Placement Document

Serial No. ________

Not for Circulation
Strictly Confidential

DCB BANK LIMITED

(Formerly Development Credit Bank Limited)
(DCB Bank Limited (the Bank) was incorporated as Development Credit Bank Limited under the Companies Act, 1956. The Bank is registered with RBI under the
Banking Regulation Act, 1949 and with the Registrar of Companies with registration No.11-89008 on May 31, 1995. Subsequently, the name of the Bank was changed to
DCB Bank Limited w.e.f. October 24, 2013 and has received RBI approval on January 10, 2014 for the same. The corporate identification number of the Bank is
L99999MH1995PLC089008).
The Bank is issuing up to 30,432,136 equity shares of face value ` 10 each (Equity Shares) at a price of ` 82.15 per Equity Share, including a premium of ` 72.15 per
Equity Share, aggregating up to ` 2,499.99 million (the Issue or the Placement).
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
READ WITH RULE 14 OF THE COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) RULES, 2014
The Equity Shares are listed on the BSE Limited (the BSE) and the National Stock Exchange of India Limited (the NSE) and together, BSE and NSE, are referred as
the Stock Exchanges). The closing price of the outstanding Equity Shares on BSE and NSE on September 26, 2014 was ` 81.30 (Rupees Eighty one and thirty paise)
and ` 81.25 (Rupees Eighty one and twenty five paise) per Equity Share, respectively. In-principle approvals under Clause 24(a) of the Listing Agreement for listing of
the Equity Shares have been received from the Stock Exchanges i.e. BSE and NSE on September 29, 2014 and September 29, 2014, respectively. Applications to the
Stock Exchanges shall be made for obtaining final listing and trading approvals for the Equity Shares offered through this Placement Document. 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 business or of the Equity Shares.
THE BANK HAS PREPARED THIS PLACEMENT DOCUMENT SOLELY FOR PROVIDING INFORMATION IN CONNECTION WITH THE
PROPOSED ISSUE.
THIS ISSUE AND THE DISTRIBUTION OF THIS PLACEMENT DOCUMENT IS BEING MADE IN RELIANCE UPON SECTION 42 OF THE
COMPANIES ACT 2013, READ WITH RULE 14 OF THE COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) RULES, 2014, AND
CHAPTER VIII OF THE SEBI ICDR REGULATIONS. THIS 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 QUALIFIED INSTITUTIONAL BUYERS (QIB) AS DEFINED UNDER THE
SEBI ICDR REGULATIONS.
YOU MAY NOT BE AND ARE NOT AUTHORIZED TO (1) DELIVER THIS PLACEMENT DOCUMENT TO ANY OTHER PERSON; (2) REPRODUCE
THIS PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER; OR (3) RELEASE ANY PUBLIC ADVERTISEMENTS OR UTILISE ANY MEDIA,
MARKETING OR DISTRIBUTION CHANNELS OR AGENTS TO INFORM THE PUBLIC AT LARGE ABOUT THE ISSUE. ANY DISTRIBUTION OR
REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY
RESULT IN A VIOLATION OF APPLICABLE LAWS OF INDIA AND OTHER JURISDICTIONS.
Invitations, offers and sales of the Equity Shares shall only be made pursuant to the Preliminary Placement Document, the Application Form, this Placement Document
and the Confirmation of Allocation Note. Please refer to the chapter titled Issue Procedure. The distribution of this Placement Document or the disclosure of its
contents 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 Placement Document, agrees to observe the foregoing restrictions and to make no copies of this Placement
Document or any documents referred to in this Placement Document.
INVESTMENTS IN THE EQUITY SHARES INVOLVE A DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST ANY FUNDS IN
THIS ISSUE UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENTS. PROSPECTIVE
INVESTORS ARE ADVISED TO READ THE CHAPTER TITLED RISK FACTORS CAREFULLY BEFORE TAKING AN INVESTMENT DECISION
IN THIS ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS ADVISORS ABOUT THE PARTICULAR CONSEQUENCES OF AN
INVESTMENT IN THE EQUITY SHARES BEING ISSUED PURSUANT TO THIS PLACEMENT DOCUMENT.
A copy of this 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 (as defined hereinafter)) will be filed with the Stock Exchanges. The
Bank shall also make the requisite filings with the Registrar of Companies, Maharashta, Mumbai (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. This Placement Document has not been reviewed by SEBI, RBI, the
Stock Exchanges, RoC or any other regulatory or listing authority. The Equity Shares offered in the Issue have not been recommended or approved by SEBI, nor does
SEBI guarantee the accuracy or adequacy of this Placement Document. This Placement Document has not been and will not be registered as a prospectus with any
Registrar of Companies in India, 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. This Placement Document will be circulated or distributed to Qualified Institutional Buyers (as defined in the SEBI ICDR Regulations), only and will
not constitute an offer to any other class of investors in India or any other jurisdiction. The Issue of Equity Shares proposed to be made pursuant to this Placement
Document is meant solely for Qualified Institutional Buyers (as defined in the SEBI ICDR Regulations) on a private placement basis.
The information on the Banks website or any website directly or indirectly linked to the Banks website does not form part of this Placement Document and prospective
investors should not rely on such information contained in, or available through, such websites.
The Equity Shares in the Issue have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act), and unless so registered
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. Accordingly, the Equity Shares are being offered and sold outside the United States in offshore transactions in reliance
on Regulation S under the Securities Act and the applicable laws of the jurisdictions where those offers and sales occur. The Equity Shares are transferable only in
accordance with the restrictions described under the chapter titled Transfer Restrictions. Please also refer to Distribution and Solicitation Restrictions.
This Placement Document is dated October 8, 2014.
SOLE GLOBAL COORDINATOR AND BOOK RUNNING LEAD MANAGER

TABLE OF CONTENTS

Page
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
EXCHANGE RATES .......................................................................................................................................... 11
INDUSTRY AND MARKET DATA .................................................................................................................. 12
FORWARD LOOKING STATEMENTS ............................................................................................................ 13
ENFORCEMENT OF CIVIL LIABILITIES ....................................................................................................... 14
DEFINITIONS AND ABBREVIATIONS .......................................................................................................... 15
SUMMARY OF THE ISSUE .............................................................................................................................. 21
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE
COMPANIES ACT, 2013 .................................................................................................................................... 23
SUMMARY OF OUR BUSINESS ...................................................................................................................... 25
SUMMARY FINANCIAL INFORMATION ...................................................................................................... 30
RISK FACTORS .................................................................................................................................................. 32
MARKET PRICE INFORMATION .................................................................................................................... 57
USE OF PROCEEDS ........................................................................................................................................... 59
CAPITALISATION AND INDEBTEDNESS ..................................................................................................... 60
DIVIDEND POLICY ........................................................................................................................................... 61
CAPITAL STRUCTURE ..................................................................................................................................... 62
SELECTED STATISTICAL INFORMATION ................................................................................................... 66
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ..................................................................................................................................................... 80
INDUSTRY OVERVIEW ................................................................................................................................. 106
OUR BUSINESS................................................................................................................................................ 119
REGULATIONS AND POLICIES .................................................................................................................... 138
BOARD OF DIRECTORS AND SENIOR MANAGEMENT .......................................................................... 153
PRINCIPAL SHAREHOLDERS ....................................................................................................................... 165
ISSUE PROCEDURE ........................................................................................................................................ 169
PLACEMENT .................................................................................................................................................... 180
DISTRIBUTION AND SOLICITATION RESTRICTIONS ............................................................................. 181
TRANSFER RESTRICTIONS .......................................................................................................................... 185
INDIAN SECURITIES MARKET .................................................................................................................... 186
DESCRIPTION OF EQUITY SHARES ............................................................................................................ 189
STATEMENT OF POSSIBLE TAX BENEFITS .............................................................................................. 195
LEGAL PROCEEDINGS .................................................................................................................................. 206
GENERAL INFORMATION ............................................................................................................................ 211
FINANCIAL STATEMENTS ............................................................................................................................ F-1
DECLARATION ............................................................................................................................................... 212

NOTICE TO INVESTORS
The Bank has furnished and accepts full responsibility for all the information contained in this Placement
Document and confirms that to the best of its knowledge and belief, having made all reasonable enquiries,
confirms that this Placement Document contains all information with respect to the Bank and the Equity
Shares, which are material in the context of this Issue. The statements contained in this Placement Document
relating to the Bank and the Equity Shares are, in all material respects, true and accurate and not misleading,
the opinions and intentions expressed in this Placement Document with regard to the Bank and the Equity
Shares are honestly held, have been reached after considering all relevant circumstances, are based on
information presently available to the Bank and are based on reasonable assumptions. There are no other facts
in relation to the Bank and the Equity Shares, the omission of which would, in the context of the Issue, make
any statement in this Placement Document misleading in any material respect.
Further, all reasonable enquiries have been made by the Bank to ascertain such facts and to verify the accuracy
of all such information and statements.
The Sole Global Coordinator and Book Running Lead Manager has not separately verified all the information
contained in this Placement Document (financial, legal or otherwise). Accordingly, neither the Sole Global
Coordinator and Book Running Lead Manager nor any of its 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 Sole Global Coordinator and Book Running
Lead Manager, as to the accuracy or completeness of the information contained in this Placement Document or
any other information supplied in connection with the issue of Equity Shares or their distribution. Each person
receiving this Placement Document acknowledges that such person has neither relied on the Sole Global
Coordinator and Book Running Lead Manager nor on any of its respective shareholders, employees, counsel,
officers, directors, representatives or affiliates 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 the 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 Placement
Document and any information or representation not so contained must not be relied upon as having been
authorised by or on behalf of the Bank or the Sole Global Coordinator and Book Running Lead Manager. The
delivery of this 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 Placement Document.
The Equity Shares have not been recommended by any foreign federal or state securities commission or
regulatory authority. As such, this 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 the Bank and the Sole Global Coordinator and Book Running Lead Manager which would permit
an issue of the Equity Shares or distribution of this 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 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 chapter
titled Distribution and Solicitation Restrictions. All purchasers will be required to make the applicable
representations set forth in the chapter titled Transfer Restrictions.
The information contained in this Placement Document has been provided by the Bank and other sources
identified herein. Distribution of this Placement Document to any person other than the investor specified by
the Sole Global Coordinator and Book Running Lead Manager or its 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 the Bank, is prohibited. Any reproduction or distribution of this Placement
Document, in whole or in part, and any disclosure of its contents to any other person is prohibited.

The distribution of this Placement Document and the issue of the Equity Shares in certain jurisdictions may be
restricted by law. As such, this 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 the Bank and the Sole Global Coordinator and Book Running Lead Manager which would
permit an issue of the Equity Shares or distribution of this 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 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 the Bank and the terms of
this Issue, including the merits and risks involved. Investors should not construe the contents of this 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 the Bank nor the Sole Global Coordinator and Book Running Lead Manager 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 the Bank under Indian law, including section 42 of the Companies Act 2013, read with rules
framed thereunder and Chapter VIII of the SEBI ICDR Regulations 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. Each investor, subscriber purchaser of Equity Shares in the Issue also acknowledges that it has been
afforded an opportunity to request from the Bank and review information relating to the Bank and the Equity
Shares.
This 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.dcbbank.com does not constitute or form part of this Placement
Document. Prospective investors should not rely on the information contained in, or available through such
website.

REPRESENTATIONS BY INVESTORS
All references to you or your in this chapter 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 the Bank and the Sole Global Coordinator and Book Running Lead Manager, as
follows:

you (i) are a QIB as defined under Regulation 2(1)(zd) of the SEBI ICDR Regulations, (ii) have a valid and
existing registration under applicable laws 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 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
Stock Exchanges;

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. The Preliminary Placement Document
and this Placement Document has not been reviewed by SEBI, RBI, the Stock Exchanges or any other
regulatory or listing authority(ies) and is intended only for use by QIBs. Further, the Preliminary Placement
Documentand this Placement Document has not been verified or affirmed by SEBI or the Stock Exchanges
and will not be filed or registered with the Registrar of Companies. This Placement Document has been
filed with the Stock Exchanges and has been displayed on the websites of the Bank and the Stock
Exchanges;

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 Placement Document) and complied with all the necessary
formalities and that you will honour such obligations;

none of the Bank, any Sole Global Coordinator and Book Running Lead Manager 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 Sole Global Coordinator and Book Running Lead Manager and that the
Sole Global Coordinator and Book Running Lead Manager 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 Placement Document, including,
without limitation, those regarding the Banks financial position, business strategy, plans and objectives of
management for future operations (including development plans and objectives relating to the 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 the Banks present and
future business strategies and environment in which the 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 Placement
Document. The Bank or any of its shareholders, Directors, officers, employees, counsels, advisors,
representatives, agents or affiliates assumes no responsibility to update any of the forward-looking
statements contained in this 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 the Bank in consultation with the Sole Global Coordinator and Book Running Lead Manager;

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

you have been provided a serially numbered copy of the Placement Document and have read this Placement
Document in its entirety;

that in making your investment decision, (i) you have relied on your own examination of the Bank and the
terms of the Issue, including the merits and risks involved, (ii) you have made and will continue to make
your own assessment of the Bank, the Equity Shares and the terms of the Issue based on such information
as is publicly available, (iii) you have relied upon your own investigations and resources in deciding to
invest in the Equity Shares, (iv) 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, (v) you have relied solely on the information contained in this Placement Document and no other
disclosure or representation by the Bank or any other party and (vi) you have received all information that
you believe is necessary or appropriate in order to make an investment decision in respect of the Bank and
the Equity Shares;

neither the Sole Global Coordinator and Book Running Lead Manager nor its 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 Sole
Global Coordinator and Book Running Lead Manager 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 the Sole Global Coordinator and Book
Running Lead Manager or any of its shareholders, directors, officers, employees, counsels, 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 the Bank or the Sole Global Coordinator and Book Running Lead Manager 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, (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 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 authorized 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;

in relation to the 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;

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 Takeover
Regulations;

to the best of your knowledge and belief together with other QIBs in the Issue that belong to the same group
or are under common control as you, the Allotment under this Issue to you shall not exceed 50.0% of the
Issue. For the purposes of this representation:
a.

the expression belongs to the same group shall be interpreted by applying the concept of companies
under the same group as provided in sub-section (11) of section 372 of the Companies Act; and

b.

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 are aware that if you are Allotted more than 5.0% of the Equity Shares 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 the Bank in the format prescribed in clause 35 of the Listing Agreement, 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;

you acknowledge, represent and agree that your total interest in the paid-up share capital of the Bank,
whether direct or indirect, beneficial or otherwise (any such interest, your Holding), when aggregated
together with any existing Holding and/or Holding of any of your associated enterprises (as defined under
Section 92A of the Indian Income Tax Act, 1961), does not exceed 5.0% of the total paid-up share capital
of the Bank, unless you are an existing shareholder who already holds 5.0% or more of the underlying paid
up share capital of the Bank pursuant to the acknowledgment of RBI, provided that your Holding does not,
without the further acknowledgment of RBI, exceed your existing Holding after Allotment;

you are aware that after the completion of the allotment process, the Bank shall apply for a post facto
approval from RBI in respect of this Issue, and that in the event that RBI does not grant the post facto
approval in respect of Allotment of Equity Shares to you, you shall be required to comply with the
instructions received from RBI in this regard;

you are aware that pursuant to the Allotment of the Equity Shares in the Issue, applications shall be made
by the 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;

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 Sole Global Coordinator and Book Running Lead Manager will have
entered into a Placement Agreement with the Bank whereby the Sole Global Coordinator and Book
Running Lead Manager has, subject to the satisfaction of certain conditions set out therein, undertaken
severally and not jointly to use its reasonable endeavours to seek to procure subscription for the Equity
Shares on the terms and conditions set forth therein;

the contents of this Placement Document are exclusively the responsibility of the Bank and none of the Sole
Global Coordinator and Book Running Lead Manager nor any person acting on their behalf or any of the
counsels, advisors, to the Issue has or shall have any liability for any information, representation or
statement contained in this Placement Document or any information previously published by or on behalf of
the Bank and will not be liable for your decision to participate in the Issue based on any information,
representation or statement contained in this 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 Sole Global
Coordinator and Book Running Lead Manager or the Bank or any other person and that none of the Sole
Global Coordinator and Book Running Lead Manager nor the 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 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 the
Sole Global Coordinator and Book Running Lead Manager (including any view, statement, opinion or
representation expressed in any research published or distributed by the Sole Global Coordinator and Book
Running Lead Manager or its respective affiliates or any view, statement, opinion or representation
expressed by any staff (including research staff) of the Sole Global Coordinator and Book Running Lead
Manager or their respective affiliates) or the Bank or any of their respective shareholders, directors,
officers, employees, counsels, advisors, representatives, agents or affiliates and neither the Sole Global
Coordinator and Book Running Lead Manager nor the 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 the Bank and the Sole Global Coordinator and Book Running Lead
Manager 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 chapter. 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 Sole Global Coordinator and Book Running Lead Manager 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 the Bank of any of our respective obligations or
any breach of any representations or warranties by the 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 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 the Preliminary Placement Document
and this 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 the Bank or our agents with regard to the 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 Sole
Global Coordinator and Book Running Lead Manager may not have the knowledge of the statements that
the 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 Sole Global Coordinator and Book
Running Lead Manager has 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;

you are, at the time the Equity Shares are purchased pursuant to Regulation S, located outside of the United
States (within the meaning of Regulation S) and you are not an affiliate of the Bank, or a person acting on
behalf of an affiliate;

you are purchasing the Equity Shares in an offshore transaction meeting the requirements of Rule 903 or
904 of Regulation S;

you understand that the Equity Shares have not been and will not be registered under the Securities Act or
with any securities regulatory authority of any state of the United States, and that the Equity Shares may not
be offered or sold within the United States except in reliance on an exemption from the registration
requirement of the U.S. Securities Act. Please refer to the chapter titled Transfer Restrictions;

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 the Bank, the Sole Global Coordinator and Book Running Lead Manager, 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 Sole Global Coordinator and Book Running Lead Manager on their
own behalf and on behalf of the 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
(SEBI FPI Regulations), FPIs (which includes FII) other than Category III FPIs and those unregulated broad
based funds which are classified as Category II FPIs (as defined in the SEBI FPI Regulations) 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) (all such offshore derivative instruments are referred to herein as PNotes), for which they may receive compensation from the purchasers of such instruments. P-Notes may be
issued only in favor of those entities which are regulated by any appropriate foreign regulatory authorities in the
countries of their incorporation or establishment subject to compliance with know your client requirements.
An FPI shall also ensure that no further issue or transfer of any P-Notes is made to any person other than such
entities which are regulated by an appropriate foreign regulatory authority. P-Notes have not been and are not
being offered or sold pursuant to this Placement Document. This Placement Document does not contain any
information concerning P-Notes or the issuer(s) of any P-Notes, including, without limitation, any information
regarding any risk factors relating thereto.
Any P-Notes that may be issued are not securities of the Bank and do not constitute any obligation of, claims on
or interests in the Bank. The 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 the P-Notes. Any P-Notes that may be
offered are issued by, and are the sole obligations of, third parties that are unrelated to the Bank. The Bank and
the Sole Global Coordinator and Book Running Lead Manager do not make any recommendation as to any
investment in P-Notes and do not accept any responsibility whatsoever in connection with the P-Notes. Any PNotes that may be issued are not securities of the Sole Global Coordinator and Book Running Lead Manager
and do not constitute any obligations of or claims on the Sole Global Coordinator and Book Running Lead
Manager. Affiliates of the Sole Global Coordinator and Book Running Lead Manager that are FPIs or FIIs may
purchase, to the extent permissible under law, Equity Shares, 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 from the
issuer(s) of 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 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. Also refer to Distribution and
Solicitation Restrictions and Transfer Restrictions for restrictions that may be applicable to P-Note
issuers and investors.

DISCLAIMER CLAUSE OF THE STOCK EXCHANGES

As required, a copy of this 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 Placement
Document; or
2. warrant that the Banks 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 the Bank, its Promoters, its management or any
scheme or project of the Bank;
and the filing of this Placement Document it should not for any reason be deemed or construed to mean that this
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 any of 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

Certain Conventions
In this Placement Document, unless otherwise specified or the context otherwise indicates or implies, references
to us, we or our are to the Bank. All references to you, your, offeree, subscriber, recipient,
investors, prospective investors and potential investor are to the prospective investors of Equity Shares in
the Issue. References in this Placement Document to India are to the Republic of India and the Government
are to the governments in India, Central or State, as applicable. All references herein to the U.S. or the United
States are to the United States of America and its territories and possessions.
References to the singular also refer to the plural and one gender also refers to any other gender, wherever
applicable. All references to Rupees or Rs. or ` are to the lawful currency of India. All references to
U.S. dollars and US$ are to the currency of the United States of America. All references to Euro or
are to the single currency of the participating member states introduced in the Third Stage of European
Economic and Monetary Union of the Treaty establishing the European Community.
Financial and Other Information
This Placement Document includes our audited financial statements as of and for the years ended March 31,
2012, March 31, 2013 and March 31, 2014 (Audited Financial Statements) and our Limited Reviewed
Financial Statements as of and for the three months ended June 30, 2014 (Reviewed Financials, together with
Audited Financial Statements, the Financial Statements). The Financial Statements have been prepared in
accordance with Indian GAAP. Please refer to Managements Discussion and Analysis of Financial
Condition and Results of Operations - Significant Factors Affecting Our Results of Operations and Financial
Condition - Basis of Preparation of Financial Statements.
Indian GAAP differs in certain significant respects from accounting principles generally accepted in other
countries, including International Financial Reporting Standards (IFRS) and U.S. GAAP. We do not provide a
reconciliation of our Financial Statements to IFRS or U.S. GAAP and other accounting principles with which
investors may be more familiar. We have not attempted to quantify the impact of U.S. GAAP on the financial
data included in this Placement Document, nor do we provide a reconciliation of our Financial Statements to
those of U.S. GAAP. Accordingly, the degree to which the Financial Statements prepared in accordance with
Indian GAAP included in this 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 Placement Document should
accordingly be limited. Please refer to the chapter titled Risk Factors.
We publish our Financial Statements in Rupees. The Financial Statements and the financial data relating to the
Bank herein are converted from crores, lacs or thousands, as the case may be, into millions and shown to the
nearest million of Rupees. (1 crore = 10 million and 1 million = 10 lacs)
In this Placement Document, certain monetary amounts have been subject to rounding adjustments; accordingly,
figures shown as totals in certain tables may not be an arithmetic aggregation of figures which precede them.
Unless stated otherwise, the financial data in this Placement Document is derived from the Financial Statements.
Our Fiscal Year commences on April 1 of each year and ends on March 31 of the immediately succeeding year,
so all references to a particular Fiscal Year are to the twelve-month period ended on March 31 of that year,
unless stated otherwise.

10

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
conversions 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 RBI. The
exchange rate as at September 26, 2014 was ` 61.5720 = U.S. Dollar 1.00. (Source: www.rbi.org.in)
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

Period End

Average*
High
(Rupee per US $1.00)
47.95
54.24
54.45
57.22
60.50
68.36

Low

2012
2013
2014

51.16
54.39
60.10

Months Ended
September 30, 2014
August 31, 2014
July 31, 2014
June 30, 2014
May 31, 2014
April 30, 2014

61.61
60.47
60.25
60.09
59.03
60.34

60.86
60.90
60.06
59.73
59.31
60.36

61.61
61.56
60.33
60.37
60.23
61.12

60.26
60.43
59.72
59.06
58.43
59.65

Quarter Ended
June 30, 2014
March 31, 2014
December 31, 2013
September 30, 2013
June 30, 2013

60.09
60.10
61.90
62.78
59.70

59.77
61.79
62.03
62.13
55.95

61.12
62.99
63.65
68.36
60.59

58.43
60.10
61.16
58.91
53.74

*Average of the official rate for each working day of the relevant period.
(Source: www.rbi.org.in)

11

43.95
50.56
53.74

INDUSTRY AND MARKET DATA

Information regarding market position, growth rates, other industry data and certain industry forecasts pertaining
to the businesses of the Bank contained in this Placement Document consists of estimates based on data reports
compiled by government bodies, data reports compiled by professional organisations and analysts, data from
other external sources such as RBI, IBEF etc. and on our knowledge of the markets in which the Bank
competes. Unless stated otherwise, the statistical information included in this Placement Document relating to
the industry in which we operate has been reproduced from various trade, industry and government publications
and websites.
This information 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. We confirm that such information and data has been accurately reproduced, and that as far as we are
aware and are able to ascertain from information published by third parties, no facts have been deliberately
omitted that would render the reproduced information inaccurate or misleading. Industry publications generally
state that the information that they contain has been obtained from sources believed to be reliable but that the
accuracy and completeness of that information is not guaranteed. In some cases, there is no readily available
external information (whether from trade associations, government bodies or other organisations) to validate
market-related analyses and estimates, requiring the Bank to rely on internally developed estimates. Similarly,
internal estimates and surveys, industry forecasts and market research, while believed to be reliable, have not
been independently verified and neither the Bank nor the Sole Global Coordinator and Book Running Lead
Manager makes any representation as to the accuracy and completeness of information based on trade, industry
and government publications and websites, data reports compiled by government bodies, professional
organisations and analysts, or from other external sources.
The extent to which the market and industry data used in this Placement Document is meaningful
depends on the familiarity with and understanding of reader of the methodologies used in compiling such
data.

12

FORWARD LOOKING STATEMENTS

Certain statements contained in this 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, can, could, may, objective, plan, potential,
project, pursue, shall, should, will, would, will likely result, is likely, are likely, believe, expect, expected to,
will continue, will achieve, or other words or phrases of similar import. Similarly, statements that describe our
strategies, objectives, plans or goals are also forward-looking statements. However, these are not the exclusive
means of identifying forward-looking statements. All statements regarding the Banks expected financial
condition and results of operations and business plans and prospects are forward-looking statements. These
forward-looking statements include statements as to the Banks business strategy, revenue and profitability
(including, without limitation, any financial or operating projections or forecasts), new business and other
matters discussed in this Placement Document that are not historical facts.
These forward-looking statements and any other projections contained in this Placement Document (whether
made by the Bank or any third party) are predictions and involve known and unknown risks, uncertainties
associated with the managements expectations with respect to, but not limited to:

volatility in interest rates and other market conditions;

failure to sustain or achieve growth of our deposit base, including our current and savings account deposit
base;
non-availability of funding and increase in funding costs;
any regulatory actions, notices or proceedings;
inability to expand operations to other part of India;
any adverse performance by priority sectors;
our inability to compete effectively;
our inability to grow at a similar rate that we have experienced in the past, or at all and successfully execute
our business and growth strategies;
failure to maintain capital adequacy requirements;
any increase in the CRR and the SLR and our ability to maintain stipulated CRR and SLR;
increase in our NPA portfolio and our ability to manage the corresponding risks;
changes in the regulatory environment, under which we operate, or our inability to comply with the
regulations;
fall in the value of our collateral or delays experienced in enforcing our collateral if borrowers default on
their obligations; and
our inability to retain our current management team and attract and retain skilled personnel.

By their nature, certain of the market risk disclosures are only estimates and could be materially different from
what actually occurs in the future. As a result, actual future gains, losses or impact on net interest income and
net income could materially differ from those that have been estimated, expressed or implied by such forwardlooking statements or other projections. All forward-looking statements are subject to risks, uncertainties and
assumptions about us that could cause actual results to differ materially from those contemplated by the relevant
forward-looking statement. Important factors that could cause actual results, performance or achievements to
differ materially include, but are not limited to, those discussed under the chapters Risk Factors, Our
Business and Managements Discussion and Analysis of Financial Condition and Results of Operations.
The forward-looking statements contained in this Placement Document are based on the beliefs of the
management, as well as the assumptions made by and information currently available to the management.

13

ENFORCEMENT OF CIVIL LIABILITIES

The Bank is a company incorporated with limited liability under the laws of India. All our Directors are Indian
residents, except Mr. Suhail Nathani who is a citizen of the U.S.A. A substantial portion of the assets of the
Bank and such persons are located in India. As a result, it may be difficult for investors outside India to effect
service of process upon the Bank or such persons in India, or to enforce against them judgments obtained in
courts outside India. Recognition and enforcement of foreign judgments is provided for under section 13 and
section 44A of the Code of Civil Procedure, 1908, as amended from time to time (the Civil Code) on a
statutory basis.
Section 13 of the Civil Code provides that a foreign judgment shall be conclusive regarding matter directly
adjudicated upon except:
(a) where it has not been pronounced by a court of competent jurisdiction; or
(b) where it has not been given on the merits of the case; or
(c) where it appears on the face of the proceedings to be founded on an incorrect view of international law or
a refusal to recognise the law of India in cases where such law is applicable; or
(d) where the proceedings in which the judgment was obtained were opposed to natural justice; or
(e) where the judgment has been obtained by fraud; or
(f) where the judgment sustains a claim founded on a breach of any law then in force in India.
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 Code provides that a foreign judgment rendered by a superior court (within
the meaning of that chapter) in any jurisdiction outside India which the Government has by notification declared
to be a reciprocating territory, may be enforced in India by proceedings in execution as if the judgment had been
rendered by a district court in India. However, Section 44A of the Civil 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.
Each of the United Kingdom, Singapore and Hong Kong (among others) has been declared by the Government
to be a reciprocating territory for the purposes of section 44A of the Civil 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 new suit upon the judgment 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. Accordingly, a judgment of a court in the United States may be enforced only by a fresh suit
upon the judgment and not by proceedings in execution.
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 a foreign judgment if it viewed
the amount of damages awarded as excessive or inconsistent with public policy, and is uncertain whether an
Indian court would enforce foreign judgments that would contravene or violate Indian law. A party seeking to
enforce a foreign judgment in India is required to obtain approval from RBI to repatriate outside India any
amount recovered pursuant to execution, and any such amount may be subject to tax in accordance with
applicable laws. Any judgment for payment of amounts denominated in a foreign currency would be converted
into Rupees on the date of the judgment and not on the date of the payment. The Bank cannot predict whether a
suit brought in an Indian court will be disposed off in a timely manner or be subject to considerable delays.

14

DEFINITIONS AND ABBREVIATIONS

Unless otherwise defined or the context otherwise indicates or requires, certain capitalized terms used in this
Placement Document have the meanings set forth below:
Bank-related Terms
Term
DCB Bank Limited, DCB,
the Issuer, we, us, our, the
Company or the Bank
AKFED/ Promoter
ALCO
Articles or Articles of
Association or AoA
Auditors
Board of Directors or Board
CRMC
Director(s)
Equity Shares or Shares
ESOP
MD & CEO
Memorandum or
Memorandum of
Association or MoA
Promoter Group
Registered Office/
Corporate Office
Registrar of Companies or
RoC

Description
DCB Bank Limited, a banking company incorporated under the laws of India
and whose registered and corporate office is at 601 & 602, 6th Floor, Peninsula
Business Park, Tower A, Senapati Bapat Marg, Lower Parel, Mumbai 400 013,
India.
Aga Khan Fund for Economic Development S.A.
The Asset and Liability Committee of the Bank.
The articles of association of the Bank, as amended.
B.S.R & Co. LLP, Chartered Accountants, the statutory auditors of the Bank.
The board of directors of the Bank and any committee constituted thereof.
Credit Risk Management Committee.
Director(s) of the Bank.
The equity shares of the Bank of face value ` 10 each.
Development Credit Bank Limited Employee Stock Option Plan 2007, as
amended.
Managing Director and Chief Executive Officer
The memorandum of association of the Bank, as amended.

Promoter group of the Bank as per the definition provided in Regulation

2(1)(zb) of the SEBI ICDR Regulations
The registered office and corporate office of the Bank located at 601 & 602, 6th
Floor, Peninsula Business Park, Tower A, Senapati Bapat Marg, Lower Parel,
Mumbai 400 013, India.
The Registrar of Companies, Maharashtra, Mumbai.

Issue-related Terms
Term
Allocated or Allocation

Allotment
Allottees
Application Form or Bid
cum Application Form
Application or Bid
Bidder
BSE
CAN or Confirmation of
Allocation Note
CDSL
Closing Date
Cut-off Price

Description
The allocation of Equity Shares following the determination of the Issue Price
to QIBs on the basis of Application Forms submitted by them, in consultation
with the Sole Global Coordinator and Book Running Lead Manager and in
compliance with Chapter VIII of the SEBI ICDR Regulations.
The issue and allotment of Equity Shares pursuant to this Issue.
QIBs who are allotted Equity Shares pursuant to this Issue.
The form, including all revisions and modifications thereto, pursuant to which
a QIB submits an Application.
Indication of interest from a QIB to subscribe for a specified number of Equity
Shares in this Issue on the terms set out in the Application Form to the Bank.
Any prospective investor, a QIB, who makes a Bid pursuant to the terms of the
Preliminary Placement Document and the Application Form.
BSE Limited.
Note or advice or QIBs confirming Allocation of Equity Shares to such QIBs
after determination of the Issue Price and requesting payment for the entire
applicable Issue Price for all Equity Shares Allocated to such QIBs .
Central Depository Services (India) Limited.
On or about October 10, 2014 the date on which the Allotment is expected to
be made.
The Issue Price of the Equity Shares, which shall be determined by the Bank,
in consultation with the Sole Global Coordinator and Book Running Lead

15

Term
Discounted Floor Price

Escrow Bank
Escrow Account

FII

FPI(s)

Form PAS-4
FVCI

SEBI FII Regulations

Floor Price
SEBI ICDR Regulations
Issue

Issue Closing Date or Bid

Closing Date
Issue Opening Date or Bid
Opening Date
Issue Price
Issue Proceeds
Issue Size
Sole Global Coordinator
and Book Running Lead
Manager or SGCBRLM
Listing Agreement
MF
Net Proceeds
NSDL
NSE
Pay-in Date
Placement Agreement

Description
Manager.
The Floor Price less discount of not more than 5%, if any, offered by the Bank
in accordance with SEBI ICDR Regulations.
In case no discount is offered by the Bank, the Discounted Floor Price shall be
the Floor Price.
The Issue Price shall not be less than the Discounted Floor Price.
DCB Bank Limited.
The non-interest bearing, no-lien, escrow bank account DCB QIP 2014-15
ESCROW ACCOUNT without any cheque or overdraft facilities opened by
the Bank with the Escrow Bank, subject to the terms of the Escrow Agreement
to be entered into among the Bank, the Sole Global Coordinator and Book
Running Lead Manager and the Escrow Bank.
Any Foreign Institutional Investor (as defined under the Securities and
Exchange Board of India (Foreign Institutional Investors) Regulations, 1995,
as amended) registered with SEBI under applicable laws in India.
Foreign portfolio investors as defined under the SEBI FPI Regulations and
includes a person who has been registered under the SEBI FPI Regulations.
Any foreign institutional investor or qualified foreign investor who holds a
valid certificate of registration is deemed to be a foreign portfolio investor till
the expiry of the block of three years for which fees have been paid as per the
Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995
Form PAS-4 as prescribed under the Companies (Prospectus and Allotment of
Securities) Rules, 2014
Any foreign venture capital investor (as defined under the Securities and
Exchange Board of India (Foreign Venture Capital Investors) Regulations,
2000, as amended) registered with SEBI under applicable laws in India.
The Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995, as amended.
The floor price of ` 86.45 per Equity Share, calculated in accordance with
Regulation 85 of the SEBI ICDR Regulations.
The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009, as amended.
The offer and sale of the Equity Shares to QIBs, pursuant to Chapter VIII of
the SEBI ICDR Regulations, which shall be equal to or more than the
Discounted Floor Price.
October 8, 2014, the date on which the Bank (or the Sole Global Coordinator
and Book Running Lead Manager on behalf of the Bank) shall cease
acceptance of Application Forms.
September 29, 2014, the date on which the Bank (or the Sole Global
Coordinator and Book Running Lead Manager on behalf of the Bank) shall
commence acceptance of Application Forms.
The price per Equity Share of ` 82.15, which shall be equal to or more than the
Discounted Floor Price.
The gross proceeds to be raised through the Issue.
The issue of up to 30,432,136 Equity Shares, aggregating up to ` 2,499.99
million.
Ambit Corporate Finance Private Limited

The listing agreement(s) executed by us with each of the Stock Exchanges.

Mutual Fund.
The Issue Proceeds less the Issue related expenses. For further details, please
refer to the chapter Use of Proceeds.
National Securities Depository Limited.
National Stock Exchange of India Limited.
The last date specified in the CAN for receipt of payment of application
monies by the QIBs.
The Placement Agreement dated September 29, 2014 between the Bank and
16

Term
Placement Document

Preliminary Placement
Document
QIBs or Qualified
Institutional Buyers
QIP

Regulation S
Relevant Date

SEBI
SEBI Act
Stock Exchanges
U.S. Securities Act or the
Securities Act

Description
the Sole Global Coordinator and Book Running Lead Manager.
This Placement Document dated October 8, 2014, issued in accordance with
Chapter VIII of the SEBI ICDR Regulations and Section 42 of the Companies
Act, 2013 and the Rules made thereunder.
The Preliminary Placement Document dated September 29, 2014, issued in
accordance with Chapter VIII of the SEBI ICDR Regulations and Section 42 of
the Companies Act, 2013 and the Rules made thereunder.
Any Qualified Institutional Buyer as defined under Regulation 2(1)(zd) and
Chapter VIII of the SEBI ICDR Regulations.
Qualified Institutions Placement under Chapter VIII of the SEBI ICDR
Regulations and Section 42 of the Companies Act, 2013 and the Rules made
thereunder.
Regulation S, as defined under the U.S. Securities Act.
September 29, 2014, which is the date of the meeting of the Board of Directors
or any committee duly authorised by the Board of Directors deciding to open
the Issue.
The Securities and Exchange Board of India.
The Securities and Exchange Board of India Act, 1992, as amended.
BSE and NSE.
The U.S. Securities Act of 1933, as amended.

Industry-related Terms
Term
AMC
ANBC
A.P. MFI Act
A.P. MFI Ordinance
AS
ATMs
Banking Regulation Act
Base Rate
Basel II

Basel III
BFS
BPLR
CASA
CBLO
CCB
CDR
CIA Factbook
CEO
CP
CRAR
CRE
CRR
DRT
ECB
EGM
F.Y. / Fiscal/ Fiscal Year

Description
Asset Management Company.
Adjusted Net Bank Credit.
The Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending)
Act, 2011.
The Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending)
Ordinance, 2010.
Accounting Standards issued by the Institute of Chartered Accountants of India.
Automated Teller Machines.
The Banking Regulation Act, 1949, as amended.
Minimum lending rate set by the Bank in accordance with applicable laws and
regulations.
International Convergence of Capital Measurement and Capital Standards A
Revised Framework (Comprehensive Version: June 2006) published by the
Bank for International Settlements, as applicable to banks in India.
Recommendations of the Basel Committee on Banking Supervision dated
December 2010.
Board for Financial Supervision.
Benchmark Prime Lending Rate.
Current Accounts and Savings Accounts.
Collateralized Borrowing and Lending Obligation.
Capital Conservation Buffer.
Corporate Debt Restructuring.
United States Central Intelligence Agency (CIA) World Factbook
Chief Executive Officer.
Commercial Paper.
Capital to Risk weighted Assets Ratio.
Commercial Real Estate.
Cash Reserve Ratio.
Debts Recovery Tribunal.
External Commercial Borrowing.
Extraordinary General Meeting.
Period of twelve months ending March 31 of that particular year unless
otherwise stated.

17

Term
HFT
HTM
IMF
IRS
IRDA
LAF
Ltd.
MFIs
MSMEs
NBC
NBFC
NEFT
Net worth

NHB
NPA
OTS
PMLA
RBI
RBI Guidelines
RIDF
RRBs
RTGS
SARFAESI Act
SBI
SHG
SLR
SME
SSI
Tier I capital

Description
Held For Trading.
Held To Maturity.
International Monetary Fund.
Interest Rate Swap.
The Insurance Regulatory and Development Authority.
Liquidity Adjustment Facility.
Limited.
Micro Finance Institutions.
Micro Small and Medium Enterprises.
Net bank credit, being the Banks gross advances, net of provisions and interbank advances.
Non - banking financial company, as defined under the Reserve Bank of India
Act, 1934, as amended.
National Electronic Fund Transfer.
Aggregate of issued and paid up share capital, employee stock options (grants
outstanding net of deferred costs), reserves and surplus excluding revaluation
reserves and net of miscellaneous expenses to the extent not written off and the
debit balance of the profit and loss account.
National Housing Bank.
Non-performing asset.
One Time Settlement.
Prevention of Money Laundering Act, 2002, as amended.
The Reserve Bank of India.
Guidelines issued from time to time by RBI.
The Rural Infrastructure Development Fund.
Regional Rural Banks.
Real Time Gross Settlement.
The Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interests Act, 2002, as amended.
State Bank of India.
Self Help Group.
Statutory Liquidity Ratio.
Small and Medium Enterprises.
Small Scale Industries.
Paid-up equity capital, statutory reserves, and other disclosed free reserves, if
any; capital reserves representing surplus arising out of sale proceeds of assets;
certain innovative perpetual debt instruments eligible for inclusion in Tier I
capital, certain perpetual non-cumulative preference shares that comply with
specified regulatory requirements; and any other type of instrument generally
notified by the Reserve Bank of India from time to time for inclusion in Tier I
capital.

Tier II Bonds

Unsecured, redeemable, non-convertible, subordinated bonds in the nature of

promissory notes issued by the Bank to augment Tier II capital for capital
adequacy purposes.

Tier II capital

Revaluation reserves (at a discount of 55%); general provisions and loss

reserves (allowed up to a maximum of 1.25% of risk weighted assets); hybrid
debt capital instruments (which combine certain features of equity and debt
securities); subordinated debt; innovative perpetual debt instruments and
perpetual non-cumulative preference shares; and any other type of instrument
generally notified by the Reserve Bank of India from time to time for inclusion
in Tier II capital.

USD

United States Dollar.

18

General Terms/Abbreviations
Term
Act / Companies Act

Description
The Companies Act, 1956, and the notified provisions of the Companies Act,
2013.
AML
Anti-Money Laundering.
CCI
Competition Commission of India
Companies Act, 1956
The Companies Act, 1956, as amended.
Companies Act, 2013
The Companies Act, 2013 and the rules made thereunder to the extent in force
pursuant to the notification of the Notified Sections
Competition Act
The Competition Act, 2002, as amended.
Control
It shall have the same meaning as given under Regulation 2(1)(e) of the
Takeover Regulations.
CRISIL
CRISIL Limited.
Delisting Regulations
The Securities and Exchange Board of India (Delisting of Equity Shares)
Regulations, 2009, as amended.
Depositories Act
The Depositories Act, 1996, as amended.
Depository
Any depository registered with SEBI under the Securities and Exchange Board
of India (Depositories and Participant) Regulations, 1996, as amended.
DIN
Director Identification Number
DP / Depository Participant Any depository participant, as defined under the Depositories Act, 1996, as
amended.
Eligible FPIs
FPIs that are eligible to participate in the Issue and does not include qualified
foreign investors and Category III Foreign Portfolio Investors (who are not
eligible to participate in the Issue)
EPS
Earnings per Share.
FDI
Foreign Direct Investment.
FDI Policy
Consolidated Foreign Direct Investment Policy notified under Circular No. 1 of
2014, effective from April 17, 2014, as amended from time to time.
FEMA
The Foreign Exchange Management Act, 1999, as amended.
FEMA 20
The Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2000, as amended.
FI
Financial Institution.
FSMA
The U.K. Financial Services and Markets Act, 2000.
GAAP
Generally Accepted Accounting Principles.
GDP
Gross Domestic Product.
GoI or Government
Government of India.
ICAI
The Institute of Chartered Accountants of India.
IFRS
International Financial Reporting Standards of the International Accounting
Standards Board.
Indian GAAP
Generally accepted accounting principles followed in India as applicable to
banks in India.
Insider Trading
The Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations
Regulations, 1992, as amended.
IT Act or the Income Tax
The Income Tax Act, 1961, as amended.
Act
KYC
Know Your Customer.
Mutual Fund
Any mutual fund registered with SEBI under the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996, as amended.
NABARD
National Bank for Agricultural and Rural Development.
NRI
Non-Resident Indian as defined under applicable FEMA regulations.
p.a.
Per annum.
PAN
Permanent Account Number.
RBI
The Reserve Bank of India.
RBI Act
The Reserve Bank of India Act, 1934, as amended.
S&P
Standard & Poors Rating Services
SCRA
The Securities Contracts (Regulation) Act 1956, as amended.
SCRR
The Securities Contracts (Regulation) Rules, 1957, as amended.
SICA
The Sick Industrial Companies (Special Provisions) Act, 1985, as amended.

19

Term
SIDBI
Takeover Regulations
U.S.
U.S. GAAP

Description
Small Industries Development Bank of India.
The Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011, as amended.
United States of America, its territories and its possessions and the District of
Columbia.
Generally accepted accounting principles followed in the United States.

20

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, the more detailed information appearing elsewhere in this Placement
Document, including under the chapters titled Risk Factors, Use of Proceeds, Placement, Issue
Procedure and Description of Equity Shares.
Issuer
Issue Size
Floor Price
Issue Price per Equity
Share
Discounted Floor Price

DCB Bank Limited.

The issue of up to 30,432,136 Equity Shares at a premium of ` 72.15 each,
aggregating up to ` 2,499.99 million.
` 86.45 per Equity Share, calculated in accordance with Regulation 85 of the SEBI
ICDR Regulations.
` 82.15.
The Floor Price less discount of upto 5%, i.e. ` 82.13 per Equity Share.
In case no discount is offered by the Bank, the Discounted Floor Price shall be the
Floor Price.

Equity Shares outstanding

prior to the Issue*
Equity Shares outstanding
after the Issue*
Eligible Investors

Dividend
Indian Taxation
Issue Procedure

Listing

Transferability
Restrictions
Pay-In Date
Closing
Ranking

Use of Proceeds

Date of Board Resolution

Date of Shareholders
Resolution
Lock-up

The Issue Price shall not be less than the Discounted Floor Price.
250,774,222 Equity Shares.
281,206,358 Equity Shares.
Qualified Institutional Buyers as defined under Regulation 2(1)(zd) and Chapter VIII
of the SEBI ICDR Regulations. For further details, please refer to the chapters Issue
Procedure Qualified Institutional Buyers and Transfer Restrictions.
Refer to the chapters Description of Equity Shares, Dividend Policy and
Taxation.
Refer to the chapter titled Statement of Possible Tax Benefits.
The Issue is being made only to QIBs in reliance on Section 42 of the Companies
Act, 2013, read with Rule 14 of the Companies (Prospectus and Allotment of
Securities) Rules, 2014, and Chapter VIII of the SEBI ICDR Regulations. Please
refer to the chapter titled Issue Procedure.
(i) Applications for approval, in terms of Clause 24(a) of the listing agreements with
the Stock Exchanges were made and approval has been received from each of the
Stock Exchanges and (ii) applications for the in-principle and final approval for
listing and admission of the Equity Shares and for trading on the Stock Exchanges
will be made only after Allotment of the Equity Shares in the Issue.
The Equity Shares being allotted pursuant to this Issue cannot be sold for a period of
one year from the date of Allotment, except if sold on the floor of the Stock
Exchanges. Please refer to the chapter titled Transfer Restrictions.
The last date specified in the CAN sent to the QIBs for payment of application
money for the Equity Shares pursuant to this Issue.
The Allotment of the Equity Shares offered pursuant to this Issue is expected to be
made on or about the Closing Date.
The Equity Shares being issued in the Issue are subject to the provisions of our
Memorandum and Articles of Association and shall rank pari passu in all respects
with the existing Equity Shares, including with respect to dividend rights.
Shareholders will be entitled to participate in dividends and other corporate benefits,
if any, declared by us after the Closing Date, in compliance with the Companies Act.
Shareholders may attend and vote in shareholders meetings in accordance with the
provisions of the Companies Act. Please refer to the chapter Description of Equity
Shares.
The Gross Proceeds are expected to be approximately ` 2,499.99 million. The Net
Proceeds are expected to be approximately ` 2,441.99 million. For further details,
please refer to the chapter Use of Proceeds.
April 15, 2014
June 6, 2014
Subject to exceptions listed below, we have agreed that we will not, from the date
hereof and for a period of up to 180 days from the Closing Date, without the prior

21

written consent of the Sole Global Coordinator and Book Running Lead Manager,
directly or indirectly: (a) issue, offer, lend, sell, pledge, contract to sell or issue, sell
any option or contract to purchase, purchase any option or contract to sell or issue,
grant any option, right or warrant to purchase, lend or otherwise transfer or dispose
of, directly or indirectly, any Equity Shares, or any securities convertible into or
exercisable or exchangeable for Equity Shares or publicly announce an intention with
respect to any of the foregoing; (b) enter into any swap or other agreement that
transfers, directly or indirectly, in whole or in part, any of the economic
consequences of ownership of Equity Shares or any securities convertible into or
exercisable or exchangeable for Equity Shares; or (c) announce any intention to enter
into any transaction whether any such transaction described in (a) or (b) above is to
be settled by delivery of Equity Shares, or such other securities, in cash or otherwise,
provided, however, that the foregoing restrictions shall not be applicable to (i) any
grant of options by us under the ESOP; or (ii) any issue or allotment of Equity Shares
by us pursuant to the exercise of any options awarded under the ESOP. For further
information with respect to the ESOP, please refer to the chapter titled Board of
Directors and Senior Management.

Risk Factors
Interest of directors,
promoters or key
managerial personnel in
the offer
Security codes:
ISIN
BSE Code
NSE Code
Bloomberg

Our Promoter has agreed that it will not, from the date hereof and for a period of up
to 180 days from the Closing Date, without the prior written consent of the Sole
Global Coordinator and Book Running Lead Manager, directly or indirectly: (a) sell,
contract to sell, purchase any option or contract to sell, grant any option to purchase,
lend, pledge or otherwise transfer or dispose of, directly or indirectly, any Equity
Shares, or any securities convertible into or exercisable or exchangeable for Equity
Shares or publicly announce an intention with respect to any of the foregoing; (b)
enter into any swap or other agreement that transfers, directly or indirectly, in whole
or in part, any of the economic consequences of ownership of Equity Shares or any
securities convertible into or exercisable or exchangeable for Equity Shares; or (c)
announce any intention to enter into any transaction whether any such transaction
described in (a) or (b) above is to be settled by delivery of Equity Shares, or such
other securities, in cash or otherwise.
For a discussion of certain risks in connection with an investment in the Equity
Shares, please refer to the chapter titled Risk Factors.
Directors, promoters or key managerial personnel do not have any financial or other
material interest in the Issue.

INE 503A01015
532772
DCBBANK
DCBB IN Equity

Pursuant to a resolution passed at the shareholder meeting held on December 15, 2006 and resolutions passed by the
Board of Directors of the Bank at its meeting held on March 5, 2007, we have adopted the Development Credit Bank
Limited Employee Stock Option Plan (the ESOP) with up to 7% of the issued Equity Shares of the Bank available
for issuance to our employees. As of September 25, 2014, 23,690,467 options had been granted of which 6,649,865
were vested and exercisable, representing 2.65% of our paid up and issued Equity Shares as of that date. Of the
remaining options granted as of September 25, 2014, 5,153,000 were unvested, 3,158,145 had been exercised and
8,729,457 had been cancelled.

22

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
Placement Document where these disclosures, to the extent applicable, have been provided.
Sr.
No.
1.
a.
b.
c.
d.
e.
f.
g.

h.
2.
a.
b.
c.
d.
e.
f.
g.

h.
i.
j.
k.
3.
a.

b.

c.
d.

Particulars

Page No.

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 :
(i) statutory dues;
(ii) debentures and interest thereon;
(iii) deposits and interest thereon;
(iv) 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 by the shareholders through postal ballot/e-voting ,
authorizing 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,
alongwith 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:
i. duration;
ii. rate of dividend;
iii. rate of interest;
iv. mode of payment;
v. 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 Fiscal Years);
Related party transactions entered during the last three Fiscal Years immediately
preceding the year of circulation of offer letter including with regard to loans
made or, guarantees given or securities provided;

23

Cover page, 214

Cover page
25, 119
153 155
153 -155
32
99

179, 214

211
211
21
21
Not Applicable
21
Not Applicable
61
Not Applicable
Not Applicable
Not Applicable
15
59
59
Not Applicable

22

210

156 158
Related party transactions are
disclosed in the Audited
Financial Statements as required
by Accounting Standard 18

Sr.
No.

e.

f.

g.
4.
a.
(i)

(ii)

b.
c.

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

c.

Particulars

Page No.

Summary of reservations or qualifications or adverse remarks of auditors in the

last five Fiscal 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 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
(a) the authorised, issued, subscribed and paid up capital (number of securities,
description and aggregate nominal value);
(b) size of the present offer;
(c) paid up capital:
(A) after the offer;
(B) after conversion of convertible instruments (if applicable);
(d) 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
Fiscal Years immediately preceding the date of circulation of offer letter;
Dividends declared by the company in respect of the said three Fiscal 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 Companies Act and the
rules made thereunder;
The compliance with the Companies 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; and
The monies received under the offer shall be used only for the purposes and
objects indicated in the Offer letter.

24

Related
Party
Disclosures
issued by the Institute of
Chartered Accountants of India
read with circular dated March
29, 2003 issued by the RBI on
Guidance on Compliance with
the Accounting Standards by
Banks. For further details
please refer to F - 2 to F - 110
99

210

99

62
21
62
62
62 65

62 65

F - 2 to F 110
61
30 31
F - 2 to F 110
99

213
213

213

SUMMARY OF OUR BUSINESS

Overview
We are a private sector bank in India offering a wide range of banking and financial products and services to
retail, corporate, small and medium enterprises (SME), micro small and medium enterprises (MSME) and
agriculture & inclusive banking (AIB) through various delivery channels. We lay special emphasis on
agriculture and financial inclusion banking where we offer wide range of products to cater to the various needs
of the unbanked, under-banked, rural and semi-urban population. As of August 31, 2014 we had 138
interconnected branches spread across 17 states and two Union Territories in India. In Fiscal Year 2014, the
Bank increased its network by 36 branches, which is the highest number of branches opened by us in one Fiscal
Year in various location including states of Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Punjab, Odisha and
Rajasthan. Our branch network is largely concentrated in the four states of Maharashtra, Gujarat, Odisha and
Telangana. Our distribution network included 239 interconnected ATMs comprising 117 onsite and 122 offsite
ATMs as of August 31, 2014. As of August 31, 2014 we had a customer base of more than 500,000 banking
customers.
We have the following main business units:

Retail banking business is our largest business unit, which offers a wide range of financial products and
services to retail customers. Retail banking products principally comprise retail banking accounts, deposits
and retail loans. As of March 31, 2013 and as of March 31, 2014 our retail banking business contributed
42.02% and 43.53% of our total advances;

Corporate banking business largely caters to mid-sized corporate companies. Our range of corporate
banking products and services includes current accounts, terms loans, working capital facilities, import and
export financing, cash management and salary accounts. As of March 31, 2013 and as of March 31, 2014
our Corporate banking business contributed 23.77% and 25.73% of our total advances;

SME and MSME banking business has historically been our focus since our days as a co-operative bank
and we continue today to focus on our small and medium business customers. We offer a similar range of
products through our SME banking unit as through our corporate banking unit. As of March 31, 2013 and
as of March 31, 2014 our SME and MSME banking contributed 22.59% and 16.58% of our total advances;

AIB exists to systematically co-ordinate across all business units and complete the priority sector lending
targets each year for the Bank as a whole. AIB offers a wide range of products to cater to various needs of
banked, under-banked, rural and semi-urban population. The unit is responsible inter alia for disbursing
agriculture loans (commodity-based finance), term loans to micro finance institutions (MFIs), tractor loans,
home loans and business loans to lower middle income group, portfolio buyouts from MFIs, term loans to
institutions which extend collateralised jewellery loans and portfolio buyouts from and term loans to any
other institutions that qualify as a priority sector loan. As of March 31, 2013 and as of March 31, 2014,
AIB contributed 11.62% and 14.16% of our total advances;

Treasury operations are our interface with the financial markets. Our treasury operations consist primarily
of statutory reserves management, liquidity management, investment and trading activities, money market
and foreign exchange activities.

Our Competitive Strengths

We believe that the following principal strengths enable us to implement our long-term strategy and distinguish
us in a competitive Indian financial services market.
Professional and experienced management team and board of directors with a proven track record
We have a professional and experienced management team which has wide ranging experience in the banking
industry. Mr. Murali M. Natrajan, our MD & CEO, joined us in April 2009 with an extensive experience for
over 25 years at recognised banks across India and other Asian countries and demonstrated track record in the
financial services industry. Also supporting our MD & CEO is a strong management team, including Mr. Bharat
Sampat, our Chief Financial Officer, Mr. Rajesh Verma, our Head Treasury, Trade Finance & Corporate
Banking, Mr. Praveen Kutty, our Head Retail and SME Banking, Mr. R. Venkattesh, our HeadOperations,
25

Technology and Human Resources, Mr. J.K. Vishwanath, Chief Credit Officer and Mr. Abhijit Bose, HeadRetail Assets and Strategic Alliances. All members of our senior management team have in-depth knowledge of
banking operations and management and have a strong focus on continuing to formulate and implement our
turnaround and growth strategy as our business grows and evolves. Our senior management team has been
responsible for the formulation of our new strategy to emphasise on the restructuring of our balance sheet and
business mix, improving operating efficiency, leveraging on the strengths of our distribution network and
existing resources, deepening customer relationships and improving the brand.
Comprehensive bouquet of products and services
We offer a wide range of products that generate both interest and non-interest income. 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.
Effective multi-channel distribution infrastructure
As of August 31, 2014 we had 138 interconnected branches spread across 17 states and two union territories in
the country. Our branch network is largely concentrated in the states of Maharashtra and Gujarat, where our
branch footprint is highly correlated to locations in which small businesses and trading companies are
concentrated. The proximity to our target customers (e.g., SMEs and MSMEs) gives us a competitive
advantage. As an important complement to and an extension of our branch network, we have a multi-channel
electronic banking system that includes 239 interconnected ATMs as of August 31, 2014, comprising 117 onsite
and 122 offsite ATMs, Internet banking, phone banking (available 24 hours a day / 7 days a week) and account
services via mobile phone. Our integrated distribution network as complemented by our multi-channel
electronic banking system is capable of providing a comprehensive suite of products to customers, provides us
with a strong sales platform in the areas in which we operate, enables us to cross-sell products and to deliver
high-quality, convenient and comprehensive services to a range of customers.
Strong and loyal customer base
As of August 31, 2014 we had a customer base of over 500,000 banking customers. Many of our customers,
particularly those in the SME and MSME sector and trading community, have had long-standing relationships
with us due to our strong customer and neighbourhood-oriented focus. Our branches are conveniently located in
close proximity to a large proportion of our target customer base. We believe that this has played a significant
role in retaining customer loyalty. Also, we strive to be a one-stop solution to our retail, corporate and SME and
MSME customers, delivering all required banking and financial services across the value chain, including loan
products (such as cash credit, overdraft and term loans), transaction banking products (such as cash
management and trade services) and foreign exchange services. This strategy, including identifying and
introducing attractive new products and services, is designed to help us understand and address all the needs of
these customers.
Modern and scalable information technology systems infrastructure
We strongly emphasise technology in our business as a means of improving the efficiency and competitiveness
of our business operations. We consistently invest towards maintaining a centralized and modern technology
platform for our internal systems and to support our core banking functions. We implemented FinacleTM, a
core banking solution, in December 2003, which enables the integration of our front, mid and back offices. It
also facilitates branch banking and real time ATM transactions. Our systems, ranging from FinacleTM, an
internet banking solution, to a Trade Finance platform and a VISA Money Transfer facility, enable us to
provide a comprehensive suite of competitive products to our customers. Our technology platform can be
leveraged for volume growth with a less than proportionate increase in costs. We use FinnOneTM for the
processing and accounting of instalment-based loans, which enables centralized back-office operations in
Mumbai to cater to all our offices and branches for efficient, accurate and timely service delivery. Our Treasury
operations are carried out with an integrated Treasury system which enables seamless straight through
processing of deals in both fixed income securities and in foreign exchange transactions including accounting of
such transactions to core banking system seamlessly without manual intervention. We have also launched DCB
on the Go instant mobile banking facility for our customers. DCB on the Go instant mobile banking is a
service that enables banking anywhere anytime to the customers through their mobile phones.
26

Well-positioned to capitalise on Indias future growth, particularly in the states where we operate
According to the CIA Factbook, Indias economy was the fourth largest economy, among the largest fifty
economies in the world in terms of GDP on a purchasing power parity basis, after USA, European Union and
China per 2013 estimate. In its Third Bi-Monthly Monetary Policy Statement 2014-15 released on August 5,
2014, RBI has anticipated the central estimate of real GDP growth of 5.5 per cent within a likely range of 5 to 6
per cent that was set out in the April projection for 2014 - 15 can be sustained. We believe that the growth trend
in these areas is likely to continue in the foreseeable future. Given the rapid development of Indias economy,
the increase in per capita income and population growth, particularly in the western regions of the country, we
believe that our significant presence in the western states of Maharashtra and Gujarat (55 out of our 138
branches are located in these states as of August 31, 2014) has us well-positioned to capitalise on Indias future
growth, particularly in such areas.
Consistent growth in balance sheet and strong performance indicators
Through restructuring our operations and implementing several initiatives designed to refocus business lines
and streamline operations over the last about five years, our total assets increased from ` 112,788.2 million as
of March 31, 2013 to ` 129,231.4 million as of March 31, 2014 and to ` 128,837.5 million as of June 30, 2014.
Our total deposits increased 23.45% from ` 83,638.4 million as of March 31, 2013 to ` 103,251.6 million as of
March 31, 2014 and our net advances increased 23.60% from ` 65,860.9 million to ` 81,401.9 million during
the same period. While the growth in current account balances was muted in the Fiscal Year ended March 31,
2014 the savings account (SA) deposits increased 18.20% in the Fiscal Year. The overall CASA balances
growth was 13.63% and the percentage of our current and savings account deposits out of our total deposits (or
the CASA ratio) was at 25.00% as of March 31, 2014 (27.16% as of March 31, 2013). Retail banking deposits
constituted 76.94% of our total deposits as of March 31, 2014, thus reducing dependence on bulk deposits in
our growth.
In addition, our gross NPA and net NPA ratios as of June 30, 2014 were 1.78% and 0.97%, respectively, which
represent significant decreases from the levels as of March 31, 2009 when our gross NPA and net NPA ratios
were 8.78% and 3.88%, respectively.
A strong capital adequacy ratio is a pre-requisite for growth. As of March 31, 2013 and March 31, 2014,
according to the Basel II norms, our capital adequacy ratio was 13.61% and 13.84% respectively and according
to the Basel III norms, capital adequacy ratio was 13.71% as on March 31, 2014. Basel III norms were effective
for the first full Fiscal Year ended March 31, 2014. As of June 30, 2014 our capital adequacy ratio as per Basel
II and Basel III norms was 13.73% and 13.63% respectively. A robust capital adequacy ratio will be critical to
the scaling up of our operations.
Strong Promoter
We have a strong and committed Promoter, AKFED. We believe that our association with our Promoter helps
us in attracting talent at all levels including the senior management and the Board. We propose to build on our
Promoters expertise, including their experience in managing banks in other jurisdictions, as well as to
capitalize on the business relations of the Promoter with other banks. Our Promoter has a presence in 16
countries in the developing world and employs over 30,000 persons. (Source: http://www.akdn.org/akfed)
Our Strategy
Our strategy and business model are built around our current strengths. We intend to continue to grow our
market share, including our retail deposit base, and to continue to achieve balanced growth in our balance sheet,
profitability (improving our return on assets and our return on equity) and efficiency (improving our cost to
income ratio) across all segments of our operations. Our key strategies to achieve these goals are set out below:
Continue to achieve balanced and systematic growth through diversification and balancing of portfolio mix
with emphasis on secured lending
We intend to achieve and maintain a balanced advances portfolio spread across retail, SME, MSME and
corporate (including AIB) customers and to continue our focus on secured lending. We constantly evaluate our
27

product and service offerings and seek to adapt to changing market conditions by updating or revising our
product portfolio to reflect customer preferences. In view of our past experience with a portfolio predominantly
comprised of unsecured loans, which needed to be provisioned significantly, we made a conscious decision to
reduce risks of capital loss and increase stability to our operations by seeking to balance the portfolio mix with
secured loans. For instance, in Fiscal Year 2010, we re-launched a range of mortgage-based products that has
been proved to be a popular product among retail customers constituting about 38.44% of our net advances as
of March 31, 2014. In Fiscal Year 2013 we re-launched Commercial Vehicle loans and Gold loans in the retail
segment, which are secured products.
We have actively increased our focus on the SME and MSME business, which tends to have a higher degree of
secured/collateralised loans. Based on our experience, SME and MSME customers often have very specific
banking needs for which a one-size-fits-all approach by a bank would not be suitable. Additionally, SMEs and
MSMEs as a group offer a diversified credit risk profile due to the smaller individual customer exposure,
comparatively higher yields, associated business/cross-selling opportunities, higher degree of
secured/collateralised loans, and good geographic spread. Lending to SMEs can also help us meet our priority
sector lending requirements. The pricing to this segment is based upon an internally-generated rating, collateral
coverage and competitive landscape. Though the growth in this segment was muted in Fiscal Year 2013 and
Fiscal Year 2014 due to a sluggish economy, we intend to grow this portfolio cautiously with smaller size loans
and continue our focus on improving turnaround time in approving and disbursing of credit proposals in order
to assure a higher level of customer service.
We intend to continue to emphasise growth in advances through secured lending across a diverse customer
base. As a percentage of total loans, secured loans accounted for 95.34%, 95.47% and 97.26% of net advances
as of March 31, 2013, March 31, 2014 and June 30, 2014 respectively.
Continue to focus on growth of retail deposit base and focus on growth in tier 2 to tier 6 cities
With the increase in household income levels in India and the consequent need for diversified financial services,
the retail sector has emerged as a rapidly growing opportunity for banks with the skills and infrastructure to
adequately service this market. Deposits from retail customers represent a significant, low-cost source of
funding. We have in the past five Fiscal Years focused our efforts on growing our CASA ratio and the level of
term deposits to help manage our balance sheet and fund growth in advances.
The proximity of our branches, particularly in Maharashtra, Gujarat, Odisha and Telangana, to our target
customers (e.g., self-employed individuals, SMEs and MSMEs) allows us to attract interest-free current account
and low cost savings account deposits. We will continue to focus on such efforts by upgrading our multichannel distribution network to cater to the needs of our customers, including upgrading branches, re-allocating
space to certain business to improve marketing and enhance cross-selling in our retail banking business and to
improve the service quality and efficiency of our non-branch delivery channels.
We are also focusing on growth in tier 2 to tier 6 cities of India. We strive to open branches in such areas where
which are unbanked or under-banked by other private sector banks and focus in opening branches in the
neighbourhood or close by areas. Advantage of opening branches in close proximity helps us in managing cash,
staff, operations and risk effectively besides creating/ establishing brand presence in such areas.
Continue to build our corporate banking business
As part of our specific focus on building on our mid-sized corporate customer base, we intend to steadily grow
our corporate business in industries and segments that have good growth potential. We intend to continue to
monitor the needs of this market segment in order to formulate specific products to cater to the requirements of
doing business in their respective industries.
Increase the contribution of non-interest income
An important strategic focus for us is to grow our fee and commission-based income. In order to grow noninterest income, we distribute third-party investment products, such as mutual funds and insurance products,
and provide wealth management services. Our integrated branch and electronic banking network and our
increasingly diversified product and service portfolio have enabled us to develop our fee and commission-based
business. We have entered into agreements with well-known providers of life and general insurance products to
distribute life and general insurance policies, respectively. Third party non-interest based income (including
28

commissions on the sale of insurance products, brokerage on marketing of mutual funds and demat transaction
and maintenance charges) constituted 10.04% and 6.22% of the total non-interest income in the Fiscal Years
ended March 31, 2013 and March 31, 2014, respectively. For the quarter ended June 30, 2014 our third party
income constituted 5.28% of total non-interest income. We intend to continue to bring innovative products to
the market and improve cross-selling efforts in order to enhance non-interest income. We will also continue to
focus on running a conservative treasury book, in line with our ability to manage risks, in order to maintain our
non-interest income from treasury operations.
Continue to strengthen risk management capabilities
We have adopted a prudent risk management strategy and continue to enhance our risk management
organisational structure and processes in order to create an effective risk management system. We aim to
continue to enhance our credit risk management systems and processes in line with growth of business. We
believe that our efforts in strengthening risk management have improved our asset quality. Our gross NPAs
decreased from 4.40% as of March 31, 2012 to 1.78% as of June 30, 2014. We have also kept our net NPA in
check below 1%. The Net NPA has marginally increased from 0.57% to 0.97%, during the same period. We
intend to continue to improve upon and refine our risk management tools and systems.
Continue to focus on improving and maintaining cost efficiency
We continually seek to improve operating efficiencies, reduce our operating costs and thereby increase our
profitability. Streamlining manpower is an important driver of our strategy in this area as it brings in operational
efficiency, improves the level of control and reduces overall costs relative to income. Simplifying reporting
lines, consolidation of roles and higher productivity has allowed us to grow the business with greater efficiency
in manpower utilisation. We also seek to use other methods to reduce operational costs, such as rationalising
and consolidating our property portfolio, renegotiating and rationalising rates with vendors and service
providers, and rationalising and streamlining of the workforce. We intend to continue to realise cost efficiencies
and thereby improve our cost to income ratio consistently.
Attract, motivate and develop talented and experienced professionals
We believe a key to our success is the ability to recruit, retain, motivate and develop talented and experienced
professionals. We intend to continue to focus on the recruitment and cultivation of a high-quality and
professional workforce through provision of training and development programs for employees to enhance
professional knowledge and capabilities, enhancement of management and employee incentive programs to
align compensation with employee performance, creation of a collegial and encouraging work atmosphere and
improvement of morale.

29

SUMMARY FINANCIAL INFORMATION

The following summary financial information as of and for the Fiscal Years ended March 31, 2012, 2013 and
2014, has been derived from our Audited Financial Statements included elsewhere in this Placement Document.
You should read the following summary financial information in conjunction with our Financial Statements and
the related notes and Managements Discussion and Analysis of Financial Condition and Results of
Operations. Our audited financial statements for Fiscal Year 2012 has been prepared in accordance with
Indian GAAP and have been audited by S.R.Batliboi & Co., Chartered Accountants (now known as S. R.
Batliboi & Co. LLP, Chartered Accountants). Our audited financial statements for Fiscal Year 2013 and 2014
have been prepared in accordance with Indian GAAP and have been audited by B.S.R &Co. LLP, Chartered
Accountants. Our historical results do not necessarily indicate our results expected for any future periods.
Solely for the convenience of the reader, the selected data set out below are presented in a format different from
our Financial Statements. Neither the information set forth below nor the format in which it is presented should
be viewed as comparable to information prepared in accordance with Indian GAAP, U.S. GAAP, IFRS or other
accounting principles.
AUDITED BALANCE SHEET AS OF,
CAPITAL & LIABILITIES
Capital
Employee Stock Options
(Grants Outstanding net of deferred cost)
Reserves & Surplus
Deposits
Borrowings
Other Liabilities and Provisions
TOTAL CAPITAL & LIABILITIES
ASSETS
Cash and Balances with
Reserve Bank of India
Balances with Banks and Money at Call and Short notice
Investments
Advances
Fixed Assets
Other Assets
TOTAL ASSETS
Contingent liabilities
Bills for Collection

March 31, 2012

March 31, 2013

(` in million)
March 31, 2014

2,406.7
28.2

2,501.1
30.2

2,503.2
29.7

6,178.8
63,355.6
11,234.5
3,564.7
86,768.5

7,499.3
83,638.4
15,256.2
3,863.0
112,788.2

9,006.7
103,251.6
8,601.6
5,838.6
129,231.4

4,075.1

3,787.6

5,050.7

490.5
25,177.6
52,844.2
1,846.4
2,334.7
86,768.5
32,737.8
4,374.6

5,044.8
33,586.6
65,860.9
2,394.5
2,113.8
112,788.2
44,765.5
4,756.9

1,845.0
36,342.2
81,401.9
2,386.4
2,205.2
129,231.4
25,210.4
4,304.5

The Balance Sheet has been prepared in conformity with Form A of the Third Schedule to the Banking Regulation Act.

AUDITED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED,

I. INCOME
Interest Earned
Other Income
TOTAL INCOME
II. EXPENDITURE
Interest Expended
Operating Expenses
Provisions and Contingencies
TOTAL EXPENDITURE
III. PROFIT / (LOSS)
Net Profit for the Year
Losses Brought Forward
TOTAL PROFIT/(LOSS)
IV. APPROPRIATIONS
Transfer to Statutory Reserve
Transfer to Special Reserve
Transfer to Revaluation Reserve
30

March 31, 2012

March 31, 2013

(` in million)
March 31, 2014

7,169.7
1,027.3
8,197.0

9,161.0
1,170.2
10,331.2

11,282.6
1,386.6
12,669.2

4,892.7
2,466.1
287.4
7,646.2

6,316.9
2,753.0
240.7
9,310.6

7,598.7
3,190.9
366.0
11,155.6

550.8
(3,645.5)
(3,094.7)

1,020.6
(3,233.6)
(2,213.0)

1,513.6
(2,494.7)
(981.1)

137.7
-

255.1
-

378.4
20.7
-

Transfer to Capital Reserve

Transfer to Investment Reserve
Balance carried over to Balance Sheet
TOTAL
Earning per share
(i) Basic (`)
(ii) Diluted (`)
Face Value per share (`)
Significant Accounting Policies
Notes to Accounts

March 31, 2012

0.9
0.3
(3,233.6)
(3,094.7)

March 31, 2013

22.7
3.9
(2,494.7)
(2,213.0)

March 31, 2014

2.2
1.7
(1,384.1)
(981.1)

2.73
2.71
10.00

4.19
4.17
10.00

6.05
5.99
10.00

The Profit & Loss Account has been prepared in conformity with Form B of the Third Schedule to the Banking Regulation
Act.

AUDITED CASH FLOW STATEMENT FOR THE YEAR ENDED,

Cash Flow from Operating Activities
Net Profit for the year ended
Adjustments for:
Provisions for Advances
Provisions for Restructured Advances
Provision for Investments
Provision for Standard Assets
Provision for Income Tax (including wealth tax)
Provision for Other Assets and Contingencies
Depreciation on Fixed Assets
Loss on Sale of Fixed Assets
Amortization of Premium on Investment
Amortization of Premium on Acquired Assets
ESOP Compensation
Adjustments for:
Increase/(Decrease) in Deposits
Increase/(Decrease) in Borrowings
Increase/(Decrease) in Other Liabilities & Provisions
(Increase)/Decrease in Investments
(Increase)/Decrease in Advances
(Increase)/Decrease in Other Assets
Refund/(Payment) of direct taxes (Including Tax
Deducted at Source)
Net Cash Flow from Operating activities (A)
Cash Flow from Investing activities
Purchase of Fixed assets
Proceeds from sale of Fixed Assets
Net Cash Flow from Investing activities (B)
Cash Flow from Financing activities
Net Proceeds from Issue of Capital
Issue of Subordinated Debt
Repayment of Subordinated Debt
Payment of Unclaimed Dividend \ Transfer to Investor
Education Protection Fund
Increase/ (Decrease) in Borrowings
Net Cash Flow from Financing activities (C)
Net Increase/(Decrease) in Cash & Cash (A+B+C)
Equivalent
Cash and Cash equivalent at the beginning of the year
Cash and Cash equivalent at the end of the year

31

March 31, 2012

March 31, 2013

(` in million)
March 31, 2014

550.8

1,020.6

1,513.6

245.9
28.7
8.3
(0.6)
0.3
(3.0)
119.7
28.3
56.8
37.6
2.0

175.0
3.6
(3.5)
19.2
0.3
42.2
136.4
17.1
47.3
41.0
2.2

348.5
(65.0)
(2.2)
70.6
0.4
(1.4)
179.7
4.0
60.0
40.1
(0.1)

7,253.9
2,887.3
361.9
(2,292.2)
(10,339.6)
(124.7)
7.9

20,282.8
279.1
(8,452.8)
(13,236.3)
182.3
(3.8)

19,613.2
1,904.5
(2,813.5)
(15,864.6)
(107.2)
16.9

(1,170.7)

552.7

4,897.5

(739.2)
8.0
(731.2)

(722.9)
9.5
(713.4)

(199.0)
11.5
(187.5)

1,857.8
(260.0)
(1.5)

406.0
(100.0)
-

7.8
-

1,596.3
(305.6)

4,121.7
4,427.7
4,267.0

(6,654.6)
(6,646.8)
(1,936.8)

4,871.1
4,565.5

4,565.5
8,832.5

8,832.5
6,895.7

RISK FACTORS
Investing in the Equity Shares offered in this Issue involves a high degree of risk. Before investing in our Equity
Shares, you should carefully consider all the information in this Placement Document, including the risks and
uncertainties described below and in the chapters Our Business and Managements Discussion and
Analysis of Financial Condition and Results of Operations, as well as the Financial Statements beginning on
page F-1 of this Placement Document. If any of the following risks, or other risks that are not currently known
or are now deemed immaterial, actually occur, our business and financial results and cash flows could be
materially and adversely affected, the trading price of the Equity Shares could decline significantly and you
may lose all or part of your investment.
In particular, you should note that we are governed in India by a legal and regulatory environment which, in
some material respects, may be different from that which prevails in the United States or other countries.
Internal Risk Factors
Our results of operations depend to a significant extent on net interest income, which in turn is sensitive to
changes in interest rates. Any changes in the interest rate environment that may cause the costs on our
interest-bearing liabilities to increase disproportionately to the income from our interest-earning assets may
adversely impact our business and financial results.
Our results of operations depend to a significant extent on our net interest income. During the Fiscal Years
ended March 31, 2013 and March 31, 2014, net interest earned represented 70.85% and 72.65%, respectively,
of our operating income, which includes our net interest income and other income. For the three months ended
June 30, 2014 our net interest earned represented 80.12% of our operating income. Net interest income
represents the excess of interest earned from interest-bearing assets (performing assets and investments) over
the interest paid on customer deposits and borrowings. Interest rates are highly sensitive to many external
factors beyond our control, including growth rates in the economy, inflation, money supply, RBIs monetary
policies, deregulation of the financial sector in India, domestic and international economic and political
conditions and other factors. In addition, an increase in interest expense relative to interest income may lead to a
reduction in our net interest income, which could materially and adversely affect our results of operations.
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 of the time lag in re-pricing of our assets and
liabilities. The difference could result in an increase in interest expense relative to interest income leading to a
reduction in our net interest income, which could materially and adversely affect our results of operations. Any
volatility or increase in interest rates or other market conditions may also adversely affect the rate of growth of
certain sectors of the Indian economy and the value of our marked-to-market fixed-income securities portfolio,
which may adversely impact our business and financial results.
Our inability to improve the share of CASA deposits may result in higher cost of deposits and thereby affect
the profitability of the Bank in future.
The Bank as on March 31, 2013 and March 31, 2014 had total deposits of ` 83,638.4 million and ` 103,251.6
million, respectively. The share of CASA deposits amounted to 27.16% of total deposits in Fiscal Year 2013
and 25.00% in Fiscal Year 2014. The reduction in share of CASA deposits has led to increase in cost of deposits
from 7.44% in Fiscal Year 2013 to 7.56% in Fiscal Year 2014. Inability to improve the share of CASA deposits
may affect the profitability of the Bank.
If we are unable to manage the significant challenges that we face in maintaining or managing the growth
in our retail banking business, our business, liquidity position, results of operations and financial condition
could be adversely affected.
As part of our growth strategy, we have expanded our retail banking business products and services to include
wealth management products and services, including investment advice, mutual funds and bonds and
bancassurance. Our retail banking constituted 77.39%, 76.94% and 78.81% of our total deposits and 42.02%,
43.53% and 45.46% of our total net advances as at March 31, 2013, March 31, 2014 and June 30, 2014,
respectively. We cannot assure you that we will be able to maintain the present growth rates in retail banking
business or how long we may be able to maintain such growth. Any failure to maintain or manage our planned
32

growth in retail banking business could require us to seek more expensive sources of funding to meet our
funding requirements. In case of such events, our business, liquidity, results of operations and financial
condition could be materially and adversely affected.
Our business and financial performance are dependent on increasing our area coverage through our branch
network. Any failure to do so will affect our growth.
a)

As of August 31, 2014, we had 138 interconnected branches spread across 17 states and two union
territories in the country. We opened three additional branches in Pitampura in New Delhi, in Tambaram
in Chennai and in Indore after August 31, 2014. In Fiscal Year 2014, the Bank increased its network by 36
branches, which is the highest number of new branches installed in one fiscal year by us. The new
branches were opened in many locations including the states of Andhra Pradesh, Chattisgarh, Madhya
Pradesh, Punjab, Odisha and Rajasthan. In line with our strategy, we also intend to expand our branches in
Tier II to Tier VI cities. Our newly opened branches may not be profitable immediately upon their
opening or may take time to breakeven. In the event of delay in achieving breakeven by the newly opened
branches in a reasonable period as envisaged by us, our profitability may be affected. Our aggressive
branch expansion plans may have an adverse effect on the capital outlay which in turn may adversely
affect the financial condition and results of operations of the Bank.

b) Also, as of August 31, 2014, we had 3,100 employees. The employee additions were made to support our
growth strategies. The ratio of employee cost to operating income for the Fiscal Years ended March 31,
2013 and March 31, 2014 was 34.35% and 30.98%, respectively. Our planned growth, including any
expansion into newer cities and/or existing cities, will require us to continue to significantly increase our
employee headcount at various levels and invest in effective training programs. Such activities and
investments in our employees will require substantial management effort and attention as well as
employee compensation expense. If we are unable to manage our employee levels effectively, our
operating expenses could increase disproportionately, which could adversely affect our results of
operations.
c)

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 costeffective. If we are unable to maintain or increase awareness of or otherwise enhance our brand in a costeffective 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 expected to completely utilize the benefit of carry-forward and set-off of accumulated losses in the
near future and would be eligible to pay tax at the full rate which would impact our net profit, cash flows,
accounting ratios and results of operations in the future.
As on March 31, 2014, we have unabsorbed loss of ` 1,384.1 million. We expect to completely utilize the
benefit of carry-forward and set-off of accumulated losses under section 72 of the Income-tax Act, 1961, in the
near future. Non-utilisation of these carry forward losses within the prescribed time limit may increase our
actual tax outgo.
Further, once our unabsorbed losses are fully adjusted, we would be eligible to pay tax at the full rate which
would impact our net profit, cash flows, return on equity, return on capital employed and results of operations in
the short term. For further details, please refer to the chapters titled Financial Statements and Statement of
Possible Tax Benefits.
Income Tax Department has filed certain appeals against various orders in favour of the Bank, which if
determined against us could have an adverse impact our cash flows, financial condition and results of
operations.
Income Tax Appellate Tribunal has passed in the Fiscal Year 2014 various orders in respect of cases pertaining
to various assessment years in favour of the Bank which resulted into tax refund amounting to ` 742.7 million
(including interest) (Refunds Amounts), received in the Fiscal Year 2015. Aggrieved by these orders, the
income tax department has filed various appeals before the Honble Bombay High Court. The appeals are
currently sub-judice before the Bombay High Court.
33

In the event we fail to successfully defend our claims and in the event the Bombay High Court upholds the
appeals filed by the income tax department, we may have to repay the Refunds Amounts along with interest or
comply with any other directions issued by the Bombay High Court which may adversely impact our cash
flows, financial condition and results of operations.
For further details, refer to the chapter Legal Proceedings.
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,
corporate and SME & MSMEs to include retail asset products, prepaid cards, travel cards and a remittance
platform etc. 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 start-up costs, an inability to attract
and obtain new customers or knowledge and expertise applicable to the new businesses, lower growth and
profitability potential than previously anticipated, risk management, establishing monitoring and recovery
systems, and marketing.
If we are unable 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, which may materially and
adversely affect our liquidity, business, prospects, financial condition, and results of operations. In addition, if
our competitors are able to better anticipate the needs of customers within our target market, our market share
could decrease and our business could be adversely affected.
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) primarily have been
customer deposits, Tier II subordinated debt, inter-bank loans and refinancing from development financial
institutions (e.g., NABARD and SIDBI). Our cost of funds is sensitive to interest rate fluctuations, which
exposes us to the risk of reduction in spreads. The pricing of our issuances of debt will also be negatively
impacted by any downgrade or potential downgrade in our credit ratings. The rates that we must pay to attract
deposits are determined by numerous factors such as the prevailing interest rate structure, deregulated savings
interest rate, competitive landscape, Indian monetary policy and inflation.
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.
We may be unable to successfully execute our business and growth strategies due to a variety of factors, in
which case our business growth could be adversely affected.
During the years ended March 31, 2013 and March 31, 2014, we expanded our business and infrastructure, with
deposits increasing from ` 83,638.4 million as of March 31, 2013 to ` 103,251.6 million as of March 31, 2014
and advances increasing from ` 65,860.9 million as of March 31, 2013 to ` 81,401.9 million as of March 31,
2014. As of June 30, 2014, our deposits and advances were ` 105,519.1 million and ` 82,913.9 million,
respectively. 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 our strategy.
We continue to develop and implement a number of growth initiatives to become more competitive and
neighbourhood-oriented. In particular, we are transitioning to a more balanced portfolio of retail secured loans
and loans to SMEs and MSMEs and agriculture-related microfinance and mid-corporate loans, including both
fixed and floating rate loans. There is no assurance that we will be able to successfully implement our business
strategies in a timely manner or at all.
Our ability to sustain and manage growth depends primarily upon our ability to manage key issues such as
selecting and retaining skilled personnel, developing profitable products and services to cater to the needs of our
existing and potential customers in our current markets, improving our risk management systems to monitor our
existing and new businesses, maintaining and in a timely manner, upgrading an effective technology platform,
developing a knowledge base to face emerging challenges and ensuring a high standard of customer service.
34

Sustained growth also puts pressure on our ability to effectively manage and control historical and emerging
risks. Our ability to sustain and manage growth is also affected by macroeconomic factors affecting India, such
as GDP growth, changes in implementation of macroeconomic policies, changes in demand for loans and
changes in interest rates. We may not be able to successfully maintain growth rates due to unfavourable changes
in any one or more of the aforementioned factors. Our inability to effectively manage any of these issues may
adversely affect our business growth and, as a result, adversely impact our businesses, prospects, financial
condition and results of operations, as well as the market price of our Equity Shares.
We have a regional concentration, and are therefore dependent on the general economic condition and
activity, in certain areas in western, eastern and southern India, particularly Maharashtra, Gujarat, Odisha
and Telengana. Any downturn in the economies of these areas may adversely affect our business, results of
operations and financial condition.
A majority of our branches are located in Maharashtra, Gujarat, Odisha and Telengana. Of the 138
interconnected branches that we operated in as of August 31, 2014, 79 branches, constituting 57.25% of total
branches, were concentrated in these states, with 25.36% of our total branches located in Maharashtra.
The total deposits as on March 31, 2013 was ` 83,638.4 million out of which ` 46,506.7 million, ` 6,747.0
million, ` 315.3 million and ` 5,582.0 million, were at branches located in Maharashtra, Gujarat, Odisha and
Telengana, constituting 55.60%, 8.07%, 0.38% and 6.67%, respectively. Of the total deposits, as of March 31,
2014 of ` 103,251.6 million, out of which ` 55,538.5 million, ` 8,899.6 million, ` 548.5 million and ` 6,990.7
million, were by branches located in Maharashtra, Gujarat, Odisha and Telengana, constituting 53.79%, 8.62%,
0.53% and 6.77%, respectively. Our concentration in these states, exposes us to any adverse economic or
political circumstances in that region as compared to other public and private sector banks that have more
diversified national presence. If there is a sustained downturn in the economies of western, eastern and southern
India, particularly in Maharashtra, Gujarat, Odisha and Telengana, our business, results of operations and
financial condition may be materially and adversely affected.
We have concentrations of loans to and deposits from certain customers, which exposes us to risk of credit
losses and premature withdrawal of deposits from these customers that could materially and adversely affect
our business, results of operations and financial condition.
Our advances (funded and non-funded) to the 20 largest borrowers, accounted for approximately 11.88% (i.e. `
12.278.1 million) and 10.77% (i.e. ` 13,197.5 million) of our total advances as of March 31, 2013 and March
31, 2014, respectively. As of March 31, 2014, our largest single customer exposure (which included fund-based
and non-fund-based) was ` 1,300.0 million representing 1.06% of our total customer exposure (fund-based and
non-fund-based). None of our 20 largest customer exposures were classified as non-performing as of March 31,
2014. If any of our 20 largest customer exposures were to become non-performing, the credit quality of our
portfolio and our business and financial results could be adversely affected.
Further, our deposits from the twenty largest depositors, accounted for approximately 15.57% (i.e. ` 9,865.9
million), 18.31% (i.e. ` 15,314.2 million) and 17.24% (i.e. ` 17,797.4 million) of our total deposits as of March
31, 2012, 2013 and 2014, respectively. We cannot assure you that there will not be any premature withdrawal or
non-renewal of deposits from these depositors.
Deterioration in the performance of any of the industry sectors where we have significant exposure may
adversely impact our business, results of operations and financial condition
Our total gross loan to borrowers is dispersed across various industry sectors, the most significant of which are
wholesale trade, which represented 6.39% (i.e. ` 5,242.4 million), transport, which represented 4.41% (i.e. `
3,621.8 million) and construction which represented 4.08% (i.e. ` 3,353.2 million), respectively, of our
outstanding gross loan as of March 31, 2014.
Further, it has been our policy to diversify the exposure over different industry sectors. We have fixed exposure
norms (sectoral cap) for major industry sectors. For example, our internal policies set out limit of our credit
exposure to any particular industry depending upon the nature of that industry.
Any significant deterioration in the performance of the industry sector we lend to (including priority sectors),
driven by events not within our control, such as regulatory action or policy announcements by Government or
State government authorities, would adversely impact the ability of borrowers in that industry sector to service
35

their debt obligations.

We cannot assure you that we will be able to diversify our exposure over different industry sectors in the future.
Failure to maintain diverse exposure resulting in industry sector concentration may adversely impact our
business, financial condition and results of operation, in case of any significant deterioration in performance of
such industry sector.
We have substantial exposure to certain sectors and borrowers and our business could be materially and
adversely affected by difficulties experienced in these sectors or by such borrowers.
We monitor concentration of exposures to sectors and borrowers. We calculate customer and sector exposure,
as required by RBI.
As of March 31, 2014, priority sector lending aggregated ` 35,156.2 million and represented 48.57% of our
adjusted net bank credit. Any significant difficulty in a particular sector, driven by events not within our control,
such as regulatory action or policy announcements by government authorities or natural disasters, would
adversely impact the ability of borrowers in that industry to service their debt obligations to us. As a result, we
would experience an increased level of NPAs, which may adversely impact our business, our financial
performance and the price of our Equity Shares.
If we are unable to manage the significant risks and challenges that we face in our fee income businesses,
our business and financial results could be adversely affected.
As part of our growth strategy, we have been diversifying and expanding our products and services, including
from marketing transaction banking services to retail customers and small and medium-sized companies to earn
fee income. Such products include debit cards, trade products, cash management, foreign exchange transactions
and sales of third party products such as insurance and mutual funds. Fee income based products and services
entail a number of risks and challenges.
For insurance products, we have a corporate agency arrangement with a well-known insurance company in
India, whereby we earn commission from the sale and renewal of their insurance products that we solicit and
procure from our customers. We also have a referral arrangement with a well-known provider of general
insurance policies, whereby we earn referral fees by marketing general insurance products through our
distribution channels to our customers. Our income from these arrangements depends greatly on the reputation
of such insurers in the marketplace and the quality and variety of products they offer, which are factors beyond
our control. Under existing guidelines, Indian banks are currently permitted to have arrangements with only one
life insurer and one non-life insurer for the sales of insurance products. We are unable to offset risk arising from
our dependence on such insurers by offering products from other insurers.
We recently expanded the number of ATMs in our network in order to take advantage of opportunities to
expand. A majority of our new ATMs are owned, installed and operated by a third-party vendor but have our
name and logo and are accessible by our customers, as well as by non-customers. We receive a transactionbased fee for use of our ATMs by non-customers. On February 13, 2012, RBI announced new guidelines for socalled white label ATMs in an effort to increase ATM penetration on a per capita basis. Going forward, we
may face difficulty finding third-party vendors with whom to partner for our existing ATM network or to
expand our network, and we may face increased competition with white label ATMs. In the event that we are
unable to find third-party vendors with whom to partner, or to reach commercially agreeable terms with
vendors, and that competition from entrants to the market reduces the number of customers and non-customers
that use our ATMs, our fee income from ATMs could decrease, which could adversely affect our financial
results.
SEBI has also limited the amount that asset management companies can pay distributors of mutual funds. RBI
has prohibited ATM service charges for cash withdrawals and balance enquiries to ATM users who are not
customers of the bank operating the ATM for five transactions or less each month not exceeding ` 10,000 per
cash withdrawal. In addition, charges above such usage are limited to ` 20 per transaction. Any such regulatory
changes, which restrict / reduce fees and charges receivable on third party products, including insurance and
mutual funds, our fee income from the sales of such products may be adversely affected. If we are unable to
manage the attendant risks and challenges, returns on such products and services may be less than anticipated,
which could have a material adverse effect on our business and financial results.

36

The Bank distributes third-party investment products, such as mutual funds, brokerage and insurance
products, and provides wealth management services. Our inability to effectively manage any of the above
businesses may adversely affect our business, results of operation and financial condition.
The Bank has increased its focus on fee and commission-based income over a period of years. In order to grow
non-interest income, the Bank distributes third-party investment products, such as mutual funds, brokerage and
insurance products and provides wealth management services. In case the customers to whom such products are
sold, experience deficiency of service or are otherwise aggrieved, the Bank may be subject to litigation or
claims for damages by such aggrieved customers, which could have adverse effects on our reputation and our
business, financial position and results of operations.
Regulations in India require us to extend a certain amount of loans to the priority sector, which could
subject us to higher delinquency rates. In addition, our results of operations could be affected if we do not
meet our priority sector lending requirements.
The directed lending norms of RBI require that every bank should extend an aggregate of 40% of its adjusted
net bank credit, or ANBC, to certain eligible priority sectors, such as agriculture, MSMEs and SMEs and
housing finance. Within this requirement, banks are required to extend at least 13.5% of the ANBC to direct
agriculture, 4.5% to indirect agriculture (any spill over from direct agriculture can be applied to the indirect
agriculture limit) and 10% to weaker sections, which includes small and marginal farmers as well as artisans,
village and cottage industries. RBI regulations specify that priority sector requirements should be met on the
basis of credit equivalent of off-balance sheet exposure rather than ANBC if such off-balance sheet exposure by
a bank is higher than its ANBC. Moreover, domestic commercial banks in India have been advised by RBI to
increase credit to micro and small enterprises (which are defined according to the level of investments by such
enterprises in plant and machinery or equipment ranging up to ` 50 million for manufacturers and ` 20 million
for service providers) by 20% every year. In addition, such banks are also required to allocate 60% of such
advances of credit to micro enterprises (which are enterprises in which the level of investments in plant and
machinery for manufacturers is less than ` 2.5 million and in equipment for service providers is less than ` 1
million), with certain further sub-allocations within such group, such allocation to be achieved in stages over a
three-year period ending in March 31, 2014. Further, RBI recently stated that loans sanctioned by banks to
NBFCs for on-lending to individuals or other entities against gold jewellery, investments made by banks in
securitised assets originated by NBFCs, where the underlying assets are loans against gold jewellery, and the
purchase or assignment of gold loan portfolios from NBFCs would each no longer be eligible for classification
under direct agriculture sector lending. For more information, please refer to the chapter titled Regulations
and Policies in this Placement Document.
We have experienced, in the past, and may continue to experience, shortfalls in meeting our priority sector
lending requirements. For example, we extended 32.61% and 33.40% of our ANBC to the priority sectors as
against the 40.0% requirement under RBIs directed lending norms as of March 31, 2006 and March 31, 2009,
respectively. Although we have met with our overall priority sector lending requirements as of March 31, 2014,
we have not met sub-allocation requirement of 18% of ANBC to the agricultural sector and 10% of ANBC to
the weaker sections of the society. If we are unable to meet priority sector lending requirements, we are required
to place an amount based on 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, SIDBI and NHB deposits, from which we would earn lower levels of
interest as compared to loans made to the priority sector. These deposits are generally required to be held in
such accounts for five to seven years. However, effective March 31, 2014, existing and fresh 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 small enterprises sector, as the case may be. In such
circumstances, our financial condition and results of operations could be materially and adversely impacted. As
of March 31, 2014, we had ` 4,034.5 million held in NABARD, SIDBI and NHB deposits.
Our microcredit lending, poses unique risks not generally associated with other forms of lending in India,
and, as a result, we may experience increased levels of non-performing loans and related provisions and
write-offs that negatively impact our results of operations.
We have expanded our portfolio of loans to small businesses and poor and illiterate individuals in India, who
have limited sources of income, savings and credit histories, and who cannot provide us with any collateral or
security for their borrowings. Our loans to the microfinance sector include term loans to micro finance
institutions (MFIs), portfolio buyouts from MFIs, and, direct lending through our AIB branches to self-help
37

groups (SHGs). Our microfinance customers typically belong to the economically weaker segments of
society in rural India, who have limited sources of income, savings and credit records, and who cannot provide
us with any collateral or security for their borrowings. As a result, our microfinance customers present a higher
credit risk of default than our other customers with better access to education, employment opportunities, and
social services. As of March 31, 2014, our outstanding microfinance loans, including through portfolio buyouts,
amounted to ` 2,888.4 million. Gross non-performing assets on our total loans to MFIs were ` 10.5 million, of
which ` 10.3 million were provided for as of March 31, 2014. In addition, we expect to rely on non-traditional
guarantee mechanisms in connection with such loan products, which are generally secured by informal
individual and group guarantees, rather than tangible assets. As a result, these loan products may pose a higher
degree of risks than loans secured with physical collateral. Due to the precarious financial and social
circumstances of our microfinance customers and our non-traditional lending practices we may, in the future,
experience increased levels of non-performing loans and related provisions and write-offs that could have a
material and adverse effect on our business, future financial performance and results of operations.
Incidents of backlash against microcredit lenders may inhibit our ability to meet our priority sector lending
requirements, grow our microcredit business and may increase our levels of non-performing loans.
Incidents of backlash against micro-credit lenders in erstwhile Andhra Pradesh resulted in the enactment of the
Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act, 2011 (the A.P. MFI Act).
The A.P. MFI Act provides for, inter alia, registration and cancellation of registration of microfinance
institutions, filing of periodic returns by MFIs, limits on interest recoverable by MFIs, prohibition on security
for loans provided to SHGs and prior approval for granting of further loans to SHGs. Due to uncertainty
regarding the implementation and enforcement of the A.P. MFI Act, most Banks operating in Andhra Pradesh
have ceased micro-lending disbursements and microcredit borrowers in the state of Andhra Pradesh may stop
repaying their loans. This has materially and adversely affected the ability of MFIs to collect on existing
microfinance loans and the amount of business volumes in the microfinance sector in Andhra Pradesh. We
cannot assure you that we will be able to comply with the provisions of the A.P. MFI Act. The Government of
India may introduce a new bill in the parliament to regulate MFIs. There is no assurance that the resultant
legislation will be beneficial for the Bank.
Further, other state governments may promulgate similar or stricter regulations, resulting in increased levels of
non-performing loans and related provisions and write-offs that could materially and adversely affect our results
of operations and prospects. In addition, if the micro-credit crisis spreads, we may face a decline in yields from,
and increase in prices of, other priority sector assets, or we may be unable to meet our priority sector lending
requirements altogether, as we may experience greater competition from other banks in securing other forms of
priority sector lending. In such circumstances, our financial condition and results of operations could be
materially and adversely affected.
We face maturity and interest rate mismatches between our assets and liabilities. Our depositors may not roll
over term deposits on maturity and we may be otherwise unable to increase our term deposits in which case
our liquidity position could be adversely affected and we may be required to pay higher interest rates in order
to attract and/or retain further deposits, which could have a material adverse effect on our business,
financial results and the price of the Equity Shares.
We meet our funding requirements through short and long term deposits from retail and large corporate
depositors as well as wholesale interbank deposits. Matching the duration of our assets to our liabilities reduces
our exposure to changes in interest rates. However, a significant portion of our assets (such as loans) have
maturities with longer terms than our liabilities (such as deposits). For further information, please refer to the
chapter titled Selected Statistical InformationAsset Liability Gap.
If a substantial number of our depositors do not roll over their funds upon maturity, our liquidity position could
be adversely affected and we may be required to pay higher interest rates in order to attract and/or retain further
deposits, which could have a material adverse effect on our business, financial results and the price of the
Equity Shares.
In addition, interest-earning assets tend to re-price more quickly than interest-bearing liabilities. Increase in
interest rates applicable to our liabilities, in particular our inter-bank and other wholesale funding, without
concurrent corresponding increases in interest rates applicable to our interest-bearing assets, may result in a
decline in net interest income, which could materially and adversely affect our business and financial results.

38

A substantial portion of our loans have a tenor exceeding one year, which may expose us to risks associated
with economic cycles.
As of last reporting Wednesday of June 2014, loans with a tenor exceeding one year based on RBIs assetliability management guidelines constituted 75.65% of our total loans. The tenor of such loans may expose us to
risks arising out of economic cycles such as rising default levels, reduction in the value of collateral and assetliability mismatch, any of which could adversely impact our results of operations.
If we are not be able to effectively manage increases in our asset portfolio and our NPA levels arising from
our growth, the quality of our loan portfolio and other assets may decrease and our business and financial
performance could be adversely affected.
We suffered from the impact of increasing NPAs in unsecured personal loans for the first few months of the
Fiscal Year ended March 31, 2010 due to the severe economic slowdown. We have increased our selectivity in
advancing to current customers, unsecured personal loans and loans for construction equipment and small ticket
vehicle loans. An increase in our asset portfolio may cause the level of our NPAs to increase if we are unable to
manage the growth and maintain the quality of our loan portfolio or other assets. In particular, retail and
corporate loans may carry a higher risk for delinquency if there is an increase in unemployment, prolonged
recessionary conditions or a sharp rise in interest rates. If we are not able to maintain the quality of our loan
portfolio and control and reduce our NPAs, our business and financial performance could be materially and
adversely affected.
Our gross NPAs were ` 2,149.8 million, ` 1,384.5 million and ` 1491.9 million , respectively as of March 31,
2013, March 31, 2014 and June 30, 2014, respectively whereas the net NPAs were ` 491.3 million, ` 740.2
million and ` 804.5 million, for the same periods. Our gross NPA ratio was 3.18%, 1.69% and 1.78% ,
respectively as of March 31, 2013, March 31, 2014 and June 30, 2014, respectively, while our Net NPA ratio
0.75%, 0.91% and 0.97%, respectively, as of the same dates. While we had already made provisions with
respect to 85.71% and 80.54% of our NPAs (including technical write-offs) as of March 31, 2013 and as of
March 31, 2014, respectively, we may need to make further provisions if recoveries with respect to such NPAs
do not materialise in time or at all. We have a larger exposure to small businesses, retail customers and priority
sectors relative to some of our competitors, which may result in increased lending to customers that do not
already have an established credit history with us and may thereby require us to invest substantial resources to
manage inherent risks. Small businesses generally have limited capital and liability management experience and
such businesses and retail customers are more sensitive to economic downturns. As a result, these customers
may be more likely to default on their loans and we may be required to increase our loan impairment provisions.
Any increase in NPAs will reduce the net interest-earning asset base and increase provisioning requirements,
thereby adversely affecting our financial condition and results of operations. Our ability to continue to reduce or
contain the level of our gross and net NPA ratios may be affected by a number of factors beyond our control,
such as increased competition, depressed economic conditions, including with respect to specific industries to
which we are exposed, decreases in agricultural production, decline in commodity prices, adverse fluctuations
in interest and exchange rates, adverse changes in Indian policies, laws or regulations, a continuing slowdown
in the growth of Indian or global economies due to the recent financial crisis or a relapse of a global credit crisis
or other adverse macroeconomic trends in Indian and other parts of the world. In addition, there can be no
assurance that reductions in NPAs over prior periods will continue in the future or that current levels of
restructured loans may not increase in the future.
Our ability to withstand a major default in our loan book remains low due to our relatively small capital
position. If we are unable to plan for or reduce our exposure to large customers relative to our balance sheet
size, or if we experience a major default, our financial condition and results of operations could be
materially and adversely affected.
Compared to many of our competitors, our capital position is relatively small, which may render us less likely
than our competitors to withstand a major default in our loan portfolio. We have in the past had major defaults
where large accounts have turned delinquent and we were required to make large provisions, thereby having a
significant impact on our profitability. Further, our current loan loss reserves may not be adequate to cover
actual losses. If we are unable to plan for or reduce our exposure to large customers relative to our balance sheet
size, or if we experience a major default, our financial condition and results of operations could be materially
and adversely affected.

39

A portion of our advances are unsecured. In case we are unable to recover such advances in a timely manner
or at all, it may adversely affect our business, financial condition and results of operations. Part of our
investment portfolio is exposed to risks relating to mark-to-market valuation.
As of March 31, 2013 and March 31, 2014, 4.66% (i.e. ` 3,067.5 million) and 4.53% (i.e. ` 3,683.8 million),
respectively, of our net advances were unsecured. While the Bank continuously monitors portfolio
concentrations by segment, ratings, borrower, group, sensitive sectors, unsecured exposures, industry,
geography, etc and have been selective in our lending policies and strive to satisfy ourselves with the credit
worthiness and repayment capacities of our customers, there can be no assurance that we will be able to recover
the interest and the principal advanced by us in a timely manner or at all. Any failure to recover the unsecured
advances given to our customers would expose us to a potential loss which could adversely affect our business,
financial condition and results of operations.
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 restructured standard advances. As a result of a slowdown in economic activity,
rising interest rates and the limited ability of corporations to access capital due to the volatility in global
markets, there has been an increase in restructured advances in the banking system as well as in our loan
portfolio in Fiscal Year 2014 and Fiscal Year 2013.
In November 2012, RBI increased the general provisioning on restructured standard accounts from 2.00% to
2.75%. 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, RBI issued final guidelines on the restructuring of advances.
Pursuant to those guidelines, advances that are restructured (other than due to delays in project implementation
under certain conditions and up to specified periods) from April 1, 2015 onwards would be classified as nonperforming. The general provision required on restructured standard accounts as of March 31, 2013 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. General provisions on standard accounts restructured after June 1, 2013 were increased to 5.00%. 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.
We have more limited access to credit and other financial information on borrowers than banks in other
economies, which may decrease the accuracy of our assessments of credit risks and thereby increase the
likelihood of borrower defaults.
Our principal activity is providing financing to borrowers, almost all of whom are based in India. The credit risk
of our borrowers, including small and middle market companies, may be higher than in other economies due to
the higher uncertainty in our regulatory, political and economic environment and the inability of our borrowers
to adapt to global technological advances. Our corporate borrowers may suffer from low profitability because of
increased competition as a result of economic liberalization policies, a sharp decline in commodity prices, a
high debt burden and high interest rates in the Indian economy and other factors.
In addition, Indias system for gathering and publishing statistical information relating to the Indian economy
generally or specific economic sectors within it or corporate or financial information relating to companies or
other economic enterprises is not as comprehensive as those of several countries with established market
economies. The absence of such reliable and comprehensive statistical, corporate and financial information,
including audited financial statements and recognised debt rating reports, relating to our present and prospective
corporate borrowers or other customers makes the assessment of credit risk, including the valuation of
collateral, more difficult. Nationwide credit bureaus have become operational in India only recently, and it may
be some time before comprehensive credit information as to the credit history of our borrowers, especially
individuals and small businesses, is available to us. In many cases, we need to rely on the accuracy and
completeness of information furnished by or on behalf of customers and counterparties, including financial
40

statements and financial information. 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 or that the relevant collateral will have a value commensurate to
such a loan.
Such difficulties in assessing credit risks associated with our day-to-day lending operations and risks associated
with the business environment in India may lead to an increase in the level of our non-performing and
restructured assets, which could materially and adversely affect our business, financial results, shareholders
equity and the price of the Equity Shares.
We are subject to annual financial inspection (AFI) by RBI. Non-compliance with RBI guidelines could
result in penalties which may adversely affect our business, financial condition or results of operations.
We are subject to an AFI by RBI under the Banking Regulation Act. In the past certain observations were made
by RBI during the AFI regarding our business and operations in its AFI reports. Inspection by RBI is a regular
exercise and is carried out periodically by RBI for all banks and financial institutions. While we attempt to be in
compliance with all regulatory provisions applicable to us, in the event we are not able to comply with the
observations made by RBI, we may be subject to penalties by RBI. Imposition of any penalty by RBI may have
a material adverse effect on our reputation, financial condition and results of operations.
RBI has directed us to reduce shareholding of the promoter and promoter group in the Bank.
RBI had directed the Bank to reduce shareholding of the promoter and promoter group to 10% of the paid up
share capital of the Bank by March 31, 2014. As of September 25, 2014, the shareholding of the Aga Khan
Fund For Economic Development SA and Platinum Jubilee Investments Ltd, members of our promoter group,
is 18.42% of the paid-up share capital of the Bank. The Bank has on June 5, 2014 sought an extension till
March 31, 2017 to meet the requirement of the reduced shareholding of the promoter and promoter group. For
details of the current shareholding of the Bank, please refer to the chapter titled Principal Shareholders.
There can be no assurance that RBI will grant us additional time for compliance with its direction. Any further
directions from RBI to reduce promoter and the promoter groups shareholding in a time bound manner may
increase the liquidity and affect the market price of the Equity Shares. Any failure to comply with directions
from RBI may adversely affect our business, financial condition and results of operations.
Implementation of Basel III framework on liquidity standards would affect the net interest margin and
increase operating expenses during the transition period
RBI on June 9, 2014, released the final Basel III framework on liquidity standards, which includes guidelines on
liquidity coverage ratio (LCR), liquidity risk monitoring tools and LCR disclosure standards. LCR is the
proportion of high-quality liquid assets to the total net cash outflows through 30 calendar days. 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 LCR is being introduced in
a phased manner starting with a minimum requirement of 60% from January 1, 2015 and reaching minimum
100% on January 1, 2019. Any failure to comply with these standards prescribed by RBI may adversely affect
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 RBI for domestic banks. There can be no assurance that we will be able to access capital as and
when we need it for growth. If we fail to maintain the CRAR as stipulated by RBI, RBI may take certain
actions against us that could adversely affect our reputation, business and financial results
Under the Basel III framework of RBI as of March 31 2014, we are required to maintain a CET I, Tier I and
total capital adequacy ratios of 5.00%, 6.5% and 9.00%, respectively. These increase to 5.50%, 7.00% and
9.00% by March 31, 2015. Further, we are required to maintain a capital conversion buffer of 2.5% by March
31, 2019.
In addition, RBI issued RBI Basel III Capital Regulations on May 2, 2012 pursuant to the Bank for International
Settlements Basel III international regulatory framework for banks, which have been implemented from April
1, 2013. RBI Basel III Capital Regulations require, among other things, higher levels of Tier I capital and
41

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. 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. RBI Basel III Capital Regulations
are to be on an on-going basis, with full implementation of such regulations by March 31, 2019.
Although we currently meet or exceed the applicable capital adequacy requirements under Basel II and Basel
III, certain adverse developments could affect our ability to continue to satisfy the capital adequacy
requirements, including deterioration in our asset quality, decline in the values of our investments and change to
the minimum capital adequacy requirements, or applicable risk weight for different asset classes. Further, our
ability to support and grow our business could be limited by a declining capital adequacy ratio if we are unable
to access or have difficulty accessing the capital markets or have difficulty obtaining capital in any other
manner. We cannot assure you that we will be able to obtain additional capital on commercially reasonable
terms in a timely manner, or at all. If we fail to meet capital adequacy requirements, RBI may take certain
actions, including restricting our lending and investment activities, and the payment of dividends by us. These
actions could materially and adversely affect our reputation, business and financial results. If we fail to maintain
the CRAR as stipulated by RBI, RBI may take certain actions against us that could adversely affect our
reputation, business and financial results.
We are required to maintain cash reserve ratio (CRR) and statutory liquidity ratio (SLR) and any
increase in these requirements could materially and adversely affect our business, financial condition and
results of operations.
As a result of the statutory reserve requirements stipulated by RBI, we may be more exposed structurally to
interest rate risk than banks in other countries. Under RBI regulations, we are subject to a CRR requirement
under which we are currently required to keep 4.00% of our net demand and time liabilities in current account
with RBI. We do not earn interest on cash reserves maintained with RBI. RBI may further increase the CRR
requirement as a monetary policy measure and has done so on numerous occasions. Increases in the CRR
requirement could materially and adversely affect our business, results of operations and financial condition.
In addition, under RBI regulations, our liabilities are subject to a SLR requirement, according to which 22% of
our demand and time liabilities need to be invested in government securities, state government securities and
other securities approved by RBI from time to time. In our experience, these securities generally carry fixed
coupons. When the interest rate rises, the value of these fixed coupon securities depreciates. We cannot assure
you that investment in such securities will provide returns better than other market instruments. Further, any
increase in the CRR and the SLR requirements, would reduce the amount of cash available for lending, which
may materially and adversely affect our business, financial condition and results of operations.
We are subject to supervision and regulation by RBI. RBI may impose stricter regulations and guidelines
which are intended to provide tighter control may adversely affect our business, results of operation and
financial condition.
We are regulated principally by and have reporting obligations to RBI. We are also subject to the corporate,
taxation and other laws in effect in India. The regulatory and legal framework governing us has been and may
continue to change as Indias economy and commercial and financial markets evolve. 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 in the industry where we operate, such as change in
loan to value ratio in our mortgage loans, restriction on charging pre-closure penalty on variable rate loans etc.
Compliance with many of the regulations applicable to our operations may involve significant costs and
otherwise may impose restrictions on our operations. Further, these regulations are subject to frequent
amendments and depend upon government policy. There can be no assurance that changes in these regulations
and the implementation of future rules by governmental and regulatory authorities (including lower loan to
value ratio for mortgage loans, cap on interest rate charged/ interest spread for mortgage loans or loans to
weaker sections etc.) will not adversely affect our business, results of operation and financial condition.
Any materialisation of our significant contingent liabilities could materially and adversely affect our
business, financial conditions, results of operations and prospects.
As of March 31, 2014, we had total contingent liabilities of ` 25,210.4 million, as shown below.
42

Sr.
No.
1.

2.

3.

4.

Contingent Liability (*)

Claim against the Bank not

acknowledged as debts.

Liability on account of
outstanding forward
exchange and derivative
contracts.
Guarantees given on behalf
of constituents, acceptances,
endorsements and others.
Other items for which the
Bank is contingently liable.

Brief Description

An amount of ` 444.6 million is outstanding as at March 31, 2014, as

claims against us are not acknowledged as debts, including ` 300.0 million
being in the nature of a contingent liability on account of proceedings
pending with income tax authorities.
We enter into foreign exchange contracts on our own account and on
behalf of our customers and currency options/swaps on a pure hedge basis.
forward exchange contracts are commitments to buy or sell foreign
currency at a future date at the contracted rate
As a part of our commercial banking activity, we issue letters of credit and
guarantees on behalf of our customers.
These include liability on account of credit enhancement relating to the
sale of mortgage loan portfolio undertaken by us.

If any of these contingent liabilities materialise, fully or partially, our financial results could be materially and
adversely affected. For further details, please refer to chapter titled Financial Statements.
We may not be able to attract or retain talented professionals required for our business, which may adversely
affect our business and financial performance.
Certain functions of our business operations require skilled, knowledgeable and experienced personnel. Such
highly skilled personnel give us a competitive edge. Further the successful implementation of our growth plans
would largely depend on the availability of such skilled personnel and our ability to attract and retain such
qualified personnel. We may lose many business opportunities and our business would suffer if such required
personnel are not available. Some of our key management personnel, including our Managing Director and
Chief Executive Officer, have joined us in the past few years. We may face the risk of losing our key
management personnel due to reasons beyond our control and we may not be able to replace them in a
satisfactory and timely manner which may adversely affect our business and our future financial performance
and the price of the Equity Shares.
Our business is dependent on relationships established through our branches with our clients. Closure of
branches or loss of our key branch personnel may lead to damage to these relationships and a decline in our
revenue and profits.
Our business is dependent on the key branch personnel who directly manage client relationships. We encourage
dedicated branch personnel to service specific clients since we believe that this leads to long-term client
relationships, a trust based business environment and over time, better cross-selling opportunities. While no
single branch manager or operating group of managers contributes a meaningful percentage to our business, our
business may suffer materially if a substantial number of branch managers either become ineffective or leave
the organisation.
Any adverse decisions in any of the legal and regulatory proceedings in which we are involved could
adversely affect our reputation and financial condition.
We are contesting certain legal proceedings in various courts, including certain civil cases that have been filed
against us and civil/criminal cases that have been filed against our current/former officers, in respect of actions
allegedly taken by us and/or our current/former officers during the ordinary course of our business. Any adverse
decision in any of these cases may adversely affect our reputation and financial condition. 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. For further
details, please refer to the chapter titled Legal Proceedings.

43

In the past, penalties have been imposed against us by certain regulatory authorities in relation to certain
non-compliances.
Penalties have been levied against us in the past for non-compliance with the regulations applicable to us.
Pursuant to the press release dated April 26, 2011, we, along with 18 other commercial banks, were subjected to
a penalty by RBI. RBI vide its letter dated April 26, 2011 had directed the Bank to pay a penalty of ` 1 million.
The penalty was imposed in terms of provisions u/sec 47 A(1)(b) r/w sec 46(4)(i) of the Banking Regulations
Act, 1949 for contravention of statutory and regulatory guidelines in few derivative contracts entered into by the
Bank during Fiscal Year 2007 and Fiscal Year 2008, which has been paid by the Bank. Further, RBI vide their
letter dated July 12, 2013 imposed a penalty of ` 10 million on the Bank in terms of provisions u/sec 47 A(1)(c)
r/w sec 46(4)(i) of the Banking Regulations Act, 1949 for non-compliance of RBI instructions. On September 3,
2009, we received a show cause notice from SEBI alleging violations of various laws and regulations. The
matter was disposed off, without admission or denial of guilt on our part, by way of consent order from SEBI
dated March 2, 2010 in recognition of our payment of ` 350,000. Such actions and any additional failure to
meet other RBI or SEBI requirements could materially and adversely affect our reputation, business, financial
condition, results of operations, pending applications or requests with RBI and our ability to obtain the
regulatory permits and approvals required to expand our business. If similar penalties are levied against us in
the future, it could have an adverse effect on our business and results of operations.
We have instances of negative operating cash flows in the past. If we continue to experience negative cash
flows in the future, our business, financial condition and results of operations could be adversely affected.
Our net cash flow from operating activities was ` (1,170.7) million for Fiscal Year 2012. The reduction in cash
flow from operating activities was primarily due increase in advances and investments. However, in Fiscal Year
2013 and Fiscal Year 2014 our net cash flow from operating activities was ` 552.7 million and ` 4,897.5
million. In the event we experience negative cash flow in the future, we may not be able to generate sufficient
amount of cash to finance our future growth of assets, which could have a material adverse effect on our
business, financial condition and results of operations. For further details, please refer to chapter titled
Financial Statements.
Our business is highly dependent on our information technology systems, which require significant
expenditure for regular maintenance, upgrades and improvements. Any breach of our information
technology systems or any failure of such systems to perform as expected could adversely affect our business,
reputation and ability to service our customers.
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 in our retail banking, corporate banking, SME banking and treasury business units. There
is no warranty under our information technology licence agreements that the relevant software or system is free
of interruptions, will meet our requirements or be suitable for use in any particular condition. Any technical
failures associated with our information technology systems or network infrastructure, including those caused
by power failures and breaches in security caused by computer viruses and other unauthorised tampering, may
cause interruptions or delays in our ability to provide services to our customers on a timely basis or at all, and
may also result in costs for information retrieval and verification. Corruption of certain information could also
lead to errors when we provide services to our customers. Any failure on the part of third party vendors under
agreements with us to provide products and services, including software that enables our operations, or to
appropriately maintain such products and services under annual maintenance contracts, may adversely affect
our functioning and operations. In the event of failure on the part of these third party vendors, their liabilities
towards us usually do not exceed a certain percentage of the total fee paid by us and they will not be liable to us
for any loss of profits or revenue or any consequential or indirect loss, which in turn exposes us to higher risks
in using these software and systems. In addition, we may be subject to liability as the result of any theft or
misuse of personal information stored on our systems or on the systems of our outsourcing service providers.
Any of these outcomes could adversely affect our business, our reputation and the quality of our customer
service.
In particular, the secure transmission of confidential information is critical to our operations. Our networks and
systems may be vulnerable to unauthorised access and other security problems. We cannot assure you that our
existing security measures will prevent unforeseeable security breaches, including break-ins and viruses, or
other disruptions such as those caused by defects in hardware or software and errors or misconduct of operators.
Persons who circumvent our security measures could use our clients confidential information wrongfully. Any
44

material security breach or other disruptions could expose us to losses and regulatory actions and could harm
our reputation.
We need to regularly upgrade and improve our information technology systems, including our software, backup systems and disaster recovery operations, at substantial cost so that we remain competitive. Our success will
also depend, in part, on our ability to respond to new technological advances and emerging banking, capital
market and other financial services industry standards and practices on a cost-effective and timely basis. The
development and implementation of such technology entails significant technical and business risks. The high
cost to upgrade and improve our information technology systems, whether to comply with changes in regulatory
requirements, to remain competitive or otherwise, could be prohibitive due to the relatively small size of the
Bank. 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. Any failure to improve or upgrade
our information technology systems effectively or in a timely manner could materially and adversely affect our
competitiveness, financial condition and results of operations.
If our risk management policies and procedures do not adequately address unidentified or unanticipated
risks, out business could be adversely affected.
We have devoted significant resources to develop our risk management policies and procedures and aim to
continue to do so in the future. We have set up a Credit Risk Management Committee (CRMC) for credit risk,
Operations Risk Management Committee (ORCO) for operations risk and Asset Liability Committee (ALCO)
for market risk. These committees meet at least monthly to discuss the various risks and identify and implement
risk mitigation. The meetings of these committees are chaired by our MD & CEO/ CFO and the members of
these committees are Senior Management Executives relevant to the respective functional areas. The Board has
constituted a Risk Management Committee (RMC) consisting of non-executive directors who oversee and guide
the various risk management committees referred above. Despite this, our policies and procedures to identify,
monitor and manage risks may not be fully effective. Some of our risk management systems are not automated
and are subject to human error. Some of our methods of managing risk 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 indicated by historical measures. Inability to develop and implement
effective risk management policies may adversely affect our business, prospects, financial condition and results
of operation.
We have not paid any dividends since Fiscal Year 2005 and may not be able to pay dividends in the future.
We have not paid dividends since Fiscal Year 2005 and may not be able to pay dividends in the future. Whether
the Bank pays dividends in the future and the amount of any such dividends, if declared, will depend upon a
number of factors, including our compliance with regulatory requirements and our results of operations and
financial condition and other factors considered relevant by our Board of Directors and shareholders. There is
no assurance that we will declare and pay, or have the ability to declare and pay, any dividends on Equity
Shares in the future.
Foreign investment in the Equity Shares, and acquisitions or transfers of our Equity Shares resulting in an
aggregate holding of 5% or more are subject to limits specified by RBI. Further, in relation to our foreign
investment, we are required to comply with the various provisions of the Foreign Exchange Management
Act, 1999 (FEMA).
Under Indian laws, the aggregate permissible foreign investment, including FDI and investment by FIIs and
NRIs in a private sector bank is limited to an aggregate of 74% of the paid up capital under the automatic route.
Further, the aggregate FII and NRI holding cannot exceed 24% and 10%, respectively, of the paid up capital.
However, with the approval of the board of directors and the shareholders by way of a special resolution, the
aggregate FII and NRI holding in a bank can be increased up to 49% and 24%, respectively.
Pursuant to the guidelines issued by RBI, any acquisition or transfer of shares in a private bank which will take
the aggregate holding of an individual or a group to five per cent or more of the paid-up capital of a bank
requires the prior acknowledgement of RBI.
Our foreign shareholding is restricted to 49% of our paid up capital, with the aggregate shareholding of FII not
exceeding 49% and individual shareholding not exceeding 5%, of our paid up capital, pursuant to resolution
passed by our shareholders in the annual general meeting held on December 15, 2006. As of September 25,
45

2014, our aggregate foreign shareholding (including FII and NRI shareholding) was 39.44% of our paid up
capital of which shareholding by NRIs was 2.52% of our paid up capital.
The aforementioned regulatory framework could adversely affect the liquidity, free transferability of the Equity
Shares and in turn have an adverse effect on the price of the Equity Shares.
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 centre 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.
The collateral or guarantees securing our loans may not be sufficient, and we may be unable to foreclose on,
or experience delays in enforcing, collateral when borrowers default on their obligations.
A substantial portion of our loans to retail and corporate customers is secured by tangible collateral,
predominantly real estate, vehicles, property and equipment financed by us. A portion of our loans to corporate
customers is secured by assets, including property, plant and equipment. Our loans to corporate customers also
include working capital credit facilities that are typically secured by a first lien or charge on inventory,
receivables and other current assets. In some cases, we may have taken further security of a first or second lien
or charge on fixed assets, a pledge of financial assets (such as marketable securities), corporate guarantees and
personal guarantees. As of March 31, 3013 and 2014, the ratio of secured to total funded lending by us was
95.34% and 95.47%, respectively and the ratio of our mortgage loans secured by property to total loan as on
that date was 36.41% and 38.44%, respectively.
The value of the collateral securing our loans, including particularly any property assets, may significantly
fluctuate or decline due to factors beyond our control, including those affecting the Indian economy in general.
For example, a slowdown in the Indian economy may lead to a downturn in the real estate markets, which in
turn could result in a decline in the value of the real estate properties securing our loans to levels below the
outstanding principal balances of such loans. Any decline in the value of such collateral may reduce the
amounts we can recover from such collateral and increase our impairment losses.
In addition, we may be unable to foreclose on collateral when borrowers default on their obligations to us,
which may result in failure to recover the expected value of such collateral security. Although there has been
legislation (including the Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 or SARFAESI Act) strengthening the rights of creditors and which may lead to faster
realisation of collateral in the event of default, there can be no assurance that such legislation will have a
favourable impact on our efforts to reduce our levels of NPAs and we may not be able to realise the full value of
our collateral, due to, among other things, delays in foreclosure proceedings, defects in the perfection of
collateral, fraudulent transfers by borrowers and decreases in the values of collateral.
Such difficulties in realizing our collateral fully or at all, including if we are instead compelled to restructure
our loans, could adversely affect our business and financial results.
We may not be able to obtain, renew or maintain our statutory and regulatory permits and approvals
required to grow or operate our business on time or at all, and may be subject to penalties pursuant to
inspection and supervision by regulatory authorities including RBI and SEBI.
We have licences from RBI for all of our banking and other operations, a depository participant licence from
SEBI for depository operations, and an IRDA licence for bancassurance, however our operations are subject to
continued review and the governing regulations may change. Failure to obtain, renew or maintain any required
approvals, permits or licences may result in the interruption of all or some of our operations and could
materially and adversely affect our business and financial results. For further information on Indian banking
regulations, please refer to the chapter titled Regulations and Policies.

46

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 loan 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 loan agreements impose restrictive financial covenants. 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, termination
of the agreements, as well as prepayment obligations
Any damages caused by the materialisation of banking business operational risks to which we are subject
could adversely affect our profitability and results of operations.
We are exposed to operational risk arising from inadequacy or failure of internal processes or systems or from
fraud. We are susceptible to, and have experienced in the past, fraud or misconduct by employees or outsiders,
unauthorised transactions by employees and operational errors, including clerical or record keeping errors.
Employee or executive misconduct could also involve the improper use or disclosure of confidential
information, which could result in regulatory sanctions and reputational or financial harm, including harm to
our brand. Given our high volume of transactions, errors may be repeated or compounded before they are
discovered and rectified. Our management information systems and internal control procedures are designed to
monitor our operations and overall compliance. However, they may not be able to identify non-compliance
and/or suspicious transactions in a timely manner or at all. As a result, we may suffer monetary losses, which
may not be covered by our insurance and may thereby adversely affect our profitability and results of
operations. Such a result may also adversely affect our reputation.
We face intense competition from housing finance companies and other banks in the housing finance
industry. If we are unable to compete effectively, our business and financial results could be adversely
affected.
Historically, the housing finance industry in India was dominated by housing finance companies (HFCs).
Interest rate deregulation and other liberalization measures affecting the housing finance industry, together with
increased demand for home finance, have increased our ability to enter the housing finance market. The demand
for housing loans has also increased due to relatively lower and affordable interest rates, stable property prices,
higher disposable incomes and increased fiscal incentives for borrowers. Entering the housing finance market
has various risks, including, among others, regulatory risks, credit risk, the risk that we may not be able to
effectively enforce on our collateral and the risk that the competitive atmosphere may force us to offer
customer-friendly terms. In addition, our portfolio includes under construction loans, which exposes us to the
risk that the project may not be executed on time or at all. Our ability to compete effectively with HFCs and
other commercial banks will depend, to some extent, on our ability to raise low-cost funding in the future and
our ability to manage unforeseen circumstances. If we are unable to compete effectively with other participants
in the housing finance industry, our business, future financial performance and the trading price of the Equity
Shares may be adversely affected.
Any breach by us of third party intellectual property rights could divert management attention and require us
to pay financial compensation to such third parties.
We may become subject to claims by third parties if we use slogans, names, designs, software or other such
subjects in breach of any intellectual property rights registered by such third parties. Any legal proceedings
pursuant to such claims, or settlements thereunder, may divert management attention and require us to pay
financial compensation to such third parties, as well as compel us to change our marketing strategies or brand
names of our products and services, which could adversely affect our business, prospects and financial results.
We do not own some of the trade names or trademarks that we use. We may be unable to adequately protect
our intellectual property. Furthermore, we may be subject to claims alleging breach of third party intellectual
property rights.
We have applied for registration with the Trade Mark Registry but do not own some of the copyright,
trademark, trade name or other intellectual property right in or to our names or logos, including for certain
classes of DCB Bank and DCB Bank Limited trade names or trademarks. We do not therefore enjoy the
statutory protections accorded to a registered trademark. While we have applied for and have received
registration for certain trademarks, including DCB, DCB Bank, DCB Bank Limited, Development
47

Credit Bank limited and X-Gen in certain classes, including the service mark category, there can be no
assurance that we will be able to register additional trademarks and logos or that third parties will not infringe
on our intellectual property, causing damage to our business prospects, reputation and goodwill. We may need
to litigate to protect our intellectual property or to defend against third party infringement. Any such litigation
could be time consuming and costly and the outcome cannot be guaranteed. We may not be able to detect any
unauthorised use or take appropriate and timely steps to enforce or protect our intellectual property. Any
inability to use or protect our intellectual property could affect our relationships with our customers, which
could materially and adversely affect our results of operation and financial condition.
Our measures to prevent money laundering may not be completely effective, which could adversely affect our
business and reputation.
In accordance with the requirements applicable to banks, we are mandated to comply with applicable AML and
KYC regulations in India. These laws and regulations require us, among other things, to adopt and enforce
AML and KYC policies and procedures. 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.
Any downgrade of our debt ratings or of Indias sovereign debt rating could adversely affect our business.
Our debt / fixed deposit is rated by CRISIL (the Indian subsidiary of S&P), ICRA and Brickwork Ratings, as
follows: CRISIL has rated our Lower Tier II Subordinated Bonds at A-/Stable and our Certificate of Deposit
programme up to an amount of `10 billion at A1+ on February 18, 2013 and was reaffirmed in March 2014.
CRISIL has also rated our Short term Fixed Deposits Programme (with a contracted maturity of upto one year)
at A1+ on July 31, 2013 and was reaffirmed in March 2014. ICRA has rated our Fixed Deposits with tenor upto
1 year at [ICRA]A1+ on July 16, 2014. Brickwork Ratings have rated our Lower Tier II Subordinated Debt at
BWR A-/Stable, as of July 2009, which was reaffirmed in August 2013. 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.
In addition, 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. This could have an adverse effect on our business and
future financial performance and our ability to fund our growth.
Our insurance coverage could prove inadequate to satisfy potential claims. If we were to incur a serious
uninsured loss or a loss that significantly exceed the limits of our insurance policies, it could have a material
adverse effect on our business, results of operations and financial condition.
We do not carry insurance to cover all of the risks associated with our business, either because insurance
coverage is not available or prohibitively expensive. We have taken out insurance within a range of coverage
consistent with industry practice in India to cover certain risks associated with our business. We cannot assure
you that our current insurance policies will insure us fully against all risks and losses that may arise in the
future. In addition, even if such losses are insured, we may be required to pay a significant deductible on any
claim for recovery of such a loss, or the amount of the loss may exceed our coverage for the loss. In addition,
our insurance policies are subject to annual review, and we cannot assure you that we will be able to renew
these policies on similar or otherwise acceptable terms, if at all. If we were to incur a serious uninsured loss or a
loss that significantly exceed the limits of our insurance policies, it could have a material adverse effect on our
business, results of operations and financial condition.
Most of our branch premises are acquired on lease. Any termination of arrangements for lease of our
branches or our failure to renew the same in a favourable, timely manner, could adversely affect our
business and results of operations.
As on August 31, 2014, 114 of our 138 branches are on leased premises. There can be no assurance that these
leases will be renewed or extended or that new leases will be entered into for similar periods in the future. In the
event these leases are not renewed or new leases are not entered into at terms acceptable to us or at all, Further,
if any of these leases are terminated or revoked subsequent to or during its tenure, or if we have to cease
48

operations at such property for any reason, our business, results of operations, financial condition and prospects
could be materially and adversely affected. Further our back office in Chennai is also located on leased
premises. If any of the owners of these premises does not renew an agreement under which we occupy the
premises, attempts to evict us or seeks to renew an agreement on terms and conditions non-acceptable to us, we
may suffer a disruption in our operations or increased costs, or both, which may adversely affect our business
and results of operations.
We face intense competition from banks and financial institutions that are much larger than we are and
have an established presence all over India. If we are unable to compete effectively, our business and
financial results could be adversely affected.
The Indian banking industry is highly competitive. We face strong competition in all lines of our business, and
many of our competitors are much larger than we are. We compete directly with large government-controlled
public sector banks, major private sector banks, HFCs and NBFCs, many of which have much larger customer
and deposit bases, larger branch networks and more capital than we do. The Government of India has also
expressed a preference for consolidation in the banking sector in India. Mergers among banks may result in
enhanced competitive strengths in pricing and delivery channels for merged entities. We may face greater
competition from larger banks as a result of such consolidation, which may adversely affect our future financial
performance.
We also compete with foreign banks with operations in India, including some of the largest multinational banks
and financial institutions in the world, and, for certain products, with non-banking financial institutions. The
Government of India has raised the limit on aggregate foreign investment in private sector banks to 74%. In
2006, our Board of Directors and shareholders approved increasing the aggregate FII holding limit from 24% to
49% of our paid-up capital. We compete with other banks operating in India for quality priority sector
borrowers, particularly in the agriculture and housing finance sectors.
Due to intense competition, we may not be able to successfully execute our growth strategy and offer
competitive products and services that generate reasonable returns, reduce our currently high operating costs
and retain our competitive advantage, which could negatively impact our profit margins and materially and
adversely affect our business and financial results.
We are exposed to fluctuations in foreign exchange rates, which could affect adversely our financial results.
We are exposed to fluctuation in foreign currency rates on our limited unhedged exposure, which may directly
affect non-interest income and thereby, our financial results. Such fluctuations could also affect our treasury
revenue adversely. Movements in foreign exchange rates may also adversely affect our borrowers and this may,
in turn, affect the quality of our exposure to these borrowers.
External Risk Factors
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.
A majority of the provisions and rules under the Companies Act, 2013 have recently been notified and have
come into effect from April 1, 2014 or the date of their respective notifications, as the case may be, 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 fiscal years on corporate social responsibility activities. Further, the
Companies Act, 2013 imposes greater monetary and other liability on the Bank, 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.

49

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, the Board of Directors of the Bank presently does not have requisite number of directors liable to
retire by rotation. 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 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; directly or indirectly 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 penalised under the Competition Act, our
business may be adversely affected. On March 4, 2011, the Government notified and brought into force new
provisions under the Competition Act in relation to combined entities (the Combination Regulation
Provisions), which came into effect from June 1, 2011. The Combination Regulation Provisions require that
any acquisition of shares, voting rights, assets or control or mergers or amalgamations, which cross the
prescribed asset and turnover based thresholds, must be notified to and pre-approved by the CCI. In addition, on
May 11, 2011, the CCI issued the final Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations) Regulations, 2011 (which were further amended on March 28,
2014). These regulations, as amended, set out the mechanism for the implementation of the Combination
Regulation Provisions under the Competition Act.
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.
Changes in applicable laws, rules and regulation affecting our business could materially affect our business
and financial results.
The banking and financial sector in India is highly regulated and extensively supervised, including by RBI.
Laws, rules and regulations and regulatory interpretations may change from time to time. Compliance with
applicable laws, rules and regulations may restrict our business activities or require us to incur increased
expense and to devote considerable time to such compliance efforts. Our business could be directly affected by
any changes in laws, regulations and policies for banks, including if we are directed to increase lending to
certain sectors or increase our reserves. Such changes may also affect our scope in specific businesses or foreign
investment limits in the banking industry. Any such changes may require us to modify our business, which may
adversely affect our financial results. RBI guidelines and provisions of the Banking Regulation Act also restrict
our ability to pay dividends. RBI also requires banks to maintain certain cash reserve and statutory liquidity
ratios, and increases in such requirements could affect our ability to expand credit. Any RBI requirements
specifying increase in provisioning norms for impaired assets, risk weighting and capital adequacy may
adversely affect our financial condition. In addition, any action by any regulator to curb inflows into India could
50

negatively affect our business. RBI also requires that every bank extend an aggregate of 40% of our adjusted net
bank credit to certain eligible priority sectors, such as agriculture, small-scale industries and housing finance
and has advised that credit to micro, small and medium enterprises should be increased by 20% every year, and
also places restrictions on building overseas asset portfolios. RBI has prohibited ATM service charges for cash
withdrawals and balance enquiries to ATM users who are not customers of the bank operating the ATM for five
transactions or less each month not exceeding ` 10,000 per cash withdrawal. In addition, charges above such
usage are limited to ` 20 per transaction. In October 2011, RBI deregulated the interest payable on savings
accounts subject to the following two conditions: first, each bank will have to offer a uniform rate on savings
bank deposits upto ` 100,000 irrespective of the amount in the account within this limit; and, secondly, for
savings bank deposits over ` 100,000 a bank may provide differential rates of interest, if it so chooses, subject
to the condition that banks will not discriminate in the matter of interest paid on such deposits, between one
deposit and another of similar amount, accepted on the same date, at any of its offices.
In addition, RBIs guidelines on corporate debt restructuring specify that for debt amounts of ` 100 million and
above, 60% of the creditors by number and 75% of creditors by value can decide to restructure the debt and that
such a decision would be binding on the remaining creditors. If we own 25% 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. Recently, we
have opted out of the CDR system, but have the option to join the same on an individual transaction basis.
Our business may also be adversely affected by changes in other laws, governmental policies, enforcement
decisions, direct as well as indirect tax laws, foreign investment rules and accounting principles. For example,
the Insurance Regulatory and Development Authority has stipulated limits on fees and charges associated with
certain insurance products, commonly known as unit-linked insurance plans or ULIPs, which could affect
intermediaries facilitating sales of such products to customers, including banks providing bancassurance
services. In addition, SEBI has prohibited entry loads and any additional management fees for mutual funds
schemes and limited the amount that asset management companies can pay distributors of mutual funds. For
further details please refer to the chapter titled Regulations and Policies.
The proposed adoption of IFRS could result in our financial condition and results of operations appearing
materially different than under Indian GAAP.
We may be required to prepare annual and interim financial statements under IFRS in accordance with the
roadmap for the adoption of, and convergence with, IFRS announced by the Ministry of Corporate Affairs,
Government of India in January 2010. The convergence of certain Indian Accounting Standards with IFRS was
notified by the Ministry of Corporate Affairs on February 25, 2011. The date of implementing such converged
Indian accounting standards has not yet been determined, and will be notified by the Ministry of Corporate
Affairs in due course. Our financial condition, results of operations, cash flows or changes in shareholders
equity may appear materially different under IFRS than under Indian GAAP. This may have a material effect on
the amount of income recognised during that period and in the corresponding period in the comparative period.
In addition, in our transition to IFRS reporting, we may encounter difficulties in the ongoing process of
implementing and enhancing our management information systems.
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, please refer to the chapter titled
Indian Securities Market.
Foreign Account Tax Compliance withholding may affect payments on the Equity Shares.
The U.S. Foreign Account Tax Compliance Act (FATCA) imposes a new reporting regime and, potentially,
a 30% withholding tax with respect to (i) certain payments from sources within the United States, (ii) foreign
pass-through payments made to certain non-U.S. financial institutions that do not comply with this new
reporting regime, and (iii) payments to certain investors that do not provide identification information with
respect to interests issued by a participating non-U.S. financial institution. The Bank is classified as a financial
institution for these purposes. If a withholding tax in respect of FATCA were to be deducted or withheld from
any payments, neither the Bank nor any other person will pay additional amounts as a result of the deduction or
withholding.
51

Our failure to adapt to technological advancements that can potentially disrupt the banking industry could
affect the performance and features of our products and services and reduce our attractiveness to customers.
Any technological advancements in the way customers prefer to execute their banking services, may change the
way banking has been perceived and carried out. Technological innovation such as mobile wallets, mobile
operator banking, payment banks, internet banking through smart phones, etc. could disrupt the banking
industry as a whole. In the future, there can be no assurance that we will be able to adapt our systems quickly
and efficiently to such changing environment. Even if we are able to maintain, upgrade or replace our existing
systems or innovate or customize and develop new technologies and systems, we may not be as quick or
efficient as our competitors in upgrading or replacing our systems. Our failure to adapt to such technological
advancements quickly and effectively could affect the performance and features of our products and services
and could reduce our attractiveness to existing and potential customers.
If ownership restrictions on private sector banks are relaxed, a single investor may acquire a controlling
stake in the Bank.
If the current restrictions are further liberalised to allow not only increased investment by Indian entities but
also greater foreign ownership in private sector banks, a single entity or group of investors acting in unison may
acquire Equity Shares to the extent that would allow it to control or strongly influence us. Such an entity or
investor group would, subject to restrictions in the Articles, be able to determine, or would have a
disproportionate influence compared to other shareholders in, the election of the Board of Directors,
management policies and the outcome of corporate transactions submitted to shareholders for approval. There
can be no assurance that any future controlling shareholder(s) will have the same interests as any minority
shareholder or will pursue the same strategies as the current management.
The growth of the Indian banking industry may not be sustainable.
The Indian banking industry has experienced substantial growth, consistent with the economic development of
India. We expect the banking industry in India to expand as a result of continued growth in the Indian economy
and increases in household income, among other factors. However, since the second half of 2008, global
markets have experienced tremendous volatility as a result of the turmoil originating from the United States
sub-prime mortgage crisis, which has brought about a global economic downturn, and concerns over sovereign
debt, particularly in Europe, which have impeded a global recovery. The Indian economy rebounded strongly in
Fiscal Year 2011 from the moderation induced by the global downturn. India registered real GDP growth of
9.3% in Fiscal Year 2008, 6.8% in Fiscal Year 2009, an estimated 8.0% in Fiscal Year 2010 and an estimated
8.5% in Fiscal Year 2011. In its Third Quarter Review of Monetary Policy 2011-12, RBI announced it expects
baseline GDP growth of around 7.0% for Fiscal Year 2012, revised downwards from 8.0% as of the forecast for
the previous quarter. (Sources: RBI, Annual Report 2010-11; RBI, Macroeconomic and Monetary
Developments Third Quarter Review 2011-12). Although Indias economic growth has moderated and there are
downside risks globally and, in India, weak industrial growth, slowdown in investment activity and deceleration
in the resource flow to the commercial sector, RBI anticipates a modest recovery in Fiscal Year 2013. (Sources:
RBI, Third Quarter Review of Monetary Policy 2011-12). It is uncertain whether the Indian economy and the
banking industry can return to previous levels of growth. Consequently, we cannot assure you that the growth
and development of the Indian banking industry will be sustainable. If the rate of growth of the Indian banking
industry slows down, our business, financial condition and results of operations may be materially and
adversely affected.
A decline in Indias foreign exchange reserves may affect liquidity and interest rates in the Indian economy,
which could have an adverse impact on the Bank. A rapid decrease in reserves would also create a risk of
higher interest rates and a consequent slowdown in growth.
According to RBIs Half Yearly Report on Management of Foreign Exchange Reserves October 2013 March
14 dated August 1, 2014 and Half Yearly Report on Management of Foreign Exchange Reserves April 2013
September 2013 dated March 13, 2014, Indias foreign exchange reserves increased significantly from US$5.8
billion as of March 31, 1991 to US$ 54.1 billion by March 31, 2002, after which reserves rose steadily reaching
a level of US$304.2 billion as of March 31, 2014. Foreign exchange reserves increased from US$277.2 billion
as of September 30, 2013 to US$304.2 billion as of March 31, 2014. A decline in these reserves could result in
reduced liquidity and higher interest rates in the Indian economy. On the other hand, high levels of foreign fund
inflows could add excess liquidity into the system, leading to policy interventions, which will also slow
economic growth. Any significant decline or increase in foreign exchange reserves could adversely affect our
business, results of operation and financial condition
52

Inflation in India could have an adverse impact on our business.

The Indian economy has recently experienced high levels of inflation. According to the Monthly Economic
Report for July 2014 prepared by the Department of Economic Affairs, Ministry of Finance, Government of
India, the year-on-year inflation in terms of the Wholesale Price Index (WPI) was 5.85% for the month of
July 2013, reached a monthly-high for calendar year 2014 of 7.52% for November 2013 and eased to 5.19%
(provisional) for the month of July 2014. Over the long run, high inflation is inimical to sustained growth as it
harms investment by creating uncertainty, according to RBI. In its Third Bi-monthly Review of Monetary
Policy 2014-15 dated August 5, 2014, RBI decided against reducing the repo rate and kept the policy repo rate
under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent in order to avoid an imminent risk of
resurgent inflation. In the event of a sustained high rate of inflation, our costs, such as operating expenses, may
increase, which could have an adverse effect on our results of operations.
A deterioration of general economic conditions, including a slowdown in economic growth in India, could
have an adverse effect on our business.
Our performance is highly correlated to general economic conditions in India, which are in turn influenced by
global economic factors. Any event or trend resulting in a deterioration in whole or part of the Indian or global
economy may directly or indirectly affect our performance, including the quality and growth of our assets. Any
volatility in global commodity prices, in particular oil and steel prices, could adversely affect our borrowers and
contractual counterparties.
A significant change in economic liberalization and deregulation policies in India could disrupt our
business.
All, or substantially all, of our assets and customers are located in India. The GoI has traditionally exercised and
continues to exercise a dominant influence over many aspects of the economy. Its economic policies have had
and could continue to have a significant effect on the banking and financial sector, including on us, and on
market conditions and prices of Indian securities, including securities issued by us. Any significant shift in the
Governments economic liberalisation policies could adversely affect business and economic conditions in India
and could also adversely affect our business and financial results and the trading price of the Equity Shares.
Continuing financial instability in other countries could disrupt our business and cause the trading price of
the Equity Shares to decrease.
Economic developments outside India have adversely affected the economy. Since the second half of 2007, the
global credit markets have experienced, and may continue to experience, significant volatility which have
originated from the adverse developments in the United States and the European Union credit and sub-prime
residential mortgage markets. These and other related and subsequent events, such as the recent collapse of a
number of financial institutions and the sovereign debt crisis, notably in the European Union, have had, and
continue to have, a significant adverse impact on the availability of credit and the confidence of the financial
markets, globally as well as in India. Our business is affected by domestic and international economic
conditions, including rates of economic growth and the impact that such economic conditions have on consumer
spending. The current global economic downturn has led to an increased level of consumer delinquencies, lack
of consumer confidence, decreased market valuations and liquidity, increased market volatility and a widespread
reduction of business activity generally. The resulting economic pressure and dampened consumer sentiment
may adversely affect our business and our results of operations.
In addition, market volatility has been unprecedented in recent months, and the resulting economic turmoil may
continue to exacerbate industry conditions or have other unforeseen consequences, leading to uncertainty about
future conditions in our industry. There can be no assurances that government responses to the disruptions in the
financial markets will restore consumer confidence, stabilize the markets or increase liquidity and the
availability of credit. Continuation or worsening of this downturn or general economic conditions may have an
adverse effect on our business, liquidity and results of operations, as well as on the trading price of our Equity
Shares.
Terrorist attacks and other acts of violence in India could adversely affect our operations.
Terrorist attacks, such as the attacks in November 2008 and July 2011 in the city of Mumbai, where our
53

registered office and corporate office is located, and other acts of violence or war may adversely affect
worldwide financial markets and could potentially lead to economic recession, which could adversely affect our
business and financial results. These events also pose significant risks to our employees and operations.
Southern Asia has, from time to time, experienced instances of civil unrest and political tensions and hostilities
among neighboring countries. Political tensions could create a perception that there is a risk of disruption of
operations, which could have an adverse effect on the market for our services. Additionally, any of these events
could lower confidence in Indias economy and create a perception that investments in companies with Indian
operations involve a high degree of risk, which could have a material adverse effect on the price of our Equity
Shares.
Natural disasters and other disruptions could adversely affect the Indian economy and could cause our
business and operations to suffer and the trading price of our Equity Shares to decrease.
Our operations, including our branch network, may be damaged or disrupted as a result of natural disasters such
as earthquakes, floods, heavy rainfall, epidemics, tsunamis and cyclones and other events such as protests, riots
and labour unrest. Such events may lead to the disruption of information systems and telecommunication
services for sustained periods. They also may make it difficult or impossible for employees to reach our
business locations. Damage or destruction that interrupts our provision of services could adversely affect our
reputation, our relationships with our customers, our senior management teams ability to administer and
supervise our business or it may cause us to incur substantial additional expenditure to repair or replace
damaged equipment or rebuild parts of our branch network. We may also be liable to our customers for
disruption in services resulting from such damage or destruction. Our bankers indemnity insurance coverage
for such liability may not be sufficient. Any of the above factors may adversely affect our business and financial
results, the quality of our customer service and the price of our Equity Shares.
Investors in our Equity Shares may not be able to enforce a judgment of a foreign court against us, our
directors or our executive officers.
Most of our directors and executive officers and some of the experts named herein are residents of India and
substantially all of our assets and the assets of our directors and executive persons are located in India. As a
result, it may not be possible for investors to effect service of process upon us, our directors, our executive
officers or such experts in countries outside India, including the United States, or enforce, in Indian courts,
judgments obtained in foreign courts, against us or such persons or entities. For more information on the
enforcement of civil liabilities in India, please refer to the chapter titled Enforcement of Civil Liabilities.
Risk Factors Related to the Equity Shares
You may be required to sell your Equity Shares if directed by RBI.
In connection with the Issue, RBI may not approve the sale of Equity Shares to any investor after the allotment
has been completed, in which case such investor would be required by RBI to sell its stake in the Bank in the
public market. There can be no assurance that an active trading market for our Equity Shares will be sustained
or that the market price for our Equity Shares will not decline below the Issue Price. Accordingly, holders of
our Equity Shares are subject to the risk that the prices of our Equity Shares could fall between the time of
allotment and the time it can effectuate a sale of Equity Shares as may be required by RBI.
There may be less information available about entities listed on Indian stock exchanges than entities listed
on stock markets in other countries.
The Equity Shares will be publicly listed on the Stock Exchanges and will not be listed on any stock exchange
in any other country other than India. While SEBI has issued regulations on disclosure requirements, insider
trading and other matters, there may be less publicly available information about Indian entities than is regularly
made available by public entities in many other countries. As a result, you may have access to less information
about our business, result of operations and financial condition, and those of our competitors listed on Indian
stock exchanges, on an ongoing basis, than entities subject to the reporting requirements of other countries.
Conditions in Indian stock exchanges may affect the price or liquidity of our Equity Shares.
Indian stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities and
other problems that have affected the market price and liquidity of the securities of Indian entities. These
54

problems have included temporary closure of the Stock Exchanges to manage extreme market volatility, broker
defaults, settlement delays and strikes by brokers. In addition, the governing bodies of the Indian stock
exchanges have from time to time restricted securities from trading, limited price movements and imposed
margin requirements. If similar problems occur in the future, the market price and liquidity of our Equity Shares
could be adversely affected. For more information on the securities market in India, please refer to the chapter
Indian Securities Market.
Currency exchange rate fluctuations may affect the value of the Equity Shares.
The exchange rate between the Rupee and other foreign currencies, including the U.S. Dollar, the British Pound
Sterling, the Euro, the Emirati Dirham, the Hong Kong Dollar, the Singapore Dollar and the Japanese Yen, has
changed substantially in recent years and may fluctuate substantially in the future. If you purchase Rupees to
purchase our Equity Shares, fluctuations in the exchange rate between the Rupee and the foreign currency with
which you purchased the Rupees may affect the value of your investment in our Equity Shares, including,
specifically, such foreign currency equivalent of:

the Rupee trading price of our Equity Shares in India;

the proceeds that you would receive upon the sale in India of any of our Equity Shares; and
cash dividends, if any, on our Equity Shares, which will be paid only in Rupees.

For information on certain historical exchange rates between the Rupee and the U.S. Dollar, please refer to the
chapter Exchange Rates.
An investor will not be able to sell any of our Equity Shares purchased in the Issue other than on a
recognised Indian stock exchange for a period of one year from the date of issue of such Equity Shares.
Pursuant to the SEBI ICDR Regulations, for a period of one year from the date of the allotment of our Equity
Shares in the Issue, investors purchasing our Equity Shares in the Issue may only sell their shares on a
recognised stock exchange in India and may not enter into any off-market trading in respect of their Equity
Shares. We cannot assure that these restrictions will not have an impact on the market price of any Equity
Shares purchased by you.
Investors may be subject to Indian taxes arising out of capital gains on the sale of our Equity Shares.
Capital gains arising from the sale of our Equity Shares are generally taxable in India. Any gain realised on the
sale of our Equity Shares on a stock exchange held for more than 12 months will not be subject to capital gains
tax in India if the securities transaction tax, or STT, has been paid on the transaction. The STT will be levied on
and collected by an Indian stock exchange on which our Equity Shares are sold. Any gain realised on the sale of
our Equity Shares held for more than 12 months to an Indian resident, which are sold other than on a recognised
stock exchange and as a result of which no STT has been paid, will be subject to capital gains tax in India.
Further, any gain realised on the sale of our Equity Shares held for a period of 12 months or less will be subject
to capital gains tax in India. Capital gains arising from the sale of our Equity Shares will be exempt from
taxation in India in cases where an exemption is provided under a treaty between India and the country of which
the seller is a 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 liable for tax in India as well as in their own jurisdictions on
gains arising from a sale of Equity Shares. For more information, please refer to the chapter Statement of
Possible Tax Benefits.
Your ability to sell your Equity Shares, and our ability to make future acquisitions or investments in India,
may be adversely affected by restrictions on foreign investment applicable to us.
Under current Indian regulations and practice, RBI approval is required for the sale of Equity Shares by a nonresident to a resident of India, unless the sale is made on a stock exchange in India through a stock broker or a
merchant banker registered with SEBI at the market price or in terms of the pricing guidelines specified by RBI
if the sale is an off-market transfer. If the Equity Shares are thinly traded, then certain other pricing guidelines
specified by RBI must be followed. Prior to the repatriation of sale proceeds, certain filings must be made with
an authorized dealer (bank) remitting the proceeds along with certain documents, including an undertaking from
the resident buyer in the prescribed form confirming compliance with the pricing guidelines and a no
objection or tax clearance certificate from the income tax authority or a certificate from a chartered accountant.
RBI approval may not be obtained on terms favourable to a non-resident investor, in a timely manner or at all.
55

In addition, foreign investment, including FDI and investments by FIIs, in private sector banks in India is
restricted to 74%. Moreover, foreign investment by FIIs in private sector banks in India cannot exceed 49%. As
of September 25, 2014, the aggregate foreign investment in the Bank was 39.56%, of which 14.88% constituted
shareholding by FIIs. RBI monitors such limits on a daily basis and has cautioned all authorised dealers not to
purchase any equity shares traded on Indian stock exchanges without prior RBI approval if the aggregate net
purchases of equity shares of listed Indian companies reach a cut-off point of two percentage points lower than
the specified foreign investment limit, which would be 72% for private sector banks in India (and 47% for FIIs
investing in such banks). In such circumstances, your ability, if you are a person resident in India, to sell Equity
Shares to persons resident outside India, including NRIs and FIIs, may be restricted or delayed. In addition,
because of possible delays in obtaining requisite approvals, investors in Equity Shares may be prevented from
realizing gains during periods of price increases or limiting losses during periods of price declines.
There are also other restrictions on foreign investment in India under the FDI policy, including with respect to
downstream investments by Indian companies that are owned (more than 50% of the share capital is held by
non-resident entities) or controlled (non-resident entities have the power to appoint more than a majority of its
directors) by non-resident entities. If we are owned or controlled by non-resident entities, we will be subject to
the downstream investment restrictions for an investment in another Indian company. These restrictions require
compliance with FDI sector norms, minimum pricing, prior approval or notification and other requirements.
Certain approvals required for the listing of the Equity Shares to be issued pursuant to the Issue may not be
obtained in a timely manner or at all, in which event you may not be able to obtain ownership over any
Equity Shares allotted to you.
In accordance with applicable Indian laws and regulations and the requirements of the Stock Exchanges, in
principle and final approvals for the listing and trading of the Equity Shares to be issued pursuant to the Issue
will not be applied for by us or granted by the Stock Exchanges until after such Equity Shares have been issued
and allotted by us on the Closing Date. If there is a failure or a delay in obtaining such approvals, we may not
be able to credit Equity Shares allotted to you to your Depository Participant account or assure ownership of
such Equity Shares by you in any manner promptly after the Closing Date or at all. In any such event, your
ownership over Equity Shares allotted to you and your ability to dispose off any such Equity Shares may be
restricted. For further information on issue procedure, refer to the chapter Issue Procedure.
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. As such, there can be no assurance that shareholders will be able to sell Equity Shares at their preferred
price or at all at any particular point in time. For further details, please refer to the chapter Indian Securities
Market.

56

MARKET PRICE INFORMATION

The Equity Shares are listed and traded on BSE and NSE. The stock market data presented below is given for
BSE and NSE separately.
(i) The following tables set forth the reported high, low and average closing prices of the Equity Shares and
the number of Equity Shares traded on the days such high and low closing prices were recorded on BSE
and NSE during the Fiscal Years ended March 31, 2012, March 31, 2013 and March 31, 2014:
BSE
Year
ending
March 31
2012
2013
2014

High(1)
(`)

Date of High

64.50
51.55
60.95

July 13, 2011

January 4, 2013
March 31, 2014

Volume on
date of high
(Number of
Equity Shares)
2,420,589
873,686
235,155

Low(2)
(`)

Date of Low

31.75
37.70
39.20

December 29, 2011

June 1, 2012
August 29, 2013

Volume on date
of low (Number
of Equity
Shares)
517,974
275,535
148,785

Average
price for
the year*
(`)
48.28
44.01
49.21

Source: www.bseindia.com

* Average of the daily closing price

(1)
High of Intraday Highs. In case the price is the same on 2 dates then the date on which the volume is higher has been
considered.
(2)
Low of Intraday Lows. In case the price is the same on 2 dates then the date on which the volume is higher has been
considered.

NSE
Year
ending
March 31
2012
2013
2014

High(1)
(`)

Date of High

64.45
51.45
61.25

July 13, 2011

January 4, 2013
March 31, 2014

Volume on
date of high
(Number of
Equity Shares)
8,170,365
2,676,715
1,153,233

Low(2)
(`)

Date of Low

31.70
37.85
39.10

December 29, 2011

June 1, 2012
August 29, 2013

Volume on
date of low
(Number of
Equity Shares)
2,467,588
1,279,890
596,720

Average
price for
the year*
(`)
48.32
44.02
49.23

Source: www.nseindia.com

* Average of the daily closing price

(1)
High of Intraday Highs. In case the price is the same on 2 dates then the date on which the volume is higher has been
considered.
(2)
Low of Intraday Lows. In case the price is the same on 2 dates then the date on which the volume is higher has been
considered.

(ii) The following tables set forth the reported monthly high, low and average of the closing prices of the
Equity Shares and the total trading volume on BSE and NSE during the last six months preceding the date
of filing of this Placement Document:
BSE
Month

Sept 2014
Aug 2014
July 2014
Jun 2014
May 2014
April 2014

High(1)
(`)

Date of High

89.85
86.05
86.05
83.45
74.75
65.75

Sept 19, 2014

August 21, 2014
July 3, 2014
June 26, 2014
May 23, 2014
April 15, 2014

Volume on date
of high
(Number of
Equity Shares)
492,800
358,828
445,059
600,030
490,951
728,421

Low(2)
(`)

Date of Low

81.05
78.60
75.70
69.60
60.10
59.65

Sept 25, 2014

August 13, 2014
July 11, 2014
June 13, 2014
May 2, 2014
April 7, 2014

Volume on
date of low
(Number of
Equity Shares)
235,483
131,522
369,792
191,480
121,239
48,591

Average
price for
the month*
(`)
84.91
81.56
81.47
75.42
66.27
62.62

Source: www.bseindia.com

* Average of the daily closing price

(1)
High of Intraday Highs. In case the price is the same on 2 dates then the date on which the volume is higher has been
considered.
(2)
Low of Intraday Lows. In case the price is the same on 2 dates then the date on which the volume is higher has been
considered.

57

NSE
Month

Sept 2014
Aug 2014
July 2014
Jun 2014
May 2014
April 2014

High(1)
(`)

Date of High

90.05
85.95
86.20
83.55
74.65
65.60

Sept 19, 2014

August 21, 2014
July 3, 2014
June 26, 2014
May 23, 2014
April 15, 2014

Volume on date
of high
(Number of
Equity Shares)
2,637,207
1,327,821
3,477,420
2,708,865
2,898,716
3,256,724

Low(2)
(`)

Date of Low

81.00
78.50
75.50
69.60
60.20
59.75

Sept 25, 2014

August 13, 2014
July 11, 2014
June 13, 2014
May 2, 2014
April 7, 2014

Volume on
date of low
(Number of
Equity Shares)
827,296
319,520
1,043,353
850,762
568,665
800,783

Average
price for
the
month* (`)
84.98
81.59
81.53
75.42
66.27
62.66

Source: www.nseindia.com

* Average of the daily closing price

(1)
High of Intraday Highs. In case the price is the same on 2 dates then the date on which the volume is higher has been
considered.
(2)
Low of Intraday Lows. In case the price is the same on 2 dates then the date on which the volume is higher has been
considered.

(iii)

The following tables set forth the details of the number of Equity Shares traded and the volume of
business transacted during the last six months and the Fiscal Years ended March 31, 2012, March 31,
2013 and March 31, 2014 on the Stock Exchanges:

Number of Equity Shares traded

Period
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
Year ended March 31, 2012
Year ended March 31, 2013
Year ended March 31, 2014

NSE
21,799,334
29,798,873
38,605,677
25,153,030
13,314,722
22,916,397
870,013,788
510,235,440
217,921,330

BSE
4,981,952
6,184,216
8,880,611
5,647,922
3,068,571
4,555,041
246,852,684
122,400,433
73,600,538

(Source: www.bseindia.com, www.nseindia.com)

Volume of business in

(` in millions)

Period

NSE
1,388
2,039
2,966
2,066
1,099

April 2014
May 2014
June 2014
July 2014
August 2014

BSE
318
423
679
461
253

September 2014

1,976.62

392.38

Year ended March 31, 2012

Year ended March 31, 2013
Year ended March 31, 2014

44,523
22,959
10,971

12,897
5,569
3,676

(Source: www.bseindia.com, www.nseindia.com)

(iv) The following table sets forth the market price on the Stock Exchanges on April 16, 2014, the first working
day following the approval of the Board of Directors for the Issue:
Date
Price of the Equity Shares (`)
Volume on the Date (number of
Equity Shares)

Open
64.15

BSE
High
Low
64.4
61.5
420,580

Close
62.1

Open
64.00

(Source: www.bseindia.com, www.nseindia.com)

High, low and average prices are of the daily closing prices.
(2)
In case of two days with the same closing price, the date with higher volume has been considered.
(1)

58

NSE
High
Low
64.40
61.50
1,845,310

Close
62.30

USE OF PROCEEDS
The gross proceeds from the Issue will be approximately ` 2499.99 million (Gross Proceeds).
The net proceeds from the Issue, after deducting fees, commissions and expenses of the Issue, will be
approximately ` 2,441.99 million (Net Proceeds).
We will apply the Net Proceeds primarily to enhance our capital adequacy ratio and increase our capacity to
lend and for general corporate purposes, subject to compliance with applicable laws and regulations.
In accordance with the policies approved by the Board and as permissible under applicable laws and
government policies, our management will have flexibility in deploying the Net Proceeds. Pending utilisation
for the purposes described above, we intend to temporarily invest funds in creditworthy instruments, including
money market Mutual Funds and deposits with banks and corporates. Such investments would be in accordance
with the investment policies as approved by the Board from time to time and all applicable laws and regulations.
Neither our Promoters nor our Directors are making any contribution either as part of the Issue or separately in
furtherance of the use of the proceeds.

59

CAPITALISATION AND INDEBTEDNESS

The following table shows, as of June 30, 2014:

our actual capitalisation and indebtedness, as derived from our audited financial statements; and
our capitalisation as adjusted for the Issue.

This table should be read in conjunction with the chapter titled Managements Discussion and Analysis of
Financial Condition and Results of Operations and our Financial Statements and the related notes thereto
contained elsewhere in this Placement Document.
(` in millions)
As adjusted for the
Pre-Issue as of
Particulars
Issue
June 30, 2014
Debt
- Deposits (1)
105,519.1
105,519.1
- Borrowings
5,954.9
5,954.9
Total Debt
111,474.0
111,474.0
Shareholders' Funds
- Share capital
- Reserves and Surplus (2)
Total Shareholders' Funds
Total Capitalisation

2,504.7
8,962.4
11,467.1

2,812.06
11,167.6
13,979.7

122,941.1

125,453.7

Notes:
(1)
Deposits include both demand and time deposits.
(2)
Reserves and surplus excluding revaluation reserve and including stock options granted under the ESOP (grants
outstanding net of deferred cost).
(3)
Considering the issue of equity shares of 30,432,136 shares at `82.15 per share.
(4)
Reserves and surplus excluding revaluation reserve and including Employee Stock Options (Grants Outstanding net of
deferred cost).
(5)
Post issue Reserve and Surplus of ` 11,167.6 million reported above includes securities premium prior to adjustment of
share issue related expenses.
(6)
Debt-equity ratio is not relevant being a Bank

60

DIVIDEND POLICY
Under the Companies Act, an Indian company may pay dividends only upon a recommendation by its board of
directors and approval by a majority of its shareholders at the annual general meeting. Shareholders may
decrease, but not increase the amount of dividend recommended by the Board of Directors. Under the
Companies Act, a company may pay dividends only out of its profits in the year in which the dividend is
declared or out of the undistributed profits or reserves of prior fiscal years or out of both.
Payment of dividends is also 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
capitalized expenses (including preliminary expenses, organization 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.
RBI has also placed certain restrictions on the payment of dividends by banks which are summarized as follows:
a)

Only banks with a CRAR of at least 9% in each of the prior two completed years together with the
accounting year for which it proposes to declare a dividend and with NPAs of less than 7% are eligible to
declare a dividend. In the event that any bank does not meet the above CRAR requirement, but has a CRAR
of at least 9% for the accounting year for which it proposes to declare dividend and a net NPA ratio of less
than 5%, it would be eligible to declare a dividend.

b) The bank should comply with the provisions of Sections 15 and 17 of the Banking Regulation Act.
c)

The bank should comply with the prevailing regulations/guidelines issued by RBI, including creating
adequate provisions for impairment of assets and staff retirement benefits, transfer of profits to statutory
reserves, etc.

d) Any dividend can only be paid out of our profit in the year in which the dividend is to be paid.
e)

The maximum permissible dividend payout ratio is 40% of our net profit in the year in which the dividend
is to be paid.

f)

RBI should not have placed any explicit restrictions on the bank for declaration of dividends.

g) The Financial Statements pertaining to the Fiscal Year for which the bank is declaring a dividend should be
free of any qualifications by the statutory auditors which have an adverse bearing on the profit during that
year. In case of any qualification to that effect, the net profit should be suitably adjusted while computing
the dividend payout ratio.
h) The dividend payout is linked to a matrix of maximum permissible range of our CRAR and NPA ratios as
follows:
Category
A
B
C
D

Total CRAR
11% or more for each of the last 3 years
10% or more for each of the last 3 years
9% or more for each of the last 3 years
9% or more in the current year.

0%
Up to 40
Up to 35
Up to 30
Up to 10

Net NPA Ratio

0%-3%
3%-5%
Up to 35
Up to 25
Up to 30
Up to 20
Up to 25
Up to 15
Up to 10
Up to 5

5%-7%
Up to 15
Up to 10
Up to 5
Nil

We have not declared any dividend in the last three years in terms of Section 15(1) of the Banking Regulation
Act, as provided above.
The form, frequency and amount of future dividends, if any, will depend on our revenues, cash flows, financial
condition (including capital position) and other factors and shall be at the discretion of our Board and subject to
the approval of our shareholders.
For a summary of certain Indian tax consequences of dividend distributions to shareholders, refer to the chapter
titled Statement of Possible Tax Benefits.

61

CAPITAL STRUCTURE
The Equity Share capital of our Company as at the date of this Placement Document is set forth below:
(In `, except share data)
Aggregate value
at face value
A.
AUTHORIZED SHARE CAPITAL
500,000,000 Equity Shares
5,000,000,000
TOTAL
5,000,000,000
B.

D.

E.

F.

ISSUED, SUBSCRIBED AND PAID UP CAPITAL BEFORE THE ISSUE

250,774,222 Equity Shares
TOTAL
PRESENT ISSUE IN TERMS OF THIS PLACEMENT DOCUMENT
30,432,136 Equity Shares (1)
PAID-UP CAPITAL AFTER THE ISSUE
281,206,358 Equity Shares
TOTAL

2,507,742,220
2,507,742,220

304,321,360

2,812,063,580
2,812,063,580

SECURITIES PREMIUM ACCOUNT

Before the Issue
After the Issue(2)

7,693,767,286
9,889,445,898.09

(1)

The Issue has been authorised by the Board on April 15, 2014 and the Shareholders pursuant to their resolution dated June
6, 2014.
(2)
The Securities Premium Account is calculated on the basis of Net Proceeds from the Issue.

Share Capital History of the Bank

The history of the Equity Share capital of the Bank as on the date of the Preliminary Placement Document is
provided in the following table:
Date of Allotment
May 31, 1995
November 9, 1995
November 9, 1995
December 30, 1995
December 30, 1995
January 1, 1996
April 18, 1996
June 7, 1996
June 20, 1996
July 18, 1996
August 23, 1996
September 12, 1996
September 28, 1996
November 14, 1996
December 30, 1996
March 6, 1997
June 12, 1997
July 17, 1997
October 16, 1997
November 13, 1997
December 11, 1997
March 12, 1998
May 27, 1999
January 14, 2000
February 23, 2001
December 19, 2002

No. of Equity Shares

Allotted
7,334,100*
1,848,000
1,500,000
3,148,800
217,600
2,250,000
21,600
12,200
5,000
12,800
1,600
1,800
200
1,200
200
1,000
200
200
200
200
400
250,000
200
200
6,365,400
5,177,272

Face Value
(`)
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

62

Issue price per

Equity Share (`)
10.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00

Consideration
Other than 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
February 12, 2004
March 11, 2004
March 25, 2004
June 3, 2004
March 31, 2005
February 17, 2006
October 19, 2006
August 30, 2007
June 19, 2009
July 17, 2009
October 12, 2009
November 18, 2009
February 25, 2010
May 18, 2010
May 18, 2010
August 17, 2010
September 6, 2010
October 15, 2010
December 27, 2010
December 27, 2010
December 27, 2010
February 2, 2011
February 2, 2011
February 2, 2011
March 24, 2011
March 24, 2011
March 24, 2011
May 4, 2011
May 4, 2011
May 4, 2011
June 14, 2011
June 14, 2011
July 7, 2011
July 7, 2011
August 18, 2011
August 18, 2011
September 28, 2011
November 3, 2011
November 3, 2011
November 3, 2011
November 22, 2011
November 22, 2011
November 22, 2011
November 22, 2011
March 6, 2012
March 15, 2012
March 15, 2012
March 15, 2012
March 28, 2012
March 30, 2012
March 30, 2012
March 30, 2012
April 12, 2012
June 1, 2012
October 11, 2012
October 11, 2012
October 11, 2012
December 19, 2012
January 4, 2013

No. of Equity Shares

Allotted
6,664,541
51,350
4,491,843
47,589
25,173,158
11,553,334
71,500,000
26,666,667
1,333,400
364,600
201,000
23,725,835
61,500
82,000
600
1,800
6,650
35,200
1,125
16,125
32,280
600
1,500
6,400
300
90
1,350
600
2,250
6,550
7,500
11,000
225
23,000
1,840
300
3,000
7,500
4,240
7,800
300
50,000
2,250
7,000
19,650,000
1,200
3,000
47,005
20,641,388
150
1,500
14,650
4,375
2,000
3,000
37,500
3,000
9,300,000
3,000

Face Value
(`)
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
63

Issue price per

Equity Share (`)
40.00
40.00
40.00
40.00
55.00
45.00
26.00
105.00
23.40
23.40
23.40
34.14
23.40
23.40
40.00
40.00
40.00
40.00
23.65
48.80
40.00
18.80
23.65
40.00
18.80
23.65
40.00
18.80
23.65
40.00
23.65
40.00
23.65
40.00
40.00
48.80
36.10
41.50
40.00
23.65
18.80
23.40
23.65
36.10
47.84
18.80
38.90
40.00
47.84
18.80
38.90
40.00
40.00
40.00
40.00
23.40
38.90
43.68
18.80

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

Date of Allotment
January 4, 2013
January 4, 2013
January 15, 2013
March 6, 2013
March 6, 2013
March 6, 2013
March 6, 2013
April 11, 2013
June 5, 2013
June 5, 2013
June 5, 2013
August 6, 2013
August 6, 2013
October 15, 2013
November 18, 2013
November 18, 2013
November 18, 2013
December 20, 2013
December 20, 2013
December 20, 2013
December 20, 2013
January 15, 2014
January 15, 2014
January 15, 2014
January 15, 2014
January 15, 2014
February 13, 2014
February 13, 2014
February 13, 2014
February 13, 2014
February 13, 2014
April 14, 2014
April 14, 2014
April 14, 2014
April 14, 2014
May 30, 2014
May 30, 2014
May 30, 2014
May 30, 2014
May 30, 2014
May 30, 2014
May 30, 2014
May 30, 2014
June 6, 2014
June 6, 2014
June 6, 2014
June 6, 2014
June 6, 2014
June 6, 2014
July 8, 2014
July 8, 2014
July 8, 2014
July 8, 2014
July 8, 2014
July 8, 2014
July 8, 2014
July 8, 2014
July 8, 2014
July 31, 2014

No. of Equity Shares

Allotted
675
1,400
37,500
900
50,390
1,500
900
3,000
1,000
1,500
25,000
25,000
40,000
2,000
10,525
15,000
15,500
10,250
1,500
8,000
6,000
6,000
3,750
7,000
6,750
2,250
4,500
1,050
8,000
2,750
6,700
150
1,000
4,000
5,000
400
30,000
4,000
600
5,000
45,000
18,000
500
8,050
2,000
2,500
11,250
6,000
3,000
2,600
210
25,000
13,350
18,500
8,800
3,000
6,750
1,550
20,950

Face Value
(`)
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
64

Issue price per

Equity Share (`)
23.65
40.00
23.40
18.80
23.65
38.90
40.00
40.00
38.90
41.50
23.65
23.65
36.10
40.00
23.65
38.90
40.00
18.80
38.90
41.50
48.30
38.90
40.00
41.50
45.95
48.30
38.90
40.00
41.50
45.95
48.30
23.65
38.90
41.50
45.95
23.65
36.10
38.90
40.00
41.50
45.95
48.30
48.80
38.40
38.90
40.00
45.95
48.30
51.50
18.80
23.65
36.10
38.40
38.90
40.00
41.50
45.95
48.30
38.40

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
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
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 14, 2014
August 14, 2014
August 14, 2014
August 14, 2014
September 3, 2014
September 3, 2014
September 3, 2014
September 3, 2014
September 3, 2014
September 23, 2014
September 23, 2014
September 23, 2014
September 23, 2014
September 23, 2014

No. of Equity Shares

Allotted
25,000
14,000
12,000
12,000
9,000
7,950
5,000
10,500
3,000
4,000
40,500
14,500
19,500
5,000
5,000
490
4,000
9,000
2,000
250,774,222

Face Value
(`)
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

Issue price per

Equity Share (`)
38.90
41.50
45.95
48.30
51.50
38.40
38.90
45.95
48.30
38.40
40.80
41.50
45.95
48.30
38.90
40.00
41.50
48.30
51.50

Consideration
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash

* Initial capital on conversion of Development Co-operative Bank Limited into the bank.

Employees Stock Option Plan

We have introduced an employee stock option plan. The Development Credit Bank Limited - Employees Stock
Option Plan (the ESOP) was adopted by our Board of Directors by a resolution passed at its meeting held on
March 5, 2007 pursuant to the enabling authority granted under a resolution at the extra-ordinary meeting of
December 15, 2006. The ESOP is managed by the Nomination & Remuneration Committee acting under
authority delegated by the Board. The Nomination & Remuneration Committee consists of a majority of
independent directors. The maximum number of shares that may be awarded under the ESOP is 7.00% of our
issued equity share capital. The ESOP is available to full-time directors, officers and employees. The ESOP
consists of two Sub Plans. For Sub Plan 1, options granted prior to August 17, 2010 vest in a graded manner
over a five-year period with 40.00% vesting at the end of the third year from the date of the grant, 30.00% at the
end of the fourth year and 30.00% at the end of the fifth year. Options granted after August 17, 2010 under Sub
Plan 1 vest in a graded manner over a five-year period with 30.00% vesting at the end of the second year from
the date of the grant, 30.00% at the end of the third year, 20.00% at the end of the fourth year and 20.00% at the
end of the fifth year. For Sub Plan 2, options vest in a graded manner over a five-year period with 30.00%
vesting at the end of the second year from the date of the grant, 30.00% at the end of the third year from the date
of the grant, 20.00% at the end of the fourth year and 20.00% at the end of the fifth year.
As of September 25, 2014, 23,690,467 options had been granted of which 6,649,865 were vested and
exercisable, representing 2.65% of our paid up and issued Equity Shares as of that date. Of the remaining
options granted as of September 25, 2014, 5,153,000 were unvested, 3,158,145 had been exercised and
8,729,457 had been cancelled.

65

SELECTED STATISTICAL INFORMATION

The following information should be read together with our Financial Statements included in this Placement
Document and the chapter titled Managements Discussion and Analysis of Financial Condition and Results
of Operations. All amounts presented in this chapter have been prepared based on data used in compiling our
Financial Statements. Footnotes appear at the end of each related section of tables.
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 yields and
cost for each period. The average balances are either average daily or average month-end balances as described
in the notes to each table below. The average yield is the ratio of interest revenue to average interest-earning
assets. The average cost is the ratio of interest expense to average interest-bearing liabilities. The average
balances of loans and advances are performing advances. We have not recalculated tax exempt income on a tax
equivalent basis.
(in ` millions, except percentages)
For the year ended March 31, 2013
For the year ended March 31, 2014
Average
Interest
Average
Average
Interest
Average
Balance(1)
Income/ Yield/ Cost
Balance
Income/
Yield/
(1)
Expense
(%)
Expense
Cost (%)
(A)
(B)
(C=B/A)
(D)
(E)
(F=E/D)
Interest-earning assets:
Advances(2)
55,426.6
7,118.3
12.84%
66,998.9
8,678.7
12.95%
Gross Investments
27,887.4
1,963.2
7.04%
33,281.0
2,453.1
7.37%
Other interest-earning assets(3)
1,115.0
67.5
6.06%
2,258.2
142.4
6.30%
Total interest-earning assets
84,429.0
9,149.0
10.84% 102,538.1
11,274.2
11.00%
Non-interest earning assets:
Fixed assets
2,125.3
2,382.9
Other non-interest-earning assets(4)
8,724.9
8,914.7
Total assets
95,279.2
9,149.0
9.60% 113,835.7
11,274.2
9.90%
Interest-bearing liabilities:
Total Deposits
71,855.4
5,346.4
7.44%
87,942.0
6,649.0
7.56%
Demand Deposits
8,448.0
8,741.6
Savings Deposits
12,884.2
515.0
4.00%
14,767.9
590.7
4.00%
Term Deposits
50,523.2
4,831.4
9.56%
64,432.5
6,058.3
9.40%
Borrowings
8,709.0
895.8
10.29%
9,036.0
876.6
9.70%
Subordinated debt Tier II Bonds
674.7
74.7
11.07%
650.0
73.1
11.25%
Total interest-bearing liabilities(5)
81,239.1
6,316.9
7.78%
97,628.0
7,598.7
7.78%
Non-interest bearing liabilities:
Other liabilities
4,926.2
5,496.6
Total non-interest bearing
liabilities
Capital and reserves
9,113.9
10,711.1
Total liabilities
95,279.2
6,316.9
6.63% 113,835.7
7,598.7
6.68%
Net Interest Income(6)
2,832.1
3,675.5
(1) Average balance represents the average daily balances outstanding for each balance sheet item.
(2) Advances represent performing advances. Average NPA are reduced out of average daily balance of advances to
arrive at performing advances using month end balances of NPA.
(3) Other interest-earning assets represents average daily balances of fixed deposits with banks & financial institutions,
call lending, reverse repurchase transactions (including LAF with RBI), placement outside India and lending under
CBLO.
(4) Other non interest-earning assets represent average daily balances with RBI, other assets, cash balances and gross
non-performing assets.
(5) Total interest-bearing liabilities represents average daily balances in demand deposits, savings deposits, term
deposits, borrowings, and subordinated debts -Tier II.
(6) Net interest income for the above purpose does not include ` 12.0 million for Fiscal Year 2013 and ` 8.4 million for
Fiscal Year 2014 being interest on certain items like interest on tax refund.

66

Average Balance(1)
(G)
Interest-earning assets:
Advances(3)
Gross Investments
Other interest-earning assets(4)
Total interest-earning assets
Non-interest earning assets:
Fixed assets
Other non-interest-earning assets(5)
Total assets
Interest-bearing liabilities:
Total Deposits
Demand Deposits
Savings Deposits
Term Deposits
Borrowings
Subordinated Debt Tier II Bonds
Total interest-bearing liabilities(6)
Non-interest bearing liabilities:
Other liabilities
Total non-interest bearing liabilities
Capital and reserves
Total liabilities
Net interest income(7)
(1)

(2)
(3)

(4)

(5)

(6)

(7)

(` in millions, except percentages)

Quarter ended June 30, 2014
Interest Income/
Average Yield/Cost
(%)(2)
Expense
(H)
(I=H/G)

78,601.4
35,554.2
2,095.1
116,250.7

2,538.6
656.1
21.2
3,215.9

12.95%
7.40%
4.06%
11.10%

2,392.5
8,053.5
126,696.7

3,215.9

10.18%

102,733.6
9,314.0
16,488.6
76,931.0
6,348.1
650.0
109,731.7

1,965.9
164.4
1,801.5
148.1
18.2
2,132.2

7.68%
4.00%
9.39%
9.36%
11.25%
7.79%

5,276.8

2,132.2
1,083.7

6.75%

11,688.2
126,696.7

For the quarter ended June 30, 2014, average balance represents the average daily balance outstanding for each
balance sheet item.
Average Yield / Cost percentages in the above table are annualised.
Advances represent performing advances. Average NPA are reduced out of average daily balance of advances to
arrive at performing advances using month end balances of NPA.
Other interest earning assets represents average daily balances of fixed deposits with banks& financial institutions,
call lending, reverse repurchase transactions (including LAF with RBI), placement outside India and lending under
CBLO.
Other non-interest earning assets represent average daily balances with RBI, other assets, cash balances and gross
non-performing assets.
Total interest-bearing liabilities represents average daily balances in demand deposits, savings deposits, term
deposits, borrowings, and subordinated debts -Tier II.
Net interest income for the above purpose does not include ` 306.1 million being interest on certain items like interest on
tax refund.

Analysis of Changes in Interest Income and Interest Expense by Volume and Rate
The following tables set forth, for the periods indicated, the allocation of the changes in our interest income and
interest expense between average volume and changes in average rates.
(` in millions)
For the year ended March 31, 2014 vs. For the year ended March 31, 2013
Increase (Decrease)(1) due to
Net Change
Change in Average Volume
Change in Average Rate
Interest income:
Advances
1,560.4
1,486.2
74.2
Gross Investments
489.9
379.7
110.2
Other Interest Earning Assets
74.8
69.2
5.6
Total interest-earning assets
2,125.1
1,935.1
190.0
Interest expenses:
Deposits
1302.6
1,196.9
105.7
Borrowings, as adjusted
(19.2)
33.6
(52.8)
Sub Debts
(1.6)
(2.7)
1.1
Total interest-bearing liabilities
1,281.8
1,227.8
54.0
Net interest income
843.3
707.3
136.0
(1)

The changes in net interest revenue between periods have been reflected as attributed either to volume or rate changes.
67

For 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:
(` in millions, except percentages)
For the year ended March 31,
For the quarter ended
June 30, 2014(6)
2013
2014
Average interest-earning assets (A)
84,429.0
102,538.1
116,250.7
Average interest-bearing liabilities (B)
81,239.1
97,628.0
109,731.7
Average total assets (C)
95,279.2
113,835.7
126,696.7
Average interest-earning assets as a percentage of
88.61%
90.08%
91.76%
Average total assets (%) (A)/(C)
Average interest-bearing liabilities as a percentage of
85.26%
85.76%
86.61%
average total assets (%)(B)/(C)
Average interest-earning assets as a percentage of
103.93%
105.03%
105.94%
average interest-bearing liabilities (%)(A)/(B)
Yield on Average Interest Earning Assets(1)(%) (D)
10.84%
11.00%
11.10%
Cost of Funds(2)(%) (E)
7.78%
7.78%
7.79%
Spread (%)(3) (F) = (D) - (E)
3.06%
3.22%
3.31%
Yield on Advances (%)(4)
12.84%
12.95%
12.95%
Net interest margin (%)(5)
3.34%
3.56%
3.71%
(1)
(2)
(3)
(4)
(5)

(6)

Yield on Average Interest-Earning Assets is the ratio of interest income to average interest-earning assets.
Cost of Funds is the ratio of interest expense to average interest-bearing liabilities.
Spread is the difference between yield on average interest-earning assets and cost of funds.
Advances represent performing advances.
Net interest margin is the ratio of net interest income to average interest earning assets, including net NPAs. The
difference in net interest margin and spread arises due to the difference in amount of interest-earning assets and
interest-bearing liabilities.
Ratios are annualised.

For notes on A, B and C, please also refer to the notes stated under the table above titled Average Balance
Sheet.
Return on Equity and Assets
The following table presents selected financial ratios for the periods indicated:

Return on Equity (1)(5)

Return on Assets (2)(5)
Capital Adequacy Ratio (BASEL II)
Tier I Capital Adequacy Ratio (BASEL II)
Capital Adequacy Ratio (BASEL III)
Tier I Capital Adequacy Ratio (BASEL III)
Net NPA Ratio
Book Value per Share (`) (3)(4)
(1)

(2)

(3)
(4)
(5)

As of or for the year ended March 31,

2013
2014
11.13%
14.04%
1.06%
1.31%
13.61%
13.84%
12.62%
13.03%
N.A
13.71%
N.A
12.86%
0.75%
0.91%
37.95
44.00

As of or for quarter
ended June 30, 2014
15.21%
1.39%
13.73%
12.94%
13.63%
12.77%
0.97%
45.78

Return on Equity is the ratio of net profit after tax to average monthly equity as reported to Reserve Bank of India in
Form X under Section 27 of the Banking Regulation Act. (Equity represents share capital plus reserves and surplus).
Return on Assets is the ratio of net profit after tax to average of total monthly assets as reported to Reserve Bank of
India in Form X under Section 27 of the Banking Regulation Act.
Book Value per Share is the ratio of net worth to outstanding Equity Shares at the end of the period.
Net worth includes share capital, ESOPS (net of deferred cost), reserves and surplus minus revaluation reserves.
Ratios for quarter ended June 30, 2014 are annualised.

68

Investment Portfolio
The following tables set forth, as of the dates indicated, information related to our investments:

Government securities and treasury bills

Other approved securities
Total SLR
Shares
Debentures and bonds
Units, CP, SRS and CDs
Others(1)
Total non-SLR
Total
(1)

As of March 31, 2013

Held To
Available Held For
Maturity
For Sale
Trading
19,873.7
2,824.0
1,634.2
19,873.7
2,824.0
1,634.2
2.1
30.0
2,329.1
3,191.1
3,702.4
3,732.4
2,331.2
3,191.1
23,606.1
5,155.2
4,825.3

Held To
Maturity
22,572.7
22,572.7
30.0
4,034.5
4,064.5
26,637.2

(` in millions)
As of March 31, 2014
Available Held For
For Sale
Trading
4,707.7
791.6
4,707.7
791.6
361.1
2,615.2
1229.4
2,976.3
1,229.4
7,684.0
2,021.0

Includes deposits with NABARD, SIDBI and NHB.

(` in millions)
For the quarter ended June 30, 2014
Held To Maturity
Available For Sale
Held For Trading
23,305.4
5,197.8
51.8
3,676.9
1,921.6
1,248.7
26,982.3
7,119.4
1,300.5

Total SLR
Total non-SLR
Total

Funding
Our funding operations are designed to ensure stability, low cost of funding and effective liquidity management.
Our sources of funding include the details set out below.
Total Deposits
The following table sets forth, for the dates indicated, our outstanding deposits and the percentage composition
by each category of deposits.
(` in millions, except percentages)
As of March 31, 2013
As of March 31, 2014
As of June 30, 2014
Amount
% of Total
Amount
% of Total
Amount
% of Total
Demand deposits
8,992.4
10.75%
9,590.8
9.29%
9,913.4
9.39%
Savings deposits
13,723.7
16.41%
16,221.9
15.71%
16,868.4
15.99%
Term deposits
60,922.3
72.84%
77,438.9
75.00%
78,737.3
74.62%
Total
83,638.4
100.00%
103,251.6
100.00%
105,519.1
100.00%
Deposits by Geography and Demography
The state-wise distribution of our deposits, relative to our total deposits, as of March 31, 2013, March 31, 2014
and June 30, 2014, is set out in the table below:

Maharashtra
Delhi
Gujarat
Telangana
West Bengal
Others(1)
Total
(1)

As of March 31, 2013

(` in
(as a % of
total deposits)
millions)
46,506.7
55.60%
9,583.5
11.46%
6,747.0
8.07%
5,582.0
6.67%
6,266.9
7.49%
8,952.3
10.71%
83,638.4
100.00%

As of March 31, 2014

(` in
(as a % of
total deposits)
millions)
55,538.5
53.79%
9,190.6
8.90%
8,899.6
8.62%
6,990.7
6.77%
6,599.1
6.39%
16,033.1
15.53%
103,251.6
100.00%

As of June 30, 2014

(` in
(as a % of
total deposits)
millions)
54,666.6
51.81%
11,477.9
10.88%
8,968.3
8.50%
7,400.7
7.01%
6,844.0
6.49%
16,161.6
15.31%
105,519.1
100.00%

Includes Tamil Nadu, Goa, Punjab, Karnataka, Uttar Pradesh, Rajasthan and others.

The demographic distribution of our deposits according to metropolitan, semi-urban, urban and rural areas,
relative to our total deposits, as of March 31, 2013, March 31, 2014 and June 30, 2014, is set out in the table
69

below:

Rural
Semi-urban
Urban
Metropolitan
Total

As of March 31, 2013

(` in
(as a % of
total deposits)
millions)
1,582.3
1.89%
6,388.3
7.64%
6,921.3
8.28%
68,746.5
82.19%
83,638.4
100.00%

As of March 31, 2014

(` in
(as a % of
total deposits)
millions)
3,128.7
3.03%
8,724.3
8.45%
10,051.4
9.73%
81,347.2
78.79%
103,251.6
100.00%

As of June 30, 2014

(` in
(as a % of
total deposits)
millions)
2,460.8
2.33%
8,917.6
8.45%
10,801.7
10.24%
83,339.0
78.98%
105,519.1
100.00%

Borrowings
The following table sets forth, for the periods indicated, information related to our borrowings, which are
comprised primarily of money-market borrowings and refinances, mainly from NHB, NABARD and SIDBI.
Borrowings exclude deposits and subordinated debts.
(` in millions, except percentages)
For the year ended March 31,
For the quarter ended
June 30, 2014
2013
2014
Period end balance
14,606.2
7,951.6
5,304.9
Daily average balance during the period
8,709.0
9,036.0
6,348.1
Maximum outstanding
14,606.2
14,460.3
8,696.3
Interest paid during the year
895.8
876.6
148.1
Average cost of borrowing during the period(1)
10.29%
9.70%
9.36%
(1)

Average cost represents annualised ratio of interest expense on borrowings to the average balances of borrowings.

Subordinated Debt (Lower Tier II Capital)

We obtain funds from the issuance of unsecured non-convertible subordinated debt securities, which qualify as
Tier II capital under RBI guidelines for assessing capital adequacy. As of March 31, 2013, March 31, 2014 and
June 30, 2014 our outstanding subordinated debt aggregated to ` 650.0 million.
Capital Adequacy (As per BASEL II)
The table below sets out our capital to risk-weighted assets ratio (CRAR) as of March 31, 2013, March 31, 2014
and June 30, 2014.
(` in millions, except percentages)
As of March 31,
For the quarter ended
June 30, 2014
2013
2014
Paid-up capital
2,501.1
2,503.2
2,504.7
Reserve and surplus (excluding revaluation reserves)(1)
6,961.5
8,480.8
8,932.1
Capital adequacy ratio (%)
13.61%
13.84%
13.73%
Capital adequacy ratio Tier I capital (%)
12.62%
13.03%
12.94%
(1)
Reserves and surplus includes net profit of ` 446.4 million for the quarter ended June 30, 2014. However, the same
has not been considered for computing capital adequacy ratio as of June 30, 2014 as per extant regulatory guidelines.

Capital Adequacy (As per BASEL III)

The table below sets out our capital to risk-weighted assets ratio (CRAR) as of March 31, 2014 and June 30,
2014.
(` in millions, except percentages)
As of March 31,
For the quarter ended
June 30, 2014
2014
Paid-up capital
2,503.2
2,504.7
Reserve and surplus (excluding revaluation reserves)(1)
8,480.8
8,932.1
Capital adequacy ratio (%)
13.71%
13.63%
Capital adequacy ratio Tier I capital (%)
12.86%
12.77%
(1)
Reserves and surplus includes net profit of ` 446.4 million for the quarter ended June 30, 2014. However, the same has
not been considered for computing capital adequacy ratio as of June 30, 2014 as per extant regulatory guidelines.

70

Asset Liability Gap

The following table sets forth our asset-liability gap position as of June 18, 2014, which was the last reporting
Wednesday in the three months ended June 30, 2014:
(` in millions)
OUT FLOWS
Next 2 days to 8 days to 15 days 29 days Over 3
Over 6 Over 1 Over 3 Over 5
Total
Day
7 days 14 days
to 28
and up months months year & years & years
days
to 3
& up to 6 & up to up to 3 up to 5
months months
1 year
years
years
Capital
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0 2,504.7
2,504.7
Reserves &
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0 9,224.5
9,224.5
Surplus
Deposits
2,881.1 2,558.1 3,244.3 1,620.4 9,676.5 10,025.5 16,091.4 44,192.9 2,149.6
222.1 92,661.9
Interbank
22.2
12.1
310.5 3,170.3 2,201.4
3,121.4 2,481.9
189.5
0.00
0.2 11,509.5
deposits
Borrowings
504.5
0.0
500.0
0.0
160.2
0.0 1,354.5
609.5 3,401.2
44.3
6,574.2
Other
77.6
374.6
349.7
235.1
506.7
388.4
732.0 1,005.1
474.7
6.8
4,150.7
Liabilities
Off Balance
1,558.1 3,468.0
208.8
20.5
960.1
343.9
501.3 4,904.0
0.0
0.0 11,964.7
Sheet
A. TOTAL
5,043.5 6,412.8 4,613.3 5,046.3 13,504.9 13,879.2 21,161.1 50,901.0 6,025.5 12,002.6 138,590.2
OUTFLOWS
IN FLOWS
Cash
696.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
696.9
Balances with
342.4
96.6
98.2
133.8
349.4
409.8
618.0 1,759.8
102.0
8.3
3,918.3
RBI
Balances with
1,197.5
0.0
422.8
0.0
0.1
1.5
1.2
2.4
0.0
0.0
1,625.5
other Banks
Investments
5,855.1
131.0
0.0
308.2
735.0
1,014.8 1,153.1 6,113.9 3,154.2 17,303.3 35,768.6
Advances
361.4
676.4 2,051.3
981.4 3,943.5
3,383.6 8,236.7 28,658.3 8,864.9 23,464.4 80,621.9
Fixed Assets
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0 2,375.6
2,375.6
Other Assets
114.2
134.3
18.4
117.1
532.9
122.7
18.9
154.2
0.0
406.2
1,618.9
Off Balance
4,072.6 3,900.2
513.1
408.4 2,460.5
2,774.3 5,150.9 11,597.9
922.9
113.8 31,914.6
Sheet
B. TOTAL
12,640.1 4,938.5 3,103.8 1,948.9 8,021.4
7,706.7 15,178.8 48,286.5 13,044.0 43,671.6 158,540.3
INFLOWS
C = GAP(B-A) 7,596.6 (1,474.3) (1,509.5) (3,097.4) (5,483.5) (6,172.5) (5,982.3) (2,614.5) 7,018.5 31,669.0 19,950.1
Gross and Net Loans Portfolio
As of March 31, 2013 and March 31, 2014, our gross loan portfolio was ` 67,529.5 million and ` 82,122.4
million, respectively. For a description of our corporate and retail loan products, please refer to the chapter titled
Our Business
The following table sets forth, for the periods indicated, our net loan portfolio classified by type of loan facility:
(` in millions)
Classification of Advances
As of March 31,
As of June 30, 2014
2013
2014
Cash credits, overdrafts and loans repayable on demand
20,948.5
21,166.4
21,549.1
Term loans
42,288.4
57,721.0
59,687.2
Bills purchased and discounted
2,624.0
2,514.5
1,677.6
Total
65,860.9
81,401.9
82,913.9
Maturity and Interest Rate Sensitivity of Loans
The following table sets forth, for the periods indicated, the interest rate sensitivity of our loans:
As of June 30, 2014
Due in one
Due in one year
year or less
to five years
Interest rate classification of loans by maturity:
Variable rates

66,390.3
71

0.0

(` in millions)

Total
Due after
five years
0.0

66,390.3

Fixed Rates
Total:

Due in one
year or less
8,862.6
75,252.9

As of June 30, 2014

Due in one year
to five years
3,756.9
3,756.9

Total
Due after
five years
3,164.5
3,164.5

15,784.0
82,174.3

1.

The above data does not include Non-performing loans.

Mortgage loans other than fixed rate loans are included in Variable rates due in one year or less as they are base rate
linked and are re-priceable.
2.

Concentration of Loans
The following table sets forth the composition of our asset book by business unit as of March 31, 2013, March
31, 2014 and June 30, 2014:
As of March 31,
2013
Retail of whichMortgages
Commercial Vehicle
Gold Loan
PL/CE/STVL
Other(1)
Total Retail
SME / MSME
Corporate banking
AIB
Total Advances
(1)

2014
36.41%
1.72%
1.03%
0.00%
2.86%
42.02%
22.59%
23.77%
11.62%
100.00%

38.44%
2.11%
1.26%
0.00%
1.72%
43.53%
16.58%
25.73%
14.16%
100.00%

As of June 30,
2014
40.04%
2.33%
1.30%
0.00%
1.79%
45.46%
16.17%
23.86%
14.51%
100.00%

Primarily includes loans against deposits, Inter Bank Participation Certificate (IBPC).

The following table sets forth a breakdown of our home mortgage loans by source as of March 31, 2013, March
31, 2014 and June 30, 2014:
(` in millions, except percentages)
Classification of
As of March 31, 2013
As of March 31, 2014
As of June 30, 2014
Mortgages
Advances
% of Total
Advances
% of Total
Advances
% of Total
Advances
Advances
Advances
Mortgages sourced by DCB
15,388.9
23.37%
23,583.0
28.97%
25,663.2
30.95%
Mortgages acquired
8,590.8
13.04%
7,709.7
9.47%
7,539.0
9.09%
Total Mortgages
23,979.7
36.41%
31,292.7
38.44%
33,202.2
40.04%
The following table sets forth, at the dates indicated, our fund-based gross loans outstanding categorized by
industry.
(` in millions, except percentages)
As of March 31,
As of June 30,
Customers
2013
2014
2014
Loans
% of Total
Loans
% of Total
Loans
% of Total
Wholesale trade
5,367.4
7.95%
5,242.4
6.39%
5,919.8
7.07%
Transport
3,116.7
4.62%
3,621.8
4.41%
3,898.2
4.66%
Construction
3,934.9
5.83%
3,353.2
4.08%
4,553.7
5.44%
Chemical
2,048.5
3.03%
2,366.6
2.88%
2,273.3
2.72%
Infrastructure
1,036.1
1.53%
1,813.4
2.21%
2,196.5
2.62%
Textiles
1,355.0
2.01%
1,940.4
2.36%
1,694.3
2.02%
IT & Entertainment
231.2
0.34%
232.6
0.28%
244.6
0.29%
Retail trade
1,361.3
2.02%
1,726.3
2.10%
1,691.7
2.02%
Food & beverages
3,311.0
4.90%
4,718.7
5.75%
3,967.5
4.74%
Iron and steel
1,476.5
2.19%
1,412.0
1.72%
793.7
0.95%
Others(1)
44,290.9
65.58%
55,695.0
67.82%
56,495.6
67.47%
Total gross loans outstanding
67,529.5
100.00%
82,122.4
100.00%
83,728.9
100.00%
(1)

Others primarily includes retail mortgage loans that we sourced and acquired, commercial vehicle loans, loans to
agriculture and microfinance and loans to corporate and SME not falling in the industry categories specified above.
As of June 30, 2014, the aggregate credit exposure which included fund-based and nonfund-based) of our twenty
largest borrowers amounted to ` 13,838.6 million, representing 11.23% of our total exposure (which included fund72

based and non fund-based) as of that date. Our single largest borrower on such date had an exposure (which included
fund-based and non fund-based) of ` 1,300.0 million, representing 1.06% of our total exposure as of such date. Please
refer to chapter titled Risk Factors.

Priority Sector Lending

As stipulated by RBI, commercial banks in India are required to lend 40% of their adjusted net bank credit to
specified sectors known as priority sectors, subject to certain exemptions permitted by RBI from time to time.
Priority sector advances include loans to agriculture, small-scale industry and services and loans to weaker
section, housing and education finance up to certain ceilings, lending for specific infrastructure projects and also
investments in instruments issued by notified institutions. 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
agricultural sector may be required to be deposited with government sponsored Indian developmental banks
such as NABARD.
These deposits have a maturity of up to seven years and carry interest rates lower than market rates.
The following table sets forth a breakdown of our priority sector lending by type as of the dates indicated.

Portfolio
Total priority sector lending
Out of which
Agriculture
Weaker section

As of March 31, 2013

23,200.0

As of March 31, 2014

35,156.2

(` in millions)
As of June 30, 2014
35,528.5

5,809.0
5,104.0

11,085.3
5,870.1

10,672.7
5,195.3

The following tables set forth a breakdown of our priority sector lending by sector as of the dates indicated:

Portfolio

Agriculture
SSI(2) / Small
enterprises(3)
Others
Total
priority
sector
lending
(1)

(2)
(3)

As of March 31, 2013

Outstan
Total
% to
ding
ANBC / ANBC
NBC(1)
amounts
5,809.0
- 10.56%
13,550.6
- 24.64%
3,840.4
23,200.0

6.99%
54,991.4 42.19%

As of March 31, 2014

Outstand Total
% to
ing
ANBC /
ANBC
amounts NBC(1)
11,085.3
15.31%
20,098.5
27.77%
3,972.4
35,156.2

72,377.8

5.49%
48.57%

(` in millions)
As of June 30, 2014
Outstan
Total
% to
ding
ANBC /
ANBC
NBC(1)
amounts
10,672.7
- 12.21%
21,027.7
- 24.05%

3,828.1
35,528.5

87,414.8

4.38%
40.64%

ANBC/NBC represents gross advances less bills re-discounted, other investment eligible to be treated as part of priority
sector lending like investment in securitised assets.
Small scale industries.
Small enterprises include certain small scale industries accounts.

Recognition of Non-Performing Assets

As a commercial bank operating in India, we recognize NPAs strictly in accordance with RBI 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
to such asset. Further, the NPA classification is at the borrower level, rather than at the facility level, and,
accordingly, if one of the loans granted to a borrower becomes non-performing, such borrower is classified as
non-performing and all loans due from the borrower are so classified.
Substandard Assets
An asset becomes non-performing if interest and/or instalment of principal in relation thereto remain overdue
for more than 90 days (an exception to this rule is that loans to agricultural borrowers are classified as nonperforming only if the loan remains overdue for more than two harvest seasons). With respect to Equated
Monthly Instalment (EMI) based advances, accounts are classified as non-performing advances when
morethan three EMIs are overdue. With effect from March 31, 2005, and in accordance with RBI guidelines, a
73

substandard asset is an asset that has remained non-performing for a period of up 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 non-performing for a period exceeding one year. Further, with effect from March 31, 2005, doubtful
assets are to be classified further into Doubtful-I, Doubtful-II and Doubtful-III. Depending on the period, such
assets have been classified as doubtful in the following manner:
(a) If the asset has remained in the doubtful category for a period of up to one year, it is classified as a
Doubtful-I asset;
(b) If the asset has remained in the doubtful category for a period of more than one year but less than three
years, it is classified as a Doubtful-II asset; and
(c) If the asset has remained in the doubtful category for a period of more than three years, it is classified as a
Doubtful-III asset.
Loss Assets
In accordance with RBI guidelines, a loss asset is an asset that is considered uncollectible with little or no
salvage or recovery value.
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% of the value as assessed by us or as accepted by 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. If the realizable value of the security, as assessed
by our appraisers or by RBI, is less than 10% of the amount outstanding from the borrower providing such
security, the value of the security is ignored and the asset is immediately classified as a loss, which is either
written off or fully provided for.
The table below sets forth our NPA position as of the dates specified:

(` in millions, except percentages)

As of March 31,
As of June 30,
2013
2014
2014

Sub-standard loans:
Amount
As a percentage of total NPAs
Doubtful loans:
Amount
As a percentage of total NPAs
Loss loans:
Amount
As a percentage of total NPAs
Gross NPAs

588.2
27.36%

476.8
34.44%

619.9
41.55%

755.7
35.15%

876.3
63.29%

835.9
56.03%

805.9
37.49%
2,149.8

31.4
2.27%
1,384.5

36.1
2.42%
1,491.9

The tables below set forth our NPA position as of the dates specified:
As of March 31,
2013
2014

Category of Advance
Retail of whichMortgages
Commercial Vehicle
Gold Loan
PL/CE/STVL
Others
Total Retail
Small and Medium Enterprises (SME)/MSME
Corporate
Agriculture & Inclusive Banking(AIB)

197.5
127.1
2.9
745.0
1.5
1074.0
575.9
473.2
26.7
74

239.8
9.6
12.3
28.7
1.4
291.8
872.5
153.8
66.4

(` in millions)
As of June 30,
2014

268.2
17.7
18.8
28.6
1.4
334.7
899.9
153.7
103.6

As of March 31,
2013
2014
2,149.8
1,384.5
491.3
740.2

Category of Advance
Gross NPAs
Net NPAs

As of June 30,
2014
1,491.9
804.5
(` in millions)

Category of Advances
March 31,
2013
Retail of whichMortgages
Commercial Vehicle
Gold Loan
PL/CE/STVL
Others
Total Retail
SME and MSME
Corporate
Agriculture & Inclusive
Banking(AIB)
Gross NPAs
Net NPAs

June 30,
2013

As of
September 30, December 31,
2013
2013

March 31,
2014

June 30,
2014

197.5
127.1
2.9
745.0
1.5
1,074.0
575.9
473.2
26.7

219.1
123.4
3.8
726.0
1.5
1,073.8
592.3
568.7
28.9

243.1
121.6
5.5
709.5
1.5
1,081.2
682.7
552.9
34.0

297.8
119.8
9.0
354.7
1.5
782.8
702.4
541.4
52.6

239.8
9.6
12.3
28.7
1.4
291.8
872.5
153.8
66.4

268.2
17.7
18.8
28.6
1.4
334.7
899.9
153.7
103.6

2,149.8
491.3

2,263.7
543.1

2,350.8
571.6

2,079.2
570.4

1,384.5
740.2

1,491.9
804.5

As of June 30, 2014, gross NPAs as a proportion of gross loans were 1.78% and net NPAs as a proportion of net
loans were 0.97%. We had, as of June 30, 2014, effected a provision cover of 79.07% of our gross NPAs
(including technical write-offs).
The following table sets forth, for the periods indicated, information about our NPA portfolio:
(` in millions, except percentages)
As of or for the year ended March 31, For Quarter ended
June 30, 2014
2013
2014
Total
Total
Opening balance at the beginning of the period
2,418.0
2,149.8
1,384.5
Additions during the period
752.9
970.7
240.3
Less: Reductions during the period on account of
1,021.1
1,736.0
132.9
recovery and write-offs
Gross NPAs at the close of the period.
2,149.8
1,384.5
1,491.9
Gross NPAs
2,149.8
1,384.5
1,491.9
Net NPAs
491.3
740.2
804.5
Gross loans
67,529.5
82,122.4
83,728.9
Net loans
65,860.9
81,401.9
82,913.9
Gross NPAs / Gross loans (%)
3.18%
1.69%
1.78%
Net NPAs / Net Loans (%)
0.75%
0.91%
0.97%
Total provisions as a percentage of gross NPAs(%)
85.71%
80.54%
79.07%
Provisions for NPAs
The following table sets forth, for the periods indicated, movements in our provisions against NPAs:
Particulars

For the year ended

March 31,
2013
2014

NPA Provisions:
Total NPA provisions at the beginning of the period
Additions during the period
Reductions during the period on account of recovery and
write-offs
Total NPA provisions at the end of the period

(` in millions)
For Quarter ended
June 30,
2014

2,064.0
379.5
848.9

1,594.6
428.8
1,398.9

624.5
90.5
47.5

1,594.6

624.5

667.5

Non-Accrual Policy
When an asset is classified as non-performing, interest accrual thereon is stopped and the unrealized interest is
75

reversed by a debit to our profit and loss account. In accordance with RBI guidelines, interest realized on NPAs
may be credited as income, provided that the interest does not relate to additional credit facilities sanctioned to
the borrower. 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
the borrowers loans are classified as an NPA, all loans to such borrower are classified as NPAs.
Policy for making provisions for Non-Performing Assets
RBI policy on provisioning for NPAs is described below.
Substandard
assets
Doubtful assets

Loss assets

15% of the amount outstanding for secured exposures: 25% for unsecured exposures; 20% for
unsecured exposures in respect of infrastructure loan accounts where certain safeguards such
as escrow accounts are available
Doubtful-I 100% of the unsecured portion and 25% of the secured portion
Doubtful-II 100% of the unsecured portion and 40% of the secured portion
Doubtful-III 100% of the unsecured portion and 100% of the secured portion
100% to be provided or written-off.

We follow the policy on NPA provisioning prescribed by RBI. In May 2011 RBI announced enhanced
provisioning requirements for certain categories of non-performing advances and restructured advances.
The tables below set out our cost of credit as of the dates specified.

Provision/write-off towards non-performing and restructured advances (A)

Average performing advances (B)
Credit Costs(1) (C = (A)/(B))
Net NPAs
(1)

(` in millions, except percentages)

As of March 31,
As of June 30,
2013
2014
2014
182.5
298.6
100.9
55,426.6 66,998.9
78,601.4
0.33%
0.45%
0.51%
491.3
740.2
804.5

Represents annualised credit cost ratio.

Standard Assets provisions and Floating provisions

As of June 30, 2014 the Bank holds provision for standard assets of ` 461.8 million as required under RBI
guidelines. As of the same date, the Bank holds floating provision of ` 87.3 million as per our Board approved
policy.
Further, the Bank is also required, as per recent regulatory guidelines, to provide for likely losses on lending to
borrowers who have unhedged foreign currency exposure in their portfolio. Such provision is computed based
on certain directions and computation methodology given in such guidelines. The provision so held by the Bank
as of June 30, 2014 amounted to ` 4.5 million.
In accordance with RBI guidelines, the general provision on standard assets has been made at 0.40% of the
outstanding amount on a portfolio basis except at the rate of 0.25% of outstanding amount in the case of direct
advances to agriculture and SME sectors, 0.75% of the outstanding amount in case of advances to commercial
real estate- residential housing sector (CRE RH), 1% of the outstanding amount in the case of advances to
commercial real estate sector, at 2% on the outstanding amount of housing loans at teaser rates (i.e. at
comparatively lower rates of interest in the first few years, after which rates are reset at higher rates) and at 5%
on standard restructured loans.
NPA Strategy
We have utilised the SARFAESI Act to enforce our security charged to us in case of defaulting borrowers as
well to take appropriate portfolio intervention such as the sale of non-performing loans to specialized asset
reconstruction companies. We have also restructured loans to customers who have faced cash flow problems
causing delay or default in servicing their loan obligations.

76

Restructuring of Debt
In case of restructured or rescheduled accounts we make provisions for the sacrifice against erosion diminution
in fair value of restructured loans, in accordance with the general framework of restructuring of advances issued
by RBI pursuant to its circular dated August 27, 2008, subsequently modified pursuant to its circular dated April
9, 2009 and the master circular updated and issued by RBI every year.
The erosion in fair value of advances is computed as difference between the fair values of the loan before and
after restructuring.
The fair value of the loan after restructuring is computed as the present value of cash flows representing the
interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to the
banks BPLR or Base Rate (whichever is applicable to the borrower) as on the date of restructuring plus the
appropriate term premium and credit risk premium for the borrower category on the date of restructuring.
The restructured accounts have been treated as standard or NPA in line with the guidelines contained in RBI
circulars:
(` in millions, except percentages)
Particulars
As of March 31, 2013 As of March 31, 2014
As of June 30, 2014
No.
No.
No.
Restructured Corporate / SME / AIB
8
577.9
8
1,134.3
10
1,169.9
Loans
Restructured Retail Loans
297
137.3
8
7.5
8
6.8
Total Restructured Loans
305
715.2
16
1,141.8
18
1,176.7
Net Advances
65,860.9
81,401.9
82,913.9
% Restructured Loans to Net Advances
1.09%
1.40%
1.42%
Operating Performance
The following table sets out our operating performance for the Fiscal Years ended March 31, 2013, March 31,
2014 and quarter ended June 30, 2014:
(` in millions)
For the year ended March 31,
For the Quarter ended June 30,
2013
2014
2014
Net Interest Income
2,844.1
3,683.9
1,389.8
Other Income
1,170.2
1,386.6
344.9
Operating Income
4,014.3
5,070.5
1,734.7
Staff Cost
1,379.0
1,570.8
463.0
Operating Expenses
1,374.0
1,620.1
459.5
Total Operating Expenses
2,753.0
3,190.9
922.5
Operating Profit
1,261.3
1,879.6
812.2
Provisions
240.7
366.0
365.8
Net Profit
1,020.6
1,513.6
446.4
The following table sets out our operating performance over the past six three-month periods ended June 30,
2014:
(` in millions)
For the three months ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
2013
2013
2013
2013
2014
2014
Net Interest Income
815.3
831.2
912.6
939.6
1,000.4
1,389.8
Other Income
330.7
451.0
272.7
328.4
334.5
344.9
Operating Income
1,146.0
1,282.2
1,185.3
1,268.0
1,334.9
1,734.7
Staff Cost
358.8
377.0
388.0
395.0
410.9
463.0
Operating Expenses
356.9
391.9
396.1
409.5
422.4
459.5
Total Operating
715.7
768.9
784.1
804.5
833.3
922.5
Expenses
Operating Profit
430.3
513.3
401.2
463.5
501.6
812.2
Provisions
89.2
85.0
70.3
99.9
110.8
365.8
Net Profit
341.1
428.3
330.9
363.6
390.8
446.4

77

Key Performance Indicators

The following table sets out certain key metrics in our performance as of or for the Fiscal Years ended March
31, 2013, March 31, 2014 and three months ended June 30, 2014:
(` in millions)
As of March 31,
As of June 30,
2014
2013
2014
Total Assets
112,788.2
129,231.4
128,837.5
Gross Advances
67,529.5
82,122.4
83,728.9
Net Advances
65,860.9
81,401.9
82,913.9
Fixed Assets
2,394.5
2,386.4
2,355.3
Other Assets
2,113.8
2,205.2
1,567.4
Investments
33,586.6
36,342.2
35,402.2
Cash and Balances with RBI & Balances with Banks and
8,832.4
6,895.7
6,598.7
Money at Call and Short Notice
Shareholders equity
10,030.6
11,539.6
11,990.0
Total Deposits
83,638.4
103,251.6
105,519.1
CASA
22,716.1
25,812.7
26,781.8
Term Deposits from others
53,262.1
61,947.8
64,719.2
Term Deposits from Banks
7,660.2
15,491.1
14,018.1
Total Retail Deposits
64,729.8
79,442.7
83,157.1
Retail CASA
20,885.3
23,497.4
24,762.4
Retail Term Deposits
43,844.5
55,945.3
58,394.7
Borrowings including subordinated debt
15,256.2
8,601.6
5,954.9
Other liabilities & provisions
3,863.0
5,838.6
5,373.5
(in percentages, except ` in millions per branch figures)
As of or for the year ended March 31,
As of or Quarter
ended June 30, 2014
2013
2014

Key Ratios
Yield on Performing Advances
Yield on Interest Earning Assets
Cost of Funds
Gross NPA Ratio
Net NPA Ratio
Return on Equity(1)
Return on Assets (2)
Cost to Income Ratio(3)
Retail deposits / Total Deposits
CASA Ratio
Total Retail Deposits per branch
Retail CASA per branch
Retail Term Deposit per branch
Credit Deposit Ratio
(1)

(2)

(3)

12.84%
10.84%
7.78%
3.18%
0.75%
11.13%
1.06%
68.58%
77.39%
27.16%
688.6
222.2
466.4
78.74%

12.95%
11.00%
7.78%
1.69%
0.91%
14.04%
1.31%
62.93%
76.94%
25.00%
611.1
180.8
430.3
78.84%

12.95%
11.10%
7.79%
1.78%
0.97%
15.21%
1.39%
53.18%
78.81%
25.38%
620.6
184.8
435.8
78.58%

Return on Equity is the ratio of net profit after tax to average monthly equity as reported to Reserve Bank of India in
Form X under Section 27 of the Banking Regulation Act. (Equity represents share capital plus reserves and surplus).
Return on Assets is the ratio of net profit after tax to average of total monthly assets as reported to Reserve Bank of
India in Form X under Section 27 of the Banking Regulation Act.
Cost to Income Ratio is the ratio of our total operating expenses to operating income (net interest income and other
income)

The following table sets out certain key metrics in our performance as of or for the past six three-month periods
ended June 30, 2014:
(` in millions)
As of
March 31,
June 30,
September 30, December 31, March 31,
June 30,
2013
2013
2013
2013
2014
2014
Total Assets
112,788.2
109,933.2
111,252.1
119,889.8
129,231.4 128,837.5
Gross Advances
67,529.5
66,457.6
68,565.5
75,139.1
82,122.4
83,728.9
Net Advances
65,860.9
64,714.8
66,765.1
73,614.5
81,401.9
82,913.9
Fixed Assets
2,394.5
2,364.0
2,372.5
2,366.1
2,386.4
2,355.3
Other Assets
2,113.8
2,303.6
2,268.6
2,147.7
2,205.2
1,567.4
78

Investments
Cash and Balances with
RBI & Balances with
Banks and Money at
Call and Short Notice
Shareholders equity
Total Deposits
CASA
Term Deposits from
others
Term Deposits from
Banks
Total Retail Deposits
Retail CASA
Retail Term Deposits
Borrowings including
subordinated debt
Other liabilities &
provisions

Key Ratios
Yield on Performing
Advances
Yield on Interest Earning
Assets
Cost of Funds
Gross NPA Ratio
Net NPA Ratio
Return on Equity(1)
Return on Assets (2)
Cost to Income Ratio(3)
Retail deposits / Total
Deposits
CASA Ratio
Total Retail Deposits per
branch
Retail CASA per branch
Retail Term Deposit per
branch
Credit Deposit Ratio
(1)

(2)

(3)

As of
September 30, December 31,
2013
2013
33,135.0
35,546.0
6,710.9
6,215.5

March 31,
2013
33,586.6
8,832.4

June 30,
2013
31,538.4
9,012.4

10,030.6
83,638.4
22,716.1
53,262.1

10,456.6
83,196.4
22,880.3
51,722.6

10,786.5
87,880.5
23,653.1
53,875.1

7,660.2

8,593.5

64,729.8
20,885.3
43,844.5
15,256.2
3,863.0

March 31,
2013
12.94%

March 31,
2014
36,342.2
6,895.7

June 30,
2014
35,402.2
6,598.7

11,149.9
95,918.5
23,791.2
57,263.9

11,539.6
103,251.6
25,812.7
61,947.8

11,990.0
105,519.1
26,781.8
64,719.2

10,352.3

14,863.4

15,491.1

14,018.1

66,153.1
21,698.4
44,454.7
12,035.7

69,438.5
22,362.3
47,076.2
8,438.0

73,618.8
22,475.8
51,143.0
8,014.6

79,442.7
23,497.4
55,945.3
8,601.6

83,157.1
24,762.4
58,394.7
5,954.9

4,244.5

4,147.1

4,806.8

5,838.6

5,373.5

(in percentages, except ` in millions per branch figures)

As of or for the three months ended
June 30,
September 30,
December 31,
March 31, June 30,
2013
2013
2013
2014
2014
12.84%
12.84%
13.07%
13.04%
12.95%

11.02%

10.87%

10.91%

11.05%

11.12%

11.10%

7.83%
3.18%
0.75%
13.85%
1.30%
62.45%
77.39%

7.76%
3.41%
0.84%
16.68%
1.55%
59.97%
79.51%

7.56%
3.43%
0.86%
12.50%
1.19%
66.15%
79.01%

7.86%
2.77%
0.77%
13.28%
1.26%
63.44%
76.75%

7.93%
1.69%
0.91%
13.82%
1.25%
62.42%
76.94%

7.79%
1.78%
0.97%
15.21%
1.39%
53.18%
78.81%

27.16%
688.6

27.50%
655.0

26.92%
674.2

24.80%
640.2

25.00%
611.1

25.38%
620.6

222.2
466.4

214.8
440.2

217.1
457.1

195.5
444.7

180.8
430.3

184.8
435.8

78.74%

77.79%

75.97%

76.75%

78.84%

78.58%

Return on Equity is the ratio of net profit after tax to average monthly equity as reported to Reserve Bank of India in
Form X under Section 27 of the Banking Regulation Act. (Equity represents share capital plus reserves and surplus).
Return on Assets is the ratio of net profit after tax to average of total monthly assets as reported to Reserve Bank of
India in Form X under Section 27 of the Banking Regulation Act.
Cost to Income Ratio is the ratio of our total operating expenses to operating income (net interest income and other
income).

79

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations
together with the Financial Statements included in this Placement Document, along with the chapters titled
Our Business and Selected Statistical Information, which present important statistical information about
our business. Our actual results and the timing of selected events could differ materially from those anticipated
in forward-looking statements contained in this discussion as a result of various factors, including those set
forth under Risk Factors and elsewhere in this Placement Document. Please refer to chapter titled
Forward Looking Statements.
We prepare our Financial Statements in accordance with Indian GAAP. The Financial Statements reflect
applicable statutory requirements and regulatory guidelines and accounting practices in India. These
requirements, guidelines and practices change from time to time and in accordance with Indian GAAP. For the
purposes of a comparative analysis in the discussion below, previous years figures have been reclassified
wherever necessary.
Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the 12month period ended March 31 of that fiscal year. For a description of our business, please refer to the chapter
titled Our Business. Unless otherwise specified, all information regarding cost, yield and average balances
are based on daily average balances outstanding during the relevant period.
Overview
We are a new private sector bank in India offering a wide range of banking and financial products and services
to retail, corporate, small and medium enterprises (SME), micro small and medium enterprises (MSME)
and agriculture & inclusive banking (AIB) and treasury through various delivery channels. We have a long
history in India since 1930 when our predecessors started operating as co-operative banks. In 1988, the Bank
acquired scheduled status from RBI. On May 31, 1995, we converted to a private sector commercial bank and
secured a foreign exchange licence to become an authorised dealer. In 2004, we were classified by RBI as a
new private sector bank.
As of August 31, 2014, we had 138 interconnected branches spread across 17 states and two union territories in
the country. In Fiscal Year 2014, the Bank increased its network by 36 branches, which is the highest number of
new branches installed in one fiscal year by us. The new branches were opened in the states of Andhra Pradesh,
Chhattisgarh, Gujarat, Haryana, Madhya Pradesh, Odisha, Punjab, Rajasthan, Tamil Nadu and Utter Pradesh.
Our branch network is largely concentrated in the four states of Maharashtra, Gujarat, Odisha and Telangana.
Our distribution network included 239 interconnected ATMs comprising 117 onsite and 122 offsite ATMs as of
August 31, 2014. As of August 31, 2014, we had a customer base of more than 500,000 banking customers.
We have the following main business units:

Retail banking business is our largest business unit, which offers a wide range of financial products and
services to retail customers. Retail banking products principally comprise retail banking accounts, deposits
and retail loans. As of March 31, 2014 and as of March 31, 2013 our retail banking business contributed
43.53% and 42.02% of our total advances;

Corporate banking business largely caters to mid-sized corporate companies. Our range of corporate
banking products and services includes current accounts, terms loans, working capital facilities, import and
export financing, cash management and salary accounts. As of March 31, 2014 and as of March 31, 2013
our Corporate banking business contributed 25.73% and 23.77% of our total advances;

SME and MSME banking business has historically been our focus since our days as a co-operative bank
and we continue today to focus on our small and medium business customers. We offer a similar range of
products through our SME banking unit as through our corporate banking unit. As of March 31, 2014 and
as of March 31, 2013 our SME and MSME banking contributed 16.58% and 22.59% of our total advances;

AIB exists to systematically co-ordinate across all business units and complete the priority sector lending
targets each year for the Bank as a whole. AIB offers a wide range of products to cater to various needs of
banked, under-banked, rural and semi-urban population. The unit is responsible inter alia for disbursing
80

agriculture loans (commodity-based finance), term loans to micro finance institutions (MFIs), tractor loans,
home loans and business loans to lower middle income group, portfolio buyouts from MFIs, term loans to
institutions which extend collateralised jewellery loans and portfolio buyouts from and term loans to any
other institutions that qualify as a priority sector loan. As of March 31, 2014 and as of March 31, 2013,
AIB contributed 14.16% and 11.62% of our total advances;

Treasury operations are our interface with the financial markets. Our treasury operations consist primarily
of statutory reserves management, liquidity management, investment and trading activities, money market
and foreign exchange activities.

Our total assets have increased from ` 112,788.2 million as of March 31, 2013 to ` 129,231.4 million as of
March 31, 2014 at a growth of 14.58% and our total deposits have grown from ` 83,638.4 million as of March
31, 2013 to ` 103,251.6 million as of March 31, 2014 at a growth of 23.45%. Our customer deposits have
increased from ` 75,818.8 million as of March 31, 2013 to ` 87,305.8 million as of March 31, 2014 at a growth
of 15.15%. Our CASA increased from ` 22,716.1 million as of March 31, 2013 to ` 25,812.7 million as of
March 31, 2014 at a growth of 13.63%.
In the Fiscal Years ended March 31, 2013 and March 31, 2014, our total income (interest income plus other
income) was ` 10,331.2 million and ` 12,669.2 million, respectively. For the three months ended June 30, 2013
and 2014, our total income was ` 3,058.4 million and ` 3,866.9 million, respectively. In the Fiscal Years ended
March 31, 2013 and March 31, 2014, our net profit was ` 1,020.6 million and ` 1,513.6 million, respectively.
For the three months ended June 30, 2013 our net profit was ` 428.3 million and for the three months ended
June 30, 2014, our net profit was ` 446.4 million.
The following table sets out certain key metrics in our performance over the past two Fiscal Years and the three
months ended June 30, 2013 and June 30, 2014:

Net interest margin(2)

Return on equity(3)
Return on assets(4)
Capital Adequacy Ratio (BASEL II)
Tier I Capital Adequacy Ratio (BASEL II)
Capital Adequacy Ratio (BASEL III)
Tier I Capital Adequacy Ratio (BASEL III)
Gross NPA Ratio
Net NPA Ratio
Coverage Ratio(5)
(1)
(2)

(3)

(4)

(5)

As of or for the year ended

March 31,
2013
2014
3.34%
3.56%
11.13%
14.04%
1.06%
1.31%
13.61%
13.84%
12.62%
13.03%
NA
13.71%
NA
12.86%
3.18%
1.69%
0.75%
0.91%
85.71%
80.54%

As of or for the three months

ended June 30,(1)
2013
2014
3.44%
3.71%
16.68%
15.21%
1.55%
1.39%
13.89%
13.73%
13.05%
12.94%
13.75%
13.63%
12.84%
12.77%
3.41%
1.78%
0.84%
0.97%
84.56%
79.07%

Ratios are annualised

Net interest margin is the ratio of net interest income to average interest earning assets, including net NPAs. The difference in net
interest margin and spread arises due to the difference in amount of interest-earning assets and interest-bearing liabilities.
Return on equity is the ratio of net profit after tax to average monthly equity as reported to Reserve Bank of India in Form X under
Section 27 of the Banking Regulation Act. (equity represents share capital plus reserves and surplus).
Return on assets is the ratio of net profit after tax to average of total monthly assets as reported to Reserve Bank of India in Form X
under Section 27 of the Banking Regulation Act.
Coverage ratio for the Bank is defined as the amount of provisions (including technical write-offs) in respect of non-performing loans
as a percentage of gross loans/advances.

The following table sets out certain key metrics in our performance over the past six three-month periods ended
June 30, 2014:

Net interest margin(2)

Return on equity(3)
Return on assets(4)
Capital Adequacy Ratio (BASEL II)
Tier I Capital Adequacy Ratio (BASEL II)
Capital Adequacy Ratio (BASEL III)

March 31,
2013
3.52%
13.85%
1.30%
13.61%
12.62%
NA

81

As of or for the three months ended(1)

June 30, September December March 31,
2013
30, 2013
31, 2013
2014
3.44%
3.68%
3.55%
3.59%
16.68%
12.50%
13.28%
13.82%
1.55%
1.19%
1.26%
1.25%
13.89%
13.95%
12.96%
13.84%
13.05%
13.10%
12.15%
13.03%
13.75%
13.81%
12.86%
13.71%

June 30,
2014
3.71%
15.21%
1.39%
13.73%
12.94%
13.63%

Tier I Capital Adequacy Ratio (BASEL III)

Gross NPA Ratio
Net NPA Ratio
Cost to income(5)
Net NPAs (` in million)
Gross NPAs (` in million)
Coverage Ratio(6)
(7)
(8)

(9)

(10)

(11)
(12)

March 31,
2013
NA
3.18%
0.75%
62.45%
491.3
2,149.8
85.71%

As of or for the three months ended(1)

June 30, September December March 31,
2013
30, 2013
31, 2013
2014
12.84%
12.89%
11.98%
12.86%
3.41%
3.43%
2.77%
1.69%
0.84%
0.86%
0.77%
0.91%
59.97%
66.15%
63.44%
62.42%
543.1
571.6
570.4
740.2
2,263.7
2,350.8
2,079.2
1,384.5
84.56%
83.96%
84.25%
80.54%

June 30,
2014
12.77%
1.78%
0.97%
53.18%
804.5
1,491.9
79.07%

Ratios are annualised

Net interest margin is the ratio of net interest income to average interest earning assets, including net NPAs. The difference in net
interest margin and spread arises due to the difference in amount of interest-earning assets and interest-bearing liabilities.
Return on equity is the ratio of net profit after tax to average monthly equity as reported to Reserve Bank of India in Form X under
Section 27 of the Banking Regulation Act. (equity represents share capital plus reserves and surplus).
Return on assets is the ratio of net profit after tax to average of total monthly assets as reported to Reserve Bank of India in Form X
under Section 27 of the Banking Regulation Act.
Cost to income ratio for the Bank is defined as operating expenses to net interest income plus other income.
Coverage ratio for the Bank is defined as the amount of provisions (including technical write-offs) in respect of non-performing loans
as a percentage of gross loans/advances.

COMPONENTS OF INCOME AND EXPENDITURE

Revenue
Our revenue, which is referred to herein and in our Financial Statements as total income, consists of interest
earned and other income.
Interest earned includes interest and discounts on advances/bills, income on investments, interest on balances
with RBI and other inter-bank funds and other interest income. Income on investments consists of interest from
securities and our other investments. We also earn interest income from deposits that we maintain with other
banks. Our investment portfolio consists primarily of Central Government and State Government securities and
corporate debt securities. We meet SLR requirements through investments in these and other approved
securities. Our deposits under the Rural Infrastructure Development Fund scheme with NABARD, SIDBI and
NHB are also included under our investments. We also hold debentures and bonds issued by public sector
undertakings and government-controlled companies, certificates of deposit, commercial paper and mutual fund
units. Our interest income is affected by fluctuations in interest rates as well as the volume of the activity.
Interest rates are highly sensitive to many external factors beyond our control, including growth rates in the
economy, inflation, money supply, RBIs monetary policies, deregulation of the financial sector in India,
domestic and international economic and political conditions and other factors.
Our other income consists principally of fee based income, such as commissions, exchange and brokerage
income, net profit on the sale of investments, profits or losses on the sale of land, buildings and other assets, net
profits / losses on foreign exchange transactions and miscellaneous income, which includes recovery from
written-off accounts and incidental charges such as account keeping fees and sundry charges. Fee based income
includes fees and charges for services in our transactional banking business unit, such as cash management
services, remittance services, documentary credits, letters of credit and issuance of guarantees and service
charges and processing fees on customer accounts. It also includes income from commissions on sales of third
party products, such as insurance and mutual funds. We also earn fee based income from foreign exchange
transactions for customers and inter-bank transactions.
Expenditure
Our expenditure consists of interest expended, operating expenses and provisions and contingencies.
Our interest expended consists of the interest paid on deposits and borrowings, including borrowings from RBI
and other inter-bank funds. Our interest expended is affected by fluctuations in interest rates, our deposit mix
and business volumes. Our non-interest expenditure consists principally of operating expenses, including
expenses for wages and employee benefits, lease rentals and related expenses such as electricity charges paid on
premises, depreciation on fixed assets, repairs and maintenance, insurance, postage and telecommunications,
printing and stationery, advertising and publicity, directors and professional fees and expenses, and other
expenses. Our provisioning for non-performing assets, provisioning for standard assets, floating provision,
82

depreciation and provision on investments and income tax and other taxes are included in provisions and
contingencies.
Financial Performance Indicators
Besides our Financial Statements, we use a variety of indicators to measure our financial performance. These
indicators are presented in tables in the chapter titled Selected Statistical Information of this Placement
Document. Our net interest income represents our interest income over interest expense. Net interest margin for
any given period represents the ratio of net interest income to the average of interest-earning assets. We
calculate (1) the yield on average of interest earning assets, (2) the cost of funds and (3) the spread. Our cost of
funds is our interest expended divided by our average interest bearing liabilities, expressed as a percentage.We
include the interest cost of the unsecured subordinated bonds that we issued for Tier II capital adequacy
purposes in our borrowings. In our Financial Statements, these bonds are presented as subordinated debt. Our
spread is our yield on average of interest earning assets less our cost of funds.
Factors affecting our Financial Results
The majority of our income comprises of interest earned on loans to large companies, medium-sized companies
and small businesses, as well as consumer finance loans, primarily for the purchase of housing. Our major
expenses comprise interest expense on deposits, short-term borrowings and loans from banks and financial
institutions.
Our financial results will be influenced by macroeconomic factors, including growth and inflation in the Indian
economy, and, in particular, the continued growth of the housing sector. We are also vulnerable to interest rate
volatility and changes in banking regulation and fiscal policy. Our results will also depend on our ability to
attract new customers and additional business volumes from existing and new customers. Our business is
subject to various other risks and uncertainties, including those discussed in the chapter titled Risk Factors.
The following is a discussion of certain factors that have had, and we expect will continue to have, a significant
effect on our financial results:
The Macroeconomic Environment
The Indian economy stands at crossroads that could take it from a slow bumpy lane to a faster highway. Some
acceleration is likely in 2014-15 that could take the growth to around 5.5 per cent. Deficiency in rainfall during
the 2014 monsoon season so far poses some downside risks, but overall growth in 2014-15 is likely to be better
than previous year with likely revival in industrial and construction activities. The improvement in the monsoon
since mid-July will also help contain crop output losses. With greater political stability and a supportive policy
framework, investment could turn around. The economy is poised to make a shift to a higher growth trajectory.
Enabling this shift in gear requires policies in support of sustainable growth. The economy had to face serious
challenges to stability in 2013-14 emanating from exchange rate pressures amid capital outflows, persistence of
near double digit inflation, fiscal imbalances and a decline in investment. This prompted the Reserve Bank and
the government to take several measures to stabilise the economy. Monetary and fiscal policies, therefore, need
to maintain caution during 2014-15 so that the gains in macro-stability are preserved and the disinflationary
momentum gathers traction. In the near term, the objective of macroeconomic policies should be to secure a
sustainable recovery.
The year 2014-15 has begun on a promising note. Index of Industrial Production (IIP) growth is beginning to
look up, while inflation on an average, so far, has been lower than in the corresponding period of the previous
year. Monetary policy is providing a more stable environment in terms of interest rates, liquidity and credit
conditions, with tangible efforts to improve resource flow to productive sectors. The latter includes cuts in
statutory liquidity ratio (SLR) and exemptions from regulatory pre-emptions such as cash reserve ratio (CRR),
SLR and priority sector lending (PSL) for issuing long-term bonds to finance loans to infrastructure and
affordable housing. The Union Budget aims to keep the economy on the path of fiscal consolidation. However,
strict adherence to fiscal discipline to avoid overshooting of expenditures and concerted efforts to mobilise tax
and non-tax revenues, as also strong efforts on non-debt capital receipts will be necessary to attain these fiscal
targets.
(Source: Reserve Bank of India Annual Report, 2013-14)
83

Regulatory intervention
The banking industry in India is subject to extensive regulation by Governmental and self-regulatory
organisations, including RBI, SEBI, IRDA, 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. 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.
The Governments 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. RBI responds to fluctuating levels
of economic growth, liquidity concerns and inflationary pressures in the economy by adjusting the monetary
policy. For example, RBI undertook several measures from July 2013 onwards to restore stability in the Rupee.
In consultation with the Government, gold imports were restricted to reduce the pressure on CAD. There was a
cap on overnight repo borrowing at 0.50% of NDTL, and RBI managed liquidity through open market
operations sale of Government securities and a hike in the minimum daily CRR maintenance requirement from
70.00% to 95.00%. RBI also provided an unconventional U.S. dollar swap window to public sector oil
marketing companies (for oil imports) and banks (for FCNR (B) deposits and foreign currency borrowings) for a
limited period until March 2014. These measures restored confidence in the Rupee; which appreciated from a
low of ` 68.82 against the U.S. dollar on August 28, 2013 to ` 59.89 on March 28, 2014 and ` 60.50 on August
31, 2014.
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, RBI has also instituted
several prudential measures to moderate credit growth including increase in risk weights for capital adequacy
computation and general provisioning for various asset classes.
Over time RBI has increased the CRR for Indian banks. However, in fiscal year 2013, RBI conducted open
market operations and cut the CRR to counter the prolonged strain on liquidity in India. From March 2012 to
May 2013, RBI decreased the CRR and the SLR, the amount that commercial banks in India are required to
maintain in the form of gold or Government approved securities before providing credit, by 150 basis points and
100 basis points to 4.00% and 22.00%, respectively, in order to provide more liquidity in the market. However,
RBI continues to suspend interest payments on CRR balances. 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. The SLR on our NDTL was reduced by 50 basis points from 23.00% to 22.50% in
June 2014 and further reduced by 50 basis points from 22.50% to 22.00% in August 2014. Any increases in the
SLR 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.
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
banking industry could have a significant impact on our operations and financial condition.
The Banking Regulation Act was amended in January 2013 to strengthen the regulatory powers of RBI and to
further develop the banking sector in India. Pursuant to the amendment, private sector banks are permitted to
issue perpetual, redeemable and non-redeemable preference shares in addition to ordinary equity shares. Further,
the Banking Regulation Act requires any person to seek the prior approval of RBI to acquire or agree to acquire,
shares or voting rights of a bank, either directly or indirectly, by himself or with persons acting in concert,
wherein such acquisition (taken together with the shares or voting rights held by him or his relative or associate
enterprise or person acting in concert with him) results in aggregate shareholding of such person to be 5.00% or
more of paid-up capital of a bank or entitles such person to exercise 5.00% or more of the voting rights in a
bank. Further, RBI may, by passing an order, restrict any person holding more than 5.00% of the total voting
rights of a bank from exercising voting rights in excess of 5.00%, if such person is deemed to be not fit and
proper by RBI. Further, RBI may increase the ceiling of the voting rights from 10.00% to 26.00% in a phased
manner.
In addition to the above, the recent amendments also confer power on RBI (in consultation with the
Government) to supersede the board of directors of a banking company for a period not exceeding a total period
84

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.
Interest rate environment
Our results of operations depend to a great extent on our net interest income. Net interest income represents the
excess of interest earned from interest-earning assets (performing assets and investments) over the interest paid
on interest-bearing customer deposits and borrowings. Changes in interest rates affect the interest rates we
charge on our interest-earning assets and that we pay on our interest-bearing liabilities. Since the maturities of
our loans and investments tend to be more long-term than our deposits, any faster increase or slower decrease in
the interest rates that we must pay our depositors relative to the interest rates we charge our borrowers may
cause our net interest income to decrease. Changes in interest rates could also adversely affect demand for our
loan products. Interest rates are highly sensitive to many external factors beyond our control, including growth
rates in the economy, inflation, money supply, RBIs monetary policies, deregulation of the financial sector in
India, domestic and international economic and political conditions and other factors. For further information,
please refer to chapter titled Selected Statistical Information Asset Liability Gap.
The following table sets forth the bank rate, the reverse repo rate and the repo rate as of the dates set forth in the
table.

As of March 31, 2010

As of March 31, 2011
As of March 31, 2012
As of March 31, 2013
As of March 31, 2014

Bank Rate
6.00%
6.00%
9.50%
8.50%
9.00%

Reverse Repo Rate

3.50%
5.75%
7.50%
6.50%
7.00%

Repo Rate
5.00%
6.75%
8.50%
7.50%
8.00%

Source: Reserve Bank of India

Availability of cost-effective funding sources

Our current and savings account deposits as of March 31, 2013 and March 31, 2014 was ` 22,716.1 million, `
25,812.7 million, respectively, resulting in ratios of our current and savings account deposits to our total
deposits, expressed as a percentage, (or CASA ratio) as of March 31, 2013 and March 31, 2014 of 27.16 % and
25.00 %, respectively. We have thus been increasing the volume of our low cost deposits in line with our overall
business strategy though the CASA ratio declined in Fiscal Year 2014 due to higher proportionate increase in
our term deposits.
Our ability to meet demand for new loans and lower our cost of funding will depend on our ability to continue to
broad base our deposit profile, our ability to attract and retain new customers, and our continued access to term
deposits from the retail, corporate and inter-bank market. Our debt service costs and cost of funds depend on
many external factors, including developments in the Indian credit markets and, in particular, interest rate
movements and the existence of adequate liquidity in the inter-bank markets. Internal factors that will impact
our cost of funds include changes in our credit ratings, available credit limits and our ability to mobilize lowcost deposits, particularly through our retail banking branches.
Ability to achieve operating efficiencies
We use several methods to achieve operating efficiencies, such as streamlining our manpower requirements,
rationalising and consolidating our property portfolio and exiting surplus properties. We have also engaged in
vendor re-negotiation and rationalisation. Our ability to sustain our growth strategy, increase the yield on our
investments and increase in our profitability will depend on our continued success at achieving operating
efficiencies.
Ability to manage credit, market and operational risk
The credit quality of the loans given by us is a key driver of our results of operations, as quality loans help
reduce the risk of losses from loan impairment. Our gross NPAs was ` 2,149.8 million and ` 1,384.5 million
and ` 1,491.9 million as of March 31, 2013, March 31, 2014 and three months ended June 30, 2014,
respectively, and our net NPAs was ` 491.3 million, and ` 740.2 million, and ` 804.5 million as of March 31,

85

2013 and March 31, 2014 and three months ended June 30, 2014, respectively. Our gross NPA ratio was 3.18%,
1.69% and 1.78% as of March 31, 2013 and March 31, 2014 and three months ended June 30, 2014, respectively
and our net NPA ratio was 0.75% and 0.91% and 0.97%, respectively, as of the same dates. Such decrease in
gross NPAs has significantly improved our financial performance over the aforementioned periods.
The level of our NPAs is a function of the credit quality of our loans, which is further dependent upon the credit
appraisal processes and recovery procedures adopted by us. We have enterprise-wide risk management systems
to manage credit risk, market risk and operational risk. We monitor credit risk at the transaction level as well as
the portfolio level. Our ability to continue to reduce or contain the level of our gross and net NPA ratios may be
impacted by a number of factors beyond our control, such as increased competition, depressed economic
conditions, including with respect to specific industries to which we are exposed, decreases in agricultural
production, increases or decreases in commodity prices, adverse fluctuations in interest and exchange rates or
adverse changes in Indian policies, laws or regulations and also on our ability to manage our risk.
Significant Accounting Policies
Our Financial Statements are prepared and presented under the historical cost convention on the accrual basis of
accounting, and comply with the Generally Accepted Accounting Principles in India (GAAP), statutory
requirements prescribed under the Banking Regulation Act, circulars and guidelines issued by RBI from time to
time and the notified Accounting Standards under the Companies (Accounting Standards) Rules, 2006, (as
amended) to the extent applicable and the current practices prevailing within the banking industry in India.
The preparation of the financial statements in conformity with GAAP requires the management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the results of operations during the years ended on the date
of the financial statements. Although these estimates are based upon the managements best knowledge of
current events and actions, actual results could differ from these estimates. Any revisions to the accounting
estimates are recognised prospectively in the current and future periods. Our significant accounting policies are
more fully described under the notes to our financial statements in the chapter Financial Statements. The
following is a summary of our significant accounting policies, in accordance with RBI guidelines:
Investments
The investment portfolio comprising approved securities (predominantly Government Securities) and other
securities (Shares, Debentures and Bonds, etc.) are classified at the time of acquisition in accordance with RBI
guidelines under three categories viz. Held to Maturity (HTM), Available for Sale (AFS) and Held for
Trading (HFT). For the purposes of disclosure in the Balance Sheet, they are classified under six groups viz.
Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Subsidiaries and/or joint
ventures and Other Investments.
The transfer/shifting of securities between categories of investments is accounted as per RBI guidelines.
Investments that are held principally for resale within 90 days from the date of purchase are classified as HFT
securities. As per RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified
as AFS securities as on that date. Investments which the Bank intends to hold till maturity are classified as HTM
securities. Investments which are not classified in the above categories are classified under AFS category.
Valuation:

HFT and AFS categories:

Investments classified under HFT and AFS are marked to market as per RBI guidelines. These securities
are valued scrip-wise and any resultant depreciation or appreciation is aggregated for each category. The net
depreciation for each category is provided for, whereas the net appreciation for each category is ignored.
The book value of individual securities is not changed consequent to periodic valuation of investments.
Traded investments are valued based on the trades / quotes from the recognised stock exchanges, price list
of RBI or prices declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income
Money Market and Derivatives Association (FIMMDA), periodically.

86

The market value of unquoted government securities which qualify for determining the Statutory Liquidity
Ratio (SLR) included in the AFS and HFT categories is computed as per the Yield-to-Maturity (YTM)
rates published by FIMMDA.
The valuation of other unquoted fixed income securities (viz. State government securities, Other approved
securities, Bonds and debentures) wherever linked to the YTM rates, is computed with a mark-up
(reflecting associated credit and liquidity risk) over the YTM rates for government securities with similar
maturity profile published by FIMMDA. Unquoted equity shares are valued at the break-up value, if the
latest Balance Sheet is available or at ` 1 as per RBI guidelines. Units of mutual funds are valued at the
latest repurchase price / net asset value declared by the mutual fund. Treasury bills, commercial papers and
certificate of deposits, being discounted instruments, are valued at carrying cost.
In the event provisions recognised on account of depreciation in the AFS or HFT categories are found to be
in excess of the required amount in any year, such excess is recognised in the Profit and Loss Account and
subsequently appropriated, from profit available for appropriation, if any, to Investment Reserve Account in
accordance with RBI guidelines after adjusting for income tax and appropriation to Statutory Reserve.

HTM:
These are carried at their acquisition cost and are not marked to market. Any premium on acquisition is
amortised over the remaining maturity period of the security on a straight-line basis. Provision is recognised
for diminutions other than temporary in the value of such investments for each investment individually.

Non-performing investments are identified and provision is recognised as per RBI guidelines.
Disposal of Investment: Profit/Loss on sale of investment under the aforesaid three categories is recognised in
the Profit and Loss Account. The profit on sale of investment in HTM category, net of taxes and net of transfer
to Statutory Reserve is appropriated to Capital Reserve.
Acquisition Cost: Cost including brokerage, commission pertaining to investments, paid at the time of
acquisition, is charged to the Profit and Loss Account. Broken period interest is charged to the Profit and Loss
Account. Cost of investments is computed based on the weighted average cost method.
Advances
In pursuance of guidelines issued by RBI, advances are classified as Standard, Sub-Standard, Doubtful and Loss
Assets and are stated net of specific provisions made towards NPAs and floating provisions.
Provision for non-performing advances (NPAs) comprising sub-standard, doubtful and loss assets is made in
accordance with RBI guidelines which prescribe minimum provision levels and encourage banks to make a
higher provision based on sound commercial judgement. NPAs are identified by periodic appraisals of the loan
portfolio by the management. In respect of identified NPAs, provision is made based on the inherent risk
assessed for the various product categories. The provisioning done is at or higher than the minimum rate
prescribed under RBI guidelines.
Advances are net of bills rediscounted, claims realised from Export Credit Guarantee Corporation (ECGC),
provisions for non- performing advances, floating provisions, unrealised fees and unrealised interest held in
suspense account.
In case of restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI,
which require the diminution in the fair value of the assets to be provided in the profit and loss account at the
time of restructuring.
Credit facility/investment, where interest and/or instalment of principal has remained overdue for more than 90
days, is classified as non-performing asset. However, in respect of Equated Monthly Instalment (EMI) based
advances, those accounts where more than 3 EMIs are overdue are classified as NPAs.
In case of NPAs other than retail EMI loans, recoveries effected are first adjusted towards the principal amount.
In case of retail EMI loans, recoveries effected are adjusted towards the EMI and within the EMI first towards
the principal amount.
87

Fixed Assets
Premises and other fixed assets are stated at historical cost (or revalued amounts, as the case may be), less
accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable
cost of bringing the asset to its working condition for its intended use. Subsequent expenditure incurred on
assets put to use is capitalised only when it increases the future benefit / functioning capability from / of such
assets.
Revaluation of Fixed Assets
Portfolio of immovable properties is revalued periodically by an independent valuer to reflect current market
valuation. All land and building owned by the Bank and used as branches or offices or godowns are grouped
under Office Premises in the fixed assets category. Appreciation, if any, on revaluation is credited to
Revaluation Reserve under Capital Reserves.
Depreciation and Amortisation
Depreciation on fixed assets, including amortisation of software, is charged over the estimated useful life of the
fixed assets on a straight line basis at the rates and in the manner prescribed in Schedule XIV of the Companies
Act, 1956, except as mentioned below:

Computer Hardware - 33.33% p.a.

Automated Teller Machine (ATM) - 12.50% p.a.
Air conditioner 11.11% p.a.
Core Banking Software - 12.50% p.a.
Application Software and System Development Expenditure - Depending upon estimated useful life
between 3-5 years.
Hard Furnishing 25% p.a.
Improvements (Civil) to Leased Premises and Fixed Furniture in Leased Premises such as work-stations,
etc. over the contracted period of the lease.
Vehicle 19% p.a. over 5 years with 5% residual value.

Assets purchased/sold during the year are depreciated on a pro-rata basis, based on the actual number of days
the assets have been put to use.
Assets individually costing up to ` 5,000 are depreciated fully in the year of purchase.
Impairment of Assets
The carrying amount of assets is reviewed at each Balance Sheet date if there is any indication of impairment
based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value
in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to
the asset. After impairment, depreciation is provided on the revised carrying amount of the asset over remaining
useful life.
Recognition of Income and Expenditure
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Bank and the
revenue can be reliably measured. Items of income and expenditure are generally accounted on accrual basis.
Interest income is recognised in the Profit and Loss Account on accrual basis, except in the case of nonperforming assets where it is recognised as per RBI norms. Interest income on investments in Pass Through
Certificates (PTC) and loans bought out through the direct assignment route is recognised at their effective
interest rate.
Processing fees recovered on loans are recognised as income and processing overheads on loans are expensed at
the inception of the loan. Overdue rent on safe deposit lockers is accounted for on realisation. Guarantee
commission, annual safe deposit locker rent fees are recognised on a straight line basis over the period of

88

contract. Letters of credit (LC) are generally issued for a shorter tenor, typically of 90 days. The commission
on such LC is recognised when due.
Foreign Exchange Transactions
Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount
the exchange rate between the reporting currency and foreign currency at the date of the transaction.
Foreign currency monetary items are reported using the closing rate notified by Foreign Exchange Dealers
Association of India (FEDAI) at the balance sheet and the resulting profit or loss are included in the Profit and
Loss Account, as per the guidelines issued by RBI.
Exchange difference arising on settlement of monetary, are recognised as income or as expenses in the year in
which they arise. Non-monetary items which are carried in terms of historical cost denominated in a foreign
currency are reported using the exchange rate at the date of the transaction and non-monetary items which are
carried at fair value or other similar valuations denominated in a foreign currency are reported using exchange
rates that existed when the values were determined.
Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of
reporting currency required or available at the settlement date of transaction and are outstanding at the Balance
Sheet date, are effectively valued at the closing spot rate. The premium or discount arising at the inception of
such a forward exchange contract is amortised as expense or income over the life of the contract.
Outstanding forward exchange contracts are revalued on the Balance Sheet date at the rates notified by FEDAI
and at interpolated rates for contracts of interim maturities. The resultant gain/loss on revaluation is included in
the Profit and Loss Account in accordance with RBI/FEDAI guidelines.
Contingent liabilities denominated in foreign currencies are disclosed in the Balance Sheet date at the rates
notified by FEDAI.
Forward exchange contracts and other derivative contracts which have overdue receivables remaining unpaid
over 90 days or more are classified as non-performing assets and provided for as per the extant master circular
on Prudential Norms on Income Recognition, Asset Classification and Provisioning issued by RBI.
Accounting for Derivative Contracts
Income from derivative transactions designated as hedge is recorded on an accrual basis and these transactions
are not marked to market. Derivative transactions, which are not designated as hedge, are marked to market as
per the generally accepted practices prevalent in the industry. Any resultant gain or loss is recognised in the
Profit and Loss Account.
Retirement Benefits of Employees
Provision in respect of future liability for payment of gratuity is made on the basis of actuarial valuation on
projected unit credit method made at the end of the year. Gratuity is funded with the Gratuity Trust duly
registered under the provisions of Income tax Act, 1961. Actuarial gains/losses are recognised immediately to
the Profit and Loss Account and are not deferred. Retirement benefit in the form of provident fund is a defined
contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the
contributions to the fund are due. There is no other obligation other than the contribution payable to the fund.
Taxes on Income
Tax expense comprises current and deferred taxes. Current income tax is measured at the amount expected to be
paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred Income Tax reflects the
impact of current year timing differences between taxable income and accounting income for the year and
reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance
Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to
89

taxes levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is
reasonable certainty that sufficient future taxable income will be available against which such deferred tax
assets can be realised. In situations where the Bank has unabsorbed depreciation or carry forward tax losses, all
deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they
can be realised against future taxable profits.
At each Balance Sheet date, the Bank re-assesses unrecognised deferred tax assets. It recognises unrecognised
deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such deferred tax assets can be realised.
Accounting for Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised in terms of Accounting Standard 29 on Provisions, Contingent Liabilities and
Contingent Assets, when there is a present legal or statutory obligation as a result of past events leading to
probable outflow of resources, where a reliable estimate can be made of the amount required settling the
obligation.
Contingent Liabilities are recognised only when there is a possible obligation arising from past events due to
occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Bank,
or where there is a present obligation arising from a past event which is not recognised as it is not probable that
an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the
likelihood of outflow of resources is remote, no provision or disclosure is made.
Employee Share Based Payments
Measurement and disclosure of employee share-based employment plans is done in accordance with SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 / Guidance Note on
Accounting for the Employee Share-based Payments issued by The Institute of Chartered Accountants (ICAI)
of India. The Bank measures compensation cost relating to employee stock options using the intrinsic value
method. Compensation expense is amortised over the vesting period of the option on a straight line basis.
Earnings per Share
Basic and diluted earnings per share are computed in accordance with Accounting Standard 20 Earning per
share. Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity
shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding
during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity
shareholders and the weighted average number of shares outstanding during the year are adjusted for the effect
of dilutive potential equity shares.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and ATMs, balances with the Reserve Bank of India, balances
with other banks and money at call and short notice (including effect of changes in exchange rates on cash and
cash equivalents in foreign currency).
Leases
Leases where lessor effectively retains substantially all risks and benefits of ownership of the leased item are
classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss
Account on a straight-line basis over the lease term.
Summary of Our Financial Results
The following sets forth a summary of our financial results containing significant items of our income and
expenditure based on our Financial Statements for the Fiscal Years ended March 31, 2013 and March 31, 2014:

90

Statement of Profits and Losses

(` in million)
For the Fiscal Year ended March 31,
2013
2014
2,844.1
3,683.9
1,170.2
1,386.6
4,014.3
5,070.5
2,753.0
3,190.9
1,261.3
1,879.6
240.7
366.0
1,020.6
1,513.6

Net Interest Income

Other income
Operating Income
Operating expenses
Operating Profit
Provisions and contingencies
Net profit

Fiscal Year ended March 31, 2014 compared to the fiscal year ended March 31, 2013
Operating Income
Our operating income increased by 26.31% from ` 4,014.3 million in the fiscal year ended March 31, 2013 to `
5,070.5 million in the fiscal year ended March 31, 2014 mainly due to increase in net interest income from
` 2,844.1 million for Fiscal Year 2013 to ` 3,683.9 million for Fiscal Year 2014 and increase in other income
from ` 1,170.2 million for Fiscal Year 2013 to ` 1,386.6 million for Fiscal Year 2014.
Net interest income
Our net interest income increased by 29.53% from ` 2,844.1 million in the fiscal year ended March 31, 2013 to
` 3,683.9 million in the fiscal year ended March 31, 2014. The following table sets forth the components of our
net interest income:
(` in millions)
For the Fiscal Year ended March 31,
2013
2014
Total interest earned
9,161.0
11,282.6
Total interest expended
6,316.9
7,598.7
Net interest income
2,844.1
3,683.9
Interest earned

(` in millions)
For the Fiscal Year ended March 31,
2013
2014
7,118.3
8,678.7
1,963.2
2,453.1
67.5
142.4
12.0
8.4
9,161.0
11,282.6

Interest/discount on Advances/bills
Income on investments
Interest on balances with RBI and other inter-bank funds
Others
Total

Our interest income increased by 23.16% from ` 9,161.0 million in the fiscal year ended March 31, 2013 to
` 11,282.6 million in the fiscal year ended March 31, 2014 due to a 20.88% increase in average loan assets to
` 66,998.9 million in the fiscal year ended March 31, 2014 as compared to ` 55,426.6 million in the fiscal year
ended March 31, 2013 and increase in the average yield on advances during the period from 12.84% to 12.95%
due to higher yields from retail assets portfolio and AIB loans. The increase in average loan assets was because
of an increase in our business volumes as a result of an increase in our mortgage loan products, other retail
products, corporate loans and AIB loans. As part of our strategy, our mortgage loans increased from 36.41% of
our advances portfolio as of March 31, 2013 to 38.44% as of March 31, 2014, primarily through mortgage loans
which we originated.
Our income on investments increased by 24.95% from ` 1,963.2 million in the fiscal year ended March 31, 2013
to ` 2,453.1 million in the fiscal year ended March 31, 2014 primarily due to an increase in our average
investment from ` 27,887.4 million to ` 33,281.0 million representing a growth of 19.34% and an increase in
the average yield on investments during the period from 7.04% to 7.37% due to increasing yields on government
securities owing to increased interest rates and movement in the market. The increase in our average
investments was mainly due to an increase in SLR requirements due to a higher volume of business.

91

Income on balances with RBI and other inter-bank funds increased by 110.96% from ` 67.5 million in the fiscal
year ended March 31, 2013 to ` 142.4 million in the fiscal year ended March 31, 2014 primarily because of
higher volumes of placement of inter-bank deposits.
Other income

(` in millions)
For the Fiscal Year ended March 31,
2013
2014
893.3
1,010.9
139.0
224.5
(17.1)
(4.0)
72.3
56.5
0.0
0.0
82.7
98.7
1,170.2
1,386.6

Commission, exchange and brokerage

Sale of investments
Sale of land, buildings and other assets
Exchange transactions
Lease income (Net of Lease Equalisation Account)
Miscellaneous income
Total

Our other income increased by 18.49% from ` 1,170.2 million in the fiscal year ended March 31, 2013 to `
1,386.6 million in the fiscal year ended March 31, 2014, mainly because of an increase in commission,
exchange and brokerage income and profit from sale of investments, which were partially offset by decreases in
profit on exchange transactions.
Commission, exchange and brokerage
Income from commission, exchange and brokerage increased by 13.16% from ` 893.3 million in the fiscal year
ended March 31, 2013 to ` 1,010.9 million in the fiscal year ended March 31, 2014 due to increase in loan
processing fees, arising from increase in business volume, commission on letter of credit and locker rent.
Profit on sales of investments
Profit on sales of investments increased by 61.51% from ` 139.0 million in the fiscal year ended March 31,
2013 to ` 224.5 million in the fiscal year ended March 31, 2014, primarily because of increased trading gains
including profit on sale of investments on transfer of securities from HTM portfolio to AFS as permitted by
regulations.
Profit / (loss) on sale of land, buildings and other assets
We had a loss on sale of land, buildings and other assets of ` 17.1 million in the fiscal year ended March 31,
2013 as compared to a loss of ` 4.0 million in the fiscal year ended March 31, 2014.
Profit on exchange transactions
Profit on exchange transactions decreased by 21.85% from ` 72.3 million in the fiscal year ended March 31,
2013 to ` 56.5 million in the fiscal year ended March 31, 2014 due to unfavourable market conditions.
Miscellaneous income
Miscellaneous income has increased by 19.35% from ` 82.7 million in the fiscal year ended March 31, 2013 to
` 98.7 million in the fiscal year ended March 31, 2014 due to higher recovery from loans earlier written-off.
Expenditure
Interest expense

(` in millions)
For the Fiscal Year ended March 31,
2013
2014
5,346.4
6,649.0
798.1
631.9
172.4
317.8
6,316.9
7,598.7

Interest on deposits
Interest on Reserve Bank of India/inter-bank borrowings
Other interest
Total

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Our interest expense increased by 20.29% from ` 6,316.9 million in the fiscal year ended March 31, 2013 to
` 7,598.7 million in the fiscal year ended March 31, 2014 primarily due to growth in deposits explained below.
Interest on deposits
Interest on deposits increased by 24.36% from ` 5,346.4 million in the fiscal year ended March 31, 2013 to
` 6,649.0 million in the fiscal year ended March 31, 2014. The average deposits increased by 22.39% from
` 71,855.4 million in the fiscal year ended March 31, 2013 to ` 87,942.0 million in the fiscal year ended March
31, 2014. The average cost of deposits increased from 7.44% in Fiscal Year 2013 to 7.56% in Fiscal Year 2014
due to decrease in ratio of average demand deposits and saving deposits to average total deposits from 29.69%
to 26.73%.
Interest on Reserve Bank of India/inter-bank borrowings
Interest on Reserve Bank of India/inter-bank borrowings decreased by 20.82% from ` 798.1 million in the fiscal
year ended March 31, 2013 to ` 631.9 million in the fiscal year ended March 31, 2014 primarily due to
repayment of short term loans from banks in India.
Operating expenses
The principal components of our operating expenses are as indicated below:

(` in millions)
For the Fiscal Year ended March 31,
2013
2014

Payments to and provisions for employees

Rent, taxes and lighting
Other operating expenses
Total

1,379.0
363.0
1,011.0
2,753.0

1,570.8
386.0
1,234.1
3,190.9

Our operating expenses increased by 15.91% from ` 2,753.0 million in the fiscal year ended March 31, 2013 to
` 3,190.9 million in the fiscal year ended March 31, 2014 mainly due to an increase in employee expenses
arising out of an increase in employee headcount during the year from 2,220 as of March 31, 2013 to 2,718 as of
March 31, 2014 and an increase in infrastructure related cost including rent, taxes, depreciation and other
operating expense resulting from an increase in branch network from 94 as of March 31, 2013 to 130 as of
March 31, 2014.
Provisions and contingencies
The principal components of our provisions and contingencies are as indicated below:

(` in millions)
For the Fiscal Year ended March 31,
2013
2014

Provision / write-off towards non-performing, restructured advances

&one-time settlement
Provision for depreciation on investments
Provision for others
Provision for taxes
Total

182.5

298.7

(3.5)
61.4
0.3
240.7

(2.2)
69.1
0.4
366.0

Our total provisions and contingencies increased by 52.06% from ` 240.7 million in the fiscal year ended
March 31, 2013 to ` 366.0 million in the fiscal year ended March 31, 2014 primarily due to a 63.67% increase
in provisions for non-performing and restructured advances owing to certain provisions made on SME &
MSME portfolio. Provisions for others primarily included provision toward standard assets resulting from the
growth in standard advances.
Net profit for the year
As a result of the factors stated above, we had a net profit after tax of ` 1,513.6 million in the fiscal year ended
March 31, 2014 as against a net profit after tax of ` 1,020.6 million in the fiscal year ended March 31, 2013.

93

Related Party Transactions

We enter into transactions with related parties in the normal course of business. The principal related parties are
our key management personnel. All significant transactions in relation to our business are conducted on an
arms-length basis. For further information, please refer to Schedule 18 paragraph 10.5, 9.5 and 10.5
respectively which discloses related party transactions as required by Accounting Standard 18 Related Party
Disclosures issued by the Institute of Chartered Accountants of India read with circular dated March 29, 2003
issued by RBI on Guidance on Compliance with the Accounting Standards by Banks in the Notes to Accounts
in our audited financial statements as of and for the year ended March 31, 2012, March 31, 2013 and March 31,
2014 in the chapter titled Financial Statements.
Liquidity and Capital Resources
Cash Flows

(` in millions)
For the Fiscal Year ended March 31,
2013
2014
552.7
4,897.5
(713.4)
(187.5)
4,427.7
(6,646.8)
8,832.5
6,895.7

Cash flow generated from operating / (used in) activities

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

We need cash primarily to finance lending to new borrowers, to repay deposits and borrowings as they become
due and to meet working capital requirements. We fund these requirements through a variety of sources,
including deposits, cash from interest and other income, short-term borrowings and long-term borrowings,
refinancing from financial institutions and banks and securitization transactions. Greater deployment of funds to
provide loans generally results in decreasing our cash flow.
Operating Activities
We derive our cash inflow from operating activities principally from deposits, repayment of advances and
through receipt of interest income and other income, including fee income. Our cash outflow from operating
activities principally comprises the disbursement of loans to customers, the funding of investments made by us,
deposits with the Reserve Bank of India, the payment of interest on deposits and borrowings and operating
expenses.
In the Fiscal Years ended March 31, 2013 and March 31, 2014, we generated net cash in operating activities of
` 552.7 million and ` 4,897.5 million, respectively. The increase in net cash inflow from operating activities in
the fiscal year ended March 31, 2014 was principally on account of an increase in deposits which was partially
offset by an increase in advances and investments.
Investing Activities
We used net cash in investing activities of ` 713.4 million and ` 187.5 million in the Fiscal Years ended
March 31, 2013 and March 31, 2014, respectively, principally in connection with fixed asset purchases for our
bank branches and offices including computer hardware and software.
Financing Activities
In the fiscal year ended March 31, 2013, we generated net cash from financing activities of ` 4,427.7 million
mainly due to increase in borrowings and from Tier I capital infusion from the issuance of Equity Shares in
connection with a preferential issue to certain investors in December 2012 aggregating ` 406.2 million. In the
fiscal year ended March 31, 2014 we used net cash in financing activities of ` 6,646.8 million mainly for
repayment of borrowings.
Liquidity
We regularly monitor our funding levels to ensure we are able to satisfy the requirements of our loan
disbursements and those that would arise upon maturity of our liabilities. We maintain diverse sources of
funding and liquid assets to facilitate flexibility in meeting our liquidity requirements. Liquidity is provided
94

principally by deposits from customers and repayments by our borrowers. Surplus funds, if any, are invested in
accordance with our investment policy.
In addition, we monitor and manage our asset-liability gap with respect to our maturing assets and liabilities. As
of last reporting Wednesday of June 18, 2014, our assets maturing within 28 days exceeded our liabilities
maturing within the same period by ` 1,515.4 million. Our liabilities maturing in between 29 days and one year
exceeded our assets maturing during the same period by ` 17,638.3 million, and our liabilities maturing in one
to three years exceeded our assets maturing in the same period by ` 2,614.5 million. Our assets maturing
between three and five years exceeded our liabilities maturing during the same period by ` 7,018.5 million. Our
assets maturing over five years also exceeded our liabilities maturing within the same period by ` 31,669.0
million.
For further information, please refer to chapter titled Selected Statistical Information.
Qualitative Disclosure about Risk and Risk Management
Risk is associated with all of our businesses. 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 organisation. Our risk management
strategy is based on understanding the various types of risk, assessment of the risk and continuous monitoring of
the risk.
Risk Management
As a bank, we are exposed to risks that are particular to our lending and other investment activities and the
environment in which we operate. Our goal in risk management is to ensure that we understand, measure and
monitor the various risks that arise and that, as an organisation, we adhere strictly to the policies and procedures
that are established to address these risks.
Credit Risk
The credit risk policy supports and is aligned with the Banks priority of achieving growth and at the same time
maintaining asset quality to ensure long term sustainable profitability over business cycles. The Bank strives to
maintain a healthy balance between risk and reward. The Bank also undertakes the exercise of measuring the
credit risks involved in the composition of its present portfolio and realigning them to have a better risk-reward
composition. The Bank endeavours to continuously enhance its internal risk assessment capabilities. The Risk
function over time has developed capabilities to assess the risk associated with various products and business
segments (Mortgages, SME & MSME, Corporate, AIB etc.). The effort is to standardize the credit approval
process so that the outcomes are predictable. The Bank has implemented a rating model for obligors. This model
takes into account both quantitative and qualitative factors as inputs and produces a rating that becomes one of
the key inputs to credit decisions.
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 term 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 offbalance sheet items, creating a risk to our net worth as a result of re-pricing mismatches and other interest rate
sensitive positions.
Our asset and liability management committee meets on a monthly basis and reviews the interest rate and
liquidity gap positions on the book, formulates a view on interest rates, reviews the business profile and its
impact on asset liability management and determines the asset liability management strategy, in light of the
then-current and expected business environment.
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

95

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.
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. In addition, we also use interest rate derivatives to manage the asset
and liability positions.
Liquidity Risk
Liquidity risk arises from the absence of liquid resources, when funding loans, and repaying deposits and
borrowings. This could be due to a decline in the expected collection, or our inability to raise adequate resources
at an appropriate price. This risk is minimized through a mix of strategies, including increasing current account
and savings deposits and following a forward-looking borrowing programme based on projected loans and
maturing obligations.
We monitor liquidity risk through our asset liability management function aided by liquidity gap reports. This
involves the categorization of all assets and liabilities in different maturity profiles, and evaluating them for any
mismatches in any particular maturities, especially in the short term. The asset liability management policy is
based on RBI guidelines and our asset liability management committees guidelines and establishes the
maximum allowed mismatches in the various maturities. The Banks asset liability management policy defines
the gap limits for the structural liquidity and the liquidity profile is analyzed on both static and dynamic basis by
tracking cash inflow and outflow in the maturity ladder based on the expected occurrence of cash flow. The
Bank undertakes behavioural analysis of the non-maturity products, namely CASA, Cash Credit and Overdraft
accounts on a periodic basis to ascertain the volatility of balances in these accounts.
As part of the liquidity management and contingency planning, the Bank assesses potential trends, demands,
events and uncertainties that could result in adverse liquidity conditions. The liquidity profile is estimated on an
active basis by considering the growth in deposits, advances and investment obligations. The concentration of
large deposits is monitored on a periodic basis. Emphasis has been placed on growing Retail deposits and
avoiding as far as possible bulk deposits. The Bank periodically conducts liquidity stress testing.
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or
external events. The Banks operational risk management framework is defined in the operational risk
management policy approved by the Board of Directors. While the policy provides a broad framework,
operational risk management policy oversees the operational risk management in the Bank. The policy specifies
the composition, roles and responsibilities of the operational risk management policy. The framework comprises
identification, assessment, management and mitigation of risks through tools like incident reporting, loss
reporting, key operational risk indicators, risk and control self-assessment, and periodic risk identification and
controls evaluation.
Trading risk management
Trading risk management is part of the market risk function and deals with the trading activities of the treasury.
This consists of transactions involving SLR and non-SLR securities, including bonds and derivatives, and
foreign exchange activities. One function of our risk management department is to determine the exposure
limits, with the approval of the Board for the various counter-parties with whom the Bank enters into
transactions in the securities market.
Financial Condition
Our net worth (excluding revaluation reserves) increased from ` 9,492.8 million as of March 31, 2013 to
` 11,013.7 million as of March 31, 2014.
Assets
The following table sets forth the principal components of our assets:

96

(` in millions)

As of March 31,
2013
Cash and balances with the Reserve Bank of India
Balances with banks and money at call and short notice
Investments
Advances
Fixed assets
Other assets
Total assets

2014

3,787.6
5,044.8
33,586.6
65,860.9
2,394.5
2,113.8
112,788.2

5,050.7
1,845.0
36,342.2
81,401.9
2,386.4
2,205.2
129,231.4

Our total assets increased by 14.58% from ` 112,788.2 million as of March 31, 2013 to ` 129,231.4 million as
of March 31, 2014 mainly on account of increases in advances and investments.
Our investments primarily include investments in Government securities as required by RBI and surplus funds
held in short-term liquid investments. Our net investments increased to ` 36,342.2 million as of March 31, 2014
from ` 33,586.6 million as of March 31, 2013. The increase in investments as of March 31, 2014 was primarily
due to an increase in our NDTL and a consequent increase in statutory prescription by way of SLR to be
maintained by us.
Our advances increased by 23.60% from ` 65,860.9 million as of March 31, 2013 to ` 81,401.9 million as of
March 31, 2014. The increase was primarily due to an increase in mortgage loans and corporate loans and AIB
loans which was partially offset by the running down of our SME & MSME portfolio.
Other assets, which include interest accrued, tax paid in advance/tax deducted at source (net of provisions),
stationery stamps and others, increased by 4.32% from ` 2,113.8 million as of March 31, 2013 to ` 2,205.2
million as of March 31, 2014. There was no significant movement in other assets in the fiscal year ended
March 31, 2014.
Capital and Liabilities
The following table sets forth the principal components of our capital and liabilities:

(` in millions)

As of March 31,
2013
Capital
Employee Stock Options Outstanding (net of deferred cost)
Reserves and Surplus
Deposits
Borrowings
Other Liabilities and Provisions
Total Capital and Liabilities

2,501.1
30.2
7,499.3
83,638.4
15,256.2
3,863.0
112,788.2

2014
2,503.2
29.7
9,006.7
103,251.6
8,601.6
5,838.6
129,231.4

Our total capital and liabilities increased by 14.58% from ` 112,788.2 million as of March 31, 2013 to
` 129,231.4 million as of March 31, 2014.
The increases in the fiscal year ended March 31, 2014 was principally due to the increase in our deposit base as
a result of the growth of our business volumes in line with our strategy to grow low cost deposits and build
stable retail term deposits.
Our total deposits have grown from ` 83,638.4 million as of March 31, 2013 to ` 103,251.6 million as of March
31, 2014 at a growth of 23.45%. Our customer deposits have increased from ` 75,818.8 million as of March 31,
2013 to ` 87,305.8 million as of March 31, 2014 at a growth of 15.15%. Our CASA increased from ` 22,716.1
million as of March 31, 2013 to ` 25,812.7 million as of March 31, 2014.
Other liabilities and provisions include bills payable, interest accrued on deposits and other liabilities. The
increase in fiscal year ended March 31, 2014 was mainly on account of interest accrued but not due on term
deposits and borrowings and on account of demand drafts issued by the Bank.

97

Off-Balance Sheet Items

Contingent liabilities
The following table sets forth the principal components of our contingent liabilities:

Contingent Liabilities
Claims against the Bank not acknowledged as debts
Liability on account of outstanding forward exchange and derivative contracts
a) Forward contract
b) Interest rate swap and currency swap
c) Foreign currency option
Guarantees given on behalf of constituents
a) In India
b) Outside India
Acceptances, endorsements and other obligations
Other items for which the Bank is contingently liable
Total

(` in millions)
As of March 31,
2013
2014
451.3

444.6

31,504.4
-

12,816.4
-

6,206.5
4,645.8
1,801.5
156.0
44,765.5

6,810.4
2,484.1
2,498.9
156.0
25,210.4

Our total contingent liabilities decreased by 43.68% from ` 44,765.5 million as of March 31, 2013 to ` 25,210.4
million as of March 31, 2014. This decrease in contingent liabilities was principally due to a decrease in
liabilities on account of outstanding forward exchange contracts and guarantees given on behalf of constituents.
Claims against us not acknowledged as debts comprises of disputes filed against the Bank and liabilities in
respect of disputed tax liabilities, and was ` 451.3 million as of March 31, 2013, and ` 444.6 million as of
March 31, 2014. The decrease in such claims was mainly on account of resolution of civil suits and consumer
cases filed against us in the normal course of our business by various parties, including customers. We believe
that we have fairly provisioned for all such claims.
Capital Adequacy
We are subject to the capital adequacy requirements of RBI. We are required to maintain a minimum capital
adequacy ratio of 9% (of which Tier 1 capital is 6%) prescribed by RBI guidelines based on total capital to riskweighted assets under BASEL II.
Effective April 1, 2013 under Basel III guidelines, we are required to maintain a minimum capital adequacy
ratio of 9% (of which Tier 1 capital is 6.5%). As of March 31, 2015, the regulatory minimum CRAR will be 9%
of which minimum Tier I capital ratio will be 7%.
Our capital adequacy ratios as per BASEL II are as follows:

Capital base amount

Tier I capital
Tier II capital
Total capital (TC)
Total RWA
Capital to risk assets ratios (CRAR)
Capital adequacy ratio (CRAR) (%)
CRAR Tier I capital (%)
CRAR Tier II capital) (%)

(` in millions, except percentages)

As of March 31,
2013
2014

9,344.3
733.1
10,077.4
74,028.7

10,866.9
670.9
11,537.8
83,369.6

13.61%
12.62%
0.99%

13.84%
13.03%
0.81%

Our capital adequacy ratios as per BASEL III are as follows:

2013
Capital base amount
Tier I capital

(` in millions, except percentages)

As of March 31,
2014

NA
98

10,944.9

As of March 31,
2013
Tier II capital
Total capital (TC)
Total RWA
Capital to risk assets ratios (CRAR)
Capital adequacy ratio (CRAR) (%)
CRAR Tier I capital (%)
CRAR Tier II capital) (%)

2014
NA
NA
NA

722.9
11,667.8
85,110.3

NA
NA
NA

13.71%
12.86%
0.85%

Additions to Fixed Assets

Our fixed assets mainly comprise owned assets such as furniture, office equipment, computers and vehicles.
Based on cash flow, the additions to fixed assets in the Fiscal Years ended March 31, 2013 and March 31, 2014
was ` 722.9 million and ` 199.0 million, respectively.
Other confirmation
a.

Details of acts of material frauds committed against the Bank in the last three years, if any, and if so, the
action taken by the Bank:
In Fiscal Year 2012 the Bank reported one material fraud (amounting to more than ` 10 million) amounting
to an outstanding exposure of ` 24.5 million. In Fiscal Year 2013 and Fiscal Year 2014 there were no
material frauds reported by the Bank.

b.

There are no reservations or qualifications or adverse remarks of auditors in the last five Fiscal Years
immediately preceding the Issue. For further details please refer to chapter titled Financial Statements.

c. Details of default, if any, including therein the amount involved, duration of default and present status, in
repayment of statutory dues or repayment of debentures or repayment of deposits or repayment of loans
from any bank or financial institution:
There have been no defaults in payment of statutory dues or repayment of debentures and interest thereon
or repayment of deposits and interest thereon or repayment of loans from any bank or financial institution
and interest thereon by the Bank during the period April 1, 2014 up to August 31, 2013. For the period
ended August 31, 2014 the Bank had few instances of delays in payment of statutory dues that have been
paid in full alongwith interest:
Sr.
No.
1.
2.
3.

d.

Applicable statute
Income tax Act, 1961
The Maharashtra Value
Added Tax Act, 2002
The Maharashtra Value
Added Tax Act, 2002

Nature of Statutory Dues

Tax deducted at source on
Professional and Technical Services
Value Added Tax
Value Added Tax

Statutory
Dues (`)
398

Date of
Payment
July 12, 2014

167

July 17, 2014

3,802

July 17, 2014

Except for the following there were no changes in the accounting policies of the Bank during the last three
Fiscal Years prior to the date of this Placement Document:
During the year ended March 31, 2013 the Bank migrated the erstwhile treasury system to a new integrated
system, consequent to this migration:
profit or loss on sale of investments under the erstwhile system was determined after consideration of
depreciation on the respective investments, whereas, under the new system the profit or loss was
determined without utilizing depreciation. As a result of this, on an overall basis, there was no impact on
the profit after tax or reserves and surplus balance; and
the premium calculation on Held to Maturity (HTM) securities in the erstwhile system was computed
on a first-in first-out (FIFO) basis at an individual transaction level whereas under the new system the
same is computed on Weighted Average Cost (WAC) basis at an overall security level. As a result of
99

this, both, the profit after tax and reserves and surplus balance of the Bank as at and for the year ended
March 31, 2013 were higher by ` 1.9 million.
Material Developments
Except as disclosed below, there are no subsequent developments after March 31, 2014, that we believe are
expected to have material impact on our reserves, profits, earnings per share or book value.
1)

We have received various orders from the Income tax department for various assessments years
consequent to decisions in favour of us by the Income Tax Appellate Tribunal. The orders resulted into tax
refund amounting to ` 742.7 million (including interest). Accordingly, we have credited interest on tax
refund amounting to ` 304.3 million to Profit and Loss account for the first quarter ended June 30, 2014
(Q1).

2)

During the quarter ended June 30, 2014, a policy for Specific Provision on Standard Advances was put in
place. As per the above policy, we have made additional specific provision in respect of a few standard
advances amounting to ` 103.3 million.

3)

Effective April 1, 2014 the Bank has changed the estimated useful life of a certain group of assets in line
with the recommended useful life as per Part C of Schedule II to the Companies Act, 2013. As per para 7
(b) of Notes to Part C, where the remaining useful life of an asset as on the effective date is nil, the
carrying amount of the asset should be recognised in the retained earnings. Such carrying amount as on
April 1, 2014 for the Bank was ` 61.2 million. The Bank has referred this matter to Reserve Bank of India
for the adjustment of retained earnings, which has since been approved by RBI vide its letter dated
September 5, 2014.

In compliance with the listing agreement, the Board of Directors of the Bank has approved and the Bank has
filed the following limited review financial results for the quarter ended June 30, 2014 with the Stock
Exchanges:

100

Review Report
To
The Board of Directors of
DCB Bank Limited
(formerly known as Development Credit Bank Limited)
1.

We have reviewed the accompanying Unaudited Financial Results (the Statement) of DCB Bank Limited
(formerly known as Development Credit Bank Limited) (the Bank) for the quarter ended June 30, 2014,
except for the disclosures regarding Public Shareholding, Promoters and Promoter Group Shareholding
which have been traced from disclosures made by management and have not been reviewed by us. Further,
disclosures relating to Pillar 3 under Basel III Capital Regulations as have been disclosed on the Banks
website and in respect of which a link has been provided in the aforesaid Statement have not been
reviewed by us. This Statement is the responsibility of the Banks management and has been approved by
the Board of Directors of the Bank in their meeting held on July 14, 2014. Our responsibility is to issue a
report on the Statement based on our review.

2.

We conducted our review in accordance with the Standard on Review Engagement (SRE) 2410, Review of
Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Institute
of Chartered Accountants of India. This Standard requires that we plan and perform the review to obtain
moderate assurance as to whether the Statement is free of material misstatement. A review is limited
primarily to inquiries of Banks personnel and analytical procedures applied to financial data and thus
provides less assurance than an audit. We have not performed an audit and accordingly, we do not express
an audit opinion.

3.

In the conduct of our review we have relied on the reports, explanation and information collated by the
Head Office of the Bank from its various branches.

4.

Based on our review conducted as mentioned in paragraph 2 and 3 above, nothing has come to our
attention that causes us to believe that the accompanying Statement prepared in accordance with applicable
accounting standards notified pursuant to the Companies (Accounting Standards) Rules, 2006 and other
recognized accounting practices and policies has not disclosed the information required to be disclosed in
terms of Clause 41 of the Listing Agreement including the manner in which it is to be disclosed, or that it
contains any material misstatement or that it has not been prepared in accordance with the relevant
prudential norms prescribed by Reserve Bank of India in respect of income recognition, asset
classification, provisioning and other related matters.
For B S R & Co. LLP
Chartered Accountants
Firms Registration No: 101248W/W-100022

Akeel Master
Partner
Membership No: 046768

Mumbai
July 14, 2014

101

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30, 2014
Sr.
No.

Particulars

Interest Earned (a+b+c+d)

Interest / Discount on advances /
bills
Income on Investments
Interest on balances with Reserve
Bank of India and Other Inter
Bank Funds
Others
Other Income
Total Income (1+2)
Interest Expended
Operating Expenses (i+ii)
Employees cost
Other Operating Expenses
Total Expenditure (4+5)
(excluding provisions and
contingencies)
Operating Profit before
Provisions and Contingencies
(3-6)
Provisions (Other than tax) and
Contingencies
Exceptional Items
Profit from Ordinary Activities
before tax (7-8-9)
Tax expense
Net Profit from Ordinary
Activities after tax (10-11)
Extraordinary items (Net of tax
expenses)
Net Profit for the period (1213)
Paid-up Equity Share Capital
(Face value ` 10)
Reserves excluding Revaluation
Reserves
Analytical Ratios
Percentage of shares held by
Government of India
Capital Adequacy Ratio (%)
Basel II
Basel III
Earnings Per Share (EPS)
(a) Basic and diluted EPS before
Extraordinary items (net of tax
expenses) for the period and for
the previous year
(i) Basic (`)
(ii) Diluted (`)

a.
b.
c.

d.
2
3
4
5
i.
ii.
6

8
9
10
11
12
13
14
15
16
17
i.
ii.

iii.

(b) Basic and diluted EPS after

Extraordinary items (net of tax
expenses) for the period and for
the previous year
(i) Basic (`)
(ii) Diluted (`)

For the quarter

ended 30.06.2014
(Unaudited)
35,219.92
25,385.60

For the quarter

ended 31.03.2014
(Audited)
30,789.33
23,888.44

For the quarter

ended 30.06.2013
(Unaudited)
26,073.64
20,150.31

(` in lakhs)
For the year
ended 31.03.2014
(Audited)
112,825.93
86,787.25

6,561.11
212.03

6,717.17
164.55

5,673.40
226.24

24,530.78
1,423.53

3,061.18
3,449.44
38,669.36
21,322.28
9,224.42
4,629.61
4,594.81
30,546.70

19.17
3,344.79
34,134.12
20,784.57
8,333.21
4,108.78
4,224.43
29,117.78

23.69
4,510.26
30,583.90
17,761.85
7,689.35
3,769.65
3,919.70
25,451.20

84.37
13,866.25
126,692.18
75,986.96
31,908.73
15,708.19
16,200.54
107,895.69

8,122.66

5,016.34

5,132.70

18,796.49

2,293.12

1,104.37

850.15

3,656.44

5,829.54

3,911.97

4,282.55

15,140.05

1,365.28
4,464.26

4.00
3,907.97

4,282.55

4.00
15,136.05

4,464.26

3,907.97

4,282.55

15,136.05

25,047.11

25,032.46

25,014.21

25,032.46
84,807.47

Nil

Nil

Nil

Nil

13.73
13.63

13.84
13.71

13.89
13.75

13.84
13.71

(Not Annualised)

1.78
1.76
(Not Annualised)

1.78
1.76
102

(Not Annualised)

1.56
1.55
(Not Annualised)

1.56
1.55

(Not Annualised)

1.71
1.70
(Not Annualised)

1.71
1.70

(Annualised)

6.05
5.99
(Annualised)

6.05
5.99

Sr.
No.
iv.

v.
18
i.
ii.
19
i.

ii.

Particulars

NPA Ratios
(a) Amount of Gross nonperforming assets
(b) Amount of Net nonperforming assets
(c)% of Gross NPAs to Gross
Advances
(d) % of Net NPAs to Net
Advances
Return on Assets (%)
(Annualised)
Public shareholding
No. of shares
Percentage of shareholding
Promoters and Promoter Group
Shareholding
Pledged / Encumbered
No. of shares
Percentage of shares (as % of the
total shareholding of promoter
and promoter group)
Percentage of shares (as % of the
total share capital of the
company)
Non-encumbered
No. of shares
Percentage of shares (as % of the
total shareholding of promoter
and promoter group)
Percentage of shares (as % of the
total share capital of the
company)

For the quarter

ended 30.06.2014
(Unaudited)

For the quarter

ended 31.03.2014
(Audited)

For the quarter

ended 30.06.2013
(Unaudited)

For the year

ended 31.03.2014
(Audited)

14,919

13,845

22,637

13,845

8,045

7,402

5,431

7,402

1.78

1.69

3.41

1.69

0.97

0.91

0.84

0.91

1.39

1.25

1.55

1.31

204,270,838
81.55

204,124,388
81.54

203,941,863
81.53

204,124,388
81.54

Nil
N.A.

Nil
N.A.

Nil
N.A.

Nil
N.A.

N.A.

N.A.

N.A.

N.A.

46,200,234
100.00

46,200,234
100.00

46,200,234
100.00

46,200,234
100.00

18.45

18.46

18.47

18.46

SEGMENTAL RESULTS FOR THE QUARTER ENDED JUNE 30, 2014

Sr.
No.

1
a
b
c
d
e

2
a
b
c
d
e
3

Business Segment

Segment Revenue
Treasury Operations
Corporate
Retail
Other Banking Operations
Unallocable
Total
Less:- Inter Segment Revenue
Income from Operations
Segment Results
Treasury Operations
Corporate
Retail
Other Banking Operations
Unallocable
Total Profit before Tax
Capital Employed
(Segment Assets - Segment
Liabilities)

For the quarter

ended
30.06.2014
(Unaudited)

For the quarter

ended
31.03.2014
(Audited)

For the quarter

ended
30.06.2013
(Unaudited)

(` in lakhs)
For the
year ended
31.03.2014
(Audited)

14,349.44
9,022.61
27,693.03
161.59
3,043.84
54,270.51
15,601.15
38,669.36

15,388.96
8,986.57
25,634.77
146.43

14,273.33
7,447.30
21,109.50
267.69

56,910.47
32,356.17
93,130.81
737.74

50,156.73
16,022.61
34,134.12

43,097.82
12,513.92
30,583.90

183,135.19
56,443.01
126,692.18

310.13
162.59
2,397.92
116.76
2,842.14
5,829.54

863.04
919.99
2,132.56
126.06
(129.68)
3,911.97

1,903.32
550.96
1,837.34
227.13
(236.20)
4,282.55

3,640.29
4,014.32
7,566.74
593.93
(675.23)
15,140.05

103

Sr.
No.

a
b
c
d
e

Business Segment

Treasury Operations
Corporate
Retail
Other Banking Operations
Unallocable
Total Capital Employed

For the quarter

ended
30.06.2014
(Unaudited)
205,815.83
257,688.53
(353,850.66)
(121.61)
10,368.86
119,900.96

For the quarter

ended
31.03.2014
(Audited)
182,358.40
269,747.07
(351,693.34)
(86.19)
15,070.00
115,395.94

For the quarter

ended
30.06.2013
(Unaudited)
171,136.95
191,347.92
(271,803.81)
1.11
13,883.44
104,565.61

For the
year ended
31.03.2014
(Audited)
182,358.40
269,747.07
(351,693.34)
(86.19)
15,070.00
115,395.94

Treasury: Includes all financial markets activities undertaken on behalf of the Banks customers, proprietary
trading, maintenance of reserve requirements and resource mobilisation from other banks and financial
institutions.
Corporate Banking: Includes lending, deposit taking and other services offered to corporate customers.
Retail Banking: Includes lending, deposit taking and other services offered to retail customers.
Other Banking Operations: Includes para banking activities like third party product distribution, merchant
banking, etc.
Notes:
1.

The above financial results for the quarter ended June 30, 2014 were subjected to Limited Review by
the Statutory Auditors of the Bank. An unqualified report has been issued by them thereon. These
results have been reviewed by the Audit Committee and recommended for approval to and approved by
the Board of Directors at its meeting held on July 14, 2014.

2.

Interest earned-Others includes an amount of ` 30.43 crores being interest on income tax refunds.
The corresponding tax expenses (including ` 3.06 crores pertaining to the earlier assessment years) on
the same have been included in item 11. Tax expense.

3.

Other Income includes income from non-fund based activities such as brokerage and commission, fees,
earnings in foreign exchange and derivative transactions, profit (net) on sale / revaluation of
investments.

4.

The working results for the quarter ended June 30, 2014 have been arrived at after considering the
provision for standard assets including requirements for exposures to entities with Unhedged Foreign
Currency Exposure`, non-performing assets (NPAs), depreciation on investments, income tax and
other usual and necessary provisions.

5.

Provision (Other than tax) and Contingencies also includes a specific provision on standard advances
made on a prudential basis where the Bank believes a possible slippage may arise from stress. Such
specific provision on standard assets amounts to ` 10.33 crores for the quarter ended June 30, 2014.

6.

Effective April 1, 2014 the Bank has changed the estimated useful life of a certain group of assets in
line with the recommended useful life as per Part C of Schedule II to the Companies Act, 2013. As per
para 7 (b) of Notes to Part C, where the remaining useful life of an asset as on the effective date is nil,
the carrying amount of the asset should be recognised in the retained earnings. Such carrying amount as
on April 1, 2014 for the Bank was ` 6.12 crores. The Bank has referred this matter to Reserve Bank of
India for the adjustment of retained earnings.

7.

During the period ended June 30, 2014, the Bank allotted 148,450 shares pursuant to the exercise of
stock options by certain employees.

8.

The figures for the quarter ended March 31, 2014 are the balancing figures between audited figures in
respect of the full Fiscal Year upto March 31, 2014 and the unaudited published year-to-date figures
upto December 31, 2013, being the date of the end of the third quarter of the Fiscal Year.

104

9.

In terms of RBI circular DBOD.No.BP.BC.2/21.06.201/2013-14 dated July 01, 2013 on Basel III
Capital Regulations, banks are required to make certain Pillar 3 disclosures along with the publication
of financial results. Accordingly, such Pillar 3 disclosures have been placed on the Banks website at
the following link http://www.dcbbank.com/disclosures/baseldisclosure.html. These Pillar 3 disclosures
have not been subjected to Limited Review by the Statutory Auditors.

10.

Disclosure about investor complaints:

Complaints Pending
as on April 1, 2014
NIL

Received during
the period
1

Disposed-off during
the period
1

Complaints Pending
as on June 30, 2014
NIL

11.

There are no significant changes in the accounting policies during the period.

12.

Previous period / year figures have been regrouped / reclassified wherever necessary to conform to the
presentation of the current period / year classification.
Murali M. Natrajan
MD & CEO

Place : Mumbai
Date : July 14, 2014

105

INDUSTRY OVERVIEW
The information in this chapter has been obtained or derived from publicly available documents prepared by
various sources, including officially prepared materials from the Government of India and its various
ministries, RBI and the Indian Banks Association, and has not been prepared or independently verified by us or
the Sole Global Coordinator and Book Running Lead Manager. 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 chapter that are not statements of historical fact constitute forward-looking statements. Such forwardlooking statements are subject to various risks, assumptions and uncertainties and certain factors could cause
actual results or outcomes to differ materially.
Overview of the Indian Economy
India is a country with an estimated population of 1.24 billion people and a GDP of US$ 4.99 trillion. It is
developing into an open-market economy since economic liberalization measures such as industrial
deregulation, privatization of state-owned enterprises and reduced controls on foreign trade and investment
began in the early 1990s. The Indian economy has averaged under 7% per year from 1997 to 2011, with a
slowdown in 2011 due to high interest rates and rising inflation, leading to a decline in investments. The outlook
for Indias long-term growth is moderately positive due to a young population and corresponding low
dependency ratio, healthy savings and investment rates, and increasing integration into the global economy.
However, investors perceptions of India improved in early 2014, due to a reduction of the current account
deficit and expectations of post-election economic reform, resulting in a surge of inbound capital flows and
stabilization of the rupee.
(Source: CIA World Factbook)
As part of the liberalization measures, RBI has taken a number of measures to enhance the effectiveness of the
FDI Policy and provide greater clarity on ownership and control. In recent years, India has become a popular
destination for FDI, owing to its well-developed private corporate sector, large consumer market potential, large
pool of well-educated and English speaking work force and well established legal systems. Overall, India
attracted FDI equity inflows of $24.3 billion in fiscal year (FY) 2013-14, which is an 8% increase over the
FDI equity inflows of US $22.42 billion received during the previous FY 2012-13.
(Source: Annual Report 2013-14, Department of Industrial Policy and Promotion)
Indian Banking Industry
India is considered among the top economies in the world, with tremendous potential for its banking sector to
flourish.
(Source: IBEF-http://www.ibef.org/industry/banking-india.aspx)
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 the implementation of the recommendations of the Committee on the Financial System, namely the
Narasimham Committee I. Following that, reports were submitted in 1998 by other committees, such as the
second Committee on Banking Sector Reform, i.e., 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.
The five years since the onset of the global financial crisis have seen policymakers across the globe strive to
rebuild their financial systems to ensure robustness and mitigate contagion risks with a view to preventing future
crisis. In addition to strengthening the regulatory and supervisory framework, RBI has also focused on
106

mitigating risks amid asset quality concerns in the banking and non-banking space.
Slowdown in the domestic economy has caused strains on a number of companies/projects resulting in higher
non-performing assets (NPAs) and restructured accounts in the Indian banking system in recent years. This has
impacted bank profitability as evident from the dwindling return on assets. Increased provisioning requirements
to cover delinquencies and rise in operating expenses (reflected in an increase in the cost-income ratio)
adversely affected bank profitability, especially in 2013-14.
The asset quality of the banking system showed deterioration during 2013-14 mainly reflecting the performance
of public sector banks (PSBs). Not only were the gross and net NPA ratios of PSBs more than the industry
averages, but they also accounted for about 92 per cent of the restructured standard advances.
(Source: RBI Annual Report 2013-14)
The countrys banking industry looks set for greater transformation. With the Indian Parliament passing the
Banking Laws (Amendment) Act in 2012, the landscape of the sector has duly changed. The Banking Laws
(Amendment) Act in 2012 allows RBI to make final guidelines on issuing new licenses, which could lead to a
greater number of banks in the country. The style of operation is also slowly evolving with the integration of
modern technology into the banking industry.
The size of banking assets in India totaled US$ 1.8 trillion in FY 13 and is expected to touch US$ 28.5 trillion in
FY 25. Bank deposits have grown at a CAGR of 21.2 per cent over FY 06-13. In FY 13, total deposits were US$
1,274.3 billion.
The revenue of Indian banks increased from US$ 11.8 billion to US$ 46.9 billion over the period 2001-2010.
Profit after tax also reached US$ 12 billion from US$ 1.4 billion in the period.
Credit to housing sector grew at a CAGR of 11.1 per cent during the period FY 08-13. Total banking sector
credit is anticipated to grow at a CAGR of 18.1 per cent (in terms of INR) to reach US$ 2.4 trillion by 2017.
Indias banking industry could become the fifth largest banking sector globally by 2020 and the third largest by
2025. These days, banks in India are turning their focus to servicing clients and improving their technology
infrastructure, which can help better customer experience and give them a competitive edge. The popularity of
internet and mobile banking is at an all-time high, with customer relationship management (CRM) and data
warehousing anticipated to drive the next wave of banking technology in the country.
(Source: IBEF)
Banks in India may be categorized as scheduled banks and non-scheduled banks, where the former are banks
which are included in the second schedule to RBI Act. These banks comprise scheduled commercial banks and
scheduled co-operative banks. Scheduled commercial banks may further be classified based on their
ownership/nature of operation as the State Bank of India and its Associates, nationalized banks, foreign banks,
regional rural banks, old private sector banks and new private sector banks.
The focus of commercial banks in India has largely been on meeting the short term financing needs of industry,
trade and agriculture sectors. As of fiscal year 2013, there were 155 commercial banks in the country, of which
151 were scheduled commercial banks. As of fiscal year 2013, commercial banks had a nationwide network of
109,811 offices with 62.04% of the offices in rural and semi-urban areas.
(Source: RBI, Statistical Tables Relating to Commercial Banks in India)
As of fiscal year 2013, scheduled commercial banks, not including regional rural banks, had approximately `
74.3 trillion of deposits and approximately ` 58.8 trillion of loans and advances. Aggregate deposits for all
scheduled commercial banks had registered an annual growth rate of 15.1% while the loans and advances for all
scheduled commercial banks had increased by 15.9%.
(Source: RBI- A Profile of Banks 2012-13)

107

Constituents of the Indian Banking Industry

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

acts as the central bank and the monetary authority of India;

issuer of currency;

debt manager for the central and state governments;

regulator and supervisor for NBFCs;

manages the countrys foreign exchange reserves;

manages the capital account of the balance of payments;

designs and operates payment systems;

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

develops initiatives like financial inclusion and the strengthening of the credit delivery mechanisms for
agriculture, and small and micro-enterprises, especially in rural areas.

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 nonperforming and restructured assets, investment valuation and capital adequacy. All the institutions under the
purview of 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 significant GoI shareholding and constitute the largest
category in the Indian banking system. These include the SBI and its six associate banks, 20 nationalised banks
and 64 regional rural banks. As of fiscal year 2013, public sector banks had 72,661 branches. SBI and its
associates had 20,181 branches and nationalised banks had 52,480 branches. Public sector banks in India had
total deposits of approximately ` 57.457 trillion and loans and advances of approximately ` 44.72 trillion.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13)
Further, as of fiscal March 2013, SBI and its associates accounted for approximately 21.758% of the total
deposits and approximately 23.454% of the loans and advances and nationalised banks accounted for
approximately 55.56% of the total deposits and approximately 52.61% of the loans and advances of the
scheduled commercial banks. The public sector banks, in total, accounted for approximately 77.33% of the
deposits and approximately 76.07% of the advances of the scheduled commercial banks. These figures do not
include regional rural banks.
(Source: A Profile of Banks 2012-13)
Regional Rural Banks
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 labourers. The NABARD is responsible for
regulating and supervising the functions of the regional rural banks. During 2012-13, 947 branches were opened
by RRBs taking the cumulative number of branches to 17,856 spread across 635 districts in 26 states and one
UT. It is now compulsory for all the new branches to be equipped with CBS. Sponsor banks are required to
extend all necessary help in this regard, including financial assistance, training and back office support. As on
108

March 31, 2013, CBS was fully implemented in all the 64 RRBs.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13)
Private Sector Banks
After bank nationalization was completed in 1969 and 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, RBI permitted entry by the private sector into the banking system. This resulted in the
emergence of nine private sector banks. These banks are collectively known as the New Private Sector Banks.
There were seven New Private Sector Banks operating as of fiscal year 2013. In addition, 13 private sector
banks existing prior to July 1993 were operating as of fiscal year 2013. These are collectively known as the
Old Private Sector Banks.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13.)
As of fiscal year 2013, private sector banks accounted for approximately 18.8% of the deposits and
approximately 19.4% of the advances of the scheduled commercial banks. These figures do not include regional
rural banks.
(Source: A Profile of Banks 2012-13)
The Union Finance Minister made an announcement in his budget speech for 2010-11 that there was a need to
extend the geographic coverage of banks and improve access to banking services and RBI considered whether to
begin granting additional banking licences to private sector players.
Following the budget announcement, the New Banks Licensing Guidelines were issued by 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 10 years would be eligible to promote banks.
Further, RBI has published certain criteria for ascertaining whether a bank is fit and proper for the grant of a
licence. The new banks can be set up only through a non-operative financial holding company registered with
RBI and the initial minimum paid up equity voting capital requirement for the applicants is ` 5.0 billion, with
foreign shareholding not exceeding 49.0% for the first five years. The applicants were required to submit
applications for these licences to RBI by July 1, 2013 and 25 applications were reviewed by RBI. These
applications were screened by RBI before being forwarded to RBIs HLAC for further scrutiny, which
submitted its recommendations to RBI on February 25, 2014.
On April 2, 2014, RBI granted in-principle approval to two applicants to set up banks under the New Banks
Licensing Guidelines. The in-principle approval is valid for a period of 18 months and the applicants will not
be permitted to engage in banking business until a regular licence is issued after satisfaction of the conditions
stipulated by RBI. In the future, RBI intends to issue licences on an on-going basis, subject to RBIs
qualification criteria
Foreign Banks
As part of the liberalisation process, RBI has permitted foreign banks to operate more freely, subject to
requirements largely similar to those imposed on domestic banks. Foreign banks operate in India through
branches of the parent bank. The primary activity of most foreign banks in India has been in the corporate
segment. However, in recent years, some of the larger foreign banks have started to put a greater emphasis on
consumer financing based on the growth opportunities in India.
In 2009, as part of the liberalisation process that accompanied the second phase of the reform process that began
in 2005, 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, RBI stipulated that banks, including foreign banks operating in India, should not acquire any
fresh stake in another banks equity shares if by such acquisition, the investing banks holding would exceed
109

5.0% of the investee banks equity capital. In February 2005 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 95 wholly-owned
subsidiaries.
Also during the first phase, foreign banks were allowed to acquire a controlling stake in private sector banks
identified by 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 Organization
commitment of allowing increases of 12 branches per year. A more liberal policy will be followed for areas with
a small number of banks.
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, RBI postponed the second phase until greater clarity emerged as to recovery and reform of
the global regulatory and supervisory architecture. In January 2011, RBI released a draft discussion paper on the
mode of presence of foreign banks in India. The paper indicates a preference for a wholly-owned subsidiary
model of presence over a branch model. Other recommendations of the discussion paper include requiring
systemically important foreign banks to convert their Indian operations into wholly-owned subsidiaries, a less
restrictive branch expansion policy and 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.
As of fiscal year 2013, there were 43 foreign banks with 332 offices operating in India. (Source: RBI Report on
Trend and Progress of Banking in India 2012-13.) Foreign banks accounted for approximately 3.9% of deposits
and approximately 4.5% of aggregate advances of scheduled commercial banks (not including regional rural
banks).
(Source: A Profile of Banks 2012-13)
Co-operative Banks
Co-operative 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 from September 24, 2004, specify that all multi-state co-operative
banks are under the supervision and regulation of RBI. Accordingly, RBI is currently responsible for the
supervision and regulation of urban co-operative societies, NABARD, state co-operative banks and district
central co-operative banks. The wide network of co-operative 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.
Non-Bank Finance Insitituions
Non-Bank Finance Institutions (NBFIs) are heterogeneous group of institutions that cater to a vide rage of
financial requirements and can broadly be grouped as financial institutions (FIs), non-banking financial
companies (NBFCs) and primary dealers (PDs).
As on March 2013, there were four financial institutions under the regulations and supervision of RBI viz., the
Export-Import Bank of India (EXIM Bank), National Bank of Agriculture and Rural Development (NABARD),
National Housing Banking (NHB) and Small Industries Development Bank of India (SIDBI).
Based on liabilities, NBFCs are classified into two categories - Category A companies (NBFCs-D), and
Category B companies (NBFCs not raising public deposits or NBFCs-ND). NBFCs-D are subject to
requirements of capital adequacy, maintaining liquid assets, exposure norms (including restrictions on exposure
to investments in land, building and unquoted shares), ALM discipline and reporting requirements. Category
B companies, in contrast, were subject to minimal regulation till 2006. However, since April 1, 2007, nondeposit taking NBFCs with assets of ` 1 billion and above have been classified as NBFCs- ND-SI and
110

prudential regulations such as capital adequacy requirements and exposure norms along with reporting
requirements have been made applicable to them. Capital market exposure (CME) and asset liability
management (ALM) reporting and disclosure norms were also made applicable to them at different points of
time.
In terms of activities undertaken, NBFCs are classified into eight categories, viz., Asset Finance Companies
(AFCs), Investment Companies (ICs), Loan Companies (LCs), Infrastructure Finance Companies (IFCs), Core
Investment Companies (CICs), Infrastructure Debt Fund - Non-Banking Financial Companies (IDF-NBFCs),
Non-Banking Financial Company - Micro Finance Institutions (NBFC-MFIs) and NBFC-Factors. During 201213, various policy measures were introduced to improve the regulation and supervision of NBFCs. RBI has been
carrying outreach and sensitisation programmes, besides issuing public notices, from time to time, cautioning
the general public not to fall prey to fictitious offers promising unsustainable returns by individuals,
unincorporated bodies and companies. Further, RBI has also advised the public to evaluate their investment
decisions carefully, including making deposit with NBFCs. RBI also clarified that it does not regulate chit fund
activities or Collective Investment Schemes (CIS). It regulates only those NBFCs that conduct financial activity
as their principal business and that it has authorised only a few of them to accept deposits and such entities do
not enjoy DICGCs deposit insurance facility.
As of June 30, 2013, there were 12,225 non-bank finance companies registered in India. The number of NBFCsD during 2012-13 declined mainly due to the cancellation of Certificates of Registration (CoR) and migration to
non-deposit-taking category. Though the number of NBFCs in business declined, their total assets, and net
owned funds increased marginally. Public deposits mobilized by them also increased. Holding of public deposits
by the Residuary Non-Banking Companies (RNBCs) contracted. Despite a rise in deposits mobilised by NBFCs,
the ratio of NBFCs public deposits to aggregate deposits of scheduled commercial banks (SCBs) continued to
decline during 2012-13. The ratio of NBFCs deposits to the broadest measure of liquidity aggregates.
(Source: RBI, Report on Trend and Progress of Banking in India 2012-2013)
Housing Finance Companies
Housing finance companies are a sub-group of non-bank finance companies. As a result of the Governments
incentives for investing in the housing sector in recent years, the scope of housing finance companies has grown
significantly. In particular, housing loans up to certain limits prescribed by RBI as well as mortgage-backed
securities qualify as priority sector lending under RBIs directed lending rules.
(Source: RBI, Master Circular Lending to Priority Sector, July 1, 2014)
Key Banking Industry Trends in India
Global growth continued to remain sluggish in fiscal year 2013. Adverse international economic developments
combined with the loss of growth momentum in the domestic economy posed challenges to the banking sector
in India during fiscal year 2013. There was a rise in asset impairment coupled with a dip in profitability. Macro
stress tests indicate that if the current macroeconomic conditions persist, the credit quality of commercial banks
could deteriorate further. However, overall, the comfortable capital base still lends resilience to the Indian
banking sector.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13.)
Consumer Credit
The consumer credit market in India has undergone a significant transformation over the last decade and
experienced rapid growth due to consumer credit becoming cheaper, more widely available and increasingly a
more acceptable avenue of funding for consumers. The market has changed 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/financiers;

Increasing desire by customers to acquire assets such as cars, goods and houses on credit;

Emerging middle class and growing number of households in consumer credit target segment;
111

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.

Commercial Banking Trends

Credit-Deposit Ratio
As of fiscal year 2013, the credit-deposit ratio for scheduled commercial banks was 79.1 as compared to 78.6 as
of fiscal year 2012. The aggregate deposits increased by 15.10% while loans and advances increased by 15.90%
in fiscal year 2013.
The fiscal year 2013 was marked by a slowdown in the growth of credit to all productive sectors, including
agriculture, industry and services. The slowdown was the sharpest for agriculture and allied activities. There
was a slowdown in the growth of credit to the infrastructural sector within industry. The slowdown in credit to
NBFCs, accounting for about one-fifth of the total credit to the services sector, was an important reason behind
an overall slowdown in the growth of services sector credit. By contrast, retail loans was the only segment
which maintained its growth in fiscal year 2013.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13.)
There was a rise in the growth of priority sector credit in fiscal year 2013 as compared to a drop in overall credit
growth during the year. The growth in priority sector credit, however, remained lower than the growth in overall
credit. In fiscal year 2013, credit to priority sectors by public and private sector banks was 36.3% and 37.5% of
adjusted net bank credit or credit equivalent of off-balance sheet exposure, whichever is higher, respectively,
indicating a shortfall against the overall target of 40.0%.
In the past, growth in credit to sensitive sectors, namely, real estate, capital market and commodities, generally
followed a pattern similar to the growth in overall credit. However, in fiscal year 2013, growth in credit to
sensitive sectors almost doubled primarily on account of credit to real estate. This expansion needs to be seen in
light of the steep rise in housing prices in all Tier I cities and several Tier II cities in fiscal year 2013.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13.)
Trends in 2014:
On a year-on-year (y-o-y) basis, non-food bank credit increased by 12.6% in July 2014 as compared with the
increase of 14.8 % in July 2013.
Credit to agriculture increased by 19.5 per cent in July 2014, up from 10.5 per cent in July 2013.
Credit to industry increased by 10.1 per cent in July 2014 as compared with the increase of 15.9 per cent in
July 2013. Deceleration in credit growth was observed in infrastructure, basic metals, textiles, chemicals and
food processing industries among others.
Credit to the services sector increased by 12.3 per cent in July 2014 as compared with the increase of 13.3
per cent in July 2013.
Credit to NBFCs increased by 11.5 per cent in July 2014 as compared with the increase of 5.7 per cent in
July 2013.
Personal loans increased by 14.5 per cent in July 2014 as compared with the increase of 17.0 per cent in July
2013.
(Source: RBI Press Release - Aug 28, 2014)

112

Balance Sheet Operations of Scheduled Commercial Banks

In continuation with the trend during 2011-12, the overall growth in balance sheet of banks moderated further in
2012-13. The major source of this moderation was bank credit. The moderation in credit growth was partly
reflective of the slowdown in real economic activity coupled with increasing risk aversion by banks. The
slowdown in credit growth in March 2013 over March 2012 could be seen across all bank groups except the SBI
Group.
Although there was a moderation in the balance sheet of the banking sector, deposits the largest component on
the liabilities side maintained their growth in 2012-13, primarily with the help of a revival in the growth of
current and savings accounts (CASA). Consequently, the share of CASA was maintained at around 33 per cent.
The increase in CASA growth in 2012-13 over 2011-12 was most perceptible for new private sector banks. In
2012-13, growth in CASA for new private sector banks, at 18.5 per cent, was the highest among all bank
groups. In part, this could be attributed to improved competition among banks in attracting savings deposits
following the deregulation of the savings deposit rate. The share of savings deposits for new private sector
banks stood at around 25 per cent of their total deposit base and was the highest among all bank groups in 2013
(Source: RBI, Report on Trend and Progress of Banking in India 2012-13)
Asset Quality of Scheduled Commercial Banks
The gross NPA ratio at the aggregate level stood at 3.6% as of March 31, 2013 up from 3.1% as of March 31,
2012.There were also signs of a deepening deterioration within NPAs with an increase in the proportion of
doubtful loan assets. The increased shift of loan assets towards the doubtful category was most prominent
for the nationalised banks.
There was a steep rise in the growth of restructured debt under the CDR mechanism in fiscal year 2013. The
CDR mechanism covers only multiple banking accounts and syndication/consortium accounts where all banking
institutions together have an outstanding exposure of ` 100 million and above. In fiscal year 2013, there was a
growth of about 37% in the total number of cases approved for restructuring under this mechanism and the debt
thus restructured posted a growth of 52%, marking a sharp increase over its corresponding growth in 2011-12 of
35.7%. The growth in the number of cases and amount of debt receded marginally in the first quarter of 2013-14
to 48.6%.
Although the NPA ratio in the priority sector was consistently higher than the NPA ratio in the non-priority
sector, deterioration in asset quality in fiscal year 2013 was primarily on account of the non-priority sector.
Industry, which accounts for a little less than half the total credit of domestic banks, has shown a steady
deterioration in asset quality, particularly in fiscal year 2013. The NPA ratio for the infrastructural sector, which
accounted for about one-third of the total industrial credit, showed a rising trend during this period. By contrast,
there was a falling trend in the NPA ratio for the retail sector.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13)
Gross and Net NPA Ratio
Gross NPA Ratio

Public Sector Banks

Private Sector Banks
Foreign Banks
Aggregate

March 2013
3.8
1.9
3.0
3.4

March 2014
4.7
1.9
3.9
4.1

Net NPA Ratio

March 2013
2.0
0.5
1.0
1.7

March 2014
2.7
0.7
1.1
2.2

(per cent)
Restructured Structured
Advances to Gross Advances
March 2013
March 2014
7.2
7.2
1.9
2.3
0.2
0.1
5.8
5.9

Gross NPAs across Sectors

(as per cent of gross advances to the sector)

Agriculture
Medium & Small Enterprises
Other Priority Sector
Total Priority Sector

March 2011
3.3
3.6
4.0
3.6
113

March 2012
4.3
4.0
4.4
4.2

March 2013
4.7
5.1
3.0
4.4

March 2014
4.4
5.2
3.0
4.4

Non-Priority Sector
Total

March 2011
1.8
2.4

March 2012
2.3
2.9

March 2013
3.0
3.4

March 2014
4.0
4.1

(Source: Source: RBI Annual Report 2013-14)

Interest Rates and inflation
During fiscal year 2013, RBI focused on addressing the sharp slowdown in growth while not jeopardising the
objective of reigning in inflation. RBI reduced the repo rate by 50 basis points in April 2012 and, in response to
this and earlier monetary policy tightening, a moderation in inflation was witnessed in the second half of fiscal
year 2013. Headline WPI inflation averaged 7.0% in the second half of the fiscal year 2013 as against 7.7% in
the first half. By March 2013, WPI inflation on a point to point basis moderated to 5.7%.
As a result of the softening of WPI inflation in the second half of fiscal year 2013, RBI reduced the repo rate by
25 basis points in January 2013 and again in March 2013, leading to a cumulative 100 basis points easing in
fiscal year 2013. The repo rate was further reduced by 25 basis points in May 2013 to 7.25% to address the
accentuated risks to growth while noting that upside risks to inflation were still significant.
After easing in the first quarter of fiscal year 2014, WPI inflation started rising. Retail inflation as measured by
CPIs also continued to remain elevated. Considering the imperative need to curb the mounting inflationary
pressures and anchor inflation expectations and thereby strengthen the foundations of growth, the repo rate was
increased by 25 basis points each in September 2013 and October 2013 to 7.75%.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13).
Income and profitability
In fiscal year 2013, interest earnings were adversely affected with credit growth slowing down. This was also a
period when interest rates, which had hardened during earlier years, started softening. Interest expended also
grew at a slower pace during the year but its growth was higher than that of interest earned, thereby putting a
downward pressure on the growth in both operating and net profits of banks.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13.)
Return on Assets (RoA), the most commonly used indicator of profitability, showed a further reduction by about
5 basis points in 2012-13. This reduction was discernible in the case of public sector banks in general, and
nationalised banks in particular. New private sector banks and foreign banks reported an increase in RoA in
2012-13 as against nationalised banks as they could manage to maintain their profits growth through a reduction
in the growth of their operating expenses.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13)
Priority Sector Lending
The priority sector comprises of a vast section of the population engaged in sectors such as agriculture, MSEs,
education and housing. As per the extant guidelines on priority sector lending, a target of 40 per cent of adjusted
net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposures (CE of OBE), whichever is
higher, as on March 31 of the preceding year, has been prescribed for lending to the priority sector by domestic
scheduled commercial banks and foreign banks with at least 20 branches. For foreign banks with less than 20
branches, the target for lending to the priority sector is 32 per cent of ANBC or CE of OBE, whichever is
higher, as on March 31 of the preceding year. The performance of private sector banks has been better, as
compared to public sector and foreign banks.
(Source: RBI Annual Report 2013-14)
There was a rise in the growth of priority sector credit in 2012-13 against a drop in overall credit growth during
the year. In 2012-13, credit to priority sectors by public and private sector banks was 36.3 per cent and 37.5 per
cent (of ANBC/Credit equivalent of Off-Balance Sheet Exposure, whichever is higher) respectively, indicating a
shortfall against the overall target of 40 per cent.
(Source: RBI Report on Trend and Progress of Banking in India 2012-2013)
114

Microfinance
Indias poor have historically been excluded from the formal banking sector and have relied instead on
moneylenders or on friends and relatives. Microfinance presents an alternative to formal and informal sources
for providing basic financial services to the poor. Microcredit involves the provision of thrift, credit and other
financial services and products of very small amounts to the poor in order to enable the poor to raise their
income levels and living standards. Financial institutions have played a leading role in microfinance for nearly
two decades by utilizing informal delivery channels. Currently, self-help groups and microfinance institutions
are the dominant microfinance models. Under the SHG model, banks lend directly to groups of 10-20 persons
formed to receive financing. Under the MFI model, MFIs borrow funds from banks to on-lend to microfinance
clients.
Growth of Microfinance

SHG Model
MFI Model

(` in Crore)

Bank loans disbursed to SHGs

Bank loans outstanding with SHGs
Bank loans disbursed to MFIs
Bank loans outstanding with MFIs

2011
14547.73
31221.17
8448.96
13730.62

Fiscal Years
2012
16534.77
363400
4965.86
9853.23

2013
20585.36
39375.29
7431.23
12545.21

(Source: National Bank for Agricultural and Rural Development, Status of Micro Finance in India 2010-11, Status of Micro
Finance in India 2011-12 and Status of Micro Finance in India 2012-13)

Housing Finance
The Indian real estate sector plays a significant role in the countrys economy. Its growth has been driven by
several factors, including the trends toward overall population growth, increasing urbanization and increasing
disposable income.
As Indias population has grown, so has the trend toward urbanization in India. According to the Jawaharlal
Nehru National Urban Renewal Mission (JNNURM), approximately 28% of Indias population in 2001 was
living in urban areas. As a result of the Governments liberalization policies, the proportion of Indias
population living in urban areas is expected to increase to about 40% by 2021. Thus, Indias towns and cities
have expanded and continue to expand rapidly as increasing numbers migrate to towns and cities in search of
economic opportunity.
Urbanization in India is an integral part of the growth process. Indias urban areas make a major contribution to
the countrys economy. According to the World Bank, although less than 1/3 of Indias population lives in cities
and towns, these areas generate over 2/3 of the countrys GDP and account for 90% of government revenues.
According to the a study of residential housing demand in India prepared by the National Institute of Bank
Management and the National Housing Bank, people living in urban areas have greater demand for bigger
houses as compared to their suburban counterparts. With increased wealth, consumer tastes and preferences in
housing should also shift toward higher-end housing. As Indias urban population grows and shifts away from
suburban and rural areas and as the populations per capita income increases, the demand for housing, both in
terms of units and size of units and, therefore, the demand for housing finance services, will grow.
Affordable Housing for All is an important policy agenda of the Government of India. The Government has
sought to create an enabling and a supportive environment for expanding credit flow to the housing sector and
increasing home ownership in the country. Various national policy pronouncements have reinforced the primacy
of the housing sector and the need to provide shelter opportunities to all. A major initiative has been launched
for provision of housing for the Economically Weaker Sections and Low Income Groups through the JNNURM.
The Ministry of Housing and Urban Poverty Alleviation (MH&UPA), Government of India, has designed an
interest subsidy scheme as an additional instrument for addressing the housing needs of the EWS/LIG segments
in urban areas. The Scheme envisages the provision of interest subsidies to EWS and LIG segments to enable
them to buy or construct houses.
(Source: http://mhupa.gov.in/ - Website of Ministry of Housing and Urban Poverty Alleviation)

115

Debt Recovery
Debts Recovery Tribunals (DRT)
DRTs have been established for the recovery of debts in accordance with the Recovery of Debts due to Banks
and Financial Institutions Act, 1993 for expeditious adjudication and recovery of debts that are owed to banks
and financial institutions. The amendments made in 1995, 2000 and 2004 to the Act and the Rules framed in
accordance with it have further strengthened the functioning of the DRTs. Out of the 13,365 and 13,408 cases
referred during Fiscal Year 2012 and Fiscal Year 2013, respectively, 17% and 14% of the amount involved was
recovered during such periods through DRTs.
(Source: RBI Report on Trend and Progress of Banking in India 2012-2013)
SARFAESI Act
The SARFAESI Act was enacted in 2002. Banks can give a notice in writing to the borrower requiring it to
discharge its liabilities within 60 days, failing which the secured creditor may take possession of the assets
constituting the security for the loan and exercise management rights in relation thereto. The SARFAESI Act
also provides for the establishment of asset reconstruction companies regulated by RBI to acquire assets from
banks and financial institutions. In addition to the SARFAESI Act, several states also have revenue recovery
acts and lok adalats (peoples courts). In Fiscal Year 2012, RBI created a central electronic registry to prevent
fraud in loan cases involving multiple lending from different banks on the same immovable property. In
December 2012, the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 was
passed by the Parliament.
Out of the 1,40,991 and 1,90,537 notices issued during Fiscal Year 2012 and Fiscal Year 2013, respectively,
23.76% and 27.1% of the amount involved was recovered during such periods through the SARFAESI Act.
(Source: RBI Report on Trend and Progress of Banking in India 2012-13)
Rates of Recovery
Among the various channels of recovery available to banks for dealing with bad loans, the SARFAESI Act and
Debt Recovery Tribunals have historically been the most effective in terms of amount recovered.
NPAs Recovered by SCBs through Various Channels
Recovery
Channel

No. of
cases
Referred

(i) Lok Adalats

(ii) DRTs
(iii) SARFAESI
Act

4,76,073
13,365
1,40,991

2011-2012
Amount
Amount
Involved Recovered

17
241
353

Amount
No. of
Recovered
cases
as % of
Referred
Amount
Involved
2
11.8
8,40,691
41
17.0
13,408
101
28.6
1,90,537

(Amount in `. billion)

2011-2012
Amount
Amount
Involved Recovered

66
310
681

Amount
Recovered
as % of
Amount
Involved
4
6.1
44
14.0
185
27.1

(Source: RBI Report on Trend and Progress of Banking in India 2012-2013)

Recent Developments
April 2014

RBI granted in-principle approval to 2 out of 25 applicants to set up banks under the Guidelines on
Licensing of New Banks in the Private Sector issued on February 22, 2013. RBI stated that its approach
was conservative and that, going forward it intended to give licences more regularly, including to some
entities whose application for a licence had been unsuccessful in this round.

RBI issued a circular for simplification of KYC related procedures for opening bank accounts by FPIs.
RBI has advised that those FPIs who have been duly registered in accordance with SEBI guidelines and
116

have undergone the required KYC due diligence / verification prescribed by SEBI through a custodian /
intermediary regulated by SEBI, banks may rely on the KYC verification done by the third party (i.e.
the custodian / SEBI regulated intermediary), subject to conditions laid down in the Prevention of
Money Laundering (Maintenance of Records) Rules, 2005.
RBI issued a circular whereby it laid down that banks, including overseas branches or subsidiaries of
Indian banks, shall not issue standby letters of credit, guarantees, letter of comforts on behalf of
overseas joint ventures, wholly owned subsidiaries or wholly owned step-down subsidiaries of Indian
companies for the purpose of raising loans or advances of any kind from other entities except in
connection with the ordinary course of overseas business. Further, while extending fund or non-fund
based credit facilities to aforementioned entities in connection with their business, either through
branches in India or through branches or subsidiaries abroad, banks should ensure effective monitoring
of the end use of such facilities and its conformity with the business needs of such entities.
May 2014

RBI issued a circular whereby it has decided to include the outstanding deposits placed by SCBs under
the RIDF and certain other funds established with NABARD under priority sector classification. The
change was made on account of SCBs shortfall in lending to the priority sector as part of indirect
agriculture under the priority sector classifications. Accordingly, the outstanding deposits as of March
31 of the current year under RIDF, the Warehouse Infrastructure Fund, the Short Term Co-operative
Rural Credit Refinance Fund and the Short Term RRB Fund with NABARD will be treated as part of
indirect agriculture and will count towards overall priority sector target achievement. The outstanding
deposits under the above funds with NABARD as on the preceding March 31 will form part of ANBC.

June 2014

The statutory liquidity ratio (SLR) of commercial banks has been reduced by 50 basis points from 23
per cent to 22.5 percent. The reduction in SLR will give banks more freedom to expand credit to the
non-government sector
(Source: RBIs Bi-Monthly Monetary Policy 2014-15)

RBI issued a circular that stated the levels of Liquidity Coverage Ratio (LCR) banks should adhere to
in a phased manner to adhere to Basel III norms. The LCR would be binding on banks from January 1,
2015; with a view to provide a transition time for banks, the LCR requirement would be 60% for the
calendar year 2015, i.e. with effect from January 1, 2015 and rise in equal steps to reach 100% on
January 1, 2019, as per the timeline given below:

Minimum LCR

January 1,
2015
60%

January 1,
2016
70%

January 1,
2017
80%

January 1,
2018
90%

January 1,
2019
100%

July 2014

RBI issued instructions to banks specifying the operational guidelines and incentives in the form of
flexibility in loan structuring and refinancing, and also granting exemptions from regulatory preemptions, such as, cash reserve ratio, statutory reserve ratio and priority sector lending. The objective
of these instructions is to mitigate the Asset-Liability Management problems faced by banks in
extending project loans to infrastructure and core industries sectors, and also to ease the raising of long
term resources for project loans to infrastructure and affordable housing sectors.
(Source: RBI Press Release July 15, 2014)

August 2014

RBI has simplified the KYC norms and relaxed certain requirements, required for opening a bank
account
(Source: RBI Press Release August 26, 2014)
117

The policy framework of RBI has aimed at fostering the growth of non-cash payments. It issued
revised instructions with the objective to move away from micro management of business decisions of
banks while protecting the interests of the weaker sections of the society. Accordingly, the number of
mandated free transactions for savings bank accountholders at other bank ATMs has been reduced from
five to three per month. This will apply for transactions done at ATMs located in six metro centres,
namely, Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad which are well-served in
terms of payment infrastructure. Taking into account the scope for cross-subsidisation and with a view
to ensuring more transparency in the pricing of these transactions, banks have been advised to provide
their savings bank account holders with at least five free transactions per month at their own ATMs.
Beyond this, banks may decide to levy transaction charges (not exceeding ` 20 plus applicable taxes
per transaction) which are decided in a transparent manner.
(Source: RBI Press Release August 14, 2014)

118

OUR BUSINESS
Overview
We are a private sector bank in India offering a wide range of banking and financial products and services to
retail, corporate, small and medium enterprises (SME), micro small and medium enterprises (MSME) and
agriculture & inclusive banking (AIB) through various delivery channels. We lay special emphasis on
agriculture and financial inclusion banking where we offer wide range of products to cater to the various needs
of the unbanked, under-banked, rural and semi-urban population. As of August 31, 2014 we had 138
interconnected branches spread across 17 states and two Union Territories in India. In Fiscal Year 2014, the
Bank increased its network by 36 branches, which is the highest number of branches opened by us in one Fiscal
Year in various location including states of Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Punjab, Odisha and
Rajasthan. Our branch network is largely concentrated in the four states of Maharashtra, Gujarat, Odisha and
Telangana. Our distribution network included 239 interconnected ATMs comprising 117 onsite and 122 offsite
ATMs as of August 31, 2014. As of August 31, 2014 we had a customer base of more than 500,000 banking
customers.
We have the following main business units:

Retail banking;

Corporate banking;

SME and MSME banking;

Agriculture & Inclusive Banking; and

Treasury operations.

Retail banking
Our largest business unit is our retail banking business, which offers a wide range of financial products and
services to retail customers. Retail banking products principally comprise retail banking accounts (e.g., current
and savings accounts and time deposits) and retail loans (e.g., home loans and loans against property,
commercial vehicles and gold ornaments). As our retail customers needs grow, we are also able to offer wealth
management products and services, including mutual funds and bancassurance (e.g., distribution of third-party
life insurance and general insurance products). The Bank is also focussing on building relationships with the
NRIs to tap deposits, trade finance and remittance market.
As a percentage of total deposits, retail banking deposits accounted for 77.39%, 76.94% and 78.81% as of
March 31, 2013, March 31, 2014 and June 30, 2014, respectively. As a percentage of total net advances, retail
banking advances accounted for 42.02%, 43.53% and 45.46% as of March 31, 2013, March 31, 2014 and June
30, 2014, respectively.
Corporate banking
Our corporate banking business largely caters to mid-sized corporate companies (i.e., companies with annual
turnover generally in excess of ` 1,000 million and less than ` 7,500 million). On a case to case basis, our
corporate banking business also caters to corporates with annual turnover in excess of ` 7,500 million. Our
range of corporate banking products and services includes current accounts, term loans, working capital
facilities, import and export financing, cash management and salary accounts. We also provide non fund-based
services such as letters of credit (LCs), guarantees and foreign currency conversion. Our commercial banking
products and services are delivered to our customers through multiple corporate banking locations around the
country. In addition, we have entered into tie-ups with certain large new private sector banks to provide
customers with cash management facilities at various locations across India.
As a percentage of total deposits, corporate banking deposits accounted for 5.87%, 3.57% and 4.03% as of
March 31, 2013, March 31, 2014 and June 30, 2014, respectively. As a percentage of total net advances,
corporate banking advances accounted for 23.77%, 25.73% and 23.86% as of March 31, 2013, March 31, 2014
and June 30, 2014, respectively.
119

SME and MSME banking

We have historically focused (since our days as a co-operative bank) and continue today to focus on our small
and medium business or SME, customers (i.e., customers with annual turnover generally from ` 100 million up
to ` 1,000 million) and MSMEs (i.e., customers with annual turnover of generally up to ` 100 million). MSME
customers are usually already associated with the Bank and are located within proximity of the locations of our
branches. Carving out SME and MSME business separately has helped focus our efforts on building and
expanding on our neighbourhood customer base, which we have found through our experience provides a more
diversified credit risk profile due to smaller individual exposure, comparatively higher yields, associated
business and cross-selling opportunities, a higher degree of secured/collateralized loans, good geographic
spread and ability to meet priority sector lending targets. Our SME and MSME customers are important to
maintaining our CASA ratio. The SME business provides a similar range of products and services as our
corporate banking unit with some differentiation following evaluation of each customers profile and dynamics.
The Bank has established new branches in tier 2 to tier 6 cities to specifically cater to our SME and MSME
customers. As a percentage of total net advances, SME and MSME banking advances accounted for 22.59%,
16.58%, and 16.17% as of March 31, 2013, March 31, 2014 and June 30, 2014, respectively.
Agriculture & Inclusive Banking (AIB)
Our AIB business unit caters to agriculture, micro-finance and rural customers. This business mainly exists to
systematically co-ordinate across all business units and completes the priority sector lending targets each year
for the Bank as a whole. The AIB offers various products that are suited for the unbanked and under-banked
areas in the rural and semi-urban areas which would also help the Bank meet its financial inclusion targets
agreed with RBI. This unit is responsible inter alia for disbursing agriculture loans (commodity-based finance),
loans for agricultural farm equipment including tractors, term loans to micro finance institutions (MFIs),
portfolio buyouts from MFIs, term loans to micro finance institutions which extend loans to self-help groups
and portfolio buyouts from such institutions. The Bank also provides micro mortgage loans to the lower middle
income group for the purpose of home construction, purchase, repairs, business, marriage, education etc.
As a percentage of total net advances, AIB advances accounted for 11.62%, 14.16% and 14.51% as of March
31, 2013, March 31, 2014 and June 30, 2014, respectively.
Treasury
Our treasury operations are our interface with the financial markets. Our treasury operations consist primarily of
statutory reserves management, liquidity management, investment and trading activities, money market and
foreign exchange activities. We actively trade in major currencies of the world and participate in the forward
market. In the Fiscal Year 2014 the Bank has completed the implementation of an integrated new treasury
system. Treasury activities are supported by appropriate technology, information systems and risk management
systems and are manned by experienced professionals.
As of June 30, 2014 our Base Rate, which is the lowest interest rate at which we can lend, was 10.85% per
annum.
Our Lower Tier II Subordinated Bonds and Certificates of Deposit are rated by CRISIL (a subsidiary of S&P),
ICRA and Brickwork Ratings and historical ratings are set forth in the table below:
Rating Agency
CRISIL
(subsidiary of S&P)

March 31, 2013

A- / Stable(1)
A1+
A1+(2)

March 31, 2014

A- / Stable(3)
A1+(3)
A1+(3)

Debt Type
August 31, 2014
A- / Stable
A1+
A1+

Lower Tier II Subordinated Bonds

Short term Fixed Deposits
Certificate of Deposit programme up

ICRA
Brickwork Ratings

BWR A- / Stable

BWR A- / Stable

[ICRA ]A1+(4)
BWR A- /Stable(5)

to an amount of `10 billion

Fixed Deposits with tenor upto 1 year
Lower Tier II Subordinated Bonds

(1) Upgraded from BBB+/Positive as of February 18, 2013

(2) Upgraded from A1 as of February 18, 2013
(3) Ratings have been re-affirmed in March 2014 by the rating agencies
(4) Ratings assigned in July 2014.
(5) Ratings have been re-affirmed in August 2013 by the rating agencies
120

In the Fiscal Years ended March 31, 2013 and March 31, 2014 our total income (interest income plus other
income) was ` 10,331.2 million and ` 12,669.2 million respectively and for the three months ended June 30,
2014 our total income was ` 3,866.9 million. In the Fiscal Years ended March 31, 2013 and March 31, 2014 our
net profit was ` 1,020.6 million and ` 1,513.6 million respectively and for the three months ended June 30,
2014 our net profit was ` 446.4 million. Our total assets increased from ` 112,788.2 million as of March 31,
2013 to ` 129,231.4 million as of March 31, 2014 and ` 128,837.5 million as of June 30, 2014.
History
The Bank was originally formed as a co-operative bank by merger of the Banks predecessors which were
established in the 1930s. In 1988, the Bank acquired scheduled status from RBI. On May 31, 1995, the Bank
converted to a private sector commercial bank and subsequently secured a foreign exchange licence to become
an authorised dealer in 1999. In 2004, RBI classified us as a new private sector bank.
Our promoter since 1995 is the Aga Khan Fund for Economic Development S.A. (AKFED). AKFED, which
is incorporated in Switzerland, is an international development agency dedicated to promoting entrepreneurship
in the private sector and building economically sound enterprises in the developing world. The Bank made an
initial public offering in the year 2006 and our Equity Shares have been listed on BSE and NSE since October
2006.
In August 2007, we issued 26,666,667 Equity Shares in connection with a preferential issue to certain investors
at an offer price of ` 105 per Equity Share, aggregating approximately ` 2,800.0 million. In November 2009,
we made a further issue of 23,725,835 Equity Shares at an offer price of ` 34.14 per Equity Share to certain
qualified institutional investors in a qualified institutions placement in reliance on Chapter VIII of the Securities
and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended,
aggregating approximately ` 810.0 million in Tier I capital.
In March 2012, we issued 19,650,000 Equity Shares at an offer price of ` 47.84 per Equity Share to certain
qualified institutional investors in a qualified institutions placement in reliance on Chapter VIII of the Securities
and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended,
aggregating approximately ` 940.1 million in Tier I capital. In March 2012, we also issued 20,641,388 Equity
Shares at an offer price of ` 47.84 per Equity Share to certain investors on a preferential allotment basis in
reliance on Chapter VII of the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009, as amended, aggregating approximately ` 987.5 million in Tier I capital.
In December 2012, we further issued 9,300,000 Equity Shares at an offer price of ` 43.68 per Equity Share to
certain investors on a preferential allotment basis in reliance on Chapter VII of the Securities and Exchange
Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended, aggregating
approximately ` 406.2 million in Tier I capital.
The Registered Office and Corporate Office of the Bank is located at 601 & 602, 6 th Floor, Peninsula Business
Park, Tower A, Senapati Bapat Marg, Lower Parel, Mumbai 400 013, India.
Our Competitive Strengths
We believe that the following principal strengths enable us to implement our long-term strategy and distinguish
us in a competitive Indian financial services market.
Professional and experienced management team and board of directors with a proven track record
We have a professional and experienced management team which has wide ranging experience in the banking
industry. Mr. Murali M. Natrajan, our MD & CEO, joined us in April 2009 with an extensive experience for
over 25 years at recognised banks across India and other Asian countries and demonstrated track record in the
financial services industry. Also supporting our MD & CEO is a strong management team, including Mr. Bharat
Sampat, our Chief Financial Officer, Mr. Rajesh Verma, our Head Treasury, Trade Finance & Corporate
Banking, Mr. Praveen Kutty, our Head Retail and SME Banking, Mr. R. Venkattesh, our HeadOperations,
Technology and Human Resources, Mr. J.K. Vishwanath, Chief Credit Officer and Mr. Abhijit Bose, HeadRetail Assets and Strategic Alliances. All members of our senior management team have in-depth knowledge of
banking operations and management and have a strong focus on continuing to formulate and implement our
turnaround and growth strategy as our business grows and evolves. Our senior management team has been
121

responsible for the formulation of our new strategy to emphasise on the restructuring of our balance sheet and
business mix, improving operating efficiency, leveraging on the strengths of our distribution network and
existing resources, deepening customer relationships and improving the brand.
Comprehensive bouquet of products and services
We offer a wide range of products that generate both interest and non-interest income. 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.
Effective multi-channel distribution infrastructure
As of August 31, 2014 we had 138 interconnected branches spread across 17 states and two union territories in
the country. Our branch network is largely concentrated in the states of Maharashtra and Gujarat, where our
branch footprint is highly correlated to locations in which small businesses and trading companies are
concentrated. The proximity to our target customers (e.g., SMEs and MSMEs) gives us a competitive
advantage. As an important complement to and an extension of our branch network, we have a multi-channel
electronic banking system that includes 239 interconnected ATMs as of August 31, 2014, comprising 117 onsite
and 122 offsite ATMs, Internet banking, phone banking (available 24 hours a day / 7 days a week) and account
services via mobile phone. Our integrated distribution network as complemented by our multi-channel
electronic banking system is capable of providing a comprehensive suite of products to customers, provides us
with a strong sales platform in the areas in which we operate, enables us to cross-sell products and to deliver
high-quality, convenient and comprehensive services to a range of customers.
Strong and loyal customer base
As of August 31, 2014 we had a customer base of over 500,000 banking customers. Many of our customers,
particularly those in the SME and MSME sector and trading community, have had long-standing relationships
with us due to our strong customer and neighbourhood-oriented focus. Our branches are conveniently located in
close proximity to a large proportion of our target customer base. We believe that this has played a significant
role in retaining customer loyalty. Also, we strive to be a one-stop solution to our retail, corporate and SME and
MSME customers, delivering all required banking and financial services across the value chain, including loan
products (such as cash credit, overdraft and term loans), transaction banking products (such as cash
management and trade services) and foreign exchange services. This strategy, including identifying and
introducing attractive new products and services, is designed to help us understand and address all the needs of
these customers.
Modern and scalable information technology systems infrastructure
We strongly emphasise technology in our business as a means of improving the efficiency and competitiveness
of our business operations. We consistently invest towards maintaining a centralized and modern technology
platform for our internal systems and to support our core banking functions. We implemented FinacleTM, a
core banking solution, in December 2003, which enables the integration of our front, mid and back offices. It
also facilitates branch banking and real time ATM transactions. Our systems, ranging from FinacleTM, an
internet banking solution, to a Trade Finance platform and a VISA Money Transfer facility, enable us to
provide a comprehensive suite of competitive products to our customers. Our technology platform can be
leveraged for volume growth with a less than proportionate increase in costs. We use FinnOneTM for the
processing and accounting of instalment-based loans, which enables centralized back-office operations in
Mumbai to cater to all our offices and branches for efficient, accurate and timely service delivery. Our Treasury
operations are carried out with an integrated Treasury system which enables seamless straight through
processing of deals in both fixed income securities and in foreign exchange transactions including accounting of
such transactions to core banking system seamlessly without manual intervention. We have also launched DCB
on the Go instant Mobile Banking facility for our customers. DCB on the Go instant Mobile Banking is a
service that enables banking anywhere anytime to the customers through their mobile phones.
Well-positioned to capitalise on Indias future growth, particularly in the states where we operate
According to the CIA Factbook, Indias economy was the fourth largest economy, among the largest fifty
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economies in the world in terms of GDP on a purchasing power parity basis, after USA, European Union and
China per 2013 estimate. In its Third Bi-Monthly Monetary Policy Statement 2014-15 released on August 5,
2014, RBI has anticipated the central estimate of real GDP growth of 5.5 per cent within a likely range of 5 to 6
per cent that was set out in the April projection for 2014 - 15 can be sustained. We believe that the growth trend
in these areas is likely to continue in the foreseeable future. Given the rapid development of Indias economy,
the increase in per capita income and population growth, particularly in the western regions of the country, we
believe that our significant presence in the western states of Maharashtra and Gujarat (55 out of our 138
branches are located in these states as of August 31, 2014) has us well-positioned to capitalise on Indias future
growth, particularly in such areas.
Consistent growth in balance sheet and strong performance indicators
Through restructuring our operations and implementing several initiatives designed to refocus business lines
and streamline operations over the last about five years, our total assets increased from ` 112,788.2 million as
of March 31, 2013 to ` 129,231.4 million as of March 31, 2014 and to ` 128,837.5 million as of June 30, 2014.
Our total deposits increased 23.45% from ` 83,638.4 million as of March 31, 2013 to ` 103,251.6 million as of
March 31, 2014 and our net advances increased 23.60% from ` 65,860.9 million to ` 81,401.9 million during
the same period. While the growth in current account balances was muted in the Fiscal Year ended March 31,
2014 the savings account (SA) deposits increased 18.20% in the Fiscal Year. The overall CASA balances
growth was 13.63% and the percentage of our current and savings account deposits out of our total deposits (or
the CASA ratio) was at 25.00% as of March 31, 2014 (27.16% as of March 31, 2013). Retail banking deposits
constituted 76.94% of our total deposits as of March 31, 2014, thus reducing dependence on bulk deposits in
our growth.
In addition, our gross NPA and net NPA ratios as of June 30, 2014 were 1.78% and 0.97%, respectively, which
represent significant decreases from the levels as of March 31, 2009 when our gross NPA and net NPA ratios
were 8.78% and 3.88%, respectively.
A strong capital adequacy ratio is a pre-requisite for growth. As of March 31, 2013 and March 31, 2014,
according to the Basel II norms, our capital adequacy ratio was 13.61% and 13.84% respectively and according
to the Basel III norms, capital adequacy ratio was 13.71% as on March 31, 2014. Basel III norms were effective
for the first full Fiscal Year ended March 31, 2014. As of June 30, 2014 our capital adequacy ratio as per Basel
II and Basel III norms was 13.73% and 13.63% respectively. A robust capital adequacy ratio will be critical to
the scaling up of our operations.
Strong Promoter
We have a strong and committed Promoter, AKFED. We believe that our association with our Promoter helps
us in attracting talent at all levels including the senior management and the Board. We propose to build on our
Promoters expertise, including their experience in managing banks in other jurisdictions, as well as to
capitalize on the business relations of the Promoter with other banks. Our Promoter has a presence in 16
countries in the developing world and employs over 30,000 persons. (Source: http://www.akdn.org/akfed)
Our Strategy
Our strategy and business model are built around our current strengths. We intend to continue to grow our
market share, including our retail deposit base, and to continue to achieve balanced growth in our balance sheet,
profitability (improving our return on assets and our return on equity) and efficiency (improving our cost to
income ratio) across all segments of our operations. Our key strategies to achieve these goals are set out below:
Continue to achieve balanced and systematic growth through diversification and balancing of portfolio mix
with emphasis on secured lending
We intend to achieve and maintain a balanced advances portfolio spread across retail, SME, MSME and
corporate (including AIB) customers and to continue our focus on secured lending. We constantly evaluate our
product and service offerings and seek to adapt to changing market conditions by updating or revising our
product portfolio to reflect customer preferences. In view of our past experience with a portfolio predominantly
comprised of unsecured loans, which needed to be provisioned significantly, we made a conscious decision to
reduce risks of capital loss and increase stability to our operations by seeking to balance the portfolio mix with
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secured loans. For instance, in Fiscal Year 2010, we re-launched a range of mortgage-based products that has
been proved to be a popular product among retail customers constituting about 38.44% of our net advances as
of March 31, 2014. In Fiscal Year 2013 we re-launched Commercial Vehicle loans and Gold loans in the retail
segment, which are secured products.
We have actively increased our focus on the SME and MSME business, which tends to have a higher degree of
secured/collateralised loans. Based on our experience, SME and MSME customers often have very specific
banking needs for which a one-size-fits-all approach by a bank would not be suitable. Additionally, SMEs and
MSMEs as a group offer a diversified credit risk profile due to the smaller individual customer exposure,
comparatively higher yields, associated business/cross-selling opportunities, higher degree of
secured/collateralised loans, and good geographic spread. Lending to SMEs can also help us meet our priority
sector lending requirements. The pricing to this segment is based upon an internally-generated rating, collateral
coverage and competitive landscape. Though the growth in this segment was muted in Fiscal Year 2013 and
Fiscal Year 2014 due to a sluggish economy, we intend to grow this portfolio cautiously with smaller size loans
and continue our focus on improving turnaround time in approving and disbursing of credit proposals in order
to assure a higher level of customer service.
We intend to continue to emphasise growth in advances through secured lending across a diverse customer
base. As a percentage of total loans, secured loans accounted for 95.34%, 95.47% and 97.26% of net advances
as of March 31, 2013, March 31, 2014 and June 30, 2014 respectively.
Continue to focus on growth of retail deposit base and focus on growth in tier 2 to tier 6 cities
With the increase in household income levels in India and the consequent need for diversified financial services,
the retail sector has emerged as a rapidly growing opportunity for banks with the skills and infrastructure to
adequately service this market. Deposits from retail customers represent a significant, low-cost source of
funding. We have in the past five Fiscal Years focused our efforts on growing our CASA ratio and the level of
term deposits to help manage our balance sheet and fund growth in advances.
The proximity of our branches, particularly in Maharashtra, Gujarat, Odisha and Telangana, to our target
customers (e.g., self-employed individuals, SMEs and MSMEs) allows us to attract interest-free current account
and low cost savings account deposits. We will continue to focus on such efforts by upgrading our multichannel distribution network to cater to the needs of our customers, including upgrading branches, re-allocating
space to certain business to improve marketing and enhance cross-selling in our retail banking business and to
improve the service quality and efficiency of our non-branch delivery channels.
We are also focusing on growth in tier 2 to tier 6 cities of India. We strive to open branches in such areas where
which are unbanked or under-banked by other private sector banks and focus in opening branches in the
neighbourhood or close by areas. Advantage of opening branches in close proximity helps us in managing cash,
staff, operations and risk effectively besides creating/ establishing brand presence in such areas.
Continue to build our corporate banking business
As part of our specific focus on building on our mid-sized corporate customer base, we intend to steadily grow
our corporate business in industries and segments that have good growth potential. We intend to continue to
monitor the needs of this market segment in order to formulate specific products to cater to the requirements of
doing business in their respective industries.
Increase the contribution of non-interest income
An important strategic focus for us is to grow our fee and commission-based income. In order to grow noninterest income, we distribute third-party investment products, such as mutual funds and insurance products,
and provide wealth management services. Our integrated branch and electronic banking network and our
increasingly diversified product and service portfolio have enabled us to develop our fee and commission-based
business. We have entered into agreements with well-known providers of life and general insurance products to
distribute life and general insurance policies, respectively. Third party non-interest based income (including
commissions on the sale of insurance products, brokerage on marketing of mutual funds and demat transaction
and maintenance charges) constituted 10.04% and 6.22% of the total non-interest income in the Fiscal Years
ended March 31, 2013 and March 31, 2014, respectively. For the quarter ended June 30, 2014 our third party
income constituted 5.28% of total non-interest income. We intend to continue to bring innovative products to
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the market and improve cross-selling efforts in order to enhance non-interest income. We will also continue to
focus on running a conservative treasury book, in line with our ability to manage risks, in order to maintain our
non-interest income from treasury operations.
Continue to strengthen risk management capabilities
We have adopted a prudent risk management strategy and continue to enhance our risk management
organisational structure and processes in order to create an effective risk management system. We aim to
continue to enhance our credit risk management systems and processes in line with growth of business. We
believe that our efforts in strengthening risk management have improved our asset quality. Our gross NPAs
decreased from 4.40% as of March 31, 2012 to 1.78% as of June 30, 2014. We have also kept our net NPA in
check below 1%. The Net NPA has marginally increased from 0.57% to 0.97%, during the same period. We
intend to continue to improve upon and refine our risk management tools and systems.
Continue to focus on improving and maintaining cost efficiency
We continually seek to improve operating efficiencies, reduce our operating costs and thereby increase our
profitability. Streamlining manpower is an important driver of our strategy in this area as it brings in operational
efficiency, improves the level of control and reduces overall costs relative to income. Simplifying reporting
lines, consolidation of roles and higher productivity has allowed us to grow the business with greater efficiency
in manpower utilisation. We also seek to use other methods to reduce operational costs, such as rationalising
and consolidating our property portfolio, renegotiating and rationalising rates with vendors and service
providers, and rationalising and streamlining of the workforce. We intend to continue to realise cost efficiencies
and thereby improve our cost to income ratio consistently.
Attract, motivate and develop talented and experienced professionals
We believe a key to our success is the ability to recruit, retain, motivate and develop talented and experienced
professionals. We intend to continue to focus on the recruitment and cultivation of a high-quality and
professional workforce through provision of training and development programs for employees to enhance
professional knowledge and capabilities, enhancement of management and employee incentive programs to
align compensation with employee performance, creation of a collegial and encouraging work atmosphere and
improvement of morale.
Our Business Units
Our business units consist of retail banking, corporate banking, SME and MSME banking, AIB and treasury
operations. The following table sets forth the composition of our asset book by business unit as of March 31,
2013, March 31, 2014 and as of June 30, 2014:
As of March 31,
2013
Retail of whichMortgages
Commercial Vehicle
Gold Loan
PL/CE/STVL
Other(1)
Total Retail

36.41%
1.72%
1.03%
0.00%
2.86%
42.02%
22.59%
23.77%
11.62%
100.00%

SME and MSME

Corporate banking
AIB
Total Advances
(1)

2014
38.44%
2.11%
1.26%
0.00%
1.72%
43.53%
16.58%
25.73%
14.16%
100.00%

As of June 30,
2014
40.04%
2.33%
1.30%
0.00%
1.79%
45.46%
16.17%
23.86%
14.51%
100.00%

Primarily includes loans against deposits, Inter Bank Participation Certificate (IBPC).

Retail banking
Our retail banking business unit includes mortgage loans, commercial vehicle loans, gold loans and loans
against term deposits (LATD) and constitutes a significant portion of our total operating income. We offer a
broad range of services to retail customers through our traditional branch outlets as well as our multi-channel
electronic banking system that includes 239 interconnected ATMs as of August 31, 2014 comprising 117 onsite
125

and 122 offsite ATMs, Internet banking and phone banking (available 24 hours a day / 7 days a week) and
instant mobile banking. Our retail banking business enables us to (i) reduce the cost of funds, (ii) reduce our
reliance on volatile wholesale time deposits, (iii) balance our asset portfolio, (iv) increase the yield on assets
and (v) increase fee income opportunities.
Our CASA ratio, comprised primarily of retail demand and savings deposits, decreased from 27.16% as of
March 31, 2013 to 25.00% as of March 31, 2014 and then improved to 25.38% as of June 30, 2014. As a
percentage of total deposits, retail deposits accounted for 77.39%, 76.94% and 78.81% as of March 31, 2013,
March 31, 2014 and June 30, 2014, respectively. As a percentage of total net advances, retail advances
accounted for 42.02%, 43.53% and 45.46% as of March 31, 2013, March 31, 2014 and June 30, 2014,
respectively.
As of August 31, 2014 we had more than 500,000 banking customers, of which more than 35,000 had
outstanding loans from us.
We offer residential mortgage loans for the purchase of new homes and homes that are under construction, as
well as for the financing of the cost of new construction. We also refinance home loans held by other banks.
Our residential mortgage loans are generally secured by the underlying property being purchased or
constructed. As of June 30, 2014 our total outstanding residential mortgage loans (excluding home equity)
amounted to ` 6,752.6 million, representing 8.14% of our total advances.
The following table summarises our key retail banking products:
Existing key product offerings
Accounts
Current accounts

Savings accounts

Salary accounts

Deposit Products
Term deposits
NRI deposits
Cards(2)
ATM cards
Debit cards
Credit cards

Pre-paid cards with strategic tieups e.g. ITZ Cash card, Janajeevan
card, etc.
Travel cards

Gift cards

Loans
Car loans
Commercial vehicle loans(3)

Product details
We offer several types of current accounts, depending on the amount maintained
in the account, into which customers may deposit funds for immediate use.
Current accounts are generally interest-free deposits.
We offer several types of interest-bearing savings accounts, depending on the
amount maintained in the account. Under RBI regulations, the interest rate has
been deregulated, subject to certain conditions.
We offer salary savings accounts to employees of our corporate clients at the
same interest rates as our savings accounts but with benefits such as reduced
minimum balance requirements and ATM/debit cards.
We offer a range of deposit accounts with tenures normally ranging from a
minimum of 14 days to a maximum of 10 years (1).
We offer several deposit accounts to Non-Resident Indians, including deposits in
foreign currencies.
We issue ATM cards to customers upon request.
We offer debit cards which may be used for cash-less transactions and to
withdraw cash at VISA ATMs in India and abroad.
We offer the DCB PayLess Card, a credit card secured with a fixed deposit held
by a customer with us. We also offer the DCB Advantage credit card to our
customers under an arrangement with ICICI Bank whereby we accept credit card
applications and submit the applications to ICICI Bank which issues the card and
holds the portfolio and the risk.
These cards support the financial inclusion of the urban un-banked population
and disbursal of small loans to semi-urban and rural unbanked population.
We have launched a prepaid travel card, which is also affiliated with VISA,
denominated in United States dollars, Euros, British Pounds or Canadian dollars
that may be used for purchases at merchant establishments and for ATM
withdrawals abroad.
We also offer a prepaid gift card which is an Indian rupee denominated, nonreloadable, prepaid gift card that can be used for shopping at merchant
establishments.
We offer loans for the purchase of new cars, which can be up to 85% of a cars
value, at certain of our branches.
We make available loans for the purchase of new and used commercial vehicles
126

Existing key product offerings

Construction equipment loans(3)

Residential mortgage loans

Home equity loans/Loans against

property
Gold loans

Loans against securities

Payments
Remittance
Demat

Utilities
Other
Lockers

Product details
We offer loans for the purchase of new and used construction equipment,
including excavators, backhoe loaders, cranes and high-end construction
equipment.
We offer loans in six cities for the purchase of completed and under-construction
homes, as well as for financing the cost of new construction, and we offer
refinancing of loans held by other banks.
We offer business purpose loans in six cities against residential and commercial
property as collateral.
We offer loans at certain of our branches for which we accept gold ornaments as
security. We use appraisers to determine the purity, weight and value of the gold.
These loans are generally 70-80% of the appraised value. We monitor the value
of the gold on a monthly basis to carry out effective portfolio management.
We offer loans for which customers may pledge securities in our favour.
We facilitate both outward and inward remittances.
As a depository participant with Central Depository Services (India) Limited, we
offer customers a way to manage their holdings in securities and make trades
through a Demat account. The Demat account may be accessed via the internet or
at our branches.
We offer customers a means to pay their electricity and other utility bills such as
mobile phone bills and credit card bills.
Our lockers are available in different sizes, are protected by advanced security
systems and may be nominated to others

(1) We are permitted under RBI Regulations to accept term deposits for a minimum period of 7 days and we accept such
deposits for select categories.
(2) We have launched a program for a secured card product, which is affiliated with VISA that offers customers the
convenience of a debit card with the security of a deposit. We are considering the launch of a prepaid travel card,
which is also affiliated with VISA, denominated in United States dollars, Euros, British Pounds or Canadian dollars
that may be used for purchases at merchant establishments and for ATM withdrawals abroad.
(3) Since mid-2008 we have increased our selectivity in advancing unsecured personal loans and loans for commercial
vehicles and construction equipment to current customers.

As of June 30, 2014, our retail deposits accounted for 78.81% of our total outstanding deposits. The state-wise
distribution of our deposits, relative to our total deposits, as of March 31, 2013, March 31, 2014 and June 30,
2014, is set out in the table below:

Maharashtra
Delhi
Gujarat
Telangana
West Bengal
Others(1)
Total
(2)

As of March 31, 2013

(` in
(as a % of
total deposits)
millions)
46,506.7
55.60%
9,583.5
11.46%
6,747.0
8.07%
5,582.0
6.67%
6,266.9
7.49%
8,952.3
10.71%
83,638.4
100.00%

As of March 31, 2014

(` in
(as a % of
total deposits)
millions)
55,538.5
53.79%
9,190.6
8.90%
8,899.6
8.62%
6,990.7
6.77%
6,599.1
6.39%
16,033.1
15.53%
103,251.6
100.00%

As of June 30, 2014

(` in
(as a % of
total deposits)
millions)
54,666.6
51.81%
11,477.9
10.88%
8,968.3
8.50%
7,400.7
7.01%
6,844.0
6.49%
16,161.6
15.31%
105,519.1
100.00%

Includes Tamil Nadu, Goa, Punjab, Karnataka, Uttar Pradesh, Rajasthan and others.

The demographic distribution of our deposits according to metropolitan, semi-urban, urban and rural areas,
relative to our total deposits, as of March 31, 2013, March 31, 2014 and June 30, 2014, is set out in the table
below:

Rural
Semi-urban
Urban
Metropolitan
Total

As of March 31, 2013

(` in
(as a % of
total deposits)
millions)
1,582.3
1.89%
6,388.3
7.64%
6,921.3
8.28%
68,746.5
82.19%
83,638.4
100.00%

As of March 31, 2014

(` in
(as a % of
total deposits)
millions)
3,128.7
3.03%
8,724.3
8.45%
10,051.4
9.73%
81,347.2
78.79%
103,251.6
100.00%

127

As of June 30, 2014

(` in
(as a % of
total deposits)
millions)
2,460.8
2.33%
8,917.6
8.45%
10,801.7
10.24%
83,339.0
78.98%
105,519.1
100.00%

The following table sets forth, for the dates indicated, our outstanding deposits and the percentage composition
by each category of deposits.
(in ` millions, except percentages)
As of March 31, 2013
As of March 31, 2014
As of June 30, 2014
Amount
% of Total
Amount
% of Total
Amount
% of Total
Demand deposits
8,992.4
10.75%
9,590.8
9.29%
9,913.4
9.39%
Savings deposits
13,723.7
16.41%
16,221.9
15.71%
16,868.4
15.99%
Term deposits
60,922.3
72.84%
77,438.9
75.00%
78,737.3
74.62%
Total
83,638.4
100.00%
103,251.6
100.00%
105,519.1
100.00%
Fee and Commission-based Products and Services
We offer retail banking customers products and services, such as bancassurance, personal wealth management,
mutual fund products and demat services. For the Fiscal Years ended March 31, 2013, March 2014 and quarter
ended June 30, 2014, our total fees and commissions from third party distribution products were ` 117.5
million, ` 86.3 million, and ` 18.2 million, respectively.
We distribute insurance policies as an agent for third-party insurance companies. We have entered into an
agreement with a well-known provider of life insurance products to distribute life insurance policies, whereby
we earn commissions from the sale and renewal of life insurance products which we solicit and procure from
our customers. In addition, we have entered into a memorandum of understanding with a well-known provider
of general insurance policies whereby we earn referral fees by marketing general insurance products through
our distribution channels to our customers. We also refer customers to portfolio management services
companies for their products under referral arrangements, for which we earn referral fee income. We also
distribute various mutual fund products.
Our Privilege Banking business targets high net worth individuals (HNIs) in India and is supported by our team
of relationship managers catering to individual customers. Besides core retail bank offerings such as lockers,
demat accounts and lending products and third party products such as insurance and mutual funds, we also
provide a broad-spectrum of financial planning services, including risk profiling, asset allocation, research
reports and mutual fund portfolio selection.
Corporate banking
Our corporate banking business unit has a customer-focused approach that caters to the business needs of varied
enterprises and corporate entities, particularly mid-sized corporate (e.g., companies with annual turnover of up
to ` 7,500 million). The corporate banking business provides a range of commercial banking products and
services to our customers including current accounts, term loans, working capital facilities, import and export
financing, cash management and salary accounts. We also provide non fund-based services such as letters of
credit (LCs), guarantees and foreign currency conversion. Our commercial banking products and services are
delivered to our customers through designated corporate banking locations around the country. We also crosssell and distribute life insurance products, general insurance products and mutual funds to corporate customers
and their proprietors, owners and employees.
As a percentage of total deposits, Corporate Banking deposits accounted for 5.87%, 3.57% and 4.03% as of
March 31, 2013, March 31, 2014 and June 30, 2014, respectively. As a percentage of total net advances,
corporate banking advances accounted for 23.77%, 25.73% and 23.86% as of March 31, 2013, March 31, 2014
and June 30, 2014, respectively.
As of June 30, 2014 our largest sector concentrations, in each case as a percentage of our gross advances, were
as follows:
Sr.
No.
1.
2.
3.
4.
5.

Sectors
Wholesale trade
Construction
Food and beverage
Transport
Chemical

As on Fiscal Year ended

March 31, 2014
6.39%
4.08%
5.75%
4.41%
2.88%

128

As on three months
ended June 30, 2014
7.07%
5.44%
4.74%
4.66%
2.72%

Our relationship managers with specific industry expertise enable us to improve contribution in these areas.
This helps to not only improve business volumes but also enhances our fee income through the sale of products
such as letters of credit and guarantees as well as cash management products such as collections and
remittances.
The following table summarises our key corporate banking products:
Existing key
product offerings
Current accounts
Trade current
accounts

Working capital
facilities
Term loans

Bill collections
Import/export
financing
Foreign currency
exchange
Letters of credit
Supply chain

Guarantees
Cash management
RTGS/NEFT

Point of sale

Product details
We offer non-interest bearing current accounts for businesses for everyday banking purposes.
We offer a trade current account to address the business needs of customers. We target the
trader communities, who are largely cash-sufficient and do not enjoy any credit facilities from
us. Our trade current account encompasses everything from trade and forex services to local
and anywhere banking.
We provide over-draft and cash credit limits against stocks or inventory and receivables to
assist companies with their day-to-day working capital requirements.
We offer term loans to companies for investment in fixed assets (e.g. plant and machinery,
buildings, fixtures), which are payable in installments over periods ranging from 1 to 10
years.
We act as a collecting agent by obtaining payment on behalf of a seller and remitting it on
behalf of a buyer, typically in import or export transactions.
We offer pre- and post-shipment finance, forward covers, buyers credit and finance in
foreign currency
We facilitate the exchange of foreign currency for governments and businesses.
We offer letters of credit on behalf of our customers, typically for trade finance.
We provide corporate customers and their trading partners (i.e., suppliers, vendors and
dealers) a means to electronically transmit secure digital records of transaction information
and thereby free up our corporate customers lines of credit and reduce processing time for
discounting of bills for their partners.
We offer guarantees for the liabilities of our customers to enable our customers to acquire
goods, buy equipment, or draw down loans, and thereby expand their business activity.
We offer cash management services including account reconciliation, controlled
disbursement, and collection/receivables and payment/payables management
We offer Real Time Gross Settlement (RTGS), which allows the transfer of funds from our
bank to another on a real time, meaning without any waiting period, or gross basis,
meaning transactions are settled on a one-to-one basis without bunching or netting with other
transactions. We also offer the National Electronic Funds Transfer (NEFT) system, which
settles transactions in batches at a particular point in time.
We offer point of sale (POS) terminals that accept VISA and VISA Electron brand credit
and debit cards that allow funds to be deposited directly into our customers accounts.

SME and MSME banking

Prior to our conversion to a joint stock banking company, our focus as a co-operative bank was on SME and
MSMEs who were primarily our customers. We have made a conscious effort to build and expand this customer
segment as part of our plans to diversify our customer base because we believe that SME and MSMEs have
diversified credit risk profiles, offer comparatively higher yields for banking products, expand associated
business and cross-selling opportunities, generally have a higher degree of secured/collateralized loans, provide
a good geographic spread, improve our ratio of current and savings account deposits to our total deposits and
enable us to meet certain priority sector targets. Over the years a number of these customers have grown in size
and now form part of the clientele catered to by the SME and MSME banking business.
We have developed an internal credit rating system for the SME sector. This system is dynamic and takes into
account various factors including operational, financial and managerial strengths of the potential customers. The
internal rating system is regulated and supervised by the credit risk department.
We intend to focus our business development efforts in the SME sector in selective regional locations including
Mumbai, Ahmedabad, Pune, Delhi, Ludhiana, Lucknow, Jaipur, Hyderabad, Bengaluru and Chennai.
Due to economic conditions, growth in this business has been muted in the last two years. However, this
business continues to remain and important part of the Banks business strategy. As a percentage of total net
129

advances, SME and MSME advances accounted for 22.59%, 16.58% and 16.17% as of March 31, 2013, March
31, 2014 and June 30, 2014, respectively.
Agriculture & Inclusive Banking (AIB)
Our AIB business unit caters to agriculture, micro-finance and rural customers. This business mainly exists to
systematically co-ordinate across all business units and to complete the priority sector lending targets each year
for the Bank as a whole. This unit is responsible inter alia for disbursing loans under commodity based finance,
loans for warehouse construction, Loans under Kisan Credit Card (KCC) and Hi-Tech Agri, term loans to
MFIs/NBFCs, Securitisation from MFIs, trade advance to Tractor dealer, Farm Equipment finance including
tractor loans, loans to agro processors and lending under Business Correspondent model. Besides AIB has been
expanding branches in rural and semi urban areas and manages 45 such branches across various states. These
branches focus on all products (Asset, Liability, and Insurance) in a customer centric approach in the
neighbourhood. These branches also sell Mortgage loans particularly Micro-mortgage, commercial vehicle
loans particularly small/light commercial vehicle loans, Gold loans, Loans to SME/MSME in addition to other
products mentioned above.
The commodity-based finance product offers agri-processors, market intermediaries and farmers funding
secured against their stock of agricultural commodities. We consider a key element to success in this business to
be the ability to understand the customers and their needs in order to help ensure the right facility is available to
them at the right time.
As a part of our overall strategy to increase our rural reach, we have been providing micro-finance through
leading Microfinance Institutions (MFIs). Under the microfinance product, we also securitise existing portfolios
from MFIs and also lend to MFIs to for further lending. As of June 30, 2014, our outstanding microfinance
loans, including through securitisation, amounted to ` 2,747.6 million. Gross NPAs on our total loans to MFIs
were ` 10.7 million, of which ` 10.5 million were provided for as of June 30, 2014.
We have been providing loans for farm equipment including tractors across our branches and the portfolio as on
30th June is ` 1,540.6 million. This is in line with overall strategy of meeting agricultural advance, a sub-target
for meeting our PSL requirements, more through origination. We also provide trade advance to tractor dealers
to strengthen overall relationship with them to promote retail tractor finance.
We also provide working capital to Agri-Corporate and Agri-SMEs and rural focused NBFCs. We have also
introduced a product to cater to NBFCs through which we purchase the portfolio of loans extended by NBFCs
to their customers which are secured against gold.
As a percentage of total net advances, AIB advances accounted for 11.62%, 14.16% and 14.51% as of March
31, 2013, March 31, 2014 and June 30, 2014, respectively.
Treasury operations
Our treasury operations are our interface with the financial markets. Our treasury operations consist primarily of
statutory reserves management, liquidity management, investment and trading activities, money market and
foreign exchange activities. We believe that we have a well-equipped integrated dealing room, which was
established in 2002. Advanced technology, information systems and risk management systems have been
deployed and are manned by experienced market professionals.
Our interest income on investments of treasury operations was ` 1,963.2 million, ` 2,453.1 million, and ` 656.1
million for the Fiscal Years ended March 31, 2013, March 31, 2014 and the three months ended June 30, 2014,
respectively. Our non-interest income from our treasury operations, consisting of profit and loss from the sale of
investments and foreign exchange transactions was ` 211.3 million, ` 281.0 million and ` 55.7 million for the
Fiscal Years ended March 31, 2013, March 31, 2014 and the three months ended June 30, 2014, respectively.
Our treasury manages our liquidity position and manages and maintains our regulatory reserve requirements.
The treasury department manages the daily inflow and outflow of funds of the Bank. We invest any excess
amounts after meeting outflow requirements in the overnight call money market, collateralised lending and
borrowing operations and repo to increase our returns. The treasury department invests in securities including
sovereign debt instruments, keeping in view market developments, expectations of policy changes and interest
rate movements.
130

Our treasury also invests in non-SLR instruments, such as commercial paper, corporate debentures, and PSU
bonds. Under RBI norms, our direct investment in equity shares cannot exceed 20% of our net worth. Our
Investment Policy sets the various limits, controls, accounting policies and general guidelines, including the
parameters of investments in securities requiring approval by our Board, for the treasury operations. Our
investment portfolio is managed with a view to capitalize on the market movements in interest rates and credit
spread, to maintain a balanced portfolio, to ensure deployment of surplus cash in securities at attractive yields
while favouring liquidity, to minimise risk and also to deepen relationships with corporate customers.
As an authorized dealer in foreign currencies, we undertake foreign exchange transactions on behalf of our
customers and we engage in proprietary trading. We are active in the spot and forward forex markets in Rupee
and cross currencies. Timely advice and delivery of these products benefits our corporate customers and thereby
enhances customer relationships. We charge our customers exchange margins or commissions that vary with the
size of the transaction.
The treasury department issues certificates of deposits ranging in maturity from 7 days to 1 year, which offer a
means of raising resources on short notice. We issue the certificates of deposit at a discount to the face value
and, unlike fixed deposits, the certificates of deposit are negotiable and may be traded. Our certificates of
deposit up to an amount of `10 billion are rated A1+ by CRISIL.
The organization of the treasury operations integrates the debt markets and the foreign exchange and derivatives
segments. However, the risk management is functionally separate and we follow a model wherein the treasury
operations division is demarcated into the front office, back office and mid-office, each having separate lines of
reporting to ensure their independence and segregation of duties:

front office the front office concludes deals and transactions on our behalf;

back office the back office settles the transactions concluded by the front office. The back office controls
the transactions by adhering to the internal / external norms stipulated by the Board and RBI and other
regulatory authorities; and

mid-office the mid-office maintains an overall control on the transactions concluded and executed by the
front and back offices, respectively. Further, it also lays down internal operational parameters and apprises
the Board of Directors of treasury activities periodically.

Our treasury operations fund the balance sheet through both inter-bank deposits, including those from FIs,
mutual funds and insurance companies, and corporate banking deposits. Additionally, our treasury handles all
correspondent banking relationships with foreign banks, FIs, and domestic banks. The main services provided
through the correspondent banking network include collection of bills, advising and confirming letters of credit
issued by other banks, discounting of bills drawn under letters of credits, maintenance of foreign currency
accounts and handling remittances on behalf of other banks.
The following tables set forth, as of the dates indicated, information related to our investments
(` millions)

Government securities and

treasury bills
Other approved securities
Total SLR
Shares
Debentures and bonds
Units, CP, SRS and CDs
Others(1)
Total non-SLR
Total
(1)

As of March 31, 2013

Held To
Available
Held For
Maturity
For Sale
Trading
19,873.7
2,824.0
1,634.2
19,873.7
30.0
3,702.4
3,732.4
23,606.1

2,824.0
2.1
2,329.1
2,331.2
5,155.2

Includes deposits with NABARD, SIDBI and NHB.

131

1,634.2
3,191.1
3,191.1
4,825.3

Held To
Maturity
22,572.7
22,572.7
30.0
4,034.5
4,064.5
26,637.2

As of March 31, 2014

Available
Held For
For Sale
Trading
4,707.7
791.6
4,707.7
361.1
2,615.2
2,976.3
7,684.0

791.6
1,229.4
1,229.4
2,021.0

(` million)

Total SLR
Total non-SLR
Total

For the quarter ended June 30, 2014

Held To Maturity
Available For Sale
Held For Trading
23,305.4
5,197.8
51.8
3,676.9
1,921.6
1,248.7
26,982.3
7,119.4
1,300.5

Our forex business involves transactions in foreign currency with corporates and other banks. The following
table sets out the details of our profits from our foreign exchange transactions and its turnover in the Fiscal
Years ended March 31, 2013, March 31, 2014 and the quarter ended June 30, 2014:
(in ` million)
Particulars
For the year ended March 31, For the quarter ended
June 30, 2014
2013
2014
Turnover(1)
2,863,362.9
2,211,509.3
387,535.4
Profit
72.3
56.5
12.4
(1)

Turnover is the aggregate of the notional of purchase and sale leg of all merchant and inter-bank foreign exchange
transactions converted to Indian Rupees using the daily rate applicable for that day and entered into the system or the
contract rate as applicable.

Distribution Network
Branches and ATMs
The following map depicts our branch locations in India as of August 31, 2014:

Branches as on August 31, 2014

138

DCB ATMs as on August 31, 2014

239

Note: Branch locations shown on the map are approximate and may not represent the exact location.

132

The following table sets out a geographic breakdown of our branches and ATM network as of August 31, 2014:
Sr.
No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

State/Union Territory
Maharashtra
Gujarat, including Dadra and Nagar Haveli and Daman and Diu
Odisha
Telangana
Madhya Pradesh
Chhattisgarh
Delhi
Punjab
Rajasthan
Goa
Karnataka
Tamil Nadu
Andhra Pradesh
West Bengal
Haryana
Uttar Pradesh
Kerala
TOTAL

As of August 31, 2014

Branches
ATMs
35
83
22
21
13
7
11
10
7
6
1
6
28
6
5
5
5
4
3
4
22
4
8
4
25
3
7
2
9
2
6
1
2
138
239

As of August 31, 2014, we had 239 interconnected ATMs, 122 of which were off-site ATMs, with the rest
located within our branches. Our ATMs are part of the VISA, Cashnet, Rupay and National Finance Switch
shared payment networks and cardholders of these payment networks can access their accounts with other
banks using our ATM network.
We actively manage the number of ATMs in our network in order to take advantage of emerging opportunities.
The new ATMs are owned, installed and operated by a third-party ATM vendor and service provider, but have
our name and logo and are accessible by our customers, as well as by non-customers. We receive a transactionbased fee for use of our ATMs by non-customers.
Internet and mobile phone banking
We provide our customers with secure, fast, flexible and efficient electronic banking services, including account
management, cash deposit and withdrawal, money transfer and settlement, fee payment and wealth
management. We offer services 24 hours a day, seven days a week through Internet banking, phone banking and
mobile phone account services. We have also launched DCB on the Go instant Mobile Banking facility for
our customers. DCB on the Go instant Mobile Banking is a service that enables banking anywhere anytime to
the customers through their mobile phones. As of June 30, 2014, the number of customers registered for our
Internet banking services was approximately 271,700, for our instant mobile banking was approximately
56,650, besides our phone banking and our mobile phone message alert services being available to almost all
our accountholders.
Investments
As of June 30, 2014, the total value of our gross investments was ` 35,408.3 million and the total value of our
net investments was ` 35,402.2 million. The average yield on gross investments was 7.40% for the three
months ended June 30, 2014 as against 7.37% for the year ended March 31, 2014, respectively.
Under RBI guidelines, we are required to maintain 22% of our net demand and time liabilities in Government
and other approved securities and 4.00% of our net demand and time liabilities in a deposit account with RBI.
As of June 30, 2014, Government securities constituted 80.66% of our net investments compared with 77.24%
and 72.45% as of March 31, 2014 and as of March 31, 2013, respectively.
For further information, please refer to Selected Statistical Information Investment Portfolio.

133

Priority Sector Lending and Export Credit

RBI requires all domestic commercial banks in India to allocate a minimum of 40% of their adjusted net bank
credit as of March 31 of the applicable prior year (ANBC) to the priority sector, which includes the
agricultural sector, economically weaker sections of the community, micro and small enterprises, professionals
and self-employed individuals. RBI also specifies sub-allocation requirements, including a minimum of 18% of
ANBC to the agricultural sector and 10% of ANBC to economically weaker sections of the community.
If our lending falls below RBIs directed lending requirements, we are required to fulfil our obligations to RBI
by investing in securities specified by RBI and/or in deposits under RBI-specified deposit schemes of the
National Bank for Agriculture and Rural Development, Small Industries Development Bank of India and the
National Housing Bank. These deposits have a maturity ranging up to seven years and carry interest rates lower
than market rates. Our investments outstanding in NABARD RIDF, SIDBI and NHB deposits as of March 31,
2013, and 2014 were ` 3,702.4 million, and ` 4,034.5 million, respectively. As of June 30, 2014, we had `
3,676.9 million held in NABARD, SIDBI and NHB deposits.
As of March 31, 2014, our lending to priority sectors constituted 48.57% of our ANBC. Out of our ANBC,
15.31% was lent to the agricultural sector and the remaining 33.26% was lent to other priority sectors, including
economically weaker sections of the community, SSIs and Rural Infrastructure Development Fund deposits.
Some of our existing businesses, including SME banking and AIB qualify as eligible agricultural sector lending
under RBIs priority sector lending requirements. As of March 31, 2014, advances to economically weaker
sections constituted 8.11% of our ANBC.
The following table sets forth a breakdown of our priority sector lending by type as of the dates indicated:
(` in million)

Portfolio
Total priority sector lending
Out of which
Agriculture
Weaker section

As of March 31, 2013

23,200.0

As of March 31, 2014

35,156.2

As of June 30, 2014

35,528.5

5,809.0
5,104.0

11,085.3
5,870.1

10,672.7
5,195.3

The following table sets forth a breakdown of our priority sector lending by sector as of the dates indicated:

(` in million)

Portfolio

Agriculture
SSI(2) /
Small
enterprises(3)
Others
Total
priority
sector
lending
(1)

(2)
(3)

As of March 31, 2013

Outstan
Total
% to
ding
ANBC / ANBC
NBC(1)
amounts
5,809.0
- 10.56%
13,550.6

3,840.4
23,200.0

As of March 31, 2014

Outstan
Total
% to
ding
ANBC /
ANBC
NBC(1)
amounts
11,085.3
15.31%

Outstan
ding
amounts
10,672.7

24.64%

20,098.5

27.77%

21,027.7

6.99%
54,991.4 42.19%

3,972.4
35,156.2

72,377.8

5.49%
48.57%

3,828.1
35,528.5

As of June 30, 2014

Total
% to
ANBC / ANBC
NBC(1)
12.21
%
24.05
%
87,414.8

4.38%
40.64
%

ANBC/NBC represents gross advances less bills re-discounted, other investment eligible to be treated as part of priority
sector lending like investment in securitised assets.
Small scale industries.
Small enterprises include certain small scale industries accounts.

In addition, under recommendations contained in the Report of Prime Ministers Task Force on Micro, Small
and Medium Enterprises, Government of India and the Reserve Bank of Indias Master Circular on Lending to
MSME Sector dated July 1, 2014, domestic commercial banks in India have been advised to increase credit to
micro and small enterprises (which are defined according to the level of investments by such enterprises in plant
and machinery or equipment ranging up to ` 50 million for manufacturers and ` 20 million for service
providers) by 20% every year and a 10% annual growth in the number of micro enterprise accounts. In addition,
domestic commercial banks are also required to allocate 60% of such advances to micro enterprises (which are
enterprises in which the level of investments in plant and machinery for manufacturers is less than ` 2.5 million
and in equipment for service providers is less than ` 1 million), with certain further sub-allocations within such
134

group, such allocation to be achieved in stages over a three-year period ending in March 2013. Currently, there
are no penalties stipulated for any failure in achieving these targets.
RBI earlier required banks to make loans to exporters at concessional rates of interest. This enabled exporters to
have access to an internationally competitive financing option. However, with effect from July 1, 2010, preshipment and post-shipment rupee export credit can be at or above the base rate. Pursuant to specific guidelines,
12% of a banks ANBC is required to be in the form of export credit. Currently, there are no penalties for not
meeting this export credit requirement. We provide export credit for pre-shipment and post-shipment
requirements of exporter customers in Rupees and foreign currencies. As of March 31, 2014, our outstanding
export credit was ` 1,007.4 million, representing 1.39% of our ANBC. As of June 30, 2014 our export credit
advances totalled ` 830.7 million, representing 0.95% of our ANBC.
RBI regulations specify that the above priority sector and export credit requirements should be met on the basis
of 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 further information, please refer to chapter Selected Statistical Information Priority Sector Lending.
Risk Management
As a bank, we are exposed to risks that are particular to our lending and trading businesses and the environment
in which we operate. Our goal in risk management is to ensure that we understand, measure and monitor the
various risks that arise and that, as an organisation, we adhere strictly to the policies and procedures that are
established to address these risks.
We are proactive in the implementation of best practices in the arena of risk management by setting up a Credit
Risk Management Committee (CRMC) for credit risk, Operations Risk Management Committee (ORCO) for
operations risk and Asset Liability Committee (ALCO) for market risk. These committees meet once in a month
at least and discuss the various risks and identify and implement risk mitigants. The meetings of CRMC and
ALCO are chaired by our MD & CEO and of ORCO by the Chief Financial Officer and the members of these
committees are Senior Management Executives relevant to the respective functional areas. The Board has
constituted a Risk Management Committee (RMC) consisting of non-executive directors and our MD&CEO,
who oversee and guide the various risk management committees referred above. We have implemented the
International Convergence of Capital Measurement and Capital Standards or the Basel II Framework and
Basel III Framework as per regulatory guidelines. For details regarding the risk management please refer to the
chapter Managements Discussion and Analysis of Financial Condition and Results of Operations.
Internal Inspection and Audit
We have an Internal Audit Department (IAD), which reports to the Audit Committee of the Board to ensure its
independence. The IAD is headed by an experienced auditor. The basic objectives of the IAD are to report to
senior management and the Board on the adequacy and effectiveness of the systems and controls and on the
level of adherence to rules, regulations, systems and procedures laid down by us and by the regulatory
authorities.
The main functions of the IAD are:
a)

carrying out audit assignments as per the annual plan approved by the Audit Committee of the Board
covering all our units viz. branches, departments, functions, etc.;

b) conducting an independent review of the loans portfolio covering quality of credit submissions, quality of
credit checks on new borrowers, compliance with the our credit policy / prudential norms / RBI guidelines /
income recognition norms / asset classification / adequacy of provisioning, etc.;
c)

reviewing IT-related controls to ensure confidentiality, integrity and availability of information;

d) overseeing and coordinating the concurrent audit function and also the statutory audit function; and
e)

placing irregularities, regulatory information and other significant issues before the Audit Committee.

135

The audits are carried out on a risk-based approach. Under RBI guidelines on Risk Based Internal Audits, we
have developed a well-defined policy, approved by our Board, for undertaking risk-based internal audits. The
policy includes the risk assessment methodology for identifying the risk areas based upon which the audit plan
is formulated. Our internal audit department has devised a risk assessment methodology, approved by the Board
of Directors, keeping in view the size and complexity of the business undertaken by the bank. Under the risk
assessment methodology, the various business and functional support units are categorised into high, medium
and low risk units with reference to their inherent business risks. The policy also lays down the maximum time
period beyond which even the low risk business activities/locations should not remain unaudited.
Prevention of Money Laundering Act
Our Chief Compliance Officer is also responsible for ensuring compliance with the Prevention of Money
Laundering Act, 2002 the (PML Act). We have implemented advanced anti-money laundering software to
strengthen the monitoring of suspicious transactions to aid the compliance with the PML Act and RBI
guidelines issued in this respect.
Capital Adequacy
For details regarding Capital Adequacy please refer to the chapter Managements Discussion and Analysis of
Financial Condition and Results of Operations.
Competition
We face strong competition in all our principal lines of business from other commercial banks and other
financial institutions in India. Our primary competitors are government-controlled public sector banks, major
private sector banks, foreign banks with operations in India and, for certain products, non-banking financial
institutions. Our competition with other commercial banks and financial institutions primarily focuses on the
variety, pricing and quality of products and services, convenience of banking facilities, reach of distribution
network and brand recognition, as well as information technology capabilities. In his budget speech for Fiscal
Year 2011, the Union Minister of Finance announced that RBI was considering giving additional banking
licenses to private sector banks and accordingly RBI had given banking licenses to two organisations, which are
expected to commence banking business in Fiscal Year 2015 or Fiscal Year 2016. For more details on
regulations, please refer to the chapter titled Regulations and Policies.
For more information on competition, please refer to Risk Factors We face intense competition from banks
and financial institutions that are much larger than we are and have an established presence all over India.
Insurance
We maintain insurance cover for our assets and branches in accordance with industry practice. We have
purchased the following insurance coverage policies:
1.

Standard Fire and Special Perils Policy for damage caused by, among others, fire, lightning,
explosion/implosion, missile testing operations, leakage from automatic sprinkler installations, an act of
terrorism or by an earthquake;

2.

Burglary and House Breaking Policy for damage caused by, among others, a burglary, housebreaking, theft,
riots, strikes or malicious damage to office equipment and furniture and fixtures at various branches;

3.

Bankers Indemnity Policy; and

4.

Money Insurance Policy against, among others, fire and burglary in branches holding gold deposits made
by our customers.

Additionally, we have purchased a group life insurance and group mediclaim policies for our permanent
employees. We have also purchased directors and officers liability insurance.
We do not have insurance for business interruption as it is not industry practice.

136

Intellectual Property Rights

We have applied for and have received registration for certain trademarks, including DCB, DCB Bank,
DCB Bank Limited, Development Credit Bank Limited, the DCB logo, DCB Label, DCB Payless and
X-Gen in certain classes, including the service mark category. Additionally, we have applied for registration
of trademarks under certain additional classes, including for DCB and DCB Firstcash which are pending.
We also have received copyright for the DCB Signature Tune in December 2012.
Properties
Our registered office and corporate office are, owned premises, located in Mumbai, to which we had shifted in
Fiscal Year 2012 and 2013 in phases. As of August 31, 2014, 114 of our 138 branches were in leased premises
and the remaining were in owned premises. In addition, we operate out of certain owned and leased premises for
other business requirements of the Bank including our centralised back office operations in Chennai.
Employees
As of August 31, 2014 we had 3,100 employees.
We consider our relations with our employees to be good. Our employees do not belong to any union.
In addition to basic compensation, employees are eligible for basic retirement benefits, including provident fund
and gratuity for eligible employees.
We have introduced an employee stock option plan. The Development Credit Bank Limited - Employees Stock
Option Plan (the ESOP) was adopted by our Board of Directors by a resolution passed at its meeting held on
March 5, 2007 pursuant to the enabling authority granted under a resolution at the extra-ordinary meeting of
December 15, 2006. For details please refer to the chapter Capital Structure.

137

REGULATIONS AND POLICIES

The following description is a summary of certain laws and regulations in India, which are applicable to the
Bank. The primary legislation governing commercial banks in India is the Banking Regulation Act. The
provisions of the Banking Regulation Act are in addition to and not, save as expressly provided in the Banking
Regulation Act, in derogation of the Companies Act, 1956 and any other law for the time being in force. Another
significant legislation that governs banks is the Reserve Bank of India Act, 1934. RBI, from time to time, issues
guidelines, regulations, policies, notifications, press releases and circulars to be followed by banks. Other
important statutes include the Negotiable Instruments Act, 1881, the Bankers Books Evidence Act, 1891, the
Prevention of Money Laundering Act, 2002, the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 and the Recovery of Debts due to Banks and Financial Institutions
Act, 1993. Compliance with applicable regulatory requirements is evaluated with respect to financial statements
under Indian GAAP which form the basis of Financial Statements which are included elsewhere in this
Placement Document, as well as through periodic inspection. The information detailed in this chapter has been
obtained from publications available in the public domain. The regulations set out below may not be exhaustive,
and are only intended to provide general information to the investors and are neither designed nor intended to
be a substitute for professional legal advice.
RBI Regulations

Commercial banks in India are required under the Banking Regulation Act to obtain a licence from RBI to carry
on banking business in India. Prior to granting the licence, RBI must be satisfied that certain conditions are
complied with, 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 bank has adequate capital and earnings
prospects; and (iv) that the public interest will be served if such licence is granted to the bank. RBI can cancel
the licence if the bank fails to meet any of the above conditions or if the bank ceases to carry on banking
operations in India.
We have obtained a banking licence from RBI dated May 31, 1995, and are regulated and supervised by RBI.
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. RBI has set up a
Board for Financial Supervision (BFS), under the chairmanship of the Governor of 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 banks is
subject to the approval of RBI. RBI can direct a special audit of any bank in the interest of its depositors or in
the public interest
Banking Regulation Act
Commercial banks in India are required to obtain a licence from RBI to carry on banking business in India. To
be granted such licences, banks must meet certain conditions. RBI has the power to cancel the licence if the
bank fails to meet these conditions or if the bank ceases to carry on banking operations in India. Additionally,
RBI has issued various reporting and record keeping requirements for such commercial banks. The appointment
of the auditors of the banks is subject to the prior approval of RBI. RBI can direct a special audit in the interest
of the depositors or in the public interest. RBI also sets out the provisions in relation to the loan granting
activities of a banking company. The Banking Regulation Act specifies the business activities in which a bank
may engage. Banks are prohibited from engaging in business activities other than the specified activities. No
shareholder in a bank can exercise voting rights on a poll in excess of 10.00% of total voting rights of all the
shareholders of the bank. However, RBI may increase this ceiling to 26.00% in a phased manner. Pursuant to
the amendments to the Banking Regulation Act in January 2013, private sector banks are permitted to issue
perpetual, redeemable and non-redeemable preference shares in addition to ordinary equity shares.
Further, the Banking Regulation Act, as amended, requires any person to seek prior approval of RBI, to acquire
or agree to acquire, shares or voting rights of a bank, by himself or with persons acting in concert, 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 aggregate shareholding of such person to be 5.00% or more of
paid up capital of a bank or entitles him to exercise 5.00% or more of the voting rights in a bank. Further, RBI

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may, by passing an order, restrict any person holding more than 5.00% of the total voting rights of a bank from
exercising voting rights in excess of 5.00%, if such person is deemed to be not fit and proper by RBI.
Banks are also required to obtain licences from RBI to shift their branches otherwise than within the same city,
town or village. Further, RBI requires banks to create a reserve fund to which they must transfer not less than
20.00% of their profits of each year before dividends. If there is an appropriation from this account, the bank is
required to report the same to RBI within 21 days, explaining the circumstances leading to such appropriation.
The Banking Regulation Act also permits RBI to establish a Depositor Education and Awareness Fund, which
will take over the deposit accounts which have not been claimed or operated for a period of 10 years or more.
Further, RBI (in consultation with the central government) may 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 or any banking
company or for securing the proper management of any banking company. RBI may impose penalties on banks
and its employees in case of infringement of regulations under the Banking Regulation Act. The penalty may be
a fixed amount or may be related to the amount involved in any contravention of the regulations. The penalty
may also include imprisonment. The banks are required to disclose any penalty imposed on them in their annual
report.
Regulatory reporting and examination procedures
RBI is empowered under the Banking Regulation Act to inspect a bank. RBI monitors prudential parameters at
quarterly intervals. To this end and to enable off-site monitoring and surveillance by RBI, banks are required to
report to RBI on various aspects of their business. RBI conducts periodical on-site inspections on matters
relating to the banks portfolio, risk management systems, internal controls, credit allocation and regulatory
compliance, at intervals ranging from one to three years. RBI also conducts on-site supervision of selected
branches with respect to their general operations and foreign exchange related transactions.
Annual RBI Inspection
As with all scheduled commercial banks, RBI annually conducts an inspection which examines all matters
addressing our banking operations. During the course of finalizing this inspection, RBI inspection team shares
its findings and recommendations with us and provides us an opportunity to provide clarifications, additional
information and, where necessary, justification for a different position, if any, than that observed by RBI. RBI
incorporates such findings in its final inspection report and, upon final determination by RBI of the inspection
results, we are required to take actions specified therein by RBI to its satisfaction, including, without limitation,
requiring us to make provisions, impose internal limits on lending to certain sectors and tighten controls and
compliance measures and restricting our lending and investment activities, and the payment of dividends by us.
Maintenance of records
The Banking Regulation Act specifically requires banks to maintain books and records in a particular manner
and file the same with ROC 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 the Bank as in the case of any company. The KYC / AML Guidelines framed by RBI also provide for
certain records to be maintained for a minimum period of five years from the cessation of relationship with the
client.
Regulations relating to the opening of branches and ATMs
As per the Master Circular on Branch Authorisation dated July 1, 2014 banks are required to obtain prior
approval from RBI to open or shift their branches otherwise than within the same city, town or village.
Permission for new branches are granted on an annual basis based on factors such as the financial condition and
history of the banking company, its management, adequacy of capital structure, earning prospects and the public
interest. Banks are exempt from seeking prior approval of RBI for opening branches in tier 2 to tier 6 centers
(centers are assigned a tier in terms of population size as specified in the 2001 census) and in rural, semi-urban
and urban centres in North Eastern States and Sikkim. Banks are also exempt from seeking prior approval of
RBI for opening mobile branches in Tier 3 to Tier 6 centres and in rural, semi-urban and urban centres in North
Eastern States and Sikkim. However, banks are required to report the opening of such branches to RBI. Further,
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banks are mandated to allocate 25.00% of the total number of new branches opened during a year to unbanked
rural areas, which are tier 5 and tier 6 centers. On September 19, 2013, RBI extended the general permission to
open branches in Tier 1 centres, without prior approval of RBI, subject to compliance with specified conditions.
Additionally, Banks are permitted to install ATMs without prior permission from RBI.
Capital adequacy requirements
RBI has set out the minimum capital adequacy standards for banks based on the guidelines of the Basel
Committee on Banking Supervision. Under the Master Circular on Prudential Guidelines on Capital Adequacy
and Market Discipline - New Capital Adequacy Framework dated July 1, 2014, a bank is required to maintain a
minimum total CRAR of 9.00% and Tier 1 CRAR of 6.00%.
In January 2006, RBI issued guidelines permitting banks to issue perpetual debt with a call option after not less
than 10 years, to be exercised with its prior approval, for inclusion in Tier I Capital up to a maximum of 15.00%
of total Tier I Capital as on March 31 of the previous Fiscal Year. RBI also permitted banks to issue debt
instruments with a minimum maturity of 15 years and a call option after not less than 10 years, to be exercised
with its prior approval, for inclusion in Tier II capital. In July 2006, RBI issued guidelines permitting the
issuance of Tier I and Tier II debt instruments denominated in foreign currencies. In October 2007, RBI issued
guidelines for issuance of certain type of preference shares as part of the regulatory capital.
To further ensure compliance with the guidelines of Basel II, RBI has set out compliance periods for banks to
transition into the Internal Ratings Based and Advanced Measurement Approach methods of risk assessment.
Under RBIs guidelines, banks were to submit their revised methodologies by April 1, 2012 and RBI was to
approve these no later than March 31, 2014.
RBI Basel III guidelines were introduced in May 2012 and became effective from April 1, 2013 in a phased
manner. Basel III capital regulations will be fully implemented by March 31, 2019.
Please find below some of the Basel III requirements which will be applicable to the banks in the future (i.e.
from April 2016):
Capital Conservation Buffer
Additionally, as per Basel III guidelines of RBI, banks are required to maintain a CCB of 2.5%, comprised of
common equity tier 1 capital, above the regulatory minimum capital requirement of 9% as shown in following
table:
Minimum capital ratios in %
Minimum CET1
CCB
Minimum CET1+ CCB
Minimum Tier 1 capital
Minimum Total Capital(1)
Minimum Total Capital +CCB

2015
5.5
5.5
7
9
9

2016
5.5
0.625
6.125
7
9
9.625

March 31,
2017
5.5
1.25
6.75
7
9
10.25

2018
5.5
1.875
7.375
7
9
10.875

2019
5.5
2.5
8
7
9
11.5

Note:
1.
The difference between the minimum total capital requirement of 9% and the Tier 1 requirement can be met with Tier 2
and higher forms of capital.

A CCB is applicable both at the solo level (global position) as well as at the consolidated level, i.e. restrictions
would be imposed on distributions at the level of both the solo bank and the consolidated group. RBI may also
consider accelerating the build-up of the CCB and shorten the transition periods, if the situation warrants so.
Restriction of Distribution
Banks should not distribute capital (i.e. pay dividends or bonuses in any form) in case capital level falls within
this range. The distribution constraints imposed on banks when the capital levels fall into the range increase as
the banks capital levels approach the minimum requirements. The table set forth below indicates the minimum
capital conservation ratios the bank must meet at various levels of the common equity tier 1 capital ratios:

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Minimum capital conservation standards for individual banks

(fully effective as on March 31, 2019)
Common Equity Tier 1 Ratio after including the current periods retained earnings
Minimum Capital Conservation Ratios
5.5% - 6.125%
100%
>6.125% - 6.75%
80%
>6.75% - 7.375%
60%
>7.375% - 8.0%
40%
>8.0%
0%
Common Equity Tier 1 Ratio after including the current periods retained earnings
Minimum Capital Conservation Ratios

Minimum Capital Conservation Ratio

During the Basel III transition period, banks have to refer to the following table for meeting the minimum
capital conservation ratios at various levels of the common equity tier 1 capital ratios:
Common Equity Tier 1 Ratio after including the current periods retained earnings
As on March 31, 2016
As on March 31, 2017
As on March 31, 2018
5.5% - 5.65625%
5.5% - 5.8125%
5.5% - 5.96875%
>5.65625% - 5.8125%
>5.8125% - 6.125%
> 5.96875% - 6.4375%
>5.8125% - 5.96875%
>6.125% - 6.4375%
> 6.4375% - 6.90625%
>5.96875% - 6.125%
>6.4375% - 6.75%
> 6.90625% - 7.375%
>6.125%
>6.75%
>7.375%

Minimum Capital Conservation

Ratios (expressed as % of earnings)
100%
80%
60%
40%
0%

Asset Classification and Provisioning

In April 1992, RBI issued guidelines on income recognition, asset classification, provisioning standards and
valuation of investments applicable to banks, applicable from Fiscal 1993. These guidelines are revised from
time to time. These guidelines are applied for the calculation of impaired assets under the Indian GAAP.
The basis for treating various credit facilities as non-performing assets under these guidelines are set forth
below.
Non-Performing Assets
An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.
A non-performing asset (NPA) is a loan or an advance where:

In respect of a term loan, interest and/or repayment of principal has remained outstanding for a period of
more than 90 days;

In respect of an overdraft or cash credit, the account has remained out-of-order for a period of more than
90 days;

In respect of bills purchased and discounted, the bill remained overdue for a period of more than 90 days;

In respect of short duration crops, the installment of principal or interest thereon remains overdue for two
crop seasons. In respect of long duration crops, if the installment of principal or interest thereon remains
overdue for one crop season (crops with crop season longer than one year are long duration crops, and
crops, that are not long duration crops are treated as short duration crops);

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;

In respect of a securitization transaction undertaken in terms of the guidelines on securitisation dated

February 1, 2006, the amount of liquidity facility remains outstanding for more than 90 days; and

Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.

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Banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced
fully within 90 days from the end of the quarter.
Once the account has been classified as a non-performing asset, the unrealised interest and other income already
debited to the account is derecognised and further interest is not recognised or credited to the income account
unless collected in cash.
Out-of-Order Status
An account is treated as out-of-order if the outstanding balance remains continuously in excess of the
sanctioned limit or drawing limit for a period of 90 days. In circumstances where the outstanding balance in the
principal operating account is less than the sanctioned limit or drawing limit, but (i) there are no credits
continuously for a period of 90 days from the date of our last balance sheet or (ii) the credits are not sufficient to
cover the interest debited during the same period, these accounts are treated as out-of-order.
Asset Classification
Pursuant to RBIs master circular on income recognition, asset classification and provisioning pertaining to
advances portfolio of banks, issued in July 2014, assets are classified as below:

Standard Assets: Assets that do not disclose any problems and which do not carry more than the normal risk
attached to the business are classified as standard assets.

Sub-Standard Assets: A sub-standard asset is one which has remained as an NPA for a period less than or
equal to 12 months.

Doubtful Assets: An asset is classified as doubtful if it remains in the sub-standard category for 12 months.

Loss Assets: Assets on which losses have been identified by the bank or internal or external auditors or RBI
inspection but the amount has not been fully written off.

There are separate guidelines for projects under implementation, which are based on the achievement of
financial closure and the date of approval of the project financing.
All the facilities granted by a bank to a borrower and investment in all the securities issued by the borrower will
have to be treated as NPA and not the particular facility/investment or part thereof which has become irregular.
Asset classification of accounts under consortium should be based on the record of recovery of the individual
member banks and other aspects having a bearing on the recoverability of the advances.
To create an institutional mechanism for the restructuring of corporate debt, RBI has developed a corporate debt
restructuring mechanism.
Liquidity coverage ratio
The Basel III framework on Liquidity Standards includes LCR, NSFR and liquidity risk monitoring tools.
RBI had issued draft guidelines on Liquidity Risk Management and Basel III framework on Liquidity
Standards in February 2012. After taking into account the feedback received from stakeholders, the guidelines
on liquidity risk management were issued in November 2012. These included enhanced guidance on liquidity
risk governance, and measurement, monitoring and reporting to RBI on liquidity positions. The Basel III
liquidity standards were subject to an observation period/revision by the Basel Committee with a view to
addressing any unintended consequences that the standards may have for financial markets, credit extension and
economic growth. RBI indicated in the guidelines on liquidity risk management issued in November 2012 that
the guidelines on Basel III liquidity standards will be issued once the Basel Committee finalises the relevant
framework. The Basel Committee that issued Basel III: The Liquidity Coverage Ratio and Liquidity Risk
Monitoring Tools in January 2013 is in the process of finalising the NSFR and disclosure requirements. The
LCR is proposed to be implemented from January 1, 2015 and the NSFR from January 1, 2018. RBI has issued
the final guidelines on Basel III liquidity standards and liquidity risk monitoring tools, taking into account the
revisions by the Basel Committee on June 9, 2014.

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Prudential Norms
Pursuant to the Prudential Norms issued on July 1, 2014, RBI has classified NPAs as (i) sub-standard assets; (ii)
doubtful assets; and (iii) loss assets. These guidelines specify provisioning requirements specific to the
classification of the assets. The following guidelines apply to the various asset classifications:

Standard Assets: A general provision for standard assets at the following revised rates is made for the
funded outstanding amount on a global loan portfolio basis:
(a)
(b)
(c)
(d)

direct advances to agricultural and SME sectors at 0.25%;

advances to Commercial Real Estate (CRE) Sector at 1.00%;
housing loans extended at teaser rates and restructured advances as provided by RBI;
all other advances and advances not included in (a), (b) and (c) at 0.40%.

Sub-Standard Assets: A general provision of 15% on total outstanding should be made without making any
allowance for Export Credit Guarantee Corporation of India, or ECGC, guarantee cover and securities
available. The unsecured exposures which are identified as substandard would attract an additional
provision of 10%, i.e., a total of 25% on the outstanding balance.

Doubtful Assets: A 100% provision/write-off of the portion of the advance which is not covered by
realizable value of the security, to which the bank has a valid recourse and the realizable value is estimated
on a realistic basis. In cases where there is a secured portion of the asset, depending upon the period for
which the asset remains doubtful, a 25% to 100% provision is required to be made against the secured asset
as follows:
Period for which advance remained in Doubtful category
Up to one year
One to three years
More than three years

Provision requirement (%)

25%
40%
100%

Loss Assets: The entire asset is required to be written off or provided for. If loss assets are permitted to
remain in the books for any reason, 100% of the outstanding should be provided for.

Restructured Assets: RBI has also issued separate guidelines for restructured loans.

In July 2005, 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. As per RBI guidelines dated February 29, 2014, Banks will be permitted to sell their NPAs
without any initial holding period. In October 2007, RBI issued guidelines regarding valuation of NPAs being
put up for sale. Further, RBI has advised banks to maintain provisioning coverage ratio of at least 70.00%.
RBI has also issued a separate set of prudential guidelines on restructuring of advances by banks. These
guidelines relate to the norms/conditions, which must be fulfilled in order to maintain the category of the
restructured account as a standard asset. RBI has specified that during the pendency of the application for
restructuring of the advance, the usual asset classification norms continue to apply. However, as an incentive for
quick implementation of the restructured advance package, if the approved package is implemented by the bank
as per the specified time schedule (within 120 days from the date of approval under the CDR mechanism or
within 120 days from the date of receipt of application by the bank in cases other than those restructured under
the CDR mechanism), the asset classification status may be restored to the position which existed when the
reference was made to the CDR cell in respect of cases covered under the CDR mechanism or when the
restructuring application was received by the bank in non-CDR cases. This special regulatory treatment is not
applicable to consumer and personal advances, advances classified as capital market exposures and advances
classified as commercial real estate exposures. This special regulatory treatment will stand withdrawn from
April 1, 2015.
RBI issued revised Prudential Guidelines on Restructuring of Advances by Banks and Financial Institutions on
May 30, 2013. Pursuant to the revised guidelines the provision has been increased to 5.00% in respect of new
restructured standard accounts (flow) with effect from June 1, 2013 and in a phased manner for the stock of
restructured standard accounts as of March 31, 2014 as follows:

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a)

4.25% with effect from March 31, 2015 (spread over the four quarters of 2014-2015); and

b) 5.00% with effect from March 31, 2016 (spread over the four quarters of 2015-2016).
CDR mechanism (CDR System)
The institutional mechanism for restructuring has been set up through the establishment of the CDR System in
2001. The CDR System is a joint forum of all banks and financial institutions and operates as a non-judicial
body.
Decisions in relation to a particular advance require a super-majority amongst the participating banks and
financial institutions. The Prudential Norms as mentioned above equally apply to the accounts restructured
under the CDR System.
SARFAESI Act
The SARFAESI Act provides for sale of financial assets by banks and financial institutions to asset
reconstruction companies. The Prudential Norms issued by RBI prescribe 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.
In January 2013, the SARFAESI Act was amended by the Enforcement of Security Interest and Recovery of
Debt Laws (Amendment) Act, 2012. Pursuant to the amendment, means for recovery of assets available to
banks and financial institutions have been strengthened. For instance, securitisation and reconstruction
companies have been permitted to convert part of their debt into shares of a borrower company for the purpose
of asset reconstruction. Further, banks and financial institutions have been 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. The amendment also enables banks and financial institutions to enter into
settlement or compromise with the borrower and empowers DRTs to pass an order acknowledging any such
settlement or compromise.
Priority sector lending
The Master Circular on Priority Sector Lending issued on July 1, 2014 by RBI sets out the broad policy in
relation to priority sector lending. In accordance with this master circular, the priority sectors for all scheduled
banks include: (a) agriculture; (b) MSEs; (c) education; (d) housing; (e) export credit; and (f) others. While
export credit is no longer a separate category under this circular, export credit for eligible activities under
agriculture and MSE will qualify for priority sector lending under such categories. Under RBI guidelines, the
priority sector lending targets are linked to adjusted net bank credit (net bank credit plus investments made by
banks in non-statutory liquidity bonds included in the held-to-maturity category and not taking in account the
recapitalisation bonds floated by the Government) or credit equivalent amount of off-balance sheet exposure,
whichever is higher, as on March 31 of the previous 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.
In February 2011, RBI excluded loans sanctioned to NBFCs, which are then lent onwards to individuals and
entities with gold jewellery as collateral, from classification as direct agriculture lending under priority sector
requirements. Similarly, investments made by banks in securitised assets originated by NBFCs, where the
underlying assets were loans secured against gold jewellery, and the purchase/assignment of a gold loan
portfolio from NBFCs, were also made ineligible for classification under agriculture sector lending. In May
2011, RBI declassified fresh loans to NBFCs for on-lending to individuals, so that such loans were no longer a
priority sector, effective from April 1, 2011. Pursuant to this circular, loans extended by banks to NBFCs are
classified as priority sector advances only if the NBFC is registered as a NBFC MFI under applicable law.
However, loans to microfinance institutions, including NBFCs operating as microfinance companies, sanctioned
prior to April 1, 2011, for on-lending to individuals, continue to be eligible for classification under the priority
sector category.
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Export credit
As per the Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters
issued on July 1, 2014 banks can offer export credit at interest rates at or above the base rate. Pre-shipment and
post-shipment export credit can be provided in both Indian Rupees and foreign currencies. Banks are required to
reach a level of outstanding export credit equivalent of 12.00% of each banks adjusted net bank credit.
Exposure norms
As a prudent measure aimed at better risk management and avoidance of concentration of credit risk, 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). RBI has prescribed exposure
ceiling for a single borrower as 15.00% of capital funds and group exposure limit as 40.00% of capital funds.
The limit may be increased to 20.00% and 50.00%, respectively, provided that the excess exposure is on account
of extension of credit for infrastructure projects. Banks may, in exceptional circumstances, with the approval of
their board of directors, consider enhancement of the exposure to a borrower up to further 5.00% of capital
funds, subject to the borrower (single or group) consenting to the banks making appropriate disclosures in their
annual reports. The total exposure to a single NBFC has been limited to 10.00% of the banks capital funds
while exposure to a single 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 lent by the NBFC to infrastructure sectors.
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, as on March 31 of the previous year. Within this overall ceiling, the
banks direct investment in shares, convertible bonds, convertible debentures, units of equity-oriented mutual
funds and all exposures to venture capital funds (both registered and unregistered) should not exceed 20.00% of
its net worth.
Country Risk Management
RBI has issued detailed guidelines on country risk management that cover banks exposure to those countries to
which they have a net funded exposure of 1% of the funded assets and no provision is maintained on such
country exposure. The countries are categorised into seven risk categories, namely insignificant, low, moderate,
high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded
scale ranging from 0.25% to 100%. Banks may make a lower level of provisioning of 25% of the requirement in
respect of exposures with contractual maturity of less than 180 days.
Consolidated Supervision Guidelines
In Fiscal 2003, RBI issued guidelines for consolidated accounting and consolidated supervision for banks. These
guidelines became effective April 1, 2002, and the principal features thereof are:

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

Banks are required to submit to RBI, consolidated prudential returns reporting their compliance with
various prudential norms on a consolidated basis, excluding insurance subsidiaries. Compliance on a
consolidated basis is required in respect of the following main prudential norms:
-

Single borrower exposure limit of 15% of capital funds (20% of capital funds provided the additional
exposure of up to 5% is for the purpose of financing infrastructure projects);

Borrower group exposure limit of 40% of capital funds (50% of capital funds provided the additional
exposure of up to 10% is for the purpose of financing infrastructure projects);

Deduction from Tier I capital of the bank, of any shortfall in capital adequacy of a subsidiary for which
capital adequacy norms are specified; and

Consolidated capital market exposure limit of 2% of total on-balance sheet assets (excluding intangible
assets and accumulated assets). Within the total limit, investment in shares, convertible bonds and

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debentures and units of equity-oriented mutual funds should not exceed 10% of the Banks
consolidated net worth.
Prudential norms for Classification, Valuation and Operation of Investment Portfolio by Banks
Pursuant to the Prudential norms for Classification, Valuation and Operation of Investment Portfolio by Banks
issued on July 1, 2014, RBI has classified the investment portfolio of Banks (including SLR Securities and Non
SLR securities) as (i) held to maturity, (ii) available for sale, and (iii) held for trading. Investments classified
under held to maturity need not be marked to market and will be carried at acquisition cost, unless it is more
than the face value, in which case the premium should be amortised over the period remaining to maturity. The
individual scrips in the available for sale category will be marked to market at quarterly or at more frequent
intervals. Domestic securities under this category shall be valued scrip-wise and depreciation / appreciation shall
be aggregated for each classification. Foreign investments under this category shall be valued scrip-wise and
depreciation / appreciation shall be aggregated for five classifications (i.e. Government securities (including
local authorities), shares, debentures and bonds, subsidiaries and / or joint ventures abroad and other
investments (to be specified)). Further, the investment in a particular classification, both in domestic and foreign
securities, may be aggregated for the purpose of arriving at net depreciation / appreciation of investments under
that category. Net depreciation, if any, is to be provided for and net appreciation, if any, is to be ignored. Net
depreciation required to be provided for in any one classification is required to not be reduced on account of net
appreciation in any other classification. The individual scrips in the held for trading category will be marked to
market at monthly or at more frequent intervals and provided for as in the case of those in the available for sale
category. In respect of securities included in any of the three categories where interest / principal is in arrears,
banks are required to not rely on income from the securities and to make appropriate provisions for the
depreciation in the value of the investment.
Short-selling of Government securities
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. 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 (WI) market or allotment in primary auction.
Regulations relating to interest rates on Rupee deposits held in domestic, NRO and NRE Accounts
As per the Master Circular on Interest Rates on Rupee Deposits held in Domestic, NRO and NRE Accounts,
dated July 1, 2014, RBI has permitted banks to independently determine their interest rates on savings and term
deposits (minimum period of seven days) under domestic/NRO accounts. Banks are also free to determine
interest rates for savings deposits and term deposits of maturity of one year and above, under NRE deposit
accounts. However, interest rates offered by banks on NRO and NRE deposits cannot be higher than those
offered by them on comparable domestic Rupee deposits.
With respect to savings and time deposits accepted from resident employees and senior citizens, the Bank is
permitted by RBI to pay additional interest over the interest payable on deposits from the public, which must not
exceed 1.00% in case of accounts of employees.
With a view to increasing the availability of financial services across regions and population segments, in
August 2012, RBI advised banks to make available a Basic Savings Bank Deposit Account account requiring
no minimum balances and charges, making these accounts accessible to low-income segments of the population.
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 DICGC, a wholly-owned subsidiary of 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.
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,
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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. 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 and anti-money laundering
RBI issued a master circular on July 1, 2014 prescribing the guidelines for KYC and AML procedures. Banks
are required to formulate their KYC policies which, at a minimum, must incorporate: (a) a customer acceptance
policy (laying down explicit criteria for acceptance of customers and defining risk parameters); (b) customer
identification procedures (including the allotment of the unique customer identification code for existing
customers by March 31, 2014); (c) monitoring of transactions; and (d) risk management. The guidelines provide
that banks should undertake customer identification procedures when: (a) establishing a banking relationship;
(b) carrying out a financial transaction; or (c) the bank doubts the authenticity or the adequacy of the previously
obtained customer identification data.
With effect from April 1, 2012, banks are not permitted to make payment of cheques, drafts, pay orders or
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.
In July 2013, RBI stipulated instructions that are required to be followed by the banks while selling third party
products for mitigating reputational risk to banks and to enable a holistic view of a customers transactions.
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 net demand and time
liabilities, excluding interbank deposits, by way of a balance in a current account with RBI. The CRR is 4.00%
with effect from February 9, 2013. RBI does not pay any interest on CRR balances. The CRR has to be
maintained on an average basis for a fortnightly period and should not be below 95.00% of the required CRR on
any day of the fortnight. RBI may impose penal interest at the rate of 3.00% 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 5.00% 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 its SLR, a specified percentage of its net demand and time
liabilities by way of liquid assets like cash, gold or approved unencumbered securities. The percentage of this
liquidity ratio is fixed by RBI from time to time, pursuant to Section 24 of the Banking Regulation Act. At
present, RBI requires banks to maintain an SLR of 22.00%, with effect from August 09, 2014. Further, in
December 2011, RBI has permitted banks to avail funds from RBI on an overnight basis, under the MSF,
against their excess SLR holdings. Additionally, they can also avail themselves of funds, on an overnight basis
below the stipulated SLR, up to 2.00% of their respective net demand and time liabilities outstanding at the end
of the second preceding fortnight.
Regulations on Asset Liability Management
RBI has advised banks to actively monitor the difference in the amount of assets and liabilities maturing or
being re-priced in a particular period and place internal prudential limits on the gaps in each time period.
Additionally, RBI has asked banks to manage their asset-liability structure such that the negative liquidity gap in
the next day, 2-7 days, 8-14 days, and 15-28 days time periods does not cumulatively exceed 5%, 10%, 15% and
20%, respectively, of cash outflows in these time periods. While banks may undertake dynamic liquidity
management and should prepare the statement of structural liquidity on a daily basis, such statements should,
however, be reported to RBI, as on the first and third Wednesday of every month with effect from April 1, 2008.
On the basis of RBIs directions, we have fixed limits for mismatches as a percentage to outflows and
cumulative mismatches for all the other time buckets and the Board of Directors have approved of these limits.
In case of interest rate sensitivity, we have set limits for cumulative mismatches up to one year to earning assets
and individual bucket wise limits as a ratio of rate sensitive liabilities.
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
147

Foreign Exchange Management Act. All branches should monitor all non-resident accounts to prevent money
laundering. RBI Master Circular on External Commercial Borrowings and Trade Credits, dated July 1, 2014,
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.
RBI Master Circular on Risk Management and Interbank Dealings, dated July 1, 2014, states that all categories
of overseas foreign currency borrowings of banks, including existing external commercial borrowings and loans
or overdrafts from their head office, overseas branches and correspondents and overdrafts in nostro accounts
(not adjusted within five days), shall not exceed 50.00% of their unimpaired Tier I capital or U.S.$ 10 million
(or its equivalent), whichever is higher. Overseas borrowings for the purpose of financing export credit, capital
funds raised/augmented by the issue of innovative perpetual debt instruments and debt capital instruments in
foreign currency, subordinated debt placed by head offices of foreign banks with their branches in India as Tier
II capital and any other overseas borrowings with the specific approval of RBI would continue to be outside the
limit of 50.00%.
Secrecy obligations
A banks obligations relating to maintaining secrecy arise out of common law principles governing its
relationship with its customers. Subject to certain exceptions, a bank cannot disclose any information to third
parties. Further, RBI may, in the public interest, publish the information obtained from the bank.
Regulations Governing Offshore Banking Units
The Government and RBI have permitted banks to set up offshore banking units in special economic zones,
which are specially delineated duty free enclaves deemed to be foreign territory for the purpose of trade
operations, duties and tariffs. The key regulations applicable to offshore banking units include, but are not
limited to, the following:

Permission of RBI is required for setting up offshore banking units.

No separate assigned capital is required. However, the parent bank is required to provide a minimum of
U.S. $10 million to its offshore banking unit.

Offshore banking units are exempt from CRR requirements.

Banks are required to maintain the SLR. However, RBI may exempt a banks offshore banking unit from
SLR requirements for a specific period on application by the bank.

An offshore banking unit can only have external sources for raising foreign currency funds with residents in
India, unless such a person is eligible under the existing exchange control regulations to invest/maintain
foreign currency accounts abroad.

All prudential norms applicable to overseas branches of Indian banks apply to offshore banking units. The
offshore banking units are also required to follow the best international practice of 90 days payment
delinquency norm for income recognition, asset classification and provisioning.

Offshore banking units are required to adopt liquidity and interest rate risk management policies prescribed
by RBI in respect of overseas branches of Indian banks as well as within the overall risk management and
asset and liability management framework of subject to monitoring by our board of directors at prescribed
intervals.

Offshore banking units may operate and maintain balance sheets only in foreign currency and are not
allowed to deal in Indian rupees except for having a special rupee account out of the convertible funds in
order to meet their daily expenses. These branches are prohibited from participating in the domestic call,
notice, term etc., money market and payment system.

The loans and advances of offshore banking units would not be reckoned as net bank credit for computing
priority sector lending obligations.

148

Offshore banking units must follow the Know Your Customer guidelines and must be able to establish the
identity and address of the participants in a transaction, the legal capacity of the participants and the identity
of the beneficial owner of the funds.

A bank cannot borrow from its offshore banking unit.

The exposures of an offshore banking unit in the domestic tariff area should not exceed 25% of its total
liabilities as at the close of business of the previous working day, at any point of time.

Ownership restrictions
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 subject to guidelines for
setting up branches or subsidiaries of foreign banks issued by RBI. Shares held by FIIs / FPIs / qualified foreign
investors within this limit of 74.00% cannot exceed 24.00% of the paid-up capital of the bank unless approved
by the board of directors and shareholders of the bank. However, FIIs / FPIs / qualified foreign investors cannot
hold more than 49.00% of the paid-up capital of the bank.
The Banking Regulation Act, as amended, requires any person to seek prior approval of RBI, to acquire or agree
to acquire, shares or voting rights of a bank, directly or indirectly, by himself or with persons acting in concert,
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 an aggregate shareholding of such person to be
5.00% or more of paid-up capital of a bank, or entitles him to exercise 5.00% or more of the voting rights in a
bank. Further, RBI may, by passing an order, restrict any person holding more than 5.00% of the total voting
rights of a bank from exercising voting rights in excess of 5.00%, if such person is deemed to be not fit and
proper by RBI.
Investments in Indian companies can be made both by non-resident and resident Indian entities. While
investment by a non-resident entity in an Indian company is considered a foreign investment, investment by
resident Indian entities could also comprise a non-resident investment. If the Indian investing company is
owned or controlled by non-resident entities, investments made by such an investing company into an Indian
company may also be considered as a foreign investment.
Guidelines for merger and amalgamation of private sector banks
In May 2005, RBI issued guidelines on Mergers and Amalgamation of Private Sector Banks. The guidelines
relate to: (a) an amalgamation of two banking companies; and (b) an amalgamation of a NBFC with a banking
company. In the case of an amalgamation of two banking companies, the draft scheme of amalgamation must be
approved by the board of directors and majority of the shareholders of each of the banking companies.
Additionally, such approved draft scheme must also be submitted to RBI for approval. Where a NBFC is
proposed to be amalgamated into a banking company, the banking company should obtain the approval of the
board of directors and RBI before it is submitted to the relevant high court for approval.
Guidelines for Licensing of New Banks in the Private Sector
RBI issued Guidelines for Licensing of New Banks in the Private Sector on February 22, 2013. In terms of these
guidelines, eligible promoters may promote new banks through a wholly-owned NOFHC. The guidelines lay
down the criteria for an eligible promoter including the fit and proper criteria to be fulfilled by eligible
promoters. The guidelines also prescribe in detail, the corporate structure of the Non-Operative Financial
Holding Company (NOFHC), voting equity capital requirement and shareholding of the NOFHC, the
regulations that will be applicable to the new banks, restrictions on foreign shareholding in the bank, corporate
governance norms to be adhered to by the NOHFC, prudential norms applicable to the NOFHC, exposure norms
applicable to the NOFHC and the bank and other financial entities held by the NOFHC apart from the bank,
business plan of the bank and various other conditions applicable to banks. The guidelines also prescribe the
procedure for application for new banking licences and the procedure for RBI decisions in this regard. In terms
of the guidelines, applications for new licences were to be made to RBI in the prescribed form along with
requisite information before July 1, 2013.

149

Guidelines on Management of Intra-Group Transactions and Exposures

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. These guidelines
will become effective from October 1, 2014.
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. This framework became fully effective from April 1, 2014.
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, RBI issued Guidelines on a JLF and a CAP detailing guidelines on formation of the JLF and
adoption of the CAP for operationalising the aforementioned framework.
Special status of banks in India
The special status of banks is recognised under various statutes including the SICA, Recovery of Debts Due to
Banks and Financial Institutions Act, 1993, and the SARFAESI Act. As a bank, we are entitled to certain
benefits under the provisions of these legislations.
Banking Ombudsman Scheme
The Banking Ombudsman Scheme 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, RBI issued guidelines on Declaration of Dividends by Banks, which prescribed certain
conditions for declaration of dividends by banks, such as:
150

a)

b)
c)

d)
e)
f)

g)
h)

i)

j)

only banks with a CRAR of at least 9.00% in each of the prior two completed years together with the
accounting year for which it proposes to declare a dividend and with net NPAs of less than 7.00% are
eligible to declare a dividend. In the event that any bank does not meet the above CRAR requirement, but
has a CRAR of at least 9.00% for the accounting year for which it proposes to declare dividend and a net
NPA ratio of less than 5.00%, it would be eligible to declare a dividend;
the bank should comply with the provisions of Sections 15 and 17 of the Banking Regulation Act;
the bank should comply with the prevailing regulations and guidelines issued by RBI, including creating
adequate provisions for impairment of assets and staff retirement benefits, transfer of profits to statutory
reserves, etc;
any dividend can only be paid out of profit in the year in respect of which the dividend is to be paid;
the maximum permissible dividend payout ratio is 40.00% of net profit in the year in which the dividend
is to be paid;
in case the profit for the relevant period includes any extra-ordinary profits / income, the payout ratio
shall be computed after excluding such extra-ordinary items for reckoning compliance with the
prudential payout ratio;
RBI should not have placed any explicit restrictions on the bank for declaration of dividends;
the financial statements pertaining to the Fiscal Year for which the bank is declaring a dividend should be
free of any qualifications by the statutory auditors which have an adverse bearing on the profit during
that year. In case of any qualification to that effect, the net profit should be suitably adjusted while
computing the dividend payout ratio;
in case the profit for the relevant period includes any extra-ordinary profits / income, the payout ratio
shall be computed after excluding such extra-ordinary items for reckoning compliance with the
prudential payout ratio; and
the dividend payout is linked to a matrix of the Banks CRAR and NPA ratios as follows:
Category
A
B
C
D

Total CRAR
11% or more for each of the last 3 years
10% or more for each of the last 3 years
9% or more for each of the last 3 years
9% or more in the current year.

0%
Up to 40
Up to 35
Up to 30
Up to 10

Net NPA Ratio

0%-3%
3%-5%
Up to 35
Up to 25
Up to 30
Up to 20
Up to 25
Up to 15
Up to 10
Up to 5

5%-7%
Up to 15
Up to 10
Up to 5
Nil

Income tax benefits

We are entitled to certain tax benefits under the IT Act including the following:
a)

Our income earned from infrastructure financing, which is interest income on long-term financing
(defined as loans and advances extended for a period of not less than five years) for infrastructure
projects, is exempt from income tax.

b)

The income of non-resident persons and persons not ordinarily resident in India, by way of interest on
our deposits in a foreign currency and which qualifies under Section 10(15) of the Income Tax Act, is
exempt from income tax.

c)

Our dividend income earned from shares held in domestic companies is exempt from income tax.
However the Bank may depending on the circumstances be subject to disallowance under Section 14A of
the IT Act towards interest and certain administrative expenses; and

d)

We are entitled to a tax deduction on the provisioning towards bad and doubtful debts equal to 7.50% of
the our total business income, computed before making any deductions prescribed under Section
36(1)(viia) of the IT Act and to the extent of 10.00% of the aggregate average advances made by our
rural branches computed in the manner prescribed. However no deduction will be allowed for the amount
of bad debt written off under Section 36(2) of the IT Act unless that amount is debited to the provision
made under Section 36(1)(viia) of the IT Act in that previous year.

Corporate governance
We adhere to certain corporate governance requirements as prescribed by Clause 49 of our Listing Agreement
with BSE and NSE, including, complying with requirements for a minimum number of independent directors on
151

the Board and specifications for the composition of various committees such as the audit committee and
remuneration committee. We also comply with the guidelines issued by RBI, pursuant to the applicable
provisions of the Banking Regulation Act in relation to the board composition and adhere to recommendations
of the Dr. Ganguly Committee, including among others the eligibility criteria and fit and proper norms for
nomination of directors, criteria for commonality of directors of banks and board composition.

152

BOARD OF DIRECTORS AND SENIOR MANAGEMENT

Overview
Our Board currently consists of twelve Directors. Our Articles of Association provide that the number of
directors shall not be less than three (3) nor more than fifteen (15). Further, our Articles of Association provide
that one-third of the members of the Board of Directors liable to retire by rotation will retire every year. A
retiring director shall be eligible for re-appointment.
Directors
The following table sets forth details regarding the Board as on the date of this Placement Document:
Sr.
No.
1.

Name, Address, Age and Term

Mr. Nasser Munjee

DIN
00010180

Occupation

Designation

Consultant,
Advisor

Non-Executive (Part Time)

Chairman

00061194

Service

Managing Director & Chief

Executive Officer

01676752

Retired

Non-Executive Independent
Director

01089938

Lawyer

Non-Executive Independent
Director

05166241

Service

Non-Executive Independent
Director

Address:
Benedict Villa House No. 471,
Saudevado Charao Island,
Tiswadi, Goa 403 102
Age: 61

2.

Term: Three years from August 19, 2014

Mr. Murali M. Natrajan
Address:
5th Floor, Sanghi House,
Nepeansea Road,
Mumbai 400 006
Age: 52

3.

Term: Three years from April 29, 2012

Mr. Sukh Dev Nayyar
Address:
5, Rockdale, 16, L. D. Ruparel Road,
Malabar Hill,
Mumbai 400 006
Age: 72

4.

Term: Upto five years from April 1, 2014

Mr. Suhail Nathani
Address:
Flat No. 801, 8th Floor, Prabhu Kutir,
Altamount Road,
Mumbai 400 026
Age: 49

5.

Term: Upto five years from April 1, 2014

Mr. Altaf Jiwani
Address:
10/1003, Upohar Luxury Chakgaria,
Kolkata 700 094
Age: 47

153

Sr.
No.

6.

Name, Address, Age and Term

DIN

Occupation

Term: Upto five years from April 1, 2014

Mr. Amin Manekia

00053745

BusinessMarketing, Self
Employed

Non-Executive Independent
Director

06382169

Investor

Non-Executive Independent
Director

00003940

Chartered
Accountant in
Public Practice

Non-Executive Independent
Director

02133263

Retired

Non-Executive Independent
Director

00882723

Retired

Non-Executive Independent
Director

00004272

Retired

Non-Executive Independent
Director

Address:
10 Bhaveshwar Sagar,
20 Nepeansea Road,
Mumbai 400 036

Designation

Age: 53

7.

Term: Upto five years from April 1, 2014

Mr. Imran Contractor
Address:
26 Sea Bird,
B J Road, Bandra (W),
Mumbai 400 050
Age: 52

8.

Term: Upto five years from April 1, 2014

Mr. Keki Elavia
Address:
2A, Anand Bhavan, 36th Road,
Near National College,
Bandra (W),
Mumbai 400 050
Age: 68

9.

Term: Upto five years from April 1, 2014

Mr. C. Narasimhan
Address:
98, 6th Main Road,
5th Block, Jayanagar,
Bangalore 560 041
Age: 63

10.

Term: Upto five years from April 1, 2014

Mr. Nalin Shah
Address:
A/18-I Great Eastern Royale,
333 Bellasis Road, Tardeo,
Mumbai 400 034
Age: 67

11.

Term: Upto five years from April 1, 2014

Mr. S. Sridhar
Address:
D-905, Ashok Towers,
Dr. S. S. Rao Road,
Parel, Mumbai 400 012
Age: 63

154

Sr.
No.

12.

Name, Address, Age and Term

DIN

Term: Upto five years from April 1, 2014

Mr. Jamal Pradhan

00308504

Address:
F-2, Dvilla Apts,
4 Edward Road, Off Queens Road,
Bangalore 560 052

Occupation

Business
(manufacturer
and exports)

Designation

Non-Executive Independent
Director

Age: 45
Term: Upto five years from April 1, 2014

All our Directors are Indian residents, except Mr. Suhail Nathani who is a citizen of the U.S.A. None of our
Directors are related to each other.
Mr. Nasser Munjee, is a non-executive director and our non-executive chairman. He has been a non-executive
director since June 2005 and our non-executive chairman since August 2005. He is also the chairman of the
Executive Committee, the Capital Raising Committee and the Corporate Social Responsibility Committee of the
Board. Mr. Munjee joined the Chairman of ICICI, H. T. Parekh, to establish the first housing finance company
in India, Housing Development Finance Corporation (HDFC), where he rose to be an executive director on its
board with wide responsibilities. Mr. Munjee was instrumental in establishing Infrastructure Development
Finance Company Limited (IDFC). Mr. Munjee is a director on the boards of other 10 public companies in
India, including Tata Motors Limited, Tata Chemicals Limited, Britannia Industries Limited, Cummins India
Limited, ABB Limited and Ambuja Cements Limited. He is also the chairman of two other Aga Khan
Development Network (AKDN) institution in India the Aga Khan Rural Support Programme (AKRSP) and
the Muniwarabad Charitable Trust. He has served as the President of the Bombay Chamber of Commerce and
Industry and on several government task forces on housing and urban development. Mr. Munjee obtained
Bachelors and Masters degrees at the London School of Economics, United Kingdom, and was earlier
educated at the Leys School in Cambridge.
Mr. Murali M. Natrajan, is our Managing Director & Chief Executive Officer. He became our Managing
Director & Chief Executive Officer in April 2009. Prior to joining us, Mr. Natrajan served in various roles at
Standard Chartered Bank, including as the Global Head for SME Banking in the Standard Chartered Bank,
Singapore and as Head of Consumer Banking for India & Nepal. He previously worked with the American
Express TRS in India for five years and then with Citibank for 14 years in various disciplines. Mr. Natrajan
obtained a Bachelor of Commerce (Honours course) degree in 1982 at Delhi and qualified as a Chartered
Accountant in 1986.
Mr. Sukh Dev Nayyar, is a non-executive independent director of the Bank. He has been a non-executive
independent director of the Bank since August 2007. He was an independent director on the boards of Greaves
Cotton Limited and Diamond Trust Bank Kenya Limited. He was the Chairman & Managing Director of ING
Asset Management Company from 1998 to 2002. Mr. Nayyar obtained an M.Sc. degree in Physics (Hons.), and
was an Associate of the Institute of Bankers, England.
Mr. Suhail Nathani, is a non-executive independent director of the Bank. He has been a non-executive
independent director of the Bank since January 2009. He is a founder Partner of Economic Laws Practice, a law
firm with offices in Mumbai, New Delhi, Ahmedabad and Pune. His areas of legal practice include corporate
and commercial matters, private equity and international trade. He has represented the Government of India at
the World Trade Organization (Panel and Appellate Body). He serves as an independent director of Phoenix
Mills Limited and is part of the India advisory board of Duke University. Mr. Nathani obtained an M.A. in Law
from Cambridge University, United Kingdom, and an LL.M. degree from Duke University in the United States.
He is enrolled as an advocate in India and is admitted to the New York State Bar.
Mr. Altaf Jiwani, is a non-executive independent director of the Bank. He has been a non-executive
independent director of the Bank since January 2012. He has approximately 20 years of experience in corporate
finance in the electrical, textile and automobile industries and expertise in foreign exchange, risk management
and trade finance. He received the Outstanding Achiever award in the RP-SG Group during 2007-2008 and is
currently on the Board of Philips Carbon Black Limited, handling Finance function, Specialty Black and Power.
155

Mr. Jiwani obtained a B.E. (Production) degree from V.J.T.I, Mumbai, and M.M.S. (Finance) degree from L. N.
Welingkar Institute of Management Studies, Mumbai.
Mr. Amin Manekia, is a non-executive independent director of the Bank. He has been a non-executive
independent director of the Bank since January 2012, and was earlier a director from September 2000 until
September 2008. Mr. Manekia is a director of IVP Limited. Mr. Manekia has obtained an M.B.A. degree from
Babson College in United States of America, and a B.Com. degree from Mumbai University.
Mr. Imran Contractor, is a non-executive independent director of the Bank. He has been a non-executive
independent director of the Bank since October 2012. Mr. Contractor currently manages his own investments.
Mr. Contractor has a previous experience which include association with W. I. Carr (Far East) Limited and
Stratcap Securities India Private Limited as head of research, advisor to several corporate managements and
high net worth individuals on investment strategy and a consultant with Reliance Mutual Fund. Mr. Contractor
has obtained a B.Com degree and is a qualified Chartered Accountant and a cost accountant. Mr. Contractor also
holds a Certificate in Software Technology from the National Centre for Software Technology.
Mr. Keki Elavia, is a non-executive independent director of the Bank. He has been a non-executive independent
director of the Bank since October, 2012. Mr. Elavia has an experience as a Chartered Accountant. Mr. Elavia
was associated with M/s. Kalyaniwala & Mistry, a chartered accountancy firm. Mr. Elavia is currently the sole
proprietor of a chartered accountancy firm. Mr. Elavia is on the Board of several listed and unlisted companies.
Mr. Elavia is also on the Board of Trustees of various public charitable trusts. Mr. Elavia has obtained a B.Com
degree from the University of Mumbai and is a Fellow Member of the Institute of Chartered Accountants of
India.
Mr. C. Narasimhan, is a non-executive independent director of the Bank. He has been a non-executive
independent director of the Bank since October 2012. Mr. Narasimhan was previously with the State Bank of
India (SBI). Mr. Narasimhan has obtained a MBA from University of Madras.
Mr. Nalin Shah, is a non-executive independent director of the Bank. He has been a non-executive independent
director of the Bank since October 2012. Mr. Shah retired as a partner of M/s. Deloitte Haskins & Sells,
Chartered Accountants and M/s. S.B. Billimoria & Co., Chartered Accountants. Mr. Shah has been a member of
the Expert Advisory Committee and the Accounting Standards Board of the Institute of Chartered Accountants
in India. Mr. Shah was a member of the Company Law Committee of the Bombay Chamber of Commerce &
Industry. Mr. Shah was awarded a gold key by gamma omicron chapter of the international fraternity of delta
sigma pi at University of San Francisco for scoring highest in his business administration course. Mr. Shah has
obtained a B.Sc (Bus. Admin., USA) degree and is a Chartered Accountant.
Mr. S. Sridhar, is a non-executive independent director of the Bank. He has been a non-executive independent
director of the Bank since October 2012. Mr. Sridhar retired as a Chairman and Managing Director of Central
Bank of India (CBI), which is amongst Indias oldest and largest public sector banks. Mr. Sridhar was also the
Chairman and Managing Director of National Housing Bank (NHB), the regulator of housing finance
companies. Mr. Sridhar was earlier the Executive Director of EXIM Bank. Mr. Sridhar started his career with
State Bank of India. Mr. Sridhar has obtained a M.Sc. degree frm IIT Delhi and a Diploma in Systems
Management.
Mr. Jamal Pradhan, is a non-executive independent director of the Bank. He has been a non-executive
independent director of the Bank since January 2013. Mr. Pradhan is a Commerce Graduate from H.R. College
of Commerce and Economics, Mumbai and has specialized in the areas of exports and small scale industry. Mr.
Pradhan is a promoter director of Pradhan Mercantile Private Limited and has experience in export and small &
medium manufacturing industry.
Compensation of the Directors
Non-Executive Directors
The non-executive Directors are paid remuneration consisting of sitting fees, which is determined by the Board
of Directors. The following table sets forth the compensation paid by us to the present non-executive Directors
of the Bank for the current Fiscal 2015 (upto August 31, 2014) and for Fiscal Years 2014, 2013 and 2012:

156

Name
Mr. Sukh Dev Nayyar
Mr. Darius Udwadia
Mr. Suhail Nathani
Mr. Altaf Jiwani
Mr. Amin Manekia
Mr. Imran Contractor
Mr. Keki Elavia
Mr. C. Narasimhan
Mr. Jamal Pradhan
Mr. Nalin Shah
Mr. S. Sridhar
Total

Siting Fees for

Fiscal Year 2012
595,000
220,000
270,000
20,000
305,000
1,190,000

Siting Fees for

Fiscal Year 2013
525,000
150,000
160,000
150,000
625,000
235,000
140,000
85,000
40,000
130,000
280,000
2,520,000

Siting Fees for

Fiscal Year 2014
425,000
100,000
100,000
200,000
450,000
490,000
370,000
450,000
170,000
280,000
410,000
3,445,000

(Amount in `)
Siting Fees for Fiscal 2015
(upto August 31, 2014)
140,000
NIL*
30,000
100,000
210,000
180,000
180,000
260,000
100,000
130,000
220,000
1,550,000

*Mr. Darius Udwadia resigned with effect from January 14, 2014.

Managing Director
The remuneration paid to Mr. Murali M. Natrajan during the fiscal year ended March 31, 2012 is the following:
Particulars
Basic
Allowance and Perquisite value
Contribution to Provident Fund
No. of Employees Stock Options granted during the year (2011-12)
No. of Employees Stock Options granted during the year (2010-11)

Amount (`)
11,060,700
16,184,944
1,327,284
NIL
2,000,000

RBI vide letter DBOD No.2402/29.03.001/2011-12 dated August 11, 2011 has approved revision in remuneration and
payment of Bonus of ` 2,415,000 for FY 2010-11 to Mr. Murali M. Natrajan, MD & CEO. The Board has noted this
approval on October 12, 2011.

The remuneration paid to Mr. Murali M. Natrajan during the fiscal year ended March 31, 2013 is the following:
Particulars
Basic
Allowance and Perquisite value
Bonus (F.Y.) 2011-12
Contribution to Provident Fund
No. of Employees Stock Options granted during the year (2012-13)
No. of Employees Stock Options granted during the year (2011-12)

Amount (`)
12,720,000
13,259,555
2,765,175
1,526,400
750,000
NIL

RBI vide letter DBOD No.15543/29.03.001/2011-12 dated April 17, 2012 has approved revision in remuneration w.e.f. April
1, 2012 to MD & CEO. RBI vide letter DBOD No.3836/29.03.001/2012-13 dated September 07, 2012 has approved payment
of Bonus of ` 2,765,175 for FY 2011-12 to MD & CEO. Board has noted RBIs approvals on October 12, 2012.

The remuneration paid to Mr. Murali M. Natrajan during the fiscal year ended March 31, 2014 is the following:
Particulars
Basic
Allowance and Perquisite value
Bonus (F.Y.) 2012-13
Contribution to Provident Fund
No. of Employees Stock Options granted during the year (2013-14)
No. of Employees Stock Options granted during the year (2012-13)

Amount (`)
14,628,000*
15,250,747*
6,037,080*
1,755,360*
NIL
750,000

*RBI vide letter no. DBOD.No.10737/29.03.001/2013-14 dated December 2, 2013 has approved the revision in
remuneration of Mr. Murali M. Natrajan MD & CEO of the Bank with effect from April 1, 2013. RBI has also approved
payment of bonus of ` 6,037,080 for the Fiscal Year 2013 to Mr. Murali M. Natrajan vide letter no.
DBOD.No.14409/29.03.001/2013-14 dated February 13, 2014. The Board of Directors has noted the aforesaid approvals of
RBI on April 15, 2014. Relevant amounts are provided for in the accounts for FY14 and included in the figures marked*.

The remuneration paid to Mr. Murali M. Natrajan for Fiscal 2015 (upto August 31, 2014) is the following:

157

Particulars
Basic
Allowance and Perquisite value
Contribution to Provident Fund
No. of Employees Stock Options granted during the year (2014-15)
No. of Employees Stock Options granted during the year (2013-14)

Amount (`)
8,003,000
5,122,307
960,360
NIL
NIL

Chairman
Mr. Nasser Munjee has been paid the following remuneration during the fiscal year ended March 31, 2012:
Particulars
Remuneration
Sitting fees for attending Board/Committee Meetings

Amount (`)
1,200,000*
190,000

*RBI vide its letter No.DBOD.No.857/29.03.001/2011-12 dated July 15, 2011 approved the remuneration paid to Mr.
Nasser Munjee.

Mr. Nasser Munjee has been paid the following remuneration during the fiscal year ended March 31, 2013:
Particulars
Remuneration
Sitting fees for attending Board/Committee Meetings

Amount (`)
1,200,000*
140,000

*RBI vide its letter No.DBOD.No.857/29.03.001/2011-12 dated July 15, 2011 and the Government of India, Ministry of
Corporate Affairs (MCA) vide its letter dated March 26, 2013 approved the remuneration paid to Mr. Nasser Munjee.

Mr. Nasser Munjee has been paid the following remuneration during the fiscal year ended March 31, 2014:
Particulars
Remuneration
Sitting fees for attending Board/Committee Meetings

Amount (`)
1,200,000*
120,000

*RBI vide its letter No.DBOD.No.857/29.03.001/2011-12 dated July 15, 2011 and the Government of India, Ministry of
Corporate Affairs (MCA) vide its letter dated March 26, 2013 approved the remuneration paid to Mr. Nasser Munjee.

Mr. Nasser Munjee has been paid the following remuneration during Fiscal 2015 (upto August 31, 2014):
Particulars
Remuneration
Sitting fees for attending Board/Committee Meetings

Amount (`)
500,000*
NIL

*RBI vide its letter No.DBOD.No.857/29.03.001/2011-12 dated July 15, 2011 and the Government of India, Ministry of
Corporate Affairs (MCA) vide its letter dated March 26, 2013 approved the remuneration paid to Mr. Nasser Munjee.

Performance linked variable compensation

The Variable Compensation offered is linked to the Banks performance and could even zero during a year of
poor performance.
Variable Compensation of all Whole Time Directors (WTO) / Chief Executive Officer (CEO) will not be more
than 70% of the Fixed Compensation. Any Variable Compensation above 50% of the Fixed Compensation is to
be deferred over a period of 3 years. The same will vest at 40%, 30% and 30% at the end of 1 st, 2nd and 3rd year.
The Bank reserves the right to prevent any deferred variable compensation from vesting in a year of negative
performance. The deferred variable compensation shall lapse if the employment is terminated prior to vesting.
The Bank utilises performance payout / bonus as the form of variable remuneration. The Bank shall give
performance payouts to promote a healthy financial performance by its staff.
Corporate Governance
The Bank is required to comply with applicable corporate governance requirements, including the listing
agreements with the Stock Exchanges and the SEBI ICDR Regulations in respect of constitution of the Board
and committees thereof. The corporate governance framework of the Bank is based on an effective independent

158

Board of Directors, separation of the supervisory role of the Board of Directors from the executive management
team and proper constitution of committees of the Board of Directors. The Board of Directors functions either as
a full Board or through various committees constituted to oversee specific operational areas. The executive
management of the Bank provides the Board of Directors with detailed reports on the performance of the Bank
periodically.
Board Committees
The Board has constituted several committees of Directors to take decisions on and monitor the activities falling
within their terms of reference. The Boards Committees are as follows:
Audit Committee of the Board (ACB)
The Audit Committee of the Board comprises Mr. Keki Elavia (chairman), Mr. Nalin Shah, Mr. Amin Manekia
and Mr. Altaf Jiwani, all of whom are independent Directors. The Company Secretary acts as secretary to the
audit committee.
The terms of reference of ACB are in accordance with the applicable provisions of the Companies Act, 2013
and Clause 49 of the Listing Agreement entered into with the Stock Exchanges in India and inter alia include
the following:
a)

Overseeing the Banks financial reporting process and ensuring correct, sufficient and credible disclosure
of its financial information;

b) Recommending appointment, re-appointment and replacement or removal of statutory auditors and fixing
of their fees;
c)

Approving payment to statutory auditors for any other services rendered, if authorised by the Board;

d) Reviewing with the management, the quarterly financial statements before submission to the Board for
approval and securing the Certificate from the CFO in terms of Clause 41 of the Listing Agreement;
e)

Any other terms of reference as may be included from time to time in Clause 49 of the Listing
Agreement.

Executive Committee of the Board (ECB)

The Executive Committee of the Board comprises Mr. Nasser Munjee (chairman) and Mr. Suhail Nathani. ECB,
inter alia, considers matters relating to properties, insurance, profit and loss and business performance, etc.
Credit Committee of the Board
The Credit Committee of the Board comprises Mr. Sukh Dev Nayyar (chairman), Mr. Imran Contractor, Mr. S.
Sridhar and Mr. C. Narasimhan. The Credit Committee of the Board, inter alia, looks after sanctioning of loans
and advances, approving of One Time Settlements (OTS), etc.
Risk Management Committee of the Board (RMC)
The Risk Management Committee of the Board comprises Mr. Keki Elavia (chairman), Mr. Sukh Dev Nayyar,
Mr. Amin Manekia, Mr. Murali M. Natrajan and Mr. C. Narasimhan. RMC is the apex body of the Banks risk
management architecture and is responsible for aligning various risk policies of the Bank with the risk appetite
and risk philosophy articulated by the Board. Towards this end, it approves specific risk policies, including the
Credit Policy, Investment Policy, Asset Liability Management Policy, Outsourcing Policy, Operational Risk
Management Policy, KYC Standards and Anti-Money Laundering measures etc. The Terms of Reference of
RMC also include Management of ORCO, ALCO, CRMC through the review of the minutes of such
committees and any issues that require the attention of the Risk Management Committee, and management of
the risk profile of the Bank.

159

Nomination & Remuneration Committee of the Board (NRC)

The Companies Act, 2013 requires Nomination & Remuneration Committee to have an Independent Director
who is not the Chairman of the Bank as its Chairman. Accordingly, Mr. Nasser Munjee ceased to be a Chairman
of the Nomination & Remuneration Committee on January 15, 2014 and has continued as a member. Mr. Amin
Manekia has become the new Chairman w.e.f January 15, 2014. Mr. Amin Manekia, Mr. S. Sridhar and Mr.
Keki Elavia are Independent Directors. NRC, inter alia, looks after the due diligence process for appointment or
re-appointment of Directors, remuneration, ESOPs etc. to Managing Director and Chief Executive Officer and
other key managerial personnel of the Bank, monitors the compensation policy of the Bank, etc.
Stakeholders Relationship Committee of the Board (SRC)
The Stakeholders Relationship Committee of the Board comprises of Mr. Amin Maneka (chairman), Mr. Sukh
Dev Nayyar and Mr. Nalin Shah. SRC monitors redressal of complaints received from shareholders and other
security investors with respect to transfer of shares, non-receipt of dividend, non-receipt of Annual Reports,
interest payment on Bonds, etc. SRC also takes note of number of transfers processed, issue of fresh certificates,
top holders, pattern of holding, etc. The Company Secretary acts as the Secretary and has been appointed as the
Compliance Officer of the Stakeholders Relationship Committee.
Fraud Reporting and Monitoring Committee of the Board (FRMC)
Pursuant to the directives of RBI to all commercial banks, the Bank has constituted a Fraud Reporting and
Monitoring Committee for monitoring cases of fraud involving amounts of ` 10 million or more. FRMC
comprises of Mr. Keki Elavia (chairman), Mr. Sukh Dev Nayyar, Mr. C. Narasimhan and Mr. Murali M.
Natrajan.
Customer Service Committee of the Board (CSC)
The Customer Service Committee of the Board comprises Mr. Amin Manekia (chairman), Mr. Sukh Dev
Nayyar, Mr. S. Sridhar, Mr. Jamal Pradhan and Mr. Murali M. Natrajan. CSC monitors enhancing the quality of
customer service and improving the level of customer satisfaction for all categories of customers at all times. It
also oversees the functioning of the Standing Committee of Executives on Customer Service.
Capital Raising Committee of the Board (CRC)
The Capital Raising Committee of the Board comprises Mr. Nasser Munjee (chairman), Mr. Suhail Nathani, Mr.
Keki Elavia, Mr. S. Sridhar and Mr. Murali M. Natrajan. CRC has been formed to, inter alia, formulate the
capital raising plans of the Bank to raise resources through various channels, to expedite the process of
preparation and approval of offer documents and information memoranda, to determine terms and conditions
including pricing, to engage intermediaries and other related functions.
Information Technology Strategy Committee of the Board (ITSC)
The Information Technology Strategy Committee of the Board comprises of Mr. C. Narasimhan (chairman), Mr.
Imran Contractor and Mr. Jamal Pradhan. Mr. R. Venkattesh, Head Ops., Tech & HR is also a member of the
said Information Technology Strategy Committee as a Management Representative. ITSC, inter alia, approves
IT related strategy, Road-map for initiatives, Budget and investments to support Banks growth growth
strategies in accordance with the Business Plan.
Corporate Social Responsibility Committee of the Board (CSR)
Corporate Social Responsibility Committee of the Board was constituted on January 15, 2014 pursuant to the
requirement of the Companies Act, 2013 and the members of CSR are Mr. Nasser Munjee (chairman), Mr. Keki
Elavia, Mr. S. Sridhar, Mr. Amin Manekia and Mr. Murali N. Natrajan.
Directors Interests as of March 31, 2014
All our Directors, including our independent Directors, may be deemed to be interested to the extent of fees, if
any, payable to them for attending meetings of the Board or a committee thereof, as well as to the extent of other
remuneration and reimbursement of expenses payable to them. The Directors, including independent Directors,
160

may also be regarded as interested to the extent that they hold Equity Shares and to the extent of any dividend
payable on such Equity Shares.
Except as otherwise stated in this Placement Document, the Bank has not entered into any contract, agreements
or arrangements during the two years preceding the date of this Placement Document, in which the Directors are
interested directly or indirectly and no payments have been made to them in respect of such contracts,
agreements or arrangements.
The total of the interests of our Directors in Equity Shares, held directly or indirectly, as of September 25, 2014,
are set out in the table below:
Name

Number of Equity Shares held as of

September 25, 2014

Mr. Nasser Munjee

Mr. Imran Contractor
Mr. Jamal Pradhan
Mr. Amin Manekia
Total

4,401
4,575
4,718
17,303
30,997

No other Director held any of our Equity Shares as of September 25, 2014.
We instituted the ESOP to enable our employees, including our Managing Director & Chief Executive Officer,
to participate in our future growth. We have not granted stock options to any of our non-executive Directors or
to our non-executive Chairman.
Key Managerial Personnel
The table below sets out the names of our key managerial personnel and their current responsibilities.
Name
Mr. Murali M. Natrajan
Mr. Bharat Sampat
Mr. Hemant Bharve

Age
53
53
59

Designation
Managing Director & Chief Executive Officer
Chief Financial Officer
Company Secretary

Year of
appointment
2009
2008
1984

Profiles of Key Managerial Personnel

Mr. Murali M. Natrajan Managing Director & Chief Executive Officer
Please refer to Board of Directors and Senior Management Directors above.
Mr. Bharat Sampat Chief Financial Officer
Mr. Sampat joined us in September 2008. Mr. Sampat obtained a B.Com. degree from the University of
Bombay and an LL.B. (General) from the University of Bombay. He is a Chartered Accountant and an
Associate of the Institute of Company Secretaries of India as also of the Institute of Cost and Works
Accountants of India. He has approximately 28 years of experience.
Mr. Hemant Barve Company Secretary
Mr. Barve joined us in August 1984. Mr. Barve is an Associate of the Institute of Company Secretaries of India
and is a Certified Associate of the Indian Institute of Bankers. He has approximately 40 years of experience.
Senior Management
Under the provisions of the Banking Regulation Act, the management of the whole of the affairs of a banking
company is entrusted to a managing director who exercises his powers subject to the superintendence, control
and direction of the board of directors.
The table below sets out the names of our principal executive officers and their current responsibilities.

161

Name

Age

Mr. Praveen Kutty

Mr. Rajesh Verma

48
59

Mr. R. Venkattesh
Mr. J.K. Vishwanath
Mr. Narendranath Mishra
Mr. Ravi Kumar
Mr. Aditya Prasad

46
47
40
43
52

Designation
Head Retail & SME Banking
Head Treasury, Correspondence Banking, FIG &
Trade Finance & Corporate Banking
Head Operations, Technology and Human Resources
Chief Credit Officer
Head AIB
Chief Internal Auditor
Chief Compliance Officer

Year of
appointment
2007
2009
2005
2010
2007
2009
2010

Profiles of Senior Management

Mr. Praveen Kutty Head Retail and SME Banking
Mr. Kutty joined us in July 2007 and has approximately 23 years of banking experience. Mr. Kutty holds an
M.B.A. from Bharathidasan Institute of Management, Tiruchirapalli.
Mr. Rajesh Verma Head Treasury, Correspondent Banking, FIG, Trade Finance and Corporate Banking
Mr. Verma joined us in May 2009 and has approximately 35 years of experience. Mr. Verma obtained an M.Sc.
degree in chemistry from Kanpur University and is a Certified Associate of the Indian Institute of Bankers, an
Associate of the Chartered Institute of Bankers (United Kingdom) and a Certified Information Systems Auditor.
Mr. R. Venkattesh Head Operations, Technology and Human Resources
Mr. Venkattesh joined us in December 2005. He has approximately 24 years of experience in the areas of
human resource management, mergers and acquisitions, operations and technology. Mr. Venkattesh obtained a
B.Com. degree from St. Xaviers College, Ranchi and has completed his Post Graduate Diploma in Personnel
Management from Xavier Institute of Social Service, Ranchi.
Mr. J.K. Vishwanath Chief Credit Officer
Mr. Vishwanath joined us in July 2010. Mr. Vishwanath graduated from T.A. Pai Management Institute,
Manipal with a PGDM in marketing and finance. He completed his B.E. (Mechanical Engineering) from the
Bangalore Institute. He has approximately 21 years of experience.
Mr. Ravi Kumar Chief Internal Auditor
Mr. Kumar joined us in November 2009. He brings with him an in-depth understanding of the banking domain
and its nuances. He has obtained a B.Sc degree from Madurai Kamaraj University and is an Fellow of the
Institute of Chartered Accountants of India and a Certified Information Systems Auditor. He has approximately
17 years of experience.
Mr. Narendranath Mishra Head AIB
Mr. Mishra joined us in August 2007. He has obtained a B.Sc (Agriculture) degree from Orissa University of
Agriculture and Technology and a Post Graduation Diploma in Rural Management from Institute of Rural
Management, Anand (IRMA). He has approximately 15 years of experience.
Mr. Aditya Prasad Chief Compliance Officer
Mr. Prasad joined us in April 2010. He has obtained a M.A. (Economics) degree from Lucknow University and
is a Certified Associate of the Indian Institute of Bankers. He has approximately 29 years of experience.

162

Organisation Structure
The Banks management organisation structure is set forth below:
CFO, Risk
Mgmt & Co.
Secy. Unit

Head Treasury,
Corporate Bkg.
FIG & Trade
Finance

Head
AIB

Head
Vigilance

Chief
Credit
Officer

Managing

Director &
CEO

Head
Operations,

Chief
Compliance
Officer

Technology
& HR

Chief
Internal
Auditor

Head
Retail Banking
& SME

ACB
Chief Internal Auditor has a dotted line reporting to MD & CEO and a hard line to ACB

Management Level Committees

We have management level committees which take decisions in areas such as asset and liability management,
risk management, customer service and the sanction of higher value credit proposals.
Interests of Management as of September 25, 2014
Except to the extent of their shareholding (and holding of stock options, as may be applicable) in the Bank, and
remuneration or benefits to which they are entitled as per the terms of their appointment and reimbursement of
expenses incurred by them in the ordinary course of business, members of the Banks management do not have
any other interest in the Bank.
The interests of our management in our Equity Shares, held directly or indirectly, as of September 25, 2014, are
set out in the table below:
Name
Murali M. Natrajan
Praveen Kutty
Rajesh Verma
R. Venkattesh
Bharat Sampat
Jayaraman Vishwanath
Narendranath Mishra
Ravi Kumar
Aditya Prasad
Hemant Barve

Number of Equity
Shares Held
70,500
200
50,000
12,000
4,000
12,500

Total ESOPs as of
September 25, 2014
4,450,000
859,500
205,000
715,000
690,000
295,000
125,500
180,000
88,000
32,500

ESOPs Vested & Exercisable

as of September 25, 2014
3,175,000
540,000
146,500
465,500
440,500
154,500
23,000
80,000
20,500
23,000

Employee Stock Option Plan

Pursuant to a resolution passed at the shareholder meeting held on December 15, 2006 and resolutions passed by
the Board of Directors of the Bank at its meeting held on March 5, 2007, we have adopted the ESOP with up to
7% of the issued Equity Shares of the Bank available for issuance to our employees. As of September 25, 2014,
23,690,467 options had been granted of which 6,649,865 were vested and exercisable, representing 2.65% of
our paid up and issued Equity Shares as of that date. Of the remaining options granted as of September 25, 2014,
163

5,153,000 were unvested, 3,158,145 had been exercised and 8,729,457 had been cancelled. Please refer to
Capital Structure.
Loans to Directors and Management
There are no loans or advances outstanding to us from any Director. We have made loans and advances in the
aggregate of ` 0.22 million to one senior managerial personnel listed in the table showing interests in our Equity
Shares above, other than Directors.

164

PRINCIPAL SHAREHOLDERS
The Ismailia Co-operative Bank Limited and the Masalawala Co-operative Bank Limited came into being in the
1930s. Eventually, Diamond Jubilee Co-operative Bank Limited merged with Ismailia Co-operative Bank
Limited. Subsequently in 1981, Ismailia Co-operative Bank Limited was amalgamated with Masalawalla Cooperative Bank Limited to form the Development Co-operative Bank Limited. Citi Co-operative Bank Limited
later merged with Development Co-operative Bank Limited, which thereafter was converted into a joint stock
banking company, the Development Credit Bank Limited on May 31, 1995.
In the 1990s there were about 1,400 co-operative banks in India and a few of these co-operative banks were
given permission by RBI to convert into scheduled commercial banks. Development Co-operative Bank was one
of 11 such banks that converted themselves into scheduled commercial banks. Vide their resolution dated
January 28, 1995, the shareholders of Development Co-operative Bank resolved to register as a limited company
within the meaning of Sections 566 of the Companies Act, 1956.
Since its conversion into a scheduled commercial bank, the Bank has over the years expanded its operations
beyond the states of Maharashtra, Gujarat and Telangana into the states of Andhra Pradesh, Goa, Haryana,
Karnataka, Kerala, Tamil Nadu, Telangana, Rajasthan, Punjab, Chattisgarh, Madhya Pradesh, Odisha, Uttar
Pradesh, Union Territories of Daman and Diu & Dadra & Nagar Haveli and the National Capital Territory of
Delhi.
The Bank completed its Initial Public Offering in 2006. The Bank has changed its name to DCB Bank Limited
w.e.f. October 24, 2013 and has also received RBI approval on January 10, 2014 for the same.
The following table contains information as of September 25, 2014 concerning our shareholding pattern:
Category of
Shareholder

No. of
Share
holders

Total No. of
Shares

Total No. of
Total Shareholding as a
Shares pledged or
Shares held in % of Total No. of Shares
otherwise encumbered
Dematerialized As a % of As a % of Number of As a % of Total
Form
(A+B)
(A+B+C)
shares
No. of Shares
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Bodies Corporate
1
2,450,182
2,450,182
0.98
0.98
0
0.00
Sub Total
1
2,450,182
2,450,182
0.98
0.98
0
0.00
(2) Foreign
Bodies Corporate
2
43,750,052
43,750,052
17.45
17.45
0
0.00
Sub Total
2
43,750,052
43,750,052
17.47
17.47
0
0.00
Total shareholding of
3
46,200,234
46,200,234
18.43
18.43
0
0.00
Promoter and
Promoter Group (A)
(B) Public Shareholding
(1) Institutions
Mutual Funds/UTI
34
25,736,189
25,736,189
10.26
10.26
0
0.00
Financial Institutions/
6
832,227
832,227
0.33
0.33
0
0.00
Banks
Central Government/
0
0
0
State Government(s)
Venture Capital Funds
1
6,270,904
6,270,904
2.50
2.50
0
0.00
Insurance Companies
2
7,887,721
7,887,721
3.14
3.14
0
0.00
Foreign Institutional
59
37,320,569
37,320,569
14.88
14.88
0
0.00
Investors
Foreign Venture
0
0
0
0
0.00
Capital Investors
Qualified Foreign
0
0
0 Investor
0
0.00
Any Other (specify)
Sub Total
112
78,911,499
78,910,464
31.46
31.46
0
0.00
(2) Non-Institutions
Bodies Corporate
1,585
30,529,457
30,221,045
12.17
12.17
0
0.00
Individual shareholders
165,354
53,668,195
45,314,720
21.40
21.40
0
0.00
holding nominal share

165

Category of
Shareholder
capital up to ` 0.1
million
Individual shareholders
holding nominal share
capital in excess of `
0.1 million
Qualified Foreign
Investor
Any Others (Specify)
Clearing Member
Non Resident Indians
(Repat.)
Non Resident Indians
(Non Repat.)
Foreign Companies
Directors & Relatives
Sub Total
Total Public
shareholding (B)
Total (A)+(B)
(C) Shares held by
Custodians and
against which
Depository Receipts
have been issued
(1) Promoter and
Promoter Group
(2) Public
Sub Total
Total (A)+(B)+(C)

No. of
Share
holders

Total No. of
Shares

Total No. of
Total Shareholding as a
Shares pledged or
Shares held in % of Total No. of Shares
otherwise encumbered
Dematerialized As a % of As a % of Number of As a % of Total
Form
(A+B)
(A+B+C)
shares
No. of Shares

475

21,304,529

21,280,168

8.50

8.50

0.00

0.00

0.00

0.00

389
1,125

1,609,461
5,250,481

1,609,461
5,250,481

0.64
2.09

0.64
2.09

0
0

0.00
0.00

333

1,095,096

1,094,096

0.44

0.44

1
23
169,285
169,397

11,745,484
459,786
125,662,489
204,573,988

11,745,484
409,960
116,925,415
195,835,879

4.68
0.18
50.11
81.57

4.68
0.18
50.11
81.57

0
0
0
0

0.00
0.00
0.00
0.00

169,400
0

250,774,222
0

242,036,113
0

100.00
0.00

100.00
0.00

0
0

0.00
0.00

0.00

0.00

0.00

0
0
169,400

0
0
250,774,222

0
0
242,036,113

0.00
0.00
100.00

0.00
0.00
100.00

0
0
0

0.00
0.00
0.00

Shareholding of securities (including shares, warrants, convertible securities) of persons belonging to the
category Promoter and Promoter Group
Sr. Name of the
No. Shareholder

Details of Shares
Encumbered
Details of
Details of convertible Total shares
held
shares (*)
warrants
securities
(including
underlying
No. of
As a % No. of As a % As a % Number As a % Number of As a %
shares
Shares of grand Shares
of grand
of
total convertible
total
assuming
held
total
held
total warrants number securities number of
full
(A)+(B)
(A)+(B) held
of
held
convertible
+(C)
+(C) of
warrants
securities of conversion
of warrants
subof the
the same
and
clause
same
class
convertible
(I)(a)
class
securities) as
a % of
diluted share
capital
43,750,052
17.45
0
0.00
0.00
0
0.00
0
0.00
17.45

Aga Khan
Fund For
Economic
Development
SA
2 Platinum
2,450,182
0.98
0
0.00
0.00
0
0.00
0
0.00
Jubilee
Investments
Limited
Total
46,200,234
18.43
0
0.00
0.00
0
0.00
0
0.00
(*) The term encumbrance has the same meaning as assigned to it in regulation 28(3) of the Takeover Regulations.
166

0.98

18.43

DCB BANK
SCHEDULE 15 INTEREST EXPENDED
Year Ended
31.03.2014
(` in 000s)

Year Ended
31.03.2013
(` in 000s)

6,649,000
631,896
317,800

5,346,381
798,134
172,431

7,598,696

6,316,946

I.
Interest on Deposits
II. Interest on Reserve Bank of India/Inter-Bank Borrowings
III. Other Interest
TOTAL

SCHEDULE 16 OPERATING EXPENSES

I.
II.
III.
IV.
V.

Payments to and Provisions for Employees

Rent, Taxes and Lighting
Printing and Stationery
Advertisement and Publicity
Depreciation on Banks property
Less:Transfer from Revaluation Reserve
VI. Directors Fees, Allowances and Expenses
VII. Auditors Fees and Expenses
VIII. Law Charges
IX. Postages,Telegrams,Telephones, etc.
X. Repairs and Maintenance
XI. Insurance
XII. Other Expenditure

191,571
(11,859)

TOTAL

Year Ended
31.03.2014
(` in 000s)

Year Ended
31.03.2013
(` in 000s)

1,570,819
385,976
43,787
14,713

1,379,008
362,955
29,438
10,237

179,712
4,102
6,134
24,604
70,177
75,057
82,146
733,646
3,190,873

148,217
(11,858)

136,359
4,821
5,731
17,756
62,553
68,188
63,341
612,561
2,752,948

F-13
DCB Bank Limited A NNUAL R EPORT 2013-14

I 49 I

Shareholding of securities (including shares, warrants, convertible securities) of persons belonging to the
category Public and holding more than 1% of the total number of shares
Sl.
No.

1
2
3

8
9

10

10
11

13

Name of the
Shareholder

Tano Mauritius
India FVCI II
WCP Holdings III
Ambit Corporate
Finance Private
Limited
IL&FS Trust
Company Limited
Trustee -Tvs
Shriram Growth
Fund I
Tata Capital
Financial
Services Limited
Sundaram Mutual
Fund A/C
Sundaram Select
Midcap
Bajaj Allianz Life
Insurance
Company Limited
DSP Blackrock
Micro Cap Fund
Housing
Development
Finance
Corporation
Limited
College
Retirement
Equities Fund Stock Account
Satpal Khattar &
Shareen Khattar
Dimensional
Emerging
Markets Value
Fund
ICICI Prudential
Life Insurance
Company Limited
Total

No. of
Shares
held

Shares
as %
of
Total
No. of
Shares

Details of warrants
Number
As a %
of
total
warrants number of
held
warrants
of the
same class

Details of convertible
securities
Number of
% w.r.t
convertible
total
securities
number of
held
convertible
securities of
the same
class
0
0.00

Total shares
(including
underlying shares
assuming full
conversion of
warrants and
convertible
securities) as a % of
diluted share capital
4.76

11,925,000

4.76

0.00

11,745,484
10,472,867

4.68
4.18

0
0

0.00
0.00

0
0

0.00
0.00

4.68
4.18

6,270,904

2.50

0.00

0.00

2.50

6,001,000

2.39

0.00

0.00

2.39

5,630,000

2.25

0.00

0.00

2.25

5,303,556

2.11

0.00

0.00

2.11

4,764,803

1.90

0.00

0.00

1.90

4,047,926

1.61

0.00

0.00

1.61

3,330,650

1.33

0.00

0.00

1.33

3,207,296

1.28

0.00

0.00

1.28

2,874,325

1.15

0.00

0.00

1.15

2,584,165

1.03

0.00

0.00

1.03

78,157,976

31.17

0.00

0.00

31.17

167

Shareholding of securities (including shares, warrants, convertible securities) of persons (together with PAC)
belonging to the category Public and holding more than 5% of the total number of shares of the Bank
Sl. Name(s) of the
No. shareholder(s)
and the
Persons Acting
in Concert
(PAC) with
them
1

No. of
Shares

Nil

0
0

Total

Shares
as % of
Total
No. of
Shares

Details of warrants
Number
of
warrants

0.00
0.00

0
0

Details of convertible
Total shares
securities
(including underlying
As a % total Number of % w.r.t total shares assuming full
conversion of
number of convertible number of
warrants and
warrants of securities convertible
convertible
the same
held
securities of
class
the same class securities) as a % of
diluted share capital
0.00
0
0.00
0.00
0.00
0
0.00
0.00

Details of Locked-in Shares

Sl.
No.
1

Name of the Shareholder

No. of Shares

Nil
Total

Nil

Locked-in Shares as % of Total No. of

Shares
0.00
0.00

Details of Depository Receipts (DRs)

Sl.
No.

Type of Outstanding DR
(ADRs, GDRs, SDRs, etc.)

No. of
Outstanding
DRs
Nil

NIL
Total

1.

No. of Shares
Underlying
Outstanding DRs
Nil

Shares Underlying Outstanding

DRs as % of Total No. of Shares
0.00
0.00

Holding of Depository Receipts (DRs), where underlying shares held by promoter / promoter group are
in excess of 1% of the total number of shares.
Sl.
No.
1

Name of the
DR Holder

Type of Outstanding DR
(ADRs, GDRs, SDRs, etc.)

Nil
Total

Nil

No. of Shares
Underlying
Outstanding DRs
Nil

168

Shares Underlying Outstanding

DRs as a % of Total No. of Shares
0.00
0.00

ISSUE PROCEDURE
Below is a summary, intended to provide a general outline of the procedures relating to the application,
payment, Allocation and Allotment of the Equity Shares to be issued pursuant to the Issue. The procedure
followed in the Issue may differ from the one mentioned below, and investors are presumed to have apprised
themselves of the same from the Bank or the Sole Global Coordinator and Book Running Lead Manager.
The Bank and the Sole Global Coordinator and Book Running Lead Manager are not liable for any amendment
or modification or change to applicable laws or regulations, which may occur after the date of this 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 Bid from them does not exceed the investment limits
or maximum number of Equity Shares that can be held by them under applicable law or regulation or as
specified in this Placement Document. Further, QIBs are required to satisfy themselves that their Application
Forms would not result in triggering a tender offer under the Takeover Code.
QIBs are advised to inform themselves of any restrictions or limitations that may be applicable to them and are
required to consult their respective advisers in this regard. Investors that apply in this Issue will be required to
confirm and will be deemed to have represented to the Bank, the Sole Global Co-ordinat or and Book Running
Lead Manager and its respective directors, officers, agents, affiliates and representatives that they are eligible
under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares. The Bank and
the Sole Global Coordinator and Book Running Lead Manager and its respective directors, officers, agents,
affiliates and representatives accept no responsibility or liability for advising any investor on whether such
investor is eligible to acquire Equity Shares. Refer to the chapters titled Distribution and Solicitation
Restrictions and Transfer Restrictions.
Qualified Institutions Placement
1.

The Issue is being made to QIBs in reliance upon Chapter VIII of the SEBI ICDR Regulations and Section
42 of the Companies Act, 2013 through the mechanism of a qualified institutions placement. Under Chapter
VIII of the SEBI ICDR Regulations and Section 42 of the Companies Act, 2013, a company may issue
equity shares to QIBs provided that certain conditions are met by the issuer company. Some of these
conditions are set out below:

a special resolution approving the qualified institutions placement has been passed by its shareholders.
Such special resolution must specify (a) that the allotment of Equity Shares is proposed to be made
pursuant to the qualified institutions placement and (b) the relevant date;

the explanatory statement to the notice to the shareholders for convening the general meeting must
disclose the basis or justification for the price (including premium, if any) at which the offer or
invitation is being made;

equity shares of the same class of the issuer company, which are proposed to be allotted through the
QIP, are listed on a recognised stock exchange in India having nation-wide trading terminals for a
period of at least one year prior to the date of issuance of notice to its shareholders for convening the
meeting to pass the abovementioned special resolution;

the Issue must be made through a private placement offer letter (i.e., this Placement Document) and an
application form serially numbered and addressed specifically to the QIB to whom the Issue is made
and is sent within 30 days of recording the names of such QIBs;

the aggregate of the proposed issue and all previous qualified institutions placements made by the
issuer in the same Fiscal Year does not exceed five times the net worth (as defined in the SEBI ICDR
Regulations) of the issuer as per the audited balance sheet of the previous Fiscal Year ;

the issuer company complies with the minimum public shareholding requirements set out in the SCRR;

the issuer shall have completed allotments with respect to any offer or invitation made by the issuer and
has not withdrawn or abandoned any invitation or offer made by the issuer;

169

Prior to circulating the private placement offer letter (i.e., this Placement Document), the Bank must
prepare and record a list of QIBs to whom the offer will be made. The offer must be made only to such
persons whose names are recorded by the Bank prior to the invitation to subscribe;

issuer shall offer to each Allottee at least such number of the securities in the issue which would
aggregate to ` 20,000 calculated at the face value of the securities; and

At least 10 per cent. of the equity shares issued to QIBs must be allotted to mutual funds, provided that,
if this portion or any part thereof to be allotted to mutual funds remains unsubscribed, it may be allotted
to other QIBs.

the offering of securities by issue of public advertisements or utilisation of any media, marketing or
distribution channels or agents to inform the public about the Issue is prohibited.

2.

As required under the Companies Act, 2013, in the past, the Bank has completed allotments with respect to
any offer or invitation made by the Bank and has not withdrawn or abandoned any invitation or offer made
by the Bank.

3.

Prospective purchasers will be deemed to have represented to us and the Sole Global Coordinator and Book
Running Lead Manager in order to participate in the Issue that they are outside the United States and
purchasing the Equity Shares in an offshore transaction in accordance with Regulation S under the
Securities Act and the applicable laws of the jurisdictions where those offers and sales occur. For further
details, please refer to the chapters titled Distribution and Solicitation Restrictions and Transfer
Restrictions.

4.

Investors are not allowed to withdraw their Bids after the Bid Closing Date.

5.

Additionally, there is a minimum pricing requirement under the SEBI ICDR Regulations. The Floor Price
shall not be less than the average of the weekly high and low of the closing prices of the related Equity
Shares of the same class quoted on the stock exchange during the two weeks preceding the relevant date.
Additionally, the Bank may offer discount up to five per cent of the Floor Price, in accordance with the
SEBI ICDR Regulations.

6.

The relevant date referred to hereinabove, for the purpose of Allotment, shall be the date of the meeting
in which the Board or the committee of Directors duly authorised by the Board decides to open the Issue
and stock exchange means any of the recognised stock exchanges in India on which the Equity Shares of
the same class are listed and on which the highest trading volume in such Equity Shares has been recorded
during the two weeks immediately preceding the relevant date.

7.

The Equity Shares will be Allotted within 12 months from the date of the shareholders resolution
approving the Issue and within 60 days from the date of receipt of subscription money from the relevant
QIBs.

8.

The Equity Shares being issued pursuant to this Issue shall be issued on the basis of this Placement
Document and the Placement Document that shall contain all material information including the
information specified in Schedule XVIII of the SEBI ICDR Regulations and the requirements prescribed
under Form PAS 4. This Placement Document and the Placement Document are private documents that
will be provided only to select investors through serially numbered copies and will be placed on the website
of the concerned stock exchange and of the Bank with a disclaimer to the effect that it is in connection with
an issue to QIBs and no offer is being made to the public or to any other category of investors.

9.

The Bank has applied for and received the in principle approvals of the Stock Exchanges under Clause 24
(a) of the Listing Agreements for the listing of the Equity Shares on the Stock Exchanges. The Bank has
also delivered a copy of this Placement Document to and has filed a copy of the Preliminary Placement
Document to the Stock Exchanges.

10. The Bank shall also make the requisite filings with ROC and SEBI within the stipulated period as required
under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014.

170

11. The Issue has been authorised by (i) the resolution of the Board passed at its meeting held on April 15,
2014, and (ii) the resolution of the shareholders passed at the AGM held on June 6, 2014.
12. The minimum number of Allottees for each qualified institutions placement shall not be less than:

two, where the issue size is less than or equal to ` 2,500 million; and

five, where the issue size is greater than ` 2,500 million.

13. No single allottee shall be allotted more than 50 per cent. of the issue size. QIBs that belong to the same
group or that are under common control shall be deemed to be a single allottee. For details of what
constitutes same group or common control, please refer to Issue Procedure Application Process
Application Form.
14. The aggregate of the proposed Issue shall not exceed five times the net worth of the Bank as per its audited
balance sheet of the previous Fiscal Year. The Bank shall furnish a copy of the Placement Document to
each stock exchange on which its equity shares are listed.
15. Securities allotted to a QIB pursuant to the Issue shall not be sold for a period of one year from the date of
allotment, except on a recognised stock exchange in India.
16. The Equity Shares have not been and will not be registered under the Securities Act or registered,
listed or otherwise qualified in any other jurisdiction outside India 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 US state securities laws. Accordingly,
the Equity Shares are being offered and sold outside the United States in offshore transactions in
reliance on Regulation S under the Securities Act and the applicable laws of the jurisdictions where
those offers and sales occur. Bids may not be made by persons in any such jurisdiction, except in
compliance with the applicable laws of such jurisdiction.
Issue Procedure
1.

The Bank and the Sole Global Coordinator and Book Running Lead Manager shall circulate serially
numbered copies of the Preliminary Placement Document and the serially numbered Application Form,
either in electronic or physical form, to the QIBs and the Application Form will be specifically addressed to
such QIBs. In terms of Section 42(7) of the Companies Act, 2013 the Bank shall maintain complete records
of the QIBs to whom the Preliminary Placement Document and the serially numbered Application Form
have been dispatched. Please refer to the chapter titled Representations by Investors. The Bank will
make the requisite filings with RoC and SEBI within the stipulated time period as required under the
Companies Act, 2013.

2.

Unless a serially numbered Preliminary Placement Document along with the Application Form is
addressed to a particular QIB, no invitation to subscribe shall be deemed to have been made to such
QIB. 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 the 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 an Application Form, including any revisions thereof, during the Bidding Period to the
Sole Global Coordinator and Book Running Lead Manager.

5.

All Bidders will be required to indicate the following in the Application Form:

name of the QIB to whom Equity Shares are to be Allotted;

number of Equity Shares Bid for;

171

price at which they are agreeable to subscribe for the Equity Shares, provided that QIBs may also
indicate that they are agreeable to submit an Application Form at Cut-off Price, which shall be any
price as may be determined by the Bank in consultation with the Sole Global Coordinator and Book
Running Lead Manager at or above the Floor Price net of such discount as approved in accordance with
SEBI ICDR Regulations;

details of the depository accounts to which the Equity Shares should be credited; and

a representation that it is outside the United States, and it has agreed to certain other representations set
forth in the Application Form.

Note: Each 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. FIIs or sub-accounts of FIIs are required to indicate SEBI FII/
sub-account registration number in the Application Form.
6.

Once a duly completed 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 the QIBs shall be deemed to have been given notice of such date after
receipt of the Application Form.

7.

The 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.

8.

Upon receipt of the Application Form, after the Bid Closing Date, the Bank shall determine the final terms,
including the Issue Price and the number of Equity Shares to be issued pursuant to the Issue in consultation
with the Sole Global Coordinator and Book Running Lead Manager. Upon determination of the final terms
of the Equity Shares, the Sole Global Coordinator and Book Running Lead Manager will send the serially
numbered CAN along with this Placement Document to the QIBs who have been allocated the Equity
Shares. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the QIB to pay
the entire Issue Price for all the 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 the
Bank and will be based on the recommendation of the Sole Global Coordinator and Book Running
Lead Manager.

9.

Pursuant to receiving a CAN, each QIB shall be required to make the payment of the entire application
monies for the Equity Shares indicated in the CAN at the Issue Price, only through electronic transfer to the
Banks designated bank account by the Pay-In Date as specified in the CAN sent to the respective QIBs. 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. 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 the Bank in a separate bank account with a scheduled bank and shall be
utilised only for the purposes permitted under the Companies Act, 2013.

10. Upon receipt of the application monies from the QIB and post the Board or the Committee passing
resolution for allotment the Bank shall Allot Equity Shares as per the details in the CANs to the QIBs. The
Bank will intimate to the Stock Exchanges the details of the Allotment and apply for approvals for listing
on the Stock Exchanges prior to crediting the Equity Shares into the Depository Participant accounts of the
QIBs.
11. After receipt of the listing approval from the Stock Exchanges, the Bank shall credit the Equity Shares into
the Depository Participant accounts of the respective QIBs.
12. The Bank shall then apply for the final trading permissions from the Stock Exchanges.
13. The Equity Shares that have been credited to the Depository Participant accounts of the QIBs shall be
172

eligible for trading on the Stock Exchanges only upon the receipt of final trading and listing approvals from
the Stock Exchanges.
14. Upon receipt of the final trading and listing approval from the Stock Exchanges, The Bank shall inform the
Allottees of the receipt of such approval. The Bank and the Sole Global Coordinator and Book Running
Lead Manager shall not be responsible for any delay or non-receipt of the communication of the final
trading and listing permissions from the Stock Exchanges or any loss arising from such delay or nonreceipt. Final listing and trading approvals granted by the Stock Exchanges are also placed on their
respective websites. QIBs are advised to apprise themselves of the status of the receipt of the permissions
from the Stock Exchanges or the Bank.
15. Further, the Bank shall received an in principle approval from RBI vide its letter dated September, 25,
2014. The Bank will procure a post facto approval from RBI in respect of this Issue, upon completion of the
Allotment process. In the event that RBI does not grant the post facto approval in respect of Allotment to
any Allottee(s), such Allottee shall be required to comply with the instructions received from RBI in this
regard.
Qualified Institutional Buyers
1.

2.

Only QIBs as defined in Regulation 2(1)(zd) of the SEBI ICDR Regulations, and not otherwise excluded
pursuant to Regulation 86(1)(b) of the SEBI ICDR Regulations are eligible to invest. Under Regulation
86(1)(b) of the SEBI ICDR Regulations, no Allotment shall be made, either directly or indirectly, to any
QIB who is a Promoter or any person related to the Promoters. Currently, the definition of a QIB includes:

Mutual funds, VCFs and FVCIs registered with SEBI;

AIFs as defined in Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012 registered with SEBI;

Eligible FPIs;

Foreign institutional investors and sub-account (other than a sub-account which is a foreign corporate
or foreign individual), registered with SEBI;

Public financial institutions as defined in Section 4A of the Companies Act, 1956 and Section 2(72) of
the Compaines Act, 2013;

Scheduled commercial banks;

Multilateral and bilateral development financial institutions;

State industrial development corporations;

Insurance companies registered with Insurance Regulatory and Development Authority;

Provident funds with minimum corpus of ` 250 million;

Pension funds with minimum corpus of ` 250 million;

The National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005
of the Government 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.

Please note that pursuant to amendments to the SEBI ICDR Regulations, a sub-account of an FII
that is a foreign corporate or foreign individual is no longer included under the definition of a QIB.

173

3.

FIIs (other than a sub-account which is a foreign corporate or a foreign individual) and Eligible FPIs
are permitted to participate through the portfolio investment scheme under Schedule 2 and Schedule
2A of FEMA 20 respectively, in this Issue. 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.

4.

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
exceed 10 per cent. of our post-Issue Equity Share capital. Further, in terms of the FEMA 20, the total
holding by each FPI shall be below 10 per cent of the total paid-up Equity Share capital of the Bank and the
total holdings of all FPIs put together shall not exceed 24 per cent. of the paid-up Equity Share capital of
the Bank. The aggregate limit of 24 per cent 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 the Bank.

5.

Eligible FPIs are permitted to participate in the Issue subject to compliance with conditions and restrictions
are specified by SEBI and RBI and which may be specified from time to time.

6.

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 FII Regulations. An FII or a sub-account
(other than a sub-account which is a foreign corporate or a foreign individual) may participate in the Issue,
until expiry of its registration as an FII or sub-account or until it obtains a certificate of registration as an
FPI, whichever is earlier. If the registration of an FII or sub-account has expired or is about to expire, such
FII or sub-account may, subject to payment of conversion fees as applicable 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.

7.

In terms of the FEMA 20, for calculating the aggregate holding of FPIs in a company, holding of all
registered FPIs as well as holding of FIIs (being deemed FPIs) shall be included.

8.

Allotments made to FVCIs and VCFs and AIFs in the Issue are subject to the rules and regulations
that are applicable to each of them respectively, including in relation to lock-in requirements.

9.

No Allotment shall be made pursuant to the Issue, either directly or indirectly, to any QIB being the
Promoters or any person related to the Promoters. QIBs which have all or any of the following rights shall
be deemed to be persons related to our Promoters:

rights under a shareholders agreement or voting agreement entered into with the Promoters or persons
related to the Promoters;

veto rights; or

a right to appoint any nominee director on the Board.

provided, however, a QIB which does not hold any of our Equity Shares and which has acquired the
aforesaid rights in the capacity of a lender shall not be deemed to be related to a Promoter.
10. The Bank and the Sole Global Coordinator and Book Running Lead Manager are not liable for any
amendment or modification or change to applicable laws or regulations, which may occur after the
date of this 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 law or regulation or as specified in this Placement
Document. QIBs are required to satisfy themselves that any requisite compliance pursuant to this
Allotment such as public disclosures under applicable laws are complied with. QIBs are advised to
consult their advisors in this regard. Further, QIBs are required to satisfy themselves that their Bids
would not eventually result in triggering a tender offer under the Takeover Regulations.
11. A minimum of 10 per cent. of the Equity Shares offered in the Issue shall be Allotted to Mutual
Funds. If no Mutual Fund is agreeable to take up the minimum portion as specified above, such
minimum portion or part thereof may be Allotted to other QIBs.
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Note: Affiliates or associates of the Sole Global Coordinator and Book Running Lead Manager who are QIBs may
participate in the Issue in compliance with applicable laws.

Application Process
Application Form
1.

QIBs shall only use the serially numbered Application Forms (which are addressed to them) supplied by the
Bank and the Sole Global Coordinator and Book Running Lead Manager in either electronic form or by
physical delivery for the purpose of making a Bid (including revision of a Bid) in terms of the Preliminary
Placement Document.

2.

By making a Bid (including the revision thereof) for Equity Shares through Application Forms and pursuant
to the terms of the Preliminary Placement Document, the QIB will be deemed to have made the following
representations and warranties in addition to the representations, warranties and agreements made under the
chapters Representations by Investors Notice to Investors, Distribution and Solicitation
Restrictions and Transfer Restrictions:

The QIB confirms that it is a QIB in terms of Regulation 2(1)(zd) of the SEBI ICDR Regulations, and
is not excluded under Regulation 86 of the SEBI ICDR Regulations, has a valid and existing
registration under applicable laws of India and is eligible to participate in this Issue;

The QIB confirms that it is not a Promoter and is not a person related to the Promoters, either directly
or indirectly and its Application Form does not directly or indirectly represent our Promoters or
Promoter Group;

The QIB confirms that it has no rights under a shareholders agreement or voting agreement with the
Promoters or persons related to the Promoters, no veto rights or right to appoint any nominee director
on the Board of Directors, other than those acquired in the capacity of a lender to the Bank, which shall
not be deemed to be a person related to the Promoters;

The QIB has no right to withdraw its Bid after the Bid Closing Date;

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 other than on the Stock Exchanges;

The QIB confirms that the QIB is eligible to apply and hold Equity Shares so Allotted and together
with any Equity Shares and 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;

The QIB confirms that the Application Form would not result in triggering a tender offer under the
Takeover Regulations;

The QIB confirms that together with other QIBs in the Issue that belongs to the same group or are
under same control, the Allotment to the QIB shall not exceed 50 per cent. of the Issue Size. For the
purposes of this statement:
(a) The expression belongs to the same group shall derive meaning from the concept of companies
under the same group as provided in sub-section (11) of Section 372 of the Companies Act, 1956;
(b) Control shall have the same meaning as is assigned to it under clause (e) of sub-regulation (1) of
Regulation 2 of the Takeover Regulations.

The QIBs shall not undertake any trade in the Equity Shares credited to its Depository Participant
account until such time that the final listing and trading approvals for the Equity Shares are issued by
the Stock Exchanges.

3.

The QIB confirms that it is purchasing the Equity Shares in an offshore transaction meeting the
175

requirements of Rule 903 or 904 of Regulation S and it shall not offer, sell, pledge or otherwise transfer
such Equity Shares except in an offshore transaction complying with Regulation S or pursuant to any
other available exemption from registration under the U.S. Securities Act and in accordance with all
applicable securities laws of the states of the United States and any other jurisdiction, including India.
It also confirms all other applicable representations and warranties included under Representations by
Investors Notice to Investors, Distribution and Solicitation Restrictions and Transfer
Restrictions.
4.

QIBS MUST PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, PAN, 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 DEPOSITORY ACCOUNT IS HELD FOR THIS
PURPOSE, ELIGIBLE SUB ACCOUNTS OF AN FII WOULD BE CONSIDERED AS AN
INDEPENDENT QIB.

5.

IF SO REQUIRED BY THE SOLE GLOBAL COORDINATOR AND BOOK RUNNING LEAD

MANAGER, THE QIB SUBMITTING A BID, ALONG WITH THE APPLICATION FORM, WILL
ALSO HAVE TO SUBMIT REQUISITE DOCUMENT(S) TO THE SOLE GLOBAL
COORDINATOR AND BOOK RUNNING LEAD MANAGER TO EVIDENCE THEIR STATUS AS
A QIB AS DEFINED HEREINABOVE.

6.

Demographic details such as address and bank account will be obtained from the Depositories as per the
Depository Participant account details given above.

7.

The submission of an 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 the Allotment (as indicated by the CAN) and becomes a
binding contract on the QIB upon issuance of the CAN by us in favour of the QIB.

Submission of Application Form

1.

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 Sole Global
Coordinator and Book Running Lead Manager either through electronic form or through physical delivery
at the following address:
Ambit Corporate Finance Private Limited
Ambit House, 449,
Senapati Bapat Marg, Lower Parel,
Mumbai - 400 013, Maharashtra, India
Contact Person:
Telephone:
Fax:
E-mail Id:

2.

Akriti Jain
+91 22 39821819
+91 22 39823020
projectmoneta@ambitpte.com

The Sole Global Coordinator and Book Running Lead Manager shall not be required to provide any written
acknowledgement of the receipt of the Application Form.

PAN
Each QIB should mention its PAN allotted under the IT Act in the Application Form. Applications without this
information will be considered incomplete and are liable to be rejected. QIBs should not submit the GIR number
instead of the PAN as the Application Form is liable to be rejected on this ground.
Pricing and Allocation
1.

Build-up of the book

The QIBs shall submit their Bids (including the revision of bids) within the Bidding Period to the Sole Global
176

Coordinator and Book Running Lead Manager. Such Bids cannot be withdrawn after the Bid Closing Date. The
book shall be maintained by the Sole Global Coordinator and Book Running Lead Manager.
2.

Price discovery and allocation

The Bank, in consultation with the Sole Global Coordinator and Book Running Lead Manager, shall determine
the Issue Price, which shall be at or above the Discounted Floor Price.
After finalisation of the Issue Price, the Bank has updated the Preliminary Placement Document with the Issue
details and will file the same with the Stock Exchanges as this Placement Document.
3.

Method of Allocation

The Bank shall determine the Allocation in consultation with the Sole Global Coordinator and Book Running
Lead Manager on a discretionary basis and in compliance with Chapter VIII of the SEBI ICDR Regulations.
Bids received from the QIBs at or above the Issue Price shall be grouped together to determine the total demand.
The Allocation to QIBs will be made at the Issue Price. Allocation to Mutual Funds for up to a minimum of 10
per cent of the Issue Size shall be undertaken subject to valid Bids being received at or above the Issue Price.
THE DECISION OF THE BANK IN CONSULTATION WITH THE SOLE GLOBAL COORDINATOR
AND BOOK RUNNING LEAD MANAGER IN RESPECT OF ALLOCATION SHALL BE FINAL AND
BINDING ON ALL QIBS. QIBS MAY NOTE THAT ALLOCATION OF EQUITY SHARES IS AT
THE SOLE AND ABSOLUTE DISCRETION OF THE BANK IN CONSULTATION WITH THE SOLE
GLOBAL COORDINATOR AND BOOK RUNNING LEAD MANAGER AND QIBS MAY NOT
RECEIVE ANY ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID APPLICATION
FORMS AT OR ABOVE THE ISSUE PRICE. NEITHER THE BANK NOR THE SOLE GLOBAL
COORDINATOR AND BOOK RUNNING LEAD MANAGER ARE OBLIGED TO ASSIGN ANY
REASON FOR ANY NON ALLOCATION.
4.

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 per cent. of the aggregate amount of the Issue
Size, and provided further that QIBs belonging to the same group or those who are under common control shall
be deemed to be a single Allottee for the purpose of this clause. For details of what constitutes same group or
control, please refer to - Application Process - Application Form.
Further the Equity Shares will be Allotted within 12 months from the date of the shareholders resolution
approving the Issue and within 60 days from the date of receipt of subscription money from the relevant QIBs.
CAN
1.

Based on the Application Forms received, the Bank shall, in consultation with the Sole Global Coordinator
and Book Running Lead Manager, decide the 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 relevant Escrow Bank accounts for transfer of funds
if done electronically, address where the application money needs to be sent, Pay-In Date as well as the
probable designated date, being the date of credit of the Equity Shares to the respective QIBs account.

2.

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.

3.

The dispatch of the serially numbered Placement Document and the CAN to the QIBs shall be deemed a
177

valid, binding and irrevocable contract for the QIB to furnish all details that may be required by the Sole
Global Coordinator and Book Running Lead Manager and to pay the entire Issue Price for all the Equity
Shares Allocated to such QIB.
4.

QIBs are advised to instruct their Depository Participant to accept the Equity Shares that may be
Allotted to them pursuant to the Issue.

Bank Account for payment of application money

1.

The Bank has opened the DCB QIP 2014-15 ESCROW ACCOUNT with the Escrow Bank in terms of
the arrangement among the Bank, the Sole Global Coordinator and Book Running Lead Manager and
Escrow Bank. 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.

2.

If the payment is not made favouring the DCB QIP 2014-15 ESCROW ACCOUNT within the time
stipulated in the CAN, the Application Form and the CAN of the QIB are liable to be cancelled.

3.

The Bank undertakes to utilise the amount deposited in DCB QIP 2014-15 ESCROW ACCOUNT only
for the purposes of (i) adjustment against Allotment of Equity Shares in the Issue; or (ii) repayment of
application money if the Bank is not able to Allot Equity Shares in the Issue.

4.

In case of cancellations or default by the QIBs, the Bank and the Sole Global Coordinator and Book
Running Lead Manager 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
1.

The payment of application money shall be made by the QIBs in the name of DCB QIP 2014-15
ESCROW ACCOUNT as per the payment instructions provided in the CAN.

2.

Payments are to be made 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 Issue Price for the Equity Shares Alloted to
the DCB QIP 2014-15 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 dematerialised form to the Allottees. Allottees will have the option to re-materialise the Equity
Shares, if they so desire, as per the provisions of the Companies Act, 2013 and the Depositories Act.

3.

The Bank, at its sole discretion, reserves the right to cancel the Issue at any time up to Allotment without
assigning any reason whatsoever.

4.

Following the Allotment and credit of Equity Shares into the QIBs Depository Participant accounts, the
Bank will apply for final trading and listing approvals from the Stock Exchanges. In the event of any delay
in the Allotment or credit of Equity Shares, or receipt of trading or listing approvals or cancellation of the
Issue, no interest or penalty would be payable by us or the Sole Global Coordinator and Book Running
Lead Manager.

5.

In the case of QIBs who have been Allotted more than five per cent of the Equity Shares in the Issue, the
Bank shall disclose the name and the number of the Equity Shares Allotted to such QIB to the Stock
Exchanges and the Stock Exchanges will make the same available on their website.

6.

The Escrow Bank shall release the monies lying to the credit of the Escrow Bank Account to the Bank after
Allotment of Equity Shares to QIBs and receipt of Listing and Trading approval from Stock Exchanges.

7.

In the event that the Bank is unable to issue and Allot the Equity Shares offered in the Issue or there is a
178

cancellation of the Issue within 60 days from the date of receipt of application money from a QIB, the Bank
shall repay the application money within 15 days from expiry of 60 day period, failing which the Bank shall
repay that money to such QIBs with interest at the rate of 12 per cent per annum from expiry of the 60 th
day. The application money to be refunded by the Bank shall be refunded to the same bank account from
which application money was remitted by the QIBs.
Other Instructions
1.

Right to reject applications

The Bank, in consultation with the Sole Global Coordinator and Book Running Lead Manager, may reject Bids,
in part or in full, without assigning any reason whatsoever. The decision of the Bank and the Sole Global
Coordinator and Book Running Lead Manager in relation to the rejection of Bids shall be final and binding.
2.

Equity Shares in Dematerialised form with NSDL or CDSL

The Allotment of the Equity Shares in this Issue shall be only in dematerialised form (i.e., not in physical
certificates but be fungible and be represented by the statement issued through the electronic mode).
A QIB applying for Equity Shares to be issued pursuant to the Issue must have at least one beneficiary account
with a Depository Participant of either NSDL or CDSL prior to making the Bid. Allotment to a successful QIB
will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the
QIB.
Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with
NSDL and CDSL. The Stock Exchanges have electronic connectivity with NSDL and CDSL.
The trading of the Equity Shares to be issued pursuant to the Issue would be in dematerialised form only for all
QIBs in the demat segment of the respective Stock Exchanges.
The Bank will not be responsible or liable for the delay in the credit of Equity Shares to be issued pursuant to
the Issue due to errors in the Application Form or otherwise on part of the QIBs.
Nodal Officer/ Compliance officer
Mr. Hemant Barve
Company Secretary and Compliance Officer
601 & 602, Peninsula Business Park,
6th Floor, Tower A,
Senapati Bapat Marg, Lower Parel,
Mumbai 400 013,
Maharashtra, India
Tel: +91 22 6618 7000
Email: investorgrievance@dcbbank.com/ barve@dcbbank.com

179

PLACEMENT
Placement Agreement
The Sole Global Coordinator and Book Running Lead Manager has entered into the Placement Agreement,
pursuant to which the Sole Global Coordinator and Book Running Lead Manager has agreed to manage the
Issue and to act as placement agents in connection with the proposed Issue and procure subscriptions for the
Equity Shares to be placed with the QIBs, pursuant to Chapter VIII of the SEBI ICDR Regulations and Section
42 of the Companies Act, 2013.
The Placement Agreement contains customary representations, warranties and indemnities from the Bank and
the Sole Global Coordinator and Book Running Lead Manager, and it 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 on liquidity or
sustainability of trading market for the 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 Placement Document has not been, and will not be, registered as a prospectus with ROC and, no Equity
Shares issued pursuant to the Issue 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 Sole Global Coordinator and Book Running Lead Manager (or its affiliates)
may, for its own accounts, subscribe to the Equity Shares or enter into asset swaps, credit derivatives or other
derivative transactions relating to the Equity Shares to be issued pursuant to the Issue 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
Sole Global Coordinator and Book Running Lead Manager 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.
From time to time, the Sole Global Coordinator and Book Running Lead Manager and its affiliates have
engaged in and may engage in transactions with and perform services for the Bank or its affiliates in the
ordinary course of business and have engaged, or may in the future engage, in commercial banking and
investment banking transactions with the Bank or its affiliates, for which they have received compensation and
may in the future receive compensation.
Lock-up
Subject to exceptions listed below, we have agreed that we will not, from the date hereof and for a period of up to 180
days from the Closing Date, without the prior written consent of the Sole Global Coordinator and Book Running Lead
Manager, directly or indirectly: (a) issue, offer, lend, sell, pledge, contract to sell or issue, sell any option or contract
to purchase, purchase any option or contract to sell or issue, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any Equity Shares, or any securities convertible into or
exercisable or exchangeable for Equity Shares or publicly announce an intention with respect to any of the foregoing;
(b) enter into any swap or other agreement that transfers, directly or indirectly, in whole or in part, any of the
economic consequences of ownership of Equity Shares or any securities convertible into or exercisable or
exchangeable for Equity Shares; or (c) announce any intention to enter into any transaction whether any such
transaction described in (a) or (b) above is to be settled by delivery of Equity Shares, or such other securities, in cash
or otherwise, provided, however, that the foregoing restrictions shall not be applicable to (i) any grant of options by us
under the ESOP; or (ii) any issue or allotment of Equity Shares by us pursuant to the exercise of any options awarded
under the ESOP. For further information with respect to the ESOP, please refer to the chapter titled Board of
Directors and Senior Management.
Our Promoter has agreed that it will not, from the date hereof and for a period of up to 180 days from the Closing
Date, without the prior written consent of the Sole Global Coordinator and Book Running Lead Manager, directly or
indirectly: (a) sell, contract to sell, purchase any option or contract to sell, grant any option to purchase, lend, pledge
or otherwise transfer or dispose of, directly or indirectly, any Equity Shares, or any securities convertible into or
exercisable or exchangeable for Equity Shares or publicly announce an intention with respect to any of the foregoing;
(b) enter into any swap or other agreement that transfers, directly or indirectly, in whole or in part, any of the
economic consequences of ownership of Equity Shares or any securities convertible into or exercisable or
exchangeable for Equity Shares; or (c) announce any intention to enter into any transaction whether any such
transaction described in (a) or (b) above is to be settled by delivery of Equity Shares, or such other securities, in cash
or otherwise.
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DISTRIBUTION AND SOLICITATION RESTRICTIONS

The distribution of this Placement Document and the offer, sale or delivery of the Equity Shares in this Issue is
restricted by law in certain jurisdictions. Persons who come into possession of this Placement Document or
any offering material 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 or will be taken in any jurisdiction by the Bank or the Sole Global Coordinator and Book
Running Lead Manager that would permit a public offering of the Equity Shares or the possession, circulation
or distribution of this Placement Document or any other material relating to the Bank or the Equity Shares in
the Issue in any jurisdiction where action for such purpose is required. Accordingly, the Equity Shares in the
Issue may not be offered or sold, directly or indirectly and neither this Placement Document nor any other
offering material or advertisements in connection with the Equity Shares issued pursuant to the Issue 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 and will not impose
any obligations on the Bank or the Sole Global Coordinator and Book Running Lead Manager. The Issue will
be made in compliance with the SEBI ICDR Regulations. Each subscriber of the Equity Shares in the Issue will
be required to make, or will be deemed to have made, as applicable, the acknowledgments and agreements as
described under the chapter titled Transfer Restrictions.
Australia. This Placement Document is not a disclosure document under Chapter 6D of the Corporations Act
2001 (the Australian Corporations Act), has not been lodged with the Australian Securities & Investments
Commission and does not purport to include the information required of a disclosure document under the
Australian Corporations Act. (i) The offer of Equity Shares under this Placement Document is only made to
persons to whom it is lawful to offer Equity Shares without disclosure to investors under Chapter 6D of the
Australian Corporations Act under one or more exemptions set out in Section 708 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 agrees not to sell or offer for sale within Australia any Equity Share sold to the offeree
within 12 months after their transfer to the offeree under this Placement Document.
Cayman Islands. No offer or invitation to purchase Equity Shares may be made to the public in the Cayman
Islands.
European Economic Area (including Liechtenstein, Iceland and Norway). In relation to each Member State
of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member
State), an offer may not made to the public in that Relevant Member State prior to the publication of a
prospectus in relation to the Equity Shares which has been approved by the competent authority in that
Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the
competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that
it may, with effect from and including the date on which the Prospectus Directive is implemented in that
Relevant Member State (the Relevant Implementation Date), make an offer of Equity Shares to the public
in that Relevant Member State at any time:

to legal entities which are authorized or regulated to operate in the financial markets or, if not so
authorized or regulated, whose corporate purpose is solely to invest in securities;

to any legal entity which has two or more of (i) an average of at least 250 employees during the last Fiscal
Year , (ii) a total balance sheet of more than 43,000,000 and (iii) an annual net turnover of more than
50,000,000, as shown in its last annual or consolidated accounts;

to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus
Directive) subject to obtaining the prior consent of the Sole Global Coordinator and Book Running Lead
Manager for any such offer; or

in any other circumstances which do not require the publication of a prospectus pursuant to Article 3(2) of
the Prospectus Directive.
181

provided that no such offer of Equity Shares shall result in a requirement for the publication by the Bank or the
Sole Global Coordinator and Book Running Lead Manager of a prospectus pursuant to Article 3 of the
Prospectus Directive. For the purposes of this provision, the expression an offer of Equity Shares to the
public in relation to any of the Equity Shares in any Relevant Member States means the communication in any
form and by any means, of sufficient information on the terms of the offer and the Equity Shares to be offered
so as to enable an investor to decide to purchase or subscribe for the Equity Shares, as the same may be varied
in that Member State by any measure implementing the Prospectus Directive in that Member State.
Hong Kong. No Equity Shares have been offered or sold, and no Equity Shares may be offered or sold, in
Hong Kong by means of any document, other than to persons whose ordinary business is to buy or sell shares
or debentures, whether as principal or agent; or to professional investors as defined in the Securities and
Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or in other
circumstances which do not result in the document being a prospectus as defined in the Companies
Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of the
Companies Ordinance (Cap.32) of Hong Kong. No document, invitation or advertisement relating to the
Equity Shares has been issued or may be issued, 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 under the securities laws of Hong Kong)
other than with respect to the Equity Shares which 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 (Cap. 571)
of Hong Kong and any rules made under that Ordinance.
Japan. The offering of the Equity Shares has not been and will not be registered under the Financial
Instruments and Exchange Law of Japan, as amended (the Financial Instruments and Exchange Law). No
Equity Shares have been offered or sold, and will not be offered or sold, directly or indirectly, in Japan or to, or
for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan,
including any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly in Japan or to, or for the benefit of, any resident of Japan except pursuant to an
exemption from the registration requirements of the Financial Instruments and Exchange Law and otherwise in
compliance with the Financial Instruments and Exchange Law and any other applicable laws, regulations and
ministerial ordinances of Japan.
Korea. The Equity Shares have not been registered under the Korean Securities and Exchange Law, and the
Equity Shares acquired in connection with the distribution contemplated hereby may not be offered or sold,
directly or indirectly, in Korea or to or for the account of any resident thereof, except as otherwise permitted by
applicable Korean laws and regulations, including, without limitation, the Korean Securities and Exchange Law
and the Foreign Exchange Transaction Laws.
Kuwait. The Equity Shares have not been authorized or licensed for offering, marketing or sale in the State of
Kuwait. The distribution of this Placement Document and the offering and sale of the Equity Shares in the State
of Kuwait is restricted by law unless a license is obtained from the Kuwaiti Ministry of Commerce and Industry
in accordance with Law 31 of 1990.
Qatar. The Equity Shares have not been offered, sold or delivered, and will not be offered, sold or delivered at
any time, directly or indirectly, in the state of Qatar in a manner that would constitute a public offering. This
Placement Document has not been reviewed or registered with Qatari Government Authorities, whether under
Law No. 25 (2002) concerning investment funds, Central Bank resolution No. 15 (1997), as amended, or any
associated regulations. Therefore, this Placement Document is strictly private and confidential, and is being
issued to a limited number of sophisticated investors, and may not be reproduced or used for any other
purposes, nor provided to any person other than recipient thereof.
Singapore. The Sole Global Coordinator and Book Running Lead Manager has acknowledged that this
Placement Document has not been registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, the Sole Global Coordinator and Book Running Lead Manager has represented and agreed that it
has not offered or sold any Equity Shares issued pursuant to the Issue or caused such Equity Shares to be made
the subject of an invitation for subscription or purchase and will not offer or sell such Equity Shares issued
pursuant to the Issue or cause such Equity Shares to be made the subject of an invitation for subscription or
purchase, and have not circulated or distributed, nor will they circulate or distribute, this Placement Document
or any other document or material in connection with the offer or sale, or invitation for subscription or
purchase, of such Equity Shares issued pursuant to the Issue, whether directly or indirectly, to persons in
182

Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore (SFA), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant
to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (iii)
otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Equity Shares are subscribed or purchased under Section 275 by a relevant person which is:
(a) a corporation (which is not an accredited investor) (as defined in Section 4A of the SFA) 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
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and
each beneficiary of the trust is an individual who is an accredited investor,
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest
(howsoever described) in that trust shall not be transferred within 6 months after that corporation or that trust
has acquired the Equity Shares pursuant to an offer made under Section 275 except:
(i) to an institutional investor under Section 274 of the SFA or to a relevant person defined in Section 275(2)
of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B)
of the SFA;
(ii) where no consideration is or will be given for the transfer;
(iii) where the transfer is by operation of law; or
(iv) as specified in Section 276(7) of the SFA.
Switzerland. This Placement Document does not constitute an issue prospectus pursuant to Art. 652a of the
Swiss Code of Obligations. The Equity Shares will not be listed on the SWX Swiss Exchange, and therefore,
this Placement Document does not comply with the disclosure standards of the Listing Rules of the SWX
Swiss Exchange. Accordingly, the Equity Shares may not be offered to the public in or from Switzerland, but
only to a selected and limited group of investors, which do not subscribe the Shares with a view to distribution
to the public. The investors will be individually approached by the Sole Global Coordinator and Book
Running Lead Manager.
This Placement Document is personal to each offeree and does not constitute an offer to any other person. This
Placement Document may only be used by those persons to whom it has been handed out in connection with
the offer described herein and may neither directly nor indirectly be distributed or made available to other
persons without the express consent of the Bank. It may not be used in connection with any other offer and
shall in particular not be copied and/or distributed to the public in or from Switzerland.
United Arab Emirates. This Placement Document is not intended to constitute an offer, sale or delivery of
shares or other securities under the laws of the United Arab Emirates (the UAE). The Equity Shares have
not been and will not be registered under Federal Law No. 4 of 2000 Concerning the Emirates Securities and
Commodities Authority and the Emirates Security and Commodity Exchange, or with the UAE Central Bank,
the Dubai Financial Market, the Abu Dhabi Securities market or with any other UAE exchange. The Issue, the
Equity Shares and interests therein do not constitute a public offer of securities in the UAE in accordance with
the Commercial Companies Law, Federal Law No. 8 of 1984 (as amended) or otherwise. This Placement
Document is strictly private and confidential and is being distributed to a limited number of investors and must
not be provided to any person other than the original recipient, and may not be reproduced or used for any
other purpose. The interests in the Equity Shares may not be offered or sold directly or indirectly to the public
in the UAE.
By receiving this Placement Document, the person or entity to whom the Placement Document has been
issued understands, acknowledges and agrees that the Equity Shares have not been and will not be offered,
sold or publicly promoted or advertised in the Dubai International Financial Centre other than in compliance
with laws applicable in the Dubai International Financial Centre, governing the issue, offering or sale of
securities. The Dubai Financial Services Authority has not approved this Placement Document nor taken steps
to verify the information set out in it, and has no responsibility for it.
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United Kingdom. The Sole Global Coordinator and Book Running Lead Manager has represented and agreed
that it:
i.

is a person who is a qualified investor within the meaning of Section 86(7) of the Financial Services
and Markets Act 2000 (the FSMA), being an investor whose ordinary activities involve it in
acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of
its business;

ii.

has not offered or sold and will not offer or sell the Equity Shares other than to persons who are
qualified investors within the meaning of Section 86(7) of the FSMA or who it reasonably expects
will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their
businesses where the issue of the Equity Shares would otherwise constitute a contravention of Section
19 of the FSMA by us;

iii.

has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of
Section 21 of the FSMA) received by it in connection with the issue or sale of the Equity Shares in
circumstances in which Section 21(1) of the FSMA does not apply to it; and

iv.

has complied and will comply with all applicable provisions of the FSMA with respect to anything
done by it in relation to the Equity Shares in, from or otherwise involving the United Kingdom.

United States of America.

The Equity Shares in the Issue have not been and will not be registered under the U.S. Securities Act of 1933,
as amended (the Securities Act), and unless so registered 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. Accordingly, the Equity Shares are being offered and
sold outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.
Each purchaser of the Equity Shares will be deemed to have made the representations, agreements and
acknowledgements as described under the chapter titled Transfer Restrictions.

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TRANSFER RESTRICTIONS
In terms of Chapter VIII of the SEBI ICDR Regulations, resale of Equity Shares, except on the Stock
Exchanges, is not permitted for a period of one year from the date of Allotment. Investors are advised to
consult legal counsel prior to making any resale, pledge or transfer of the Banks Equity Shares, and also to
refer to the chapter titled Distribution and Solicitation Restrictions.
Subject to the foregoing, by accepting this Placement Document and purchasing any Equity Shares under this
Issue, you are deemed to have represented, warranted, acknowledged and agreed with the Bank and the Sole
Global Coordinator and Book Running Lead Manager as follows:

you have received a copy of the Preliminary Placement Document and the Placement Document and such
other information as you deem necessary to make an informed decision and that you are not relying on any
other information or the representation concerning the Bank or the Equity Shares and neither the Bank nor
any other person responsible for this document or any part of it or the Sole Global Coordinator and Book
Running Lead Manager will have any liability for any such other information or representation;

you are purchasing the Equity Shares in an offshore transaction meeting the requirements of Rule 903 or
904 of Regulation S and you agree that you will not offer, sell, pledge or otherwise transfer such Equity
Shares except in an offshore transaction complying with Regulation S or pursuant to any other available
exemption from registration under the U.S. Securities Act and in accordance with all applicable securities
laws of the states of the United States and any other jurisdiction, including India;

you are authorised to consummate the purchase of the Equity Shares in compliance with all applicable
laws and regulations;

you acknowledge (or if you are a broker-dealer acting on behalf of a customer, your customer has
confirmed to you that such customer acknowledges) that such Equity Shares have not been and will not be
registered under the U.S. Securities Act;

you certify that either (A) you are, or at the time the Equity Shares are purchased will be, the beneficial
owner of the Equity Shares and are located outside the United States (within the meaning of Regulation S)
or (B) you are a broker-dealer acting on behalf of your customer and your customer has confirmed to you
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 located outside the United States (within the meaning of
Regulation S); and

the Bank, the Sole Global Coordinator and Book Running Lead Manager, their respective affiliates and
others will rely upon the truth and accuracy of your representations, warranties, acknowledgements and
undertakings set out in this document, each of which is given to (a) the Sole Global Coordinator and Book
Running Lead Manager on its own behalf and on behalf of the Bank, and (b) to the Bank, and each of
which is irrevocable and, if any of such representations, warranties, acknowledgements or undertakings
deemed to have been made by virtue of your purchase of the Equity Shares are no longer accurate, you will
promptly notify the Bank.

In addition to the above, allotments made to QIBs, including FVCIs, VCFs and AIFs in the Issue, may be
subject to lock-in requirements, if any, under the rules and regulations that are applicable to them.
Any resale or other transfer or attempted resale or other transfer, made other than in compliance with the above
stated restrictions will not be recognised by the Bank.

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INDIAN SECURITIES MARKET

The information in this chapter has been extracted from documents available on the website of SEBI and the
Stock Exchanges and has not been prepared or independently verified by the Bank or the Sole Global
Coordinator and Book Running Lead Manager or any of its affiliates or advisors.
The Indian Securities Market
India has a long history of organised securities trading. In 1875, the first stock exchange was established in
Mumbai.
Indian Stock Exchanges
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 Securities Contracts (Regulation) Act, 1956 (SCRA)
and the Securities Contracts (Regulation) Rules, 1957 (SCRR). On June 20, 2012, SEBI, in exercise of its
powers under the SCRA and the SEBI Act, notified the Securities Contracts (Regulation) (Stock Exchanges and
Clearing Corporations) Regulations, 2012 (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.
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, FPIs, credit rating agencies and other capital market participants have been
notified by the relevant regulatory authority.
Listing and Delisting of Securities
Most of the stock exchanges have their own governing board for self-regulation. BSE and NSE together hold a
dominant position among the stock exchanges in terms of the number of listed companies, market capitalisation
and trading activity.
Listing 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 SEBI and the listing agreements of the respective stock exchanges. 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 such listing
agreement 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 equity listing agreements and
bye-laws of the stock exchanges in India, to overrule a stock exchanges governing body and withdraw
recognition of a recognised stock exchange.
Delisting
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.
Minimum Level of Public Shareholding
Pursuant to an amendment of the SCRR in June 2010, all listed companies except public sector undertakings are
required to maintain a minimum public shareholding of 25%. In this regard, SEBI has amended the listing
186

agreement and has provided several mechanisms to comply with this requirement. We are in compliance with
the minimum public shareholding requirement. Further, where the public shareholding in a listed company falls
below 25% at any time, such company is required to bring the public shareholding to 25% within a maximum
period of twelve months from the date of such fall in the manner specified by SEBI.
Index-Based Market-Wide Circuit Breaker System
In order to restrict abnormal price volatility in any particular stock, 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 BSE or the CNX NIFTY of 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 scrip 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
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 NSE. 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, NSE commenced
operations in the wholesale debt market segment in June 1994, the capital market (equities) segment
commenced operations in November 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. 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 NSE.
Trading Hours
Trading on both NSE and 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). BSE and 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, BSE replaced its open outcry system with BSE On-line Trading
(BOLT) 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
187

settlement cycles and improving efficiency in back-office work.

NSE has introduced a fully automated trading system called National Exchange for Automated Trading
(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 open offer obligations for listed Indian companies under Indian law 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 acquisitions of the Banks shares/voting rights/control. The Takeover
Regulations prescribes 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.
If an acquirer (together with any persons acting in concert with him): (a) acquires 25% of the voting rights in a
listed company; or (b) already holds 25% of the voting rights in a listed company, and acquires more than 5% of
the voting rights in the listed company between April 1 and March 31 in any year; or (c) acquires control over a
listed company, such acquirer will have to make an open offer to the public shareholders for at least 26% of the
total shares of the listed company.
The Takeover Regulations also provides for the possibility of indirect acquisitions, imposing specific
obligations on the acquirer in case of such indirect acquisition. Since, the Bank is an Indian listed company, the
provisions of the Takeover Regulations apply to the Bank.
Insider Trading Regulations
The SEBI Insider Trading Regulations have been notified to prohibit and penalise insider trading in India. An
insider is, among other things, prohibited from dealing either on his own behalf or on behalf of any other person,
in the securities of a listed company when in possession of unpublished price sensitive information.
The SEBI Insider Trading Regulations also provide disclosure obligations for shareholders holding more than a
pre-defined percentage, and directors and officers, with respect to their shareholding in the Bank, and the
changes therein. The definition of insider includes any person who has received or has had access to
unpublished price sensitive information in relation to securities of a company or any person reasonably expected
to have access to unpublished price sensitive information in relation to securities of a company and who is or
was connected with the Bank or is deemed to have been connected with the Bank.
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, among other
things, the formation and 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 SEBI.

188

DESCRIPTION OF EQUITY SHARES

The following is information relating to the Equity Shares including a brief summary of our 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
As of the date of this Placement Document, the authorized share capital of the Bank is ` 5,000 million
consisting of 500,000,000 Equity Shares of ` 10 each. The Banks issued, subscribed and paid-up Capital is `
2,812.06 million divided into 281,206,358 Equity Shares of ` 10 each.
The Equity Shares have been listed on NSE and BSE since October 27, 2006.
Dividends
Under the Companies Act, an Indian company pays dividend upon a recommendation by its board of directors
and subject to approval by a majority of the members, who have the right to decrease but not to increase the
amount of the dividend recommended by the board of directors. However, the board of directors is not obligated
to recommend a dividend. The decision of the board of directors and shareholders of the Bank may depend on a
number of factors, including but not limited to, the Banks profits, capital requirements and overall financial
condition. The declaration of the Board as to the amount of the net profits shall be conclusive.
Subject to certain conditions specified under Section 123 of the Companies Act, 2013 and the rules made
thereunder no dividend can be declared or paid by a company for any Fiscal Year except (a) out of the profits of
the company for that year, calculated in accordance with the provisions of the Companies Act, 2013; or (b) out
of the profits of the company for any previous Fiscal Year (s) arrived at in accordance with the Companies Act,
2013 and remaining undistributed; or (c) out of both; or (d) out of money provided by the Central Government
or a State Government for payment of dividend by the company in pursuance of a guarantee given by that
government.
No amount paid or credited as paid on shares in advance of calls shall be treated as paid on shares. No dividend
shall be payable except in cash. The Directors may pay interim dividend as justified by the position of the Bank.
Subject to the provisions of the Act and the Articles, the Board may retain the dividends payable upon shares to
any person, until such person becomes a Shareholder in respect of such shares or until such shares shall have
been duly transferred to him. A transfer of shares shall not pass the right to any dividend declared thereon before
the registration of the transfer unless the Bank is authorised by the registered holder of such shares in writing to
pay such dividend to the transferee specified in such instrument of transfer.
Subject to the provisions of the Act, no Shareholder shall be entitled to receive payment of any interest or
dividends in respect of his share(s), whilst any money may be due or owing from him to the Bank in respect of
such share(s) either above or jointly with any other person and the Board may deduct from the interest or
dividend payable to any such Shareholder all sums of money so due from him to the Bank.
Unless otherwise directed, dividend may be paid by cash (including by cheque or warrant) or in electronic mode
to the Shareholder or person entitled or in case of joint-holders to the joint-holder first named in the register of
members. The Bank is not liable for any cheque or warrant lost in transmission, or for any dividend lost due to a
forged endorsement of any cheque or warrant.
Subject to applicable provisions of the FEMA, all dividends and other distributions declared and payable on the
Equity Shares may be paid by the Bank to the Shareholder in Rupees and may be converted into foreign
currency and freely transferred out of the Republic of India without the necessity of obtaining any governmental
or regulatory authorisation or approval in the Republic of India or any political subdivision or taxing authority
thereof.
Capitalization of Profits
The Bank may at general meeting capitalize any part of the amount for the time being standing to the credit of
any of the Banks reserve accounts or to the credit of the profit and loss account or otherwise available for
189

distribution. The capitalization may be done among the Shareholders in the same proportion as they would have
been entitled thereto as dividend and can be applied in paying up in full any unissued shares and/or towards
payment of any unpaid amounts on shares. In addition, a bonus issue by the Bank shall also be subject to the
SEBI ICDR Regulations.
Alteration of Share Capital
Subject to the provisions of the Companies Act, 2013 the Bank may increase its share capital by issuing new
shares on such terms and with such rights as it, by action of its shareholders in a General Meeting may
determine. According to Section 62(1)(a) of the Companies Act, 2013 such new shares shall be offered to
existing shareholders in proportion to the paid up share capital 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 or on receipt of earlier intimation from the persons to whom such notice is given
that they decline to accept the shares offered, the Board may dispose of the shares offered in respect of which no
acceptance has been received in a manner which shall not be disadvantageous to the shareholders of the Bank.
The 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. Private Placement and Public Issues shall be undertaken pursuant to Chapter III
the Companies Act, 2013. Under the provisions of Section 62(1)(c) of the Companies Act, 2013 and the
Companies (Share Capital and Debentures) Rules, 2014, new shares may be offered to any persons whether or
not those persons include existing shareholders or employees to whom shares are allotted under a scheme of
employees stock options, either for cash or for consideration other than cash, if a special resolution to that effect
is passed by the Banks shareholders in a general meeting. The Bank may, by a resolution passed in a general
meeting, from time to time, increase the share capital by the creation of new Shares of such amount as may be
deemed expedient and specified in the resolution. Such increase in the share capital shall be subject to
compliance with the provision of the Companies Act and of any other laws that may be in force. New Shares
shall be issued upon such terms and conditions and with such rights and privileges attached thereto as are
consistent with provisions of the Companies Act and which the general meeting, resolving upon the creation
thereof shall direct and if direction be given, as our Board shall determine, and in particular such Shares may be
issued with a preferential or qualified right to dividends and in the distribution of assets of the Bank and with a
special or without any right of voting, subject to the conditions prescribed under the Companies Act, 2013.
The Articles provide that the Bank may in general meeting, by an ordinary/special resolution, alter the
conditions of its Memorandum as follows:
1.

increase its share capital by such amount as it thinks fit and expedient by issuing new shares of such amount
which shall be subject to such terms and conditions and with such rights and privileges as the general
meeting of the Shareholders resolving on the creation thereof shall direct, and if no such direction is given
the Board shall determine, and in particular such shares may be issued with a preferential right to dividends
and in the distribution of the assets of the Bank;

2.

consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

3.

convert all or any of its fully paidup shares into stock and reconvert that stock into fully paid-up shares of
any denomination;

4.

sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum so,
however, that in the sub-division the proportion between the amount paid and the amount if any, unpaid on
each reduced share shall be the same as it was in the case of the share from which the reduced share is
derived; and

5.

Cancel any shares which, at the date of passing of the resolution in that behalf, have not been taken or
agreed to be taken by any person, and diminish the amount of its share capital by the amount of share so
cancelled. Such cancellation of shares shall not be deemed to be a reduction of share capital within the
meaning of the Companies Act.

Preference Shares
In accordance with the provisions of the Companies Act 2013, a company may have preference share capital
carrying preferential rights in respect of payment of dividend and repayment in case of winding up. Further, the
190

Companies Act 2013 provides that no company shall issue any irredeemable preference share, and preference
shares issued by any company shall be redeemed within a period not exceeding 20 years from the date of issue
of such preference shares. Only fully paid preference shares shall be redeemed, and such redemption shall only
be out of profits of the Bank that are available for distribution of dividends, or in accordance with the provisions
of the Companies Act.
The Bank may subject to the provisions of the Companies Act and the consent of the Board issue on a
cumulative or non-cumulative basis preference shares liable to be redeemed. The Board may provide for
redemption of such shares on such terms as they deem fit, subject to the provisions of the Companies Act,
including the right to redeem at a premium or otherwise as they deem fit. In addition, the Bank may subject to
the provisions of the Companies Act and the consent of the Board issue on a cumulative or noncumulative basis
convertible redeemable preference shares. The Directors may provide for redemption at a premium or otherwise
and/or conversion of such shares into such securities on such terms as they may deem fit.
General Meetings of Shareholders
There are two types of general meetings of the shareholders:
(i) Annual General Meeting (AGM); and
(ii) Extraordinary general meeting (EGM).
A company must hold its AGM within 15 months of the previous AGM or within six months after the end of
each Fiscal Year, whichever is earlier, unless extended by ROC at the request of the Bank for any special
reason. Our 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). Written notices convening
a meeting setting out the date, place and agenda of the meeting must be given to members at least 21 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 in electronic mode, from not less than 95% of the shareholders entitled to vote at the
meeting.
Voting Rights
Every member present in person and entitled to vote shall have one vote on a show of hands and on a poll, the
voting rights will be in proportion to his share of the paid up capital of the Bank held by him, subject to any
rights or restrictions for the time being attached to any class or classes of shares.
The Articles provide that votes may be given by proxies in a manner as authorised by the Articles. The
instrument appointing a proxy is required to be lodged with the Bank at least 48 hours before the time of the
meeting.
According to the Articles, a vote given in accordance with the terms of an instrument appointing a proxy shall
be valid notwithstanding the prior death or insanity of the principal, or revocation of the instrument, or transfer
of the share in respect of which the vote is given, provided no intimation in writing of the death, insanity,
revocation or transfer of the share shall have been received by the Bank at the Registered Office and Corporate
Office before the vote is given. Further, no member shall be entitled to exercise any voting right personally or
by proxy at any meeting of the Bank in respect of any shares registered in his name on which any calls or other
sums presently payable by him have not been paid or in regard to which the Bank has exercised any right of lien
and as provided under the applicable provisions of the Companies Act, 2013 and rules made thereunder from
time to time. The chairman of any general meeting shall be the sole judge of the validity of any vote tendered at
such meeting. The chairman of the Board shall be the chairman of the general meeting and in his absence such
general meeting shall be chaired in the manner as provided in the Article of Association of the Bank. In case of
an equality of votes, whether on poll or by show of hands, the Chairman will have a casting vote.
Register of Members and Registration of Transfers
The Bank is required to maintain a register of Shareholders wherein the particulars of the Shareholders are
entered. For the purpose of determining the Shareholders, the register may be closed for such period not

191

exceeding in the aggregate 45 (forty five) days in any one year or 30 (thirty) days at a time at such times, as the
Board may deem expedient.
Transfer of shares
An instrument of transfer of shares must be in writing in the form prescribed under the Companies Act. Such
instrument must be executed both by the transferor and the transferee and attested and the transferor is deemed
to be the member until the name of the transferee is entered in the register of members in respect thereof. An
application for the registration of a transfer of shares in a company may be made either by the transferor or the
transferee. Where the application is made by the transferor and relates to partly paid shares, the transfer shall not
be registered unless the Bank gives notice of the application to the transferee and the transferee makes no
objection to the transfer within two weeks from the receipt of the notice. Shares held through Depositories are
transferred in the form of book entries or in electronic form in accordance with the Depositories Act and the
Securities and Exchange Board of India (Depositories and Participant) Regulations, 1996. These regulations
provide the regime for the functioning of the Depositories and the Depository Participants and set out the
manner in which the records are to be kept and maintained and the safeguards to be followed in such a system.
Transfers of beneficial ownership of shares held through a Depository are exempt from stamp duty on the
instrument of transfer. The Bank has entered into an agreement for such Depository services with the NSDL and
the CDSL.
Acquisition by the Bank of its own shares
A company is empowered to buy-back its own shares or other specified securities out of its free reserves, the
securities premium account or the proceeds of any fresh issue of shares or other specified securities (other than
the kind of shares or securities proposed to be bought back) subject to certain conditions, including:

the buy-back should be authorised by the articles of association of the Bank;

a special resolution has been passed in a general meeting authorizing the buy-back (in the case of listed
companies, by means of a postal ballot) unless the buy-back is for 10% or less than 10% of the total paid-up
equity capital and free reserves of the Bank and such buy-back has been authorized by the board of
directors of the Bank by means of a resolution passed at its meeting;

the proceeds utilised for the buy-back is limited to not more than 25% of the total paid-up capital and free
reserves of the Bank;

the buy-back of equity shares in any Fiscal Year is limited to not more than 25% of the total paidup equity
capital of the Bank in that Fiscal Year. No offer of buy-back shall be made within one year from the closure
of the previous offer of buy-back;

the ratio of the secured and unsecured debt owed by the Bank is not more than twice the paid-up capital and
free reserves after such buy-back;

the shares or other specified securities for buy back are fully paid-up; and

the buy-back is in accordance with the Securities and Exchange Board of India (Buy-Back of Securities)
Regulations, 1998.

A company buying back its securities is required to extinguish and physically destroy the securities so bought
back within seven days of the last date of completion of the buy-back. Further, a company buying back its
securities is not permitted to buy back any securities for a period of one year from the date of closure of the
preceding offer of buy-back or to issue the same kind of securities for six months subject to certain limited
exceptions.
Other than as described above, a company is prohibited from acquiring its own shares unless the consequent
reduction of capital is effected by an approval of at least 75% of its shareholders, voting on it in accordance with
the Companies Act and sanctioned by the High Court in terms of the Companies Act. Subject to certain
conditions, a public company is prohibited from giving, whether directly or indirectly and whether by means of
loan, guarantee, provision of security or otherwise, any financial assistance for the purpose of or in connection
192

with a purchase or subscription made or to be made by any person for any shares in the Bank or its holding
company.
A company is also prohibited from purchasing its own shares or specified securities through any subsidiary
company including its own subsidiary companies or through any investment company or group of investment
companies. Further, a company is prohibited from purchasing its own shares or specified securities, inter alia, if
the Bank is in default with respect to the repayment of deposit or interest, in the redemption of debentures or
preference shares, in payment of dividend to a shareholder, in repayment of any term loan or interest payable
thereon to any financial institution or bank.
Directors
The Bank has twelve (12) Directors. The composition of the Board is governed by the provisions of the
Companies Act and the Listing Agreement. The Chairman shall preside over all meetings of the Board and the
general meetings of the Bank and will have a casting vote in the event of a tie. Out of twelve Directors, ten are
independent Directors and one, Mr. Nasser Munjee, is a non-executive, non-independent Director.
The Directors may be appointed by the Board or by a general meeting of the Shareholders. The Board may
appoint any person as an additional Director, but such a Director must retire at the next AGM or on the last date
when the AGM should have been held, whichever is earlier, unless re-elected by the Shareholders after
complying with the provisions of the Companies Act. A person who fails to get appointed as a Director in a
general meeting cannot be appointed as an additional Director. A casual vacancy caused in the Board due to
death or resignation of a Director, can be filled by the Board, but such a person can remain in office only for the
unexpired term of the person in whose place he was appointed and on the expiry of the term he will retire unless
elected by the Shareholders. The Board may appoint an alternate Director in accordance with the provisions of
the Companies Act to act for a Director during his absence from India, which period of absence shall not be less
than three months (subject to such person being acceptable to the Chairman). The alternate Director cannot hold
office for a period longer than that permissible for the original Director in whose place he has been appointed
and has to vacate office if and when the original Director returns to India.
Not less than two-thirds of the total number of Directors is subject to retirement by rotation, and of such
Directors, one third, or if their number is not three or multiples of three, then the number nearest to one-third,
must retire every year. The Directors to retire are those who have been the longest in office. A retiring Director
is eligible for re-appointment. The Directors are not required to hold any qualification Equity Shares. The Bank
must have at least one Director who has stayed in India for at least 182 days in the previous calendar year (i.e. is
an Indian resident). The Bank is required to have at least one-half of its Directors as independent Directors.
The quorum for meetings of the Board is one-third of the total number of Directors (any fraction contained in
that one-third being rounded off as one) or two Directors, whichever is higher. The participation of the Directors
by video conferencing or by other visual means will be counted towards quorum. However, where the number
of interested Directors is equal to or exceeds two-thirds of total strength, the remaining number of Directors (i.e.
Directors who are not interested) present at the meeting, being not less than two shall be the quorum during such
time. In case there is no quorum for a Board meeting, the remaining Directors may act only for the purpose of
increasing the number of Directors to meet the quorum requirements or to summon a general meeting.
Annual Report and Financial Results
An annual report which includes information about the Bank such as the Financial Statements as of the date of
closing of the Fiscal Year , the Directors report, the managements discussion and analysis and a corporate
governance section is required to be sent to the Shareholders in compliance with applicable laws. The Bank is
required to submit the annual report to the Stock Exchanges under the Listing Agreement. The Bank must also
publish its financial results in at least one English daily newspaper circulating in the whole or substantially the
whole of India and also in a daily newspaper published in the language of the region where the Registered
Office and Corporate Office is situated. The Bank files certain information online, including the annual report,
Financial Statements and the shareholding pattern statement, in accordance with the requirements of the Listing
Agreement and as may be specified by SEBI from time to time.
Liquidation Rights
On winding up, preference shares rank as regards capital in priority to Equity Shares to the extent of the paid up
value of the preference shares, but to no other rights or participation in its assets. Subject to the rights of
193

creditors, of employees and of the holders of any other shares entitled by their terms of issue to preferential
repayment over the Equity Shares and other dues payable, in the event of a winding-up of the Bank, the
preference shareholders are entitled to be repaid the amounts of capital paid up or credited as paid up on such
shares. All surplus assets, after payment of statutory dues and other dues to employees, creditors and the holders
of any preference shares, belong to the holders of the Equity Shares in proportion to the amount paid up or ought
to have been paid up on the Equity Shares, respectively, at the commencement of the winding-up.
Subject to applicable provisions of the FEMA, all amounts payable with respect to Equity Shares upon
liquidation of the Bank may be paid by the Bank to the holder thereof in Rupees and may be converted into
foreign currency and freely transferred out of the Republic of India without the necessity of obtaining any
governmental or regulatory authorisation or approval in the Republic of India or any political subdivision or
taxing authority thereof.

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STATEMENT OF POSSIBLE TAX BENEFITS

The information provided below sets out the possible tax benefits available to the Bank and its shareholders 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 equity shares under the current tax laws presently in force in India.
Several of these benefits are dependent on us or our shareholders fulfilling conditions prescribed under relevant
tax laws.
This information is not exhaustive or comprehensive and is not intended to be a substitute for professional
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, 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
Benefit / consequences under the Income-tax Act, 1961 (Act) as amended by Finance (No. 2) Act, 2014
A.

To the Bank:

1.

Income by way of interest, premium on redemption or other payment on notified securities, bonds,
certificates issued by the Central Government is exempt from tax under section 10 (15) of the Act in
accordance with and subject to the conditions and limits as may be specified in notifications.

2.

Dividends earned by the Bank are exempt from tax in accordance with and subject to the provisions of
section 10(34) read with section 115-O of the Act. However, as per section 94 (7) of the 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.

3.

Income earned by the Bank from investment in units of a specified Mutual Fund is exempt from tax under
section 10 (35) of the Act. However, as per section 94 (7) of the Act, losses arising from the sale/
redemption of units purchased within three months prior to the record date (for entitlement to receive
income) and sold within nine months from the record date, will be disallowed to the extent such loss does
not exceed the amount of income claimed exempt.
Further, as per section 94 (8) of the Act, if an investor purchases units within three months prior to the
record date for entitlement of bonus, is allotted bonus units without any payment on the basis of holding
original units on the record date and such person sells/ redeems the original units within nine months of the
record date, then the loss arising from sale/ redemption of the original units will be ignored for the purpose
of computing income chargeable to tax and the amount of loss ignored shall be regarded as the cost of
acquisition of the bonus units held on the date of sale/ redemption of the original units.

4.

Section 14A of the Act restricts claim for deduction of expenses incurred in relation to incomes which do
not form part of the total income under the Act. Thus, any expenditure incurred to earn tax exempt income
is not a tax deductible expenditure.

5.

Under section 36(1)(vii) of the Act, any bad debt or part thereof written off as irrecoverable in the accounts
of the Bank is allowable as a deduction from the Banks total income. However, the deduction is limited to
the amount by which such bad debts or part thereof, exceeds the credit balance in the provision for bad and
doubtful debts account made under section 36(1)(viia) of the Act, and further subject to compliance with
section 36(2)(v) of the Act which requires that such debt or part thereof should have been debited to the
provision for bad and doubtful debts account under section 36(1)(viia) of the Act.

6.

Under section 36(1)(viia) of the Act, a deduction is allowable in respect of any provision made for bad and
doubtful debts, by an amount not exceeding 7.50% of total income (computed before making any
deduction under this section and Chapter VIA) and an amount not exceeding 10.00% of the aggregate
average advances made by rural branches of the Bank.
As per the third proviso to the section and subject to the conditions specified therein, the Bank at its option
is allowed a further deduction for an amount not exceeding the income derived from redemption of
securities in accordance with a scheme framed by the Central Government.
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7.

Under section 36(1)(viii) of the Act, subject to the conditions specified therein, a deduction is allowable in
respect of an amount not exceeding 20.00% of the profits derived from eligible business [viz., providing
long-term finance for industrial or agricultural development or development of infrastructure facility in
India or development of housing in India] provided such amount is transferred to a special reserve account
created and maintained by the Bank for this purpose. Provided that where the aggregate of the amounts
carried to such reserve account from time to time exceeds twice the amount of the paid up share capital
and general reserves of the Bank, no allowance under this clause shall be made in respect of such excess.

8.

As per section 43D of the Act, the interest income on certain categories of bad and doubtful debts, as
specified in Rule 6EA of the Income-tax Rules, 1962, is chargeable to tax only in the year of receipt or
credit to the profit & loss account of the Bank whichever is earlier.

9.

As per section 72 of the Act, business loss other can speculation loss can be carried forward for eight
assessment years. Such carried forward business loss can be set off only against business income other
than speculation loss.

10.

As per section 32(2) of the Act, where full effect cannot be given to any allowance under sub-section (1) of
section 32 of the Act in any previous year, owing to there being no profits or gains chargeable for that
previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the
provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of
the allowance to which effect has not been given, as the case may be, shall be added to the amount of the
allowance for depreciation for the following previous year and deemed to be part of that allowance, or if
there is no such allowance for that previous year, be deemed to be the allowance for that previous year,
and so on for the succeeding previous years.

B.

To the Resident shareholders:

1.

Where the shares of the Bank are held by the shareholders as a capital asset, gains arising from transfer
of such shares shall be taxed under the head Capital gains.

2.

Long-term capital gain1 arising (i.e. where the listed equity shares are held for more than 12 months) on
sale of Banks shares is fully exempt from tax in accordance with the provisions of section 10(38) of the
Act, where the sale is made on a recognized stock exchange and the transaction is chargeable to securities
transaction tax (STT).

3.

If the long-term capital gains are not exempt under section 10(38) of the Act, taxable
long-term capital gains would arise to a resident shareholder. In accordance with and subject to the
provisions of section 48 of the Act, in order to arrive at the quantum of capital gains, the following
amounts would be deductible from the full value of consideration:

Cost of acquisition/ improvement of the shares as adjusted by the cost inflation index notified by the
Central Government; and

Expenditure incurred wholly and exclusively in connection with the transfer of shares
4.

Under section 112 of the Act, taxable long-term capital gains are subject to tax at a rate of 20.00% (plus
applicable surcharge and education cess) after indexation, as provided in the second proviso to section 48
of the Act. However, in case of listed securities, the amount of such tax could be limited to 10.00% (plus
applicable surcharge and education cess), without indexation, at the option of the shareholder.

5.

Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long-term
capital gain arising on sale of the Banks shares [other than the sale referred to in section 10(38) of the
Act] would be exempt from tax to the extent the same is invested for a minimum period of three years in a
long-term specified asset within a period of six months from the date of such transfer (upto a maximum
limit of ` 5 million during a financial year).

Long term capital gains are gains from shares held (a) for a period exceeding twelve months in the case of listed shares;
and (b) for a period exceeding thirty six months in the case of unlisted shares.

196

Provided further that the investment made by an assessee in the long-term specified asset, from capital
gains arising from transfer of one or more original assets, during the financial year in which the original
asset or assets are transferred and in the subsequent financial year does not exceed ` 5 million.
A long-term specified asset means any bond, redeemable after three years and issued on or after the 1st
day of April 2007 by the:

National Highways Authority of India constituted under section 3 of the National Highways Authority
of India Act, 1988; or

Rural Electrification Corporation Limited, a company formed and registered under the Companies Act,
1956.
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.
If the shareholder transfers or converts the long-term specified asset into money within a period of three
years from the date of its acquisition, the amount of capital gains exempted earlier would become
chargeable to tax in the year in which the long-term specified asset is transferred or converted 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-tax under section 80C and section 88 of the Act.
6.

Under section 54F of the Act and subject to the conditions and to the extent specified therein, long-term
capital gain arising to an individual or a HUF on sale of the Banks shares [other than the sale referred to
in section 10(38) of the Act] is exempt from tax if the net consideration is invested to purchase one
residential house property in India within a period of one year before or two years after the date of sale/
transfer or invested in the construction of one residential house property in India within a period of three
years from the date of transfer. If only a part of the net consideration is invested in the new asset then the
exemption will be available proportionately.

7.

As per section 111A of the Act, short-term capital gains2 on the transfer of listed equity shares of the Bank,
where the shares are held for a period of not more than 12 months, would be taxed at 15.00% (plus
applicable surcharge and education cess), where the sale is made on a recognized stock exchange and the
transaction is chargeable to STT. Cost indexation benefits would not be available in computing tax on
short-term capital gain. Short-term capital gains arising from transfer of share of the Bank, other than those
covered by section 111A of the Act, would be subject to as calculated under the normal provisions of the
Act.

8.

Dividend referred to in section 115-O of the Act are exempt from tax as per the provisions of section
10(34) of the Act.
As per section 115-O of the Act, a dividend distribution tax at the rate of 15.00% (plus applicable
surcharge and education cess) is applicable on the total amount distributed or declared or paid as dividend.
However, the Finance Act (No 2), 2014, has with effect from 1 October 2014 amended the provisions of
section 115-O to provide that tax on dividends to be distributed by domestic companies is to be computed
on the grossed up amount of dividend by the rate of tax on such dividend, instead of the net amount paid.

9.

As per section 94(7) of the 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.

10.

Section 14A of the Act restricts claim for deduction of expenses incurred in relation to incomes which do
not form part of the total income under the Act. Thus, any expenditure incurred to earn tax exempt income
(i.e. dividend/exempt long-term capital gains) is not a tax deductible expenditure.

Short term capital gains are gains from shares held (a) for a period not exceeding twelve months in the case of listed shares;
and (b) for a period not exceeding thirty six months in the case of unlisted shares.

197

11.

As per section 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off
against short-term as well as long-term capital gains of the said year. Balance loss, if any could be carried
forward for eight years for claiming set-off against subsequent years short-term as well as long-term
capital gains. Long-term capital loss [other than the above long-term capital assets whose gains are exempt
under section 10(38) of the Act] suffered during the year is allowed to be set-off only against long-term
capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against
subsequent years long-term capital gains.

12.

No deduction of amount paid on account of STT will be allowed in computing the income chargeable to
tax as capital gains.

C.

To Non-Resident shareholders other than Foreign Institutional Investor (FII) and Foreign Venture Capital
Investors (FVCI):

1.

Where the shares of the Bank are held by the shareholders as a capital asset, gains arising from transfer
of such shares shall be taxed under the head Capital gains.

2.

Long-term capital gain3 arising (i.e. where the listed equity shares are held for more than 12 months) on
sale of Banks shares is fully exempt from tax in accordance with the provisions of section 10(38) of the
Act, where the sale is made on a recognized stock exchange and the transaction is chargeable to STT.

3.

If the long-term capital gains are not exempt under section 10(38) of the Act, taxable
long-term capital gains would arise to a non-resident shareholder. In accordance with and subject to the
provisions of section 48 of the Act, in order to arrive at the quantum of capital gains, the following
amounts would be deductible from the full value of consideration:

Cost of acquisition/ improvement of the shares as adjusted by the cost inflation index notified by
the Central Government; and

Expenditure incurred wholly and exclusively in connection with the transfer of the shares

First proviso to section 48 of the Act further provides that capital gains arising from the transfer of
equity shares acquired by the non-resident in foreign currency, are to be computed by converting the
cost of acquisition/ improvement, expenditure incurred wholly and exclusively in connection with such
transfer and the full value of the consideration received or accruing as a result of transfer of the capital
asset into the same foreign currency as was initially utilized in the purchase of the shares and the
capital gains so computed in such foreign currency shall be reconverted into Indian currency.
Indexation will not be available in this case.
Having regards to the provisions of section 112 of the Act, other relevant provisions of the Act and
recent judicial precedents, Long -term capital gains, [other than those exempt under section 10 (38) of
the Act] arising on off-market transfer of our listed equity shares, at the option of the shareholders,
should be subject to tax at a rate of 10.00% (plus applicable surcharge and education cess), without
indexation.
4.

Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long-term
capital gain arising on sale of the Banks shares [other than the sale referred to in section 10(38) of the
Act] would be exempt from tax to the extent the same is invested in a long-term specified asset within a
period of six months from the date of such transfer (upto a maximum limit of ` 5 million during a financial
year) for a minimum period of three years.
Provided further that the investment made by an assessee in the long-term specified asset, from capital
gains arising from transfer of one or more original assets, during the financial year in which the original
asset or assets are transferred and in the subsequent financial year does not exceed ` 5 million.

Long term capital gains are gains from shares held (a) for a period exceeding twelve months in the case of listed shares;
and (b) for a period exceeding thirty six months in the case of unlisted shares.

198

A long-term specified asset means any bond, redeemable after three years and issued on or after the
1st day of April 2007 by the:

National Highways Authority of India constituted under section 3 of the National Highways
Authority of India Act, 1988; or

Rural Electrification Corporation Limited, a company formed and registered under the Companies
Act, 1956.

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.
If the shareholder transfers or converts the long-term specified asset into money within a period of
three years from the date of its acquisition, the amount of capital gains exempted earlier would
become chargeable to tax in the year in which the long-term specified asset is transferred or converted
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-tax under section 80C and section 88 of the
Act for any assessment year beginning on or after 1 April 2006.
5.

Under section 54F of the Act and subject to the conditions and to the extent specified therein, long-term
capital gain arising to an individual or a HUF on sale of the Banks shares [other than the sale referred to
in section 10(38) of the Act] is exempt from tax if the net consideration is invested to purchase one
residential house property in India within a period of one year before or two years after the date of sale/
transfer or invested in the construction of one residential house property in India within a period of three
years from the date of transfer. If only a part of the net consideration is invested in the new asset then the
exemption will be available proportionately. However, any such investment will need to be in compliance
with the Foreign Exchange Management Act, 1999 and Regulations issued thereunder.
If the new residential house is transferred within a period of three years from the date of purchase or
construction, the amount of capital gains on which tax was not charged earlier, shall be deemed to be
income chargeable under the head Capital Gains of the year in which the residential house is
transferred.

6.

Short-term capital gains4 on the transfer of listed equity shares of the Bank, where the shares are held for a
period of not more than 12 months would be taxed at 15.00% (plus applicable surcharge and education
cess), where the sale is made on a recognized stock exchange and the transaction is chargeable to STT. In
all other cases, the short-term capital gains would be taxed at the normal rates of tax (plus applicable
surcharge and education cess). Cost indexation benefits would not be available in computing tax on shortterm capital gain.

7.

Dividend referred to in section 115-O of the Act are exempt from tax as per the provisions of section
10(34) of the Act.
As per section 115-O of the Act, a dividend distribution tax at the rate of 15.00% (plus
applicable surcharge and education cess) is applicable on the total amount distributed or declared or paid
as dividend. However, the Finance Act (No 2), 2014 has with effect from 1 October 2014 amended the
provisions of section 115-O to provide that tax on dividends to be distributed by domestic companies is
to be computed on the grossed up amount of dividend by the rate of tax on such dividend, instead of the
net amount paid.

8.

As per section 94(7) of the 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.

Short term capital gains are gains from shares held (a) for a period not exceeding twelve months in the case of listed shares;
and (b) for a period not exceeding thirty six months in the case of unlisted shares.

199

9.

Section 14A of the Act restricts claim for deduction of expenses incurred in relation to incomes which do
not form part of the total income under the Act. Thus, any expenditure incurred to earn tax exempt income
(ie dividend/ exempt long-term capital gains) is not a tax deductible expenditure.

10.

As per section 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off
against short-term as well as long-term capital gains of the said year. Balance loss, if any could be carried
forward for eight years for claiming set-off against subsequent years short-term as well as long-term
capital gains. Long-term capital loss suffered (other than the above long-term capital assets whose gains
are exempt under section 10(38) of the Act) during the year is allowed to be set-off only against long-term
capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against
subsequent years long-term capital gains.

11.

Option available to Non-resident Indians (NRI) of being governed by the provisions of Chapter XII-A of
the Act, which inter-alia entitles them to the following benefits:

Under section 115E of the Act, long-term capital gains arising to a NRI [other than the sale referred to
in section 10(38) of the Act] on transfer of specified capital assets (which includes Banks equity
shares) acquired out of convertible foreign exchange, are taxable at the rate of 10% (plus applicable
surcharge and education cess) without indexation benefit and deduction under chapter VI-A of the Act.
Short-term capital gains are however, taxable at the normal rates of tax.

Under section 115F of the Act, long-term capital gains arising to a NRI [other than the sale referred to
in section 10(38) of the Act] from the transfer of shares of the Bank subscribed to in convertible foreign
exchange shall be exempt from tax, if the net consideration is reinvested in specified asset or in any
savings certificate as defined by section 10(4B) of the Act, 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 as long-term capital gains in the year subsequently, if
the specified assets are transferred or converted into money within three years from the date of their
acquisition.

Under section 115G of the Act, it shall not be necessary for an NRI to furnish his return of income
under section 139(1) of the Act, if his income chargeable under the Act consists of only investment
income of long-term capital gains or both, arising out of specified assets (inter-alia including shares of
a Bank) 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 Act.

In accordance with the provisions of section 115H of the Act, where an NRI become 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 Act to the effect that the provisions of Chapter XII-A
of the Act shall continue to apply to him in relation to such investment income derived from the
specified assets (which do not include shares of a Bank) for that year and subsequent assessment years
until such assets are converted into money.

As per provisions of section 115-I of the 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 Act.

For the purpose of aforesaid clauses NRI means an Individual, being a citizen of India or a person of
Indian origin who is not a resident. A person shall be deemed to be of Indian origin if he, or either of
his parents or any of his grand-parents, was born in undivided India.
12.

Under section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the double
tax avoidance agreement (tax treaty) entered into 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 Act or the applicable tax treaty,
whichever is more beneficial. However, the non-resident investor will have to qualify as a tax resident
under the applicable tax treaty and would need to furnish a Tax Residency Certificate (TRC) of his being
a resident in a country outside India, to get the benefit of the applicable tax treaty and such other document
as may be prescribed as per the provisions of section 90(5) of the Act.

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13.

No deduction of amount paid on account of STT will be allowed in computing the income chargeable to
tax as capital gains.

D.

To FIIs:

1.

As per section 2(14) of the Act, any securities held by a FIIs which has invested in such securities in
accordance with the regulations made under the Securities and Exchange Board of India Act, 1992, shall
be treated as capital assets. Accordingly, any gains arising from transfer of such securities shall be
chargeable to tax in the hands of FIIs as capital gains.

2.

Long-term capital gain5 arising (i.e. where the listed equity shares are held for more than 12 months) on
sale of Banks shares is fully exempt from tax in accordance with the provisions of section 10(38) of the
Act, where the sale is made on a recognized stock exchange and the transaction is chargeable to STT.

3.

As per section 115AD of the Act, long-term capital gains arising on transfer of shares purchased by FIIs,
are taxable at the rate of 10% (plus applicable surcharge and education cess) if such long-term capital
gains are not exempt under section 10(38) of the Act. The benefits of indexation of cost and of foreign
currency conversion are not available to FIIs.

4.

Short-term capital gains6 earned by FIIs are taxable at the rate of 15.00% (plus applicable surcharge and
education cess) if the transaction is chargeable to STT [proviso to section 115AD(1)(ii)]. In all other cases
the short-term capital gains shall be taxed at 30.00% (plus applicable surcharge and education cess).
Indexation benefits are not available. Further, the provisions relating to foreign currency conversion
benefit will not apply.

5.

Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long-term
capital gain arising on sale of the Banks shares [other than the sale referred to in section 10(38) of the
Act] would be exempt from tax to the extent the same is invested in a long-term specified asset within a
period of six months from the date of such transfer (upto a maximum limit of ` 5 million during a financial
year) for a minimum period of three years.
Provided further that the investment made by an assessee in the long-term specified asset, from capital
gains arising from transfer of one or more original assets, during the financial year in which the original
asset or assets are transferred and in the subsequent financial year does not exceed ` 5 million.
A long-term specified asset means any bond, redeemable after three years and issued on or after the 1st
day of April 2007 by the:

National Highways Authority of India constituted under section 3 of the National Highways
Authority of India Act, 1988; or
Rural Electrification Corporation Limited, a company formed and registered under the Companies
Act, 1956.

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.
If the shareholder transfers or converts the long-term specified asset into money within a period of three
years from the date of its acquisition, the amount of capital gains exempted earlier would become
chargeable to tax in the year in which the long-term specified asset is transferred or converted into money.
6.

Dividend referred to in section 115-O of the Act are exempt from tax as per the provisions of section
10(34) of the Act.

Long term capital gains are gains from shares held (a) for a period exceeding twelve months in the case of listed shares;
and (b) for a period exceeding thirty six months in the case of unlisted shares.

Short term capital gains are gains from shares held (a) for a period not exceeding twelve months in the case of listed shares;
and (b) for a period not exceeding thirty six months in the case of unlisted shares.

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As per section 115-O of the Act, a dividend distribution tax at the rate of 15.00% (plus
applicable surcharge and education cess) is applicable on the total amount distributed or declared or paid
as dividend. However, the Finance Act (No 2), 2014 has with effect from 1 October 2014 amended the
provisions of section 115-O to provide that tax on dividends to be distributed by domestic companies is
to be computed on the grossed up amount of dividend by the rate of tax on such dividend, instead of the
net amount paid.
7.

As per section 94(7) of the 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.

8.

As per section 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off
against short-term as well as long-term capital gains of the said year. Balance loss, if any could be carried
forward for eight years for claiming set-off against subsequent years short-term as well as long-term
capital gains. Long-term capital loss suffered (other than the above long-term capital assets whose gains
are exempt under section 10(38) of the Act) during the year is allowed to be set-off only against long-term
capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against
subsequent years long-term capital gains.

9.

Under section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the tax treaty
entered into 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 FIIs) can opt to be governed by
the provisions of the Act or the applicable tax treaty, whichever is more beneficial. However, the FII will
have to qualify as a tax resident under the applicable tax treaty and would need to furnish a TRC of it
being a resident in a country outside India, to get the benefit of the applicable tax treaty and such other
document as may be prescribed as per the provisions of section 90(5) of the Act.

10.

No deduction of amount paid on account of STT will be allowed in computing the income chargeable to
tax as capital gains.

11.

The CBDT has issued a Notification No. 9 dated 22 January 2014 which provides that FPI registered under
the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 shall be
treated as FII for the purpose of section 115AD of the Act.

E.

Venture Capital Fund (VCF) / Venture Capital Company (VCC):

1.

Under section 10(23FB) of the Act, any income of VCF/VCC registered with Securities and Exchange
Board of India (SEBI) on or before 21 May 2012 or VCF/VCC registered with SEBI as a sub-category of
Category-I Alternative Investment Fund, would be exempt from income-tax, subject to fulfilment of
conditions specified therein.

2.

As per provisions of section 115U of the Act, any income accruing or arising to or received by a person
out of investments made in a VCF/VCC [referred in section 10(23FB) of the Act] shall be chargeable to
income-tax in the same manner as if it were the income accruing or arising to or received by such person
had he made investments directly in the Venture Capital Undertaking.

F.

To Mutual Funds:
Under section 10(23D) of the Act, exemption is available in respect of income (including capital gains
arising on transfer of shares of the Bank) of a Mutual Fund registered under the Securities and Exchange
Board of India Act, 1992 or such other Mutual fund set up by a public sector bank or a public financial
institution or authorized by the Reserve Bank of India and subject to the conditions as the Central
Government may by notification in the Official Gazette, specify in this behalf.

G.

Provident Fund and Pension Fund:

Under section 10(25) of the Act, any income received by trustees on behalf of a recognised provident fund
and a recognised superannuation fund is exempt from tax.

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H.

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.

I.

Tax Deduction at Source/ Advance-tax:

1.

No income-tax is deductible from income by way of capital gains under the present provisions of the Act, in
case of residents. However as per the provisions of section 195 of the Act, any income by way of capital
gains, payable to non-residents (except long-term capital gains exempt under section 10(38) of the Act), may
fall within the ambit of with-holding tax provisions, subject to the provisions of the relevant tax treaty.
Accordingly, income-tax may have to be deducted at source in the case of non-resident at the rate under the
domestic tax laws or under the tax treaty, whichever is beneficial to the assessee unless a lower withholding
tax certificate is obtained from the tax authorities.

2.

As far as FIIs are concerned, as per section 196D of the Act, no deduction of tax at source shall be made in
respect of capital gains arising on sale proceeds on transfer of shares (including shares of the Bank). Tax, if
any, would be required to be discharged by the concerned FII prior to making the remittance of the
proceeds out of India.

J.

Requirement to furnish Permanent Account Number (PAN) under the Act

1.

Section 139A(5A) of the Act

Section 139A(5A) requires every person from whose income tax has been deducted at source under chapter
XVII-B of the Act to furnish his PAN to the person responsible for deduction of tax at source.

2.

Section 206AA of the Act

K.

Section 206AA of the Act requires every person entitled to receive any sum, on which tax is
deductible under Chapter XVIIB (deductee) to furnish his PAN to the deductor, failing which tax
shall be deducted at the highest of the following rates:
(i)

at the rate specified in the relevant provision of the Act; or

(ii)

at the rate or rates in force; or

(iii)

at the rate of twenty per cent.

Where a wrong PAN is provided, it will be regarded as non furnishing of PAN and Para (a) above will
apply.

Where the shareholder is a person located in a Notified Jurisdictional Area (NJA) under section 94A of the Act
Where the shareholder is a person located in a NJA [at present, Cyprus has been notified 7 as NJA], as per the
provisions of section 94A of the Act:

All parties to such transactions shall be treated as associated enterprises under section 92A of the Act
and the transaction shall be treated as an international transaction resulting in application of transfer
pricing regulations including maintenance of documentations, benchmarking, etc.

No deduction in respect of any payment made to any financial institution in a NJA shall be allowed
under the Act unless the assessee furnishes an authorisation in the prescribed form authorizing the
CBDT or any other income-tax authority acting on its behalf to seek relevant information from the

Notification No. 86/2013, dated 1 November, 2013 published in Official Gazette through SO 4625 GI/13
203

said financial institution [section 94A(3)(a) of the Act read with Rule 21AC and Form 10FC].

No deduction in respect of any expenditure or allowance (including depreciation) arising from the
transaction with a person located in a NJA shall be allowed under the Act unless the assessee
maintains such documents and furnishes such information as may be prescribed [section 94A(3)(b) of
the Act read with Rule 21AC].

If any assessee receives any sum from any person located in a NJA, then the onus is on the assessee to
satisfactorily explain the source of such money in the hands of such person or in the hands of the
beneficial owner, and in case of his failure to do so, the amount shall be deemed to be the income of
the assessee [section 94A(4) of the Act].

Any sum payable to a person located in a NJA shall be liable for withholding tax at the highest of the
following rates:
(i) at the rate or rates in force;
(ii) at the rate specified in the relevant provision of the Act; or
(iii) at the rate of thirty per cent.

L.

General Anti-Avoidance Rules (GAAR)

1.

In terms of Chapter XA of the Act, GAAR may be invoked notwithstanding anything contained in the Act.
Due to this, any arrangement entered into by an assessee may be declared to be impermissible avoidance
arrangement, as defined in that Chapter and the consequence would be inter alia denial of tax benefit.
This would also include denial of the benefit of the tax treaty to an investor if the Revenue Authorities
declares any arrangement to be an impermissible avoidance arrangement. The GAAR provisions are
applicable with effect from the Financial Year 2015-16. It remains to be seen whether Government decides
to defer it.

2.

However, the GAAR provisions can be said to be not applicable in certain circumstances viz. the main
purpose of arrangement is not to obtain a tax benefit etc. including circumstances enumerated in CBDT
Notification No. 75/2013 dated 23 September 2013.

II.

Wealth Tax:
Shares are not treated as assets within the meaning of section 2(ea) of the Wealth-tax Act, 1957.
Accordingly, shares purchased in the issue are not liable to Wealth-tax in the hands of the shareholders.

Notes:
1.

All the above benefits are as per the current tax law as amended by the Finance (No. 2) Act, 2104 (the
FA).

2.

As per the FA, surcharge is to be levied as under:

In the case of individual or Hindu undivided family or association of persons or body of

individuals, whether incorporated or not, or every artificial juridical person, where his income
exceeds ` 10 million, surcharge at 10% of tax is payable.

In case of domestic company, where its income exceeds ` 10 million but does not exceed ` 100
million, a surcharge at 5% of tax is payable and when such income exceeds ` 100 million,
surcharge at 10% of tax is payable.

In case of foreign companies, where the income exceeds ` 10 million but does not exceed ` 100
million, a surcharge at 2% of tax is payable and when such income exceeds ` 100 million,
surcharge at 5% of tax is payable.

Further, 2% education cess and 1% secondary and higher education cess on the total income tax (including
surcharge) is also applicable.
204

3.

The above statement covers only certain relevant benefits under the Income-tax Act, 1961 and Wealth
Tax Act, 1957 (collectively referred to as direct tax laws) and does not cover benefits under any other
law.

4.

The above statement of possible tax benefits sets out the provisions of law in a summary manner only
and is not a complete analysis or list of all potential tax consequences.

5.

The stated benefits will be available only to the sole/ first named holder in case the shares are held by
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 tax treaty, if any, between India and the country in which the
non-resident has fiscal domicile.

7.

In respect of non-residents, taxes paid in India could be claimed as a credit in accordance with the
provisions of the relevant tax treaty.

8.

This statement is intended only to provide general information to the investors and is neither designed
nor intended to be a substitute 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.

9.

The above statement of possible direct-tax benefits sets out the possible tax benefits available to its the
shareholders of the Company under the current tax laws presently in force in India. Several of these
benefits available are dependent on the Company or its shareholders fulfilling the conditions prescribed
under the relevant tax laws.

10.

No assurance is given that the Revenue authorities / Courts will concur with the view expressed herein.
Our view is based on the existing provisions of law and its interpretation which is subject to change
from time to time. We do not assume responsibility to update our view consequent to such changes.
We shall not be liable to any claims, liabilities or expenses relating to this assignment except to the
extent of fees relating to this assignment, as finally judicially determined to have resulted primarily
from bad faith or intentional misconduct. We will not be liable to any other person in respect of this
statement.

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LEGAL PROCEEDINGS
Our Bank is involved in various legal proceedings from time to time, most of which arise from the ordinary
course of business that we are engaged in. As of the date of this Placement Document, and except as described
below, we are not involved in any legal proceedings, and we are not aware of any threatened legal proceedings,
which if determined adversely, could result in a material adverse effect on our business, financial condition or
results of operations. A summary of certain pending legal proceedings where the amount claimed by us or any
other party exceeds ` 50 million is set forth below. All amounts mentioned below are excluding interest, unless
specifically mentioned.
Litigation involving the Bank
Litigation against the Bank
Civil cases
1.

Ahmedali G. Kathawala and others (Plaintiff) filed a suit vide Suit No. 22 of 2001 before the High Court
of Bombay (Court) against the Bank. Our Bank had granted various credit facilities to Union Quality
Plastics Limited amounting to ` 126.69 million against the collateral security of Pledge of Shares in the
name of the Plaintiff. The Plaintiff executed letter of pledge and irrevocable Power of Attorney in favour of
the Bank to deal with the shares as required. As per the said Power of Attorney, the Bank has sold the
shares held as security and appropriated the amount towards the over-dues of the Bank. The Plaintiff
claimed a sum of ` 76.56 million with interest towards damages and/or losses sustained by the Plaintiff.
Our Bank filed a written statement in reply to the suit filed by the Plaintiff. The matter is currently pending.

2.

Salim Nanji (Petitioner) filed a Writ Petition vide Writ Petition No. 2225 of 2005 before the High Court
of Bombay (Court) against the Bank seeking issue of an appropriate writ and to restrain the Bank from
writing off NPAs - Loans of ` 564.1 million and NPAs - Investments of ` 497.1 million aggregating to `
1,061.2 million for the Fiscal Year ended March 31, 2005 without following proper procedure prescribed
under the law to recover debts and NPAs Loans and Investments of the Bank from the debtors and
defaulters. Further, the Petitioner filed a Notice of Motion before the Court for seeking interim reliefs. The
Court passed an order granting interim reliefs till the date of next hearing. The Court, by its order dated
December 20, 2006, recalled its order and the matter is currently pending.

Litigation by the Bank

Civil cases
1.

Our Bank has filed an application bearing O.A. number 46 of 2014 (Application) before the Debts
Recovery Tribunal II, Mumbai (DRT (Mumbai)) against ABG Shipyard Limited and others
(Defendants). The Defendants had availed a short term loan facility from the Bank for an amount of `
300 million (Loan) for the purposes of building a ship for the National Institute of Oceanography
(NIO). The Defendants, however, have claimed that the final invoice of ` 445.5 million was payable by
NIO to the Bank rather than by the Defendants to the Bank. The DRT (Mumbai) vide its orders dated March
7, 2014 and April 28, 2014 (Orders) has directed the Defendants to deposit proceeds received by it from
NIO with the Bank. As the Defendants have not complied with the order of the DRT (Mumbai), the Bank
has filed a contempt petition against the Defendants before the High Court of Judicature at Bombay (High
Court). Further, the Bank has challenged the order dated September 10, 2014 passed by the DRT
(Mumbai) fixing the matter for the examination of the witness before the Debts Recovery Appellate
Tribunal, Mumbai (DRAT). The matter is currently pending before the High Court and the DRAT.

2.

State Bank of India (SBI) has filed an application bearing O.A. number 367 of 2014 (Application)
before the Debts Recovery Tribunal at Hyderabad (DRT (Hyderabad)) against Ameya Laboratories
Limited (Ameya) (formerly known as Anu Laboratories Limited) and others (Defendants) (the Bank
being Defendant number 11) for recovery of ` 501.83 million from Ameya. Our Bank has been impleaded
by SBI in the proceedings wherein SBI has sought that certain property mortgaged as security by Ameya be
sold and the sale proceeds be directed by the DRT (Hyderabad) to be proportionately paid to the Bank. The
matter is currently pending.

206

Anu Laboratories Limited (now known as Ameya Laboratories Limited) and K. Hari Babu (Petitioners)
have filed stay application number 212 of 2014 (Stay Application) before the Debts Recovery Tribunal
at Hyderabad (DRT (Hyderabad)) against the Bank. The Petitioners have filed the Stay Application
against physical possession of mortgaged property and got the stay by paying 20% of the notice, but the
same was not complied and Anu filed a new application for depositing ` 5 million and redelivery of
possession. The matter is currently pending.
3.

Our Bank filed Securitisation Application before the Debts Recovery Tribunal, Hyderabad (DRT) against
the Bank of Maharashtra and Ors (Respondent) for stay on all proceedings initiated by the Respondent in
respect of the property mortgaged to the Bank. This property was mortgaged to the Bank prior to the rights
being created on it by M. Madhu (Respondent No. 4) in favour of the Respondent and therefore the
Respondent has no rights to take possession of the said property. Our Bank prayed the DRT to declare, inter
alia, the possession Notice dated June 7, 2014 as illegal, void, contrary to Law and without jurisdiction; to
stay all proceedings to be initiated by the Respondent pending disposal of this application and to award
costs to the Bank. The matter is currently pending.

4.

Our Bank filed an original application before the Learned Debts Recovery Tribunal No. 1, Kolkata
(DRT) against Ramsarup Industries Limited (Ramsarup) for the recovery of an aggregate sum of `
288.27 million together with interest. Ramsarup had availed credit facilities from the Bank for business
purposes. Ramsarup committed series of defaults in making payments of moneys in respect of the credit
facility and further defaulted in performance of various covenants and conditions obligatory on Ramsarup.
Thereafter, on or about April 21, 2011 Ramsarup issued an acknowledgement of Debt and Confirmation of
securities in favour of the Bank. Ramsarup, however, failed/neglected to act in terms of the said letter and
therefore in view of the successive non-payments and defaults committed by Ramsarup in respect of
repayment of the credit facility and the interest payable thereon, the Bank issued a notice dated March 22,
2013 under the SARFAESI Act, 2002. The matter is currently pending.
Our Bank has filed a criminal complaint being C/8556 of 2011 for cheque amount of ` 44.4 million on
March 16, 2011 against Ramsarup in the Court of the Metropolitan Magistrate, Kolkata, seeking repayment
of double the amount due to us as compensation, as well as the imposition of other penalties prescribed
under Section 138 of the Negotiable Instruments Act, 1881. The matter is currently pending.
Our Bank has filed a criminal complaint being C/10283 of 2011 for cheque amount of ` 57.6 million on
April 7, 2011 against Ramsarup in the Court of the Metropolitan Magistrate, Kolkata, seeking repayment of
double the amount due to us as compensation, as well as the imposition of other penalties prescribed under
Section 138 of the Negotiable Instruments Act, 1881. The matter is currently pending.
Our Bank has filed a criminal complaint being C/11100 of 2011 for cheque amount of ` 50 million on April
12, 2011 against Ramsarup in the Court of the Metropolitan Magistrate, Kolkata, seeking repayment of
double the amount due to us as compensation, as well as the imposition of other penalties prescribed under
Section 138 of the Negotiable Instruments Act, 1881. The matter is currently pending.
Our Bank has filed a criminal complaint being C/11099 of 2011 for cheque amount of ` 5.82 million on
April 12, 2011 against Ramsarup in the Court of the Metropolitan Magistrate, Kolkata, seeking repayment
of double the amount due to us as compensation, as well as the imposition of other penalties prescribed
under Section 138 of the Negotiable Instruments Act, 1881. The matter is currently pending.

5.

Our Bank filed an original application vide O.A. No. 223 of 2013 before the Debts Recovery Tribunal II,
Mumbai (DRT) against M/s Megahertz Systems Private Limited (Respondent) and Ors. The
Respondent requested the Bank to grant cash credit facility for meeting the working capital needs of the
Respondent on the security of stock and book debts and collateral securities of five flats and one farm house
at Karjat. Due to the failure on the part of the Respondent, the Bank issued a notice to the Respondent to
pay the amount due and payable under the said facility a sum of ` 76.63 million together with further
interest. Further, Smt. Vijayaben Sangani (Plantiff), Respondent No. 11 for the above original
application, filed Securitisation Application vide S.A. (L) No.13 of 2014 before the Debts Recovery
Tribunal-II, Mumbai against the Bank for stay on the possession of the mortgaged properties. The matter is
currently pending.

6.

Our Bank filed a petition vide Cri. P. No. 324 of 2013 before the Court of Chief Metropolitan Magistrate,
Ranga Reddy District (Court) against Marga Services Private Limited and others (Respondent) for
207

taking possession of the secured asset and deliver the vacant possession to the Bank under section 14 of the
SARFAESI Act, 2002. The Respondent availed cash credit and term loan facility from the Bank for which
there was a default in payment by the Respondent. Accordingly, the Court passed an order on June 11, 2013
appointing an Advocate Commissioner for taking possession of the secured asset and handing over the
same to the Bank. The Court Commissioner has taken possession of the mortgaged properties and handedover the same to the Bank on August 17, 2013.
Our Bank has filed an original application bearing O.A. No. 667 of 2012 before the DRT (Hyderabad)
against the Respondent for recovery of amount of ` 46.48 million. The matter is currently pending.
The Respondent has filed Securitisation Application bearing S.A. No. 604 of 2013 before the DRT
(Hyderabad) against the Bank to declare possession notice dated March 23, 2013 as null and void. The
matter is currently pending.
Our Bank has filed a criminal complaint being S.R. 375 of 2013 for cheque amount of ` 0.94 million
against the Respondent in the Court of the Metropolitan Magistrate, Hyderabad, seeking repayment of
double the amount due to us as compensation, as well as the imposition of other penalties prescribed under
Section 138 of the Negotiable Instruments Act, 1881. The matter is currently pending.
7.

Our Bank has filed an original application before the DRT-I (Ahmedabad) against Shree Shivbaba Agro
Industries (Shree Shivbaba) for recovery of amount of ` 155.09 million on August 28, 2014. Shree
Shivbaba availed the Cash Credit and Term Loan Facility from the Bank for which there was a default in
payment to the Bank. Shree Shivbaba has filed Securitisation Application bearing S.A. No. 295 of 2014
before the DRT-I (Ahmedabad) on May 20, 2014 challenging our action under SARFAESI Act, 2002. The
matter is currently pending.

8.

Our Bank has filed an application bearing O.A. No. 379 of 2013 before the Debts Recovery Tribunal No. I,
Kolkata (DRT (Kolkata)) against the Official Liquidator, High Court, Calcutta representing Prime Impex
Limited (Prime Impex) and others (Defendants) for recovery of amount of ` 69.19 million from the
Defendants. Our Bank has sought that the DRT (Kolkata) passed an order of injunction directing the
Defendants not to sell certain property given by the Defendants as security to the Bank and to declare all the
movable and immovable property to be taken possession of by the Receiver. The matter is currently
pending.
Our Bank has filed an application bearing O.A. No. 444 of 2013 before the DRT (Kolkata) against the
Official Liquidator, High Court, Calcutta representing Prime Impex and others (Defendants) for recovery
of amount of ` 34.37 million from the Defendants. The matter is currently pending.
Our Bank has filed an application bearing O.A. No. 353 of 2013 before the DRT (Kolkata) against the
Official Liquidator, High Court, Calcutta representing Prime Impex and others (Defendants) for recovery
of amount of ` 107.95 million from the Defendants. The matter is currently pending.

9.

Our Bank filed an original application vide O.A. No. 278 of 2004 before the Debts Recovery Tribunal No.
III, Mumbai (DRT) against M/s Unique Fabricators & Ors (Defendant). Our Bank sanctioned various
credit facilities aggregating to ` 32.50 million. The account turned NPA on March 31, 2002. Therefore, the
Bank filed an application for recovering ` 62.63 million. Further, the Defendant filed a counter claim
application for ` 150.24 million from the Bank. The O.A. was decreed on May 13, 2010 for ` 54.80 million
and the counter claim was dismissed. The Defendant had filed miscellaneous application vide M.A. No. 109
of 2010 for setting aside the order passed in O.A. No. 278 of 2004. The said miscellaneous application was
dismissed by DRT on June 15, 2011.
Vincent Paul Koreth (Appellant), aggrieved by the order passed by the Chief Metropolitan Magistrate
and filed Securitization Application vide S.A. No. 62 of 2008 before the DRT. The said application was
rejected. Aggrieved by the same, the Appellant filed an appeal vide Appeal No. 91 of 2009 before the Debts
Recovery Appellate Tribunal, Mumbai. The matter is currently pending.

10. Our Bank has filed an application before the Debts Recovery Tribunal, Chennai for recovery of ` 505.79
million due and payable by Subhiksha Trading Services Limited (STSL) and its director, R.
Subramanium, pursuant to loans provided to STSL. In addition, the Bank filed a criminal complaint for
cheque amount of ` 100 million against STSL in the Court of the Metropolitan Magistrate, Egmore,
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Chennai, seeking repayment of double the amount due to us as compensation, as well as the imposition of
other penalties prescribed under Section 138 of the Negotiable Instruments Act, 1881. STSL was granted a
cash credit facility of ` 250 million in December 2007, for which a first pari passu charge was created on
all STSLs inventories and book debts as security and a second pari passu charge was created on all of
STSLs movable assets. In addition, Subramanium provided a personal guarantee for the repayment of the
loan amount. Upon STSLs request, this credit facility was enhanced by ` 50 million and an additional
facility of ` 100 million repayable in 3 months was provided on an ad hoc basis to STSL. STSLs conduct
of its loan account was not satisfactory after October 2008, and was classified as an NPA on December 31,
2008. A corporate debt restructuring proposal, which contemplated an infusion of ` 3,000 million for the
revival of STSL by its lenders, was unsuccessful because STSL failed to cooperate in a special investigative
audit. The matter is currently pending.
11. Our Bank has filed a civil suit vide Civil Suit No. 1828 of 1998 before the City Civil Court at Ahmedabad
against N. K. Industries Limited, Mahendra N. Patel and Naranbhai B. Patel (India) Private Limited for the
sale of certain pledged goods. By an order in May 1998, the Court permitted the Bank to sell the pledged
goods and deposit the proceeds with State Bank of India. The Court permitted the Bank to withdraw such
proceeds from State Bank of India by an order in October 2004. Aggrieved by this order, Mahendra N.
Patel and Naranbhai B. Patel (India) Private Limited filed Review Application before the Court in 2004 to
redeposit the proceeds with State Bank of India. The total amount involved is ` 44.93 million. The matter is
currently pending.
Criminal cases
1.

Mustaq Ahmadalli Dosani, bank manager of the Bank filed a First Information Report vide C.R. No.
100/1997 which got converted to a criminal complaint No. 59/P/1998 against Salman Merchant,
Kamruddin Charania, Nooruddin Parmar and Tanvir Chaviwala before the Court of Additional Chief
Metropolitan Magistrate, Mumbai alleging charges under sections 465, 467, 468, 471, 477(A), 419, 420
r/w 120-B r/w 34 of the Indian Penal Code, 1908 claiming a sum of ` 3.82 million for the purpose of
falsification of account, forgery in respect of valuable security, using forged documents as genuine and
cheating the Bank. The matter is currently pending.

2.

Our Bank has filed an application number 29549 of 2011 before the Chief Metropolitan Magistrate at
Calcutta (Chief Magistrate) against Ranjit Kothari, Director of Prime Impex and others (Defendants)
under Section 156 (3) of the Code of Criminal Procedure, 1973. Our Bank has alleged that it has been
deprived of valuable consideration in excess of ` 150 million relying upon the false, misleading and
mischievous promises and criminal misconduct of the Defendants. The Chief Metropolitan Magistrate has
directed the Officer-in-Charge of the Shakespeare Sarani Police Station to register the first information
report filed by the Bank and carry out an investigation into the matter. The matter is currently pending.

3.

Our Bank has filed a criminal case at the Lake Police Station, Kolkata vide case No. 88 of 2008 which got
converted to CGR No. 1084 of 2008 against Debashish Karmakar, teller-in-charge of the Bank before the
3rd Judicial Magistrate Court, Alipore alleging charges under section 408 of the Indian Penal Code, 1908
claiming a sum of ` 5 million for the purpose of fraud done by him single-handedly. Our Bank received `
2.79 million from Insurance Co. (Reliance) and for remaining amount claim is under process. Further, an
amount of ` 0.31 million is recovered from his house which has been kept in the Banks sundry creditor
account. The matter is currently pending.

4.

Our Bank filed a criminal case vide Cri. Case No. 560/PW/2011 in furtherance to a criminal miscellaneous
application vide C.R. No. 166 of 2010 against Sumit Raj Sinha, an ex-employee of the Bank before the
Court of Learned Additional Chief Metropolitan Magistrate, Mumbai alleging charges under sections 409,
420, 467, 468 and 471 of the Indian Penal Code, 1908 for the purpose of fraud committed by the Sumit
Raj Sinha by forging the false advocate bills and thereafter en-cashing the same. Further, the Bank filed a
criminal application vide Cri. Misc. No. 121/N/2011 before the Court of Additional Chief Metropolitan
Magistrate, Mumbai for the return of amounts of ` 0.87 million and ` 0.62 million (along with interest) in
his accounts with Bank of India and HDFC Bank Limited respectively and gold ornaments worth ` 45,563
approximately. The Court of Additional Chief Metropolitan Magistrate, Mumbai allowed the application
to grant the abovementioned amount to the Bank on the condition that the Bank would submit a Bank
Guarantee worth ` 1.5 million. However, the request for return of gold ornaments was rejected by the
Court. On execution of the Bank Guarantees in favour of the respective Banks, the Bank had received an

209

amount of ` 1.60 million from these Banks which has been kept in the Banks sundry creditor account.
The matter is currently pending.
Tax Proceedings
We are also involved in disputes pending in various tribunals and courts with the Income Tax Department of
India with respect to income tax assessments for the assessment years 1996-1997, 1997-1998, 1998-1999, 19992000, 2000-2001, 2001-2002, 2002-2003, 2003-2004 and 2004-2005 in which the aggregate income tax liability
in dispute is approximately ` 300 million. The details of the aggregate income tax liability in dispute are given
below:
1.

For Assessment Years 1998-1999, 1999-2000, 2000-2001, 2001-2002, 2002-2003, 2003-2004 and 20042005, the Income Tax Appellate Tribunal, Mumbai (ITAT) has disallowed an amount of ` 81.3 million
which resulted into tax liability including interest (approximately) of ` 35 million pursuant to Section 14A
of the Income Tax Act.

2.

For Assessment Years 1987-1988, to 1996-1997 ( block assessment), the ITAT had remanded the matter
to the Assessing Officer involving an aggregate sum of ` 223.4 million in relation to treatment of fixed
deposits of our customers as undisclosed income resulting in a tax liability including interest aggregating
to a sum of ` 160 million under the Income Tax Act.

3.

For Assessment Years 1998-1999, 1999-2000, 2000-2001, 2001-2002, 2002-2003, 2003-2004 and to
2004-2005, the ITAT has remanded the matter to the Assessing Officer involving a sum of ` 147.1 million
in relation to depreciation on investment which could result into tax liability including interest aggregating
to a sum of ` 70 million under the Income Tax Act.

4.

For Assessment Year 2002-2003, the ITAT has disallowed an amount of ` 680 million on account of bad
debts written off adjustment against provision for bad debts which resulted into tax liability including
interest (approximately) of ` 30 million under the Income Tax Act.

5.

For Assessment Year 1997-1998 and 1998-1999, the ITAT has remanded the matters to the Assessing
Officer on miscellaneous grounds such as disallowance sought on expenses incurred on professional/legal
fee s, miscellaneous expenses etc. which could result into tax liability including interest (approximately) of
` 5 million under the Income Tax Act.

We are also involved in disputes (appeal) pending before the Bombay High Court filed by the income tax
department in respect of orders passed by the Income Tax Appellate Tribunal in favour of the Bank for the
Income Tax Assessment Years 1996-97, 1997-98, 1998-99, 1999-00, 2000-01, 2001-02, 2002-03, 2003-04,
2004-05 and 2008-09 involving, inter alia, matters such as disallowance of provision for REPO; income from
leasing activity to be treated as interest and interest was chargeable thereon; allowing depreciation on assets
leased out; disallowance under section 14A of the Income Tax Act; and allowing deduction of bad debts,
resulting in a tax refund amounting to ` 742.7 million (including interest) (Refunds Amounts), which was
received in the Fiscal Year 2015. The appeals are currently pending.
Other confirmations
1.

There are no litigation or legal action pending or taken by any Ministry or Department of the Government
or a statutory authority against our Promoter during the last three years immediately preceding the date of
this Placement Document.

2.

No inquiries, inspections or investigations have been initiated or conducted against the Bank under the
Companies Act in the last three years immediately preceding the date of the Placement Document. Further,
there have been no prosecutions filed, fines imposed, compounding of offences against the Company in
the last three years immediately preceding the date of this Placement Document.

210

GENERAL INFORMATION
1.

We received our certificate of incorporation as Development Credit Bank Limited and license to conduct
banking business under Section 22 of the Banking Regulation Act on May 31, 1995.
The name of our Bank was subsequently changed to DCB Bank Limited and a fresh certificate of
incorporation consequent upon change of name was issued by office of Registrar of Companies,
Maharashtra at Mumbai on October 24, 2013 and has received RBI approval on January 10, 2014 for the
same.

2.

Our registered and corporate office is located at 601 & 602, 6 th Floor, Peninsula Business Park, Tower A,
Senapati Bapat Marg, Lower Parel, Mumbai 400 013, India.

3.

The authorized share capital of our Bank is ` 5,000 million consisting of 500,000,000 Equity Shares of `
10 each. Our Banks issued and subscribed Capital is ` 2,507,742,220 divided into 250,774,222 Equity
Shares of ` 10 each.

4.

Under our Memorandum of Association, our principal objects are to carry out the business described in
the chapter titled Our Business. The objects are set out in Clause III (A) of our Memorandum of
Association.

5.

The Issue was authorized and approved by our Board of Directors at our Board meeting held on April 15,
2014 and approved by our shareholders at our annual general meeting held on June 6, 2014. The
Shareholders resolution is valid for a period of one year from the date of the AGM.

6.

We have received approval from RBI dated September 25, 2014 for this Issue.

7.

We have received in-principle approvals from the Stock Exchanges under Clause 24(a) of the listing
agreements with the Stock Exchanges for the issue of the Equity Shares in this Issue. We will apply for
in-principle and final approvals for listing and trading such Equity Shares on BSE and NSE.

8.

Copies of our Memorandum of Association and Articles of Association will be available for inspection
during usual business hours on any weekday (except Saturdays and public holidays) during the offering
period at our Registered Office and Corporate Office.

9.

Other than as set forth in this Placement Document, there has been no significant adverse change in our
financial position since March 31, 2014, the date of our last audited financial statements for Fiscal Year
2014.

10.

Except as disclosed in this Placement Document, there are no litigation or arbitration proceedings
pending against or affecting our Bank or our Banks assets or revenues, nor is our Bank aware of any
threatened litigation or arbitration proceedings, which are or might be material in the context of this Issue.

11.

S.R. Batliboi & Co., Chartered Accountants (now known as S. R. Batliboi & Co. LLP, Chartered
Accountants), have audited our financial statements as of and for the year ended March 31, 2012 and they
have acknowledged inclusion of their reports in this Placement Document.

12.

BSR & Co. LLP, Chartered Accountants, have audited our financial statements as of and for the years
ended March 31, 2013 and March 31, 2014 and have reviewed our financial statements as of and for the
three months ended June 30, 2014 and they have consented to the inclusion of their reports in this
Placement Document.

13.

We confirm that we are in compliance with minimum public shareholding requirements under the terms
of our listing agreements with the Stock Exchanges.

14.

The Floor Price is ` 86.45 per Equity Share and the Discounted Floor Price is ` 82.13 per Equity Share,
calculated in accordance with the provisions of Chapter VIII of the SEBI ICDR Regulations.

211

FINANCIAL STATEMENTS
Particulars
Auditors Report and financial statements as of a for the Fiscal Year ended March 31, 2014
Auditors Report financial statements as of and for the Fiscal Year ended March 31, 2013
Auditors Report financial statements as of and for the Fiscal Year ended March 31, 2012

F-1

Page Number
F - 2 to F - 39
F - 40 to F - 77
F - 78 to F - 110

DCB BANK

B S R & Co. LLP

Chartered Accountants
1st Floor, Lodha Excelus
Appollo Mills Compound
N. M. Joshi Marg
Mahalakshmi
Mumbai - 400 011
India

Telephone +91 22 3989 6000

Fax
+91 22 3090 2511

Independent Auditors Report

To the Members of DCB Bank Limited
(formerly known as Development Credit Bank Limited)
Report on the Financial Statements
1. We have audited the accompanying financial statements of DCB Bank Limited (formerly known as Development Credit Bank Limited)
(the Bank), which comprise the Balance Sheet as at 31 March 2014, the Profit and Loss Account and the Cash Flow Statement for the
year then ended, a summary of significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
2. Management is responsible for preparation of these financial statements that give a true and fair view of the financial position, financial
performance and cash flows of the Bank in accordance with provisions of Section 29 of the Banking Regulation Act, 1949 read
with Section 211 of the Companies Act, 1956 and circulars and guidelines issued by Reserve Bank of India from time to time. This
responsibility includes the design, 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.
Auditors Responsibility
3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of the Bank
including its branches in accordance with Standards on Auditing (the Standards) issued by the Institute 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 financial statements are free of material misstatements.
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 auditors 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 Banks
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Banks internal control. An audit 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 to provide a basis for our audit opinion.

B S R & Co. (a partnership firm with

Registration No. BA61223) converted into
B S R & Co. LLP (a Limited Liability, Partnership
with LLP Registration No. AAB-8181)
with effect from October 14, 2013

F-2

I 38 I

DCB Bank Limited A NNUAL R EPORT 2013-14

Registered Office:
1st Floor, Lodha Excelus
Appollo Mills Compound
N. M. Joshi Marg, Mahalakshmi
Mumbai - 400 011

DCB BANK
Opinion
6. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the
information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956, in the manner so required for banking
companies and give a true and fair view in conformity with accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31 March 2014;
(b) in the case of the Profit and Loss Account, of the profit of the Bank for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows of the Bank for the year ended on that date.
Report on Other Legal and Regulatory Requirements
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.
8. We report that:
(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose
of our audit and have found them to be satisfactory;
(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and
(c) during the course of our audit we have visited 13 branches. Since the key operations of the Bank are automated with the key
applications integrated to the core banking systems, the audit is carried out centrally as all the necessary records and data required for
the purposes of our audit are available therein.
9. In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement comply with the Accounting Standards
referred to in subsection (3C) of section 211 of the Companies Act, 1956, to the extent they are not inconsistent with the accounting
policies prescribed by Reserve Bank of India.
10. We further report that:
(i) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the
books of account;
(ii) the financial accounting systems of the Bank are centralised and, therefore, returns are not necessary to be submitted by the branches;
(iii) 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; and
(iv) on the basis of written representations received from the Directors and taken on record by the Board of Directors, none of the
Directors is disqualified as on 31 March 2014 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section
274 of the Companies Act, 1956.

For B S R & Co. LLP

Chartered Accountants
Firms Registration No: 101248W
Akeel Master
Partner
Membership No: 046768

Mumbai
15 April 2014

F-3
DCB Bank Limited A NNUAL R EPORT 2013-14

I 39 I

DCB BANK
BALANCE SHEET AS ON MARCH 31, 2014
Schedule

As on 31.03.2014

As on 31.03.2013

(` in 000s)

(` in 000s)

2,503,246

2,501,116

29,649

30,189

9,006,699

7,499,288

11,539,594

10,030,593

CAPITAL & LIABILITIES

Capital

Employee Stock Options

(Grants Outstanding net of deferred cost)
Reserves & Surplus

Capital and Reserves - Subtotal

Deposits

103,251,608

83,638,385

Borrowings

8,601,599

15,256,195

Other Liabilities and Provisions

5,838,571

3,863,066

129,231,372

112,788,239

5,050,693

3,787,670

TOTAL CAPITAL & LIABILITIES

ASSETS
Cash and Balances with Reserve Bank of India

Balances with Banks and Money at Call and Short Notice

1,845,024

5,044,854

Investments

36,342,226

33,586,568

Advances

81,401,862

65,860,852

Fixed Assets

10

2,386,422

2,394,471

Other Assets

11

2,205,145

2,113,824

129,231,372

112,788,239

25,210,398

44,765,489

4,304,525

4,756,905

TOTAL ASSETS
Contingent Liabilities

12

Bills for Collection

Significant Accounting Policies

17

Notes to Accounts

18

The Schedules referred to above form an integral part of the Balance Sheet.
The Balance Sheet has been prepared in conformity with Form A of the Third Schedule to the Banking Regulation Act, 1949.

As per our report of even date.

For and on behalf of the Board of Directors

For B S R & Co. LLP

Chartered Accountants
Firm Registration Number: 101248W

Nasser Munjee
Chairman

Murali M Natrajan
MD & CEO

Akeel Master
Partner
Membership No.: 046768

Bharat Sampat
EVP & CFO

H.V. Barve
VP & Company Secretary

Place : Mumbai
Date : April 15, 2014

Place : Gurgaon
Date : April 15, 2014
F-4

I 40 I

DCB Bank Limited A NNUAL R EPORT 2013-14

Keki Elavia
Director

DCB BANK
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2014
Schedule

I.

INCOME
Interest Earned
Other Income

13
14

TOTAL INCOME
II. EXPENDITURE
Interest Expended
Operating Expenses
Provisions and Contingencies

15
16
18 (11.1)

TOTAL EXPENDITURE
III. PROFIT / (LOSS)
Net Profit for the Year
Losses Brought Forward
TOTAL PROFIT/(LOSS)
IV. APPROPRIATIONS
Transfer to Statutory Reserve
Transfer to Special Reserve
Transfer to Revaluation Reserve
Transfer to Capital Reserve
Transfer to Investment Reserve
Balance carried over to Balance Sheet
TOTAL
Earning per share
(i) Basic (`)
(ii) Diluted (`)
Face Value per share (`)
Significant Accounting Policies
Notes to Accounts

17 (17)
18 (10.2)
18 (10.2)

Year Ended
31.03.2014
(` in 000s)

Year Ended
31.03.2013
(` in 000s)

11,282,593
1,386,625

9,161,031
1,170,192

12,669,218

10,331,223

7,598,696
3,190,873
366,044

6,316,946
2,752,948
240,705

11,155,613

9,310,599

1,513,605
(2,494,652)

1,020,624
(3,233,581)

(981,047)

(2,212,957)

378,401
20,718

2,244
1,657
(1,384,067)

255,156

22,648
3,891
(2,494,652)

(981,047)

(2,212,957)

6.05
5.99
10.00

4.19
4.17
10.00

17
18

The Schedules referred to above form an integral part of the Profit & Loss Account.
The Profit and Loss Account has been prepared in conformity with Form B of the Third Schedule to the Banking Regulation Act, 1949.
As per our report of even date.

For and on behalf of the Board of Directors

For B S R & Co. LLP

Chartered Accountants
Firm Registration Number: 101248W

Nasser Munjee
Chairman

Murali M Natrajan
MD & CEO

Akeel Master
Partner
Membership No.: 046768

Bharat Sampat
EVP & CFO

H.V. Barve
VP & Company Secretary

Place : Mumbai
Date : April 15, 2014

Place : Gurgaon
Date : April 15, 2014

F-5

Keki Elavia
Director

DCB Bank Limited A NNUAL R EPORT 2013-14

I 41 I

DCB BANK
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2014
(` in 000s)
Year Ended
31-Mar-14

Year Ended
31-Mar-13

1,513,605

1,020,624

348,508
(65,033)
(2,210)
70,554
400
(1,348)
179,712
3,986
60,027
40,074
(89)

175,013
3,651
(3,470)
19,213
300
42,154
136,359
17,098
47,310
41,048
2,153

19,613,223
1,904,500
(2,813,475)
(15,864,559)
(107,238)
16,864

20,282,830
279,100
(8,452,840)
(13,236,341)
182,305
(3,844)

4,897,501

552,663

(199,013)
11,506

(722,946)
9,569

(187,507)

(713,377)

7,795

(6,654,596)

406,010

(100,000)
4,121,694

(6,646,801)

4,427,704

A+B+C

(1,936,807)
8,832,524
6,895,717

4,266,990
4,565,534
8,832,524

Notes to the cash flow statement

Cash and cash equivalent includes the following:
Cash and balances with Reserve Bank of India
Balances with Banks and Money at Call and Short notice

5,050,693
1,845,024

3,787,670
5,044,854

Cash and Cash equivalent at the end of the year

6,895,717

8,832,524

Cash Flow from Operating Activities

Net Profit for the year ended March 31, 2014
Adjustments for:
Provisions for Advances
Provisions for Restructured Advances
Provision for Investments
Provision for Standard Assets
Provision for Income Tax (including wealth tax)
Provision for Other Assets and Contingencies
Depreciation on Fixed Assets
Loss on Sale of Fixed Assets
Amortisation of Premium on Investment
Amortisation of Premium on Acquired Assets
ESOP Compensation
Adjustments for:
Increase/(Decrease) in Deposits
Increase/(Decrease) in Other Liabilities & Provisions
(Increase)/Decrease in Investments
(Increase)/Decrease in Advances
(Increase)/Decrease in Other Assets
Refund/(Payment) of direct taxes (Including Tax Deducted at Source)
Net Cash Flow from Operating activities
Cash flow from Investing activities
Purchase of Fixed assets
Proceeds from sale of Fixed Assets

Net Cash Flow from Investing activities

Cash flow from Financing activities
Net Proceeds from Issue of Capital
Issue of Subordinated Debt
Repayment of Subordinated Debt
Increase / (Decrease) in Borrowings

Net Cash Flow from Financing activities

Net Increase/(Decrease) in Cash & Cash Equivalent
Cash and cash equivalent at the beginning of the year
Cash and cash equivalent at the end of the year

As per our report of even date.

For and on behalf of the Board of Directors

For B S R & Co. LLP

Chartered Accountants
Firm Registration Number: 101248W

Nasser Munjee
Chairman

Murali M Natrajan
MD & CEO

Akeel Master
Partner
Membership No.: 046768

Bharat Sampat
EVP & CFO

H.V. Barve
VP & Company Secretary

Place : Mumbai
Date : April 15, 2014

Place : Gurgaon
Date : April 15, 2014

I 42 I

DCB Bank Limited A NNUAL R EPORT 2013-14

F-6

Keki Elavia
Director

DCB BANK
SCHEDULE 1 CAPITAL
As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

Authorised Capital
50,00,00,000 (Previous year 50,00,00,000)
Equity Shares of ` 10/- each

5,000,000

5,000,000

Issued, Subscribed and Paid up Capital

250,324,622 (Previous year 250,111,597)
Equity Shares of ` 10/- each

2,503,246

2,501,116

TOTAL

2,503,246

2,501,116

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

1,369,678
378,401
1,748,079

1,114,522
255,156
1,369,678

20,718

20,718

537,811

(11,859)
525,952

549,669

(11,858)
537,811

375,333
2,244

377,577
903,529

352,685
22,648

375,333
913,144

7,673,678
5,665

7,679,343

7,361,922
311,756

7,673,678

37,440
1,657

39,097

33,549
3,891

37,440

(1,384,067)
9,006,699

(2,494,652)
7,499,288

SCHEDULE 2 RESERVES & SURPLUS

I.

Statutory Reserve
Opening balance
Additions during the year
TOTAL (I)

II. Special Reserve

Opening balance
Additions during the year
Deductions during the year
TOTAL (II)
III. Capital Reserve
a) Revaluation Reserve
Opening balance
Additions during the year
Deductions during the year
TOTAL (a)
b) Other Capital Reserve
Opening balance
Additions during the year
Deductions during the year
TOTAL (b)
TOTAL (a + b ) (III)
IV. Share Premium
Opening balance
Additions during the year
Deductions during the year
TOTAL (IV)
V.

Revenue and Other Reserves

Investment Reserve
Opening balance
Additions during the year
Deductions during the year
TOTAL (V)

VI. Balance in Profit & Loss Account

TOTAL (I to VI)
F-7

DCB Bank Limited A NNUAL R EPORT 2013-14

I 43 I

DCB BANK
SCHEDULE 3 DEPOSITS

I.

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

Demand Deposits
(i) From Banks
(ii) From Others

454,635
9,136,134

159,439
8,832,978

TOTAL (I)

9,590,769

8,992,417

II. Savings Bank Deposits

16,221,896

13,723,741

TOTAL (II)

16,221,896

13,723,741

III. Term Deposits

(i) From Banks
(ii) From Others

15,491,133
61,947,810

7,660,159
53,262,068

TOTAL (III)

77,438,943

60,922,227

TOTAL (I, II and III)

103,251,608

83,638,385

Deposits of branches in India

103,251,608

83,638,385

I.

II. Deposits of branches outside India

103,251,608

83,638,385

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

Borrowings in India
(i) Reserve Bank of India
(ii) Other Banks
(iii) Other Institutions and Agencies
(iv) Sub-Ordinated Debts

900,000
1,100,000
5,208,661
650,000

2,900,000
7,100,000
3,805,879
650,000

TOTAL (I)

7,858,661

14,455,879

742,938

800,316

TOTAL (I & II)

8,601,599

15,256,195

Secured Borrowings included in I & II above

1,439,107

3,399,761

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

Bills Payable
Inter Office Adjustments (Net)
Interest Accrued (Net of TDS recoverable)
Others
(i) Provision for Standard Assets
(ii) Other Liabilities (including provisions)

2,251,917

1,526,887

1,436,847

1,057,097

342,247
1,717,520

271,694
1,097,428

TOTAL

5,838,571

3,863,066

TOTAL

SCHEDULE 4 BORROWINGS

I.

II. Borrowings outside India

SCHEDULE 5 OTHER LIABILITIES AND PROVISIONS

I.
II.
III.
IV.

F-8

I 44 I

DCB Bank Limited A NNUAL R EPORT 2013-14

DCB BANK
SCHEDULE 6 CASH AND BALANCES WITH RESERVE BANK OF INDIA

I.

Cash in hand
(including foreign currency notes:- ` Nil
{Previous Year ` Nil } )
II. Balances with Reserve Bank of India
(i) In Current Accounts
(ii) In Other Accounts

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

849,018

905,841

4,201,675

2,881,829

TOTAL (II)

4,201,675

2,881,829

TOTAL (I & II)

5,050,693

3,787,670

SCHEDULE 7 BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE

I.

In India
i. Balance with Banks
(a) In Current Accounts **
(b) In Other Deposit Accounts

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

287,279
2,780

472,399
46,700

290,059

519,099

600,000
2,507,260

** includes funds in transit

TOTAL
ii. Money at Call and Short Notice
(a) With Banks
(b) With Other Institutions
TOTAL

3,107,260

290,059

3,626,359

167,633
1,387,332

129,226
1,289,269

TOTAL (II)

1,554,965

1,418,495

TOTAL (I & II)

1,845,024

5,044,854

TOTAL (I)
II. Outside India
(i) In Current Accounts
(ii) In Other Deposit Accounts
(iii) Money at Call and Short Notice

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DCB BANK
SCHEDULE 8 INVESTMENTS

I.

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

28,072,027

391,119

24,331,872

2,061
30,000

2,200,689
1,643,894
3,618,522
165,775
250,200

3,928,427
1,591,804
3,376,629
127,675
198,100

36,342,226

33,586,568

36,342,226

33,588,778
(2,210)

36,342,226

33,586,568

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

(i) Bills Purchased and Discounted

(ii) Cash credits, Overdrafts and Loans repayable on demand
(iii) Term Loans

2,514,471
21,166,400
57,720,991

2,623,969
20,948,454
42,288,429

TOTAL (I)

81,401,862

65,860,852

(i) Secured by tangible assets*

(ii) Covered by Bank / Government Guarantees
(iii) Unsecured
*includes Advances against Book Debts

77,718,124

3,683,738

62,793,331

3,067,521

TOTAL (II)

81,401,862

65,860,852

30,641,087
29,987

50,730,788

21,196,653
29,351
150,089
44,484,759

81,401,862

65,860,852

81,401,862

65,860,852

Investments in India
Net Investments in :(i) Government Securities
(ii) Other Approved Securities
(iii) Shares
(iv) Debentures and Bonds
(v) Subsidiaries and/or Joint Ventures
(vi) Other Investments :
(a) Units of Mutual Funds/CDs
(b) Pass Through Certificates/Security Receipts
(c) Deposits with NABARD RIDF
(d) Deposits with SIDBI MSME (Refinance) Fund
(e) Deposits with NHB Rural Housing Fund
TOTAL (I)

II. Investments in India

i. Gross Value
ii. Provision for Depreciation
TOTAL (II)
III. Investments outside India
(i) Government Securities
(ii) Subsidiaries and/or Joint Ventures
(iii) Other Investments
TOTAL (III)

SCHEDULE 9 ADVANCES

I.

II.

III (a) Advances in India

(i) Priority Sectors
(ii) Public Sector
(iii) Banks
(iv) Others
TOTAL
III (b) Advances outside India
TOTAL (III)
Advances are net of provisions

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DCB BANK
SCHEDULE 10 FIXED ASSETS

(a) Premises (including Revaluation)

(i) At cost on 31 March of the preceding year
(ii) Additions during the year
(iii) Deductions during the year
Total
Depreciation to date (including Revaluation)
(i) As at 31 March of the preceding year
(ii) Charge for the year
(iii) On deductions during the year
Total
Net Block
(b) Capital Work In Progress

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

2,122,270
17,434
(9,226)

997,546
1,147,054
(22,330)

2,130,478

2,122,270

181,944
41,126
(4,270)

169,603
33,706
(21,365)

218,800

181,944

1,911,678

1,940,326

33,592

1,911,678

1,973,918

1,181,608
215,171
(30,250)

1,156,287
129,856
(104,535)

1,366,529

1,181,608

761,055
150,445
(19,715)

725,376
114,512
(78,833)

Total (Schedule 18(7))

891,785

761,055

Net Block

474,744

420,553

474,744

420,553

TOTAL (I) (a+b)

II. Other Fixed Assets (including Furniture & Fixtures)
(i) At cost on 31 March of the preceding year
(ii) Additions during the year
(iii) Deductions during the year
Total
Depreciation to date
(i) As at 31 March of the preceding year
(ii) Charge for the year
(iii) On deductions during the year

TOTAL (II)
III. Assets given on Lease
(i) At cost as per last Balance Sheet
(ii) Additions during the year
(iii) Deductions during the year
(iv) Depreciation to date
TOTAL (III)
TOTAL ( I+II+III)

2,386,422

2,394,471

As on 31.03.2014
(` in 000s)

539,319
930,074
2,417

733,335

As on 31.03.2013
(` in 000s)

491,601
931,209
4,246

686,768

2,205,145

2,113,824

SCHEDULE 11 OTHER ASSETS

I. Inter-Office Adjustments (Net)

II. Interest accrued
III. Tax paid in Advance/Tax deducted at Source (Net of provision)
IV. Stationery and Stamps
V. Non-Banking Assets acquired in satisfaction of claims (Net)
VI. Deferred Tax Assets (Net)
VII. Others1
TOTAL

includes an advance amount of `0.46 crore as on March 31, 2014 (` 1.82 crore as on March 31, 2013) with gratuity trust fund - refer Schedule 18 (10.1) (Staff
.
Retirement Benefits)
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DCB BANK
SCHEDULE 12 CONTINGENT LIABILITIES

I.
Claims against the bank not acknowledged as debts
II. Liability for partly paid investments
III. Liability on account of outstanding forward exchange and derivative contracts
(a) Forward Contracts
(b) Interest Rate Swaps and Currency Swaps
(c) Foreign Currency Options
IV. Guarantees given on behalf of constituents
(a) In India
(b) Outside India
V. Acceptances, Endorsements and other obligations
VI. Other items for which the bank is contingently liable
TOTAL

As on 31.03.2014
(` in 000s)

As on 31.03.2013
(` in 000s)

444,614

451,346

12,816,430

31,504,363

6,810,379
2,484,134
2,498,837
156,004

6,206,499
4,645,814
1,801,463
156,004

25,210,398

44,765,489

Year Ended
31.03.2014
(` in 000s)

Year Ended
31.03.2013
(` in 000s)

8,678,725
2,453,078
142,353
8,437

7,118,291
1,963,203
67,525
12,012

11,282,593

9,161,031

Year Ended
31.03.2014
(` in 000s)

Year Ended
31.03.2013
(` in 000s)

1,010,865

893,500

224,548

139,071

SCHEDULE 13 INTEREST EARNED

I.
II.
III.
IV.

Interest/Discount on Advances/Bills
Income on Investments
Interest on Balance with Reserve Bank of India and other Inter Bank Funds
Others
TOTAL

SCHEDULE 14 - OTHER INCOME

I.

Commission, Exchange and Brokerage

II.

Profit/(Loss) on sale of Investments (Net)

III.

Profit/(Loss) on revaluation of Investments (Net)

IV.

Profit/(Loss) on sale of Land, Buildings and Other Assets (Net)

(3,986)

(17,098)

V.

Profit/(Loss) on Exchange Transactions (Net)

56,528

72,239

VI.

Income earned by way of Dividends etc. from Subsidiaries,

Companies and/or Joint Ventures abroad/in India

VII. Lease Income (Net of Lease Equalisation Account)

VIII. Miscellaneous Income
(Includes recoveries from bad debts written off in earlier years)
TOTAL

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DCB Bank Limited A NNUAL R EPORT 2013-14

98,670

82,480

1,386,625

1,170,192

DCB BANK
SCHEDULE 17 SIGNIFICANT ACCOUNTING POLICIES
1.

BACKGROUND
DCB Bank Limited (DCB or the Bank), incorporated in Mumbai, India is a publicly held banking company engaged in providing banking
and financial services. DCB is a banking company governed by the Banking Regulation Act, 1949.
Pursuant to the approval received from the Registrar of Companies, Maharashtra -Mumbai and from the Reserve Bank of India (RBI) vide
their letter no. DBOD.No.Ret.BC/ 83 /12.06.097/2013-14 dated 10 January, 2014 the Bank has changed its name from Development Credit
Bank Limited to DCB Bank Limited with effect from 24 October, 2013.

2.

BASIS OF PREPARATION
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, and comply
with the Generally Accepted Accounting Principles in India (GAAP), statutory requirements prescribed under the Banking Regulation Act,
1949, circulars and guidelines issued by the RBI from time to time and the notified Accounting Standards under the Companies (Accounting
Standards) Rules, 2006, (as amended) to the extent applicable and the current practices prevailing within the banking industry in India.

3.

USE OF ESTIMATES
The preparation of the financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of
operations during the reporting period. Although these estimates are based upon the managements best knowledge of current events and
actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognised prospectively in the current
and future periods.

4.
4.1

INVESTMENTS
Classification:
The investment portfolio comprising approved securities (predominantly Government Securities) and other securities (Shares, Debentures
and Bonds, etc.) are classified at the time of acquisition in accordance with the RBI guidelines under three categories viz. Held to Maturity
(HTM), Available for Sale (AFS) and Held for Trading (HFT). For the purposes of disclosure in the Balance Sheet, they are classified
under six groups viz. Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Subsidiaries and/or joint ventures
and Other Investments.
The Bank follows Settlement Date accounting for recording purchase and sale transactions.
Basis of Classification:
Investments that are held principally for resale within 90 days from the date of purchase are classified as HFT securities. As per the RBI
guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date.
Investments which the Bank intends to hold till maturity are classified as HTM securities.
Investments which are not classified in the above categories are classified under AFS category.
Transfer of Securities between Categories:
The transfer/shifting of securities between categories of investments is accounted as per the RBI guidelines.
Valuation:
Held for Trading and Available for Sale categories:
Investments classified under HFT and AFS are marked to market as per the RBI guidelines. These securities are valued scrip-wise and any
resultant depreciation or appreciation is aggregated for each category. The net depreciation for each category is provided for, whereas the
net appreciation for each category is ignored. The book value of individual securities is not changed consequent to periodic valuation of
investments.
Traded investments are valued based on the trades / quotes from the recognised stock exchanges, price list of RBI or prices declared by Primary
Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association (FIMMDA), periodically.
The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (SLR) included in the AFS
and HFT categories is computed as per the Yield-to-Maturity (YTM) rates published by FIMMDA.
The valuation of other unquoted fixed income securities (viz. State government securities, Other approved securities, Bonds and debentures)
wherever linked to the YTM rates, is computed with a mark-up (reflecting associated credit and liquidity risk) over the YTM rates for
government securities with similar maturity profile published by FIMMDA. Unquoted equity shares are valued at the break-up value, if the
latest Balance Sheet is available or at `1 as per the RBI guidelines. Units of mutual funds are valued at the latest repurchase price / net asset
value declared by the mutual fund. Treasury bills, commercial papers and certificate of deposits, being discounted instruments, are valued at
carrying cost.

4.2

4.3
4.4

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DCB BANK

4.5

4.6

4.7
5.
5.1
5.2

5.3
5.4
5.5

5.6

In the event provisions recognised on account of depreciation in the AFS or HFT categories are found to be in excess of the required amount
in any year, such excess is recognised in the Profit and Loss Account and subsequently appropriated, from profit available for appropriation,
if any, to Investment Reserve Account in accordance with the RBI guidelines after adjusting for income tax and appropriation to Statutory
Reserve.
Held to Maturity:
These are carried at their acquisition cost and are not marked to market. Any premium on acquisition is amortised over the remaining maturity
period of the security on a straight-line basis. Provision is recognised for diminutions other than temporary in the value of such investments
for each investment individually.
Non-performing investments are identified and provision is recognised as per the RBI guidelines.
Disposal of Investment:
Profit/Loss on sale of investment under the aforesaid three categories is recognised in the Profit and Loss Account. The profit on sale of
investment in HTM category, net of taxes and transfers to Statutory Reserve is appropriated to Capital Reserve.
Acquisition Cost:
Cost including brokerage, commission pertaining to investments, paid at the time of acquisition, is charged to the Profit and Loss Account.
Broken period interest is charged to the Profit and Loss Account.
Cost of investments is computed based on the weighted average cost method.
Repo and reverse repo transactions under Liquidity Adjustment Facility (LAF):
Repo transactions under LAF with RBI are accounted for as secured borrowing/ lending transactions.
ADVANCES
In pursuance of guidelines issued by the RBI, advances are classified as Standard, Sub-Standard, Doubtful and Loss Assets and are stated net
of specific provisions made towards NPAs and floating provisions.
Provision for non-performing advances (NPAs) comprising sub-standard, doubtful and loss assets is made in accordance with the RBI
guidelines which prescribe minimum provision levels and encourage banks to make a higher provision based on sound commercial judgement.
NPAs are identified by periodic appraisals of the loan portfolio by the management. In respect of identified NPAs, provision is made based
on the inherent risk assessed for the various product categories. The provisioning done is at or higher than the minimum rate prescribed under
the RBI guidelines.
Advances are net of bills rediscounted, claims realised from Export Credit Guarantee Corporation (ECGC), provisions for non- performing
advances, floating provisions, unrealised fees and unrealised interest held in suspense account.
In case of restructured/rescheduled assets, provision is made in accordance with the guidelines issued by the RBI, which require the diminution
in the fair value of the assets to be provided in the profit and loss account at the time of restructuring.
Credit facility/investment, where interest and/or installment of principal has remained overdue for more than 90 days, is classified as nonperforming asset. However, in respect of Equated Monthly Instalment (EMI) based advances, those accounts where more than 3 EMIs are
overdue are classified as NPAs.
In case of NPAs other than retail EMI loans, recoveries effected are first adjusted towards the principal amount. In case of retail EMI loans,
recoveries effected are adjusted towards the EMI and within the EMI first towards the principal amount.

6.

FIXED ASSETS
Premises and other fixed assets are stated at historical cost (or revalued amounts, as the case may be), less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for
its intended use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit / functioning
capability from / of such assets.

7.

REVALUATION OF FIXED ASSETS

Portfolio of immovable properties is revalued periodically by an independent valuer to reflect current market valuation. All land and building
owned by the Bank and used as branches or offices or godowns are grouped under Office Premises in the fixed assets category. Appreciation,
if any, on revaluation is credited to Revaluation Reserve under Capital Reserves.

8.

DEPRECIATION & AMORTISATION

Depreciation on fixed assets, including amortisation of software, is charged over the estimated useful life of the fixed assets on a straight line
basis at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956, except as mentioned below:
- Computer Hardware - 33.33% p.a.
- Automated Teller Machine (ATM) - 12.50% p.a.
- Air conditioner - 11.11% p.a.
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DCB BANK
-

Core Banking Software - 12.50% p.a.

Application Software and System Development Expenditure - Depending upon estimated useful life between 3-5 years.
Hard Furnishing - 25% p.a.
Improvements (Civil) to Leased Premises and Fixed Furniture in Leased Premises such as work-stations, etc. - over the contracted period
of the lease.
- Vehicle - 19% p.a. over 5 years with 5% residual value.
Assets purchased/sold during the year are depreciated on a pro-rata basis, based on the actual number of days the assets have been put to use.
Assets individually costing upto `5,000/- are depreciated fully in the year of purchase.

9.

IMPAIRMENT OF ASSETS
The carrying amount of assets is reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount
is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.
After impairment, depreciation is provided on the revised carrying amount of the asset over remaining useful life.

10.
10.1
10.2
10.3

RECOGNITION OF INCOME AND EXPENDITURE

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Bank and the revenue can be reliably measured.
Items of income and expenditure are generally accounted on accrual basis.
Interest income is recognised in the Profit and Loss Account on accrual basis, except in the case of non-performing assets where it is
recognised as per the RBI norms.
Interest income on investments in Pass Through Certificates (PTC) and loans bought out through the direct assignment route is recognised
at their effective interest rate.
Processing fees recovered on loans are recognised as income and processing overheads on loans are expensed at the inception of the loan.
Overdue rent on safe deposit lockers is accounted for on realisation.
Guarantee commission, annual safe deposit locker rent fees are recognised on a straight line basis over the period of contract. Letters of credit
(LC) are generally issued for a shorter tenor, typically of 90 days. The commission on such LC is recognised when due.

10.4
10.5
10.6
10.7
11.
11.1

11.2

11.3

11.4

11.5
11.6

12.

FOREIGN EXCHANGE TRANSACTIONS

Initial recognition:
Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between
the reporting currency and foreign currency at the date of the transaction.
Conversion:
Foreign currency monetary items are reported using the closing rate notified by Foreign Exchange Dealers Association of India (FEDAI) at
the balance sheet and the resulting profit or loss are included in the Profit and Loss Account, as per the guidelines issued by the RBI.
Exchange differences:
Exchange difference arising on settlement of monetary, are recognised as income or as expenses in the year in which they arise. Non-monetary
items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the
transaction and non-monetary items which are carried at fair value or other similar valuations denominated in a foreign currency are reported
using exchange rates that existed when the values were determined.
Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required
or available at the settlement date of transaction and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate.
The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the
contract.
Outstanding forward exchange contracts are revalued on the Balance Sheet date at the rates notified by FEDAI and at interpolated rates for
contracts of interim maturities. The resultant gain/loss on revaluation is included in the Profit and Loss Account in accordance with the RBI/
FEDAI guidelines.
Contingent liabilities denominated in foreign currencies are disclosed in the Balance Sheet date at the rates notified by FEDAI.
Forward exchange contracts and other derivative contracts which have overdue receivables remaining unpaid over 90 days or more are classified
as non-performing assets and provided for as per the extant master circular on Prudential Norms on Income Recognition, Asset Classification
and Provisioning issued by the RBI.
ACCOUNTING FOR DERIVATIVE CONTRACTS
Income from derivative transactions designated as hedge is recorded on an accrual basis and these transactions are not marked to market.
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DCB BANK
Derivative transactions, which are not designated as hedge, are marked to market as per the generally accepted practices prevalent in the
industry. Any resultant gain or loss is recognised in the Profit and Loss Account.
13.
13.1

13.2

14.
14.1

14.2

14.3

RETIREMENT BENEFITS OF EMPLOYEES

Defined Benefit Plan
Provision in respect of future liability for payment of gratuity is made on the basis of actuarial valuation on projected unit credit method made
at the end of the year. Gratuity is funded with the Gratuity Trust duly registered under the provisions of Income tax Act, 1961. Actuarial gains/
losses are recognised immediately to the Profit and Loss Account and are not deferred.
Defined Contribution Scheme
Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the Profit and Loss
Account of the year when the contributions to the fund are due. There is no other obligation other than the contribution payable to the fund.
TAXES ON INCOME
Tax expense comprises current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities
in accordance with the Income Tax Act, 1961. Deferred Income Tax reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax
assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the
deferred tax assets and deferred tax liabilities relate to taxes levied by same governing taxation laws. Deferred tax assets are recognised only
to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can
be realised. In situations where the Bank has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if
there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits.
At each Balance Sheet date, the Bank re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which
such deferred tax assets can be realised.

15.

ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognised in terms of Accounting Standard 29 on Provisions, Contingent Liabilities and Contingent Assets, when there is a
present legal or statutory obligation as a result of past events leading to probable outflow of resources, where a reliable estimate can be made
of the amount required to settle the obligation.
Contingent Liabilities are recognised only when there is a possible obligation arising from past events due to occurrence or non-occurrence
of one or more uncertain future events, not wholly within the control of the Bank, or where there is a present obligation arising from a past
event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of
the amount of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood
of outflow of resources is remote, no provision or disclosure is made.

16.

EMPLOYEE SHARE BASED PAYMENTS

Measurement and disclosure of employee share-based employment plans is done in accordance with SEBI (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines, 1999 / Guidance Note on Accounting for the Employee Share-based Payments issued by
The Institute of Chartered Accountants (ICAI) of India. The Bank measures compensation cost relating to employee stock options using the
intrinsic value method. Compensation expense is amortised over the vesting period of the option on a straight line basis.

17.

EARNINGS PER SHARE

Basic and diluted earnings per share are computed in accordance with Accounting Standard 20 Earning per share. Basic earnings per share is
calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted
average number of shares outstanding during the year are adjusted for the effect of dilutive potential equity shares.

18.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand and ATMs, balances with the Reserve Bank of India, balances with other banks and money at
call and short notice (including effect of changes in exchange rates on cash and cash equivalents in foreign currency).

19.

LEASES
Leases where lessor effectively retains substantially all risks and benefits of ownership of the leased item are classified as operating leases.
Operating lease payments are recognised as an expense in the Profit and Loss Account on a straight-line basis over the lease term.
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DCB BANK
SCHEDULE 18 NOTES TO ACCOUNTS
1

CAPITAL

1.1

Capital to Risk Assets Ratio (CRAR)

(` in crore)
Particulars

As per Basel II framework

As per Basel III framework

As at
March 31, 2014

As at
March 31, 2013

As at
March 31, 2014

Tier 1 Capital

1,086.69

934.43

1,094.49

N.A

ii. Tier 2 Capital

67.09

73.31

72.29

N.A

i.

As at
March 31, 2013

iii. Total Capital

1,153.78

1,007.74

1,166.78

N.A

iv. Total Risk Weighted Assets

8,336.96

7,402.87

8,511.03

N.A

v. Common Equity Tier 1 Capital Ratio (%)

vi. Tier 1 Capital Ratio (%)

N.A

N.A

12.86%

N.A

13.03%

12.62%

12.86%

N.A

vii. Tier 2 Capital Ratio (%)

viii. Total Capital Ratio (CRAR) (%)

0.81%

0.99%

0.85%

N.A

13.84%

13.61%

13.71%

N.A

N.A

N.A

N.A

N.A

ix. Percentage of shareholding of the Government

of India in public sector banks
x. Amount of equity capital raised
Share Capital:

0.21

9.45

0.21

N.A

Share Premium:

0.57

31.18

0.57

N.A

PNCPS:

N.A

PDI:

N.A

xi. Amount of Additional Tier 1 capital raised;

of which

xii. Amount of Tier 2 capital raised; of which-

Debt capital instrument:

N.A

Preference Share Capital Instruments:

[Perpetual Cumulative Preference Shares (PCPS)/
Redeemable Non-Cumulative Preference Shares
(RNCPS) / Redeemable Cumulative Preference
Shares (RCPS)]

N.A

SUB-ORDINATED DEBT THROUGH PRIVATE PLACEMENT OF BONDS

The detail of total outstanding subordinated debt is given below:
(` in crore)
Issue Series
IV

Deemed Date
of Allotment

Coupon Rate
(% p.a.)

Tenure
(in months)

Equivalent Amount as
on March 31, 2014

Equivalent Amount as
on March 31, 2013

August 31, 2009

11.25

68

65.00

65.00

65.00

65.00

Total

F-18

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DCB Bank Limited A NNUAL R EPORT 2013-14

DCB BANK
3
3.1

INVESTMENTS
Particulars of investments and movement in provision held towards depreciation on investments
(` in crore)
Particulars
1.

March 31, 2014

March 31, 2013

Value of Investments:
(i) Gross Value of Investments
a. In India
b. Outside India

3,634.22

3,358.88

(ii) Provisions for Depreciation

a. In India
b. Outside India

0.22

3,634.22

3,358.66

0.22
0.62

0.72
0.63

0.84
0.00

1.13
0.22

(iii) Net Value of Investments

a. In India
b. Outside India
2.

3.2

Movement of provision held towards depreciation on investments:

(i) Opening balance
(ii) Add: Provision made during the year
(iii) Less: Write-off/ write-back of excess provision during the year
(including depreciation utilised on sale of securities)
(iv) Closing balance

The net book value of investments held under the three categories, viz. Held to Maturity (HTM), Held for Trading (HFT) and
Available for Sale (AFS) is as under:Category

As at March 31, 2014

`

Held to Maturity

in crore

in crore

2,663.72

73.30

2,360.61

70.28
14.37

Held for Trading

202.10

5.56

482.53

Available for Sale

768.40

21.14

515.52

15.35

3,634.22

100.00

3,358.66

100.00

Total
3.3

As at March 31, 2013

Repo Transactions
Financial Year 2013-14
(` in crore)
Minimum
outstanding
during the year

Maximum
outstanding
during the year

Daily Average
outstanding
during the year

Balance as at
March 31, 2014

Securities Sold under Repos *

304.50

32.83

68.25

(i) Government Securities

304.50

32.83

68.25

(ii) Corporate debt Securities

Securities purchased under Reverse Repos*

78.75

0.36

78.75

0.36

(i) Government Securities

(ii) Corporate debt securities
* consist of RBI LAF disclosed at face value.

F-19
DCB Bank Limited A NNUAL R EPORT 2013-14

I 55 I

DCB BANK
Financial Year 201213
(` in crore)
Minimum
outstanding
during the year

Maximum
outstanding
during the year

Daily Average
outstanding
during the year

Balance as at
March 31, 2013

Securities Sold under Repos *

315.00

38.97

304.50

(i) Government securities

315.00

38.97

304.50

(ii) Corporate debt securities

Securities purchased under Reverse Repos *

(i) Government securities

(ii) Corporate debt securities

* consist of RBI LAF disclosed at face value.
3.4

NonSLR Investments Portfolio Issuer Composition of NonSLR Investments

Balances as at March 31, 2014
(` in crore)
Sr.
No.

Issuer

1.

PSUs

2.

FIs

3.

Banks

223.07

3.00

4.

Private Corporates

5.

Subsidiaries/ Joint Ventures

6.

Others***

164.39

7.

Provision held towards Depreciation

827.02

3.00

Extent of Below
Investment
Grade Securities

Extent of
Unrated
Securities**

Total

Amount

Extent of
Private
Placement*

Extent of below
Investment
Grade Securities

Extent of
Unrated
Securities**

Extent of
Unlisted
Securities*

10.00

429.56

* excludes deposits with NABARD, SIDBI, NHB and pass through certificates
** excludes deposits with NABARD, SIDBI and NHB
*** includes investments in pass through certificates
Balances as at March 31, 2013
Sr.
No.

Issuer

1.
2.

PSUs
FIs

Amount

370.24

3.
4.
5.
6.
7.

Extent of
Private
Placement*

Banks
395.85
3.00
Private Corporates
0.41
0.41
Subsidiaries/ Joint Ventures

Others***
159.18

Provision held towards Depreciation

(0.21)

Total
925.47
3.41
* excludes deposits with NABARD, SIDBI, NHB and pass through certificates
** excludes deposits with NABARD, SIDBI, NHB and equity shares
*** includes investments in pass through certificates

F-20

I 56 I

DCB Bank Limited A NNUAL R EPORT 2013-14

0.21

0.21

(` in crore)
Extent of
Unlisted
Securities*

0.41

0.41

DCB BANK
3.5

NonPerforming NonSLR Investments

(` in crore)
Particulars

March 31, 2014

March 31, 2013

NIL

Additions during the year

0.41

NIL

Reductions during the year

Opening Balance

0.41

NIL

Closing Balance

NIL

Total provisions held

NIL

3.6

Sale and Transfers to / from HTM Category

Other than onetime transfer of securities to / from HTM category permitted by the RBI at the beginning of the accounting year, onetime
transfer permitted in terms of the RBI circular DBOD.BP.BC.No.41/21.04.141/201314 dated August 23, 2013 on Investment portfolio of
banks Classification, Valuation and Provisioning and sale to the RBI under preannounced Open Market Operations (OMO) auctions, the
Bank has not carried out any sale and transfer of securities to / from HTM category during the financial year 201314.

DERIVATIVES

4.1

Forward Rate Agreements / Interest Rate Swaps

(` in crore)
Particulars

4.2

March 31, 2014

March 31, 2013

i. The notional principal of swap agreements

NIL

NIL

ii. Losses which would be incurred if counterparties failed to fulfill their obligations under the
agreements

NIL

NIL

iii. Collateral required by the bank upon entering into swaps

NIL

NIL

iv. Concentration of credit risk arising from the swaps

NIL

NIL

v. The fair value of the swap book

NIL

NIL

Exchange Traded Interest Rate Derivatives

(` in crore)
Sr. No.

4.3

March 31, 2014

March 31, 2013

i.

Particulars
Notional principal amount of exchange traded interest rate derivatives undertaken
during the year (instrumentwise)

NIL

NIL

ii.

Notional principal amount of exchange traded interest rate derivatives outstanding

(instrumentwise)

NIL

NIL

iii.

Notional principal amount of exchange traded interest rate derivatives outstanding

and not highly effective (instrumentwise)

NIL

NIL

iv.

Marktomarket value of exchange traded interest rate derivatives outstanding and

not highly effective (instrumentwise)

NIL

NIL

Disclosures on risk exposure in derivatives:

a) Qualitative Disclosures
Management of Risk in Derivatives Trading
The Banks market risk unit plays a key role in setting up of the limits and laying down of the risk assessment and monitoring methods.
The policies of the Bank include setting limits upon the notional principal value of product specific gaps, maximum tenor, overall
outstanding and the setting-up of counter party-wise, tenor-wise limits.
All limits are monitored on a daily basis by the Banks Treasury Back Office and Mid Office. Exposure reports are submitted to the
Treasurer as well as the Head-Market Risk and any limit excesses are brought to the notice of the management immediately for further
action.

F-21
DCB Bank Limited A NNUAL R EPORT 2013-14

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DCB BANK
Policies for Hedging Risk
All transactions undertaken by the Bank for trading purposes are classified under the Trading Book. All other transactions are classified as
a part of the Banking Book. The Banking Book includes transactions concluded for the purpose of providing structures to customers on
a back-to-back basis. It also consists of transactions in the nature of hedges based on identification of supporting trades, with appropriate
linkages done for matching amounts and tenor within the approved tolerance limits.
The accounting for all derivative trades is done for the notional amount on the trade date. The valuation of all outstanding trades is done
category wise. The valuation for outstanding trades under the Trading portfolio is done on a daily basis and the net MTM is accounted in
the Profit and Loss Account. The valuation for outstanding trades under the hedged portfolio is done on a monthly basis and the residual
MTM, if any, is accounted in the Profit and Loss Account on a monthly basis. Valuation of the outstanding hedged Forex Options is done
on a monthly basis and the net MTM is zero as all customer trades are hedged on identical basis with counter party banks.
The MTM position on all outstanding trades of individual corporate customers is reported on a monthly basis to Credit Risk department
for exposure monitoring.
b) Quantitative Disclosures
(` in crore)
Sr.
No

Particulars

Currency
Derivatives

Interest Rate
Derivatives

Currency
Derivatives

Interest Rate
Derivatives

1.

Derivatives (notional Principal Amount)

March 31, 2014

March 31,2014

March 31, 2013

March 31, 2013

(a) For hedging

NIL

NIL

NIL

NIL

(b) For trading

NIL

NIL

NIL

NIL

(a) Asset (+)

NIL

NIL

NIL

NIL

(b) Liability (-)

NIL

NIL

NIL

NIL

3.

Credit Exposure

NIL

NIL

NIL

NIL

4.

Likely impact of one percentage change in

Interest Rate (100*PV01)
(a) On hedging derivatives

NIL

NIL

NIL

NIL

(b) On trading derivatives

NIL

NIL

NIL

NIL

Maximum

NIL

NIL

NIL

NIL

Minimum

NIL

NIL

NIL

NIL

2.

5.

Marked to Market position

Maximum and Minimum of 100*PV01

observed during the year
(a) On hedging

(b) On trading
Maximum

NIL

NIL

NIL

NIL

Minimum

NIL

NIL

NIL

NIL

Note:
1 The notional principal amount of forward exchange contracts classified as Hedging and Trading outstanding as on March 31, 2014
amounted to ` 317.84 crore (Previous year: ` 777.96 crore ) and ` 963.80 crore (Previous year: ` 2,372.48 crore) respectively.

F-22

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DCB Bank Limited A NNUAL R EPORT 2013-14

DCB BANK
5
5.1

ASSET QUALITY
Non-Performing Assets (NPAs)
(` in crore)
Particulars
(i)
(ii)

(iii)

(iv)

1.
2.
3.
4.
5.2

March 31, 2014

March 31, 2013

0.91%

0.75%

214.98
97.07
173.60
138.45

241.80
75.29
102.11
214.98

49.13
52.34
27.45
74.02

30.24
36.11
17.22
49.13

159.46
42.88
139.89
62.45

206.40
37.95
84.89
159.46

March 31, 2014

March 31, 2013

214.98

241.80

Net NPAs to Net Advances (%)

Movement of NPAs (Gross)
(a) Opening balance
(b) Additions during the year
(c) Reductions during the year
(d) Closing balance
Movement of Net NPAs
(a) Opening balance
(b) Additions during the year1,2
(c) Reductions during the year3
(d) Closing balance
Movement of provisions for NPAs (excluding provision on Standard Assets)
(a) Opening balance
(b) Provisions made during the year4
(c) Write-off/ write-back of excess provisions
(d) Closing balance

Includes interest capitalisation of `1.85 crore (Previous year: `1.23 crore).

Includes addition to NPAs net off provisions on such NPAs and additional provision on existing NPAs.
Includes interest capitalisation of `6.26 crore (Previous year: NIL).
Includes floating provision of `5.63 crore (Previous year: `1.08 crore).

Movement of Gross NPAs

(` in crore)
Particulars
Opening balance of Gross NPAs
Additions during the year*
Sub-total (A)

97.07

75.29

312.05

317.09

11.99

8.55

36.30

27.44

Less:
i. Upgradations
ii. Recoveries (excluding recoveries made from upgraded accounts)**
iii. Write-offs

125.31

66.12

Sub-total (B)

173.60

102.11

Closing balance of Gross NPAs (A-B)

138.45

214.98

* including fresh NPAs during the year.

** includes interest capitalisation reversal on written-off accounts of ` 6.26 crore (Previous year: NIL).
5.3

Concentration of NPAs
(` in crore)
Particulars
Total Exposure to top four NPA accounts *

March 31, 2014

March 31, 2013

28.73

23.58

* NPAs are taken on net basis.

Exposure includes funded and non-funded exposures identified as NPA.

F-23
DCB Bank Limited A NNUAL R EPORT 2013-14

I 59 I

DCB BANK
5.4

Sector-wise NPAs
Sr.
No.

Sector

Percentage of NPAs to Total

Advances in that Sector
March 31, 2014

March 31, 2013

1.

Agriculture & allied activities

0.51

2.10

2.

Industry (Micro & small, Medium and Large)

1.59

0.91

3.

Services

0.74

1.44

4.

Personal Loans

0.00

0.00

NPAs are taken net of provisions.

Total Advances are net advances in the particular sector.
Classification into sectors as above has been done based on the Banks internal norms.
5.5

RESTRUCTURED ACCOUNTS
Details of restructured accounts as of March 31, 2014
(` in crore)
Sr.
No.

Under CDR Mechanism

Type of Restructuring
Asset Classification

StandSub- Doubtard Standful

ard

Loss

Under SME Debt Restructuring

Mechanism
Total StandSub- Doubtard Standful
ard

Loss

Others

Total StandSub- Doubtard Standful

ard

Total
Loss

Total StandSub- Doubtard Standful

ard

Loss

Total

247

305

Details
1

Restructured Accounts as on
April 01, 2013

12

43

247

303

13

Amount outstanding

0.48

21.12

21.60

27.37

5.01

8.45

9.09

49.92

27.85

5.01

29.57

9.09

71.52

Provision thereon

0.10

21.12

21.22

0.38

0.99

8.14

9.09

18.60

0.48

0.99

29.26

9.09

39.82

No. of borrowers

Amount outstanding

78.89

0.03

0.90

79.82

78.89

0.03

0.90

79.82

Provision thereon

1.69

0.52

9.44

11.65

1.69

0.52

9.44

11.65

No. of borrowers

Amount outstanding

Provision thereon

Restructured standard advances No. of borrowers

which cease to attract higher
provisioning and / or additional
risk weight at the end of the
FY and hence need not be
shown as restructured standard
advances at the beginning of
the next FY

7.00

7.00

7.00

7.00

Amount outstanding

0.13

0.13

0.13

0.13

Provision thereon

0.01

0.01

0.01

No. of borrowers

(4)

(4)

Amount outstanding

Provision thereon

Fresh restructuring during

the FY*

Upgradations to restructured
standard category during
the FY

Downgradations of restructured accounts during the FY

No. of borrowers

- (27.24)

(4.29)

31.53

(0.37)

(0.76)

1.13

38

244

44

0.01
1

- (27.24)

(4.29)

31.53

(0.37)

(0.76)

1.13

283

39

244

285

Write-offs of restructured
accounts during the FY**

No. of borrowers

0.48

21.12

21.60

0.01

0.08

7.93

7.42

15.44

0.49

0.08

29.05

7.42

37.04

Restructured Accounts as on
March 31, 2014***

No. of borrowers

16

16

Amount outstanding

78.89

0.67

32.95

1.67 114.18

78.89

0.67

32.95

1.67 114.18

Provision thereon

1.69

0.67

10.95

1.67

1.69

0.67

10.95

1.67

Amount outstanding

* includes ` 0.93 crore due to increase in outstanding balance in respect of 4 accounts and increase in provisions amounting to `9.96 crore
** includes ` 0.20 crore due to reduction in outstanding balance in respect of 3 accounts and reduction in provisions amounting to `0.09 crore.
*** excluding accounts, where full amount has been recovered.

F-24

I 60 I

DCB Bank Limited A NNUAL R EPORT 2013-14

14.98

14.98

DCB BANK
Details of restructured accounts as of March 31, 2013
(` in crore)
Sr.
No.

Asset Classification

Under CDR Mechanism

Type of Restructuring

Details
Restructured Accounts No. of borrowers
as on April 01, 2012
Amount outstanding
Provision thereon
Fresh restructuring
No. of borrowers
during the FY
Amount outstanding
Provision thereon
Upgradations to restruc- No. of borrowers
tured standard category
during the FY
Amount outstanding
Provision thereon
Restructured standard
No. of borrowers
advances which cease to
attract higher provisioning and / or additional
risk weight at the end of
the FY and hence need
not be shown as restructured standard advances
at the beginning of the
next FY
Amount outstanding
Provision thereon
Downgradations of
No. of borrowers
restructured accounts
during the FY
Amount outstanding
Provision thereon
Write-offs of restrucNo. of borrowers
tured accounts during
the FY
Amount outstanding
Restructured Accounts No. of borrowers
as on March 31, 2013*
Amount outstanding
Provision thereon

StandSubard Standard

Doubtful

Loss

Under SME Debt Restructuring

Others
Mechanism
Total StandSub- DoubtLoss Total StandSub- Doubtard Standful
ard Standful
ard
ard

Total
Loss

Total StandSub- Doubtard Standful

ard

Loss

Total

13

34

53

361

461

14

34

54

361

463

0.43
0.10
-

20.02
17.30
-

20.45
17.40
-

0.33
0.01
5

4.56
2.40
-

9.21
8.32
-

11.05
11.05
-

25.15
21.78
5

0.76
0.11
5

4.56
2.40
-

29.23
25.62
-

11.05
11.05
-

45.60
39.18
5

32.15
1.26
3

(2)

(1)

32.15
1.26
-

32.15
1.26
3

(2)

(1)

32.15
1.26
-

0.35
(0.12)
-

(0.31)
0.08

(0.04)
0.04

0.35
(0.12)
-

(0.31)
0.08

(0.04)
0.04

(1)

(19)

18

(1)

(19)

18

(5.01)
(0.99)
-

1.90
(0.68)
-

1.20
(0.24)
4

1.91
1.91
82

86

(5.01)
(0.99)
-

1.90
(0.68)
-

1.20
(0.24)
4

1.91
1.91
82

86

12

0.03
43

2.45
247

2.48
303

13

0.03
44

2.45
247

2.48
305

0.48
0.10

21.12
21.12

21.60
21.22

27.37
0.38

5.01
0.99

8.45
8.14

9.09
9.09

49.92
18.60

27.85
0.48

5.01
0.99

29.57
29.26

9.09
9.09

71.52
39.82

*excluding accounts, where full amount has been recovered.

5.6

Details of financial assets (including written off accounts) sold to Securitization / Reconstruction Company for Asset
Reconstruction
(` in crore)
Particulars
(i)
(ii)
(iii)
(iv)
(v)

5.7

No. of accounts
Aggregate value (net of provisions) of accounts sold to SC/RC
Aggregate consideration
Additional consideration realised in respect of accounts transferred in earlier years
Aggregate gain/loss over net book value

March 31, 2014

March 31, 2013

NIL
NIL
NIL
NIL
NIL

NIL
NIL
NIL
NIL
NIL

March 31, 2014

March 31, 2013

NIL
NIL
NIL
NIL

NIL
NIL
NIL
NIL

a) Details of non-performing financial assets purchased

(` in crore)
Particulars
1. (a)
(b)
2. (a)
(b)

No. of accounts purchased during the year

Aggregate outstanding
Of these, number of accounts restructured during the year
Aggregate outstanding

F-25
DCB Bank Limited A NNUAL R EPORT 2013-14

I 61 I

DCB BANK
b)

Details of non-performing financial assets sold

(` in crore)
Particulars
1. No. of accounts sold during the year
2. Aggregate outstanding
3. Aggregate consideration received

5.8

March 31, 2014

March 31, 2013

NIL
NIL
NIL

NIL
NIL
NIL

Provisions on Standard Assets

(` in crore)
Particulars
Provisions towards Standard Assets

March 31, 2014

March 31, 2013

34.22

27.17

March 31, 2014

March 31, 2013

9.75
1.20
1.62
1.31
6.89
0.06

9.49
1.21
1.31
1.06
6.74
0.05

BUSINESS RATIOS
Particulars
Interest Income as a percentage to Working Funds (%)
Non-Interest Income as a percentage to Working Funds (%)1
Operating Profit as a percentage to Working Funds (%)1
Return on Assets (%)2
Business per employee (` in crore)3, 4
Profit per employee (` in crore)3
1

1. Working funds have been considered as average of total monthly assets (excluding accumulated losses, if any) as reported to the Reserve
Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949 during the financial year.
2. Assets have been considered as average of total monthly assets (excluding accumulated losses, if any) as reported to Reserve Bank of India
in Form X under Section 27 of the Banking Regulation Act, 1949.
3. For the purpose of this ratio, employees have been considered as the average of the total employees at the end of each month of the year.
4. For the purpose of this ratio, business per employee has been recorded as deposits plus advances (excluding interbank deposits).
7

OTHER FIXED ASSETS (including furniture and fixtures)

Other fixed assets include amount capitalised on software having useful life of three to five years. Details regarding the same are given below:
(` in crore)
Particulars

March 31, 2014

March 31, 2013

Cost
As at March 31 of the previous year
Additions during the year
Deductions during the year

30.36
1.59

27.52
2.84

Total (a)

31.95

30.36

Depreciation
As at March 31 of the previous year
Charge for the year
On deductions during the year

24.99
3.23

21.78
3.21

Total (b)

28.22

24.99

3.73

5.37

Net value as at March 31 of the current year (a-b)

F-26

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DCB BANK
8
8.1

ASSET LIABILITY MANAGEMENT

Maturity pattern of certain items of assets and liabilities as of March 31, 2014
(` in crore)
Maturity Buckets

Loans and
Advances

Investments

Deposits

Borrowings

Foreign
Currency
Assets@

Foreign
Currency
Liabilities

Day 1

39.36

261.72

99.29

83.68

96.79

2 to 7 days

86.62

30.41

361.47

153.91

72.36

0.60

8 to 14 days

79.35

237.45

0.54

0.67

15 to 28 days

156.36

127.63

289.97

0.42

0.03

29 days to 3 months

533.29

472.04

1,247.09

50.00

0.40

2.43

Over 3 months & upto 6 months

421.74

180.95

1,309.63

16.02

2.63
28.21

Over 6 months & upto 1 year

Over 1 year & upto 3 years
Over 3 years & upto 5 years

860.15

195.85

1,934.18

70.45

2,886.57

697.02

4,443.44

125.95

20.63

32.55

828.24

313.22

221.24

340.12

31.55

Over 5 years

2,248.51

1,617.10

18.97

4.42

5.84

Total

8,140.19

3,634.22

10,325.16

860.16

183.87

195.46

@ excludes foreign currency bills discounted as they are booked in Indian Rupees.
Maturity pattern of certain items of assets and liabilities as of March 31, 2013
(` in crore)
Maturity Buckets

Loans and
Advances

Investments

Deposits

Borrowings

Foreign
Currency
Assets@

Foreign
Currency
Liabilities

Day 1

74.19

208.81

24.88

36.44

15.56

2 to 7 days

84.73

5.40

283.79

339.98

120.69

0.67

8 to 14 days

75.74

60.79

336.19

38.00

0.09

38.92

15 to 28 days

150.91

6.90

388.80

27.14

0.83

27.32

29 days to 3 months

365.78

603.91

1,627.39

50.00

26.67

1.74

Over 3 months & upto 6 months

233.85

212.07

1,124.66

320.09

1.57

1.45

Over 6 months & upto 1 year

Over 1 year & upto 3 years
Over 3 years & upto 5 years

696.45

57.12

1,493.22

268.86

0.08

9.35

2,640.41

516.97

2,709.57

206.67

3.85

14.81

585.33

552.40

176.21

250.00

Over 5 years

1,678.70

1,343.10

15.20

5.29

Total

6,586.09

3,358.66

8,363.84

1,525.62

195.51

109.82

@ excludes foreign currency bills discounted as they are booked in Indian Rupees.
8.2

Concentration of Deposits
(` in crore)
Particulars
Total deposits of twenty largest depositors1
Percentage of deposits of twenty largest depositors to total deposits of the Bank

March 31, 2014

March 31, 2013

1,779.74

1,531.42

17.24%

18.31%

1. Excludes holders of Certificates of Deposits.

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8.3

Concentration of Advances
(` in crore)
Particulars

March 31, 2014

March 31, 2013

Total advances to twenty largest borrowers

1,319.75

1,227.81

Percentage of Advances to twenty largest borrowers to total advances of the bank

10.77%

11.88%

Note: Advances reported above include both funded and non-funded loan exposure with limits or outstanding whichever is higher, for other
than term loans and NPAs. In case of term loans and NPAs, the outstanding amount has been considered for this purpose. The Advances
figure above also includes non-inter bank credit exposure on derivatives including forward exchange contracts.

8.4

Concentration of Exposures
(` in crore)
Particulars

March 31, 2014

March 31, 2013

Total Exposures to twenty largest borrowers / customers

1,331.20

1,282.24

Percentage of Exposures to twenty largest borrowers / Customers to Total Exposures of the

bank on borrowers / Customers

10.50%

11.78%

Note: Exposures reported above include both funded and non-funded exposures [including advances and investments (other than SLR
Investments and deposits placed with NABARD, SIDBI & NHB)] with limits or outstanding whichever is higher, for other than term loans
and NPAs. In case of term loan and NPAs, the outstanding amount has been considered for this purpose. The exposure figure above also
includes non-inter bank credit exposure on derivatives.
8.5

Overseas Assets, NPAs and Revenue

(` in crore)

8.6

Particulars

March 31, 2014

March 31 ,2013

Total Assets

NIL

NIL

Total NPAs

NIL

NIL

Total Revenue for the year

NIL

NIL

Off-Balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms) as on March 31, 2014
Name of the SPV sponsored
Domestic

Overseas

NIL

NIL

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DCB BANK
9
9.1

EXPOSURES
Exposure to Real Estate Sector
(` in crore)
Category

a)

b)

Direct Exposure
(i) Residential Mortgages(*)
Lending fully secured by mortgages on residential property that is or
will be occupied by the borrower or that is rented:
(*) Includes Individual housing loans eligible for inclusion in priority
sector advances ` 160.04 crore (previous year: ` 132.70 crore)
(ii) Commercial Real Estate
Lending secured by mortgages on commercial real estates (office buildings,
retail space, multi-purpose commercial premises, multi-family residential buildings,
multi-tenanted commercial premises, industrial or warehouse space, hotels,
land acquisition, development and construction, etc.)
(iii) Investments in Mortgage Backed Securities (MBS) and other securitized exposures
(a) Residential
(b) Commercial Real Estate
Indirect Exposure
Fund based and non-fund based exposures on National Housing Bank (NHB) and
Housing Finance Companies (HFCs).
Total Exposure to Real Estate Sector

9.2

March 31, 2014

March 31, 2013

660.56

650.94

604.97

445.65

5.12

8.04

100.47

26.27

1,371.12

1,130.90

Exposure to Capital Market

(` in crore)
Particulars
Direct investment in equity shares, convertible bonds, convertible debentures and
units of equity-oriented mutual funds the corpus of which is not exclusively
invested in corporate debt;
ii. Advances against shares/bonds/ debentures or other securities or on clean basis
to individuals for investment in shares (including IPOs/ESOPs), convertible bonds,
convertible debentures, and units of equity-oriented mutual funds;
iii. Advances for any other purposes where shares or convertible bonds or convertible
debentures or units of equity oriented mutual funds are taken as primary security;
iv. Advances for any other purposes to the extent secured by the collateral security of
shares or convertible bonds or convertible debentures or units of equity oriented mutual
funds i.e. where the primary security other than shares/convertible bonds/convertible
debentures/units of equity oriented mutual funds does not fully cover the advances;
v. Secured and unsecured advances to stockbrokers and guarantees issued on behalf of
stockbrokers and market makers;(see * below)
vi. Loans sanctioned to corporates against the security of shares / bonds/debentures or
other securities or on clean basis for meeting promoters contribution to the equity of
new companies in anticipation of raising resources;
vii. Bridge loans to companies against expected equity flows/issues;
viii. Underwriting commitments taken up by the banks in respect of primary issue of
shares or convertible bonds or convertible debentures or units of equity oriented
mutual funds;
ix. Financing to stockbrokers for margin trading;
x. All exposures to Venture Capital Funds (both registered and unregistered)

March 31, 2014

March 31, 2013

0.41

0.43

0.43

0.01

8.46

1.50

138.25

83.62

147.14

85.97.

i.

Total Exposure to Capital Market

* Includes Advances to Stock Brokers ` NIL (Previous year: `1.37 crore) and Financial Guarantees issued on their behalf to Stock Exchanges
`138.25 crore (Previous year: `82.25 crore)
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DCB BANK
9.3

Risk category-wise country exposure

(` in crore)
Risk Category

Exposure (net) as at
March 31, 2014

Provision held
as at March 31, 2014

Exposure (net) as at
March 31, 2013

Provision held
as at March 31, 2013

Insignificant
Low
Moderate Low
Moderate*
Moderate High
High
Very High

169.90
28.61
6.67
1.35
0.31

0.09

143.58
51.10
39.30
10.43

Total

206.84

0.09

244.41

* Includes exposure to restricted countries `0.51 crore (Previous year: `1.32 crore)
9.4

Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank
As per regulatory guidelines, the Bank should restrict its exposure to 15% of its capital funds to any Single Borrower, defined as Single
Borrower Limit and 40% as Group Borrower Limit. Additionally, the Bank can lend 5% to infrastructure projects and a further 5% with the
specific approval of its Board.
During the years ended March 31, 2014 and March 31, 2013, the Bank has not exceeded the prudential exposure limits as laid down by the RBI
guidelines for the Single Borrower Limit (SBL) and Group Borrower Limit (GBL).

9.5

Unsecured Advances
Details of advances included in Schedule 9 where intangibles like rights, licenses, authorisations, etc. are charged to the Bank as collateral:
(` in crore)
Particulars

March 31, 2014

March 31, 2013

Total amount of advances against intangible collateral

NIL

NIL

Estimated value of intangible collateral

NIL

NIL

As per directions from RBI, these advances are treated as unsecured advances in Schedule 9.
10
10.1

COMPLIANCE WITH ACCOUNTING STANDARDS, READ WITH RBI GUIDELINES

Staff Retirement Benefits (Accounting Standard 15 Revised)
The contribution to employees Provident Fund amounted to `4.83 crore for the year ended March 31, 2014 (Previous year `4.28 crore).
The Bank has a gratuity trust approved by Income Tax Department namely Development Credit Bank Ltd. Staff Gratuity Fund. Every
employee who has completed 5 years or more of service gets gratuity on separation at half months last drawn salary for each completed year
of service, subject to a cap of `10.00 lakhs for employees who joined after April 1, 2006 and without any such limit for other employees.

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DCB BANK
Reconciliation of opening and closing balance of the present value of the defined benefit obligation for gratuity benefits is given below:
(` in crore)
Particulars

March 31, 2014

March 31, 2013

Balance Sheet Details of provision for Gratuity

Defined benefit obligation
Fair value of plan Assets
Included in Schedule 11 Other Assets
Less: Unrecognised past service cost

8.10
8.56
(0.46)

7.37
8.52
(1.15)

Obligations at the beginning of the year

Interest Cost
Current Service Cost
Past Service Cost
Benefits paid
Actuarial (gain)/loss on Obligation
Present value of obligation at the end of the year

7.37
0.63
1.63
0.00
(0.81)
(0.72)
8.10

6.53
0.49
1.45
0.00
(0.79)
(0.31)
7.37

Fair value of plan assets at the beginning of the year

Expected Return on plan assets
Contributions
Benefits paid
Actuarial gain/(loss) on plan assets
Fair value of plan assets at the end of the year

8.52
0.68

(0.81)
0.17
8.56

8.35
0.67

(0.79)
0.29
8.52

Cost for the year

Current service cost
Interest cost
Expected return on plan assets
Net Actuarial (gain)/loss recognised in the year
Past service cost
Expenses recognised in the Profit and Loss Account
Actual return on plan assets

1.63
0.63
(0.68)
(0.89)
0.00
0.69
0.85

1.45
0.49
(0.67)
(0.60)
0.00
0.67
0.96

Experience Adjustment
Experience Adjustment on obligation
Experience Adjustment on plan assets

(0.49)
0.17

(0.43)
0.29

9.06% p.a.
8.00% p.a.
Indian Assured Lives
Mortality (2006-08)
Ultimate
5.00% p.a.

8.03% p.a.
8.00% p.a.
Indian Assured Lives
Mortality (2006-08)
Ultimate
5.00% p.a.

Assumptions
Discount rate
Expected return on plan assets
Mortality

Future salary increases

Experience adjustment

(` in crore)
Particulars

March 31, 2014

March 31, 2013

March 31, 2012

March 31, 2011

March 31, 2010

8.56

8.52

8.35

8.01

8.00

Defined benefit obligation

8.10

7.37

6.53

5.88

5.35

Surplus / (Deficit)

0.46

1.15

1.82

2.13

2.65

Experience adjustment gain/

(loss) on plan assets

0.17

0.29

0.12

(0.24)

2.26

(0.49)

(0.43)

(0.62)

(0.72)

(0.81)

Plan assets

Experience adjustment (gain) /

loss on plan liabilities

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DCB BANK
All the plan assets are invested by the gratuity trust namely Development Credit Bank Ltd. Staff Gratuity Fund in Government securities
(CY about 35%, PY about 35%), high rated corporate bonds (CY about 55%, PY about 55%), Money Market Instruments (CY about 1%,
PY about 1%) and units of mutual funds/ insurance companies (CY about 9%, PY about 9%) set up as dedicated funds for management of
gratuity funds.
The estimates of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant
factors, such as supply and demand in the employment market.
Estimated rate of return on plan assets is based on the Banks expectation of the average longterm rate of return expected on investments
of the Fund during the estimated term of the obligations.
As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is based on various internal/
external factors, a best estimate of the contribution is not determinable.
10.2

Earnings Per Share (EPS)

The Bank reports basic and diluted earnings per equity share in accordance with AS-20, Earnings per Share. The dilutive impact is due to
stock options granted to employees by the Bank.
The computation of earnings per share is given below:Particulars

10.3

March 31, 2014

March 31, 2013

Basic
Net Profit (` in crore)
Weighted average number of equity shares outstanding
Basic Earnings per share (`)

151.36
250,210,919
6.05

102.06
243,329,085
4.19

Diluted
Net Profit (` in crore )
Weighted average number of equity shares outstanding
Diluted Earnings per share (`)
Nominal value per share (`)

151.36
252,671,826
5.99
10.00

102.06
244,859,991
4.17
10.00

Employees Stock Options

The Shareholders of the Bank had approved an ESOP plan Phase I in November 2005, enabling the Board and /or the Nomination Committee
to grant such number of equity shares and/or equity linked instruments, including options of the Bank not exceeding 4% of the Issued Capital
or 60,00,000 Equity Shares of the Bank. The Shareholders, at the Annual General Meeting held on September 11, 2006 had approved an
additional 3% of the Issued Capital, aggregating the total Equity Share Capital reserved for all ESOPs to 7% of the Issued Capital from time
to time. As the shares of the Bank were subsequently listed, confirmation of shareholders was obtained at the Extraordinary General Meeting
held on December 15, 2006 in line with the guidelines of the Securities & Exchange Board of India. Pursuant thereto, during the year the
Nomination Committee of the Bank did not grant any options.
Under the stock option scheme options vest in a graded manner over a 5 year period from the date of grant, the details of which are set out
below:
End of the Year

For Sub Plan 1

Till August 16, 2010 From August 17, 2010

2nd
3rd
4th
5th

40%
30%
30%

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DCB Bank Limited A NNUAL R EPORT 2013-14

30%
30%
20%
20%

For Sub Plan 2

30%
30%
20%
20%

DCB BANK
Method used for accounting for ESOP
The Bank has applied the intrinsic value method to account for the compensation cost of ESOP to the employees of the Bank. Intrinsic value
is the amount by which the quoted market price of the underlying share exceeds the exercise price of the options.
Activity in options outstanding under Employees Stock Option Plan
Particulars

March 31, 2014

March 31, 2013

Number of
options

Weighted Average
Exercise Price

Number of
options

Weighted Average
Exercise Price

10,693,260

45.34

8,953,420

46.70

NIL

2,138,500

38.85

Exercised during the year

213,025

34.48

146,140

25.19

Forfeited/Lapsed during the year

335,810

47.51

252,520

50.23

10,144,425

45.50

10,693,260

45.34

5,921,425

48.68

4,315,540

50.44

Options outstanding at the beginning

of the year
Granted during the year

Options outstanding at the end of the year

Options exercisable

Summary of stock options outstanding as on March 31, 2014 is given below:

Range of exercise price
(Rupees per share)

Number of shares arising

out of options
(Number of shares)

Weighted average exercise

price (`)

Weighted average
remaining contractual life
(Number of years)

17.00 ` 24.00

1,953,770

23.55

2.82

25.00 ` 109.00

7,845,305

47.87

4.91

110.00 ` 200.00

345,350

115.82

2.33

Number of shares arising

out of options
(Number of shares)

Weighted average exercise

price (`)

Weighted average
remaining contractual life
(Number of years)

There were 213,025 stock options exercised during the period ended March 31, 2014.
Summary of stock options outstanding as on March 31, 2013 is given below:
Range of exercise price
(Rupees per share)
`

17.00 ` 24.00

2,030,745

23.52

3.82

25.00 ` 109.00

8,300,975

47.61

5.89

110.00 ` 200.00

361,540

115.83

3.42

There were 146,140 stock options exercised during the period ended March 31, 2013.
Fair value Methodology
The fair value of options used to compute proforma net income and earnings per equity share have been estimated using the binomial optionpricing model. The Bank estimated the volatility based on the historical share prices. There was no option granted during the year ended March
31, 2014.
The various assumptions considered in the pricing model for ESOPs granted during the year ended March 31, 2013 were:
Particular

March 31, 2013

Dividend Yield
Expected Volatility
Risk Free Interest Rate
Expected life of options

60%
7.88%
4-5 years

The expected volatility was determined based on historical volatility data; historical volatility includes data since listing.
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DCB BANK
Impact of Fair Value Method on Net Profit and EPS
Had the compensation cost for the Banks stock option plans outstanding been determined based on the fair value approach, the Banks net
profit and earnings per share would have been as per the proforma amounts indicated below:
(` in crore)
Particulars

March 31, 2014

March 31, 2013

Net Profit (as reported)

151.36

102.06

Add: Stock based compensation expense accounted

(0.01)

0.22

151.35

102.28

Less: Stock based compensation expense determined under fair value based method (proforma)

0.35

0.38

151.00

101.90

March 31, 2014

March 31, 2013

Basic earnings per share (as reported)

6.05

4.19

Basic earnings per share (proforma)

6.03

4.19

Diluted earnings per share (as reported)

5.99

4.17

Diluted earnings per share (proforma)

5.98

4.16

Net Profit (proforma)

Particulars

10.4

Segment Reporting
Part A: Business Segments
As per the RBI guidelines on Segment Reporting, the Bank has classified its activity into Treasury Operations, Corporate Banking, Retail
Banking and Other Banking Operations.
Treasury Operations includes all financial markets activities undertaken on behalf of the Banks customers, proprietary trading, maintenance
of reserve requirements and resource mobilisation from other banks and financial institutions.
Corporate Banking includes lending, deposit taking and other services offered to corporate customers.
Retail Banking includes lending, deposit taking and other services offered to retail customers.
Other Banking Operations includes para banking activities like third party product distribution, merchant banking, etc.
(` in crore)
Business Segments
Particulars
Revenue
Results
Unallocated expenses
Operating profit
Income taxes
Extraordinary profit / loss
Net profit
Other Information
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Capital Expenditure
Unallocable
Total Capital Expenditure
Depreciation
Non Cash Expenses2

Treasury Operations
FY 2013-14
FY 2012-13
569.10
470.12
36.40
37.77

Corporate Banking
FY 2013-14
FY 2012-13
323.56
298.86
40.14
19.87

Retail Banking
Other Banking Operations
FY 2013-14
FY 2012-13
FY 2013-14
FY 2012-13
931.31
742.95
7.38
9.21
75.67
41.99
(0.81)
2.46

4,283.35

4,174.36

3,152.74

2,614.99

5,333.75

4,330.78

0.00

0.02

2,459.77

2,497.79

455.27

622.90

8,850.68

7,133.78

0.86

0.96

0.39

0.98

0.28

19.48

67.58

0.84
(0.22)

0.61
(0.34)

0.52
12.95

0.43
20.23

16.61
18.35

12.60
(1.01)

5.48

5.16

Total1
FY 2013-14
FY 2012-13
1,831.35
1,521.14
151.40
102.09
187.96

126.13

(0.04)
151.36

(0.03)
102.06

12,769.84
153.30
12,923.14
11,766.58
1,156.56
12,923.14
21.42
1.84
23.26
17.97
36.56

11,120.15
158.67
11,278.82
10,254.47
1,024.35
11,278.82
68.25
59.44
127.69
13.64
24.04

1. Revenue i.e. Total Revenue includes inter segment revenue of `564.43 crore in FY 2013-14 (Previous year `488.02 crore). Excluding this, the revenue for the Bank is `1,266.92 crore in FY 2013-14
(Previous year `1,033.12 crore).
2. Excluding depreciation and provision for taxes

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DCB BANK
Part B: Geographic Segments
The Bank does not have overseas branches and the operations are entirely domestic. Therefore, no separate reporting is done based on
geographic segments.
10.5

Related Party Transactions

Related Party Transactions in terms of AS-18 on Related Party Disclosures are disclosed below.
The details of transactions entered into with the Key Management Personnel of the Bank are as under:
Financial Year 2013-14
Mr. Murali M. Natrajan
: Managing Director
Managerial Remuneration
: `3.77 crore*
* The above includes increment arrears of `0.32 crore and bonus for FY 2012-13 of `0.60 crore which will be paid in the FY 2014-15.
Financial Year 2012-13
Mr. Murali M. Natrajan
Managerial Remuneration

10.6

:
:

Managing Director
`3.12 crore

Deferred Tax
a. In accordance with AS-22 on Accounting for Taxes on Income, the Bank has recognised Deferred Tax Assets on such timing differences
where there is a virtual certainty based on contracts and arrangements in place that such deferred tax assets can be reversed. Deferred
Tax Assets have been recognised on unabsorbed depreciation and restricted to the extent of deferred tax liability arising on account of
timing difference arising between book depreciation and tax depreciation and Special Reserve created and maintained u/s 36(1)(viii) of the
Income Tax Act, 1961.
b. The composition of Deferred Tax Liabilities (DTL) and Deferred Tax Assets (DTA) is as under:
(` in crore)
As at
March 31, 2014

Sr. No. Particulars

A.

DTA :

(i)

Provision for Loan Losses/Non Banking Assets

(ii)

Unabsorbed Depreciation

(iii)

Provision for Other Assets

Total DTA [A]

B.

DTL :

(i)

Depreciation

(ii)

Special Reserve u/s 36(1)(viii) of the Income Tax Act, 1961

Total DTL [B]

C.

NET DTA [ A B]

As at
March 31, 2013

13.16

11.88

13.16

11.88

12.49

11.88

0.67

13.16

11.88

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DCB BANK
10.7

Provisions, Contingent Liabilities and Contingent Assets

Description of Contingent Liabilities
Sr. No.

Contingent Liability (*)

Brief Description

1.

Claim against the Bank not acknowledged

as Debts

An amount of `44.46 crore is outstanding as at March 31, 2014, as claims

against the Bank not acknowledged as Debts, including `30.00 crore being in
the nature of a contingent liability on account of proceedings pending with
Income Tax authorities. The Bank does not expect the outcome of these
proceedings to have a materially adverse effect on its financial results.

2.

Liability on account of outstanding

forward exchange and derivative contracts

The Bank enters into foreign exchange contracts on its own account and
for customers and currency options/swaps on a pure hedge basis. Forward
exchange contracts are commitments to buy or sell foreign currency at a future
date at the contracted rate.

3.

Guarantees given on behalf of

constituents, Acceptances, Endorsements
and Others

As a part of its commercial banking activity, the Bank issues Letters of Credit
and Guarantees on behalf of its customers.

4.

Other items for which the Bank is

contingently liable.

These include liability on account of credit enhancement relating to the sale of

mortgage loan portfolio undertaken by the Bank.

* Also refer Schedule 12.

11
11.1

Additional Disclosure
Details of Provisions & Contingencies debited to the Profit and Loss Account
(` in 000s)
Particulars

March 31, 2014

Depreciation on Investments
Provision/write-off towards non-performing assets

March 31, 2013

(2,210)

(3,470)

292,208

164,213

Floating Provision

56,300

10,800

Provision for Standard Assets

70,554

19,213

18,400

300

Provision for Income Tax*

MAT Credit Entitlement
Sacrifice in One Time Settlement
Provision for Other Assets and Contingencies

(18,000)

15,173

3,844

(1,348)

42,154

Provisions for Restructured Advances**

(65,033)

3,651

Total

366,044

240,705

* Provision for Income Tax includes Minimum Alternate Tax (MAT) and Wealth Tax.
* * Provision for restructured advances includes NPV provision on standard advances of `0.35 crore. (Previous year: `0.32 crore)
11.2

Floating Provisions
The Bank has put in place a Board approved Floating Provision policy in accordance with the RBI guidelines.
Movement in floating provision is set out below:
(` in crore)
Particulars

March 31, 2014

Opening balance at the beginning of the year

1.08

Provision made during the year

5.63

1.08

Draw down made during the year

Closing balance at the end of the year

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DCB Bank Limited A NNUAL R EPORT 2013-14

6.71

1.08

DCB BANK
11.3

Provisioning Coverage Ratio

In accordance with the RBI circular, the Banks Provision Coverage Ratio at March 31, 2014 is 80.54% (previous year: 85.71%).

11.4

Customer Complaints+
Particulars

As at March 31, 2014

As at March 31, 2013

(a)

No. of complaints pending at the beginning of the year

10

(b)

No. of complaints received during the year

295

200

(c)

No. of complaints redressed during the year

292

197

(d)

No. of complaints pending at the end of the year*

13

10

* Out of 13 (Previous year: 10) pending complaints, 2 (Previous year: 2) pertain to CDRF (Consumer Disputes Redressal Forum) cases.
+ As compiled by the management and relied upon by the auditors.
11.5

Awards passed by the Banking Ombudsman+

Particulars

As at March 31, 2014

As at March 31, 2013

No. of Awards passed by Banking Ombudsman during the year

No. of Awards implemented during the year

No. of unimplemented Awards Pending at the end of the year

(a)

No. of unimplemented Awards at the beginning of the year

(b)
(c)
(d)

* As on March 31, 2014, the acceptance of Award yet to be communicated by the customer.
+ As compiled by the management and relied upon by the auditors.
11.6

Letters Of Comfort
The Bank has issued letters of comfort to other banks. Outstanding letters of comfort as on March 31, 2014 aggregate `187.88 crore (previous
year: `418.28 crore). In the Banks assessment, no financial impact is likely to arise.

11.7

Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006, certain disclosures are required to be made relating to Micro, Small
and Medium Enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments
due to delays in such payments.

12

OTHER MATTERS

12.1

Disclosure of penalties imposed by RBI

RBI, vide its Speaking Order dated July 12, 2013 had directed the Bank to pay a penalty of `1 crore in terms of Section 47 A(1)(c) read with
Section 46(4)(i) of the Banking Regulation Act, 1949, for non compliance of RBI instructions. The Bank paid the penalty on July 17, 2013.
No penalties were imposed by the RBI on the Bank during the year ended March 31, 2013.

12.2

Revaluation of Fixed Assets

The Bank revalued its owned premises as at March 31, 2009 which resulted in a revaluation gain of `52.02 crore which was credited to
Revaluation Reserve as at that date. The Bank computes depreciation on such revalued premises over its estimated remaining useful life and
accordingly an amount of `1.19 crore has been accounted as depreciation and reduced from the Revaluation Reserve for the year ended March
31, 2014 (Previous year: `1.19 crore).

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DCB BANK
12.3

Assets Taken Under Operating Lease

(` in crore)
Particulars

March 31, 2014

March 31, 2013

Minimum Lease Rent payable

Payable not later than 1 year

15.56

12.34

Payable later than 1 year but not later than 5 years

48.35

35.75

Payable later than 5 years

27.42

14.05

Total

91.33

62.14

The total of lease payments recognised in the Profit and Loss Account for the year

19.30

19.17

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.
12.4

Remuneration
a) Qualitative disclosures
Remuneration Committee
The Nomination & Remuneration Committee of the Board consists of Independent Directors with one member from the Risk
Management Committee of the Board.
Objectives of Compensation Policy
The Bank has put in place a Board approved Compensation Policy.
An important objective of the Compensation Policy is to provide all relevant internal and external parties with appropriate information
and transparency thereby promoting a thorough understanding of the Banks compensation practices.
The Banks objective is to maintain a Compensation Policy that: Is able to attract, retain talent and motivate them to perform at high standards.
Facilitates a performance culture in the Bank by balancing a mix of fixed pay with variable pay.
Supports the Banks risk management practices and takes into account long-term performance of the Bank.
Is compliant with regulatory requirements and is approved by the Boards Nomination & Remuneration Committee.
The Nomination & Remuneration Committee of the Board works in close coordination with the Risk Management Committee of the
Board to ensure effective alignment of remuneration and risks.
Risk adjustments in remuneration
The methodologies for adjusting remuneration to risk and performance are consistent with the general risk management and corporate
governance framework. Risk adjustments take into account the nature of the risks involved and the time horizons over which they
could emerge. The Bank is adhering to the guidelines mentioned in the Basel Committee on Banking Supervision Report on Range of
Methodologies for Risk and Performance Alignment of Remuneration and Financial Stability Board (FSB) Implementation standards on
sound compensation practices.
Performance linked variable compensation
The Variable Compensation offered is linked to the Banks performance and could be even zero during a year of poor performance.
Variable Compensation of all Whole Time Directors (WTD) / Chief Executive Officer (CEO) will not be more than 70% of the
Fixed Compensation. Any Variable Compensation above 50% of the Fixed Compensation is to be deferred over a period of 3 years. The
same will vest at 40%, 30% and 30% at the end of 1st, 2nd and 3rd year. The Bank reserves the right to prevent any deferred variable
compensation from vesting in a year of negative performance. The deferred variable compensation shall lapse if the employment is
terminated prior to vesting.
The Bank utilises performance payout / bonus as the form of variable remuneration. The Bank shall give performance payouts to promote
a healthy financial performance by its staff.
F-38

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DCB Bank Limited A NNUAL R EPORT 2013-14

DCB BANK
b) Quantitative disclosures
(` in crore)
Sr. No.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)

Particulars
Number of meetings held by the Remuneration Committee during the
financial year
Remuneration paid to the members of the Remuneration Committee
Number of employees having received a variable remuneration award
during the financial year (as per compensation policy)
Number and total amount of sign-on awards made during the financial
year
Details of guaranteed bonus, if any, paid as joining / sign on bonus
Details of severance pay, in addition to accrued benefits, if any
Total amount of outstanding deferred remuneration, split into cash,
shares and share-linked instruments and other forms
Total amount of deferred remuneration paid out in the financial year
Breakdown of amount of remuneration awards for the financial year to
show fixed and variable, deferred and non-deferred*
Total amount of outstanding deferred remuneration and retained
remuneration exposed to ex-post explicit and / or implicit adjustment
Total amount of reductions during the financial year due to ex-post
explicit adjustments
Total amount of reductions during the financial year due to ex-post
implicit adjustment

As at March 31, 2014

5

As at March 31, 2013

5

0.01
2

0.01
2

NIL

NIL

NIL
NIL
NIL

NIL
NIL
NIL

NIL
Fixed- 3.93**
Variable- 0.92***
NIL

NIL
Fixed- 3.51
Variable- 0.51
NIL

NIL

NIL

NIL

NIL

* excludes ESOP granted during the year and monetary value of perquisites as per Income Tax rules.
** includes increment arrears of `0.32 crore.
*** includes bonus for FY 2012-13 of `0.60 crore which will be paid in the FY 2014-15.
13

INCOME FROM BANCASSURANCE BUSINESS

(` in crore)
Sr. No.
1.
2.
3.
4.

Nature of Income
For selling life insurance policies
For selling non life insurance policies
For selling mutual fund products
Others
Total

March 31, 2014

3.31
2.25
2.12

7.68

March 31, 2013

5.84
1.74
2.38

9.96

14

DRAW DOWN FROM RESERVES

The Bank has not undertaken any draw down of reserves during the year ended March 31, 2014. (Previous year: Nil)

15

Net overnight open position outstanding as on March 31, 2014 was ` (11.04) crore (Previous year `11.16 crore).

16

Previous years figures have been regrouped / reclassified, wherever considered necessary, in order to make them comparable with figures for
the current year.

17

These are the Notes appended to and forming part of the Financial Statements for the year ended March 31, 2014.

As per our report of even date.

For and on behalf of the Board of Directors

For B S R & Co. LLP

Chartered Accountants
Firm Registration Number: 101248W

Nasser Munjee
Chairman

Murali M Natrajan
MD & CEO

Akeel Master
Partner
Membership No.: 046768

Bharat Sampat
EVP & CFO

H.V. Barve
VP & Company Secretary

Place : Mumbai
Date : April 15, 2014

Place : Gurgaon
Date : April 15, 2014

F-39

Keki Elavia
Director

DCB Bank Limited A NNUAL R EPORT 2013-14

I 75 I

DCB BANK

B S R & Co.
(Registered)

Chartered Accountants

Lodha Excelus
1st Floor, Appollo Mills Compound
N. M. Joshi Marg
Mahalakshmi
Mumbai - 400 011
India

Telephone
Fax

+91(22) 3989 6000

+91(22) 3090 2511

INDEPENDENT AUDITORS REPORT

To the Members of Development Credit Bank Limited
Report on the Financial Statements
1. We have audited the accompanying financial statements of Development Credit Bank Limited (the Bank), which comprise the Balance Sheet as
at 31 March 2013 and 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.
Managements Responsibility for the Financial Statements
2. Management is responsible for preparation of these financial statements that give a true and fair view of the financial position, financial performance
and cash flows of the Bank in accordance with provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies
Act, 1956 and circulars and guidelines issued by the Reserve Bank of India from time to time. This responsibility includes the design, 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.
Auditors Responsibility
3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of the Bank including its branches
in accordance with Standards on Auditing (the Standards) issued by the Institute 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 financial statements are free
of material misstatements.
4. An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected
depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the Banks preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the 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 to provide a basis for our audit opinion.
Opinion
6. In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the
notes thereon give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956, in the manner so required for
banking companies and give a true and fair view in conformity with accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31 March 2013;
(b) in the case of the Profit and Loss Account, of the profit of the Bank for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows of the Bank for the year ended on that date.

I 34 I

A NNUAL R EPORT 2012-13 Development Credit Bank Limited

F-40

DCB BANK
Report on Other Legal and Regulatory Requirements
7. The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement 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.
8. We report that:
(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our
audit and have found them to be satisfactory;
(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank;
(c) during the course of our audit we have visited 8 branches. Since the key operations of the Bank are completely automated with the key applications
integrated to the core banking systems, the audit is carried out centrally at the Head Office as all the necessary records and data required for the
purposes of our audit are available therein.
9. In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting
Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956, to the extent they are not inconsistent with the accounting
policies prescribed by the Reserve Bank of India.
10. We further report that:
(i) the Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account;
(ii) the financial accounting systems of the Bank are centralised and, therefore, accounting returns are not submitted by the branches;
(iii) 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;
(iv) on the basis of written representations received from the Directors and taken on record by the Board of Directors, none of the Director is
disqualified as on 31 March 2013 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies
Act, 1956.

For B S R & Co.

Chartered Accountants
Firms Registration No: 101248W

N Sampath Ganesh
Partner
Membership No: 042554

Mumbai
12 April 2013

Development Credit Bank Limited A NNUAL R EPORT 2012-13

F-41

I 35 I

DCB BANK
BALANCE SHEET AS ON MARCH 31, 2013
Schedule

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

2,501,116

2,406,655

30,189

28,244

7,499,288

6,178,766

10,030,593

8,613,665

CAPITAL & LIABILITIES

Capital

Employee Stock Options

(Grants Outstanding net of deferred cost)
Reserves & Surplus

Capital and Reserves - Subtotal

Deposits

83,638,385

63,355,555

Borrowings

15,256,195

11,234,501

Other Liabilities and Provisions

3,863,066

3,564,752

112,788,239

86,768,473

TOTAL CAPITAL & LIABILITIES

ASSETS
Cash and Balances with Reserve Bank of India

3,787,670

4,075,047

Balances with Banks and Money at Call and Short Notice

5,044,8 54

490,487

Investments

33,586,568

25,177,568

Advances

65,860,852

52,844,224

Fixed Assets

10

2,394,471

1,846,409

Other Assets

11

2,113,824

2,334,738

112,788,239

86,768,473

44,765,489

32,731,894

4,756,905

4,374,635

TOTAL ASSETS

Contingent Liabilities

12

Bills for Collection

Significant Accounting Policies

17

Notes to Accounts

18

The Schedules referred to above form an integral part of the Balance Sheet.
The Balance Sheet has been prepared in conformity with Form A of the Third Schedule to the Banking Regulation Act, 1949.
As per our report of even date.

For and on behalf of the Board of Directors

For B S R & Co.

Chartered Accountants
Firm Registration Number: 101248W

Nasser Munjee
Chairman

Murali M. Natrajan
MD & CEO

N Sampath Ganesh
Partner
Membership No.: 042554

Bharat Sampat
EVP & CFO

H.V. Barve
VP & Company Secretary

Place : Mumbai
Date : April 12, 2013

Place : Hyderabad
Date : April 12, 2013

I 36 I

A NNUAL R EPORT 2012-13 Development Credit Bank Limited

F-42

Keki Elavia
Director

DCB BANK
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2013
Schedule

I.

II.

Year Ended
31.03.2013
(` in 000s)

Year Ended
31.03.2012
(` in 000s)

13
14

9,161,031
1,170,192
10,331,223

7,169,691
1,003,738
8,173,429

15
16
refer note 18.11.1

6,316,946
2,752,948
240,705
9,310,599

4,892,683
2,442,527
287,449
7,622,659

1,020,624
(3,233,581)
(2,212,957)

550,770
(3,645,443)
(3,094,673)

APPROPRIATIONS
Transfer to Statutory Reserve
Transfer to Revaluation Reserve
Transfer to Capital Reserve
Transfer to Investment Reserve
Balance carried over to Balance Sheet

255,156

22,648
3,891
(2,494,652)

137,693

861
354
(3,233,581)

TOTAL

(2,212,957)

(3,094,673)

4.19
4.17
10.00

2.73
2.71
10.00

INCOME
Interest Earned
Other Income
TOTAL INCOME
EXPENDITURE
Interest Expended
Operating Expenses
Provisions and Contingencies
TOTAL EXPENDITURE

III. PROFIT / (LOSS)

Net Profit for the year
Losses Brought Forward
TOTAL PROFIT/(LOSS)
IV.

Earning per share

(i) Basic (`)
(ii) Diluted (`)
Face Value per share (`)
Significant Accounting Policies
Notes to Accounts

17 (17)
refer note 18.10.2
refer note 18.10.2
17
18

The Schedules referred to above form an integral part of the Profit & Loss Account.
The Profit and Loss Account has been prepared in conformity with Form B of the Third Schedule to the Banking Regulation Act, 1949.
As per our report of even date.

For and on behalf of the Board of Directors

For B S R & Co.

Chartered Accountants
Firm Registration Number: 101248W

Nasser Munjee
Chairman

Murali M. Natrajan
MD & CEO

N Sampath Ganesh
Partner
Membership No.: 042554

Bharat Sampat
EVP & CFO

H.V. Barve
VP & Company Secretary

Place : Mumbai
Date : April 12, 2013

Place : Hyderabad
Date : April 12, 2013

Keki Elavia
Director

Development Credit Bank Limited A NNUAL R EPORT 2012-13

F-43

I 37 I

DCB BANK
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2013
(` in 000s)
Year Ended
31.03.2013

Year Ended
31.03.2012

1,020,624

550,770

175,013
3,651
(3,470)
19,213
300
42,154
136,359
17,098
47,310
41,048
2,153

245,933
28,699
8,271
(607)
300
(3,000)
119,692
28,269
56,847
37,564
2,038

20,282,830
279,100
(8,452,840)
(13,236,341)
182,305
(3,844)
552,663

7,253,897
361,886
(2,292,239)
(10,339,549)
(124,645)
7,872
(4,058,002)

(722,946)
9,569
(713,377)

(739,220)
8,036
(731,184)

406,010

(100,000)
4,121,694

4,427,704
4,266,990
4,565,534
8,832,524

1,857,816

(260,000)
2,887,349
(1,540)
4,483,625
(305,561)
4,871,095
4,565,534

Notes to the Cash ow statement

Cash and Cash equivalent includes the following:
Cash and Balances with Reserve Bank of India
Balances with Banks and Money at Call and Short notice

3,787,670
5,044,854

4,075,047
490,487

Cash and Cash equivalent at the end of the year

8,832,524

4,565,534

Cash Flow from Operating Activities

Net Prot for the year
Adjustments for:
Provisions for Advances
Provisions for Restructured Advances
Provision for Investments
Provision for Standard Assets
Provision for Income Tax (including wealth tax)
Provision for Other Assets and Contingencies
Depreciation on Fixed Assets
Loss on Sale of Fixed Assets
Amortization of Premium on Investment
Amortization of Premium on Acquired Assets
ESOP Compensation
Adjustments for:
Increase/(Decrease) in Deposits
Increase/(Decrease) in Other Liabilities & Provisions
(Increase)/Decrease in Investments
(Increase)/Decrease in Advances
(Increase)/Decrease in Other Assets
Refund/(Payment) of direct taxes (Including Tax Deducted at Source)
Net Cash Flow from Operating activities
Cash ow from Investing activities
Purchase of Fixed assets
Proceeds from sale of Fixed Assets
Net Cash Flow from Investing activities
Cash ow from Financing activities
Net Proceeds from Issue of Capital
Issue of Subordinated Debt
Repayment of Subordinated Debt
Increase/(Decrease) in Borrowings
Payment of Unclaimed Dividend/Transfer to Investor Education Protection Fund
Net Cash Flow from Financing activities
Net Increase/(Decrease) in Cash & Cash Equivalent
Cash and Cash equivalent at the beginning of the year
Cash and Cash equivalent at the end of the year

C
A+B+C

As per our report of even date.

For and on behalf of the Board of Directors

For B S R & Co.

Chartered Accountants
Firm Registration Number: 101248W

Nasser Munjee
Chairman

Murali M. Natrajan
MD & CEO

N Sampath Ganesh
Partner
Membership No.: 042554
Place : Mumbai
Date : April 12, 2013

Bharat Sampat
EVP & CFO

H.V. Barve
VP & Company Secretary

I 38 I

Place : Hyderabad
Date : April 12, 2013

A NNUAL R EPORT 2012-13 Development Credit Bank Limited

F-44

Keki Elavia
Director

DCB BANK
SCHEDULE 1 CAPITAL
As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

Authorised Capital
50,00,00,000 (Previous year 50,00,00,000)
Equity Shares of ` 10/- each

5,000,000

5,000,000

Issued, Subscribed and Paid up Capital

250,111,597 (Previous year 240,665,457)
Equity Shares of ` 10/- each

2,501,116

2,406,655

TOTAL

2,501,116

2,406,655

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

1,114,522
255,156
1,369,678

976,829
137,693
1,114,522

549,669

(11,858)
537,811

561,528

(11,859)
549,669

352,685
22,648

375,333
913,144

351,824
861

352,685
902,354

7,361,922
311,756

7,673,678

5,907,121
1,454,801

7,361,922

33,549
3,891

37,440
(2,494,652)
7,499,288

33,195
354

33,549
(3,233,581)
6,178,766

SCHEDULE 2 RESERVES & SURPLUS

I.

II.

Statutory Reserve
Opening balance
Additions during the year
TOTAL (I)
Capital Reserve
a) Revaluation Reserve
Opening balance
Additions during the year
Deductions during the year
TOTAL (a)
b) Other Capital Reserve
Opening balance
Additions during the year
Deductions during the year
TOTAL (b)
TOTAL (a + b ) (II)

III. Share Premium

Opening balance
Additions during the year
Deductions during the year
TOTAL (III)
IV.

V.

Revenue and Other Reserves

Investment Reserve
Opening balance
Additions during the year
Deductions during the year
TOTAL (IV)
Balance in Prot & Loss Account
TOTAL (I to V)

Development Credit Bank Limited A NNUAL R EPORT 2012-13

F-45

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DCB BANK
SCHEDULE 3 DEPOSITS

A I.

II.

III.

B I.
II.

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

Demand Deposits
(i) From Banks
(ii) From Others

159,439
8,832,978

185,756
8,206,502

TOTAL (I)

8,992,417

8,392,258

Savings Bank Deposits

13,723,741

11,954,440

TOTAL (II)

13,723,741

11,954,440

Term Deposits
(i) From Banks
(ii) From Others

7,660,159
53,262,068

2,207,746
40,801,111

TOTAL (III)
TOTAL (I, II and III)
Deposits of branches in India
Deposits of branches outside India

60,922,227
83,638,385
83,638,385

43,008,857
63,355,555
63,355,555

TOTAL

83,638,385

63,355,555

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

2,900,000
7,100,000
3,805,879
650,000

7,000,000
2,174,871
750,000

14,455,879

9,924,871

SCHEDULE 4 BORROWINGS

I. Borrowings in India
(i) Reserve Bank of India
(ii) Other Banks
(iii) Other Institutions and Agencies
(iv) Sub-Ordinated Debts
TOTAL (I)
II. Borrowings outside India
TOTAL (I & II)
Secured Borrowings included in I & II above

800,316

1,309,630

15,256,195

11,234,501

3,399,761

999,405

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

1,436,847

1,057,097

1,326,933

894,907

271,694
1,097,428

252,480
1,090,432

3,863,066

3,564,752

SCHEDULE 5 OTHER LIABILITIES AND PROVISIONS

I. Bills Payable
II. Inter Ofce Adjustments (Net)
III. Interest Accrued (Net of TDS recoverable)
IV. Others
(i) Provision for Standard Assets
(ii) Other Liabilities (including provisions)
TOTAL

I 40 I

A NNUAL R EPORT 2012-13 Development Credit Bank Limited

F-46

DCB BANK
SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA
As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

905,841

856,762

2,881,829

3,218,285

TOTAL (II)

2,881,829

3,218,285

TOTAL (I & II)

3,787,670

4,075,047

I. Cash in hand
(including foreign currency notes:- ` Nil
{Previous Year ` Nil } )
II. Balances with Reserve Bank of India
(i) In Current Accounts
(ii) In Other Accounts

SCHEDULE 7 BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE

I. In India
i. Balance with Banks
(a) In Current Accounts **
(b) In Other Deposit Accounts
** includes funds in transit
TOTAL
ii. Money at Call and Short Notice
(a) With Banks
(b) With Other Institutions

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

472,399
46,700

317,587
4,655

519,099

322,242

600,000
2,507,260

TOTAL

3,107,260

TOTAL (I)

3,626,359

322,242

129,226
1,289,269

134,668
33,577

II. Outside India

(i) In Current Accounts
(ii) In Other Deposit Accounts
(iii) Money at Call and Short Notice
TOTAL (II)

1,418,495

168,245

TOTAL (I & II)

5,044,854

490,487

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SCHEDULE 8 INVESTMENTS

I.

II.

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

24,331,872

2,061
30,000

20,218,487

2,061
30,000

3,928,427
1,591,804
3,376,629
127,675
198,100

741,952

3,802,493
207,075
175,500

TOTAL (I)

33,586,568

25,177,568

Investments in India
(i) Gross Value
(ii) Provision for Depreciation
TOTAL (II)

33,588,778
(2,210)
33,586,568

25,184,818
(7,250)
25,177,568

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

(i) Bills Purchased and Discounted

(ii) Cash credits, Overdrafts and Loans repayable on demand
(iii) Term Loans

2,623,969
20,948,454
42,288,429

3,086,898
18,225,185
31,532,141

TOTAL (I)

65,860,852

52,844,224

(i) Secured by tangible assets*

(ii) Covered by Bank / Government Guarantees
(iii) Unsecured

62,793,331

3,067,521

45,940,615

6,903,609

TOTAL (II)

65,860,852

52,844,224

(a) Advances in India

(i) Priority Sectors
(ii) Public Sector
(iii) Banks
(iv) Others

21,196,653
29,351
150,089
44,484,759

19,195,753
17,333
5,333
33,625,805

TOTAL

65,860,852

52,844,224

65,860,852

52,844,224

Investments in India
Net Investments in :(i) Government Securities
(ii) Other Approved Securities
(iii) Shares
(iv) Debentures and Bonds
(v) Subsidiaries and/or Joint Ventures
(vi) Other Investments :
(a) Units of Mutual Funds/CDs
(b) Pass Through Certicates/Security Receipts
(c) Deposits with NABARD RIDF
(d) Deposits with SIDBI MSME (Renance) Fund
(e) Deposits with NHB Rural Housing Fund

III. Investments outside India

(i) Government Securities
(ii) Subsidiaries and/or Joint Ventures
(iii) Other Investments
TOTAL (III)

SCHEDULE 9 ADVANCES

I.

II.

*includes Advances against Book Debts

III

III

(b) Advances outside India

TOTAL (III)

Advances are net of provisions

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SCHEDULE 10 FIXED ASSETS
As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

997,546
1,147,054
(22,330)
2,122,270

1,001,069
3,184
(6,707)
997,546

169,603
33,706
(21,365)
181,944

145,644
27,327
(3,368)
169,603

1,940,326

827,943

33,592

587,555

1,973,918

1,415,498

1,156,287
129,856
(104,535)
1,181,608

1,203,861
148,481
(196,055)
1,156,287

725,376
114,512
(78,833)
761,055

784,241
104,224
(163,089)
725,376

Net Block

420,553

430,911

TOTAL (II)

420,553

430,911

I (a) Premises (including Revaluation)

(i) At Cost on 31 March of the preceding year
(ii) Additions during the year
(iii) Deductions during the year
Total
Depreciation to date (including Revaluation)
(i) As at 31 March of the preceding year
(ii) Charge for the year
(iii) On deductions during the year
Total
Net Block
(b) Capital Work In Progress
TOTAL (I)
II. Other Fixed Assets (including Furniture & Fixtures)
(i) At Cost on 31 March of the preceding year
(ii) Additions during the year
(iii) Deductions during the year
Total
Depreciation to date
(i) As at 31 March of the preceding year
(ii) Charge for the year
(iii) On deductions during the year
Total (refer note 18.7)

III. Assets given on Lease

(i) At Cost as per last Balance Sheet
(ii) Additions during the year
(iii) Deductions during the year
(iv) Depreciation to date
TOTAL (III)
TOTAL ( I+II+III )

2,394,471

1,846,409

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

491,601
931,209
4,246

686,768

385,569
927,365
3,551

1,018,253

2,113,824

2,334,738

SCHEDULE 11 OTHER ASSETS

I.
II.
III.
IV.
V.
VI.
VII.

Inter-Ofce Adjustments (Net)

Interest accrued
Tax paid in Advance/Tax deducted at Source (Net of provision)
Stationery and Stamps
Non-Banking Assets acquired in satisfaction of claims (Net)
Deferred Tax Assets (Net)
Others1
TOTAL

1: Includes an advance amount of ` 1.15 crore as on March 31, 2013 (` 1.82 crore as on March 31, 2012) with gratuity trust fund - refer note 18.10.1 (Staff Retirement
Benets)
Development Credit Bank Limited A NNUAL R EPORT 2012-13 I 43
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DCB BANK
SCHEDULE 12 CONTINGENT LIABILITIES

I.
Claims against the bank not acknowledged as debts
II. Liability for partly paid investments
III. Liability on account of outstanding forward exchange and derivative contracts
(a) Forward Contracts
(b) Interest Rate Swaps and Currency Swaps
(c) Foreign Currency Options
IV. Guarantees given on behalf of constituents
(a) In India
(b) Outside India
V. Acceptances, Endorsements and other obligations
VI. Other items for which the bank is contingently liable
TOTAL

As on 31.03.2013
(` in 000s)

As on 31.03.2012
(` in 000s)

451,346

1,185,496

31,504,363

17,834,421
3,508,750

6,206,499
4,645,814
1,801,463
156,004

6,122,983
2,037,560
1,931,118
111,566

44,765,489

32,731,894

Year Ended
31.03.2013
(` in 000s)

Year Ended
31.03.2012
(` in 000s)

7,118,291
1,963,203

5,362,015
1,724,799

67,525
12,012

72,379
10,498

9,161,031

7,169,691

Year Ended
31.03.2013
(` in 000s)

Year Ended
31.03.2012
(` in 000s)

893,327
139,001

(17,098)
72,239

786,086
117,543

(28,269)
69,167

82,723

59,211

1,170,192

1,003,738

SCHEDULE 13 INTEREST EARNED

I.
Interest/Discount on Advances/Bills
II. Income on Investments
III. Interest on Balance with Reserve
Bank of India and other Inter Bank Funds
IV. Others
TOTAL

SCHEDULE 14 OTHER INCOME

I.
II.
III.
IV.
V.
VI.

Commission, Exchange and Brokerage

Prot/(Loss) on sale of Investments (Net)
Prot/(Loss) on revaluation of Investments (Net)
Prot/(Loss) on sale of Land, Buildings and Other Assets (Net)
Prot/(Loss) on Exchange Transactions (Net)
Income earned by way of Dividends etc. from Subsidiaries,
Companies and/or Joint Ventures abroad/in India
VII. Lease Income (Net of Lease Equalisation Account)
VIII. Miscellaneous Income
(Includes recoveries from bad debts written off in earlier years)
TOTAL

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DCB BANK
SCHEDULE 15 INTEREST EXPENDED

I.
Interest on Deposits
II. Interest on Reserve Bank of India/Inter-Bank Borrowings
III. Other Interest
TOTAL

Year Ended
31.03.2013
(` in 000s)

Year Ended
31.03.2012
(` in 000s)

5,346,381
798,134
172,431

4,080,897
711,676
100,110

6,316,946

4,892,683

SCHEDULE 16 OPERATING EXPENSES

I.
II.
III.
IV.
V.

Payments to and Provisions for Employees

Rent, Taxes and Lighting
Printing and Stationery
Advertisement and Publicity
Depreciation on Banks property
Less: Transfer from Revaluation Reserve

VI. Directors Fees, Allowances and Expenses

VII. Auditors Fees and Expenses
VIII. Law Charges
IX. Postages,Telegrams,Telephones etc.
X. Repairs and Maintenance
XI. Insurance
XII. Other Expenditure
TOTAL

148,217
(11,858)

Year Ended
31.03.2013
(` in 000s)

Year Ended
31.03.2012
(` in 000s)

1,379,008
362,955
29,438
10,237

1,245,883
327,142
27,892
13,187

136,359

131,551
(11,859)

119,692

4,821
5,731
6,645
62,553
68,188
63,341
623,672

5,921
5,763
11,192
63,760
67,176
59,923
494,996

2,752,948

2,442,527

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DCB BANK
SCHEDULE 17 SIGNIFICANT ACCOUNTING POLICIES
1.

BACKGROUND
Development Credit Bank Limited (DCB or the Bank), incorporated in Mumbai, India is a publicly held banking company engaged in
providing banking and nancial services. DCB is a banking company governed by the Banking Regulation Act, 1949.

2.

BASIS OF PREPARATION
The nancial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, and comply
with Generally Accepted Accounting Principles in India (GAAP), statutory requirements prescribed under the Banking Regulation Act, 1949,
circulars and guidelines issued by the Reserve Bank of India (RBI) from time to time and notied Accounting Standards by Companies (Accounting
Standards) Rules, 2006, (as amended) to the extent applicable and current practices prevailing within the banking industry in India.

3.

USE OF ESTIMATES
The preparation of nancial statements in conformity with GAAP requires the management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the nancial statements and the results of
operations during the reporting period. Although these estimates are based upon managements best knowledge of current events and actions,
actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future
periods.

4.
4.1

INVESTMENTS
Classication:
The Investment portfolio comprising approved securities (predominantly Government Securities) and other securities (Shares, Debentures and
Bonds, etc.) are classied at the time of acquisition in accordance with the Reserve Bank of India (RBI) guidelines under three categories viz.
Held to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT). For the purposes of disclosure in the Balance Sheet, they
are classied under six groups viz. Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Subsidiaries and/or joint
ventures and Other Investments.
The Bank follows Settlement Date accounting for recording purchase and sale transactions.

4.2

Basis of Classication:
Investments that are held principally for resale within 90 days from the date of purchase are classied as HFT securities. As per RBI guidelines,
HFT securities, which remain unsold for a period of 90 days are reclassied as AFS securities as on that date.
Investments which the Bank intends to hold till maturity are classied as HTM securities.
Investments which are not classied in the above categories are classied under AFS category.

4.3

Transfer of Securities between Categories:

The transfer/shifting of securities between categories of investments is accounted as per RBI guidelines.

4.4

Valuation:
Held for Trading and Available for Sale categories:
Investments classied under HFT and AFS are marked to market as per the RBI guidelines. These securities are valued scrip-wise and any resultant
depreciation or appreciation is aggregated for each category. The net depreciation for each category is provided for, whereas the net appreciation
for each category is ignored. The book value of individual securities is not changed consequent to periodic valuation of investments.
Traded investments are valued based on the trades / quotes on the recognized stock exchanges, price list of RBI or prices declared by Primary
Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association (FIMMDA), periodically.
The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (SLR) included in the AFS
and HFT categories is computed as per the Yield-to-Maturity (YTM) rates published by FIMMDA.
The valuation of other unquoted xed income securities (viz. State government securities, Other approved securities, Bonds and debentures)
wherever linked to the YTM rates, is computed with a mark-up (reecting associated credit and liquidity risk) over the YTM rates for government
securities published by FIMMDA. Unquoted equity shares are valued at the break-up value, if the latest Balance Sheet is available or at ` 1 as per
the RBI guidelines. Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund. Treasury bills,
commercial papers and certicate of deposits being discounted instruments, are valued at carrying cost.
In the event provisions created on account of depreciation in the AFS or HFT categories are found to be in excess of the required amount in
any year, such excess is recognized in the Prot and Loss Account and subsequently appropriated, from prot available for appropriation, if any,

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DCB BANK
to Investment Reserve Account in accordance with RBI guidelines after adjusting for income tax and appropriation to Statutory Reserve.
Held to Maturity:
These are carried at their acquisition cost and are not marked to market. Any premium on acquisition is amortized over the remaining maturity
period of the security on a straight-line basis. Provisions are made for diminutions other than temporary in the value of such investments for each
investment individually.
Non-performing investments are identied and provision is made as per RBI guidelines.
4.5

Disposal of Investment:
Prot/Loss on sale of investment under the aforesaid three categories is taken to the Prot and Loss Account. The prot on sale of investment
in HTM category, net of taxes and transfers to Statutory Reserve is appropriated to Capital Reserves.

4.6

Acquisition Cost:
Costs including brokerage, commission pertaining to investments, paid at the time of acquisition, are charged to the Prot and Loss Account.
Broken period interest is charged to the Prot and Loss Account.
Cost of investments is computed based on the weighted average cost method.

4.7

Repo and reverse repo transactions under LAF:

In respect of repo transactions under LAF with RBI, amount borrowed from RBI is accounted for as borrowing transactions.
In respect of reverse repo transactions under LAF with RBI, amount lent to RBI is accounted for as lending transactions.

5.
5.1

ADVANCES
In pursuance of guidelines issued by the RBI, advances are classied as Standard, Sub-Standard, Doubtful and Loss Assets and are stated net of
specic provisions made towards NPAs and oating provisions.

5.2

Provision for non-performing advances (NPAs) comprising sub-standard, doubtful and loss assets is made in accordance with the RBI guidelines
which prescribes minimum provision levels and also encourages banks to make a higher provision based on sound commercial judgement. Nonperforming advances are identied by periodic appraisals of the loan portfolio by the management. In respect of identied NPAs, provision is
made based on the inherent risk assessed for the various product categories. The provisioning done is at or higher than the minimum rate prescribed
under the RBI guidelines.

5.3

Advances are net of bills rediscounted, claims realized from ECGC, provisions for non- performing advances, oating provisions, unrealized fees
and unrealized interest held in suspense account.

5.4

In case of restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the diminution in
the fair value of the assets to be provided at the time of restructuring.

5.5

Credit facility/investment, where interest and/or installment of principal has remained overdue for more than 90 days, is classied as nonperforming asset. However, in respect of Equated Monthly Instalment (EMI) based advances those accounts where more than 3 EMIs are overdue
are classied as non-performing advances.

5.6

In case of NPAs other than retail EMI loans, recoveries effected are rst adjusted towards the principal amount. In case of retail EMI loans,
recoveries effected are adjusted towards the EMI and within the EMI rst towards the principal amount.

6.

FIXED ASSETS
Premises and other xed assets are stated at historical cost (or revalued amounts, as the case may be), less accumulated depreciation and impairment
losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.
Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benet / functioning capability from / of
such assets.

7.

REVALUATION OF FIXED ASSETS

Portfolio of immovable properties is revalued periodically by an independent valuer to reect current market valuation. All land and building
owned by the Bank and used as branches or ofces or godowns are grouped under Ofce Premises in the xed assets category. Appreciation,
if any, on revaluation is credited to Revaluation Reserve under Capital Reserves.

8.

DEPRECIATION
Depreciation on xed assets, including amortisation of software, is charged over the estimated useful life of the xed assets on a straight line basis
at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956, except as mentioned below:
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Computer Hardware - 33.33% p.a.
ATM - 12.50% p.a.
Core Banking Software - 12.50% p.a.
Application Software and System Development Expenditure - Depending upon estimated useful life between 3-5 years.
Hard Furnishing 25% p.a.
Improvements (Civil) to Leased Premises over the contracted period of the lease.
Fixed Furniture in Leased Premises such as work-stations, etc. over the contracted period of the lease.
Vehicle 19% p.a. over 5 years with 5% residual value.
Assets purchased/sold during the year are depreciated on a pro-rata basis, based on the actual number of days the asset has been put to use.
Assets individually costing upto ` 5,000/- are depreciated fully in the year of purchase.
9.

IMPAIRMENT OF ASSETS
The carrying amount of assets is reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors.
An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater
of the assets net selling price and value in use. In assessing value in use, the estimated future cash ows are discounted to their present value
using a pre-tax discount rate that reects current market assessments of the time value of money and risks specic to the asset. After impairment,
depreciation is provided on the revised carrying amount of the asset over remaining useful life.

10. RECOGNITION OF INCOME AND EXPENDITURE

10.1 Revenue is recognized to the extent that it is probable that the economic benet will ow to the Bank and the revenue can be reliably measured.
10.2 Items of income and expenditure are generally accounted on accrual basis.
10.3 Interest income is recognized in Prot and Loss Account on accrual basis, except in the case of non-performing assets where it is recognized as
per RBI norms.
10.4 Interest income on investments in PTCs and loans bought out through the direct assignment route is recognized at their effective interest rate.
10.5 Processing fees recovered on loans are recognized as income and processing overheads on loans are expensed at the inception of the loan.
10.6 Overdue rent on Safe Deposit Lockers is accounted for on realisation.
10.7 Guarantee commission, annual safe deposit locker rent fees are recognized on a straight line basis over the period of contract. Letters of credit
(LC) are generally issued for a shorter tenor, typically of 90 days. The Commission on such LC is recognized when due.
11. FOREIGN EXCHANGE TRANSACTIONS
11.1 Initial recognition:
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the
reporting currency and foreign currency at the date of the transaction.
11.2 Conversion:
Foreign currency monetary items are reported using the closing rate notied by Foreign Exchange Dealers Association of India (FEDAI), as per
the guidelines issued by the RBI.
11.3 Exchange differences:
Exchange difference arising on settlement of monetary items or on reporting monetary items of the Bank at rates different from those at which
they were initially recorded during the year, or reported in previous nancial statements, are recognized as income or as expenses in the year in
which they arise. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the
exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuations denominated in a
foreign currency are reported using exchange rates that existed when the values were determined.
11.4 Outstanding forward exchange contracts are revalued on the Balance Sheet date at rates notied by FEDAI and at interpolated rates for contracts
of interim maturities. The resultant gain/loss on revaluation is included in the Prot and Loss Account in accordance with RBI/FEDAI guidelines.
11.5 Contingent liabilities denominated in foreign currencies are disclosed in Balance Sheet date at the rates notied by FEDAI.
11.6 Forward exchange contracts and other derivative contracts which have overdue receivables which have remained unpaid over 90 days or more
are classied as non-performing assets and provided for as per the extant master circular on Prudential Norms on Income Recognition, Asset
Classication and Provisioning issued by the RBI.

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12. RETIREMENT BENEFITS OF EMPLOYEES
12.1 Provision in respect of future liability for payment of gratuity is made on the basis of actuarial valuation on projected unit credit method made
at the end of the year. Gratuity is funded with the Gratuity Trust duly registered under the provisions of Income tax Act, 1961. Actuarial gains/
losses are immediately taken to Prot and Loss Account and are not deferred.
12.2 Retirement benet in the form of provident fund is a dened contribution scheme and the contributions are charged to the Prot and Loss
Account of the year when the contributions to the fund are due. There are no other obligations other than the contribution payable to the fund.
13. TAXES ON INCOME
13.1 Tax expense comprises current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961 enacted in India. Deferred Income Tax reects the impact of current year timing differences between
taxable income and accounting income for the year and reversal of timing differences of earlier years.
13.2 Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets
and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred
tax assets and deferred tax liabilities relate to taxes levied by same governing taxation laws. Deferred tax assets are recognized only to the extent
that there is reasonable certainty that sufcient future taxable income will be available against which such deferred tax assets can be realized. In
situations where the Bank has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that they can be realized against future taxable prots.
13.3 At each Balance Sheet date the Bank re-assesses unrecognized deferred tax assets. It recognises unrecognized deferred tax asset to the extent that
it has become reasonably certain or virtually certain, as the case may be that sufcient future taxable income will be available against which such
deferred tax assets can be realized.
14.

ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognized in terms of Accounting Standard-29 on Provisions, Contingent Liabilities and Contingent Assets, when there is a
present legal or statutory obligation as a result of past events leading to probable outow of resources, where a reliable estimate can be made of
the amount required to settle the obligation.
Contingent Liabilities are recognized only when there is a possible obligation arising from past events due to occurrence or non-occurrence of one
or more uncertain future events, not wholly within the control of the Bank, or where there is a present obligation arising from a past event which
is not recognized as it is not probable that an outow of resources will be required to settle the obligation or a reliable estimate of the amount
of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outow of
resources is remote, no provision or disclosure is made

15.

ACCOUNTING FOR DERIVATIVE CONTRACTS

Income from derivative transactions designated as hedge is recorded on an accrual basis and these transactions are not marked to market. Derivative
transactions, which are not designated as hedge, are marked to market as per the generally accepted practices prevalent in the industry. Any resultant
gain or loss is recognized in the Prot and Loss Account.

16.

EMPLOYEE SHARE BASED PAYMENTS

Measurement and disclosure of employee share-based employment plans is done in accordance with SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for the Employee Share-based Payments issued by
The Institute of Chartered Accountants of India. The Bank measures compensation cost relating to employee stock options using the intrinsic
value method. Compensation expense is amortised over the vesting period of the option on a straight line basis.

17.

EARNINGS PER SHARE

Basic and diluted earnings per share are computed in accordance with Accounting Standard 20 Earning per share. Basic earnings per share is
calculated by dividing the net prot or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net prot or loss for the year attributable to equity shareholders and the weighted
average number of shares outstanding during the year are adjusted for the effect of dilutive potential equity shares.

18.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand and ATMs, balances with Reserve Bank of India, balances with other banks and money at call and
short notice (including effect of changes in exchange rates on cash and cash equivalents in foreign currency).

19.

LEASES
Leases where lessor effectively retains substantially all risks and benets of ownership of the leased item are classied as operating leases. Operating
lease payments are recognized as an expense in the Prot and Loss Account on a straight-line basis over the lease term.
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SCHEDULE 18 NOTES TO ACCOUNTS
1 CAPITAL
1.1 During the nancial year 201213, the Bank issued 9,300,000 equity shares on preferential basis at ` 43.68 per share. Net of issue costs, this resulted
in an increase of ` 9.30 crore in Share Capital and ` 30.93 crore in Share Premium Account.
In connection with this issue, the Bank has incurred share issue expenses aggregating to ` 0.39 crore. The Bank has utilized the share premium
account for meeting the said share issue expenses.
1.2 Capital to Risk Assets Ratio (CRAR)
Particulars

i.
ii.
iii.
iv.
v.
vi.
vii.
viii.

Tier I Capital
Tier II Capital
Total Capital
Total Risk Weighted assets
CRAR (%)
CRAR Tier I capital (%)
CRAR Tier II capital (%)
Percentage of shareholding of the
Government of India in nationalized banks
ix. Amount of subordinated debt raised as Tier II capital
x. Amount raised by issue of IPDI
xi. Amount raised by issue of Upper Tier II instruments

As per Basel I framework

As at
As at
March 31, 2013
March 31, 2012
934.43
799.73
73.31
92.34
1,007.74
892.07
7,700.61
6,028.56
13.09%
14.80%
12.14%
13.27%
0.95%
1.53%
N.A
65.00

(` in crore)
As per Basel II framework
As at
As at
March 31, 2013
March 31, 2012
934.43
799.73
73.31
92.34
1,007.74
892.07
7,402.87
5,790.66
13.61%
15.41%
12.62%
13.81%
0.99%
1.60%
N.A
65.00

N.A
75.00

N.A
75.00

SUBORDINATED DEBT THROUGH PRIVATE PLACEMENT OF BONDS

During the year the Bank redeemed subordinated debt of ` 10 crore, the details of which are set out below:
(` in crore)
Issue Series
III (Option II)

Date of Maturity

Coupon Rate (% p.a.)

Tenure (in months)

Amount

June 30, 2012

7.15

99

10.00

The details of total outstanding subordinated debt are given below:

(` in crore)
Issue Series

Deemed Date of
Allotment

Coupon Rate
(% p.a.)

III (Option II)

March 31, 2004

7.15

IV

August 31, 2009

11.25

Total

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A NNUAL R EPORT 2012-13 Development Credit Bank Limited

F-56

Tenure Equivalent Amount

(in months) as on March 31, 2013

Equivalent Amount
as on March 31, 2012

99

10.00

68

65.00

65.00

65.00

75.00

DCB BANK
3 INVESTMENTS
3.1 Particulars of investments and movement in provision held towards depreciation on investments
(` in crore)
Particulars
1. Value of Investments:
(i) Gross Value of Investments
a. In India
b. Outside India
(ii) Provisions for Depreciation
a. In India
b. Outside India
(iii) Net Value of Investments
a. In India
b. Outside India
2. Movement of provision held towards depreciation on investments:
(i) Opening balance
(ii) Add: Provision made during the year
(iii) Less: Writeoff/ writeback of excess provision during the year
(including depreciation utilized on sale of securities)
(iv) Closing balance

March 31, 2013

March 31, 2012

3,358.88

2,518.48

0.22

0.72

3,358.66

2,517.76

0.72
0.63

0.05
0.87

1.13
0.22

0.20
0.72

3.2 The net book value of investments held under the three categories, viz. Held to Maturity (HTM), Held for Trading (HFT) and Available
for Sale (AFS) are as under:
Category
`

Held to Maturity
Held for Trading
Available for Sale
Total

As at March 31, 2013

in crore
2,360.61
482.53
515.52
3,358.66

%
70.28
14.37
15.35
100.00

As at March 31, 2012

in crore
2,084.45
79.18
354.13
2,517.76

%
82.79
3.14
14.07
100.00

3.3 Repo Transactions

Financial Year 201213
(` in crore)
Minimum
outstanding
during the year

Maximum
outstanding
during the year

Daily Average
outstanding
during the year

Balance as at
March 31, 2013

Securities Sold under Repos *

315.00

38.97

304.50

(i) Government securities

315.00

38.97

304.50

(ii) Corporate debt securities

Securities purchased under Reverse Repos *

(i) Government securities

(ii) Corporate debt securities

* consist of RBI LAF disclosed at face value.

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DCB BANK
Financial Year 201112
(` in crore)

Securities Sold under Repos *

(i) Government securities
(ii) Corporate debt securities
Securities purchased under Reverse Repos *
(i) Government securities
(ii) Corporate debt securities

Minimum
outstanding
during the year

Maximum
outstanding
during the year
446.25
446.25

Daily Average
outstanding
during the year
94.67
94.67

Balance as at
March 31, 2012

* consist of RBI LAF disclosed at face value.

3.4 Non-SLR Investments Portfolio Issuer Composition of NonSLR Investments

Balances as at March 31, 2013
Sr.
No.

Issuer

1.
2.
3.
4.
5.
6.
7.

PSUs
FIs
Banks
Private Corporates
Subsidiaries/ Joint Ventures
Others***
Provision held towards Depreciation
Total

Amount

370.24
395.85
0.41

159.18
(0.21)
925.47

Extent of
Private
Placement*

3.00
0.41

3.41

(` in crore)

Extent of below
Investment
grade securities

Extent of
Unrated
Securities**

0.21

0.21

Extent of Extent of Below

Private
Investment
Placement* grade securities

27.98

0.41

28.39

Extent of
Unrated
Securities**

0.21

0.21

Extent of
Unlisted
Securities*

0.41

0.41

*excludes deposits with NABARD, SIDBI, NHB and pass through certicates
** excludes deposits with NABARD, SIDBI, NHB and equity shares
***includes investments in pass through certicates

Balances as at March 31, 2012

Sr.
No.

Issuer

1.
2.
3.
4.
5.
6.
7.

PSUs
FIs
Banks
Private Corporates
Subsidiaries/ Joint Ventures
Others
Provision held towards Depreciation
Total

(` in crore)
Amount

418.51
77.20
0.41

(0.21)
495.91

Extent of
Unlisted
Securities*

0.41

0.41

* excludes deposits with NABARD, SIDBI and NHB

** excludes deposits with NABARD, SIDBI, NHB and equity shares

3.5 NonPerforming NonSLR Investments

Particulars
Opening Balance
Additions during the year
Reductions during the year
Closing Balance
Total provisions held

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(` in crore)
March 31, 2013
NIL
NIL
NIL
NIL
NIL

March 31, 2012

NIL
NIL
NIL
NIL
NIL

DCB BANK
3.6 Sale and transfers to / from HTM Category
Other than onetime transfer of securities to / from HTM category permitted by the RBI at the beginning of the accounting year and sales to the
RBI under preannounced OMO auctions, the Bank had not carried out any sales and transfers of securities to / from HTM category during the
nancial year 201213.
4 DERIVATIVES
4.1 Forward Rate Agreements / Interest Rate Swaps
Sr.
No.
i.
ii.
iii.
iv.
v.

Particulars
The notional principal of swap agreements
Losses which would be incurred if counterparties failed to fulll their obligations
under the agreements
Collateral required by the bank upon entering into swaps
Concentration of credit risk arising from the swaps (with Banks)
The fair value of the swap book [(Payable)/Receivable]

March 31,
2013
NIL

(` in crore)
March 31,
2012
NIL

NIL
NIL
NIL
NIL

NIL
NIL
NIL
NIL

4.2 Exchange Traded Interest Rate Derivatives

(` in crore)
Sr.
No.
i.
ii.
iii.
iv.

Particulars
Notional principal amount of exchange traded interest rate derivatives undertaken
during the year (instrumentwise)
Notional principal amount of exchange traded interest rate derivatives outstanding
(instrumentwise)
Notional principal amount of exchange traded interest rate derivatives outstanding and
not highly effective (instrumentwise)
Marktomarket value of exchange traded interest rate derivatives outstanding and not
highly effective (instrumentwise)

March 31,
2013

March 31,
2012

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

4.3 Disclosures on risk exposure in derivatives:

a) Qualitative Disclosures
Management of Risk in Derivatives Trading
The Banks market risk unit plays a key role in sanctioning of the limits and laying down of the risk assessment and monitoring methods. The
policies of the Bank include setting limits upon the notional principle value of product specic gaps, maximum tenor, overall outstanding and
the settingup of counter partywise, tenorwise limits.
All limits are monitored on a daily basis by the Banks Treasury and Settlements Department. Exposure reports are submitted to the Treasurer
as well as the HeadMarket Risk and any limit excesses are brought to the notice of the management immediately for further action.
Policies for Hedging Risk
All transactions undertaken by the Bank for trading purposes are classied under the Trading Book. All other transactions are classied as a
part of the Banking Book. The Banking Book includes transactions concluded for the purpose of providing structures to customers on a back
to back basis. It also consists of transactions in the nature of hedges based on identication of supporting trades, with appropriate linkages
done for matching amounts and tenor within the approved tolerance limits.
The accounting for all derivative trades is done for the notional amount on the trade date. The valuation of all outstanding trades is done
category wise. The valuation for outstanding trades under the Trading portfolio is done on a daily basis and the net MTM is accounted in the
Prot and Loss Account. The valuation for outstanding trades under the hedged portfolio is done on a monthly basis and the net MTM if
any is accounted in the Prot and Loss Account on monthly basis. Valuation of the outstanding hedged Forex Options is done on a monthly
basis and the net MTM is zero as all customer trades are hedged on identical basis with counter party banks.
Coupon payments on IRS are settled on a net basis for individual trades on settlement date. Interest income is recognized on settlement date.
The MTM position on all outstanding trades of individual corporate customers is reported on a monthly basis to Credit Risk department for
exposure monitoring.
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DCB BANK
b) Quantitative Disclosures
(` in crore)
Sr. Particulars
No.
1.

2.

3.
4.

5.

Currency
Derivatives
March 31, 2013

Interest Rate
Derivatives
March 31, 2013

Currency
Derivatives1
March 31, 2012

Interest Rate
Derivatives
March 31, 2012

NIL
NIL

NIL
NIL

350.87
0.00

NIL
NIL

NIL
NIL
NIL

NIL
NIL
NIL

2.36
2.36
9.38

NIL
NIL
NIL

NIL
NIL

NIL
NIL

Note 4

NIL
NIL

NIL
NIL

NIL
NIL

NIL
NIL

NIL
NIL

NIL
NIL

NIL
NIL

NIL
NIL

NIL
NIL

Derivatives (notional Principal Amount)

(a) For hedging
(b) For trading
Marked to Market position2
(a) Asset (+)
(b) Liability ()
Credit Exposure3
Likely impact of one percentage change in
Interest Rate (100*PV01)
(a) On hedging derivatives
(b) On trading derivatives
Maximum and Minimum of 100*PV01 observed
during the year4,5
(a) On hedging
Maximum
Minimum
(b) On trading
Maximum
Minimum

Note:
1
Currency derivative includes currency options and cross currency swaps.
2
The above does not include MTM on transaction done to hedge interest bearing asset or liability as these are not marked to market but accounted on accrual basis.
3
Credit exposure is calculated as per the Current Exposure method.
4
Since the portfolio of currency derivatives is a completely hedged book (including transaction done to hedge interest bearing asset or liability), the Bank has not
computed the PV01 for these derivatives.
5
The Bank has computed maximum and minimum of PV01 for the year based on balances at the end of every month.
6
Foreign exchange forward contracts have not been included in the above disclosure.
7
The amount of notional principal shown above is converted as per the closing rate of FEDAI for outstanding foreign currency items.

5 ASSET QUALITY
5.1 Non-Performing Assets (NPAs)
(` in crore)
Particulars
(i) Net NPAs to Net Advances (%)
(ii) Movement of NPAs (Gross)
(a) Opening balance
(b) Additions during the year
(c) Reductions during the year
(d) Closing balance
(iii) Movement of Net NPAs
(a) Opening balance
(b) Additions during the year1,2
(c) Reductions during the year3
(d) Closing balance
(iv) Movement of provisions for NPAs (excluding provision on Standard Assets)
(a) Opening balance
(b) Provisions made during the year4
(c) Writeoff/ writeback of excess provisions
(d) Closing balance

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A NNUAL R EPORT 2012-13 Development Credit Bank Limited

F-60

March 31, 2013

0.75%

March 31, 2012

0.57%

241.80
75.29
102.11
214.98

263.57
68.17
89.94
241.80

30.24
36.11
17.22
49.13

41.23
15.81
26.80
30.24

206.40
37.95
84.89
159.46

218.63
50.86
63.09
206.40

DCB BANK
1. Includes interest capitalisation of ` 1.23 crore (Previous year: ` 1.50 crore).
2. Includes addition to NPAs net off provisions on such NPAs and additional provision on existing NPAs.
3. Includes interest capitalisation of ` NIL (Previous year: ` 0.05 crore).
4. Includes oating provision of ` 1.08 crore (Previous year: NIL).

5.2 Movement of Gross NPAs

(` in crore)
Particulars
Opening balance of Gross NPAs
Additions during the year*
Subtotal (A)
Less:
i. Upgradations
ii. Recoveries (excluding recoveries made from upgraded accounts)
iii. Writeoffs
Subtotal (B)
Closing balance of Gross NPAs (AB)

March 31, 2013

241.80
75.29
317.09

March 31, 2012

263.57
68.17
331.74

8.55
27.44
66.12
102.11
214.98

19.86
33.27
36.81
89.94
241.80

*including fresh NPAs during the year.

5.3 Concentration of NPAs

(` in crore)
Particulars
Total Exposure to top four NPA accounts *

March 31, 2013

23.58

March 31, 2012

18.55

* NPAs are taken on net basis.

Exposure includes funded and nonfunded exposures identied as NPA.

5.4 Sectorwise NPAs

Sr.
No.

Sector

1
2
3
4

Agriculture & allied activities

Industry (Micro & small, Medium and Large)
Services
Personal Loans

Percentage of NPAs to
Total Advances in that Sector
March 31, 2013
March 31, 2012
2.10%
0.00%
0.91%
1.79%
1.44%
2.19%
0.00%
0.00%

NPAs are taken net of provisions.

Total Advances are net advances in the particular sector.
Classication into sectors as above has been done based on the Banks internal norms.

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DCB BANK
5.5 RESTRUCTURED ACCOUNTS
Details of restructured accounts as of March 31, 2013
(` in crore)
Type of Restructuring 

Sr.
No.

Asset Classication 

Under CDR Mechanism

Standard

Under SME Debt Restructuring Mechanism

Sub- Doubtful Loss

Standard

Total

Standard

SubDoubtful Loss
Standard

Others

Total

Standard

Total

SubDoubtful Loss
Standard

Total

Standard

SubDoubtful Loss
Standard

Total

Details 
1

Restructured Accounts as on
April 01, 2012

No. of borrowers

13

34

53

361

461

14

34

54

361

463

Amount outstanding

0.43

20.02

20.45

0.33

4.56

9.21

11.05

25.15

0.76

4.56

29.23

11.05

45.60

Provision thereon

0.10

17.30

17.40

0.01

2.40

8.32

11.05

21.78

0.11

2.40

25.62

11.05

39.18

Fresh restructuring during the FY No. of borrowers

32.15

32.15

32.15

32.15
1.26

Amount outstanding

Upgradations to restructured
standard category during the FY

Provision thereon

1.26

1.26

1.26

No. of borrowers

(2)

(1)

(2)

(1)

Amount outstanding

0.35

(0.31)

(0.04)

0.35

(0.31)

(0.04)

0.08

0.04

0.08

0.04

Provision thereon
4

(0.12)

(0.12)

Restructured standard advances No. of borrowers

which cease to attract higher
provisioning and / or additional
Amount outstanding
risk weight at the end of the FY
and hence need not be shown as
restructured standard advances at Provision thereon
the beginning of the next FY

Downgradations of restructured No. of borrowers

accounts during the FY
Amount outstanding

(1)

(19)

18

(1)

(19)

18

(5.01)

1.90

1.20

1.91

(5.01)

1.90

1.20

1.91

Provision thereon

(0.99)

(0.68)

(0.24)

1.91

(0.99)

(0.68)

(0.24)

1.91

82

86

82

86
2.48

Write-offs of restructured accounts during the FY

No. of borrowers
Amount outstanding

0.03

2.45

2.48

0.03

2.45

Restructured Accounts as on
March 31, 2013*

No. of borrowers

12

43

247

303

13

44

247

305

Amount outstanding

0.48

21.12

21.60

27.37

5.01

8.45

9.09

49.92

27.85

5.01

29.57

9.09

71.52

Provision thereon

0.10

21.12

21.22

0.38

0.99

8.14

9.09

18.60

0.48

0.99

29.26

9.09

39.82

*excluding accounts, where full amount has been recovered.

The above disclosure is effective from FY 2012-13. Hence the comparative data for previous year has not been given.

5.6 Details of nancial assets (including written off accounts) sold to Securitization / Reconstruction Company for Asset Reconstruction
(` in crore)
Particulars
(i)
(ii)
(iii)
(iv)

No. of accounts
Aggregate value (net of provisions) of accounts sold to SC/RC
Aggregate consideration
Additional consideration realized in respect of accounts transferred
in earlier years
(v) Aggregate gain/loss over net book value
5.7 a)

March 31, 2013

March 31, 2012

NIL
NIL
NIL

NIL
NIL
NIL

NIL
NIL

NIL
NIL

Details of nonperforming nancial assets purchased

(` in crore)

Particulars

March 31, 2013

March 31, 2012

1.

(a) No. of accounts purchased during the year

(b) Aggregate outstanding

NIL
NIL

NIL
NIL

2.

(a) Of these, number of accounts restructured during the year

(b) Aggregate outstanding

NIL
NIL

NIL
NIL

b) Details of nonperforming nancial assets sold

(` in crore)
Particulars
1.
2.
3.

I 56 I

No. of accounts sold during the year

Aggregate outstanding
Aggregate consideration received

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March 31, 2013

March 31, 2012

NIL
NIL
NIL

NIL
NIL
NIL

DCB BANK
5.8 Provisions on Standard Assets
(` in crore)
Particulars
Provision on Standard Assets
6

Interest Income as a percentage to Working Funds (%)

NonInterest Income as a percentage to Working Funds (%)1
Operating Prot as a percentage to Working Funds (%)1
Return on Assets (%)2
Business per employee (` in crore)3, 4
Prot per employee (` in crore)3

2.
3.
4.

March 31, 2012

27.17

25.25

March 31, 2013

March 31, 2012

9.49
1.21
1.31
1.06
6.74
0.05

8.86
1.24
1.04
0.68
5.14
0.02

BUSINESS RATIOS
Particulars

1.

March 31, 2013

Working funds have been considered as average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section
27 of the Banking Regulation Act, 1949 during the 12 months of the nancial year.
Assets have been considered as average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of
the Banking Regulation Act, 1949.
For the purpose of this ratio, employees have been considered as the average of the total employees at the end of each month of the year.
For the purpose of this ratio, business per employee has been recorded as deposits plus advances (inter bank deposits have been excluded).

OTHER FIXED ASSETS (including furniture and xtures)

Other xed assets include amount capitalized on software having useful life of three to ve years. Details regarding the same are tabulated below:
(` in crore)
Particulars
Cost
As at March 31 of the previous year
Additions during the year
Deductions during the year
Total (a)
Depreciation
As at March 31 of the previous year
Charge for the year
On deductions during the year
Total (b)
Net value as at March 31 of the current year (ab)

March 31, 2013

March 31, 2012

27.52
2.84

30.36

24.82
2.70

27.52

21.78
3.21

24.99
5.37

17.88
3.90

21.78
5.74

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DCB BANK
8 ASSET LIABILITY MANAGEMENT
8.1 Maturity pattern of certain items of assets and liabilities as of March 31, 2013
(` in crore)
Maturity Buckets
Day 1
2 to 7 days
8 to 14 days
15 to 28 days
29 days to 3 months
Over 3 months & upto 6 months
Over 6 months & upto 1 year
Over 1 year & upto 3 years
Over 3 year & upto 5 years
Over 5 years
Total

Loans and
Advances

Investments

Deposits

Borrowings

Foreign Currency
Assets@

Foreign Currency
Liabilities

74.19
84.73
75.74
150.91
365.78
233.85
696.45
2,640.41
585.33
1,678.70
6,586.09

5.40
60.79
6.90
603.91
212.07
57.12
516.97
552.40
1,343.10
3,358.66

208.81
283.79
336.19
388.80
1,627.39
1,124.66
1,493.22
2,709.57
176.21
15.20
8,363.84

24.88
339.98
38.00
27.14
50.00
320.09
268.86
206.67
250.00

1,525.62

36.44
120.69
0.09
0.83
26.67
1.57
0.08
3.85

5.29
195.51

15.56
0.67
38.92
27.32
1.74
1.45
9.35
14.81

109.82

@ excludes foreign currency bills discounted as they are booked in Indian Rupees.

Maturity pattern of certain items of assets and liabilities as of March 31, 2012
(` in crore)
Maturity Buckets
Day 1
2 to 7 days
8 to 14 days
15 to 28 days
29 days to 3 months
Over 3 months & upto 6 months
Over 6 months & upto 1 year
Over 1 year & upto 3 years
Over 3 year & upto 5 years
Over 5 years
Total

Loans and
Advances

Investments

Deposits

Borrowings

Foreign Currency
Assets@

Foreign Currency
Liabilities

78.75
91.70
97.46
117.77
367.89
240.84
314.37
2,405.82
401.45
1,168.37
5,284.42

64.92

207.03
123.04
78.36
202.05
798.26
1,044.10
2,517.76

236.68
161.83
195.78
193.34
851.76
712.28
1,008.34
2,890.86
66.82
17.87
6,335.56

1.54
149.94
50.88
7.63
60.00
260.65
209.71
318.10
65.00
0.00
1,123.45

19.42
0.08
0.09
2.07

1.62

4.96
28.24

2.01
0.81
51.68
8.08
1.11
72.48
1.87
6.48

144.52

@ excludes foreign currency bills discounted as they are booked in Indian Rupees.

8.2 Concentration of Deposits

(` in crore)
Particulars
Total deposits of twenty largest depositors 1
Percentage of deposits of twenty largest depositors to total deposits of the Bank

March 31, 2013

1,531.42
18.31%

March 31, 2012

986.59
15.57%

Note 1: Excludes holders of Certicates of Deposits.

8.3 Concentration of Advances

(` in crore)
Particulars
Total advances to twenty largest borrowers
Percentage of Advances to twenty largest borrowers to total advances of the bank

March 31, 2013

1,227.81
11.88%

March 31, 2012

1,189.19
14.15%

Note: Advances reported above include both funded and nonfunded loan exposure with limits or outstanding whichever is higher, for other than term loans and NPAs.
In case of term loans and NPAs, the outstanding amount has been considered for this purpose. The Advances gure above also includes noninter bank credit exposure
on derivatives including forward exchange contracts.

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DCB BANK
8.4 Concentration of Exposures
(` in crore)
Particulars
Total Exposures to twenty largest borrowers / customers
Percentage of Exposures to twenty largest borrowers / Customers to
Total Exposures of the bank on borrowers / Customers

March 31, 2013

1,282.24

March 31, 2012

1,189.19

11.78%

14.02%

Note: Exposures reported above include both funded and nonfunded exposures [including advances and investments (other than SLR Investments and deposits placed
with NABARD, SIDBI & NHB)] with limits or outstanding whichever is higher, for other than term loans and NPAs. In case of term loan and NPAs, the outstanding
amount has been considered for this purpose. The exposure gure above also includes noninter bank credit exposure on derivatives.

8.5 Overseas Assets, NPAs and Revenue

(` in crore)
Particulars
Total Assets
Total NPAs
Total Revenue for the year ended

March 31, 2013

NIL
NIL
NIL

March 31, 2012

NIL
NIL
NIL

8.6 OffBalance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms) as on March 31, 2013
Name of the SPV sponsored
Domestic

Overseas

NIL

NIL

9 LENDING TO SENSITIVE SECTOR

9.1 Exposure to Real Estate Sector
(` in crore)
Category
a) Direct Exposure
(i) Residential Mortgages(*)

March 31, 2013

March 31, 2012

650.94

598.94

445.65

282.03

8.04

12.27

26.27

13.42

1,130.90

906.66

Lending fully secured by mortgages on residential property that is or

will be occupied by the borrower or that is rented:
(*) Includes Individual housing loans eligible for inclusion in priority
(*) sector advances ` 132.70 crore (previous year: ` 104.18 crore)
(ii) Commercial Real Estate
Lending secured by mortgages on commercial real estates (ofce buildings,
retail space, multipurpose commercial premises, multifamily residential
buildings, multitenanted commercial premises, industrial or warehouse
space, hotels, land acquisition, development and construction, etc.)
(iii) Investments in Mortgage Backed Securities (MBS) and other securitized
exposures
(a) Residential
(b) Commercial Real Estate
b) Indirect Exposure
Fund based and nonfund based exposures on National Housing Bank (NHB)
and Housing Finance Companies (HFCs).
Total Exposure to Real Estate Sector

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9.2 Exposure to Capital Market Sector
(` in crore)
Particulars

March 31, 2013

March 31 ,2012

Direct investment in equity shares, convertible bonds, convertible debentures

and units of equityoriented mutual funds the corpus of which is not exclusively
invested in corporate debt;

0.41

0.41

Advances against shares/bonds/ debentures or other securities or on clean basis

to individuals for investment in shares (including IPOs/ESOPs), convertible
bonds, convertible debentures, and units of equityoriented mutual funds;

0.43

0.42

0.01

0.01

1.50

0.00

83.62

46.89

vi. Loans sanctioned to corporates against the security of shares / bonds/

debentures or other securities or on clean basis for meeting promoters
contribution to the equity of new companies in anticipation of raising resources;

vii. Bridge loans to companies against expected equity ows/issues;

viii. Underwriting commitments taken up by the banks in respect of primary issue

of shares or convertible bonds or convertible debentures or units of equity
oriented mutual funds;

ix. Financing to stockbrokers for margin trading;

i.

ii.

iii. 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;
iv.

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/
convertible bonds/convertible debentures/units of equity oriented mutual
funds does not fully cover the advances;

v.

Secured and unsecured advances to stockbrokers and guarantees issued on

behalf of stockbrokers and market makers;(see * below)

x.

All exposures to Venture Capital Funds (both registered and unregistered) will
be deemed to be on par with equity and hence will be reckoned for compliance
with the capital market exposure ceilings (both direct and indirect)

Total Exposure to Capital Market Sector

85.97

47.73

* Includes Advances to Stock Brokers ` 1.37 crore (Previous year: ` 0.39 crore) and Financial Guarantees issued on their behalf to Stock Exchanges
` 82.25 crore (Previous year: ` 46.50 crore).

9.3 Risk categorywise country exposure

(` in crore)
Risk Category

Exposure (net) as at
March 31, 2013

Provision held
as at March 31, 2013

Exposure (net) as at
March 31, 2012

Provision held
as at March 31, 2012

Insignicant
Low
Moderate
High
Very High
Restricted
Offcredit

143.58
51.10
39.30
9.11

1.32

50.83
10.38
5.93
0.37

1.16

Total

244.41

68.67

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9.4 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank
As per regulatory guidelines, the Bank should restrict its exposure to 15% of its capital funds to any Single Borrower, dened as Single Borrower
Limit and 40% as Group Borrower Limit. Additionally, the Bank can lend 5% to infrastructure projects and a further 5% with the specic approval
of its Board.
During the years ended March 31, 2013 and March 31, 2012, the Bank had not exceeded the prudential exposure limits as laid down by the RBI
guidelines for the Single Borrower Limit (SBL).
During the years ended March 31, 2013 and March 31, 2012, the Bank had not exceeded the prudential exposure limits as laid down by the RBI
guidelines for the Group Borrower Limit (GBL).
9.5 Unsecured Advances
Details of advances included in Schedule 9 where intangibles like rights, licenses, authorizations, etc. are charged to Bank as collateral:
(` in crore)
Particulars

March 31, 2013

March 31, 2012

Total amount of advances against intangible collateral

NIL

NIL

Estimated value of intangible collateral

NIL

NIL

As per directions from RBI, these advances are treated as unsecured advances in Schedule 9.

10

COMPLIANCE WITH ACCOUNTING STANDARDS, READ WITH RBI GUIDELINES

10.1 Staff Retirement Benets (Accounting Standard 15 Revised)

The contribution to employees Provident Fund amounted to ` 4.28 crore for the year ended March 31, 2013 (Previous year ` 4.22 crore).
The Bank has a gratuity trust approved by Income Tax Department namely Development Credit Bank Ltd. Staff Gratuity Fund. Every employee
who has completed 5 years or more of service gets gratuity on separation at half months last drawn salary for each completed year of service,
subject to a cap of ` 10.00 lakh for employees who joined after April 1, 2006 and without any such limit for other employees.

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Reconciliation of opening and closing balance of the present value of the dened benet obligation for gratuity benets is given below:
(` in crore)
Particulars

March 31, 2013

March 31, 2012

7.37
8.52
(1.15)

6.53
8.35
(1.82)

Obligations at the beginning of the year

Interest Cost
Current Service Cost
Past Service Cost
Benets paid
Actuarial (gain) loss on Obligation
Present value of obligation at the end of the year

6.53
0.49
1.45
0.00
(0.79)
(0.31)
7.37

5.88
0.49
1.32
0.00
(0.43)
(0.73)
6.53

Fair value of plan assets at the beginning of the year

Expected Return on plan assets
Contributions
Benets paid
Actuarial gain (Loss) on plan assets
Fair value of plan assets at the end of the year

8.35
0.67

(0.79)
0.29
8.52

8.01
0.65

(0.43)
0.12
8.35

Cost for the year

Current service cost
Interest cost
Expected return on plan assets
Net Actuarial (gain) loss recognized in the year
Past service cost
Expenses recognized in the Prot and Loss Account
Actual return on plan assets

1.45
0.49
(0.67)
(0.60)
0.00
0.67
0.96

1.32
0.49
(0.65)
(0.85)
0.00
0.31
0.77

Experience Adjustment
Experience Adjustment on obligation
Experience Adjustment on plan assets

(0.43)
0.29

(0.62)
0.12

8.03% p.a.
8.00% p.a.
Indian Assured Lives
Mortality (200608)
Ultimate
5.00% p.a.

8.63% p.a.
8.00% p.a.
Indian Assured Lives
Mortality (199496)
Ultimate
5.00% p.a.

Balance Sheet Details of provision for Gratuity

Dened benet obligation
Fair value of plan Assets
Included in Schedule 11 Other Assets
Less: Unrecognized past service cost

Assumptions
Discount rate
Expected return on plan assets
Mortality

Future salary increases

Experience adjustment

(` in crore)
Particulars
Plan assets
Dened benet obligation
Surplus / (Decit)
Experience adjustment gain/
(loss) on plan assets
Experience adjustment (gain) /
loss on plan liabilities

I 62 I

March 31, 2013

8.52
7.37
1.15

March 31, 2012

8.35
6.53
1.82

March 31, 2011

8.01
5.88
2.13

March 31, 2010

8.00
5.35
2.65

March 31, 2009

6.04
5.65
0.39

0.29

0.12

(0.24)

2.26

(2.12)

(0.43)

(0.62)

(0.72)

(0.81)

(0.98)

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DCB BANK
All the plan assets are invested by the gratuity trust namely Development Credit Bank Ltd. Staff Gratuity Fund in Government securities (CY
about 35%, PY about 34%), high rated corporate bonds (CY about 55%, PY about 58%), Money Market Instruments (CY about 1%, PY about
0%) and units of mutual funds/ insurance companies (CY about 9%, PY about 8%) set up as dedicated funds for management of gratuity funds.
The estimates of future salary increases, considered in actuarial valuation, take account of ination, seniority, promotion and other relevant factors,
such as supply and demand in the employment market.
Estimated rate of return on plan assets is based on our expectation of the average long-term rate of return expected on investments of the Fund
during the estimated term of the obligations.
With respect to dened benet plans, the Bank is yet to determine the contributions expected to be paid to the plans during the annual period
beginning April 1, 2013.
10.2 Earnings Per Share (EPS)
The Bank reports basic and diluted earnings per equity share in accordance with AS20, Earnings per Share. The dilutive impact is due to stock
options granted to employees by the Bank.
The computation of earnings per share is given below:
Particulars

March 31, 2013

March 31, 2012

Basic
Net Prot (` in crore)
Weighted Average no. of equity shares outstanding
Basic Earnings per share (`)

102.06
243,329,085
4.19

55.08
201,867,723
2.73

Diluted
Net Prot (` in crore)
Weighted average no. of equity shares outstanding
Diluted Earnings per share (`)
Nominal value per share (`)

102.06
244,859,991
4.17
10.00

55.08
202,934,702
2.71
10.00

10.3 Employees Stock Options

The Shareholders of the Bank had approved an ESOP plan Phase I in November 2005, enabling the Board and /or the Nomination Committee
to grant such number of equity shares and/or equity linked instruments including options of the Bank not exceeding 4% of the Issued Capital or
60,00,000 Equity Shares of the Bank. The Shareholders, at the Annual General Meeting held in September 2006, had approved an additional 3% of
the Issued Capital, aggregating the total Equity Share Capital reserved for all ESOPs to 7% of the Issued Capital from time to time. As the shares
of the Bank were subsequently listed, conrmation of Shareholders was obtained at the ExtraOrdinary General Meeting held on 15th December,
2006, in line with the guidelines of the Securities & Exchange Board of India. Pursuant thereto, during the year the Nomination Committee of the
Bank granted the following options:
Date

Price

Sub Plan 1

Sub Plan 2

June 01, 2012

38.40

750,000

983,500

July 31, 2012

40.80

405,000

Under the stock option scheme options vest in a graded manner over a 5 year period from the date of grant, the details of which are set out below:
End of the Year
2nd
3rd
4th
5th

For Sub Plan 1

Till August 16, 2010
From August 17, 2010

30%
40%
30%
30%
20%
30%
20%

For Sub Plan 2

30%
30%
20%
20%

Mr. Murali M. Natrajan, MD & CEO has been granted 750,000 options duly approved by the Board of Directors which shall vest in accordance with
vesting schedule of Sub Plan 1 (from August 17, 2010) as mentioned above.

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Method used for accounting for ESOP
The Bank has applied the intrinsic value method to account for the compensation cost of ESOP to the employees of the Bank. Intrinsic value is
the amount by which the quoted market price of the underlying share exceeds the exercise price of the options.
Activity in options outstanding under Employees Stock Option Plan
Particulars

Options outstanding at the beginning of the year

Granted during the year
Exercised during the year
Forfeited/Lapsed during the year
Options outstanding at the end of the year
Options exercisable

Number of
options

March 31, 2013

Weighted Average
Exercise Price

8,953,420
2,138,500
146,140
252,520
10,693,260
4,315,540

46.70
38.85
25.19
50.23
45.34
50.44

March 31, 2012

Number of
Weighted Average
options
Exercise Price
9,836,795
NIL
202,860
680,515
8,953,420
2,560,630

46.96
0.00
33.91
54.22
46.70
50.69

Summary of stock options outstanding as on March 31, 2013 is given below:

Range of exercise price (Rupees per share)

17.00 ` 24.00
25.00 ` 109.00
` 110.00 ` 200.00
`
`

Number of shares
arising out of options
(Number of shares)
2,030,745
8,300,975
361,540

Weighted average
exercise price (`)
23.52
47.61
115.83

Weighted average
remaining contractual life
(Number of years)
3.82
5.89
3.42

There were 146,140 stock options exercised during the period ended March 31, 2013.
Summary of stock options outstanding as on March 31, 2012 is given below:
Range of exercise price (Rupees per share)

17.00 ` 24.00
25.00 ` 109.00
` 110.00 ` 200.00
`
`

Number of shares
arising out of options
(Number of shares)

Weighted average
exercise price (`)

Weighted average
remaining contractual life
(Number of years)

2,166,310
6,415,630
371,480

23.51
50.53
115.83

2.76
4.23
2.43

There were 202,860 stock options exercised during the period ended March 31, 2012.
Fair value Methodology
The fair value of options used to compute proforma net income and earnings per equity share have been estimated using the binomial option-pricing
model. The Bank estimated the volatility based on the historical share prices. The various assumptions considered in the pricing model for ESOPs
granted during the year ended March 31, 2013 are:
Particular
Dividend Yield
Expected Volatility
Risk Free Interest Rate
Expected life of options
The expected volatility was determined based on historical volatility data; historical volatility includes data since listing.
There was no option granted during the year ended March 31, 2012.

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F-70

March 31, 2013

60%
7.88%
45 years

DCB BANK
Impact of Fair Value Method on Net Prot and EPS
Had the compensation cost for the Banks stock option plans outstanding been determined based on the fair value approach, the Banks net prot
and earnings per share would have been as per the proforma amounts indicated below:
(` in crore)
Particular

March 31, 2013

March 31, 2012

102.06
0.22
102.28

55.08
0.20
55.28

0.38
101.90

0.23
55.05

March 31, 2013

4.19
4.19
4.17
4.16

March 31, 2012

2.73
2.73
2.71
2.71

Net Prot (as reported)

Add: Stock based compensation expense accounted
Less: Stock based compensation expense determined under fair
value based method (proforma)
Net Prot (proforma)
Particular
Basic earnings per share (as reported)
Basic earnings per share (proforma)
Diluted earnings per share (as reported)
Diluted earnings per share (proforma)
10.4 Segment Reporting
Part A: Business Segments

As per the RBI guidelines on Segment Reporting, the Bank has classied its activity into Treasury Operations, Corporate Banking, Retail Banking
and Other Banking Operations.
Treasury Operations includes all nancial markets activities undertaken on behalf of the Banks customers, proprietary trading, maintenance of
reserve requirements and resource mobilization from other banks and nancial institutions.
Corporate Banking includes lending, deposit taking and other services offered to corporate customers.
Retail Banking includes lending, deposit taking and other services offered to retail customers.
Other Banking Operations includes para banking activities like third party product distribution, merchant banking, etc.
(` in crore)
Business Segments
Particulars

Treasury Operations

Corporate Banking

Retail Banking

Total1

Other Banking
Operations

FY 2012-13

FY 2011-12

FY 2012-13

FY 2011-12

FY 2012-13

FY 2011-12

FY 2012-13

FY 2011-12

FY 2012-13

FY 2011-12

Revenue

470.12

426.42

298.86

240.36

742.95

604.39

9.21

11.10

1,521.14

1,282.27

Results

37.77

19.23

19.87

0.67

41.99

25.48

2.46

9.73

102.09

55.11

126.13

83.82

(0.03)

(0.03)

Unallocated expenses
Operating prot
Income taxes
Extraordinary prot / loss
Net prot

102.06

55.08

11,120.15

8,516.30

158.67

160.55

Other Information
Segment assets

4,174.36

2,945.94

2,614.99

2,319.01

4,330.78

3,251.28

0.02

0.07

Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities

2,497.79

1,493.68

622.90

457.32

7,133.78

5,847.89

11,278.82

8,676.85

10,254.47

7,798.89

1,024.35

877.96

11,278.82

8,676.85

Note 1: Revenue i.e. Total Revenue includes inter segment revenue of ` 488.02 crore in FY 2012-13 (Previous Year ` 464.93 crore). Excluding this, the revenue for the Bank
is ` 1033.12 crore in FY 2012-13 (Previous Year ` 817.34 crore).

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Part B: Geographic Segments
The Bank does not have overseas branches and the operations are entirely domestic. Therefore, no separate reporting is done based
on geographic segments.
10.5 Related Party Transactions
Related Party Transactions in terms of AS18 on Related Party Disclosures are disclosed below:
The details of transactions entered into with the Key Management Personnel of the Bank are as under:
Financial Year 201213
Mr. Murali M. Natrajan
: Managing Director
Managerial Remuneration
: ` 3.12 crore
Financial Year 201112
Mr. Murali M. Natrajan
Managerial Remuneration

:
:

Managing Director
` 2.86 crore

10.6 Deferred Tax

a.

In accordance with AS22 on Accounting for Taxes on Income, the Bank has recognized Deferred Tax Assets on such timing differences
where there is a virtual certainty based on contracts and arrangements in place that such deferred tax assets can be reversed. Deferred Tax
Assets have been recognized on unabsorbed depreciation and restricted to the extent of deferred tax liability arising on account of timing
difference arising between book depreciation and tax depreciation.

b.

The composition of Deferred Tax Liabilities (DTL) and Deferred Tax Assets (DTA) is as under:
(` in crore)

Sr.
No.

Particulars

A.
(i)
(ii)
(iii)
B.
(i)
C.

I 66 I

As at
March 31, 2013

As at
March 31, 2012

DTA :
Provision for Loan Losses/Non Banking Assets
Unabsorbed Depreciation
Provision for Other Assets

11.88

10.41

Total DTA

11.88

10.41

DTL :
Depreciation

11.88

10.41

Total DTL

11.88

10.41

NET DTA

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10.7 Provisions, Contingent Liabilities and Contingent Assets
Description of Contingent Liabilities
Sr. No. Contingent Liability (*)
1.
Claim against the Bank not
acknowledged as Debts

2.

Liability on account of outstanding

forward exchange and derivative
contracts

3.

Guarantees given on behalf

of constituents, Acceptances,
Endorsements and Others
Other items for which the Bank is
contingently liable

4.

Brief Description
An amount of ` 45.13 crore is outstanding as at March 31, 2013, as claims against the Bank
not acknowledged as Debts, including ` 30.00 crore being in the nature of a contingent
liability on account of proceedings pending with Income Tax authorities. The Bank does
not expect the outcome of these proceedings to have a materially adverse effect on its
nancial results.
The Bank enters into foreign exchange contracts on its own account and for customers
and currency options/swaps on a pure hedge basis. The Bank also enters into Interest rates
swaps on its own account. Forward exchange contracts are commitments to buy or sell
foreign currency at a future date at the contracted rate. Currency swaps are commitments
to exchange cash ows by way of interest/principal in two currencies, based on ruling
spot rates. Interest rate swaps are commitments to exchange xed and oating interest
rate cash ows. A foreign currency option is an agreement between two parties in which
one grants to the other the right to buy or sell a specied amount of currency at a specic
price within a specied time period or at a specied future time.
As a part of its commercial banking activities, the Bank issues Letters of Credit and
Guarantees on behalf of its customers.
These include liability on account of credit enhancement relating to the sale of mortgage
loan portfolio undertaken by the Bank.

*Also refer Schedule 12.

11 Additional Disclosure
11.1 Details of Provisions & Contingencies debited to the Prot and Loss Account
(` in crore)
Particulars

March 31, 2013

March 31, 2012

Depreciation on Investments
Provision/writeoff towards nonperforming assets
Floating Provision
Provision for Standard Assets
Provision for Income Tax (including Wealth Tax)
Sacrice in One Time Settlement
Provision for Other Assets and Contingencies
Provisions for Restructured Advances*

(0.35)
16.42
1.08
1.92
0.03
0.38
4.22
0.37

0.83
24.59

(0.06)
0.03
0.78
(0.30)
2.87

Total

24.07

28.74

* Provision for restructured advances includes NPV provision on standard advances of

0.32 crore (Previous year: ` (0.19) crore).

11.2 Floating Provisions

The Bank has put in place a Board approved Floating Provision policy in accordance with the RBI guidelines. Accordingly the Bank started oating
provision in the nancial year 201213.
Movement in oating provision is set out below:
(` in crore)
Particulars
Opening balance at the beginning of the year
Provision made during the year
Draw down made during the year
Closing balance at the end of the year

March 31, 2013

1.08

1.08

March 31, 2012

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11.3 Provisioning Coverage Ratio
In accordance with RBI circular, the Banks Provision Coverage Ratio at March 31, 2013 is 85.71% (previous year: 91.17 %).
11.4 Customer Complaints+
Particulars
(a)
(b)
(c)
(d)

No. of
No. of
No. of
No. of

As at March 31, 2013

As at March 31, 2012

7
200
197
10

9
207
209
7

As at March 31, 2013

As at March 31, 2012

1
1

complaints pending at the beginning of the year

complaints received during the year
complaints redressed during the year
complaints pending at the end of the year*

* Out of 10 (Previous year: 7) pending complaints, 2 (Previous year: 4) pertain to CDRF (Consumer Disputes Redressal Forum) cases.
+ As compiled by the management and relied upon by the auditors.

11.5 Awards passed by the Banking Ombudsman+

Particulars
(a)
(b)
(c)
(d)

No. of
No. of
No. of
No. of

unimplemented Awards at the beginning of the year

Awards passed by Banking Ombudsman during the year
Awards implemented during the year
unimplemented Awards Pending at the end of the year

+ As compiled by the management and relied upon by the auditors.

11.6 Letters Of Comfort

The Bank has issued letters of comfort to other banks. Outstanding letters of comfort as on March 31, 2013 aggregate to ` 418.28 crore (previous year:
` 189.31 crore). In the Banks assessment, no nancial impact is likely to arise.
11.7 Small and Micro Industries
Under the Micro, Small and Medium Enterprises Development Act 2006, certain disclosures are required to be made relating to Micro, Small and
Medium Enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in
such payments. The above is based on information provided by the Bank which has been relied upon by the auditors.
12 OTHER MATTERS
12.1 Amount of Provisions made for Incometax (including Wealth Tax) during the year
(` in crore)
Particulars
Provision for tax

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March 31, 2013

March 31, 2012

0.03

0.03

DCB BANK
12.2 Disclosure of penalties imposed by RBI
No penalties have been imposed by the RBI on the Bank during the year ended March 31, 2013.
During the year ended March 31, 2012, RBI vide its letter dated April 26, 2011 had directed the Bank to pay a penalty of ` 10 lakh. The penalty
had been imposed in terms of provisions under section 47 A(1)(b) read with sec 46(4)(i) of the Banking Regulations Act, 1949 for contravention
of statutory and regulatory guidelines in few derivative contracts entered into by the Bank during FY 0607 & 0708. The Bank has since paid the
penalty vide pay order dated May 05, 2011.
12.3 Changes in accounting policies
a)

Consequent to migration of treasury software to new integrated solution, the Bank changed the accounting policy to compute prot or loss
on sale of investment without utilizing depreciation. Consequently, prot/(loss) on sale of investments under Schedule14 and provision for
investments under provision & contingencies for the year was lower by ` 0.28 crore. There is no impact on overall prot after tax during the
year.

b)

Consequent to migration of treasury software to new integrated solution, the Bank changed the methodology for calculating premium amount
on HTM security from each transaction level on FIFO basis to overall security level on a weighted average cost basis. This Premium is amortized
over the remaining maturity period of the security on a straightline basis. Consequently, prot after tax for the year was higher by ` 0.19 crore.

12.4 Revaluation of Fixed Assets

The Bank revalued its owned premises as at March 2009 which resulted in a revaluation gain of ` 52.02 crore which was credited to Revaluation
Reserve as at that date. The Bank computes depreciation on such revalued premises over its estimated remaining useful life and accordingly an
amount of ` 1.19 crore has been accounted as depreciation and reduced from the Revaluation Reserve for the year ended March 31, 2013 (Previous
Year: ` 1.19 crore).
12.5 Assets Taken Under Operating Lease
(` in crore)
Particulars
Minimum Lease Rent payable
Payable not later than 1 year
Payable later than 1 year but not later than 5 years
Payable later than 5 years

March 31, 2013

March 31, 2012

12.34
35.75
14.05

8.27
15.36
0.06

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.
12.6 Unamortized Pension and Gratuity Liabilities
Consequent on the reopening of pension option to employees of Public Sector Banks and enhancement in gratuity limits following the amendment
to Payment of Gratuity Act, 1972, the RBI vide its circular DBOD.No.BP.BC.80/21.04.018/201011 dated February 9, 2011 permitted banks to
amortize over a period of ve years beginning with the nancial year ending March 31, 2011 the expenditure incurred by them on reopening of
pension option as well as enhancement in gratuity limits as aforesaid, subject to certain conditions.
The Bank does not have any unamortized Pension and Gratuity Liabilities in its books as on March 31, 2013.
12.7 Remuneration
a)

Qualitative disclosures
Remuneration Committee
The Nomination & Remuneration Committee of the Board consists of Independent Directors with one member from the Risk Management
Committee of the Board.

Development Credit Bank Limited A NNUAL R EPORT 2012-13

F-75

I 69 I

DCB BANK
Objectives of Compensation Policy
The Bank has put in place a Board approved Compensation policy.
An important objective of the Compensation Policy is to provide all relevant internal and external parties with appropriate information and
transparency thereby promoting a thorough understanding of the Banks compensation practices.
The Banks objective is to maintain a Compensation Policy that:

Is able to attract, retain talent and motivate them to perform at high standards.
Facilitates a performance culture in the Bank by balancing a mix of xed pay with variable pay.
Supports the Banks risk management practices and takes into account long-term performance of the Bank.
Is compliant with regulatory requirements and is approved by the Boards Nomination & Remuneration Committee.

The Nomination & Remuneration Committee of the Board works in close coordination with the Risk Management Committee of the Board to
ensure effective alignment of remuneration & risks.
Risk adjustments in remuneration
The methodologies for adjusting remuneration to risk and performance are consistent with the general risk management and corporate governance
framework. Risk adjustments take into account the nature of the risks involved and the time horizons over which they could emerge. The Bank is
adhering to the guidelines mentioned in the Basel Committee on Banking Supervision Report on Range of Methodologies for Risk & Performance
Alignment of Remuneration and Financial Stability Board (FSB) Implementation standards on sound compensation practices.
Performance linked variable compensation
The Variable Compensation offered is linked to the Banks performance and could be even zero during a year of poor performance.
Variable Compensation of all WTD / CEO will not be more than 70% of the Fixed Compensation. Any Variable Compensation above 50% of
the Fixed Compensation is to be deferred over a period of 3 years. The same will vest at 40%, 30% and 30% at the end of 1st, 2nd and 3rd year.
The Bank reserves the right to prevent any deferred variable compensation from vesting in a year of negative performance. The deferred Variable
Compensation shall lapse if the employment is terminated prior to vesting.
The Bank utilizes Performance Payout / Bonus as the form of variable remuneration. The Bank shall give Performance Payouts to promote a
healthy nancial performance by its staff.
b) Quantitative disclosures
(` in crore)
Sr. Particulars
No.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)

Number of meetings held by the Remuneration Committee during the nancial year
Remuneration paid to the members of the Remuneration Committee
Number of employees having received a variable remuneration award during the nancial year
(as per compensation policy)
Number and total amount of signon awards made during the nancial year
Details of guaranteed bonus, if any, paid as joining / sign on bonus
Details of severance pay, in addition to accrued benets, if any
Total amount of outstanding deferred remuneration, split into cash,
shares and sharelinked instruments and other forms
Total amount of deferred remuneration paid out in the nancial year
Breakdown of amount of remuneration awards for the nancial year to show xed and
variable, deferred and nondeferred*
Total amount of outstanding deferred remuneration and retained remuneration exposed
to ex post explicit and / or implicit adjustment
Total amount of reductions during the nancial year due to expost explicit adjustments
Total amount of reductions during the nancial year due to expost implicit adjustment

* excludes ESOP granted during the year and monetary value of perquisites as per Income Tax rules.
The above disclosure is effective from FY 2012-13. Hence the comparative data for previous year has not been given.

I 70 I

A NNUAL R EPORT 2012-13 Development Credit Bank Limited

F-76

As at March 31, 2013

5
0.01
2
NIL
NIL
NIL
NIL
NIL
Fixed 3.51
Variable 0.51
NIL
NIL
NIL

DCB BANK
13

INCOME FROM BANCASSURANCE BUSINESS

(` in crore)
Sr. Nature of Income
No.
1.
2.
3.
4.

March 31, 2013

March 31, 2012

5.84
1.74
2.38

8.41
0.59
2.12

For selling life insurance policies

For selling non life insurance policies
For selling mutual fund products
Others

14

DRAW DOWN FROM RESERVES

The Bank has not undertaken any draw down of reserves during the year ended March 31, 2013. (Previous year: Nil)

15

Net overnight open position outstanding as on March 31, 2013 was ` 11.16 crore (Previous year ` 12.73 crore).

16

Previous years gures have been regrouped / reclassied, wherever considered necessary, in order to make them comparable with gures for the
current year.

17

These are the Notes appended to and forming part of the Financial Statements for the year ended March 31, 2013.

For and on behalf of the Board of Directors

For B S R & Co.
Firm Registration No.: 101248W
Chartered Accountants

Nasser Munjee
Chairman

Murali M. Natrajan
MD & CEO

N Sampath Ganesh
Partner
Membership No.: 042554

Bharat Sampat
EVP & CFO

H.V. Barve
VP & Company Secretary

Place : Mumbai
Date : April 12, 2013

Place : Hyderabad
Date : April 12, 2013

Keki Elavia
Director

Development Credit Bank Limited A NNUAL R EPORT 2012-13

F-77

I 71 I

DCB BANK
S.R. B at l i b o i & C o .
Chartered Accountants

6th Floor, Express Towers

Nariman Point
Mumbai-400 021, India

Tel: +91 22 6192 0000

Fax: +91 22 6192 2000

INDE PE N DE NT AU D ITOR S REPORT

To the Members of Development Credit Bank Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Development Credit Bank Limited (the Bank), which comprise the Balance Sheet as at 31
March 2012, and the Profit and Loss Account and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and
other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and
cash flows of the Bank in accordance with accounting principles generally accepted in India, including the Accounting Standards referred to in sub-section
(3C) of section 211 of the Companies Act, 1956 (the Act) 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, 1949 as applicable. This responsibility includes
the design, 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.
Auditors Responsibility
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 Institute 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 financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected
depend on the auditors 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 Banks preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances. An audit 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the
Banking Regulation Act, 1949 and the Companies Act, 1956 in the manner so required for banking companies, and give a true and fair view in conformity
with the accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31 March 2012;
(b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

32

ANNUAL REPORT 2011-12

F-78

DCB BANK
Report on Other Legal and Regulatory Requirements
As required by section 227 (3) of the Act, section 30 (3) of the Banking Regulation Act, 1949 and the appointment letter dated 27 May 2011 issued by the
Reserve Bank of India, we report that:
(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and
have found them to be satisfactory;
(b) In our opinion, the transactions of the Bank which have come to our notice have been within its powers;
(c) The financial accounting systems of the Bank are centralised and therefore, accounting returns for the purpose of preparing financial statements are
not required to be submitted by the branches; we have visited 10 branches for the purpose of our audit;
(d) 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;
(e) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of account;
(f) In our opinion, the financial statements give the information required by the Form A and B (revised) of the Third Schedule to the Banking Regulation
Act, 1949 read with section 211 of the Act in the manner so required for banking companies;
(g) On the basis of written representations received from the directors as on 31 March 2012, and taken on record by the Board of Directors, none of
the directors is disqualified as on 31 March 2012, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the
Companies Act, 1956.

For S.R. Batliboi & Co.

Chartered Accountants
Firms Registration Number: 301003E

per Surekha Gracias

Partner
Membership Number: 105488
Place of Signature: Mumbai
Date: 13 April 2012

F-79

ANNUAL REPORT 2011-12

33

DCB BANK
B ALA NCE SHEET A S O N M ARCH 3 1 , 2 0 1 2
Schedule

As on 31.03.2012

As on 31.03.2011

(` in 000s)

(` in 000s)

2,406,655

2,001,712

(Grants Outstanding net of deferred cost)

28,244

28,133

CAPITAL & LIABILITIES
Capital
Employee Stock Options

Reserves & Surplus

6,178,766

4,185,054

Deposits

63,355,555

56,101,658

Borrowings

11,234,501

8,607,153

Other Liabilities and Provisions

3,564,752

3,205,013

TOTAL CAPITAL & LIABILITIES

86,768,473

74,128,723

ASSETS
Cash and Balances with Reserve Bank of India

4,075,047

4,045,104

Balances with Banks and Money at Call and Short notice

490,487

825,991

Investments

25,177,568

22,950,448

Advances

52,844,224

42,816,870

Fixed Assets

10

1,846,409

1,275,045

Other Assets

11

2,334,738

2,215,265

TOTAL ASSETS

86,768,473

74,128,723

Contingent Liabilities

32,737,813

32,923,379

4,374,635

4,918,381

12

Bills for Collection

The Schedules referred to above form an integral part of the Balance Sheet.
The Balance Sheet has been prepared in conformity with Form A of the Third Schedule to the Banking Regulation Act, 1949.

As per our report of even date

For S.R. Batliboi & Co.
Nasser Munjee
Murali M. Natrajan
Narayan K. Seshadri
Firm Registration Number: 301003E
Chairman
MD & CEO
Director
Chartered Accountants
per Surekha Gracias
Bharat Sampat
H.V. Barve
Partner
EVP & CFO
VP & Company Secretary
Membership No. : 105488
Place: Mumbai
Date: April 13, 2012

34

ANNUAL REPORT 2011-12

Place: Bengaluru
Date: April 13, 2012

F-80

DCB BANK
P RO FIT & LOSS ACCOU N T F OR THE Y EAR E ND ED ON M A RCH 31 , 2012
Year Ended

Year Ended

Schedule

31.03.2012

31.03.2011

(` in 000s)

(` in 000s)

Interest Earned

13

7,169,691

5,362,624

Other Income

14

1,027,274

1,120,986

8,196,965

6,483,610

I. INCOME

TOTAL INCOME
II. EXPENDITURE
Interest Expended

15

4,892,683

3,471,241

Operating Expenses

16

2,466,063

2,151,805

Provisions and Contingencies

287,449

646,273

TOTAL EXPENDITURE

7,646,195

6,269,319

Net Profit/(Loss) for the Period

550,770

214,291

Profit/(Loss) Brought Forward

(3,645,443)

(3,783,745)

TOTAL PROFIT/(LOSS)

(3,094,673)

(3,569,454)

137,693

53,573

III. PROFIT / (LOSS)

IV. APPROPRIATIONS
Transfer to Statutory Reserve
Transfer to Revaluation Reserve

Transfer to Capital Reserve

861

21,712

Transfer to Investment Reserve

354

704

Balance carried over to Balance Sheet

(3,233,581)

(3,645,443)

TOTAL

(3,094,673)

(3,569,454)

Earning per share

17 (17)

(i) Basic (`)

2.73

1.07

(ii) Diluted (`)

2.71

1.06

Face Value per share (`)

10.00

10.00

Significant Accounting Policies

17

Notes to Accounts

18

The Schedules referred to above form an integral part of the Profit & Loss Account.
The Profit & Loss Account has been prepared in conformity with Form B of the Third Schedule to the Banking Regulation Act, 1949.
As per our report of even date
For S.R. Batliboi & Co.
Nasser Munjee
Murali M. Natrajan
Narayan K. Seshadri
Firm Registration Number: 301003E
Chairman
MD & CEO
Director
Chartered Accountants
per Surekha Gracias
Bharat Sampat
H.V. Barve
Partner
EVP & CFO
VP & Company Secretary
Membership No. : 105488
Place: Mumbai
Date: April 13, 2012

Place: Bengaluru
Date: April 13, 2012

F-81

ANNUAL REPORT 2011-12

35

DCB BANK
CA SH F LOW STATEM EN T F OR THE Y EA R E NDED M ARCH 31 , 2012
(` in 000s)

Year Ended
31.03.2012

Year Ended
31.03.2011

550,770

214,291

245,933
28,699
8,271
(607)
300
(3,000)
119,692
28,269
56,847
37,564
2,038

467,122
30,787
1,541
556
78,243
67,207
131,497
(10,528)
61,362
33,795
8,392

7,253,897
2,887,349
361,886
(2,292,239)
(10,339,549)
(124,645)
7,872

8,228,370
4,032,034
353,120
(2,834,050)
(8,649,069)
(141,666)
(6,916)

Net Cash Flow from Operating activities

A
Cash Flow from Investing activities
Purchase of Fixed assets
Proceeds from sale of Fixed Assets

(1,170,653)

2,066,088

(739,220)
8,036

(105,841)
42,386

Net Cash Flow from Investing activities

B
Cash Flow from Financing activities
Net Proceeds from Issue of Capital
Issue of Subordinated Debt
Repayment of Subordinated Debt
Payment of Unclaimed Dividend/Transfer to Investor Education Protection Fund

(731,184)

(63,455)

1,857,816

(260,000)
(1,540)

6,158

(460,000)
(1,176)

Net Cash Flow from Financing activities

1,596,276

(455,018)

A+B+C

(305,561)

1,547,615

Cash and Cash equivalent at the beginning of the year

Cash and Cash equivalent at the end of the year
Notes to the Cash Flow statement
Cash and Cash equivalent includes the following:
Cash and Balances with Reserve Bank of India
Balances with Banks and Money at Call and Short notice

4,871,095
4,565,534

3,323,480
4,871,095

4,075,047
490,487

4,045,104
825,991

Cash and Cash equivalent at the end of the year

4,565,534

4,871,095

Cash Flow from Operating activities
Net Profit/(Loss) for the year
Adjustments for:
Provisions for Advances
Provisions for Restructured Advances
Provision for Investments
Provision for Standard Assets
Provision for Income Tax (including wealth tax)
Provision for Other Assets
Depreciation on Fixed Assets
Loss/(Profit) on Sale of Fixed Assets
Amortization of Premium on Investment
Amortization of Premium on Acquired Assets
ESOP Compensation
Adjustments for:
Increase/(Decrease) in Deposits
Increase/(Decrease) in Borrowings
Increase/(Decrease) in Other Liabilities & Provisions
(Increase)/Decrease in Investments
(Increase)/Decrease in Advances
(Increase)/Decrease in Other Assets
Refund/(Payment) of direct taxes (Including Tax Deducted at Source)

Net Increase/(Decrease) in Cash & Cash Equivalent

As per our report of even date

For S.R. Batliboi & Co.
Firm Registration Number: 301003E
Chartered Accountants

Nasser Munjee
Chairman

Murali M. Natrajan
MD & CEO

Narayan K. Seshadri
Director

per Surekha Gracias

Bharat Sampat
H.V. Barve
Partner
EVP & CFO
VP & Company Secretary
Membership No. : 105488
Place: Mumbai
Date: April 13, 2012

36

ANNUAL REPORT 2011-12

Place: Bengaluru
Date: April 13, 2012

F-82

DCB BANK
SCHED U LE 1 C A PITA L
As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

5,000,000

5,000,000

Issued, Subscribed and Paid up Capital

24,06,65,457 (Previous year 20,01,71,209)
Equity Shares of ` 10/- each

2,406,655

2,001,712

TOTAL

2,406,655

2,001,712

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

976,829
137,693

923,256
53,573

1,114,522

976,829

II. Capital Reserve

a) Revaluation Reserve

Opening balance

Additions during the year

Deductions during the year

561,528

(11,859)

586,524

(24,996)

549,669

561,528

351,824
861

330,112
21,712

Authorised Capital
50,00,00,000 (Previous year 50,00,00,000)
Equity Shares of ` 10/- each

SCHED U LE 2 RESERVES & SUR P L US

I.

Statutory Reserve
Opening balance
Additions during the year

TOTAL (I)

TOTAL (a)

b)

Other Capital Reserve

Opening balance
Additions during the year
Deductions during the year

TOTAL (b)

352,685

351,824

TOTAL (a + b ) (II)

902,354

913,352

III.

Share Premium
Opening balance
Additions during the year
Deduction during the year

5,907,121
1,454,801

5,901,323
5,798

TOTAL (III)

7,361,922

5,907,121

IV.

Revenue and other Reserves

Investment Reserve
Opening balance
Additions during the year
Deductions during the year

33,195
354

32,491
704

TOTAL (IV)

33,549

33,195

(3,233,581)

(3,645,443)

6,178,766

4,185,054

V. Balance in Profit & Loss Account

TOTAL (I to V)

F-83

ANNUAL REPORT 2011-12

37

DCB BANK
SCHED U LE 3 DE POSITS
As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

185,756
8,206,502

293,210
8,564,864

8,392,258

8,858,074

II. Savings Bank Deposits

11,954,440

10,896,499

TOTAL (II)

11,954,440

10,896,499

III. Term Deposits

(i) From Banks
(ii) From Others

2,207,746
40,801,111

2,601,530
33,745,555

TOTAL (III)

43,008,857

36,347,085

TOTAL (I, II and III)

63,355,555

56,101,658

B I. Deposits of branches in India

II. Deposits of branches outside India

63,355,555

56,101,658

TOTAL

63,355,555

56,101,658

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

7,000,000
2,174,871
750,000

1,800,000
3,750,000
1,340,016
1,010,000

TOTAL (I)

9,924,871

7,900,016

II. Borrowings outside India

1,309,630

707,137

11,234,501

8,607,153

999,405

1,800,000

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

I. Bills Payable
II. Inter Office adjustments (Net)
III. Interest Accrued (Net of TDS recoverable)
IV. Others
(i) Provision for Standard Assets
(ii) Other Liabilities (including provisions)

1,326,933

894,907

1,195,637

680,296

252,480
1,090,432

253,087
1,075,993

3,564,752

3,205,013

A I. Demand Deposits
(i) From Banks
(ii) From Others
TOTAL (I)

SCHED U LE 4 BORRO W IN G S


I. Borrowings in India
(i) Reserve Bank of India
(ii) Other Banks
(iii) Other Institutions and Agencies
(iv) Sub-Ordinated Debts

TOTAL (I & II)

Secured Borrowings included in I & II above

SCHED U LE 5 OTHER L IA BIL ITIES A N D PROVISIO N S

TOTAL

38

ANNUAL REPORT 2011-12

F-84

DCB BANK
SCHED U LE 6 C ASH A N D BA L A N CES W ITH RESERVE B ANK O F IND IA

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

I. Cash in hand
(including foreign currency notes: ` Nil
{Previous Year ` Nil } )

II. Balances with Reserve Bank of India
(i) In Current Accounts
(ii) In Other Accounts

856,762

638,566

3,218,285

3,406,538

TOTAL (II)

3,218,285

3,406,538

TOTAL (I & II)

4,075,047

4,045,104

SCHED U LE 7 B A L A N CES WITH BA N K S AND M ON EY AT C ALL AND SHORT NOTICE

I. In India
i. Balance with Banks
(a) In Current Accounts **
(b) In Other Deposit Accounts

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

317,587
4,655

309,009
23,172

322,242

332,181

ii. Money at Call and Short Notice

(a) With Banks
(b) With Other Institutions

TOTAL

TOTAL (I)

322,242

332,181

II.

Outside India
(i) In Current Accounts
(ii) In Other Deposit Accounts
(iii) Money at Call and Short Notice

134,668
33,577

80,191
413,619

TOTAL (II)

168,245

493,810

TOTAL (I & II)

490,487

825,991

** includes funds in transit

TOTAL

F-85

ANNUAL REPORT 2011-12

39

DCB BANK
SCHED U LE 8 I N VEST MEN TS




I. Investments in India
Net Investments in : (i) Government Securities
(ii) Other Approved Securities
(iii) Shares
(iv) Debentures and Bonds
(v) Subsidiaries and/or Joint Ventures
(vi) Other Investments :
(a) Units of Mutual Funds/CDs
(b) Pass Through Certificates/Security Receipts
(c) Deposits with NABARD RIDF
(d) Deposits with SIDBI MSME (Refinance) Fund
(e) Deposits with NHB Rural Housing Fund

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

20,218,487

2,061
30,000

17,466,113
45,417

30,000

741,952

3,802,493
207,075
175,500

977,263

3,966,180
312,875
152,600

25,177,568

22,950,448

II. Investments in India

i. Gross Value
ii. Provision For Depreciation

25,184,818
(7,250)

22,950,931
(483)

25,177,568

22,950,448

III. Investments outside India

(i) Government Securities
(ii) Subsidiaries and/or Joint Ventures
(iii) Other Investments

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

I. (i) Bills Purchased and Discounted

(ii) Cash credits, Overdrafts and Loans repayable on demand
(iii) Term loans

3,157,319
18,154,764
31,532,141

1,628,798
15,773,862
25,414,210

52,844,224

42,816,870

45,940,615

6,903,609

38,952,557

3,864,313

52,844,224

42,816,870

III. (a) Advances in India

(i) Priority Sector
(ii) Public Sector
(iii) Banks
(iv) Others

19,195,753
17,333
5,333
33,625,805

16,231,100
534,384
5,053
26,046,333

52,844,224

42,816,870

52,844,224

42,816,870

TOTAL (I)

TOTAL (II)

TOTAL (III)

SCHED U LE 9 A DVA N CES

TOTAL (I)

II. (i) Secured by tangible assets*

(ii) Covered by Bank / Government Guarantees
(iii) Unsecured

*includes Advances against Book Debts

TOTAL (II)

TOTAL

III. (b) Advances outside India

TOTAL (III)

40

ANNUAL REPORT 2011-12

F-86

DCB BANK
SCHED U LE 1 0 F IXED A SSETS



I(a) Premises

(i) At Cost as per last Balance Sheet (including Revaluation)

(ii) Additions during the year

(iii) Deductions during the year

(iv) Depreciation to date (including on Revalued Premises)
I(b) Capital Work In Progress

TOTAL (I)

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

1,001,069
3,184
(6,707)
(169,603)

1,032,088
6,387
(37,406)
(145,644)

587,555

1,415,498

855,425

1,203,861
148,481
(196,055)
(725,376)

1,156,684
99,453
(52,276)
(784,241)

430,911

419,620

II. Other Fixed Assets

(Including furniture and fixtures)

(i)
(ii)
(iii)
(iv)

At Cost as per last Balance Sheet

Additions during the year
Deductions during the year
Depreciation / Amortisation to date

TOTAL (II)

III.

Assets given on Lease

(i) At Cost as per last Balance Sheet
(ii) Additions during the year
(iii) Deductions during the year
(iv) Depreciation to date

TOTAL (III)

TOTAL ( I+II+III )

1,846,409

1,275,045

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

I. Inter-Office adjustments (Net)

II. Interest accrued
III. Tax paid in Advance/Tax deducted at Source (Net of provision)
IV. Stationery and Stamps
V. Non-Banking Assets acquired in satisfaction of claims (Net)
VI. Deferred Tax Assets (Net)
VII. Others

385,569
927,365
3,551


1,018,253

314,244
935,528
2,804

962,689

2,334,738

2,215,265

SCHEDU L E 1 1 OTHER A SSETS

TOTAL

F-87

ANNUAL REPORT 2011-12

41

DCB BANK
SCHEDU L E 1 2 CO NTI N GE N T L I ABIL ITIES

As on 31.03.2012
(` in 000s)

As on 31.03.2011
(` in 000s)

1,191,415

1,230,634

17,834,421
3,508,750

14,925,011
6,500,000

6,122,983
2,037,560
1,931,118
111,566

4,903,717
2,422,357
2,941,660

32,737,813

32,923,379

Year Ended
31.03.2012
(` in 000s)

Year Ended
31.03.2011
(` in 000s)

I. Interest/Discount on Advances/Bills
II. Income on Investments
III. Interest on Balance with Reserve Bank of India and other Inter Bank Funds
IV. Others

5,362,015
1,724,799
72,379
10,498

4,026,531
1,319,706
16,387

TOTAL

7,169,691

5,362,624

Year Ended
31.03.2012
(` in 000s)

Year Ended
31.03.2011
(` in 000s)

786,931
117,543

(28,269)
69,167

660,819
252,904

10,528
90,260

81,902

393

106,082

1,027,274

1,120,986

I. Claims against the bank not acknowledged as debts

II. Liability for partly paid investments
III. Liability on account of outstanding forward exchange and derivative contracts
(a) Forward Contracts
(b) Interest Rate Swaps and Currency Swaps
(c) Foreign Currency Options
IV. Guarantees given on behalf of constituents
(a) In India
(b) Outside India
V. Acceptances, Endorsements and other obligations
VI. Other items for which the bank is contingently liable

TOTAL

SCHEDU LE 1 3 IN TEREST E AR NE D

SCHEDU LE 1 4 OTHER I N CO ME





I.
II.
III.
IV.
V.
VI.

Commission, Exchange and Brokerage

Profit/(Loss) on sale of Investments (Net)
Profit/(Loss) on revaluation of Investments (Net)
Profit/(Loss) on sale of Land, Buildings and Other Assets (Net)
Profit/(Loss) on Exchange Transactions (Net)
Income earned by way of Dividends etc. from Subsidiaries,
Companies and/or Joint Ventures abroad/in India
VII. Lease Income (Net of Lease Equalisation Account)
VIII. Miscellaneous Income

42

TOTAL

ANNUAL REPORT 2011-12

F-88

DCB BANK
SCHEDU L E 1 5 IN TEREST EXP EN DE D
Year Ended

31.03.2012
(` in 000s)

Year Ended
31.03.2011

(` in 000s)

I. Interest on Deposits
II. Interest on Reserve Bank of India/Inter-Bank Borrowings
III. Other Interest

4,080,897
711,676
100,110

2,917,053
420,538
133,650

4,892,683

3,471,241

TOTAL

SCHED ULE 1 6 O PERATIN G EXPE N SES

Year Ended
31.03.2012
(` in 000s)

Year Ended
31.03.2011
(` in 000s)

I. Payments to and Provisions for Employees

II. Rent, Taxes and Lighting
III. Printing and Stationery

IV. Advertisement and Publicity
V. Depreciation on Banks property
131,551
Less:Transfer from Revaluation Reserve
(11,859)

VI. Directors Fees, Allowances and Expenses
VII. Auditors Fees and Expenses
VIII. Law Charges
IX. Postages,Telegrams,Telephones etc.
X. Repairs and Maintenance
XI. Insurance
XII. Other Expenditure

1,245,883
327,142
27,892
13,187

143,594
119,692
(12,097)
5,921
5,763
11,192
41,323
67,176
59,923
540,969

1,063,655
302,224
25,631
12,393

2,466,063

2,151,805

TOTAL

F-89

131,497
4,994
5,703
11,389
38,858
56,239
53,946
445,276

ANNUAL REPORT 2011-12

43

DCB BANK
SCHED U LE 1 7 SIG NI F ICA N T A CCOU N TI NG POL ICIES
1.

BACKGROUND
Development Credit Bank Limited (DCB or the Bank), incorporated in Mumbai, India is a publicly held banking company engaged in providing
banking and financial services. DCB is a banking company governed by the Banking Regulation Act, 1949.

2.

BASIS OF PREPARATION
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless otherwise
stated, and comply with generally accepted accounting principles in India, statutory requirements prescribed under the Banking Regulation Act,
1949, circulars and guidelines issued by the Reserve Bank of India (RBI) from time to time and notified Accounting Standards by Companies
(Accounting Standards) Rules, 2006, (as amended) to the extent applicable and current practices prevailing within the banking industry in India. The
Accounting policies have been consistently applied and are consistent with those used in the previous year.

3.

USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements
and the results of operations during the reporting period. Although these estimates are based upon managements best knowledge of current events
and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current
and future periods.

4.
4.1

INVESTMENTS
The Investment portfolio comprising approved securities (predominantly Government Securities) and other securities (Shares, Debentures and
Bonds, etc.) are classified at the time of acquisition in accordance with the Reserve Bank of India (RBI) guidelines under three categories viz. Held
to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT). For the purposes of disclosure in the Balance Sheet, they are classified
under six groups viz. Government Securities, Other Approved Securities, Shares, Debentures & Bonds, Subsidiaries and/or Joint Ventures and
Other Investments.

4.2

Basis of Classification:

Investments that are held principally for resale within 90 days from the date of purchase are classified as HFT securities. As per RBI guidelines, HFT
securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date.

Investments which the Bank intends to hold till maturity, are classified as HTM securities.

Investments which are not classified in the above categories, are classified under AFS category.

4.3

Transfer of Securities between Categories:

The transfer/shifting of securities between categories of investments is accounted as per RBI guidelines.

4.4

Valuation:

Held for Trading and Available for Sale categories:

Investments classified as HFT and AFS are marked to market at monthly intervals. These securities are valued scrip-wise and any resultant
depreciation or appreciation is aggregated for each category. The net depreciation for each category is provided for, whereas the net appreciation
for each category is ignored. The book value of individual securities is not changed consequent to periodic valuation of investments.

Held to Maturity:

These are carried at their acquisition cost and are not marked to market. Any premium on acquisition is amortized over the remaining maturity
period of the security on a straight-line basis. Provisions are made for diminutions other than temporary in the value of such investments for each
investment individually.

In the event provisions created on account of depreciation in the AFS or HFT categories are found to be in excess of the required amount in any year,
such excess is recognized in the Profit and Loss account and subsequently appropriated, from profit available for appropriation, if any, to Investment
Reserve Account in accordance with RBI guidelines after adjusting for income tax and appropriation to Statutory Reserve.

4.5

Non-performing investments are identified and provision is made as per RBI guidelines.

44

ANNUAL REPORT 2011-12

F-90

DCB BANK
4.6

Profit/Loss on sale of investment under the aforesaid three categories is taken to the Profit & Loss Account. The profit on sale of investment in HTM
category, net of taxes and transfers to Statutory Reserve is appropriated to Capital Reserves.

For all securities other than discounted instruments, weighted average cost after adjusting the depreciation booked is used to compute profit/loss
on sale. In case of discounted instruments the FIFO method is used for computing profit/loss on sale.

4.7

Brokerage, fees, commission and broken period interest incurred at the time of acquisition of securities, including money market instruments, are
recognized as expenses.

5.
5.1

ADVANCES
In pursuance of guidelines issued by the RBI, advances are classified as Standard, Sub-Standard, Doubtful and Loss Assets and are stated net of
the required provision made on such advances.

5.2

Provision for non-performing advances (NPAs) comprising sub-standard, doubtful and loss assets is made in accordance with the RBI guidelines
which prescribes minimum provision levels and also encourages banks to make a higher provision based on sound commercial judgement. Nonperforming advances are identified by periodic appraisals of the loan portfolio by the management. In respect of identified NPAs, provision is made
based on the inherent risk assessed for the various product categories. The provisioning done is at or higher than the minimum prescribed under
the RBI guidelines.

5.3

Advances are net of bills rediscounted, claims realised from ECGC, provisions for non- performing advances, unrealized fees and unrealized interest
held in suspense account.

5.4

Credit facility/investment, where interest and/or installment of principal has remained overdue for more than 90 days, is classified as non-performing
asset. However, in respect of Equated Monthly Instalment (EMI) based advances those accounts where more than 3 EMIs are overdue are classified
as non-performing advances.

5.5

In case of non performing assets other than retail EMI loans, recoveries effected are first adjusted towards the principal amount. In case of retail EMI
loans, recoveries effected are adjusted towards the EMI and within the EMI first towards the principal amount.

6.

FIXED ASSETS
Premises and other fixed assets are stated at historical cost (or revalued amounts, as the case may be), less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended
use.

7.

REVALUATION OF FIXED ASSETS

Portfolio of immovable properties is revalued periodically by an independent valuer to reflect current market valuation. All land and building owned
by the Bank and used as branches or offices or godowns are grouped under Office Premises in the fixed assets category. Appreciation, if any, on
revaluation is credited to Revaluation Reserve under Capital Reserves.

8.

DEPRECIATION
Depreciation on fixed assets, including amortisation of software, is charged over the estimated useful life of the fixed assets on a straight line basis
at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956, except as mentioned below:

Computer Hardware - 33.33% p.a.

ATM - 12.50% p.a.

Core Banking Software - 12.50% p.a.

Application Software & System Development Expenditure - Depending upon estimated useful life between 3-5 years.

Hard Furnishing 25% p.a.

Improvements (Civil) to Leased Premises over the contracted period of the lease.

Fixed Furniture in Leased Premises such as work-stations, etc. over the contracted period of the lease.

Vehicle 19% p.a. over 5 years with 5% residual value.

Assets purchased/sold during the year are depreciated on a pro-rata basis, based on the actual number of days the asset has been put to use.

Assets individually costing upto ` 5,000/- are depreciated fully in the year of purchase.
F-91

ANNUAL REPORT 2011-12

45

DCB BANK
9.

IMPAIRMENT OF ASSETS
The carrying amount of assets is reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An
impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater
of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment,
depreciation is provided on the revised carrying amount of the asset over remaining useful life.

10. RECOGNITION OF INCOME & EXPENDITURE

10.1 Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Bank and the revenue can be reliably measured.
10.2 Items of income and expenditure are generally accounted on accrual basis, except as otherwise stated.
10.3 Interest income is recognised in Profit & Loss Account on accrual basis, except in the case of non-performing assets where it is recognised as per
RBI norms.
10.4 Processing fees recovered on loans are recognised as income and processing overheads on loans are expensed at the inception of the loan.
10.5 Overdue rent on Safe Deposit Lockers is accounted for on realisation.
10.6 Commission on bank guarantees issued is amortised over the period of the guarantees.
11. FOREIGN EXCHANGE TRANSACTIONS
11.1 Initial recognition:

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the
reporting currency and foreign currency at the date of the transaction.

11.2 Conversion:

Foreign currency monetary items are reported using the closing rate notified by Foreign Exchange Dealers Association of India (FEDAI), as per the
guidelines issued by the RBI.

11.3 Exchange differences:

Exchange difference arising on settlement of monetary items or on reporting monetary items of the Bank at rates different from those at which they
were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which
they arise. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate
at the date of the transaction and non-monetary items which are carried at fair value or other similar valuations denominated in a foreign currency
are reported using exchange rates that existed when the values were determined.

11.4 Outstanding forward exchange contracts, bills and foreign currency loans are revalued on the balance sheet date at rates notified by FEDAI and the
resultant gain/loss on revaluation is included in the Profit and Loss Account.
11.5 Contingent liabilities denominated in foreign currencies are disclosed in balance sheet date at the rates notified by FEDAI.
11.6 Forward exchange contracts and other derivative contracts which have overdue receivables which have remained unpaid over 90 days or more
are classified as non-performing assets and provided for as per the extant master circular on Prudential Norms on Income Recognition, Asset
Classification and Provisioning issued by the RBI.
12. RETIREMENT BENEFITS OF EMPLOYEES:
12.1 Provision in respect of future liability for payment of gratuity is made on the basis of actuarial valuation on projected unit credit method made at the
end of the year. Gratuity is funded with the Gratuity Trust duly registered under the provisions of Income tax Act, 1961. Actuarial gains/losses are
immediately taken to Profit and Loss Account and are not deferred.
12.2 Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the profit and loss account
of the year when the contributions to the fund are due. There are no other obligations other than the contribution payable to the fund.

46

ANNUAL REPORT 2011-12

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DCB BANK
13. TAXES ON INCOME:
13.1 Tax expense comprises current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961 enacted in India. Deferred Income Tax reflects the impact of current year timing differences between
taxable income and accounting income for the year and reversal of timing differences of earlier years.
13.2 Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets
and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred
tax assets and deferred tax liabilities relate to taxes levied by same governing taxation laws. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In
situations where the Bank has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realized against future taxable profits.
13.3 At each balance sheet date the Bank re-assesses unrecognized deferred tax assets. It recognises unrecognized deferred tax asset to the extent that
it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such
deferred tax assets can be realised.
14.

ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

Provisions are recognised in terms of Accounting Standard-29 on Provisions, Contingent Liabilities and Contingent Assets issued by the ICAI,
when there is a present legal or statutory obligation as a result of past events leading to probable outflow of resources, where a reliable estimate can
be made of the amount required to to settle the obligation.

Contingent Liabilities are recognised only when there is a possible obligation arising from past events due to occurrence or non-occurrence of one
or more uncertain future events, not wholly within the control of the Bank, or where there is a present obligation arising from a past event which is
not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made

15.

ACCOUNTING FOR DERIVATIVE CONTRACTS:

Income from derivative transactions designated as hedge is recorded on an accrual basis and these transactions are not marked to market.
Derivative transactions, which are not designated as hedge, are marked to market as per the generally accepted practices prevalent in the industry.
Any resultant gain or loss is recognised in the Profit & Loss Account.

16.

EMPLOYEE SHARE BASED PAYMENTS

Measurement and disclosure of employee share-based employment plans is done in accordance with SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments issued by the
Institute of Chartered Accountants of India. The Bank measures compensation cost relating to employee stock options using the intrinsic value
method. Compensation expense is amortised over the vesting period of the option on a straight line basis.

17.

EARNINGS PER SHARE

Basic and diluted earnings per share are computed in accordance with Accounting Standard 20 Earning per share. Basic earnings per share
is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted
average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted
average number of shares outstanding during the year are adjusted for the effect of dilutive potential equity shares.

18.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand and ATMs, balances with Reserve Bank of India, balances with other banks/institutions and money
at call and short notice (including effect of changes in exchange rates on cash and cash equivalents in foreign currency).

19.

LEASES
Leases where lessor effectively retains substantially all risks and benefits of ownership of the leased item are classified as operating leases. Operating
lease payments are recognised as an expense in the Profit and Loss account on a straight-line basis over the lease term.

F-93

ANNUAL REPORT 2011-12

47

DCB BANK
SCHED U LE 1 8 NOTES TO A CCOU N TS
1

CAPITAL

1.1 During the financial year 2011-12 the Bank issued 19,650,000 equity shares to Qualified Institutional Investors at ` 47.84 per share. Net of issue costs,
this resulted in an increase of ` 19.65 crore in Share Capital and ` 69.30 crore in Share Premium Account.

In connection with this issue, the Bank has incurred share issue expenses aggregating to ` 5.06 crore. It includes expenses related to commission and
brokerage which is higher than the limit prescribed under Section 13 of the Banking Regulation Act, 1949. In this connection, the Bank has written to the
Reserve Bank of India seeking its approval, which is awaited. The Bank has utilized the share premium account for meeting the said share issue expenses.

1.2 During the financial year 2011-12 the Bank issued 20,641,388 equity shares on preferential basis at ` 47.84 per share. Net of issue costs, this resulted in
an increase of ` 20.64 crore in Share Capital and ` 75.50 crore in Share Premium Account.

In connection with this issue, the Bank has incurred share issue expenses aggregating to ` 2.61 crore. It includes expenses related to commission and
brokerage which is higher than the limit prescribed under Section 13 of the Banking Regulation Act, 1949. In this connection, the Bank has written to the
Reserve Bank of India seeking its approval, which is awaited. The Bank has utilized the share premium account for meeting the said share issue expenses.

1.3 Capital to Risk Assets Ratio (CRAR)

Particulars

As per Basel II framework

As at March 31, 2012

As at March 31, 2011

i) CRAR (%)

15.41%

13.25%

ii) CRAR - Tier I capital (%)

13.81%

11.10%

iii) CRAR - Tier II Capital (%)

1.60%

2.15%

N.A.

N.A.

75.00

101.00

vi) Amount raised by issue of IPDI (` in crore)

vii) Amount raised by issue of Upper Tier II instruments (` in crore)

iv) Percentage of shareholding of the Government of India in nationalized banks

v) Amount of subordinated debt raised as Tier II capital (` in crore)

SUB-ORDINATED DEBT THROUGH PRIVATE PLACEMENT OF BONDS

During the year the Bank redeemed subordinated debt of ` 26 crore, the details of which are set out below:
(` in crore)

Issue Series
II (Option II)

Date of Maturity

Coupon Rate (% p.a.)

Tenure (in months)

Amount

May 30, 2011

7.30

92

26.00

The details of total outstanding subordinated debt are given below:

(` in crore)
Deemed Date

Coupon Rate

Tenure

Equivalent Amount

Equivalent Amount

of Allotment

(% p.a.)

(in months)

as on March 31, 2012

as on March 31, 2011

II (Option II)

September 30, 2003

7.30

92

26.00

III (Option II)

March 31, 2004

7.15

99

10.00

10.00

August 31, 2009

11.25

68

65.00

65.00

75.00

101.00

Issue Series

IV
Total

48

ANNUAL REPORT 2011-12

F-94

DCB BANK
3

INVESTMENTS
3.1 Particulars of investments and movement in provision held towards depreciation on investments

Particulars

(` in crore)
March 31, 2011

March 31, 2012

1. Value of Investments:

(i) Gross Value of Investments

a. In India

b. Outside India

2,295.09

(ii) Provisions for Depreciation

a. In India

b. Outside India

2,518.48

0.72

0.05

(iii) Net Value of Investments

a. In India

b. Outside India

2,517.76

2,295.04

2. Movement of provision held towards depreciation on investments:

(i) Opening balance

0.05

0.04

(ii) Add: Provision made during the year

0.87

0.25

(iii) Less: Write-off/ write-back of excess provision during the year

(including depreciation utilized on sale of securities)

0.20

0.24

0.72

0.05

(iv) Closing balance

3.2 The net book value of investments held under the three categories, viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale
(AFS) are as under:Category
Held to Maturity

` in crore

2,084.45

82.79

1,884.69

82.12

Held for Trading

79.18

3.14

107.47

4.68

Available for Sale

354.13

14.07

302.88

13.20

2,517.76

100.00

2,295.04

100.00

Total

As at March 31, 2011

As at March 31, 2012

` in crore

3.3 Repo Transactions

Financial Year 2011-2012

(` in crore)
Minimum
outstanding
during the year

Maximum
outstanding
during the year

Daily Average
outstanding
during the year

Balance as at
March 31, 2012

Securities Sold under Repos *

446.25

94.67

(i) Government securities

446.25

94.67

(ii) Corporate debt securities

Securities purchased under Reverse Repos *

(i) Government securities

(ii) Corporate debt securities

Minimum
outstanding
during the year

Maximum
outstanding
during the year

Daily Average
outstanding
during the year

Balance as at
March 31, 2011

Securities Sold under Repos *

199.50

22.65

189.00

(i) Government securities

199.50

22.65

189.00

(ii) Corporate debt securities

Securities purchased under Reverse Repos *

157.50

1.29

(i) Government securities

157.50

1.29

(ii) Corporate debt securities

* consist of RBI LAF disclosed at face value.

Financial Year 2010-2011

(` in crore)

* consist of RBI LAF disclosed at face value.

F-95

ANNUAL REPORT 2011-12

49

DCB BANK

3.4 Non-SLR Investments Portfolio - Issuer Composition of Non-SLR Investments

Balances as at March 31, 2012

(` in crore)

Sr.
No.

Issuer

1.
2.
3.
4.
5.
6.
7.

PSUs
FIs
Banks
Private Corporates
Subsidiaries/ Joint Ventures
Others
Provision held towards Depreciation
Total

Amount

Extent of Private
Placement*

Extent of Below
Investment
Grade Securities

Extent of Unrated
Securities**

Extent of Unlisted
Securities*

418.51
77.20
0.41
(0.21)
495.91

27.98
0.41
28.39

0.21
0.21

0.41
0.41

Extent of Below
Investment
Grade Securities
-

Extent of Unrated
Securities*

Extent of Unlisted
Securities*

*excludes deposits with NABARD, SIDBI and NHB

** excludes deposits with NABARD, SIDBI, NHB and equity shares

Balances as at March 31, 2011

(` in crore)

Sr.
No.

Issuer

1.
2.
3.
4.
5.
6.
7.

PSUs
FIs
Banks
Private Corporates
Subsidiaries/ Joint Ventures
Others
Provision held towards Depreciation
Total

Amount

Extent of Private
Placement*

443.16
100.73
543.89

3.00
3.00

*excludes deposits with NABARD, SIDBI and NHB

Non-Performing Non-SLR Investments

(` in crore)

Particulars
Opening Balance
Additions during the year
Reductions during the year
Closing Balance
Total provisions held

March 31, 2012

NIL
NIL
NIL
NIL
NIL

March 31, 2011

NIL
NIL
NIL
NIL
NIL

3.5 Sale and transfers to / from HTM Category

Other than one-time transfer of securities to / from HTM category permitted by RBI at the beginning of the accounting year and sales to the RBI under preannounced OMO auctions, the Bank had not carried out any sales and transfers of securities to / from HTM category during the financial year 2011-12.
4

DERIVATIVES

4.1 Forward Rate Agreement / Interest Rate Swap

(` in crore)
Particulars
i. The notional principal of swap agreements
ii. Losses which would be incurred if counterparties failed to fulfill their obligations under the agreements
iii. Collateral required by the bank upon entering into swaps
iv. Concentration of credit risk arising from the swaps (with Banks)
v. The fair value of the swap book [(Payable)/Receivable]

March 31, 2012

March 31, 2011

NIL
NIL
NIL
NIL
NIL

50.00
0.15
100.00%
(0.05)

The nature and terms of the Interest Rate Swaps (IRS) as on March 31, 2011 are set out below:
(` in crore)

Nature

No.

Notional principal

Benchmark

Terms

Trading

25.00

MIBOR

Receive Fixed vs. Pay Floating

Trading

25.00

MIBOR

Receive Floating vs. Pay Fixed

50

ANNUAL REPORT 2011-12

F-96

DCB BANK

4.2 Exchange Traded Interest Rate Derivatives

(` in crore)
Sr.
No.
i.

Particulars
Notional principal amount of exchange traded interest rate derivatives undertaken during the year (instrumentwise)
Notional principal amount of exchange traded interest rate derivatives outstanding
(instrument-wise)
Notional principal amount of exchange traded interest rate derivatives outstanding and not highly effective
(instrument-wise)
Mark-to-market value of exchange traded interest rate derivatives outstanding and not highly effective
(instrument-wise)

ii.
iii.
iv.

March 31, 2012

March 31, 2011

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

4.3 Disclosures on risk exposure in derivatives:

a) Qualitative Disclosures
Management of Risk in Derivatives Trading
The Banks market risk unit plays a key role in sanctioning of the limits, and laying down of the risk assessment and monitoring methods. The policies
of the Bank include setting limits upon the notional principle value of product specific gaps, maximum tenor, overall outstanding and also the setting-up
of counter party-wise, tenor-wise limits.
All limits are monitored on a daily basis by the Banks Treasury and Settlements Department. Exposure reports are submitted to the Treasurer as well
as the Head-Market Risk and any limit excesses are brought to the notice of the management immediately for further action.

Policies for Hedging Risk

All transactions undertaken by the Bank for trading purposes are classified under the Trading Book. All other transactions are classified as a part of the
Banking Book. The Banking Book includes transactions concluded for the purpose of providing structures to customers on a back to back basis. It also
consists of transactions in the nature of hedges based on identification of supporting trades, with appropriate linkages done for matching amounts and
tenor within the approved tolerance limits.

The accounting for all derivative trades is done for the Notional amount on the trade date. The valuation of all outstanding trades is done category wise.
The valuation for outstanding trades under the Trading portfolio is done on a daily basis and the net MTM is accounted in the Profit & Loss account. The
valuation for outstanding trades under the hedged portfolio is done on a monthly basis and the net MTM if any is accounted in the Profit & Loss account
on monthly basis. Valuation of the outstanding hedged Forex Options is done on a monthly basis and the net MTM is zero as all customer trades are
hedged on identical basis with counter party banks.

Coupon payments on IRS are settled on a net basis for individual trades on settlement date. Interest income is recognized on settlement date.

The MTM position on all outstanding trades of individual corporate customers is reported on a monthly basis to Credit Risk department for exposure
monitoring.

b) Quantitative Disclosures
(` in crore)
Currency
Derivatives1

Interest Rate
Derivatives

Currency
Derivatives1

Interest Rate
Derivatives2

March 31, 2012

March 31,2012

March 31, 2011

March 31, 2011

Sr.
Particulars
No.

1.

Derivatives (notional Principal Amount)

(a) For hedging

(b) For trading

350.87

NIL

600.00

0.00

0.00

NIL

0.00

50.00

2.

Marked to Market position8

(a) Asset (+)

2.36

NIL

22.53

0.15

(b) Liability (-)

2.36

NIL

22.53

0.20
0.40

3.

Credit Exposure

9.38

NIL

66.53

4.

Likely impact of one percentage change in Interest Rate (100*PV01)

(a) On hedging derivatives

Note 4

NIL

Note 4

(b) On trading derivatives

NIL

0.00

5.

Maximum and Minimum of 100*PV01 observed during the year4,5

(a) On hedging

Maximum

NIL

NIL

NIL

NIL

Minimum

NIL

NIL

NIL

NIL

(b) On trading

Maximum

NIL

NIL

NIL

0.00

Minimum

NIL

NIL

NIL

0.00

F-97

ANNUAL REPORT 2011-12

51

DCB BANK
Note:
1 Currency derivative includes currency options and cross currency swaps.
2 Interest Rate derivative consist of Interest Rate swaps.
3 Credit exposure is calculated as per the Current Exposure method.
4 Since the portfolio of currency derivatives is a completely hedged book (including transaction done to hedge interest bearing asset or liability), the Bank has not computed
the PV01 for these derivatives.
5 The Bank has computed maximum and minimum of PV01 for the year based on balances at the end of every month.
6 Foreign exchange forward contracts have not been included in the above disclosure.
7 The amount of notional principal shown above is converted as per the closing rate of FEDAI for outstanding foreign currency items.
8 The above does not include MTM on transaction done to hedge interest bearing asset or liability as these are not marked to market but accounted on accrual basis.

ASSET QUALITY
5.1 Non-Performing Assets (NPAs)

Particulars

(` in crore)
March 31, 2012

March 31, 2011

0.57%

0.96%

(i)

Net NPAs to Net Advances (%)

(ii)

Movement of NPAs (Gross)

263.57

(a) Opening balance

(b) Additions during the year

68.17

319.18
50.71

(c) Reductions during the year

89.94

106.32

(d) Closing balance

241.80

263.57

(iii) Movement of Net NPAs

(a) Opening balance

41.23

107.62

(b) Additions during the year1,2

15.81

(31.16)

(c) Reductions during the year3

26.80

35.23

(d) Closing balance

30.24

41.23

(iv) Movement of provisions for NPAs (excluding provision on Standard Assets)

(a) Opening balance

218.63

211.51

(b) Provisions made during the year

50.86

78.17

(c) Write-off/ write-back of excess provisions

63.09

71.05

(d) Closing balance

206.40

218.63

March 31, 2012

March 31, 2011

263.57

319.18

1. Includes interest capitalisation of ` 1.50 crore (Previous year: ` 3.70 crore).

2. Includes addition to NPAs net off provisions on such NPAs and additional provision on existing NPAs.
3. Includes interest capitalisation of ` 0.05 crore (Previous year: ` 0.04 crore).

5.2 Movement of Gross NPAs

(` in crore)
Particulars
Opening balance of Gross NPAs
Additions during the year*
Sub-total (A)

68.17

50.71

331.74

369.89

Less:
i.

Upgradations

19.86

30.93

ii.

Recoveries (excluding recoveries made from upgraded accounts)

33.27

33.60

iii.

Write-offs

36.81

41.79

89.94

106.32

241.80

263.57

Sub-total (B)
Closing balance of Gross NPAs (A-B)
*including fresh NPAs during the year.

52

ANNUAL REPORT 2011-12

F-98

DCB BANK

5.3 Concentration of NPAs

(` in crore)
Particulars

March 31, 2012

March 31, 2011

18.55

12.01

Total Exposure to top four NPA accounts *

* NPAs are taken on net basis.
Exposure includes funded and non-funded exposures identified as NPA.

5.4 Sector-wise NPAs

Sr.
No.

Sector

Percentage of NPAs to Total Advances in that Sector

March 31, 2012

March 31, 2011

Agriculture & allied activities

0.00%

0.41%

Industry (Micro & small, Medium and Large)

1.79%

3.58%

Services

2.19%

3.77%

Personal Loans

0.00%

0.00%

NPAs are taken net of provisions.

Total Advances are net advances in the particular sector.
Classification into sectors as above has been done based on the Banks internal norms.

5.5 Details of loan assets subjected to restructuring during the year

(` in crore)
As at March 31, 2012
Standard
advances
restructured
Sub Standard
advances
restructured
Doubtful
advances
restructured
Total

Number of borrowers

CDR
Mechanism

SME Debt
Restructuring

Others

Amount outstanding @

0.39

0.00

Sacrifice (diminution in the fair value)

0.00

0.10

Number of borrowers

Amount outstanding@

0.02

Sacrifice (diminution in the fair value)

0.00

Number of borrowers

Amount outstanding@

Sacrifice (diminution in the fair value)

Number of borrowers

Amount outstanding @

0.39

0.02

Sacrifice (diminution in the fair value)

0.10

0.00

CDR
Mechanism

SME Debt
Restructuring

Number of borrowers

Amount outstanding @

11.36

Sacrifice (diminution in the fair value)

0.25

Number of borrowers

Amount outstanding

0.34

Sacrifice (diminution in the fair value)

0.00

Number of borrowers

15.00

0.35

4.41

0.00

13

15.00

12.05

4.41

0.25

@ represents balances as on March 31, 2012 for the restructured accounts.

(` in crore)
As at March 31, 2011
Standard
advances
restructured
Sub Standard
advances
restructured
Doubtful
advances
restructured

Amount outstanding
Sacrifice (diminution in the fair value)
Number of borrowers

Total

Amount outstanding @
Sacrifice (diminution in the fair value)

Others

@ represents balances as on March 31, 2011 for the restructured accounts.

F-99

ANNUAL REPORT 2011-12

53

DCB BANK

5.6 Details of financial assets (including written off accounts) sold to Securitisation / Reconstruction Company for Asset Reconstruction
(` in crore)
March 31, 2012

March 31, 2011

(i) No. of accounts

NIL

NIL

(ii) Aggregate value (net of provisions) of accounts sold to SC/RC

NIL

NIL

(iii) Aggregate consideration

NIL

NIL

(iv) Additional consideration realized in respect of accounts transferred in earlier years

NIL

NIL

(v) Aggregate gain/loss over net book value

NIL

NIL

March 31, 2012

March 31, 2011

1. a) No. of accounts purchased during the year

NIL

NIL

NIL

NIL

2. (a) Of these, number of accounts restructured during the year

NIL

NIL

NIL

NIL

Particulars

5.7 a) Details of non-performing financial assets purchased

(` in crore)
Particulars

(b) Aggregate outstanding

(b) Aggregate outstanding
b) Details of non-performing financial assets sold

(` in crore)
March 31, 2012

March 31, 2011

1. No. of accounts sold during the year

NIL

NIL

2. Aggregate outstanding

NIL

NIL

3. Aggregate consideration received

NIL

NIL

March 31, 2012

March 31, 2011

25.25

25.31

Particulars

5.8 Provisions on Standard Assets

(` in crore)
Particulars

Provision on Standard Assets

6

BUSINESS RATIOS
March 31, 2012

March 31, 2011

Interest Income as a percentage to Working Funds (%)1

8.86

7.62

Non-Interest Income as a percentage to Working Funds (%)1

1.27

1.59

Operating Profit as a percentage to Working Funds (%)1

1.04

1.22

Return on Assets (%)2

0.68

0.30

Business per employee (` in crore) 3, 4

5.14

4.91

Profit/ (Loss) per employee (` in crore)3

0.02

0.01

Particulars

1. Working funds have been considered as average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of
the Banking Regulation Act, 1949, during the 12 months of the financial year.
2. Assets have been considered as average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of the
Banking Regulation Act, 1949.
3. For the purpose of this ratio, employees have been considered as the average of the total employees at the end of each month of the year.
4. For the purpose of this ratio, business per employee has been recorded as deposits plus advances (inter bank deposits have been excluded).

54

ANNUAL REPORT 2011-12

F-100

DCB BANK
7

ASSET LIABILITY MANAGEMENT

7.1 Maturity pattern of certain items of assets and liabilities as of March 31, 2012
(` in crore)
Maturity Buckets

Loans and
Advances

Investments

Deposits

Borrowings

Foreign Currency
Assets@

Foreign Currency
Liabilities
2.01

Day 1

78.75

236.68

1.54

19.42

2 to 7 days

91.70

64.92

161.83

149.94

0.08

0.81

8 to 14 days

97.46

195.78

50.88

0.09

51.68

15 to 28 days

117.77

193.34

7.63

2.07

8.08

29 days to 3 months

367.89

207.03

851.76

60.00

1.11

Over 3 months & upto 6 months

240.84

123.04

712.28

260.65

72.48

Over 6 months & upto 1 year

314.37

78.36

1,008.34

209.71

1.87

Over 1 year & upto 3 years

2,405.82

202.05

2,890.86

318.10

1.62

6.48

Over 3 year & upto 5 years

401.45

798.26

66.82

65.00

Over 5 years

1,168.37

1,044.10

17.87

0.00

4.96

Total

5,284.42

2,517.76

6,335.56

1,123.45

28.24

144.52

Borrowings

Foreign Currency
Assets@

Foreign Currency
Liabilities

@ excludes foreign currency bills discounted as they are booked in Indian Rupees.

Maturity pattern of certain items of assets and liabilities as of March 31, 2011
(` in crore)

Maturity Buckets

Loans and
Advances

Investments

Deposits

Day 1

100.57

215.42

5.16

15.37

5.66

2 to 7 days

185.17

183.21

193.38

33.54

14.85

8 to 14 days

101.70

218.19

0.68

1.34

15 to 28 days

60.42

25.17

114.14

20.96

21.14

29 days to 3 months

306.23

241.84

749.54

209.22

35.81

Over 3 months & upto 6 months

364.02

26.92

451.27

259.72

2.37

Over 6 months & upto 1 year

228.56

129.91

1,210.92

59.73

5.66

Over 1 year & upto 3 years

1,829.19

195.77

2,414.68

47.55

1.92

11.18

Over 3 year & upto 5 years

297.87

537.62

33.33

65.00

Over 5 years

807.96

1,137.81

19.47

4.35

4,281.69

2,295.04

5,610.17

860.72

55.86

98.01

Total

@ excludes foreign currency bills discounted as they are booked in Indian Rupees.

7.2 Concentration of Deposits

(` in crore)
Particulars
Total deposits of twenty largest depositors
Percentage of deposits of twenty largest depositors to total deposits of the Bank

March 31, 2012

March 31, 2011

986.59

1,010.94

15.57%

18.02%

7.3 Concentration of Advances

(` in crore)
Particulars
Total advances to twenty largest borrowers
Percentage of Advances to twenty largest borrowers to total advances of the bank

March 31, 2012

March 31, 2011

1,189.19

1,283.05

14.15%

16.97%

Note: Advances reported above include both funded and non-funded loan exposure with limits or outstanding whichever is higher, for other than term loans and NPAs. In case
of term loans & NPAs, the outstanding amount has been considered for this purpose. The Advances figure above also includes non-inter bank credit exposure on derivatives
including forward exchange contracts.

F-101

ANNUAL REPORT 2011-12

55

DCB BANK

7.4 Concentration of Exposures

(` in crore)
Particulars
Total Exposures to twenty largest borrowers / customers
Percentage of Exposures to twenty largest borrowers / Customers to Total Exposures of the bank on
borrowers / Customers

March 31, 2012

March 31, 2011

1,189.19

1,283.05

14.02%

16.97%

Note: Exposures reported above include both funded and non-funded exposures (including advances and investments (other than SLR Investments and deposits places with
NABARD, SIDBI & NHB)) with limits or outstanding whichever is higher, for other than term loans and NPAs. In case of term loan & NPAs, the outstanding amount has been
considered for this purpose. The exposure figure above also includes non-inter bank credit exposure on derivatives.

7.5 Overseas Assets, NPAs and Revenue

(` in crore)

Particulars

March 31, 2012

March 31 ,2011

Total Assets

NIL

NIL

Total NPAs

NIL

NIL

Total Revenue for the year ended

NIL

NIL

7.6 Off-balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms) as on March 31, 2012
Name of the SPV sponsored
Domestic

Overseas

NIL

NIL

LENDING TO SENSITIVE SECTOR

8.1 Exposure to Real Estate Sector

(` in crore)
Category

March 31, 2012

a)

Direct Exposure

(i)

598.94

Residential Mortgages(*)

Lending fully secured by mortgages on residential property that is or will be occupied by

the borrower or that is rented:

(*)

(ii)

March 31, 2011

526.79

Includes Individual housing loans eligible for inclusion in priority sector advances
`104.18 crore (previous year: ` 123.97 crore)
282.03

Commercial Real Estate

133.09

Lending secured by mortgages on commercial real estates (office buildings, retail space,
multi-purpose commercial premises, multi-family residential buildings, multi-tenanted
commercial premises, industrial or warehouse space, hotels, land acquisition, development
and construction, etc.)

(iii) Investments in Mortgage Backed Securities (MBS) and other securitized exposures

(a) Residential

(b) Commercial Real Estate

12.27

17.16

b) Indirect Exposure

Fund based and non-fund based exposures on National Housing Bank (NHB) and
Housing Finance Companies (HFCs).

56

Total Exposure to Real Estate Sector

ANNUAL REPORT 2011-12

F-102

13.42

17.24

906.66

694.28

DCB BANK

8.2 Exposure to Capital Market

(` in crore)
March 31, 2012

March 31, 2011

Direct investment in equity shares, convertible bonds, convertible debentures and units of
equity-oriented mutual funds the corpus of which is not exclusively invested in corporate debt;

0.41

Advances against shares/bonds/ debentures or other securities or on clean basis to individuals

for investment in shares (including IPOs/ESOPs), convertible bonds, convertible debentures,
and units of equity-oriented mutual funds;

0.42

2.37

Advances for any other purposes where shares or convertible bonds or convertible debentures
or units of equity oriented mutual funds are taken as primary security;

0.01

0.01

iv.

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/convertible bonds/convertible debentures/units of equity
oriented mutual funds does not fully cover the advances;

0.00

8.71

v.

Secured and unsecured advances to stockbrokers and guarantees issued on behalf of

stockbrokers and market makers;(see * below)

46.89

42.39

vii. Bridge loans to companies against expected equity flows/issues;

viii. Underwriting commitments taken up by the banks in respect of primary issue of shares or
convertible bonds or convertible debentures or units of equity oriented mutual funds;

ix.

Financing to stockbrokers for margin trading;

x.

All exposures to Venture Capital Funds (both registered and unregistered) will be deemed
to be on par with equity and hence will be reckoned for compliance with the capital market
exposure ceilings (both direct and indirect)

47.73

53.48

Particulars
i.
ii.

iii.

vi.

Loans sanctioned to corporates against the security of shares / bonds/debentures or other

securities or on clean basis for meeting promoters contribution to the equity of new
companies in anticipation of raising resources;

Total Exposure to Capital Market

* Includes Advances to Stock Brokers ` 0.39 crore (Previous year: ` 0.39 crore) and Financial Guarantees issued on their behalf to Stock Exchanges ` 46.50
crore. (Previous year: ` 42.00 crore).

8.3 Risk category-wise country exposure

(` in crore)
Risk Category

Exposure (net) as at
March 31, 2012

Provision held as at
March 31, 2012

Exposure (net) as at
March 31, 2011

Provision held as at
March 31, 2011

Insignificant

50.83

69.50

Low

10.38

27.01

Moderate

5.93

19.47

High

0.37

0.24

Very High

0.66

Restricted

1.16

Off-credit
Total

68.67

116.88

8.4 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank

As per regulatory guidelines, the Bank should restrict its exposure to 15% of its capital funds to any Single Borrower, defined as Single Borrower Limit and
40% as Group Borrower Limit. Additionally, the Bank can lend 5% to infrastructure projects and a further 5% with the specific approval of its Board.

During the year ended March 31, 2012 and March 31, 2011 the Bank had not exceeded the prudential exposure limits as laid down by RBI guidelines for
the Single Borrower Limit (SBL).

During the year ended March 31, 2012 and March 31, 2011 the Bank had not exceeded the prudential exposure limits as laid down by RBI guidelines for
the Group Borrower Limit (GBL).

F-103

ANNUAL REPORT 2011-12

57

DCB BANK

8.5 Unsecured Advances

Details of advances included in Schedule 9 where intangibles like rights, licenses, authorizations, etc. are charged to Bank as collateral:
(` in crore)
March 31, 2012

March 31, 2011

Total amount of advances against intangible collateral

NIL

NIL

Estimated value of intangible collateral

NIL

NIL

Particulars

As per directions from RBI, these advances are treated as unsecured advances in schedule 9.

COMPLIANCE WITH ACCOUNTING STANDARDS, READ WITH RBI GUIDELINES

9.1 Staff Retirement Benefits (Accounting Standard 15 Revised)

The contribution to employees Provident Fund amounted to ` 4.22 crore for the year ended March 31, 2012 (Previous year ` 3.73 crore).

The Company has a gratuity trust approved by Income Tax Department namely Development Credit Bank Ltd. Staff Gratuity Fund. Every employee who
has completed 5 years or more of service gets gratuity on separation at half months last drawn salary for each completed year of service, subject to a cap
of ` 10.00 lakh for employees who joined after April 1, 2006 and without any such limit for other employees.

Reconciliation of opening and closing balance of the present value of the defined benefit obligation for gratuity benefits is given below:
(` in crore)
March 31, 2012

March 31, 2011

Balance Sheet Details of provision for Gratuity

Defined benefit obligation
6.53
Fair value of plan Assets
8.35

(1.82)
Less: Unrecognised past service cost
-

5.88
8.01
(2.13)
-

Obligations at the beginning of the year

Interest Cost
Current Service Cost
Past Service Cost
Benefits paid
Actuarial (gain) loss on Obligation
Present value of obligation at the end of the year

5.88
0.49
1.32
0.00
(0.43)
(0.73)
6.53

5.35
0.41
1.30
0.02
(0.39)
(0.81)
5.88

Fair value of plan assets at the beginning of the year

Expected Return on plan assets
Contributions
Benefits paid
Actuarial gain (Loss) on plan assets
Fair value of plan assets at the end of the year

8.01
0.65
-
(0.43)
0.12
8.35

8.00
0.64
(0.39)
(0.24)
8.01

Cost for the year

Current service cost
1.32
Interest cost
0.49
Expected return on plan assets
(0.65)
Net Actuarial (gain) loss recognised in the year
(0.85)
Past service cost
0.00
Expenses recognised in the Profit and Loss account
0.31
Actual return on plan assets
0.77

1.30
0.41
(0.64)
(0.57)
0.02
0.52
0.40

Experience Adjustment
Experience Adjustment on obligation
Experience Adjustment on plan assets

(0.62)
0.12

(0.72)
(0.24)

8.63% p.a.
8.00% p.a.
LIC (94-96)
ULTIMATE
5.00% p.a.

8.02% p.a.
8.00% p.a.
LIC (94-96)
ULTIMATE
5.00% p.a.

Particulars

Assumptions
Discount rate
Expected return on plan assets
Mortality

Future salary increases

58

ANNUAL REPORT 2011-12

F-104

DCB BANK

All the plan assets are invested by the gratuity trust namely Development Credit Bank Ltd. Staff Gratuity Fund in Government securities (CY about 34%,
PY about 33%), high rated corporate bonds (CY about 58%, PY about 58%), Money Market Instruments (CY about 0%, PY about 1%) and units of mutual
funds/ insurance companies (CY about 8%, PY about 8%) set up as dedicated funds for management of gratuity funds.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as
supply and demand in the employment market.

With respect to defined benefit plans, the Bank is yet to determine the contributions expected to be paid to the plans during the annual period beginning
April 1, 2012.

9.2 Earnings Per Share (EPS)

The Bank reports basic and diluted earnings per equity share in accordance with AS-20, Earnings per Share. The dilutive impact is due to stock options
granted to employees by the Bank.

The computation of earnings per share is given below:-

Particulars

March 31, 2011

March 31, 2012

Basic
Net Profit / (loss) (` in crore)
Weighted Average no. of equity shares outstanding

55.08

21.43

201,867,723

200,092,525

2.73

1.07

Basic Earnings per share (`)

Diluted
Net Profit / (loss) (` in crore)
Weighted average no. of equity shares outstanding

55.08

21.43

202,934,702

202,307,345

2.71

1.06

10.00

10.00

Diluted Earnings per share (`)

Nominal value per share (`)

9.3 Employees Stock Options

The Shareholders of the Bank had approved an ESOP plan Phase I in November 2005, enabling the Board and /or the Nomination Committee to grant such
number of equity shares and/or equity linked instruments including options of the Bank not exceeding 4% of the Issued Capital or 60,00,000 Equity Shares
of the Bank. The Shareholders, at the Annual General Meeting held in September 2006, had approved an additional 3% of the Issued Capital, aggregating
the total Equity Share Capital reserved for all ESOPs to 7% of the Issued Capital from time to time. As the shares of the Bank were subsequently listed,
confirmation of Shareholders was obtained at the Extra-Ordinary General Meeting held on 15th December, 2006, in line with the guidelines of the Securities
& Exchange Board of India. Pursuant thereto, during the year the Nomination Committee of the Bank did not grant any options.

Under the stock option scheme options vest in a graded manner over a 5 year period from the date of grant, the details of which are set out below:

End of the Year

For Sub Plan 1

For Sub Plan 2

Till August 8, 2010

From August 8, 2010

2nd

30%

30%

3rd

40%

30%

30%

4th

30%

20%

20%

5th

30%

20%

20%

Method used for accounting for ESOP

The Bank has applied the intrinsic value method to account for the compensation cost of ESOP to the employees of the Bank. Intrinsic value is the amount
by which the quoted market price of the underlying share exceeds the exercise price of the options.
Activity in options outstanding under Employees Stock Option Plan

Particulars

March 31, 2011

March 31, 2012

Number of options

Weighted Average
Exercise Price

Number of options

Weighted Average
Exercise Price

9,836,795

46.96

5,951,135

48.29

NIL

0.00

4,580,000

46.56

Exercised during the year

202,860

33.91

186,020

33.10

Forfeited/Lapsed during the year

680,515

54.22

508,320

64.07

Options outstanding at the end of the year

8,953,420

46.70

9,836,795

46.96

Options exercisable

2,560,630

50.69

2,012,465

47.03

Options outstanding at the beginning of the year

Granted during the year

F-105

ANNUAL REPORT 2011-12

59

DCB BANK

Summary of stock options outstanding as on March 31, 2012 is given below:

Number of shares
arising out of options
(Number of shares)

Weighted average
exercise price (Rupees)

Weighted average
remaining contractual life
(Number of years)

` 17.00 ` 24.00

2,166,310

23.51

3.90

` 25.00 ` 109.00

6,415,630

50.53

4.23

371,480

115.83

2.43

Weighted average
exercise price (Rupees)

Weighted average
remaining contractual life
(Number of years)
4.79

Range of exercise price (Rupees per share)

` 110.00 ` 200.00

There are 202,860 stock options exercised during the period ended March 31, 2012.

Summary of stock options outstanding as on March 31, 2011 is given below:

Range of exercise price (Rupees per share)

Number of shares
arising out of options
(Number of shares)

` 17.00 ` 24.00

2,246,835

23.50

` 25.00 ` 109.00

7,166,310

50.24

5.18

` 110.00 ` 200.00

423,650

115.80

3.39

There are 186,020 stock options exercised during the period ended March 31, 2011.
Fair value Methodology
The fair value of options used to compute proforma net income and earnings per equity share have been estimated using the binomial option pricing model.
The Bank estimated the volatility based on the historical share prices. There was no option granted during the year ended March 31 2012. The various
assumptions considered in the pricing model for ESOPs granted during the year ended March 31, 2011 are:
Particulars

March 31, 2011

Dividend Yield

Expected Volatility

44% - 66%

Risk Free Interest Rate

7.44% - 7.90%

Expected life of options

4-6 years

The expected volatility was determined based on historical volatility data; historical volatility includes data since listing.

Impact of Fair Value Method on Net Profit and EPS

Had the compensation cost for the Banks stock option plans outstanding been determined based on the fair value approach, the Banks net profit and
earnings per share would have been as per the proforma amounts indicated below:
(` in crore)
Particulars
Net Profit (as reported)
Add: Stock based compensation expense accounted
Less: Stock based compensation expense determined under fair value based method (proforma)
Net Profit (proforma)

March 31, 2012

March 31, 2011

55.08

21.43

0.20

0.84

55.28

22.27

0.23

0.23

55.05

22.04

The options granted before the listing of the Banks equity on the stock exchange has not been fair valued for the purpose of calculating the impact on
Net profit and EPS.
March 31, 2012

March 31, 2011

Basic earnings per share (as reported)

2.73

1.07

Basic earnings per share (proforma)

2.73

1.10

Diluted earnings per share (as reported)

2.71

1.06

Diluted earnings per share (proforma)

2.71

1.09

Particulars

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ANNUAL REPORT 2011-12

F-106

DCB BANK

9.4 Segment Reporting

Part A: Business Segments
As per the RBI guidelines on Segment reporting the Bank has classified its activity into Treasury operations, Corporate Banking, Retail Banking, and other
Banking operations.
Treasury operations includes all financial markets activities undertaken on behalf of the Banks customers, proprietary trading, maintenance of reserve
requirements and resource mobilisation from other banks and financial institutions.
Corporate Banking includes lending, deposit taking and other services offered to corporate customers.
Retail Banking includes lending, deposit taking and other services offered to retail customers.
Other Banking Operations includes para banking activities like third party product distribution, merchant banking etc.

Business Segments
Treasury
Corporate Banking
Retail Banking

Particulars

Other Banking
Operations

Total

FY 2011-12 FY 2010-11 FY 2011-12 FY 2010-11 FY 2011-12 FY 2010-11 FY 2011-12 FY 2010-11 FY 2011-12 FY 2010-11

Revenue

426.42

323.22

240.36

220.55

606.75

427.31

11.10

17.47

1,284.63

988.55

Results

19.23

18.40

0.67

21.47

25.48

(23.59)

9.73

12.97

55.11

29.25

Unallocated expenses
Operating profit

83.82

86.06

Income Taxes

(0.03)

(7.82)

Extraordinary profit/loss

Net profit

55.08

21.43

0.13

8,516.30

7,318.01

Unallocated assets

160.55

94.86

Other Information
Segment assets

2,945.94

2,764.75

2,319.01

2,105.55

3,251.28

2,447.58

0.07

Total assets
Segment liabilities

1,493.68

1,283.43

457.32

444.61

5,847.89

5,050.89

8,676.85

7,412.87

7,798.89

6,778.93

Unallocated liabilities

877.96

633.94

Total liabilities

8,676.85

7,412.87

Part B: Geographic Segments

The Bank does not have overseas branches and the operations are entirely domestic. Therefore, no separate reporting is done based on geographic
segments.

9.5 Related Party Transactions

Related Party Transactions in terms of AS-18 on Related Party Disclosures are disclosed below:

List of Related Parties and details of transactions entered into with them during the year:
Associate
Platinum Jubilee Investments Ltd.
As per paragraph 4.5 of the Master circular on Disclosure in Financial Statements Notes to Accounts dated 1st July, 2011, where there is only one
entity in any category of related party, banks need not disclose any details pertaining to that related party other than the relationship with that related party.
Since Platinum Jubilee Investments Ltd. is the only entity in the category of associates, details pertaining to the same are not disclosed.
The details of transactions entered into with the Key Management Personnel of the Bank are as under:
Financial Year 2011-12
Mr. Murali M. Natrajan
: Managing Director
Managerial Remuneration
: ` 2.86 crore
Financial Year 2010-11
Mr. Murali M. Natrajan
Managerial Remuneration

:
:

Managing Director
` 1.99 crore

F-107

ANNUAL REPORT 2011-12

61

DCB BANK

9.6 Deferred Tax

a. In accordance with AS-22 on Accounting for Taxes on Income issued by the Institute of Chartered Accountants of India, the Bank has recognized
Deferred Tax Assets on such timing differences where there is a virtual certainty based on contracts and arrangements in place that such deferred tax
assets can be reversed. Deferred Tax Assets have been recognized on unabsorbed depreciation to the extent of deferred tax liability arising on account
of timing difference arising between book depreciation and tax depreciation.

b. The composition of Deferred Tax Liabilities (DTL) & Deferred Tax Assets (DTA) is as under:
(` in crore)

Sr.
No.

Particulars

A.

DTA :

(i)

Provision for Loan Losses/Non Banking Assets

(ii)

Unabsorbed Depreciation

(iii)

Provision for Other Assets

As at March 31, 2012

Total DTA

As at March 31, 2011

10.41

12.15

10.41

12.15

B.

DTL :

(i)

Depreciation

10.41

12.15

Total DTL

10.41

12.15

NET DTA

C.

9.7 Provisions, Contingent Liabilities and Contingent Assets

Description of Contingent Liabilities
Sr. No.

Contingent Liability (*)

Brief Description

1.

Claim against the Bank not acknowledged as

Debts.

An amount of ` 119.14 crore is outstanding as at March 31, 2012, as claims against the Bank
not acknowledged as Debts, including ` 104.99 crore being in the nature of a contingent liability
on account of proceedings pending with Income Tax authorities. Of this, claims amounting to
` 17.93 crore, for which relief was granted to the Bank, has been appealed against by the Income
Tax Department. The Bank does not expect the outcome of these proceedings to have a materially
adverse effect on its financial results.

2.

Liability on account of outstanding forward

exchange and derivative contracts

The Bank enters into foreign exchange contracts on its own account and for customers and
currency options/swaps on a pure hedge basis. The Bank also enters into Interest rates swaps
on its own account. Forward exchange contracts are commitments to buy or sell foreign currency
at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows
by way of interest/principal in two currencies, based on ruling spot rates. Interest rate swaps are
commitments to exchange fixed and floating interest rate cash flows. A foreign currency option is an
agreement between two parties in which one grants to the other the right to buy or sell a specified
amount of currency at a specific price within a specified time period or at a specified future time.

3.

Guarantees given on behalf of constituents,

Acceptances, Endorsements and Others

As a part of its commercial banking activities, the Bank issues Letters of Credit and Guarantees on
behalf of its customers.

4.

Other items for which the Bank is contingently

liable.

These include liability on account of credit enhancement relating to the sale of mortgage loan
portfolio undertaken by the Bank.

*Also refer Schedule 12.

10 Additional Disclosure

10.1 Details of Provisions & Contingencies debited to Profit & Loss Account
(` in crore)
Particulars

March 31, 2012

0.83

0.15

Provision/write-off towards non-performing assets

24.59

46.71

Provision for Standard Assets

Depreciation on Investments

(0.06)

0.06

Provision for Income Tax (including Deferred Tax)

0.03

7.83

Sacrifice in One Time Settlement

0.78

0.08

(0.30)

6.72

Provision for Other Assets

Provisions for Restructured Advances*
Total
* Provision for restructured advances includes NPV provision on standard advances of ` (0.19) Cr. (Previous year: ` (0.44) Cr)

March 31, 2011

62

ANNUAL REPORT 2011-12

F-108

2.87

3.08

28.74

64.63

DCB BANK

In respect of penal charges accrued on delayed Equated Monthly Instalments (EMI) and returned cheques / ECS on secured EMI based loans, in the
quarter ended December 31, 2011 the Bank increased provision coverage to cover fully such uncollected amounts. Consequently Provisions/write-off
towards non-performing assets are higher by ` 3.54 crore in the year ended March 31, 2012.

10.2 Floating Provisions

As per Banks laid down floating provision policy, there are no floating provisions made during the year ended March 31, 2012 or in the previous financial
year.

10.3 Provisioning Coverage Ratio

In accordance with RBI circular, the Banks Provision Coverage Ratio at March 31, 2012 is 91.17% (previous year: 87.64%).
10.4 Customer Complaints+
Particulars
(a) No. of complaints pending at the beginning of the year
(b) No. of complaints received during the year
(c) No. of complaints redressed during the year
(d) No. of complaints pending at the end of the year*

As at March 31, 2012

9
207
209
7

As at March 31, 2011

12
208
211
9

* Out of 7 (Previous year: 9) pending complaints, 4 (Previous year: 6) pertain to CDRF (Consumer Disputes Redressal Forum) cases.
+ As compiled by management and relied upon by the auditors.

10.5 Awards passed by the Banking Ombudsman+

Particulars
(a)
(b)
(c)
(d)

No. of unimplemented Awards at the beginning of the year

No. of Awards passed by Banking Ombudsman during the year
No. of Awards implemented during the year
No. of unimplemented Awards Pending at the end of the year

As at March 31, 2012

As at March 31, 2011

-
-
-
-

+ As compiled by management and relied upon by the auditors.

10.6 Letters Of Comfort

The Bank has issued letters of comfort to other banks. Outstanding letters of comfort as on March 31, 2012 aggregate to ` 189.31 crore (previous year:
` 266.83 crore). In the Banks assessment no financial impact is likely to arise.

10.7 Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act 2006 which came into force from October 2, 2006 certain disclosures are required to
be made relating to Micro, Small and Medium Enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of
interest payments due to delays in such payments. The above is based on information provided by the Bank which has been relied upon by the auditors.
11 OTHER MATTERS

11.1 Amount of Provisions made for Income-tax (including Deferred Tax) during the year
(` in crore)
Particulars
Provision for tax

March 31, 2012

March 31, 2011

0.03

7.83

11.2 Disclosure of penalties imposed by RBI

RBI vide its letter dated April 26, 2011 had directed the Bank to pay a penalty of ` 10 lakh. The penalty had been imposed in terms of provisions under
section 47 A(1)(b) read with sec 46(4)(i) of the Banking Regulations Act, 1949 for contravention of statutory and regulatory guidelines in few derivative
contracts entered into by the Bank during FY 06-07 & 07-08. The Bank has since paid the penalty vide pay order dated May 05, 2011.

Other than above no penalties have been imposed by the RBI on the Bank during the year ended March 31, 2012 as well as in the previous financial year.

F-109

ANNUAL REPORT 2011-12

63

DCB BANK

11.3 Revaluation of Fixed Assets

The Bank revalued its owned premises as at March 2009 which resulted in a revaluation gain of ` 52.02 crore which was credited to Revaluation Reserve
as at that date. The Bank computes depreciation on such revalued premises over its estimated remaining useful life and accordingly an amount of ` 1.19
crore has been accounted as depreciation and reduced from the Revaluation Reserve for the year ended March 31, 2012 (previous year: ` 2.50 crore).

11.4 Assets Taken Under Operating Lease

(` in crore)
Particulars

March 31, 2012

March 31, 2011

Minimum Lease Rent payable

Payable not later than 1 year
Payable later than 1 year but not later than 5 years
Payable later than 5 years

8.27

13.45

15.36

34.00

0.06

1.32

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.

11.5 Unamortised Pension and Gratuity Liabilities

Consequent on the re-opening of pension option to employees of Public Sector Banks and enhancement in gratuity limits following the amendment to
Payment of Gratuity Act 1972, RBI vide its circular DBOD.No.BP.BC.80/21.04.018/2010-11 dated February 9, 2011 permitted banks to amortize over a
period of five years beginning with the financial year ending March 31, 2011 the expenditure incurred by them on re-opening of pension option as well as
enhancement in gratuity limits as aforesaid, subject to certain conditions.

The Bank does not have any unamortized Pension and Gratuity Liabilities in its books as on March 31, 2012.

12 INCOME FROM BANCASSURANCE BUSINESS

(` in crore)
March 31, 2012

March 31, 2011

For selling life insurance policies

8.41

10.44

For selling non life insurance policies

0.59

0.08

3.

For selling mutual fund products

2.12

1.43

4.

Others

Sr.
No.

Nature of Income

1.
2.

13 DRAW DOWN FROM RESERVES

The Bank has not undertaken any draw down of reserves during the year ended March 31, 2012. (Previous year: Nil)
14 Net overnight open position outstanding as on March 31, 2012 is ` 12.73 crore (Previous year ` 1.44 crore).
15 Previous years figures have been regrouped / reclassified, wherever considered necessary, in order to make them comparable with figures for the current year.
16 These are the Notes appended to and forming part of the Financial Statements for the year ended March 31, 2012.

For and on behalf of the Board of Directors

For S.R. Batliboi & Co.

Firm Registration Number: 301003E
Chartered Accountants

Nasser Munjee
Chairman

Murali M. Natrajan
MD & CEO

Narayan K. Seshadri
Director

per Surekha Gracias

Bharat Sampat
H.V. Barve
Partner
EVP & CFO
VP & Company Secretary
Membership No. : 105488
Place: Mumbai
Date: April 13, 2012

64

ANNUAL REPORT 2011-12

Place: Bengaluru
Date: April 13, 2012

F-110

DECLARATION
The Bank certifies that all relevant provisions of Chapter VIII and Schedule XVIII of the SEBI ICDR
Regulations have been complied with and no statement made in this Placement Document is contrary to the
provisions of Chapter VIII and Schedule XVIII of the SEBI ICDR Regulations and that all approvals and
permissions required to carry on our Banks business have been obtained, are currently valid and have been
complied with. Our Bank further certifies that all the statements in this Placement Document are true and
correct.
Signed by:

________________________
Name: Murali M. Natrajan
Designation: Managing Director & Chief Executive Officer

Place: Mumbai
Date: October 8, 2014

212

DECLARATION UNDER PAS 4

We, the directors of the Bank certify that:
(i)

the Bank has complied with the provisions of the Companies Act, 2013 and the rules made thereunder;

(ii)

the compliance with the Companies Act, 2013 and the rules does not imply that payment of dividend or
interest or repayment of debentures, if applicable, is guaranteed by the Central Government; and

(iii)

the monies received under the offer shall be used only for the purposes and objects indicated in this
Placement Document (which includes disclosures prescribed under Form PAS-4).

Signed by:

________________________
Name: Murali M. Natrajan
Designation: Managing Director & Chief Executive Officer

I am authorized by the Board of Directors of the Bank, vide resolution dated September 29, 2014, 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 the 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 by:

________________________
Name: Murali M. Natrajan
Designation: Managing Director & Chief Executive Officer

Place: Mumbai
Date: October 8, 2014

213

DCB BANK LIMITED

REGISTERED AND CORPORATE OFFICE OF THE ISSUER
601 & 602, 6th Floor, Peninsula Business Park,Tower A
Senapati Bapat Marg, Lower Parel
Mumbai 400 013, Maharashtra, India
CIN - L99999MH1995PLC089008
Website: www.dcbbank.com Email : investorgrievance@dcbbank.com
COMPLIANCE OFFICER
Mr. Hemant Barve, Company Secretary and Compliance Officer
601 & 602, Peninsula Business Park, 6th Floor, Tower A
Senapati Bapat Marg, Lower Parel
Mumbai 400 013, Maharashtra, India
Tel: +91 22 6618 7000
Email: investorgrievance@dcbbank.com/ barve@dcbbank.com
SOLE GLOBAL COORDINATOR AND BOOK RUNNING LEAD MANAGER
Ambit Corporate Finance Private Limited
Ambit House
449, Senapati Bapat Marg, Lower Parel
Mumbai 400 013, Maharashtra, India
ADVISOR TO THE BANK
Spark Capital Advisors (India) Private Limited
Reflections New No. 2
Leith Castle Center Street, Santhome High Road
Chennai 600 028, Tamil Nadu, India
LEGAL ADVISORS TO THE ISSUE
Khaitan & Co
One Indiabulls Centre, 13th Floor, Tower 1
841 Senapati Bapat Marg, Lower Parel
Mumbai 400 013, Maharashtra, India
LEGAL ADVISORS TO THE SOLE GLOBAL COORDINATOR AND BOOK RUNNING LEAD
MANAGER (as to U.S. federal securities law)
Squire Patton Boggs Singapore LLP
10 Collyer Quay
#03-01/02 Ocean Financial Center
Singapore 049 315
AUDITORS
BSR & Co. LLP
CHARTERED ACCOUNTANTS
Lodha Excelus, 1st Floor, Apollo Mills Compound
N.M. Joshi Marg, Mahalakshmi
Mumbai 400 011, Maharashtra, India

214