COMPANY INFORMATION
DCB Board of Directors DCB Senior Management Team
Chairman (Part-time) Mr. Gautam Vir - Managing Director & Mr. Nasser Munjee Chief Executive Officer
Managing Director Mr. Harihar Krishnamoorthy - Executive Vice President & Mr. Gautam Vir Head Treasury and Financial Institutions Group Mr. Parag Patankar - Executive Vice President & Chief Operations and Technology Officer Directors Mr. Praveen Kutty - Executive Vice President & Mr. Amin Manekia Head Consumer Banking
Ms. Nasim Devji Mr. Pravin Batra - Executive Vice President & Mr. Narayan K. Seshadri Head Corporate and Business Banking Group Mr. Anuroop Singh Mr. R. Venkattesh - Executive Vice President & Mr. Rajab A. Momin Head Human Capital Mr. Amir Sabuwala Mr. Susheel Kak - Executive Vice President & Mr. Shabir Kassam Chief Credit and Risk Officer Mr. D. E. Udwadia Mr. Sukh Dev Nayyar Company Secretary
Mr. H. V. Barve
DCB Statutory Auditors
M/s. N. M. Raiji & Co.
contents Company Information...... 1 Performance Highlights...... 16 Chairman’s Statement...... 2 Directors’ Report...... 17 Board of Directors...... 4 Corporate Governance...... 29 From the Managing Director & CEO...... 5 Auditors’ Report...... 41 Senior Management...... 6 Balance Sheet...... 42 Stability - A Stable Foundation...... 8 Profit & Loss Account...... 43 Performance - Celebrating our Successes...10 Schedules...... 44 Growth - Exploring New Avenues...... 12 Cash Flow Statement...... 63 Products and Services at a Glance...... 14
Chairman’s Statement
Dear Shareholders, The turnaround I wrote about last “ In this, the third full year of the transformation of DCB, (and my fourth Statement as Chairman), I am happy to report year has been consolidated this that the turnaround I wrote about last year has now been past year and we look forward to consolidated this past year and we look forward to a period of a period of stability, performance stability, performance and growth. These are the three pillars “ on which we will base our efforts in the next few years. Last and growth. year completed the capital raising programme, this year we intend to put our business model to work.
During the year, DCB grew its retail and corporate portfolio, packaged and sold some of its NPAs to ARCIL, introduced its first microfinance branch in Dediapada, Gujarat, opened eight new branches and consolidated many more, created a modern back office at Vikhroli, and met its priority sector targets established by the Reserve Bank of India. As a result, corporate growth was 45%; CASA grew by 18%; Gross NPAs were down from 5.15% to 1.54% and Net NPA’s down from 1.64% to 0.66%. Operating Profit was up from Rs. 41 crores to Rs. 109.61 crores and PAT grew to Rs. 38.33 crores from Rs. 7.37 crores, a growth of 420%.
Pursuing profitable growth in a highly competitive market and a difficult lending environment is a challenge. This is further compounded by the costs involved in improving branch infrastructure, making IT investments and migrating creaky manual systems onto a modern automated IT platform, strengthening the management team and developing front office habits in a way that puts customers first. One of the major challenges we have faced is the acquisition and retention of human capital to meet the challenges the Bank faces. I am happy to report that we have managed to attract excellent talent and develop a team at all levels who have
2 3 STABILITY lead the transformation of the Bank from the front; and about to change. International trends suggest a substantial they continue to do so. DCB has attempted to undertake slow down in the global economy and higher inflation; India all these tasks and the process will continue in the present is likely to experience similar conditions. Monetary Policy is financial year. likely to be expected to play a dual role which it may not be effective in fulfilling: managing the exchange rate as well as Last year, I stressed the need for substantial and steady domestic credit. growth to achieve a critical mass that would bring DCB’s financial ratios in line with the market. This is beginning to At home, a global slow down is likely to affect domestic happen but not at the pace we anticipated. A metaphor for economic activity significantly and it is in this context that the issue we are facing is that of a naval frigate. In order DCB is presently strategizing its responses. Since the Bank to play its role effectively for speed and maneuverability, it has not been exposed to the excesses of “good times” needs an engine room fully responsive for any changes in the where the concept of “prudence” in financial products and throttle the captain may require. Being relatively small it can retail lending was a scarce commodity, it has an opportunity turn quickly and change speed effectively. to build where others are coping. Being a small bank playing a niche role, it is likely that we could take advantage of the DCB has acquired an engine that was in need of constant present situation and grow our business with our chosen maintenance leaving it unresponsive to the demands made constituency with prudence and energy. upon it. The engine is presently being refurbished into one that serves its purpose: being responsive and innovative for Last year, and the first half of the current financial year, will the customer. This will give DCB the speed, reliability and witness the continuation of a consolidation phase at DCB maneuverability that it requires to face the current market preparing all systems to drive our business model. The place. Much progress has been made and this new engine second half of the year will witness acceleration as we begin is expected to be fully operational during this year. In the to accelerate at a higher quality and pace of growth. DCB meantime, our speed will be calibrated to what we can has built a highly professional management team, infused absorb; with full speed being reserved for the incorporation much young talent at all levels of the organisation, explored of our fully functioning engine room. Hence the theme of its market options, calibrated its systems and is now poised this report: Stability, Performance & Growth. Growth will be to demonstrate ideas in action. I look forward to an eventful predicated on certainty of performance and the stability of year ahead. the mechanism which is likely to give us both sustainability and profitability.
The Banking industry has experienced unprecedented Nasser Munjee growth in the past few years. Liquidity has been relatively easy with a benign interest rate environment. All this is April, 2008
2 3 STABILITY Board of Directors
Mr. Amir Sabuwala Ms. Nasim Devji Mr. Anuroop (Tony) Singh Mr. Amin H. Manekia Mr. R. A. Momin Mr. D. E. Udwadia
Mr. Shabir Kassam Mr. Gautam Vir Mr. Narayan Mr. Sukh Dev Nayyar Seshadri
Mr. Nasser Munjee
4 5 From the Managing Director & CEO
Dear Shareholders,
We complete another year in our history. 2007-08 has been a good year for DCB. In short our performance parameters compared to the previous year have been spectacular. Our management and our staff, DCBians as we call them are responsible for this success and deserve a lot of praise. We opened 8 new branches and started microfinance in a very small way. We further strengthened our management team and have attracted high quality staff to join the Bank. Some of them are experienced bankers who were working overseas.
Though we are proud of our turnaround and the tremendous effort of our team, we need to further strengthen our delivery I would also like to thank the Chairman, our Board of and must not rest on our laurels but focus on our future Directors and our Promoter AKFED for the continued support and the tasks ahead of us. However, we are yet to achieve they have provided to build the Bank. standards and financial parameters of a few leading private sector banks in this country. Over the next three years Last but not least, thanks for being a part of our family which we plan to take steps to move the Bank in that direction. we cherish, especially those who have been with us for long We are confident of converting your Bank into a long term and those who see a long term future in this institution. sustainable financial service provider, which is respected in the parts of India where we decide to operate in.
We raised Rs. 280 crores of capital in August 2007 and Gautam Vir would like to thank our new shareholders and welcome Managing Director & CEO them to our family. The economic environment has changed and will continue to be much less buoyant during the course of the year. We will exercise utmost discretion as we build the bank. The Bank is focusing in improving customer service levels and training our staff which are key to our long term future. May, 2008
4 5 Senior Management
Mr. H. Vijayabalan Mr. Harihar Krishnamoorthy Mr. Praveen Kutty Mr. Parag Patankar Mr. Susheel Kak
Mr. Gautam Vir Mr. Pravin Batra
Mr. R. Venkattesh
SENIOR MANAGEMENT TEAM
Mr. Gautam Vir - Managing Director & Chief Executive Officer
Mr. Harihar Krishnamoorthy - Executive Vice President & Head Treasury and Financial Institutions Group Mr. H. Vijayabalan - Chief Internal Auditor Mr. Parag Patankar - Executive Vice President & Chief Operations and Technology Officer
Mr. Praveen Kutty - Executive Vice President & Head Consumer Banking
Mr. Pravin Batra - Executive Vice President & Head Corporate and Business Banking Group
Mr. R. Venkattesh - Executive Vice President & Head Human Capital
Mr. Susheel Kak - Executive Vice President & Chief Credit and Risk Officer 6 7 Mr.. Gautam Vir – Managing Director & international operations where he successfully managed Chief Executive Officer multiple consumer banking businesses including Credit Mr. Gautam Vir has over 29 years of banking experience Cards, Personal Loans, Home Loans, Branch Banking and across India, Asia Pacific, Middle East and Eastern Europe. He Wealth Management. As Area Director for Bangalore for returned to India after 14 years in 2005 as Managing Director Consumer Banking, he was instrumental in scaling up the & CEO of the Development Credit Bank (DCB). remote banking Suvidha experiment into a highly profitable Mr. Vir is credited with turning around DCB. The Bank had a customer proposition. Prior to joining DCB, he was the successful IPO in October 2006 against all odds. Area Director for Citibank’s NRI Business in North America. Mr. Kutty holds a B.Com and an MBA degree. Prior to joining DCB, he was the CEO of Hebros Bank (Sofia, Bulgaria) from 2000-2005. Mr. Vir has held very senior Mr. Pravin Batra – Executive Vice President & positions in Citibank N.A., Singapore, and Standard Chartered Head - Corporate & Business Banking Group Bank, Dubai, where he was Head Personal Banking. He was Mr. Batra holds a B.E. degree and has also done his MMS. involved in setting up the Citibank NRI business in India He has 20 years of banking experience, out of which 17 and after that from 1988 to 1991 was Vice President and have been with Citibank NA in India and overseas in various Area Director, Eastern India, and commenced their retail capacities. Prior to joining the Bank, he was with IndusInd business there. Bank as Senior Vice President & Head of Corporate Banking. Gautam Vir is an alumnus of St. Xavier’s College, Kolkata, where he did his B.A. (Hons.) in Economics and also holds a Mr. R. Venkattesh – Executive Vice President & P.G.D.M. from IIM Kolkata. Head - Human Capital Mr. Venkattesh holds a B.Com. degree and is an MBA in Mr. Harihar Krishnamoorthy – Executive Vice Personnel Management. Prior to joining the Bank, he was President & with Standard Chartered Bank as Head, Human Resources Head Treasury and Financial Institutions Group – Countries. He has over 15 years of experience in the Mr. Krishnamoorthy is a B.Com., an A.C.A., and a CAIIB. areas of Human Resource Management and Mergers He has over 22 years of experience in banks such as the and Acquisitions. Standard Chartered Bank and Commerzbank. Mr. Susheel Kak – Executive Vice President & Mr. Parag Patankar – Executive Vice President & Chief Credit and Risk Officer Chief Operations and Technology Officer Mr. Susheel Kak brings with him around 30 years of corporate Mr. Patankar is a B.Tech. from IIT, Kanpur and has a PGDBM and commercial banking experience. He has worked with from IIM, Ahmedabad. He has 14 years of experience in several large nationalised, private and foreign banks. the areas of project finance, banking and technology in organizations including ICICI Bank and 3i Infotech (formerly Prior to joining the Bank, Susheel Kak was the Head of ICICI Infotech). Prior to joining the Bank, he was the Director, Corporate Banking, at IDBI Bank Ltd. Prior to this, he was with CIO & Business Head of Apnaloan.com, a company in the the Deutsche Bank AG (DB) holding various positions before financial services industry co-founded by him. taking over as Director & Head, Corporate Relationship and Global Banking, Northern Region. He also worked as Acting Mr. Praveen Kutty – Executive Vice President & CEO of DB Financial Services Co., a joint venture of DB with Head Consumer Banking the Unilever Group (Brooke Bond India Ltd). Mr. Susheel Kak Mr. Kutty brings with him around 16 years of banking is a CAIIB and holds a Bachelor’s degree in Arts and Law experience. He has worked with Citibank’s Indian and from Mumbai University.
6 7
STABILITY True stability results when presumed order and “ presumed disorder are balanced. A truly stable system expects the unexpected, is prepared to be disrupted, waits to be transformed. “Tom Robbins American Author
8 9
8 9
by providing an uninterrupted flow of funds, positioning the Bank for future growth. future for Bank the positioning funds, of flow uninterrupted an providing by
> The Bank has an active and robust treasury, managing its interest rate risks and liquidity liquidity and risks rate interest its managing treasury, robust and active an has Bank The
aspiring banking professionals. banking aspiring
a non-hierarchical and dynamic organisation, DCB is one of the chosen destinations for for destinations chosen the of one is DCB organisation, dynamic and non-hierarchical a “
incentives have already charged the existing work force. Given its reputation for being being for reputation its Given force. work existing the charged already have incentives
> The pan-India employee teleconferences and introduction of performance-based performance-based of introduction and teleconferences employee pan-India The
service to its customers. its to service
equipped with the latest versions of Finacle from Infosys and Oracle to provide seamless seamless provide to Oracle and Infosys from Finacle of versions latest the with equipped
It continues to fulfill every consumer need with great enthusiasm. The Bank is also suitably suitably also is Bank The enthusiasm. great with need consumer every fulfill to continues It
deposit products and providing for the needs of small and medium businesses in select regions. regions. select in businesses medium and small of needs the for providing and products deposit
> Since its inception, DCB has always taken an active interest in developing low-cost customer customer low-cost developing in interest active an taken always has DCB inception, its Since
offering complete. offering
a range of investment products like mutual funds, insurance and bonds, make the product product the make bonds, and insurance funds, mutual like products investment of range a
as the ‘DCB Trio’ and ‘Easy Business,’ keep DCB ahead of the pack. Demat Accounts and and Accounts Demat pack. the of ahead DCB keep Business,’ ‘Easy and Trio’ ‘DCB the as
of the basic products like savings and current accounts as well as innovative products such such products innovative as well as accounts current and savings like products basic the of
> DCB intends to offer an extensive range of products across its branches. Suitable variants variants Suitable branches. its across products of range extensive an offer to intends DCB
key differentiator. differentiator. key
becoming the key focus of the Bank. This will become the hallmark of DCB and act as its its as act and DCB of hallmark the become will This Bank. the of focus key the becoming
intensive training and service quality programmes have been initiated with customer delight delight customer with initiated been have programmes quality service and training intensive
> To adhere to its vision of becoming the gold standard in customer service in Indian banking, banking, Indian in service customer in standard gold the becoming of vision its to adhere To
in 2008. in
dynamic senior management team, work is on to substantially expand the DCB network network DCB the expand substantially to on is work team, management senior dynamic
> Under the able guidance of an experienced Board of Directors and the leadership of a a of leadership the and Directors of Board experienced an of guidance able the Under
of change. of
It was the only co-operative bank, which successfully crossed over and thrived in the face face the in thrived and over crossed successfully which bank, co-operative only the was It
sector commercial bank on May 31,1995, in the wake of India’s economic liberalisation. liberalisation. economic India’s of wake the in 31,1995, May on bank commercial sector
> Built on over 77 years of trust, tradition and togetherness, DCB was converted into a private private a into converted was DCB togetherness, and tradition trust, of years 77 over on Built A Stable Foundation Stable A
PERFORMANCE It is an immutable law in business “ the words are words, explanations are explanations, promises are promises but only performance is reality.
Harold S Geneen “American Businessman
14 10 11 Celebrating our Successes
DCB turnaround gained momentum with over 420% increase in Net Profit in FY ‘08, which amounted to Rs. 38.33 crores.
Operating Profit in FY ‘08 was 110 crores, an increase of 168% from the previous year.
In Q2 FY ‘08 the total Capital raised was Rs. 280 crores reflecting growing investor confidence.
Assets Growth showed an increase of 44% as compared to the preceding year.
PERFORMANCE Net Interest Income was 186 crores, up 56% from FY ‘07.
Net NPAs (Non Performing Assets) was reduced to 0.66% from 1.6% in FY ‘07.
There was a 12.7% rise in the Yield on Total Advances.
DCB’s Capital Adequacy Ratio was up at 13.4% from 11.3% in the previous year.
10 11 There are no such things as limits to growth, “ because there are no limits to the human capacity for intelligence, imagination and wonder.
Ronald Regan “40th President of US
GROWTH 10 12 13
12 13
Bancassurance business. Bancassurance DCB has ramped up the the up ramped has DCB >
Priority Sector lending Sector Priority target as on 31st March 2008. March 31st on as target met DCB >
The Bank added 425 people in FY 2007-08. FY in people 425 added Bank The
workforce of 2,235 employees. 2,235 of workforce dedicated a has DCB >
was completed successfully. completed was
Retail Assets Software Assets Retail (FinnOne) (FinnOne) the to on Migration
>
segment of NSE. of segment
Futures & Options (F&O) (F&O) Options & Futures
DCB’s stock permitted to be traded in in traded be to permitted stock DCB’s
>
life insurance premium in 2007-08. in premium insurance life
3rd largest distributor for Birla Sun Life Insurance Life Sun Birla for distributor largest 3rd DCB is India’s India’s is DCB in terms of collection of of collection of terms in >
Point of Sale (PoS) and Online Broking. Online and (PoS) Sale of Point
Cards, Credit Loans, Mortgage DCB forged strategic alliances for for alliances strategic forged DCB >
Home Loan products. Loan Home
> HDFC Ltd. HDFC DCB formed a strategic alliance with with alliance strategic a formed DCB their marketing for
Customer Care Centre. Care Customer DCB launched a 24x7 24x7 a launched DCB >
Customer Base Customer > The Bank has a a has Bank The of over 631,000 which is still growing. still is which 631,000 over of
18,000 ATMs ATMs 18,000 in India. in of network a to access have customers DCB >
112 ATMs 112 across the country. the across has Bank The
> “
Branch Network Branch > of 76 branches and 4 extension counters. extension 4 and branches 76 of a has now DCB
Microfinance. exclusively for for exclusively
Dediapada > opened was Gujarat in at Sahyog DCB
. branches new Eight added DCB > Exploring New Avenues New Exploring Products and Services at a Glance
NEW ADDITIONS TO DCB’s PRODUCT PORTFOLIO
DCB Sahayog Microfinance initiative, with a dedicated branch at Dediapada, Narmada district, Gujarat Online Utility Bill Payment facility Facilities and services Offering convenience to customers in paying utility bills International Debit Card Mix-N-Match Statement of Account by E-Mail A product that offers systematic reinvestment facility Phone Banking through a combination of Recurring FD’s (Fixed Deposits) National Electronic Funds Transfer (NEFT) and traditional SIP’s (Systematic Investment Plan) Mobile Phone Banking in Mutual Funds Celfill – ATM Mobile top up facility DCB Advantage Credit Card VISA Money Transfer A lifetime free credit card, featuring an Express Rewards 9 to 9 Banking Program, in alliance with ICICI Bank Lockers New Classic Current Account launched Card-to-Card Fund Transfer (VISA) DCB PoS (Point of Sale) launched with over DCB Advantage Credit Card 3,000 merchant leads NRI operative accounts NRE Savings Account NRO Saving Account NRE Current Account NRO Current Account
CONSUMER BANKING GROUP DCB Deposits DCB Current Accounts Fixed Deposits DCB M-Power Current Account Recurring Deposits DCB Classic Current Account DCB Premium Current Account Loans DCB Excel Current Account DCB Personal Loans DCB Privilege Current Account DCB Easy Business DCB Loan Against Gold DCB Savings Accounts DCB Auto Loan Free Style Savings Account Commercial Vehicle Loans Classic Savings Account Construction Equipment Loans Premium Savings Account Value Saving Account – No Frills Account Investment services DCB Trio Account Mutual Funds DCB Junior Saver Demat Account Customised Corporate Salary Accounts Life & General Insurance 1146 Privilege Banking relationship offering 15 CORPORATE AND BUSINESS BANKING GROUP Corporate Banking Group Working Capital Finance Corporate Loans Bill Finance Deposits Bill Discounting NRE Fixed Deposit Export/Import Finance NRO Fixed Deposit Corporate Current Accounts FCNR Cash Management
Forex services Business Banking Group Foreign Currency Traveller’s cheques Working Capital Finance Demand Drafts Demand Loans Telegraphic Transfers Term Loans Currencies Loans against receivables Vendor Financing Remittances Equipment Financing Inward Remittance Trade Finance Instant Cash Remittance Corporate Current Accounts
CBBG (Corporate and Business Banking Group) CBBG (Corporate and Business Banking Group) caters to its diverse clientele by offering structured products in high potential industry clusters such as Auto, Agri, Pharma and Logistics. • Commodity Based Funding • Funding for Automotive Component Industry • Letter of Credit Programme
14 15 Performance Highlights
Growth in Assets Net Interest Income Net Interest Margin (%)
Rs. in crores Rs. in crores
2.9 8000 3.0 7577 200 186 2.7 7000 44% 56% 2.5 6000 150 5262 120 2.0 1.8 5000 t 41% 59% crores rcen crores . . 3742 . 75 Pe Rs 4000 Rs 100 1.5
3000 1.0 2000 50 0.5 1000
0 0 0.0 FY 06 FY 07 FY 08 FY 06 FY 07 FY 08 FY 06 FY 07 FY 08
Non Performing Assets (%) Operating Profit Cost Income Ratio (%)
Gross NPA Net NPA Rs. in crores 115.1% 15.0 120 120 15 110 168% 100 100 12 80 80.7% 80 68.6% t t
9 in crores 60 . . rcen rcen Rs Pe 60 41 308% Pe 40 6 5.1 4.5 40 20
3 -20 20 1.6 1.5 0 0.7
0 -20 0 FY 06 FY 07 FY 08 FY 06 FY 07 FY 08 FY 06 FY 07 FY 08
1168 PB Directors’ Report Your Directors are pleased to present the thirteenth Annual Report of DCB together Management discussion and analysis of with the audited accounts for the year ended 31st March, 2008. business performance FINANCIAL RESULTS A. CONSUMER BANKING GROUP (CBG)
(Rs. in crores) DCB took significant steps for the FY 2007-08 towards building and consolidating
For the year For the year Variance (%) its position as an emerging player in the retail banking industry. With an expanding ending ending national footprint, the introduction of new and innovative products and strategic 31 March, 2008 31 March, 2007 partnerships, the Bank has continued on its growth trajectory. Deposits 6,074.85 4,415.20 37.59 Customer Deposits 5,646.00 4,102.51 37.62 DCB has expanded its retail operations. It currently operates a network of 80 (Including CASA) (1,474.29) (1,251.68) 17.78 branches and extension counters spread over ten States and two Union Territories Inter Bank Deposits 428.85 312.69 37.15 with a strong presence in Maharashtra, Gujarat and Andhra Pradesh. In addition Advances 4,068.80 2,658.31 53.06 to its own ATMs, the Bank has ATM sharing arrangements with the Cashnet and Non Performing Assets Infinet networks, thereby allowing customers access to more than 18000 ATMs (Gross) 63.43 146.16 (56.60) across the country. Non Performing Assets (Net) 26.98 43.62 (38.14) The year also saw DCB expand into new markets including Nashik and Jodhpur Provision for Standard Assets 28.12 20.89 34.61 while further strengthening its retail presence in cities like New Delhi, Bengaluru, Total Assets 7,577.48 5,262.15 44.00 Chennai, Kolkata, Mumbai and Pune. Profit & Loss Parameters Due to an increased thrust on the retail business, all efforts have been focused Net Interest Income 186.11 119.55 55.68 on developing and delivering to customers a comprehensive suite of “best in Non-Interest Income 162.56 92.49 75.75 class” products for specific market segments in chosen geographies. DCB’s Total Operating Income 348.67 212.04 64.43 strategy of developing select asset and liability products, through a mix of Operating Cost 239.06 171.07 39.74 owned and outsourced products and multi-channel capability has been highly Operating Profit 109.61 40.97 167.54 successful. Provisions 73.47 39.15 87.66 There has been a significant growth in retail accounts. The number of retail Net Profit Before Tax 36.14 1.82 1885.71 accounts is at present over 631,000 as on 31st March 2008. During the year, DCB Tax (2.19) (5.55) (60.54) opened approximately 120,000 new accounts. Net Profit After Tax 38.33 7.37 420.08 Growth in Liabilities During the year, DCB has consolidated its position by posting an Operating The Current & Savings Accounts (CASA) and Term Deposits portfolio showed Profit of Rs. 109.61 crores (Previous year: Rs. 40.97 crores) and Net Profit of continued momentum and have increased by 36% - rising to Rs. 3,155 crores in Rs. 38.33 crores (Previous year: Rs. 7.37 crores). The total assets of DCB FY 2007-08 from Rs. 2,328 crores in FY 2006-07. have grown by 44% during the year to Rs. 7,577 crores in FY 2007-08, from Rs. 5,262 crores in FY 2006-07. DCB launched several value-added initiatives, providing a comprehensive suite Total Deposits and Total Advances have grown by 38% and 53% respectively. of liability products ranging from premium accounts to zero balance accounts for Gross and Net Non-Performing Advances have been brought down considerably specific market segments in chosen geographies. to Rs. 63 crores and Rs. 27 crores in FY 2007-08 from Rs. 146 crores and With core liability product offerings such as the Classic Savings and Current Rs. 44 crores in FY 2006-07. Accounts, Corporate Payroll Account, Fee-based Free Style Savings Account and Cost to Income Ratio has been reduced to 68.6% for the year ended FY 2007-08, M-Power Account, the Bank managed to accelerate the process of customer from 80.7% in FY 2006-07. acquisition. At the same time, DCB increased focus on the premium segment Capital Adequacy Ratio (CAR) in FY 2007-08 stood at 13.38% over the previous accounts, which aided growth in CASA. These initiatives enabled DCB to acquire year’s 11.34% compared with a regulatory minimum of 9%. over one lakh transaction relationships in FY 2007-08. The Bank opened eight new branches in FY 2007-08, which substantially enhanced DCB’s TRIO Account launched in FY 2006-07 continues to be a success. This DCB’s business footprint and brand presence in key market locations. deposit portfolio registered an increase of 126% in FY 2007-08.
DIVIDEND The introduction of a Tax Saver Fixed Deposit product provided customers an additional DCB’s return to the dividend list will require a longer period of profitable option to invest in tax-planning instruments. DCB today has a complete suite of liability growth to eliminate accumulated losses of prior years. In view of this, offerings that complements the unique needs and requirements across customer your Directors do not recommend payment of any dividend for FY 2007-08 segments. The Bank also initiated the Point of Sale business through which it plans to (Previous Year: Nil). enhance the heavy float based Current Accounts of merchants. 17 Alternate Channels contributed by commercial vehicles / construction equipment and other DCB offers a host of alternate channel options to its customers such as Internet collateralised products. Currently, the retail asset products network spans 19 Banking, Mobile Banking, Phone Banking and access to over 18000 ATMs through centres (13 centres in the previous year) across the country with a renewed focus Cashnet, Infinet and Visa networks. The Bank’s alternate channel offerings are on distribution. truly world class, with the launch of several value-added initiatives to strengthen As a conscious strategy, it was decided to tighten the credit screens on non- the alternate channels portfolio. collateralised loans keeping in mind the external environment and the risk reward Products like Visa card-to-card transfer, National Electronic Funds Transfer (third scenario. Collateralised lending products contribute 62% of the total retail asset party funds transfer through internet banking), Visa Money Transfer, Online Utility books and DCB endeavours to grow this segment further. Bill Payments, etc. are likely to have a very positive effect on customer acquisition, There has been an increase in provisioning for non-collateralised lending in increased customer loyalty and service quality in the immediate future. DCB’s Phone- FY 2007-08. This has been an industry-wide phenomenon and is being corrected banking alternate channel recorded impressive usage with over 75,000 customer calls with strong collections, reduced proportion of such loans, and continuous change received in March 2008 alone, from around 10,500 calls in March 2007. in the lending criteria. DCB Phone Banking DCB’s Retail Asset Portfolio
Customer Care Calls Received in FY 2007-08 RETAIL ASSETS (Rs. in crores) Advances Advances 80000 Product as on as on 70000 31 March, 2008 31 March,2007 Secured Loan 60000 Infrastructure Supply Chain 665 130 50000 Mortgage 181 206 40000 Business Banking 324 194
30000 Total Secured 1,170 530 Unsecured Loans 20000 NUmber of Customer Calls Personal Loan 726 547 10000 Total Unsecured 726 547 0 Total Retail Assets 1,896 1,077 July May April June March August January October A recent initiative by the Bank has been in the home loan space where it entered February December November September into a strategic alliance with HDFC Ltd. to market their home loan products. HDFC is one of the country’s premier financial institutions in the home loan business Investment Services and is recognized for its excellent customer service. This alliance will help the Investment Services products have been a key contributor to the Bank’s fee Bank serve customers better by providing them with a comprehensive range of income. The Bank experienced a good year for its Third Party Distribution / Wealth financial services. Advisory business. The insurance distribution business (both, Life and General taken together) B. CORPORATE BUSINESS & BANKING GROUP (CBBG) has contributed Rs.10.58 crores in FY 2007-08 as fee income, (Rs. 7.31 crores Corporate Business and Banking Group (CBBG) has been a significant contributor FY 2006-07), a growth of 45%. The Mutual funds distribution business added to DCB’s growth story. Rs. 7.32 crores to fee income in FY 2007-08, (Rs. 6.16 crores FY 2006-07) a CBBG has posted impressive growth on all parameters. The asset book has seen a growth of 16%. sharp growth to Rs. 2,324 crores, from previous year’s Rs. 1,605 crores, an increase The year also saw DCB launching its credit Card. The DCB Advantage Credit Cards of 45% in FY 2007-08. Asset growth has been influenced by the growth in the come with a host of features and benefits that offers customers, convenience, economy and the Bank’s continuous endeavour to enhance the customer base. The rewards and financial freedom. Available in Gold and Silver variants, the free asset portfolio ratings as per the CRISIL RAM rating model continue to be good. for life card can be used to shop, dine and travel at any MasterCard merchant During FY 2007-08, renewed efforts were made to increase non-funded establishment in India and overseas. The Card comes with powerful benefits income through a thrust in Trade Finance business. This has been reflected in such as SMS alerts, balance transfer facility and an accelerated rewards a substantial growth in CBBG’s contribution to non-funded income of the Bank. program. Non-funded income grew sharply to Rs. 26.7 crores, an increase of 69% in Retail Assets FY 2007-08 over the previous year. A major highlight has been the growth in The retail asset portfolio of DCB has also shown a quantum growth of 76%, Rs. income from non-credit trade transactions that grew to Rs. 7 crores, over the 1,896 crores in FY 2007-08 from Rs. 1,077 crores in FY 2006-07, predominantly previous year (Rs. 3.9 crores), an increase of 79%. 18 CBBG follows a dual strategy for achieving business growth in the corporate CBBG’s business strategy takes into account the emerging capital requirements and SME segments. In order to intensify the Bank’s effort on the SME segment, under the BASEL II norms and is well geared for change. Product and Relationship Specialists have been hired to cater to the specific Small and Medium Enterprise (SME) needs of this customer segment. CBBG continues with its strategic focus on the high growth SME sector. The During the year, the Bank was able to achieve the mandatory priority sector lending sector has been the growth engine for India’s economic prosperity and has a targets for both, direct and indirect agricultural advances. CBBG contributed huge potential for net interest and fee income for banks. Advances to Micro and significantly towards this achievement. The Bank’s priority sector lending portfolio Small Enterprises have been classified as Priority Sector. To strengthen DCB’s grew to Rs. 1,611 crores from Rs. 1130 crores in FY 2006-07, an increase of 43% presence in the segment, the Bank focused on scaling up operations through in FY 2007-08 over the previous year. branch presence in the small enterprises segment and product customisation. Advances under the warehouse receipt-financing program grew extremely well Product customisation has simplified the credit approval process, improving both to Rs. 213 crores in FY 2007-08 from Rs. 81 crores in FY 2006-07, an increase of consistency and speed. 163%. Significant volumes under the product have been booked in the agrarian During the year, DCB enhanced the value proposition of it’s assets products states - Rajasthan, Gujarat, Maharashtra, Punjab and Haryana. for SMEs through product innovation and process efficiency. One of the major DCB Trade Finance Volumes developments in the last year has been the initiation of parameterised lending for providing both fund based and non-fund based working capital loans to Trade Finance Volumes Traders, Manufacturers, and the Service segment. This approach is unique as 39656 it evaluates the borrower not only on the financial basis, but also rewards the 40000 promoter for business and transaction efficiency, thereby lending consistency in 35000 credit assessment. 30000 We also further plan to expand services by targeting clusters of small enterprises 24598 that have a homogeneous profile. To drive operational efficiency in the entire 25000 transaction process, the Bank proposes to develop SME hubs at various locations
ransactions 20000 in the country that have industry concentration in order to provide dedicated
15000 service to the SME segment. No. of T
10000 Microfinance Initiative 3929 DCB introduced Microfinance in its portfolio in FY 2007-08 with direct lending to 5000 2275 groups and lending to Microfinance Institutions (MFIs). This segment is expected 0 to grow significantly in the coming years. Credit Non Credit Microfinance activities have been started at various locations in India. DCB has tie- Mar-07 Mar-08 ups with well-known MFIs in these geographies. To service the growing needs of CBBG has launched a very sophisticated state-of-the-art Internet banking platform the microfinance sector, the Bank has planned a comprehensive range of products for its corporate customers. The product compares with the best in the industry and services. The Bank has set up a Business Facilitator model with the Aga Khan and will enable customers to conduct their banking operations including fund Rural Support Programme (India) - AKRSP (I) in Gujarat. transfers through Real Time Gross Settlement (RTGS)/ National Electronic Funds As a pilot project, DCB has opened a dedicated microfinance branch at Dediapada Transfer (NEFT) from their own sites. in Gujarat this year. DCB will provide direct credit facilities to microfinance DCB has been empanelled as a clearing and settlement banker with the National borrowers through relationships with MFIs in the region. This initiative will also Commodities & Derivatives Exchange (NCDEX) in addition to the Multi Commodity help DCB meet the RBI requirements of lending to the economically weaker Exchange (MCX). CBBG offers customised stock and commodity exchange related sections of society. products to cater to the needs of the broking community. C. SPECIAL ACCOUNTS GROUP (SAG) CBBG’s team is well equipped to handle the changing needs of its clients. The The SAG team continued to excel in the challenging task of reducing DCB’s team has ensured that customer service quality standards are best in class. Non Performing Assets (NPAs). As on 31st March 2008 NPAs were at Rs. 63.43 Going forward, CBBG is in the process of introducing Cash Management Services. crores (1.54% of gross advances) against Rs. 146.16 crores (5.15% of gross The product incorporates the latest technology and will enable customers advances) as on 31st March 2007. There was also a reduction in net NPA to Rs. to manage their finances in a more profitable and effective manner. The trade 26.98 crores (0.66% of net advances) as on 31st March 2008, from Rs. 43.62 finance product suite is being enhanced through the addition of factoring services crores (1.64% of net advances) as on 31st March 2007. The continued effort and structured trade products. This will boost growth in non-funded income for of recoveries resulted in collections to the tune of Rs. 62.73 crores from NPAs DCB. The improved performance of the Bank has resulted in increased counter and written off accounts, inclusive of the Rs. 31.25 crores received from Asset party trade lines, which will boost income further. Reconstruction Company India Limited (ARCIL) for saleable legacy portfolio. 19 D. TREASURY Risk Management Committee (CRMC), in turn support the Risk Management DCB’s Treasury is active in foreign exchange (forex), equity and fixed income Committee (RMC). securities market apart from managing the growing balance sheet and customer Credit Risk sales. The credit risk policy of DCB supports, and is aligned with, the Bank’s corporate Continued tightening of the money market by RBI through increased Cash Reserve priority of achieving growth and at the same time maintaining asset quality to Ratio (CRR) by 100 basis points (bps), reduced liquidity from the market and kept ensure long term sustainable profitability over business cycles. DCB assumes interest rates under pressure for most part of the year. Money supply, inflation only those credit risks that are acceptable within the context of provisioning and credit growth remained under continuous attention of the RBI. During the requirements, and present and expected future earnings. A healthy balance is year, DCB’s Treasury was successful in funding requirements of the Bank. A maintained between risk and reward. During the course of the financial year, the rising interest rate scenario provided limited opportunities to trade in Government Bank moved over to linking exposure limits to credit rating. Securities (G-sec). DCB traded in the G-sec market with a cautious approach. The During the year, DCB further strengthened its internal risk assessment capabilities equity market provided good opportunities during the bull run and DCB invested by procuring / developing additional risk assessment models, industry risk reports, in Initial Public Offerings (IPOs) of fundamentally sound companies. The Money score card templates for retail lending, etc. All individual corporate exposures Market Desk generated revenues of Rs. 18.40 crores during FY 2007-08, (Rs. 6.29 are internally rated on one of five modules: Large Corporates, Traders, Small crores in FY 2006-07). and Medium Sized Enterprises (SME), Manufacturing and SME Services and Non Banking Financial Companies (NBFC). For each product, programs defining The Treasury is dealing actively in G7 Currencies & Cross Currencies as well as customer segments, underwriting standards, security structures and other criteria participating in USD/INR forwards market. Treasury has also been dealing in are specified to ensure consistency of credit buying patterns. Clear separation derivatives product like Overnight Index Swaps (OIS), both, for trading as well as of functional responsibilities is maintained between business acquisition, credit hedging. DCB offers a bouquet of forex and derivatives product to its customers. assessment and approval, and loan administration. An aggressive and proactive marketing approach has resulted in increasing the The role of the Credit Monitoring Unit was enhanced during the year and it now exclusive client base for the merchant forex desk, which generated a turnover functions as a Credit Risk Analytics & Monitoring (CRAM) unit. The unit monitors of USD10.62 billion / Rs. 42,607 crores. Active and opportunistic trading calls in all corporate exposures centrally, to identify and reveal early warning signals. It the volatile inter-bank forex market resulted in a turnover of USD 29.66 billion/ also evaluates impact on the loan book arising or evolving because of specific Rs.118,991 crores. The forex desk generated gross revenue of Rs. 22.51 crores market developments. An independent Credit Risk Inspection Group (CRIG) as part during FY 2007-08 as against Rs. 14.93 crores in FY 2006-07. of credit audit carries out periodic loan reviews to assess the quality of the loan During FY 2007-08, the Treasury generated gross revenue of Rs. 40.91 crores book on an ongoing basis. from its activities, as against Rs. 21.22 crores in the previous year. Concentration Risk Risk is managed at individual exposure as well as portfolio level, with prudential Highlights caps fixed for individual and groups of borrowers, industrial sectors, geographies, • CRISIL has awarded DCB the rating of P1+ for its Certificate of Deposit asset classes and unsecured exposures. The exposures norms adopted by the Program. This is the highest rating possible indicating that the degree of Bank are conservative in comparison to the regulatory prudential exposure norms. safety regarding timely payment of interest and principal is very strong To avoid imbalance in corporate portfolio, DCB has set a Substantial Exposure • Gross revenue of Rs. 40.91 crores, previous year Rs. 21.22 crores threshold (exposure above Rs. 50 crores) and the Aggregate Substantial Exposure limit at a very conservative limit of four times capital funds. The actual exposure • Inter Bank forex turnover of USD 29.66 billion / Rs.118,991 crores, against under this limit as on 31st March, 2008 is Rs. 458 crores (17% of the aggregate USD 14.17 billion / Rs. 62,358 crores in FY 2006-07 substantial exposure limit set). • Corporate forex turnover of USD 10.62 billion / Rs. 42,607 crores, against DCB Credit Risk Asset Distribution USD 4.48 billion / Rs. 19,485 crores in FY 2006-07 Distribution of credit risk asset by industry sector as on 31st March 2008 E. CREDIT & RISK Industry Sector Percent Risk Management DCB has deployed a risk management framework that enables comprehensive Loans - Personal, housing, staff, others 16.81 and integrated management of risks, with a clear objective of identifying all Direct & Indirect - Agriculture 16.78 types of risks that DCB is exposed to. DCB has developed structured Risk Profile Transport 10.12 Templates to cover various types of risks and assiduously monitors and measures Construction - Contractors 5.87 the level and direction of risks. Establishing a well-defined and independent risk Wholesale Trade 5.02 management function in respective business and operations is a key requirement Finance - others 4.32 before undertaking any new activity. Operating level risk committees, which oversee specific risk areas, viz., the Asset Liability Management Committee Infrastructure-Power, Ports, Roads, Bridges 3.47 (ALCO), the Operational Risk Management Committee (ORCO) and the Credit Retail Trade 3.42 20 Industry Sector Percent risk is managed largely on a portfolio basis, across various products and customer Other Chemicals 2.89 segments. During the year, the Bank has initiated a project to revamp its existing credit scoring models for retail assets with the external support of a reputed Iron & Steel 2.88 international vendor. All Others 2.79 Miscellaneous Services 2.44 Market Risk Information Technology 2.33 Besides Structural Liquidity, Interest Rate Sensitive Gap limits and Absolute Holding limits, DCB also monitors interest rate risks using Value at Risk (VaR) limits. Food & Beverages 2.32 Exposures to foreign exchange, commodities, and capital markets are monitored Textiles - Others 2.11 within pre-set exposure limits, margin requirements, and stop-loss limits. DCB has Housing Finance Companies 2.05 taken steps to have system generated comprehensive Asset Liability statements Edible Oils 1.75 that are expected to be rolled out during the current year. Moreover, DCB enters Gems & Jewellery 1.63 into derivative transactions on a fully hedged basis. Miscellaneous Manufacturing 1.60 Country Exposure Risk Electronic Equipment & parts 1.48 DCB has established specific country exposure limits capped at 1% of Total Assets Real Estate 1.39 for each individual country, and uses insurance cover available through the Export Cotton Textiles 1.19 Credit and Guarantee Corporation (ECGC), where appropriate. Heavy Engineering 1.19 Liquidity Risk Pharmaceuticals & Bulk Drugs 1.08 Liquidity risk arises in any bank’s general funding of its activities. As part of the Petrochemicals / Plastics & Products 0.84 liquidity management contingency planning, DCB assesses potential trends, Vehicles & Parts 0.68 demands, events and uncertainties that could reasonably result in an adverse Metal Products 0.56 liquidity condition. The Bank considers the impact of these potential changes on Paper & Products 0.41 its sources of short term funding and long term liquidity planning. The Bank’s ALM Metals and Alloys - Non Ferrous 0.31 policy defines the gap limits for the structural liquidity, and the liquidity profile of the Light Engineering 0.19 Bank is analysed, on a static as also a dynamic basis, by tracking all cash inflows and outflows in the maturity ladder based on the expected occurrence of cash Renting of Equipment 0.10 flows. The Bank undertakes behavioural analysis of the non-maturity products, viz., DCB Portfolio Distribution savings and current deposits and cash credit / overdraft accounts, on a periodic Distribution of Portfolio by Sectors as on 31st March, 2008 basis, to ascertain the volatility of residual balances in these accounts. The renewal pattern and premature withdrawals of term deposits and draw downs of unavailed credit limits are also captured through behavioural studies. The liquidity profile of the Bank is estimated on a dynamic basis by considering the growth in deposits Manufacturing and loans, and investment obligations, for a short-term period of three months. 26% Infrastructure The concentration of large deposits is monitored on a periodic basis. The Bank’s 9% ability to meet its obligations and fund itself in a crisis scenario is very critical, and accordingly, stress tests are conducted under different scenarios at periodical Services intervals to assess the impact on liquidity to withstand stressed conditions. 31% Operational Risk
Loans-Personal, Operational risk is the risk of loss resulting from inadequate or failed internal Housing etc. processes, people or systems, or normal external events. The business units put 17% in place the baseline internal controls as approved by the Product Management Committee to ensure a sound and well controlled operating environment Agriculture throughout the organisation. Each new product or service introduced is subject to 17% a rigorous risk review and sign-off process where all relevant risks are identified and assessed by departments independent of the risk taking unit proposing Consumer Credit Risk Management the product. Key Operational Risk Indicators (KORIs) have been defined and DCB continued its thrust in the area of retail banking resulting in a sharp build up are regularly tracked. Self-assessment of operational risks within all business of the retail asset portfolio. The key challenge for a healthy retail asset portfolio is divisions has been done and loss reporting and data capturing systems have been to ensure a stable risk adjusted earnings stream by maintaining customer defaults implemented. Business Continuity Plans (BCP) for all critical units is in place. The within acceptable levels. Given the granularity of individual exposures, retail credit Bank is in the process of evaluating software solutions for efficient management 21 of operational risk with emphasis on identification of all key risk indicators at the • Document imaging and archival system implemented unit level, monitoring all identified risk and measuring their impact in terms of • Image-based processing of trade finance documents successfully piloted occurrence and severity at the unit level and then aggregating them to a higher • Auditing software implemented organisational level • Implementation of a web-enabled retail asset processing system to Implementation of Basel II guidelines automate the loan life cycle for all retail asset products DCB has decided to migrate to New Capital Adequacy Framework (NCAF) under • Strengthening of the telecom network across the Bank Basel II guidelines on 31st March, 2009. DCB is adopting the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach DCB continues to examine appropriate technologies to support the business for Operational Risk. The Bank has assessed the key requirements of the NCAF plans in the coming financial year including the requirements relating to contained in the Basel II guidelines issued by the regulator and has set in place a Basel II implementation. The Bank is taking active steps to make use of technology core group to monitor the implementation. Several critical steps, as under, have to create competitive advantage in addition to its enabling role. been taken to ensure that the Bank is in readiness to migrate under NCAF, well The Operations and Technology division moved to a new premises at Vikhroli, before the scheduled date for migration: Mumbai. This is an excellent work environment, housed in low cost premises, and • Approval of External Credit Assessment Institutions, mapping of credit very similar to a BPO. The Vikhroli premises also houses DCB’s training centre. rating, strategies for getting the corporate portfolio externally rated • System for capturing credit rating / loan quality migrations G. INTERNAL AUDIT • Credit rating and pricing DCB has established a well-defined and independent Internal Audit function in line • Policy on Credit Risk Mitigants and Collateral Management with the expectations of the shareholders and regulators. • Disclosure policies and processes to ensure adequate disclosure Internal Audit department is staffed with professionals in the fields of accounting, • Procurement of capital assessment module to be integrated with the information audit etc. The internal audit function undertakes three types of audit: Bank’s systems to ensure ongoing computation of capital Operational Audit, Information Systems Audit and Credit Audit. • Parallel runs of capital assessment are being carried on a monthly basis since June 2006 which have, to date, indicated an improvement in DCB’s Highlights capital adequacy under the proposed Basel II policy framework • Introduction of Control Effectiveness Index© (CEI) as a tool for Risk-Based Audit across the bank The Bank views the implementation of the Basel II framework as an opportunity to systematically review its risk management systems and practices, with an • Introduction of Audit Command Language (ACL) as a tool for audit objective of aligning them to international best practices. • Creation of Branch Control Department (BCD) for effective control over branches F. INFORMATION TECHNOLOGY
DCB continues to leverage technology for supporting its business strategy and H. HUMAN CAPITAL to constantly improve the level of customer service. The applications acquisition 2007-08 has been a milestone year for DCB. Fast paced growth, restructuring strategy continues to be product-led, while the IT service delivery strategy is and strengthening the human capital of the Bank through strategic and focused evolving towards a hybrid model involving a strong in-house team combined with initiatives have redefined the landscape of the organisation. judicious use of outsourcing options with reputed players. Ensuring customer data security and confidentiality is an important element of the IT strategy. As DCB prepares to take on the challenge to be a preferred employer through DCB continues to augment and modernise its core IT infrastructure in line its human capital initiatives, it participated in best employer surveys of with business priorities to provide faster processing and better connectivity Watson Wyatt and Great Places to Work. Inputs from these surveys have to branches and offices. The Bank continues to adopt suitable measures to resulted in initiatives for employee connect and people policies. The Bank’s strengthen controls around information security. During the year, creation of a senior management team provides the line of sight on growth, performance, service delivery infrastructure around alternate channels, particularly, the Internet opportunities and challenges. Open, direct and regular communication across and voice channels, have been an area of focus. Some of the key technology all levels and the senior management team in the Bank has improved employee initiatives undertaken during this financial year include: morale, and fostered engagement across all regions.
• Modernisation of branch IT infrastructure covering more than 75% of the Promotion of the DCB brand as a preferred employer was achieved through branch IT assets participation in campus placements. The Bank recruited 49 management trainees as a part of the “DCB Future Leaders Campaign”. • Internet Banking capability enhanced to include account-to-account fund transfers for customers including interbank fund transfers In management changes, Mr. Praveen Kutty joined DCB as EVP & Head Consumer • On-line utility bill payment facility launched Banking Group; he replaced Mr. P. N. Vasudevan who resigned in July 2007.
22 With a view to enhance regional presence and provide greater support to Highlights employees, Human Capital had initiated an area structure at Mumbai, Delhi, • DCB has been voted at 72% by it’s employees as a part of Great Places to Gujarat and the South. The new approach allows for a single point interface for all Work survey human capital related requirements of the region. • Town Halls, Children’s day, festivals and birthdays celebrated Training is synonymous with development and growth and over 4000 • In FY 2007-08, 33 Management Trainees joined the Bank as part of the people-days of training were provided in FY 2007-08. Programs ranged from campus recruitment programme technical, skill building to customer service, Know Your Customers (KYC) and • 930 people joined the Bank’s talent pool from various organisations Anti Money Laundering (AML). Department specific training roadmaps • Training management system, “The Atlas”, launched as an alternative were created and deployed. These added immense value to the employee training and testing platform knowledge base, enhanced customer experience and reaffirmed the learning • “Kshitij”, a detailed banking basics and employee orientation programme culture at DCB. achieved 4,397 people-days of training The staff strength of the Bank ending 31st March, 2008 stood at 2,235 as against • DCB issued employee stock options to eligible employees across all staff 1,810 as on 31st March, 2007. Human Capital has focused on realigning and levels driving the ‘best-fit’ philosophy. • HR consultant Mercer undertook a compensation survey for DCB DCB undertook employee pool reprofiling at all levels with the objective to attract external talent and fill crucial gaps with the best available talent. Strategic I. CUSTOMER SERVICE empanelment, targeted campus drives, campaign based hiring and tie-ups with 2006 saw the launch of the Service Quality initiative at DCB with a lot of awareness job portals like naukri.com and monster.com provided the impetus and brand visibility to attract talent to DCB. created amongst employees. 2007-08 was devoted to driving home a change in mindset with respect to service through relevant projects at grassroots level. The outsourcing of the Payroll to Mafoi has improved the service offerings to the employees. All employees are able to access the compensation, Provident Fund, The Quality Management System (QMS) project was one such major initiative leave, and tax details with ease. launched across 78 branches. The objective of the project was to supplement the training on “Customers for Life” with practical application at the branch. The Employee Stock Option Plan (ESOP) is a powerful motivator. At DCB, even The project focused on three main aspects, viz., Customer Service, Workplace new staff members are eligible. ESOP attracts the right talent, recognises the contribution of employees and inculcates ownership. The Bank has a tie-up with Management and Quality Management. ESOP Direct for employees to view the ESOP details on-line. At the branches, small-customised training modules were deployed to create The Human Capital mandate is to build a strong performance driven culture awareness on ways of improving customer service, workplace organisation through transparent mid-year and annual appraisal programmes. and quality management. These modules were followed up with practical implementation involving the entire branch staff using tools such as 5S. This Age Group Segmentation - Employee Resource Base exercise brought about a perceptible change in mindset towards customer service DCB diversity in experiance and ideas at branches. Mystery Audits conducted through an independent external agency, and Mystery 40 - 50 years 11% Calling conducted by members of the Customer Service Committee, preceded this implementation. Two rounds of Mystery Audits revealed key areas of 30 - 40 years 50+ years improvement - in people grooming, greeting and executive knowledge. However, 34% 4% the overall Branch Index improved from 65% to 70% after the first round itself! Mystery Calling scores also showed average improvements in the range of 30% to 40% across all parameters. 20 - 30 years 51% Quality Circles were expanded across 78 branches. Branches started reporting key customer service metrics and issues on a weekly basis, and Operations have begun reporting their metrics on a monthly basis. The Customer Service Committee deliberated on these and other issues from an analysis of customer complaints as well as Branch and regional service committee meetings, and delivered many improvements that have resulted in enhanced customer experience.
Last year, DCB launched ‘Good as Gold Individual Award’, an on-the-spot award to recognise individuals for exemplary service to both, internal and external, customers. 118 winners across various departments and functions
23 were felicitated. The rewards program is being revamped and will be branded PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY and deployed with many more categories next year. ABSORPTION
Complaints showed a healthy decrease over the previous financial year with 69% The provisions of Section 217(1)(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to DCB. However, of the complaints being resolved within three days. The year had 46 Banking Om- as mentioned in the earlier part of the Report, DCB has been extensively using budsman / Reserve Bank of India (RBI) complaints against the Bank and the Om- technology in its operations. budsman passed no awards against the Bank.
Last year, DCB was amongst the first to become a member of the Banking Codes DIRECTORS’ RESPONSIBILITY STATEMENT and Standards Board of India (BCSBI), thereby, voluntarily adopting the ‘Banking In accordance with Section 217(2AA) of the Companies Act, 1956, your Board of Code of Commitment to Customers’ (Code). The Bank has already implemented Directors confirms that: almost all provisions of the Code. Internal Audits of implementation were carried a) in the preparation of the annual accounts, the applicable accounting out as part of the QMS projects and will continue throughout next year. BCSBI’s standards have been followed along with proper explanation relating to initial sample survey revealed only minor areas of improvement in customer material departures; education that have since been addressed. b) except for change in accounting policies set out in Item No. 1 in the Notes to Accounts, accounting policies have been selected and applied consistently. Overall, the Service Quality initiative has taken firm root and is poised to take the Reasonable and prudent judgments and estimates have been made so as to next big step towards achieving our vision of being the gold standard in customer give a true and fair view of the state of affairs of DCB in FY 2007-08 and of service! the profit for the year ended on that date; Highlights c) proper and sufficient care has been taken for maintenance of adequate accounting records as provided in the Companies Act, 1956, for safeguarding • Quality Management System project implemented across 78 branches the assets of DCB and for preventing and detecting frauds and other has brought about a significant change in mindset at the grassroots level irregularities; and • Mystery Audit scores improved from 65% to 70% after the first round d) the annual accounts of DCB have been prepared on a “going concern” • Service Indicators and Quality Circles expanded across 78 branches with basis metrics and service issues being reported on a weekly basis CORPORATE GOVERNANCE • 118 winners of the Good as Gold Individual Award this year The Bank strongly believes in observing the best corporate governance practices • Complaints reduced by 28% over last year with 69% of the complaints and benchmarking itself against each such practice on an ongoing basis. A being resolved within three working days separate section on Corporate Governance and a Certificate from the Practicing Company Secretary regarding compliance of conditions of Corporate Governance Annual Summary as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges (a) Number of complaints pending at the beginning of the year 7 form part of this Annual Report. (b) Number of complaints received during the year 198 DIRECTORS (c) Number of complaints redressed during the year 197 In accordance with the Companies Act, 1956 and the Articles of Association of (d) Number of complaints pending as on 31.03.2008 8 DCB, Directors Mr. Amin Manekia, Mr. R. A. Momin, and Mr. Anuroop Singh are Data on awards passed by the Banking Ombudsman retiring by rotation and, being eligible, offer themselves for re-appointment. (a) Number of unimplemented awards at the beginning of the year Nil The Board recommends the reappointments of Mr. Amin Manekia, (b) Number of awards passed by the Banking Ombudsman during the year Nil Mr. R. A. Momin, and Mr. Anuroop Singh as Directors at this Annual General Meeting. The brief resume/details relating to the Directors who are to be re- (c) Number of awards implemented during the year Nil appointed are furnished in the report on Corporate Governance. (d) Number of unimplemented awards as on 31.03.2008 Nil None of the above mentioned persons are disqualified from being appointed as a PARTICULARS OF EMPLOYEES Director as specified in terms of Section 274(1)(g) of the Companies Act, 1956. In accordance with Section 217(2A) of the Companies Act, 1956 and the rules Dr. Vijay Kelkar has resigned from the Board w.e.f. December 31, 2007 pursuant framed thereunder, a statement furnishing names and other particulars of to his appointment by the President of India as the Chairman of the Thirteenth employees in receipt of remuneration of Rs. 24 lakhs or more per annum and pro Finance Commission. Your Directors wish to place on record their sincere rata, if employed for a part of the year, is annexed to this Report. appreciation for the contribution and guidance given by Dr. Vijay Kelkar during his tenure as Director. EMPLOYEE STOCK OPTIONS The information pertaining to the Employee Stock Options is given in an annexure STATUTORY AUDITORS to this Report. Messrs N. M. Raiji & Co., Chartered Accountants, were appointed as Statutory
24 Auditors at the last Annual General Meeting. They have completed a continuous guidance and support to DCB. Your Board acknowledges with appreciation, term of four years as the Bank’s Statutory Auditors and as required under the the assistance and co-operation extended by SEBI, BSE, NSE, NSDL, CDSL, Banking Regulation Act, 1949 they cannot be reappointed at the ensuing Annual Central Government and the Governments of various States where DCB has its General Meeting. branches. The appointment of the Bank’s Statutory Auditors requires prior approval of Your Board acknowledges with appreciation, the invaluable support provided RBI. The Bank has made the usual representation to RBI, recommending the by DCB’s auditors, lawyers, business partners and investors. Your Board is appointment of Statutory Auditors from a panel of Chartered Accountants as also thankful for the continued co-operation of various financial institutions and approved by the Board of Directors. The order of preference includes the name of correspondents in India and abroad. M/s. S. R. Batliboi & Co., Chartered Accountants, Mumbai as first preference. The Your Board records with appreciation the valuable contribution made by employees approval of RBI for appointing M/s. S. R. Batliboi & Co., Chartered Accountants, at all levels and looks forward to their continued commitment to achieve and Mumbai as Statutory Auditors, is therefore expected. surpass the ambitious organisational goals that we have set ourselves for the ACKNOWLEDGEMENTS coming financial year. On behalf of the Board of Directors Your Board wishes to thank the principal shareholder, the Aga Khan Fund for Economic Development (AKFED), and all the other shareholders for the confidence Mumbai Nasser Munjee and trust they have reposed in DCB. Your Board also thanks the RBI for its valuable May 6, 2008 Chairman
25 Annexure to the Directors’ Report
EMPLOYEE STOCK OPTIONS
Options granted during the year 2,906,193
The pricing formula The last prevailing price on the largest volumes traded on the day before the Nomination Committee Meeting. (July ’07 – Rs. 108.30, Oct ‘07- Rs.106.20, Jan ’08 – Rs. 117.60) Options vested Nil
Options exercised and the total number of shares arising as a result of exercise of options Nil
Options lapsed 475,750
Variation of terms of option Nil
Money realised by exercise of options Nil
Total Number of options in force 8,393,017
Details of options granted to: 1,830,643 (i) Senior managerial personnel (ii) Any other employee who receives a grant in any one year of option amounting to 5% Mr. Gautam Vir – 1,430,643 options granted or more of option granted during that year (iii) Identified employees who were granted option, during any one year, equal to or Total ESOPs granted to Mr. Gautam Vir were 2,952,643 which include 1,522,000 issued exceeding 1% of the issued capital (excluding outstanding warrants and conversions) in FY 06-07 and 1,430,643 in Dec-07. of the Company at the time of grant: Diluted Earnings per Share (EPS) pursuant to issue of shares on exercise of option calculated The diluted EPS of DCB calculated after considering the effect of potential equity shares in accordance with AS 20-Earnings per Share arising on account of exercise of options is Rs. 2.25 Where the company has calculated the employee compensation cost using the intrinsic Had DCB followed fair value method for accounting, the stock option compensation ex- value of the stock options, the difference between the employee cost so calculated and pense would have been higher by Rs. 2.86 crores. Consequently, the profit would have the employee compensation cost that should have been recognised, if it had used the fair been lower by that extent. The basic EPS and diluted EPS of the Bank would have been value of the options, shall be disclosed. The impact of this difference on profits and on EPS Rs. 2.14 and Rs. 2.08. of the company shall also be disclosed. Weighted-average exercise prices and weighted-average fair values of options shall be Not Applicable disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock A description of the method and significant assumption used during the year to estimate The Securities Exchange Board of India has prescribed 2 methods to account for stock the fair values of options, including the following weighted- average information: grants: (i) intrinsic value method, (ii) the fair value method. DCB adopts the intrinsic value method to account for the stock options it grants to the employees. DCB also calculates the fair value of options, using a model with the following assumptions: (i) Risk free interest rate The risk free interest rate is expected to remain at 8.00% (ii) Expected life 1-2 years (iii) Expected volatility, and 40% (iv) Expected dividends No dividends expected
26 Annexure to the Directors’ Report (Contd.)
Statement under Section 217 (2A) of the Companies Act 1956, read with the companies (particular of employees) rule, 1975 and forming part of the Directors’ Report for the year ended March 31, 2008
Employed throughout the year and were in receipt of remuneration at the rate of not less than Rs. 24,00,000/- per annum.
Sr. Emp. Name of the Employee Date of Designation Qualification Age Experience Remuneration Last Employment No No. Joining Years Rs. 1. 1193 Mr. Harihar Krishnamoorthy 21.12.2001 Head Treasury B.com., A.C.A., CAIIB, Inter 47 25 9,482,326 Commerzbank A.G. C.S. 2. 1220 Mr. Paresh Nayar 18.04.2002 Chief Dealer Forex & Money B.A., CAIIB, Cert Course in Int. 44 23 4,839,107 Agee Gold Refineries Market Bank Financing 3. 1304 Mr. Nasir Sayed 04.04.2003 Head Unsecured Loans B.Sc., MBA 39 18 2,707,282 Standard Chartered Bank 4. 1921 Mr. Gautam Vir 13.09.2005 Managing Director & CEO B.A., PGDBA (IIM, Kolkata) 52 30 13,073,800 Hebros Bank 5. 2098 Mr. Gautam Gan 19.11.2005 Head Branch Banking M.A. 54 34 3,192,206 Deutsche Bank Ltd. 6. 2119 Mr. R Venkattesh 15.12.2005 Head Human Capital B. Com., PGDPM (MBA) 40 17 7,391,546 Standard Chartered Bank 7. 2130 Mr. Pio Leo Fernandes 21.12.2005 Head Recoveries B.Sc., CAIIB, DFSM, DIM, 49 28 2,777,659 IndusInd Bank Ltd. 8. 2144 Mr. Pravin Batra 03.01.2006 Head Corporate & BE, MMS 47 21 7,984,582 IndusInd Bank Ltd. Business Banking 9. 2156 Mr. Parag Patankar 16.01.2006 Chief Operations & B. Tech., PGDM 40 16 8,738,812 Independent Consultant Technology Officer 10. 2240 Mr. Ganesh Rao 09.03.2006 Head Secured Loans B. Com., MEP 42 20 3,661,005 G. E. Commercial Finance 11. 2421 Mr. Ashokkumar Balakrishna 02.05.2006 Head Quality BE, PGDBM 38 16 2,769,972 Prudential Process Kurup Management Services India Pvt. Ltd. 12. 2475 Mr. Adil Kasad 16.05.2006 Chief Financial Officer B.Com., FCA, FCS, AICWA, 43 23 5,805,694 Countrywide Financial LLB (Gen.) Corporation, USA 13. 2831 Mr. V L Ramakrishnan 06.07.2006 Head Credit, Retail Assets B.Com., ACA, ACS 39 14 3,333,936 GE Capital Services Ltd. 14. 2844 Mr. Ajit Kumar Choudhary 11.07.2006 Chief Technology Officer MBA, CISA, CIISA 43 18 3,749,292 First Gulf Bank 15. 2979 Mrs. Parool Seth 07.08.2006 Head CBBG Products B.Com., Inter ICWA 42 19 2,953,728 Barclays Bank PLC 16. 3020 Mr. Susheel Narain Kak 15.09.2006 Chief Credit & Risk Officer B.A., LLB 54 32 5,247,855 IDBI Bank Ltd. 17. 3071 Mr. H. Vijayabalan 22.09.2006 Head Internal Audit B.Sc., MBA, CAIIB (Part 1), 48 26 2,673,491 ICICI One Source Limited CIA, CISA, CIISA
27 Annexure to the Directors’ Report (Contd.)
Statement under Section 217 (2A) of the Companies Act 1956, read with the companies (particular of employees) rule, 1975 and forming part of the Directors’ Report for the year ended March 31, 2008. Employed for part of the year and were in receipt of remuneration at the rate of not less than Rs. 2,00,000/- per Month.
Sr. Emp. Name of the employee Date of Designation Qualification Age Experience Remuneration Last Employment No. No. Joining Years Rs. 1 2114 Mr. Devender K Vasal 10.12.2005 to Head Legal & Compliance B.Com., LLB, LLD, CAIIB 52 31 4,564,000 Sterlite Group of 30.06.2007 Industries
2 2161 Mr. Vasudevan Narasimhan 18.01.2006 to Head Consumer Banking B.Sc., ACS, B.L. 46 21 1,369,141 Cholamandalam Pathangi 14.07.2007 Investment & Finance Co. Ltd. 3 2452 Mr. Rahul Majumdar 02.05.2006 to Head NRI Business & Product B.Tech., PGDM 36 14 2,685,526 ICICI Bank Ltd. 10.03.2008 Liabilities 4 2717 Mr. Rajesh Chakrabarti 15.06.2006 to Head Marketing M.A. 36 11 2,595,270 UTV Software 10.02.2008 Communication Ltd. 5 3387 Mr. Kartik Shailesh Mehta 22.01.2007 to Head Microfinance B.Com., ICWA, ICAI 40 14 2,774,808 Yes Bank Ltd. 24.01.2008
6 4155 Mr. Padmanabhan K.S.V. 02.07.2007 to Head Cash Management B.Sc., MA., CAIIB, PGDCA, 45 20 1,193,549 Smelpower Consulting & 31.12.2007 Services PGDPM Technologies
7 4296 Mr. Praveen Achuthan Kutty 30.07.2007 Head Consumer Banking B.Com., MBA 41 17 9,049,371 CITIBANK 8 4992 Mr. Vipan Kumar Khanna 01.12.2007 Financial Controller & Head B.Sc., FCA 51 24 1,025,050 Rolta India Limited Investor Relations 9 5112 Mr. Anuj Kumar Puri 05.01.2008 Head Privilege Banking B.E., PGDBA 33 8 862,752 HSBC Bank Middle East Ltd. 10 5139 Mr. Yogesh Kapoor 14.01.2008 Head Operations B.Pharmacy, CAIIB 41 18 678,248 ICICI Bank Ltd. 11 5143 Mr. Praveen Kumar Abhishetty 18.01.2008 Head Portfolio Management B.Sc., MBA 39 16 1,218,512 CITIBANK Ramnarsaiah Services 12 5281 Mr. Abraham Alapatt 18.02.2008 Head Marketing B.Com., PGDBA (Marketing) 36 12 627,380 Reliance Mutual Fund 13 5354 Mr. Gaurav Mehta 15.03.2008 Head Public Relations & B.A., PGDBA (Marketing) 35 12 517,103 HSBC Global Resourcing Corporate Communications Notes : 1. Remuneration shown above includes Salary, Allowance, Medical, Leave Travel Assistance, Leave Encashment, Arrears of Salary, Ex-Gratia, Bank’s contribution towards Provident Fund, Gratuity and Monetary value of perquisites as per income tax rule. 2. Nature of employment is contractual. 3. None of the employees mentioned above is related to any Director of the Bank.
28 Corporate Governance I. PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE from St. Xavier’s College. He is an alumnus of IIM, Kolkata and holds a Post The Bank strongly believes in adopting and adhering to the best corporate Graduate Diploma in Management. governance practices, and benchmarking itself against the industry’s best Mr. Vir holds 8,750 equity shares in the Bank as on March 31, 2008. practices. It is the Bank’s endeavour to continue to achieve the highest Ms. Nasim Devji is a Fellow of The Institute of Chartered Accountants of England levels of governance as a part of its responsibility towards the shareholders & Wales and Associate of the Institute of Taxation (United Kingdom) as well as a and stakeholders. Transparency and integrity are the cornerstones for good Fellow of the Kenya Institute of Bankers. She has specialised in the field of banking governance, and the Bank is committed to these principles for enhancing and small-scale industries. Ms. Devji is currently Managing Director and Group shareholder value. CEO of Diamond Trust Bank in East Africa. II. BOARD OF DIRECTORS Ms. Devji holds 259 equity shares in the Bank as on March 31, 2008. The Bank has a non-executive part-time Chairman and more than 1/3rd Mr. Shabir Suleman Kassam is a Certified Public Accountant from Australia of the total numbers of Directors are independent. The number of non- and a Fellow of the Association of Chartered Accountants, United Kingdom. executive Directors is more than 50% of the total number of Directors. He is a banking consultant for the last five years. Previously, he spent 10 years The day-to-day management of the Bank is entrusted in the hands of the within Chartered Accounting firms and fourteen years in the banking profession key management personnel led by the Managing Director who operates in Australia. Currently he is a member on the Board of Industrial Promotion and under the superintendence, direction and control of the Board. The Board Development Company Ltd., Bangladesh. reviews and approves strategy and oversees the actions and performance of the management to ensure that the long-term objective of enhancing Mr. Kassam does not hold any equity shares in the Bank as on March 31, 2008. stakeholder value is met. Mr. Amin Manekia holds an MBA degree from Babson College (USA). Mr. Manekia has specialised in the field of finance and marketing and has vast COMPOSITION OF THE BOARD OF DIRECTORS experience in the areas of corporate and consumer marketing strategy formulation Mr. Nasser Munjee is the non-executive part-time Chairman of the Bank. He and implementation. holds a Master’s degree from the London School of Economics, U.K. following Mr. Manekia holds 18,303 equity shares in the Bank as on March 31, 2008. which he even read at the University of Chicago, USA. Mr. R. A. Momin holds a B.Com. degree and is a Fellow of Institute of Chartered Prior to joining DCB, Mr. Munjee was with IDFC Ltd. as its MD and CEO. His Accountants of India. Mr. Momin has more than 31 years of experience in the field journey in creating financial institutions began with HDFC Ltd., with whom he of accounting and audit. He had been on the Board of Directors of the erstwhile has been associated since its inception in February 1978. In March 1993 he Development Co-operative Bank for 7 years. joined the Board of HDFC Ltd. as Executive Director on which he continues to be a Director along with 14 other companies and several other institutions as Mr. Momin holds 13,841 equity shares in the Bank as on March 31, 2008. Chairman, Member of the Board or as a Trustee. Mr. Munjee has a deep interest Mr. A. A. Sabuwala is a qualified diploma holder in Mechanical Engineering for rural development, housing finance, urban issues - specially the development and has specialised in Small Scale Industries. He has set up several small-scale of modern cities and humanitarian causes. Mr. Munjee is a Technical Advisor on industries over the past 30 years. the World Bank - Public Private Partnership Infrastructure Advisory Fund, Member Mr. Sabuwala holds 9,159 equity shares in the Bank as on March 31, 2008. of the Board of Emerging Markets of South Asia Fund (EMSAF), Trustee of HSBC Asset Management Trust and an Advisor to Primary (Quantum) Real Estate Fund. Mr. Narayan K. Seshadri holds a B.Sc. degree and is a Chartered Accountant. He Mr. Munjee is also a Member of the Goa Planning Board, Managing Committee of has specialised in the field of agriculture, SSI and rural economy. Mr. Seshadri is a the Bombay Chamber of Commerce & Industry and CII. He is a Trustee of Welham corporate consultant and is on the Board of a number of companies such as DHFL Boys School, Dehra Dun, and Member of Academic Council of Goa University. He Venture Capital India Private Ltd., PI Industries Ltd., Kalpataru Power Transmission is also on the Board of Governors of the Narsee Monjee Institute of Management Ltd., Magma Shrachi Finance Ltd., Halcyon GB Holdings Private Ltd., Halcyon Studies, Mumbai and an honorary distinguished Professor at IIT, Kanpur. Enterprises Pvt. Ltd. and Halcyon Resources and Management Private Ltd. Mr. Munjee holds 4,076 equity shares in the Bank as on March 31, 2008. Mr. Seshadri does not hold any equity shares in the Bank as on March 31, 2008. Mr. Gautam Vir has over 30 years of banking experience across India, Asia Mr. Anuroop (Tony) Singh currently serves as Vice Chairman (Non-Executive), Pacific, Middle East and Eastern Europe. He returned to India after 14 years in Max New York Life Insurance Company Ltd. and was its Founder Chief Executive 2005 as Managing Director & CEO of Development Credit Bank Ltd. (DCB). Mr. Vir Officer & Managing Director. He also serves as Director for Perot Systems, USA, is credited with DCB’s turn around and growth over the last couple of years. since March 2005. Mr. Singh is also a Director of Max Healthcare Institute Ltd., Max India Ltd., SOS Children’s Village of India, Nirvana Corporate Institute Pvt. Prior to joining DCB, he was the CEO of Hebros Bank (Sofia, Bulgaria) from Ltd., and Society for Integrated Development of Himalayas. He is a Fellow of the 2000–2005. Mr. Vir has held very senior positions in Citibank N.A., Singapore and Institute of Chartered Accountants and has been in the financial services industry Standard Chartered Bank, Dubai, where he was Head Personal Banking. He was for over 35 years. He has served as a Chief Executive Officer for over 22 years in involved in setting up the Citibank NRI business in India, and after that from 1988 several multinational organizations. to 1991, was Vice President and Area Director, Eastern India and commenced their retail business there. Mr. Vir graduated with B.A. (Honours) in Economics Mr. Singh does not hold any equity shares in the Bank as on March 31, 2008. 29 Mr. D.E. Udwadia M.A. L.L.B. (Honors) is a Solicitor & Advocate of the Category of Directorship Bombay High Court and Solicitor of the Supreme Court of England. His area of Executive / Independent / legal practice is Corporate Law, Foreign Collaboration, Joint Venture and Project Non-Executive Non-Independent Finance. He is Partner of Udwadia & Udeshi, a firm of solicitors and advocates. Director Director He is an Independent Director on the boards of several corporate entities, both Chairman (Part-time) listed and unlisted including Sundaram Clayton Ltd., J.M. Financial Ltd., ABB Ltd, Mr. Nasser Munjee Non-Executive Independent ADF Foods Ltd., Bombay Burmah Trading Corporation Ltd., Coromandel Fertilisers Managing Director Ltd., Eureka Forbes Ltd., ITD Cementation Ltd., Macmillan India Ltd., Wyeth Ltd., Gautam Vir Executive Director Non-Independent AstraZeneca Pharma India Ltd., Avesthagen Ltd., Mechanalysis (India) Ltd. and MPS Technologies Ltd. Directors Mr. Amin Manekia Non-Executive Independent Mr. Udwadia does not hold any equity shares in the Bank as on March 31, 2008. Ms. Nasim Devji Non-Executive Non-Independent Mr. Sukh Dev Nayyar is M.Sc. (Physics Honors). He is an Associate of the Mr. Narayan K. Seshadri Non-Executive Independent Institute of Bankers, England, and an expert in the area of Risk Management. Mr. Anuroop Singh Non-Executive Independent He has vast experience in banking and has previously worked in various senior Mr. Rajab A. Momin Non-Executive Non-Independent positions with Grindlays Bank from 1964 to 1998. His last assignment was as Mr. Amir Sabuwala Non-Executive Independent Chairman & Managing Director of ING Asset Management Company. He is also an Independent Director on the Boards of Greaves Cotton Ltd. and PI Industries Ltd. Mr. Shabir Kassam Non-Executive Independent Mr. D. E. Udwadia Non-Executive Independent Mr. Sukh Dev Nayyar does not hold any equity shares in the Bank as on March Mr. Sukh Dev Nayyar Non-Executive Independent 31, 2008.
Board Meetings During the year ended March 31, 2008, 7 (seven) Board Meetings were held on May 3, 2007, July 10, 2007, July 30, 2007, August 9, 2007, October 31, 2007, January 30, 2008 and January 31, 2008. Details of attendance at the Bank’s Board Meetings, Directorship, Membership and Chairmanship in other companies for each director of the Bank are as follows:
Name of Director Attendance at the Bank’s Directorship of other Indian Membership of other Chairmanship of other Board Meetings public limited Companies Companies’ Committees Companies’ Committees Mr. Nasser Munjee 7 14 **18 4 Ms. Nasim Devji 4 None in India – – Mr. Shabir Kassam 5 None in India – – Dr. Vijay Kelkar *** 2 12 5 2 Mr. Amin Manekia 7 NA NA NA Mr. R. A. Momin 7 1 – – Mr. A. A. Sabuwala 7 NA NA NA Mr. Narayan K. Seshadri 7 9 2 1 Mr. Anuroop Singh 5 2 – – Mr. D.E. Udwadia 6 13 10 – Mr. Sukh Dev Nayyar* 4 2 – – Mr. Gautam Vir 7 NA NA NA
* Mr. Sukh Dev Nayyar was appointed as Director on August 9, 2007. ** No. includes committees other than Audit Committee & Shareholders’ Grievance Committee. *** Ceased to be Director of Bank w.e.f. January 1, 2008.
All Directors then on the Board of the Bank attended the last Annual General Meeting held on August 9, 2007.
30 III. COMPOSITION OF COMMITTEES OF DIRECTORS AND THEIR IT and Credit Committees, through the review of their minutes and any issues that ATTENDANCE AT THE MEETINGS require the attention of the RMC, manage effectively the risk profile of the Bank and consider all litigations and their progress. The Board has constituted Committees of Directors to take informed decisions in the best interest of the Bank. These committees monitor the During the year, the Committee met on 4 (four) occasions. activities falling within their terms of reference. The Board’s Committees NOMINATION COMMITTEE (NC) are as follows: The members of the Committee are Mr. Anuroop Singh (Chairman), AUDIT COMMITTEE OF BOARD (ACB) Mr. Nasser Munjee, Mr. Amin Manekia and Mr. A. A. Sabuwala. The Committee, Mr. Narayan K. Seshadri chairs the Audit Committee of Board (ACB) of the Bank. inter-alia, looks after the due diligence process for Directors, recommendation for The other members of the Committee are Mr. R. A. Momin and Mr. D.E. Udwadia. appointment/re-appointment of Directors, ESOPs etc. Mr. Narayan K. Seshadri and Mr. D. E. Udwadia both are independent Directors and During the year, the Committee met on 4 (four) occasions and twice through form the quorum. The Company Secretary acts as the Secretary to the Committee. teleconference. During the year, the Committee held 6 (six) meetings. SHAREHOLDERS’ GRIEVANCE COMMITTEE (SGC) The terms of reference of the Audit Committee are in accordance with Clause The Committee comprises of Mr. Amin Manekia (Chairman), Mr. Gautam Vir and 49 of the Listing Agreement entered into with the Stock Exchanges in India and Mr. A. A. Sabuwala. inter-alia include the following: The Committee monitors redressal of complaints received from shareholders/ a) Overseeing the Bank’s financial reporting process and ensuring correct, investors with respect to transfer of shares, non-receipt of dividend, non- adequate and credible disclosure of financial information; receipt of Annual Reports, etc. The Committee also takes note of number of b) Recommending appointment and removal of external auditors and fixing of transfers processed, issue of fresh share certificates, top shareholders, pattern their fees; of shareholding, etc. During the period 206 complaints relating to IPO such as non-receipt of Refund Order or ECS Credit or non-credit of allotted shares were c) Reviewing with management the annual financial statements before received and all were redressed. As of March 31, 2008, 15 instruments of transfer submission to the Board with special emphasis on accounting policies were pending and since then the same have been processed. and practices, compliance with accounting standards and other legal requirements concerning financial statements; The Committee met on 4 (four) occasions during the year. d) Reviewing the adequacy of the audit and compliance functions, including FRAUD REPORTING & MONITORING COMMITTEE (FRMC) their policies, procedures, techniques and other regulatory requirements; Pursuant to the directives of the RBI to all commercial banks, the Bank has e) Any other terms of reference as may be included from time to time in constituted a Fraud Monitoring Committee for monitoring cases of fraud involving Clause 49 of the Listing Agreement. amounts of Rs.1 crore or more. The Committee has Mr. Narayan K. Seshadri as its Chairman and Mr. Gautam Vir, Mr. Shabir Kassam, Mr. R. A. Momin and EXECUTIVE & CREDIT COMMITTEE (E&CC) Ms. Nasim Devji as other members. The Executive & Credit Committee comprising of Mr. Amin Manekia (Chairman), Since no fraud of Rs.1.00 crore or more was reported, the Committee was not Mr. Nasser Munjee, Mr. Gautam Vir and Mr. Shabir Kassam was reconstituted required to meet during the year under review. on August 9, 2007 and Mr. Sukh Dev Nayyar became the Chairman. Mr. Amin Manekia, Mr. Nasser Munjee and Mr. Shabir Kassam have continued to be the CUSTOMER SERVICE COMMITTEE (CSC) members whereas Mr. Gautam Vir has ceased to be a member w.e.f. October 31, The members of the Committee are Mr. Gautam Vir (Chairman), Mr. Amin Manekia 2007. The Committee, inter-alia, looks after sanctioning of loans and advances, and Mr. A. A. Sabuwala. investments, approving of One Time Settlements (OTS), approving of expenditure, The Committee monitors enhancing the quality of customer service and improving both of capital and revenue nature, purchase/sale of properties etc. the level of customer satisfaction for all categories of clientele at all times. It During the year the Committee met on 50 (fifty) occasions. also oversees the functioning of Standing Committee of Executives on Customer Service. RISK MANAGEMENT COMMITTEE (RMC) The Committee met on 4 (four) occasions during the year. Mr. Narayan K. Seshadri chairs the Risk Management Committee of the Bank. Other members of the Committee are Mr. Gautam Vir, Mr. Shabir Kassam, Mr. R. CAPITAL RAISING COMMITTEE (CRC) A. Momin, Ms. Nasim Devji and Mr. S. D. Nayyar. The members of the Committee are Mr. Nasser Munjee (Chairman), The Risk Management Committee (RMC) of the Board is the apex body of DCB’s risk Mr. Amin Manekia, Mr. Narayan K. Seshadri and Mr. Gautam Vir. This Committee management architecture. It is responsible for aligning various risk policies of the has been formed to formulate capital raising plans of Board to raise resources Bank with the risk appetite and risk philosophy articulated by the Board. Towards through various alternative channels and to expedite the process of preparation this end, it approves specific risk policies, including the Credit Policy, Investment and approval of offer documents/information memorandum, fixing of terms and Policy, Asset Liability Management Policy, Outsourcing Policy, Operational Risk conditions including pricing, engaging of intermediaries etc. for various kinds of Management Policy, KYC Standards and Anti-Money Laundering measures etc. securities, at opportune times. The Committee met once during the year to finalise The Terms of Reference of RMC also include Management of ORCO, ALCO, CRMC, the raising of capital through private placement. 31 ATTENDANCE AT COMMITTEE MEETINGS NOMINATION COMMITTEE * Total 4 meetings held AUDIT COMMITTEE OF BOARD Total 6 meetings held Name Number of meetings attended Mr. Anuroop Singh (Chairman) 4 Name Number of meetings attended Mr. Nasser Munjee 3 Mr. Narayan K. Seshadri (Chairman) 6 Mr. Amin Manekia 4 Mr. R. A. Momin 6 Mr. A. A. Sabuwala 4 Mr. D. E. Udwadia 6 * The Committee also met via teleconferencing on two occasions, at which all EXECUTIVE & CREDIT COMMITTEE members joined. Total 50 meetings held CUSTOMER SERVICE COMMITTEE Name Number of meetings attended Total 4 meetings held Mr. Amin Manekia Name Number of meetings attended (Chairman upto August 13, 2007) 49 Mr. Gautam Vir (Chairman) 4 Mr. Sukh Dev Nayyar Mr. Amin Manekia 4 (Chairman w.e.f August 14, 2007) 35 (2) Mr. A. A. Sabuwala 3 Mr. Nasser Munjee 15 Mr. Shabir Kassam 2 (13) CAPITAL RAISING COMMITTEE Mr. Gautam Vir (member upto October 31, 2007) 23 (3) One meeting held (Figures in parenthesis indicate meetings joined through teleconference) Name Number of meetings attended Mr. Nasser Munjee (Chairman) 1 RISK MANAGEMENT COMMITTEE Mr. Amin Manekia 1 Total 4 meetings held Mr. Narayan K. Seshadri 1 Name Number of meetings attended Mr. Gautam Vir 1 Mr. Narayan K. Seshadri (Chairman) 4 SHAREHOLDERS’ GRIEVANCE COMMITTEE Mr. Gautam Vir 4 Total 4 meetings held Mr. Shabir Kassam 4 Mr. R. A. Momin 4 Name Number of meetings attended Mr. Sukh Dev Nayyar Mr. Amin Manekia (Chairman) 4 (Director w.e.f August 14, 2007) 2 Mr. Gautam Vir 3 Ms. Nasim Devji 3 Mr. A. A. Sabuwala 4
SUMMARY OF ATTENDANCE OF DIRECTORS
Sr. No. Name of Directors Appointed on BM E&CC ACB RMC FRMC NC SGC CSC CRC No. of meetings held 7 50 6 4 0 4 4 4 1 1 Mr. Nasser Munjee June 29, 2006 7 15 N.M. N.M. N.M. 3 N.M. N.M. 1 2 Ms. Nasim Devji January 13, 2005 4 N.M. N.M. 3 0 N.M. N.M. N.M. N.M. 3 Mr. Shabir Kassam January 10, 2006 5 2 * N.M 4 0 N.M N.M N.M N.M 4 Dr. Vijay Kelkar January13, 2005 2 N.M. N.M. N.M. N.M. N.M. N.M. N.M. N.M. 5 Mr. Amin Manekia September 30, 2000 7 49 N.M. N.M. N.M. 4 4 4 1 6 Mr. R. A. Momin January 13, 2005 7 N.M. 6 4 0 N.M. N.M. N.M. N.M. 7 Mr. A. A. Sabuwala January 13, 2005 7 N.M. N.M. N.M. N.M. 4 4 3 N.M. 8 Mr. Narayan K. Seshadri September 30, 2004 7 N.M. 6 4 0 N.M. N.M. N.M. 1 9 Mr. Anuroop Singh January 13, 2005 5 N.M. N.M. N.M. N.M. 4 N.M. N.M. N.M. 10 Mr. D.E. Udwadia January 27, 2007 6 N.M. 6 N.M. N.M. N.M. N.M. N.M. N.M. 11 Mr. Sukh Dev Nayyar August 9, 2007 4 35** N.M. 2 N.M. N.M. N.M. N.M. N.M. 12 Mr. Gautam Vir September 13, 2005 7 23^ N.M. 4 0 N.M. 3 4 1 N.M. = Not a member * Mr. Shabir Kassam joined 13 meetings through teleconference. ** Mr. Nayyar also joined 2 E&CC meetings by teleconferencing. ^ Also joined 3 meetings through teleconference. Ceased to be member of Executive & Credit Committee from October 31, 2007 onwards.
32 IV. REMUNERATION OF DIRECTORS DETAILS OF REMUNERATION/SITTING FEES PAID TO OTHER Honorarium to Chairman DIRECTORS Following payments have been made to the Chairman during the year 2007-08: Other than the honorarium to the Chairman, the Bank does not pay any remuneration 1. Honorarium w.e.f. April 01, 2007 to March 31, 2008 : Rs. 12,00,000 to any non-executive Directors. Sitting fees paid to the non-executive Directors during the year are as under: 2. Sitting fees for attending Board/Committee Meetings : Rs. 2,60,000 Name of Directors Sitting Fees (INR) 3. Reimbursement of actual business related expenses : Rs. 49,385 Ms. Nasim Devji 70,000 Remuneration to MD & CEO Mr. Shabir Kassam 1,10,000 Mr. Gautam Vir is the Managing Director & CEO of the Bank. The details of the Dr. Vijay Kelkar 20,000 remuneration paid to the Managing Director during the year 2007-08 are as Mr. Amin Manekia 6,90,000 follows: Mr. R. A. Momin 2,20,000 Break up of remuneration Amount Paid (Rs.) Mr. A. A. Sabuwala 1,90,000 Basic 82,50,000 Mr. Narayan K. Seshadri 2,30,000 Performance Bonus 18,90,000 Mr. Anuroop Singh 90,000 Bank’s Contribution towards PF 9,90,000 Mr. D. E. Udwadia 1,70,000 Medical 3,00,000 Mr. Sukh Dev Nayyar 6,30,000 LTA 4,91,000 Driver’s Salary 1,37,538 Children’s tuition fees 5,00,000 Insurance premium 2,00,000
In addition, the Managing Director is eligible for gratuity as per the Payment of Gratuity Act, 1972 (On completion of five years service with the Bank). Perquisites (evaluated as per Income Tax Rules wherever applicable and at actual cost of the Bank otherwise) such as the benefit of the Bank’s furnished accommodation, gas, electricity, water and furnishing, club fees, personal accident insurance, use of car and telephone at residence, medical reimbursement, leave and leave travel concession, provident fund, superannuation and gratuity were provided in accordance with the rules of the Bank in this regard. The Reserve Bank of India has approved the remuneration to the Managing Director. No sitting fees are paid to Mr. Gautam Vir for attending the meetings of the Board and Committees thereof. Mr. Vir has been granted 14,30,643 stock options in FY 2007-08. Other than Mr. Vir, no stock options have been granted to any of the Directors of the Bank.
33 V. DETAILS OF DIRECTORS SEEKING APPOINTMENT/RE-APPOINTMENT AT THE FORTHCOMING ANNUAL GENERAL MEETING
Name of Director Mr. Amin Manekia Date of Birth 16-06-1961 Date of Appointment to the Board 30-09-2000 Expertise in specific functional area Co-operation, Finance & Marketing Qualifications M.B.A. (Babson College, USA) B.Com. – Mumbai University Directorship in Public Limited Companies NIL NIL Membership of Committees in Public Limited Companies Sr. No. Name of Company Nature of Committee Position Held NIL NIL NIL NIL Shareholding of Director in the Bank 18,303 Relationship with other directors of Bank NIL
Name of Director Mr. R. A. Momin Date of Birth 30-01-1944 Date of Appointment to the Board 13-01-2005 Expertise in specific functional area Co-operation, Accounting & Agriculture Qualifications B.Com., F.C.A. Directorship in Public Limited Companies Platinum Jubilee Investments Ltd. Director Membership of Committees in Public Limited Companies Sr. No. Name of Company Nature of Committee Position Held NIL NIL NIL NIL Shareholding of Director in the Bank 13,841 Relationship with other directors of Bank NIL
Name of Director Mr. Anuroop Singh Date of Birth 09-09-1953 Date of Appointment to the Board 13-01-2005 Expertise in specific functional area Accounting, Finance & Insurance Qualifications Chartered Accountant Directorship in Public Limited Companies Max New York Life Insurance Company Limited Vice Chairman Max Healthcare Institute Limited Director Max India Limited Director Membership of Committees in Public Limited Companies Sr. No. Name of Company Nature of Committee Position Held NIL NIL NIL NIL Shareholding of Director in the Bank NIL Relationship with other directors of Bank NIL 34 VI. GENERAL BODY MEETINGS HELD DURING THE LAST THREE YEARS Date Venue Special Resolution passed 12th AGM 09-08-2007 at Rama Watumall Auditorium, K.C. College, Dinshaw 1. To approve and authorize the issue of Equity Shares by way of 3.00 p.m. Wacha Road, Churchgate, Mumbai 400 020 Preferential Issue. EGM 15-12-2006 at Birla Matushri Sabhagar, 19, Marine Lines, 1. Increase of shareholding limit of FIIs from 24% to 49% 3.30 p.m. Mumbai 400 020 2. Issue of Shares to Qualified Institutional Buyers (QIBs) 3. Approval for Employee Stock Option Plans (ESOP) 4. Keeping Registers, Indexes and Copies of Certificates and documents at the office of Bank’s Registrar and Share Transfer Agents 11th AGM 11-09-2006 at Rama Watumall Auditorium, K.C. College, Dinshaw 1. Employee Stock Options Plan (ESOP) 3.30 p.m. Wacha Road, Churchgate, Mumbai 400 020 2. Honorarium to Chairman EGM 25-07-2006 at Centrum, World Trade Centre, Centre-1,First Floor, 1. Increase in Authorized Capital 11.00 a.m. Cuffe Parade, Mumbai 400 020 2. Alteration in Articles of Association EGM 21-11-2005 at Birla Matushri Sabhagar, 19, Marine Lines, 1. Alterations in Articles of Association 4.00 p.m. Mumbai 400 020 2. Further Issue of Capital – Private Placement/Preferential Allotment 3. Initial Public Offer 4. Employee Stock Option Plan (ESOP)
10th AGM 13-9-2005 at – do – — 4.00 p.m. EGM 31-3-2005 at 1. Further Issue of Capital – do – 4.00 p.m. Postal Ballot: No Special Resolution was passed through postal ballot during the previous year. The Bank proposes to seek the shareholders approval by way of Special Resolution for amending the Object Clause in the Memorandum of Association of the Bank through Postal Ballot. Towards this end, the Bank would be dispatching a separate Notice of Postal Ballot along with the Postal Ballot form and pre-paid envelope to shareholders of the Bank to vote on the resolution. The result of the same is expected to be announced at the Annual General Meeting of the Bank. VII. GENERAL INFORMATION FOR SHAREHOLDERS Date of 13th AGM Tuesday, July 15, 2008 at Rama Watumall Auditorium, K.C. College, Dinshaw Wacha Road, Churchgate, Mumbai 400 020 at 3.00 p.m. Book Closure Tuesday, 08th July, 2008 to Tuesday 15th July, 2008 Board Meetings for considering unaudited results for quarters of FY 2008-09 July 2008, October 2008, January 2009 and May 2009. Shareholders holding 1% and above shares in the Bank as on March 31, 2008
Sr. No. Name No. of Shares % of Share Capital Total Shares % to Capital 1 Aga Khan Fund for Economic Development Sa 29962700 17.19 Aga Khan Fund for Economic Development Sa 13787352 7.91 43750052 25.10 2 Al Bateen Investment Co. L.l.c 7390527 4.24 7390527 4.24 3 Oppenheimer Funds, Inc. Oppenheimer International Small Company Fund 7000000 4.02 7000000 4.02 4 Tata Capital Limited 6587210 3.78 6587210 3.78 5 Bnp Paribas Arbitrage 5899568 3.38 5899568 3.38 6 Lehman Brothers Asia Limited A/c Gra Finance Corporation Ltd. 5301900 3.04 5301900 3.04 7 Dcb Investments Ltd. 5301900 3.04 5301900 3.04 8 Morgan Stanley Investments (Mauritius) Limited 4632997 2.66 Morgan Stanley Mauritius Company Limited 564104 0.32 5197101 2.98 9 Housing Development Finance Corporation Ltd. 4047926 2.32 4047926 2.32
35 Sr. No. Name No. of Shares % of Share Capital Total Shares % to Capital 10 Citigroup Global Markets Mauritius P. Ltd. 3843132 2.20 3843132 2.20 11 Goldman Sachs Investments (Mauritius) 3810102 2.19 3810102 2.19 12 Khattar Holdings Private Limited 3394296 1.95 3394296 1.95 13 Pictet Country Fund (Mauritius) Limited 3090569 1.77 3090569 1.77 14 India Capital Opportunities Limited 2829529 1.62 2829529 1.62 15 Merrill Lynch India Equities Fund (Mauritius) Limited 2766180 1.59 2766180 1.59 16 Platinum Jubilee Investments Ltd. 2450182 1.41 2450182 1.41 17 Abn Amro Bank N.v. London Branch 2385391 1.37 2385391 1.37 18 Merrill Lynch Capital Markets Espana S.a. 2170097 1.25 2170097 1.25
DISTRIBUTION OF SHAREHOLDING AS ON MARCH 31, 2008 Number of equity shares held Folio Shares Numbers % to total holders Numbers % to total shares Upto 500 95710 88.4330 13604405 7.8050 501 to 1000 6663 6.1560 5191430 2.9780 1001 to 2000 3554 3.2840 5023221 2.8820 2001 to 3000 888 0.8200 2229358 1.2790 3001 to 4000 308 0.2850 1080820 0.6200 4001 to 5000 239 0.2210 1116195 0.6400 5001 to 10000 508 0.4690 3358254 1.9270 10001 and above 359 0.3320 142695171 81.8680 Total 108229 100.0000 174298854 100.0000 The 59809 folios comprise 162255265 shares forming 93.09% of the share capital, which are in dematerialised mode. Another 48420 folios comprise 12043589 shares constituting 6.91% of the share capital that are held in physical mode. CATEGORIES OF SHAREHOLDERS Shareholding Pattern as at March 31, 2008 CAT. Category of Shareholders No. of Shares % to Paid-up Capital CODE (A) Promoters’ Holding 1 Aga Khan Fund for Economic Development S.a. 43750052 25.10 2 Platinum Jubilee Investments Ltd. 2450182 1.41 Sub-Total (A) 46200234 26.51 (B) Non Promoter Holding 1 Institutions (a) Mutual Funds/Uti 1900253 1.09 (b) Financial Institutions/Banks 1816080 1.04 (c) Insurance Companies 0 0 (d) Fii’s 52348014 30.03 Sub Total (B) (1): 56064347 32.16 2 Non-institutions (a) Bodies Corporate 17667099 10.14 36 CAT. Category of Shareholders No. of Shares % to Paid-up Capital CODE i Individual (Capital <= Rs. 1 Lakh) 28911349 16.59 ii Individual (Capital > Rs. 1 Lakh) 6674049 3.83 (b) Others iii Clearing Member 703824 0.40 iv Non-Resident Indians (Repat) 1869028 1.07 v Non-Resident Indians (Non-Repat) 1168 - vi Foreign Companies 16086723 9.23 vii Directors & Relatives 121033 0.07 Sub Total (B)(2) : 72034273 41.33 Total Holding for Public 128098620 73.49 (B)=(B)(1)+(B)(2): Grand Total (A)+(B) 174298854 100.00
OUTSTANDING WARRANTS/ADRS/GDRS/CONVERTIBLE INSTRUMENTS COMPLIANCE WITH NON-MANDATORY REQUIREMENTS NIL 1. The Board BRANCHES An office of the Chairman is maintained at the Bank’s expense and The Bank has 76 branches, 04 extension counters and 112 ATM centres (both reimbursement of expenses incurred by the Chairman in performance of onsite and offsite) as at March 31, 2008. his duties is allowed. All the Directors of the Bank other than its Chairman and/or whole time director cannot hold office continuously for a period CODE FOR PREVENTION OF INSIDER TRADING exceeding eight years. The Bank has adopted a Code for the prevention of insider trading in the shares of the Bank. The Code, inter-alia, prohibits purchase/sale of shares of the Bank by 2. Remuneration Committee employees while in possession of unpublished price sensitive information relating The Board has not constituted a separate Remuneration Committee as to the Bank. the Nomination Committee of the Board also deals with the remuneration DISCLOSURES: payable to Directors. The Nomination Committee has four independent 1. The Bank has not entered into any materially significant transactions during Directors as its members, which include its Chairman. the year, which could have a potential conflict of interest between the 3. Audit qualifications Bank and its promoters, directors, management and/or their relatives, etc. other than the transactions carried out in the normal course of business. There are no audit qualifications in the Bank’s financial statements. The Bank Details of related party transactions entered into in the normal course of wishes to continue in the regime of unqualified financial statements. business are given in Notes to Accounts. 4. Whistle Blower Policy 2. There were no penalties or strictures imposed on the Bank by the Stock The Bank has in place a Whistle Blower Policy enabling employees to Exchange(s) and /or SEBI and/or any other statutory authorities on matters relating to capital market activities, except a penalty of Rs. 3,500/- by report to the management concerns about unethical behaviour, action or Central Depository Services (India) Limited (CDSL) for discrepancies in suspected trend or violation of Bank’s Code of Conduct. opening of Demat Accounts and dispatch of transaction statements to DECLARATION OF COMPLIANCE WITH THE CODE OF CONDUCT clients. All the Directors and Senior Management personnel have affirmed compliance 3. There are no relationships between the Directors of the Bank, inter-se. with the Code of Conduct as approved and adopted by the Board of Directors. COMPLIANCE WITH MANDATORY REQUIREMENTS LISTING ON STOCK EXCHANGES The Bank has complied with the mandatory requirements of the Code of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock In order to impart liquidity and convenience for trading, the equity shares of the Exchanges. The Bank has also complied with the requirements of amended Clause Bank are listed at the following Stock Exchanges. The annual fees for 2007-08 49 after it came into force. have been paid to all the Stock Exchanges where the shares are listed.
37 Sr. Name & Address Stock Code Name of the Compliance Officer of the Bank No. of the Stock Exchanges Mr. Hemant V. Barve - Vice President & Company Secretary. 1. Bombay Stock Exchange Ltd. 532772 Telephone: 6618 7013 Fax: 2423 1525 Phiroze Jeejebhoy Towers, COMPLIANCE CERTIFICATE OF THE PRACTISING COMPANY Dalal Street, Fort, Mumbai - 400 023 SECRETARIES: 2. The National Stock Exchange of India Ltd. DCB A firm of Practicing Company Secretaries has certified that the Bank has complied Exchange Plaza, 5th Floor, with the conditions of Corporate Governance as stipulated in Clause 49 of the Bandra Kurla Complex, Bandra (East), Listing Agreement with the Stock Exchanges and the same is annexed to the Mumbai - 400 051 Annual Report. Names of Depositories in India for dematerialisation of equity shares (ISIN No. The certificate from the firm of Practicing Company Secretaries will be sent to the INE503A01015): Stock Exchanges along with the Annual Report of the Bank. • National Securities Depository Ltd. (NSDL) Registered & Corporate Office: • Central Depository Services (India) Ltd. (CDSL) 301, Trade Plaza, The Bank’s shares that are in compulsory dematerialised (demat) list are 414, Veer Savarkar Marg, transferable through the depository system. Shares in physical form are processed Prabhadevi, by the Registrars and Share Transfer Agents, Intime Spectrum Registry Ltd., and Mumbai - 400 025 approved by the Share Transfer Committee of the Bank. Intime Spectrum Registry Telephone: 2438 7000 / 6618 7000 Fax: 2423 1520 Ltd. processes the share transfers within a period of 21 days from the date of Registrars and Transfer Agents: receipt of the transfer documents. INTIME SPECTRUM REGISTRY LTD. MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT C-13, Pannalal Silk Mills Compound, The Management Discussion and Analysis Report is included in the Directors’ LBS Marg, Bhandup (W), Report, and forms a part of Corporate Governance. Mumbai-400 078 Tel. No. 022- 25963838 Fax No. 022- 25946969 MEANS OF COMMUNICATION E-mail id: [email protected] Financial results and all materially important communications are promptly shared Website: www.intimespectrum.com with the Stock Exchanges. Bank’s results are also published in newspapers pursuant to applicable regulatory provisions and hosted on its website at www.dcbl.com. The half yearly declaration of financial performance including I confirm that for the year under review, all Directors and senior management summary of the significant events is not being sent to every shareholder as the have affirmed their adherence to the provisions of the Code of Conduct. Bank’s half yearly results are published in a national English newspaper and a local Marathi newspaper having a wide circulation in Mumbai. INVESTOR HELPDESK Nasser Munjee Share transfers, dividend payments and all other investor related activities are Chairman attended to and processed at the office of our Registrars and Transfer Agents. For lodgment of transfer deeds and any other documents or for any grievances/ complaints, kindly contact at the following address: Date: May 06, 2008 INTIME SPECTRUM REGISTRY LTD., Registrars and Transfer Agents, Unit: DEVELOPMENT CREDIT BANK LTD. C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (W), Mumbai - 400 078 Tel. No. 2596 3838, Fax No. 2594 6969 203, Daver House, 197/199 D. N. Road, Fort, Mumbai - 400 001. Telephone & Fax No. 2269 4127 E-mail id: [email protected] Website: www.intimespectrum.com Counter Timing: 10 a.m. to 4 p.m. Monday through Friday (except National holidays) Shareholders/Investors can also send their queries through e-mail to the Bank at [email protected]. This has also been displayed on the Bank’s website www.dcbl.com under the section ‘Investor Relations’. 38 SHARE PRICE & VOLUME OF SHARES TRADED
The monthly high and low quotation and volume of shares traded on the The monthly high and low quotation and volume of shares traded on the Bombay Stock Exchange (BSE) National Stock Exchange (NSE) Month Highest (Rs.) Lowest (Rs.) Volume of shares Month Highest (Rs.) Lowest (Rs.) Volume of shares traded during the traded during the Month Month April 2007 77.00 61.70 9417906 April 2007 76.40 63.80 12064318
May 2007 120.35 74.05 45437408 May600 2007 120.55 74.90 6005393025000 June 2007 107.40 88.70 7854934 June 2007 106.70 88.50 13324575 July 2007 122.85 101.50 11604953 July500 2007 122.85 101.55 17558087 August 2007 96.00 3302519 109.90 August400 2007 110.00 96.10 537693420000 September 2007 127.50 102.00 8758441 September 2007 127.80 101.40 12830139
Price 300 October 2007 126.80 97.30 6714811 October 2007 126.80 97.10 7989073 Sensex November 2007 102.05 32552197 154.20 November200 2007 154.00 105.20 4325302615000 December 2007 160.00 134.50 13491976 December 2007 169.90 134.55 25028658 January 2008 162.00 83.00 12972418 January100 2008 161.75 79.50 23680579 February 2008 119.90 96.10 5390041 120.00 96.35 10866905 February0 2008 10000 March 2008 109.50 75.20 4004747 March 2008 109.00 75.35 7978630 Apr – 07 May – 07 June – 07 July – 07 Aug – 07 Sept – 07 Oct – 07 Nov – 07 Dec – 07 Jan – 08 Feb – 08 Mar – 08
Months
DCB Share Price on BSE High DCB ShareLow Price on Nifty Sensex
600 25000 600 8000
500 500 7000 400 20000 400
300 6000 Price Price 300 Sensex S&P CNX NIFTY 200 15000 200 5000 100 100
0 10000 0 4000 Apr – 07 May – 07 June – 07 July – 07 Aug – 07 Sept – 07 Oct – 07 Nov – 07 Dec – 07 Jan – 08 Feb – 08 Mar – 08 Apr – 07 May – 07 June – 07 July – 07 Aug – 07 Sept – 07 Oct – 07 Nov – 07 Dec – 07 Jan – 08 Feb – 08 Mar – 08
Months Months
High Low Sensex High Low S&P CNX NIFTY
600 8000
500 7000 400
300 6000 Price S&P CNX NIFTY 200 5000 100 39 0 4000 Apr – 07 May – 07 June – 07 July – 07 Aug – 07 Sept – 07 Oct – 07 Nov – 07 Dec – 07 Jan – 08 Feb – 08 Mar – 08
Months
High Low S&P CNX NIFTY Corporate Governance Compliance Certificate
To, The Members, Development Credit Bank Limited 301, Trade Plaza, 414, Veer Savarkar Marg, Prabhadevi, Mumbai - 400 025 We have examined all relevant records of Development Credit Bank Limited (the Bank) for the purpose of certifying compliance of the conditions of Corporate Governance under Clause 49 of the Listing Agreement entered into with the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited for the financial year ended 31st March, 2008. We have obtained all the information and explanations to the best of our knowledge and belief as were necessary for the purpose of this certification. The compliance of the conditions of Corporate Governance is the responsibility of the management. Our examination was limited to the procedure and implementation thereof. This certificate is neither an assurance as to the future viability of the Bank nor of the efficacy or effectiveness with which the management has conducted the affairs of the Bank. On the basis of our examinations of the records produced explanations and information furnished, we certify that: a. the Bank has complied with all the mandatory conditions of the said Clause 49 of the Listing Agreement. b. the Bank has complied with the following non-mandatory requirements of the said Clause 49 of the Listing Agreement. (i) The Board (ii) Remuneration Committee (iii) Audit qualification (iv) Whistle Blower Policy
For S. N. ANANTHASUBRAMANIAN & CO.
S. N. Ananthasubramanian Proprietor C.P. No.: 1774 Date: May 5, 2008 Place: Mumbai
40 Auditors’ Report
TO THE MEMBERS OF DEVELOPMENT CREDIT BANK LIMITED
We have audited the annexed Balance Sheet of DEVELOPMENT CREDIT BANK LIMITED (‘the Bank’) as at 31st March, 2008 and also the annexed Profit & Loss Account of the Bank for the year ended on that date, in which are incorporated the returns of seventy six branches audited by us. We have also audited the Cash Flow Statement annexed to the Balance Sheet for the year ended on that date. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the auditing standards generally accepted in India. These Standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
On the basis of the audit indicated above and as required by the Banking Regulation Act, 1949 we report that: a) The Balance Sheet and the Profit & 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; b) 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; c) The transactions of the Bank, which have come to our notice, have been within the powers of the Bank;
In our opinion, proper books of account, as required by law, have been kept by the Bank, so far as it appears from our examination of those books and proper returns, adequate for the purpose of our audit, have been received from the branches of the Bank;
The Balance Sheet and the Profit & Loss Account and Cash Flow Statement dealt with by this Report, are in agreement with the books of account and the Branch returns;
In our opinion, the Balance Sheet, the Profit & Loss Account and the Cash Flow Statement, dealt with by this Report, are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956, in so far as they apply to Banks and are in accordance with the guidelines issued by the Reserve Bank of India;
On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2008, from being appointed as a director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
In our opinion and to the best of our information and according to the explanations given to us, the said accounts, give the information required by the Companies Act, 1956, in the manner so required for banking companies, and give a true and fair view in conformity with the accounting principles generally accepted in India;
(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2008;
(ii) in the case of the Profit and Loss Account, of the profit of the Bank for the year ended on that date; and
(iii) in case of the Cash Flow Statement, of the cash flows of the Bank for the year ended on that date.
For N.M. RAIJI & CO. Chartered Accountants
(VINAY D. BALSE) Partner (Membership No. 39434) Place: Mumbai Dated : May 6, 2008
41 Balance Sheet as on 31st March, 2008 Schedule As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) CAPITAL & LIABILITIES Capital 1 1,742,989 1,476,321
Employee Stock Options (Grants Outstanding) 53,016 59,996
Reserves & Surplus 2 4,600,449 1,821,628
Deposits 3 60,748,508 44,152,028
Borrowings 4 4,268,039 1,543,988
Other liabilities and Provisions 5 4,361,817 3,567,507
TOTAL 75,774,818 52,621,468
ASSETS
Cash and Balances with Reserve Bank of India 6 6,734,281 3,293,269
Balances with Banks and Money at Call and Short Notice 7 3,881,249 1,383,599
Investments 8 21,345,628 18,466,332
Advances 9 40,687,965 26,583,103
Fixed Assets 10 997,849 814,444
Other Assets 11 2,127,846 2,080,721
TOTAL 75,774,818 52,621,468
Contingent Labilities 12 57,366,724 26,182,167
Bills for Collection 3,449,413 3,331,999
Significant Accounting Policies 17
Notes on 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 N.M.Raiji & Co. Chartered Accountants Nasser Munjee Gautam Vir Narayan K. Seshadri Chairman Managing Director & CEO Director Vinay D. Balse Partner Adil Kasad H. V. Barve M. No. 39434 Executive Vice President & CFO V.P. & Company Secretary
Place : Mumbai Date : May 6, 2008
42 Profit & Loss Account for the year ended 31st March, 2008 Schedule Year ended Year ended 31.03.2008 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. INCOME
Interest Earned 13 5,741,137 3,469,276
Other Income 14 1,625,606 924,930
TOTAL 7,366,743 4,394,206
II. EXPENDITURE
Interest Expended 15 3,880,008 2,273,754
Operating Expenses 16 2,390,630 1,710,688
Provisions and Contingencies 712,804 336,045
TOTAL 6,983,442 4,320,487
III. PROFIT/(LOSS)
Net Profit for the Year 383,301 73,719
Profit/(Loss) Brought Forward (2,277,622) (2,332,911)
Adjustment as per AS-15 (refer note 1.3 to Schedule 18) (48,379) –
TOTAL (1,942,700) (2,259,192)
IV. APPROPRIATIONS
Transfer to Statutory Reserve 95,826 18,430
Investment Reserve Account 23,487 –
Balance carried over to Balance Sheet (2,062,013) (2,277,622)
TOTAL (1,942,700) (2,259,192)
Significant Accounting Policies 17
Notes on Accounts 18
The Schedules referred to above form an integral part of the Profit and 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 N.M.Raiji & Co. Chartered Accountants Nasser Munjee Gautam Vir Narayan K. Seshadri Chairman Managing Director & CEO Director Vinay D. Balse Partner Adil Kasad H. V. Barve M. No. 39434 Executive Vice President & CFO V.P. & Company Secretary
Place : Mumbai Date : May 6, 2008
43 Schedule 1 - Capital As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) Authorised Capital 30,00,00,000 (Previous year 30,00,00,000) 3,000,000 3,000,000 Equity Shares of Rs. 10/- each Issued, Subscribed and Paid-up Capital 17,42,98,854 (Previous year 14,76,32,187) 1,742,989 1,476,321 Equity Shares of Rs. 10/- each
Total 1,742,989 1,476,321 Schedule 2 - Reserves and Surplus As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Statutory Reserve Opening Balance 827,430 809,000 Additions during the year 95,826 18,430
Total 923,256 827,430
II. Capital Reserve a) Revaluation Reserve Opening Balance 127,547 248,812 Additions during the year – – Deductions during the year (23,600) (121,265)
Total 103,947 127,547
b) Others Opening Balance 282,840 282,840 Additions during the year – – Deductions during the year – –
Total 282,840 282,840
Total (a + b) 386,787 410,387
III. Share Premium Opening Balance 2,861,433 1,872,814 Additions during the year 2,533,333 1,144,000 Amount utilised for share issue expenses (65,834) (155,381)
Total 5,328,932 2,861,433
IV. Revenue and Other Reserves Investment Reserve Opening Balance – – Additions during the year 23,487 – Deductions during the year – –
Total 23,487 –
V. balance in Profit & Loss Account (2,062,013) (2,277,622)
TOTAL (I to V) 4,600,449 1,821,628
44 Schedule 3 - Deposits As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) A. I. Demand Deposits (i) From Banks 17,887 14,430 (ii) From Others 6,329,572 5,279,087
Total 6,347,459 5,293,517
II. Savings Bank Deposits 8,395,449 7,223,321
Total 8,395,449 7,223,321
III. Term Deposits (i) From Banks 4,270,622 3,112,500 (ii) From Others 41,734,978 28,522,690
Total 46,005,600 31,635,190
TOTAL (I, II and III) 60,748,508 44,152,028
B. Deposits of branches in India 60,748,508 44,152,028
TOTAL 60,748,508 44,152,028 Schedule 4 - Borrowings As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. borrowings in India i. Reserve Bank of India – – ii. Other Banks 1,350,000 750,000 iii. Other Institutions and Agencies 1,750,000 31
Total 3,100,000 750,031
II. borrowings outside India 1,168,039 793,957
TOTAL (I & II) 4,268,039 1,543,988
Secured Borrowings included in I & II above - Rs. Nil (Previous year Rs. Nil) Schedule 5 - Other Liabilities And Provisions As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Inter Office adjustments ( Net ) 8,901 - II. bills Payable 1,083,078 731,373 III. Interest Accrued 702,871 417,897 IV. Sub-ordinated Debts (8% Unsecured Bonds for 63 months) 660,000 660,000 (7% Unsecured Bonds for 68 months) 180,000 180,000 (7.30% Unsecured Bonds for 92 months) 260,000 260,000 (7.00% Unsecured Bonds for 75 months) 460,000 460,000 (7.15% Unsecured Bonds for 99 months) 100,000 100,000 V. Others (including provisions) 906,967 758,237
TOTAL 4,361,817 3,567,507
45 Schedule 6 - Cash and Balances with Reserve Bank of India As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Cash in hand 408,572 350,140 (including foreign currency notes:- Rs. Nil {Previous year Rs. Nil}) II. balances with Reserve Bank of India i. In Current Accounts 6,325,709 2,943,129 ii. In Other Accounts – – Total 6,325,709 2,943,129 TOTAL (I & II) 6,734,281 3,293,269 Schedule 7 - Balances with Banks and Money at Call and Short Notice As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. In India i. Balance with Banks a. In Current Accounts ** 300,392 343,720 b. In Other Deposit Accounts 731,147 203,296 ** includes funds in transit Total 1,031,539 547,016 ii. Money at Call and Short Notice a. With Banks 750,000 – b. With Other Institutions 1,999,080 – Total 2,749,080 – TOTAL ( I ) 3,780,619 547,016 II. Outside India i. In Current Accounts 56,498 19,347 ii. In Other Deposit Accounts 44,132 817,236 iii. Money at Call and Short Notice – – TOTAL (II) 100,630 836,583
TOTAL (I & II) 3,881,249 1,383,599 Schedule 8 - Investments As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Investments in India Net Investments in :- i. Government securities 16,946,912 13,677,987 ii. Other approved securities 198,064 259,422 iii. Shares 19,675 28,725 iv. Debentures and Bonds 443,885 481,916 v. Other Investments : a. Units of Mutual Funds/CDs 1,033,887 2,001,908 b. Pass Through Certificates/Security Receipts 51,214 101,615 c. Deposits with NABARD RIDF 2,651,991 1,914,759 TOTAL (I) 21,345,628 18,466,332
46 Schedule 8 - Investments (contd.) As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) II. Investments in India i. Gross Value 21,425,610 18,533,158 ii. Provision For Depreciation 79,982 66,826 TOTAL (II) 21,345,628 18,466,332
Schedule 9 - Advances As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) A. (i) Bills purchased and discounted 2,480,919 924,751 (ii) Cash Credits, Overdrafts and Loans repayable on demand 9,789,040 6,648,143 (iii) Term loans 28,418,006 19,010,209
TOTAL (A) 40,687,965 26,583,103
B. (i) Secured by tangible assets* 28,926,574 16,295,949 (ii) Covered by Bank/Government Guarantees – – (iii) Unsecured 11,761,391 10,287,154 *includes Advances against Book Debts
TOTAL (B) 40,687,965 26,583,103
C. Advances in India (i) Priority Sector 14,380,334 9,044,547 (ii) Public Sector 352,696 389,282 (iii) Banks 6,746 45,852 (iv) Others 25,948,189 17,103,422
TOTAL (C) 40,687,965 26,583,103
Schedule 10 - Fixed Assets As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Premises 1. At Cost as per last Balance Sheet 440,814 702,017 2. Additions during the year 127,145 15,636 3. Deductions during the year 58,199 276,840 4 . Depreciation to date (including on Revalued Premises) 50,024 40,935
Total 459,736 399,878
II. Other Fixed Assets (including Furniture & Fixtures) 1. At Cost as per last Balance Sheet 621,999 540,063 2. Additions during the year 280,697 139,805 3. Deductions during the year 23,377 57,869 4. Depreciation to Date 342,780 243,455
Total 536,539 378,544
47 Schedule 10 - Fixed Assets (contd.) As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) III. Assets given on Lease 1. At Cost as per last Balance Sheet 193,411 223,402 2 . Additions during the year – – 3 . Deductions during the year – 29,992 4. Depreciation to date (Net) 191,837 179,384
Sub Total 1,574 14,026
5. Lease Terminal Adjustment Account – 21,996
Total 1,574 36,022
Total of Fixed Assets (I+II+III) 997,849 814,444 Schedule 11 - Other Assets As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Inter-Office adjustments (Net) – 1,823 II. Interest accrued 240,981 191,965 III. Tax paid in Advance/Tax deducted at Source (net of provision) 894,857 984,636 IV. Stationery and Stamps 2,743 3,122 V. Non-Banking assets acquired in satisfaction of claims (Net) 9,281 9,280 VI. Deferred Tax Assets (Net) 94,906 62,664 VII. Others 885,078 827,231
TOTAL 2,127,846 2,080,721 Schedule 12 - Contingent Liabilities As on 31.03.2008 As on 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Claims against the Bank not acknowledged as debts 1,004,350 914,794 II. Liability for partly paid investments – – III. Liability on account of outstanding forward exchange contracts 34,183,976 15,295,008 IV. Guarantees given on behalf of constituents (a) In India 4,145,937 3,546,007 (b) Outside India 507,600 537,642 V. Acceptances, Endorsements and other obligations 5,983,021 3,369,196 VI. Other items for which the Bank is contingently liable 2,791,840 1,269,520 VII. Interest rate swap 8,750,000 1,250,000
TOTAL 57,366,724 26,182,167
48 Schedule 13 - Interest Earned Year ended Year ended 31.03.2008 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Interest/Discount on Advances/Bills 4,292,923 2,253,552 II. Income on Investments 1,254,185 951,919 III. Interest on balance with Reserve Bank of India and other Inter Bank Funds 183,126 240,308 IV. Others 10,903 23,497
TOTAL 5,741,137 3,469,276 Schedule 14 - Other Income Year ended Year ended 31.03.2008 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) (Rs. in 000’s) (Rs. in 000’s) I. Commission, Exchange and Brokerage – 844,591 – 594,579 II. Profit on sale of Investments 198,964 85,644 Less: Loss on sale of Investments (14,942) (21,669) Less: Loss on redemption of Investments – 184,022 (999) 62,976
III. Profit on revaluation of Investments – – Less: Amortization on premium on Investments (168,973) (168,973) (215,429) (215,429)
IV. Profit on sale of Land, Buildings and Other Assets 113,063 188,923 Less: Loss on sale of Land, Buildings and Other Assets (10,565) 102,498 (33,650) 155,273 V. Profit on Exchange Transactions 228,749 149,287 Less: Loss on Exchange Transactions – 228,749 – 149,287
VI. Income earned by way of Dividends etc. from Subsidiaries/ Companies and/or Joint Ventures abroad/in India – – – – VII. Lease income 28,905 37,137 Add/(Less): Lease Equalisation Account (21,996) 6,909 (6,224) 30,913 VIII. Miscellaneous Income 427,810 147,331
TOTAL 1,625,606 924,930 Schedule 15 - Interest Expended Year ended Year ended 31.03.2008 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) I. Interest on Deposits 3,590,660 2,064,305 II. Interest on Reserve Bank of India/Inter-Bank Borrowings 228,908 188,790 III. Other interest 60,440 20,659
TOTAL 3,880,008 2,273,754
49 Schedule 16 - Operating Expenses Year ended Year ended 31.03.2008 31.03.2007 (Rs. in 000’s) (Rs. in 000’s) (Rs. in 000’s) (Rs. in 000’s) I. Payments to and Provisions for Employees 971,325 684,584 II. Rent, Taxes and Lighting 306,183 239,068 III. Printing and Stationery 36,988 35,105 IV. Advertisement and Publicity 27,958 25,198 V. Depreciation on Bank’s property 135,447 94,173 Less: Transfer from Revaluation Reserve (2,388) 133,059 (4,382) 89,791 VI. Directors’ fees, Allowances and Expenses 4,435 2,251 VII. Auditors’ Fees and Expenses 4,200 2,976 VIII. Law Charges 2,802 1,668 IX. Postages, Telegrams, Telephones etc. 51,372 42,847 X. Repairs and Maintenance 72,426 47,591 XI. Insurance 46,565 34,279 XII. Other Expenditure 733,317 505,330
TOTAL 2,390,630 1,710,688
Schedule - 17 b. Held for Trading: Securities which are held for resale within 90 days from the date of 1. SIGNIFICANT ACCOUNTING POLICIES: acquisition. 1.1 ACCOUNTING CONVENTIONS: c. Available for Sale The financial statements have been prepared on a Going Concern concept and Investments which cannot be classified in the above two categories. on the historical cost basis and in accordance with the generally accepted 1.2.3 Transfer of Securities between Categories: accounting practices and conform to the statutory provisions and practices prevailing within the banking industry in India, except as otherwise stated. The transfer/shifting of securities between the three categories of investments is accounted for at the lower of acquisition cost/book value/market value on 1.2 INVESTMENTS: the date of transfer and depreciation, if any, on such transfer is fully provided 1.2.1 The Investment portfolio comprising of approved securities (predominantly for. Government Securities) and other securities (Shares, Debentures and Bonds 1.2.4 Valuation: etc.) has been classified at the time of acquisition in accordance with the Reserve Bank of India (RBI) guidelines under three categories viz. `Held to Held for Trading and Available for Sale categories: Maturity’, `Available for Sale’ and `Held for Trading’. For the purposes of Each scrip in the above two categories is revalued at the market price or fair disclosure in the Balance Sheet, they are classified under five groups viz. value in accordance with the RBI guidelines and only the net depreciation of Government Securities, Other Approved Securities, Shares, Debentures & each group for each category is recognised in the Profit and Loss Account. Bonds and Other Investments. Held to Maturity: 1.2.2. Basis of Classification: These are carried at their acquisition cost and are not marked to market. Any Classification of an Investment is done at the time of acquisition into the premium on acquisition is amortised over the remaining maturity period of the following categories: security on a straight-line basis. a. Held to Maturity: 1.2.5 Non-performing investments are identified and provision is made as per RBI These comprise of investments, which the bank intends to hold till maturity. guidelines. 50 1.2.6 Brokerage, fees, commission and broken period interest incurred at the time of 1.5 RECOGNITION OF INCOME & EXPENDITURE:
acquisition of securities, including money market instruments, are recognised 1.5.1 Items of income and expenditure are generally accounted on accrual basis, as expenses. except as otherwise stated.
1.2.7 Cost of investment is determined on the basis of weighted average cost 1.5.2 Interest on non-performing assets other than doubtful assets (including lease method. assets), to the extent it is realised, is recognised as income. In the case of 1.2.8 Profit/Loss on sale of investment in any category is taken to the Profit & Loss doubtful assets, recoveries effected are first adjusted towards the principal Account, except in the case of profit on sale of investment in `Held to Maturity’ amount. Income accounted for in the preceding year and remaining unrealised category, where the same is appropriated to Capital Reserves. is derecognised in respect of assets classified as NPA during the year.
1.3 ADVANCES: 1.5.3 Overdue rent on Safe Deposit Lockers is accounted for on realisation. Commission on bank guarantee up to and including Rs. 1 lakh is accounted in 1.3.1 In pursuance of guidelines issued by the Reserve Bank of India, advances the year of receipt. are classified as Standard, Sub-Standard, Doubtful and Loss Assets and the required provision is made on such advances. 1.5.4 Lease rentals and finance charges in respect of hire purchase transactions are recognised as income on accrual basis. However, overdue lease rentals and 1.3.2 Advances are net of bills rediscounted, claims realised from ECGC, provisions for overdue finance charges are accounted as income only upon realisation. non-performing advances and unrealised interest held in suspense account. 1.5.5 Accounting of assets leased out prior to 01.04.2001, is done as per the 1.3.3 Any credit facility/investment, where interest and/or installment of principal Guidance Note of the Institute of Chartered Accountants of India (ICAI). has remained overdue for more than 90 days, is classified as non-performing Provision in respect of Non Performing Assets is made by applying the asset asset. classification norms prescribed by the RBI for advances. 1.4 FIXED ASSETS: 1.5.6 The amount of lease equalization, representing the difference between 1.4.1 Premises and other fixed assets are stated at historical cost, except those the annual lease charge and the depreciation provided on leased assets in premises which have been revalued, and appreciation, if any, on such the books, is adjusted in the Profit & Loss Account, with a corresponding revaluation is credited to Revaluation Reserve under Capital Reserves. adjustment to the value of leased assets, through a separate Lease Adjustment 1.4.2 Depreciation: account.
Depreciation on fixed assets, including leased assets, is provided for on the 1.5.7 Interest on matured term deposits, which have not been renewed, is accounted straight line basis at the rates and in the manner prescribed in Schedule XIV of on cash basis. the Companies Act, 1956, except as mentioned below: 1.6 FOREIGN EXCHANGE TRANSACTIONS: • Computer Hardware - 33.33% p.a. Accounting for transactions involving foreign exchange is done in accordance • ATM - 12.50% p.a. with Accounting Standard-11 (Revised 2003) on “The Effect of Changes in
• Core Banking Software - 12.50% p.a. Foreign Exchange Rates” issued by the ICAI as mentioned below:
• Application Software & System Development Expenditure - Depending a. Items of income and expenditure are accounted for at the exchange upon estimated useful life between 3-5 years. rates ruling on the date of the transactions.
• Hard Furnishing – 25% p.a. b. Foreign currency assets and liabilities, including outstanding forward contracts, acceptances, endorsements and other obligations are • Revalued Portion of Premises - over its residual life. translated on the Balance Sheet date at the rates notified by Foreign • Improvements (Civil) to Leased Premises – over the contracted period Exchange Dealers’ Association of India (FEDAI), as per the guidelines of the lease. issued by the RBI. The resultant gain/loss is taken to revenue as • Fixed Furniture in Leased Premises such as work-stations, etc. – over per FEDAI guidelines. FCNR/EEFC/Non-position Nostro accounts the contracted period of the lease. are translated on the Balance Sheet date at the rates notified
• Vehicle – 19% p.a. over 5 years with 5% residual value. by FEDAI.
51 1.7 NON BANKING ASSETS: probable outflow of resources, where a reliable estimate can be made to settle the same. Non Banking Assets acquired in satisfaction of claims are recorded at the fair value on the date of acquisition and provision is made for diminution, if any, as Contingent Liabilities are recognised only when there is a possible obligation at the Balance Sheet date. 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 any 1.8 RETIREMENT BENEFITS OF EMPLOYEES: present obligation cannot be measured in terms of future outflow or resources, a. Provision in respect of future liability for payment of gratuity is made or where a reliable estimate of the obligation cannot be made. Obligations are on the basis of actuarial valuation as at the end of the year. Gratuity is assessed on an ongoing basis and only those having a largely probable outflow funded with the Gratuity Trust duly registered under the provisions of of resources are provided for. Income Tax Act, 1961. Contingent Assets are not recognised in the financial statements. b. Compensation paid to employees who have opted for Early Retirement Scheme (ERS) is amortised over the period over which 1.12 ACCOUNTING FOR DERIVATIVE CONTRACTS: the benefit is perceived to accrue, in any case not extending beyond Income from derivative transactions classified as hedge are recorded on an March 31, 2010. accrual basis and these transactions are not marked to market. Derivative transactions, which are not in the nature of hedge are marked to market as per c. The Bank has a scheme for non vesting compensated absences for the generally accepted practices prevalent in the industry. Any resultant gain employees valid upto 31st December, 2008, the liability for which is or loss is recognised in the Profit & Loss Account. determined at the end of the year on a cost to company basis. 1.13 NET PROFIT/(LOSS): 1.9 TAXES ON INCOME: The Net Profit/(Loss) in the Profit and Loss Account is after considering Income taxes are computed using the tax effect accounting method, where provision for advances, depreciation in the value of investments, provision for taxes are accrued in the same period in which the related revenue and expenses taxation and other necessary provisions. arise. The differences that result between the profit offered for income taxes and the profit as per the financial statements are identified and thereafter a Schedule 18 - Notes to Accounts Deferred Tax Asset or a Deferred Tax Liability is recorded for timing differences, 1. Change in Accounting Policy: namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. 1.1 During the year, the Bank has changed its depreciation policy on vehicles. Vehicles, The tax effect is calculated on the accumulated timing differences at the end of which were hitherto, depreciated @ 9.5% p.a. on the straight line basis are now the accounting period, based on prevailing or substantially enacted regulations, depreciated @ 19% p.a. Had there been no change in the accounting policy, the as the case may be. Deferred tax assets are recognised only if there is virtual/ profit for the year would have been higher by Rs. 0.21 crore.
reasonable certainty, as the case may be, that they will be realised and are 1.2 During the year, the Bank has changed its policy on provisioning on Personal reviewed for appropriateness of the respective carrying values at each Balance Loans overdue for periods ranging between 90 to 180 days. The provision Sheet date. which were hitherto 25% of the delinquent amount has been increased to 50%.
1.10 IMPAIRMENT OF ASSETS: Such rate is higher than the rate prescribed by the Reserve Bank of India (RBI). Had there been no change in the accounting policy, the profit for the year would Impairment losses (if any) on assets (including revalued assets) are recognised have been higher by Rs. 4.66 crores. in accordance with the Accounting Standard-28 on “Impairment of Assets” issued by the ICAI. 1.3 Pursuant to the Accounting Standard 15 (AS-15) (Revised) - Employee Benefits - issued by the Institute of Chartered Accountants of India becoming 1.11 ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND mandatory with effect from April 1, 2007, the Bank has, under the transitional CONTINGENT ASSETS: provisions of the said Revised Standard, determined a liability of Rs. 4.84 crores Provisions are recognised in terms of Accounting Standard-29 on “Provisions, on account of leave as a short term benefit, which has been adjusted to the Contingent Liabilities and Contingent Assets” issued by the ICAI, when there debit balance in Profit and Loss Account as at April 1, 2007. Consequent upon is a present legal or statutory obligation as a result of past events leading to adoption of the revised AS – 15 and restatement of the liability under the said
52 Revised Standard as at March 31, 2008, the Bank has recognised a credit of 2.2 Preferential Issue Expenses of Rs. 6.58 crores have been adjusted against Rs. 1.26 crores, in the Profit and Loss Account for the year. Share Premium account.
2. Share Capital & Reserves: 2.3 Investment Reserve Account:
2.1 During the year, the Bank issued 2,66,66,667 equity shares of Rs.10/- each, at As per RBI Guidelines, excess provision of Rs. 3.13 crores on account of a price of Rs. 105/- each, through preferential issue. Consequently, the paid up depreciation in the ‘Available for Sale’ category has been credited to the Profit capital of the Bank increased by Rs. 26.67 crores to Rs. 174.30 crores and the & Loss Account and an amount of Rs. 2.35 crores (net of transfer to Statutory Share Premium account increased by Rs. 253.33 crores. Reserve) has been appropriated to Investment Reserve Account.
2.4 Capital to Risk Assets Ratio (CRAR):
Particulars 31/03/2008 31/03/2007 i) CRAR (%) 13.38 11.34 ii) CRAR - Tier I Capital (%) 11.82 8.44 iii) CRAR - Tier II Capital (%) 1.56 2.90 iv) Percentage of shareholding of the Government of India in nationalised banks N.A. N.A. v) Amount of subordinated debt raised as Tier-II Capital (Rs. in crores) 166.00 166.00
3. Investments:
3.1 Particulars of Investments and movement in provision held towards depreciation on Investments: (Rs. in crores)
Particulars 31/03/2008 31/03/2007
(1) Value of Investments: (i) Gross Value of Investments (a) In India 2,142.56 1,853.32 (b) Outside India – – (ii) Provisions for Depreciation (a) In India 8.00 6.68 (b) Outside India – – (iii) Net Value of Investments (a) In India 2,134.56 1,846.64 (b) Outside India – – (2) Movement of provision held towards depreciation on Investments: (i) Opening balance 6.68 8.57 (ii) Add: Provision made during the year 6.07 3.50 (iii) Less: Write-off/write-back of excess provision during the year 4.75 5.39 (iv) Closing balance 8.00 6.68
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 As at 31/03/2008 As at 31/03/2007 Rs. in crores % Rs. in crores % Held to Maturity 768.84 36.02 752.64 40.76 Held for Trading 107.21 5.02 384.40 20.82 Available for Sale 1,258.51 58.96 709.60 38.42 Total 2,134.56 100.00 1,846.64 100.00
53 3.3 Repo Transactions: (Rs. in crores) Minimum Maximum Daily Average As at outstanding outstanding outstanding 31/03/2008 during the year during the year during the year Securities Sold under Repos – – – – Securities purchased under Reverse Repos – 360.00 63.26 48.23
3.4 Non-SLR Investments Portfolio: i. Issuer Composition of Non-SLR Investments: (Rs. in crores) Extent of Below Extent of Private Extent of Unrated Extent of Unlisted Sr. No. Issuer Amount Investment grade Placement Securities Securities securities 1. PSUs – – – – – 2. FIs 275.20 10.00 – 10.00 10.00 3. Banks 112.39 9.00 – – – 4. Private Corporates 28.83 11.97 10.16 11.97 11.97 5. Subsidiaries/Joint Ventures – – – – – 6. Others 10.16 10.16 – – – 7. Provision held towards Depreciation (6.51) – – – – Total 420.07 41.13 10.16 21.97 21.97
ii. Non-Performing Non-SLR Investments: (Rs. in crores) Particulars 31/03/2008 31/03/2007 Opening Balance 3.00 3.00 Additions during the year – – Reductions during the year 3.00 – Closing Balance – 3.00 Total provisions held – 3.00
4. Derivatives: 4.1 Forward Rate Agreement/Interest Rate Swap: (Rs. in crores) Particulars 31/03/2008 31/03/2007 i) The notional principal of swap agreements 875.00 125.00 ii) Losses which would be incurred if counterparties failed to fulfill their obligations under the agreements 34.09* – iii) Collateral required by the bank upon entering into swaps – – iv) Concentration of credit risk arising from the swaps – – v) The fair value of the swap book (0.24) 0.09
* Based on the valuations provided by counterparty Banks in accordance with the disclosure norms.
54 4.2 Exchange Traded Interest Rate Derivatives: (Rs. in crores) Sr. No. Particulars 31/03/2008 31/03/2007 i) Notional principal amount of exchange traded interest rate derivatives undertaken during the year – (instrument-wise) – ii) Notional principal amount of exchange traded interest rate derivatives outstanding as on 31st March, 2008 – (instrument-wise) – iii) Notional principal amount of exchange traded interest rate derivatives outstanding and not “highly – effective” (instrument-wise) – iv) Mark-to-market value of exchange traded interest rate derivatives outstanding and not “highly effective” – (instrument-wise) –
4.3 Disclosures on risk exposure in derivatives:
a) Qualitative Disclosures:
Management of Risk in Derivatives Trading:
The Bank’s 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 principal 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 Bank’s 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.
b) Quantitative disclosures:
(Rs. in crores) Currency Interest Rate Currency Interest Rate Sr. No. Particulars Derivatives Derivatives Derivatives Derivatives 31/03/2008 31/03/2008 31/03/2007 31/03/2007 1. Derivatives (notional Principal Amount) (a) For hedging 129.18 675.00 46.95 50.00 (b) For trading – 200.00 – 75.00 2. Marked to Market position (a) Asset (+) 9.82 35.00 – 0.44 (b) Liability (-) 9.82 35.24 – 0.35 3. Credit Exposure 9.82 35.00 – 0.44 4. Likely Impact of one percentage change in Interest Rate (100*PV01) (a) On hedging derivatives – 0.01 – 0.01 (b) On trading derivatives – 0.01 – 0.01 5. Maximum and Minimum of 100*PV01 observed during the year (a) On hedging – 0.02 – 0.01 (b) On trading – 0.02 – 0.01
55 5. Asset Quality: 5.1 Non-Performing Assets (NPAs): (Rs. in crores)
Particulars 31/03/2008 31/03/2007 (i) Net NPAs to Net Advances (%) 0.66 1.64 (ii) Movement of NPAs (Gross) (a) Opening balance 146.16 314.92 (b) Additions during the year 103.48 34.95 (c) Reductions during the year 186.21 203.71 (d) Closing balance 63.43 146.16 (iii) Movement of Net NPAs (a) Opening balance 43.62 83.96 (b) Additions during the year 27.26 14.91 (c) Reductions during the year 43.90 55.23 (d) Closing balance 26.98 43.62 (iv) Movement of provisions for NPAs (excluding provision on Standard Assets) (a) Opening balance 96.62 222.03 (b) Provisions made during the year 68.48 32.55 (c) Write-off/ write-back of excess provisions 134.41 157.96 (d) Closing balance 30.69 96.62
5.2 Details of Loan Assets subjected to Restructuring during the year:
(Rs. in crores)
Particulars 31/03/2008 31/03/2007
(i) Total amount of loan assets subjected to restructuring, rescheduling, renegotiation; 21.02 14.29 - of which under CDR – – (ii) The amount of Standard assets subjected to restructuring, rescheduling, renegotiation; 20.96 14.25 - of which under CDR – – (iii) The amount of Sub-standard assets subjected to restructuring, rescheduling, renegotiation; 0.06 0.04 - of which under CDR – – (iv) The amount of Doubtful assets subjected to restructuring, rescheduling, renegotiation; – – - of which under CDR – –
5.3 Details of financial assets (including written off accounts) sold to Securitisation/Reconstruction Company for Asset Reconstruction: (Rs. in crores)
Particulars 31/03/2008 31/03/2007 (i) No. of accounts 4,764 – (ii) Aggregate value (net of provisions) of accounts sold to SC/RC 16.08 – (iii) Aggregate consideration 31.25 – (iv) Additional consideration realised in respect of accounts transferred in earlier years – – (v) Aggregate gain/loss over net book value 15.17 –
56 5.4 a) Details of non-performing financial assets purchased: (Rs. in crores) Particulars 31/03/2008 31/03/2007 1. (i) No. of accounts purchased during the year – – (ii) Aggregate outstanding – – 2. (i) Of these, number of accounts restructured during the year – – (ii) Aggregate outstanding – –
b) Details of non-performing financial assets sold: (Rs. in crores) Particulars 31/03/2008 31/03/2007 1. No. of accounts sold – – 2. Aggregate outstanding – – 3. Aggregate consideration received – –
5.5 Provisions on Standard Assets: (Rs. in crores) Particulars 31/03/2008 31/03/2007 Provisions on Standard Assets 28.12 20.89
6. business Ratios: Particulars 31/03/2008 31/03/2007 Interest Income as a percentage to Working Funds (%) 8.94 7.81 Non-Interest Income as a percentage to Working Funds (%) 2.53 2.08 Operating Profit as a percentage to Working Funds (%) 1.71 0.91 Return on Assets (%) 0.60 0.17 Business per employee (Rs. in crores) 4.54 3.91 Profit/(Loss) per employee (Rs. in crores) 0.02 0.004
7. Asset Liability Management: Maturity pattern of certain items of assets and liabilities as of 31/03/2008 (Rs. in crores)
Maturity Buckets Loans and Investments Deposits Borrowings Foreign Currency Foreign Currency Advances Assets Liabilities 1 day 201.26 – 378.66 1.10 5.65 1.10 2 to 7 days 48.33 59.96 169.38 5.45 4.41 5.46 8 to 14 days 69.47 56.90 138.12 – – – 15 to 28 days 183.89 41.94 319.32 – – – 29 days to 3 months 505.95 444.75 1,124.83 59.11 – 59.33 3 months to 6 months 452.34 271.43 602.58 91.86 – 42.04 6 months to 1 year 740.56 295.69 1,516.97 269.28 – 9.31 1 year to 3 years 1,497.20 318.06 1,756.54 – – – 3 years to 5 years 172.06 312.13 62.71 – – – Above 5 years 197.73 333.70 5.74 – 3.91 – Total 4,068.80 2,134.56 6,074.85 426.80 13.97 117.24
57 8. Lending to Sensitive Sector:
8.1 Exposure to Real Estate Sector (Rs. in crores) Category 31/03/2008 31/03/2007 a) Direct exposure (i) Residential Mortgages – Lendings fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented; 106.69(*) 129.12 (*) (*) Includes Individual housing loans up to Rs.20 lakhs – Rs.54.75 crores (previous year: Rs. 15 lakhs - Rs. 63.97 crores) (ii) Commercial Real Estate – Lendings 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.). 117.37 77.30 (iii) Investments in Mortgage Backed Securities (MBS) and other securitised exposures – a. Residential, 66.61 84.98 b. Commercial Real Estate. 0.21 0.49 b) Indirect Exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs). 93.28 115.98
8.2 Exposure to Capital Market (Rs. in crores) Particulars 31/03/2008 31/03/2007 a. Direct investment in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual funds – 5.91 the corpus of which is not exclusively invested in corporate debt; b. Advances against shares/bonds/debentures or other securities or on clean basis to individuals for investment in shares 3.80# 3.70 (including IPOs/ESOPs), convertible bonds, convertible debentures and units of equity-oriented mutual funds; c. 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; d. Advances for any other purposes to the extent secured by the collateral security of shares or convertible bonds or convertible 5.06 – 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; e. Secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers; 68.50* 41.00 f. Loans sanctioned to corporates against the security of shares/bonds/debentures or other securities or on clean basis for – – meeting promoter’s contribution to the equity of new companies in anticipation of raising resources; g. Bridge loans to companies against expected equity flows/issues; – – h. 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; i. Financing to stockbrokers for margin trading; – – j. 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 77.36 50.61 # Includes Sanctioned but not disbursed Rs.5.76 Lakhs. * Includes Advances to Stock Brokers Rs.12 crores and Financial Guarantees issued on their behalf to Stock Exchanges Rs.56.50 crores.
58 8.3 Country Risk Category wise Exposure (Rs. in crores) Risk Category Exposure (Net) Provision held Exposure (Net) Provision held as at 31.03.2008 as at 31/03/2008 as at 31/03/2007 as at 31/03/2007 Insignificant 24.27 – 26.40 – Low 35.28 – 39.95 – Moderate 2.17 – 4.92 – High – – 0.10 – Very High – – – – Restricted – – – – Off-credit – – – – Total 61.72 – 71.37 –
8.4 The Bank has not exceeded credit exposure limits to single and group borrowers during the year. 9. Compliance with Accounting Standards, read with RBI guidelines: 9.1 There are no material amounts of expenditure/income required to be disclosed as “Prior period” items as per Accounting Standard (AS) - 5 on “Net Profit or Loss for the period, Prior Period Items & Changes in Accounting Policies” issued by ICAI, read with RBI Guidelines, other than what is already disclosed. 9.2 Segment Reporting: Part A: Business Segments (Rs. in crores)
Treasury Corporate Retail Other Banking Total Total Particulars Operations Operations 2007-08 2007-08 2007-08 2007-08 2007-08 2006-07 Gross Revenue 161.36 272.30 284.85 18.16 736.67 439.42 Result 45.44 (13.26) (11.23) 17.38 38.33 7.37 Unallocated Expenses – – Operating Profit/(Loss) 109.61 40.98 Income Tax (Net) (3.22) (6.26) Extraordinary Profit/(Loss) – – Net Profit/(Loss) 38.33 7.37 Other Information: Segment Assets 2,900.43 2,519.67 1,885.38 – 7,305.48 4,995.43 Unallocated Assets 272.00 266.72 Total Assets 7,577.48 5,262.15 Segment Liabilities 2,288.95 1,186.48 3,184.99 – 6,660.42 4,735.60 Unallocated Liabilities 917.06 526.55 Total Liabilities 7,577.48 5,262.15
Pursuant to the Guidelines issued by RBI on Accounting Standard 17 (Segment Reporting) – Enhancement of disclosures dated April 18, 2007, effective March 31, 2008 the additional segments of Corporate Banking and Retail Banking have been included for the Year ended March 31, 2008. The figures for previous year have not been reclassified and hence are not comparable.
Part B: Geographic Segments
Since the Bank does not have overseas branches, the operations are entirely domestic.
9.3 Related Party Transactions:
i. Related Party Transactions in terms of AS- 18 on “Related Party Disclosures” issued by the ICAI are disclosed below: List of Related Parties and details of transactions entered into with them during the year:
Associate Platinum Jubilee Investments Ltd. Deposits: Balance as on 31/03/2008 – Rs.1.02 crores (Maximum Balance during the year – Rs.1.02 crores) 59 Interest paid/accrued on Deposits – Rs.0.07 crore. Overdraft Balance as on 31/03/2008 – Rs. 0.03 crore (credit balance) (Maximum Balance during the year– Rs. 0.08 crore). ii. Details of transactions entered into with the Key Management Personnel of the Bank are as under: Mr. Gautam Vir – Managing Director Managerial Remuneration – Rs.1.34 crores.
9.4 Deferred Tax:
i) In accordance with AS–22 on “Accounting for Taxes on Income” issued by the ICAI, the Bank has recognised deferred tax assets arising only on such timing differences where there is a reasonable certainty of profits being earned in the coming financial year, against which the deferred tax assets so recognised can be recovered; deferred tax assets have been recognised on unabsorbed depreciation to the extent of deferred tax liability arising on account of the timing difference arising between book depreciation and income tax depreciation.
ii) The composition of Deferred Tax Liabilities (DTL) & Deferred Tax Assets (DTA) as at 31/03/2008 is as under:
(Rs. in crores) Sr. No. Particulars DTL DTA 1. Depreciation 14.81 – 2. Provision for Loan Losses – 5.08 3. Provision for Non Banking Assets – 3.70 4. Unabsorbed Depreciation – 14.81 5. Provision for Other Assets – 0.71 Total 14.81 24.30
9.5 Provisions, Contingent Liabilities and Contingent Assets:
i. In accordance with AS-29 on “Provisions, Contingent Liabilities and Contingent Assets” issued by the ICAI, the Bank has carried out financial assessment of the Contingent Liabilities and determination of provision for probable losses.
Movement in Provision for Contingent Liabilities during the year:
(Rs. in crores) Particulars 31/03/2008 31/03/2007 Opening Provision – – Additions/(Deductions) made during the year – – Closing Provision – –
ii. Description of Contingent Liabilities:
Sr. No. Contingent Liability (*) Brief Description 1. Claim against the Bank not acknowledged as Debts. An amount of Rs. 100.43 crores is outstanding as at 31/03/2008, as Claims against the Bank not acknowledged as Debts, including Rs.87.95 crores being in the nature of a contingent liability on account of proceedings pending with Income Tax authorities. Of this, claims amounting to Rs.28.35 crores, 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 forward exchange and derivative contracts. The Bank enters into foreign exchange contracts, currency options, forward rate agreements, currency swaps and interest rate swaps with inter-bank participants on its own account and for customers. The notional amounts, that are recorded as contingent liabilities, are amounts used as a benchmark for the calculation of the interest component of such contracts. 3. Guarantees given on behalf of constituents, Acceptances, As a part of its commercial banking activities, the Bank issues Letters of Credit and Guarantees Endorsements and Others on behalf of its customers. 4. Other items for which the Bank is contingently liable. These include: i. Credit enhancements in respect of securitised loans. ii. Bills rediscounted by the Bank. *Also refer Schedule – 12. 60 10. Floating Provisions, Customer Complaints and Awards passed by Banking Ombudsman: 10.1 Floating Provisions: There are no floating provisions during the current year or in the previous year. 10.2 Customer Complaints:
(a) No. of Complaints Pending at the beginning of the year 7 (b) No. of Complaints Received during the year 198 (c) No. of Complaints Redressed during the year 197 (d) No. of Complaints Pending at the end of the year 8
10.3 Awards passed by the Banking Ombudsman:
(a) No. of unimplemented Awards at the beginning of the year – (b) No. of Awards passed by Banking Ombudsman during the year – (c) No. of Awards implemented during the year – (d) No. of unimplemented Awards Pending at the end of the year –
11. Other Matters:
11.1 Amount of Provisions made for Income-tax (including Deferred Tax) during the year (Rs. in crores) Particulars 31/03/2008 31/03/2007 Deferred Tax Liability / (Asset) (3.22) (6.27)
11.2 Disclosure of Penalties imposed by RBI No penalties have been imposed by the RBI on the Bank. 11.3 Outstanding Advances to SC/ST out of Total Priority Sector Advances : Rs.1,665 Recovery during the year: Rs. Nil 11.4 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, the Nomination Committee of the Bank granted 53,29,092 options at a price of Rs.40 per option. The date of grant of options is March 5, 2007. During the year, the Nomination Committee of the Bank has granted 8,30,700 options in July 20, 2007, 2,43,050 options in October 20, 2007 and 4,01,800 options in January, 2008 at Rs. 108.30, Rs. 106.20 and Rs. 117.60 per option respectively. 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 No. of Options Options outstanding at the beginning of the year 59,62,574 Granted during the year 29,06,193 Exercised during the year – Forfeited/Lapsed during the year 4,75,750 Options outstanding at the end of the year 83,93,017 Options exercisable –
61 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, 2008 are:
Dividend Yield – Expected Volatility 40% Risk Free Interest Rate 8% Expected life of options 1-2 years
Impact of Fair Value Method on Net Profit and EPS Had the compensation cost for the Bank’s stock option plans outstanding been determined based on the fair value approach, the Bank’s net profit and earnings per share would have been as per the pro forma amounts indicated below: (Rs. in crores) Net Profit (as reported) 38.33 Add: Stock based compensation expense accounted 1.64 39.97 Less: Stock based compensation expense determined under fair value based method (proforma) 4.50 Net Profit (pro forma) 35.47
Basic earnings per share (as reported) Rs. 2.32 Basic earnings per share (pro forma) Rs 2.14 Diluted earnings per share (as reported) Rs. 2.25 Diluted earnings per share (pro forma) Rs. 2.08 11.5 Securitisation: Advance/Receivables relating to retail assets portfolio as at March 31, 2008 – Rs.71.74 crores (previous year – Rs.95.32 crores) 11.6 Details of “Provisions & Contingencies” debited to Profit & Loss Account (Rs. in crores) Particulars 31/03/2008 31/03/2007 Loan Loss Provisions 49.82 15.18 Sacrifice in OTS 13.05 6.39 Provision for Taxation (Deferred Tax) (3.22) (6.27) Provision for Fringe Benefit Tax 1.03 0.72 Depreciation on Investments 3.07 2.85 Provision for Standard Assets 7.23 13.73 Provision for Other Assets 0.30 1.00 Total 71.28 33.60
12. Previous year’s figures have been regrouped, wherever considered necessary, in order to make them comparable with figures for the current year. These are the Notes appended to and forming part of the Financial Statements for the year ended March 31, 2008. Place : Mumbai Date : May 6, 2008
62 Cash Flow Statement for the year ended 31st March, 2008 31/03/2008 31/03/2007 Rs. in 000’s Rs. in 000’s Cash Flow from Operating Activities Net Profit/(Loss) for the Year 383,302 73,719 Adjustments for: Depreciation on Fixed Assets 133,059 89,791 Depreciation on Investments 30,727 28,524 Deferred Tax (32,242) (62,664) Loss/(Profit) on Sale of Fixed Assets (102,498) (155,273) Provision for Loan Losses (628,681) 215,735 Provision for Standard Assets 72,347 137,274 Provision for Other Assets 2,998 10,000 Amortization of Premium on Investment 168,973 215,429 ESOP Compensation 16,407 1,565 Lease Terminal Adjustment 21,996 24,760 Leave Encashment Transition Liability (48,379) – Adjustments for: (Increase)/Decrease in Investments (3,078,997) (5,641,088) (Increase)/Decrease in Advances (13,476,182) (8,127,697) Increase/(Decrease) in Deposits 16,596,479 12,912,070 Increase/(Decrease) in Borrowings 2,724,051 228,724 (Increase)/Decrease in Other Assets (41,266) (332,261) Increase/(Decrease) in Other Liabilities & Provisions 721,962 212,183 Direct Tax Paid/Provision for Income Tax – – Net Cash generated from Operating activities A 3,464,056 (169,211) Cash flow from Investing activities Purchase of Fixed Assets (407,842) (155,441) Proceeds from sale of Fixed Assets 148,282 331,951 Net Cash Flow from Investing activities B (259,560) 176,510 Cash flow from Financing activities Proceeds from Issue of Capital 2,734,165 1,703,618 Refund of Share Application Money – – Net Cash Flow from Financing activities C 2,734,165 1,703,618
Net Increase/(Decrease) in Cash & Cash Equivalent A+B+C 5,938,661 1,710,917 Cash and Cash equivalent at the beginning of the Year 4,676,869 2,965,952 Cash and Cash equivalent at the end of the Year 10,615,530 4,676,869
As per our report of even date. For N.M. Raiji & Co. Chartered Accountants Nasser Munjee Gautam Vir Narayan K. Seshadri Chairman Managing Director & CEO Director Vinay D. Balse Partner Adil Kasad H. V. Barve M. No. 39434 Executive Vice President & CFO V.P. & Company Secretary
Place : Mumbai Date : May 6, 2008 63 Notes
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