FUTURE ICICI BANK Directors Report

DIRECTORS'''' REPORT


The Directors have pleasure in presenting the Twenty-Third Annual Report of ICICI Bank Limited along with the audited financial statements for the year ended March 31, 2017.


FINANCIAL HIGHLIGHTS


The financial performance for fiscal 2017 is summarized in the following table:










































Rs, in billion, except percentages



Fiscal 2016



Fiscal 2017



% change



Net interest income and other income



365.46



412.42



12.8%



Operating expenses



126.83



147.55



16.3%



Provisions & contingencies (including collective contingency and related reserve for fiscal 2016)1



116.67



152.08



30.4%



Profit before tax



121.96



112.79



(7.5)%



Profit after tax



97.26



98.01



0.8%



1. Excludes provision for taxes.



























Rs, in billion, except percentages



Fiscal 2016



Fiscal 2017



% change



Consolidated profit before tax and minority interest



143.04



138.09



(3.5)%



Consolidated profit after tax and minority interest



101.80



101.88



0.1%



Appropriations


The profit after tax of the Bank for fiscal 2017 is Rs, 98.01 billion after provisions and contingencies of Rs, 152.08 billion, provision for taxes of Rs, 14.78 billion and all expenses. The disposable profit is Rs, 269.33 billion, taking into account the balance of Rs, 171.32 billion brought forward from the previous year. Your Bank''''s dividend policy is based on the profitability and key financial metrics of the Bank, the Bank''''s capital position and requirements and the regulations pertaining to the same. Your Bank has a consistent dividend payment history. Given the financial performance for fiscal 2017 and in line with the Bank''''s dividend policy, your Directors are pleased to recommend a dividend of Rs, 2.50 per equity share (pre-bonus issue) for the year ended March 31, 2017 and have appropriated the disposable profit as follows:




























































Rs, billion



Fiscal 2016



Fiscal 2017



To Statutory Reserve, making in all Rs, 212.02 billion



24.32



24.50



To Special Reserve created and maintained in terms of Section 36(1)(viii) of the Income Tax Act, 1961, making in all Rs, 83.79 billion



13.50



4.50



To Capital Reserve, making in all Rs, 102.61 billion1



23.82



52.93



To/(from) Investment Reserve Account, making in all Nil



-



-



To Revenue and other reserves, making in all Rs, 32.00 billion2



5.01



0.01



Dividend for the year (proposed)



- On equity shares for fiscal 2016 @ Rs, 5.00 per share of face value Rs, 2.00 each34



29.11



(0.06)



- On preference shares for fiscal 2016 @ Rs, 100.00 per preference share (?)3



35,000



-



- Corporate dividend tax4



2.79



-



Leaving balance to be carried forward to the next year



171.32



187.45



In terms of the Reserve Bank of India circular no. DBR.BPBC.No.63/21.04.018/2016-17 dated April 18, 2017, banks are required to disclose the divergences in asset classification and provisioning consequent to RBI''''s annual supervisory process in their notes to accounts to the financial statements.


The Bank prepares its financial statements in accordance with the applicable accounting standards, RBI guidelines and other applicable laws/regulations. RBI, under its risk-based supervision exercise, carries out the risk assessment of the Bank on an annual basis. This assessment is initiated subsequent to the finalization, completion of audit and publication of audited financial statements for a financial year and typically occurs a few months after the financial year-end. As a part of this assessment, RBI separately reviews asset classification and provisioning of credit facilities given by the Bank to its borrowers. The divergences, if any, in classification or provisioning arising out of the supervisory process are given effect to in the financial statements in subsequent periods after conclusion of the exercise.


During the supervisory process for FY2016, which was conducted in FY2017, the incremental gross NPAs assessed by RBI amounted to Rs, 51.05 billion. The additional provisioning assessed by RBI was Rs, 10.71 billion, with a post-tax impact of Rs, 7.00 billion on the net profit after tax of the Bank. All these accounts have been classified as NPA by the Bank during FY2017. About 40% of the total amount was classified as NPA during the quarter ended June 30, 2016 as per the Bank''''s application of relevant RBI guidelines, prior to the annual supervisory process of RBI. Out of the incremental gross NPAs amounting to Rs, 51.05 billion assessed by RBI, about 84% related to accounts internally rated below investment grade in the key sectors disclosed by the Bank, and about 7% was from the restructured asset portfolio.


Bonus Shares


The Board of Directors at its Meeting held on May 3, 2017 approved issue of bonus shares, in the proportion of 1:10, i.e. 1 (One) bonus equity share of Rs, 2 each for every 10 (Ten) fully paid-up equity shares held (including shares underlying ADS) as on the record date, subject to approval by the Members of the Bank. Subsequent to the bonus issue, the ratio of ADSs to equity shares will remain unaffected and each ADS after the bonus issue will continue to represent two equity share of par value of Rs, 2 per share. The bonus issue of equity shares would, inter alia, require appropriate adjustments with respect to all the stock options of the Bank under The Employee Stock Option Scheme 2000.


The Bank is seeking approval of shareholders through postal ballot notice dated May 5, 2017 for increase in the Authorized Share Capital, consequential alterations to the Memorandum and Articles of Association of the Bank and issuance of bonus shares. The postal ballot notice can be viewed on the Bank''''s website at the we blink https://www.icicibank.com/ aboutus/notice.page.


DIVIDEND DISTRIBUTION POLICY


In accordance with the Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank has formulated a Dividend Distribution Policy and the same is annexed herewith as Annexure F. The Policy is hosted on the website of the Bank and can be viewed (https://www.icicibank.com/ managed-assets/docs/investor/policy-for-determining-material-subsidiaries/dividend-distribution-policy.pdf).


PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS


Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.


SUBSIDIARY, ASSOCIATE AND JOINT VENTURE COMPANIES


Jhagadia Copper Limited and FINO Pay Tech Limited, which were considered as associates under Section 2(6) of the Companies Act, 2013, ceased to be associates of the Bank effective June 30, 2016 and January 5, 2017 respectively.


The particulars of subsidiary and associate companies as on March 31, 2017 have been included in Form MGT-9 which is annexed to this report as Annexure D.


HIGHLIGHTS OF PERFORMANCE OF SUBSIDARIES, ASSOCIATES AND JOINT VENTURE COMPANIES AND THEIR CONTRIBUTION TO THE OVERALL PERFORMANCE OF THE COMPANY


The performance of subsidiaries and associates and their contribution to the overall performance of the Bank as on March 31, 2017 has been annexed to this report as Annexure A. A summary of key financials of the Bank''''s subsidiaries is also included in this Annual report.


The highlights of the performance of key subsidiaries are given as a part of Management''''s Discussion & Analysis under section "Consolidated financials as per Indian GAAP".


The Bank will make available separate audited financial statements of the subsidiaries to any Member upon request. These documents/details are available on the Bank''''s website (www.icicibank.com) and will also be available for inspection by any Member or trustee of the holder of any debentures of the Bank at its Registered Office and Corporate Office. As required by Accounting Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the Bank''''s consolidated financial statements included in this Annual Report incorporate the accounts of its subsidiaries and other consolidating entities.


SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY AND ITS FUTURE OPERATIONS


There are no significant and/or material orders passed by the Regulators or Courts or Tribunals impacting the going concern status or future operations of the Bank.


DIRECTORS AND OTHER KEY MANAGERIAL PERSONNEL


The Board of the Bank at March 31, 2017 consisted of 13 Directors, out of which seven are independent Directors, one is a Government Nominee Director and five are whole time Directors.


Changes in the composition of the Board of Directors and other Key Managerial Personnel


The Board of Directors at their Meeting held on April 29, 2016 approved the appointment of Vijay Chandok as a whole time Director (designated as executive Director) for a period of five years effective from the date of receipt of RBI approval. The Members at their Meeting held on July 11, 2016 approved the appointment of Vijay Chandok for a period of five years effective the date of receipt of RBI approval. RBI approved the appointment of Vijay Chandok for a period of three years effective from July 28, 2016 up to July 27, 2019.


The Board of Directors at their Meeting held on October 14, 2016 approved the appointment of Anup Bagchi as a whole time Director (designated as executive Director) for a period of five years effective from February 1, 2017 or the date of receipt of approval from RBI, whichever is later. RBI approved the appointment of Anup Bagchi for a period of three years effective February 1, 2017 up to January 31, 2020. The said appointment is subject to the approval of Members. Approval of the Members is being sought for Anup Bagchi''''s appointment for five years in the Notice of the forthcoming Annual General Meeting vide item no. 7 and 8.


Amit Agrawal, Joint Secretary, Department of Financial Services, Ministry of Finance has been nominated by Government of India as a Director on the Board of the Bank effective January 16, 2017 in place of Alok Tandon.


M. S. Ramachandran, independent Director ceased to be a Director on the Board of the Bank effective close of business hours on April 24, 2017 pursuant to completion of his maximum permissible tenure of eight years as per the provisions of the Banking Regulation Act, 1949. The Board placed on record its appreciation of the valuable contribution and guidance provided by Alok Tandon and M. S. Ramachandran to the Bank.


Rajiv Sabharwal, executive Director stepped down from his position as an executive Director effective close of business hours on January 31, 2017 consequent to his decision to pursue other opportunities. The Board placed on record its appreciation for Rajiv Sabharwal''''s contribution to the growth of the Bank.


Declaration of Independence


All independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 of the Companies Act, 2013 and Regulation 16 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 which have been relied on by the Bank and were placed at the Board Meeting held on April 6, 2017.


Retirement by rotation


In terms of Section 152 of the Companies Act, 2013, Vishakha Mulye would retire by rotation at the forthcoming AGM and is eligible for re-appointment. Vishakha Mulye has offered herself for re-appointment.


AUDITORS


Statutory Auditors


At the AGM held on June 30, 2014, the Members approved the appointment of M/s B S R & Co. LLP, Chartered Accountants as statutory auditors for a period of four years commencing from the Twentieth AGM till the conclusion of the Twenty-Fourth AGM subject to the annual approval of RBI and ratification by the Members every year. As recommended by the Audit Committee, the Board has proposed the ratification of appointment of M/s B S R & Co. LLP, Chartered Accountants as statutory auditors for fiscal 2018. Their appointment for fiscal 2018 has been approved by RBI. The appointment is accordingly proposed in the Notice of the forthcoming AGM vide item no. 5 for ratification by Members.


There are no qualifications, reservation or adverse remarks made by the statutory auditors in the audit report.


Secretarial Auditors


Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank with the approval of its Board, appointed M/s. Parikh Parekh & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Bank for the financial year ended March 31, 2017. The Secretarial Audit Report is annexed herewith as Annexure B. There are no qualifications, reservation or adverse remark or disclaimer made by the auditor in the report save and except disclaimer made by them in discharge of their professional obligation.


PERSONNEL


The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in an Annexure and forms part of this report. In terms of Section 136(1) of the Companies Act, 2013, the Report and the Accounts are being sent to the Members excluding the aforesaid Annexure. Any Member interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Bank.


INTERNAL CONTROL AND ITS ADEQUACY


The Bank has adequate internal controls and processes in place with respect to its financial statements which provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. These controls and processes are driven through various policies, procedures and certifications. The processes and controls are reviewed periodically. The Bank has a mechanism of testing the controls at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.


DISCLOSURE UNDER FOREIGN EXCHANGE MANAGEMENT ACT, 1999


The Bank has obtained a certificate from its statutory auditors that it is in compliance with the Foreign Exchange Management Act, 1999 provisions with respect to investments made in its consolidated subsidiaries and associates during fiscal 2017.


RELATED PARTY TRANSACTIONS


The Bank undertakes various transactions with related parties in the ordinary course of business. The Bank has a Board approved policy on Related Party Transactions, which has been disclosed on the website of the Bank and can be viewed at https://www.icicibank.com/managed-assets/docs/personal/general-links/related-party-transactions-policy.pdf. The Bank also has a Board approved Group Arm''''s Length Policy which requires transactions with the group companies to be at arm''''s length. The transactions between the Bank and its related parties, during the year ended March 31, 2017, were in the ordinary course of business and based on the principles of arm''''s length. The details of material related party transactions at an aggregate level for year ended March 31, 2017 are given in Annexure C.


EXTRACT OF ANNUAL RETURN


The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure D.


BUSINESS RESPONSIBILITY REPORTING


Business Responsibility Report as stipulated under Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been hosted on the website of the Bank (http://www.icicibank.com/aboutus/annual.html). Any Member interested in obtaining a physical copy of the same may write to the Company Secretary at the Registered Office of the Bank.


RISK MANAGEMENT FRAMEWORK


The Bank''''s risk management framework is based on a clear understanding of various risks, disciplined risk assessment and measurement procedures and continuous monitoring. The policies and procedures established for this purpose are continuously benchmarked with international best practices. The Board of Directors has oversight on all the risks assumed by the Bank. Specific Committees have been constituted to facilitate focused oversight of various risks, as follows:


- The Risk Committee of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity, operational, outsourcing risks and business continuity management. The Committee also reviews the Risk Appetite & Enterprise Risk Management frameworks, Internal Capital Adequacy Assessment Process (ICAAP) and stress testing. The stress testing framework includes a range of Bank-specific, market (systemic) and combined scenarios. The ICAAP exercise covers the domestic and overseas operations of the Bank, banking subsidiaries and material non-banking subsidiaries. The Committee reviews migration to the advanced approaches under Basel II and implementation of Basel III, risk return profile of the Bank, and the activities of the Asset Liability Management Committee. The Committee reviews the level and direction of major risks pertaining to credit, market, liquidity, operational, technology, compliance, group, management and capital at risk as part of risk dashboard. In addition, the Committee has oversight on risks of subsidiaries covered under the Group Risk Management Framework. The Risk Committee also reviews the Liquidity Contingency Plan for the Bank and the various thresholds set out in the Plan.


- The Credit Committee of the Board, apart from sanctioning credit proposals based on the Bank''''s credit authorization framework, reviews developments in key industrial sectors and the Bank''''s exposure to these sectors as well as to large borrower accounts and borrower groups. The Credit Committee also reviews the major credit portfolios, nonperforming loans, accounts under watch, overdoes and incremental sanctions.


- The Audit Committee of the Board provides direction to and monitors the quality of the internal audit function and also monitors compliance with inspection and audit reports of Reserve Bank of India, other regulators and statutory auditors.


- The Asset Liability Management Committee provides guidance for management of liquidity of the overall Bank and management of interest rate risk in the banking book within the broad parameters laid down by the Board of Directors/ Risk Committee.


Summaries of reviews conducted by these Committees are reported to the Board on a regular basis.


Policies approved from time to time by the Board of Directors/Committees of the Board form the governing framework for each type of risk. The business activities are undertaken within this policy framework. Independent groups and subgroups have been constituted across the Bank to facilitate independent evaluation, monitoring and reporting of various risks. These groups function independently of the business groups/sub-groups.


The Bank has dedicated groups, namely, the Risk Management Group, Compliance Group, Corporate Legal Group, Internal Audit Group and the Financial Crime Prevention & Reputation Risk Management Group, with a mandate to identify, assess and monitor all of the Bank''''s principal risks in accordance with well-defined policies and procedures. The Risk Management Group is further organized into the Credit Risk Management Group, Market Risk Management Group, Operational Risk Management Group and Information Security Group. These groups are completely independent of all business operations and coordinate with representatives of the business units to implement the Bank''''s risk management policies and methodologies. The Internal Audit and Compliance groups are responsible to the Audit Committee of the Board.


INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL), ACT, 2013


Please refer Principle 3 under Section E of the Business Responsibility Report.


CORPORATE GOVERNANCE


The corporate governance framework at ICICI Bank is based on an effective independent Board, the separation of the Board''''s supervisory role from the executive management and the constitution of Board Committees, which at March 31, 2017 comprised majority of independent Directors and most of the Committees were chaired by independent Directors, to oversee critical areas.


I. Philosophy of Corporate Governance


ICICI Bank''''s corporate governance philosophy encompasses regulatory and legal requirements, which aims at a high level of business ethics, effective supervision and enhancement of value for all stakeholders. The corporate governance framework adopted by the Bank already encompasses significant portion of the recommendations contained in the ''''Corporate Governance Voluntary Guidelines 2009'''' issued by the Ministry of Corporate Affairs, Government of India.


Whistle Blower Policy


The Bank has formulated a Whistle Blower Policy. The policy comprehensively provides an opportunity for any employee/ Director of the Bank to raise any issue concerning breaches of law, accounting policies or any act resulting in financial or reputation loss and misuse of office or suspected or actual fraud. The policy provides for a mechanism to report such concerns to the Audit Committee through specified channels. The policy has been periodically communicated to the employees and also posted on the Bank''''s intranet. The Whistle Blower Policy complies with the requirements of Vigil mechanism as stipulated under Section 177 of the Companies Act, 2013. The details of establishment of the Whistle Blower Policy/Vigil mechanism have been disclosed on the website of the Bank.


Code of Conduct as prescribed under Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015


In accordance with the requirements of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, ICICI Bank has instituted a comprehensive code of conduct to regulate, monitor and report trading by its directors, employees and other connected persons.


Group Code of Business Conduct and Ethics


The Group Code of Business Conduct and Ethics for Directors and employees of the ICICI Group aims at ensuring consistent standards of conduct and ethical business practices across the constituents of the ICICI Group. This Code is reviewed on an annual basis and the latest Code is available on the website of the Bank (www.icicibank.com). Pursuant to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a confirmation from the Managing Director & CEO regarding compliance with the Code by all the Directors and senior management forms part of the Annual Report.


Material Subsidiaries


In accordance with the requirements of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank has formulated a Policy for determining Material Subsidiaries and the same has been hosted on the website of the Bank (https://www.icicibank.com/managed-assets/docs/investor/policy-for-determining-material-subsidiaries/policy-for-determining-material-subsidiaries.pdf).


Familiarization Programme for independent Directors


Independent Directors are familiarized with their roles, rights and responsibilities in the Bank as well as with the nature of industry and business model of the Bank through induction programmes at the time of their appointment as Directors and through presentations on economy & industry overview, key regulatory developments, strategy and performance which are made to the Directors from time to time. The details of the familiarization programmes have been hosted on the website of the Bank and can be accessed on the link: (http://www.icicibank.com/managed-assets/docs/about-us/board-of-directors/familiarisation-programme-for-independent-directors.pdf).


CEO/CFO Certification


In terms of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the certification by the Managing Director & CEO and Chief Financial Officer on the financial statements and internal controls relating to financial reporting has been obtained.


Board of Directors


ICICI Bank has a broad-based Board of Directors, constituted in compliance with the Banking Regulation Act, 1949, the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and in accordance with good corporate governance practices. The Board functions either as a full Board or through various committees constituted to oversee specific operational areas. The Board has constituted various committees, namely, Audit Committee, Board Governance, Remuneration & Nomination Committee, Corporate Social Responsibility Committee, Credit Committee, Customer Service Committee, Fraud Monitoring Committee, Information Technology Strategy Committee, Risk Committee, Stakeholders Relationship Committee and Review Committee for Identification of Wilful Defaulters/Non Co-operative Borrowers. At March 31, 2017, independent Directors constituted a majority of these Board Committees and all Committees except the Credit Committee and Review Committee for Identification of Willful Defaulters/Non Co-operative Borrowers were chaired by independent Directors.


There were nine Meetings of the Board during fiscal 2017 - on April 29, June 28, July 29, September 20, September 26, October 14, November 7 and November 21 in 2016, and January 31 in 2017.


At March 31, 2017, the Board of Directors consisted of 13 members. There were no inter-se relationships between any of the Directors. The names of the Directors, their attendance at Board Meetings during the year, attendance at the last Annual General Meeting (AGM) and the number of other directorships and board committee memberships held by them at March 31, 2017 are set out in the following table.























































































Name of Director



Board Meetings attended during the year



Attendance at last AGM (July 11, 2016)



Number of other directorships



Number of other committee3 memberships



of Indian public limited companies1



of other companies2



Independent Directors



M. K. Sharma, Chairman



(DIN: 00327684)



9/9



Present



4



6



4(2)



Dileep Choksi*



(DIN: 00016322)



8/9



Present



7



3



6(4)



Homi Khusrokhan



(DIN: 00005085)



8/9



Present



3



1



2(1)



M. S. Ramachandran



(DIN: 00943629)



9/9



Present



6



3



3(1)


























































































































Board Meetings attended during the year



Attendance at last AGM (July 11, 2016)



Number of other directorships



Number of other committee3 memberships



Name of Director



of Indian public limited companies1



of other companies2



Tushaar Shah# (DIN: 03055738)



6/9



Present



V K. Sharma (DIN: 02449088)



4/9



Absent



7



5



V. Sridar (DIN: 02241339)



8/9



Present



9



7(5)



Government Nominee Director



Alok Tandon (up to January 16, 2017) (DIN: 01841717)



0/8



Absent



N.A.



N.A.



N.A.



Amit Agrawal (w.e.f. January 16, 2017) (DIN: 07117013)



0/1



N.A.



Wholetime/Executive Directors



Chanda Kochhar (DIN: 00043617)



9/9



Present



4



2



N. S. Kannan (DIN: 00066009)



9/9



Present



4



2



2



K. Ramkumar (up to close of business hours on April 29, 2016)


(DIN: 00244711)



1/1



N.A.



N.A.



N.A.''''



N.A.



Rajiv Sabharwal (up to close of business hours on January 31, 2017)


(DIN: 00057333)



8/9



Present



N.A.



N.A.



N.A.



Vishakha Mulye (DIN: 00203578)



9/9



Present



1



Vijay Chandok (w.e.f. July 28, 2016) (DIN: 01545262)



7/7



N.A.



2



2



1



Anup Bagchi (w.e.f. February 1, 2017) (DIN: 00105962)



0/0



N.A.



3



-



2



* Participated in one Meeting through tele-conference.


# Participated in two Meetings through tele-conference.


1. Comprises public limited companies incorporated in India.


2. Comprises private limited companies incorporated in India, foreign companies, statutory bodies and insurance corporations but excludes Section 8 companies and not for profit foreign companies.


3. Comprises only Audit Committee and Stakeholders'''' Relationship Committee of Indian public limited companies. Figures in parentheses indicate committee chairpersonships.


Upon completion of his tenure as a non-executive Director, M. S. Ramachandran ceased to be a Director on the Board of the Bank with effect from April 25, 2017.


In terms of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the number of Committees (Audit Committee and Stakeholders'''' Relationship Committee) of public limited companies in which a Director is a member/chairman were within the limits provided under listing regulations, for all the Directors of the Bank. The number of directorships of each independent Director is also within the limits prescribed under listing regulations.


The terms of reference of the Board Committees as mentioned earlier, their composition and attendance of the respective Members at the various Committee Meetings held during fiscal 2017 are set out below:


II. Audit Committee Terms of Reference


The Audit Committee provides direction to the audit function and monitors the quality of internal and statutory audit. The responsibilities of the Audit Committee include examining the financial statements and auditors'''' report and overseeing the financial reporting process to ensure fairness, sufficiency and credibility of financial statements, review of the quarterly and annual financial statements before submission to the Board, recommendation of appointment, terms of appointment, fixing remuneration and removal of central and branch statutory auditors and chief internal auditor, approval of payment to statutory auditors for other permitted services rendered by them, review and monitor with the management the auditor''''s independence, performance and effectiveness of audit process, approval of transactions with related parties or any subsequent modifications, review of statement of significant related party transactions, review of functioning of Whistle Blower Policy, review of the adequacy of internal control systems and the internal audit function, review of compliance with inspection and audit reports and reports of statutory auditors, review of the findings of internal investigations, review of management letters/ letters on internal control weaknesses issued by statutory auditors, reviewing with the management the statement of uses/ application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for the purposes other than those stated in the offer document/prospectus/notice and the report submitted by the monitoring agency, monitoring the utilization of proceeds of a public or rights issue and making appropriate recommendations to the Board to take steps in this matter, discussion on the scope of audit with external auditors, examination of reasons for substantial defaults, if any, in payment to stakeholders, valuation of undertakings or assets, evaluation of risk management systems, scrutiny of inter-corporate loans and investments. The Audit Committee is also empowered to appoint/oversee the work of any registered public accounting firm, establish procedures for receipt and treatment of complaints received regarding accounting and auditing matters and engage independent counsel as also provide for appropriate funding for compensation to be paid to any firm/advisors. In addition, the Audit Committee also exercises oversight on the regulatory compliance function of the Bank. The Audit Committee is also empowered to approve the appointment of the CFO (i.e., the whole time Finance Director or any other person heading the finance function or discharging that function) after assessing the qualifications, experience and background, etc. of the candidate.


Composition


At March 31, 2017, the Audit Committee comprised of four independent Directors and was chaired by Homi Khusrokhan, an independent Director. There were nine Meetings of the Committee during the year.


The details of the composition of the Committee and attendance at its Meetings are set out in the following table:


























Name of Member



Number of meetings attended



Homi Khusrokhan, Chairman



8/9



Dileep Choksi, Alternate Chairman



9/9



M. S. Ramachandran



7/9



V. Sridar*



8/9



* Participated in one Meeting through video - conference.


Upon completion of his tenure as a non-executive Director, M. S. Ramachandran ceased to be a Member of the Committee with effect from April 25, 2017.


III. Board Governance, Remuneration & Nomination Committee Terms of Reference


The functions of the Committee include recommending appointments of Directors to the Board, identifying persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down and recommending to the Board their appointment and removal, formulate a criteria for the evaluation of the performance of the Whole time/independent Directors and the Board and to extend or continue the term of appointment of independent Director on the basis of the report of performance evaluation of independent Directors, recommending to the Board a policy relating to the remuneration for the Directors, key managerial personnel and other employees, recommending to the Board the remuneration (including performance bonus and perquisites) to whole time Directors (WTDs), commission and fee payable to non-executive Directors subject to applicable regulations, approving the policy for and quantum of bonus payable to the members of the staff including senior management and key managerial personnel, formulating the criteria for determining qualifications, positive attributes and independence of a Director, framing policy on Board diversity, framing guidelines for the Employees Stock Option Scheme (ESOS) and decide on the grant of Bank''''s stock options to employees and WTDs of the Bank and its subsidiary companies.


Composition


At March 31, 2017, the Board Governance, Remuneration & Nomination Committee comprised of three independent Directors and was chaired by Homi Khusrokhan, an independent Director. There were ten Meetings of the Committee during the year. The details of the composition of the Committee and attendance at its Meetings are set out in the following table:

























Name of Member



Number of meetings attended



Homi Khusrokhan, Chairman



8/10



M. K. Sharma



9/10



M. S. Ramachandran



10/10



Upon completion of his term as a non-executive Director M. S. Ramachandran ceased to be a Member of the Committee with effect from April 25, 2017. The Board at its Meeting held on April 6-7, 2017 reconstituted the Committee pursuant to which V. K. Sharma was appointed as a Member of the Committee with effect from April 6, 2017.


Policy/Criteria for Directors'''' Appointment


The Bank with the approval of its Board Governance, Remuneration & Nomination Committee (Committee) has put in place a policy on Directors'''' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director as well as a policy on Board diversity. The policy has been framed based on the broad principles as outlined hereinafter. The Committee would evaluate the composition of the Board and vacancies arising in the Board from time to time. The Committee while recommending candidature of a Director would consider the special knowledge or expertise possessed by the candidate as required under Banking Regulation Act, 1949. The Committee would assess the fit and proper credentials of the candidate and the companies/entities with which the candidate is associated either as a director or otherwise and as to whether such association is permissible under RBI guidelines and the internal norms adopted by the Bank. For the above assessment, the Committee would be guided by the guidelines issued by RBI in this regard.


The Committee will also evaluate the prospective candidate for the position of a Director from the perspective of the criteria for independence prescribed under Companies Act, 2013 as well as the Listing Regulations. For a non-executive Director to be classified as independent he/she must satisfy the criteria of independence as prescribed and sign a declaration of independence. The Committee will review the same and determine the independence of a Director.


The Committee based on the above assessments will make suitable recommendations on the appointment of Directors to the Board.


Remuneration policy


Reserve Bank of India (RBI) vide its circular DBOD No. BC. 72/29.67.001/2011-12 dated January 13, 2012 has issued guidelines on "Compensation of whole time Directors/Chief executive Officers/Risk takers and Control function staff etc." for implementation by private sector banks and foreign banks from the financial year 2012-13. The Bank adopted a Compensation Policy in January 2012 which is amended from time to time based on regulatory requirements. The Compensation Policy of the Bank as adopted in line with the RBI circular is in compliance with the requirements for the Remuneration Policy as prescribed under Companies Act, 2013. Further details with respect to the Compensation Policy are provided under the section titled "Compensation Policy and Practices".


The remuneration payable to non-executive/independent Directors is governed by the provisions of the Banking Regulation Act, 1949, RBI guidelines issued from time to time and the provisions of the Companies Act, 2013 and related rules to the extent it is not inconsistent with the provisions of the Banking Regulation Act, 1949/RBI guidelines. The remuneration for the non-executive/independent Directors (other than Government nominee) would be sitting fee for attending each Meeting


of the Committee/Board as approved by the Board from time to time within the limits as provided under Companies Act, 2013 and related rules. RBI vide its guidelines dated June 1, 2015 regarding Compensation of non-executive Directors (NEDs) (except part-time Chairman) of Private Sector Banks has permitted payment of profit related commission up to '''' 1,000,000 per annum for non-executive Directors (other than non-executive (part-time) Chairman). The Members at their Meeting held on July 11, 2016 approved the payment of profit related commission up to '''' 1,000,000 per annum to nonexecutive Directors (other than the non-executive (part-time) Chairman and the Government Nominee Director), for each year effective from the financial year ended March 31, 2016.


For the non-executive (part-time) Chairman, the remuneration, in addition to sitting fee includes such fixed payments on such periodicity as may be recommended by the Board and approved by the Members and RBI from time to time, maintaining a Chairman''''s office at the Bank''''s expense, bearing expenses for travel on official visits and participation in various forums (both in India and abroad) as Chairman of the Bank and bearing travel/halting/other expenses and allowances for attending to duties as Chairman of the Bank and any other modes of remuneration as may be permitted by RBI through any circulars/guidelines as may be issued from time to time.


All the non-executive/independent Directors would be entitled to reimbursement of expenses for attending Board/ Committee Meetings, official visits and participation in various forums on behalf of the Bank.


Performance evaluation of the Board, Committees and Directors


The Bank with the approval of its Board Governance, Remuneration & Nomination Committee has put in place an evaluation framework for evaluation of the Board, Directors and Chairperson. The Board also carries out an evaluation of the working of its Audit Committee, Board Governance, Remuneration & Nomination Committee, Corporate Social Responsibility Committee, Credit Committee, Customer Service Committee, Fraud Monitoring Committee, Information Technology Strategy Committee, Risk Committee, Stakeholders Relationship Committee and Review Committee for identification of wilful defaulters/non co-operative borrowers. The evaluation of the Committees is based on the assessment of the compliance with the terms of reference of the Committees.


The evaluations for the Directors, the Board and the Chairperson of the Board were undertaken through circulation of three questionnaires, one for the Directors, one for the Board and one for the Chairperson of the Board. The performance of the Board was assessed on select parameters related to roles, responsibilities and obligations of the Board and functioning of the Committees including assessing the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties. The evaluation criteria for the Directors was based on their participation, contribution and offering guidance to and understanding of the areas which were relevant to them in their capacity as members of the Board. The evaluation criteria for the Chairperson of the Board besides the general criteria adopted for assessment of all Directors, focused incrementally on leadership abilities, effective management of meetings and preservation of interest of stakeholders. The evaluation process for whole time Directors is further detailed under the section titled "Compensation Policy and Practices".


Details of Remuneration paid to whole time Directors


The Board Governance, Remuneration & Nomination Committee determines and recommends to the Board the amount of remuneration, including performance bonus and perquisites, payable to the whole time Directors.


The following table sets out the details of remuneration (including perquisites and retrial benefits) paid to whole time Directors for fiscal 2017:

















































































































Details of Remuneration (?)



Chanda


Kochhar



N. S. Kannan



K.


Ramkumar1



Rajiv


Sabharwal4



Vishakha


Mulye



Vijay


Chandok2



Anup Bagchi3



Basic



26,670,840



17,619,600



5,778,471



14,683,000



17,619,600



15,930,000



6,637,500



Performance bonus for fiscal 20175



22,028,362



14,766,738



4,854,818



N.A.



14,766,738



13,539,876



5,601,428



Allowances and perquisites6



24,387,366



15,331,842



26,199,599



17,178,774



14,352,803



15,072,215



5,698,078



Contribution to provident fund



3,200,496



2,114,354



693,418



1,761,958



2,114,354



1,911,600



796,500



Contribution to superannuation fund



0



2,642,940



753,712



0



2,642,940



2,389,500



995,625



Contribution to gratuity fund



2,221,681



1,467,713



481,347



1,223,094



1,467,713



1,326,969



552,904



Stock options7 (Numbers)



Fiscal 20175



1,375,000



685,000



N.A.



N.A.



685,000



685,000



685,000



Fiscal 2016



1,375,000



685,000



685,000



685,000



685,000



495,000



N.A.



Fiscal 2015



1,450,000



725,000



725,000



655,000



N.A.



420,000



N.A.



1. K. Ramkumar ceased to be a Director from the close of business hours on April 29, 2016 and has taken early retirement from the Bank. His last working date was July 29, 2016.


2. Vijay Chandok assumed office as executive Director with effect from July 28, 2016, post approval granted by RBI.


3. Anup Bagchi has joined the services of the Bank on November 1, 2016, and he assumed office as executive Director with effect from February 1, 2017.


4. Rajiv Sabharwal''''s last working day with the Bank was January 31, 2017.


5. Options and performance bonus for fiscal 2017 are subject to Reserve Bank of India (RBI) approval.


6. Allowances and perquisites exclude stock options exercised during fiscal 2017 which does not constitute remuneration paid to the whole time Directors for fiscal 2017.


7. The above table excludes special grant of stock options approved by RBI in November 2015 aggregating to 2,100,000 for Chanda Kochhar; 1,000,000 each for N. S. Kannan, K. Ramkumar and Rajiv Sabharwal and 700,000 for Vijay Chandok.


Perquisites (evaluated as per Income-tax rules wherever applicable and otherwise at actual cost to the Bank) such as the benefit of the Bank''''s furnished accommodation, gas, electricity, water and furnishings, club fees, group insurance, use of car and telephone at residence or reimbursement of expenses in lieu thereof, medical reimbursement, leave and leave travel concession, education benefits, provident fund, superannuation fund and gratuity, were provided in accordance with the scheme(s) and rule(s) applicable from time to time. In line with the staff loan policy applicable to specified grades of employees who fulfill prescribed eligibility criteria to avail loans for purchase of residential property, the whole time Directors are also eligible for housing loans subject to approval of RBI.


The Members have approved the minimum and maximum ranges for remuneration as well as supplementary allowance for the Whole time Directors. In terms of the said approvals, the monthly basic salary for Chanda Kochhar, Managing Director & CEO would be within the range of Rs, 1,350,000 - Rs, 2,600,000, N. S. Kannan, Vishakha Mulye, Vijay Chandok and Anup Bagchi, executive Directors would be within the range of Rs, 950,000 - Rs, 1,700,000. The monthly supplementary allowances for the Managing Director & CEO, would be within the range of Rs, 1,000,000 - Rs, 1,800,000, for N. S. Kannan, Vishakha Mulye, Vijay Chandok and Anup Bagchi, executive Directors would be within the range of Rs, 675,000 - Rs, 1,225,000. The Board would determine the actual remuneration/supplementary allowance payable within the above ranges from time to time subject to the approval of RBI.


Details of Remuneration paid to non-executive Directors


As provided under Article 132 of the Articles of Association of the Bank, the fees payable to a non-executive Director (other than to the nominee of Government of India) for attending a Meeting of the Board or Committee thereof are decided by the Board of Directors from time to time within the limits prescribed by the Companies Act, 2013 and the rules there under. The Board of Directors have approved the payment of Rs, 100,000 as sitting fee for each Meeting of the Board and Rs, 20,000 as sitting fee for each Meeting of the Committee attended.


The Board of Directors at its Meeting held on June 9, 2015 and subsequently Members through a postal ballot resolution dated April 22, 2016 approved a remuneration range of Rs, 3,000,000 - Rs, 5,000,000 per annum for M. K. Sharma, Chairman of the Board with the remuneration for each year to be determined by the Board within this range. The Board approved remuneration of Rs, 3,000,000 per annum effective July 1, 2015 to be paid to M. K. Sharma for the first year of his tenure. RBI while approving the appointment of M. K. Sharma for the period July 1, 2015 to June 30, 2018 also approved the above remuneration. The Board at its Meeting held on June 28, 2016 approved the revision in remuneration for M. K. Sharma to Rs, 3,500,000 per annum for the period July 1, 2016 to June 30, 2017. The same has been approved by RBI.


Information on the total sitting fees paid to each non-executive Director during fiscal 2017 for attending Meetings of the Board and its Committees is set out in the following table:

















































Name of Director



Amount (?)



M. K. Sharma



1,220,000



Dileep Choksi



1,180,000



Homi Khusrokhan



2,060,000



M. S. Ramachandran (ceased w.e.f. April 25, 2017)



2,000,000



Tushaar Shah



620,000



V. K. Sharma



460,000



V. Sridar



1,480,000



Amit Agarwal1



-



Total



9,020,000



1. Being a Government Nominee Director, not entitled to receive sitting fees.


The details of shares and convertible instruments of the Bank, held by the non-executive Directors as at March 31, 2017 are set out in the following table:






















































Name of Director



Instrument



No. of shares held



M. K. Sharma



Equity



50,000



Dileep Choksi



Equity



2,500



Homi Khusrokhan



Equity



3,5001



M. S. Ramachandran



Equity



1,300



Tushaar Shah



-



-



V. K. Sharma



-



-



V. Sridar



-



-



Amit Agarwal



-



-



1. Shares held jointly with relatives.


Remuneration disclosures as required under RBI guidelines


The RBI circular DBOD No. BC. 72/29.67.001/2011-12 on "Compensation of wholetime Directors/Chief Executive Officers/ Risk takers and Control function staff etc." requires the Bank to make following disclosures on remuneration on an annual basis in their Annual Report:


COMPENSATION POLICY AND PRACTICES


(A) Qualitative disclosures


a) Information relating to the bodies that oversee remuneration.


- Name, composition and mandate of the main body overseeing remuneration.


The Board Governance, Remuneration & Nomination Committee (BGRNC/ Committee) is the body which oversees the remuneration aspects. The functions of the Committee include recommending appointments of Directors to the Board, identifying persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down and recommending to the Board their appointment and removal, formulate a criteria for the evaluation of the performance of the whole time/ independent Directors and the Board and to extend or continue the term of appointment of independent Director on the basis of the report of performance evaluation of independent Directors, recommending to the Board a policy relating to the remuneration for the Directors, Key Managerial Personnel and other employees, recommending to the Board the remuneration (including performance bonus and perquisites) to wholetime Directors (WTDs), commission and fee payable to non- executive Directors subject to applicable regulations, approving the policy for and quantum of bonus payable to members of the staff including senior management and key managerial personnel, formulating the criteria for determining qualifications, positive attributes and independence of a Director, framing policy on Board diversity, framing guidelines for the Employee Stock Option Scheme (ESOS) and decide on the grant of the Bank''''s stock options to employees and WTDs of the Bank and its subsidiary companies.


- External consultants whose advice has been sought, the body by which they were commissioned, and in what areas of the remuneration process.


The Bank did not take advice from an external consultant on any area of remuneration during the year ended March 31, 2017.


- Scope of the Bank''''s remuneration policy (eg. by regions, business lines), including the extent to which it is applicable to foreign subsidiaries and branches.


The Compensation Policy of the Bank, as last amended during FY2017 and approved by the BGRNC and the Board at its Meeting held on April 28, 2016, pursuant to the guidelines issued by RBI, covers all employees of the Bank, including those in overseas branches of the Bank. In addition to the Bank''''s Compensation Policy guidelines, the overseas branches also adhere to relevant local regulations.


o Alignment of compensation philosophy with prudent risk taking:


The Bank seeks to achieve a prudent mix of fixed and variable pay, with a higher proportion of variable pay at senior levels and no guaranteed bonuses. Compensation is sought to be aligned to both financial and non-financial indicators of performance including aspects like risk management and customer service. In addition, the Bank has an employee stock option scheme aimed at aligning compensation to long term performance through stock option grants that vest over a period of time. Compensation to staff in financial and risk control functions is independent of the business areas they oversee and depends on their performance assessment.


- Whether the Remuneration Committee reviewed the firm''''s remuneration policy during the past year, and if so, an overview of any changes that were made


During FY2017, the Bank''''s Compensation Policy was reviewed by the BGRNC and the Board on April 28, 2016. The disclosures were reviewed pursuant to RBI circular on Disclosures in Financial Statements.


- Discussion of how the Bank ensures that risk and compliance employees are remunerated independently of the businesses they oversee.


The compensation of staff engaged in control functions like Risk and Compliance depends on their performance, which is based on achievement of the key results of their respective functions. Their goal sheets do not include any business targets.


c) Description of the ways in which current and future risks are taken into account in the remuneration processes.


- Overview of the key risks that the Bank takes into account when implementing remuneration measures.


The Board approves the risk framework for the Bank and the business activities of the Bank are undertaken within this framework to achieve the financial plan. The risk framework includes the Bank''''s risk appetite, limits framework and policies and procedures governing various types of risk. KPIs of WTDs & equivalent positions, as well as employees, incorporate relevant risk management related aspects. For example, in addition to performance targets in areas such as growth and profits, performance indicators include aspects such as the desired funding profile and asset quality. The BGRNC takes into consideration all the above aspects while assessing organizational and individual performance and making compensation-related recommendations to the Board.


- Overview of the nature and type of key measures used to take account of these risks, including risk difficult to measure


The annual performance targets and performance evaluation incorporate both qualitative and quantitative aspects includin

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
“2019 © COPYRIGHT DYNAMIC EQUITIES PVT. LTD.”

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com

  • Download our Mobile App
  • Available on Google Play
  • Available on App Store
  • RSS