was offset
by an increase in advances of `231,580.13 million and an increase in held-for-trading investments and availablefor-sale investments of `18,915.98 million.
Net cash from operations in fiscal year 2015 resulted primarily from net profit before taxes of `29,101.08
million, adjusted for a provision/write-off of non-performing advances of `1,300.10 million, and a net increase
in deposits of `169,838.33 million and in provision for standard advances of `2,440.32 million. This was offset
by an increase in advances of `200,468.64 million, and an increase in held-for-trading investments and
available-for-sale investments of `12,922.91 million.
Net cash from operations in fiscal year 2014 resulted primarily from net profit before taxes of `23,262.82
million, adjusted for a provision/write-off of non-performing advances of `1,358.17 million, and a net increase
in deposits of `72,364.30 million and a provision for standard advances of `1,278.98 million. This was offset by
an increase in advances of `87,692.13 million, an increase in other liabilities of `8,772.12 million, an increase in
other assets of `14,273.31 million and a decrease in held-for-trading investments and available-for-sale
investments of `39,246.01 million.
Cash Flow from (used in) Investing Activities
In first quarter of fiscal year 2016, net cash used in investing activities was `21,562.16 million and in the first
quarter of fiscal year 2017, our cash from investing activities was `2,917.78 million. Our cash from investing
activities in the first quarter of 2017 was mainly from the sale of securities from our investment portfolio.
In fiscal years 2014, 2015 and 2016, net cash used in investing activities was `21,567.73million, `36,081.96
million and `40,352.76 million, respectively. This was primarily used to increase the net investment portfolio
under the held-to-maturity investment category as well as to purchase fixed assets such as leasehold
improvements and furniture and fixtures adjusted from proceeds from the sale of fixed assets and changes in
capital work-in-progress.
Cash Flow from (used in) Financing Activities
In first quarters of the fiscal years of 2016 and 2017, net cash used in financing activities was `13,799.33
million and `2,114.31 million. Our net cash used in financing activities in the first quarter of fiscal year 2017
was mainly due to dividends paid of `5,067.13 million, which was partially offset by an increase in long term
borrowings of `2,772.76 million.
In fiscal years 2014, 2015 and 2016, net cash generated from financing activities was `1,758.88 million,
`75,739.65 million and `50,596.97 million, respectively. This was primarily due to issuances of subordinated
debt, perpetual debt and equity.
Capital Expenditure (Purchase of Fixed Assets)

96

Our capital expenditure consists principally of branch network expansion as well as investments in technology
and communication infrastructure. We have incurred aggregate capital expenditure of `442.84 million and
`849.17 million during the first quarters of fiscal years 2016 and 2017, respectively, and aggregate capital
expenditure of `1,296.78 million, `1,125.71 million and `2,644.18 million during fiscal years 2014, 2015 and
2016, respectively.
Financial Instruments and Off Balance Sheet Arrangements
Contingent Liabilities
As of June 30, 2016, we had contingent liabilities arising from capital commitments of `1,025.96 million and
also had certain outstanding orders for acquisition of certain capital assets for our business. We also have
contingent liabilities in the form of foreign exchange and derivative contracts and documentary credits and
guarantees on behalf of our customers.
Foreign exchange and derivative contracts
We enter into foreign exchange and derivative transactions for customers and for our own account. Foreign
exchange products offered include forward exchange contracts, currency swaps and currency options. The
derivative products offered include interest rate swaps, forward rate agreements, interest rate futures and crosscurrency derivatives primarily for corporate customers. We also trade in interest rate swaps for our own account
and enter into foreign exchange contracts to cover our exposure. We earn profit on customer transactions by
way of margin as a mark-up over the interbank exchange rate. We earn profit on interbank transactions based on
the spread between the purchase rate and the sale rate. These profits are booked as income from foreign
exchange and derivative transactions.
The following table sets forth the notional principal amounts of our outstanding foreign and derivative contracts
as of the dates indicated.

2014
Forward contracts
Swap agreements (notional principal)
Other outstanding derivative contracts
Total foreign exchange derivative products

1,104,666.49
498,750.66
95,971.51
1,699,388.66

As of March 31,
2015
2016
(in ` million)
2,116,095.63
1,765,909.84
634,287.01
622,202.39
193,447.01
369,521.51
2,943,829.65
2,757,633.74

As of June 30,
2016
2,151,446.28
751,458.36
407,243.83
3,310,148.47

Documentary credit and guarantees

As a part of our commercial banking activities, we issue documentary credit and guarantees on behalf of our
customers. Documentary credits such as letters of credit enhance the credit standing of our customers.
Guarantees generally represent irrevocable assurances that we will make payments in the event of the customer
failing to fulfill its financial or performance obligations.
The following table sets forth, as of the dates indicated, the values of documentary credits and outstanding
guarantees.

2014
Guarantees
Letters of Credit
Total

104,640.63
164,442.13
269,082.76

As of March 31,
2015
2016
(in ` million)
142,909.76
178,664.54
225,393.72
257,500.74
368,303.48
436,165.28

As of June 30,
2016
187,954.29
249,357.14
437,311.43

Contractual Obligations
The following table summarizes certain outstanding obligations (Tier I and Tier II debt instruments and
operating leases) due by period as of March 31, 2016.
Total

Less than
1 year

97

1-3 years

3-5 years

after
5 years

Tier I and Tier II instruments

Due under operating leases(1)
Total

107,623.79
22,731.17
130,354.96

1,800.00
3,198.82
4,998.82

(in ` million)
6,180.68
10,724.64
16,905.32

9,662.98
4,236.64
13,899.62

89,980.13
4,571.07
94,551.20

Note:
1.

Represents the amount payable under outsourcing contracts for IT and branch rentals.

Qualitative Disclosure about Risks and Risk Management

Risk is associated with all of our businesses. Risks are broadly classified into three major categories namely,
credit risk, operational risk and market risk. We have developed our risk management systems to ensure that
there is an appropriate balance between risk and return and we have implemented comprehensive policies and
procedures to identify, measure, monitor and control risk throughout our organization. Our risk management
strategy is based on understanding the various types of risk, assessment of the risk and continuous monitoring of
the risk. For further details about the types of risks we manage and our risk management policies and structures
see sub-section titled Risk Management below.
Risk Management
Our long-term financial security and success of is built on a robust risk management system. Through proactive
and improved risk management practices, risk management function continuously works towards achieving
financial stability and enhancing stakeholder value. Our Risk Management architecture is overseen by the Risk
Monitoring Committee (the RMC), an independent Board level sub-committee that strives to put in place
specific policies, frameworks and systems for effectively managing the various risks. The day-to-day
functioning is managed by the Risk Management Department (the RMD). The RMD is headed by the Chief
Risk Officer (the CRO), who leads the Credit Risk Unit and Risk Control Units. Credit Risk Unit is
responsible for evaluating, rating and underwriting credit under respective Risk Heads. The Risk Control Units,
such as Market Risk, Operational Risk, Enterprise Risk Management Unit, Information Security Unit, Portfolio
Analytics Unit, Credit Risk Control Unit, Credit Mid Office and Risk Containment Unit are responsible for
independent review, monitoring and reporting of all risk control parameters, and recommending appropriate
corrective actions where necessary. These units are also responsible for ensuring compliance to internal policies
and regulatory guidelines.
Credit risk
Our Credit Risk management is governed by comprehensive and well-defined Credit Policy, which is approved
by the Board. It encompasses credit approval processes for all business segments, along with the guidelines for
monitoring and mitigating the risks associated with them. All corporate credit proposals are approved either
through a committee approach or through joint delegation, depending on rating and exposure thresholds outlined
in the credit policy.
We currently have three committees for approving credits:

Board Credit Committee (the BCC);

Management Credit Committee (the MCC); and

Executive Credit committee (the ECC).

Of these, the BCC is a Board level subcommittee, while the MCC and the ECC comprise of senior management
personnel. Joint Delegation involves two or three approvers jointly approving the proposal, which primarily
addresses large volume of smaller proposals. While exercising their approval powers, these designated
committees exercise high level of due diligence, and ensure adherence to the Banks credit policy and other
regulatory guidelines. The appraisal process encompasses a detailed risk assessment and rating of all obligors,
using our rating models. These models have been developed in conjunction with a reputed external credit rating
agency, and cover all corporate business segments of the Bank. The ratings of customers are assessed based on
their financial performance, industry characteristics, business positioning, project risks, operating performance
and other non-financial parameters, such as quality of management and conduct of account.

98

We additionally have in place, scorecards for specific schematic programs, in case of Retail and SME
borrowers. This function works in close coordination with various business segments to periodically review the
individual borrower relationships, identify early warning signals and assess the overall health of borrowers. We
have taken proactive measures to ensure that delinquencies are maintained at a minimum level, through robust
post sanction monitoring processes. There is a dedicated team, which works towards ensuring compliance to the
sanctioned terms and conditions, through an internal tracking system. There is also an independent Portfolio
Analytics Unit, which is responsible for monitoring the entire credit portfolio across all segments, including
monitoring of early warning signals, identifying portfolio trends, and generating portfolio levels, covering
various credit quality indicators, conducting industry studies and determining industry outlook. Further, Credit
Risk Control Unit is responsible for independently reviewing our credit policies and programs, including rating
models, scorecard development /implementation/testing for retail / program based lending. The unit is also
responsible for migration to Internal Ratings Based approach for credit risk, under Basel II.
Counterparty risk
We have in place appropriate guidelines to monitor counterparty risk covering all counterparty exposures on
banks, primary dealers and financial institutions arising out of movement in market variables. Credit exposures
to issuers are monitored under the prudential norms for exposure to a single borrower as per either our
Corporate Credit Risk Policy or Investment Policy, as applicable. Rating of counterparty banks, primary dealers
and NBFCs and sanctioning of limits are done based upon suitable rating models that we have devised. We have
also put in place the Derivative Appropriateness Policy to evaluate suitability and appropriateness risk arising
out of all customer derivatives contracts. We use the current exposure method for monitoring treasury exposure
against sanctioned limits.
Market risk
Market risk is the exposure to loss arising from changes in the value of a financial instrument as a result of
changes in market variables such as interest rates, exchange rates and other asset prices. In addition, we are
exposed to other elements of market risk, such as liquidity or funding risk.
Our market risk management is governed by a comprehensive market risk policy, asset liability management
policy, liquidity policy, investment policy, hedging policy, stress testing policy, derivative policy and a
derivative appropriateness policy to ensure that risks underwritten across business activities are within our
stipulated risk appetite and also to aggregate similar risks. These policies have been benchmarked with industry
best practices and RBI regulations. We have an integrated and straight-through processing state-of-the-art
treasury system for enabling better risk management.
We measure liquidity, currency and interest rate risks through various metrics, including liquidity gap analysis,
dynamic cash flow analysis, liquidity ratios, VaR, EaR, duration of equity and sensitivity analysis using internal
risk models. We regularly conduct stress testing to monitor our vulnerability towards unfavorable shocks.
We monitor and control our risk, using various internal and regulatory risk limits for our trading book and
banking book, which are set according to a number of criteria including economic scenarios, business strategy,
management experience, peer analysis and our risk appetite. Our risk reporting mechanism comprises
disclosures and reporting to the various management committees, including our Investment Committee and
Asset Liability Committee (ALCO).
Liquidity risk
Liquidity risk is the risk that we will be unable to meet our financial commitment to a customer or market in any
location, in any currency at any given point in time. We face liquidity risk on account of the mismatch in the
maturity of our assets and liabilities. Liquidity risk also includes both the risk of our inability to raise
incremental funds or unexpected increases in the cost of those funds and the risk of being unable to liquidate an
asset in a timely manner at a reasonable price. The goal of liquidity risk management is to be able, even under
adverse conditions, to meet all of the funding needs of a business.
Managing liquidity risk involves estimating liquidity needs and providing for them in the most cost-effective
way possible. We identify, quantify and actively monitor our liquidity positions and primary sources of liquidity
risk at both the transactional and portfolio levels in a timely manner. We have a regular information flow and an

99

active dialogue process between our funding and lending divisions to enable optimal liquidity management. We
also seek to control existing and anticipated liquidity risk exposures.
The ALCO is a strategic decision-making body constituted by the Board, responsible for balance sheet planning
from a risk return perspective, including the strategic management of interest rates and liquidity risks. The
ALCO forms a liquidity view of us with the help of economic analysis provided by our in-house economic
research team. The ALCO studies the structural liquidity and interest rate sensitivity reports in detail and makes
decisions on the cost and yield, keeping in mind business strategies and the business cycles.
Our Balance Sheet Management Group (BSMG) formulates funding strategies to achieve an optimal funding
mix, which is consistent with prudent liquidity management, diversity of sources, and servicing costs by keeping
itself abreast of important market developments, trends and regulatory initiatives. BSMG plays a pivotal role in
planning strategic liquidity for the long-term and managing tactical liquidity for day-to-day liquidity by actively
accessing alternative funding from the certificate of deposit, call, collateralized borrowing and lending
obligation, and term money markets.
Interest rate risk
Our core business is deposit-taking and lending. These activities expose us to interest rate risk. Since our
balance sheet consists predominantly of Rupee assets and liabilities, movements in Indian interest rates
constitute the main source of interest rate risk. The short and intermediate impact of changes in interest rates is
on our net interest income. In the longer term, changes in interest rates impact cash flows on assets, liabilities
and off balance sheet items, creating a risk to our net worth as a result of re-pricing mismatches and other
interest rate sensitive positions.
We measure exposure to fluctuations in interest rates primarily by way of gap analysis, providing a static view
of the maturity and re-pricing characteristics of balance sheet positions. We prepare an interest rate gap report
by classifying all assets and liabilities into various time period categories according to contracted maturities or
anticipated re-pricing dates. The difference in the amount of assets and liabilities maturing or being re-priced in
any time period category would then give us an indication of the extent of exposure to the risk of potential
changes in the margins on new or re-priced assets and liabilities. We measure interest rate risk from the
perspective of earnings as well as economic value and follow the VaR approach to measure the potential price
risk of the trading book to changes in interest rates. We also use VaR limits for the banking book to measure the
impact of changing interest rates on our net worth. We use stress tests to provide our management with a view
of the potential impact of large market movements and also to allow us to estimate the size of potential losses
due to stress events that are unlikely but potentially significant.
We submit interest rate risk reports to the RBI on a monthly basis. Our interest rate risk is also monitored by the
RMC, which approves our interest rate risk limits.
To manage our interest rate risk, we use the duration of the Government securities portfolio as well as our
corporate bond portfolio as key variables. We increase or decrease the duration of the Government securities
portfolio and our corporate bond portfolio to manage our interest rate risk exposure. In addition, we also use
interest rate derivatives to manage the asset and liability positions.
Exchange rate risk
Exchange rate risk is the risk that we may suffer losses as a result of adverse exchange rate movements during a
period in which we have an open position in an individual foreign currency. To evaluate the extent of our
exchange rate risk, a liquidity gap report for each currency is prepared. Gaps or mismatch of maturities can arise
either because of proprietary trading positions or due to a customer transaction resulting in a long or short
position for us.
We engage in trading activities in the foreign currency markets that expose us to exchange rate risks. In
addition, our foreign exchange business exposes us to foreign currency interest rate risks that arise from
maturity mismatches of foreign currency positions, and settlement risk, which is the risk of default by
counterparties. We mitigate these foreign exchange risks by setting counterparty limits and subjecting the
overall foreign currency positions to an overnight open exchange position limit that has been approved by the
RBI. We also offer foreign currency advances and deposits and foreign currency hedge instruments such as

100

swaps, forwards, and currency options to customers, which are primarily banks and corporate customers, and we
actively hedge exchange risks arising out of these customer positions.
Derivative instruments risk
We engage in limited trading of derivative instruments on our own account and generally enter into interest rate
and currency derivative transactions primarily for the purpose of hedging interest rate and foreign exchange
mismatches. We provide limited derivative services to select customers and other Indian and international
financial institutions, including foreign currency forward transactions, foreign currency and interest rate swaps
and foreign exchange related products. Our derivative transactions are subject to counterparty risk to the extent
that particular obligors are unable to make payment on contracts when due. Derivative transactions are done
after evaluating the appropriateness of the transaction for the counterparty in compliance with guidelines
provided in our derivative appropriateness policy. In addition, exposure for these customers is monitored on a
continuous basis against the limits sanctioned for our treasury business.
Equity price risk
We assume equity price risk with respect to equities held in our portfolio. Fluctuations in the market can affect
the value of equity shares resulting in a negative effect on our positions. We have put in place a limit control
structure for overall equity positions, exposure limits on capital markets and individual scrip limits. We also
monitor equity risk through VaR.
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or
from external events. In general, some major sources of operational risk are process reliability, IT security,
outsourcing operations, dependence on key suppliers, fraud, error, regulatory compliance, and recruiting,
training and maintaining staff. Operational risk also includes exposure to lawsuits related to employment
matters.
We have a Board-approved Operational Risk Management Policy, which is implemented under the supervision
of the Chief Risk Officer who also chairs the Operational Risk Management Committee. The Operational Risk
Management Committee meets periodically to review all operational risk events and control strategies. To
understand our operational risk exposure, we identify, assess and document the operational risks inherent in all
our material products, activities and process events. We have put in place a structure of well-defined policies,
processes and procedures that are designed to mitigate material operational risks. These policies, processes and
procedures are based on best practices in the Indian financial industry and are aimed at enhancing operational
efficiency without compromising on controls. In addition, to ensure compliance with the Basel III capital
accord, we have adopted the basic indicator approach for measurement of operational risk.
We have also put in place a Product and Process Approval Policy, which covers the approval and risk evaluation
process, of all the new products/modifications to existing processes. Additionally, your Bank has also
constituted Outsourcing Management Committee (OMC) to ensure effective due diligence and monitoring of
your banks outsourced activities on continuous basis.
Some of the other initiatives that we have undertaken to address operational risks include:

creating standard operating procedures with defined processes, such as the maker-checker concept, for
handling paper-based transactions and updating those procedures on a central depository on our intranet;

establishing protocols to have all suspected fraud and suspicious activity, including regulatory and legal
notices, immediately brought to the attention of our Chief Vigilance Officer who is responsible for
conducting a thorough investigation of all fraud cases, which is then reviewed by a committee of senior
management to identify any systemic changes that are necessary;

reducing risks related to employment policies and laws by implementing periodic performance evaluations;

creating checklists and standard legal document forms to aid employees in properly completing all customer
documentation;

101

assessing and monitoring external service providers through a comprehensive outsourcing policy;

tracking the movement of records through storage and retrieval; and

designing a comprehensive business continuity plan that has been tested using regularly conducted drills.

Legal risk
Legal risk is the uncertainty of the enforceability of the obligations of our customers and counterparties,
including the foreclosure on collateral. Changes in law and regulation could adversely affect us. Legal risk is
higher in new areas of business where the law is often untested by the courts. We seek to minimize legal risk by
using appropriate legal documentation, employing procedures designed to ensure that transactions are properly
authorized and consulting internal and external legal advisors, where necessary.

102

INDUSTRY OVERVIEW
The information in this section has been extracted from publicly available documents from various sources,
including officially prepared materials from the Government and its various ministries, the RBI and the Indian
Banks Association, and has not been prepared or independently verified by us, any of the Managers or any of
their affiliates or advisors. Wherever we have relied on figures published by the RBI, unless stated otherwise,
we have relied on the 2014 and 2015 RBI Annual Reports, the 2014 and 2015 Report on Trend and Progress of
Banking in India and the accompanying Explanatory Notes available at http://www.rbi.org.in. Industry sources
and publications referred to by us state that the information contained therein has been obtained from sources
generally believed to be reliable, but their accuracy, completeness and underlying assumptions are not
guaranteed and their reliability cannot be assured, and accordingly, investment decisions should not be based
on such information. Statements in this section that are not statements of historical fact constitute forwardlooking statements. Such forward-looking statements are subject to various risks, assumptions and
uncertainties, and certain factors could cause actual results or outcomes to differ materially.
Indian Economy
The Indian economy consolidated the gains achieved in restoring macroeconomic stability, a process that began
in fiscal year 2015. In fiscal year 2015, the Indian Government introduced a new methodology for estimating the
gross domestic product and also commenced publication of sector data on a gross value added basis. According
to the new methodology, Indias gross domestic product grew by 5.1% in fiscal year 2013, 6.9% in fiscal year
2014 and 7.3% in fiscal year 2015. The agriculture sector accounted for 16.3% of gross value added, while
industry and services accounted for 31.2% and 52.5%, respectively, in fiscal year 2015. While economic growth
has improved, the fiscal and current account deficits have reduced and the Indian Rupee has stabilized, and the
prolonged slowdown in global economic growth and gradual recovery continued to adversely impact credit
growth and the level of non-performing and restructured loans during fiscal year 2015 and during the nine
months ended December 31, 2015. As per the Central Statistical Organizations advance estimates, Indias GDP
growth for fiscal year 2016 is expected to increase to 7.6% from 7.2% in fiscal year 2015. This is expected to be
led by private consumption demand (primarily urban) and gross fixed capital formation (primarily through
public capital expenditures). On the sector front, growth is projected to be led by manufacturing and agriculture
allied activities.
Indian Banking Industry
Until the 1980s, the Indian financial system was strictly controlled. Interest rates were administered by the
Government. Formal and informal parameters governed asset allocation and strict controls limited entry into and
expansion within the financial sector. Bank profitability was low, NPAs were comparatively high, capital
adequacy was diminished and operational flexibility was hindered. The Governments economic reform
program, which began in 1991, encompassed the financial sector. The first phase of the reform process began
with implementation of the recommendations of the Committee on the Financial System, known as the
Narasimham Committee I. Following that, reports were submitted in 1997 and 1998 by other committees, such
as the second Committee on Banking Sector Reform, known as the Narasimham Committee II, and the
Tarapore Committee on Capital Account Convertibility. This, in turn, led to the second phase of reforms relating
to capital adequacy requirements, asset classification and provisioning, risk management and merger policies.
The deregulation of interest rates, the emergence of a liberalized domestic capital market and the entry of new
private sector banks have progressively intensified the competition among banks.
Banks in India may be categorised as scheduled banks and non-scheduled banks, where the former are banks
that are included in the second schedule to the RBI Act 1934, as amended. These banks comprise scheduled
commercial banks and scheduled cooperative banks. Scheduled commercial banks may further be classified as
the SBI and its associates, nationalized banks, private sector banks, foreign banks and regional rural banks. The
focus of commercial banks in India has traditionally been on meeting the short-term financing needs of industry,
trade and agriculture sectors. In recent years, they have also focused on increasing long-term financing to
sectors like infrastructure. As of December 31, 2015, there were 149 scheduled commercial banks in the
country, including 56 regional rural banks. As of December 31, 2015, scheduled commercial banks had a
nationwide network of 130,698 branches and 64.60% of these branches were located in rural or semi-urban
areas of the country. A large number of these branches belong to the public sector banks.
Constituents of the Indian Banking Industry

103

The Reserve Bank of India

The RBI is the central regulatory and supervisory authority for the Indian banking sector. Besides regulating and
supervising the banking system, the RBI performs the following important functions:

acts as the central bank and the monetary authority;

issues currency;

manages debt for the Central Government and certain state governments that have entered into
agreements with it;

regulates and supervises NBFCs;

manages the countrys foreign exchange reserves;

manages the capital account of the balance of payments;

regulates and supervises payment settlement systems;

operates a grievance redressal scheme for bank customers through the Banking Ombudsmen and
formulates policies for fair treatment of banking customers; and

develops initiatives such as financial inclusion and strengthening of the credit delivery mechanisms to
priority sectors and weaker sections, including agricultural entities, small and micro-enterprises and for
affordable housing and education.

The RBI issues guidelines on various issues relating to the financial reporting of entities under its supervision.
These guidelines regulate exposure standards, income recognition practices, asset classification, provisioning for
non-performing and restructured assets, investment valuation and capital adequacy. All the institutions under the
purview of the RBI are required to furnish information relating to their businesses on a regular basis.
Public Sector Banks
Public sector banks are scheduled commercial banks with a significant Government shareholding and constitute
the largest category in the Indian banking system. These include the SBI and its five associate banks, 21
nationalised banks (including IDBI Bank) and 56 regional rural banks. Excluding the regional rural banks, the
remaining public sector banks had 88,937 branches and accounted for 69.73% of gross bank credit and 71.65%
of the aggregate deposits of the scheduled commercial banks as of December 31, 2015.
Regional rural banks were established from 1976 to 1987 by the central Government, state governments and
sponsoring commercial banks jointly, with a view to develop the rural economy. Regional rural banks provide
credit to small farmers, artisans, small entrepreneurs and agricultural laborers. The NABARD is responsible for
regulating and supervising the functions of the regional rural banks. As of December 31, 2015, there were
20,135 branches of regional rural banks. As of December 31, 2015, regional rural banks accounted for 3.1% of
aggregate deposits and 2.71% of the gross bank credit outstanding of the scheduled commercial banks.
Private Sector Banks
After bank nationalization, which commenced in 1969 and was completed in 1980, the majority of Indian banks
were public sector banks. Some of the existing private sector banks, which showed signs of an eventual default,
were merged with state-owned banks. In July 1993, as part of the banking reform process and as a measure to
induce competition in the banking sector, the RBI permitted entry by the private sector into the banking system.
This resulted in the emergence of private sector banks, collectively known as the New Private Sector Banks.
As of June 26, 2016, there were eight New Private Sector Banks. In addition, there were 13 private sector banks
existing prior to July 1993. These are collectively known as the Old Private Sector Banks. We are classified as
a New Private Sector Bank. As of June 26, 2016, there were 25 private banks.
As of December 31, 2015, private sector banks accounted for approximately 20.81% of aggregate deposits and
27.17% of gross bank credit outstanding of the scheduled commercial banks. As of December 31, 2015, their

104

network of 21,302 branches accounted for 16.29% of the total branch network of scheduled commercial banks
in the country.
Following the budget announcement, the New Banks Licensing Guidelines were issued by the RBI in February
2013 specifying that select entities or groups in the private sector, entities in the public sector, and non-banking
financial companies with a successful track record of at least ten years would be eligible to promote banks.
Further, the RBI has published certain criteria for ascertaining whether a bank is fit and proper for the grant of
a license. The new banks can be set up only through a wholly-owned, non-operative financial holding company
registered with the RBI and the initial minimum paid-up equity voting capital requirement for applicants is ` 5.0
billion, with foreign shareholding not exceeding 49.0% for the first five years. Applicants were required to
submit applications for these licenses to the RBI by July 1, 2013 and 25 applications were reviewed by the RBI.
These applications were screened by the RBI before being forwarded to the RBIs HLAC for further scrutiny,
which submitted its recommendations to the RBI on February 25, 2014.
On April 2, 2014, the RBI granted in-principle approval to two applicants, IDFC Bank and Bandhan Bank, to
set up universal banks under the New Banks Licensing Guidelines and pursuant to that, those two applicants
have established banks. In the future, the RBI intends to issue licenses on an ongoing basis, subject to the RBIs
qualification criteria. On May 5, 2016, the RBI released draft guidelines for on-tap licensing of universal
banks in the private sector. As these licenses are on-tap, there is no special window and applicants can apply at
any time. While large industrial houses are barred, entities or groups in the private sector that are owned and
controlled by residents (as defined in the FEMA Regulations, as amended from time to time) and have a
successful track record for at least ten years are allowed to be promoted to universal banks, provided that such
entity/group has total assets of ` 50 billion or more and the non-financial business of the group does not account
for 40% or more in terms of total assets or gross income.
The RBI also issued guidelines in November 2014 on the entry of Small Finance Banks and Payments
Banks into the private sector in the banking industry, including the eligibility criteria, structure, capital
requirements, shareholding structure and corporate governance practices applicable to such proposed entities. In
August 2015, the RBI issued licenses to two new private sector banks, eleven payment banks and ten small
finance banks. The RBI has also indicated that it will issue guidelines with respect to a continuous licensing
policy for universal banks.
Foreign Banks
As of December 31, 2015, there were over 45 foreign banks with 324 branches operating in India. As of
December 31, 2015, foreign banks accounted for 4.54% of aggregate deposits and 4.97% of outstanding gross
bank credit of scheduled commercial banks.
In 2009, as part of the liberalization process that accompanied the second phase of the reform process that began
in 2005, the RBI began permitting foreign banks to operate more freely, subject to requirements largely similar
to those imposed on domestic banks. The primary activity of most foreign banks in India has been in the
corporate segment. However, some of the larger foreign banks have made retail banking a significant part of
their portfolios. Most foreign banks operate in India through branches of the parent bank. Certain foreign banks
also have wholly-owned non-banking financial company subsidiaries or joint ventures for both corporate and
retail lending. In 2004, the RBI stipulated that banks, including foreign banks operating in India, should not
acquire any fresh stakes in another banks equity shares if by such acquisition, the investing banks holding
would exceed 5.0% of the investee banks equity capital. In February 2005 the RBI issued a Roadmap for
Presence of Foreign Banks in India, announcing the following measures to be implemented in two phases:

During the first phase (from March 2005 through to March 2009), foreign banks were allowed to
establish a presence by setting up wholly-owned subsidiaries or by converting existing branches into
wholly-owned subsidiaries.

Also during the first phase, foreign banks were allowed to acquire a controlling stake in private sector
banks identified by the RBI for restructuring. This was only to be done in a phased manner.

For new and existing foreign banks, proposals were made to go beyond the existing World Trade
Organisation commitment of allowing increases of 12 branches per year. A more liberal policy will be
followed for areas with a small number of banks.

105

During the second phase (from April 2009 onwards) and after a review of the first phase, foreign banks
would be allowed to acquire up to 74.0% in private sector banks in India.

In April 2009, in light of deteriorating global financial markets, the RBI postponed the second phase until
greater clarity emerged as to recovery and reform of the global regulatory and supervisory architecture. In
January 2011, the RBI released a draft discussion paper on the mode of presence of foreign banks in India. The
paper indicated a preference for a wholly-owned subsidiary model of presence over a branch model. Other
recommendations of the discussion paper included requiring systemically important foreign banks to convert
their Indian operations into wholly-owned subsidiaries, a less restrictive branch expansion policy and the ability
to raise Rupee debt through issuance of non-equity capital instruments for such converted subsidiaries, lower
priority sector targets as compared to domestic banks and unified regulation for both Indian and foreign banks
with respect to investments in subsidiaries and associates.
In July 2012, the RBI revised priority sector lending norms and mandated foreign banks with 20 branches or
more in India to meet priority lending norms as prescribed for domestic banks within the five-year period
commencing on April 1, 2014. All other foreign banks will continue to be subject to the existing overall target
of 32%.
In November 2013, the RBI issued a scheme for setting up wholly-owned subsidiaries by foreign banks in India.
The scheme envisages that foreign banks that commenced business in India after August 2010, or do so in the
future, would be permitted to do so only through wholly-owned subsidiaries if certain specified criteria applied
to them. These criteria include incorporation in a jurisdiction that gives legal preference to home country
depositor claims in the case of winding-up proceedings, among others.
Further, a foreign bank that has set up operations in India through the branch mode after August 2010 will be
required to convert its operations into a subsidiary if it is considered to be systemically important. A bank would
be considered to be systemically important if the assets on its Indian balance sheet (including credit equivalent
of off balance sheet items) equals 0.25% of the total assets (inclusive of credit equivalents of off balance sheet
items) for all scheduled commercial banks in India as of March 31 of the preceding year. Establishment of a
subsidiary would require approval of the home country regulator or supervisor and the RBI, which would be
subject to various factors including economic and political relations with the country of incorporation of the
parent bank and reciprocity with the home country of the parent bank. The regulatory framework for a
subsidiary of a foreign bank would be substantially similar to that applicable to domestic banks, including with
respect to priority sector lending and branch expansion. Wholly-owned subsidiaries of foreign banks may, after
further review, be permitted to enter into merger and acquisition transactions with Indian private sector banks,
subject to adherence to the foreign ownership limit of 74.00% that is currently applicable to Indian private
sector banks.
Cooperative Banks
Cooperative banks cater to the financing needs of agriculture, small industry and self-employed businessmen in
urban, semi-urban and rural areas of India. The state land development banks and the primary land development
banks provide long-term credit for agriculture. The Banking Regulation (Amendment) and Miscellaneous
Provisions Act, 2004, which came into effect on September 24, 2004, specifies that all multi-state cooperative
banks are under the supervision and regulation of the RBI. Accordingly, the RBI is currently responsible for the
supervision and regulation of urban cooperative societies, NABARD, state cooperative banks and district central
cooperative banks. The wide network of cooperative banks, both rural and urban, supplements the commercial
banking network for deepening financial intermediation by bringing a large number of depositors/borrowers
under the formal banking network.
Key Banking Industry Trends in India
During fiscal years 2015 and 2016, risks to global financial stability continued to remain at elevated levels, with
global growth witnessing a fragile and multi-paced pattern of recovery. Meanwhile, global macro-financial risks
shifted from advanced to emerging economies, with the latter facing pressure from weakening prospects of
growth, falling commodity prices and the strengthening of the dollar. Within the emerging world, however, the
Indian economy appeared quite resilient, given a modest recovery in the economy and steady capital flows that
helped in maintaining the external sector balance.

106

The performance of the Indian banking sector, mainly public sector banks, remained subdued. Most banks
experienced a slowdown in balance sheet growth coupled with asset quality woes. Profit was marginally up due
to contained operating expenses rather than increased revenue. (Source: RBI Report on Trend and Progress of
Banking in India 2014-15.)
Consumer credit
The consumer credit market in India has undergone a significant transformation over the last decade and has
experienced rapid growth due to consumer credit becoming cheaper, more widely available and a more
acceptable avenue of funding for consumers. The market has changed dramatically due to the following factors:

increased focus by banks and financial institutions on consumer credit, resulting in a market shift
towards regulated players from unregulated money lenders or financiers;

increasing desire by consumers to acquire assets such as cars, goods and houses on credit;

fast emerging middle class and growing number of households in a banks target segment;

improved terms of credit;

legislative changes that offer greater protection to lenders against fraud and potential default,
increasing the incentive to lend; and

growth in assignment and securitization arrangements for consumer loans, enabling non-deposit based
entities to access wholesale funding and compete in the market based on the ability to originate,
underwrite and service consumer loans.

Commercial Banking Trends

Credit
As of the end of fiscal year 2016, the credit-deposit ratio for scheduled commercial banks was 77.9% as
compared to 77.4% the previous year. As of March 31, 2016, the aggregate deposits increased by 8.6% while
loans and advances increased by 9.3%. (Source: RBI Quarterly Statistics on Deposits and Credit of Scheduled
Commercial Banks: December 2015.)
For fiscal year 2015, the decline in credit growth reflected the slowdown in industrial growth, poor earnings
growth reported by the corporates, risk aversion on the part of banks against a background of rising bad loans
and governance-related issues. Further, corporates also switched part of their financing needs to other sources,
such as external commercial borrowings, corporate bonds and commercial paper. On the liabilities side, growth
in deposits and borrowings also declined significantly in terms of public sector banks, which witnessed
deceleration in credit growth in 2014 to 2015; private sector banks and foreign banks, however, indicated higher
credit growth.
For fiscal year 2016, credit to agriculture and allied activities grew by 11.8% as compared to 13.3% in fiscal
year 2015. Credit to micro and small enterprises was one of the main sectors that saw a decline in growth in
fiscal year 2015. Credit to the services sector increased by 5.9% during fiscal year 2016, higher than the increase
of 3.0% during fiscal year 2015. Personal loans increased by 17.9% during fiscal year 2016 as compared to an
increase of 14.2% during fiscal year 2015. (Source: RBI Data on Sectoral Deployment of Bank Credit
February 2016.)
Interest rates and inflation
Inflation continued to moderate. Average CPI inflation in fiscal year 2016 decelerated to 4.9% from 6.0% in
fiscal year 2015. Despite monsoon deficiency for the second consecutive year, food inflation declined, aided by
a limited increase in minimum support prices for food grains, subdued rural wage growth and the Governments
timely offloading of surplus food stocks. Sharp drops in crude oil prices helped moderate fuel inflation. The
central banks anti-inflationary stance and quality fiscal consolidation bode well for core inflation, which
remained below 5% throughout the course of the year.

107

Indias external position strengthened further in fiscal year 2016. As per the Economic Survey presented by the
Finance Minister in February 2016, the current account deficit is expected to remain well within comfort at 1.01.5% of the GDP. Foreign exchange reserves of U.S. $356billion (as of end of March 2016) and robust net FDI
inflows (U.S.$34 billion between April and February of fiscal year 2016) were noteworthy developments
against the background of global uncertainties.
On the fiscal front, the Government is expected to meet its fiscal year 2016 fiscal deficit target of 3.9% of GDP
accompanied by a healthy quality of adjustment. While the capital expenditure is slated for a 20.9% growth in
fiscal year 2016, the subsidy bill is expected to contract marginally by 0.2%.
On the monetary policy front, the RBI reduced the repo rate by a cumulative of 75 basis points (bps) to 6.75%
during the course of fiscal year 2016, after reducing it by 50 bps in the fourth quarter of fiscal year 2015. With
CPI inflation for January 2016 turning out to be 31 bps lower than the RBIs target of 6.0% and the Government
maintaining fiscal discipline, the central bank opted for another cut of 25 bps in the repo rate to 6.50% in April
2016.
Money market liquidity conditions improved in the first half of fiscal year 2016 (with average liquidity being in
surplus between July and September) largely on the back of front-loading of Government expenditure and dollar
purchases by the RBI. Thereafter, liquidity conditions started deteriorating sequentially and closed fiscal year
2016 with a deficit of ` 2145 billion. Build-up of Government cash balances with the RBI, the above upward
trend in currency in circulation, and a dollar sale by the RBI contributed towards the tightening of liquidity
conditions in the second half of fiscal year 2016.
Over the course of fiscal year 2016, the Indian Rupee traded in a band of 62.19 to 68.71. The Rupee was trading
predominantly between the 62 to 64 range during April to July. This was breached after the surprise Chinese
yuan devaluation in August 2015. Thereafter, a stronger dollar on the back of expectations regarding interest
rate hikes in the U.S. resulted in weakness in emerging market currencies including the Rupee. While the
currency lost 6.0% to the U.S. dollar in fiscal year 2016, it remained one of the outperformers in emerging
markets.
Despite global financial markets imparting volatility, the 10-year government securities yield fell by 27 bps to
7.47% as of the end of March 2016 on account of monetary easing from the RBI during the course of the year,
and quality fiscal consolidation from the Government.
Earlier, in response to increased inflation, in fiscal years 2011 and 2012, the RBI increased its policy rates 13
times, enacting gradual increases in the repo rate from 5.00% in March 31, 2010 to a peak of 8.50% with effect
from October 25, 2011. For fiscal year 2016, the RBI has cut the repo rate by 25 bps in June 2015 and 50 bps in
October 2015. The repo rate is currently at 6.50%. However, during the first bi-monthly policy statement in
April 2016, the corridor between repo and reverse repo was narrowed to 0.5%. The reverse repo rate is currently
at 6%. (Source: RBI Notifications available at http://www.rbi.org.in.)
The base rate system, which replaced the benchmark prime lending rate system introduced in 2003, became
effective from July 2010 and has contributed to improvement in the pricing of loans, enhanced transparency in
lending rates and has improved the assessment of the transmission of monetary policy. This, combined with the
freeing of interest rates on export credit in foreign currency, effective from May 5, 2012, has resulted in
complete deregulation of interest rates on lending by commercial banks. As proposed in the RBI Second Quarter
Review of Monetary Policy 2010-11 and pursuant to Guidelines on Deregulation of Savings Bank Deposit
Interest Rate, the RBI decided to deregulate the savings bank deposit interest rate, effective from October 25,
2011, subject to the following two conditions:

first, each bank will have to offer a uniform interest rate on savings bank deposits up to ` 100,000,
irrespective of the amount in the account within this limit; and

second, for savings bank balances over ` 100,000, a bank may provide differential rates of interest, if it
so chooses. However, there should not be any differentiation on interest rates between similar deposit
amounts accepted on the same date at any of a banks branches.

On December 17, 2015, the RBI released the final guidelines on computing interest rates on advances based on
the marginal cost of funds. The guidelines came into effect on April 1, 2016. Apart from helping to improve the
transmission of policy rates into the lending rates of banks, these measures are also expected to improve

108

transparency in the methodology followed by banks for determining interest rates on advances. The guidelines
are also expected to ensure availability of bank credit at interest rates which are fair to the borrowers as well as
the banks. Further, marginal cost pricing of loans will help the banks become more competitive and enhance
their long-run value and contribution to economic growth.
The highlights of the guidelines are as follows:

all Rupee loans sanctioned and credit limits renewed with effect from April 1, 2016 will be priced with
reference to the MCLR which will be the internal benchmark for such purposes;

the MCLR will be a tenor linked internal benchmark;

actual lending rates will be determined by adding the components of spread to the MCLR;

banks will review and publish their MCLR of different maturities every month on a pre-announced
date;

banks may specify interest reset dates on their floating rate loans. They will have the option to offer
loans with reset dates linked either to the date of sanction of the loan/credit limits or to the date of
review of the MCLR;

the periodicity of reset shall be one year or lower;

the MCLR prevailing on the day the loan is sanctioned will be applicable until the next reset date,
irrespective of the changes in the benchmark during the interim period;

existing loans and credit limits linked to the base rate may continue until repayment or renewal, as
the case may be. Existing borrowers will also have the option to move to the MCLR linked loan on
mutually acceptable terms; and

banks will continue to review and publish the Base Rate as hitherto.

As per the new guidelines issued by the RBI, banks have to publish the MCLR for various tenors which will be
the internal benchmark lending rates. Based upon this MCLR, interest rates for different types of customers
should be fixed in accordance with their respective risk profiles.
The MCLR is to be revised monthly. As per the new guidelines, banks have to set five benchmark rates for
different tenure or time periods ranging from overnight (one day) rates to one year.
The new methodology uses the marginal cost or latest cost conditions reflected in the interest rate given by the
banks for obtaining funds while setting their lending rate.
Asset quality
The gross NPAs of scheduled commercial banks as a percentage of gross advances increased to 7.6% from 5.1%
between September 2015 and March 2016. The restructured standard advances during the same period declined
from 6.2% to 3.9%, while the stressed advances ratio increased from 11.3% to 11.5%. Public Sector Banks
recorded the highest level of stressed assets at 14.5%, compared to 4.5% in the case of Private Sector Banks.
The net non-performing advances (NNPAs) as a percentage of the total net advances for all scheduled
commercial banks increased to 4.6% from 2.8%. At bank group level, the NNPA ratio of public sector banks
increased from 3.6% to 6.1% and, in the case of private sector banks, it increased from 0.9% to 1.3%.
Among major sectors, the industrial sector showed a decline in the stressed advances ratio from 19.9% to 19.4%
between September 2015 and March 2016, while the GNPA ratio of the sector increased sharply to 11.9% from
7.3%. Retail loans continued to witness the least stress.
Five sub-sectors, namely mining, iron and steel, textiles, infrastructure and aviation, which together constituted
24.2% of the total advances of scheduled commercial banks, had a much larger share of 53% in the total stressed
advances. Stressed advances of the infrastructure sector increased from 22.9% to 24.0%. Among the bank

109

groups, public sector banks, which had the maximum exposure to these five sub-sectors, had the highest stressed
advances. (Source: Financial Stability Report 2015 dated December 23, 2015.)
Income and profitability
Profit after tax of scheduled commercial banks declined by 4.4% during the first half of the fiscal year 2015-16,
due to lower growth in earnings before provisions and taxes, higher provisions and write-offs. Among the bank
groups, profit after tax declined by 22.7% for public sector banks, whereas it increased by 11.5% for private
sector banks and 4.6% for foreign banks during the same period. The return on assets was 0.7% and the return
on equity was 8.5% for all scheduled commercial banks as at September 31, 2015 compared to 0.8% and 9.3%
as at March 31, 2015 respectively. (Source: Financial Stability Report 2015 dated December 23, 2015.)
Recent Developments in the Indian Banking Industry
Fiscal Year 2016

The RBI has liberalized the licensing regime and intends to issue licenses on an ongoing basis, subject
to the RBIs qualification criteria. The RBI has issued licenses to two new private sector banks, eleven
payment banks and ten small finance banks in fiscal year 2016. On May 5, 2016, the RBI published the
Draft Guidelines for on tap Licensing of Universal Banks in the Private Sector. As these licenses are
on-tap, there is no special window and applicants can apply at any time. While large industrial houses
are barred, entities or groups in the private sector that are owned and controlled by residents (as
defined in the FEMA Regulations, as amended from time to time) and have a successful track record
for at least ten years are allowed to promote to universal banks, provided that such entity/group has
total assets of ` 50 billion or more, the non-financial business of the group does not account for 40% or
more in terms of total assets or gross income.

The MCLR was introduced by the RBI to ensure better transmission of policy rates and it replaced the
existing base rate regime from April 1, 2016. See section titled Regulations and Policies on page 148.

Credit Policy Measures

The RBI issues an annual policy statement setting out its monetary policy stance and announcing various
regulatory measures. The RBI issues a review of the annual policy statement on a bi-monthly basis.
Monetary Policy Statement for Fiscal Year 2015
The first bi-monthly Monetary Policy Statement 2014-15 was announced on April 11, 2014. The RBI decided to
keep the reverse repo rate under the liquid adjustment facility (LAF) unchanged at 7.0%, and the marginal
standby facility (MSF) rate and the Bank Rate at 9.0%. Consequently, the reverse repo rate under the LAF
remained unchanged at 7.0%, and the MSF rate and the Bank Rate stood at 9.0%.
The second bi-monthly Monetary Policy Statement 2014-15 was announced on June 3, 2014. The RBI
maintained the repo rate under the LAF at 8.0%, kept the cash reserve ratio (CRR) of scheduled banks
unchanged at 4.0% of net demand and time liabilities (NDTL), statutory liquidity ratio (SLR) of scheduled
commercial banks reduced by 50 bps from 23.0% to 22.5% of their NDTL with effect from the fortnight
beginning June 14, 2014; reduced the liquidity provided under the export credit refinance (ECR) facility from
50% of eligible export credit outstanding to 32% with immediate effect; introduced a special term repo facility
of 0.25% of NDTL to compensate fully for the reduction in access to liquidity under the ECR with immediate
effect; and continued to provide liquidity under 7-day and 14-day term repos of up to 0.75% Of NDTL of the
banking system. Consequently, the reverse repo rate under the LAF remained unchanged at 7.0%, and the MSF
rate and the Bank Rate stood at 9.0%.
The third bi-monthly Monetary Policy Statement 2014-15 was announced on August 5, 2014. The RBI decided
to keep the repo rate under the LAF unchanged at 8.0%, keep the CRR of scheduled banks unchanged at 4.0%
of NDTL; SLR of scheduled commercial banks reduced by 50 bps points from 22.5% to 22.0% of their NDTL
with effect from the fortnight beginning August 9, 2014; and continue to provide liquidity under overnight repos
at 0.25% of bank-wise NDTL and liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the
banking system. Consequently, the reverse repo rate under the LAF remained unchanged at 7.0%, and the MSF
rate and the Bank Rate stood at 9.0%.

110

The fourth bi-monthly Monetary Policy Statement 2014-15 was announced on 30 September 2014. The RBI
decided to keep the repo rate under the LAF unchanged at 8.0%, keep the CRR of scheduled banks unchanged at
4.0% of NDTL; reduce the liquidity provided under the ECR facility from 32% of eligible export credit
outstanding to 15% with effect from October 10, 2014; continue to provide liquidity under overnight repos at
0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75%
of NDTL of the banking system through auctions; and continue with daily one-day term repos and reverse repos
to smooth liquidity. Consequently, the reverse repo rate under the LAF remained unchanged at 7.0%, and the
MSF rate and the Bank Rate stood at 9.0%.
The fifth bi-monthly Monetary Policy Statement 2014-15 was announced on December 2, 2014. The RBI
decided to keep the policy repo rate under the LAF unchanged at 8.0%; keep the CRR of scheduled banks
unchanged at 4.0% of NDTL; continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL
at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking
system through auctions; and continue with daily one-day term repos and reverse repos to smooth liquidity.
Consequently, the reverse repo rate under the LAF remained unchanged at 7.0%, and the MSF rate and the Bank
Rate stood at 9.0%.
In a statement by the RBI Governor on Monetary Policy on January 15, 2015, and for the first time in the
monetary policy review cycle, the RBI decided to: reduce the policy repo rate under the LAF by 25 bps from
8.0% to 7.75% with immediate effect; keep the CRR of scheduled banks unchanged at 4.0% of NDTL; continue
to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate and liquidity under
7-day and 14-day term repos of up to 0.75% of NDTL of the banking system through auctions; and continue
with daily variable rate repos and reverse repos to smooth liquidity. Consequently, the reverse repo rate under
the LAF was adjusted to 6.75%, and the MSF rate and the Bank Rate stood at 8.75%
The sixth bi-monthly Monetary Policy Statement 2014-15 was announced on February 3, 2015. The RBI
decided to keep the repo rate under the LAF unchanged at 7.75%; keep the CRR of scheduled banks unchanged
at 4.0% of NDTL; reduce the SLR of scheduled commercial banks by 50 bps from 22.0% to 21.5% of their
NDTL with effect from the fortnight beginning February 7, 2015; replace the ECR facility with the provision of
system level liquidity with effect from February 7, 2015; continue to provide liquidity under overnight repos of
0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75%
of NDTL of the banking system through auctions; and continue with daily variable rate term repo and reverse
repo auctions to smooth liquidity. However, the repo rate was subsequently reduced by 25 bps to 7.50%.
Consequently, the reverse repo rate under the LAF changed to 6.50%. The MSF rate and the Bank Rate stood at
8.75%.
Monetary Policy for Fiscal Year 2016
First Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on April 7, 2015
Monetary and Liquidity Measures

The policy repo rate under the LAF remained unchanged at 7.50%.

The MSF rate remained unchanged at 8.50%, the Bank Rate at 8.50% and the reverse repo rate under
the LAF at 6.50%.

The liquidity provided under term repos of 7-day and 14-day tenor remained unchanged at 0.75% of
NDTL of the banking system while liquidity provided under overnight repos remained unchanged at
0.25% of bank-wise NDTL.

Announced intent to allow Indian exporters/importers to write covered options.

Banks encouraged to move to marginal cost of funds methodology for base rate computation.
Indian corporates allowed to raise INR bonds overseas.

Second Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on June 2, 2015

111

Monetary and Liquidity Measures

The policy repo rate under the LAF reduced 25 bps to 7.25%.

The MSF rate, Bank Rate and reverse repo rate under the LAF lowered 25 bps each to 8.25%, 8.25%
and 6.25% respectively.

The liquidity provided under term repos of 7-day and 14-day tenor remained unchanged at 0.75% of
NDTL of the banking system while liquidity provided under overnight repos remained unchanged at
0.25% of bank-wise NDTL.

Third Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on August 4, 2015
Monetary and Liquidity Measures

The policy repo rate under the LAF remained unchanged at 7.25%.

The MSF rate remained unchanged at 8.25%, the Bank Rate at 8.25% and the reverse repo rate under
the LAF at 6.25%.

The liquidity provided under term repos of 7-day and 14-day tenor remained unchanged at 0.75% of
NDTL of the banking system while liquidity provided under overnight repos remained unchanged at
0.25% of bank-wise NDTL.

Announced intent to institutionalize framework for foreign portfolio investors in debt, with conversion
of limits into INR and regular, half-yearly increases.

Announced readiness of external committee report on Small Banks/Payment Banks, with one set of
licenses expected by the end of August.

Fourth Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on October 10, 2015
Monetary and Liquidity Measures

Reduce the policy repo rate under the liquidity adjustment facility by 50 bps from 7.25% to 6.75% with
immediate effect.

Cash reserve ratio of scheduled banks unchanged at 4.0% of NDTL.

Continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate
and liquidity under 14-day term repos as well as longer term repos of up to 0.75% of NDTL of the
banking system through auctions.

Continue with daily variable rate repos and reverse repos to smooth liquidity.

The reverse repo rate under the LAF stands adjusted to 5.75%, and the marginal standing facility rate
and the Bank Rate to 7.75%.

Fifth Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on December 1, 2015
Monetary and Liquidity Measures

Policy repo rate under the LAF unchanged at 6.75%.

CRR of scheduled banks unchanged at 4.0% of NDTL.

Continue to provide liquidity under overnight repos at 0.25 % of bank-wise NDTL at the LAF repo rate
and liquidity under 14-day term repos as well as longer term repos of up to 0.75% of NDTL of the
banking system through auctions.

112

Continue with daily variable rate repos and reverse repos to smooth liquidity.

The reverse repo rate under the LAF will remain unchanged at 5.75%, and the MSF rate and the Bank
Rate at 7.75%.

Sixth Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on February 2, 2016
Monetary and Liquidity Measures

Policy repo rate under the LAF unchanged at 6.75%.

CRR of scheduled banks unchanged at 4.0% of NDTL.

Continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate
and liquidity under 14-day term repos as well as longer term repos of up to 0.75% of NDTL of the
banking system through auctions.

Continue with daily variable rate repos and reverse repos to smooth liquidity.

The reverse repo rate under the LAF will remain unchanged at 5.75%, and the MSF rate and the Bank
Rate at 7.75%.

Monetary Policy for Fiscal Year 2017

First Bi-Monthly Monetary Policy Statement for Fiscal Year 2017 held on April 5, 2016
Monetary and Liquidity Measures

Policy repo rate under the LAF reduced from 6.75% to 6.5%.

CRR of scheduled banks unchanged at 4.0% of NDTL.

Reduce minimum daily maintenance of the CRR from 95% of the requirement to 90% with effect from
April 16, 2016.

Narrow the policy rate corridor from +/-100 bps to +/- 50 bps by reducing the MSF rate by 75 bps and
increasing the reverse repo rate by 25 bps, with a view to ensuring finer alignment of the weighted
average call rate with the repo rate.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.0%, and the MSF rate to 7.0%. The
Bank Rate which is aligned to the MSF rate also stands adjusted to 7.0%.
Future Developments in the Banking Sector and Expected Domestic Reforms

Implementation of the Basel III Capital Regulations

In December 2010, the BCBS issued a comprehensive reform package of capital regulations, known as Basel
III. The objective of the reform package is to improve the banking sectors ability to absorb shocks arising from
financial and economic stress, thus reducing the risk of spill over from the financial sector to the real economy.
The RBI issued the RBI Basel III Capital Regulations and the guidelines became operational from April 1, 2013
(Source RBI Press Release dated December 28, 2012 available at http://www.rbi.org.in as of February 15,
2013.). However, the reform package and guidelines will be implemented in a phased manner. On December 31,
2013, the RBI further extended the implementation of credit valuation adjustment risk to April 1, 2014; and, on
March 27, 2014, extended the deadline for full implementation of Basel III requirements to March 31, 2019.
(Source: RBI Circular DBOD.No.BP.BC.81/21.06.201/2013-14 dated December 31, 2013 and RBI Circular
DBOD.No.BP.BC.102/21.06.201/2013-14 dated March 27, 2013.)
Under Basel III, the total capital of a bank in India must be at least 9.00% of RWAs (8.00% as specified by the
BCBS), Tier I capital must be at least 7.00% of RWAs (6.00% as specified by the BCBS) and Common Equity

113

Tier I capital must be at least 5.50% of RWAs (4.50% as specified by BCBS). Due to the transitional
arrangements, the capital requirements of banks may be lower during the initial periods and higher during later
years. Banks have, therefore, been advised to do their capital planning accordingly. In addition to the minimum
requirements as indicated above, a CCB, in the form of common equity of 2.50% of RWAs, is required to be
maintained by banks. Under the RBI Basel III Guidelines, total capital with CCB has been fixed at 11.50% of
RWAs. In July 2014, the RBI released the Final Report of the Internal Working Group on Implementation of
Counter-cyclical Capital Buffer (CCCB) which requires banks to maintain a buffer of up to 2.5% of RWAs in
period of high credit growth as a precaution for downturn.
Further, under Basel III, a simple, transparent, non-risk based leverage ratio has been introduced. The BCBS
will test a minimum Tier I leverage ratio of 3.00% during a parallel run period from January 1, 2013 to January
1, 2017. The RBI has prescribed that during this parallel run period, banks should strive to maintain their
existing leverage ratios, but in no case should a banks leverage ratio fall below 4.50%. Banks whose leverage is
below 4.50% have been advised to achieve this target as early as possible. This leverage ratio requirement is yet
to be finalised and will be finalised taking into account the final proposals of the BCBS. (Source: RBI Annual
Report 2011-2012.) Additionally, in June 2014, the RBI released guidelines for a liquidity cover ratio (LCR)
as part of the Basel III framework on liquidity standards, which will require minimum LCRs starting at 60% as
at January 1, 2015, increasing in equal annual steps to 100% by January 1, 2019.
Further, Additional Tier I non-equity capital instruments under Basel III are expected to provide additional
features such as full coupon discretion, and principal loss absorption when the common equity ratio of a bank
falls below 6.125% of its risk-weighted assets. In the case of Tier II non-equity capital instruments, the
distinction between Upper Tier II and Lower Tier II instruments under Basel II is removed and a single class of
Tier II instrument eligibility criteria has been prescribed. Additionally, under Basel III, loss absorption features
have been included in the event of occurrence of the Point of Non-Viability trigger. The RBI has also fixed
the base at the nominal amount of capital instruments outstanding on January 1, 2013, and their recognition will
be capped at 90.00% from April 1, 2013, with the cap reducing by 10.00% points in each subsequent year.
On August 31, 2015, the RBI designated the SBI and ICICI Bank Ltd. as domestic systemically important banks
(D-SIB). Based on the methodology provided in the D-SIB framework and data collected from banks as at
March 31, 2015, the SBI and ICICI Bank Ltd. will have to provide Additional Common Equity Tier 1 (CET1)
requirements as a percentage of risk weighted assets of 0.6% and 0.2% respectively. The CET1 requirements
applicable to D-SIBs will be applicable from April 1, 2016 in a phased manner and would become fully
effective from April 1, 2019. The additional CET1 requirements will be in addition to the CCB.

Dynamic Provisioning Guidelines

At present, banks generally make two types of provisions: general provisions on standard assets and specific
provisions on NPAs. Since the level of NPAs varies through the economic cycle, the resultant level of specific
provisions also behaves cyclically. Consequently, lower provisions during upturns and higher provisions during
downturns have a pro-cyclical effect on the real economy.
To address the pro-cyclicality of capital and provisioning, efforts at an international level are being made to
introduce countercyclical capital and provisioning buffers. The RBI has prepared a discussion paper on a
countercyclical (dynamic) provisioning (DP) framework.
The DP framework is based on the concept of expected loss (EL), which is the average level of losses a bank
can reasonably expect to experience, and is considered the cost of doing business. It is generally covered by
provisioning and pricing. The objective of DP is to soften the impact of incurred losses on the results of
operations through the economic cycle, and not to provide a general provisioning cushion for EL. More
specifically, the DP created during a year will be the difference between the long-run average EL of the
portfolio for one year and the incremental specific provisions made during the year. The parameters of the
model suggested in the discussion paper are calibrated based on data of Indian banks. Banks that have the
capability to calibrate their own parameters may, with the prior approval of the RBI, introduce a DP framework
using the theoretical model indicated by the RBI. Other banks will have to use the standardised calibration
provided by the RBI. (Source: RBI Annual Report 2011-2012 and Discussion Paper on Introduction of Dynamic
Loan Loss Provisioning Framework for Banks in India dated March 30, 2012.)

FSLRC

114

The FSLRC was constituted on March 24, 2011 to redraft and harmonize legislation related to the financial
sector. (Source: RBI Report on Trend and Progress of Banking in India 2011-12.)
In its approach paper released on October 1, 2012, the FSLRC has proposed a two-agency regulatory model: the
RBI as the monetary authority, banking regulator and payment systems regulator, and a single regulator for the
rest of the financial sector. This approach paper is currently in draft form. (Source: FSLRC, Ministry of Finance,
Approach Paper and Press Release available at http://www.fslrc.org.in as of January 10, 2013.)

BHC or FHC
In June 2010, the RBI set up a working group to examine the different holding company structures prevalent
internationally in the financial sector and to examine the feasibility of introducing an FHC structure in India.
FHCs are companies that own or control one or more banks or NBFCs. Currently, banks in India are organized
under a bank-subsidiary model (BSM), in which the bank is the parent of all the subsidiaries of the group. In
May, 2011, the RBI released the working groups recommendations that included, among others, that the FHC
model should be pursued as a preferred model for the financial sector in India and that the RBI should be
designated as the regulator for FHCs. The recommendations have currently not been implemented. (Source: RBI
Report of the Working Group on Introduction of Financial Holding Company Structure in India and Press
Release available at http://www.rbi.org.in as of January 10, 2013.)

115

OUR BUSINESS
Overview
We are a new generation private sector bank in India founded by Rana Kapoor and late Ashok Kapur. We were
incorporated as a public limited company in November 2003 and obtained our certificate of commencement of
business in 2004. In May 2004, the RBI granted us a license under Section 22(1) of the Banking Regulation Act
to commence banking operations in India, and we began banking operations in August 2004. We have been
recognized in India, as well as globally, with certain awards and recognitions, such as the Golden Peacock
National Quality Award in 2016, the Best Trade Finance Bank in India Bankers Choice Award by the Asian
Banker and the International Council of Advisors in 2015, and the India Domestic Cash Management Bank of
the Year ABF Wholesale Banking Award for the year 2015.
In October 2015, we commenced operation of our IBU at GIFT City.
We provide a knowledge-based approach to banking that we believe adds value for our customers by allowing
them to capitalize on our knowledge in specific business sectors as well as across products. We believe that this
approach also strengthens our relationships with our customers, by allowing us to develop those existing
relationships to cross sell our full range of product and service offerings.
Our total assets have increased from `1,090,157.90 million as of March 31, 2014 to `1,772,288.74 million as of
June 30, 2016 at a CAGR of 24.11%. Our total deposits have grown from `741,920.15 million as of March 31,
2014 to `1,225,810.54 million as of June 30, 2016 at a CAGR of 25.00%. Our CASA deposits increased from
`163,446.80 million as of March 31, 2014 to `362,883.09 million as of June 30, 2016 at a CAGR of 42.54%.
Our net profit increased from `16,177.80 million for the fiscal year 2014 to `25,394.47 million for the fiscal
year 2016 at a CAGR of 25.29% and our net profit increased from `5,511.98 million for the first quarter of
fiscal year 2016 to `7,318.02 million for the first quarter of fiscal year 2017 at a CAGR of 32.77%. In addition,
our number of branches has increased from 560 as of March 31, 2014 to 860 as of March 31, 2016.
Competitive Strengths
Our competitive strengths include the following:
Diverse revenue streams and strong execution capabilities
We offer a wide range of products that generate both interest and non-interest income, and we have
demonstrated sustained growth with respect to both sources of income. We provide diversified solutions to the
financial and banking needs of our customers, with a focus on cross-selling multiple products to them. We
believe that our combination of diverse product offerings and a relationship-driven approach has enabled us to
structure solutions to meet our customers needs, resulting in sustained revenue generation. Our non-interest
income has broadly grown in line with the growth in our total net income and accounted for 38.79%, 36.98%
and 37.26% of our total net income for the fiscal years 2014, 2015 and 2016, respectively and 40.62% of our
total net income for the first quarter of fiscal year 2017.
The tables below present our net interest income and non-interest income and the corresponding growth for each
of the periods indicated:
Income Statement

March 31, 2014

Net interest income

Non-interest income
Total net income

27,162.60
17,215.77
44,378.37

Increase(1)

March 31, 2015 Increase(1) March 31, 2016

(in ` million, except percentages)
22.42%
34,878.37
28.41%
45,667.23
36.91%
20,464.55
18.87%
27,121.47
27.66%
55,342.92
24.71%
72,788.70

Increase(1)
30.93%
32.53%
31.52%

Note:
(2) year-on-year comparison
Income Statement
Net interest income
Non-interest income

June 30, 2015

10,598.03
5,451.73

Increase(1)
June 30, 2016
(in ` million, except percentages)
42.19%
13,165.79
31.81%
9,005.17

116

Increase(1)
24.23%
65.18%

Income Statement

June 30, 2015

Total net income

16,049.76

Increase(1)
June 30, 2016
(in ` million, except percentages)
38.49%
22,170.96

Increase(1)
38.14%

Note:
(2) quarter-on-quarter comparison
We believe that our execution capabilities are reflected in the growth of our business across our various business
streams, including the increase in the proportion of our CASA and retail term deposits. Implementation of our
growth strategies with prudent risk management has resulted in a return on assets of 1.59%, 1.70% and 1.76% as
at March 31, 2014, 2015 and 2016 and 1.71% as at June 30, 2016. Our net interest margin (the ratio of interest
income less interest expense to average interest-earning assets) has expanded from 3.00% in the fiscal year 2014
to 3.43% in the fiscal year 2016 and witnessed a marginal decline to 3.34% in the first quarter of fiscal year
2017.
Robust risk management practices and healthy asset quality
We believe we have an independent risk management function covering enterprise risk management, credit risk,
market risk and operational risk that contribute to preserving our asset quality amongst other risk objectives. Our
risk management function is overseen by the Risk Monitoring Committee, an independent board-level subcommittee that strives to put in place specific policies, frameworks and systems for effectively managing the
various risks. These policies and procedures are constantly reviewed and updated. We have a dedicated
independent risk management department that comprises various units responsible for evaluating and
underwriting credit; formulating independent ratings and reviewing monitoring and reporting of all risk control
parameters, and recommending appropriate corrective actions where necessary; and ensuring compliance with
internal policies and regulatory guidelines.
We believe that the success of our risk management systems is reflected in the level of our gross and net NPAs,
which as of June 30, 2016 amounted to `8,445.59 million, or 0.79% of our total gross advances, and `3,023.92
million, or 0.29% of our total net advances, respectively. These figures reflect the implementation of the RBIs
asset quality review exercise, in early 2016, which resulted in the reclassification of certain accounts as NPAs
that were not previously considered as NPAs. Our risk management function is described in further detail under
Managements Discussion and Analysis of Financial Condition and Results of OperationsRisk
Management.
Knowledge-based approach to banking enabling cross-selling
We utilize a knowledge-based approach to banking that we believe differentiates us from our competitors and
enables us to provide our customers with well-informed, customized and risk-mitigated solutions. We deliver
sector-focused advice, products and services using teams of professionals with sector-specific knowledge, which
we believe has helped us to develop our corporate banking franchise. We believe that this approach also
solidifies our relationships with our customers, by allowing us to develop those existing relationships to crosssell our full range of product and service offerings.
Technology infrastructure
Our information technology (IT) strategy is divided into two parts: the first being Run the Bank, which
focuses on initiatives aimed at ensuring efficient and effective operations and the second our strategy entitled
Build the Bank, which focuses on transformative technologies that could further enhance our business. For
additional details on our IT achievements see sub-section titled Information Technology on page 128. As a
new generation bank unencumbered by legacy systems, we have been able to invest in technology infrastructure
and applications to significantly enhance customer experience across all service delivery channels, including
digital banking. For example, we offer online payment solutions supported by a reliable internet security
framework. Further, we have launched a new customer-centric interactive voice response system to enhance the
quality of our customer service. We are also focused on leveraging technology to deliver a reliable suite of cardbased products such as RuPay, MasterCard and Visa cards. More than 1.6 million Yes Bank co-branded virtual
prepaid cards have been issued on the MasterCard platform since its launch in January 2016.
Experienced and well-regarded leadership supported by high-quality personnel

117

Our management team has a successful track record of project management and execution and a history of
significant corporate as well as retail relationships. Prior to joining us, the members of our senior management
held key positions at leading Indian private sector and foreign banks. For additional details see section titled
Board of Directors and Senior Management on page 158.
We also believe that our management is supported by well-trained and qualified staff. We offer our employees
career growth opportunities in an entrepreneurial environment, along with attractive compensation and suitable
training programs. In recent years, we have hired a number of experienced professionals from other private
sector banks that have strengthened our retail banking team leadership.
We have made significant investments in our employees in the last three years. As a result of our investment and
commitment to our employees, we believe we have good relationships with our workforce, which numbered
more than 15,000 as of March 31, 2016. For further details, see sub-section titled Human Resources on
page 129.
Award-winning quality of service
We aim to regularly monitor current processes, benchmark them against our competitors and incorporate best
practices. We also seek to disseminate knowledge across our workforce and to introduce robust mechanisms for
process improvement. Our process management function seeks to facilitate the ease of execution of transactions
through the automation of manual processes, and is also responsible for ensuring the effectiveness of training for
our employees. We have also implemented various customer satisfaction measures that enable us to monitor
compliance with service-level agreements across our relevant operational units and provide an efficient
information platform to support effective decision-making.
We have been recognized as World Class in the large organization service category by the Asia Pacific Quality
Organization in 2014. We have also won IMC Ramakrishna Bajaj National Quality Award in the services
category in 2014.
Business Strategy
We continuously evaluate our growth strategy, with the aim of expanding our operations, including the number
of branches, ATMs, employees, deposit base, loan book and balance sheet.
The objectives that form our near-to-medium term business strategies are described below:
Liabilities generation
We are committed to increasing the volume of our CASA and granular term deposits. Key elements of this
objective are the identification of current account corporate customers and offering them a range of customized
products, including wealth products targeted at their owners, promoters and directors, salary accounts and cash
management and liquidity management solutions.
Other steps that we have taken include:

expanding our distribution network to provide better access to our customers, evidenced by an increase in
our number of branches from 560 as of March 31, 2014 to 860 as of March 31, 2016 and an increase in our
number of ATMs from 1,139 as of March 31, 2014 to 1,609 as of March 31, 2016;

offering a higher savings rate to customers, following the RBIs deregulation of savings bank deposits rates
in October 2011, which has led to a significant improvement in and savings bank deposits balances and new
account openings; and

offering targeted products such as 3-in-1 accounts, family accounts, salary accounts and specialized
accounts for senior citizens and women with select privileges and relationship pricing on key banking
offerings.

Optimal risk management

118

We are actively focused on evaluating our enterprise, credit, market and operational risks and we intend to
optimize our capital needs for our growth to achieve high returns on capital while managing and mitigating risks
appropriately.
Sustainable and diversified revenue generation
We intend to increase our customer base in our Corporate Banking and Branch Banking segments through a
focused customer relationship management approach. In order to develop our retail liabilities business, we
incorporated a brokerage subsidiary, YES Securities (India) Limited, in March 2013. The brokerage business
complements our retail offering and wealth management proposition. We have also launched a full suite of retail
asset products, comprising car loans, commercial vehicle loans, inventory finance, personal loans, loans against
securities, education loans, gold loans and construction equipment loans, tractor finance loans, hospitality,
education and healthcare equipment finance loans and two-wheeler loans. Our goal is to increase the amount of
business we do with our existing customers by building on our existing customer relationships and cross-selling
our banking and advisory products. We expect these initiatives will further diversify our sources of revenue.
Enhancing brand value
We have built our brand around six key values: trust, growth, knowledge-driven human capital, technology,
transparency and responsible banking. We intend to develop our brand further and focus on improving customer
sentiment by engaging in various activities such as advertising across print media, radio, television and the
internet, domestically and abroad. Our marketing initiative abroad focuses on capturing market share from the
NRI market. We have also been one of the co-sponsors of the Indian Premier League 2013-2017.
Human capital management
We intend to continue hiring high-quality talent from leading financial institutions and business schools in India
and to focus on retaining our employees by offering career growth opportunities in an entrepreneurial
environment, along with attractive compensation and suitable training programs. For further details, see subsection titled Human Resources on page 129.
Effective cost management
We maintain a relatively low cost-to-income ratio compared to our peers in the Indian private banking sector.
We will continue to focus on effective cost management through the efficient use of resources, achieving
economies of scale, continuous benchmarking of our rate contracts, evaluating various cost-effective solutions
and implementing cost-effective technology solutions to increase productivity and eliminate costs. However, we
plan to continue investing in key strategic investment and expansion opportunities in retail assets and liabilities.
Strengthening of systems, controls, processes and procedures
We intend to continue developing technology-based solutions in conjunction with robust processes and controls
through centralized operations and investment in risk management. This is a key focus area in light of our
growth plans and the potential challenges in achieving them.
Our Business Segments
We have two separate business divisions organized by customer type and product offers. Each of these divisions
is managed by dedicated relationship teams that focus on serving specific needs of the customer types under it.
These two major divisions are:

Corporate Banking, which focuses on large corporate clients; and

Branch Banking, which comprises Business Banking for SMEs and Retail Banking.

The table below provides the total amount of advances made by our Corporate Banking and Branch Banking
divisions as of March 31, 2014, 2015 and 2016 and as of June 30, 2016.
As of March 31,

119

As of June 30,

2014
Advances
Corporate Banking 352,143.31
Branch Banking
204,186.31
Total Advances
556,329.62

2015
2016
2016
(in ` million, except percentages)
%
Advances
%
Advances
%
Advances
63.30 488,946.66
64.72 638,887.53
65.05 715,631.01
36.70 266,551.51
35.28 343,211.74
34.95 343,788.89
100.00 755,498.16
100.00 982,099.27
100.00 1,059,419.90

%
67.55
32.45
100.00

Set out below is a description of each of our two business divisions.

Corporate Banking
Our relationship teams in this division provide comprehensive financial and risk management solutions to
corporates within a highly competitive market. We believe that over time, our relationship teams have built
long-term relationships with our clients by offering appropriate industry-specific products in a timely manner,
developing a thorough understanding of our clients business models and the market conditions they operate in,
and by tracking developments in their industry. Our Corporate Banking advances increased by 30.67% from
`488,946.66 million as of March 31, 2015 to `638,887.53 million as of March 31, 2016 and by 12.01% to
`715,631.00 as of June 30, 2016. Currently, we enjoy strong relationships with customers in several sectors,
including life sciences and healthcare, information technology, food and agribusiness, manufacturing,
infrastructure, media and entertainment, hospitality and education. These companies vary from multinational
corporates, Indian financial institutions, and government-owned entities. We have divided our Corporate
Banking business into eight specialized and dedicated relationship units to deliver innovative, structured and
comprehensive financial solutions through our specialized knowledge-banking approach.
Our eight dedicated corporate relationship segments include the following:

Corporate Finance Infrastructure Banking: offers a combination of advisory services and customized
products to assist clients in the infrastructure sector;

Corporate Finance Urban Infrastructure Banking: provides diversified product offerings including
structured finance, realty banking, project advisory and syndication and private equity to the realty,
hospitality, healthcare and education sectors;

Corporate Banking: caters to large corporates with annual revenue of over `15.00 billion;

Emerging Corporates Banking: caters exclusively to the requirements of emerging corporates, with
annual revenue between `5.00 billion to `15.00 billion;

Government Banking: caters to banking requirements of the Government, public sector undertakings, and
other government affiliates;

International Banking: offers debt, trade finance, treasury services, investment banking solutions,
financial advisory and global Indian banking to our international customers;

Multinational Corporate Banking: caters to the financial needs of multinational corporations that seek to
increase their footprint in the Indian market; and

Indian Financials Institution Banking: spearheads relationship development with various banks and
financial institutions nationally.

Branch banking
Our Branch Banking division serves two key segments through our branch network, which are business banking
(Business Banking) and retail banking (Retail Banking). Business Banking caters to the banking
requirements of SMEs in identified sectors with annual revenue of up to `5.00 billion, while Retail Banking
caters to the requirements of small business (including proprietorship/partnerships) and individual customers.
Our Branch Banking advances increased by 28.76% from `266,551.51 million as of March 31, 2015 to
`343,211.74 million as of March 31, 2016 and by 0.17% to `343,788.89 million as of June 30, 2016. As of
March 31, 2016, our total number of branches was 860, which we believe demonstrates our focus on expanding
our low-cost deposit base.

120

A summary of our branches as categorized by region and by the type of branch as of March 31, 2016 is set out
below.
As of March 31, 2016
Type of Branch
Number of Branches
Metropolitan
266
Urban
174
Semi-urban
260
Rural
160
Total
860

As of March 31, 2016

Region in India
Number of Branches
North
347
South
94
East
51
West
368
Total
860

Business Banking
Our Business Banking operation provides banking and advisory services to MSMEs in sectors such as
infrastructure services, food and agribusiness, life sciences, logistics, education, traders, auto ancillary, electrical
and electronic goods manufacturers and other engineering product manufacturers. Our Business Banking
operation comprises the following three business units based on factors such as revenue, sector and geography,
among others:

Commercial Business Banking: provides comprehensive banking solutions to medium-sized enterprises

with annual revenue generally between `1.00 billion to `5.00 billion;

Emerging Business Banking: caters to small enterprises with annual revenue generally between `0.10
billion to `1.00 billion; and

Small Business Banking: focuses on loans to micro-enterprises.

These groups offer a range of services, including fund-based lending (working capital and term financing),
inventory financing, healthcare equipment financing, crop lending, cash management, collections and payment
solutions, direct banking (phone and internet), trade and treasury services, advisory services and specialized
credit underwriting. We believe that the success of our Branch Business Banking is due to the concentration of
our branch network across significant SME clusters within India.
Retail Banking
Our Retail Banking operation serves the retail banking and wealth management needs of individual customers,
including Indian residents and NRIs as well as small businesses. We believe that our Retail Banking operation
delivers long-term value to our customers through effective relationship management, customized product
solutions, premium touch points direct access, research, investment advisory and wealth management services.
We offer a comprehensive retail product suite including secured business loans, cars loans, super bike loans,
commercial vehicle loans, construction equipment loans, loans against securities, gold loans, personal loans and
home loans, among others.
Our Retail Banking customers comprises the following three business units:

YES Prosperity: provides value-added services to customers by offering them a combination of highservice standards and expertise in wealth management;

YES First: offers a combination of high-service standards, expertise in wealth management, value-added
services, concierge solutions and premium lifestyle privileges to high net worth individuals; and

Global Indian Banking: provides customized service experience to NRIs, by offering a comprehensive
suite of basic banking facilities, online remittances, differentiated wealth management and investments in
alternate asset classes. Our representative office in Abu Dhabi is a part of our Global Indian Banking
product; see sub-section titled International Footprint on page 122 for additional details.

In addition, in order to facilitate convenient, direct access and high quality service for our retail customers, we
have created various direct access points that have been branded as YES TOUCH. These access points operate
24 hours a day, seven days a week.

121

The following table sets out the number of branches and ATMs in our network as of March 31, 2014, 2015 and
2016, respectively.
As of March 31,
2015

2014
Branches
ATMs

560
1,139

630
1,190

2016
860
1,609

International Footprint
We began our international operations by establishing a representative office in Abu Dhabi, United Arab
Emirates in April 2015 which has promoted our brand and visibility among NRIs in the region.
In October 2015, we commenced operations of our IBU at GIFT City. Our IBU at the IFSC is, for most
regulatory purposes, treated as a foreign branch. Further, the IBU will also allow us to raise foreign currency
funding through off-shore bond issuances and bilateral loans, among others.
Product Capital
Product capital is our selection of various products and services that suit the needs of our customers which
includes the following:
Transaction Banking
Our Transaction Banking product, Yes Transact has won several international awards and recognitions in the
fiscal year 2016. We were awarded Best Trade Finance Bank in India during The Asian Banker Transaction
Banking Awards 2016. Further, our YES BANK Snapdeal application programming interface banking solution
was awarded Best Corporate Payment Project in India during The Asian Banker Leadership Achievement
Awards, 2016 held in Vietnam. We were also awarded Cash Management Bank of the Year and Trade
Finance Bank of the Year in India during Asian Banker Summit 2015 held in Hong Kong.
Transaction Banking comprises core banking offerings such as corporate current accounts, cash management
services, capital markets, escrow services, trade finance and services, and bullion (gold and silver) trading.
These services are provided under our YES Transact brand. Our Transaction Banking team interacts with
customers to understand, address and service their strategic, financial and operating needs in the following
areas:

working capital and liquidity management;

treasury integration;

exposure and risk management;

inbound and outbound remittances;

state of the art integration with client-end ERP system to provide seamless receivables and payables
solutions;

innovative technological solutions for process automation and for integration of customers and inter-bank
systems;

regulatory and international trade advisory; and

bullion (gold and silver) purchase and gold on loan to fulfill working capital requirements.

We have also started offering API banking services, which provides an instant banking facility for our corporate
clients including Indias first instant refund facility in e-commerce.
Financial Markets

122

Backed by experienced professionals, we offer a competitive and comprehensive line of financial market
products and services. We provide effective risk management solutions relating to foreign currency and interest
rate exposures faced by our corporate clients. We proactively assist clients by making them aware of the risks
they face with respect to capital raising, investments, exports, imports and other market-related issues.
We have a Debt Capital Markets team with knowledge of the underlying market dynamics, coupled with strong
distribution and structuring capabilities. Since its inception, our Debt Capital Markets team has originated and
efficiently executed numerous transactions, across the product line, for clients including corporates, PSUs,
Government entities and NBFCs.
We also have received the Primary Dealership License for underwriting and bidding of Government securities.
We actively trade and distribute dated securities, treasury bills and Government bonds, which cover the
sovereign debt product needs of our clients. We also engage in proprietary trading to maximize returns by
investing in key fixed income, equities and global foreign exchange markets. In addition, we provide balance
sheet management, liquidity management, maintenance of cash and statutory reserve requirements, day-to-day
fund management and subordinated and hybrid debt capital solutions.
Loan Syndications
We have invested in establishing a strong loan syndication franchise over several years. Our Loan Syndication
team has strong credit appraisal and structuring capabilities, deep sector-specific knowledge, and strong
relationship management skills. Our Loan Syndication team has syndicated several medium and long-term
projects and other term loans. We believe we have built strong brand equity with other banks, NBFCs and other
financial institutions in this product category.
Structured Credits Group
An ongoing challenge faced by the Indian banking industry is a decline in asset quality. We have a team of
qualified and experienced professionals specializing in distressed asset management. We provide effective
solutions for distressed assets by leveraging our regulatory and legal understanding.
We employ multi-pronged resolution strategies, which includes operational and financial restructuring,
identifying strategic investors for the takeover of distressed assets, negotiating with borrowers for one-off
settlement, recovering through the enforcement of security interest under the Securitisation Act 2002 and selling
NPAs to asset reconstruction companies.
YES Securities
YES Securities (India) Limited (YSIL) is our brokerage and investment banking subsidiary. During the year
ended March 31, 2016, we expanded YSILs business beyond Mumbai and the national capital region to
additional cities.
YSIL is a well-integrated financial services firm offering a range of services, such as investment banking
(including equity capital markets and sustainable investment banking), institutional sales & trading and equity
research to our clients. The firm is a registered securities broker with SEBI and is also a member of NSE and
BSE. The following are descriptions of YSILs primary business functions:

Investment Banking: provides advisory and capital-raising services to large and midmarket corporate and
financial sponsor clients through key products such as mergers and acquisition advisory, private equity
fund-raising and equity capital markets. The investment banking team offers expertise across a variety of
sectors including food and agribusiness, media and entertainment, internet and e-commerce, consumer
markets, infrastructure, banking, financial services and insurance, industrials and logistics.

Sustainable Investment Banking: focuses on providing advisory services exclusively in the areas of clean
technology, renewable energy, environmental services and education.

Institutional Sales and Trading: caters to domestic institutional investors and foreign institutional
investors.

123

Equity Research: provides clients with research reports, to enhance portfolio performance and minimize
risk. The Equity Research team comprises experienced fundamental and technical research analyst covering
companies across diverse sectors.

Investments
As of March 31, 2016, our gross investments were `488,936.38 million, and our net investments as of the same
date were `488,384.66 million. Our average yield on investments was 8.08% for the fiscal year 2016.
The following table sets out details of our investments as of March 31, 2014, 2015 and 2016 and as of June 30,
2016.
Investment
2014
Government securities
Shares
Debentures and bonds
Subsidiaries, joint ventures
& other approved
securities
Others
Total

224,290.11
932.48
103,155.91
175.00

58.37%
0.24%
26.85%
0.05%

As of March 31,
As of June 30,
2015
2016
2016
(in ` million, except percentages)
300,012.13 69.40% 351,862.55 72.05% 334,888.03 72.65%
601.37
0.14%
628.16
0.13%
621.63
0.13%
94,667.48 21.90% 95,154.14 19.48% 90,335.62 19.60%
350.00
0.08%
500.00
0.10%
500
0.11%

55,696.83 14.49% 36,653.95

8.48% 40,239.80
8.24% 34,619.43
7.51%
384,250.33 100.00% 432,284.93 100.00% 488,384.66 100.00% 460,964.71 100.00%

Funding
Our funding operations are designed to ensure the availability of liquidity to all our businesses, while
minimizing cost. We have also implemented a funds transfer pricing policy for efficient management of the
sourcing and the application of funds. We raise funds through deposits (current, savings and time), domestic
market borrowings and the issuance of certificates of deposit. The table below sets out details of our deposits as
of March 31, 2014, 2015 and 2016 and as of June 30, 2016.
Deposit Type
2014
Current
Savings
Term
Total

70,171.61
93,275.19
578,473.35
741,920.15

9.4%
12.6%
78.0%
100.0%

As of March 31,
2015
2016
(in ` million, except percentages)
84,994.49
9.3%
109,250.77
9.8%
125,795.43
13.8%
204,176.99
18.3%
700,968.56
76.9%
803,767.57
71.9%
911,758.48 100.0%
1,117,195.33 100.0%

As of June 30,
2016
111,018.04
251,865.05
862,927.45
1,225,810.54

9.1%
20.5%
70.4%
100.0%

We also have the ability to raise borrowings from overseas sources, as well as in the form of Tier I and Tier II
capital through the issuance of subordinated bonds. The following table sets out details of our capital-raising
amounts for the periods indicated.
Year ended
March 31,
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Quarter ended June 30,
2017

Tier I

Upper Tier II
(in ` million)

Lower Tier II

1,754.00
820.00
2,250.00
1,500.00
1,400.00
-

1,986.00
1,940.00
5,430.00
928.00
6,400.00
3,816.00
7,041.00
38,992.00

1,000.00
1,800.00
549.00
5,600.00
3,064.00
8,645.00
10,597.00
-

We predominantly obtain current account balances from our Corporate Banking and Branch Banking customers,
savings deposits from the balances maintained by our individual customers and certain types of non individual

124

customers like trusts and associations, among others, and time deposits from both individual and corporate
customers. In addition, we borrow call money (overnight), notice money (2 to 14 days) and term money (14 to
365 days) from Indian financial market participants, including both domestic and foreign banks.
For the fiscal year 2015, we issued 53,492,272 shares pursuant to a qualified institutional placement at `550.00
and 3,610,200 shares pursuant to the exercise of stock options, from which we received `30,056.52 million in
aggregate net proceeds. For the fiscal year 2016, we issued 2,795,543 shares pursuant to the exercise of stock
options, from which we received `739.51 million in net proceeds.
For a description of our capital-raising activities since incorporation, see section titled Capital Structure on
page 66.
Operating Information
Capital adequacy
Indian banks have to comply with the regulatory limits and requirements as prescribed under the RBI Basel III
Capital Regulations, on an ongoing basis, with full implementation of such regulations by March 31, 2019. For a
description of the RBIs capital adequacy guidelines, see section titled Regulations and Policies on page 148.
As of June 30, 2016, our capital adequacy ratio under the RBI Basel III Capital Regulations was 15.1% and our
Tier I capital adequacy ratio was 9.9% and our CET I capital adequacy ratio was 9.5%.
As of March 31, 2016, our capital adequacy ratio under the RBI Basel III Capital Regulations was 16.5%. In
particular, our Tier I capital adequacy ratio was 10.7% and our CET I capital adequacy ratio was 10.3%.
As of March 31, 2015, our CRAR and Tier I capital adequacy ratio were 15.6%, and 11.5%, respectively, and as
of March 31, 2014, our CRAR and Tier I capital adequacy ratios were 14.4% and 9.8%, respectively.
For further details regarding Basel III capital regulations, see sub-section titled Industry OverviewFuture
Developments in the Banking Sector and Expected Domestic ReformsImplementation of the Basel III Capital
Regulations on page 113.
The following table sets out our capital adequacy ratios:
Ratio
2014
Common Equity Tier I
Additional Tier I capital
Tier I capital
Tier II capital
Total Capital
Credit Risk RWA
Market Risk RWA
Operational Risk RWA
Total RWA
Common Equity Capital Adequacy Ratio (%)
Capital Adequacy Ratio Tier I capital (%)
Capital Adequacy Ratio Tier II capital (%)
Total Capital Adequacy Ratio (%)

69,913.02
5,061.34
74,974.36
34,956.51
109,930.87
643,295.25
79,983.27
42,690.46
765,968.97
9.1
9.8
4.6
14.4

As of March 31,
2015
2016
(in ` million, except percentages)
114,085.60
137,064.01
4,670.06
5,629.29
118,755.66
142,693.30
42,757.37
76,051.10
161,513.03
218,744.40
907,147.96
1,151,018.79
69,876.20
95,241.38
56,998.06
83,238.59
1,034,022.22
1,329,498.77
11.0
10.3
11.5
10.7
4.1
5.8
15.6
16.5

As of June 30,
2016
137,080.49
5,124.29
142,204.78
75,687.57
217,892.35
1,252,155.43
83,871.76
106,498.75
1,442,525.94
9.5%
9.9%
5.2%
15.1%

Asset Quality and Composition

Loan portfolio
Our current exposure limit for a single borrower is 15.00% of total capital and for a group of borrowers is
40.00% of total capital. However, in the case of financing for infrastructure projects, our exposure limit may be
extended to 20.00% and 50.00% of total capital for a single borrower and a group of borrowers, respectively.
Total capital comprises Tier I and Tier II capital for determining capital adequacy.

125

The following table sets out our total outstanding exposure by industry, including advances, investments,
guarantees, acceptances, endorsements and other obligations, as of June 30, 2016.
Industry
All Engineering
Basic Metal and Metal Products
Beverages (excluding Tea & Coffee) and Tobacco
Cement & Cement Products
Chemicals and Chemical Products (Dyes, Paints, etc.)
Construction
Food Processing
Gems and Jewelry
Glass & Glassware
Infrastructure
Leather & Leather Products
Mining & Quarrying
Other Industries
Paper & Paper Products
Petroleum (non-infra), Coal Products (non-mining) and Nuclear Fuels
Residuary other advances
Rubber, Plastic and their Products
Textiles
Vehicles, Vehicle Parts and Transport Equipment
Wood and Wood Products
Grand Total

Exposure
(in ` million)
51,283.30
70,888.12
4,459.24
17,341.90
79,593.63
91,228.90
50,954.34
30,544.14
1,919.73
333,108.58
500.17
7,912.64
625,138.46
12,713.07
50,205.53
495,851.28
10,958.19
17,800.01
43,598.98
2,289.18
1,998,289.41

(%)
2.57
3.55
0.22
0.87
3.98
4.57
2.55
1.53
0.10
16.67
0.03
0.40
31.28
0.64
2.51
24.81
0.55
0.89
2.18
0.11
100.00

Priority sector lending

Commercial banks in India are required by the RBI to lend, through advances or investments, 40.00% of their
ANBC or credit equivalent amount of off-balance sheet exposures, whichever is higher, to specified sectors
known as priority sectors, subject to certain exemptions permitted by RBI from time to time. Priority sector
advances include advances to the agriculture sector, micro and small enterprises, vulnerable groups of society,
housing and education finance.
Any shortfall in the amount required to be lent to the priority sectors may be required to be deposited with the
Rural Infrastructure Development Fund established by NABARD or funds with other financial institutions as
specified by the RBI.
The following table sets out a breakdown of our priority sector lending in the form of advances for the periods
indicated.

Agriculture
advances
Small-scale industry
Services and others
Total priority
sector

As of March 31,
As of June 30,
2014
2015
2016
2016
Advances % of total Advances % of total Advances % of total Advances % of total
(in ` million, except percentages)
73,567.18
50.51 95,163.91
50.23 107,346.91
40.49 95,678.51
36.02%
49,601.09
22,473.95
145,642.22

34.06 75,239.86
15.43 19,055.19
100.00 189,458.96

39.71 130,782.32
10.06 27,014.23
100.00 265,143.46

49.33 155,913.29
10.18 14,025.22
100.00 265,617.02

58.70%
5.28%
100.00%

Non-performing assets and provisioning

As of June 30, 2016, gross NPAs amounted to `8,445.59 million, or 0.79% of our gross advances, and net NPAs
amounted to `3,023.92 million, or 0.29% of our net advances. We maintained provisions of 64.20% of gross
NPAs as of June 30, 2016. In addition, our total gross standard restructured advances amounted to `6,192.90
million, or 0.58% of gross advances, as of June 30, 2016. See section titled Selected Statistical Information on
page 132.

126

The Bank had non-performing investments of `391.38 million as of June 30, 2016, with provisions of `154.48
million as of the same date.
Sector-wide Non-Performing Advances
The following table set out the gross NPAs and corresponding provisions in each sector as of March 31, 2014,
2015 and 2016 and as of June 30, 2016.

2014
Gross
Provision
NPA
Agriculture
Micro
and
small
enterprises
Other priority sector
Export trade
NBFC
Trade
Other
Total

20.56
164.75

20.45
77.15

34.45
120.29
255.10
1,154.11
1,749.26

33.71
120.29
255.10
981.87
1,488.58

As of March 31,
2015
2016
Gross
Provision
Gross
Provision
NPA
NPA
(in ` million)
54.22
38.95
2,115.50
840.32
500.59
242.07
479.83
185.97

As of June 30,
2016
Gross
Provision
NPA
2,108.08
359.01

833.50
176.08

40.28
45.25
120.29
205.44
2,167.94
3,134.01

326.58
5,651.91
8,445.59

122.59
4,289.50
5,421.67

28.24
39.27
120.29
201.11
1,586.82
2,256.76

85.18
4,809.30
7,489.81

37.48
3,581.30
4,645.07

Service and Technology Processes

We believe that our back-end operations and technology infrastructure are critical to ensuring that we deliver
effective customer service and seamless operations. These critical back-end functions include key business
functions such as quality assurance, technology solutions, risk management, internal audit and human capital.
Business processes
We incorporate sustainable practices into our business processes to achieve added efficiencies and generate
long-term growth. We believe that this ensures an effective maintenance mechanism through ongoing feedback
as well as complaint resolution from employees and customers. Ongoing business processes initiatives that we
have implemented to date include:

two national operating centers (NOCs) based in Mumbai and Gurgaon established with a focus on
providing an immediate response to customer requests and to provide business continuity planning. The
NOCs house our centralized back-office functions of various businesses including our YES TOUCH
Contact Centre, which is located at the NOC in Gurgaon;

the establishment of our largest operations management and services delivery facility in Ambattur, Chennai;

adhering to business excellence frameworks and quality practices such as Five S, Quality Circle, Lean Six
Sigma and ISO 9001 Standard. We monitor our back-office operations at both NOCs, 101 key branches and
our internal audit functions to comply with ISO 9001 (Quality Management System) certification;

ensuring our customer complaints management process is certified under ISO 10002;

ensuring our business continuity management system is certified under ISO 22301;

ensuring our information security management systems are certified under ISO 27001;

evaluating all critical-to-quality parameters, including an end-to-end review/analysis of all critical business
processes;

putting in place a framework for the measurement of customer experience, including customer complaint
registers, customer satisfaction surveys, telephone surveys and employee feedback and ensuring customer
feedback is collected, analyzed and acted upon in a timely and consistent manner;

127

digitizing transaction processing to enable paperless transactions; and

leveraging social media as a new channel for customer service to address questions and complaints, receive
feedback, share relevant content about products and services and build our brand.

Quality Assurance
We endeavor to provide a consistent and superior banking experience to our customers. We believe in adopting a
focused, knowledge-based approach to establish long-term partnerships, thereby enabling us to create and share
value that extends beyond the traditional realm of banking.
We strive to ingrain a culture of continuous improvement across all our departments. We utilize the Voice of
Customer process, a process used to capture feedback from customers. We also use branch service committee
meetings, transactional turnaround time, score cards and customer satisfaction surveys to complement the Voice
of Customer process. Service metrics for assessing our customer service are monitored and analyzed. We have
been certified for ISO 9001 for our back-office processes and operations and 101 branches in India. Our other
ISO standards include ISO 27001 (Information Security Management), ISO 10002 (Complaints Management),
ISO 14001 (Environment Management System) and for ISO 22301 (Business Continuity Management System).
In general, we believe we have established high standards in operational excellence using process improvement
methodologies such as Six Sigma, Lean and 5S & Quality Circles. Further, we observe and adopt efficient and
effective corporate practices utilized by other world-class organizations.
Information Technology
We have adopted modern technology and international best practices with respect to governance frameworks for
the banking sector. As a new generation bank, we have deployed technology that we believe will help us gain a
competitive advantage over our competitors and achieve high standards of customer service.
Our IT strategy is divided into two parts, the first being Run the Bank, which focuses on initiatives aimed at
ensuring efficient and effective operations and the second being Build the Bank, which focuses on
transformative technologies that could further enhance our business.
An example of our Run the Bank strategy includes, our launch of Deliverable Management Solution, a
program we developed in-house, that helps automate the tracking and reporting of various physical deliverables
across our multiple business units.
An example of our Build the Bank strategy was our implementation of API banking, which enabled the
launch of our digital wallet, YES PAY, a simple user-friendly mobile application that allows users across
India to pay for a wide range of services.
We are currently undertaking several IT initiatives that we expect to contribute to our business in the near
future. These initiatives include upgrading our core banking system to best-in-class applications to ensure our
information technology infrastructure can meet growing demand, initiatives on incorporating the latest state-ofthe-art technology in digital banking, revamping our corporate website, launching our first credit card, launching
a new customer relationship management toolkit and upgrading our business intelligence framework to enhance
our customer behavioral analytics capabilities, among others.
We have received a number of awards in recent years for our innovations, such the API Banking and Bank in
a Box Innovative Solution Finnoviti Awards from Banking Frontiers in 2016.
Responsible Banking
Our Responsible Banking team focuses on providing banking services to untapped markets and under-served
sections of society, and provides services underpinned by a focus on sustainability and socially responsible
banking initiatives for marginalized communities. These services include positive impact financing such as
climate finance, inclusive banking, nurturing talent, social outcome-based initiatives, contribution to national
goals of inclusivity, skill development and participating in the global public discourse on sustainable
development.

128

Our Responsible Banking team has been actively involved with protocols established by national and
international bodies including U.N. Global Compact, Natural Capital Declaration, CDP, India GHG Program
and TERI Council for Business Sustainability. We were the first Indian bank to join the World Business Council
for Sustainable Development and the Integrated Reporting Lab India, a collaborative effort between CIIITC
Centre of Excellence for Sustainable Development and the International Integrated Reporting Council to
advance the adoption of integrated reporting by Indian companies.
We were also the only bank to be featured in the U.N. Secretary Generals Climate Finance report, which was
launched at the Climate Finance Ministerial Meeting held in October 2015.
As a result of our efforts in these areas, we received the Karlsruhe Sustainable Finance Award in 2015.
Internal Audit
Our internal audit department performs independent and objective assessments of all business groups and other
functions, to monitor adequate implementation of, effectiveness of and adherence to the internal controls,
processes and procedures instituted by management. We have adopted a risk-based approach to our internal
audit. The primary focus of the audit is on key risk areas, which are of substantial importance to us, and it
allocates audit resources based on an assessment of the operational risks in the various businesses. The approach
has been structured to comply with the RBIs guidelines and international best practices. Our internal audit
department reports to the Managing Director and Chief Executive Officer for regular activities and to the Audit
Committee for audit planning and reporting.
In addition, we subject our operations to a concurrent audit by independent, third-party audit firms to
complement our internal audits. The concurrent audit covers core activities such as credit portfolio, financial
markets, operations and branches. All audit reports are circulated to the relevant management teams and the
Audit Committee of our Board.
Our internal audit department is ISO 9001:2008 certified (Quality Management System).
Compliance
We have implemented a stringent compliance culture across the organization, pursuant to our strategic goals of
transparency and trust among our shareholders. We have a dedicated compliance department that is tasked with
ensuring regulatory compliance across all our businesses and operations. The key functions of this department
include the dissemination of key regulatory updates affecting our various businesses, the review of new products
and processes from a regulatory compliance perspective, providing guidance on compliance-related matters, and
providing training to employees on compliance-related aspects of our business.
We have also put in place KYC and AML policies approved by our board of directors and transaction
monitoring procedures in accordance with applicable RBI guidelines.
Human Resources
We have made significant investments in our employees in the last three years, implementing initiatives such as
executive engagement, improving workplace health, wellness and promoting learning and development. As a
result of our investment and commitment to our employees, we believe we have good relationships with our
workforce, which numbered more than 15,000 as of March 31, 2016.
At the executive levels, professional entrepreneurship is the cornerstone of our human capital philosophy, which
we believe encourages executives to take ownership and responsibility. To further foster the ethos of ownerpartner-manager, we have implemented two stock option schemes:

Joining stock option plan: stock options are awarded to key executives at the time of joining, of which
50% of the stock options granted vest after 36 months from the date of grant and the remaining 50% after
60 months.

Performance stock options plan: stock options are selectively awarded to top-performing executives, of
which 30% of options granted vest after 36 months from the date of grant, 30% after 48 months and the
remaining 40% after 60 months.

129

We are committed to increasing the value of our human resources by offering our employees growth and
educational opportunities. For our newer employees, we have instituted a number of initiatives, to build on their
talent and education, including mentorship platforms, engagement platforms, and outreach program with
universities.
We have received various recognitions for our commitment to our employees including, Dream Company to
Work For, Best Employer of the Year and Best Employer Brand of the Year (Banking Sector) by the
World HRD Congress in 2016, Most Inspiring Workplace of the Year by Banking Frontiers in 2015.
Competition
We face competition in all the principal lines of our business. Our primary competitors are some of the public
sector banks, private sector banks, foreign banks, cooperative banks and, for some products, NBFCs, mutual
funds, insurance companies and investment banks. We believe that our principal competitive advantage over our
competitors is due to our knowledge-focused approach, our application of technology and selective outsourcing
and the quality of our human resources. We evaluate our competitive position separately along our business
lines. The RBI has liberalized its licensing regime and intends to issue licenses on an ongoing basis, subject to
the RBIs qualification criteria. In September 2015, the RBI has issued licenses to two new private sector
banks, 11 payment banks and ten small finance banks. The RBI has also indicated that it will issue guidelines
with respect to a continuous licensing policy for universal banks. The expansion of existing competitors or the
entry of new players could increase competition.
Our principal competitors for Corporate Banking customers, including our emerging corporate banking
(ECB) customers, are public sector banks, private sector banks, foreign banks and financial institutions. The
large public sector banks have traditionally been market leaders in both these segments, though new private
sector banks also compete in the corporate banking market on the basis of efficiency, service delivery and
technology. Foreign banks have generally served the needs of multinational companies and larger Indian
corporations. We believe our top management-focused relationship approach together with our technological
edge and the One Bank model has kept us competitive. For our ECB customers, as well as our Business
Banking customers, we believe our emphasis on quality service, knowledge-focused banking approach has
helped us compete effectively in this market.
With respect to Retail Banking, the retail asset business in India is in a relatively early stage of development. As
per capita income levels continue to increase, we expect continued growth in retail lending, which will create
opportunities for newer banks like us. However, we face competition from private sector banks, foreign banks,
public sector banks and NBFCs in this segment. We believe that our customer service focus, use of technology
to provide a customer-friendly banking experience, product and service offerings, and competitive interest rates
will help us continue to remain competitive within an increasingly competitive landscape.
Mutual funds are another source of competition. Mutual funds offer tax advantages, have the capacity to earn
competitive returns and have increasingly become a viable alternative to bank deposits. In mutual fund sales and
other investment-related products, our principal competitors are brokerage houses, foreign banks and private
sector banks. We compete with banks, brokers, corporate agents and financial consultants and advisors with
respect to sales of life and non-life insurance products. We believe that our commitment to knowledge capital
gives us a competitive edge in advisory and planning-related products and services.
Subsidiary
As of March 31, 2016, we have one subsidiary, Yes Securities (India) Limited, whose registered address is
Indiabulls Finance Centre, Tower II, 19th Floor, Senapati Bapat Marg, Elphinstone Road, Mumbai 400013. As
of March 31, 2016, Yes Securities (India) Limited does not have any branches and conducts its business through
our branches.
Branches
As of March 31, 2016, we have a network of 860 branches and 1,609 ATMs. The table below sets out a
summary of our branches by state:
State

Number of branches

130

State

Number of branches
1
11
1
8
3
8
4
1
1
83
8
67
108
8
7
5
50
13
1
44
149
1
1
1
1
4
1
71
76
1
26
14
1
53
9
19
860

Andaman and Nicobar Islands

Andhra Pradesh
Arunachal Pradesh
Assam
Bihar
Chandigarh
Chattisgarh
Dadra and Nagar Haveli
Daman and Diu
Delhi
Goa
Gujarat
Haryana
Himachal Pradesh
Jammu and Kashmir
Jharkhand
Karnataka
Kerala
Lakshadweep
Madhya Pradesh
Maharashtra
Manipur
Meghalaya
Mizoram
Nagaland
Odisha
Puducherry
Punjab
Rajasthan
Sikkim
Tamil Nadu
Telangana
Tripura
Uttar Pradesh
Uttarakhand
West Bengal
Total

Properties
Our registered and corporate office is located at Nehru Centre, 9th Floor, Discovery of India Building, Dr. Annie
Besant Road, Worli, Mumbai 400 018, India. As of March 31, 2016, all our NOCs and 860 branches are under
lease. Also, all 1,609 of our ATM locations are under lease.
Insurance
We maintain ongoing insurance policies in respect of our premises, office automation, furniture and fixtures,
electronic equipment, employee fidelity, cash in premises, cash in transit, public liability and other valuables
and documents. These assets are insured against burglary, theft and fire. We also maintain director and officer
liability insurance and stock broker indemnity insurance as well as insurance policies for our employees
including group term insurance, group medical claim policies and group personal accident policies. We believe
that we maintain all material insurance policies commonly required for a bank in India.
Intellectual Property
We are the registered proprietor of the trademark YES BANK and various other trademarks. We are also the
owner of copyright in the artistic work in the YES BANK logo, which has been duly registered with the
Registrar of Copyrights.

131

SELECTED STATISTICAL INFORMATION

The following information should be read together with our standalone financial statements, including the notes
thereto, and the section Managements Discussion and Analysis of Financial Condition and Results of
Operations appearing elsewhere in this Preliminary Placement Document. All amounts presented in this section
have been prepared based on data used in compiling our Financial Statements and our unaudited and
unreviewed management accounts not included in this Preliminary Placement Document. Footnotes appear at
the end of each related section of tables. For the purposes of a comparative analysis in the discussion below,
previous years figures have been reclassified wherever necessary.
Average Balance Sheet
The tables below present the average balances for interest-earning assets and interest-bearing liabilities together
with the related interest revenue and expense amounts, resulting in the presentation of the average yield and cost
for each period. The average balance is the average of monthly balances outstanding. The average yield on
average interest-earning assets is the ratio of interest revenue to average interest-earning assets (except that
investments include equity investments and interest revenue with respect to investments including dividends on
such equity investments). The average cost on interest-bearing liabilities is the ratio of interest expense to
average interest-bearing liabilities. The average balances of advances include NPAs and are net of provisions for
credit losses. The average balances of investments are net of mark-to-market provision. We have not
recalculated tax exempt income on a tax equivalent basis.

Average
Balance

Interest-earning
assets:
Advances
Investments(3)
Others(1)
Total interestearning assets
Non-interestearning assets:
Fixed assets
Other assets(2) (4)
Total noninterest earning
assets
Total assets
Interest-bearing
liabilities:
Deposits
Borrowings
Total interestbearing liabilities
Non-interestbearing
liabilities:
Capital and
reserves
Other liabilities
Total noninterest bearing
liabilities
Total liabilities

2014
Interest
Average
Income / Yield / Cost
Expense
(%)

492,621.71 65,399.85
387,824.73 33,001.73
26,215.49 1,411.94
906,661.93 99,813.52

Year ended March 31,

2015
Average
Interest
Average
Balance
Income / Yield / Cost
Expense
(%)
(in ` million, except percentages)

13.28% 632,735.09
8.51% 409,703.27
5.39%
38,989.28
11.01% 1,081,427.64

80,160.94
33,557.29
2,001.83
115,720.06

Average
Balance

2016
Interest
Average
Income/ Yield / Cost
Expense
(%)

12.67% 835,296.15 97,114.79

8.19% 434,105.20 35,082.09
5.13%
61,062.77
3,137.54
10.7% 1,330,464.12 135,334.42

11.63%
8.08%
5.14%
10.17%

2,651.53
109,916.46
112,567.99

2,935.28
97,710.52
100,645.80

3,945.74
111,018.08
114,963.82

1,019,229.92

- 1,182,073.44

- 1,445,427.94

666,569.75 56,186.40
206,415.93 16,464.52
872,985.68 72,650.92

8.43% 793,401.03
7.98% 222,077.73
8.32% 1,015,478.76

65,368.18
15,473.51
80,841.69

8.24% 980,663.32
6.97% 266,364.38
7.96% 1,247,027.70

71,784.17
17,883.02
89,667.19

7.32%
6.71%
7.19%

65,869.00

104,924.89

128,955.50

80,375.24
146,244.24

61,669.79
166,594.68

69,444.74
198,400.24

1,019,229.92

- 1,182,073.44

- 1,445,427.94

Three months ended June 30,

Average
Balance

2015
Interest
Income /
Expense

Average
Average
Yield /
Balance
Cost (%)
(in ` million, except percentages)

Interest-earning assets:

132

2016
Interest
Income /
Expense

Average
Yield /
Cost (%)

Three months ended June 30,

Average
Balance

Advances
Investments(3)
Others(1)
Total
interest-earning
assets
Non-interest-earning
assets:
Fixed assets
Other assets(2) (4))
Total
non-interest
earning assets
Total assets
Interest-bearing
liabilities:
Deposits
Borrowings
Total
interest-bearing
liabilities
Non-interest-bearing
liabilities:
Capital and reserves
Other liabilities
Total
non-interest
bearing liabilities
Total liabilities

2015
Interest
Income /
Expense

773,767.60
417,855.11
50,717.90
1,242,340.61

Average
Average
Yield /
Balance
Cost (%)
(in ` million, except percentages)
23,284.81
12.07%
1,031,899.53
8,555.00
8.21%
472,764.19
678.66
5.37%
75,576.38
32,518.47
10.50%
1,580,240.10

3,335.26
106,493.50
109,828.75

4,940.46
126,093.67
131,034.13

1,352,169.37

1,711,274.23

914,824.96
252,581.74
1,167,406.70

17,648.22
4,272.22
21,920.44

7.74%
6.78%
7.53%

1,154,826.68
332,434.54
1,487,261.22

119,935.91
64,826.76
184,762.67

142,089.86
81,923.15
224,013.01

1,352,169.37

1,711,274.23

2016
Interest
Income /
Expense

Average
Yield /
Cost (%)

28,400.58
9,589.72
632.77
38,623.07

11.04%
8.14%
3.36%
9.80%

19,547.50
5,909.78
25,457.28

6.79%
7.13%
6.87%

Notes:
1.

Excludes balances with the RBI held primarily for CRR, which do not carry interest and includes
application money.

2.

Includes balances with the RBI held primarily for CRR, which do not carry interest.

3.

Amortization amount in respect of held-to-maturity investments has been netted off from Investments as
per RBI guidelines.

4.

Includes investment in RIDF and related interest income. According to RBI guidelines, RIDF has been
classified as other assets.

Analysis of Changes in Interest Income and Interest Expense by Volume and Rate
The following tables set forth, for the periods indicated, the analysis of the changes in our interest income and
interest expense between average volume and changes in average rates.
Year ended March 31, 2015 vs. Year ended
Year ended March 31, 2016 vs. Year ended
March 31, 2014
March 31, 2015
Net Changes
Change in
Change in
Net Changes
Change in
Change in
in Interest
Average
Average
in Interest
Average
Average
Volume
Rate
Volume
Rate
(in ` million)
Interest income:
Advances
Investments
Others
Total interest-earning
assets
Interest expense:

14,761.09
555.56
589.89
15,906.54

18,601.28
1,861.74
687.98
21,151.01

(3,840.19)
(1,306.18)
(98.09)
(5,244.47)

133

16,953.85
1,524.80
1,135.71
19,614.36

25,662.37
1,998.67
1,133.32
28,794.37

(8,708.52)
(473.87)
2.39
(9,180.01)

Deposits
Borrowings
Total interest-bearing
liabilities
Net interest income(1)

Year ended March 31, 2015 vs. Year ended

Year ended March 31, 2016 vs. Year ended
March 31, 2014
March 31, 2015
Net Changes
Change in
Change in
Net Changes
Change in
Change in
in Interest
Average
Average
in Interest
Average
Average
Volume
Rate
Volume
Rate
(in ` million)
9,181.78
10,690.84
(1,509.06)
6,415.99
15,428.51
(9,012.52)
(991.01)
1,249.24
(2,240.25)
2,409.51
3,085.72
(676.21)
8,190.77
11,940.09
(3,749.32)
8,825.50
18,514.23
(9,688.73)
7,715.77

9,210.92

(1,495.15)

10,788.86

10,280.14

508.72

Three months ended June 30, 2016 vs. Three months ended June 30, 2015
Net Changes in Interest Change in Average Volume Change in Average Rate
(in ` million)
Interest income:
Advances
Investments
Others
Total interest-earning assets
Interest expense:
Deposits
Borrowings
Total interest-bearing liabilities
Net interest income(1)

5,115.77
1,034.71
(45.87)
6,104.61

7,767.91
1,124.19
332.62
9,224.72

(2,652.14)
(89.47)
(378.50)
(3,120.11)

1,899.28
1,637.56
3,536.84
2,567.77

4,629.96
1,350.65
5,980.61
3,244.11

(2,730.68)
286.91
(2,443.77)
(676.34)

Note:
1.

The changes in net interest income between periods have been reflected as attributed either to volume or
rate changes. For the purposes of this table, changes which are due to both volume and rate have been
allocated solely to changes in rate.

Yields, Spreads and Margins

The following table sets forth, for the periods indicated, the yields, spreads and interest margins on our interestearning assets.
Year ended March 31,
Three months ended June 30,
2015
2016
2015
2016
(in ` million, except percentages)
906,661.93
1,081,427.64
1,330,464.12
1,242,340.61
1,580,240.10
872,985.68
1,015,478.76
1,247,027.70
1,167,406.70
1,487,261.22
2014

Average interest-earning assets

Average
interest-bearing
liabilities
Average total assets/liabilities
Average interest-earning assets as
a percentage of average total
assets (%)
Average
interest-bearing
liabilities as a percentage of
average total assets (%)
Average interest-earning assets as
a percentage of average total
liabilities (%)
Yield on average interest earning
assets(1) (%)
Cost of funds(2) (%)
Spread(3) (%)
Net interest margin(4) (%)

1,019,229.92
88.96

1,182,073.44
91.49

1,445,427.94
92.05

1,352,169.37
91.88

1,711,274.23
92.34

85.65

85.91

86.27

86.34

86.91

88.96

91.49

92.05

91.88

92.34

11.01

10.70

10.17

10.50

9.80

8.32
2.69
3.00

7.96
2.74
3.23

7.19
2.98
3.43

7.53
2.97
3.42

6.87
2.94
3.34

Notes:
1.

Yield on average interest earning assets is calculated as the ratio of interest income to average interestearning assets.

134

2.

Cost of funds is the ratio of interest expense to average interest-bearing liabilities.

3.

Spread is the difference between yield on average interest-earning assets and cost of average interest
bearing liabilities/cost of funds.

4.

Net interest margin is the ratio of interest income less interest expense to average interest-earning assets.

Return on Equity and Assets

The following table presents selected financial ratios for the periods indicated.
Year ended March 31,
2014
Net profit
Average total assets
Average shareholders equity(1)
Return on equity (net profit to average
shareholders equity) (%)
Return on assets (net profit to average
assets) (%)
Average shareholders equity as a
percentage of average total assets
(%)(2)
Dividend payout ratio (%)(3)

16,177.80
1,019,229.92
65,869.00
24.56

Three months ended June

30,
2015
2016
2015
2016
(in ` million, except percentages)
20,053.61
25,394.47
5,511.98
7,318.02
1,182,073.44
1,445,427.94
1,352,169.37
1,711,274.23
104,924.89
128,955.50
119,935.91
142,089.86
19.11
19.69
18.38
20.60

1.59

1.70

1.76

1.63

1.71

6.46

8.88

8.92

8.87

8.30

17.81

18.24

16.50

NA

NA

Notes:
1.

Average shareholders equity is the monthly average of share capital, reserves and surplus.

2.

Average shareholders equity as a percentage of average total assets is calculated as average

shareholders equity divided by average total assets.

3.

Dividend payout ratio is the dividends declared per share divided by basic earnings per share.

Investment Portfolio
The following tables set forth, as of the dates indicated, information related to our total net investment portfolio.
Book
value(2)

As of March 31, 2014

Held to Available Held for
maturity
for sale trading

As of March 31, 2015

As of March 31, 2016
Held to
Available Held for
Book
Held to
Available Held for
maturity
for sale
trading
value(2)
maturity
for sale
trading
(in ` million)
23,064.79 1,892.72 300,012.13 233,685.00 49,793.45 16,533.68 351,862.55 270,744.07 23,180.76 57,937.72
Book
value(2)

Government 224,290.11 199,332.60

securities
Shares
932.48
932.48
601.37
601.37
628.16
628.16
Debentures
103,155.91
8,750.00 94,405.91
- 94,667.48
8,750.00 80,347.69 5,569.79 95,154.14
8,750.00 75,281.10 11,123.04
and bonds
Subsidiaries,
175.00
175.00
350.00
350.00
500.00
500.00
joint ventures
and
other
approved
securities
Others(1)
55,696.83
- 55,696.83
0.00 36,653.95
- 35,174.02 1,479.93 40,239.80
- 39,500.94
738.86
Total
384,250.33 208,257.60 174,100.01 1,892.72 432,284.93 242,785.00 165,916.53 23,583.40 488,384.66 279,994.07 138,590.97 69,799.62

Book
value(2)
Government securities
Shares
Debentures and bonds
Subsidiaries, joint ventures and other approved

334,888.03
621.63
90,335.62
500.00

135

As of June 30, 2016

Held to
Available for
maturity
sale
(in ` million)
266,844.59
26,336.30
621.63
8,750.00
78,482.13
500.00
-

Held for
trading
41,707.14
3,103.49
-

As of June 30, 2016

Held to
Available for
maturity
sale
(in ` million)

Book
value(2)
securities
Others(1)
Total

34,619.43
460,964.71

276,094.59

Held for
trading

30,874.46
136,314.52

3,744.97
48,555.60

Notes:
1.

Others includes investment in pass-through certificates, asset-backed securities, mortgage-backed

securities, commercial papers, certificate of deposits, venture capital and asset reconstruction companies.

2.

Book value indicates carrying value of investments adjusted for mark to market provision, if any.

Residual Maturity Profile

Available for Sale
The following tables set forth, as of the dates indicated, an analysis of the residual maturity profile of our
investments in securities classified as available for sale securities and their weighted average market yields.
Up to One Year
Amount
Government securities
Shares
Debentures and bonds
Subsidiaries and joint
ventures
Others
Total

One to Five Years

Yield

Amount

6,489.38
70.96
6,650.00
-

7.07% 6,936.03
0.00%
464.82
11.70% 20,353.11
-

6,673.11
19,883.45

8.76% 27,395.46
9.16% 55,149.43

Up to One Year
Amount
Government securities
Shares
Debentures and bonds
Subsidiaries and joint
ventures
Others
Total

More than Ten

Years
Yield
Amount
Yield
Amount
Yield
(in ` million, except percentages)
7.52% 4,369.94
7.90% 5,385.41
7.97%
0.00%
0.00%
92.39
0.00%
9.60% 31,486.79
9.70% 16,791.20
9.37%
7.54%
382.50
8.24% 36,239.23

One to Five Years

Yield

Amount

7,632.61
3.60
5,750.00
-

6.45% 8,151.15
0.00%
532.17
11.99% 39,301.46
-

2,382.90
15,769.12

8.99% 23,339.00
8.85% 71,323.78

As of March 31, 2016

Five to Ten Years

0.00% 5,049.87
9.38% 27,318.87

Yield
7.57%
0.00%
9.78%
-

8.96% 39,500.94
8.93% 138,590.97

7.86%
8.80%

More than Ten

Years
Yield
Amount
Yield
Amount
Yield
(in ` million, except percentages)
7.45% 5,165.75
7.82%
5,386.79 7.85%
0.00%
85.86 0.00%
9.03% 20,520.37 11.69% 12,910.29 9.52%
0.00%
10.75%

Amount
23,180.76
628.16
75,281.10
-

As of June 30, 2016

Five to Ten Years

7.52%
382.50
8.29% 26,068.63

Grand Total

Grand Total
Amount

Yield

26,336.30
621.63
78,482.13
-

7.31%
0.00%
10.02%

4,770.06 8.43% 30,874.46

23,152.99 8.79% 136,314.52

7.68%
8.91%

Held to Maturity
The following tables set forth, as of the dates indicated, an analysis of the residual maturity profile of our
investments in securities classified as held to maturity securities and their weighted average market yields.
Up to One Year
Amount
Government
securities
Shares
Debentures
and
bonds
Subsidiaries and
joint ventures
Others

As of March 31, 2016

Five to Ten Years

One to Five Years

Yield

Amount

More than Ten

Years
Yield
Amount
Yield
Amount
Yield
(in ` million, except percentages)
7.52%
98,504.49
7.87% 75,911.38
8.00%

19,243.65

7.16%

77,084.54

0.00%

0.00%

8,750.00

8.45%

0.00%

0.00%

0.00%

136

Grand Total
Amount

Yield

270,744.07

7.76%

0.00%

8,750.00

8.45%

500.00

0.00%

500.00

0.00%

Up to One Year
Amount
19,243.65

Total

Yield
7.16%

Amount
77,084.54

Up to One Year
Amount
Yield
Government
securities
Shares
Debentures
and
bonds
Subsidiaries and
joint ventures
Others
Total

4,730.36

4,730.36

As of March 31, 2016

Five to Ten Years

One to Five Years

7.07%

Yield
7.52%

Yield
7.92%

Grand Total
Amount
279,994.07

As of June 30, 2016

Five to Ten Years More than Ten Years
Amount
Yield
Amount
Yield
(in ` million, except percentages)
7.32% 104,791.59 7.73% 76,748.40
7.86%

Yield
7.77%

One to Five Years

Amount
Yield

Grand Total
Amount
Yield

80,574.24

266,844.59

7.63%

8,750.00

8.45%

7.07%

Amount
108,933.49

More than Ten

Years
Amount
Yield
76,411.38 7.95%

80,574.24

8,750.00

7.32%

113,541.59

8.45%
-

500.00

0.00%

500.00

0.00%

7.78%

77,248.40

7.81%

276,094.59

7.64%

Held for Trading

The following tables set forth, as of the dates indicated, an analysis of the residual maturity profile of our
investments in securities classified as held for trading securities
As of March 31, 2016
Up to One Year
Amount
Government
securities
Shares
Debentures
and
bonds
Subsidiaries and
joint ventures
Others
Total

One to Five Years

Yield

Amount

Yield
Amount Yield
(in ` million, except percentages)
736.84
7.57% 1,509.98 7.83%

55,369.48

7.06%

0.00%

9,450.00

8.99%

182.75

738.86
56,108.33

8.08%
7.08%

10,186.84

0.00%
8.88%

Amount

Yield

More than Ten

Years
Amount Yield

Grand Total
Amount

Yield

321.42

7.98%

57,937.72

7.09%

8.57%

1,490.28

7.96%

11,123.04

8.84%

1,692.74

0.00%
7.91%

1,811.71

0.00%
7.96%

738.86
69,799.62

8.08%
7.38%

As of June 30, 2016

One to Five Years
Five to Ten Years

Up to One Year

Government
securities
Shares
Debentures
and
bonds
Subsidiaries and
joint ventures
Others
Total

Five to Ten Years

Amount

More than Ten

Years
Amount Yield

Yield
Amount Yield
(in ` million, except percentages)
1,494.09
7.21%
163.08 8.10% 1,230.38

Grand Total
Amount

Yield

7.75%

41,707.14

6.85%

38,819.58

6.81%

2,250.00

10.19%

303.49

8.39%

550.00

8.23%

3,103.49

9.66%

3,744.97
42,564.55

5.74%
6.71%

3,744.09

9.00%

466.58

8.29%

1,780.38

7.90%

3,744.97
48,555.60

5.74%
6.95%

Deposits
The following table sets forth, for the dates indicated, our outstanding deposits and the percentage composition
of each category of deposits. The average cost (interest expense divided by the average monthly balance for the
relevant period) of savings deposits was 6.85% in the year ended March 31, 2014, 6.96% in the year
ended March 31, 2015 and 6.72% in the year ended March 31, 2016.

Demand deposits
Savings bank deposits

As of March 31,
2014
2015
2016
Amount
% of total
Amount
% of total
Amount
% of total
(in ` million, except percentages)
70,171.61
9.4
84,994.49
9.3
109,250.77
9.8
93,275.19
12.6 125,795.43
13.8
204,176.99
18.3

137

As of June 30,
2016
Amount
% of total
111,018.04
251,865.05

9.1%
20.5%

Term deposits
Total

As of March 31,
2014
2015
2016
Amount
% of total
Amount
% of total
Amount
% of total
(in ` million, except percentages)
578,473.35
78.0 700,968.56
76.9
803,767.57
71.9
741,920.15
100.0 911,758.48
100.0 1,117,195.33
100.0

As of June 30,
2016
Amount
% of total
862,927.45
1,225,810.54

70.4%
100.0%

Borrowings
The following table sets forth, for the periods indicated, information related to our borrowings, which are
comprised primarily of money-market borrowings, refinances and subordinated debt.
Years ended March 31,
Three months ended June 30,
2015
2016
2015
2016
(in ` million, except percentages)
213,142.86
262,204.01
316,589.77
252,844.73
319,362.53
206,415.93
222,077.73
266,364.38
52,581.74
332,434.54
16,464.52
15,473.51
17,883.02
4,272.22
5,909.78
7.98
6.97
6.71
6.78
7.13
8.70
8.37
7.83
8.20
7.48
2014

Period end balance

Average balance during the period(1)
Interest expense during the period
Average interest rate during the period(2)(%)
Average interest rate at period end(3)(%)

Notes:
1.

Average is based on monthly balances.

2.

Represents the ratio of interest expense on borrowings to the average balances of borrowings.

3.

Represents the average rate of interest on borrowings outstanding as of March 31, 2014, 2015 and 2016 and
as of June 30, 2015 and 2016.

Short-Term Borrowings
The following table sets forth, for the periods indicated, information related to our short-term borrowings, which
are comprised primarily of money-market borrowings (call borrowing, repo and interbank borrowings, and
CBLO borrowing).
Years ended March 31,
Three months ended June 30,
2015
2016
2015
2016
(in ` million, except percentages)
37,790.00
24,450.00
17,994.33
6,600.00
500.00
56,269.41
33,356.21
13,122.01
9,411.43
18,415.49
4,955.56
2,454.57
679.37
234.30
364.39
8.81
7.36
5.18
9.96
7.91
2014

Period end balance

Average balance during the period(1)
Interest expenses during the period
Average interest rate during the
period(2)(%)
Average interest rate at period end(3)(%)

9.03

7.77

6.77

6.74

5.00

Notes:
1.

Average is based on monthly balances.

2.

Represents the ratio of interest expense on borrowings to the average balances of short-term borrowings.

3.

Represents the average rate of interest short-term borrowings outstanding as of March 31, 2014, 2015 and
2016 and as of June 30, 2015 and 2016.

Interest Coverage Ratio

The following table sets forth information with respect to our interest coverage ratio for the periods indicated.
This ratio, however, is typically used to measure the debt-servicing ability of a corporate and is not relevant to a
banking company.

138

Years ended March 31,

Three months ended June

30,
2015
2016
2015
2016
(in ` million, except percentages)
20,053.61
25,394.47
5,511.98
7,318.02
850.40
1,105.55
240.07
362.51

2014
(i) Net profit
(ii) Depreciation on the Bank's
property
(iii) Interest expended
(iv) Total (i) + (ii) + (iii)
Interest coverage ratio (iv)(iii)

16,177.80
631.66
72,650.92
89,460.38
123.14

80,841.69
101,745.70
125.86

89,667.19
116,167.21
129.55

21,920.44
27,672.49
126.24

25,457.28
33,137.81
130.17

Tier II Capital
The Bank has issued unsecured non-convertible subordinated debt securities. As of June 30, 2016, outstanding
Tier II capital was `98,277.21 million of which `70,180.63 million (post grandfathering) qualifies as Tier II
capital as per Basel III standards. The following table sets forth information with respect to subordinated debt
outstanding as of June 30, 2016.
Particulars

Nature of
Security

Tranche

Date of
Issue

Lower Tier II

Debentures

Tranche I

Lower Tier II

Debentures

Tranche II

Lower Tier II

Debentures

Tranche III

Lower Tier II

Debentures

Tranche IV

Lower Tier II

Debentures

Lower Tier II

Debentures

Lower Tier II

Debentures

Lower Tier II

Debentures

Lower Tier II

Debentures

Lower Tier II

Debentures

Lower Tier II Bonds

Debentures

Lower Tier II Bonds

Debentures

Unsecured Redeemable
Non-Convertible Lower
Tier II Subordinated
Bonds
Unsecured Redeemable
Non-Convertible Lower
Tier II Subordinated
Bonds
Upper Tier II

Promissory
Notes

Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable

September
29, 2007
November
30, 2007
December
12, 2007
February 7,
2008
September
30, 2009
January 22,
2010
September
30, 2010
July
25,
2011
October 28,
2011
March 28,
2012
August 23,
2012
September
10, 2012
October 16,
2012

Debentures

Not
Applicable

Debentures

Tranche 1

Upper Tier II

Debentures

Tranche 2

Upper Tier II

Tranche 3

Upper Tier II

Promissory
Notes
Debentures

Upper Tier II

Debentures

Tranche 5

Upper Tier II

Tranche 6

Upper Tier II

Promissory
Notes
Debentures

Upper Tier II

Debentures

Tranche I

Tranche 4

Tranche 7

Coupon
Rate
(%)
10.00

9 years and
7 months
9 years and
6 months
9 years and
6 months
9 years and
3 months
10 years and
7 months
10 years

Amount
(in ` million)
100.00

Qualified as
capital
(Basel III)
-

71.00

10.00

368.00

2,600.00

936.00

3,000.00

1,080.00

3,064.00

1,103.04

10.30

9 years and
7 months
10 years

3,215.00

1,929.00

10.20

10 years

2,430.00

1,458.00

9.90

10 years

3,000.00

1,800.00

10.00

10 years

3,000.00

1,800.00

10.00

10 years

3,000.00

1,800.00

10.00

10 years

2,000.00

1,200.00

October 31,
2012

9.90

10 years

2,597.00

1,558.20

January 2,
2007
February 7,
2007
March 15,
2007
March 14,
2007
March 23,
2007
March 31,
2007
April
20,
2007
September
29, 2007

9.73

15 years

800.00

480.00

9.60

15 years

336.00

201.60

10.10

15 years

100.00

60.00

10.00

15 years

100.00

60.00

10.40

15 years

600.00

360.00

10.40

15 years

50.00

30.00

10.40

15 years

20.00

12.00

10.70

15 years

1,820.00

1,092.00

139

10.15

Tenure

10.15
10.00
9.65
9.65
9.30

Particulars

Nature of
Security

Tranche

Upper Tier II

Debentures

Tranche II

Upper Tier II(1)

Bonds

Not
Applicable

November
8, 2007
June
27,
2008

Upper Tier II

Debentures

Upper Tier II(1)

Bonds

Not
Applicable
Not
Applicable

September
15, 2008
September
30, 2009

Upper Tier II

Debentures

Upper Tier II

Debentures

Upper Tier II(1)

Debentures

Unsecured,
Redeemable,
NonConvertible, Upper Tier
II Bonds
Upper Tier II Bonds

Promissory
Note

Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable

August
14,2010
September
8, 2010
March 30,
2012
June
29,
2012

Promissory
Notes
Debentures

Not
Applicable
Not
Applicable

Promissory
Notes

Unsecured Redeemable
Non-Convertible Upper
Tier II Subordinated
Bonds
Unsecured Redeemable
Non-Convertible Upper
Tier II Subordinated
Bonds
Non-convertible,
Redeemable,
Unsecured, Basel III
compliant Tier 2 Bonds
in the nature of
debentures
8.90% Non-convertible,
Redeemable,
Unsecured, Basel III
compliant Tier 2 Bonds
in the nature of
debentures
9.00% Non-convertible,
Redeemable,
Unsecured, Basel III
compliant Tier 2 Bonds
in the nature of
debentures
9.05% Non-convertible,
Redeemable,
Unsecured, Basel III
compliant Tier 2 Bonds
in the nature of
debentures
9.00% Non-convertible,
Redeemable,
Unsecured, Basel III
compliant Tier 2 Bonds
in the nature of
debentures

Date of
Issue

Coupon
Rate
(%)
10.70

Tenure

15 years

Amount
(in ` million)
100.00

Qualified as
capital
(Basel III)
60.00

300
BPS
over
applicable
JPY LIBOR
11.75

15 years

3,430.40

2,058.24

15 years

2,000.00

1,200.00

380
BPS
over
applicable
EURIBOR
9.65

15 years

927.63

556.58

15 years

4,400.00

2,640.00

9.50

15 years

2,000.00

1,200.00

482
BPS
over LIBOR
10.25

15 years

3,815.63

2,289.38

15 years

600.00

360.00

September
28, 2012
November
10, 2012

10.15

15 years

2,000.00

1,200.00

10.25

15 years

2,750.00

1,650.00

Not
Applicable

December
27, 2012

10.05

15 years

1,691.00

1,014.60

Debentures

Not
Applicable

June
2015

9.15

5,542.00

5,542.00

Debentures

Not
Applicable

December
31,2015

8.90

15,000.00

15,000.00

Debentures

Not
Applicable

January 15,
2016

9.00

8,000.00

8,000.00

Debentures

Not
Applicable

January20,
2016

9.05

5,000.00

5,000.00

Debentures

Not
Applicable

March
2016

9.00

5,450.00

5,450.00

29,

31,

Notes:
1.

Borrowings in foreign currency converted at the rate prevalent on the date of borrowing for the purpose of
capital adequacy.

140

Perpetual Debt
The Bank has issued perpetual debt instruments qualifying as Tier I capital. As of June 30, 2016, we had
`7,747.62 million aggregate amount of perpetual debt instruments outstanding of which `5,694.64 million (post
grandfathering) qualified as Tier I capital under Basel III.
The following table sets forth information with respect to perpetual debt instruments outstanding, as of June 30,
2016.
Particulars

Nature of
Security

Tranche

Date of
Issue

Coupon Rate

Tier I Perpetual
Subscription(1)

Bonds

Not
Applicable

June
2008

Tier I Perpetual

Promissory
Notes
Promissory
Notes
Promissory
Note
Promissory
Notes
Debentures

Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable

February
21, 2009
March
9,
2009
March
5,
2010
August 21,
2010
December
31, 2013

Tier I Perpetual
Tier I Perpetual
Tier I Perpetual
Tier I Perpetual

27,

(%)
450 BPS over
applicable JPY
LIBOR
10.25

Tenure(2)

Perpetual

Amount
(in ` million)
214.40

Qualified
as capital
(Basel III)
128.64

Perpetual

1,150.00

690.00

10.25

Perpetual

390.00

234.00

10.25

Perpetual

820.00

492.00

9.90

Perpetual

2,250.00

1,350.00

10.50

Perpetual

2,800.00

2,800.00

Notes:
1.

Borrowings in foreign currency converted at the rate prevalent on the date of borrowing for the purpose of
capital adequacy.

Asset Liability Gap

The following table sets forth our asset liability gap position as of June 30, 2016.
1-28 days
Cash and bank
balances
Advances
Investments
Fixed assets
Other assets
Total assets
Capital and
reserves
Deposit
Borrowings
Tier II capital
Other liabilities
Total liabilities
Liquidity gap
Cumulative
liquidity gap
Cumulative
liabilities
Cumulative
liabilities gap as a
percentage of
cumulative
liabilities

29-90 days

3-6 months

6-12 months
1-3 years
3-5 years Over 5 years
(in ` million, except percentages)
6,568.41
12,028.16
4,959.17
12,875.34
5,076.90

Total

105,781.54

6,191.64

42,272.52
5,941.03
21,552.29
175,547.37
-

90,923.44
57,176.31
9,713.66
164,005.06
-

92,670.56
8,130.38
2,680.17
110,049.52
-

193,586.82
12,815.06
4,162.23
222,592.27
-

143,727.60
8,897.59
21,840.71
174,465.90
(1,081.48)
(1,081.48)

157,451.76
23,308.06
6,960.96
187,720.78
23,715.72
22,634.24

156,948.56
34,810.65
5,869.20
197,628.41
87,578.89
110,213.13

323,610.15
84,477.21
27,090.63
54,461.92
449.00
5,839.63
2,183.73
4,856.60
353,333.51
149,635.36
130,741.23 (293,758.54)
240,954.36 (52,804.17)

174,465.90

362,186.67

559,815.08

913,148.59 1,062,783.95 1,443,880.54 1,772,288.74 1,772,288.74

-0.62%

6.25%

19.69%

26.39%

Advances Portfolio

141

346,150.63
84,521.72
7,762.37
443,393.89
-

-4.97%

135,103.60
51,524.73
6,999.58
206,503.25
-

153,481.16

158,712.33 1,059,419.90
240,855.48
460,964.71
5,181.85
5,181.85
40,370.82
93,241.12
450,197.36 1,772,288.74
145,368.51
145,368.51

348,029.85
11,565.41 1,225,810.54
18,193.98
46,574.87
213,337.70
9,660.83
90,075.37
106,024.83
5,211.93
34,824.03
81,747.16
381,096.59
328,408.19 1,772,288.74
174,593.34 (121,789.16)
(0.00)
121,789.16
(0.00)
(0.00)

8.43%

0.00%

0.00%

As of March 31, 2014, 2015 and 2016 and as of June 30, 2016 our net advances portfolio was `556.33 billion,
`755.50 billion, `982.10 billion and 1,059.42 billion, respectively. For a description of our corporate and retail
loan products, see section titled Our Business on page 116.
The following table sets forth, for the periods indicated, our advances loan portfolio classified by product
groups.
Classification of advances

As of March 31,
2015
2016
(in ` million)
173,764.53
233,961.28

2014
Cash credits, overdrafts and
loans repayable on demand
Term loans
Bills purchased and discounted
Total

142,758.28
400,699.45
12,871.89
556,329.62

565,709.56
16,024.07
755,498.16

734,519.59
13,618.40
982,099.27

As of June 30,
2016
243,483.59
802,031.69
13,904.62
1,059,419.90

Maturity and Interest Rate Sensitivity of Advances

The following table sets forth, for the periods indicated, the interest rate sensitivity of our advances as of June
30, 2016.
Interest rate classification of
advances by maturity

Due in one year or

less

Variable rates
Fixed rates
Total

327,006.77
219,540.69
546,547.46

Due in one year to

Due after five
five years
years
(in ` million)
237,390.59
125,118.73
114,704.07
35,657.39
352,094.66
160,776.12

Total

689,516.10
369,902.15
1,059,419.90

Concentration of Advances
Our total loan portfolio consists of two broad segments: Corporate Banking (which focuses on large corporate
clients) and Branch Banking (which comprises Business Banking and Retail Banking). The annual distributions
of the advances according to the above segments for the periods indicated are set forth below:
Classification of Advances
2014
Corporate Banking
Branch Banking
Total

352,143.31
204,186.31
556,329.62

As of March 31,
2015
2016
(in ` million)
488,946.66
638,887.53
266,551.51
343,211.74
755,498.16
982,099.27

As of June 30,
2016
715,631.01
343,788.89
1,059,419.90

Priority Sector Lending

As stipulated by the RBI, commercial banks in India are required to lend, through advances or investment, 40%
of their adjusted net bank credit or credit equivalent amount of off-balance sheet exposures, whichever is higher,
to specified sectors known as priority sectors, subject to certain exemptions permitted by RBI from time to
time. Priority sector advances include advances to the agriculture sector, micro and small enterprises, weaker
sections, housing and education finance up to certain ceilings.
We are required to comply with the priority sector lending requirements as of March 31, in each fiscal year. Any
shortfall in the amount required to be lent to the priority sectors may be required to be deposited with the Rural
Infrastructure Development Fund established by NABARD or funds with other financial institutions as specified
by the RBI.
A breakdown of our priority sector lending in the form of advances for the periods indicated is as follows:

2014
Advances

% of
total

As of March 31,
2015
2016
Advances
% of
Advances
% of
total
total
(in ` million, except percentages)

142

As of June 30,
2016
Advances
% of
total

Agriculture
advances
Small-scale
industry
Services
and
others
Total priority
sector

73,567.18

50.51

95,163.91

50.23

107,346.91

40.49

95,678.51

36.02%

49,601.09

34.06

75,239.86

39.71

130,782.32

49.33

155,913.29

58.70%

22,473.95

15.43

19,055.19

10.06

27,014.23

10.18

14,025.22

5.28%

145,642.22

100.00

189,458.96

100.00

265,143.46

100.00

265,617.02

100.00%

Non-Performing Assets
As of March 31, 2016, gross NPAs were 0.76% of gross advances and net NPAs were 0.29% of net NPAs. As
of March 31, 2016, we had provisions of 62.02% of our gross NPAs.
The following table sets forth, for the periods indicated, information about our NPA portfolio.

Opening balance of gross NPAs at the beginning of the period

Additions during the period
Less: Reductions during the period on account of recovery and write-offs
Gross NPAs at the close of the period
Gross NPAs
Net NPAs
Gross advances
Net advances
Gross NPAs/gross advances (%)
Net NPAs/net advances (%)
Total provisions as a percentage of gross NPA (%)

As of or for the year ended March 31,

2014
2015
2016
(in ` million, except percentages)
943.24
1,749.26
3,134.01
3,986.70
3,874.58
9,111.08
3,180.68
2,489.83
4,755.28
1,749.26
3,134.01
7,489.81
1,749.26
3,134.01
7,489.81
260.67
877.25
2,844.74
557,818.20
757,754.92
986,744.34
556,329.62
755,498.16
982,099.27
0.31
0.41
0.76
0.05
0.12
0.29
85.10
72.01
62.02

Our non-performing investments of `230.60 million as of March 31, 2016, with a provision of `114.28 million
against the same.
As of June 30, 2016, gross NPAs were 0.79% of gross advances and net NPAs were 0.29% of net NPAs. As of
June 30, 2016, we had provisions of 64.20% of our gross NPAs.
The following table sets forth, for the periods indicated, information about our NPA portfolio.

Opening balance of gross NPAs at the beginning of the period

Additions during the period
Less: Reductions during the period on account of recovery and write-offs
Gross NPAs at the close of the period
Gross NPAs
Net NPAs
Gross advances
Net advances
Gross NPAs/gross advances (%)
Net NPAs/net advances (%)
Total provisions as a percentage of gross NPA (%)

As of or for the three months ended June 30,

2015
2016
(in ` million, except percentages)
3,134.01
7,489.81
746.62
2,996.21
197.67
2,040.43
3,682.96
8,445.59
3,682.96
8,445.59
1,067.01
3,023.92
758,114.11
1,064,841.57
755,498.16
1,059,419.90
0.46%
0.79%
0.13%
0.29%
71.03%
64.20%

Our non-performing investments of `391.38 million as of June 30, 2016, with a provision of `154.48 million
against the same.
Recognition of Non-Performing Assets
As a commercial bank operating in India, we recognize NPAs in accordance with the RBIs guidelines. The
guidelines require Indian banks to classify their NPAs into three categories, as described below, based on the
period for which the asset has remained non-performing and the estimated realization of amounts due in relation

143

to such asset. Further, the NPA classification is at the borrower level, rather than at the facility level and,
accordingly, if one of the advances granted to a borrower becomes non-performing, such borrower is classified
as non-performing and all advances due from it are so classified.
A non-performing asset 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 or cash credit; (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 securitization transaction undertaken in terms of guidelines on a securitization dated
February 1, 2006; or (vii) in respect of derivative transactions, the overdue receivables representing positive
mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified
due date for payment. According to guidelines specified by the RBI in July 2013, an account should be
classified as an NPA on the basis of the record of recovery and not merely on deficiencies which are temporary
in nature, such as non-renewal of limits on the due date or non-submission of stock statements.
Further, the RBI requires the banks to classify an account as a non-performing asset only if the interest due and
charged during any quarter is not serviced fully within 90 days from the end of the quarter.
Substandard Assets
With effect from March 31, 2005, and in accordance with RBI guidelines, a substandard asset is an asset that
has remained non-performing for a period less than or equal to 12 months.
Doubtful Assets
With effect from March 31, 2005, and in accordance with RBI guidelines, a doubtful asset is an asset that has
remained in the substandard category for a period of 12 months. Further, these doubtful assets are to be
classified into the following three categories, depending on the period for which such assets have been classified
as doubtful:
assets which have remained in the doubtful category for a period of up to one year;

assets which have remained in the doubtful category for a period of more than one year but less than three
years; and

assets which have remained in the doubtful category for a period of more than three years.

Loss Assets
In accordance with the RBI guidelines, a loss asset is an asset where loss has been identified by the bank or
internal or external auditors or the RBI at the time of inspection but the amount has not been written off wholly.
In cases of serious credit impairment, an asset is required to be immediately classified as doubtful or as a loss
asset, as appropriate. Further, erosion in the value of the security provided may also be considered significant
when the realizable value of the security is less than 50.00% of the value as assessed by the bank or as accepted
by the RBI at the time of the last inspection of the security, as the case may be. In such a case, the assets secured
by such impaired security may immediately be classified as doubtful, and provisioning should be made as
applicable to doubtful assets. If the realizable value of the security, as assessed by the bank or approved
valuation agents or by the RBI, is less than 10.00% of the outstanding amount in the borrowers accounts, the
existence of security should be ignored and the asset should be immediately classified as a loss asset and it may
be either written off or fully provided for by the bank.
The table below sets forth our NPA position as of the dates specified:
Non-Performing Assets

As of March 31,
2015
2016
(in ` million, except percentages)

2014
Substandard advances:
Amount

999.15

144

2,102.57

828.52

As of June 30,
2016

3,237.93

Non-Performing Assets
2014
As a percentage of total Gross NPAs
Doubtful advances:
Amount
As a percentage of total Gross NPAs
Loss advances:
Amount
As a percentage of total Gross NPAs
Gross NPAs

57.12%

As of March 31,
2015
2016
(in ` million, except percentages)
67.09%
11.06%

As of June 30,
2016
38.34%

665.53
38.05%

828.96
26.45%

6,661.30
88.94%

5,207.66
61.66%

84.58
4.83%
1,749.26

202.47
6.46%
3,134.01

0.00%
7,489.81

0.00%
8,445.59

Non-accrual policy
When an asset is classified as non-performing, the entire interest accrued and credited to the income account in
past periods must be reversed if it is not realized. In accordance with RBI guidelines, interest realized on NPAs
may be credited to a banks income account provided that such credited interest is not out of fresh or additional
credit facilities sanctioned to the borrower. The RBI has also stipulated that, in the absence of a clear agreement
between us and the borrower for the purpose of appropriating recoveries in NPAs (i.e. towards principal or
interest due), banks should adopt an accounting principle and exercise the right of appropriation of recoveries in
a uniform and consistent manner.
In the case of NPAs where recoveries are effected, our policy is to appropriate the same against principal. If any
of a borrowers advances are classified as an NPA, all advances to such borrower are classified as NPAs. For
more information on the recognition and provisioning of NPAs, see subsection titled Managements Discussion
and Analysis of Financial Condition and Results of Operations Critical Accounting Policies Advances on
page 82.
Policy for Making Provisions for Non-Performing Assets
Our policy for making provisions for NPAs is in accordance with the RBI policy on provisioning as described
below:
(a) Substandard assets 15.00% of the amount outstanding without making any allowance for ECGC
guarantee cover and securities available and in respect of unsecured exposures identified as
substandard, an additional provision of 10.00% of the amount outstanding (i.e. a total of 25.00% of the
outstanding balance);
(b) Doubtful assets:

Doubtful up to one year 100.00% of the unsecured portion and 25.00% of the secured portion;

Doubtful one to three years 100.00% of the unsecured portion and 40.00% of the secured portion;

Doubtful more than three years 100.00% of the unsecured portion and 100.00% of the secured
portion; and

(c) Loss assets 100.00% to be provided for or written off.

The above-mentioned provisions are the minimum provisions that have to be provided for NPAs in accordance
with the RBI policy. We provide for more than the stipulated rates if we feel that the credit deterioration of the
client requires us to do so.
Floating Provisions
We do not carry any floating provision in our books.
Provisions on Standard Advances

145

In accordance with RBI guidelines, a general provision is made on all standard advances based on the category
of advances identified in RBI guidelines. We also maintain additional general provisions on standard advances
based on our internal credit-rating matrix.
Analysis of Non-Performing Advances by Industry Sector
The table below sets forth, for the periods indicated, our non-performing advances, by the borrowers industry
or economic activity.

2014
Gross
Provision
NPA
Agriculture
Micro
and
small
enterprises
Other priority sector
Export trade
NBFC
Trade
Other
Total

20.56
164.75

20.45
77.15

34.45
120.29
255.10
1,154.11
1,749.26

33.71
120.29
255.10
981.87
1,488.58

As of March 31,
2015
2016
Gross
Provision
Gross
Provision
NPA
NPA
(in ` million)
54.22
38.95
2115.50
840.32
500.59
242.07
479.83
185.97
40.28
45.25
120.29
205.44
2167.94
3,134.01

28.24
39.27
120.29
201.11
1,586.82
2,256.76

85.18
4,809.30
7,489.81

37.48
3,581.30
4,645.07

As of June 30,
2016
Gross
Provision
NPA
2,108.08

833.50

359.01
326.58
5,651.91
8,445.59

176.08
122.59
4,289.50
5,421.67

Movement in Our Provision for Non-Performing Advances

The table below sets forth movement in the provision for non-performing advances:
As of March 31,
2015
2016
(in ` million)
873.33
1,488.58
2,256.76
1,588.01
1,894.66
5,658.29
972.76
1,126.48
3,269.98

2014
Opening balance at the beginning of the year
Addition during the period
Less reductions during the period on account of
recovery and write-offs
Provision at the close of the period

1,488.58

2,256.76

4,645.07

As of June 30,
2016
4,645.07
1,701.05
924.45
5,421.67

Restructuring of Debt
In respect of restructured or rescheduled accounts, we make provisions for the erosion in fair value of
restructured advances in accordance with the general framework of the restructuring of advances as per the
Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining
to Advances dated July 1, 2013 issued by the RBI. The erosion in fair value of advances is computed as the
difference between the fair values before and after restructuring.
The fair value 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 our
BPLR or base rate, whichever is applicable to the borrower, as of the date of restructuring plus the appropriate
term premium and credit risk premium for the borrower category on the date of the restructuring.
The fair value 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 our BPLR or base
rate, whichever is applicable to the borrower, as of the date of restructuring plus the appropriate term premium
and credit risk premium for the borrower category on the date of restructuring.
Our total gross standard restructured advances was `6,133.46 million (0.62% of gross advances) as of March 31,
2016 and `6,192.90 million (0.58% of gross advances) as of June 30, 2016.
Capital Adequacy

146

The following table sets out our capital adequacy ratios as of March 31, 2014, 2015 and 2016 and as of June 30,
2016.

Common Equity Tier I (CET I)

Additional Tier I capital
Tier I capital
Tier II capital
Total Capital
Credit Risk RWA
Market Risk RWA
Operational Risk RWA
Total risk weighted assets
CET I Ratio (%)
Capital Adequacy Ratio Tier I capital (%)
Capital Adequacy Ratio Tier II capital (%)
Total Capital Adequacy Ratio (%)

As of March 31,
2014
2015
(in ` million, except percentages)
69,913.02
114,085.60
5,061.34
4,670.06
74,974.36
118,755.66
34,956.51
42,757.37
109,930.87
161,513.03
643,295.25
907,147.96
79,983.27
69,876.20
42,690.46
56,998.06
765,968.97
1,034,022.22
9.1
11.0
9.8
11.5
4.6
4.1
14.4
15.6

147

2016
137,064.01
5,629.29
142,693.30
76,051.10
218,744.40
1,151,018.79
95,241.38
83,238.59
1,329,498.77
10.3
10.7
5.8
16.5

As of June 30,
2016
137,080.49
5,124.29
142,204.78
75,687.57
217,892.35
1,252,155.43
83,871.76
106,498.75
1,442,525.94
9.5%
9.9%
5.2%
15.1%

REGULATION AND POLICIES

Our Bank is a scheduled commercial bank within the meaning of the RBI Act. The primary legislation governing
commercial banks in India is the Banking Regulation Act. Other significant legislation that governs banks
include the Reserve Bank of India Act, the Negotiable Instruments Act and the Bankers Books Evidence Act.
Additionally, the RBI, from time to time, issues guidelines, regulations, policies, notifications, press releases
and circulars to be followed by banks. Banking companies are also subject to the purview of the Companies Act,
to the extent applicable, and if such banks are listed on a stock exchange in India then various regulations of
the SEBI would additionally apply to such companies.
Taxation statutes such as the IT Act, labour laws such as Contract Labour (Regulation and Abolition) Act, 1970
and other miscellaneous regulations and statutes such as the Trade Marks Act, 1999, apply to us as they do to
any other Indian company.
The description of laws and regulations set out below are not exhaustive, and are only intended to provide
general information to QIBs and is neither designed nor intended to be a substitute for professional legal
advice. The statements below are based on the current provisions of Indian law, and the judicial and
administrative interpretations thereof, which are subject to change or modification by subsequent legislative,
regulatory, administrative or judicial decisions.
Banking Regulation Act, 1949
Commercial banks in India are required to obtain a license from the RBI to carry on banking business in India.
Such license is granted to the bank subject to compliance with certain conditions including (i) that the bank has
the ability to pay its present and future depositors in full as their claims accrue; (ii) that the affairs of the bank
will not be or are not likely to be conducted in a manner detrimental to the interests of present or future
depositors; (iii) that the general character of the proposed management of the bank will not be prejudicial to the
public interest or the interest of its depositors (iv) that the bank has adequate capital and earnings prospects; and
(v) that public interest will be served if such license is granted to the bank. The RBI may cancel the license if the
bank fails to meet the qualifications or if the bank ceases to carry on banking operations in India.
We have obtained a banking license from the RBI and are regulated and supervised by the RBI. The RBI
requires us to furnish statements, information and certain details relating to our business and it has issued
guidelines for commercial banks on recognition of income, classification of assets, valuation of investments,
maintenance of capital adequacy and provisioning for non-performing and restructured assets. The RBI has set
up a Board for Financial Supervision (BFS), under the chairmanship of the Governor of the RBI. The primary
objective of the BFS is to undertake consolidated supervision of the financial sector comprising commercial
banks, financial institutions and non-banking finance companies. The appointment of the auditors of the banks is
subject to the approval of the RBI. The RBI can direct a special audit in the interest of the depositors or in the
public interest.
The Banking Regulation Act confers power on the RBI (in consultation with the central government) to
supersede the board of directors of a banking company for a period not exceeding a total period of 12 months, in
public interest or for preventing the affairs of the bank from being conducted in a manner detrimental to the
interest of the depositors or any banking company or for securing the proper management of any banking
company.
When a bank fails to or omits to comply with the provisions of the Banking Regulation Act, the RBI may
impose fine within prescribed limits on banks and its officers or punish with imprisonment for the term provided
in the law, on the basis of the nature of the violation.
Regulatory reporting and examination procedures
The RBI is empowered under the Banking Regulation Act to call for certain information from a bank as well as
to inspect a bank. The RBI monitors prudential parameters at quarterly intervals.
RBI has introduced a system of off-site monitoring and surveillance, with the primary objective of monitoring
the financial condition of banks in between on-site examinations. To this end and to enable off-site monitoring
and surveillance by the RBI, banks are required to report to the RBI on various aspects of their business. This
system of off-site monitoring and surveillance has been migrated to a secured Online Returns Filing System

148

(ORFS) in which data collection and consolidation has been streamlined. The RBI also conducts on-site super
vision of selected branches with respect of their general operations and foreign exchange related transactions.
The RBI also conducts periodical on-site inspections on matters relating to the bank's portfolio, risk
management systems, internal controls, credit allocation and regulatory compliance, at intervals ranging from
one to three years.
Maintenance of records
The Banking Regulation Act requires banks to maintain books and records in the manner specified therein and
file the same with the Registrar of Companies on a periodic basis. The provisions for production of documents
and availability of records for inspection by shareholders as stipulated under the Companies Act and the rules
thereunder would apply to our Bank as in the case of any company. The Reserve Bank of India (Know Your
Customer (KYC)) Directions, 2016 issued by the RBI dated February 25, 2016 also provide for certain records
to be maintained for a minimum period of five years from the business relationships have ended.
Regulations relating to the opening of branches
Under Section 23 of the Banking Regulation Act, banks are required to obtain the prior approval of the RBI to
open new branches. Permission is granted based on factors such as overall financial position of the bank, the
history of the bank the general character of its management, the adequacy of its capital structure, its earning
prospects and public interest.
As per the Relaxations in Branch Authorization Policy dated August 6, 2015 read with circulars dated
September 19, 2013 and October 21, 2013, domestic scheduled commercial banks may open branches in Tier 1
to Tier 6 centres without prior permission from RBI. Further, such banks may also shift, merge or close all
branches except rural branches and sole semi-urban branches, subject to certain conditions
The RBI has further stated that, under the annual branch expansion plan, banks are required to allocate at least
25.00% of the total number of branches proposed to be opened during a year in unbanked rural centres and that,
total number of branches opened by a bank in Tier 1 centres during the financial year cannot exceed the total
number of branches opened in Tier 2 to Tier 6 centres and all centres in the North Eastern States and Sikkim.
Further, RBI has permitted installation of off-site ATMs at centres identified by banks, without the need for
permission from the RBI in each case.
Capital adequacy requirements
The RBI has set out minimum capital adequacy standards for banks based on the guidelines of the Basel
Committee on Banking Supervision. Under the Master Circular - Prudential Guidelines on Capital Adequacy
and Market Discipline - New Capital Adequacy Framework dated July 1, 2015, a bank is required to maintain a
minimum CRAR of 9.00% and encouraged to maintain a Tier 1 CRAR of 7.00%. In accordance with the
conditions of our banking licence, we are required to maintain a CRAR of 10.00%
With effect from the fiscal year 2015, banks are also required to quantify incurred credit valuation adjustment
losses and standard credit valuation adjustment capital charge on their derivatives portfolio. Further, to the
notification dated March 1, 2016, the Master Circular on Basel III Capital Regulations has been revised by the
RBI to the effect that treatment of certain balance sheet items viz., revaluation reserves, foreign currency
translation reserve and deferred tax assets, have been aligned to some extent, with the conditions prescribed by
the Basel Committee on Banking Supervision (BCBS) guidelines.
The transitional arrangements for the implementation of Basel III capital regulations in India began from April
1, 2013 and the guidelines will be fully implemented by March 31, 2019. In view of the gradual phase-in of
regulatory adjustments to the common equity component of Tier I capital under Basel III, certain specific
prescriptions of the Basel II capital adequacy framework (e.g. rules relating to deductions from regulatory
capital, risk weighting of investments in other financial entities etc.) will also continue to apply until March 31,
2017 on the remainder of regulatory adjustments not treated in terms of Basel III rules.
Liquidity coverage ratio

149

The Basel III framework on Liquidity Standards includes Liquidity Coverage Ratio, Net Stable Funding
Ratio (NSFR) and liquidity risk monitoring tools. In June 2014, the RBI issued guidelines in relation to
liquidity coverage ratio (LCR), liquidity risk monitoring tools and LCR disclosure standards pursuant to the
publication of the Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools in January 2013
and the Liquidity Coverage Ratio Disclosure Standards in January 2014 by the Basel Committee On Banking
Supervision. The objective of the LCR standard is to ensure that a bank maintains an adequate level of
unencumbered high quality liquid assets (HQLA) that can be converted into cash to meet its liquidity needs
for a 30 calendar day period under significantly severe liquidity stress. The LCR is defined under the guidelines
as the stock of HQLAs, divided by the net cash outflows over the next 30 calendar days. Pursuant to the
guidelines, banks are required to maintain an LCR of 60.00%, 70.00%, 80.00%, 90.00% and 100.00% with
effect from January 1, 2015, January 1, 2016, January 1, 2017, January 1, 2018 and January 1, 2019,
respectively.
The Basel Committee on Banking Supervision issued the final rules on Net Stable Funding Ratio in October
2014. RBI has issued draft guidelines on NFSR on May 28, 2015. RBI proposes to make NSFR applicable to
banks in India from January 1, 2018.
Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning
Pertaining to Advances dated July 1, 2015 (Prudential Norms)
An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. The
Prudential Norms further, specify the timeline within which specific assets are to be considered non-performing.
Once the account has been classified as a non-performing asset, the unrealized interest and other income already
debited to the account is derecognized and further interest is not recognized or credited to the income account
unless collected in cash.
The Prudential Norms require banks to further classify NPAs into the following three categories based on the
period for which the asset has remained non- performing and the realisability of the dues (i) sub-standard assets;
(ii) doubtful assets; and (iii) loss assets. These norms also specify provisioning requirements specific to the
classification of the assets.
In July 2005, the RBI issued guidelines on sales and purchases of NPAs between banks, financial institutions
and NBFCs. These guidelines require that the board of directors of a bank must establish a policy for purchases
and sales of NPAs. An asset must have been classified as non-performing for at least two years by the seller
bank to be eligible for sale. In October 2007, the RBI issued guidelines regarding valuation of NPAs being put
up for sale. Further, the RBI pursuant to the circular on Prudential Norms has decided that banks should
maintain provisioning coverage ratio, including floating provisions, of at least 70.00%.
The RBI issued revised Prudential Guidelines on Restructuring of Advances by Banks and Financial
Institutions on May 30, 2013. Pursuant to those guidelines, from April 1, 2015 advances that are restructured
(other than due to extension in Date of commencement of commercial operation (DCCO) of Infrastructure and
non Infrastructure project) would be immediately classified as sub-standard on restructuring and the nonperforming assets, upon restructuring, would continue to have the same asset classification as prior to
restructuring and slip into further lower asset classification categories as per the extant asset classification norms
with reference to the pre-restructuring repayment schedule. The general provision required on restructured
standard accounts would be increased to 3.50% from 31 March 2014 and further to 4.25% from 31 March 2015
and 5.00% from 31 March 2016
Corporate debt restructuring mechanism (CDR system)
The institutional mechanism for restructuring has been set up through establishment of the CDR system in 2001.
It is a joint forum of all banks and financial institutions and operates as a non-judicial body. The CDR system
operates on the principle of super-majority amongst the participating banks and financial institutions for a
particular advance. Our Bank has signed the inter-se agreement (amongst the banks and financial institutions)
and is accordingly a member of the CDR system. The Prudential Norms as mentioned above equally apply to
the accounts restructured under the CDR system.
Scheme for Sustainable Structuring of Stressed Assets (Scheme for Stressed Assets)

150

The RBI has formulated the Scheme for Stressed Assets as an optional framework for the resolution of large
stressed accounts. The Scheme for Stressed Assets envisages determination of the sustainable debt level for a
stressed borrower, and bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity
instruments.
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act)
The RDDBFI Act was enacted for adjudication of disputes pertaining to debts due to banks and financial
institutions exceeding ` 10 million. The RDDBFI Act provides for the constitution of debt recovery tribunals,
before which banks and financial institutions may file applications for recovery of debts. Further, no court or
other authority, except the Supreme Court or a High Court exercising jurisdiction under Articles 226 and 227 of
the Constitution of India, shall have, or is entitled to exercise, any jurisdiction, powers or authority in relation to
the aforementioned matter. The tribunals may pass orders for directions including inter- alia recovery of such
dues by the bank as may be deemed fit along with a recovery certificate to such effect from the presiding officer
of the respective tribunal; attachment of the secured properties towards the dues to the bank: injunctive orders
restraining the debtors from alienating, transferring or disposing of such secured properties; appointment of
receivers and/or local commissioners with respect to such secured properties and distribution of proceeds from
sale of such secured properties towards dues. Pursuant to the recovery certificate being issued, the recovery
officer of the respective debt recovery tribunal shall effectuate the final orders of the debt recovery tribunal in
the application. Unless such final orders of the debt recovery tribunal have been passed with the consent of the
parties to an application, an appeal may be filed against such final orders of the debt recovery tribunal before the
debt recovery appellate tribunal, which is the appellate authority constituted under the RDDBFI Act.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
(SARFAESI Act)
The SARFAESI Act provides for sale of financial assets by banks and financial institutions to asset
reconstruction companies. The SARFAESI Act provides for measures in relation to enforcement of security
interests and rights of the secured creditor in case of default. The Prudential Norms issued by the RBI describe
the process to be followed for sales of financial assets to asset reconstruction companies. The banks may not sell
financial assets at a contingent price with an agreement to bear a part of the shortfall on ultimate realisation.
However, banks may sell specific financial assets with an agreement to share in any surplus realised by the asset
reconstruction company in the future. Consideration for the sale may be in the form of cash, bonds or debentures
or security receipts or pass through certificates issued by the asset reconstruction company or trusts set up by it
to acquire the financial assets.
Banks and financial institutions are empowered to accept immovable property in full or partial satisfaction of
the banks claim against the defaulting borrower in times when they cannot find a buyer for the securities.
Further, banks and financial institutions can enter into settlement or compromise with the borrower and
empowers Debt Recovery Tribunals to pass an order acknowledging any such settlement or compromise.
Certain amendments have been proposed to the SARFAESI Act, inter alia, to streamline the recovery process
for banks, to enable the sponsor of an asset reconstruction company to hold up to 100.00% stake in the company
and permit non-institutional investors to invest in securitization receipts.
Priority sector lending
The Reserve Bank of India (Priority Sector Lending Targets and Classification) Directions, 2016 dated July
7, 2016 sets out the broad policy in relation to priority sector lending. In accordance with this circular, the
priority sectors for all scheduled banks include (i) agriculture; (ii) micro, small and medium enterprises
(MSMEs); (iii) export credit; (iv) education; (v) housing; (vi) social infrastructure; (vii) renewable energy and
(viii) others. Under the Master Circular, the priority sector lending targets are linked to adjusted net bank credit
as defined (ANBC) or credit equivalent amount of off-balance sheet exposure, whichever is higher, as on the
corresponding date of the preceding year. Currently, the total priority sector lending target for domestic banks is
40.00% of ANBC or credit equivalent amount of off-balance sheet exposure, whichever is higher.
Exposure norms
As a prudent measure aimed at better risk management and avoidance of concentration of credit risk, the RBI
has prescribed credit exposure limits for banks and long-term lending institutions in respect of their lending to
individual borrowers and to all companies in a single group (or sponsor group). The RBI has prescribed

151

exposure ceiling for a single borrower as 15.00% of capital funds and group exposure limit as 40% of capital
funds comprising of Tier I and Tier II capital. Relaxations are permitted in exceptional circumstances and
lending to infrastructure sector. The total exposure to a single NBFC has been limited to 10.00% of the banks
capital funds while exposure to non-banking asset finance company has been restricted to 15.00% of the banks
capital funds. The limit may be increased to 15.00% and 20.00%, respectively, provided that the excess
exposure is on account of funds on-lent by the NBFC to the infrastructure sector.
The aggregate exposure of a bank to the capital markets in all forms (both fund based and non-fund based)
should not exceed 40.00% of its net worth, on both standalone and consolidated basis as on March 31 of the
previous year. Within this overall ceiling, the banks direct investment in shares, convertible bonds / debentures,
units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) (both registered and
unregistered) should not exceed 20 per cent of its net worth.
Short-selling of Government securities
As per the Master Circular on Prudential Norms for Classification, Valuation and Operation of Investment
Portfolio by Banks dated July 1, 2015, banks and primary dealers are allowed to undertake short sale of
Government dated securities, subject to the short position being covered within a maximum period of three
months, including the day of trade and in accordance with the conditions prescribed, therein. Further, such short
positions shall be covered only by outright purchase of an equivalent amount of the same security or through a
long position in the when issued market or allotment in primary auction.
Regulations relating to interest rates on deposits and advances
The RBI has issued Reserve Bank of India - Interest rate on Deposits Directions, 2016 dated March 3, 2016.
Scheduled commercial banks are required to pay interest on deposits of money (other than current account
deposits accepted by them or renewed by them in their domestic, ordinary non-resident, non-resident (external)
accounts and foreign currency (non-resident) accounts (banks) scheme deposit account), subject to certain
conditions prescribed by the directions. Further, certain additional restrictions have been prescribed to determine
interest rates for savings deposits and term deposits. Additionally, interest rates offered by banks on NRO and
NRE deposits cannot be higher than those offered by them on comparable domestic rupee term deposits.
Deposit insurance
Demand and time deposits of up to ` 100,000 accepted by Indian banks (other than primary co-operative
societies) have to be mandatorily insured with the Deposit Insurance and Credit Guarantee Corporation, a
wholly-owned subsidiary of the RBI. Banks are required to pay the insurance premium for the eligible amount
to the Deposit Insurance and Credit Guarantee Corporation on a half yearly basis. The cost of the insurance
premium cannot be passed on to the customer.
Prevention of Money Laundering Act, 2002 (PMLA)
In order to prevent money laundering activities, the Government enacted the PMLA which seeks to prevent
money laundering and to provide for confiscation of property derived from, or involved in money laundering,
and for incidental matters connected therewith. Section 12 of the PMLA casts certain obligations on, inter alia,
banking companies in regard to preservation and reporting of customer account information.
The RBI has advised all banks to go through the provisions of the PMLA and the rules notified thereunder and
to take all steps considered necessary to ensure compliance with the requirements of Section 12 of the PMLA.
Regulations relating to Know Your Customer (KYC) and anti-money laundering
The RBI issued the Reserve Bank of India (Know Your Customer (KYC) Directions, 2016 on February 25,
2016 prescribing the guidelines for KYC and anti-money laundering procedures. Banks are required to
formulate a KYC policy which shall include (i) customer acceptance policy, (ii) customer identification
procedures, (iii) monitoring of transactions and (iv) risk management. In relation to each of the above, the
master direction also specifies minimum procedures required to be followed by banks. Banks are not permitted
to make payment of cheques/drafts/pay orders/bankers cheques bearing that date or any subsequent date, if they
are presented beyond the period of three months from the date of such instrument.

152

Regulations relating to maintenance of statutory reserves

A bank is required to maintain, on a daily basis, CRR, which is a specified percentage of its NDTL, excluding
interbank deposits, by way of a balance in a current account with the RBI. At present the required CRR is 4%.
The RBI does not pay any interest on CRR balances. The CRR has to be maintained on an average basis for a
fortnightly period and the minimum daily maintenance of the CRR should be 90.00% effective from the
fortnight beginning April 16, 2016. The RBI may impose penal interest at the rate of 3% above the bank rate on
the amount by which the reserve falls short of the CRR required to be maintained on a particular day and if the
shortfall continues further the penal interest charged shall be increased to a rate of 5% above the bank rate in
respect of each subsequent day during which the default continues.
In addition to the CRR, a bank is required to maintain SLR, a specified percentage of its NDTL by way of liquid
assets like cash, gold or approved unencumbered securities. The percentage of this liquidity ratio is fixed by the
RBI from time to time, pursuant to Section 24 of the Banking Regulation Act. At present, the RBI requires
banks to maintain SLR of 21.00%. Further, in December 2011, the RBI has permitted banks to avail funds from
the RBI on an overnight basis, under the Marginal Standing Facility, against their excess SLR holdings.
Additionally, they can also avail themselves of funds, on an overnight basis below the stipulated SLR, up to
1.00% of their respective NDTL outstanding at the end of the second preceding fortnight.
Further, the RBI requires the banks to create a reserve fund to which it must transfer not less than 20.00% of the
profits of each year before dividends. If there is an appropriation from this account, the bank is required to
report the same to the RBI within 21 days, explaining the circumstances leading to such appropriation.
Regulations relating to authorised dealers for foreign exchange and cross-border business transactions
The foreign exchange and cross border transactions undertaken by banks are subject to the provisions of the
Foreign Exchange Management Act. All branches should monitor all non-resident accounts to prevent money
laundering. The RBI master direction on External Commercial Borrowings, dated January 1, 2016, states that no
financial intermediary, including banks, will be permitted to raise external commercial borrowings or provide
guarantees in favour of overseas lenders for external commercial borrowings.
The Master Direction on Risk Management and Interbank Dealings, dated July 5, 2016, states that all
categories of overseas foreign currency borrowings of AD Category I banks, including existing external
commercial borrowings and loans or overdrafts from their head office, overseas branches and correspondents
outside India, international/ multilateral financial institutions or any other entity as permitted by RBI and
overdrafts in nostro accounts (not adjusted within five days), shall not exceed 100.00% of their unimpaired Tier
I capital or U.S. Dollar 10 million (or its equivalent), whichever is higher. Overseas borrowings for the purpose
of financing export credit, subordinated debt placed by head offices of foreign banks with their branches in India
as Tier II capital, capital funds raised/augmented by the issue of innovative perpetual debt instruments and any
other overseas borrowings with the specific approval of the RBI would continue to be outside the limit of
100.00%.
Secrecy obligations
A banks obligations relating to maintaining secrecy arise out of Section 13 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (for public sector banks specifically) and common law
principles governing its relationship with its customers. Subject to certain exceptions, a bank cannot disclose
any information to third parties. Further, the RBI may, in the public interest, publish the information obtained
from the bank.
Ownership restrictions
Under the current policy, the total foreign ownership in a private sector bank cannot exceed 74.00% (49.00%
under the automatic route and above 49.00% and up to 74.00% under the approval route) of the paid-up capital.
Section 12 of the Banking Regulation Act prohibits any shareholder of the bank from exercising voting rights on
poll in excess of 10.00% of total voting rights of all the shareholders of the bank. However, the RBI may
increase this ceiling to 26.00% in a phased manner.

153

The Reserve Bank of India (Ownership in Private Sector Banks) Directions, 2016 (Directions on
Ownership) dated May 12, 2016, envisages diversified shareholding in private sector banks by a single
entity/corporate entity/group of related entities. Pursuant to the Directions on Ownership, ownership limits for
all shareholders in the private sector bank in the long run shall be stipulated under two broad categories: (i)
natural persons (individuals) and (ii) legal persons (entities/institutions). Further, separate limits are now
stipulated for (i) non-financial and (ii) financial institutions; and among financial institutions, for diversified and
non-diversified financial institutions. The voting rights are capped at 15.00% or as notified by the Reserve Bank
from time to time.
The approval of RBI is required for the acquisition or transfer of the shares of our private sector banks, which
take the aggregate holding (direct and indirect, beneficial or otherwise) of an individual, his relatives, associate
enterprises and persons acting in concert with him to 5.00% or more of the banks total paid up share capital or
entitles him to exercise 5.00% or more of the total voting rights of the bank, in accordance with the terms of the
Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks)
Directions, 2015.
Issue of shares by private sector banks
The Reserve Bank of India (Issue and Pricing of Shares by Private Sector Banks) Directions, 2016 provides
general permission for issue of shares by private sector banks through the routes mentioned therein subject to
certain conditions, inter alia: the issue of shares is required to be in compliance with the Companies Act, 2013
and SEBI regulations; the issue of shares has the approval from the banks board or shareholders, as may be
required under the Companies Act 2013 or applicable SEBI regulations .
Downstream investment by banks
In accordance with the Consolidated Foreign Direct Investment Policy effective from June 7, 2016, issued by
the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India,
downstream investments made by a banking company, as defined in section 5 (C) of the Banking Regulation
Act, incorporated in India, which is owned or controlled by non-residents/ non-resident entity under corporate
debt restructuring, or other loan restructuring mechanism, or in trading books, or for acquisition of shares due to
defaults in loans, shall not count towards indirect foreign investment.
Guidelines for merger and amalgamation of private sector banks
The Reserve Bank of India (Amalgamation of Private Sector Banks) Directions, 2016 dated April 21, 2016
relate to: (i) an amalgamation of two banking companies; and (ii) an amalgamation of a NBFC with a banking
company. In case of an amalgamation of two banking companies, the draft scheme of amalgamation must be
approved by the board and the requisite majority of shareholders of each of the banking companies.
Additionally, such approved draft scheme must also be submitted to the RBI for sanction.
Where a NBFC is proposed to be amalgamated into a banking company, the banking company should obtain the
approval of the board and the RBI before it is submitted to the relevant National Company Law Tribunal for
approval.
Regulation of financial services provided by banks
The Reserve Bank of India (Financial Services provided by Banks) Directions, 2016 dated May 26, 2016
require banks to comply with certain restrictions while undertaking financial services including in relation to
risk mitigation measures, limits on investment that can be made by banks in companies undertaking financial
services. The directions also provide for specific regulations for certain financial services such as, inter alia,
setting of an infrastructure debt fund, underwriting activities, mutual fund business, insurance.
Guidelines on management of intra-group transactions and exposures
The RBI issued the Guidelines on Management of Intra-Group Transactions and Exposures on February 11,
2014. Pursuant to the said guidelines, RBI has prescribed quantitative limits on financial intra-group
transactions and exposures and prudential measures for the non-financial intra-group transactions and exposures.
The objective of these guidelines is to ensure that banks engage in intra-group transactions and exposures in safe
and sound manner in order to contain concentration and contagion risks arising out of such transactions.

154

Capital and provisioning requirements for exposures to entities with unhedged foreign currency exposure
RBI issued a circular relating to Capital and Provisioning Requirements for Exposures to entities with
Unhedged Foreign Currency Exposure on January 15, 2014. Pursuant to these guidelines, RBI has introduced
incremental provisioning and capital requirements for bank exposures to entities with unhedged foreign
currency exposures. The circular also lays down the method of calculating the incremental provisioning and
capital requirements. The banks will be required to calculate the incremental provisioning and capital
requirements at least on a quarterly basis.
Framework for revitalising distressed assets in the economy
RBI issued the Framework for Revitalising Distressed Assets in the Economy on January 30, 2014 which lays
down the corrective action plan that will incentivise early identification of problem cases, timely restructuring of
accounts which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable
accounts. The salient features of this framework include, inter alia, (i) early formation of a lenders committee
with timelines to agree to a plan for resolution, (ii) incentives for lenders to agree collectively and quickly to a
plan - better regulatory treatment of stressed assets if a resolution plan is underway, accelerated provisioning if
no agreement can be reached, and (iii) independent evaluation of large value restructurings mandated, with a
focus on viable plans and a fair sharing of losses (and future possible upside) between promoters and creditors.
This framework became fully effective from April 1, 2014. In this regard, the RBI issued Guidelines on a joint
lenders forum and a corrective action plan detailing guidelines on formation of the joint lenders forum and
adoption of the corrective action plan for operationalising the aforementioned framework.
Following the notification dated February 25, 2016, the prudential guidelines on revitalising stressed assets in
the economy, have been partially revised in relation to inter alia, strategic debt restructuring scheme, joint
lenders forum empowered group, restructuring of advances, structuring of project loans and sale of financial
assets to securitisation company/ reconstruction company.
The Banking Ombudsman Scheme, 2006
The Banking Ombudsman Scheme, 2006 provides the extent and scope of the authority and functions of the
Banking Ombudsman for redressal of grievances against deficiency in banking services, concerning loans and
advances and other specified matters. On February 3, 2009, the said scheme was amended to provide for revised
procedures for redressal of grievances by a complainant under the scheme.
Declaration of dividend by banks
The payment of dividends by banks is subject to restrictions under the Banking Regulation Act. Section 15(1) of
the Banking Regulation Act states that no banking company may pay any dividend on its shares until all its
capitalised expenses (including preliminary expenses, organisation expenses, share-selling commissions,
brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have
been completely written off. In addition, Section 17(1) of the Banking Regulation Act requires every banking
company to create a reserve fund and, out of the balance of the profit of each year as disclosed in the profit and
loss account, transfer a sum equivalent to not less than 20.00% of such profit to the reserve fund before
declaring any dividend.
Further, in May 2005, the RBI issued guidelines on Declaration of Dividends by Banks, which prescribed
certain conditions for declaration of dividends by banks.
Regulations governing International Operations
The Banks international operations are governed by regulations in the countries in which the Bank has a
presence.
Consolidated Supervision Guidelines
In 2003, the RBI issued guidelines for consolidated accounting and consolidated supervision for banks. These
guidelines became effective on August 1, 2003. The principal features of these guidelines are:

155

Consolidated financial statements: Banks are required to annually prepare consolidated financial
statements intended for public disclosure.

Consolidated prudential returns: Banks are required to submit to the RBI, at periodic intervals,
consolidated prudential returns reporting their compliance with various prudential norms on a
consolidated basis, excluding insurance subsidiaries.

Regulations relating to making loans

The provisions of the Banking Regulation Act govern the making of loans by banks in India. The RBI issues
directions covering the loan activities of banks. Some of the major guidelines of the RBI, which are now in
effect, are as follows:

The RBI has prescribed norms for banks lending to non-bank financial companies and the financing of
public sector disinvestment.

With a view to providing banks greater operational flexibility, RBI has allowed banks to review the
Base Rate methodology after three years from date of its finalization instead of the current periodicity
of five years. Accordingly, banks may change their Base Rate methodology after completion of
prescribed period with the approval of their board of directors/ALCO. Banks will, however, not be
allowed to change their methodology during the review cycle.

RBI introduced the Base Rate in place of the BPLR with effect from July 1, 2010. For loans
sanctioned up to June 30, 2010, BPLR would be applicable. However, for those loans sanctioned up to
June 30, 2010 which come up for renewal from July 1, 2010 onwards, Base Rate would be applicable.

Section 21A of the Banking Regulation Act provides that the rate of interest charged by a bank shall
not be reopened by any court on the ground that the rate of interest charged by a bank is excessive. The
Banking Regulation Act provides for protection to banks for interest rates charged by them.

Classification and Reporting of Fraud Cases

The RBI issued a master direction on July 1, 2016 on the classification and reporting of fraud cases. The fraud
cases have been classified into misappropriation and criminal breach of trust, fraudulent encashment through
forged instruments, manipulation of books of account or through fictitious accounts and conversion of property,
unauthorised credit facilities extended for reward or for illegal gratification, negligence and cash shortages,
cheating and forgery, fraudulent transactions involving foreign exchange and any other type of fraud not coming
under the specific heads as above. Cash shortages resulting from negligence and fraudulent forex transactions
involving irregularities / violation of regulations have also to be reported as fraud if the intention to
cheat/defraud is suspected or proved. Information relating to frauds for the quarters ending June, September and
December may be placed before the audit committee of the board of directors during the month following the
quarter to which it pertains. Banks are also required to conduct an annual review of the frauds and place a note
before the board of directors for information. The reviews for the year-ended March may be put up to the Board
before the end of the next quarter i.e. for the quarter ended June 30 th and such reviews need not be sent to RBI.
These may be preserved for verification by the Reserve Banks inspecting officers. Additionally, Banks have to
constitute a special committee for monitoring and follow up of cases of frauds involving amounts of ` 10
million and above exclusively. Such committee is required to meet and review as and when a fraud involving an
amount of ` 10 million and above comes to light. Pursuant to the RBI notification dated January 21, 2016, the
RBI, has inter alia, increased the limits in relation to flash reporting to RBI of fraud cases to ` 50 million as
against the earlier limit of ` 10 million and above.
Issue of Long Term Bonds by Banks - Financing of Infrastructure and Affordable Housing
In order to ensure adequate credit flow to infrastructure sector also towards the affordable housing needs of the
country RBI issued guidelines on issue of long term bonds by banks on June 1, 2015. Banks can issue long-term
bonds with a minimum maturity of seven years to raise resources for lending to (i) long term projects in
infrastructure sub-sectors, and (ii) affordable housing. As a regulatory incentive these bonds exempted from
computation of net demand and time liabilities and would therefore not be subjected to CRR / SLR requirements
subject to certain conditions. Eligible bonds will also get exemption in computation of Adjusted Net Bank
Credit (ANBC) for the purpose of Priority Sector Lending (PSL).

156

Marginal Cost of Funds based Lending Rate (MCLR)

Pursuant to the notification issued by RBI dated December 17, 2015, all rupee loans sanctioned and credit limits
renewed with effect from April 1, 2016 are to be priced with reference to the MCLR which is the internal
benchmark for such purposes. MCLR comprise of: (a) marginal cost of funds; (b) negative carry on account of
CRR; (c) operating costs and; (d) tenor premium. In terms of the notification, the board of directors of the banks
are required to adopt a policy delineating the components of spread charged to a customer. Actual lending rates
are to be determined by adding the components of spread to the MCLR. Further, no lending below the MCLR of
a particular maturity for all loans linked to that benchmark is permitted. The aforementioned notification
provides exemption to certain loans from being linked to MCLR as the benchmark for determining interest rate.
Further, the aforementioned notification also provides for review of MCLR, reset of interest rates, treatment of
interest rates linked to base rate charged to existing borrowers and mandates all the banks to move to the MCLR
based pricing from April 1, 2016.
Scheme to set up IFSC Banking Units (IBUs)
The RBI has formulated a scheme for the setting up of International Financial Services Centres (IFSC)
Banking Units (IBUs) by banks in IFSCs. IBUs are permitted to engage in banking business in foreign
currency and can undertake transactions with non-resident entities other than individual / retail customers /
HNIs. The minimum capital requirement for these banking units would be U.S. Dollar 20 million. Funds raised
by the banking units, including borrowings in foreign currency, would have to be from persons not resident in
India. Deployment of funds can be with both persons resident in India as well as not resident in India. Liabilities
of these units would be exempted from cash reserve ratio and the statutory liquidity ratio. The banking units will
have to maintain the minimum regulatory capital as prescribed by RBI and prudential norms applicable to
overseas branches of Indian banks would apply to these banking units. The banking units would operate and
maintain their balance sheet only in foreign currency and will not be allowed to deal in Indian rupees, except
having a special rupee account for administrative expenses. The loans and advances of these banking units
would not be reckoned for priority sector lending requirements. IBUs are not allowed to open any current or
savings accounts.
Implementation of Indian Accounting Standards (Ind AS)
MCA notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015, pursuant to
which the banking companies were exempted to comply with Ind AS for preparation of financial statements.
However, in terms of the MCA press release dated January 18, 2016, the scheduled commercial banks are
required to prepare Ind AS based financial statements on consolidated and standalone basis in relation to
accounting period beginning from April 1, 2018 onwards, with comparatives for the period ending March 31,
2018 or thereafter and not even voluntarily before that. Further, pursuant to the notification dated February 11,
2016, RBI has advised scheduled commercial banks to inter alia, set up a Steering Committee headed by an
official of the rank of an Executive Director (or equivalent) comprising members from cross-functional areas of
the bank to immediately initiate the Ind AS implementation process.

157

BOARD OF DIRECTORS AND SENIOR MANAGEMENT

The composition of our Board is governed by the provisions of the Companies Act, the Banking Regulation Act,
the SEBI Listing Regulations and our Articles of Association.
The Board presently consists of ten Directors comprising of one executive Director, nine Non-executive
Directors which includes six Independent Directors. As per our Articles of Association, we shall not have less
than three Directors and not more than fifteen Directors unless otherwise determined by our members in a
general meeting. The quorum for meetings of the Board is one third of the total number of Directors or two
Directors, whichever is higher. Where the number of interested Directors exceeds or is equal to two thirds of the
total number of remaining Directors present at such meeting, the number of remaining Directors who are not
interested and are present at the meeting, not being less than two, shall be the quorum during such time.
The Banking Regulation Act requires that at least 51.00% of Directors have specialised knowledge or practical
experience in one or more of the following areas: accountancy, agriculture and rural economy, banking, cooperation, economics, finance, law, small-scale industry and any other matter RBI may specify. Out of the
aforesaid number of Directors, not less than two Directors are required to have specialised knowledge or
practical experience in agriculture and rural economy, co-operation or small-scale industry. As on the date of
this Preliminary Placement Document, all of our Banks Directors are professionals with the prescribed special
knowledge or practical experience and meet the conditions specified in the Banking Regulation Act. Further,
under the Banking Regulation Act, the appointment of whole-time Directors requires the approval of the RBI.
The RBI has also prescribed fit and proper criteria to be considered when appointing directors of banks, with
our Banks Directors being required to make declarations confirming their on-going compliance with such
criteria.
Pursuant to the provisions of the Companies Act, at least two-thirds of the total number of Directors, excluding
the Independent Directors, are liable to retire by rotation, with one-third of such number retiring at each annual
general meeting. A retiring Director is eligible for re-election. Further, the Independent Directors may be
appointed for a maximum of two terms of up to five consecutive years each. Any re-appointment of Independent
Directors shall inter alia be on the basis of the performance evaluation report and approved by the shareholders
by way of special resolution. Pursuant to the provisions of the Banking Regulation Act, none of the Directors
other than whole-time Directors may hold office continuously for a period of eight years. The Board presently
does not have requisite number of directors liable to retire by rotation to strictly comply with the Companies
Act, 2013.
The following table sets forth details regarding the Board of Directors as at the date of this Preliminary
Placement Document:
Sr.
No.
1

Name, Address, Occupation, DIN, Term and

Nationality
Rana Kapoor(1)
Address:
427-428, 27th Floor, Samudra Mahal, South Wing,
Dr A.B. Road, Worli
Mumbai 400 018
Maharashtra, India
Occupation: Banker
DIN: 00320702
Term: From September 1, 2015 until August 31,
2018
Nationality: Indian
M.R. Srinivasan(1)(2)
Address:
B/4, Ground Floor, Medhavi Sawami Samarth Nagar,
2nd Cross Road, Andheri West, Mumbai 400 053
Maharashtra, India
Occupation: Former chief general manager at the
Reserve Bank of India, in charge of bank regulation
and supervision
DIN: 00056617
Term: Up to October 22, 2016, or for such further

158

Age

Designation

58

Managing Director and Chief Executive

Officer

72

Non-executive Non-independent Director

Sr.
No.

Name, Address, Occupation, DIN, Term and

Nationality
period as may be approved by the Reserve Bank of
India
Nationality: Indian
Radha Singh(1)
Address:
A-46/4-Gurgaon
DLF Phase 1
Gurgaon 122 002
Haryana, India
Occupation: Ex-union agriculture and cooperation
secretary, Government of India
DIN: 02227854
Term: Up to October 29, 2016(3)
Nationality: Indian
Diwan Arun Nanda(1)(2)
Address:
Row House No. 11, Grand Paradi
572 Dady Seth Hill
August Kranti Marg
Mumbai 400 036
Maharashtra, India
Occupation: Chairman and managing director of
Rediffusion Dentsu Young and Rubicam Private
Limited
DIN: 00034744
Term: Up to October 22, 2016
Nationality: Indian
Lt. General (Dr.) Mukesh Sabharwal (Retd.)
Address:
P 381 ATS Green
Sector 93A
Noida 201 301
Uttar Pradesh, India
Occupation: Former Lt. General in Indian Army
DIN: 05155598
Term: From June 14, 2014 to June 13, 2019
Nationality: Indian
Brahm Dutt
Address:
CII/2282
Vasant Kunj
New Delhi 110070
India
Occupation: Former Secretary, Ministry of Road
Transport and Highways, Government of India
DIN: 05308908
Term: From June 14, 2014 to June 13, 2019
Nationality: Indian
Saurabh Srivastava (3)
Address:
C- 482, Defence Colony
New Delhi 110 024
India
Occupation: Entrepreneur
DIN: 00380453
Term: From June 14, 2014 to June 13, 2019
Nationality: Indian
Vasant V Gujarathi
Address:
A - 901, Vivarea building

159

Age

Designation

69

Non-executive Director and Part-time

Chairperson

73

Non-executive Independent Director

64

Non-executive Independent Director

66

Non-executive Independent Director

70

Non-executive Independent Director

65

Non-executive Independent Director

Sr.
No.

10

Name, Address, Occupation, DIN, Term and

Nationality
Sane Guruji Marg, 9th floor
Mahalakshmi, Saat Rasta
Mumbai 400 011
Maharashtra, India
Occupation: Chartered Accountant, ex-partner of
Price Waterhouse
DIN: 06863505
Term: From June 14, 2014 to June 13, 2019
Nationality: Indian
Mr. Ajai Kumar(1)
Address:
C- 2601, Ashok Tower
Dr. S.S. Rao Marg
Opposite Mahatma Gandhi Hospital
Parel (East), Mumbai-400 012
Maharashtra, India
Occupation: Former chairman and managing
director of Corporation Bank
DIN: 02446976
Term: From June 7, 2016 till the next AGM
Nationality: Indian
Mr. Ashok Chawla(4)
Address:
E-11, Mehrauli - Badarpur Road
Saket, New Delhi 110 017
India
Occupation: IAS (Retd.), Ex-Chairman
Competition Commission of India
DIN: 00056133
Term: From June 7, 2016 until June 6, 2021
Nationality: Indian

Age

Designation

63

Non-executive Non - independent Director

65

Non-executive Independent Director

of

Notes:
1. From among the current members of our Board, the appointments/reappointments, as applicable, of Rana Kapoor,
M.R. Srinivasan, Radha Singh, Diwan Arun Nanda and Ajai Kumar are currently being challenged by Madhu Kapur
and others before the Bombay High Court.For further details, see section titled Legal Proceedings on page 209.
2. M.R. Srinivasan and Diwan Arun Nanda were first appointed by a resolution passed by our Board on October 23,
2012. The RBI, pursuant to its letter dated March 4, 2015, permitted the continuation of their directorship in our Bank
beyond the age of 70 for their then term of four years ending in 2016 as non official directors. Our Bank has, pursuant
to its letter dated May 26, 2016 sought approval of the RBI for further extension of M.R. Srinivasans term from
October 23, 2016 till October 22, 2020.
3. The RBI has, pursuant to its letter dated January 28, 2016, permitted the continuation of the directorship of Saurabh
Srivastava beyond the age of 70 till he completes a term of four years from the date of his nomination on the Board.
4. Our Board has passed a resolution dated April 27. 2016, appointing Ashok Chawla as the Non-executive part-time
Chairman of our Bank from October 30, 2016, subject to approval of the shareholders. The RBI , vide letter dated
August 12, 2016, has approved the appointment of Ashok Chawla as the Non-executive part-time Chairman for a period
of three years from the date of his taking charge.

Brief Biographies of the Directors

Rana Kapoor is the founder, Managing Director and Chief Executive Officer of our Bank. He holds a
bachelors degree in economics from the University of Delhi and a masters degree in business administration
from Rutgers University, United States of America. Rana Kapoor has over 36 years of experience spanning
across various areas of commercial and investment banking. Prior to joining our Bank, he worked with Rabo
India Finance Private Limited as the managing director and chief executive officer and the main managing
partner, ANZ Grindlays Investment Bank as the general manager and country head, and Bank of America
where he headed the banks wholesale banking businesses and held several positions of increasing
responsibility, including assignments in Asian countries. He was presented the Eagle Pin in 1990, amongst
several other enterprising achievements. His term of appointment as the Managing Director and Chief Executive
Officer of our Bank has been renewed for a period of three years, i.e., from September 1, 2015 to August 31,
2018.

160

M.R. Srinivasan is a Non-executive Non-independent Director of our Bank. He holds a bachelors degree in
commerce from Madras University and a bachelors degree in law from Mumbai University. He is also a
certified associate from Indian Institute of Bankers. He has 35 years of experience with the RBI and has served
in various roles. He superannuated as the chief general manager in charge of department of banking operations
and development. He was previously a director in IDBI Bank Limited and SPIC Limited. M. R. Srinivasan has
served on our Board since October 23, 2012.
Radha Singh is a Non-executive Director and Part-time Chairperson of our Bank. She holds a bachelors degree
in history and social sciences from University of Delhi and a masters degree in arts (social and political
sciences) from University of Delhi, India. She also holds a masters degree in arts (public policy and
administration) from Harvard University. She is a retired Indian Administrative Services officer. She has more
than 39 years of experience in public service in areas of rural and agriculture development, water resources,
public finance and institution building. Prior to joining us, she was the union agriculture and cooperation
secretary. She was responsible for the formulation and implementation of the agriculture policy and has made
significant contribution in the past for the operationalisation of the protection of plant varieties and farmers
rights for safeguarding the interests of breeders. She also launched the National Horticulture Mission and
Bamboo Mission to double the horticulture and bamboo production in the country by 2010. Radha Singh has
served on the Board since April 29, 2008.
Diwan Arun Nanda is a Non-executive Independent Director of our Bank. He holds a bachelors degree in
commerce from Loyola College, University of Chennai and a masters degree in business administration from
the Indian Institute of Management, Ahmedabad. He is the founder/promoter of Rediffusion, a creative
communication agency. He is currently the chairman and managing director of Rediffusion Dentsu Young &
Rubicam Private Limited. Diwan Arun Nanda has served on the Board since October 23, 2012.
Lt. General (Dr.) Mukesh Sabharwal (Retd.) is a Non-executive Independent Director of our Bank. He holds
a masters degree in defence study from Madras University, a masters degree in management studies from
Osmania University, Hyderabad and a masters of military arts and science CGSC University, Kansas. He also
holds a masters degree in strategic studies from U.S. Army War College, Pennsylvania. He has 40 years of
experience in the Indian army. He is a recipient of the Param Vishisht Seva Medal for distinguished services of
an exceptional order, the Vishisht Seva Medal, and the Ati Vishisht Seva Medal. Lt. Gen. (Retd.) Mukesh
Sabharwal has served on the Board since April 25, 2012.
Brahm Dutt is a Non-executive Independent Director of our Bank. He holds a bachelors degree in law and
holds a masters degrees in science (physics) and arts (economics). He is a retired Indian Administrative Service
officer. He has 37 years of experience as an Indian Administrative Service officer and has previously held
several positions of responsibilities in the State Government of Karnataka as well as the Central Government
including the position of the secretary in the cabinet secretariat and in the Ministry of Road Transport and
Highways and was an advisor (energy and highways) to Government of Karnataka from May 2011 to
September 2013, besides advising several private companies on issues related to small and medium enterprises,
FDI, infrastructure, highways and power. He was also associated with several government committees and task
forces. Brahm Dutt has served on the Board since July 24, 2013.
Saurabh Srivastava is a Non-executive Independent Director of our Bank. He holds a bachelors degree in
technology from the Indian Institute of Technology, Kanpur and holds a masters degree from Harvard
University. He is a recipient of the distinguished alumnus award from the Indian Institute of Technology,
Kanpur, honorary Doctorate in technology from University of Wolverhampton, United Kingdom, and the Data
Quest Lifetime Achievement Award. He is also a recipient of the Padma Shri award. He is the co-founder and
has previously held the position of chairman of the National Association of Software and Services Companies.
He has previously also been on the advisory board of Imperial College Business School, London and several
other Indian universities. He has served on several committees set up by the government, such as the National
Innovation Council, SEBI Committee on Alternate Investment Funds, Railway Expert Committee, etc. Saurabh
Srivastava has served on the Board since April 23, 2014.
Vasant V Gujarathi is a Non-executive Independent Director of our Bank. He holds a bachelors degree in
commerce from Poona University. He is also a Chartered Accountant. He has over 35 years of post-qualification
experience in Price Waterhouse Coopers, being a partner with Price Waterhouse Coopers India for 22 years. He
has over three decades of audit experience working with large multinational and domestic companies. Vasant V
Gujarathi has served on the Board since April 23, 2014.

161

Ajai Kumar is a Non-executive Non-independent Director of our Bank. Prior to this, he was acting as Senior
Strategic Advisor of our Bank since 2014. He holds a masters degree in physics from the University of
Allahabad. He also holds degree in law. He is a Certified Associate of Indian Institute of Bankers. Ajai Kumar
has more than 40 years of experience in public sector banking industry holding leadership positions in India and
overseas (New York, USA) such as the chairman and managing director of Corporation Bank, executive director
of UCO Bank, and general manager and head of technology and retail banking at Bank of Baroda. As chairman
and managing director of Corporation Bank, he launched SME Loan centres, agriculture business development
cells, and several gold loan shoppes. Ajai Kumar has served on the Board since January 29, 2016.
Ashok Chawla has been appointed as a Non-executive Independent Director of our Bank. Prior to joining our
Bank, he was the Chairman of the Competition Commission of India. He holds a Masters Degree in Economics
from the Delhi School of Economics. He subsequently joined the Indian Administrative Service. Prior to joining
our Company, he headed the Sardar Sarovar Narmada multi-purpose project, and was the Economic Counselor
in the Indian Embassy at Washington DC, USA. He has been a permanent secretary in several ministries of the
Government of India such as Finance, Economic Affairs, and Civil Aviation. He has recently been appointed as
the Chairman of Governing Council of The Energy and Research Institute, and also the National Stock
Exchange of India Limited. Ashok Chawla has served on the Board since March 5, 2016.
Relationship with other Directors
None of the Directors are related to each other.
Borrowing Powers of our Board of Directors
Pursuant to a resolution passed by our members in the AGM dated June 6, 2015, the Board of Directors of our
Bank are authorized to borrow monies as and when required in excess of the paid-up capital and free reserves of
our Bank, such that the aggregate borrowings of our Bank shall not at any time exceed ` 500,000 million.
Interest of Directors of our Bank
Our Managing Director and Chief Executive Officer and our Part-time Chairperson may be deemed to be
interested to the extent of remuneration paid to them by our Bank. All Directors may be deemed to be interested
to the extent of fees, payable to them for attending meetings of the Board or a committee thereof, other
reimbursement of expenses payable to them, as well as to the extent of the profit based commission being paid
to them, not exceeding in aggregate one percent of the net profits of our Bank or a maximum of ` 1 million to
each director, whichever is lower.
Our Directors may also be regarded as interested to the extent of any dividend payable to them and other
distributions in respect of the Equity Shares. The Directors may also be regarded as interested in the Equity
Shares held by or that may be subscribed by and allotted to the companies, firms and trust, in which they are
interested as directors, members, partners or trustees. For details of the Equity Shares and options held by our
Directors, please refer to the sub-sections titled Shareholding of the Directors and Employees Stock Option
Scheme on pages 162 and 168, respectively.
Except as otherwise stated in this Preliminary Placement Document, we have not entered into any contract,
agreements, arrangements during the preceding two years from the date of this Preliminary Placement
Document in which our Directors are interested directly or indirectly and no payments have been made to them
in respect of these contracts, agreements, arrangements which are proposed to be made with them. Further our
directors have not taken any loan from our Bank.
Shareholding of Directors
The following table sets forth the shareholding of the Directors as on September 2, 2016:
Name

Number of
Equity Shares
20,000,000
1,610
1,000
105

Rana Kapoor
Saurabh Srivastava(1)
Vasant V Gujarathi(2)
Ajai Kumar

162

Percentage
4.75
0.00
0.00
0.00

Notes:
1. Held jointly with Lekha Srivastava.
2. Held jointly with Prafulla V. Gujarathi.

Terms of Employment and Remuneration

Terms of appointment of our Non-executive Part-time Chairperson
Pursuant to a resolution passed by our Board on October 30, 2014, resolution passed by our members through
postal ballot on January 17, 2015, and approval of the RBI dated August 1, 2014, Radha Singh has been
appointed as our Non-executive Part-time Chairperson for a period of two years, till October 29, 2016. The
Board of Directors on October 29, 2015, basis the recommendation of the Nomination & Remuneration
Committee, had proposed to increase the remuneration of Radha Singh effective from November 1, 2015 for the
remainder tenure of one year, subject to approval of RBI and shareholders. RBI, vide its letter dated December
21, 2015, also approved the proposal for increase in her remuneration with effect from November 1, 2015. On
June 7, 2016, our Bank also obtained approval from our shareholders for the remuneration payable to Radha
Singh for the period of one year ending on October 29, 2016. The terms and conditions of the remuneration
payable to Radha Singh include:
(a) salary of ` 2,400,000 per annum; and
(b) Banks car with a driver with fuel/ maintenance expenses on an actual basis, for official purpose.
Terms of appointment of our Managing Director and Chief Executive Officer
The re-appointment of Rana Kapoor as the Managing Director and Chief Executive Officer of our Bank was
approved by the Board of the Directors on April 22, 2015, based on the recommendations of the Nomination &
Remuneration Committee, with effect from September 1, 2015. Further, the RBI has, pursuant to its letter dated
August 24, 2015, approved the re-appointment for a period of three years from September 1, 2015 to August 31,
2018. The shareholders have also approved the appointment of Rana Kapoor as the Managing Director and
Chief Executive Officer for the above-mentioned period in the annual general meeting held on June 6, 2015.
The details of remuneration of Rana Kapoor, as approved by our Board on April 27, 2016, within the overall
limit of increase up to a maximum of 20% every year, approved by the shareholders on June 6, 2015 and as
approved by the RBI vide its letter dated August 2, 2016, with effect from April 1, 2016 are as under:
Particulars
Basic salary
Dearness allowance
Other allowances
Sub Total
Perquisites
Bank furnished and maintained accommodation
Free use of two Bank cars with driver for official and private purposes
Provident fund
Gratuity
Pension (Superannuation)
Traveling and halting allowances
Other benefits, if any
Gas, electricity and water
Medical
Residence telephone
Medical insurance
Life insurance/ personal accident insurance
Club membership
Leave fare concession

Remuneration(1)
` 22,645,164 p.a.
` 10,543,661 p.a.
` 3,993,674 p.a.
` 37,182,499 p.a.
Actuals
Actuals
` 2,717,420p.a.
As per Banks policy
` 2,264,516 p.a.

Actuals
Actuals
2 telephones
As per Banks policy
As per Banks policy
2 clubs
` 1,166,400 p.a.

Rana Kapoor has been paid a gross salary of ` 30,379,692 for fiscal year 2017 (as applicable). This includes a
bonus of ` 13,943,437, approved by resolutions passed by our Board and shareholders dated April 27, 2016 and
June 6, 2015, respectively, and RBI letter dated August 2, 2016. In addition to the above, Rana Kapoor is
entitled to perquisites as approved by the RBI.

163

The following table sets forth the compensation paid by our Bank, excluding perquisites as approved by the
RBI, to Rana Kapoor for fiscal year 2016, 2015 and 2014:
Executive Director

Total remuneration (including salary and other benefits)

(In ` million)
For the fiscal year ended 31 March
2016
2015
56.71
46.96

Rana Kapoor

2014*
24.40

* excluding perquisites
Remuneration of our Non Executive Directors
Pursuant to a resolution of our Board of Directors dated October 30, 2014, the sitting fee payable to our Nonexecutive Directors is ` 100,000 for attending a meeting of the Board and ` 50,000 for attending a meeting of a
committee of the Board.
The following table sets forth the remuneration paid by our Bank to our present Directors in the current fiscal
year 2017 (the the extent applicable), and in fiscal years 2016, 2015 and 2014:
Name of the Directors

M. R. Srinivasan
Radha Singh
Lt. Gen. (Dr.) Mukesh
Sabharwal (Retd.)
Diwan Arun Nanda
Brahm Dutt
Vasant V. Gujarathi
Saurabh Srivastava
Ajai Kumar
Ashok Chawla

Remuneration for
fiscal year 2017
(as applicable)
(`)*#
1,700,000
2,350,000
1,600,000

Remuneration for
fiscal year 2016
(`)

350,000
1,750,000
1,550,000
900,000
750,000
650,000

Remuneration for
fiscal year 2015
(`)

Remuneration for
fiscal year 2014
(`)

1,150,000
3,400,000
1,500,000

986,667
1,679,677
1,150,000

973,333
480,000
620,000

300,000
1,300,000
1,200,000
750,000
Nil
Nil

240,000
670,000
700,000
310,000
Nil
Nil

120,000
80,000
Nil
Nil
Nil
Nil

* Remuneration includes sitting fees, remuneration and commission paid to the Directors
#
Includes remuneration accrued
Corporate Governance
Our Board is in compliance with the corporate governance requirements under SEBI Listing Regulations, and
under the Companies Act.
Committees of the Board of Directors
Our Board has constituted committees in accordance with the relevant provisions of the Companies Act,
directions from RBI, Securities and Exchange Board of India (Share Based Employment Benefits) Regulations,
2014 and the SEBI Listing Regulations including: (i) Audit Committee; (ii) Risk Monitoring Committee; (iii)
Nomination and Remuneration Committee; (iv) Stakeholders Relationship Committee; (v)Fraud Monitoring
Committee; (vi) Service Excellence, Branding and Marketing Committee; (vii) Capital Raising Committee;
(viii) Corporate Social Responsibility Committee; (ix) IT Strategy Committee; (x) Board Credit Committee; (xi)
Committee of Independent Directors; and (xii) Board Committee on Wilful Defaulters and Non Co-operative
Borrowers.
The following table sets forth the members of the aforesaid committees as of the date of this Preliminary
Placement Document:
Committee
Audit Committee
Risk Monitoring Committee
Nomination and Remuneration Committee

Members
Vasant V. Gujarathi (Chairman), M.R.Srinivasan, Brahm
Dutt, Saurabh Srivastava, Ajai Kumar, and Ashok Chawla
M.R. Srinivasan (Chairman), Rana Kapoor (Vice Chairman),
Brahm Dutt, Ajai Kumar, and Ashok Chawla
Brahm Dutt (Chairman), Radha Singh, and Lt. Gen. (Dr.)

164

Committee
Stakeholders Relationship Committee
Fraud Monitoring Committee

Service Excellence, Branding and Marketing Committee

Capital Raising Committee
Corporate Social Responsibility Committee
IT Strategy Committee
Board Credit Committee

Committee of Independent Directors

Board Committee on Wilful Defaulters and Non Cooperative Borrowers

Members
Mukesh Sabharwal (Retd.).
Ashok Chawla (Chairman), Diwan Arun Nanada, and
Saurabh Srivastava.
Rana Kapoor (Chairman), Lt. Gen. (Dr.) Mukesh Sabharwal
(Retd.), M.R.Srinivasan, Ajai Kumar, and Vasant V.
Gujarati.
Lt. Gen. (Dr.) Mukesh Sabharwal (Retd.) (Chairman), Ajai
Kumar, Brahm Dutt, Saurabh Srivatava, and Rana Kapoor.
Rana Kapoor (Chairman), Ajai Kumar, M.R.Srinivasan, and
Vasant V. Gujarathi.
Radha Singh (Chairman), Diwan Arun Nanda, Brahm Dutt,
Rana Kapoor, and Ashok Chawla.
Saurabh Srivastava (Chairman), Ajai Kumar, Vasant V.
Gujarathi, Diwan Arun Nanda, and Radha Singh.
M.R.Srinivasan (Chairman), Lt. Gen. (Dr.) Mukesh
Sabharwal (Retd.), Radha Singh, Ashok Chawla, and Ajai
Kumar.
Lt. Gen. (Dr.) Mukesh Sabharwal (Retd.) (Chairman),
Brahm Dutt, Vasant V. Gujarathi, Diwan Arun Nanda,
Saurabh Srivastava, and Ashok Chawla.
Rana Kapoor (Chairman), Vasant V. Gujarathi,
M.R.Srinivasan, Lt. Gen. (Dr.) Mukesh Sabharwal (Retd.),
and Ajai Kumar.

Policy on disclosures and internal procedure for prevention of insider trading

Regulation 9 of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015
applies to our Bank and its employees and requires us to implement a code of internal procedures and conduct
for the prevention of insider trading. Our Bank has implemented a code of conduct for prevention of insider
trading in accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 2015.
Other confirmations
Except as otherwise stated in this Preliminary Placement Document, neither our Directors nor any key
managerial personnel of our Bank have any financial or other material interest in the Issue.
Neither our Bank, nor Rana Kapoor, nor its directors have been identified as wilful defaulters, as defined in the
SEBI Regulations.
Related Party Transactions
For details in relation to the related party transactions entered by our Bank during the last three fiscal year, as
per the requirements under Accounting Standard 18 issued by the Institute of Chartered Accountants in India
read with circular dated March 29, 2003 issued by the RBI on Guidance on Compliance with the Accounting
Standards by Banks, see the section Financial Statements on page 215.
Key Managerial Personnel of our Bank
In addition to our Managing Director and Chief Executive Officer, the following table sets forth the details of
the Key Managerial Personnel of our Bank:
Name of the Key Managerial Personnel
Rajat Monga
Amit Kumar
Sanjay Palve
Devamalya Dey
Deodutta Kurane
Ashish Agarwal
Namita Vikas
Pralay Mondal

Designation
Senior Group President Financial Markets and Chief
Financial Officer*
Group President and Country Head
Senior Group President and Senior Managing Director
Group President
Group President
Senior Group President and Chief Risk Officer
Group President
Senior Group President Retail and Business Banking

165

Name of the Key Managerial Personnel

Neelesh Sarda
Padmanabhan Kumar
Jaideep Iyer
Arun Agarwal
Surendra Jalan
Shubhada Rao
Chitra Pandeya
Anup Purohit
Sanjay Nambiar
Neeraj Dhawan

Designation
Senior President and Head of Compliance
Chief Operating Officer and Senior Group President
Group President
Group President
Group President
Group President and Chief Economist
Group President and Country Head
Senior President and Chief Information Officer
Group President and General Counsel
Group President and Chief Risk Officer Retail and Business
Banking
Rajan Pental
Group Head Retail Lending
Sumit Gupta
Group President and Country Head - Food & Agribusiness
Research Management
Rajanish Prabhu
Senior President and Head, Credit Cards
Shivanand Shettigar
President and Company Secretary*
Amit Sanan
Group President Emerging Corporate Banking &
Commercial Business Banking
*Also, key managerial personnel as per the definition under the Companies Act, 2013, along with Rana Kapoor, our
Managing Director and Chief Executive Officer.

Biographies of our Key Managerial Personnel

Rajat Monga is the Senior Group President, Financial Markets and Chief Financial Officer of our Bank. He has
a bachelors degree in technology from the Indian Institute of Technology, Delhi and a post graduate diploma on
management from the Indian Institute of Management, Ahmedabad. He heads the relationship management
coverage of our Indian financial institution division, international banking division and multinational
corporation division and is responsible for financial markets and transaction banking group covering cash
management and trade finance. He is also responsible for institutionalising best practices in all aspects of
financial accounting, taxation, technology based management information systems and expense management
and ensuring the integrity of all aspects of financial management in fullest compliance with our accounting
standards and corporate governance policies. Rajat has experience in the areas of balance sheet management,
treasury management, financial markets and product development. He joined our Bank on April 24, 2004.
Amit Kumar is the Group President and Country Head, Corporate and Institutional Banking and Commercial
Banking at our Bank. He has a bachelors degree in engineering from Birla Institute of Technology and Science,
and a post graduate diploma on management from the Indian Institute of Management, Ahmedabad. He has
been a part of our founding team since 2004 and is responsible for building the wholesale banking business of
our Bank since its inception. He has experience in areas of corporate and investment banking. He joined our
Bank on July 5, 2004.
Sanjay Palve is the Senior Group President and Senior Managing Director, Wholesale Banking, Government
Relationship Management, Food and Agribusiness Research Management and Strategic Initiatives and
Government Advisory at our Bank. He has a bachelors degree in engineering and management studies, both
from the University of Mumbai. He has experience in the area of banking with a demonstrated track record in
leading large financial business such as corporate banking, project finance, structured finance and financial
restructuring. He joined our Bank on December 1, 2004.
Devamalya Dey is the Group President, Audit and Compliance at our Bank. He has a bachelors degree in
commerce from the University of Calcutta. He is also a qualified Chartered Accountant. He has experience in
areas of operations, audit and compliance and fraud investigation. He joined our Bank on November 1, 2006.
Deodutta R. Kurane is the Group President, Human Capital Management and Infrastructure and Network
Management at our Bank. He has a bachelors degree in commerce from the University of Poona and a post
graduate diploma in induatrial relations and wefare (personnel management) from the Xavier Labour Relations
Institute. He is experienced in the area of human resources. He joined our Bank on March 1, 2007.
Ashish Agarwal is the Group President and Chief Risk Officer, at our Bank. He has a bachelors degree in
technology from the Indian Institute of Technology, Kanpur, and a post graduate diploma in computer aided
management from the Indian Institute of Management, Calcutta. He has experience in areas of commercial and
investment banking in financial services, including structured and project finance, syndications and

166

underwriting, high yield and distress asset investments, credit ratings, credit research and risk management. He
joined our Bank on March 17, 2009.
Namita Vikas is the Senior President and Chief Sustainability Officer at our Bank. She has a diploma from the
Swedish Institute Management Program. Namita Vikas has experience in areas of corporate social
responsibility, public affairs, communication and policy advocacy. She joined our Bank on May 10, 2012.
Pralay Mondal is the Senior Group President, Branch, Retail and Business Banking at our Bank. He has a
bachelors degree in technology from the Indian Institute of Technology, Kharagpur and post graduate diploma
in management from the Indian Institute of management, Calcutta. He has experience in the areas of marketing,
sales, product, business profit and loss management in the fast moving consumer goods, office automation and
banking. He joined our Bank on June 20, 2012.
Neelesh Sarda is the Senior President and Head, Compliance at our Bank. He has a bachelors degree in
commerce from the University of Mumbai. He is also a Chartered Accountant registered with the ICAI. He
joined our Bank on November 19, 2014, but had earlier worked with us for over six years as Senior President
and Country Head.
Padmanabhan Kumar is the Chief Operating Officer and Senior Group President, Operations and Service
Delivery at our Bank. He joined our Bank on November 2, 2015, but had earlier worked with us as Country
Head for over 3 years.
Jaideep Iyer is the Group President, Financial Management at our Bank. He has a bachelors degree in
engineering from the University of Rajasthan and a post graduate diploma in management from the Indian
Institute of Management, Ahmedabad. He joined our Bank on August 7, 2004.
Arun Agrawal is the Group President and Global Head, International Banking and Multinational Corporations
Relationships Banking at our Bank. He has a bachelors degree in engineering from the University of Delhi and
a masters degree in management studies from the University of Mumbai. He has experience in the areas of
business development, credit ratings and market analytics. He joined our Bank on October 27, 2005.
Surendra Jalan is the Group President, Indian Financial Institutions at our Bank. He is a qualified Chartered
Accountant. He has a bachelors degree in commerce from the University of Calcutta and a certification from
the Institute of Cost and Works Accountants of India. He is also a fellow member of the Institute of Company
Secretaries of India and the Institute of Chartered Accountants of India. He has experience in areas of treasury,
corporate and institutional banking, rural and agriculture banking. He joined our Bank on November 7, 2005.
Shubhada Rao is the Group President and Chief Economist at our Bank. She has a bachelors and masters
degree in arts (economics) from the University of Bombay. She joined our Bank on February 6, 2006.
Chitra Pandeya is the Group President and Country Head, SA Liabilities, Cards, and Direct Banking at our
Bank. She has a masters degree in management studies from the University of Bombay. She is experienced in
product management. She joined our Bank on February 18, 2012.
Anup Purohit is the Senior President and Chief Information Officer, Technology and Solutions Group. He has
a bachelors degree in engineering (electronics engineering) from the University of Bombay. He joined our
Bank on January 8, 2015.
Sanjay Nambiar is the Group President and General Counsel, Legal Risk Management at our Bank. He has a
bachelors degree and masters degree in law from the University of Calicut. He joined our Bank on December
15, 2010.
Neeraj Dhawan is the Group President and Chief Risk Officer Retails and Business Banking, Risk
Management. He has a bachelors degree in commerce from the University of Calcutta. He is a Chartered
Accountant registered with the ICAI and a Company Secretary registered with the ICSI. He has also passed the
final examination held by the Institute of Cost and Works Accountants of India. He joined our Bank on
November 2, 2015.
Rajan Pental is the Group Head Retail Lending at our Bank. He has a post graduate diploma in management
from the Indian Institute of Business Management, Patna. He joined our Bank on November 2, 2015.

167

Sumit Gupta is the Group President and Country Head - Food & Agribusiness Research Management at our
Bank. He has a bachelors degree in technology from the Indian Institute of Technology, Delhi, and a post
graduate diploma in management from the Indian Institute of Management, Calcutta. He joined our Bank on
July 23, 2004.
Rajanish Prabhu is the Senior President and Head, Credit Cards at our Bank. He has a bachelors degree in
science from the University of Bombay and a masters degree in marketing management from the University of
Mumbai. He joined our Bank on May 2, 2015.
Shivanand Shettigar is the President and Company Secretary at our Bank. He is a fellow member of the
Institute of Company Secretaries of India. He has a bachelors degree in commerce from the University of
Bombay and a bachelors degree in law from the University of Bombay. He has experience in areas of law,
compliance, internal audit and risk identification, fund raising, contracts management, IPR management,
corporate restructuring and labour law matters. He joined our Bank on May 20, 2013.
Amit Sanan is the Group President Emerging Corporate Banking & Commercial Business Banking at our
Bank. He has a bachelors degree in engineering (production) from Punjab University and a post graduate
diploma in management from the Indian Institute of Management, Ahmedabad. He has experience in corporate
finance, wholesale lending and relationship management. He joined our Bank on August 22, 2016.
All key managerial personnel are permanent employees of our Bank.
Shareholding of Key Managerial Personnel
As of September 2, 2016, except as stated below, none of the key managerial personnel of our Bank held any
Equity Shares in our Bank:
Name

No. of Equity Shares

20,000,000
901,271
255,500
598,750
180,000
162,358
54,000
10,100
25,299
35,750
19,200
218,600
215,250
10
58,500
1,010
18,000
2,500
457,050
1,186
12,250

Rana Kapoor
Rajat Monga
Amit Kumar
Sanjay Palve
Devamalya Dey
Deodutta Kurane
Ashish Agarwal
Namita Vikas
Pralay Mondal
Neelesh Sarda
Jaideep Iyer
Arun Agarwal
Surendra Jalan
Shubhada Rao
Chitra Pandeya
Anup Purohit
Sanjay Nambiar
Neeraj Dhawan
Sumit Gupta
Rajanish Prabhu
Shivanand Shettigar

Percentage
4.75
0.21
0.06
0.14
0.04
0.04
0.01
0.00
0.01
0.01
0.00
0.05
0.05
0.00
0.01
0.00
0.00
0.00
0.11
0.00
0.00

Employees Stock Option Schemes

The following are the details of the options outstanding under the ESOS Schemes, as on the date of the
Preliminary Placement Document:
Details

Number of Options

Options outstanding
Options vested

18,541,411
4,872,961

Our Directors do not hold any options under the ESOS Schemes. The details of the outstanding options granted
to our Key Managerial Personnel as on the date of the Preliminary Placement Document:

168

Name of the Key Managerial Personnel

Rajat Monga
Sanjay Palve
Pralay Mondal
Jaideep Iyer
Ashish Agarwal
Amit Kumar
Sumit Gupta
Deodutta Kurane
Devamalya Dey
Arun Agarwal
Shubhada Rao
Rajan Pental
Padmanabhan Kumar
Neeraj Dhawan
Chitra Pandeya
Sanjay Nambiar
Namita Vikas
Neelesh Sarda
Surendra Jalan
Anup Purohit
Rajanish Prabhu
Shivanand Shettigar
Amit Sanan

Number of Options Outstanding

1,600,000
760,000
675,000
530,000
496,000
311,500
275,000
246,500
184,000
183,000
157,500
155,000
150,000
125,000
124,500
104,000
105,000
100,000
94,000
64,000
60,000
32,500
50,000

Interests of Key Managerial Personnel

The Key Managerial Personnel of our Bank do not have any interest in our Bank other than (a) their
shareholding in our Bank; (b) the options under the ESOS Schemes held by them; (c) their remuneration and
benefits to which they are entitled to as per their terms of appointment; and (d) reimbursement of expenses
incurred by them during the ordinary course of business.

169

PRINCIPAL SHAREHOLDERS
Our Bank has an issued, subscribed and paid up share capital of ` 4,213,452,750.00 divided into 421,345,275 Equity Shares. The Equity Shares are listed and traded on the
Stock Exchanges.
Equity Shareholding Pattern
The shareholding pattern of our Bank as of June 30, 2016 is as follows:
Category

Category of
Shareholder

No of
Shareholders

No of fully
No of
No of
Total No of Shareholding Number of Voting Rights held in each class of No of Shares Shareholding
paid up
Partly
Shares
Shares Held
as a % of
securities
Underlying
as a %
equity
paid-up Underlying
(VII) =
total no of
Outstanding assuming full
shares held equity Depository (IV)+(V)+(VI)
shares
convertible conversion of
shares
Receipts
(calculated as
securities
convertible
held
per SCRR,
(Including Securities (as a
1957) as a %
Warrants)
percentage of
of (A+B+C2)
diluted share
capital)
(XI)=(VII)+(X)
as a % of
(A+B+C2)
No of Voting Rights
Total as a
% of
(A+B+C)
Class X

(I)
(A)
(B)
(C)
(C1)
(C2)

(II)

(III)

Promoter & Promoter

Group
Public
Non
Promoter-Non
Public
Shares
underlying
DRs
Shares
held
by
Employs Trusts
Total:

(IV)
5

(V)

(VI)

(VII)

Class
Y

(VIII)

92,142,450

92,142,450

187,011 328,951,291

328,951,291

92,142,450

78.12 328,951,291

No.

As a %
of total
Shares
held

Number of Shares
Number of
pledged or otherwise equity shares
encumbered
held in
dematerialized
form

No.

As a %
of total
Shares
held

Total
(IX)

21.88

Number of
Locked in
Shares

(X)

(XI)

(XII)

(XIII)

(XIV)

92,142,450

21.88

21.88

0.00

3,335,000 3.62

92,142,450

0 328,951,291

78.12

78.12

0.00

NA

NA

328,876,249

NA

0.00

NA

0.00

NA

NA

0.00

0.00

0.00

0.00

NA

NA

187,016 421,093,741

421,093,741

0 421,093,741

100.00

100.00

0.00

3,335,000 3.62

421,018,699

100.00 421,093,741

The following table sets forth the shareholding of the promoter and promoter group as at June 30, 2016:
Category & Name of
the Shareholder

PAN

No of
No of fully No of No of Shares Total No of Shareholding as a Number of Voting Rights held in each class
Shareholders paid up
Partly Underlying Shares Held % of total no of
of securities
equity
paid-up Depository (IV+V+VI) shares (calculated
shares held equity
Receipts
as per SCRR,
shares
1957 (VIII) As a
held
% of (A+B+C2

170

No of Shares
Underlying
Outstanding
convertible
securities
(Including
Warrants)

Shareholding as a Number of Number of Shares

Number of
% assuming full Locked in
pledged or
equity shares
conversion of
Shares
otherwise
held in
convertible
encumbered
dematerialized
Securities (as a
form
percentage of
diluted share
capital) (VII)+(X)
As a % of
(A+B+C2)

No of Voting Rights

Class X Class
Y
(I)
(II)
Indian
Individuals/Hindu
undivided Family
RANA KAPOOR
AHIPK0411A
MADHU KAPUR
AAFPK3469G
Central
Government/State
Government(s)
Financial
Institutions/Banks
Any Other
YES
CAPITAL AABCD8400H
(INDIA)
PRIVATE
LIMITED
MORGAN CREDITS AADCM6735E
PRIVATE LIMITED
MAGS
FINVEST AADCM6820G
PRIVATE LTD
Sub-Total (A)(1)
Foreign
Individuals
(NonResident
Individuals/Foreign
Individuals
Government
Institutions
Foreign
Investor

(III)

Portfolio

Any Other
Sub-Total (A)(2)
Total Shareholding of
Promoter
and
Promoter
Group
(A)=(A)(1)+(A)(2)

(IV)

(V)

(VI)

(VII)

(VIII)

Total as a %
of (A+B+C)

No. As a %
of total
Shares
held

No.

As a %
of total
Shares
held

Total
(IX)

(X)

(XI)

(XII)

(XIII)

(XIV)

2 55,125,000

55,125,000

13.09 55,125,000

55,125,000

13.09

13.09

0.00 3,335,000

0.00

55,125,000

1 20,000,000
1 35,125,000
0
0

0
0
0

0
0
0

20,000,000
35,125,000
0

4.75 20,000,000
8.34 35,125,000
0.00
0

0
0
0

20,000,000
35,125,000
0

4.75
8.34
0.00

0
0
0

4.75
8.34
0.00

0
0
0

0.00
0
0.00 3,335,000
0.00
0

0.00
9.49
0.00

20,000,000
35,125,000
0

0.00

0.00

0.00

0.00

0.00

3 37,017,450
1 15,125,000

0
0

0
0

37,017,450
15,125,000

8.79 37,017,450
3.59 15,125,000

0
0

37,017,450
15,125,000

8.79
3.59

0
0

8.79
3.59

0
0

0.00
0.00

0
0

0.00
0.00

37,017,450
15,125,000

1 14,050,000

14,050,000

3.34 14,050,000

14,050,000

3.34

3.34

0.00

0.00

14,050,000

7,842,450

7,842,450

1.86 7,842,450

7,842,450

1.86

1.86

0.00

0.00

7,842,450

5 92,142,450

92,142,450

21.88 92,142,450

92,142,450

21.88

21.88

0.00 3,335,000

3.62

92,142,450

0.00

0.00

0.00

0.00

0.00

0
0

0
0

0
0

0
0

0
0

0.00
0.00

0
0

0
0

0
0

0.00
0.00

0
0

0.00
0.00

0
0

0.00
0.00

0
0

0.00
0.00

0
0

0.00

0.00

0.00

0.00

0.00

0
0
0
0
5 92,142,450

0
0
0

0
0
0

0
0
92,142,450

0.00
0
0.00
0
21.88 92,142,450

0
0
0

0
0
92,142,450

0.00
0.00
21.88

0
0
0

0.00
0.00
21.88

0
0
0

0.00
0
0.00
0
0.00 3,335,000

0.00
0.00
3.62

0
0
92,142,450

The following table sets forth the shareholding of persons belonging to the category Public as at June 30, 2016:
Category Category & Name of the
Shareholder

PAN

No of
No of fully No of No of Shares Total No of Shareholding Number of Voting Rights held in each
Shareholders paid up
Partly Underlying Shares Held as a % of total
class of securities
equity
paid-up Depository (IV+V+VI) no of shares
shares held equity
Receipts
(A+B+C2)
shares
held

171

No of Shares
Underlying
Outstanding
convertible
securities
(Including
Warrants)

Shareholding as a Number of Number of

% assuming full Locked in
Shares
conversion of
Shares
pledged or
convertible
otherwise
Securities (as a
encumbered
percentage of
diluted share
capital)

Number of
equity shares
held in
dematerialized
form

No of Voting Rights

Class X

(1)
(a)

(b)
(c)
(d)
(e)

(f)
(g)

(h)
(i)

(2)

(I)
(II)
Institutions
Mutual Funds
Birla Sun Life Trustee AAATB0102C
Company Private Limited
along with its various
schemes
Reliance Capital Trustee AAATR0090B
Company
Limited
A/c
Reliance Growth Fund along
with its various schemes
Franklin India Monthly AAATT4931H
Income Plan alongwith its
various schemes
UTI along with its various AAATU1088L
schemes
Venture Capital Funds
Alternate Investment Funds
Foreign Venture Capital
Investors
Foreign Portfolio Investors
GMO Emerging Markets AAATG3065D
Fund, A Series of GMO
Trust
Platinum Asia Fund
AAATP8273E
Franklin
Templeton AABCT5310J
Investment Funds
GMO Emerging Domestic AABTG5059J
Opportunities
Fund,
A
Series of GMO Trust
Financial Institutions/Banks
Insurance Companies
Life Insurance Corporation AAACL0582H
of India along with its
various schemes
Bajaj Allianz Life Insurance AADCA1701E
Company Ltd.
Provident
Funds/Pension
Funds
Any Other
(Specify)
Sub Total (B)(1)
Central Government/State
Government(s)/President of
India
Sub Total (B)(2)

(III)

(IV)

(V)

(VI)

(VII)

Class
Y

(VIII)

242
35

47,607,290
7,912,485

0
0

0
0

47,607,290
7,912,485

17

4,908,375

4,908,375

12

10,373,607

10,373,607

12

4,361,257

0
0
0

0
0
0

0
0
0

0
0
0

658 177,511,573
1
5,407,556

0
0

0 177,511,573
0
5,407,556

Total as a
% of
(A+B+C)

Total
(IX)

11.31 47,607,290
1.88 7,912,485

No. As a % No. As a % of
of total
total
Shares
Shares
held
held

(X)

(XII)

(XIII)

(XIV)

11.31
1.88

0
0

11.31
1.88

0
0

0.00 NA
0.00 NA

NA
NA

47,607,290
7,912,485

4,908,375

1.17

1.17

0.00 NA

NA

4,908,375

2.46 10,373,607

0 10,373,607

2.46

2.46

0.00 NA

NA

10,373,607

4,361,257

1.04

4,361,257

4,361,257

1.04

1.04

0.00 NA

NA

4,361,257

0
0
0

0.00
0.00
0.00

0
0
0

0
0
0

0
0
0

0.00
0.00
0.00

0
0
0

0.00
0.00
0.00

0
0
0

0.00 NA
0.00 NA
0.00 NA

NA
NA
NA

0
0
0

0 177,511,573
0 5,407,556

42.15
1.28

0
0

42.15
1.28

0
0

0.00 NA
0.00 NA

NA
NA

177511573
5407556

1.17

4,908,375

42.15 177,511,573
1.28 5,407,556

0 47,607,290
0 7,912,485

(XI)

1
1

6,926,323
8,419,610

0
0

0
0

6,926,323
8,419,610

1.64
2.00

6,926,323
8,419,610

0
0

6,926,323
8,419,610

1.64
2.00

0
0

1.64
2.00

0
0

0.00 NA
0.00 NA

NA
NA

6926323
8419610

4,576,040

4,576,040

1.09

4,576,040

4,576,040

1.09

1.09

0.00 NA

NA

4576040

21
34
16

372,290
52,996,204
37,453,751

0
0
0

0
0
0

372,290
52,996,204
37,453,751

0
372,290
0 52,996,204
0 37,453,751

0.09
12.59
8.89

0
0
0

0.09
12.59
8.89

0
0
0

0.00 NA
0.00 NA
0.00 NA

NA
NA
NA

372290
52996204
37453751

5,566,784

5,566,784

1.32

5,566,784

5,566,784

1.32

1.32

0.00 NA

NA

5566784

0.00

0.00

0.00

0.00 NA

NA

0
0
955 278,487,357
0
0

0
0
0

0
0
0 278,487,357
0
0

0
0
0 27,848,7357
0
0

0.00
66.13
0.00

0
0
0

0.00
66.13
0.00

0
0
0

0.00 NA
0.00 NA
0.00 NA

NA
NA
NA

0
278487357
0

0.00

0.00

0.00 NA

NA

0.09
372,290
12.59 52,996,204
8.89 37,453,751

0.00
0
66.13 278,487,357
0.00
0

0.00

As on the date of this Preliminary Placement Document, other than the options outstanding under the employee stock option plans instituted by the Bank, there are no
outstanding convertible securities, including warrants, which would entitle any person any option to receive Equity Shares.

172

ISSUE PROCEDURE
Below is a summary intended to present a general outline of the procedure relating to the bidding, application,
payment, Allocation and Allotment of Equity Shares in the Issue. The procedure followed in the Issue may differ
from the one mentioned below and the investors are assumed to have apprised themselves of the same from our
Bank or the Managers. The prospective investors are also advised to inform themselves of any restrictions or
limitations that may be applicable to them; see the sections titled Selling Restrictions and Transfer
Restrictions on pages 183 and 188, respectively.
The Issue is being made to QIBs in reliance upon Chapter VIII of the SEBI ICDR Regulations. The Issue has
been approved by our Board pursuant to its resolution dated April 27, 2016 and has been approved by our
members in the AGM held on June 7, 2016. Further, the Issue, being a QIP, has general permission from the
RBI pursuant to section 4(ii)(b) read with section 5 of the Reserve Bank of India (Issue and Pricing of Shares by
Private Sector Banks) Directions, 2016, subject to compliance with the conditions prescribed therein.
Our Bank has received the in principle approvals dated September 7, 2016 each from the NSE and the BSE,
respectively, under Regulation 28 of the SEBI Listing Regulations. Our Bank has also filed a copy of this
Preliminary Placement Document with the Stock Exchanges. Our Bank shall also make the requisite filings with
the RoC and SEBI within the stipulated period as required under the Companies Act, 2013 and the Companies
(Prospectus and Allotment of Securities) Rules, 2014.
After our Board passes a resolution for Allotment of the Equity Shares, our Bank shall make applications to the
Stock Exchanges for the listing approvals. Subsequently, after the credit of Equity Shares to the beneficiary
accounts with the Depository Participant, our Bank shall make applications to the Stock Exchanges for the final
listing and trading approvals.
Issue Procedure
1.

Our Bank and the Managers shall identify the QIBs and circulate serially numbered copies of this
Preliminary Placement Document along with the serially numbered Application Form, either in
electronic form or physical form to QIBs and the Application Form will be specifically addressed to
such QIB. In terms of section 42(7) of the Companies Act, 2013, our Bank shall maintain complete
records of the QIBs to whom this Preliminary Placement Document and the serially numbered
Application Form have been dispatched and make requisite filings, as required under the Companies
Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014.

2.

Unless a serially numbered Preliminary Placement Document along with the Application Form is
addressed to a particular QIB, no invitation shall be deemed to have been made to such QIB to
make an offer to subscribe to Equity Shares pursuant to the Issue. Even if such documentation
were to come into the possession of any person other than the intended recipient, no offer or invitation
to offer shall be deemed to have been made to such person and any application that does not comply
with this requirement shall be treated as invalid.

3.

Bidders shall submit Bids for, and our Bank shall issue and Allot to each Allottee, at least such number
of Equity Shares in the Issue which would aggregate to ` 20,000 calculated at the face value of the
Equity Shares.

4.

QIBs may submit their Bids through the Application Form, including any revisions thereof, during the
Bidding Period to the Managers.

5.

QIBs will be required to inter alia, indicate the following in the Application Form:
a.

full official name of the QIB to whom Equity Shares are to be Allotted;

b.

number of Equity Shares Bid for;

c.

price at which they are agreeable to subscribe for the Equity Shares, provided that QIBs may
also indicate that they are agreeable to submit a Bid at a Cut-off Price; which shall be any
price as may be determined by our Bank in consultation with the Managers at or above the
Floor Price as approved in accordance with the SEBI ICDR Regulations;

173

d.

the details of the beneficiary account with the Depository Participant to which the Equity
Shares should be credited; and

e.

a representation that it is either (i) outside the United States, or (ii) an institutional investor
meeting the requirements of a qualified institutional buyer as defined in Rule 144A.

Note: Each eligible sub-account of an FII other than a sub-account which is a foreign corporate or a
foreign individual will be considered as an individual QIB and separate Application Forms would be
required from each such sub-account for submitting Bids. FIIs or sub accounts of FIIs, are required to
indicate the SEBI registration number in the Application Form. It may be noted that a sub-account
which is a foreign corporate or a foreign individual is not a QIB in terms of the SEBI ICDR
Regulations. Bids made by asset management companies or custodians of Mutual Funds shall
specifically state the names of the concerned schemes for which the Bids are made. In case of a Mutual
Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI.
6.

Once a duly filled Application Form is submitted by a QIB, such Application Form constitutes an
irrevocable offer and cannot be withdrawn after the Bid Closing Date. The Bid Closing Date shall be
notified to the Stock Exchanges and upon such notification the QIBs shall be deemed to have been
given notice of such date.
Bids made by asset management companies or custodians of Mutual Funds shall specifically state the
names of the concerned schemes for which the Bids are made. In case of a Mutual Fund, a separate Bid
can be made in respect of each scheme of the Mutual Fund registered with SEBI.

7.

Upon the receipt of the duly completed Application Forms, our Bank shall in consultation with the
Managers determine (i) the Issue Price, (ii) the number of Equity Shares to be Allocated; and (iii) the
QIBs to whom the same shall be Allocated. Upon such determination, the Managers will send CANs to
the QIBs who have been Allocated the Equity Shares, together with a serially numbered Placement
Document either in electronic form or through physical delivery. The dispatch of a CAN shall be
deemed a valid, binding and irrevocable contract for the QIBs to subscribe to the Equity Shares
Allocated to such QIB and to pay the application money (being the multiple of the Issue Price and
Equity Shares Allocated to such QIB). The CAN shall contain details such as the number of Equity
Shares Allocated to the QIB and payment instructions including the details of the amounts payable by
the QIB for Allotment of the Equity Shares in its name and the Pay-In Date as applicable to the
respective QIB. Please note that the Allocation will be at the absolute discretion of our Bank and
will be made in consultation with the Managers.

8.

Pursuant to receiving a CAN, each QIB shall be required to pay the application money for the Equity
Shares indicated in the CAN at the Issue Price, through electronic transfer to the Escrow Account by
the Pay-In Date. No payment shall be made by QIBs in cash. Please note that any payment of
application money for the Equity Shares shall be made from the bank accounts of the relevant QIBs
applying for the Equity Shares and our Bank shall keep a record of the bank account from where such
payment for subscriptions have been received. Monies payable on Equity Shares to be held by joint
holders shall be paid from the bank account of the person whose name appears first in the application.
Pending Allotment, all monies received for subscription of the Equity Shares shall be kept by our Bank
in a separate bank account with a scheduled bank and shall be utilised only for the purposes permitted
under the rules prescribed by RBI, Companies Act or any other law as may be applicable.

9.

Upon receipt of the application monies from the QIBs, our Bank shall Allot the Equity Shares as per
the details provided in the CANs to such QIBs. The details of the Allotment shall be intimated by our
Bank to the Stock Exchanges.

10.

After our Board passes the resolution for Allotment and prior to crediting the Equity Shares into the
beneficiary accounts of the successful Bidders, our Bank shall apply to the Stock Exchanges for listing
approvals. After receipt of the listing approvals from the Stock Exchanges, our Bank shall credit the
Equity Shares into the beneficiary accounts maintained with the Depository Participant by the
successful Bidders. Our Bank shall then apply for the final listing and trading approvals from the Stock
Exchanges.

174

11.

The Equity Shares that have been credited to the beneficiary accounts, maintained with the Depository
Participant, of the QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of
final listing and trading approvals from the Stock Exchanges.

12.

The final listing and trading approvals granted by the Stock Exchanges are also ordinarily available on
the websites of the Stock Exchanges, and our Bank may communicate the receipt of the final listing
and trading approvals to the QIBs who have been Allotted Equity Shares. Our Bank and the Managers
shall not be responsible for any delay or non receipt of the communication of the final listing and
trading approvals from the Stock Exchanges or any loss arising from such delay or non-receipt. QIBs
are advised to apprise themselves of the status of the receipt of such approvals from the Stock
Exchanges or our Bank.

Qualified Institutional Buyers

Only QIBs, as defined in Regulation 2(1)(zd) of the SEBI ICDR Regulations are eligible to invest in the Equity
Shares pursuant to the Issue. Currently, QIB means:

public financial institutions as defined in section 2(72) of the Companies Act, 2013;
scheduled commercial banks;
Mutual Funds;
Eligible FPIs;
multilateral and bilateral development financial institutions;
VCFs registered with SEBI;
FVCIs registered with SEBI;
AIFs registered with SEBI
state industrial development corporations;
insurance companies registered with Insurance Regulatory and Development Authority;
provident funds with minimum corpus of ` 250.0 million;
pension funds with minimum corpus of ` 250.0 million;
the National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005
of the Government of India published in the Gazette of India;
insurance funds set up and managed by army, navy or air force of the Union of India; and
insurance funds set up and managed by the Department of Posts, India.

FIIs (OTHER THAN A SUB-ACCOUNT WHICH IS A FOREIGN CORPORATE OR A FOREIGN

INDIVIDUAL) AND ELIGIBLE FPIs SHALL PARTICIPATE IN THIS ISSUE UNDER SCHEDULE 2
AND SCHEDULE 2A OF FEMA 20, RESPECTIVELY. FIIs AND ELIGIBLE FPIs ARE PERMITTED
TO PARTICIPATE IN THE ISSUE SUBJECT TO COMPLIANCE WITH ALL APPLICABLE LAWS
AND SUCH THAT THE SHAREHOLDING OF THE FPIs AND FIIs DOES NOT EXCEED
SPECIFIED LIMITS AS PRESCRIBED UNDER APPLICABLE LAWS IN THIS REGARD. OTHER
ELIGIBLE NON-RESIDENT QIBs SHALL PARTICIPATE IN THE ISSUE UNDER SCHEDULE 1 OF
THE FEMA 20 AND SHALL MAKE THE PAYMENT OF APPLICATION MONEY THROUGH THE
FOREIGN CURRENCY NON RESIDENT (FCNR) ACCOUNT AND NOT THROUGH THE SPECIAL
NON-RESIDENT RUPEE (SNRR) ACCOUNT.
Eligible FPIs are permitted to participate in the Issue subject to compliance with conditions and
restrictions which may be specified by the Government from time to time.
An FII who holds a valid certificate of registration from SEBI shall be deemed to be an FPI until the expiry of
the block of three years for which fees have been paid as per the SEBI FII Regulations. Subject to trailing
condition, an FII or sub-account of an FII may participate in the Issue, until the expiry of its registration as a FII
or sub-account, or until it obtains a certificate of registration as FPI, whichever is earlier. If the registration of
the FII or sub-account has expired or is about to expire, such FII or sub-account may, subject to payment of
conversion fees under the SEBI FPI Regulations, participate in the Issue. An FII or sub-account shall not be
eligible to invest as an FII after registering as an FPI under the SEBI FPI Regulations.
In terms of the SEBI FPI Regulations, the issue of Equity Shares to a single FPI or an investor group (which
means the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to be
10.00% or above of our post-Issue paid-up equity share capital. Further, in terms of the FEMA 20, the total

175

holding by each FPI in an Indian company is required to be below 10.00% of its total paid-up equity share
capital and the total holdings of all FPIs put together shall not exceed 24.00% of its paid-up equity share capital.
The aggregate limit of 24.00% may be increased up to the sectoral cap by way of a resolution passed by the
Board of Directors followed by a special resolution passed by the shareholders of our Bank, which should be
intimated to the RBI. Our Board, at its meeting held on April 22, 2015 and our shareholders, at the AGM held
on June 6, 2015, have permitted FPIs and FIIs (including their sub-accounts), to acquire and hold Equity Shares
of our Bank, by purchase or acquisition through primary or secondary market, up to an aggregate limit of
74.00% of the paid-up share capital of our Bank. The FIPB, pursuant to its letter dated June 1, 2016, has
increased the foreign investment limit up to 74.00% of the paid-up equity share capital of our Bank, without any
sub-limits, except a sub-limit of 24.00% of the paid-up equity share capital for holding by NRIs. The RBI has on
June 10, 2016, notified increase in our Banks FII/RFPI limit to 74.00%. For details of shareholding of our
Bank, including shareholding of FIIs and NRIs, see the section titled Principal Shareholders on page 170.
Also, prior approval of RBI is required for the acquisition or transfer of the shares of our Bank, which will take
the aggregate holding (both direct and indirect, beneficial or otherwise) of an individual, his relatives, associate
enterprises and persons acting in concert with him to 5.00% or more of our Banks total paid up share capital or
entitles him to exercise 5.00% or more of the total voting rights of our Bank, in accordance with the terms of the
Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks)
Directions, 2015.
Allotments made to FVCIs, VCFs and AIFs in the Issue are subject to the rules and regulations that are
applicable to them, including in relation to lock-in requirements.
Our Bank, the Managers and any of their respective shareholders, directors, partners, officers,
employees, counsel, advisors, representatives, agents or affiliates are not liable for any amendments or
modifications or changes to applicable laws or regulations, which may occur after the date of this
Preliminary Placement Document. QIBs are advised to make their independent investigations and satisfy
themselves that they are eligible to apply. QIBs are advised to ensure that any single application from
them does not exceed the investment limits or maximum number of Equity Shares that can be held by
them under applicable laws or regulations or as specified in this Preliminary Placement Document.
Further, QIBs are required to satisfy themselves that any requisite compliance pursuant to this Allotment
such as public disclosures under applicable laws is complied with. QIBs are advised to consult their
advisers in this regard. Further, QIBs are required to satisfy themselves that their Bids would not
eventually result in triggering an open offer under the Takeover Regulations. The QIB shall be solely
responsible for compliance with the provisions of the Takeover Regulations, the Securities and Exchange
Board of India (Prohibition of Insider Trading) Regulations, 2015 and other applicable laws, rules,
regulations, guidelines, notifications and circulars.
A minimum of 10.00% of the Equity Shares offered in this Issue shall be available for Allocation to
Mutual Funds. In case of under-subscription in the portion available for Allocation only to Mutual
Funds, such portion or part thereof may be Allotted to other QIBs.
Note: Affiliates or associates of the Managers who are QIBs may participate in the Issue in compliance with
applicable laws.
Application Process
Application Form
QIBs shall only use the serially numbered Application Forms (specifically addressed to them) supplied by the
Managers in either electronic form or by physical delivery for the purpose of making a Bid (including revision
of Bid) in terms of this Preliminary Placement Document and the Placement Document.
By making a Bid (including the revision thereof) for Equity Shares through the Application Form, the QIB will
be deemed to have made the following representations, warranties, acknowledgements and undertakings and the
representations, warranties, acknowledgements and undertakings made under the sections titled Notice to
Investors, Representations by Investors and Transfer Restrictions on pages 1, 3 and 188, respectively
including:
1.

the QIB confirms that it is a QIB in terms of Regulation 2(1)(zd) of the SEBI ICDR Regulations and is

176

eligible to participate in this Issue and is not excluded under Regulation 86 of the SEBI ICDR
Regulations or applicable law, has a valid and existing registration under the applicable laws in India
and is eligible to participate in this Issue;
2.

the QIB has no right to withdraw its Bid after the Bid Closing Date;

3.

the QIB confirms that if Equity Shares are Allotted through this Issue, it shall not, for a period of one
year from Allotment, sell such Equity Shares otherwise than on the floor of the Stock Exchanges;

4.

the QIB confirms that the QIB is eligible to Bid and hold Equity Shares so Allotted and together with
any Equity Shares held by the QIB prior to the Issue. The QIB further confirms that the holding of the
QIB, does not and shall not, exceed the level permissible as per any applicable regulations applicable to
the QIB;

5.

the QIB confirms that their application would not eventually result in triggering a tender offer under
the Takeover Regulations;

6.

the QIBs are aware of, acknowledge, represent and agree to the following in respect of your
shareholding in our Bank:
a.

that if their aggregate holding in the paid-up share capital of our Bank, whether direct or
indirect, beneficial or otherwise held by them, their relatives, associate enterprises and persons
acting in concert exceeds 5.00% of the total paid-up share capital of our Bank or entitles them
to exercise 5.00% or more of the total voting rights of our Bank, they shall seek prior approval
of the RBI, in accordance with the terms of the Reserve Bank of India (Prior approval for
acquisition of shares or voting rights in private sector banks) Directions, 2015.

b.

to the best of its knowledge and belief, together with other QIBs in the Issue that belong to the
same group or are under common control, the Allotment to the QIB shall not exceed 50.0% of
the Issue Size. For the purposes of this statement:
For the purposes of this representation: the expression belongs to the same group shall be
interpreted by applying the concept of companies under the same group as provided in subsection (11) of section 372 of the Companies Act, 1956; and control shall have the same
meaning as is assigned to it by clause (e) of sub-regulation 1 of regulation 2 of the Takeover
Regulations;

7.

you are not a promoter (as defined under the SEBI ICDR Regulations) of our Bank or any of its
affiliates and are not a person related to the promoters, either directly or indirectly, and your Bid does
not directly or indirectly represent the promoter, or promoter group, (as defined under the SEBI
ICDR Regulations) of our Bank or persons related to the promoters;

8.

in relation to our Bank, you have no rights under a shareholders agreement or voting agreement, no
veto rights or right to appoint any nominee director on our Board other than the rights acquired, if any,
in the capacity of a lender not holding any Equity Shares the QIB represents that it is either (i) outside
the United States, or (ii) an institutional investor meeting the requirements of a qualified institutional
buyer as defined in Rule 144A; and

9.

the QIBs shall not undertake any trade in the Equity Shares credited to its beneficiary accounts with the
Depository Participant until such time that the final listing and trading approvals for the Equity Shares
are issued by the Stock Exchanges.

QIBs WOULD NEED TO PROVIDE THEIR BENEFICIARY ACCOUNT DETAILS, THEIR

DEPOSITORY PARTICIPANTS NAME, DEPOSITORY PARTICIPANT IDENTIFICATION
NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBS MUST
ENSURE THAT THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS
THE NAME IN WHICH THE BENEFICIARY ACCOUNT IS HELD. EACH ELIGIBLE SUBACCOUNT OF AN FII OTHER THAN A SUB-ACCOUNT WHICH IS A FOREIGN CORPORATE OR
A FOREIGN INDIVIDUAL WILL BE CONSIDERED AS AN INDIVIDUAL QIB.

177

Bids by Mutual Funds

The Bids submitted by the asset management companies or custodians of Mutual Funds shall specifically state
the names of the concerned schemes for which the Bids are made. Each scheme or fund of a mutual fund will be
required to submit a separate Application Form. Such applications will not be treated as multiple Bids provided
that the Bids clearly indicate the scheme for which the Bid has been made. However, for the purpose of
calculating the number of allottees or applicants, various schemes of the same mutual fund will be considered as
a single allottee or applicant.
Under the current regulations, the following restrictions are applicable for investments by Mutual Funds:
No mutual fund scheme shall invest more than 10.00% of its net asset value in Equity Shares or equity related
instruments of any company provided that the limit of 10.00% shall not be applicable for investments in index
funds or sector or industry specific funds. No mutual fund under all its schemes should own more than 10% of
any company's paid-up capital carrying voting rights.
Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum
number of Equity Shares that can be held by them under applicable laws.
Demographic details such as address and bank account will be obtained from the Depositories as per the
Depository Participant account details given above.
The submission of the Application Form by a QIB shall be deemed a valid, binding and irrevocable offer for the
QIB to pay the entire Issue Price for its share of Allotment (as indicated by the CAN) and becomes a binding
contract on the QIB, upon issuance of the CAN by our Bank in favour of the QIB.
Submission of Application Form
All Application Forms must be duly completed with information including the name of the QIB, the price and
the number of Equity Shares applied for. The Application Form shall be submitted to the Managers either
through electronic form or through physical delivery at the following address:
Name

Goldman Sachs
(India) Securities
Private Limited

Motilal Oswal
Investment
Advisors Private
Limited
Motilal
Oswal
Tower, Rahimtullah
Sayani Road,
Opposite Parel ST
Depot, Prabhadevi,
Mumbai 400 025
Maharashtra, India

CLSA India Private

Limited

Edelweiss Financial
Services Limited

8/F Dalamal House

Nariman Point
Mumbai 400 021

Edelweiss
House,
Off C S T Road,
Kalina,
Mumbai 400 098,
Maharashtra, India

Address

951-A Rational House,

Appasaheb
Marathe
Marg, Prabhadevi,
Mumbai 400 025
Maharashtra, India

Contact
Person

Devarajan Nambakam

Subrat Panda

Anurag Agarwal

Email

devarajan.nambakam
@gs.com

yesbank.qip2016@
motilaloswal.com

project.tbdd@citiccls
a.com

Sujaya
Moghepadhye / Viral
H. Shah
project.tbdd@edelwe
issfin.com

Phone

Tel: (91 22) 6616 9000

Fax:(91 22) 6616 9090

Tel: (91 22) 3980

4391
Fax: (91 22) 3980
4315

Tel: (91 22) 6650

5050
Fax: (91 22) 2284
0271
Nomura Financial
Advisory &
Securities (India)
Private Limited
Ceejay House, Level
11,
Plot F, Shivsagar
Estate,
Dr. Annie Besant
Road, Worli,
Mumbai 400 018,
Maharashtra, India
Amit Thawani
amit.thawani@nomu
ra.com

Name

Investec Capital
Services (India)
Private Limited

JM Financial
Institutional
Securities Limited

Addres
s

607, 6th Floor, The

Capital - A Wing
Bandra
Kurla
Complex, Mumbai
400 051
Maharashtra, India

7th Floor, Cnergy

Appasaheb Marathe
Marg Prabhadevi
Mumbai 400 025,
Maharashtra, India

Contact
Person
Email

Adithya Anand

Vikas
Kothari /
Nikhil Panjwani
vikas.kothari@jmfl.c
om
/

adithya.anand@inves
tec.co.in

178

HSBC Securities
and Capital
Markets (India)
Private Limited
52/60, MG Road,
Fort, Mumbai 400
001, Maharashtra,
India

Mayank
Jain
Nishant Naveen

Inga Capital
Private Limited

Naman
Midtown,
21st Floor, A
Wing
Senapati
Bapat
Marg, Elphinstone
(West)
Mumbai 400 013
Maharashtra, India
Kavita Shah

tbdd@ingacapital.co
m

Tel: (91 22) 4086

3535
Fax: (91 22) 4086
3610

mayankjain@hsbc.co
.in
/
nishant.naveen@hsb
c.co.in
Tel: (91 22) 6628
1558
Fax: (91 22) 6653
6207

Religare Capital
Markets Ltd.

SBI Capital
Markets Limited

YES Securities
(India) Limited*

901,
9th Floor,
Tower I, Indiabulls
Finance
Centre,
Senapati
Bapat
Marg, Elphinstone
Road, Mumbai
400013,
Maharashtra, India
Abhijit Tripathi

202, Maker Tower

E
Cuffe Parade
Mumbai 400 005
Maharashtra, India

IFC, Tower 1 & 2,

Unit no. 602 A, 6th
Floor,
Senapati
Bapat
Marg,
Elphinstone Road,
Mumbai 400 013
Maharashtra, India

Gitesh Vargantwar

Gautam Badalia

abhijit.tripathi@relig
are.com

yes.qip@sbicaps.co
m

gautam.badalia@yes
securitiesltd.in

Tel: (91 22) 4031

3489
Fax: (91 22) 4031
3379

Phone

Tel: (91 22) 6136

7400
Fax: (91 22) 6136
7495

nikhil.panjwani@jmf
l.com
Tel: (91 22) 6630
3030
Fax: (91 22) 6630
3225

Tel: (91 22) 4037

4037
Fax: (91 22) 4037
4111

Tel: (91 22) 6766

3662,
Fax: (91 22) 6766
3575

Tel: (91 22) 2217

8300
Fax: (91 22) 2218
8332

Tel: (91 22) 3347

9612
Fax: (91 22) 2421
4508

* YES Securities (India) Limited shall be involved only in marketing of the Issue.

The Managers shall not be required to provide any written acknowledgement of the receipt of the Application
Form.
Pricing and Allocation
Build up of the book
The QIBs shall submit their Bids (including any revision thereof) through the Application Forms, within the
Bidding Period to the Managers. The QIB has no right to withdraw its Bid after the Bid Closing Date.
Price discovery and allocation
Our Bank, in consultation with the Managers, shall determine the Issue Price, which shall be at or above the
Floor Price, net of such discount as approved in accordance with Regulation 85 of the SEBI ICDR Regulations.
Method of Allocation
Our Bank shall determine the Allocation in consultation with the Managers on a discretionary basis and in
compliance with Chapter VIII of the SEBI ICDR Regulations.
All the Application Forms received from the QIBs at or above the Issue Price shall be grouped together to
determine the total demand. The Allocation to all such QIBs will be made at the Issue Price. Allocation to
Mutual Funds for up to a minimum of 10.00% of the Issue Size shall be undertaken subject to valid Bids being
received at or above the Issue Price.
THE DECISION OF OUR BANK IN CONSULTATION WITH THE MANAGERS IN RESPECT OF
ALLOCATION SHALL BE BINDING ON ALL QIBS. QIBS MAY NOTE THAT ALLOCATION OF
THE EQUITY SHARES IS AT THE SOLE AND ABSOLUTE DISCRETION OF OUR BANK IN
CONSULTATION WITH THE MANAGERS AND QIBS MAY NOT RECEIVE ANY ALLOCATION
EVEN IF THEY HAVE SUBMITTED VALID APPLICATION FORMS AT OR ABOVE THE ISSUE
PRICE. NEITHER OUR BANK NOR THE MANAGERS ARE OBLIGED TO ASSIGN ANY REASONS
FOR SUCH NON-ALLOCATION.
All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment letter
shall be submitted to the Managers as per the details provided in the respective CAN.
Number of Allottees
The minimum number of Allottees in the Issue shall not be less than:
(a)

two, where the Issue Size is less than or equal to ` 2,500 million; or

(b)

five, where the Issue Size is greater than ` 2,500 million.

Provided that no single Allottee shall be Allotted more than 50.00% of the Issue Size.
The QIBs belonging to the same group or those who are under same control shall be deemed to be a single
Allottee for the purposes of the Issue. For details of what constitutes same group or common control please
see the sub- section titled Application Process Application Form on page 176.
The Equity Shares will be Allotted within 12 months from the date of the shareholders resolution approving the
Issue.
CAN

179

Based on the Application Forms received, our Bank and the Managers, in their sole and absolute discretion,
shall decide the list of QIBs to whom the serially numbered CAN shall be sent, pursuant to which the details of
the Equity Shares Allocated to them and the details of the amounts payable for Allotment of such Equity Shares
by the Pay-In Date in their respective names shall be notified to such QIBs. Additionally, a CAN will include
details of the bank account(s) for the electronic transfer of funds, address where the application money needs to
be sent, Pay-In Date as well as the probable designated date (Designated Date), being the date of credit of the
Equity Shares to the QIBs account, as applicable to the respective QIBs.
The eligible QIBs would also be sent a serially numbered Placement Document either in electronic form or by
physical delivery along with the serially numbered CAN.
The dispatch of the serially numbered Placement Document and the CAN to the QIB shall be deemed a valid,
binding and irrevocable contract for the QIB to furnish all details that may be required by the Managers and to
pay the entire Issue Price for all the Equity Shares Allocated to such QIB.
QIBs are advised to instruct their Depository Participant to accept the Equity Shares that may be Allocated /
Allotted to them pursuant to the Issue.
Bank Account for Payment of Application Money
Our Bank has opened a special bank account in the name of YES Bank Limited QIP Escrow Account. The
QIB will be required to deposit the entire amount payable for the Equity Shares allocated to it by the Pay-In
Date as mentioned in the respective CAN.
If the payment is not made favouring the Escrow Account within the time stipulated in the CAN, the
Application Form and the CAN of the QIB are liable to be cancelled.
In case of cancellations or default by the QIBs, our Bank and the Managers have the right to reallocate the
Equity Shares at the Issue Price among existing or new QIBs at their sole and absolute discretion.
Payment Instructions
The payment of application money shall be made by the QIBs in the name of the Escrow Account as per the
payment instructions provided in the CAN.
QIBs may make payment only through electronic fund transfer.
Note: Payments through cheques are liable to be rejected.
Designated Date and Allotment of Equity Shares
1.

The Equity Shares will not be Allotted unless the QIBs pay the amount for the Equity Shares allocated
to them calculated at the Issue Price, to the Escrow Account as stated above.

2.

In accordance with the SEBI ICDR Regulations, Equity Shares will be issued and Allotment shall be
made only in the dematerialized form to the Allottees. Allottees will have the option to re-materialize
the Equity Shares, if they so desire, as per the provisions of the Companies Act and the Depositories
Act.

3.

Our Bank, at its sole discretion, reserves the right to cancel the Issue at any time up to Allotment
without assigning any reasons whatsoever.

4.

Following the resolution of our Board for Allotment, our Bank shall apply to the Stock Exchanges for
listing approvals and post receipt of the listing approvals from the Stock Exchanges, our Bank shall
credit the Equity Shares into the beneficiary accounts of the QIBs.

5.

Following the credit of Equity Shares into the QIBs beneficiary accounts, our Bank will apply for the
final listing and trading approvals from the Stock Exchanges.

180

6.

In the unlikely event of any delay, in the Allotment or credit of Equity Shares, or receipt of the listing
approvals, the final listing and trading approvals of the Stock Exchanges, or the cancellation of the
Issue, no interest or penalty would be payable by our Bank. However, in the event that we are unable to
issue and Allot the Equity Shares offered in the Issue (including due to cancellation of the Issue),
within 60 days from the date of receipt of application monies, our Bank shall repay the application
monies within 15 days from the expiry of 60 days, failing which our Bank shall repay that money with
interest at the rate of 12.00% per annum from expiry of the sixtieth day. The application monies to be
refunded by us shall be refunded to the same bank account from which application monies was
remitted by the QIBs.

7.

The monies lying to the credit of the Escrow Account shall not be released until the final listing and
trading approvals of the Stock Exchanges for the listing and trading of the Equity Shares issued
pursuant to this Issue are received by our Bank.

8.

After finalization of the Issue Price, our Bank shall update this Preliminary Placement Document with
the Issue details and file the same with the Stock Exchanges as the Placement Document. Pursuant to a
circular dated March 5, 2010 issued by SEBI, Stock Exchanges are required to make available on their
websites the details of those Allottees in Issue who have been allotted more than 5.00% of the total
number of Equity Shares Allotted in the Issue, viz, the names of the Allottees, and number of Equity
Shares Allotted to each of them, pre and post Issue shareholding pattern of our Bank, along with the
Placement Document.

Other Instructions
Permanent Account Number or PAN
Each QIB should mention its PAN allotted under the IT Act. Application Forms without this information will be
considered incomplete and are liable to be rejected. It is to be specifically noted that applicants should not
submit the GIR number instead of the PAN as the Application Form is liable to be rejected on this ground.
Right to Reject Applications
Our Bank, in consultation with the Managers, may reject Bids, in part or in full, without assigning any reasons
whatsoever. The decision of our Bank and the Managers in relation to the rejection of Bids shall be final and
binding.
Equity Shares in dematerialized form with NSDL or CDSL
The Allotment of the Equity Shares in this Issue shall be only in dematerialized form (i.e., not in the form of
physical certificates but be fungible and be represented by the statement issued through the electronic mode).
1.

A QIB applying for Equity Shares must have at least one beneficiary account with a Depository
Participant of either NSDL or CDSL prior to making the Bid.

2.

Allotment to a successful QIB will be credited in electronic form directly to the beneficiary account
(with the Depository Participant) of the QIB.

3.

Equity Shares in electronic form can be traded only on the stock exchanges having electronic
connectivity with NSDL and CDSL. The BSE and the NSE have electronic connectivity with CDSL
and NSDL.

4.

The trading of the Equity Shares would be in dematerialized form only for all QIBs in the demat
segment of the respective Stock Exchanges.

5.

Our Bank will not be responsible or liable for the delay in the credit of Equity Shares due to errors in
the Application Form or otherwise on the part of the QIBs.

181

PLACEMENT
The Managers have entered into a placement agreement dated September 7, 2016, with our Bank (the
Placement Agreement), pursuant to which the Managers have agreed to place, on a reasonable effort basis,
the Equity Shares to QIBs pursuant to the Issue under Chapter VIII of the SEBI ICDR Regulations and section
42 of the Companies Act, 2013 and the rules made thereunder. The Placement Agreement contains customary
representations and warranties, as well as indemnities from our Bank and is subject to termination in accordance
with the terms contained therein.
Applications shall be made to list the Equity Shares issued pursuant to the Issue and admit them to trading on
the Stock Exchanges. No assurance can be given as to the liquidity or sustainability of the trading market for
such Equity Shares, the ability of holders of the Equity Shares to sell their Equity Shares or the price at which
holders of the Equity Shares will be able to sell their Equity Shares.
This Preliminary Placement Document has not been, and will not be, registered as a prospectus with the
Registrar of Companies, and no Equity Shares will be offered in India or overseas to the public or any members
of the public in India or any other class of investors, other than QIBs.
In connection with the Issue, the Managers (or their respective affiliates) may, for their own accounts, enter into
asset swaps, credit derivatives or other derivative transactions relating to the Equity Shares at the same time as
the offer and sale of the Equity Shares, or in secondary market transactions. As a result of such transactions, the
Managers may hold long or short positions in such Equity Shares. These transactions may comprise a substantial
portion of the Issue, and no specific disclosure will be made of such positions. Affiliates of the Managers may
purchase Equity Shares and be allocated Equity Shares for proprietary purposes and not with a view to
distribution or in connection with the issuance of P-Notes. Further, YES Securities (India) Limited is a wholly
owned subsidiary of our Bank and accordingly, would be involved only in marketing of the Issue. Please see the
sections titled Off-shore Derivative Instruments and Representations to Investors on pages 8 and 3,
respectively.
Lock-up
Our Bank has agreed that, it will not, without the prior written consent of each of the Managers, during the
period commencing from the date of the Placement Agreement and ending 90 days after the Closing Date, (a)
directly or indirectly, issue, offer, lend, pledge, sell, contract to sell or otherwise dispose of or grant options,
issue warrants or offer rights entitling persons to subscribe or purchase any interest in any Equity Shares or any
securities convertible into or exercisable or exchangeable for the Equity Shares; (b) enter into any swap or other
agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic
consequences associated with the ownership of the Equity Shares whether any transaction is to be settled by the
delivery of the Equity Shares or other securities, in cash or otherwise; or (c) publicly announce any intention to
enter into any of the foregoing described in (a) or (b) above; except the Equity Shares which are issued by our
Bank in accordance with its employee stock option schemes.
Rana Kapoor, Yes Capital (India) Private Limited and Morgan Credits Private Limited have agreed that, during
the period commencing on the Closing Date and ending 90 days after the Closing Date, that they will not,
without the prior written permission of the Managers do the following (a) directly or indirectly, issue, offer,
lend, sell, pledge, contract to sell or otherwise dispose of or grant options, issue warrants or offer rights entitling
person to subscribe or purchase any interest in any Promoter Shares or any securities convertible into or
exercisable or exchangeable for the Promoter Shares; (b) enter into any swap or other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences
associated with the ownership of the Promoter Shares whether any of the transaction is to be settled by the
delivery of the Equity Shares or other securities, in cash or otherwise; or (c) publicly announce any intention to
enter into any of the foregoing described in (a) or (b) above; however, the foregoing restrictions shall not be
applicable, if any of the actions mentioned in (a), (b) or (c) above are required to be undertaken pursuant to any
change in applicable law, or a direction of a court of law or the RBI post the date of the Placement Agreement.
Further, in accordance with Regulation 88 of the SEBI Regulations, our Bank shall not make a subsequent QIP
until expiry of six months from the date of this Issue.

182

SELLING RESTRICTIONS
The distribution of this Placement Document and the offer, sale or delivery of the Equity Shares is restricted by
law in certain jurisdictions. Persons who come into possession of this Placement Document are advised to take
legal advice with regard to any restrictions that may be applicable to them and to observe such restrictions.
This Placement Document may not be used for the purpose of an offer or sale in any circumstances in which
such offer or sale is not authorised or permitted.
GENERAL
No action has been taken or will be taken that would permit a public offering of the Equity Shares to occur in
any jurisdiction, or the possession, circulation or distribution of this Placement Document or any other material
relating to the Bank or the Equity Shares in any jurisdiction where action for such purpose is required.
Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither this Placement
Document nor any offering materials or advertisements in connection with the Equity Shares may be distributed
or published in or from any country or jurisdiction except under circumstances that will result in compliance
with any applicable rules and regulations of any such country or jurisdiction. The Issue will be made in
compliance with the applicable SEBI Regulations. Each purchaser of the Equity Shares in the Issue will be
required to make, or be deemed to have made, as applicable, the acknowledgments and agreements as described
under the section titled Transfer Restrictions.
REPUBLIC OF INDIA
This Placement Document may not be distributed directly or indirectly in India or to residents of India and any
Equity Shares may not be offered or sold directly or indirectly in India to, or for the account or benefit of, any
resident of India except as permitted by applicable Indian laws and regulations, under which an offer is strictly
on a private and confidential basis and is limited to eligible QIBs and is not an offer to the public. This
Placement Document is neither a public issue nor a prospectus under the Companies Act or an advertisement
and should not be circulated to any person other than to whom the offer is made. This Placement Document has
not been and will not be registered as a prospectus with the Registrar of Companies in India.
UNITED STATES
The Equity Shares have not been and will not be registered under the Securities Act and, subject to certain
exceptions, may not be offered or sold within the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
The Equity Shares are being offered (1) in the United States to qualified institutional buyers (as defined in
Rule 144A under the Securities Act) pursuant to Section 4(a)(2) of the Securities Act and (2) outside the United
States in reliance upon Regulation S.
Each purchaser of the Equity Shares will be deemed to have made the representations, agreements and
acknowledgements as described under the section titled Transfer Restrictions.
EUROPEAN ECONOMIC AREA
In relation to each member state of the European Economic Area which has implemented the Prospectus
Directive (each, a Relevant Member State), each of the Managers has severally and not jointly, or jointly and
severally, represented and warranted that it has not made and will not make an offer to the public of any Equity
Shares which are the subject of the Issue contemplated by this Placement Document in that Relevant Member
State, except that the Equity Shares may be offered to the public in that Member State at any time under the
following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member
State:
1.

to any legal entity which is a qualified investor, as defined in the Prospectus Directive (as defined
below);

2.

to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus
Directive), subject to obtaining the prior consent of the relevant Managers nominated by the Bank
for any such offer; or

183

3.

at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of the Equity Shares shall result in a requirement for the publication by the Bank or
any Managers of a prospectus or the initial purchaser of a prospectus pursuant to Article 3 of the Prospectus
Directive and each person who initially acquires any Equity Shares or to whom any offer is made will be deemed
to have represented, acknowledged and agreed with the Managers and the Bank that it is a qualified investor
within the meaning of the law of the Relevant Member State implementing Article 2(1)I of the Prospectus
Directive or any measure implementing the Prospectus Directive in any Relevant Member State.
For the purposes of this provision, the expression an offer to the public in relation to any securities in
any Relevant Member State means the communication in any form and by any means of sufficient information
on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase
any securities, as the same may be varied in that Member State by any measure implementing the
Prospectus Directive in that Member State and the expression Prospectus Directive means Directive
2003/71/EC (as amended, including by Directive 2003/71/EC), and includes any relevant implementing
measure in the Relevant Member State.
UNITED KINGDOM
Each of the Managers has represented, warranted and undertaken that:
1.

it has only communicated or caused to be communicated and will only communicate or cause to be
communicated in the United Kingdom any invitation or inducement to engage in investment activity
(within the meaning of section 21 of the Financial Services and Markets Act 2000 (FSMA) received
by it in connection with the issue or sale of any Equity Shares in circumstances in which section 21(1)
of FSMA does not apply to the Bank; and

2.

it has complied and will comply with all applicable provisions of FSMA with respect to anything done
by it in relation to the Equity Shares in, from or otherwise involving the United Kingdom.

HONG KONG
This Placement Document has not been approved by the Securities and Futures Commission in Hong Kong and,
accordingly, (i) the Equity Shares have not been offered or sold and will not be offered or sold in Hong Kong,
by means of any document, other than (a) to professional investors as defined in the Securities and Futures
Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances
which do not result in the document being a prospectus as defined in the Companies (Winding up and
Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public
within the meaning of that Ordinance; and no advertisement, invitation or document relating to the Equity
Shares, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong
Kong (except if permitted to do so under the securities laws of Hong Kong), other than with respect to Equity
Shares which are or are intended to be disposed of only to persons outside Hong Kong or only to professional
investors as defined in the Securities and Futures Ordinance and any rules made under that Ordinance has been
or will be issued, whether in Hong Kong or elsewhere.
JAPAN
The Equity Shares have not been and will not be registered under the Financial Instruments and Exchange Law
of Japan (Act No. 25 of 1948, as amended; the FIEA) The Managers have represented and agreed that they
will not offer or sell any Equity Shares, directly or indirectly, in Japan or to, or for the benefit of, any resident
in Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act
No. 228 of 1949, as amended)), or to others for reoffering or resale, directly or indirectly, in Japan or to, or for
the benefit of, a resident of Japan except pursuant to an exemption from the registration requirements of, and
otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of
Japan.
SINGAPORE
This Placement Document has not been registered as a prospectus with the Monetary Authority of Singapore
under the Securities and Futures Act, Chapter 289 of Singapore (the Securities and Futures Act).

184

Accordingly, the Equity Shares may not be offered or sold or made the subject of an invitation for subscription
or purchase nor may this Placement Document or any other document or material in connection with the offer or
sale or invitation for subscription or purchase of any Equity Shares be circulated or distributed, whether directly
or indirectly, to any person in Singapore other than (a) to an institutional investor pursuant to Section 274 of the
Securities and Futures Act, (b) to a relevant person, or any person pursuant to Section 275(1A) of the Securities
and Futures Act, and in accordance with the conditions specified in Section 275 of the Securities and Futures
Act, or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the
Securities and Futures Act.
Each of the following relevant persons specified in Section 275 of the Securities and Futures Act who has
subscribed for or purchased shares, namely a person who is:
1.

a corporation (which is not an accredited investor (as defined in Section 4A of the Securities and
Futures Act)) the sole business of which is to hold investments and the entire share capital of which is
owned by one or more individuals, each of whom is an accredited investor; or

2.

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and
each beneficiary is an accredited investor,

should note that shares, debentures and units of shares and debentures of that corporation or the beneficiaries
rights and interest in that trust shall not be transferable for six months after that corporation or that trust has
acquired the shares under Section 275 of the Securities and Futures Act except:
(a)

to an institutional investor under Section 274 of the Securities and Futures Act or to a relevant person
or to any person pursuant to Section 275(2) of the Securities and Futures Act, or to any person arising
from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the Securities and Futures Act;

(b)

where no consideration is or will be given for the transfer;

(c)

where the transfer is by operation of law;

(d)

pursuant to Section 276(7) of the Securities and Futures Act; or

(e)

as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and
Debentures) Regulation 2005 of Singapore.

UNITED ARAB EMIRATES / DUBAI INTERNATIONAL FINANCE CENTRE

The Equity Shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United
Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of
the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale
of securities. Further, this Placement Document does not constitute a public offer of securities in the United
Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer. This
Placement Document has not been approved by or filed with the Central Bank of the United Arab Emirates, the
Securities and Commodities Authority or the Dubai Financial Services Authority.
AUSTRALIA
This Placement Document and the offer of Equity Shares are only made available in Australia to persons to
whom a disclosure document is not required to be given under Chapter 6D of the Australian Corporations
Act 2001 (Cth) (the Australian Corporations Act) and has not been and will not be lodged or
registered with the Australian Securities & Investments Commission or any other regulatory body or agency
in Australia. This Placement Document is not a prospectus, product disclosure statement or any other form of
formal disclosure document for the purposes of the Australian Corporations Act and is not required to, and
does not, contain all the information which would be required in a disclosure document under the Australian
Corporations Act. (i) The offer of the Equity Shares under this Placement Document is only made to persons
to whom it is lawful to offer the Equity Shares without a disclosure document such as a professional investor
or sophisticated investor for the purposes of Chapter 6D of the Australian Corporations Act; (ii) this
Placement Document is made available in Australia to persons as set forth in clause (i) above; and (iii) by
accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (ii) above and

185

agrees not to sell or offer for sale within Australia any Equity Shares sold to the offeree within 12 months after
their transfer to the offeree under this Placement Document.
SOUTH AFRICA
In South Africa, the offer of Equity Shares will only be made by to persons falling within the exemptions set out
in section 96(1) of the South African Companies Act, 2008 (South African Companies Act) and to whom the
offer will specifically be addressed (Qualifying Investors) and this Placement Document is only being made
available to such Qualifying Investors. The offer of Equity Shares does not constitute an offer for the sale of or
subscription for, or the advertisement or the solicitation of an offer to buy and/or to subscribe for, Equity Shares
to the public as defined in the South African Companies Act and will not be distributed to any person in South
Africa in any manner that could be construed as an offer to the public in terms of the South African Companies
Act. Should any person who is not a Qualifying Investor receive this Placement Document, they should not and
will not be entitled to acquire any Equity Shares or otherwise act thereon. This Placement Document does not,
nor is it intended to, constitute a prospectus prepared and registered under the South African Companies Act.
Accordingly, this Placement Document does not comply with the substance and form requirements for
prospectuses set out in the South African Companies Act and the South African Companies Regulations of 2011
and has not been approved by, and/or registered with, the Companies and Intellectual Property Commission, or
any other South African authority. Information made available in this Placement Document should not be
considered as advice as defined in the South African Financial Advisory and Intermediary Services Act, 2002,
and nothing in this Placement Document should be construed as constituting the canvassing for, or marketing or
advertising of, financial services in South Africa.
CAYMAN ISLANDS
This Placement Document does not constitute an invitation or offer to the public in the Cayman Islands of the
Equity Shares, whether by way of sale or subscription. Equity Shares have not been offered or sold, and will not
be offered or sold, directly or indirectly, to the public in the Cayman Islands. However, Cayman Islands
Exempted and Ordinary Non- Resident Companies and certain other legal entities formed under the laws of but
not resident in the Cayman Islands and engaged in business outside of the Cayman Islands may be permitted to
acquire Equity Shares.
PEOPLES REPUBLIC OF CHINA
Each of the Joint Book Running Lead Managers, severally, and not jointly, and the Bank represents, warrants
and agrees that:
This Placement Document is not intended to constitute an offer, sale or delivery of shares or other securities
under the laws of the Peoples Republic of China (the PRC). The Equity Shares have not been and will not be
filed with, or approved by, the China Securities Regulatory Commission or any other regulatory authority in the
PRC.
The Placement Document has not been, may not be, issued, circulated or distributed in the PRC and the Equity
Shares have not been and may not be offered, sold, pledged or transferred, directly or indirectly, within the
territory of PRC, to any PRC person or entity unless such person or entity has obtained the requisite approval
from, or has made the appropriate filings with, the relevant PRC authorities.
KUWAIT
The Issue has not been approved by the Kuwait Central Bank or the Kuwait Ministry of Commerce and
Industry, nor has the Bank received authorisation or licensing from the Kuwait Central Bank or the Kuwait
Ministry of Commerce and Industry to market or sell the Equity Shares within Kuwait. Therefore, no services
relating to the offering, including the receipt of applications and/or the allotment of Equity Shares, may be
rendered within Kuwait by the Bank or persons representing the Bank.
MAURITIUS
The Equity Shares may not be offered, distributed or sold, directly or indirectly, to the public in Mauritius.
Neither this Placement Document, nor any offering material or information contained herein relating to the offer
of Equity Shares, may be released or issued to the public in Mauritius or used in connection with any such offer.

186

This Placement Document does not constitute an offer to sell Equity Shares to the public in Mauritius. This
Placement Document is not a prospectus.
QATAR
This document does not, and is not intended to, constitute an invitation or an offer of securities in the State of
Qatar (including the Qatar Financial Centre) and accordingly should not be construed as such. The Equity
Shares have not been, and shall not be, offered, sold or delivered at any time, directly or indirectly, in the State
of Qatar. Any offering of the Equity Shares shall not constitute a public offer of securities in the State of Qatar.
By receiving this document, the person or entity to whom it has been provided to understands, acknowledges
and agrees that: (a) neither this Placement Document nor the Equity Shares have been registered, considered,
authorized or approved by the Qatar Central Bank, the Qatar Financial Markets Authority, the Qatar Financial
Centre Regulatory Authority or any other authority or agency in the State of Qatar; (b) neither the Bank nor
persons representing the Bank are authorized or licensed by the Qatar Central Bank, the Qatar Financial Markets
Authority, the Qatar Financial Centre Regulatory Authority, or any other authority or agency in the State of
Qatar, to market or sell the Equity Shares within the State of Qatar; (c) this Placement Document may not be
provided to any person other than the original recipient and is not for general circulation in the State of Qatar;
and (d) no agreement relating to the sale of the Equity Shares shall be consummated within the State of Qatar.
No marketing of the Equity Shares has been or will be made from within the State of Qatar and no subscription
to the Equity Shares may or will be consummated within the State of Qatar. Any applications to invest in the
Equity Shares shall be received from outside of Qatar. This document shall not form the basis of, or be relied on
in connection with, any contract in Qatar. Neither the Bank nor persons representing the Bank are, by
distributing this document, advising individuals resident in the State of Qatar as to the appropriateness of
investing in or purchasing or selling securities or other financial products. Nothing contained in this document is
intended to constitute investment, legal, tax, accounting or other professional advice in, or in respect of, the
State of Qatar.

187

TRANSFER RESTRICTIONS
Due to the following restrictions, investors are advised to consult legal counsel prior to purchasing Equity
Shares or making any resale, pledge or transfer of the Equity Shares.
Purchasers are not permitted to sell the Equity Shares Allotted pursuant to the Issue, for a period of one year
from the date of Allotment, except on the BSE or the NSE. Allotments made to FVCIs, VCFs and AIFs in the
Issue are subject to the rules and regulations that are applicable to them, including in relation to lock-in
requirements. Additional transfer restrictions applicable to the Equity Shares are listed below.
U.S. TRANSFER RESTRICTIONS
The Equity Shares have not been and will not be registered under the Securities Act and may not be offered or
sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities laws.
Each purchaser of the Equity Shares in the United States is deemed to have represented, agreed and
acknowledged as follows:

It (A) is a qualified institutional buyer (as defined in Rule 144A) and (B) is aware that the sale of the
Equity Shares to it is being made in reliance on an exemption under the Securities Act.

It is acquiring the Equity Shares for its own account or for the account of one or more eligible U.S.
investors (i.e., qualified institutional buyers, as defined above), each of which is acquiring beneficial
interests in the Equity Shares for its own account.

It understands that the Equity Shares are being offered in a transaction not involving any public
offering in the United States within the meaning of the Securities Act, that the Equity Shares have not
been and will not be registered under the Securities Act and that if in the future it decides to offer,
resell, pledge or otherwise transfer any of the Equity Shares, such Equity Shares may be offered,
resold, pledged or otherwise transferred in compliance with the Securities Act and other applicable
securities laws only outside the United States in a transaction complying with the provisions of Rule
903 or Rule 904 of Regulation S or in a transaction otherwise exempt from the registration
requirements of the Securities Act.

It will notify any transferee to whom it subsequently offers, sells, pledges or otherwise transfers and the
executing broker and any other agent involved in any resale of the Equity Shares of the foregoing
restrictions applicable to the Equity Shares and instruct such transferee, broker or agent to abide by
such restrictions.

It acknowledges that if at any time its representations cease to be true, it agrees to resell the Equity
Shares at the Banks request.

It is a sophisticated investor and has such knowledge and experience in financial, business and
investments as to be capable of evaluating the merits and risks of the investment in the Equity Shares.
It is experienced in investing in private placement transactions of securities of companies in a similar
stage of development and in similar jurisdictions. It and any accounts for which it is subscribing to the
Equity Shares (i) are each able to bear the economic risk of the investment in the Equity Shares, (ii)
will not look to the Bank or any of the Managers for all or part of any such loss or losses that may be
suffered, (iii) are able to sustain a complete loss on the investment in the Equity Shares, (iv) have
no need for liquidity with respect to the investment in the Equity Shares, and (v) have no reason to
anticipate any change in its or their circumstances, financial or otherwise, which may cause or
require any sale or distribution by it or them of all or any part of the Equity Shares. It
acknowledges that an investment in the Equity Shares involves a high degree of risk and that the Equity
Shares are, therefore, a speculative investment. It is seeking to subscribe to the Equity Shares in this
Issue for its own investment and not with a view to distribution.

It has been provided access to the Preliminary Placement Document and the Placement Document
which it has read in its entirety.

188

It agrees to indemnify and hold the Bank and each of the Managers harmless from any and all costs,
claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with
any breach of these representations and warranties. It will not hold any of the Bank or the Managers
liable with respect to its investment in the Equity Shares. It agrees that the indemnity set forth in this
paragraph shall survive the resale of the Equity Shares.

Where it is subscribing to the Equity Shares for one or more managed accounts, it represents and
warrants that it is authorised in writing, by each such managed account to subscribe to the Equity
Shares for each managed account and to make (and it hereby makes) the acknowledgements and
agreements herein for and on behalf of each such account, reading the reference to it to include such
accounts.

It acknowledges that the Bank and the Managers and their respective affiliates and others will rely
upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and
agrees that, if any of such acknowledgements, representations or agreements is no longer accurate,
it will promptly notify the Bank and the Managers.

Each purchaser of the Equity Shares outside the United States is deemed to have represented, agreed and
acknowledged as follows:

It is authorised to consummate the purchase of the Equity Shares in compliance with all applicable
laws and regulations.

It acknowledges (or if it is a broker-dealer acting on behalf of a customer, its customer has confirmed
to it that such customer acknowledges) that the Equity Shares are being issued in reliance upon
Regulation S and such Equity Shares have not been and will not be registered under the Securities Act.

It certifies that either (A) it is, or at the time the Equity Shares are purchased will be, the beneficial
owner of the Equity Shares and is located outside the United States (within the meaning of Regulation
S) or (B) it is a broker-dealer acting on behalf of its customer and its customer has confirmed to it that
(i) such customer is, or at the time the Equity Shares are purchased will be, the beneficial owner of the
Equity Shares, and (ii) such customer is not located outside the United States (within the meaning of
Regulation S).

It is aware of the restrictions of the offer, sale and resale of the Equity Shares pursuant to Regulation S.

The Equity Shares have not been offered to it by means of any directed selling efforts as defined in
Regulation S.

It understands that the Equity Shares are being offered in a transaction not involving any public
offering in the United States within the meaning of the Securities Act, that the Equity Shares have not
been and will not be registered under the Securities Act and that if in the future it decides to offer,
resell, pledge or otherwise transfer any of the Equity Shares, such Equity Shares may be offered,
resold, pledged or otherwise transferred in compliance with the Securities Act and other applicable
securities laws only outside the United States in a transaction complying with the provisions of Rule
903 or Rule 904 of Regulation S or in a transaction otherwise exempt from the registration
requirements of the Securities Act.

It is a sophisticated investor and has such knowledge and experience in financial, business and
investments as to be capable of evaluating the merits and risks of the investment in the Equity Shares.
It is experienced in investing in private placement transactions of securities of companies in a similar
stage of development and in similar jurisdictions. It and any accounts for which it is subscribing to the
Equity Shares (i) are each able to bear the economic risk of the investment in the Equity Shares, (ii)
will not look to the Bank or any of the Managers for all or part of any such loss or losses that may be
suffered, (iii) are able to sustain a complete loss on the investment in the Equity Shares, (iv) have
no need for liquidity with respect to the investment in the Equity Shares, and (v) have no reason to
anticipate any change in its or their circumstances, financial or otherwise, which may cause or
require any sale or distribution by it or them of all or any part of the Equity Shares. It

189

acknowledges that an investment in the Equity Shares involves a high degree of risk and that the Equity
Shares are, therefore, a speculative investment. It is seeking to subscribe to the Equity Shares in this
Issue for its own investment and not with a view to distribution.

It has been provided access to the Preliminary Placement Document and the Placement Document
which it has read in its entirety.

It agrees to indemnify and hold the Bank and each of the Managers harmless from any and all costs,
claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with
any breach of these representations and warranties. It will not hold any of the Bank or the Managers
liable with respect to its investment in the Equity Shares. It agrees that the indemnity set forth in this
paragraph shall survive the resale of the Equity Shares.

Where it is subscribing to the Equity Shares for one or more managed accounts, it represents and
warrants that it is authorised in writing, by each such managed account to subscribe to the Equity
Shares for each managed account and to make (and it hereby makes) the acknowledgements and
agreements herein for and on behalf of each such account, reading the reference to it to include such
accounts.

It acknowledges that the Bank and the Managers and their respective affiliates and others will rely upon the
truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if
any of such acknowledgements, representations or agreements is no longer accurate, it will promptly
notify the Bank and the Managers.

190

THE SECURITIES MARKET OF INDIA

The information in this section has been extracted from documents available on the website of SEBI and the
Stock Exchanges and has not been prepared or independently verified by our Bank or the Managers or any of
their respective affiliates or advisors.
Stock exchanges regulation
India has a long history of organised securities trading. In 1875, the first stock exchange was established in
Mumbai. The BSE and the NSE hold a dominant position among the stock exchanges in terms of the number of
listed companies, market capitalization and trading activity.
Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the
Ministry of Finance, Capital Markets Division, under the SCRA and the SCRR. On June 20, 2012, SEBI, in
exercise of its powers under the SCRA and the SEBI Act, notified the SCR (SECC) Rules, which regulate inter
alia the recognition, ownership and internal governance of stock exchanges and clearing corporations in India
together with providing for minimum capitalisation requirements for stock exchanges. The SCRA, the SCRR
and the SCR (SECC) Rules along with various rules, bye-laws and regulations of the respective stock
exchanges, regulate the recognition of stock exchanges, the qualifications for membership thereof and the
manner, in which contracts are entered into, settled and enforced between members.
The SEBI is empowered to regulate the Indian securities markets, including stock exchanges and intermediaries
in the capital markets, promote and monitor self-regulatory organisations and prohibit fraudulent and unfair
trade practices. Regulations concerning minimum disclosure requirements by public companies, rules and
regulations concerning investor protection, insider trading, substantial acquisitions of shares and takeover of
companies, buy-backs of securities, employee stock option schemes, stockbrokers, merchant bankers,
underwriters, mutual funds, foreign institutional investors, credit rating agencies and other capital market
participants have been notified by the relevant regulatory authority.
Listing and delisting of securities
The listing of securities on a recognised Indian stock exchange is regulated by the applicable Indian laws
including the Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued
by the SEBI including the SEBI Listing Regulations. The governing body of each recognised stock exchange is
empowered to suspend trading of or withdraw admission to dealings in a listed security for breach of or non
compliance with any conditions or breach of companys obligations under the SEBI Listing Regulations or for
any reason, subject to the issuer receiving prior written notice of the intent of the exchange and upon granting of
a hearing in the matter. SEBI also has the power to amend such regulations and bye-laws of the stock exchanges
in India, to overrule a stock exchanges governing body and withdraw recognition of a recognised stock
exchange.
SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 in
relation to the voluntary and compulsory delisting of equity shares from the stock exchanges. In addition, certain
amendments to the SCRR have also been notified in relation to delisting.
Disclosures under the SEBI Listing Regulations
Public listed companies are required under the SEBI Listing Regulations to prepare and circulate to their
shareholders audited annual accounts which comply with the disclosure requirements and regulations governing
their manner of presentation and which include sections relating to corporate governance, related party
transactions and managements discussion and analysis as required under the SEBI Listing Regulations. In
addition, a listed company is subject to continuing disclosure requirements pursuant to the terms of the SEBI
Listing Regulations.
Minimum level of public shareholding
Pursuant to an amendment to the SCRR in June 2010 and Regulation 38 of the SEBI Listing Regulations, all
listed companies are required to maintain a minimum public shareholding of 25.00%.

191

Index-based market-wide circuit breaker system

In order to restrict abnormal price volatility in any particular stock, the SEBI has instructed stock exchanges to
apply daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The indexbased market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index
movement, at 10.00%, 15.00% and 20.00%. These circuit breakers, when triggered, bring about a co-ordinated
trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are
triggered by movement of either the SENSEX of the BSE or the CNX NIFTY of the NSE, whichever is
breached earlier.
In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise
price bands of 20.00% movements either up or down. However, no price bands are applicable on scrips on
which derivative products are available or scrips included in indices on which derivative products are available.
The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility.
Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.
BSE
The BSE is one of the stock exchanges in India on which our Equity Shares are listed. Established in 1875, it is
the first stock exchange in India to have obtained permanent recognition in 1956 from the Government of India
under the SCRA and has evolved over the years into its present status as one of the largest stock exchange in
India.
NSE
Our Equity Shares are also listed in India on the NSE. The NSE was established by financial institutions and
banks to provide nationwide on-line satellite-linked, screen-based trading facilities to market makers, to provide
electronic clearing and settlement for securities including government securities, debentures, public sector bonds
and units. Deliveries for trades executed on-market are exchanged through the National Securities Clearing
Corporation Limited. After recognition as a stock exchange under the SCRA in April 1993, the NSE
commenced operations in the wholesale debt market segment in June 1994 and operations in the derivatives
segment in June 2000.
Internet-based securities trading and services
Internet trading takes place through order routing systems, which route client orders to exchange trading
systems for execution. Stockbrokers interested in providing this service are required to apply for permission to
the relevant stock exchange and also have to comply with certain minimum conditions stipulated by SEBI. The
NSE became the first exchange to grant approval to its members for providing internet-based trading services.
Internet trading is possible on both the equities as well as the derivatives segments of the NSE.
Trading hours
Trading on both the NSE and the BSE occurs from Monday to Friday, between 9:15 a.m. and 3:30 p.m. IST
(excluding the 15 minutes pre-open session from 9:00 a.m. to 9:15 a.m. that has been introduced recently). The
BSE and the NSE are closed on public holidays. The recognised stock exchanges have been permitted to set
their own trading hours (in the cash and derivatives segments) subject to the condition that (i) the trading hours
are between 9.00 a.m. and 5.00 p.m.; and (ii) the stock exchange has in place a risk management system and
infrastructure commensurate to the trading hours.
Trading Procedure
In order to facilitate smooth transactions, the BSE replaced its open outcry system with BSE On-line Trading
facility in 1995. This totally automated screen based trading in securities was put into practice nation-wide. This
has enhanced transparency in dealings and has assisted considerably in smoothening settlement cycles and
improving efficiency in back-office work.

192

NSE has introduced a fully automated trading system called NEAT, which operates on strict time/price priority
besides enabling efficient trade. NEAT has provided depth in the market by enabling large number of members
all over India to trade simultaneously, narrowing the spreads.
Takeover Regulations
Disclosure and mandatory bid obligations for listed Indian companies are governed by the Takeover Regulations
which provide specific regulations in relation to substantial acquisition of shares and takeover. Once the equity
shares of a company are listed on a stock exchange in India, the provisions of the Takeover Regulations will
apply to any acquisition of the companys shares/voting rights/control. The Takeover Regulations prescribe
certain thresholds or trigger points in the shareholding a person or entity has in the listed Indian company, which
give rise to certain obligations on part of the acquirer. Acquisitions up to a certain threshold prescribed under the
Takeover Regulations mandate specific disclosure requirements, while acquisitions crossing particular
thresholds may result in the acquirer having to make an open offer of the shares of the target company. The
Takeover Regulations also provide for the possibility of indirect acquisitions, imposing specific obligations on
the acquirer in case of such indirect acquisition.
Insider Trading Regulations
SEBI had earlier notified the Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992 to prohibit and penalise insider trading in India. The regulations, among other things,
prohibited an insider from dealing in the securities of a listed company when in possession of unpublished
price sensitive information (UPSI).
The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 were notified on
January 15, 2015 and came into effect on May 15, 2015, which repealed the regulations of 1992. The Insider
Trading Regulations, inter alia, impose certain restrictions on the communication of information by listed
companies. Under the Insider Trading Regulations, (i) no insider shall communicate, provide or allow access to
any UPSI relating to such companies and securities to any person including other insiders; and (ii) no person
shall procure or cause the communication by any insider of UPSI relating to such companies and securities,
except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations. However,
UPSI may be communicated, provided or allowed access to or procured, under certain circumstances specified
in the Insider Trading Regulations.
The Insider Trading Regulations make it compulsory for listed companies and certain other entities that are
required to handle UPSI in the course of business operations to establish an internal code of practices and
procedures for fair disclosure of UPSI and to regulate, monitor and report trading by insiders. To this end, the
Insider Trading Regulations provide principles of fair disclosure for purposes of code of practices and
procedures for fair disclosure of UPSI and minimum standards for code of conduct to regulate, monitor and
report trading by insiders. There are also initial and continuing shareholding disclosure obligations under the
Insider Trading Regulations.
Depositories
The Depositories Act provides a legal framework for the establishment of depositories to record ownership
details and effect transfer in book-entry form. Further, SEBI framed regulations in relation to the registration of
such depositories, the registration of participants as well as the rights and obligations of the depositories,
participants, companies and beneficial owners. The depository system has significantly improved the operation
of the Indian securities markets.
Derivatives (Futures and Options)
Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in
February 2000 and derivatives contracts were included within the term securities, as defined by the SCRA.
Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a
separate segment of an existing stock exchange. The derivatives exchange or derivatives segment of a stock
exchange functions as a self-regulatory organisation under the supervision of the SEBI.

193

DESCRIPTION OF THE EQUITY SHARES

The following is information relating to the Equity Shares including a brief summary of the Memorandum and
Articles of Association and the Companies Act. Prospective investors are urged to read the Memorandum and
Articles of Association carefully, and consult with their advisers, as the Memorandum and Articles of
Association and applicable Indian law, and not this summary, govern the rights attached to the Equity Shares.
General
Our authorised share capital is ` 8,000 million consisting of 600,000,000 Equity Shares of ` 10.00 each
aggregating to ` 6,000 million and 20,000,000 preference shares of ` 100.00 each aggregating to ` 2,000
million. As on the date of this Preliminary Placement Document, our Banks issued, subscribed and paid up
capital is ` 4,213,452,750.00 divided into 421,345,275 fully paid up Equity Shares of ` 10.00 each.
Dividends
Under Indian law, a company pays dividends upon a recommendation by its board of directors and approval by
a majority of the shareholders at the AGM held each fiscal year. Under the Companies Act, unless the board of
directors of a company recommends the payment of a dividend, the shareholders at a general meeting have no
power to declare any dividend. Subject to certain conditions laid down by Section 123 of the Companies Act,
2013, no dividend can be declared or paid by a company for any fiscal year except out of the profits of the
company for that year, calculated in accordance with the provisions of the Companies Act or out of the profits
of the company for any previous fiscal year(s) arrived at as laid down by the Companies Act. According to the
Articles of Association, the amount of dividends shall not exceed the amount recommended by the Board of
Directors. However, the Bank may declare a smaller dividend in the general meeting. In addition, as is permitted
by the Articles of Association, the Board of the Directors may pay interim dividend as appears to it be justified
by the profits of the Bank, subject to the requirements of the Companies Act. Additionally, the Bank is also
required to comply with the conditions under the Banking Regulations Act relating to the declaration of
dividends. For further details, see the section titled Regulations and Policies Declaration of dividend by
banks on page 155.
The Equity Shares issued pursuant to this Preliminary Placement Document shall rank pari passu with the
existing equity shares of the Bank in all respects including entitlements to any dividends that may be declared
by the Bank.
Capitalisation of Reserves and Issue of Bonus Shares
In addition to permitting dividends to be paid out of current or retained earnings as described above, the
Companies Act permits the board of directors, if so approved by the shareholders in a general meeting, to
distribute an amount transferred in the free reserves, the securities premium account or the capital redemption
reserve account to its shareholders, in the form of fully paid up bonus equity shares, which are similar to stock
dividend. These bonus equity shares must be distributed to shareholders in proportion to the number of equity
shares owned by them as recommended by the board of directors. No issue of bonus shares may be made by
capitalising reserves created by revaluation of assets. Further, any issue of bonus shares would be subject to the
SEBI ICDR Regulations.
As per the Articles of Association, upon resolution in the general meeting, on recommendation of the Board of
Directors, the Bank may capitalise and distribute amongst the shareholders any amount standing to the credit of
the Banks reserve accounts and to the credit of the profit and loss account or otherwise. However, aforesaid
distribution shall not be made in cash.
Pre-Emptive Rights and Alteration of Capital
Subject to the provisions of the Companies Act, the Bank may increase its share capital by issuing new shares
on such terms and with such rights as it may determine. According to Section 62 of the Companies Act, 2013
such new shares shall be offered to existing shareholders in proportion to the amount paid up on those shares at
that date. The offer shall be made by notice specifying the number of shares offered and the date (being not less
than 15 days and not exceeding 30 days from the date of the offer) within which the offer, if not accepted, will
be deemed to have been declined. After such date the Board may dispose of the shares offered in respect of
which no acceptance has been received which shall not be disadvantageous to the shareholders of the Bank. The

194

offer is deemed to include a right exercisable by the person concerned to renounce the shares offered to him in
favour of any other person subject to the provisions of FEMA 20, if applicable.
Under the provisions of Section 62(1)(c) of the Companies Act, 2013, new shares may be offered to any persons
whether or not those persons include existing shareholders, either for cash or for a consideration other than cash,
if the price of such shares is determined by the valuation report of a registered valuer subject to condition
prescribed under the Companies (Share Capital and Debentures) Rules, 2014, if a special resolution to that
effect is passed by the Banks shareholders in a general meeting.
The Articles of Association authorises the Bank to increase its issued and paid-up capital by issuing new shares
consisting of equity and/or preference shares, as the Bank may determine in a general meeting. The Bank may,
by ordinary resolution, also alter its share capital by converting any fully paid up shares into stock and
reconverting that stock into fully paid up shares of any denomination. The Articles of Association provide that
the Bank, by an ordinary resolution passed at the general meeting, from time to time, may consolidate or subdivide its share capital.
General Meetings of shareholders
There are two types of general meetings of the shareholders, AGM and EGM.
The Bank must hold its AGM in each fiscal year provided that not more than 15 months shall elapse between
each AGM, unless extended by the RoC at its request for any special reason for a period not exceeding three
months. The Board of Directors may convene an EGM when necessary or at the request of a shareholder or
shareholders holding in the aggregate not less than one tenth of the Banks issued paid up capital (carrying a
right to vote in respect of the relevant matter on the date of receipt of the requisition).
Notices, either in writing or through electronic mode, convening a meeting setting out the date, day, hour, place
and agenda of the meeting must be given to members at least 21 clear days prior to the date of the proposed
meeting. A general meeting may be called after giving shorter notice if consent is received, in writing or
electronic mode, from not less than 95.00% of the shareholders entitled to vote. Unless the Articles of
Association provide for a larger number, (i) five shareholders present in person, if the number of shareholders as
on the date of meeting is not more than 1,000; (ii) 15 shareholders present in person, if the number of
shareholders as on the date of the meeting is more than 1,000 but up to 5,000; and (iii) 30 shareholders present
in person, if the number of shareholders as on the date of meeting exceeds 5,000, shall constitute a quorum for a
general meeting of our Bank, whether AGM or EGM. The quorum requirements applicable to shareholder
meetings under the Companies Act have to be physically complied with.
A company intending to pass a resolution relating to matters such as, but not limited to, amendment in the
objects clause of the Memorandum, the issuing of shares with different voting or dividend rights, a variation of
the rights attached to a class of shares or debentures or other securities, buy-back of shares, giving loans or
extending guarantees in excess of limits prescribed, is required to obtain the resolution passed by means of a
postal ballot instead of transacting the business in the Banks general meeting. A notice to all the shareholders
shall be sent along with a draft resolution explaining the reasons therefore and requesting them to send their
assent or dissent in writing on a postal ballot within a period of 30 days from the date of posting the letter. Postal
ballot includes voting by electronic mode.
Voting Rights
At a general meeting, upon a show of hands, every member holding shares and entitled to vote and present in
person has one vote. Upon a poll, the voting rights of each shareholder entitled to vote and present in person or
by proxy is in the same proportion as the capital paid up on each share held by such holder bears to the Banks
total paid up capital, subject to the limits prescribed under the Banking Regulations Act. Voting is by a show of
hands, unless a poll is ordered by the Chairman of the meeting. The Chairman of the meeting has a casting vote.
Ordinary resolutions may be passed by simple majority of those present and voting. Special resolutions require
that the votes cast in favour of the resolution must be at least three times the votes cast against the resolution.
A shareholder may exercise his voting rights by proxy to be given in the form required by the Articles of
Association. The instrument appointing a proxy is required to be lodged with the Bank at least 48 hours before
the time of the meeting. A proxy may not vote except on a poll and does not have the right to speak at meetings.

195

Transfer of shares
Shares held through depositories are transferred in the form of book entries or in electronic form in accordance
with the regulations laid down by SEBI. These regulations provide the regime for the functioning of the
depositories and the participants and set out the manner in which the records are to be kept and maintained and
the safeguards to be followed in this system. Transfers of beneficial ownership of shares held through a
depository are exempt from stamp duty. We have entered into an agreement for such depository services with
the National Securities Depository Limited and the Central Depository Services India Limited. SEBI requires
that our shares for trading and settlement purposes be in book-entry form for all investors, except for
transactions that are not made on a stock exchange and transactions that are not required to be reported to the
stock exchange. We shall keep a book in which every transfer or transmission of shares will be entered.
Pursuant to the SEBI Listing Regulations, in the event we have not effected the transfer of shares within fifteen
days or where we have failed to communicate to the transferee any valid objection to the transfer within the
stipulated time period of fifteen days, we are required to compensate the aggrieved party for the opportunity loss
caused during the period of the delay. The Equity Shares shall be freely transferable, subject to applicable laws.
Liquidation Rights
Subject to the rights of creditors, of employees and of the holders of any other shares entitled by their terms of
issue to preferential repayment over the shares, in the event of a winding-up of the Bank, the holders of the
Equity Shares are entitled to be repaid the amounts of capital paid up or credited as paid up on such shares or in
case of a shortfall, proportionately. All surplus assets after payments due to employees, the holders of any
preference shares and other creditors, belong to the holders of the equity shares in proportion to the amount paid
up or credited as paid up on such shares, respectively, at the commencement of the winding-up.

196

TAXATION
The information provided below sets out the possible tax benefits available to the shareholders of an Indian
company in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the
subscription, ownership and disposal of equity shares, under the current tax laws presently in force in India. Several
of these benefits are dependent on the shareholders fulfilling the conditions prescribed under the relevant tax laws.
Hence the ability of the shareholders to derive the tax benefits is dependent upon fulfilling such conditions,
which, based on business imperatives a shareholder faces, may or may not choose to fulfill. The following
overview is not exhaustive or comprehensive and is not intended to be a substitute for professional advice.
Investors are advised to consult their own tax consultant with respect to the tax implications of an investment in
the Shares particularly in view of the fact that certain recently enacted legislation may not have a direct legal
precedent or may have a different interpretation on the benefits, which an investor can avail. Investors
should note that the Government of India has proposed the Direct Tax Code. If the same is passed in present
form by both houses of Indian Parliament and approved by the President of India and then notified in the Gazette of
India, there could be an impact on the tax provisions mentioned below.
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX CONSULTANT WITH RESPECT TO
THE INDIAN TAX IMPLICATIONS AND CONSEQUENCES OF PURCHASING, OWNING AND
DISPOSING OF EQUITY SHARES IN YOUR PARTICULAR SITUATION.
STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO OUR SHAREHOLDERS UNDER
THE INCOME TAX ACT, 1961, (IT ACT) AND OTHER DIRECT TAX LAWS PRESENTLY IN
FORCE IN INDIA
1.

This statement sets out below the possible tax benefits available to our shareholders under the current tax
laws presently in force in India. Several of these benefits are dependent on such shareholders fulfilling
the conditions prescribed under the relevant tax laws. Hence, the ability of our shareholders to derive
the tax benefits is dependent upon fulfilling such conditions, which based on the business
imperatives, the shareholders may or may not choose to fulfill;

2.

This statement sets out below the provisions of law in a summary manner only and is not a
complete analysis or listing of all potential tax consequences of the subscription, ownership and disposal
of Shares. This statement is only intended to provide general information to the investors and is neither
designed nor intended to be a substitute for a professional tax advice. In view of the individual
nature of tax consequences and the changing tax laws, each investor is advised to consult his or her
or their own tax consultant with respect to the specific tax implications arising out of their participation in
the issue.;

3.

In respect of non-residents, the tax rates and the consequent taxation, mentioned in this section
shall be further subject to any benefits available under the Double Taxation Avoidance Agreement,
if any, between India and the country in which the non-resident has fiscal domicile; and

4.

The under-mentioned tax benefits will be available only to the sole/first-named holder in case the
Equity Shares are held by joint shareholders.

The law stated below is as per the Income-tax Act, 1961 as amended by time to time.
I

RESIDENT SHAREHOLDERS:

1.

We are required to pay a Dividend Distribution Tax currently at the rate of 20.358% (including
applicable surcharge and education cess) on the total amount distributed or declared or paid as
dividend. Under Section 10(34) of the IT Act, income by way of dividends referred to in Section 115O of IT Act received on our shares is exempt from income tax in the hands of shareholders. However, as
per Section 115BBDA of the IT Act, in case of an Individual, Hindu Undivided Family (HUF) or a
firm, resident in India, if aggregate of dividend income during the year is in excess of ten lakh rupees,
then such dividend shall be chargeable to tax at the rate of 10% (plus applicable surcharge and education
cess).

197

However, it is pertinent to note that Section 14A of the IT Act restricts claims for deduction of expenses
incurred in relation to exempt income. Thus, any expense incurred to earn the dividend income is not
allowable expenditure.
As per section 94(7) of the IT Act, losses arising from sale/transfer of shares, where such shares are
purchased within three months prior to the record date and sold within three months from the record
date, will be disallowed to the extent such loss does not exceed the amount of dividend claimed
exempt.
2.

The characterization of gains/losses, arising from sale of shares, as Capital Gains or Business
Income would depend on the nature of holding in the hands of the shareholder and various other factors.

3.

Section 48 of the IT Act, which prescribes the mode of computation of capital gains, provides for
deduction of cost of acquisition/improvement and expenses incurred wholly and exclusively in
connection with the transfer of a capital asset, from the sale consideration to arrive at the amount of
capital gains. However, in respect of Long Term Capital Gains, (LTCG) i.e. gains from our shares
being transfer of shares of Indian company held for a period exceeding twelve months,, the second
proviso to Section 48 of the IT Act, permits substitution of cost of acquisition/improvement with the
indexed cost of acquisition/improvement, which adjusts the cost of acquisition/improvement by a cost
inflation index, as prescribed from time to time.

4.

Under Section 10(38) of the IT Act, LTCG arising to a shareholder on transfer of equity shares would
be exempt from tax where the sale transaction has been entered into on a recognised stock exchange of
India and is chargeable to Securities Transaction Tax (STT).

5.

Under Section 112 of the IT Act and other relevant provisions of the IT Act, LTCG, (other tha n
those exempt under Section 10(38) of the IT Act) arising on transfer of our shares would be subject to
tax at the rate of 20% (plus applicable surcharge and education cess) after indexation. The amount of
such tax shall, however, be limited to 10% (plus applicable surcharge and education cess) without
indexation, at the option of the shareholder in case the shares are listed.

6.

Under Section 54EC of the IT Act and subject to the conditions and to the extent specified therein,
long-term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the
transfer of our shares would be exempt from tax if such capital gain is invested within 6 months after the
date of such transfer in the bonds (long term specified assets) issued by:
(a)

National Highway Authority of India constituted under Section 3 of The National

Highway Authority of India Act, 1988;

(b)

Rural Electrification Corporation Limited, the company formed and registered under
the Companies Act, 1956.

The investment in the long term specified assets is eligible for such deduction to the extent of Rs. 5 million
whether invested during the financial year in which the asset is transferred or subsequent financial year.
If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion
as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long
term specified asset is transferred or converted into money within three years from the date of its
acquisition, the amount of capital gains so exempted shall be chargeable to tax as LTCG during the year
of such transfer or conversion. For this purpose, if any loans or advance is taken as against such
specified securities, than such person shall be deemed to have converted such specified securities into
money. The cost of the long term specified assets, which has been considered under Section 54EC for
calculating capital gain, shall not be allowed as a deduction from the income under Section 80C
of the IT Act.
7.

As per Section 111A of the IT Act, Short Term Capital Gains (STCG), i.e., gains from shares held for a
period not exceeding twelve months) arising on transfer of our equity share would be taxable at a rate
of 15% (plus applicable surcharge and education cess) where such transaction of sale is entered
on a recognised stock exchange in India and is liable to STT. STCG arising from transfer of our

198

shares, other than those covered by Section 111A of the IT Act, would be subject to tax as calculated
under the normal provisions of the IT Act.
8.

As per Section 74 of the IT Act, Short Term Capital Loss computed for the given year is allowed to be
set off against Short Term as well as Long Term Gains computed for the said year. The balance loss,
which is not set off, is allowed to be carried forward for subsequent eight assessment years for being set
off against subsequent years Short Term as well as Long Term Gains. However, the Long Term
capital Loss computed for a given year is allowed to be set off only against the LTCG. The balance loss,
which is not set off, is allowed to be carried forward for subsequent eight assessment years for
being set off only against subsequent years LTCG.

9.

In terms of Section 36(1)(xv) of the IT Act, the STT paid by the shareholder in respect of the taxable
securities transactions entered into in the course of his business of transactions/trading in shares would be
eligible for deduction from the amount of income chargeable under the head Profit and gains of
business or profession if the income arising from taxable securities transaction is included in such
income. As such, no deduction will be allowed in computing the income chargeable to tax as capital
gains of such amount paid on account of STT.

II

NON-RESIDENT SHAREHOLDERS
INVESTOR (FIIS):

1.

We are required to pay a Dividend Distribution Tax currently at the rate of 20.358% (including
applicable surcharge and education cess) on the total amount distributed or declared or paid as
dividend. Under Section 10(34) of the IT Act, income by way of dividends (whether interim or
final) referred to in Section 115-O of the IT Act, received on our shares is exempt from income tax in
the hands of shareholders. However it is pertinent to note that Section 14A of the IT Act restricts claims
for deduction of expenses incurred in relation to exempt income. Thus, any expense incurred to earn the
dividend income is not allowable expenditure. As per section 94(7) of the IT Act, losses arising from
sale/transfer of shares, where such shares are purchased within three months prior to the record date
and sold within three months from the record date, will be disallowed to the extent such loss does not
exceed the amount of dividend claimed exempt.

2.

The characterisation of gains/losses, arising from sale of shares, as Capital Gains or Business
Income would depend on the nature of holding in the hands of the shareholder and various other factors.

3.

Under the first proviso to Section 48 of the IT Act, in case of a non-resident shareholder, in computing
the capital gains arising from transfer of shares of our company acquired in convertible foreign
exchange (as per exchange control regulations) (in cases not covered by Section 115E of the IT Act,
discussed hereunder), protection is provided from fluctuations in the value of rupee in terms of foreign
currency in which the original investment was made. Cost indexation benefits will not be available in
such a case. The capital gains/loss in such a case is computed by converting the cost of acquisition, sales
consideration and expenditure incurred wholly and exclusively in connection with such transfer
into the same foreign currency which was utilised in the purchase of the shares.

4.

Under Section 10(38) of the IT Act, LTCG arising to a shareholder, being a non-resident, on sale of
equity shares would be exempt from tax where the sale transaction has been entered into on a
recognised stock exchange of India and is chargeable to STT.

5.

Under Section 112 of the IT Act and other relevant provisions of the IT Act, LTCG, (other than
those exempt under Section 10(38) of the IT Act) arising on transfer of our shares not being subject to
STT, would be subject to tax at a rate of 20% (plus applicable surcharge and education cess).

6.

As per section 115JB of the Act, income received by way of dividend (whether interim of final) which is
exempt u/s. 10(34) of the IT Act, by a foreign company to which section 115JB is applicable, will be
reduced while computing book profits. Further, any LTCG exempt u/s. 10(38) will be subject to book
profits.

7.

Under Section 54EC of the IT Act and subject to the conditions and to the extent specified therein,
long-term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the

OTHER

199

THAN

FOREIGN

INSTITUTIONAL

transfer of our shares would be exempt from tax if such capital gain is invested within 6 months after the
date of such transfer in the bonds (long term specified assets) issued by:
i.

National Highway Authority of India constituted under Section 3 of the National Highway
Authority of India Act, 1988;

ii.

Rural Electrification Corporation Limited, the company formed and registered under
the Companies Act, 1956.

The investment in the long term specified assets is eligible for such deduction to the extent of Rs. 5 million
whether invested during the financial year in which the asset is transferred or subsequent financial year.
If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion
as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long
term specified asset is transferred or converted into money within three years from the date of its
acquisition, the amount so exempted shall be chargeable to tax during the year such transfer or
conversion. For this purpose, if any loans or advance is taken as against such specified securities, then
such person shall be deemed to have converted such specified securities into money. The cost of the
long term specified assets, which has been considered under this Section for calculating capital gain,
shall not be allowed as a deduction from the income under Section 80C of the IT Act.
8.

Under Section 111A of the IT Act and other relevant provisions of the IT Act, STCG (i.e., if shares are
held for a period not exceeding 12 months) arising on transfer of our equity share would be taxable at a
rate of 15% (plus applicable surcharge and education cess) where such transaction of sale is entered
on a recognised stock exchange in India and is chargeable to STT. STCG arising from transfer of
our shares, other than those covered by Section 111A of the IT Act, would be subject to tax as
calculated under the normal provisions of the IT Act.

9.

As per Section 74 of the IT Act, Short Term Capital Loss computed for the given year is allowed to be
set off against Short Term as well as Long Term Gains computed for the said year. The balance loss,
which is not set off, is allowed to be carried forward for subsequent eight assessment years for being set
off against subsequent years Short Term as well as Long Term Gains. However, the Long Term
capital Loss computed for a given year is allowed to be set off only against the LTCG. The balance loss,
which is not set off, is allowed to be carried forward for subsequent eight assessment years for
being set off only against subsequent years LTCG.

10.

Where our shares have been subscribed in convertible foreign exchange, Non Resident Indians
(NRI), i.e. an individual being a citizen of India or person of Indian origin who is not a resident, have
the option of being governed by the provisions of Chapter XII-A of the IT Act, which inter alia entitles
them to the following benefits:
i.

Under section 115E of the IT Act, where shares of the company are subscribed to in
convertible foreign exchange by a NRI, the LTCG arising to the NRI shall be taxable at the
rate of 10% (plus applicable surcharge and education cess). The benefit of indexation of cost
would not be available.

ii.

Under Section 115F of the IT Act, LTCG (in cases not covered under Section 10(38) of the IT
Act) arising to an NRI from the transfer of our shares subscribed to in convertible
foreign exchange shall be exempt from Income tax, if the net consideration is reinvested in
specified assets within six months of the date of transfer. If only part of the net
consideration is so reinvested, the exemption shall be proportionately reduced. The
amount so exempted shall be chargeable to tax subsequently, if the specified assets are
transferred or converted into money within three years from the date of their acquisition.

iii.

Under Section 115G of the IT Act, it shall not be necessary for an NRI to furnish his return of
income under Section 139(1) of the IT Act if his income chargeable under the IT Act
consists of only investment income or LTCG or both; arising out of assets acquired,
purchased or subscribed in convertible foreign exchange and tax deductible at source has been
deducted there from as per the provisions of Chapter XVII-B of the IT Act.

200

iv.

In accordance with the provisions of Section 115H of the IT Act, where an NRI becomes
assessable as a resident in India, he may furnish a declaration in writing to the Assessing
Officer along with his return of income for that year under Section 139 of the IT Act to the
effect that the provisions of Chapter XII-A of the IT Act shall continue to apply to him in
relation to such investment income derived from the specified assets (which do not include
shares in an Indian company) for that year and subsequent assessment years until such assets are
converted into money.

v.

As per provisions of Section 115-I of the IT Act, an NRI may elect not to be governed
by provisions of Chapter XII-A and compute his total income as per other provisions of the IT
Act.

11.

In terms of Section 36(1)(xv) of the IT Act, the STT paid by the shareholder in respect of the taxable
securities transactions entered into in the course of his business of transactions/trading in shares would be
eligible for deduction from the amount of income chargeable under the head Profit and gains of
business or profession if income arising from taxable securities transaction.is included in such
income. As such, no deduction will be allowed in computing the income chargeable to tax as capital
gains, such amount paid on account of STT.

12.

As per section 90(2) of the IT Act, the provisions of the IT Act would prevail over the provisions of the
Double Tax Avoidance Agreement (DTAA) entered between India and the country of fiscal
domicile of the non-resident, if any, to the extent they are more beneficial to the non-resident. Thus, a
non-resident (including NRIs) can opt to be governed by the provisions of the IT Act or the applicable
tax treaty, whichever is more beneficial. However, the non-resident investor will have to furnish a
certificate of his being a resident in a country outside India, to get the benefit of the applicable DTAA
and such other document as may be prescribed as per the provision of section 90(4) of IT Act.

13.

With effect from April 1, 2017, the benefit of the DTAA will not be available to a non-resident investor
if the Tax department declares any arrangement to be an impermissible avoidance arrangement

III

NON-RESIDENT SHAREHOLDERS FIIS:

1.

We are required to pay a Dividend Distribution Tax currently at the rate of 20.358% (including
applicable surcharge and education cess) on the total amount distributed or declared or paid as
dividend. Under Section 10(34) of the IT Act, income by way of dividends (whether interim or final)
referred to in Section 115-O of the IT Act received on our shares is exempt from income tax in the
hands of shareholders. However it is pertinent to note that Section 14A of the IT Act restricts claims for
deduction of expenses incurred in relation to exempt income. Thus, any expense incurred to earn the
dividend income is not allowable expenditure. As per section 94(7) of the IT Act, losses arising from
sale/transfer of shares, where such shares are purchased within three months prior to the record date
and sold within three months from the record date, will be disallowed to the extent such loss does not
exceed the amount of dividend claimed exempt.

2.

Section 2(14) of IT Act defining capital asset, specifically includes any securities held by an FII
which has invested in such securities in accordance with the SEBI Regulations.

3.

Under the first proviso to Section 48 of the IT Act, in case of a non-resident shareholder, in computing
the capital gains arising from transfer of shares of the company acquired in convertible foreign
exchange (as per exchange control regulations), protection is provided from fluctuations in the value of
rupee in terms of foreign currency in which the original investment was made. Cost indexation benefits
will not be available in such a case. The capital gains/loss in such a case is computed by converting the
cost of acquisition, sales consideration and expenditure incurred wholly and exclusively in connection
with such transfer into the same foreign currency which was utilised in the purchase of the shares.

4.

Under Section 10(38) of the IT Act, Long Term Capital Gains arising to a shareholder on transfer of
equity shares would be exempt from tax where the sale transaction has been entered into on a
recognised stock exchange of India and is liable to STT.

5.

As per section 115JB of the Act, income received by way of dividend (whether interim of final) which is
exempt u/s. 10(34) of the IT Act, by a foreign company to which section 115JB is applicable, will be

201

reduced while computing book profits. Further, any LTCG exempt u/s. 10(38) will be subject to book
profits.
6.

Under Section 54EC of the IT Act and subject to the conditions and to the extent specified therein,
LTCG (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of our shares
would be exempt from tax if such capital gain is invested within six months after the date of such transfer
in the bonds (long term specified assets) issued by:
i.

National Highway Authority of India constituted under Section 3 of the National Highway
Authority of India Act, 1988;

ii.

Rural Electrification Corporation Limited, the company formed and registered under
the Companies Act, 1956.

The investment in the long term specified assets is eligible for such deduction to the extent of Rs. 5 million
whether invested during the financial year in which the asset is transferred or subsequent financial year.
If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion
as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long
term specified asset is transferred or converted into money within three years from the date of its
acquisition, the amount of LTCG so exempted shall be chargeable to tax during the year such transfer or
conversion. For this purpose, if any loans or advance is taken as against such specified securities, than
such person shall be deemed to have converted such specified securities into money.
7.

Under Section 115AD (1)(ii) of the IT Act STCG arising to an FII on transfer of shares shall be
chargeable at a rate of 30%, where such transactions are not subjected to STT, and at the rate of
15% if such transaction of sale is entered on a recognised stock exchange in India and is chargeable to
STT. The above rates are to be increased by applicable surcharge and education cess.
Under Section 115AD (1)(iii) of the IT Act income by way of LTCG arising from the transfer of shares
(in cases not covered under Section 10(38) of the IT Act) held in the company will be taxable at the
rate of 10% (plus applicable surcharge and education cess). The benefits of indexation of cost and
of foreign currency fluctuations are not available to FIIs.

8.

As per section 90(2) of the IT Act, the provisions of the IT Act would prevail over the provisions of the
DTAA entered between India and the country of fiscal domicile of the non-resident, if any, to the
extent they are more beneficial to the non-resident. Thus, a non-resident (including NRIs) can opt to be
governed by the provisions of the IT Act or the applicable tax treaty, whichever is more beneficial.
However, the non-resident investor will have to furnish a certificate of his being a resident in a country
outside India, to get the benefit of the applicable DTAA and such other document as may be prescribed
as per the provision of section 90(4) of IT Act.

9.

In terms of Section 36(1)(xv) of the IT Act, the STT paid by the shareholder in respect of the taxable
securities transactions entered into in the course of his business of transactions/trading in shares would be
eligible for deduction from the amount of income chargeable under the head Profit and gains of
business or profession arising from taxable securities transactions. As such, no deduction will
be allowed in computing the income chargeable to tax as capital gains, such amount paid on account of
STT.

10.

With effect from April 1, 2017, the benefit of the DTAA will not be available to a non-resident investor
if the Tax department declares any arrangement to be an impermissible avoidance arrangement

11.

As per Section 196D of IT Act, no tax is to be deducted from any income, by way of Capital Gains
arising to an FII from the transfer of securities referred to in section 115AD of the IT Act..

IV

INVESTMENT FUNDS:

1.

Under section 10(23FBA) of the IT Act, any income of an Investment Fund, other than the income
chargeable under the head Profits and gains of business or profession would be exempt from income tax.
For this purpose, an Investment Fund means a fund registered as Category I or Category II Alternative

202

Investment Fund under the Securities and Exchange Board of India (Alternate Investment Fund)
Regulations, 2012.
2.

As per Section 115UB(1) of the IT Act, any income accruing/arising/received by a person from his
investment in Investment Fund would be taxable in the hands of the person making an investment in the
same manner as if it were the income accruing/arising/received by such person had the investments been
made directly in the venture capital undertaking.

3.

Under section 115UB(4), the total income of an Investment Fund would be charged at the rate or rates as
specified in the Finance Act of the relevant year where the Investment Fund is a company or a firm and at
maximum marginal rate in any other case.

4.

Further, as per Section 115UB(6) of the IT Act, the income accruing or arising to or received by the
Investment Fund if not paid or credited to a person (who has made investments in an Investment Fund) shall
be deemed to have been credited to the account of the said person on the last day of the previous year in the
same proportion in which such person would have been entitled to receive the income had it been paid in the
previous year.

MUTUAL FUNDS:
Under Section 10(23D) of the IT Act, any income of mutual funds registered under SEBI or Regulations
made thereunder or mutual funds set up by public sector banks or public financial institutions or mutual
funds authorised by the RBI and subject to the conditions specified therein, is exempt from tax subject to
such conditions as the Central Government may by notification in the Official Gazette, specify in this
behalf.

VI

PROVIDENT FUND AND PENSION FUND:

Under section 10(25) of the IT Act, any income received by trustees on behalf of a recognized
provident fund and a recognized superannuation fund is exempt from tax.

VII

MULTI-LATERAL AND BILATERAL DEVELOPMENT FINANCIAL INSTITUTIONS:

Generally, Multilateral and bilateral development financial institutions may be exempt from taxation
in India on the capital gains arising on the sale of shares of the bank depending on the applicable
Statute and Acts passed in India. For e.g., World Bank, IBRD, IFC, etc. In case they are not
specifically exempt from tax then the provisions as applicable for capital gains to a non-resident FII as
they should be registered as FII should apply to these institutions.

VIII

BENEFITS AVAILABLE UNDER THE WEALTH TAX ACT, 1957:

Wealth tax is not leviable in respect of any Assessment Year on or after April 1, 2016.

IX

BENEFITS AVAILABLE UNDER THE GIFT TAX ACT, 1958:

Gift tax is not leviable in respect of any gift made on or after October 1, 1998. Therefore any gift of
share of a company will not attract gift tax.

INCOME TAX ON GIFTS

Under Section 56(2)(vii) of the IT Act and subject to exception provided in second proviso therein,
where an individual or a HUF receives from any person any property, including, inter alia, shares of a
company without consideration or for a consideration lower than the fair market value, and the value of
such benefit exceeds Rs.50,000, such benefit is taxable in the hands of the recipient as deemed income
includible in computing his taxable income. The section, however, provides for some exclusions like
gifts between relatives, receipt under a will or inheritance, gift on occasion of marriage etc

XI

TAX DEDUCTION AT SOURCE:

203

No income tax is deductible at source from income by way of capital gains arising to a resident
shareholder under the present provisions of the IT Act. However, as per the provisions of Section 195
of the IT Act, any income by way of capital gains payable to non-residents (other than LTCG exempt
u/s 10(38)) may be subject to withholding of tax at the rate under the domestic tax laws or under the
tax laws or under the DTAA, whichever is beneficial to the assessee unless a lower withholding tax
certificate is obtained from the tax authorities. However, the non-resident investor will have to furnish a
certificate of his being a resident in a country outside India, to get the benefit of the applicable DTAA
and such other document as may be prescribed as per the provision of section 90(4) of IT Act. The
withholding tax rates are subject to the recipients of income obtaining and furnishing a permanent
account number (PAN) to the payer, in the absence of which the applicable withholding tax rate
would be the higher of the applicable rates or 20%, under section 206AA of the IT Act. The
provisions of section 206AA will not apply if the non- resident shareholder furnishes the prescribed
documents to the payer.
Notes:
1.

The above benefits are as per the current tax law as amended by time to time.

2.

As per amended IT Act, surcharge is to be levied as under

Investor
Individual or HUF or AOP or body of individuals or artificial
juridical person
Total income exceeds Rs. 1 crore
Firm or Co-operative society or local authority
Total income exceeds Rs. 1 crore
Domestic Company
Total income exceeds Rs. 1 crore
Total income exceeds Rs. 10 crore
Foreign Company
Total income exceeds Rs. 1 crore
Total income exceeds Rs. 10 crore

Rate of Surcharge
15%

12%
7%
12%
2%
5%

3.

A 2% education cess and 1% secondary and higher education cess on the total income is payable by all
categories of taxpayers.

4.

The above statement of possible direct tax benefits sets out the provisions of law in a summary
manner only and is not a complete analysis or listing of all potential tax consequences of the
purchase, ownership and disposal of Shares.

5.

The stated benefits will be available only to the sole/first named holder in case the shares are held by
the joint holders.

6.

In respect of Non-residents, the tax rates and the consequent taxation mentioned above shall be
further subject to any benefits available under the DTAA, if any, between India and the country in
which the Non-resident has fiscal domicile.

7.

This statement is intended only to provide general information to the investors and is neither
designed nor intended to be substituted for professional tax advice. In view of the individual nature of
tax consequences, each investor is advised to consult his/her own tax advisor with respect to specific
tax consequences of his/her participation in the scheme.

8.

No assurance is given that the revenue authorities/courts will concur with the views expressed herein.
Our views are based on the existing provisions of law and its interpretation, which are subject to
changes from time to time. We do not assume responsibility to update the views consequent to such
changes.

9.

This statement of Possible Direct Tax Benefits enumerated above is as per the IT Act as amended
time to time.

10.

The above statement of possible Direct-tax Benefits sets out the possible tax benefits available to the
company and its shareholders under the current tax laws presently in force in India. Several of these

204

benefits available are dependent on the Company or its shareholders fulfilling the conditions
prescribed under the relevant tax laws.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership and
disposition of Equity Shares by a U.S. Holder (as defined below). This summary deals only with initial
purchasers of Equity Shares that are U.S. Holders and that will hold the Equity Shares as capital assets. The
discussion does not cover all aspects of U.S. federal income taxation that may be relevant to, or the actual tax
effect that any of the matters described herein will have on, the acquisition, ownership or disposition of Equity
Shares by particular investors, and does not address state, local, foreign or other tax laws. This summary also
does not address tax considerations applicable to investors that own (directly or indirectly) 10.00% or more of
the voting stock of the Bank, nor does this summary discuss all of the tax considerations that may be relevant to
certain types of investors subject to special treatment under the U.S. federal income tax laws (such as financial
institutions, insurance companies, investors liable for the alternative minimum tax or the Medicare tax on net
investment income, individual retirement accounts and other tax-deferred accounts, tax-exempt organisations,
dealers in securities or currencies, investors that will hold the Equity Shares as part of straddles, hedging
transactions or conversion transactions for U.S. federal income tax purposes or investors whose functional
currency is not the U.S. dollar).
As used herein, the term U.S. Holder means a beneficial owner of Equity Shares that is, for U.S. federal
income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or
organised under the laws of the United States or any State thereof, (iii) an estate the income of which is subject
to U.S. federal income tax without regard to its source or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust, or the trust has validly elected to be treated as a
domestic trust for U.S. federal income tax purposes.
The U.S. federal income tax treatment of a partner in an entity treated as a partnership for U.S. federal income
tax purposes that holds Equity Shares will depend on the status of the partner and the activities of the
partnership. Prospective purchasers that are entities treated as partnerships for U.S. federal income tax purposes
should consult their tax advisers concerning the U.S. federal income tax consequences to their partners of the
acquisition, ownership and disposition of Equity Shares by the partnership.
This summary is based on the tax laws of the United States, including the Internal Revenue Code of 1986, as
amended, its legislative history, existing and proposed regulations thereunder, published rulings and court
decisions, as well as on the income tax treaty between the United States and India (the Treaty), all as of the
date hereof and all subject to change at any time, possibly with retroactive effect.
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR
GENERAL INFORMATION ONLY. ALL PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR
TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING EQUITY
SHARES, INCLUDING THEIR ELIGIBILITY FOR THE BENEFITS OF THE TREATY, THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND
POSSIBLE CHANGES IN TAX LAW.
Dividends
General. Subject to the passive foreign investment company (PFIC) rules discussed below, distributions paid
by the Bank out of current or accumulated earnings and profits (as determined for U.S. federal income tax
purposes) will generally be taxable to a U.S. Holder as foreign source dividend income, and will not be eligible
for the dividends received deduction allowed to corporations. Distributions in excess of current and accumulated
earnings and profits will be treated as a non-taxable return of capital to the extent of the U.S. Holders basis in
the Equity Shares and thereafter as capital gain. However, the Bank does not maintain calculations of its
earnings and profits in accordance with U.S. federal income tax accounting principles. U.S. Holders should
therefore assume that any distribution by the Bank with respect to Equity Shares will constitute ordinary
dividend income. A U.S. Holder will not be able to claim a U.S. foreign tax credit for the Indian dividend
distribution tax of 20.358% (inclusive of applicable surcharge and education cess) which the Bank must pay as a
result of any distribution on the Equity Shares (as discussed the section titled Taxation Statement of Possible

205

Tax Benefits). U.S. Holders should consult their own tax advisers with respect to the appropriate U.S. federal
income tax treatment of any distribution received from the Bank.
Dividends paid by the Bank may be taxable to a non-corporate U.S. Holder at the special reduced rate normally
applicable to long term capital gain, provided the Bank qualifies for the benefits of the Treaty. A U.S. Holder
will be eligible for this reduced rate only if it has held the Equity Shares for more than 60 days during the 121day period beginning 60 days before the ex-dividend date. A U.S. Holder will not be able to claim the reduced
rate on dividends received from the Bank if the Bank is treated as a PFIC in the taxable year in which the
dividends are received or in the preceding taxable year. See sub-section titled Passive Foreign Investment
Company Considerations.
Prospective purchasers should consult their tax advisers concerning the applicability of the foreign tax credit and
source of income rules to dividends on the Equity Shares.
Foreign Currency Dividends. Dividends paid in Rupees will be included in income in a U.S. dollar amount
calculated by reference to the exchange rate in effect on the day the dividends are received, regardless of
whether the Rupees are converted into U.S. dollars at that time. If dividends received in Rupees are converted
into U.S. dollars on the day they are received, the U.S. Holder generally will not be required to recognise
foreign currency gain or loss in respect of the dividend income.
Sale or other Disposition
Subject to the PFIC rules discussed below, upon a sale or other disposition of Equity Shares, a U.S. Holder
generally will recognise capital gain or loss for U.S. federal income tax purposes equal to the difference, if any,
between the amount realised on the sale or other disposition and the U.S. Holders adjusted tax basis in the
Equity Shares. This capital gain or loss will be long-term capital gain or loss if the U.S. Holders holding period
in the Equity Shares exceeds one year.
Any gain or loss realised on the sale of Equity Shares will generally be U.S. source. Therefore, a U.S. Holder
may have insufficient foreign source income to utilise foreign tax credits attributable to any Indian tax
(excluding the applicable surcharge and education cess) imposed on a sale or disposition. In addition, it is not
entirely clear whether the STT qualifies as a foreign tax in lieu of an income tax under Section 903 of the
United States Internal Revenue Code of 1986, as amended. If the STT does not so qualify, U.S. Holders will not
be entitled to claim a foreign tax credit with respect to the STT.). Prospective purchasers should consult their tax
advisers as to the availability of and limitations on any foreign tax credit attributable to the payment of any
Indian tax.
See Passive Foreign Investment Company Considerations for a discussion of more adverse rules that will
apply to a sale or other disposition of Equity Shares if the Bank is or becomes a PFIC for U.S. federal income
tax purposes.
Passive Foreign Investment Company Considerations
A foreign corporation will be a PFIC in any taxable year in which, after taking into account the income and
assets of the corporation and certain subsidiaries pursuant to applicable look-through rules, either (i) at least
75% of its gross income is passive income or (ii) at least 50% of the average value of its assets is attributable
to assets which produce passive income or are held for the production of passive income.
The Bank does not believe that it is currently a PFIC. However, the Bank is unable to determine with certainty
whether it was a PFIC in the past because the application of the PFIC rules to banks is unclear under present
U.S. federal income tax law. Banks generally derive a substantial part of their income from assets that are
interest bearing or that otherwise could be considered passive under the PFIC rules. The U.S. Internal Revenue
Service (IRS) has issued a notice and has proposed regulations that exclude from passive income any income
derived in the active conduct of a banking business by a qualifying foreign bank (the active bank exception).
The IRS notice and proposed regulations have different requirements for qualifying as a foreign bank, and for
determining the banking income that may be excluded from passive income under the active bank exception.
Moreover, the proposed regulations have been outstanding since 1995 and will not be effective unless finalised.
Because final regulations have not been issued and because the definition of banking income for purposes of the
active bank exception is unclear under both the notice and the proposed regulations, the Banks status under the

206

PFIC rules is subject to uncertainty. The Bank conducts, and intends to continue to conduct, a significant
banking business, and therefore it believes it should qualify as an active foreign bank. However, there can be no
assurance that a sufficient amount of the Banks assets will be treated as generating qualifying banking income
to avoid characterisation as a PFIC. In particular, the Bank has in the past held a significant amount of cash and
securities that may have been considered passive assets, even if the Bank is treated as an active foreign bank.
Accordingly, U.S. holders that held Equity Shares in certain periods in the past (with respect to which it is not
entirely clear whether the Bank was a PFIC) or persons that are U.S. holders of Equity Shares in any future
periods in which the Bank will be a PFIC (with respect to which it cannot be precluded with certainty) could be
subject to U.S. federal income tax under the rules described below. U.S. holders should consult their tax
advisors regarding this issue.
If the Bank is a PFIC in any year during which a U.S. Holder owns Equity Shares, and the U.S. Holder has not
made a mark to market or qualified electing fund election (each as described below), the U.S. Holder will
generally be subject to special rules (regardless of whether the Bank continues to be a PFIC) with respect to (i)
any excess distribution (generally, any distribution during a taxable year in which distributions received by
the U.S. Holder on the Equity Shares are greater than 125% of the average annual distributions received by the
U.S. Holder in the three preceding taxable years or, if shorter, the U.S. Holders holding period for the Equity
Shares) and (ii) any gain realised on the sale or other disposition of Equity Shares. Under these rules (a) the
excess distribution or gain will be allocated ratably over the U.S. Holders holding period, (b) the amount
allocated to the current taxable year and any taxable year prior to the first taxable year in which the Bank is a
PFIC will be taxed as ordinary income, and (c) the amount allocated to each of the other taxable years will be
subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year and an interest
charge for the deemed deferral benefit will be imposed with respect to the resulting tax attributable to each such
other taxable year. If the Bank is a PFIC, a U.S. Holder of Equity Shares will generally be subject to similar
rules with respect to distributions to the Bank by, and dispositions by the Bank of the stock of, any direct or
indirect subsidiaries of the Bank that are also PFICs. Additionally, dividends paid by the Bank will not be
eligible for the special reduced rate of tax described above under Dividends-General. If the Bank ceases to be
a PFIC, a U.S. Holder may make an election (a Deemed Sale Election) to be treated for U.S. federal income
tax purposes as having sold its Equity Shares on the last day of the last taxable year of the Bank during which it
was a PFIC. A U.S. Holder that makes a Deemed Sale Election will cease to be treated as owning stock in a
PFIC. However, gain recognised by a U.S. Holder as a result of making the Deemed Sale Election will be
subject to the rules described above.
U.S. Holders can avoid the interest charge by making a mark to market election with respect to the Equity
Shares, provided that the Equity Shares are marketable. Equity Shares will be marketable if they are regularly
traded on certain U.S. stock exchanges, or on a foreign stock exchange if: (i) the foreign exchange is regulated
or supervised by a governmental authority of the country in which the exchange is located; (ii) the foreign
exchange has trading volume, listing, financial disclosure, surveillance and other requirements designed to
prevent fraudulent and manipulative acts and practices, remove impediments to, and perfect the mechanism of, a
free and open, fair and orderly, market, and to protect investors; (iii) the laws of the country in which the
exchange is located and the rules of the exchange ensure that these requirements are actually enforced; and (iv)
the rules of the exchange ensure active trading of listed stocks. For these purposes, the Equity Shares will be
considered regularly traded during any calendar year during which they are traded, other than in de minimis
quantities, on at least 15 days during each calendar quarter. Any trades that have as one of their principal
purposes the meeting of this requirement will be disregarded.
A U.S. Holder that makes a mark to market election must include in ordinary income for each year an amount
equal to the excess, if any, of the fair market value of the Equity Shares at the close of the taxable year over the
U.S. Holders adjusted basis in the Equity Shares. An electing holder may also claim an ordinary loss deduction
for the excess, if any, of the U.S. Holders adjusted basis in the Equity Shares over the fair market value of the
Equity Shares at the close of the taxable year, but this deduction is allowable only to the extent of any net mark
to market gains for prior years. Gains from an actual sale or other disposition of the Equity Shares will be
treated as ordinary income, and any losses incurred on a sale or other disposition of the Equity Shares will be
treated as an ordinary loss to the extent of any net mark to market gains for prior years. Once made, the election
cannot be revoked without the consent of the IRS unless the Equity Shares cease to be marketable. If the Bank is
a PFIC for any year in which the U.S. Holder owns the Equity Shares but before a mark to market election is
made, the interest charge rules described above will apply to any mark to market gain recognised in the year the
election is made.

207

To mitigate the application of the PFIC rules discussed above, a U.S. Holder may make an election to treat the
Bank as a qualified electing fund (QEF) for US federal income tax purposes. To make a QEF election, the
Bank must provide U.S. Holders with information compiled according to US federal income tax principles. The
Bank currently does not intend to compile such information for U.S. Holders, and therefore it is expected that
this election will be unavailable.
A U.S. Holder who owns, or who is treated as owning, PFIC stock during any taxable year in which the Bank is
classified as a PFIC may be required to file IRS Form 8621. The failure to file such form when required could
result in substantial penalties.
Backup Withholding and Information Reporting
Payments of dividends and other proceeds with respect to Equity Shares by a U.S. paying agent or other U.S.
intermediary will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations.
Backup withholding may apply to these payments if the U.S. Holder fails to provide an accurate taxpayer
identification number or certification of exempt status or fails to report all interest and dividends required to be
shown on its U.S. federal income tax returns. Certain U.S. Holders are not subject to backup withholding. U.S.
Holders should consult their tax advisers as to their qualification for exemption from backup withholding and
the procedure for obtaining an exemption.
Foreign Financial Asset Reporting
Certain U.S. Holders that own specified foreign financial assets that meet certain US dollar value thresholds
generally are required to file an information report with respect to such assets with their tax returns. The Equity
Shares generally will constitute specified foreign financial assets subject to these reporting requirements unless
the Equity Shares are held in an account at certain financial institutions. U.S. Holders are urged to consult their
tax advisors regarding the application of these disclosure requirements to their ownership of the Equity Shares.
FOREIGN ACCOUNT TAX COMPLIANCE ACT
Pursuant to certain provisions of the US Internal Revenue Code of 1986 commonly known as FATCA, a foreign
financial institution (as defined by FATCA) may be required to withhold on certain payments it makes
(foreign passthru payments) to persons that fail to meet certain certification, reporting or related
requirements. The Bank is a foreign financial institution for these purposes. A number of jurisdictions
(including India) have entered into, or have agreed in substance to, IGAs with the United States to implement
FATCA, which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as
currently in effect, a foreign financial institution in an IGA jurisdiction would generally not be required to
withhold under FATCA or an IGA from payments that it makes. Certain aspects of the application of the
FATCA provisions and IGAs to instruments such as the Equity Shares, including whether withholding would
ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Equity
Shares, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA
or an IGA with respect to payments on instruments such as the Equity Shares, such withholding would not apply
prior to 1 January 2019. Holders should consult their own tax advisers regarding how these rules may apply to
their investment in the Equity Shares.

208

LEGAL PROCEEDINGS
We are, from time to time, involved in various litigation proceedings in the ordinary course of our business.
These proceedings are primarily in the nature of recovery proceedings initiated by us in respect of advances
made pending before civil courts or the debt recovery tribunals, as the case may be, criminal cases filed by us in
cases of dishonor of cheques or fraud cases, claims against our Bank in relation to improper or fraudulent debit
from customer accounts, criminal and labour-related proceedings against our Bank, claims for refund of
business losses and damages, consumer claims for deficiency of service, claims involving forgery of demand
draft, claim for increased rent, suits claiming compensation and damages for termination from service, writ
petitions filed by our Bank and suits for setting aside recovery proceedings initiated by our Bank, and tax
matters.
A summary of certain legal proceedings where the amount involved exceeds ` 253.94 million, being 1.00% of
our profit after tax in fiscal year 2016, and certain other litigation which may be construed as material is set
forth below. Except as disclosed in this section, we are not involved in any legal proceedings, which if
determined adversely, could result in material adverse effect on our business, financial condition or results of
operations:
1.

Madhu Kapur and others (the Plaintiffs) filed a civil suit in 2013, and subsequently, several notices
of motion against our Bank, several of our directors, and others (the Defendants) before the Bombay
High Court, challenging the appointment of several directors on our Board, including the Managing
Director and Chief Executive Officer, and the Non-executive Non-independent Part-time Chairman.
Further, the Plaintiffs also sought reliefs to protect their alleged rights as Indian partner under the
Articles of Association, their alleged right to nominate directors on our Board, damages of ` 50 million
and certain other reliefs.
The Bombay High Court passed a judgment dated June 4, 2015 (the Judgment) that, inter alia, (i)
upheld the decision of the Board of Directors of our Bank in rejecting the nomination, by the Plaintiffs,
of Shagun Kapur Gogia (daughter of Madhu Kapur) on the Board of our Bank and rejected their
proposition to reserve a seat for the Plaintiffs and their family members on our Board; (ii) upheld the
appointment of Rana Kapoor as the Managing Director and Chief Executive Officer of our Bank; (iii)
observed certain procedural infirmities in the appointment of (a) Diwan Arun Nanda; (b) Ajay Vohra;
(c) M.R. Srinivasan and (d) Ravish Chopra to our Board; (iv) observed that the proposed appointment
of three Whole-time Directors, namely, Rajat Monga, Sanjay Palve and Pralay Mondal, was not in
terms of the AoA of our Bank; (v) observed that the rights of the Indian partners under the AoA had
to be jointly exercised by the Plaintiffs and Rana Kapoor; and (vi) restrained the Defendants from
initiating, taking, continuing any steps for declassifying or changing the category of the Plaintiffs as
promoter of our Bank.
Aggrieved by the Judgement, the Plaintiffs and the Defendants have filed separate appeals before the
division bench of the Bombay High Court, which are admitted and pending hearing. From among the
current members of our Board, the appointments/reappointments, as applicable, of Rana Kapoor,
M.R.Srinivasan, Diwan Arun Nanda, Radha Singh and Ajai Kumar form part of the subject matter of
the above proceedings. The appeals against the Judgment and the notices of motion are currently
pending.

2.

Zoom Developers Private Limited (Zoom) and others have filed a suit before the High Court of
Bombay against 28 banks including our Bank (the Defendants) seeking, amongst other things, an
injunction restraining the Defendants from in any manner acting upon or in pursuance of, and/or acting
upon or executing or claiming any right or benefit under, the counter guarantees issued by the
Defendants. Zoom has claimed, from all the Defendants, jointly and severally (a) an amount of `
53,772.10 million as damages, together with further interest thereon at the rate of 18% per annum, (b)
an amount of ` 19,470.00 million as loss of estimated future profits, together with further interest
thereon at the rate of 18% per annum, and (c) an amount of ` 35,965.50 million as loss of goodwill
together with further interest thereon at the rate of 18% per annum. Our Bank has filed its written
statement before the High Court of Bombay. Certain creditors of Zoom have initiated winding up
proceedings and the provisional liquidator has been appointed by the Company Court. The Bombay
High Court has dismissed the notice of motion seeking certain interim relief. The matter is currently
pending.

209

3.

UCO Bank Limited (UCO) filed an original application before the Debts Recovery Tribunal No. 2,
Mumbai (DRT) against our Bank for recovery of a sum of ` 476.01 million together with interest
and other charges. UCO alleged that the aforementioned amount is secured by a standby letter of credit
issued by our Bank in favour of UCO to secure the indebtedness, due or owed to UCO arising out of
letter of credit facilities granted by UCO to Zoom Developers Private Limited. The DRT dismissed the
application pursuant to its order dated October 23, 2012. UCO filed an appeal before the Debts
Recovery Appellate Tribunal (DRAT) challenging the order dated October 23, 2012. The DRT
passed an order dated January 12, 2016, instructing the parties to settle the matter amicably. The matter
is currently pending.

4.

Our Bank has filed an appeal against an order dated January 11, 2016, passed by the Director, Financial
Intelligence Unit, India under the Prevention of Money Laundering Act, 2002 (PMLA) and
Prevention of Money Laundering (Maintenance of Records) Rules, 2005 that imposed a penalty of `
0.30 million for non-compliance with the provisions of Section 12 of the PMLA for failure to file an
attempted suspicious transaction report for alleged money laundering activities as attempted
transactions in relation to the Cobrapost sting operation conducted at three branches (i.e., Jaipur,
Gurgaon and Chattarpur branches) of our Bank. The matter is currently pending.

5.

Our Bank had sanctioned a working capital facility of ` 250.00 million to Subhiksha Trading Services
Limited (STSL) in September 2007 and a term loan of ` 250.00 million in October 2007. STSL
repaid ` 5.08 million and ` 46.11 million towards the working capital facility and the term loan,
respectively. On January 20, 2009, STSL issued a cheque bearing no. 000005 for a sum of ` 6.10
million in favour of our Bank as part repayment of the aforesaid facilities. The said cheque was
returned by the relevant bank indicating Insufficient Funds as the reason. Our Bank thereafter
initiated criminal prosecution under Section 138 of the Negotiable Instruments Act, 1881 for dishonor
of cheque against STSL, R. Subramanian and others.
Subsequently, both the facilities became NPAs on February 28, 2009 and an amount of ` 460.60
million was written off by our Bank on June 30, 2009. STSL was admitted to the CDR Cell for debt
restructuring in January 2009. Our Bank also reported the matter to the Serious Fraud Investigation
Office, Ministry of Corporate Affairs through letter dated May 23, 2011 and filed a complaint with the
Commissioner of Police, Chennai on December 30, 2011.
In the meantime, in February 2011, our Bank also filed a case before the Debts Recovery Tribunal I,
Chennai (DRT Chennai) against STSL, R. Subramanian and others seeking, inter alia, an order
from the tribunal directing (i) STSL to pay our Bank an amount of ` 358.16 million in relation to the
working capital facility with 20.00% future interest per annum from December 25, 2010 until recovery,
(ii) STSL and R. Subramanian to pay our Bank an amount of ` 292.21 million in relation to the term
loan with 18.50% future interest per annum from December 25, 2010 until recovery, and (iii) in case of
failure to repayment the aforesaid amounts, our Bank may satisfy its dues by enforcing the securities
provided including the hypothecated assets. The guarantor, R. Subramanyam, has filed an application
for discharge from liability. Further, the R. Subramanyam has also filed an interim application for leave
to prosecute Bank for its alleged false statements in the counter affidavit. In this regard, our Bank has
filed proof of affidavit before the DRT Chennai. Our Bank has filed an amended original application
including the official liquidator of STSL as its representative. The matter is currently pending.

6.

Our Bank filed a petition under Section 14 of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 (SARFAESI Act) before District Magistrate,
Gurgaon (DM) to appoint a receiver to take possession of property mortgaged by Akme Projects
Limited (Akme), in relation to credit facilities amounting to ` 630.00 million. The DM passed an
order on November 10, 2015 allowing our Bank to take possession of the mortgaged property.
Akhilesh Gupta, an allottee of one of the mortgaged properties, filed a writ petition before the High
Court of Punjab and Haryana (High Court) seeking a writ of certiorari against the order of the DM.
The High Court has passed an interim order staying the DM order qua the flat allotted to Akhilesh
Gupta. Meanwhile, Akme filed a securitization application under Section 17(1) of the SARFAESI Act
before the Debt Recovery Tribunal-I, Chandigarh to stay the auction of the mortgaged property. The
matters are currently pending.

7.

State Bank of India (SBI) along with a consortium of banks filed a special leave petition (SLP)
against the final order of the High Court of Karnataka dated December 20, 2013, seeking that the

210

United Spirits Limited-Diageo deal be deemed void. In the SLP, it is inter alia, prayed that the amount
of approximately ` 1850.40 million disbursed in lieu of 1,285,000 pledged shares in favour of our
Bank, pursuant to the order of the Single Judge dated May 24, 2013, be deposited with High Court of
Karnataka pending an enquiry into the validity of the pledges. Our Bank filed a counter affidavit dated
September 8, 2014, seeking dismissal of the SLP. The matter is currently pending.
8.

Modi Rubber Limited (MRL) has filed a civil suit against our Bank before the High Court of Delhi
on July 14, 2014, for recovery of ` 331.31 million which, as alleged in the plaint, was wrongfully
deducted by our Bank as structuring and advisory fee, and renewal fee. Our Bank has filed a written
statement in response to the plaint. Our Bank has also filed an application for rejection of the plaint
based on the grounds that (i) the suit is barred by limitation; (ii) MRL has concealed material facts in
its plaint; and (iii) there is no cause of action. MRL filed an application seeking deposit of the money
with the court and our Bank has filed a reply in relation to the same. The matter is currently pending.

9.

Our Bank filed a civil suit before the High Court at Calcutta on December 21, 2015 seeking an
injunction restricting Syed Mohammad Sahabuddin (Sahabuddin) and persons associated with the
Bengal Provincial Banks Contract Employees Association (together, the Repondents), from
interfering in the day to day functioning of our Bank, its ATM counters and branch offices, and a
decree for a sum of ` 400 million against Sahabuddin on account of damages for causing obstruction to
the smooth and normal banking activities. The High Court of Calcutta has passed an interim order
dated December 23, 2015 restricting the Respondents from, inter alia, obstructing the entry and exit
from bank branches and ATMs of our Bank, picketing or sloganeering or engaging in demonstrations
within a radius of 100 metres from any bank branch or ATM of our Bank, and threatening official
staffs, employees and officers of our Bank. The matter is currently pending.

10.

In relation to assessment year 2012-13, the Deputy Commissioner of Income Tax, Mumbai (DCIT)
passed an assessment order dated March 31, 2015 against our Bank, disallowing deductions for, inter
alia, (i) expenses arising out of buying and selling of tax exempt securities; (ii) expenses in relation to
the qualified institutional placement by our Bank in January 2010; (iii) brokerage paid for purchase of
securities; (iv) loss on account of bad and doubtful debt; (v) amortization of premium on HTM
securities and treatment of interest from HTM securities as income from other sources; and (vi) broken
period interest on HTM securities. Further, for the assessment year 2013-14, the Assistant
Commissioner of Income Tax, Mumbai (ACIT) passed an assessment order dated February 29, 2016
against our Bank, disallowing similar deductions. Our Bank had received demand notices in relation to
these assessment orders for approximately ` 528.52 million and ` 1,200.16 million respectively. Our
Bank has filed appeals against both the assessment orders before the Commissioner of Income Tax
(Appeals), which are currently pending. These notices are in addition to the demand notices our Bank
received on similar grounds in the previous assessment years, which are also pending appeals before
various fora.

11.

Our Bank filed a contempt petition against Gammon Infrastructure Projects Limited (Gammon) and
others arising due to non-compliance of an undertaking given to the Bombay High Court by Gammon
in relation to a suit filed by our Bank for enforcement of a covenant provided under a common loan
agreement for `8,460.00 million entered into for a road construction project. As per the undertaking,
Gammon was required to infuse `850.10 million into a project escrow account in three time-bound
tranches. The matter is currently pending.

Compounding of Offences by our Bank and its Subsidiary

There have been no inquiries, inspections or investigations initiated or conducted or prosecutions filed, disposed
of or fine imposed or compounding application filed under the Companies Act, 1956 or Companies Act, 2013 or
any previous company law in relation to our Bank or its Subsidiary in the last three years.
Material Fraud Committed against our Bank
Our Bank has a Fraud Monitoring Committee which monitors and reviews all frauds against our Bank involving
an amount of ` 10.00 million or more. The terms of reference of Fraud Monitoring Committee also include
identifying the systematic lacunae, if any, that facilitate perpetration of the fraud and put in place measures to
prevent the same; identifying reasons for delay in detection, if any and reporting of frauds to our top
management, RBI and other relevant authorities.

211

In the last three years, the acts of material frauds, i.e. the act of frauds detected involving an amount of ` 10.00
million or more, against our Bank are as follows:
Sr.
No.

Details of Fraud

1.

Cheating and forgery committed by Green

Concretex Global Limited and its directors
by providing duplicate title documents for
mortgage to secure loan obtained from our
Bank

2.

Misappropriation and criminal breach of

trust committed by Venkat Rama Mohana
Rao Thota
Fraudulent transfer of funds from Galaxy
India Fund Limited, a customer of our Bank

3.

Amount
Involved
(in `
million)
120.00

145.00

12.02

Actions taken by our Bank

Our Bank has initiated steps for recovery of funds.

The case has been reported to the RBI and the Serious
Fraud Investigation Office, and a complaint has been
filed with the police for investigation. A case also
been filed before DRT and a complaint has been
lodged under section138 of NI act.
This case was reported to the RBI, SFIO and local
police. Our Bank has also filed an insurance claim in
this regard.
Our Bank has made good the amount to the customer.
We have also filed a police complaint, and reported
the matter to the RBI and Serious Fraud Investigation
Office.
Our Bank has also implemented a few systemic
changes, including the following:
(i)

Call back facility for all forex remittance

transactions;

(ii)

Call back process for RTGS/NEFT transfer into

customers own account; and,

(iii) Securing email induced transaction against

hacked accounts and certain solutions to
establish secure tunnel between bank and
customer and provide for strong encryption of
passwords.

Litigation or legal action pending or taken by any ministry or department of the Government or statutory
authority against promoters
There is no litigation or legal action pending or taken by any ministry or department of the Government or
statutory authority against Rana Kapoor during the last three years immediately preceding the year of the
circulation of this Preliminary Placement Document and any direction issued by such ministry or department of
the Government or statutory authority upon conclusion of such litigation or legal action.
Defaults in respect of dues payable
Our Bank has no outstanding defaults in relation to statutory dues payable, dues payable to holders of any
debentures and interest thereon, and in respect of deposits and interest thereon, defaults in repayment of loans
and interest thereon, from any bank or financial institution.

212

OUR AUDITORS
Our current statutory auditors are M/s B.S.R. & Co. LLP who have issued the limited review report in respect of
our unaudited standalone financial information for the three months ended June 30, 2016. The standalone and
consolidated financial statements for the fiscal years 2016, 2015 and 2014, as included in this Preliminary
Placement Document have been audited by M/s S.R. Batliboi & Co. LLP., Chartered Accountants, the previous
statutory auditors of our Bank.

213

GENERAL INFORMATION
1.

Our Bank was incorporated on November 21, 2003 under the Companies Act, 1956 and is a scheduled
commercial bank within the meaning of the RBI Act. The CIN of our Bank is
L65190MH2003PLC143249.

2.

Our Bank received a licence to commence banking operations in India from the RBI on May 24, 2004.
Further, the RBI by its letter dated September 2, 2004, included us in the second schedule of the RBI
Act with effect from August 21, 2004 and a corresponding notification was published in the Official
Gazette of India (Part III Section 4) on August 16, 2004.

3.

The Registered Office and corporate office of our Bank is located at Nehru Centre, 9th Floor, Discovery
of India Building, Dr. Annie Besant Road, Worli, Mumbai 400 018, India.

4.

Our Equity Shares were listed on the BSE and on the NSE on July 12, 2005. The Issue has been
approved by our Board pursuant to a resolution dated April 27, 2016 and approved by the members of
our Bank pursuant to a resolution in the AGM held on June 7, 2016.

5.

We have received in principle approvals dated September 7, 2016 each from the NSE and the BSE, to
list the Equity Shares to be issued pursuant to the Issue under Regulation 28 of the SEBI Listing
Regulations. We shall apply to the Stock Exchanges for the listing approvals and the final listing and
trading approvals.

6.

Our Bank has obtained necessary consents, approvals and authorization required for the Issue.

7.

Copies of the Memorandum and Articles of Association will be available for inspection between 9:30
am to 6:30 pm on any weekday (except Saturdays and public holidays) at the Registered Office.

8.

Except as disclosed in this Preliminary Placement Document, there has been no material change in our
Banks financial position since March 31, 2016, the date of audited financial statements, filed with the
Stock Exchanges in accordance with the requirements of the SEBI Listing Regulations.

9.

Our Bank is in compliance with the minimum public shareholding requirements as required under the
terms of the SEBI Listing Regulations and as per Rule 19A of the SCRR.

10.

The Floor Price is ` 1,371.84 per Equity Share, as calculated in accordance with Chapter VIII of the
SEBI ICDR Regulations. We may offer a discount of not more than 5.00% on the Floor Price in terms
of Regulation 85 of the SEBI ICDR Regulations.

214

FINANCIAL STATEMENTS
Serial No.
1.
2.
3.
4.
5.
6.
7.
8.
9.

Particulars
Report dated April 23, 2014, of S.R. Batliboi & Co. LLP.in respect of the audited standalone
financial statements of our Bank as of and for fiscal year 2014.
Report dated April 22, 2015, of S.R. Batliboi & Co. LLP.in respect of the audited standalone
financial statements of our Bank as of and for fiscal year 2015.
Report dated April 27, 2016, of S.R. Batliboi & Co. LLP.in respect of the audited standalone
financial statements of our Bank as of and for fiscal year 2016.
Report dated April 23, 2014, of S.R. Batliboi & Co. LLP.in respect of the audited consolidated
financial statements of our Bank as of and for fiscal year 2014.
Report dated April 22, 2015, of S.R. Batliboi & Co. LLP.in respect of the audited consolidated
financial statements of our Bank as of and for fiscal year 2015.
Report dated April 27, 2016, of S.R. Batliboi & Co. LLP.in respect of the audited consolidated
financial statements of our Bank as of and for fiscal year 2016.
Limited review report dated July 27, 2016, of our Statutory Auditors, in respect of our unaudited
standalone financial information for the three months ended June 30, 2016.
Limited review report dated July 27, 2016, of our Statutory Auditors, in respect of our condensed
standalone financial information for the three months ended June 30, 2016.
Limited review report dated July 27, 2016, of our Statutory Auditors, in respect of our condensed
consolidated financial information for the three months ended June 30, 2016.

215

Page
F-1
F-60
F-122
F-185
F-218
F-251
F-288
F-292
F-303

!ry6M

YES BANK Limited

Financial Statements
For the financial year ended March 31^,2014

F-1

S.R.

Bmttsot&Co. LLP

14th Floor, The Ruby

29 Senapati Bapat Marg
Dadar (West)
Mumbai-400 028. India

Chartered Account.nts

Tel : +91 226192OOOO

Fax : +91 22 6192 IOOO

INDEPENDENT AUDITOR'S REPORT

To

The Members of Yes Bank Limited

Report on the Flnanclal Statements

1.

We have audited the accompanying financial statements of Yes Bank Limited, which comprise the

Balance Sheet as at 31 March 2Ot4, the Profit and Loss Account and the Cash Flow Statement
for the year then ended and a summary of significant accounting policies and other explanatory

information.
Management's Responslblllty for the Flnanclal Statements

2. Management

is responsible for the preparation of these financial statements that give a true and
fair view of the f inancial position, financial performance and cash flows of the Bank in accordance
with accounting principles generally accepted in lndia, including the Accounting Standards
notified under the Companies Act, 1956 ("the Act") read with General Circular 8l2OL4 dated 4
April 2OL4, issued by the Ministry of Corporate Affairs read with guidelines issued by the
Reserve Bank of India insofar as they are applicable to the Bank and in conformity with Forms A
and B (revised) of the Third Schedule to the Banking Regulation Act, L949 as applicable. This
responsibility includes the deiign, implementation and maintenance of internal control relevant
to the preparation and presentation of the financial statements that give a true and fair view and
are free from material misstatement, whether due to fraud or error.

Audltor's Responslblllty

3. Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with the Standards on Auditing issued by the lnstitute of
Chartered Accountants of lndia. Those Standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.

4.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Bank's preparation and fair presentation of the f inancial
statements in order to design audit procedures that are appropriate in the circumstances. An
audlt also includes evaluating the appropriateness of accounting policies used and the
reasonableness of the accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.

5.

We believe that the audit evidence we have obtained is sufficient and appropriate
basis for our audit opinion.

F-2

to provide

s.R.Batfiboi&Co (apartnershipflrm)convertedintoS.R.Batliboi&Co.LLP(aLimitedLiabilityPartnershipwithLLptdentityNo.AAB-4294)effecflvelstADfIL2013
Regd. Office : 22. Camac Street, Block ,C,, 3rd Ftoor, Xolkata-7oo

Ot6

S.R.

Bnrusor&Co. LLP

Chartered Accountants

March 2014
Auditor's report on the financial statements of Yes Bank Limited for the year ended 31
Page 2 of 2
Oplnlon

to us,
as
1949
Act,
the financial statements give the information required by the Banking Regulation
give
a
and
well as the Companies Act, 1956, in the manner so required for the banking companies

6. ln our opinion

given
and to the best of our information and according to the explanations

in India:
true and fair view in conformity with the accounting principles generally accepted

(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31 March,2OL4i
(ii) in the case of the profit and Loss Account of the profit for the year ended on that date; and
(iii) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.
Report on Other Legal and Regulatory Matters

7. The Balance Sheet and the profit and Loss Account have been drawn up in accordance with the
provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the
Companies Act, 1956.

g.

Act, 1949 and

As required by sectio n227 (3) of the Act, section 30 (3) of the Banking Regulation
that:
report
we
India,
of
Bank
Reserve
the appointment letter dated 5 June 2013 issued by the
(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) the transactions of the Bank, which have come to our notice, have been within the powers of

the Bank.

(c) The financial accounting systems of the Bank are centralised and therefore, accounting
returns for the purpose of preparing financial statements are not reguired to be submitted
by the branchesi we have visited 20 branches for the purpose of our audit.

9.

with
ln our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply

the Accounting Standards notified under the Companies Act, 1956 read with General Clrcular
8l2OL4 dated 4 April 2014, issued by the Ministry of Corporate Affairs.

10. We further rePort that:

(i) the Batance Sheet and Profit and Loss Account dealt with by this report, are in aqreement
with the books of account.
(ii) in our opinion, proper books of account as required by law have been kept by the Bank so
far as appears from our examination of those books.
(iii) on the basis of the written representation received from the directors and taken on record
by the Board of Directors, none of the directors is dlsqualified as on 31 March 2014 from
being appointed as a director in terms of clause (9) of sub section (1) of section 274 of the
ComPanies Act, 1956.
For S.R. BATLIBOI & CO. LLP

Chartered Accountants
Flrfrr's ReOistratiln Number: 301003E

fd-

-,d.*",01,
per Surekha Graclas
Partner

Membership Number: 105488

Place of Signature: Mumbai

Date:23 April2014

F-3

wM
YES BANK Limited

Balance sheet as at March gl,2Ol4

(7in thousanils)
As at

Schedules

As at

March 31,2014 March

3'1.,2013

CAPITAL AND LIABILITIES

Capital

Reserves and surplus

Deposits

Borrowings
Other liabilities and provisions

3,606,336
67,611,074
741,920,153
213,142,862

63,8n,474

54,187,245

I,W0,157,899

99'l,,04'1,,274

45,415,683
13,500,955
409,503,624
556,329,622

TOTAL

3,586,223
54,490,482
669,555,852
2W,22'!,,472

ASSETS
Cash and balances with Reserve Bank of India
Balances with banks, money at call and short notice

Inveshents
Advances
Fixed assets
Other assets

10

2,9U,694

33,387,586
7,270,011
429,760,421
469,99s,663
2,295,452

LL

62473,321

48,332,74'1,

L,090,157,899

991.,041.,274

I
I

TOTAL
Contingent liabilities
Bills for collection

2,010,7$$,ctc

1.2

2,478,043,530
6,773,965

9,970,531

Significant Accounting Policies and Notes to

18

Accounts formi4g part of financial statements

As per our report of even date attached.
For S. R. BATLIBOI & CO. LLP

For and on behalf of the Board of Directors

Chartereil Accountants

YES BANK

Limited

ICAI Firm Registration No: 301fi)3E

**t&, L;Partner

Rana\apoo

rrl*-va"a
.{ay Vohra

Managi

Director

h\ua".-,^--l
M R Srinivasan
Non Executiae Chnirman

Membership No: 105488

lhivanandfu*'
Financidl
Clief
Officer

Mumbai

F-4

Company\ecretary

;rffi/llr

rlirrrrr

YES BANK Limited

Profit and loss account for the year ended March 31,2m4

(?in thousands)
Schedules

YearEnded
March

I.

INCOME
Interest earned
Other income

13

w,813,521

82,939,91

1.4

17,/15,774
117,029,295

12,574,326
95,5't4,317

15

72,6W,918

ffi,752,092

1.6

17498,749

13,345,367
9,410051
82,507,510

TOTAL

u.

EXPENDITURE
Interest expended

Operating expenses
Provisions and contingencies

1.7

TOTAL

IIL

1.0,7m,96
100,851493

PROFIT
Net profit for the year

16,17/,ffiz
23,#3,674

Profitbrought forward
TOTAL

ry.

YearEnded

31,2014 March 31,,2013

39,561,476

13,006,807

16,583,936
29,590,743

APPROPRIATIONS
Transfer to Capital Reserve
Transfer to Statutory Reserve
Transfer to Invesbrrent Reserve
Dividend paid for last year
Tax on dividend paid last year
Proposed Dividend
Tax (including surcharge & education cess) on Dividend
Balance carried over to balance sheet

u8,646
3,?51,702
97,136
7,559
1,227
2,151,,7U

4,385

4,026

17,n7
2,gg5,Mg

TOTAL
Significant Accounting Policies and Notes to Accounts
forming part of financial statements

41,359

4,M4A5t

4npt7
32,074,fi2

?3,393,674

39,561476

29,590,743

u.92

36.53
35.55

u9,065

78

Earning per share (Refer 5ch.1.8.7.6)

Basic

(fl

Diluted

(?

(Face Value of Equity Share

4435

is 710/ -)

As per our report of even date attached.

For S.

R BATLIBOI & CO. LLP

For and on behalf of the Board of Directors

Chartered Accountants

-ld-

ICAI Firm Reglstration No:301fi)3E

JA"^-JI^
Surekha Gracids
Pnrtner

huu--r-*l

'\(.)
^=%q"
Aiay Vohra

M R Srinivasan

Director

Non Executiae Chairman

Membership No: 105488

./'

/1

*J1",:#'
Director

F-5

'rtar

WN
YES BANK

Limited

Cash flow statement for the year ended March 31,2014

(?in thousands)

YearEnded
31,2m4

March
Cash

YearEnded
March 3't,2013

flow from operating activities

Net profit before taxes

23264817

19,257,317

631,ffi2

517,O70

u6,589

295,560
(29,910)
766,399
1,516,699
29,310

Adjustmen! for
Depreciation for the year
Amortization of prenium on inveshents
Provision for investments
Provision for standard advances
Provision/write off of non performing advances
Other provisions
Loss from sale of fixed assets

Adjustments

ffio,u79
1.27E,978
1,358,169

ll7,5l5
948

5,101

zl,956,957

22,357,535

7LW,3VI

778,038,802

for:

Increase in Deposits
Increase/ (Decrease) in Other Liabilities
(Increase)/ Decrease in Investments
Increase in Advances
Increase in Other Assets

114,273,3/J91

8,772,122

(3,998,530)

45,67,469

(8O083,831)

187,6921281

(9'1.,625,933)

24,839,455

Payment of direct taxes

Net cash generated from operating activities (A)
Cash

(8,305,958)

(10,434,71,4)

(6,576A4r)

4/4489,3il

5406,380

(1205,9781

(26,7t7,3,.11

(1,03&350)
22,310
(3Os35)
(66,368,749)

(27,989,X931

(67,475,334)

flow from investing activities

Purchase of fixed assets

I'roceeds from sale of fixed assets

Changes in Capital work in progress

24,9r,7
(g(),eos)

hrvestmentin HTM
Net cash generated from investing activities (B)
Cash

(6,765,222)

flow from financing activities

Tier II Debtraised
Increase in Borrowings
Innovative Perpetual Debt raised
Proceeds from issuance of Equity Shares
Share Premium received thereon
Dividend paid during the year

17,638,M0

:.x21p;
2,8fi),0m
20,113
339,W9
(2,755,7ffi1

(ffi,3721

Tax on dividend
Net cash generated from financing activities (C)

l,75g,ggo

Net increase in cash and cash equivalents (A+B+C)

1825,9,M1

48,618,598
1,400,000
56,349
756,774
(1,,428,296)

(?30,280)
66,81'1,,'145

4,802,191

Contd...

F-6

ry
YES BANK Limited
Cash flow statement for the year ended March 31^,2014

(Contil...)

(7in thousands)
Year Ended

Year Ended

March 31,2m4

March 31,2013

Cash and cash equivalents as at April l

Cash and cash equivalents as at March 31

40,657,597

35,855,406

s&910638

40,657,597

Cash and cash equivalents includes the following

Cash and Balances with Reserve Bank of lndia
Balances with Banks and Monev at Call and Short Notice

45,415,83
10500,955

33,387,586
7,270,01].

Cash and cash equivalents as at March 31

58,916,639

40,657,597

Notes to the Cash flow statement:

As per our report of even date attached.

For S.

R BATLIBOI & CO. LLP

Chartered Accountants

For and on behalf of the Board of Directors

YES

BANKLimited

ICAI Finn Registration No:3O1@3E

n
lr^l

x^0t t\
-v

Qrrralzlrr

YL

Csrai ra

l\rGr\rrnI

-11
Kapoor

Partner

Membership No:105488

Ajay

{Q-v
Vohra

Director

(e

Ra{ha Singh

hYc
i--t^'..---Y..-i

M R Srinivasan \
Non Executive
Chnirman
II

+o^+Raiat Mongla

Il
lr'_
druvat|'ldlltt

I\

orrrlrr5au
Director

Chief Financial

Offcer
Mumbai

F-7

C-ompany Secretary

WN

Financial Statements for the year ended March 3L 2014

YES BANK

Limited

Schedules forming part of the Balance Sheet

SCHEDULE1

((

inthousands)

As at

As at

March 31,20/.4

March 31,,2013

6,000,000

6,000,000

3,606,3%

3,586,223

3,606,3%

3,586,223

- CAPITAL

Authorized Capital
600,000,000 equity shares

of f,10/- each

(March 3'1,,2013:600,000,000 equrty shari:s of

Issue4 subscribed and paid-up capital
360,633,626 equity shares

10/- each)

of f,10/- each

(March 31,,2013:358,622,289 equity shares of

fl

10/- each)

[Refer Sch 18.5.1.1.]

TOTAL
SCHEDULEz

RESERVES AND SURPLUS

Stafutory Reserves
Openingbalance

10,3/4:0,281

Additions during the year

II.

4,0/44457

Closing balance

14,3U,732

Share Premium
Opening balance

18,925,609

18,168,835

339,509

Additions during the year

UL

Closing balance

19,265,118

756,774
78,925,609

Capital Reserve
Opening balance

1,7432O5

'1,,394,559

Additions during the year

[Refer 9chL8.5.L.2]

Closing balance

IV.

Investment Reserve
Opening balance

Additions during the year [Refu 5ch18.5.1..3]

Closing balance

V.

7,088,579

3,257,702
10,340,231

41.,359

348,646

L,7U,sU

'1,,743,205

97,713
4,395

577
87,136
97,713

104098

Balance in Profit and Loss Account

TOTAL

F-8

32,074,562
67,611,074

23,383,674

54,4n,482

E"*r

Financial Statements for the year ended March 31,2014

YES BANK

Limited

Schedules forming part of the Balance Sheet

(7 inthousanils)
As at

March
SCHEDULE 3

A.

Demand Deposits
From banks
ii) From others
Savings Bank Deposits

67,824,61
93,275,|W

64,87't,883
60,226,502

From banks

63,293,491

515,179,8&
741,920153

TOTAL
II.

'1,,776,969

ii) From others

Deposits of branches in India
Deposits of branches outside India

I.

LU6,947

Term Deposits

i)

B.

As at

March 31.,2013

DEPOSITS

i)

il.
m.

31,2014

TOTAL

41,593,943
50L,086,656

741,920,153

669,555,852
669,555,852

741,920,153

669,555,852

SCHEDULE4 - BORROWINGS
I.
A.

Innovative Perpetual Debt Instruments (IPDI) and Tier II Debt

Bonowing in India

i)
ii)
iii)

rPDr

Upper Tier II Borrowings

Lower Tier II Borrowings

roTAL(A)
B. Borrowings outside

r)
ii)
iii)

IPDI
Upper Tier II Borrowings
Lower Tier II Borrowings

TOTAL(A+B)
A.

30,255,000

3'1,,255,000

57,032,W

58,132,000

299,575

271,425

t0,3824u

9,334,9U

10,691,976

9,606,4@

67,713,975

67,738,409

31020,000

49,959,900

25,610,ffio

30,832,500

31,554A17

24,759,375

Other Borrowings*
Borrowings in India

r)
ii)
iii)
B.

7,510,0N
19,367,000

India

rorAL(B)
IL

7A\0,0ffi
19,367,ON

Reserve Bank of India

Other banks
Other institutions and agencies **

rorAL(A)

93,184,417

104,550,775

TOTAL(A+B)

52,2U,469
145,U8,996

36,932,299
741,483,063

TOTAL(r+rr)

213,142,862

209,221

Borrowings outside India (B)

"Of the above, secured borrowings are f31,300,000 thousands (March g1,zo1g: ?49,896,a31, thousands).
*Including refinance borrowing.

F-9

A72

ry

Financial Statements for the year ended March 31,2014

YES BANK

Limited

Schedules forming part of the Balance Sheet

(7 in thousands)
As at

March

SCHEDULE5

L
U.
ilI.
IV.

Bills payable
Inter-office adjustments (net)
Interest accrued
Others (including provisions)
- Provision for standard advances
- Others(includes Mark-to-Marketon derivative exposure)
- brcome Tax Provision

SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF

I.

Cash in hand
Balances with Reserve Bank of Lrdia

As at
March 31 2013

OTHER LIABILITIES & PROVISIONS

TOTAL

II.

3l,20l4

2,050477

1.,325,549

8,871,410

8,7't4,189

4,153,2U

2,655,326

48,802,783

4'1.,414,538

63,877474

77,643
54,187,245

INDIA
2299,969

In current account
In other account

TOTAL

1,,633,270

43,115,714

31,754,31,6

45,415,ffi3

33,387,586

SCHEDULE 7- BALANCES WTTH BANKS, MONEY AT CALL AND SHORT NOTICE

I.

In India
Balances

ii)

with banks
in current accounts
in other deposit accounts

420,177
60

150,753

500,m0

250,000

55

Money at call and short notice

ii)
iii)

with banks
with other institutions
Lending under Reverse Repo (RBI & Banks)

TOTAL

n.

(Il

Outside India
in current accounts

l)
ii)
iii)

555,030

1,475267

400,808

9,329,513

4,978456

2,696,175
12,025,699

6,869,203

13,500,955

7,270,011

in other deposit accounts

money at call and short notice

rorAL(rD
TOTAL(r+II)

;h,;

F-10

1,,890,747

qv',

Financial Statements for the year ended March 31, Z)14

YES BANK Limited

Schedules forming part of the Balance Sheet

SCHEDULE8

A.

As at

As at

March 37,2m4

March 37,2013

224,2n,105

235,390,801,

932,480

Shares

Debentures and bonds

Subsidiaries and/or joint ventures
Others (CPs, CDs, Pass Through Certificates etc.)
Refer Note 18.5.2

B.

inthousands)

INVESTMENTS (net of provisions)

Investments in India
i)
Govemment securities
ii) Other approved secwities

iii)
iv)
v)
vi)

(7

1,,122,391,

103,155,n7

103,M2,521,

175,000
80,950,132
409,503,624

500
89,804,208
429,760,427

409,503,624

429,760,421

1L877,890

7,794,913

142,758,282

125,790,918

400,699A50

336,409,832

556,329,622

469,995,663

374,024,A50

5,625,7M

311,,377,367
6,491,,807

476,679,865

152,126489

556,329,622

469,99s,663

Investments outside India

TOTAL

SCHEDULE 9 - ADVANCES

A.

r)

Bills pwchased and discounted

ii)

Cash credits, overdrafts and loans repayable on

iii)

demand
Term loans

TOTAL

B.

r)

Secured by tangible assets (includes advances

secured by fixed deposits and book debts)

ii)

Covered by Bank/ Government Guarantees

Unsecured(Note 1 and 2)

iii)

TOTAL

I . incluiles ailaances of 7 82,545,143 thousands (March 31., 20L3 { 34,827,6M thousanils) for which secuity
dacumentatbn is either being obtained or being registered.
2 includes nil adaances (Preoious year {263,125 thousands) for which intangible securities such as chnrge oaer
the ights, Iicenses, authority, etc of TNiI (Preaious yenr 7694,000 tlnusands) hss been taken.
I. Advances in India
i) Priority sectors

ii)
iii)
ir)

145,U2222

Public sector
Banks

Others

105,212,023

52,516

607,642

'1.,556,781

556,329,622

617,055
363,558,943
469,995,663

556,329,622

469,995,663

408,958,103

II. Advances outside India

TOTAL

F-11

wr

Financial Statements for the vear ended March 31.2014

YES BANK

Limited

Schedules forming part of the Balance Sheet

((

inthousands)

As at
March

3L,2014

As at

March 31.,2013

SCHEDULE 10. FIXED ASSETS

I.

il.

Premises
Other Fixed Assets (including furniture and fixtures)
At cost as on March 31't of preceding financial year
Additions during the year
Deductions during the year
Accumulated depreciation to date

4271,773
1.205,978
{r54,7051

{2,589,5M1
2,732,942
20't,752

Capital work-in-pro gress

3,310,459
L,034,450
(73,735)
(2,096,669\
2,184,505
110,947

2,934,694

2,295,452

15,454,763

14,278,348

SCHEDULE 11 - OTHER ASSETS

I.
II.
IIII.
IV.

Interest accrued
Advance tax and tax deducted at source
Deferred tax asset fRefer Sch 1.8.7.8]
Others (includes Mark to Market on derivative exposures)

TOTAL

M2,lgg
2493,325

1,,794,222

r14,083,035

32,259,571.

62,473,321

48,332,141,

SCHEDULE 12 - CONTINGENT LIABILITIES

I.
II.
ilI.
ry.
V.
VI.
Vil.

Claims against the bank not acknowledged as debts

Liability for partly paid invesbnents
Liability on account of outstanding forward exchange

ljlry',6ffiAg;

7,500,302,096

498,750,662
95,97L,508

659,577,736
48,188,523

70d,6/4'0,628

85,701,999

7U,M2l3O

152,629,077

contracts

Liability on account of outstanding derivative contracts

- Single curency Interest Rate Swaps

Others
Guarantees given on behalf of constituents

In India
Outside India

Acceptances, endorsements and other obligations

Other items for which the bank is contingently liable
- Value dated purchase of securities
- Capital commitnents
- Foreign Exchange Contracts

20647s

fiom & Spot)

TOTAL
Refer Note- 18.8.7 for further description

ry'^;
F-12

107,240

238,UO

255,5U

41,2:51,886

31.,281.,275

2,010,\68,222

2,478,043,530

nv!!is

Financial Statements for the year ended March 31,2014

YES BANK

Limited

Schedules forming part of the Profit and Loss Account

({

in thousands)

Y""t

Year ended
N'larch3'1.,2AL4

March 31,2013

65,399,853

53,970,675

34,7M,577

28,594,640

23g,gg0

1.65,062

30,271

209,6't4

TOTAL

ersrrs?I

sLe3L991

Commission, exchange and brokerage

Profit/(Loss) on the sale of investments (net)
Profit /(Loss) on the revaluation of investments (net)
Loss on sale of land, building and other assets
Profit on exchange transactions (net)
Income earned by way of dividends etc. from
subsidiaries, companies and/or joint venfures

72,ffi9,209

10,762,097

1,667,620

1.,556,556

""d"d

SCHEDULE 13 - INTEREST EARNED

I.

II.
m.

Interest/discount on advances/bills
Income on investments
Interest on balances with Reserve Bank of India and
other inter-bank funds

IV.

Others

SCHEDULE 14 - OTHER INCOME

L
II.
m.
IV.
V.
VI.
VII.

(e48)

(5,101)

1,981108

666,678

960,786
17,215,774

12,574,325

Interest on deposits
Interest on Reserve Bank of India/inter-bank
borrowings / Tier I and Tier II debt instruments

56,Xffi,397
75,824,830

14,935A90

Others

639,691
72,650,918

abroad/in India
Miscellaneousincome

TOTAL
SCHEDULE 15 - INTEREST EXPENDED

L
II.

ru.

TOTAL

45,636,130

180,472
60,752,092

SCHEDULE 16. OPERATING EXPENSES

I.
il.
III.
IV.
V.
VL
VII.
VIII.
IX.
X.

ffi

Q"x-?9

Payments to and provisions for employees

Rent, taxes and lighting
Printing and stationery
Advertisement and publicity
Depreciation on Bank's property
Directors'fees, allowances and expenses

7,843,9E1
2,292,026
13L,853

Auditors'fees and expenses

Law charges

6,950
77,L09
247,077
110,319
528,209
5,087,395

596,476

631,62
5,559

Postage, telegrams, telephones, etc.

Repairs and maintenance

Insurance

Other expenditure

TOTAL
F-13

17,498,779.

6,555,435
'1,,977,926

112,893
322,083
517,070
5,649
6,752
19,465
158,557
91,,463

M9,041.
3,295,133

nrv iK

Financial Statements for the year ended March 31,2014

YES BANKLimited
Schedules forming part of the Profit and Loss Account

((

in thousanils)
Yearended Yearended
March 3L,2014 March 31,2013
SCHEDULE 17 - PROVISIONS & CONTINGENCIES

I.
II.
m.
IV.
V.

Provision for taxation [Refer Sch 18.6.7]

Provision for investments
Provision for standard advances
Provision/write off for non performing advances
Other provisions

TOTAL

F-14

7,085,075
860,079
1,279,978
l,35g,1.69
119,615

6,250,510
(29,910)
756,399

10,707,856

8,410051

'1,455,215

(32,763)

Financial Statements for the year ended March 31,2014

W@

18.

Significant accounting policies and notes forming part of the accounts for the year
ended March 31,2014

L8.1.

Background
YES BANK Limited (the'Bank' or'YES BANK') is a private sector Bank promoted by the late
Mr. Ashok Kapur and Mr. Rana Kapoor. YES BANK Limited is a publicly held bank engaged in

providing a wide range of banking and financial services. YES BANK Limited is a banking
company governed by the Banking Regulation Act,1949. The Bank was incorporated as a limited
company under the Companies Acf 1956 on November 21,2003. The Bank received the licence to
commence banking operations from the Reserve Bank of India ('RBI') on May 24,2004. Further,
YES BANK was included to the Second Schedule of the Reserve Bank of India Act, 1934 with
effect from August 27, 20C/,.

1.8.2

Basis of preparation
The financial statements have been prepared in accordance with requirements prescribed under
the Third Schedule (Form A and Form B) of the Banking Regulation Act,1949. The accounting
and reporting policies of the Bank used in the preparation of these financial statements conform

to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by
the Reserve Bank of India (RBI) from time to time, the Accounting Standards (AS) notified under
the Companies Act, 1956, read with General Circular 8/2014 dated April 4,2014 issued by the
Ministry of Corporate Affairs to the extent applicable and practices generally prevalent in the
banking industry in India. The Bank follows the accrual method of accounting and the historical
cost convention.

78.3

Use of estimates

The preparation of financial statements requires the management to make estimates and
assumptions that are considered while reporting amounts of assets and liabilities (including
contingent liabilities) as of the date of the financial statements and income and expenses durin[
the reporting period' Management believes that the estimates used in the preparation of the

financial statements are prudent and reasonable. Fufure results could differ from these estimates.
Any revision to accounting estimates is recognized prospectively in current and future periods.

1.8.4

Significantaccountingpolicies
18.1LL Reaenue recognition
Revenue is recognized to the extent it is probable that the economic benefits
the Bank and the revenue can be reliably measured..

o
o
o
'

ffiR

w#

'
o

will flow to

Interest income is recognized in the profit and loss account on accrual basis, except in
the case of non-performing assets. Interest on non-performing assets is recognled
upon realization as per the prudential norms of the RBI.

Revenue

in

certain structured transactions where interest income

is

partially

receivable in advance is recognized when due.

Loan processing fee is accounted for upfront when it becomes due.
Dividend income is recognized when the right to receive payment is established.

Commission on guarantees issued by the Bank is recognized as income on yearly

basis at each anniversary over the period of the guar:antee, except for guarantee
commission not exceeding f100 thousands, which is recognized at the time of
issue
of the guarantee.
Commission on Letters of Credit ('LC') issued by the Bank is recognized as income
at
the time of issue of the LC.
Income on non-coupon bearing discounted instruments is recognized over
the tenu
of the instrument on a straight line basis. In case of coupo-n bearing discouXftl
instrumenb, discount income is recognized over the tenor of th" instrument
basis.

F-15

Financial Statements for the year ended March 31,2014

o
o

w{

In case of Bonds and Pass Through Certificates, premium on redemption, if any, is

amortised over the tenure of the instrument on a yield basis.
Revenue from financial advisory services is recognized in line with milestones
achieved as per terms of agreement with clients which is reflective of services
rendered.

Other fees and commission income are recognized on accrual basis.

78.4.2 Inoestments
Classification and valuation of the Bank's investments are carried out in accordance with
RBI Circular DBOD.No.BP.BC.8/21..04.1.41./2013-14 dated 1. july 2013 and Fixed Lrcome
Money Market and Derivative Association (FIMMDA) guidelines FIMCIR/201314/50/IN,{.arch28,2014.

a)

Accounting and Classification

Invesbnents are recognized using the value date basis of accounting. In compliance
with RBI guidelines, all inveshenb, are categorized as "Held for bading" (HFI'),
"Available for sale" (AFS') or "Held to maturity" (FilM') at the time of its purchase.
For the purpose of disclosure in the balance sheef inveshnents are classified as
disclosed in Schedule 8 (Investments') under six groups (a) government securities (b)
other approved securities (c) shares (d) bonds and debentures (e) subsidiaries and
joint ventures and (0 others.

b)

Costofacquisition
Costs such as brokerage pertaining to investments, paid at the time of acquisition are
charged to the profit and loss account.

c)

Basis ofclassification

Securities that are held principally for resale within 90 days from the date of purchase
are classified under the HFT category. Investments that the Bank intends to hold till
maturity are classified under the HTM category, or as per RBI guidelines. Securities
which are not classified in the above categories are classified under the AFS category.

d)

Transfer befween categoies

of inveshents from one category to the other, if done, is in

with RBI guidelines. Trarufer of scrips from AFS / HFT category to HTM
category is made at the lower of book value or market value. In the case of transfer of
securities from HTM to AFS / HFT category, the investments held under HTM at a
discount are transferred to AFS / Its.FT category at the acquisition price and
inveshents placed in the HTM category at a premium are transferred to AFS/ FIFT
Reclassification
accordance

at the amortized cost.

Transfer of inveshnents from AFS to HFT or vice- a- versa is done at the book value.
Depreciation carried, if any, on such investments is also hansferred from one
category to another.

e)

,n)^,^;

Valuation

Investrnents categorized under AFS and HFT categories are marked to market
(MTlvI) on a periodical basis as per relevant RBI guidelines. Net depreciatiory if any,
in the category under the classification mentioned in Schedule 8 (Inveshnents') is
recognized in the profit and loss account. The net appreciatioru iI any, in the category
under each classification is ignored, except to the extent of depreciation previously
provided. The book value of individual securities is not changed consequent tL
periodic valuation of invesbnents.

r[
F-16

iE

A*-g

*T*f t

Financial Statements for the vear ended March 31.2014

Investments received in lieu of restrucfured advances are valued in accordance with

RBI guidelines. Any diminution in value on these investments is provided for and is
not used to set off against appreciation in respect of other performing securities in
that category.

Investments classified under the HTM category are carried at their acquisition cost
and any premium over the face value, paid on acquisition, is amortised on a straight
line basis over the remaining period to maturity. Amortization expense of premia.on
investments in the HTM category is deducted from interest income. Where in the
opinion of management, a diminution, other than temporary in the value of
investments classified under HTM has taken place, suitable provisions are made.

Treasury pills, Commercial Paper and Certificates

of deposit being discounted

instruments, are valued at carrying cost.

The market/ fair value applied for the purpose of periodical valuation of quoted
investments included in the AFS and HFT categories is the market price of the scrip
as available from the &ades/ quotes on the stock exchanges and for Subsidiary
General Ledger (SGL') account transactions, the prices as periodically declared by
Primary Dealers Association of India joinfly with FIMMDA.
The market/ fair value of unquoted government securities included in the AFS and
HFT category is determined as per the prices published by FIMMDA. Further, in the
case of unquoted bonds, debentures, pass through certificates and preference shares,

valuation is carried out by applying an appropriate rrark-up (reflecting associated

credit risk) over the Yield to Maturity (YIM') rates of govemment securities. Such
mark up and YTM rates applied are as per the relevant rates published by FIMMDA.
Units of Venture Capital Funds (VCF) held under AFS category are valued using the
Net Asset Value (NAV) shown by VCF as per the financial statement. The VCFs are
valued based on the audited results once in a year. In case the audited financials are
not available for a period beyond 18 months, the inveshents are valued at ( 1 per
VCF.

Quoted equity shares are valued

at their closing price on a recognized stock

exchange. Unquoted equity shares are valued at the book value if the latest balance
sheet is available, else, at ( 1 per company, as per relevant RBI guidelines.

At the end of

each reporting period, security receipts issued

by the asset

reconskuction company are valued in accordance with the guidelines applicable to

such inshuments, prescribed by RBI from time to time. Accordingly, in cases where
the cash flows from security receipts issued by the asset reconstruction company are
limited to the actual realization of the financial assets assigned to the instruments in
the concerned scheme, the Bank reckons the net asset value obtained from the asset
reconstruction company from time to time, for valuation of such inveshents at each
reporting date.
Investrnents in quoted Mutual Fund (MF) Units are valued as per Stock Exchange
quotations. hrvesbnents in unquoted MF Units are valued on the basis of the latest
re-purchase price declared by the MF in respect of each particular Scheme.

fl

Accounting for repos / reaerse rcpos

Securities sold under agreements to repurchase (Repos) and securities purchased

under agreements to resell (Reverse Repos) including liquidity adjustment facility
(LAD with RBI are treated as collateralized borrowing and lending transactions
respectively in accordance with RBI master circular No.
DBOD.No.BP.BC.8/21..M.1.41/2013-14 dated ]uly '1,, 2013. The first leg of the repo
tansaction is contracted at the prevailing market rates. The difference between

F-17

Financial Statements for the year ended March 31,2014

mr

consideration amounts of first and second (reversal of first) leg reflects interest and is
recognized as interest income/expense over the period of transaction.

il

Proftftoss on

sale of lnoestments

Profit/Loss on sale of Investments in the HTM category is recognized in the profit

and loss account and profit thereafter is appropriated (net of applicable taxes and
statutory reserve requirements) to Capital Reserve. Profit/Loss on sale of
invesbnents in HFT and AFS categories is recognized in the Profit and Loss account.

L8.4,3 Adaances
Advances are classified as performing and non-performing based on the relevant RBI
guidelines. Advances are stated net of specific loan loss provisions, interest in suspense,
inter-bank participation certificates issued and bills rediscounted. Specific loan loss
provisions in respect of non-performing advances are made based on management's
assessment of the degree of impairment of the advances, subject to the minimum
provisioning level prescribed in relevant RBI guidelines.
As per the RBI guidelines a general provision is made on all standard advances based on
the category of advances as prescribed in the said guidelines. The Bank also maintains
additional general provisions on standard exposure based on the intemal credit rating
matrix as approved by the Board of the Bank. These provisions are included in Schedule 5
-'Other liabilities & provisions - Others'.

In respect of reshucfured standard and non performing advances, provision is made for
the present value of principal and interest component sacrificed at the time of
restructuring the assets, based on the RBI guidelines.

Amounb recovered against debts written off in earlier years and provisions no longer
considered necessary based on the current status of the borrower are recognised in the
profit and loss account.
78.4.4 Transactions inaolaingforeign exchange
Monetary foreign crurency assets and liabilities are translated at the balance sheet date at
rates notified by the Foreign Exchange Dealers' Association of India (FEDAry. Foreign
exchange contracts of original maturities less than L2 months outstanding at the balance
sheet date are marked to market at rates notified by FEDAI for specified maturities,
suitably interpolated for in-between maturity contracts. Long term foreign exchange
contracts (original maturities of over 12 months) are stated at net present value using
LIBOR/SWAP curves of the respective currencies. The resulting profits or losses are
recognized in the profit and loss account.

Premia/discounts on foreign exchange swaps, that are used to hedge risks arising from
forergn currency assets and liabilities, are amortized over the life of the swap.

Income and expenditure

in foreign crurency are accounted for at exchange

rates

prevalent on the date of the transaction.

In accordance with AS 11 'The Effects of changes in Foreign Exchange Rates', contingent

liabilities in respect of outstanding foreign exchange forward contracts, derivatives,
guarantees, endorsements and other obligations are stated at the exchange rates notified
by FEDAI corresponding to the balance sheet date.

F-18

Financial Statements for the year ended March 31,2014

nvn

78.4.5 Earnings per share

The Bank reports basic and diluted earnings per equity share in accordance with
Accounting Standard(AS) 20, "Earnings per Share" notified under the Companies Act,
1956, read with General Circular 8/201.4 dated April 4,2014 issued by the Ministry of
Corporate Affairs to the extent applicable. Basic earnings per equity share have been
computed by dividing net profit after tax for the year by the weighted average number of
equlty shares outstanding for the period.

Diluted earnings per equity share have been computed using the weighted average
number of equity shares and dilutive potential equity shares outstanding during the
period except where the results are anti dilutive.
78.4.6 Acbounting for ilerioatioe transactions
Derivative transactions comprises forward rate agreements, swaps and option contracts.
The Bank undertakes derivative transactions for market making/trading and hedging onbalance sheet assets and liabilities. All market making/hading transactions are marked to
market on a periodic basis and the resultant unrealized gains/losses are recognized in the
profit and loss account.
Derivative transactions that are undertaken for hedging are accounted for on accrual
basis except for the transaction designated with an asset or liability that is carried at
market value or lower of cost or market value in the financial statements, which are
accounted similar to the underlying asset or liability.

option premium accounting framework prescribed by FEDAI SPLcircular dated Dec 74, 2007. Premium on option transaction is recognized as
income/expense on explry or early termination of the transaction. Mark to market (NffM)
gain/loss (adjusted for premium received/paid on option contracts) is recorded under

The Bank follows the

'Other Income'.
The amounts received/paid on cancellation of option contracts are recognized as realized

gains/losses on options. Charges receivable/payable on cancellation/ termination of

foreign exchange forward contracts and swaps are recognized as income/ expense on the
date of cancellation/ termination under'Other Income'.

The requirement for collateral and credit risk mitigation on derivative contracts is
assessed based on internal credit policy. Overdues rt any, on account of derivative
tansactions are accounted in accordance with extant RBI guidelines.

As per the RBI guidelines on 'Prudential Norms for Off-balance Sheet Exposures of
Banks' a general provision is made on the current gross MTM gain of the contract for all
outstanding interest rate and foreign exchange derivative transactions.

78.4,7 Fixeil assets

Fixed assets are stated at cost less accumulated depreciation and provision for
impairment. Cost comprises the purchase price and any cost athibutable for bringing the
asset to its working condition for its intended use.
Fixed assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an
asset with future net discounted cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment is recognised by debiting the profit
and loss account and is measured as the amount by which the carrying a
the assets exceeds the fair value of the assets.
F-19

Financial Statements for the year ended March 31, 2014

Ir*r

78.4.8 Depreciation
Depreciation on fixed assets is provided on straight-line method, over estimated useful
lives, as determined by the management, at the rates mentioned below (which are higher
than or equal to the corresponding rates prescribed in Schedule XIV to the Companies
Act,1956):
Rates of depreciation per annum

Class of asset

Office equipment
Computer hardware
Computer software

76.270/"

Vehicles

20.40"/o

3333%
25.M%

Furniture and Fixtures

Leasehold improvements to premises

6.33%

Over the lease period or 9 years

whichever is less.

fully depreciated in the year of purchase.

For assets purchased/ sold during the year, depreciation is being provided on pro rata
Assets costing less than 45,000 are
basis by the Bank.

L8.4.9 Retirement and employee bmefits

lzaae salary

The employees of the Bank are entitled to carry forward a part of

their

unavailed/unurilizsd leave subject to a maximum limit. The employees cannot encash

unavailed/unurilizsd leave. The Bank has computed the compensated absence provision
as per revised AS 15

- Employee Benefits.

Gratui$

The Bank provides for gratuity, a defined benefit retirement plan, covering eligible
employees. The plan provides for lump sum payments to vested employees at retirement
or upon death while in employment or on termination of employment for an amount
equivalent to 15 days' eligible salary payable for each completed year of service if the
service is more than 5 years. The Bank accounts for the liability for future gratuity
benefits using the projected unit cost method based on annual actuarial valuation.
The Bank recognizes the actuarial gains and losses during the year in which the same are

incurred.
Prooiilent fund

In accordance with law, all employees of the Bank are entitled to receive benefits under
the provident fund, a defined contribution plan in which both the employee and the Bank
contribute monthly at a pre determined rate. The Bank has no liability for future
provident fund benefib other than its annual contribution and recognizes such
contributions as an expense in the year incurred.
78.4.70 Leases

Leases where the lessor effectively retains substantially all risks and benefits of
ownership are classified as operating leases. Operating lease payments are recognized as
an exPense in the profit and loss account on a straight line basis over the lease term.

F-20

Financial Statements for the year ended March 31, Z)14

WN

78.4.11 Income taxes

Income tax expense comprises current tax provision (i.e. the amount of tax for the period
determined in accordance with the Income Tax Act, 1951 and the rules framed there
under) and the net change in the deferred tax asset or liability in the year. Deferred tax
assets and liabilities are recognised for the future tax consequences of timing differences
between the carrying values of assets and liabilities and their respective tax bases, and
operating los-s carry forwards. Deferred tax assets and liabilities are measured using the
enacted or substantively enacted tax rates at the balance sheet date.
Deferred tax assets are recognized only to the extent there is reasonable certainty that the
assets can be realized in future. In case of unabsorbed depreciation or carried forward
loss under taxation laws, deferred tax assets are recognized only if there is virtual

certainty of realization of such assets supported by convincing evidence. Deferred tax

assets are reviewed at each balance sheet date and appropriately adjusted to reflect the
amount that is reasonably/virtually certain to be realized.
78.4.72 Proaisions anil contingent assets/liabilities
The Bank creates a provision when there is a present obligation as a result of a past event
that probably requires an outflow of resources and a reliable estimate can be made of the

amount of the obligation. A disclosure for contingent liability is made when there is a
possible obligation or a present obligation that may but probably will not require an
outflow of resources. When there is a possible obligation or a present obligation in
respect of which the likelihood of oufflow of resources is remote, no provision or
disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best

estimate. If it is no longer probable that an outflow of resowces would be required to

settle the obligation, the provision is reversed.

Contingent assets are not recognized in the financial statements. However, contingent
assets are assessed continually and if it is virtually certain that an inflow of economic
benefits will arise, the asset and related income are recognized in the period in which the
change occurs.

18.4,73 Employee Stock Compmsation Cost

Measurement of the employee share-based payment plans is done in accordance with the
Guidance Note on Accounting for Employee Share-based Payments issued by Institute of
Chartered Accountants of India (ICAD and SEBI ESOP Guidelines 199. The Bank
measures compensation cost relating to employee stock options using the intrinsic value
method. Compensation cost is measured by the excess, if any, of the fair market price of

the underlying stock (i.e. the last closing price on the stock exchange on the day

preceding the date of grant of stock options) over the exercise price. The exercise price of

the Bank's stock option is the last closing price on the stock exchange on the day
preceding the date of grant of stock options and accordingly there is no compensation
cost under the intrinsic value method.
18.4.14 Cash anil Cash equiaalent
Cash and cash equivalents include cash in hand, balances with RBI, balances with other
banks and money at call and short notice.

F-21

mr

Financial Statements for the vear ended March 31, 2014

18.5.L Capital
18.5.L.1 Equity Issue

During the financial year ended March g1, 2074, the Bank has issued 2,011.,337 shares
(previous year 5,634,865 shares) pursuant to the exercise of stock option aggregating to
? 359,622 thousands (previous year: f813,123 thousands).
1.8.5.1-.2 Capital Reserce

Profit on sale of investments in the Held to Maturity category is credited to the Profit and
Loss Account and thereafter appropriated to capital reserve (net of applicable taxes and
transfer to statutory reserve requirements). During the year 74'1.,359 thousands (previous
year: ?3418,646 thousands) was transferred to Capital Reserve.
78.5.1.3 Ina e stment Res eru e

The Bank has transferred f4,385 thousands (Previous yeat: ?97,136 thousands) (net of
applicable taxes and transfer to statutory reserve requirements) towards Investment
Reserve on provisions for depreciation on inveshents credited to Profit and Loss
Account.
18.5,7,4 Capital Ailequacy Ratio

Capital Adequary Ratio as per RBI guidelines (Basel III Capital Regulations dated |uly 01,
2013) as at March 31.,2014 is given below:

(7 in thousanils)
Basel -

III

As at
March

Common Equity Tier I

3t

2014

69,913,022

Additional Tier I Capital

5,061,,336

Tier-1 capital

74,974,358

Tier-2 capital

34,956,511,

Total capital

109,930,869

Credit Risk - Risk Weighted Assets (RWA)

Market Risk- RWA

&3,295,247
79,993,266

Operational Risk - RWA

Total risk weighted assets

42,690,460
765,968,973

Common Equity capital adequacy ratio (%)

9.\70

Tier-l capital adequacy ratio (%)

9.8%

Tier-2 capital adequacy ratio (%)

4.6%

Total capital adequacy ratio (%)

14.4%

Amount raised during the year by issue of IPDI

The capital adequacy ratio computed under Basel

2,800,000

III capitnl regulations is applicabb from fnancial

year 2013-'14 and accorilingly, conesponding details under Basel III for preuious year is not
appliuble.

.f^*s

e--g
F-22

wr

Financial Statements for the year ended March 31,20L4

Capital Adequacy Ratio as per RBI guidelines (New Capital Adequacy Framework
(NCAF) dated July 02,2012, generally referred to as Basel II) as at March 3'1,,2013 is given
below:

({
Basel

in thousands)

- II

As at

March 37,2013

Tier-l capital

63,76't,5A9

Tier-2 capital

59,190,103

Total capital

122,951,672

Credit Risk - Risk Weighted Assets (RWA)

Market Risk - RWA

553,470,237

87,829,562

Operational Risk - RWA

31,023,599

Total risk weighted assets

Tier-l capital adequary ratio

672,323,399
(%)

9.5%

Tier-2 capital adequacy ratio (%)

8.87o

Total capital adequacy ratio (%)

18.3%

Amount raised during the year by issue of IPDI

Amount raised during the year by issue of Tier II

1,400,000

instruments

78.5.7.5

17,639,000

Tierl anilTierll Capital

During the financial year 2013-14, the Bank has raised Tier I Debt inshuments amounting
to f2,800,000 thousands. Details of the same are as follows:
Tier I Debt Instruments

(? in thousanils)

Particulars

of
Security

Nature

Date of

Issue Coupon Tenure

Amount

Rate

(/r)
Unsecured,

Non

Convertible, Additional
Tier I, Subordinated
Perpetual Bonds

Debentures

December

31,

10.50 perpetual

2300,000

TOTAL

2"800,000

2019

F-23

ry

Financial Statements for the year ended March 3L, Z)14

During the financial year 2012-13, the Bank has raised Tier II Debt instruments
amounting to 717,638,000 thousands and Innovative Perpetual Debt Instruments (IPDI)
amounting to fr110Q000 thousands. Details of the same are

as

follows:

Tier II Debt Instruments

(7 inthousands)

Particulars

Date of Issue Coupon Ten

of
Rate (%) ure
Security
Unsecured, Redeemable, Promissory June29,2012 10.25 15
Non Convertible, Upper
Notes

Tiertr

Amount

Nafure

600,000

Bonds

Lower Tier II
Lower Tier II

Bonds
Bonds

Debentures Alugast?3,2lJ12

Debentures

September
2012

Upper Tier tr

Bonds

Promissory

September

Unsecured

Redeemable Promissory

Non Convertible Lower

II Subordinated Bonds
Unsecured

Notes

Tier

Redeemable

1Q

10.00 10
10.00 10

28,

10.15 15

2000,000

10.00 10

2,000,0(n

3,000,000
3,000,000

2m2
October 15,

2012

Notes

Debentures

October

31,2012

9.n

10

2"597,W

70.25 15

2,750,W

10.05 15

1,,69'1,,W

TOTAL

17,638,000

Non Convertible Lower Tier

tr Subordinated Bonds
Unsecured

Redeemable Debentures

NonConvertibleUpperTier

November

10,

2012

tr Subordinated Bonds
Unsecured

Redeemable Promissory

Non Convertible Upper

tr Subordinated Bonds

Tier

Notes

December

Z,

2m2

Innovative Perpetual Debt Instruments (IPDI)

Particulars
Unsecured,

Non

Convertible, Tier
I Subordinated

({

in thousands)

of Date of Coupon Tenure

Security Issue Rate (7o)
Promissory lune29, 10.50 Perpetual
2072
Note

Amount

Nature

1,400,000

Perpetual Bonds

TOTAL

1,400,000

f'Y-.b
'{

b'^,

\i*

iz

W;<9
F-24

Wt*sa

Financial Statements for the year ended March 31.2014

1-8.5.2 Inaestments

(? in thousands)
(In India)

As at

As at

Less: Provision for depreciation

2014 March 31, Z)13

410,614,n2 430,U1,016
1,170,678
%0,595

Net value

409,il3,624

429,760,421

March
Gross value

3!

There taere no inaestment outside lndia as at March 31.. 20L4 and Mnrch 31. 2013.

Prooision for depreciation on inoestments

(7 in thousands)
(In India)

As at

March

3t

Opening Balance
Add/(Less): Provision during the year
Closing Balance
There was no Froaision

2014

As at
March 31,2013

250,599

280,509

860,079

(2e,e10)

l,llo,678

250,599

for depreciation on inaestments outside India

as at March 31, 2014 and

March 31,2013.
78.5.3

Repo Transactions

The details of securities sold and purchased under repos and reverse repos during
the year ended March 31.,2014:

(7 in thousanils)

Minimum
outstanding

Maximun
ortstanding

duringtheyear duringtheyear

Daily

average

outstanding

As at
March

31" 2014

during the year

Securities sold
under repos

472%,W9

2,M7AO7

Security purchased
under reverse repo

72,84,763

865,359

s5t030

The details of securities sold and purchased under repos and reverse repos during the
year ended March 31,2013:

({
Minimum
outstanding

Maximum
outstanding

duringtheyear duringtheyear
Securities sold
under repos

4,350000

Security purchased
under reverse repo

70,8M,M0

The bank has not dealt

average

outstanding

As at
March31,2013

during the year

748,460

in any repo or reaerse repo transactions in corporate bonds duing

year enileil March 31,20'L4 and

The aboue

Daily

in thousands)

Mar& 31,2073.

fgures excludes seatities sold and purdtased uniler LAF with RBl.

F-25

the

fnancial

ry@

Financial Statements for the year ended March 31, 2014

18.5.4 Non-SLR Inaestment Portfolio

Issuer composition of Non SLR investments as at March 31,,201,4 is given below:

(? in thousands)

No

Issuer

of Extent of'below Extent of

private investmentgrade' 'unrated

Extent of
'unlisted'

securities securities#

securities*

67t,n3

25,927,lN
3,940,16

Extent

placement

i)
ii)

PSUs

6,269,4n

5,088,145

Institutions

37,255,096

35,370,7ffi

Banks
Private Corporates

3,979,160
87,057420

2,sm336

Financial

iii)
ir)
v)
vi)
vii)

1,,502,U0

82'626,9n

14,410

3,249,1.40

Subsidiarie{Joint
ventures
Others

175,W

171000

s0,%2473

50,962,473

1,000,000

776:723,W

2502,U0

17t0oo
50,962473

Provisionheld
towards
depreciafion

Total

(479,104

78sA3,5r9

68s;7r3

w2s3$74

*Of the inztestments iliscloseil Taz,tes,sz+ thousands are exempted

from applicability of RBI prudential limit
for unlisted Noz-SLR securities.
# excludes imtestment in equity shares and units.

Issuer composition of Non SLR investmenb as at March 31,2013 is given below:

((
No

Extentof Extentof'below
private investment grade'

Issuer

placement
PSUs

0
fi)

5A49,W

3,549,0m

39,n0,282

36,W9,7il

3,194453
r03531,278

2,734,757

Financial

Institutions

iii)
iv)

Banks
Private Corporates

Extentof
'unrated

Extent of
'unlisted

securities securities#

securities*

2378,7%

99,2M,365

in thousands)

582300

22,@7,218

L29,ffi3

24,493,824

2,862453

Subsidiarie{foint

v)

vi)
vii)

ventures
Others
Provision held
towards
depreciation

Total

500

500

42732,8t0

42,732810

(248,703)
794,369,6m

185,031,190

*Of the imtestments disclosed 7 90,626,805 thousands are

Iimit for unlishd Non-SLR secuities,
# excludes investftEnt in equity shares and units

500
42732,810

2375,7n
exempted

7r?jUJ;

92,186"805

from applicability of RBI prudential

The Bank has not sold and transferred securities to or from HTM category exceeding
5% of the book value of investment.held in HTM category at the begirming of the

year. The 5% threshold referred to above does not include onetime transfer of
securities to/fuom HTM category with the approval of Board of Directors permitted
to be undertaken by banks at the beginning of the year and sale of securities under
pre-announced Open Market Operation (OMO) auction to the RBI.

\i*
D:-:,ir)

F-26

Financial Statements for the year ended March 3L 2014

78

5.5

Deriaatioes

78.5.5.7 Fomtard Rate Agreement/ lnterest Rate

Suap

The details of Forward Rate Agreements

March 31,201/ is given below:

Interest Rate Swaps outstanding as at

(?inthousands)

Sr.

Items

As at
As at
March 31, Z)14 Malch 31, ZIl3

No

4%:7W,62

The notional prirrcipal of swap agreements

0
ii)

l,osses which

would be irrcurred if counterparties failed to

659,5n,7%
't,317,725

4068.,814

fulfill their obligations under the agreementsl

iii)

Collateral required by the bank upon entering into swaps

Concentration of credit risk arising from the swaps

ro

[Percentage Exposure to Banks] t

[Percmtage Exposure to PSU]s I

v)

74.38o/o

21,.65%

52.8o/o

38.81%

885220

532,183

INBMK

r,697,m

729,805

MIBOR
MIFOR
FCYIRS

(69,768)
(696,778)

(111,501)

(6,ffi)

(122,165)

The fair value of the swap book

.
1

36,U5

Los*s and Credit nsk concentration are measured as rct receioable undn Swap contracts

2 Fair oalues reprexnt MTM including accrued intcrest.

The nature and terms of the Rupee IRS as on March 3'1.,2014 are set out below:

(7in thousanils)
Hedging
Hedging

250,000

13

3,25O0m

25,2ffi,W

Trading
Trading
Trading
Trading
Trading

395

2M,g5O,%3

321.

18119,585

2't

10348,000

Trading

50

20,048,000

1,000,0(x)

MIFOR Fixed Payable v/s Floating Receivable

MIBOR Fixed Receivable v/s Floating Payable
INBMK Fixed Payablev/s Floating Receivable
INBMK Fixed Receivable v/s Floating Payable
MIBOR Fixed Payable v/s Floating Receivable
MIBOR 'Fixed Receivable v/s Floating Payable
MIFOR Fixed Payable v/s Floating Receivable
MIFOR Fixed Receivable v/s Floating Payable

The nature and terms of the FCY IRS as on March 31,2014 are set out below:

(Tinthousands)

245,792

EI.'RIBOR

Fixed Receivable v/s Floating Payable

Trading
Trading

245,792

EI.JRIBOR

Fixed Payable

141150

IPY LIBOR

Fixed Receivable v/s Floating Payable

Trading

39

25,565,553

USDLIBOR

Fixed Receivable

Trading

/5

20,169,673

USDLIBOR

Fixed Payable

172054

USDLIBOR

Floating

Trading

F-27

v/s Floating

Receivable

v/s Floating Payable

v/s Floating Receivable
Receivable v/s Floating

E7@

Financial Statements for the year ended March 31,2014

The nature and terms of the IRS as on March 31.,2013 are set out below:

(? inthousands)

+ffi|'{,

i#;il#+

''"

9,500,000

INBMK

Fixed Payable

74

3,500,0m

MIBOR

Fixed

Hedging

1,4

3,500,000

MIBOR

Fixed

Hedging

15

4,050000

MIFOR

Fixed

Trading

23

15,7ffi,W

1,500,000

INBMK
INBMK

Fixed

Trading
Trading
Trading

609

288,960,0m

MIBOR

Fixed

603

a3z760,ON

MIBOR

Fixed Receivable

Trading

77

3,965,0(n

MIFOR

Fixed Payable

36

125il,W

MIFOR

Fixed Receivable

Fixed

'i;.ffii-',

v/s Floating Receivable

Payable v/s Floating Receivable
Receivable v/s Floating Payable
Payable v/s Floating Receivable
Payable v/s Floating Receivable
Receivable v/s Floating Payable
Payable v/s Floating Receivable

Hedging
Hedging

v/s

Floating Payable

v/s Floating Receivable

v/s

Floa

The nature and terms of the FCY IRS as on March 37,2013 are set out below:

(? in thousanils)

1.8.5.5.2 Un-heilgeil

/ uncooered foreign curtancy

exposure

The Bank's foreign currency exposures as at March 3'J.,20't4that are not hedged/covered

by either derivative instruments or otherwise are within the Net Overnight Open
Position limit (NOOP) and the Aggregate Gap limi! as approved by the RBI. NOOP at
March 3L,201,4is 7
1.8.5.5.3 Exchange Traileil

?51,,12'1,

thousands (March 31, 2013

519,379 thousands).

lnterest Rate Derfuatiaes

The following table sets forth, for the period indicated, the details of exchange traded
interest rate derivatives:

(7

In Thousands)

Notional Principal amount of exchange traded

interest rate derivatives undertaken during the
year

8.83o/o

Government Securities 2023

Notional Principal amount of exchange traded

interest rate derivatives outstanding as on March
31.,201.4.

Notional Principal amount of exchange traded

interest rate derivatives outstanding and not
"highly effective" as on March 31^,2014.
Mark-to-Market value of exchange traded interest

rate derivatives outstanding and not "highly

effective" as on March 31,,2014.

F-28

$or--,,tU

W@

Financial Statements for the year ended March 31,2014

L8.5.5.4 Curuency Futures

The Bank had dealt in exchange traded currency forwards(futures) during the financial
year ended March 31., 201.4. As on March 3't,20't4 there were Nil Open Conkacts
(Previous Year: Nil).
L8.5.5.5 Disclosures on risk exposure in derktatiaes

As per RBI Master circular DBOD.No.BP.BC. 9/27.06.m1/2013-1.4 dated )uly

1', 2013, the

following disclosures are being made with respect to risk exposure in derivatives of the Bank:

")

Purpose: The Bank uses Derivatives including Forwards & swaps for various purposes
viz. hedging its currency and interest rate risk in its balance sheet, customer offerings and
proprietary trading. The management of these products and businesses is governed by

the Market Risk Policy, Investment Policy, Derivatives Poliry, Derivatives

Appropriateness Policy, Hedging Policy and ALM poliry.
b)

Structure: The Board of Directors of the Bank have constituted a Board level subcommittee, the Risk Monitoring Committee (RMC) and delegated to it all functions and
responsibilities relating to the risk management policy of the Bank and its supervision
thereof.

c)

As part of prudent business and risk management practice, the Bank has also instifuted a
comprehensive limit and control structure encompassing Value-at-Risk (VAR), Sensitivity

and Greeks, Stop loss

&

credit limits for derivative transactions including a robust

suitability and appropriateness framework. The Bank has an elaborate internal reporting
mechanism providing regular reports to the RMC. Such a structure helps the Bank to
monitor and rnitigate market risk across FX, interest rates, credit risk, operational risk
including reputational risk and legal risk.
d) The Bank has an independent Middle Office, which

is

responsible

for monitoring,

measurement and analysis of derivative related risks, among others. The Bank has a Credit
Risk Management unit which is responsible for setting up counterparty limits and also a

treasury operation unit which is responsible for managing operational aspects of

derivatives control function and settlement of transactions. The Bank is subject to a
concurrent audit for all treasury transactions, including derivatives, a monthly report of
which is periodically submitted to the Audit & Compliance Committee of the Bank.
e)

In addition to the above, the Bank independently evaluates the potential credit exposure
on account of all derivative transactions, wherein risk limits are specified separately for
each product, in terms of both credit exposure and tenor. As mandated by the Credit

Poliry of the Bank, the Bank has instituted an approval structure for

all

treasury/derivative related credit exposures. Wherever necessary, appropriate credit

covenanb are stipulated as trigger events to call for collaterals or terminate a transaction
and contain the risk.

The Bank reports all trading positions to the management on a daily basis. The Bank
revalues its trading position on a daily basis for Management and Information System
(MIS ) and control purposes and records the same in the books of accounts on a monthly
basis.

s)

For derivative contracts in the banking book designated as hedge, the Bank documents at
the inception of the relationshi. p between the hedging instrument and the hedged item, the
risk management objective for undertaking the hedge and ALCO monitors all outstanding
hedges on a periodical basis. Further the Bank's'Hedging Poliry'has stipulated conditions
to ensure that the Hedges entered into are effective..

h)

Refer Note 18.4.6 for accounting policy on derivatives.

r)

The details of derivative transactions as at March 31,2014 and March 31,2013 are given below:

F-29

Financial Statements for the year ended March 31,2014

(? in thoasanils)
Cunencv derivatives

Particular

Sr.

No
Year Ended

March 31,

20t4

Interest rate derivatives

Year
YearEnded
Ended
March 31,
2gl3 March 31,

YearEnded
March 31,
2013

201.l

Derivatives (Notional Principal

Amount)
a) For hedging

77,067,769

b) For trading

78,909,739

7,787,6n 3"5oo,ooo 20,550,000

40,m,8& 4Xi250,562 639,017,736

Marked to market positions2

2,395,89t

Lr3p,027

4,ffir397
3,881593

7,5n,$1,

9,Wn9

8,3M,W

a) Asset (+)

4+O7/,63

2489,0r7

b) Liability (-)

z6ss,Ms

7402+4rr

iii)

Credit exposuref

r")

Likely impact of one percentage change

in interest rate (100*PVm)
(Refer Note 1&2below)

2,349,N6

a) on hedging derivatives

374,%

339,960

7'-246

608,681

b) on hading derivatives

467233

382,3s7

1,826,522

1,010356

Maximum and nininum of 100*PV01

observed during the year (Refer Note
1&2below)
a) on hedging

Maximum
Minimum
b) on trading
Maximum
Minimum

475,991,

38f,W

655,790

5s&%5

374,46

2483r0

77246

586,280

579,34:2

5$,n8

40u,u5

r,09r,521

372947

295,206

91'7,526

684,188

Cunency deriaathxs includes options purcha*d and sold, cross currency interest rate swaps and cunency futures.

Trading portfolio incluiling acmrcd interest.

Mark to Market for oedit exposure includes accnted intetest.

+ lnfurest rate deriaatirvs include lnterest Rate Swaps, forward rate agreements and exchange traded interest ratz
derioatitxs.

Note:
1)

Denotes absolute aalue of loss which the Bnnk could suffer on account of n clnnge in interest rates
by L% which howeoer doesn't capture tlrc off-setting exposures befween interest rate and cuftency
deriantiaes.

2)

PV0L exposures reported aboae mny not necessnily indicnte the inturest rate risk the bank is
exposed to, giuen that PV01- exposures in Inaestmznts kp6ch may ffiet the PV01. reflected abooe)
do not

3)

form part of the abooe table.

Tlu notional pincipal nmount

of

foreign exchange conffacts classifed as trading nt March 3L,

2014 amounted to Rs. 1,097,322,162 thousands( preaious year: Rs. L,460,579,466 thousands). For
tluse trading contracts, at March 31, 2014, marked to mmlcet position utas asset of Rs. 24,404,919
thousands( Previous year: Rs.L7,375,046 thousands) and liability of Rs. 24,082,263 thousands(
Prsaious Year: Rs. 16,538,216 tlausands).T\rc notional principal amount of foreign exchange
contracts classifed as hedging at March 31, 20L4 amounted to Rs. 7,344,33L thousands( preuious

6rll)\
v) r

)'r
(

*t
F-30

'r'./

i{
)A"i

\;x i7

wr
I

Financial Statements for the vear ended March 31,2014

year: Rs. 39,722,630 thousands). Credit exposure on forward exchange contracts at March 31,
2014 was Rs. 4'1.,056,119 thousands (Preaious Year: Rs.39,992,956 thousands).

78.5.6 Asset quality

78. 5.6.7 N on-P erfo rming Ada ances

The details of movement of gross NPAs, net NPAs and provisions during the year ended
March 3'1.,20'1.4 and the year ended March 31.,2013 are given below :

((in
No.
(i)

(ii)

thousanils)

3l,ml4

March 31,n73

0.05%

0.01%

943236

838,589

(b) Additions (Fresh NPAs during the year)

3,986;703

2,437A11.

Subtotal (A)

4,g2g,g3g

3,276,W

March

Particulars
Net NPA to Net Advances
Movement of NPAs (Gross)
(a) Opening balance

Less:

(i) Up-gradations

(ii) Recoveries (excluding recoveries made from

(iir)

upgraded accounts)
(iii) Write-offs
Sub-total @)
Gross NPAs (closing balance) (A-B)
Movement of Net NPAs

207,854

172,61',t

2,229,912

1.,M6,'1.4't

744vr7
3J80,583

2,332,7@

1,749256

943,236

69,908

174,ffi

(b) Additions during the year

2,398,592

835,505

(c) Reductions during the year

2,207,925

940,197

2@,575

69,qJ8

(a) Opening Balance

(d) Closing balance

Movement of provisions for NPAs
(excluding provision on standard assets)

(rq

7,O74,012

873p2J3

663,9{39

1"58&011

1,,ffi1,,W

972,758

1,392,567

(a) Opening balance

(b) Additions during the year

(c)

write off

/ wite back of excess provision

(d) Closing balance

873,328

1,1188^581

The Bank does not have any advances which are outstanding in the books of the
branches, but have been written-off (fully or partially) at Head Office level.
78.5.6.2 N on-P

*f

rming lna e stment s

(7in thousanils)
March 31,2m4

Parficulars

March 37,2073

145,K7

Opening Balance

Additions during the year

Reductions during the year

50,000

745,367_

29,974

Closing Balance

165,393

Total Provision Held

131393

Ratio
The provision coverage ratio of the Bank as at March

'1.45,367

1.45,367

L8.5.6.3 Prooision coaerage

guidelines is 85.10% (previous year 92.59%)

F-31

3'1.,

20'14 computed as

per the,

Financial Statements for the year ended March 31,2014

18.5.6.4 Concentration of NPAs

Exposure (Funded + Non Funded) of the Bank to top four NPA is {718,632 thousands as
at March 31.,2014 (previous year f 558,250 thousands) and the Bank has provided for f
718,632thousands (previous year ? 558,250 thousands) for the same.
78.5.6.5 Sector-zpise NPAs

The details of Sector-wise NPAs as at March 3'1.,201.4 and March 3L, 2013 are given below:

No.
1
2
3
4

of gross NPAs to gross advances in

that sector.
March 31,413
March 3L 2014

Sector

7o

Agriculture & allied activities

Industry (Micro & small, Medium and Large)
Services
Personal loans

F-32

0.03
0.33
0.4

0.01
0.37
0.11

(/)

(a

h,

sbo
hE

9g
0r=
c' l>

Dgl
(!(t:
Qst
d'o

gF

3g

:r.E t

ti
ag

<r

(\l
Ff
ca)

=
I
0.)

d.
li

(g
q.l

EF
*S
E E P"t E R

>E

lr
o
q)
aD9)
()9
IJU
<iG
H=
turv

Ira
s:=
t!q

Fg
('CJ

$-tr
n<F
\o
\o

ro
ao

F-33

E E:

E*E

1,iiEaai
E' tgisi

'igi

iiffEiIFgE
iiH$iEf,iEEEE

HiEEI$EtilEi
gglgi;busEs
EEIiEI$EBtBg

EBgaiiiiEiigr
I

(a

33i,EEgEFgg$t
ti

(\l tO

<t

tO

\d t-

dt

F-34

p0)
-.
q)
b0
0)

co

ri

c{
co
H
(g

o)

fr
(!

>\

e.

tr
o)

k
o

o)
(a

I(J
(6

aD

(s
CJ

c)
e.

F-35

wN

Financial Statements for the year ended March 31,2014

Notes:1. There are

no SME cases which have

been restructured

during the year ended

March 37,2013.

2. There have been no up-gradations of restructured advances during the year ended
March 3'1.,2013.

3. There were no restructured standard advances which ceased to athact higher

provisioning and/or additional risk weight at the year ended March 31, 2013.
4. The outstanding amount and number of borrowers as at March 31., 2013 is after
considering recoveries and sale of assets during the year.

5. The above table pertains to advances and does not include shares of

811,099

thousands in the Amount Outstanding.

6. The provision in the above table includes general loan loss provision and other
provisions held on the reskuctured advances.

78.5.7 Financial assets

solil to

Securitization/Reconstruction Company

Reconstruction

fo,

Asset

Details of Financial assets sold to Securitization/Reconstruction Company for the year ended
March 3'1,,20'1,4 are as follows(? in thousands)
Particulars

Year Ended

Year Ended

March 31,

March 31,

Nl4

2Ut3

No. ofaccounb
ii) Aggregate value (net of provisions) of accounts sold to SC / RC

1,885,843

340,965

iii) Aggregate consideration (includes Net Book Value of Security

Receipts of 71164,199 thousands (previous year{277,637

1,953,fi)o

t)

thousands))
iv)

Additional consideration realized in respect of accounb

transferred in earlier vears

v)

(loss) over net book value*

64SZ

*As per the extant RBI guidelines, the Bank has not recognized the gains in the
financial statements and has recorded the Security Receipts at Net Book Value
(NBV).

18.5.8 N on-p etforming financial assets purchaseil/ solil frord to other b ank
The Bank has not purchased/sold any non performing financial assets from/to bank
during the year ended March 31, 201.4 and March 31,2073.

L8.5.9 Proaisions for Standaril Assets

Provision on standard advances is 74,153,204 thousands and {2,655,326 thousands as at
March 37,2074 and March 31,,2013 respectively.

f'T
G#i
F-36

wN

Financial Statements for the year ended March 31,20L4

78.5.70 Business ratios

As at March
37,2014

As at March

i) Interest income as a percentage to working fundst

9.92%

10.04'/r

ii) Noninterest income as a percentage to working funds1

iii) Operating profit as a percentage to working fundst
iv) Refurn on assetsl

1.Tr%

1..52'/"

2.67%

2.59%

1.5r%

1,.57'/"

151810

777,419

2,M5

2,102

Business Ratios

v) Business (deposits + net advances) per employee

(f

'OOO;z

vi) Profit per employee (-'OOO;z

31,20'.,3

finils represents tlrc aoerage of total assets ns reported in Rehtnr Form X to RBI under Sectiott 27 of the
Banking Regilation Act, 1949.
2 For the purpox of computation ofbusiness per employee (deposits phts adaances), interbank deposits haae been excluded
and aoerage employees hroe been considered.
7

78.5.71. A

Working

ss

et Li ab

ility

Man a gem ent

In compiling the information of maturity pattern estimates and assumptions have

been made by the management and have been relied upon by the auditors. For
Invesfinent Securities, the Bank buckets HFT porffolio and related depreciation in
29-90 days bucket or actual maturity whichever is earlier.
Specified assets and liabilities as at March

3'1,,20'1,4

((
Maturity Buckets

Loans &
Advances*#

lnvestment

inthousanils)

Deposits Borrowings

Securities

t,*,7

1 day

2,038,182

2 days to 7 days

9,825,77"1

8 days to 14 days

5,30n496

15 days to 28 days

2,362,994

'1,150,296

41,90[,56

9,695,158

29 days to 3 months

70,227,708

6,918,020

117,U5,681.

77,443,533

Over3to6months

3't,407,294

3,765,540

1U,913,352

27,854,883

Over 6 to 12 months
Over 1 year to 3 years
Over 3 years to 5 years
Over 5 years

84,4:8,727

70,457,610

773,757,q)5

18447,712

128,890,741,

68,M9,943

TOTAL

10,1.61.,393

33,860,159
26,722,761.

52,519,M2

1,47,500,815

92,875,8'1,4

'tM,M5,577

74,349,894

225,286,401.

6,692,N3

556,329,6?2

40f,w3,524 741,920,153

34,26730;
10,3U,371

26,963,7M
5,&1.,775

68,6m,386
213,142,952

Behaaioral study for bucketing the Cash credit / ouerdraft facilities into aaious tenor
for FY13 was applied for FY14, the amount in "ooer 3 years bucket" for Fy 2014 would haae

# Had the
buckets

been lower by Rs. 62,827,255 thousands.

6-AD

F-37

Financial Statements for the year ended March 31, 2014

Specified assets and liabilities as at March 31',2013

((
Maturity Buckets

&

Investment

Advances*

Securities

Loans

in thoasands)

Deposits

1 day

2,277,941

5,968,49L

2 days to 7 days

6,87,905

45,289,832

8 days to 14 days

6,245,494

%8,4N

Borrowings

62,347,081.

35,0E7,t#7

z671A2S

34,129,892

12926,26

128,802454

15,102,693

15 days to 2{t days

\0,089,421,

29 days to 3 months

43,M9,022

43,768,676

Over3to6months

374%,803

79475,685

98,1.47,lW

24,5W,ffi

Over 6 to 12 months

57,790,708

37,6944475

9Ze0,w

10,020,585

1.4,7n,M8

Over L year to 3 years

Over 3 years to 5 years
Over 5 years

193,W3,925

56,155,22l

35,536,058

6L,576,756

85,(n4308

89478,067

2,463,327

58,3S3,688

193,893,769

4,465,937

&,389,407

TOTAL

469,995,663

429,760,421

669,555,852

209,22L472

*For the
Wrpose of disclosing the mafunty pattirn, loan and adoances that hrae been subject to risk
participation vide Inter-Bank Participation Crrtifcates (lBPCs') haae been classified in the maturity
bucket corresponding to the original mafuity of such loans and adoances gross of any risk
participation. Correspondingly, the balnnes haae been reporteil rct of IBPC maturities falling due in
the respe c tiae bu ckets.

Foreign currency denominated assets and liabilities as at March 31',201,4:

(7in thousands)
Maturity Buckets

Assets

Liabilities

lday

9,il6,533

49,693

2 days to 7 days

3,779,335
433,X29

77,U9
174533

15 days to 28 days

1,795,867

2,ffi5,997

29 days to 3 months

9,M6,W0

5,W0,420

Over3to6months

4828,050

!9823,050

8 days to L4 days

Over 6 to 12 months
Over 1 year to 3 years
Over 3 years to 5 years
Over 5 years

TOTAL

727,67

6,U73,550

7,846,872

14495,Xi8

428,480

82M,323

180,(n

13,942,711

31,372,573

70414,8U

ry'^\
Q;r"4

F-38

wr

Financial Statements fot the vear ended March 31,2014

Foreign currency denominated assets and liabilities as at March 3'l',2013:

(? inthousands)
Mafurity Buckets

Assets

lday

5,458,W
2,n6,506

2 days to 7 days

Liabilities
34,945
1.,699,28't

413,248

533,595

15 days to 28 days

2782,040

7,067,259

29 days to 3 months

8,269,046

6,419,]|0

Over3to6months

5,692386

18,16r,3ffi

8 days to 14 days

1,885,608

Over 6 to 12 months
Over 1 year to 3 years

9,315,76
175,T3

Over 3 years to 5 years

Over 5 years

TOTAL

g4,w

9,606,4W

24,947,1M

48,W3,616

L8.5.12 Exposures

The Bank has lending to sectors, which are sensitive to asset price fluctuations. Such
sectors include capital market and real estate.
18.5.12.1 Exposure

to ReaI Estate Sector

The exposure, representing the higher of funded and non-funded limits sanctioned or
outstanding to real estate sector, is given in the table below:
(7 inthousands)

Sr.

As at
March 31,2014

Particulars

No.

i)

As at
March 31,2013

Direct exposwe
4,522,225

3,255,06

Commercial Real Estate*

66,014,668

57,579,M3

of total Commercial Real Estatz outstaniling as

38,395,1.18

33,592,579

2285,736

3,040,0%_

23,6n,9L5

19,958,530

96,443,il4

83,n3,495

Residential Mortgages

adoances

ii)

Investnents in Mortgage Backed Securities

(MBS) and other securitized exposures
- Residential
- Commercial Real Estate
Indirect exposwe
Fund based and non fund based exposures
on National Housing Board and Housing
Finance Companies

TOTAL
*Commercial renl estate exposure classification is based
4U08.12.01.5/2009-L0 dnted Septemtur 9, 2009.

on RBI circular DBOD.BP.BC.No,

it'*-q

F-39

Financial Statements for the year ended March 31, 2014

78.5.72.2

Exposure to Capital Market

The exposure representing the higher of funded and non-funded limits sanctioned or
outstanding to capital market sector is given in the table below:

(( ln thousands)

Sr.
i)

As at

As at

Particulars

March31,2014 March 91,2073

No.

direct invesbnent

in equrty shates, convertible

21938

bonds, convertible debentures and units of equrty-

ii)

iii)
it)

oriented mutual funds the corpus of which is not

exclusively invested in corporate deb!
advances against shares / bonds / debentures or
other securities or on clean basis to individuals for
inveshent in shares (including IPOs / ESOPs),
convertible bondt convertible debentures, and
units of equity-oriented mutual funds;
advances for any other purposes where shares or
convertible bonds or convertible debentures or
units of equity oriented mutual funds are taken as
primary security;
advances for any other purposes to the extent
secured by the collateral security of shares or
convertible bonds or convertible debentures or
units of equity oriented mutual funds i.e. where

the primary security other than

shares

20,724

26,617

6A35,238

8,357,722

3,295,7tI

3,595,750

convertible bonds / convertible debentures /

units of equity oriented mutual funds 'does not

fully cover the advances;

v)
vi)

secured and unsecured advances to stockbrokers

and guarantees issued on behalf of stockbrokers
and market makers;
loans sanctioned
corporates against the
security of shares bonds debentures or other
securities or on clean basis for meeting promoterrs

to

2750,w

contribution to the equity of new companies in

anticipation of raising resources;

vii)

to companies
/ issues;

bridge loans
equity flows

against expected

viii)

underwriting commitnrents taken

ix)
x)

all

up by

540,(X)0

the

banks in respect of primary issue of shares or

convertible bonds or convertible debentures or
units of equity oriented mutual funds;
financing to stockbrokers for margin trading
exposures

to Venture Capital Funds (both

a42736

96,726

10,555,777

L4,825,6L6

registered and unregistered)

Total Exposure to Capital Market

Capital marlet exposure is reported in line with para 2.3 of RBI's Master Grcular on
Exposure N orms dnte d l uly 1, 201, 3 (D B OD .N o.D ir.B C.L3/13.0 3.0 0801 3 -14).
*Pertains to loans gtaen to Indian company
for acquisition of shares of nn infrastructure
company.

F-40

wV'r$R

Financial Statements for the vear ended March 31,2014

18.5.1.2.3 Risk Category wise Country Exposare

As per the extant RBI guidelines, the country exposure of the Bank is categorised into
various risk categories listed in the following table. As at March 31., 201.4 and March
31.,2013, the Bank's funded exposure to any individual counky did not exceed 1% of
the total funded asseb of the Bank:
(7 In thousanils)
Risk Category

Exposure

(net) Provision
as

at

March31,2014

as at

March3Lml4

41,8n,377
4,773,217
54,720

Insignfficant

Low
Moderately Low
Moderate
Moderate High

held
-

(net)

Provision held
as at
March31,2013 March31,2013
Exposure

as

at

37,7%,676
4,152,517
203,678

,01

High

VeryHigh
TOTAL

46,645,605

36,Xffi,877

18.5.72.4 Details of Single Borrower Limit (SBL) anil Group Borrouter Limit (GBL)
31,, 2074, the Bank has complied with the Reserve
Bank of India guidelines on single borrower and borrower goup limit. As per the
exposure limits permitted under the extant RBI regulation, the Bank, with the
approval of the Board of Directors, can enhance exposure to a single borrower or
borrower group by a further 5 percent of capital funds.

During the year ended March

31., 20'1.4, with the prior approval of the Board of

Directors, the Bank sanctioned enhancement in single borrower limit for Sesa
Sterlite Ltd from 15o/" of Capital Funds to 20% of Capital Funds. At March 31,
20'I.,4, the exposure to Sesa Sterlite Ltd as a percentage of capital funds as of March
37,2014was 17.0%.

During the year ended March

During the year ended March 3't, 2014, with the prior approval of the Board of
Directors, the Bank sanctioned enhancement in group borrower linit for Tata
Group from 50% of Capital Funds to 55% of Capital Funds. At March 31, 2014, the
exposnre to Tata Group as a percentage of capital funds as of March 31,2014 was
40.7%.
31., 2013, the Bank has complied with the Reserve
Bank of India guidelines on single borrower and borrower group limit. As per the
exposure limits permitted under the extant RBI regulation, the Bank, with the
approval of the Board of Directors, can enhance exposure to a single borrower or
borrower group by a further 5 percent of capital funds. During the year ended
March 31, 2013, with the prior approval of the Board of Directors, the Bank
exceeded the single borrower limit of 15o/o of capital funds to Tata Steel and
Hindalco Industries. At March 31.,2013, the exposure to Tata Steel as a percentage
of capital funds was 11.68% and exposure to Hindalco lndustries as a percentage
of capital funds was 5.32%.

During the year ended March

;:'*s
F-41

w@

Financial Statements for the vear ended March 3L Z)14

L8.6

Miscellaneous

18.6.L lncomeTaxes
Provisions made for Income Tax during the year

((

For the year ended

March 31,2013

Current income tax expense

7,7841L8

6,677,634

Deferred income tax benefit

(699,103)

(427,124)

7,085,475

6,250,510

TOTAL

78.6.2

in thoasanils)

For the year ended

March 31,2014

Disclosure of penalties imposeilby RBI

Pursuant to the show cause notice dated June 7,2013, RBI has levied penalty of f,2Q000
thousand in Iuly 2013 under Section 47 A (1) (c ) read with section 46 (4) (i) of the
Banking Regulation Act ,1949 for non compliance of the RBI inshuction on Know Your
Customer/Anti Money Laundering. Further, hr terms of RBI circular reference no.
IDMD.DOD.I7/11..0'1..01. (B) 201C11 dated |uly'1.4,2010, RBI has levied penalty of f500
thousand on fanuary 3,201,4 on account of instance of Subsidiary General Ledger (SGL)
bounce due to insufficient balance in the SGL account on December 26,2013.
No penalty has been imposed by RBI on the Bank during the financial year ended March
31,,2013.

1,8.6.3

E ees/

Remunetation rcceioeil from bancassurance

Bank has earned (237,572 thousands from bancassur.ulce business during year ended
March 3L,2014 (previous year: 200,049 thousands).

L8.6.4

Concentration of

D ep o

sits

the deposits of top 20 depositors aggregated to ( 1M,528,126

thousands (previous year: f 100,431,510 thousands) (excluding certificate of deposits,
which are tradable instruments), representingl4.@% ftrrevious year:75.07%) of the total

As at March 3't,

20'1.4,

deposit base.
78.6.5

Concmtration ol Ailoances
31., 201.4 the top 20 advances aggregated to i 200,355,130 thousands
year
f 14Q002,772 thousau:rds), representing 1.6.19'/' (previous year 13.38%) of
ft>revious
the total advances. For this purpose, advance is computed as per definition of Credit

As at March

Exposure in

RBI

Master

on

Circular

DBOD.No.Dir.BC.13l13.03.W / 2013-L4 dated |uly

1.,

Exposure

Norms

2013.

78.6.6 Concentration of Exposures

As at March 31., 2074 the top 20 exposures aggregated to ? 229,680,4M thousands

ftrrevious year 7193,299,611 thousands), representing 16.10'/. (previous year 15.55%) of

F-42

Financial Statements for the year ended March 31,2014

the total exposures. Exposure is computed as per definition of Credit and Inveshent
Exposure in
RBI Master Circular on Exposure Norms
DBOD. No.Dir.BC.13l 13. 03 .N / 2013-L4 dated July 1', 2013.

18.6.7

Oaerseas Assets, NPAs and Rcaenue

31,, 201,4 and March 31, 2013, the Bank has not earned any
revenue from overseas branches. The Bank does not have any assets or NPA from
overseas branches as at March 3L,20'l'4and March 31,,2013.

For the year ended March

18.6.8

Sponsored SPVs

The Bank has not sponsored any SPV and hence there is no consolidation in
Bank's books.

78.7.7 Staff retiremmt bmefits

The following table sets out the funded status of the Gratuity Plan and the amounts
recognized in the Bank's financial statemenb as of March 31.,20'l.4and March 31',2013:
Changes in present value of Obligations

(7

Present Value of Obligation at the beginning of the

inthousands)

As at March
37,2n74

As at March

2@177

180,E37

37,2t13

year
19,9E7

1.4,971.

Current Service Coot

Past Service Cost

1M,376

Lm,120

Benefis Paid
Actuarial (gain)/loss on Obligation
Present Value of Obligation at the end of the year

(77AAl

(13,311 )

(s7A72)

(11600 )

375,654

264,117

Interest Cost

Changes in the fair value of planned assets:

(?

Fair value of plan assets at the beginning of the year

inthousands)

For the year ended

March 3L 2014

Fot the year ended

March 31,2013

32304

17,591

83

2,M9

Adjustment to Opening Balance

Expected return on plan assets
Contributions

9,127

2Aw

150,000

25,955

Benefits paid

(77424)

(13,311 )

(5,6961

(2,403)

76f,394

32,3M

Actuarial gain/( loss) on planned assets

Fair value of planned assets at the end of the period

f'R
Ut'.'d
F-43

wd

Financial Statements for the vear ended March 31,201.4

Fair value of planned assets:

((

in thousands)

For the year ended For the year ended

March 31,2014
March 31,2013
Fair value of plan assets at the beginning of the year
Adjustnent to Opening Balance
Actual return on plan assets

32,3M

17,59L

83

z069

3,431

Contributions

150,000

25,955

Benefits paid

(77A24)

(13,311)

Fair value of planned assets at the end of the period

L68,394

Net gratuity cost for the year ended March

3'1.,

2014 and March

3'1.,

323A4

2013 comprises the

following components:

({

Current Service Cost

For the year ended

March 31,2014

For the year ended

106,376

70'l..,120

March 31,2013

a9,gg8

741970

p,12n

(2,403\

(s1'x75)

$7,7e7)

65"531

96An

Interest Cost
Expected Return on plan assets

Net Actuarial gain recognized in the year

Past Service Cost
Expenses recognized

in thousanils)

Experience History:

(? in thousanils)

ended Forthe year ended

2014 March 3L 2013

For the year

March 3L

(Gain)/Loss

on obligation due to

assumption
Experience (Gain)/Loss on obligation
Actuarial Gain/(Loss) on planned assets

change

$274n

11,80s

5,335

Q7,4M)

('oso)

e,40,3)

The assumptions used in accounting for the gratuity plan are set out below:
For the year ended

For the year ended

March 31,2014

March 31,2013

Discount Rate

8.93o/o

7.83%

Expected Return on Plan Assets

9.Eo/o

Mortality
Future Salary Increases

9.'25%

L.LC (1994-%)

L.r.c.(l99+%)

Ultimate Table

UltimateTable

r2o/oV.a,

L5"/" p.a.

Disability

Attrition

73o/o

Retirement

- 25o/o
60

yrs

207"
60

yrs

Actuarial assumption on salary increase also takes into consideration the inflatioru
seniority, promotion and other relevant factors.

:trq

F-44

ry

Financial Statements for the year ended March 31,2014

1.8.7.3 SegmentResults
Pursuant to the guidelines issued by RBI on ,4917 (Segment Reporting) - Enhancement
of Disclosures dated April 18, 2007, effectle from period ending March 31, 2008, the
following business segments have been reported.

Treasury Includes investments, all financial markets activities undertaken on behalf

of the Bank's customers, proprietary trading, maintenance of reserve requirements
and resource mobilisation from other banks and financial institutions.

Corporate/Wholesale Banking: Includes lending, deposit taking and other services

offered to corporate customers.

Retail Bankin$ Includes lending, deposit taking and other services offered to retail
customers.

o Other Banking Operations:

Includes para banking activities tike third party

product distributioru merchant banking etc.

Segmental results for the year ended March 31.,2014 are set out below:
Business Segments

Treasur5r

Corporate/
Wholesale

Retail
Banking

Banking

(?

in thoasanils)

Other
Banking

Total

Operations

Segment Revenue

112985,9&

Less: Inter-segment

3,974,802

Revenue net of inter-

116,960,765

segment
Result
Unallocated Expenses
Operating Profit
Income Taxes
Extra-ordinary
Profit/(Loss)
Net Profit

36,184,0m
(12,921.,203)
23,262,817

2085,015

16,1n,802

Other Information:
Segment assets

512,W,M9 576,U5,M9

52,459,M0

28,247

Unallocated assets

'!.,ML,Z77,1.B1

8,380,714

Total assets
'1,w,157,8W
Segurent liabilities

232,245,520

Unallocated liabilities

5b,399,53't

197,129,929

3,8M,822

939,579,802
150,578,W7

Total liabilities
1.,W,157,899

F-45

mzm

Financial Statements for the year ended March 31,2014

Segmental results for the year ended March 3-1.,2013 are set out below:

({

in thousands)

Business Segments

Segment Revenue

94,597,sqJ
887,373

Less: Inter-segment

Revenue net of intersegment

Result

95AU,963
30,022,627
(10,765,304)

Unallocated Expenses
Operating Profit

19,257,377
6,250,510_

Income Taxes

Extra-ordinary

Profit/(Loss)
Net Profit

13,w6,807

Other Information:
Segrrent assets

506,159,088 433,273,170

45,626,'80

98s,O73,1.49

5,968,1'E

Unallocated assets

Total assets
Segment liabilities
Unallocated liabilities

991,0/41^274

Total liabilities

997,047274

855,459,521
735,587,753

Notes for segment reporting

L.

The business of the Bank is concentrated

in lndia. Accordingly, geographical segment results haae not

been reported.

2. In computing the abooe information, certain estimates

and assumptions haae been made by thz

Management and hnae been relied upon W the auditors.

3.

lncome, expense, assets and liabilities haoe been either specifcally identifed with indiaidual segment
or allocated to segments on a systematic basis or classified as unallocated.

4.

fxed assets, non treasury related bank balances at branches,

Tier II instruments, lPDl instruments and releoant interest and

Fixed assets and related depreciation on

Bills payable, Tax related accounts,

rent expenses which cannot be allocated to any segments haoe been classified as unallocateil. Thc
unallocated liabilities include Share Capital and Reseraes and Surplus.

5.

Inter-segment transactions hwe been generally based on transfer

picing

measules as determined by

tlu Management.

78.7.4 Relateil Party Disclosares

The Bank has transactions with its related parties comprising of subsidiaV, key
management personnel and the relative of key management personnel

a)

As per AS 18 "Related Party Disclosures", prescribed by the Companies (Accounting

Standards) Rules, 2006, the Bank's related parties for the year ended March 3'1.,20'1.4
are disclosed below:

Subsidiary

Yes Securities (India)

Limited.

Individuals having significant influence:

F-46

wEErc

Financial Statements for the year ended March 31,2014

Mr. Rana Kapoor, Managing Director & CEO

Key Management Personnel (KMP') (Whole time Director)

Mr. Rana Kapoor, Managing Director & CEO

The following represents the significant hansactions between the Bank and such
related parties including relatives of above mentioned KMP during the year ended
March 3'1.,2014:

(? in thousands)
Items/ Related

Parfy
Category

Subsidia Maximum Wholetimedirectors Maximum Relativesof whole

ries Balance during /individual having Balance time directors/
the year significant influence duringthe individual having
year significant influence

Deposits
Invesknent
Interestpaid

65,722
775,WO
s,lEn
Reimbursementof, 327

123,192

#
#

#
#

Maximum
Balance

dudngthe

4,061*

year
69,6K

775,WO

5,216

Cost incurred

Dividend

#
#
* Represents outstanding as of March 3L, 2014
# ln Financial Year 2013-14 there was only one related party in the said category, hence the
Bank hns not disclosed the details of transactions in accordance with circular issued by the
RBI on March 29, 2003 "Guidance on compliance with the accounting standards by banks".

paid

b)

As per AS 1.8 "Related Party Disclosures", prescribed by the Companies (Accounting

Standards) Rules, 2006, the Bank's related parties for the year ended March 31, 201-3
are disclosed below:

Subsidiary

Yes Securities (India)

Limited.

Individuals having significant influence:

Mr. Rana Kapoor, Managing Director & CEO

Key Management Personnel (KMP') (Whole time Director)

Mr. Rana Kapoor, Managing Director & CEO

The following represents the significant transactions between the Bank and such
related parties including relatives of above mentioned KMP during the year ended
March 31,2013:

(? in thousanils)

ffi

Items/
Subsidiaries
Whole time Maximum Relatives of whole Maximum
Related Party
directors/ Balance time directors/ Balance
Category
individualhaving duringthe individualhaving duringthe
year
significant
significant
year
influence
influence
Deposits
500
#
#
67,024* 69,952
lnvestnnent
500
Interestpaid
#
#
7,760
Receivingof
#
#
services

Dividendpaid

* Represents outstanding

#
as of

March

31., 201.3

# ln Financial Year 2012-1,3 there was only one related party in the said category, hence the Bankhas
not disclosed the details of transactions in accordance with cirq,ilar issued by the RBI on March 29,
2003 "Guidance on compliance

with

the accounting standards by banks".

F-47

rym
/

Financial Statements for the year ended March 31,2014

18.7.5 Operating

Leases

Lease payments recognized in the profit and loss account for the year ended
March 3'1, 20'l,4 w as 7 1.,97 6,918 thousands (Previous year: ?1.,550,7 42 thousands).

As at March 37, 2014 and March 3'1,, 2013 the Bank had certain non-cancellable
outsourcing contracts for information technology assets and branches on rent. The
future minimum lease obligations against the same were

as

follows:

(? in thousanils)
March 37,2014

As at
March 3l,m1,3

7,W'065

1,5W,924

7,599,3&

6,?39,102

3,332,577

1.,875,515

tL7ffi,W6

9,624,547

As at

Lease obligations

Not later than one year

Later than one year and not later than five years
Iater than five years

TOTAL

The Bank does not have any provisions relating to contingent rent.

The terms of renewal/purchase options and escalation clauses are those normally
prevalent in similar agreements. There are no undue restrictions or onerous clauses in
the agreements.

L8.7.6 Earnings Per Share ('EPS)

The Bank reports basic and diluted earnings per equity share in accordance with ,{920,

"Earnings Per Share". The dilutive impact is mainly due to stock options granted to
employees by the Bank.
The computation of earnings per share is given below:
Particulars

Year ended

Year ended

March 37,2m4

March 31,2073

sffi,762478

356,081,726

16177,802

13,W6,ffi7

4.92

36.53

3@,763,008

365,850,588

Basic (annualised)

Weighted average no. of equity shares outstanding

Net profit

(loss)

(fr'000)

Basic earnings per share

(f

Diluted (annualised)
Weighted average no. of equity shares outstanding
Net profit

(loss)

(7

0m)

Diluted eamings per share (f

Nominal value per share

(-

F-48

t6lT7,8O2

73,M,807

4.35

35.55

10.00

10.00

Financial Statements for the vear ended March 31,2014

nv6[sn

L8.7.7 ESOPdisclosures
Statutory Disclosures Regarding loining Stock Option Scheme:
The Bank has Five Employee Stock Option Schemes viz.

o
o
'.
o
.

Joining Stock Option Plan I $SOP D ,

Joining Employee Stock Option Plan II IESOP tr),
Joining Employee Stock Option Plan III (JESOP UI),
YBL ESOP (consisting of }ESOP IV and PESOP I )
YBL JESOP

V/

PESOP

II (consisting IESOP V, PESOP II and PESOP II -2010)

The schemes include provisions for grant of options to eligible employees of the Bank and its
subsidiaries. All the aforesaid schemes have been approved by the Board Remuneration
Committee and the Board of Directors and were also approved by the members of the Bank. All
these schemes are administered by the Board Remuneration Committee.
JSOP I was for employees joining the Bank on or before March 37, 2005. All the grants under
JSOP I were made before the IPO of the Bank. IESOP II and IESOP III were in force for

enrployees joining the Bank up to March 37,2006 and March 37,2007 respectively.
YBL JESOP V is in force for employees joining the Bank from tine to time. Under IESOP V,50%
options vest takes place at the end of three years and remaining 50% at the end of five years
from the date of Grant.
PESOP I, PESOP II and PESOP II - 2010 are Performance Stock Option Plans. Under PESOP I,
25% of the options granted would vest at the end of each year from the date of grant. Under
PESOP II,30% of the granted options vest at the end of fust year,30% vest at the end of second

year and balance 40o/o vest at the end of third year. Under YBL PESOP II - 2070,30% of the
granted optioru vest at the end of the third year, 30% vest at the end of the fourth year and
balance 40% vest at the end of the

fifth year.

Further, grants under PESOP II had been discontinued with effect from January 20,2010.
Options under all the aforesaid plans are granted for a term of 10 years (inclusive of the vesting
period) and are settled with equity shares being allotted to the beneficiary upon exercise.

F-49

@N

Financial Statements for the vear ended March 31,2014

A summary of the status of the Bank's stock option plans as on March 31.,2014 is set out below:

Particulars

JSOP-I

Openingbalance
Add:

Option granted
during the year

Less:

Optionsexercised
during the year

Less:

Options lapsed
dwing the year

J ESOP

260,000

g,750

rr

JESOP

-rII

lEsoP rv

283,s0O 50300
7,700

YBLPESOPI YBLPESOPII'ESOPV

735,02s

23,7N 406,m2

2010

946250

23 2N 5,0s9330

1988,000

3:750

- 7,0m,ffi0

3,373,sOO

35&025

275,ffiO

570,92!t 377,075

400

Closingbalance 251250

PESOPII

7m,60

329,613

59L,575

August

August Sep18,2008 Sep18,

2m8
29,N7

380,150

Itrs,m0

7,8rg27s S,M4r7s r4r%350

Approvedby
shareholdets on

granted Oct27, Aptil25,

2o{J/l 2(ns
andexercised

Options

Inly24,
20(}5

29,20n7

Sepl&
2008

during the year

Options granted
and eligible for
exercising and
exercised during
the year

Weighted average
share price on the
date of options

10.00

83.01

91.68

15635

163.43

129.M 297.69

269.30

exercised during
the year

Weighted average

remaining
contractuallife

fi7

of

816

options
outstanding (days)

The Bank has charged Nil, being the intrinsic value of the stock options granted for the year ended
March 31.,20't4. Had the Bank adopted the Fair Value method (based on Black- Scholes pricing model),
for pricing and accounting of options, net profit after tax would have been lower by 7 341,904
tlrousands, the basic earnings per share would have been ?43.97 per share instead of ?44.92 per share;
and diluted earnings per share would have been 743.42 per share instead of 744.35 per share.

re\)
'+{
21

Q';

F-50

Financial Statements for the year ended March 31,2014

A summary of the status of the Bank's stock option plans as on March 3L,2013 is set out
below:

JSOP-r JESOP-II

Particulars

JESOP-m

JESOPry

YBL PESOP

YBL PESOPU

JESOPV

PESOPU
2010

Opening
balance

267,500

30/,,7ffi

Add: Siongranted

43t650

r,487;79s

1825.400

5,639375

during the year

5,34%0

7493,s00

1,338500

3135^500

Less: @ions

exercised during
the year

1500

27,2N

Less: Sions

379350

lapsed
during the year
Closing balance

2ffi,W

Approved by

Oct27,
2M

shareholders on
Options granted
and exercised
during the year

283500
/rpriJ,2J.,
2005

50300
lily2il,
2M

55s,870

852,900

3,274,875

96,W

26,?50

41300

73s,02s

94f.,80

23n,2n0

August

August

Sep 18,2{n8

29,2N7

29,2UJ7

20551

17LM

54

91

4/49170

1,152,950
5,059"330

941,000

9,988,000

Sep18,
zn8

Sep18,

Options granted
and eligible for
exercising and
exercised during
the year

10

Weighted

10055

121.35

72235

184.13

avetage share
price on the date

of opions
exercised during
the year

Weighted
average

remaining
conhactual
of options

life

outstanding
(days)

The Bank has charged Nil, being the intrinsic value of the stock options granted for the
year ended March 3't, 2013. Had the Bank adopted the Fair Value method (based on
Black- Scholes pricing model), for pricing and accounting of options, net profit after tax
would have been lower by (292,207 thousands, the basic earnings per share would have
been i35.71 per share instead of i36.53 per share; and diluted eamings per share would
have been ?34.75 per share instead of f,35.55 per share.

F-51

2008

Financial Statements for the year ended March 3L,2014

The following assumptions have been made for computation of the fair value during the
year ended March 31,2014and March 3'1,2013.

March 3L 2014

March 3L,201.3

4.96yo-9.71"/o

4.96"/o-8.83To

Risk free interest rate

Expected life

1.5 yrs - 7.5

Expected volatility

25.010/.-82.76y,

29.210/o42.76"/o

Expected dividends

1..13% -1.50./.

1..73y"-'l..flyo

yrs

yrs - 7.5 yrs

1.5

hr computing the above informatiorL certain estimates and assumptions have been
made by the Management.

1,8.7.8 DefeneilTaxation

of 7

2,493,325 thousands as at March 3'1,,20't4 and a 1,794,222

is included under other assets and the corresponding
credits have been takm to the profit and loss account.

The deferred tax asset

thousands as at March

31,, 2013,

The components that give rise to the deferred tax asset included in the balance sheet are
as follows:

(7 in thousanils)
Particulars

As at
March 31,2014

As at
March 31, Z)13

773,554

148,167

10t080

132660

Dderred tax asset

Depreciation
Provision for gratuity and unutilized leave
Provision for Non Performing Assets
Amortization of premium on HTM securities
Provision for standard advances
Other Provisions
Deferred tax asset

6,7L4

6,409

380,91:7

280,978

7,y7,778

871,557

479,282

354,457

44e3325

1.,794,222

78.7.9 Prcoisions and Contingencies

The breakup of provisions of the Bank for the year ended March
March 3L,2013 are givenbelow:

({

March 31,2o13

2085,015

6,250,5\O

8@,M9

(29,970)

TOTAL

interest on Restructureil Assets.

made against

otlur

in thousands)

March 31,2014
Provision for taxation
Provision for investments
Provision for standard advances
Provision made/write off for non performing advances
Others Provisions*

* Otler Prwisions includes prouision

3'1., 20'1.4 and

assets

r,u8g78

76,399

1,358,169

'l.,,455,n5

779,6!5

(32,L63)

70,701,856

8,470,051

and ywision for sacrifrce of

CzPlt

F-52

wN

Financial Statements for the year ended March 31,2014

Other Disclosures

1.8.8

78.8.1- Disclosure on Remuneration

a.

lnformation relating to the composition and mandate of the Remuneration Committee.The Board of Directors of the Bank through its Board Remuneration Committee

(BRC) shall exercise oversight & effective governance over the framing and
implementing of the Compensation policy. The BRC shall comprise a minimum
of 3 Board members, of which two would be independent directors, besides the
MD and CEO.
Composition of the Board Remuneration Committee (BRC) of the Bank as on
March 31,2014is as follows:

o
o
o

LtGen (Retd.) Mukesh Sabharwal

Mr. DiwanArunNanda - Chairman
Mr. Rana Kapoor

The roles and responsibilities of the Remuneration Committee are as under-

to review the Bank's overall Compensation Structure and related policies with a
view to attract, motivate and retain employees and review compensation levels
vis-i-vis other banks and the industry in genera|
to determine the Bank's policies on remuneration packages payable to the
Directors including performance/achievement bonus, perquisites, retirals, sitting
fee, etc;

consider grant of stock options to employees and administer and supewise the
Employee Stock Option Plans with particular reference to:
o determination of quantum of options to be granted;
o determination of grant price, vesting schedule, exercise period, etc
o procedure for making fair and reasonable adjustments to the number of
options granted in case of a corporate action such as rights issues, bonus,

splif mergers, etc.

conditions under which options would lapse in
share

o
o
o

case

of termination due to

mis-conducU
procedure for cashless exercise of options, if any;

to frame suitable policies to ensure compliance with all applicable laws,

regulations.
Perform any other act duty as stipulated by the Companies Acf Reserve Bank of
India, Securities & Exchange Board of India, Stock Exchanges, and any other
regulatory authority, as prescribed from time to time.
lnformation relating to the design and structure of remuneration processes and the fuy
features and objectiaes of remuneration policy-

The Bank has framed Compensation and benefit policy based on the guidelines
contained in the RBI circular DBOD No.BC.72/29.67.007/2011-12 dated ]anuary
13,2012 which is approved by the Board Remuneration committee on fanuary 7,
2013. The remuneration of MD&CEO/Wholetime Directors will be in accordance
with the above mentioned circular and shall be reviewed basis RBI guidelines
issued from time to time and approved by BRC before obtaining Regulatory
approvals.
The compensation philosophy of the Bank is aligned to the organizational values

aimed at encouraging Professional Entrepreneurship and reinforcing a shong

culture promoting meritocracy, performance, potential and prudent risk taking.
F-53

Financial Statements for the vear ended March 31.2014

wN

The Bank's Remuneration policy is to position its pay structure competitively in

relation to the market to be able to attract and retain critical talent. The
compensation strategy clearly endeavours to differentiate performance
significantly and link the same with quality and quantum of rewards. The Bank
also strives to create long term wealth creation opportunities through stock

option schemes.

Human Capital Management shall review the policy annually or as required,

based on changes in statutory, regulatory requirements and industry practices
pertaining to Compensation and Benefits.

c.

Description of tlrc urays in uthich current and future risl<s are tal<en into account in tlu
remuneration pr@esses. It should include tle nature nnil tyry of tlu key me(Eures useil to
take account of tlrcse

isks

The broad factors taken into account for the Annual Review /revision of Fixed
Compensation (TCC) & Performance Bonus are:
1.
Individual performance based on the Annual Performance Review (APR)

2.

process of the Bank.

Business Unit performance in terms of financial outcomes, productivity,

etc.

3.
4.
5.

Consideration of all types of risk factors and shall be symmetrical with

risk outcomes as well as sensitive to the time horizon of risk.

Profitability of the Bank.

Indusky Benchmarking and consideration towards cost
adjusbnent/inflation

of

living

The Bank subscribes to a 'Sum-of-Parts' compensation methodology, which is

reflective of the Bank's commibnent and philosophy of creating and sharing
value with its employee parbrers.
The sum-of-parts compensation comprises:

Fixed Compensation
Variable Compensation in the form of Perform.rnce Bonus
Employee Stock Option Plans (ESOP)

The Board of Directors of the Bank through its Board Remuneration Committee
(BRC) shall exercise oversight & effective govemance over the framing and
implementing of the Compensation policy. Human Capital Management under
the guidance of MD & CEO shall adninister the Compensation and Benefits
structure in line with Industry practices and statutory requirements as applicable
from time to time.
d.

Description of the ways in which the bank seeks to link performance during a performance
measuremcnt period with leuels of remunerution and A discussion of tlrc bnnk's policy on
defenal and aesting of oariable remuneration and a discussion of tln bank's policy and
criteia for adjusting deferreil remuneration before aesting and after aesting.

The Bank ensures that the compensation remains adjusted for all types of risk,
symmetrical with risk outcomes as well as sensitive to the time horizon of risk.
Further, the compensation in all forms will be consistent with the risk alignment.
One of the key factors to be considered for the Annual Review /revision of Fixed
Compensation (ICC) & Performance Bonus includes individual performance
based on the Annual Performance Review (APR) process of the Bank. The
evaluation on risk m.magement parameters is an integral part of the Annual

F-54

3ryEErs

Financial Statements for the year ended March 31,2014

Performance Review process, forming part of Key Result Areas of the executives
with suitable weightage. The inputs for assessment on these parameters will be
independently provided by the Risk Management function of the Bank.
For the services pertaining to financial year 2013-1.4 where variable pay is 50% or
more, 40-60% shall be deferred over minimum period of 3 years. In the event of a

negative contribution, deferred compensation shall be subject to appropriate

malus/claw back arrangements as decided by the Board Remuneration
Committee. Guaranteed bonus shall not be a part of the compensation plan.
The compensation for executives in Risk Control and Compliance functions shall
be independent of the business areas they oversee.
The Bank shall not provide any facility or funds or permit employees to insure or
hedge their compensation structure to offset the risk alignment effects embedded
in their compensation arrangement.

e.

Description of the dffirent forms of aaiable remuneration (i.e. cash, shares, ESOPs and
other forms) thnt the bank utilizes and the rationale for using these dffirent forms.

The Bank subscribes to a 'Sum-of-Parts' compensation methodology, which is

reflective of the commitnent and philosophy of creating and sharing value with
the employee partners. The sum-of-parts compensation for executives comprises:

Fixed Compensation (Total Cost

to

Company-Tcc)

Includes value of

perquisites.

Variable compensation in the form of Performance/Deferred Bonus Variable pay shall be in the form of Performance Bonus which will be calculated
as a percentage of Fixed Pay. The evaluation on risk management parameters is
an integral part of the Annual Performance Review process, forming part of Key
Result Areas of the executives with suitable weightage. The inputs for assessment
on these parameters will be independently provided by the Risk Management
function of the Bank.

- These are formulated on a mid to long term

in accordance with SEBI and other Regulatory guidelines. The
grant of ESOP shall be under approval from MD & CEO, which shall be
subsequently ratified by the Board Remuneration Committee.
Employee Stock Options Plans

basis by the Bank

F-55

Financial Statements for the year ended March 31,2014

f.

Quantitatiue Disclosures on Remuneration for MD i CEO and otlrcr isktakers

There were 4 meetings of the Board remuneration committee held during the

year ended March

3'1,, 2014.

The Bank had paid a remuneration

of f, L20

thousands to the members of the remuneration committee.

(7 in thousanils)
No of

For the
year
ended

employe
es

a.

(')

(iii)
(iv)

For the
year
ended

employe
es

March

March

3't,20'1,4

31,2013

Number of employees having received a variable

remuneration award during the financial year. (refer
Note 1)

(ii)

No of

Number and total amount of sign-on awards made

durins the financial vear.
Detafu of guaranteed bonus, if any, paid as joining
sisn on bonus
Details of severance pay, in addition to accmed

79,883

76,086
6,000

't6'1.,612

benefits, if anv.
b.

(r)

c.

Total amount of outstanding deferred remuneration,

split into caslu shares and share-linked instruments
and other forms.(refer Note 1.)
Breakdown of amount of remuneration awards for the
financial year to show fixed and variable, deferred
and non-deferred.(refer Note 2)
T o t aI remun er ation aut ar d

Of urhich Fixed Component

Of which V ariable Component
Defened
Paid
d.

(i)

(ii)

(iii)

Total amount of outstanding deferred remuneration

and retained remuneration exposed to ex post explicit
and / or inplicit adiustments.(refer Note 1)
Total amount of reductions during the financial year
due to ex- post explicit adjustments. .(refer Note 1)

37,700

246,959
't67,076

79,883
37,700
42,183

37,700

Total amount of reductions during the financial year

due to ex- post implicit adjustutents.
(change in variable payout due to change in Market
Conditions) .(refer Note 1)
Note:
L.

Amounts disclosed represents aaiable pay paid during tlrc yem ended March 31.,
201.4 and Mmch 201.3 is for seroices renilereil by the risk takers during tlu year
March 31, 2013 and March 31 20L2 respectiaely, since the bonus pool for the year
ended March 31, 201.4 has not yet been allocatud and accordingly, tlu deferred
component for tlrc risk takers is yet tobe determined.

2.

3.

For tlu year ended March 3L, 20L3 amounts disclosed represents only fixed
component paid duing the year to the risk talcers since tlrc bonus pool toas not yet
been allocated and accordingly, the defened component zoas yet tobe iletermined.
C,ompensation for MD i CEO is as apyrooed by the RBI and paid by the Bank to the

MD , CEO.

Compensation for other risk takers is as approaedby the Bank.

ESOPs lwae not been considered as per the extant RBI guidelines.

F-56

WN

Financial Statements for the year ended March 31.2014

L8.8.7 Moaemmt in Eloating Proaisions

The bank has not created or utilized any floating provisions during the financial year
ended March 31,2014 and financial year ended March 3'1.,2013. The floating provision as
at March 3'1.,20'l.4was f Nil (Previous year: f, Nil).

1.8.8.2 Drautdornn on Resentes

During the financial year ended March

reserve. (Previous year: f, Nil).

31., 2074,

the Bank has not drawn down any

78.8.3 Disclosure of complaints

A.

Customer Complaints

Yearended Yearended
gl,2m4 March 37,20tg
274

March

i)

No. of Complaints pending at the beginning of the

year

ii)
iii)
it)

No. of Complaints received during the year

No. of Complaints redressed during the year
No. of Complaints pending at the end of the year

B.

6',116

"1,452

5,yt7

1.,464

t2l

Autards passed by the Banking Ombudsman

Yearended Yearended
March 37,2m4 March 31,2U13
i)
ir)

iir)
iv)

78.8.4

No. of unimplemented Awards at the beginning of the

year
No. of Awards passed by the Banking Ombudsman
during the year
No. of Awards implemented during the year
No. of unimplemented Awards at the end of the year

Nit

Nil

Nil

Nil

Nil
Nil

Nil
Nil

Dues to Micro and Small Enterprises

Under the Micro and Small Enterprises Development Act, 2006 which came into force
from October 02,2006, certain disclosures are required to be made relating to Micro and
Small enterprises. On the basis of information and records available with the
management and confirmation sought by the management from suppliers on their
registration with the specified authority under the said Act, there have been no reported
cases of delays in payments to micro and small enterprises or of interest payments due
to delays in such payments.
18.8.5

S ec u r it izatio

Tran

sa

ct ions

The Bank has not done any securitization transactions during the year ended
March 3'1.,2014 and March 3'1.,2013.

F-57

w@

Financial Statements for the year ended March 3L, 2014

18.8.6 Letter ofcomfort

The Bank has not issued any letter of comfort during the year ended March 3'1.,20'1.4 and

March 31,,2013.

18.8.7 Description of contingent liabilities

Sr.

No.
1.

Contingent Liabilitics

Brtef

Claim$ against the Bank

The Bank is a party to various legal proceedings in the

normal course of business. The Bank does not expect the
outcome of these proceedings to have a material adverse
effect on the BanKs financial conditions, results of

not

acknowledged

as

debts

operations or cash flows.

The Bank enters into foreign exchange contracts, currency

options, forward rate agreemenb, currency swaps and
interest rate swaps with interbank participants and
customers. Forward exchange contracts are commitrnents

Liability on account of
forward exchange and
derivative contracts.

to buy or sell foreign currency at a future date at the

contracted rate. Currenry swaps are commitments to
exchange cash flows by way of interest/principal in one
currency against another, based on predetermined rates.
Interest rate swaps are commitments to exchange fixed
and floating interest rate cash flows. The notional amounts
of financial instrummts of such foreign exchange confracts

and derivatives provide a basis for comparison with

instruments recognized on the balance sheet but do not
necessarily indicate the amounts of future cash flows
involved or the current fair value of the instruments and,
therefore, do not indicate the Bank's exposure to credit or
price risks. The derivative instruments become favorable

(assets) or unfavorable (liabilities) as a result of

flucfuations in market rates or prices relative to their
terms. The aggregate contractual or notional amount of
derivative financial instruments on hand, the extent to
which instruments are favourable or unfavourable an4
thus the aggregate fair values of derivative financial assets
and liabilities can fluctuate significanfly.

3.

Guarantees

given

on

issues documentary credit and guarantees on behalf of its

acceptances/

customers. Documentary credits such as lefters of credit

enhance the credit standing of the customers of the Bank.
Guarantees generally represent irrwocable assurances tlat
the Bank will make payments in the event of the customer
failing to fulfil its financial or performance obligations.

endorsements and other

obligations

As a part of its commercial banking activities the Bank

behalf of constituents,

which - Value dated purchase of securities

the bank is contingently - Capital commitments
liable
- Foreign Exchange Contracb (Iom & Spot)
Other items for

Scheilule 1,2 for amounts

1,8.8.8

to continsent liabili

Eixed Assets

The software capitalized under Fixed Asset was ? 215,448 thousands and f,
thousands as at March 31.,201.4 and March3l,2013 respectively.

F-58

261.,194

W*sK

Financial Statements for the vear ended March 31,2014

18.8.9 Prior peiod comparatiaes

Previous period's figures have been regrouped where necessary to conform to current
year classification.

For S.
Ch

R BATLIBOI & CO. LLP

artere il Accountants

For and on behalf of the Board of Directors

YES BANK

Limited

ICAI Firm Registration No: 30L003E

L-Ql.^

5,rt"tt

"
Partner

Gracias

\'rl^"-i
%.SVohra
Srinivasan

t^-,^
I

Aiay

MR

'

Non Executiae Chairman

Membership No: 105488

Singh

F-59

F-60

F-61

F-62

F-63

F-64

F-65

F-66

F-67

F-68

F-69

F-70

F-71

F-72

F-73

F-74

F-75

F-76

F-77

F-78

F-79

F-80

F-81

F-82

F-83

F-84

F-85

F-86

F-87

F-88

F-89

F-90

F-91

F-92

F-93

F-94

F-95

F-96

F-97

F-98

F-99

F-100

F-101

F-102

F-103

F-104

F-105

F-106

F-107

F-108

F-109

F-110

F-111

F-112

F-113

F-114

F-115

F-116

F-117

F-118

F-119

F-120

F-121

F-122

F-123

F-124

F-125

F-126

F-127

F-128

F-129

F-130

F-131

F-132

F-133

F-134

F-135

F-136

F-137

F-138

F-139

F-140

F-141

F-142

F-143

F-144

F-145

F-146

F-147

F-148

F-149

F-150

F-151

F-152

F-153

F-154

F-155

F-156

F-157

F-158

F-159

F-160

F-161

F-162

F-163

F-164

F-165

F-166

F-167

F-168

F-169

F-170

F-171

F-172

F-173

F-174

F-175

F-176

F-177

F-178

F-179

F-180

F-181

F-182

F-183

F-184

wd

YES BANK Limited and its

Subsidiary
Consolidated Financial Statements
For the financial year ended March 3'l.,,20L4

F-185

S.R.

14th Floor, The Ruby

29 Senapati Bapat Marg
Dadar (West)
Mumbai-400 028, India

Bnrusot&Co. LLP

Chartered Account!nts

Tel : +91 2251920OOO

Fax : +91 22 6j.92 LOOO

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of Yes Bank Limited

("the
We have audited the accompanying consolidated financial statements of Yes Bank Limited

Bank") and its subsidiary, which comprise the consolidated Balance Sheet as at March 3t,2OL4,
and the consolidated Statement of Profit and Loss and the consolidated Cash Flow Statement for

the year then ended, and a summary of significant accountinq policies and other explanatory
information.
Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation of these consolidated financial statements that

qive

a true

and fair view

of the consolidated

financial position, consolidated financial

principles
ierformance and consolidated cash flows of the Bank in accordance with accounting

generally accepted

in India. This responsibility includes the design, implementation

and

maintenance of internal control relevant to the preparation and presentation of the consolidated
financial statements that give a true and fair view and are free from material misstatement,
whether due to fraud or error.

Auditor's ResponsibilitY
Our responsibility is to express an opinion on these consolidated financial statements based on
our audit. We conducted our audit in accordance with the Standards on Auditing issued by the
lnstitute of Chartered Accountants of India. Those Standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
auditor,s Judgement, including the assessment of the risks of material misstatement of the
consolidated f inancial statements, whether due to f raud or error. In making those risk
assessments, the auditor considers internal control relevant to the Bank's preparation and
presentation of the consolidated financial statements that give a true and fair view in order to
design audit procedures that are appropriate in the circumstances but not for the purpose of

exprlssing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of the
accountin! estimaies made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
Opinion

ln our opinion and to the best of our information and according to the explanations given to us,
the consolidated financial statements give a true and fair view in conformity with the accountinq
principles generally accepted in India:

(a) in the case of the consolidated Balance Sheet, of the state of affairs of the

Bank as at March

3L,20L4:

(b) in the case of the consolidated Statement of Prof it and Loss, of the profit for the year

ended

on that date; and

(c)

in the case of the consolidated Cash Flow Statement, of the cash flows for the year ended on

that date.

b
S.R. Batliboi & Co. (a partoershlp

F-186

& Co. LLP (a Limited Liability Pa.tnership with LLP identtty No. AAB-4294) effective 1st
Regd. Otfice : 22. Camac Street. Block 'C', 3rd Floor, Kolkata-7o0 016

firm) convertcd into S.R. Batliboi

April,20l3

S.R.

Bmttsot&Co. LLP

Chartered Accountants

Auditor's Report on consolidated financial statements of Yes Bank'Limited for the year ended 31 March 2014
Page 2

ol 2

Other Matter

total assets of Rs. L3L,624 thousands as at March 31, 2Ot4, total revenues of
Rs. 5,445 thousands and net cash outflows amounting to Rs. 53,374 thousands for the year
then ended, included in the accompanying consolidated financial statements in respect of the
subsidiary, whose financial statements and other financial information have been audited by
other audltors and whose report has been furnished to us. Our opinion, in so far as it relates to
the affairs of such subsidiary is based solely on the report of other auditors. Our opinion is not
quallfied in respect of this matter.
We did not audit

For S.R. Batllbol & Go. LLP

Chartered Accountants
lCAl Firm Registration Number: 301003E

nf

.L"{t l*;

per Surekha Graclas

Partner
Membership Number: 105488
Place of Signature: Mumbai
Date: 23 April 2014

F-187

w
YES BANK

Limited

Consolidated Balance sheet as at Match 31,2014

(?in thoussnds)
As at

Schedules

March

31,2m4

As at

March 31,,2013

CAPITAL AND LIABILITIES

Capital

Reserves and surplus

Deposits

3
4

Borrowings
Other liabilities and provisions

TOTAL

3,606,336
67,545,861

741,856255

3,586,223
54,490,482
669,555,352

213,L42,862
63,996,369

209,221,,472

1,090,047,684

99L,040,774

54,187,245

ASSE"TS

Cash and balances with Reserve Bank of India

Balances with banks, money at call and short notice

Invesbnents
Advances
Fixed assets

Other assets

I
I

45,475,835

33,387,586

13,500,955

7,270,011,
429,759,921.

409,328,624

L0

2,970,942

469,995,663
2,295,452

1.1.

6L501,706

48,332,141.

fOTAL

556,329,6?2

1,090,047,6u

Contingent liabilities
Bills for collection

L2

Significant Accounting Policies and Notes to

18

2,010,16,222

991,M0,774
2,478,043,530
6,773,965

9,970,531

Accounts forming part of financial statements

As per our report of even date attached.

ForS. R. BATLIBOI & CO. LLP

For and on behalf of the Board of Directors

Chartered Accountants

YES BANK

Limited

ICAI Firm Registration No:

It

J*.lt" [td

-D

Aiay Vohra

Surekha Gracias

Director

Partner

Membershi

,61-\gca

Director

|.-r-L/-^,.-^--r^-;
\

M R Srinivasan \
Non Executiae Cluirm

No:105488

Rajat Monga

Shivan

Chief Financial

Company Si etary

Officer

Mumbai
4pn123,2074

F-188

. Sheftigar

s{rN
YES BANK Limited

Consolidated Profit and loss account for the year ended March 3l'2014
Schedules

INCOME
Interest earned
Other income

99,813,527
77,275,8W

1.3
1.4

95,51,4,317

EXPENDITURE
Interest expended

15

72,A5498

60,752,W2

Operating expenses
Provisions and contingencies

15

17,568,753
10,702,483

13,U5,367

1.00,q16,733

82,507,51.0

Net profit for the year

15174s87

13,006,807

Profit brought forward

23,383,674

1,5,583,936

394%,267

29,590,743

17

TOTAL

il.

82,939,991
12,574,326

117,029,34

TOTAL

II.

Year Ended

31,2014 March3't,2013

March

I.

(?in thousands)

Year Ended

8,410,051

PROFIT

TOTAL

IV.

APPROPRIATIONS
Transfer to Capital Reserve
Transfer to Statutory Reserve
Transfer to Inveshent Reserve
Dividend paid for last year
Tax on dividend paid for last year
Proposed Dividend
Tax (including surcharge and education cess) on

348,646
3,25'1,,702

4,385
17,305

97,136
7,559
7,227

2,885,M9

2,151,734

490,317

349,065

4,026

Dividend

32,W9,U9

Balance carried over to balance sheet

39496,261

TOTAL
Significant Accounting Policies and Notes to Accounts
forming part of financial statements
Eaming per share (Refer 5ch.1.8.7.6)
Basic

41,359

4,044451

18

(fl

M.74

36.53
J3.JC

u.l7

Diluted (fl/
(Face Value of Equity Share

23,383,674
29,590,743

is 710/-)

As per our report of even date attached.

For S.

R BATLIBOI & CO. LLP

Chartercd. Accountants

For and on behalf of the Board of Directors

YES BANK

Limited

n
N\/

-O"5'--\-t
Partner

Members$p No:105488

Rina Karfoor
Man@tgDirector
&CEO

Rfdha Singh
Mumbai

Apnl23,2014
F-189

^ I
I ' \-,(^r' L,'\-//--\-{

Ajay Vohra

M R Srinivasan \

Director

Non Executhrc Chairman

q"A"l--y
Rajat Monga I

Clief FinancialDficer

Director

Shivan
Company

Se,

r,f/
YES

lig

BANKLimited

Consolidated Cash flow statement for the year ended March 3l,2Ol4

(?in thousands)

YearEnded YearEnded
March 37,2074 March 3-1.,2013
Cash flow from operating activities

Net profit before taxes

Adjustment for
Depreciation for the year
Amortization of premium on invesbnents
Provision f or inveshnents
Provision for standard advances
Provision/write off of non performing advances
Other provisions
Loss from sale of fixed assets

23,798,229

19,257,317

635429

517,070
295,560
(29,910)
766,399

t146,589

Adjustments for :
Increase in Deposits
Increase in Other Liabilities
Increase in Investrnents
Increase in Advances
Increase in Other Assets

850,079
1,278,978
7,358,169
717,675
948

1,51.6,688

27,8%,036

22,357,535

72,3ffi,W
8,797,U6
45,667469

179,038,302
(3,998,530)
(86,083,331)

(87,692,1281

(91,,625,933)

29,310
5,101

(14,302,3781

(6,765,222)

24,74,943 (10,434,774)
(8,305,958) (6,516,M1\

Payment of direct taxes

Net cash generated from operating activities (A)

M,355,027

5,406,380

(1,245,99.31

(1,038,360)
22,310
(30,535)
(66,368,749\
(67,415,334)

Cash flow from investing activities

Purchase of Fixed Assets
Proceeds from sale of Fixed Assets
Changes in Capital Work- in - Progress
Changes inHeld to Maturity Investment
Net cash used in investing activities (B)

24,931
(90,805)
(26,W2,8411

(27,854,708)

Cash flow from financing activities

Tier II Debt raised

Increase in Borrowings
Innovative Perpetual Debt raised
Proceeds from issuance of Equity Shares
Share Premium received thereon
Dividend paid during the year

20,113
339,509

77,638,000
48,678,598
1,4oo,ooo
56,349
756,774

{2,X55,7601

(1,,4?3,296)

L,758,880

(230,280)
66,817,145

18,259,193

4,802,191

7,721,390

2,900,m0

(366,3721

Tax on dividend
Net cash generated from financing activities (C)

Net increase in cash and cash equivalents (A+B+C)

Contd...

F-190

ryrV
YES BANK Limited

Consolidated Cash flow statement for the year ended March 31,2014
(Contd...)

({in

thousands)
Year Ended

Year Ended
March 31,2014

March 31,,2013

Cash and cash equivalents as at April 1

Cash and cash equivalents as at March 31

40,657,597

35,855,406

58,916,790

40,657,597

Cash and cash equivalents includes the following

Cash and Balances with Reserve Bank of India
Balances with Banks and Money at Call and Short Notice

45,415,835

33,387,586

13,500,955

7,270,011.

Cash and cash equivalents as at March 31

58,916,790

Notes to the Cash flow statement:

40,657,597

As per our report of even date attached.

For S. R. BATLIBOI & CO. LLP

For and on behalf of the Board of Directors

Chartered Accountants

YES BANK Limited

ICAI Firm Registration No:

301003E

#s,

J\/

-11--------

Ajiy Vohra
Director

Partner

ru-U.^-^-1
M R Srinivasan

Non Executiae Clwirmah

Membership No:105488

t#*,-,^,"fuheftisar
Officer
Chief Financial

Mumbai
Aprtl23,20'L

F-191

Companyieuetary

WN

Consolidated Financial Statements for the vear ended March 31,2014

YES BANKLimited
Schedules forming part of the Consolidated Balance Sheet

({
As at

March
SCHEDULE

TOTAL
SCHEDULE 2

IV.

Statutory Reserves
Opening balance

6,000,000

3,606,336

3,586,223

3,ffi,336

3,586,2n

lo,3{lo,2l1
4,W451

7,088,579
3,257,702

14,3U,732

lo,34o,2g7

Opening balance

\8,92:5,ffi

Additions during the year

Closing balance

339,509
79,265,118

18,158,835
756,774
78,925,609

Capital Reserve
Opening balance
Additions during the year
Closing balance

1,743,205
41,359

L,394,559

1,7wsil

1,743,205

97,713
1.o2,o98

577
97,736
97,773

32,W9,49

23,383,674

67,545,867

il,490,482

Share Premium

Investment Reserve
Opening balance

Additions during the year

Closing balance
V.

o000,000

RESERVES AND SI.JRPLUS

Additions during the year

Closing balance

il.

As at

March 3'1.,2013

1- CAPITAL

Authorized Capital
600,000,000 equity shares of i10/- each
(March 31,2073:600,000,000equity shares of ? 10/- each)
Issued, subscribed and paid-up capital
360,633,626 equrty shares of f10/- each
(March 31.,2013:358,622,289 equity shares of i 10/- each)

I.

31,2074

in thousanils)

438s

Balance in Profit and Loss Account

TOTAL

348,&6

6t^rt\
ri lE
U'-'"'P
F-192

qN

Consolidated Financial Statements for the year ended March 31,2014

YES BANKLimited
Schedules forming part of the Consolidated Balance Sheet

(7 in thousands)
As at

March
SCHEDULE 3

A. I.

As at
March 3'1,,2013

DEPOSITS

Demand Deposits

i)

II.
ilI.

From banks

ii) From others

Savings Bank Deposits
Term Deposits

'

i)

From banks
ii) From others

B. I.
il.

TOTAL

4.

93,275,190

60,226,502

63,293,49\

711,856,256

41'593,943
50L,086,656
669,555,352
669,555,352

741,856,256

669,555,352

BORROWINGS

Innovative Perpetual Debt Instmments (IPDI) and Tier II Debt

Borrowing in India
r) IPDI
ii) Upper Tier II Borrowings
iii) Lower Tier II Borrowings
TOTAL(A)
Borrowings outside India
r) IPDI
ii) Upper Tier II Borrowings
iii) Lower Tier tr Borrowings
TOTAL(B)

7410,0n
19,367,ffi

3o,25too0
57,O3L0{m
299,575

z51O00o
19,367,000
37,255,000
58,132,000
27L,425

l0,3g2,Nl

g,3u,gu

70,681,976

9,606,449

67,713,976

67,738,409

Reserve Bank of India

35,020,m0

Other banks
Other institutions and agencies **

26,610,W
37,5ilA17

49,958,900
30,832,500
24,759,375

93,,18/.,q17

104,550,775

TOTAL(A+B)

IL

Other Borrowings*

A.

Borrowings in India

t)
ii)
iii)

7,775,969

u,877,383

7tn,856,256

Deposits of branches in India

Deposits of branches outside India

SCHEDULE

2,346,947

67,824,61

515,175,967

TOTAL

I.
A.

37,2m4

TOTAL(A)
Borrowings outside India (B)

52,2M,K9

36,932,288

TOTAL(A+B)

745,428,886

L4'1,483,063

TOTAL(I+II)

213,142,862

209,22'1.,472

*Of the above, secured borrowings are f3L,300,000 thousands (March 31, zmg :
*Represents refinance borrowing.

49,896,031 thousands).

tlt^^'*.'S

F-193

Consolidated Financial Statements for the vear ended March 31,2014

YES

BANKLimited

Schedules forming part of the Consolidated Balance Sheet

((

in thousanils)
As at
As at
March 31.,2014 March 31,2013
SCHEDULE 5

OTHER LIABILITIES & PROVISIONS

I.
IL

Bills payable
Inter-office adjustments (net)

2,050477

L,325,54g

III.
IV.

Interest accrued
Others (including provisions)
- Provision for standard advances
- Others
- Income Tax Provision

8,858,695

8,7'1.4,189

4,753,2M

2,655,326
4L,414,538
77,643
54,187,245

48,823,993

TOTAL
SCHEDULE

I.
II.

6. CASH AND BALANCES WITH

RESERVE BANK OF

Cash in hand
Balances with Reserve Bank of India

Incurrentaccount
In other account

TOTAL
SCHEDULE

I.

63,8%,369

INDIA
23M,7n

't,633,270

43,115,774

3'1,754,31.6

45,415,835

33,387,586

7. BALANCES WITH BANKS, MONEY AT CALL AND SHORT NOTICE

In India
Balances

t)
ii)

with banks
in current accounts
in other deposit accounts

420,177

750,753

60

55

500,m0

250,000

Money at call and short notice

i)
ii)
iii)

with banks
with other institutions

5st030

Lending under Reverse Repo (RBI & Banks)

TOrAL

II.

(r)

Outside India
i)
in current accounts
ii)
in other deposit accounts
Money at call and short notice
iii)

LA75,267

400,808

9,329,573

4,978456

2,696,175

TOTAL(II)

12,025,ffi8

7,890,747
6,869,203

TOTAL(I+U)

13,5m,955

7,270,011

U-:r#
F-194

Consolidated Financial Statements for the year ended March 31,2014

YES BANK Limited

Schedules forming part of the Consolidated Balance Sheet

As at
March 37,2014
SCHEDULE

A.

B.

in thousanils)
As at
March 31.,2013

I - INVESTMENTS (net of provisions)

Investments in India
i)
Government securities
ii) Other approved securities

iii)
iv)
v)

({

224,290,105

932,80

Shares

Debentures and bonds

Others (CPs, CDs, Pass Through Cerfficates etc.)

235,390,801
1,122,391

103,155,907
80,950,132
4A9328,624

103,M2,521,

&9,328,524

429,759,9y1

89,804,208
429,759,921

Investments outside India

TOTAL

SCHEDULE 9 - ADVANCES

A. i)
iD
iii)

Bills purchased and discounted

Cash credits, overdrafts and loans repayable on
demand
Term loans

rOTAL

B.

r)

ii)
iii)

Secured by tangible assets

Covered by Bank/ Government Guarantees
Unsecured(Note 1& 2)

TOTAL

12,877,890

7,794,913

142,758,282

125,790,918

4o0,699450

336,N9,832

556,329,622

469,995,663

374,024,050
5,6215,707

311,377,367
6,497,807

176,679865

152,\26,M9

556,329,622

469,95,663

. includes aduances of 7 82,545,'143 thousands (March 31., 201,3 ? 34,827,606 thousands) for which secuity
documentation is either being obtained or being registered.
includes nil adaances (Preaious year { 263,125 thousands) for which intangible secuities such as charge oaer the
ights, licenses, authoity, etc of {Nil (Prmious year 7694,000 thousands) has been taken.

I. Advances in India
i) Priority sectors

ii)
iii)
ir)

Public sector
Banks
Others

145,&2,222

105,212,023

62,515
1,656,791
408,968.103
556,329,622

617,055
363,558,943
469,995,663

556,329,522

469,995,663

607,642

II. Advances outside India

TOTAL

rq
5r((

D((
F-195

:_

{$'(.0\
)>
)z
/,\;

mv

Consolidated Financial Statements for the year ended March 3L,2014

YES

ilr

BANKLimited

Schedules forming part of the Consolidated Balance Sheet

(7 in thousands)

As at

March

31,2074

As at
March 37,2013

SCHEDTILE 10. FIXED ASSETS

I.

Premises

II.

Other Fixed Assets (including furniture and fixtures)

At cost as on March 31."t of preceding financial year
Additions during the year
Deductions during the year
Accumulated depreciation to date

4,271,173
1,245,993

3,370,459

(1il,705)

(73,735)
(2,086,669)
2,184,505
110,947

(2,593,271)
2,769,1n

Capital work-in-progress

SCHEDULE 11

I.
II.
m.
IV.

- OTHER

207,752

1,,034,450

2,970,9U2

2,295A52

tsA52A07
M2,7gg
249L598
4,114,N2

14,278,348

62,50'^,7M

48,332,'1.41

ASSETS

Interest accrued
Advance tax and tax deducted at source
Deferred tax asset (net)
Others

TOTAL

1.,794,222

32,259,577

SCHEDI.JLE 12 - CONTINGENT LIABILTTIES

I.
II.
ru.

Claims against the bank not acknowledged as debts

Liability for parfly paid inveshents
Liability on account of outstanding forward exchange

1,1r}',665Ag;

1,500,g02,096

498,750,562
95,971,508

659,577,736
49,199,5?3

1%,ffi,628

85,70'1,999

764,442,X30

152,629,077

2M475

107,240
255,584

conhacts

IV.
V.
VI.
VII.

Liability on account of outstanding derivative contracts

Single currency Interest Rate Swaps

Others
Guarantees given on behalf of constifuents

In India
Outside India

Acceptances, endorsements and other obligations

Other items for which the bank is contingently liable
- Value dated purchase of securities
- Capital commitments

- Foreign Exchange Contracts (Tom & Spot)

F-196

238'/c:0
{1,251,886

3'/..,28'1.,275

rys

Consolidated Financial Statements for the year ended March 31,2014

YES

BANKLimited

Schedules forming part of the Consolidated Profit and Loss Account

({

in thousanils)
YearEnded YearEnded
March 3L,2m4 March 31.,2013
SCHEDTILE 13

I.
II.
III.
IV.

- INTEREST EARNED

Interest/discountonadvances/bills

65,399,853

53,970,675

Income on inveshrrents

34,74c,,577

28,594,640

Interest on balances with Reserve Bank of

23&880

India and other inter-bank funds

1.65,062

30,271

209,614

TOTAL

99,813,521

82,939,991,

Commission, exchange and brokerage

Profit/(Loss) on the sale of investments (net)
Profit /(Loss) on the revaluation of
investments (net)
Loss on sale of land, building and other assets
Profit on exchange transactions (net)
Income earned by way of dividends etc. from
subsidiaries, companies and/ or joint ventures

72,609,W|

10,762,49't

Others

SCHEDULE 14 - OTHER INCOME

I.
n.
III.
IV.
V.
VL
VII.

abroad/in India
Miscellaneousincome

TOTAL
SCHEDT.JLE 15

I.
II.
UI.

7,661,620_

'1,556,556

(e48)

(5,L01)

1,981108

666,679

960,786

(405,899\

17,215,W

72,574,326

- INTEREST EXPENDED

Intereston deposits

56,\80,977
15,82+830

Interest on Reserve Bank of India/inter-bank

borrowings / Tier I and Tier II debt

45,636,130

'1,4,935,490

insffuments
Others

639,591

TOTAL

180,472

72,ffi498

50,752,W2

7,886,371
2,303,875
731,930
597,823

6,555,435

SCHEDULE 16 - OPERATING EXPENSES

L
il.
m.
IV.
V.
VI.
VIL

VIII.

IX.
X.

Payments to and provisions for employees

Rent taxes and lighting
Printing and stationery
Advertisement and publicity
Depreciation on Bank's property
Directors'fees, allowances and expenses
Auditors'fees and expenses

635A29
5,739

Law charges

't,91'1.,926

112,993
322,083
517,070
5,649

7,799

6,752

21,05\

79,465
158,557

Postage, telegrams, telephones, etc.

?soA79

Repairs and maintenance

Insurance

110,318
528,2W

M9,041

5,089,801.

3,295,133

17,56,753

,367

expenditure

TOTAL
F-197

9'1,,463

,1*V,

Consolidated Financial Statements for the year ended March 31,2014

YES BANK

Limited

Schedules forming part of the Consolidated Profit and Loss Account

Year Ended
March 37.2014

({

inthousanils)
Year Ended
March 31.,2013

SCHEDULE 17 - PROVISIONS & CONTINGENCIES

I.
II.
ilI.
IV.
V.

Provision for taxation

Provision for investments
Provision for standard advances
Provision/write off for non performing advances
Other provisions

TOTAL

7,095,642
860,079
1,278,978
1,358,759
719,675

6,250,510
(29,910)
766,3W

10,702,83

8A10,051

'1,455,215

(32,163)

4:u^qb

ai

F-198

r5

R;;=-;n7

Consolidated Financial Statements for the year ended March 31,2014

18.

Notes forming part of the Consolidated Accounts for the year ended March 97,2014

1_8.7

Backgrounil
YES BANK Limited ('the Bank') is a private sector Bank promoted by the late Mr. Ashok Kapur

and Mr. Rana Kapoor. YES BANK Limited together with ire subsidiary is a publicly held bank
engaged in providing a wide range of banking and financial services. YES BANK Limited is a
banking company governed by the Banking Regulation Act,1949. The Bank was incorporated as a
limited company under the Companies Act, 1956 on November 2'1., 2003. The Bank received the
licence to commence banking operations from the Reserve.Bank of India ('RBI') on May 24,2004.
Further, YES BANK was included to the Second Schedule of the Reserve Bank of India Act, 1934
with effect from Augustz'1.,2004.
Yes Securities (India) Limited ("the Company) is a wholly owned subsidiary of the Bank
incorporated in tndia on March 14, 2073 to provide stock broking services and distribution of
financial products. The company was admitted as a member of the equrty, futures & options and
currency derivatives, segment on 2 May 2013 by the National Stock Exchange (NSE) and the
equrty segment on 1L June 2013by the Bombay Stock Exchange (BSE). The Company has received
approval from the Securities & Exchange Board of India on 8 July 2013.
1"8.2

Principles of

onsoliilation

The consolidated financial statements comprise the financial statements of YES Bank Limited, and
its subsidiary which together constitute the'Group'.

The Bank consolidates its subsidiaries in accordance with Accounting Standard ('A9) 21,
Consolidated Financial Statements notified under the Companies Act, 1956, read with General
Circular 8/201.4 dated April 4,20'1,4 issued by the Ministry of Corporate Affairs to the extent
applicable on a line-by-line basis by adding together the like items of assets, liabilities, income
and expenditure.
78.3

Basis of preparation
The consolidated financial statements have been prepared and presented under the historical cost
convention and accrual basis of accounting, unless otherwise stated and are in accordance with
Generally Accepted Accounting Principles in India (GAAP), statutory requirements prescribed
under the Banking Regulation Act1949, circulars and guidelines issued by the Reserve Bank of
India (RBI') from time to time, AS notified under the Companies Act, 1956, read with General
Circular 8/201,4 dated April 4,20'1,4 issued by the Ministry of Corporate Affairs to the extent
applicable and current practices prevailing within the banking industry in India. Suitable

adjustments are made to align with the format prescribed under the Banking Regulation

Ac!

1949.

The consolidated financial statement includes the results of YES Securities (India) Limited in
addition to the Bank.
78.4

Use of estimates

The preparation of financial statements requires the management to make estimates and
assumptions that are considered while reporting amounts of assets and liabilities (including
contingent liabilities) as of the date of the financial statements and income and expenses during
the reporting period. Management believes that the estimates used in the preparation of the
financial statements are pnident and reasonable. Future results could differ from these estimates.
Any revision to accounting estimates is recognized prospectively in current and fufure periods.

4:r:S
Yr'

tlC

F-199

i;!, i*

]F

4'-l

--'-i)'j

Consolidated Financial Statements for the year ended March 31,2014

18.5

ignifi cant

a cc

ounting

po

ry

Ii ci e s

78.5.7 Reoenuerecognition
Revenue is recognized to the extent it is probable that the economic benefits
the Group and the revenue can be reliably measured.

will flow to

Interest income is recognized in the profit and loss account on accrual basis, except in
the case of non-performing assets. Interest on non-performing assets is recognized
upon realization as per the prudential norms of the RBI.

Revenue

receivable in advance is recognized when due.

Loan processing fee is accounted for upfront when it becomes due.
Dividend income is recognized when the right to receive paynent is established.

a
a

in certain

structured transactions where interest income

is partially

Commission on guarantees issued by the Bank is recognized as income on yearly

basis at each anniversary over the period of the guarantee, except for guarantee
commission not exceeding -100 thousands, which is recognized at the time of issue
of the guarantee.
Commission on Letters of Credit ('LC') issued by the Bank is recognized as income at
the time of issue of the LC.
Income on non-coupon bearing discounted instruments is recognized over the tenure
of the instrument on a straight line basis. In case of coupon bearing discounted
instruments, discount income is recognized over the tenor of the instrument on yield
basis.

In case of Bonds and Pass Through Certificates, premium on redemptiory if any, is

amortised over the tenure of the instrurnent on a yield basis.
Revenue from financial advisory services is recognized in line with milestones
achieved as per terms of agreement with clients which is reflective of services
rendered.

.
o

Other fees and commission income are recognized on accrual basis.

Income from Brokerage activities is recognised as per contracted rate on execution of
transaction on behalf of the customers on the trade date and is net off related sub
brokerage expenses, service tax and stock exchange expenses. Interest income from
heasury activities is recognized based on accrual basis.

78.5.2 lnaestments
Classification and valuation of the BanKs investments are carried out in accordance with
RBI Circular DBOD.No.BP.BC.8/21,.M.7n/2013-14 dated 1|uly 2013 and Fixed Income
Money Market and Derivative Association (FIMMDA) guidelines FIMCIR/2013'1.4
/ 50 / March 28, 20-l..4.

a)

Accounting and Classifcation

Investments are recognized using the value date basis of accounting. In compliance
with RBI guidelines, all investmenb, are categorized as "Held for trading" ('HFT'),
"Available for sale" ('AFS') or "Held to maturi$r" ('HTM') at the time of its purchase.
For the purpose of disclosure in the balance sheet, investments are classified as
disclosed in Schedule 8 ('Inveshnents') under six groups (a) government securities (b)
other approved securities (c) shares (d) bonds and debentures (e) subsidiaries and
joint ventures and (f) others.

b)

Costofacquisition
Costs such as brokerage pertaining to investments, paid at the time of acqu
charged to the profit and loss account.

F-200

6:t-\*.t

Consolidated Financial Statements for the year ended March 31,2014

c)

Basis of classifcation

Securities that are held principally for resale within 90 days from the date of purchase
are classified under the HFT category. Investments that the Bank intends to hold till
maturity are classified under the HTM category, or as per RBI guidelines. Securities
which are not classified in the above categories are classified under the AFS category.
d)

c ate

Reclassification

of

Tr ansfer

be

twee

gorie s

investments from one category

to the othet, if done, is in

accordance with RBI guidelines. Transfer of scrips from AFS / HFf category to HTM
category is made at the lower of book value or market value. In the case of transfer of
securities from HTM to AFS / H.FT category, the investonents held under HTM at a

discount are transferred to AFS

HFT category at the acquisition price and

HFI

investments placed in the HTM category at a premium are transferred to AFS/

at the amortized cost.

Transfer of investrnents from AFS to HFT or vice- a- versa is done at the book value.

Depreciation carried,
category to

if

another.

any, on such investments is also bansferred from

one
I

I
I

e) Valuation

Investments categorized under AFS and HFT categories are marked to market
(MTM) on a periodical basis as per relevant RBI guidelines. Net depreciation, if any,
in the category under the classification mentioned in Schedule 8 ('Investments') is
recognized in the profit and loss account. The net appreciation , rt arry , in the category
under each classification is ignored, except to the extent of depreciation previously
provided. The book value of individual securities is not changed consequent to
periodic valuation of investments.

Investments received in lieu of restructured advances are valued in accordance with

RBI guidelines. Any diminution in value on these inveshents is provided for and is
not used to set off against appreciation in respect of other performing securities in
that category.

Inveshents classified under the HTM category are carried at their acquisition cost
and any premium over the face value, paid on acquisition, is amortised on a straight
line basis over the remaining period to maturity. Amortization expense of premia on
inveshents in the HTM category is deducted from interest income. Where in the
opinion of management, a diminutioru other than temporary in the value of
investments classified under HTM has taken place, suitable provisions are made.
Treasury Bills, Commercial Paper and Certificates
instruments, are valued at carrying cost.

of deposit being

discounted

The market/ fair value applied for the purpose of periodical valuation of quoted
inveshents included in the AFS and HFT categories is the market price of the scrip
as available from the trades/ quotes on the stock exchanges and for Subsidiary
General Ledger ('SGL') account transactions, the prices as periodically declared by
Primary Dealers Association of India jointly with FIMMDA.

frq.,^;

The market/ fair value of unquoted government securities included in the AFS and
HFT category is determined as per the prices published by FIMMDA. Further, in the
case of unquoted bonds, debentures, pass through certificates and preference shates,
valuation is carried out by applying an appropriate mark-up (reflecting associated
credit risk) over the Yield to Maturity (YIM') rates of government securities. Such
mark up and YTM rates applied are as per the relevant rates published by FIiN'4.I|i'{DA.

/:

"t\

Units of Venture Capital Funds (VCF) held under AFS category are valued usngrlf4u/'^
Net Asset Value (NAV) shown by VCF as per the financial statement. The VCFs
f;h{
F-201

Qn- -",9

Consolidated Financial Statements for the year ended March 31,2014

*r\vr-

valued based on the audited results once in a year. In case the audited financials are
not available for a period beyond 18 months, the investments are valued at { 1 per
VCF.

Quoted equity shares are valued at their closing price on a recognized stock
exchange. Unquoted equity shares are valued at the book value if the latest balance
sheet is available, else, at

At the end of

{ 1 per company,

as per relevant RBI guidelines.

each reporfing period, securig receipts issued

by the

asset

reconstruction company are valued in accordance with the guidelines applicable to

such instruments, prescribed by RBI from time to time. Accordingly, in cases where
the cash flows from security receipts issued by the asset reconshuction company are
limited to the actual realization of the financial assets assigned to the inshuments in
the concerned scheme, the Bank reckons the net asset value obtained from the asset
reconstruction company from time to time, for valuation of such investrnents at each

reporting date.
Investments in quoted Mutual Fund (MF) Units are valued as per Stock Exchange
quotations. Investments in un-quoted MF Units are valued on the basis of the latest
re-purchase price declared by the MF in respect of each particular Scheme.

fl

Accounting for repos

ret:erse repos

to repurchase (Repos) and securities purchased

under agreements to resell (Reverse Repos) including liquidity adjustment facility
(LAF) wittr RBI are treated as collateralized borrowing and lending transactions
respectively in accordance with RBI master circular No.
DBOD.No.BP.BC.8/21..M.14'1./201T1.4 dated July 1, 2013. The first leg of the repo
hansaction is contracted at the prevailing market rates. The difference between
consideration amounb of first and second (reversal of first) leg reflects interest and is
recognized as interest income/expense over the period of transaction.

Securities sold under agreemenb

8)

Proft/Loss on sale of Inoestments

ProfVloss on sale of Inveshnents in the HTM category is recognized in the profit

and loss account and profit thereafter is appropriated (net of applicable taxes and
stafutory reserve requirements) to Capital Reserve. Profit/Loss on sale of
inveshents in HFT and AFS categories is recognized in the Profit and Loss account.
18.5.3

Ailoances
Advances are classified as performing and non-performing based on the relevant RBI
guidelines. Advances are stated net of specific loan loss provisions, interest in suspense,
inter-bank participation certificates issued and bills rediscounted. Specific loan loss
provisions in respect of non-performing advances are made based on management's
assessment of the degree of impairment of the advances, subject to the minimum
provisioning level prescribed in relevant RBI guidelines.
As per the RBI guidelines a general provision is made on all standard advances based on
the category of advances as prescribed in the said guidelines. The Bank also maintains
additional general provisions on standard exposure based on the internal credit rating
matrix. These provisions are included in Schedule 5 - 'Other liabilities & provisions Others'.

In respect of restrucfured standard and non performing advances, provision is made for
the present value of principal and interest component sacrificed at the
restructuring the assets, based on the RBI guidelines.

F-202

Tr#76r$r

Consolidated Financial Statements for the year ended March 31,2014

Amounts recovered against debts written off in earlier years and provisions no longer
considered necessary based on the current stafus of the borrower are recognised in the
profit and loss account.

78.5.4 Transactions inoolaing foreign exchange

Monetary foreign currency assets and liabilities are hanslated at the balance sheet date at
rates notified by the Foreign Exchange Dealers' Association of India (FEDAI'). Foreign
exchange contracts of original maturities less than 12 months outstanding at the balance
sheet date are marked to market at rates notified by FEDAI for specified maturities,
suitably interpolated for in-between maturity contracts. Long term foreign exchange
contracts (original maturities of over 12 months) are stated at net present value using
LIBOR/SWAP curves of the respective currencies. The resulting profits or losses are
recognized in the profit and loss account.

Premia/discounb on foreign exchange swaps, that are used to hedge risks arising from
foreign currency assets and liabilities, are amortized over the life of the swap.

Income and expenditure

in foreign currency are accounted for at exchange

rates

prevalent on the date of the hansaction.

In accordance with AS 11 'The Effects of changes in Foreign Exchange Rates', contingent

Iiabilities in respect of outstanding foreign exchange forward conhacts, derivatives,
guarantees, endorsements and other obligations are stated at the exchange rates notified
by FEDAI corresponding to the balance sheet date.

78.5.5 Earnings per share

The Group reports basic and diluted earnings per equity share in accordance with (AS)
20, "Earnings per Share" notified under the Companies Act, 1956, read with General
Circular 8/2014 dated April 4,2074 issued by the Ministty of Corporate Affairs to the
extent applicable. Basic earnings per equity share have been computed by dividing net
profit after tax for the year by the weighted average number of equity shares outstanding
for the period.

Diluted earnings per equity share have been computed using the weighted average
number of equity shares and dilutive potential equity shares outstanding during the
period except where the results are anti dilutive.
L8.5.6 Accounting for ilerioatiue transactions
Derivative transactions comprises forward rate agreements, swaps and option contracts.
The Bank undertakes derivative transactions for market making/hading and hedging onbalance sheet assets and liabilities. All market making/trading transactions are marked to
market on a periodic basis and the resultant unrealized gains/losses are recognized in the
profit and loss account.
Derivative transactions that are undertaken for hedging are accounted for on accrual
basis except for the transaction designated with an asset or liability that is carried at
market value or lower of cost or market value in the financial statements, which are
accounted similar to the underlying asset or liability.

option premium accounting framework prescribed by FEDAI SpLcircular dated Dec 14, 2007. Premium on option transaction is recognized as

The Bank follows the

income/expense on explry or early termination of the transaction. Mark to market (MTM)

for premium received/paid on option contracts)

Sil{li::jf|sted

F-203

r."ora.ffi

Qlr^^{
)
r(
)'/
)
+[
)
).

,0]--v'

\3nw

nv

Consolidated Financial Statements for the year ended March 31,2014

ulllr

The amounts received/paid on cancellation of option contracts are recognized as realized

gains/losses on options. Charges receivable/payable on cancellation/ termination of

foreign exchange forward contracts and swaps are recognized as income/ expense on the
date of cancellation/ termination under'Other Income'.

The requirement for collateral and credit risk mitigation on derivative contracts is
assessed based on internal credit policy. Overdues if any, on account of derivative
transactions are accounted in accordance with extant RBI guidelines.

As per the RBI guidelines on 'Prudential Norms for Off-balance Sheet Exposures of
Banks' a general provision is made on the current gross MTM gain of the contract for all
outstanding interest rate and foreign exchange derivative hansactions.

L8.5.7 Eixeil assets

Fixed assets are stated at cost less accumulated depreciation and provision for
impairment. Cost comprises the purchase price and any cost attributable for bringing the
asset to its working condition for its intended use.
Fixed assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an
asset with future net discounted cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment is recognised by debiting the profit
and loss account and is rreasured as the amount by which the carrying amount of
the asseb exceeds the fair value of the assets.

78.5.8 Depreciation
Depreciation on fixed assets is provided on straight-line method, over estimated useful
lives, as determined by the management at the rates mentioned below (which are higher
than or equal to the corresponding rates prescribed in Schedule XIV to the Companies

Act

1956):

Rates of depreciation per annum

Class of asset

Office equipment
Computer hardware
Computer software

16.27%

Vehicles

20,00Y.

33.33'/'

25.n%

Furniture and Fixtures

Leasehold improvements to prenrises

6.33%

Over the lease period or 9 years

whichever is less.

fully depreciated in the year of purchase.

For assets purchased/ sold during the year, depreciation is being provided on pro rata
basis by the Group.
Assets costing less than i5,000 are

78.5.9 Retirement anil employee benefits

Leaoe salary

to carry forward a part of their

unavailed/unutilized leave subject to a maximum limit. The employees carmot encash
unavailed/unutilized leave. The Bank has computed the compensated absence provision
as per revised AS 15 - Employee Benefits.

The employees of the Group are entitled

(.2:'l<

F-204

Consolidated Financial Statements for the year ended March 31,2014

87ffi

Gratui\1

The Group provides for gratuity, a defined benefit retirement plarl covering eligible
employees. The plan provides for lump sum payments to vested employees at retirement
or upon death while in employment or on termination of employment for an amount
equivalent to 15 days' eligible salary payable for each completed year of service if the
service is more than 5 years. The Group accounts for the liability for future gratuity
benefits using the projected unit cost method based on annual actuarial valuation.
The Group recognizes the acfuarial gains and losses during the year in which the same
are incurred.
Prooident

fund

In accordance with law, all employees of the Bank are entitled to receive benefits under
the provident fund, a defined contribution plan in which both the employee and the Bank
contribute monthly at a pre determined rate. The Bank has no liability for future
provident fund benefits other than its annual contribution and recognizes such
conhibutions as an expensie in the year incurred.
78.5.10 Leases

Leases where the lessor effectively retains substantially all risks and benefits of
ownership are classified as operating leases. Operating lease payments are recognized as
an expense in the profit and loss account on a straight line basis over the lease term.
78.5.77 lncometaxes
Income tax expense comprises current tax provision (i.e. the amount of tax for the period
determined in accordance with the Income Tax Act, 1961 and the rules framed there
under) and the net change in the deferred tax asset or liability in the year. Deferred tax
assets and liabilities are recognised for the future tax consequences of ti^iog differences

between the carrying values of assets and liabilities and their respective tax bases, and
operating loss carry forwards. Deferred tax assets and liabitties are measured using the
enacted or substantively enacted tax rates at the balance sheet date.
Deferred tax assets are recognized only to the extent there is reasonable certainty that the
assets can be realized in fufure. In case of unabsorbed depreciation or carried forward

loss under taxation laws, deferred tax assets are recognized only if there is virfual
certainty of realization of such assets supported by convincing evidence. Deferred tax
asseb are reviewed at each balance sheet date and appropriately adjusted to reflect the
amount that is reasonably/virtually certain to be realized.

18.5.72 Prooisions and contingmt

assetiliabilities

The Group creates a provision when there is a present obligation as a result of a past
event that probably requires an oufflow of resources and a reliable estimate can be made
of the amount of the obligation. A disclosure for contingent liability is made when there
is a possible obligation or a present obligation that may but probably will not require an
oufflow of resources. When there is a possible obligation or a present obligation in
respect of which the likelihood of oufflow of resources is remote, no provision or
disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best
estimate. If it is no longer probable that an oufflow of resources would be required to
settle the obligation, the provision is reversed.

Contingent assets are not recognized in the financial statemenb. Howevet, co

assets are assessed continuallv and if it is virtuallv certain that an inflow of
F-205

Rf{t.\

Consolidated Financial Statements for the year ended March 31,2014

benefits will arise, the asset and related income are recognized in the period in which the
change occurs.
18.5.L3 Employee Stock Compensation Cost
Measurement of the employee share-based payment plans is done in accordance with the
Guidance Note on Accounting for Employee Share-based Payments issued by Institute of
Chartered Accountants of India (ICAD and SEBI ESOP Guidelines 1999. The Bank
measures compensation cost relating to employee stock options using the intrinsic value
method. Compensation cost is measured by the excess, if any, of the fair market price of

the underlying stock (i.e. the last closing price on the stock exchange on the day
preceding the date of grant of stock options) over the exercise price. The exercise price of
the Bank's stock option is the last closing price on the stock exchange on the day
preceding the date of grant of stock options and accordingly there is no compensation
cost under the intrinsic value method.
18.5.14 Cash and Cash equiaalent
Cash and cash equivalents include cash in hand, balances
banks and money at call and short notice.

78.6

with RBI, balances with other

Equity lssue

During the financial year ended March 3'1, 2074, the Bank has issued 2,011,,337 shares
(previous year:5,634,855 shares) pursuant to the exercise of stock option aggregating to I
359,622 thousands (previous year: (813,123 thousands).

18.7.7 Income Taxes

Provisions made for Income Tax during the year

((

inthousands)

For the year ended

For the year ended

March 31,2074

March 37,n13

Current income tax expense

7,784118

6,677,64

Deferred income tax benefit

l6e8476)

(u27,1241

7,(J8'5,&2

6,2:50,510

TOTAL

78.7.2 Staff rctirement bmefits

The following table sets out the funded status of the Gratuity Plan and the amounts
recognized in the Bank's financial statements as of March 31,,2014 and March 3'1,,2013:
Changes in present value of Obligations

({

Present Value of Obligation at the beginning of the year

Interest Cost

Current Service Cost

in thousands)

As at March

As at March

31',2AL4

37,2UL3

2&,177

190,E37

19,99u

'1.4,977

106,741.

101.,120

(77A24)

(13,311 )
(19,600 )

Past Service Cost

Benefits Paid

Actuarial (gain)/loss on Obligation

(57A72)

Present Value of Obligation at the end of the year

376,O19

F-206

:'E/',{-

Consolidated Financial Statements for the year ended March 31,2014

Changes in the fair value of planned assets:

(7
For the year ended

March 31,2014
Fair value of plan assets at the beginning of the year

inthousands)

For the year ended

March 37,2A13

32,3M

"t7,591

83

2,M9

9,727

2,403

Adjusbnent to Opening Balance

Expected retum on plan assets
Contributions

1som0

2j,955

Benefits paid

(17,424)

(13,311)

(5,696)

(2,403)

768,394

32,3M

Actuarial garn/ (loss) on planned assets

Fair value of planned assets at the end of the period

Fair value of planned assets:

({

inthousanils)

For the year ended For the year ended

March 31,2014
March 31,2013
Fair value of plan assets at the beginning of the year
Adjustrnent to Opening Balance
Acfual refum on plan assets

32,3M

17,591.

83

2,069

Contributions

3,437
150000

25,955

Benefits paid

(17,424)

(13,311)

Fair value of planned assets at the end of the period

1.68,394

32,3M

Net gratuity cost for the year ended March 3't,

following components:

20'1,4

and March 31, 2073 comprises the

(7

Current Service Cost

Interest Cost
Expected Refurn on plan assets

Net Actuarial gain recognized in the year

inthousanils)

For the year ended

March 37,2014

For the year ended

March 31,2013

106,741.

101.,120

19,99f3

14,970

p,12n

(2,4[,3)

(51.,716)

(17ten

Past Service Cost

Expenses recognized

65,896

Experience History:

('

(Gain)/Loss

on obligation due to

change

in thousanils)

For the year ended

March 37,2074

For the year ended

March 37,2013

(62,747)

11,805

5,335
(s,6e6)

Q7,406)
(2,403)

assumption
Experience (Gain)/Loss on obligation
Actuarial Gain/(Loss) on planned assets

F-207

6,#

n8r

Consolidated Financial Statements for the year ended March 31,2014

IIK

The assumptions used in accounting for the gratuity plan are set out below:
For the year ended
March 37,2014

For the year ended

8.%%-9.19'/,

7.83%

Discount Rate
Expected Retum on Plan Assets

March 37,20\3

9.8%

9.ETo

Mortality

L.r.c.(199+e6)

L.r.c.(199+e6)

Ultirnate Table
70'/" -72% p.a.

Ultimate Table

Fufure Salary Increases

p.a.

15o/o

Disability

Attrition

5Y" -'25%

Retirement

60

207o

yrs

60

yrs

Acfuarial assumption on salary increase also takes into consideration the inflatioru
seniority, promotion and other relevant factors.
78.7.3

Segment Reporting

Pursuant to the guidelines issued by RBI on 4.917 (Segment Reporting) - Enhancement of

Disclosures dated April 18, 2007, effective from period ending March 31, 2008, the
following business segments have been reported.

Treasury: Includes invesbrrents, all financial markets activities undertaken on behalf

of the Bank's customers, proprietary trading, maintenance of reserve requirements
and resourcs mslilisntion from other banks and financial instifutions.

Corporate / Wholesale Banking: Includes lending, deposit taking and other services
offered to corporate customers.

Retail Banking: Includes lending, deposit taking and other services offered to retail
flrstomers.

Other Banking Operations: Includes para banking activities like third party product
distributioo merchant banking etc.

Segmental results for the year ended March

3'1,,20'1,4

are set out below:

({

in thousanils)

Business Segments

Total

Segment Revenue

714985,W

Add/ (Less):

Inter-

3,974,902

segment
Revenue net of intersegment

176,9@,792

ResuIt
Unallocated

35,779,7M

(r29m,874

Expenses

Operating Profit

8,198229

7,095,Y

Income Taxes

Extra-ordinary
Profit/(Loss)
Net Profit
Other Information:

75,712,587

Segment assets

1,o87,ffi,970

Unallocated assets

9,390,774

Total assets

LAm,M7,6U

Segment liabilities

Unallocated

liabilities
Total liabilities

F-208

rr*r

Consolidated Financial Statements for the vear ended March 31,2014

Segmental results for the year ended March 3-1.,2013 are set out below:

(? in thousands)
Business Segments

Segment Revenue

310,150

59,009,459

Less: Inter-segment

Revenue net of intersegment

Result

94,597,590
887,373

95,4U,963
30,o22,6n
(10,765,304)

Unallocated Expenses
Operating Profit

19,?57,377

Income Taxes

6,250,570_

Extra-ordinary

Profit/(Loss)
Net Profit

13,W,807

Other Information:

433,273,170

Segment assets

985,072,&9

45,626,250

Unallocated assets

5,959,125
991,04!0,774

Total assets
Segment liabilities
Unallocated liabilities

Total liabilities
Notes for segment repofting

1.

The business of the Group is conuntrated

in lndia. Accordingly, geographical segment results hnte not

been reported.

2. In computing the abooe information, certain estimates

and assumptions haoe been made by thz

Management andhave been relieduponby the auditors.

3.

lncome, exrynse, assets and liabilities haae been either specifically identifud with indioidual segment or
allocated to segments on a systematic basis or classifud as unallocated.

4.

Fixed

assets

and related depreciation on

fxed

assets,

non treasury related bank balances at branches,

Bills payable, Tax related accouflts, Tier II instruments, IPDI instruments and releoant interest and
rent expenses whidt cannot be allocated to any segments haoe been classifred as unallocatcd. The
unallocated liabilities include Share Capital and Reseroes and Surplus.

5.

Inter-segment transactions haoe been generally based on transfer

picing

measures as dctermined by the

Management.

1-8.7.4 Relateil Party Discloswes

The Group has transactions with its related parties comprising key management
personnel and the relative of key management personnel

a)

As per AS 18 "Related Party Disclosures", prescribed by the Companies (Accounting

Standards) Rules, 2006, the Group's related parties for the year ended March 31.,2014
are disclosed below:

Individuals having significant influence:

Mr. Rana Kapoor, Managing Director & CEO

Key Management Personnel (KMP') (Whole time Director)

F-209
r/vn${

b,#

nwfun?fr

Consolidated Financial Statements for the year ended March 31,2014

Mr. Rana Kapoor, Managing Director & CEO

The following represents the significant transactions between the Group and such
related parties including relatives of above mentioned KMP during the year ended
March 3'1.,20'1.4:

(7 in thousanils)
Items/ Related
Party
Category

Whole time directors/

Maximum

Relatives of whole

Maximum

individual having

Balance

significant influence

duringthe

time directors/
individual having
significant influence

during the

year
Deposits

4,Ml*

Interest paid

5,2;16

Receiving of
services

#
#

Balance

year
69,6K

Dividend paid
* Represents outstanding as of March 31,201.4
# In Financial Year 201.3-1.4 there was only one related party in the said category, hencc the Bank has
not disclosed the details of transactions in accordance with circular issued by the RBI on March 29,
2003 "Guidance on compliance with the accounting standarils by banks".

b)

As per AS 78 "Related Party Disclosnres", prescibed by the Companies (Accounting

Standards) Rules, 2006, the Group's related parties for thc year ended March 31, 2013
are disclosedbeknn:

Individuals having significant influence:

Mr. Rana Kapoor, Managing Director & CEO

Key Management Personnel (KMP') (Whole time Director)

Mr. Rana Kapoor, Managing Director & CEO

The following represents the significant transactions between the Group and such
related parties including relatives of above mentioned KMP during the year ended
March 3'1.,2073:

(7 inthousanils)

Maximum Relatives of whole Maximum

Balance
time directors/ Balance during
Category
significant inlluence duringthe individual having
the year
year significantinfluence
Deposits##67,024*69852
Interestpaid
#
7,760
#
Receiving of
#
#

Items/ Related Whole time directors/

Party
individual having

services

Dividend

paid

* Represents outstanding as of March 31,2013

# In Financial Year 2012-13 there was only one related par$ in the said category, hence the Bank has
not disclosed thc details of transactions in accordance with circalar issued by thz RBI on March 29,
2003 "Guidance on compliance

uith

the

acaunting standards by banks" .

L8.7.5 OperatingLeases
Lease payments recognized in the profit and loss account for the year ended
March 3'T.., 2074 w as ?'1.,97 6,918 thousands (Previous year: {1.,550,7 42 thousands).

6JAI.Q
*!
'):

F-210

Consolidated Financial Statements for the year ended March 31,2014

As at March

3'1., 201.4 and March 31., 2073 the Group had certain non-cancellable
outsourcing contracts for information technology assets and properties on rent. The
future minimum lease obligations against the same were as follows:

(? inthousanils)
As at

As at

March 31,2014

March 3/.,,2013

Not later than one year

1,954,078

1,509,924

Later than one year and not later than five years
Later than five years

7,622407

6,239,702

3,332,522

1,875,575

l2,gw,M2

9,624,547

Lease obligations

TOTAL

The Group does not have any provisions relating to contingent rent.

The terms of r-enewal/purchase options and escalation clauses are those normally
prevalent in similar agreements. There are no undue restrictions or onerous clauses in the
agreements.

78.7.6 Earnings Per Sharc (EPS')

The Group reports basic and diluted earnings per equity share in accordance with ,4,9.20,

"Earnings Per Share". The dilutive impact is mainly due to stock options granted to
employees by the Bank.
The computation of earnings per share is given below:
Particulars

Year ended

March 31,?nl4

Year ended
March 37,m13

Basic (annualised)

Weighted average no. of equity shares outstanding

Net profit / (loss) (a ' 000)
Basic earnings per share

(f, )

%0,162,478

356,08't,,726

76,112,587

13,0M,807

44.74

36.53

3&,763,08

365,850,588

1.6,112,587

13,006,807

44.17

35.55

10.00

10.00

Diluted (annualised)
Weighted average no. of equity shares outstanding
Net profit / (loss) (? 000)

Diluted earnings per share (f

Nominal value per share

78.7.7

(f

ESOP disclosures

Statutory Disclosures Regarding loining Stock Option Scheme:

The Bank has Five Employee Stock Option Schemes viz.

o
o
o
.
.

Joining Stock Option Plan I (JSOP I) ,

Joining Employee Stock Option Plan II flESOP ry,
Joining Employee Stock Option Plan III flESOP ru),
YBL ESOP (consisting of JESOP IV and PESOP I )
YBL JESOP

V/

PESOP

II (consisting jESOp V pESOp II and pESOp II -2010)

The schemes include provisions for grant of options to eligible employees of the Bank
subsidiaries. All the aforesaid schemes have been approved by the Board Remuneration
F-211

WN

Consolidated Financial Statements for the vear ended March 31, Z)14

Committee and the Board of Directors and were also approved by the members of the Bank.
these schemes are administered by the Board Remuneration Committee.

All

ISOP I was for employees joining the Bank on or before March 31, 2005. All the grants under
JSOP I were made before the IPO of the Bank. JESOP II and JESOP III were in force for
employees joining the Bank up to March 3L,2006 and March 31,2007 respectively.
YBL JESOP V is in force for employees joining the Bank from time to time. Under IESOP V,50%
options vest takes place at the end of three years and remaining 50% at the end of five years from
the date of Grant.

I, PESOP II and PESOP II - 2010 are Performance Stock Option Plans. Under PESOP I,
of the options granted would vest at the end of each year from the date of grant. Under
PESOP II,30"/o of the granted options vest at the end of first year,30% vest at the end of second
year and balance 40% vest at the end of third year. Under YBL PESOP II - 2010,30% of the
granted options vest at the end of the third year, 30% vest at the end of the fourth year and
balance 40% vest at the end of the fifth year.

PESOP
25o/"

Further, grants under PESOP II had been discontinued with effect from January 20,2070.
Options under all the aforesaid plans are granted for a term of 10 years (inclusive of the vesting
period) and are settled with equity shares being allotted to the beneficiary upon exercise.

A summary of the status of the Bank's stock option plans as on March

Particulars

31,,20'1.4 is set

out below:

JSOP-I IESOP-II JESOP-ff IESOPMBLPESOPI YBLPESOPtr JESOPV

PESOPU
2UtO

Add:

opening balance
Option granted
during the year

Less:

OpHons exerrised

during the

Less:

yeat

260,000 28s^500

g,7so

7,7w

s6300

2g,7w 405,012

Options lapsed
during the year
Closing

balance

251250 275,8N

7Bs,oE

34ffi0

g4f'zso

2}2|.,m s,0s9,330

g,7s0

- L,fim,$n

35E

7m,ffi
591975

3p73F00

s:Lo,gx g:t7,uzs

025

400
329,513

9,98g,(n0

380Js0
E45,000

1,810,275 5M4775 L4l%,sfi

Approved by
shareholders on

granted
exercised

Options
and

OctZ7, Aptil2;6,
2UJiL
2005

24+ August
2006 29,W7

Iuly

August
29,N7

Sep

18,2ffi8

18,
20(B

Sep

Sep 18,
2008

during the year

Options gnnted
and eligible for
exercising and
exercised
the year

during

Weighted average
share price on the
date of options

10.fl)

83.01

91.68

156.35

765.43

729,M 207,69

269.n

exercised during
the year

Weighted average

remaining

587

815

conkactual life of
options
(days)

The Bank has charged Nif being the intrinsic value of the stock options granted
year ended March 31, 2014. Had the Bank adopted the Fair Value method
Black- Scholes pricing model), for pricing and accounting of options, net profit
F-212

PA
'l

tax

4.(
,1I

mfgwr

Consolidated Financial Statements for the year ended March 31,2014

would have been lower by { 34'1,,904 thousands, the basic earnings per share would have
been f 43.79 per share instead of {44.74 per share; and diluted earnings per share would
have been 743.24 per share instead of {M-17 per share.

A summary of the status of the Bank's stock option plans as on March

3'1.,2013 is set

out

below:

Particulars

ISOP-r IESOP-il

JESOP-il

JESOP

Iv

YBL PESOPI

YBLPESOPII JESOPV PESOPII

2010

Opening
balance

261,ffi

Add:

Option granted
during the year

Less:

Options
exercised during
the year

Less:

3M,700

435,650

7A87,795

5,639,375 5,322,950 7493,5W

1338500
1,5m

21,,240

379,350

Options lapsed
during the year
Closing balance

260000

Approved by

Oct27, Apil26,
2W
2005

shareholders on
Options granted
and exercised
during the year

'tf,.%NO

283500

s6300
Illy24,
2006

3274,875

313s500

M9;L7O

655,870

852"900

96,W

26,zfi

73s,o2s

9462l,0

August

August

29,m7

29,20n7

205.51

77LM

184.13

97

766

41300 1152,950

941,000

2321.200 5,059"330

9,988,000

18,
2m8

Sep 18,

Sep

18,2008

Sep

2m8

Options granted
d1d sligrble for
exercising and
exercised
the year

during

Weighted

10

100.55

121..35

average share
price on the date

of options
exercised
the year

during

Weighted
avel?Se

remaining
contractual life
of options

outstanding
(days)

The Bank has charged Nil, being the intrinsic value of the stock options granted for the
year ended March 3L, 2013. Had the Bank adopted the Fair Value method (based on
Black- Scholes pricing model), for pricing and accounting of options, net profit after tax
would have been lower by 7292,207 thousands, the basic earnings per share would have
been f 35.71, per share instead of i36.53 per share; and diluted earnings per share would
have been {34.75 per share instead of 435.55 per share.

;s_!ID

F-213

954

Consolidated Financial Statements for the year ended March 31,2014

The following assumptions have been made for computation of the fair value during the
year ended March 3't,20'1.4 and March 3't,2013.
March
Risk free interest rate

3l,20l4

March 31,2013
4.96%-8.83y.

4.96%-9.117,

1.5 yrs - 7.5 yrs

yrs - 7.5 yrs

Expected life

1.5

Expected volatility

25.07%-82.767.

29.27%-82.76"/,

1,.137' -1.507'

1,.13'/.-'t".50%

Expected dividends

In computing the above informatiory certain estimates and assumptions have been made
by the Management.

78.7.8 DeferreilTaxation
The net deferred tax asset of ?2,492,698 thousands as at March 31.,201.4 and f, 7,794,222
thousands as at March 31, 2013, is included under other assets and the corresponding
credib have been taken to the profit and loss account.

The components that give rise to the deferred tax asset and liability included in the
balance sheet are as follows:
({ in thousands)
As at

As at

Particulars

March

31,2A74 March 31,2073

Deferred tax a6set

Depreciation
Provision for gratuity and unutilized leave
Provision for Non Performing Assets
Amortisation of premium onHTM securities
Provision for standard advances
Other Provisions
Preliminary expenses u/s 35D of IT Act
Total Deferred tax asset
Deferred Tax Liability

173,sil

148,767

105,193

r34ffi

6,T14

6,499t

38O,97.7

280,978

1,u7,778

877,551

479,U29

3s+4s7

207

r,794222

\493,7y2
7,W4

Depreciation and amortisation

Total Deferred Tax Liability

1,094

Total Net Deferred Tax Asset/ (Liability)

249L598

1,794,22:2

78.7.9 Proaisions and Contingencies

The breakup of provisions of the Group for the year ended March 37, 2074 and
March 31.,2013 are given below:

(? in thousanils)

Prowision for taxation

Provision for investrnents

Provision for standard advances
Provision made/write off for non performing advances
Others Provisions*

" Other

March 31,2074

March 31,20'x.3

7,W5,@2

62l,O,5tO

8ffi,O79

(2e9701

1,U8,978

766,399

1,358,169

t,4F,5215

tt9,615

(341'31

Proaisions includes prooision made against other assets and proaision

interest on Restructured Assets.

F-214

f\)r
);

JJ\

Consolidated Financial Statements for the year ended March 31,2014

nrv

:illltl

L8.8.7 Dues to Micro and Small Enterpises

Under the Micro and Small Enterprises Development Act, 2006 which came into force
from October 02,2006, certain disclosures are required to be made relating to Micro and
Small enterprises. On the basis of information and records available with the
management and confirmation sought by the rranagement from suppliers on their
registration with the specified authority under the said Act, there have been no reported
cases of delays in payments to micro and small enterprises or of interest payments due to
delays in such payments.

18.8.2 Aililitional ilisclosure

Additional statutory information disclosed in the separate financial statements of the
Bank and subsidiaries having no material bearing on the true and fair view of the
consolidated financial statements and the information pertaining to the items which are
not material have not been disclosed in the consolidated financial statement.

F-215

WN

Consolidated Financial Statements for the year ended March 31,20L4

18.8.3 Desuiption of contingent liabililies

Sr.

No.
1-.

Contingent Liabilities

Bnef

Claims against the Bank

The Bank is a party to various legal proceedings in the

normal course of business. The Bank does not expect the
outcome of these proceedings to have a material adverse
effect on the Bank's financial conditions, results of

not

acknowledged

as

debts

operations or cash flows.

2.

Liability on account of
forward exchange and

The Bank enters into foreign exchange contracts, currency

derivative contracts.

interest rate swaps

options, forward rate agreements, currency swaps and

with interbank participants

and

customers. Forward exchange contracts are commitnents

to buy or sell foreign currency at a future date at the

contracted rate. Currency swaps are commitnents to

exchange cash flows by way of interest/principal in one
currency against another, based on predetermined rates.
Interest rate swaps are commitments to exchange fixed
and floating interest rate cash flows. The notional

of financial instruments of such foreign

exchange contracts and derivatives provide a basis for
comparison with instruments recognized on the balance
sheet but do not necessarily indicate the amounts of
future cash flows involved or the current fair value of the
instruments and, therefore, do not indicate the Bank's
amounts

exposure to credit or price risks. The derivative

instrumenb become favorable (assets) or unfavorable
(liabilities) as a result of fluctuations in market rates or
prices relative to their terms. The aggregate contractual or

notional amount of derivative financial instruments on

hand, the extent to which instruments are favourable or
unfavourable and, thus the aggregate fair values of

derivative financial assets and liabilities can fluctuate

significantly.

3.

Guarantees

given

on

issues documentary credit and guarantees on behalf of its

acceptances,

customers. Documentary credits such as letters of credit

enhance the credit standing of the customers of the Bank.
Guarantees generally represent irrevocable assurulces
that the Bank will make payments in the event of the
customer failing to fulfill its financial or performance
obligations.

endorsements and other

obligations

I
?.

78.8.4

As a part of its commercial banking activities the Bank

behalf of constituents,

Other items for which

the bank is contingently

liable

- Capital commitments

Value dated purchase of securities

- Foreign Exchange Contracts

(Iom & Spot)

Eixeil Assets

The software capitalized under Fixed Asset was 7 23O,8OS thousands and
thousands as at March 31,2074 and March 37,2073 respectively.

261.,194

/{.t^"^-Q

i[]

,.i(
F-216

),

R+!*xaU

Consolidated Financial Statements for the year ended March 31,2014

1.8.8.5 Pior peiod comparatioes

Previous period's figures have been regrouped where necessary to conform to current
year classification.

For S. R. BATLIBOI & CO. LLP

For and on behalf of the Board of Directors

Chartered Accountants

YES BANK

Limited

ICAI Firm Registration No: 30L003E

nr

A.lu [;

(1
(>-1""1 \-/

ha-o-al- .--^--,

Surekha Gracias

Aiay Vohra

M R Srinivasan

Parbrer

Director

Non Executiae Cluirman

N\A..

()

wr

Shivanadd\R. Shettigar
Chief Financial Officer

F-217

Company

lluetary

F-218

F-219

F-220

F-221

F-222

F-223

F-224

F-225

F-226

F-227

F-228

F-229

F-230

F-231

F-232

F-233

F-234

F-235

F-236

F-237

F-238

F-239

F-240

F-241

F-242

F-243

F-244

F-245

F-246

F-247

F-248

F-249

F-250

F-251

F-252

F-253

F-254

F-255

F-256

F-257

F-258

F-259

F-260

F-261

F-262

F-263

F-264

F-265

F-266

F-267

F-268

F-269

F-270

F-271

F-272

F-273

F-274

F-275

F-276

F-277

F-278

F-279

F-280

F-281

F-282

F-283

F-284

F-285

F-286

F-287

F-288

F-289

F-290

F-291

F-292

F-293

F-294

F-295

F-296

F-297

F-298

F-299

F-300

F-301

F-302

F-303

F-304

F-305

F-306

F-307

F-308

F-309

F-310

F-311

F-312

REGISTERED AND CORPORATE OFFICE OF THE BANK

YES Bank Limited
Nehru Centre, 9th Floor
Discovery of India, Dr. A.B. Road
Worli, Mumbai 400 018
India
Website: www.yesbank.in; CIN: L65190MH2003PLC143249
Compliance Officer
Shivanand R. Shettigar, Group Executive Vice President and Company Secretary
17th Floor, Tower 2, Indiabulls Finance Centre
Elephinstone (West), Senapati Bapat Marg
Mumbai 400 013
Maharashtra, India
Tel: (91 22) 6669 9000; Fax: (91 22) 6669 9018; E-mail: shareholders@yesbank.in
GLOBAL CO-ORDINATORS AND BOOK RUNNING LEAD MANAGERS
Goldman
Sachs
(India) Motilal Oswal Investment Advisors CLSA India Private Limited
8/F Dalamal House
Securities Private Limited
Private Limited
951-A
Rational
House, Motilal Oswal Tower, Rahimtullah Sayani Nariman Point
Appasaheb Marathe Marg
Road, Opposite Parel ST Depot, Mumbai 400 021
Prabhadevi, Mumbai 400 025
Prabhadevi,
Maharashtra, India
Maharashtra, India
Mumbai 400 025, Maharashtra, India
JOINT BOOK RUNNING LEAD MANAGERS
HSBC Securities and Inga Capital Private Investec Capital Services
Capital Markets (India) Limited
(India) Private Limited
Naman Midtown, 21st 607, 6th Floor, The Capital
Private Limited
52/60, MG Road
Floor, A Wing
- A Wing
Fort, Mumbai 400 001 Senapati Bapat Marg, Bandra Kurla Complex,
Maharashtra, India
Elphinstone (West)
Mumbai 400 051,
Mumbai 400 013
Maharashtra, India
Maharashtra, India
JM
Financial Nomura Financial Religare Capital SBI
Capital YES
Securities
Institutional
Advisory
& Markets Limited
Markets Limited
(India) Limited*
Securities Limited
Securities (India) 901, 9th Floor, 202, Maker Tower IFC, Tower 1 & 2,
7th Floor, Cnergy
Tower I, Indiabulls E
Unit no. 602 A, 6th
Private Limited
Appasaheb Marathe Ceejay
House, Finance
Centre, Cuffe Parade
Floor
Marg Prabhadevi
Level 11,
Senapati
Bapat Mumbai 400 005
Senapati
Bapat
Mumbai 400 025 Plot F, Shivsagar Marg, Elphinstone Maharashtra, India
Marg, Elphinstone
Maharashtra, India
Estate
Road, Mumbai
Road
Dr. Annie Besant 400013
Mumbai 400 013
Road
Worli,
Maharashtra, India
Mumbai 400 018
Maharashtra, India
* YES Securities (India) Limited shall be involved only in marketing of the Issue.
LEGAL COUNSEL TO THE BANK AS TO INDIAN
LEGAL COUNSEL TO THE MANAGERS AS TO
LAW
INDIAN LAW
Edelweiss
Financial
Services Limited
Edelweiss House, Off C S
T Road, Kalina
Mumbai 400 098
Maharashtra, India

Luthra & Luthra Law Offices

20th Floor, Tower 2
Indiabulls Finance Centre
Elphinstone Mills compound, Senapati Bapat Marg Lower
Parel, Mumbai 400 013
India

Shardul Amarchand Mangaldas & Co.

24th Floor, Express Towers, Nariman Point
Mumbai 400 021
India

LEGAL COUNSEL TO THE MANAGERS AS TO U.S.

LAW

STATUTORY AUDITORS

Allen & Overy LLP

9th Floor, Three Exchange Square
Central, Hong Kong SAR

M/s B.S.R. & Co. LLP., Chartered Accountants

5th Floor, Lodha Excelus
Apollo Mills Compound, N M Joshi Marg
Mahalakshmi, Mumbai 400 011
India

218