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KOTAK-BANK-2015-2016.Pdf MULTIPLYING BY ADDING ANNUAL REPORT 2015 - 16 4 Across This Report The Integration Adding Strength, Adding People, Adding Technology, Financial Journey Multiplying Multiplying Multiplying Performance Synergies Talent Performance 02 04 06 07 08 Strategic Message from Board of Our Digital ESG Awards & Overview Uday Kotak Directors Journey Practices Accolades 10 13 16 18 20 21 Financial Consolidated Bank Reports Highlights Financial Statements & Statements 26 28 92 Consolidated 26 Consolidation at a Glance 28 Directors’ Report 92 Standalone 27 Auditors’ Report 29 Management’s Discussion & Analysis 131 Financial Statements 34 Report on Corporate Governance 168 Financial Information of Subsidiaries Auditors’ Report 192 and Basel III (Pillar 3) Disclosures 91 Financial Statements 196 REGISTERED OFFICE COMPANY SECRETARY RESGISTRAR AND TRANSFER AGENT Kotak Mahindra Bank Limited, Bina Chandarana, Karvy Computershare Private Limited, 27BKC, C 27, G Block, Company Secretary and Karvy Selenium Tower B, Plot 31-32, Bandra Kurla Complex, Bandra (E) Senior Executive Vice President Gachibowli, Financial District, Mumbai 400 051 Nanakramguda, Tel.: +91 22 61660001 AUDITORS Hyderabad 500 032 Fax.: +91 22 67132403 Messrs. S. R. Batliboi & Co. LLP, Website: www.kotak.com Chartered Accountants, 7, Andheri Industrial Estate, 14th Floor, The Ruby, Off Veera Desai Road, 29, Senapati Bapat Marg, Andheri West, Dadar West, Mumbai 400 058 Mumbai 400 028 Integration of businesses creates an interplay of addition and multiplication. Adding Presence, Multiplying Reach Adding Capacities, Multiplying Capabilities Adding Competencies, Multiplying Skills Adding Experience, Multiplying Expertise We are at an exciting cusp. With the successful integration of Kotak Mahindra Bank and erstwhile ING Vysya Bank last year, we have added branches, people and strengths. We look ahead at an unprecedented opportunity in the banking space as the Indian economy powers ahead. We are MULTIPLYING BY ADDING 1 The Integration Journey ‘One Team One Dream’ Successful integration of businesses is full The teams came together as a ‘family’ with a shared of complexities. There are many challenges vision of ‘One Team One Dream’. This paved the way for a smooth and seamless integration with that have to be resolved with focus, swift execution and minimal disruption of day-to-day determination, perseverance, and above all, activities. Further, it allowed for fair and transparent teamwork. implementation of policy changes and optimal utilisation of infrastructure and resources. The integration journey of Kotak Mahindra Bank and erstwhile ING Vysya Bank began with the formation of an Integration This will ensure multiplication of synergies, thereby Management Offce (IMO). This dedicated and single-point unlocking high value for all stakeholders. offce spearheaded and supervised the integration of different units. The IMO team had permanent members responsible for all aspects of integration and were supported by members from respective business units. The Integration Management Office’s mandate had four dimensions: People Process Technology Synergy The journey progressed steadily with a thought- The core banking system’s migration, through, step-by-step approach. Business units were regarded as one of the most complex integrated in a phased manner on diverse parameters, including regulatory constraints and complexities. banking IT migrations in India, has Some units were merged on the frst day of the been successfully completed by Kotak merger itself. Mahindra Bank. 2 Annual Report 2015 - 16 The Integration Journey MULTIPLYING BY ADDING FINANCIAL HIGHLIGHTS CONSOLIDATED FINANCIAL STATEMENTS BANK REPORTS AND STATEMENTS Stronger Reach Classifcation March 31, 2016 Metro 525 39% 2 Rural 232 17% Semi-Urban 287 22% Jammu & Kashmir Urban 289 22% Grand Total 1,333 100% 9 Himachal Pradesh 66 8 Punjab 42 Uttarakhand Haryana 98 1 Delhi 62 Sikkim 53 4 Uttar Pradesh Rajasthan 12 1 Assam Bihar Meghalaya 1 123 34 7 35 Tripura Gujarat Madhya Pradesh 15 Jharkhand West Bengal 2 Chhattisgarh 16 Dadra & Nagar Haveli 282 Odisha Maharashtra 83 Telangana STATEWISE BRANCH NETWORK 6 Representative 108 Goa Offce in Dubai 153 Andhra Pradesh International Business Karnataka Unit in Gift City, Gujarat 78 Tamil Nadu Zone Pre-Merger Post-Merger 32 March 31, 2015 March 31, 2016 East 6% 6% Kerala North 33% 29% South 15% 34% West 46% 31% Map not to scale - for illustration purposes only Grand Total 100% 100% 3 Adding Strength, Multiplying Synergies On the back of a successful integration, we are well 4th positioned to leverage Largest Private the multiplier effect as we build upon the numerous Sector Bank in India synergies of processes, products and presence. Adding Products, ` 2.4 Multiplying Capabilities Institution Trillion The combined product suite of the merged entity is more comprehensive and will further strengthen the core of its ATMs business model: 2,032 Concentrated India, Diversifed Financial Services. Employees 46,500+ ` 1,34,210 Cr+ Market Capitalisation* 1,40,000+ Shareholders 1,333 Branches * As on May 11, 2016 4 Annual Report 2015 - 16 Adding Strength, Multiplying Synergies MULTIPLYING BY ADDING FINANCIAL HIGHLIGHTS CONSOLIDATED FINANCIAL STATEMENTS BANK REPORTS AND STATEMENTS The whole is greater than the sum of its parts Distribution synergies Rationalisation synergies • Driving Savings Account • Creating an effcient organisational structure (SA) with 6% • Eliminating overlapping systems, • Distribution of Life consolidating data centres, etc. Insurance, Asset • Rationalising policies, vendors, achieving Management Products better pricing • Distribution of Asset • Rationalising overlapping branches, co-locating Products teams, vacating high cost premises • Distribution of Brokerage Products New customer Productivity synergies • Increased Transaction synergies Banking Business • Leveraging the erstwhile • Deeper penetration ING Vysya Bank branch • Accelerated Small and network to drive higher into the SME segment Medium-sized Enterprises SA, CA, Term Deposits (SME) business growth • Increased lending to (TD), Third Party Products (TPP) distribution, assets • Integrating SME with weaker sections and and revenue branches for driving direct agri lending Current Account (CA) • Lower funding costs growth • Effciencies through • Advantage of network optimised operating effect models for various business verticals Best practices • Strong credit and risk management practices • Increasing process effciencies through adoption of best practices Once we have achieved combinational synergies, our focus will move towards realising higher growth through transformational synergies for the integrated organisation 5 Adding People, Multiplying Talent It is the integration of people, which we believe, would be the biggest multiplying factor of our future growth as we stand to gain from an immense pool of high quality talent. The integration has expanded Kotak Mahindra Bank’s family to a strong and talented workforce of over 46,500 individuals. Our pool of experience and expertise is larger and deeper as diverse skillsets and different talents collectively 4. Employee Survey bond into One Team and share One Some of the initiatives taken for Dream. smooth HR integration involved : After integration of major units, an 1. Training employee satisfaction survey was From the beginning of the integration, undertaken to ascertain the effcacy of our focus was on softer aspects as much Exhaustive classroom, on-the-job the integration process. The outcome as the others. HR systems were enabled training & online programmes were of the survey indicated high levels of to ease seamless alignment amongst organised for over 6,500 employees satisfaction amongst all erstwhile ING departments and functions. Further, an across sales, operations, credit and mid- Vysya employees surveyed. Aspects effcient structure was designed for each offce functions, enabling the combined that needed more attention were also division to match the right profle with team to function as a cohesive unit. highlighted. the right person. 2. Culture Harmonisation 5. Optimised Organisational Structure Strong and talented We gained deeper insights through workforce of a survey – PULSE, on cultural 5.1 A “Bank in a Bank” structure was harmonisation which brought forth created comprising large business 46,500+ the diversity of both organisations. units of erstwhile ING Vysya Bank individuals Good practices were identifed and with continued leadership to assimilated for increased collaboration minimise disruption till completion and productivity. of the integration journey. 5.2 The next stage had a two-pronged 3. Cross-pollination approach. For all common units, Employees across various frontline and a single senior leadership was operations verticals were swapped fnalised and the units operated in between the two networks for learning parallel at both Kotak Mahindra each other’s best practices. Bank and erstwhile ING Vysya Bank. Upon integration of the units, an optimised structure was put in place for each unit. 6 Annual Report 2015 - 16 Adding People, Multiplying Talent | Adding Technology, Multiplying Performance MULTIPLYING BY ADDING FINANCIAL HIGHLIGHTS CONSOLIDATED FINANCIAL STATEMENTS BANK REPORTS AND STATEMENTS Adding Technology, Multiplying Performance In one of the largest and most complex technology integration exercises undertaken in Indian banking, multiple IT systems and IT infrastructure environments were seamlessly integrated. The integration also
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