Annual Report 2019-20 Persevere. Pioneer. Prosper. Contents Corporate Information 01 28 REGISTERED OFFICE Kotak Mahindra Bank Limited Introduction 27BKC, C 27, G Block An Organisation with Bandra-Kurla Complex, Bandra (E) Entrepreneurial Spirit 02 Mumbai - 400 051 Tel.: +91 22 61660001 Financial Highlights 04 Website: www.kotak.com Business Overview 06 Message from Uday Kotak 10 COMPANY SECRETARY Board of Directors 13 Bina Chandarana Joint President and Company Secretary Persevere 14 Pioneer 16 AUDITORS Prosper 20 Walker Chandiok & Co. LLP th ESG Practices 22 16 Floor, Tower II Indiabulls Finance Centre Awards and Recognition 24 S B Marg, Prabhadevi (W) Mumbai - 400 013 30 31 REGISTRAR AND TRANSFER AGENT Financial Highlights KFin Technologies Private Limited (Previously Karvy Fintech Private Limited) Consolidated 30 Selenium Tower B, Plot 31-32 Standalone 31 Gachibowli, Financial District, Nanakramguda Hyderabad - 500 032 32 100 24/B, Raja Bahadur Compound, Consolidated Financial Ambalal Doshi Marg, Fort, Statements Mumbai - 400 023 Consolidation at a Glance 32 Independent Auditor’s Report 33 Financial Statements 44 Financial Information of Subsidiaries and Basel III (Pillar 3) Disclosures 99 101 303 Bank Reports and Statements Directors’ Report 101 Management Discussion & Analysis 150 Report on Corporate Governance 194 Independent Auditor’s Report 222 Financial Statements 228 Read the report or download at www.kotak.com Consolidated Financial Bank Reports and Persevere. Pioneer. Prosper. Financial Highlights Statements Statements The financial year 2019-20 posed serious challenges to the In this ‘new normal’, Kotak world economy, including India. The impact of the economic Mahindra Bank will: slowdown of 2019 and the COVID-19 pandemic of 2020 will be felt for some time to come. And the financial services Persevere through the raging storm. The Bank’s strong capital industry, which underpins all position, stable deposit base and asset quality gives it the resilience to economic activity, has had to weather a crisis. Its focus on prudence, pragmatism and transparency, adapt quickly. together with a diversified business model, will help it navigate the rough waters, protecting its own business interests and those of its Kotak as a Group has faced stakeholders. several crises before and has emerged stronger from each. This time too, it has retained its firm footing and is Pioneer new technologies, charting new routes for a new world. The looking to strengthen itself in world is changing, and so is Kotak. Its investments in digital banking these uncertain times, and technology over the past few years have paid rich dividends, while keeping an eye on especially during the COVID-19 crisis. The Group will increase its focus opportunities ahead. on technology as it moves forward into a changing world. Prosper with an eye on opportunities beyond the stormy horizon. Kotak has faced rough storms before and seen the opportunities that lay beyond the crises of the past three decades. The Group believes, once again, that opportunities to create value for its stakeholders will emerge from this crisis. Grounded in its prudent approach to banking and led with a clear north-star vision of being a world-class financial services conglomerate, Kotak is determined to Persevere. Pioneer. Prosper. 01 An Organisation with Entrepreneurial Spirit The Kotak Group has been in Kotak today business for 35 years, and Kotak Mahindra Bank for 17 years now. The financial services of the Bank have a wide reach across 1,600 ` 4.4 trillion ` 2.7 trillion branches in India. Kotak also has a Institution (Consolidated Assets) Market Capitalisation presence in Singapore, London, the (as on 3rd June, 2020) USA and the Middle East through its international arms. All Group entities constantly endeavour to seize new opportunities by ` 2.7 trillion 3,50,000 + differentiating across products, Wealth, Priority and Investment Shareholder Base services and technologies. Globally, Advisory Relationship Value Kotak serves the multiple financial services needs – banking (consumer, commercial, corporate), credit video-based KYC savings and financing, equity broking, account that serves the twin wealth and asset management, purpose of convenience and insurance (general and life), and contactless opening of an 811 investment banking – of individuals account in a highly digitised post- Kotak 811 launches and corporations. COVID ‘new normal’. India's first Kotak Bank has cemented its The Bank’s reach is now zero-contact, distinctive status through unique extended beyond just its offerings and services, e.g. its network, to a point where video KYC industry-leading differentiated anyone in India can open a bank savings account. interest rate strategy on savings account from the safety and accounts; and India’s first convenience of their houses. #BankFromHome Conditions apply. Providing Aadhaar is Voluntary. 02 Annual Report 2019-20 Consolidated Financial Bank Reports and Persevere. Pioneer. Prosper. Financial Highlights Statements Statements Introduction 2,519 ~15 million 23 million+ ATMs Debit Card Holders Bank Active Customer Base 1,600* ~ 2.3 million >71,000 Bank Branches Credit Card Holders Group Employees * Does not include branches in DIFC, Dubai & GIFT city, Gujarat Geographical Presence Distribution of Branches (No./%) North 485 / 30% 3 Jammu & Kashmir 11 West East Himachal Pradesh 493 / 31% 122 / 8% 90 10 Punjab 71 Uttarakhand South Haryana 102 500 / 31% Delhi 1 66 86 Sikkim 1 Rajasthan Uttar Pradesh 22 1 Assam Bihar Meghalaya 155 1 46 9 Branch Classification 42 Tripura Gujarat Madhya Pradesh Jharkhand 22 West Bengal Chhattisgarh 19 2 Dadra & Odisha Nagar Haveli 329 Maharashtra 87 21.3% Telangana 44.5% 18.4% 7 109 Goa 15.8% 180 Andhra Pradesh Karnataka 90 No. of branches Urban Semi Urban Rural Metro 34 Tamil Nadu Kerala Map not to scale. For illustrative purposes only. 03 Financial Highlights All numbers on a consolidated basis except where stated Capital & Reserves and Net Interest Income (` in crore) Net Profit (` in crore) Surplus (` in crore) 17% 26% 19% CAGR CAGR CAGR 8,593 17,574 67,134 7,204 58,280 14,645 6,201 50,486 12,664 4,940 10,867 38,491 9,279 33,361 3,459 FY 16 FY 17 FY 18 FY 19 FY 20 FY 16 FY 17 FY 18 FY 19 FY 20 FY 16 FY 17 FY 18 FY 19 FY 20 Advances (` in crore) Total Assets (` in crore) Book Value Per Share (`) 15% 16% 18% CAGR CAGR CAGR 348.3 443,173 249,879 243,462 302.7 395,171 264.9 205,997 337,720 209.1 167,125 181.9 276,188 144,793 240,804 FY 16 FY 17 FY 18 FY 19 FY 20 FY 16 FY 17 FY 18 FY 19 FY 20 FY 16 FY 17 FY 18 FY 19 FY 20 Market Capitalisation (` in crore) Kotak Securities Average Daily Total Assets Under Volume (` in crore) Management (` in crore) 19% 35% 22% CAGR CAGR CAGR 26,203 226,189 225,877 254,723 24,318 247,939 183,379 199,674 141,336 160,563 13,691 124,857 102,249 8,981 7,329 FY 16 FY 17 FY 18 FY 19 FY 20 FY 16 FY 17 FY 18 FY 19 FY 20 FY 16 FY 17 FY 18 FY 19 FY 20 04 Annual Report 2019-20 Consolidated Financial Bank Reports and Persevere. Pioneer. Prosper. Financial Highlights Statements Statements Financial Highlights Bank Capital Adequacy Ratio and Current Account and Savings Account (CASA) Tier 1 Capital (%) (bank standalone) (` in crore) 56.2 29% 50.8 52.5 CAGR 44.0 18.2 17.9 17.6 17.5 38.1 147,622 17.3 16.9 16.8 118,586 16.3 97,775 15.9 15.3 69,265 52,776 FY 16 FY 17 FY 18 FY 19 FY 20 FY 16 FY 17 FY 18 FY 19 FY 20 Capital Adequacy Tier I CASA (` in crore) CASA Ratio (%) Group Branch Network FY 16 1,333 79 227 1,209 79 8 2,935 Bank Car Finance FY 17 1,369 79 235 1,281 79 12 3,055 Life Insurance Securities* 1,388 84 1,325 83 15 FY 18 227 119 3,241 Mutual Fund General Insurance FY 19 1,500 89 243 1,328 84 17 176 3,437 BSS Microfinance FY 20 1,600 100 245 1,315 86 18 329 3,693 *branches, franchises and referral co-ordinators 05 Business Overview Consumer Bank Corporate Bank Custodial Services (Kotak Mahindra Bank Limited) (Kotak Mahindra Bank Limited) (Kotak Mahindra Bank Limited) • Provides a complete bouquet • Caters to the diverse needs • The Custody business continued of deposit, transaction services of major Indian corporate to grow both in terms of AUC and lending products for retail bodies, financial institutions, as well as new clients added customers, small businesses, public sector undertakings, during the year under review NRIs and retail institutions, multinational companies, small • The Bank continues to be one of backed by innovative, digital- & medium enterprises and India’s largest local custodians in first solutions realty businesses spite of all the challenges faced Key Differentiators • Offers a comprehensive by the listed markets in the past • Focused on building a stable, portfolio of products and 6-12 months retail deposit base. As on services including working • It on-boarded a number of 31st March, 2020, CASA ratio capital financing, medium marquee FPIs, AIFs and PMS stood at 56.2% of total deposits term finance, export credit, clients during the year – among the highest in the transaction banking, custody who started using its industry. CASA and TDs below services, debt capital markets, Custody, Clearing and Fund ` 5 crore constitute 86% of forex and treasury services Accounting solutions total deposits Key Differentiators • The Bank also implemented a • Grew its loan book prudently, • Robust risk management new Fund Accounting software with a focus on asset quality practices have ensured that during the year with minimal and risk adjusted returns.