Kotak Mahindra Bank Ltd
Directors Reports
To the Members,
KOTAK MAHINDRA BANK LIMITED
Your Directors have pleasure in presenting the Thirty-Eighth Annual
Report of Kotak Mahindra Bank Limited ("Bank·) together with the audited
Financial Statements for the financial year ("FY") ended 31st March, 2023.
FINANCIAL HIGHLIGHTS
(A) Consolidated*:
('in crore)
|
FY
2022-23 |
FY
2021-22* |
Total
Income |
68,142.03 |
58,681.68 |
Total
expenditure, excluding provisions and contingencies |
48,056.16 |
41,962.87 |
Operating
Profit |
20,085.86 |
16,718.81 |
Provisions
and contingencies, excluding provision for tax |
439.68 |
770.51 |
Profit
Before Tax |
19,646.18 |
15,948.30 |
Provision
for Taxes |
4,865.74 |
4,016.43 |
Profit
After Tax |
14,780.44 |
11,931.87 |
Add:
Share in Profit of Associates |
144.57 |
157.52 |
Consolidated
Profit for the Group |
14,925.01 |
12,089.39 |
Earnings
per equity share: |
|
|
Basic
(Rs.) |
74.96 |
60.76 |
Diluted
(Rs.) |
74.94 |
60.73 |
Notes:
* The Financial Statements of Indian subsidiaries (excluding insurance
companies) and associates are prepared as per Indian Accounting Standards in accordance
with the Companies (Indian Accounting Standards) Rules, 2015. The Financial Statements of
the subsidiaries and associates used for preparation of the consolidated financial
statements are in accordance with the Generally Accepted Accounting Principles in India
(Rs.‘GAAP") specified under Section 133 and relevant provisions of the Companies
Act, 2013 ("Act").
APrevious year amounts have been re-classified for consistency with the
current year presentation, wherever necessary
(B) Standalone:
('in crore)
|
FY
2022-23 |
FY
2021-22* |
Total
Income |
41,333.90 |
33,024.74 |
Total
expenditure, excluding provisions and contingencies |
26,485.93 |
20,973.87 |
Operating
Profit |
14,847.97 |
12,050.87 |
Provisions
and contingencies, excluding provision for tax |
456.99 |
689.56 |
Profit
Before Tax |
14,390.99 |
11,361.31 |
Provision
for Taxes |
3,451.69 |
2,788.62 |
Profit
After Tax |
10,939.30 |
8,572.69 |
Add:
Surplus brought forward from the previous year |
30,455.85 |
24,749.78 |
Amount
available for appropriation |
41,395.15 |
33,322.47 |
Appropriations: |
|
|
Statutory
Reserve under Section 17 of the Banking Regulation Act, 1949 |
2,734.83 |
2,143.18 |
Transfer to
Capital Reserve |
0.99 |
9.47 |
Transfer to
Special Reserve |
115.00 |
95.00 |
Transfer to
Investment Fluctuation Reserve Account |
525.32 |
400.00 |
Dividend
paid ** |
258.92 |
218.96 |
Surplus
carried to Balance Sheet |
37,760.10 |
30,455.85 |
Notes:
A Previous year amounts have been re-classified for consistency with
the current year presentation, wherever necessary.
** The Bank has paid interim dividend at the rate of' 0.405 per share
on the Non-Convertible Perpetual Non-Cumulative Preference Shares (?NCPS") for FY
2022-23 (Previous Year:Rs. 0.405 per share), to all holders of PNCPS, whose names appeared
in the list of Beneficial holders on the Record Date of 17th March, 2023. Further, the
Reserve Bank of India ("RBI") has allowed banks to pay dividend on equity shares
from the profits for FY 2022-23, subject to the quantum of dividend being not more than
the amount determined as per the dividend pay-out ratio prescribed in the RBI circular
dated 4th May 2005 and subject to the banks complying with the criteria laid down in the
said circular. The Bank has complied with all the criteria specified in the above RBI
circular and the Board of Directors of the Bank have proposed a dividend of Rs. 1.50 per
share (Face Value Rs. 5/-) for FY 2022-23 (previous year:Rs. 1.10 per share). As per the
requirements of revised AS 4 - ‘Contingencies and Events Occurring after the Balance
Sheet Date', this dividend pay-out is appropriated from the amount available for
appropriation in the year of pay-out.
FINANCIAL PERFORMANCE
On a standalone basis, Profit After Tax ("PAT") of the Bank
was Rs. 10,939.30 crore in FY 2022-23 compared with Rs. 8,572.69 crore in FY 2021-22. Net
Interest Income ("NII") of the Bank for FY 2022-23 was Rs. 21,551.92 crore as
against Rs. 16,817.91 crore in FY 2021-22.
The consolidated PAT was Rs. 14,925.01 crore in FY 2022-23 compared
with Rs. 12,089.39 crore in FY 2021-22. Further, the Group had Net Worth of Rs. 111,754.10
crore as on 31st March, 2023 (Rs. 96,634.03 crore as on 31st March, 2022). The book value
per equity share was at Rs. 562.55 as on 31st March, 2023 (Rs. 486.90 as of 31st March,
2022).
Further details on the financial performance of your Bank are available
in the Management's Discussion and Analysis Report.
CAPITAL
During the year, your Bank allotted 1,894,822 equity shares arising out
of the exercise of Employees Stock Options granted to the Whole-time Directors and
Eligible Employees of your Bank and its subsidiaries.
After the allotment of the aforesaid equity shares, the total issued,
subscribed and paid-up share capital of your Bank as at 31st March, 2023 stood at Rs.
14,932,782,910/- comprising 1,986,556,582 equity shares of Rs. 5/- each and 1,000,000,000
preference shares of Rs. 5/- each.
DIVIDEND
The Board of Directors of the Bank have, at their meeting held on 29th
April, 2023, recommended a dividend of Rs. 1.50 per equity share for FY 2022-23. The
dividend, if approved by the members, would entail a payout of approximately Rs. 298 crore
based on the capital as of 23rd June, 2023 (Previous Year: Rs. 218.40 crore). The dividend
would be paid to all the equity shareholders, whose names would appear in the Register of
Members/list of Beneficial Owners on the Record Date fixed for this purpose i.e. 4th
August, 2023.
Further, the Board of Directors of the Bank, at their meeting held on
17th/18th March, 2023, declared an interim dividend on PNCPS of the face value of Rs. 5/-
each issued by the Bank, carrying a dividend rate of 8.10% p.a., in respect of FY 2022-23,
as per the terms of issuance of PNCPS. This has entailed a payout of Rs. 40.50 crore
(Previous Year: Rs. 40.50 crore). The members are requested to confirm the payment of the
aforesaid interim dividend on PNCPS at the ensuing Annual General Meeting
("AGM").
The Dividend Distribution Policy, in terms of Regulation 43A of the
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015 ("SEBI Listing Regulations") and as reviewed and adopted by
the Board of Directors of the Bank, is available on the Bank's website viz., URL:
https://www.kotak.com/content/kotakcl/en/investor-relations/qovernance/policies.html
DEBENTURES AND BONDS
Your Bank has not issued any capital under Tier II, during FY 2022-23.
During the year under review, your Bank has issued and allotted Senior
Unsecured Rated Listed Redeemable Long Term Bonds in the nature of Non-Convertible
Debentures ("Bonds") amounting to Rs. 1,500 crore and Rs. 300 crore on 1st
December, 2022 and 20th March, 2023, respectively.
Further, Unsecured, Redeemable, Non-Convertible, Subordinated Debt
Bonds aggregating Rs. 306 crore were redeemed on 14th December, 2022. As of 31st March,
2023, outstanding Bonds aggregated Rs. 1,950 crore. All the Bonds have been issued on a
private placement basis and are listed on the Stock Exchanges viz., BSE Limited and
National Stock Exchange of India Limited.
CAPITAL ADEQUACY RATIO
Your Bank has a Capital Adequacy Ratio of 21.80% as of 31st March, 2023
under Basel III, with Tier I Capital being 20.78?% (of which, Common Equity Tier 1 Capital
being 20.64%).
CREDIT RATINGS
The details of all credit ratings obtained by the Bank for various
instruments, including debt instruments outstanding as on 31st March, 2023, are disclosed
in the Report on Corporate Governance, forming part of this Report.
DEPOSITS
Being a banking company, the disclosures required under Rule 8(5)(v)
and (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Act,
are not applicable to your Bank.
OPERATIONS
Your Bank organises its principal banking business activities into the
following business units viz., Consumer Banking, Commercial Banking, Corporate Banking,
Private Banking, Treasury and other Financial Services. The Consumer, Commercial and
Corporate Banking businesses correspond to the key customer segments of the Bank. The
Treasury offers specialised products and services to these customer segments and also
undertakes Asset Liability Management as well as Proprietary Trading for the Bank.
In addition to the banking activities, the Kotak Group offers a
significant array of other financial products and services as well, which are operated
through its subsidiaries. These products and services include Banking, Financing through
Non-Banking Financial Companies ("NBFCs"), Asset Management, Insurance, Broking,
Investment Banking, Private Banking and Asset Reconstruction.
Consumer Banking
The Consumer Banking business services a wide spectrum of customers
across domestic individuals and households, non-residents, small and medium business
segments, for a range of products from basic Savings and Current Accounts to Term
Deposits, Credit Cards, Unsecured and Secured Loans, Working Capital, Digital Payments and
Investments.
As of 31st March, 2023, your Bank had 1,780 branches, 2,963 Automated
Teller Machines ("ATMs") and Recyclers and 15,572 Micro ATM installations. Your
Bank also has a branch at Dubai International Financial Centre ("DIFC") and
Gujarat International Finance Tec-City ("GIFT City·).
Your Bank always looks for innovative ways to add value in the
investment experience of the customer. In FY 2022-23, your Bank introduced 'Insta
SIP', a quick and convenient way to book multiple Systematic Investment Plans
("SIPs") to enable the customer to book SIPs in more than one mutual fund in
just two to three steps. Your Bank has also launched a first of its kind digital assisted
journey to accept transaction requests digitally from the customer. The Relationship
Manager enters the transaction details in the digital transaction request form and sends
it to the customer for authenticating the transaction. Your Bank has also empowered the
Do-It-Yourself ("DIY") option for the customers to make informed investment
decisions by providing them house views and fund factsheets on Internet Banking and Mobile
Banking ("MB") platforms. FY 2022-23 has witnessed multiple regulatory
announcements such as two-factor authentication of mutual fund transactions,
nominee/opt-out of nomination declaration, validation of Aadhaar based Know Your Customer
("KYC") process, etc. Your Bank has, in a timely manner, amended the digital
process to comply with these regulations, so as to provide seamless investment experience
to its customers.
'Privy League', the flagship programme of your Bank is an offering
for High Net Worth customers with features and benefits such as power packed cards,
lifestyle benefits, preferential pricing and more. An enriched version of this programme
was leveraged to craft a Premium Salary proposition
i.e. 'Kotak Creme', which has been extended to top corporates
having salary relationship with your Bank. The employees of such corporate customers are
offered early access into this premium programme at reduced monthly salary levels, which
enables them with a range of lifestyle and banking benefits like a life-time free premium
credit card, dining and luxury stay offers and much more.
'Kotak Silk', your Bank's programme designed for women, was
re-launched and re-positioned with specially curated new features to partner woman
customers in their financial journey. With preferential pricing on lockers and loans, a
dedicated query resolution desk and exclusive lifestyle offers from popular brands such as
Nykaa and Urban Company, Kotak Silk supports every life stage of the modern Indian woman.
Your Bank is also building a dedicated platform for financial education among women and
unveiled the 'Meri Udaan Meri Pehchaan' sculpture in GIFT City, Gujarat, ahead of
International Women's Day, commemorating the indomitable spirit of self-reliant
Indian women.
Your Bank introduced 'Everyday Savings Account' for the upper mass
segment, offering benefits such as flexibility of balances. Rs.#kharchepebachat'
promotes savings whilst spending. The proposition packs in exclusive discounts in alliance
with top service providers on a range of popular categories like groceries,
pharmaceuticals, apparel, dining, movies, vacations and more to give customers higher
value for their money.
This year, your Bank has improved the on-boarding experience for its
Savings Accounts customers by transitioning to a new platform for assisted biometric based
account opening. The platform offers seamless on-boarding experience to your Bank's
customers with an improved user interface, instant responses and a capability to handle
scale. The new account opening module has capabilities to co-originate other most relevant
products such as credit card, ActivMoney (a sweep facility for term deposits), Spendz (a
prepaid offering for small daily expenses), Forex card and Hospi Cash (a daily cash
benefit for hospitalisation), at the point of account opening, thus being able to
efficiently meet a range of customer needs.
Launch of a DIY Savings Account journey has opened up a new avenue of
online bank account opening for your Bank's customers, offering them an easy and
quick way to open their savings accounts with zero paperwork and documentation. Right from
opening the Savings Account to carrying out transactions, the end to end journey can be
completed by the customers themselves.
Your Bank was one of the few banks to be authorized for opening salary
accounts for the Indian Army, the Indian Coast Guards and civilian employees of the Indian
Navy. The Memorandum of Understanding ("MOU") was signed with the Indian Army
for their 'Agniveer' programme, Indian Coast Guards and with the Indian Navy for
offering salary accounts to all the Coast Guards and civilian Naval personnel. Further,
MOUs were signed with the Association of Scientific and Technical Officers of Oil and
Natural Gas Corporation (ASTO) for opening salary accounts of their employees.
During the year under review, three new Corporate Salary propositions
were launched namely 'NationBuilders Salary Account', an account exclusively curated
to suit the unique banking and lifestyle needs of Public Sector Undertaking and Government
professionals; 'Kotak Creme', an enhanced banking proposition for employees of top
corporates which gives them access to premium banking benefits and 'Everyday Account for
Salaried Professionals', a product designed for millennials and early jobbers,
offering value for money with power-packed benefits designed exclusively for the needs of
customers who are value seekers.
Mirroring some of the initiatives in the Savings Account space, your
Bank also introduced new variants of Debit Card to deliver superior features and
experience to customers, namely, 'Nation Builders Debit Card' and 'Everyday Debit
Card' on Rupay platform.
In order to improve customer experience and operational efficiency,
your Bank enhanced its automated online outward remittance platform. With new system
upgrades, 70% of the cross-border outward remittances transactions are now being processed
online, directly by the customers.
Your Bank has also forged successful strategic partnerships with
international investment brokers such as INDmoney and BSC arm-INDIAINX Global Access on
Kotak Remit, to facilitate outward remittance by individual customers for the purpose of
capital investments abroad.
Your Bank has launched Digital Current Account opening for small
businesses (sole proprietorships and individuals) as an assisted journey, which empowers
the acquisition teams to open current accounts for these customers in a seamless manner.
With the capability of opening the current account on the same day using instant KYC
verification, this journey provides a simple and intuitive user interface to the
acquisition teams and an account opening flow designed to provide a 'wow' experience
to the target segment of customers.
To acquire high-value accounts, your Bank has launched an 'ActivMoney
Current Account', an account with a default auto-sweep facility where customers can
earn interest through Sweep Term Deposit on the idle funds in their current account. Now,
the Business Banking customers of your Bank can avail of curated offers through associated
brands to take care of all the nitty-gritty of their business through the 'Offers Beyond
Banking' platform, a digital platform to address the non-banking needs of Small and
Medium-sized enterprises ("SMEs"). It comes across various categories such as
Business Management and Marketing, Taxation and Legal, Human Resources, Supply Chain and
Logistics and many more.
Your Bank has been pushing the envelope in the field of Digital
Payments with a host of new Point of Service ("POS") and Quick Response
("QR") products and solutions targeted at merchants. Your Bank has launched a
'Merchant One Account' for the retail segment. This is an all-in-one Current Account that
caters to the banking and other business-related needs of Micro, Small and Medium
Enterprises ("MSMEs"), including small retailers. It helps MSMEs and store
owners to bill, create a customer database, run campaigns/offers, track payments and
inventories, place orders and more, digitally. It is a unique proposition that helps
merchants digitise their daily business processes through smart automation. It also
empowers retailers to collect payments conveniently using POS or mobile through QR, UPI or
card or by sending secure payment links. Your Bank also entered into a strategic tie-up
with American Express, thus enabling its POS merchants to collect high value payments from
Amex cardholders. Your Bank has launched market leading services such as 365 Day
settlements for POS merchants and Instant Settlement for UPI transactions, both adding to
a superlative Merchant experience. Your Bank has continued to enhance the 'Kotak.biz'
merchant application by launching link-based payments, multi-user capability and
voice-based notifications. Your Bank is one of the first banks to enable acceptance for
Digital Rupee.
On Father's Day, your Bank presented Rs.#DadMySuperstar', a candid
short heart-warming video that showed the son behind the superstar Mr. Ranveer Singh
through the lens of his father, Mr. Jagjit Singh. The video depicted the special bond
between a father and a son and the important role of a father in his son's journey towards
his dream. The video garnered over 9.5 million views.
Your Bank has implemented behavioural biometrics on Net Banking and
Payment Gateway. Proof of Concept (POC) is initiated in the MB app. This also makes your
Bank to be first domestic bank to comply with guidelines issued by the RBI on Digital
Payment Security Controls dated 18th February, 2021.
One time Password (OTP) for fallback transactions for Kotak Debit card
holders using Kotak Bank ATMs has been implemented to prevent skimming frauds. It has also
helped in complying with the RBI guidelines on Digital Payment Security Controls.
Your Bank was recently felicitated with an award from Pension Fund
Regulatory & Development Authority (PFRDA) in the third quarter of FY 2022-23 on its
performance of National Pension System ("NPS"). With the Digital Initiative
taken up by your Bank in the last financial year to open NPS accounts via Kotak MB App,
80% of its individual NPS account are now being sourced through the MB App. With
persistent focus, your Bank is among the top three private banks in the industry on its
NPS performance and is contributing towards making India a 'pension enabled society'.
In an effort to enhance the General Insurance ("GI") product
offering on the Insurance platform, your Bank has made available a first in the industry
proposition, by way of floater options on small ticket group plans. Your Bank has also
made GI products available during the biometric account on-boarding process.
DIY journeys for Pradhan Mantri Bima schemes viz., Pradhan Mantri
Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) have
been made live on the Kotak MB and net banking platforms.
Your Bank has implemented Central Bank Digital Currencies
("CBDC"), an RBI initiative, enabling the merchants to collect money through
CBDC and making payments through the CBDC App.
One of the mandatory requirements of German education/employment visa
is to earmark certain sustenance fund in a blocked account. Your Bank is the only Indian
bank which has been authorised to provide such facility. In order to ensure enhanced and
superior customer experience, a German Portal has been launched to service such requests,
end to end digitally. This would ensure more applications along with new customer base.
Your Bank has introduced vernacular language option in Net Banking
(Dashboard, Account and Deposits section) which would help to connect with the target
audience in a more effective manner, resulting in exceptional user experience.
From 2021, Kotak811 operates as a 'Semi-Autonomous' Digital Bank within
your Bank, with additional focus on service, user experience, engagement and
cross-selling. As of March 2023, Kotak811 had over 1.7 crore customers residing in more
than 1,000 cities and towns across India. In FY 2022-23, while the customer base grew by
approximately 42% YoY, cross-selling grew by approximately 72%. Similarly, while the Book
Value increased by 32%, overall throughput increased by 81% YoY in FY 2022-23. These
metrics quantify the focus on cross-selling and engagement. Kotak811 has also started
contributing meaningfully to your Bank, across various parameters. In FY 2022-23, 72% of
new Savings account were acquired by Kotak811 and over 50% of Credit Cards, Unsecured
Loan, Trading Accounts and Recurring Deposits were cross sold to Kotak811 customers.
Your Bank got empanelled as an Agency Bank and started collecting both
Direct (Income Tax) and Indirect (GST and Customs) taxes, to bring forward the convenience
of easy and seamless tax payments. Now all customers of your Bank can pay their taxes
online directly from their Kotak Bank accounts. Further, your Bank has also widened its
horizon by listing as a payment gateway on the recently launched Income Tax department's
TIN 2.0 platform https://eportal.incometax.gov.in/, thus becoming one of the first banking
institutions to allow its customers to pay direct taxes via a variety of modes, such as
domestic credit cards, domestic debit cards, internet banking, UPI, as well as
international credit cards, with a bank of their choice through the Kotak payment gateway.
As digital transactions are being encouraged and scaled up across ecosystems, your Bank is
making strides into opening a plethora of options to further ease tax-paying journey for
individual tax payers.
Consumer Assets have shown strong growth in both Secured and Unsecured
segment. Secured portfolio has grown by 20% YoY while Unsecured segment has grown by 65%
YoY. The Credit Card segment has registered a growth of 81% YoY. Your Bank's market share
in terms of number of outstanding Credit Cards has grown YoY from 4.2% to 5.8% as at end
of March 2023. For Credit Cards, DIY journey has been made live and a significant
contribution to the overall card issuance is coming from this channel. Your Bank has
launched co-brand card partnering with Indian Oil and also launched 'White Reserve Metal
Card' exclusively for premium segment of customers, thus widening Bank's offerings for
Credit Card customers.
Substantial investment in developing digital and analytical
capabilities backed by strong technology in FY 2022-23 has started yielding results in the
form of improved customer experience and cost efficiencies.
Your Bank has developed scorecards and machine learning models for
identifying right segments of customers for unsecured lending, thereby improving overall
number of products sold per customer. Further, it has launched new Loan Origination System
(LOS) for Home Loans, reducing turn-around-time from login to disbursement. Your Bank has
also achieved more than 90% Personal Loans (in number terms), being serviced end-to-end
digitally, thereby providing enhanced customer experience.
Under its digital-first strategy, real-time Working Capital Finance for
MSMEs, which are registered on Government's e-Marketplace ("GeM") Sahay, a
platform that connects sellers with lenders, was launched by your Bank.
Further, digital loans for merchants using Kotak POS terminals with a
daily and weekly equated monthly instalment (EMI) option for making the repayment was
launched. This ensures better cash flow management for the merchant. Your Bank integrated
an end-to-end digital supply chain finance journey for distributors and retailers buying
from Original Equipment Manufacturers (OEMs) on Business to Business (B2B) platforms.
Commercial Banking
Your Bank's Commercial Banking business focuses on meeting the banking
and financial needs of various segments, with specialised units offering financial
solutions in the areas of Commercial Vehicles ("CV"), Construction Equipment
("CE"), Tractor and Farm Equipment ("Tractor"), SMEs operating in the
Agri Value Chain and Microfinance. A significant majority of the customers catered to by
this business is in semi-urban and rural area segment, forming a part of the priority
sector. This business plays a significant role in meeting the financial inclusion goals by
financing deep into 'Bharat'.
The CV industry continued its growth momentum in FY 2022-23,
registering a growth of around 34% YoY in unit terms, although the first three quarters of
this year did not see sequential growth in unit sales. Overall operator economics continue
to be fine with freight demand remaining good and improvement in availability of return
load. However, some segments depending on the export-import (EXIM) traffic and E-commerce
business have started to show some slowdown. Within CV, the passenger (bus) segment has
grown more than 100% YoY, coming out of the COVID impact, and all verticals such as Staff,
School and Tour and Travels are displaying increased demand. Your Bank has grown the CV
business quite strongly during this period and disbursements have grown at almost double
of industry growth. This has helped your Bank grow its market share during FY 2022-23.
Collection efficiency continues to be stable and back to pre-pandemic levels, leading to a
reduction in the Gross Non-Performing Assets ("GNPA").
The CE industry registered a healthy growth of around 30% YoY. Healthy
allocation towards capital spending by the Government, coupled with ambitious targets
under the National Infrastructure Pipeline helped the ramp-up in spending towards
infrastructure development in segments like roads, metros, railways, mining, sanitation,
etc. Apart from this, improvement in the overall macro-economic environment led to a
strong revival in construction activities and pick-up in demand for CE assets. Your Bank's
disbursements also followed healthy industry growth and grew at the same pace. As the cash
flows in the segment improved the delinquency levels remained under control during the
year.
The tractor industry grew by a healthy 12% YoY in FY 2022-23, backed by
multiple years of healthy monsoon and aided by labour shortage. Your Bank has grown the
tractor business well, led by a strong pick-up in disbursements, better than the industry
growth, thereby improving its market share. Your Bank crossed the milestone of disbursing
one lakh plus new tractor loans since inception of the tractor business. Small and
marginal farmers constitute more than 75% of these loans, demonstrating your Bank's
continued commitment towards making difference in their lives and livelihood. Focus on new
products/customer segments and on deeper geographies aided the effort. Collection
efficiency for the business is now better than the pre-COVID period for the portfolio
acquired post-COVID.
In the Agriculture value chain, during the year, prices of most
essential agro commodities such as Basmati rice, wheat, maize and tur continued to
increase to their highest levels due to lower stocks in India, weather related losses
during pre-harvest and international shortages linked to war and weather. Farmers in India
have also shown the capacity to hold onto their harvest output on expectation of higher
price realisation. Demand for credit among traders and processors therefore remained
positive. The Food and Agro trading and processing segment also saw improved margins due
to consumption demand. The strong focus among banks for loans to this segment ensured that
despite rising interest rates announced by the regulator, banks could pass on only a part
of the rate increase to the customers, which had an impact on the margins for this
business. Overall quality of credit in the segment showed improvement with higher past
default recoveries and reduced fresh impairments. Your Bank continued to focus on
implementing digital initiatives to reach to small and marginal farmers, by working on
Application Programming Interface ("API") based small loan for the dairy
farmers.
Conducive regulatory and policy environment for Microfinance led to a
strong growth for the industry during the year. Your Bank continued on its path of growth
momentum and grew at more than 100%, while extending the outreach of the business in new
locations across eleven states (six of which were added during the year). The business
also crossed the one million-customer mark during the year. With the rural economy and
livelihoods on a path of recovery, leaving the uncertainties of COVID behind, collection
efficiency for the business saw a significant improvement with reduction in both
delinquency and GNPA levels.
Your Bank continued its expansion strategy in the Gold Loan Business.
Gold loans are now available in 541 branches covering 30% of the total branch network of
the Bank. As a result, disbursements grew by around 50% during the year.
Your Bank's Crop Loan Non Performing Asset recovery and portfolio
quality improved as compared to last year, due to better resolution and collection focus.
Better monsoon and good crop yields aided the same.
Corporate Banking
Your Bank's Corporate Banking business caters to a wide range of
corporate customer segments, including major Indian corporates, conglomerates, financial
institutions, public sector undertakings, multinational companies, new-age companies,
small and medium enterprises and realty businesses.
This business offers a comprehensive portfolio of products and services
to these customers, including working capital finance, medium-term finance, trade finance,
foreign exchange services, other transaction banking services, custody services, debt
capital markets and treasury services. In addition, this year, your Bank has set up a team
of structuring experts to provide comprehensive structured financing solutions to clients.
The core focus of this business has been to deepen existing relationships and acquire new
quality customers on a consistent basis, delivering customised solutions through efficient
structuring. Your Bank also aims to secure value addition through cross-selling of varied
products and services.
Despite the challenges with respect to the reversals in rate cycle and
liquidity, your Bank has successfully continued the positive momentum from the previous
year by maintaining a focus on acquiring new customers in a profitable manner. The
addition of New-to-Bank customers across assets and liabilities continued to be healthy
across segments in FY 2022-23. This has further strengthened the foundation of the
Corporate Banking business.
During the year under review, your Bank continued to focus on the SME
segment and advances had grown by 18% YoY, with minimal slippages. The initiatives taken
by your Bank to grow the priority sector business across the last couple of years have
yielded good results, resulting in healthy growth in Priority sector advances. Loans to
NBFCs continued to grow while maintaining focus on quality. Overall, your Bank ended the
year with a well-diversified growth in advances across all customer segments.
Your Bank's share of credit substitutes increased significantly during
FY 2022-23, driven by a combination of requirements by clients and preferences of your
Bank. Your Bank's investment positions led to a mark-to-market loss in FY 2022-23, due to
an increase in the interest rates.
Your Bank also assisted several customers in raising debt through these
challenging markets and was able to protect its Debt Capital Market and Loan Syndication
revenue stream. Income from other non-credit income streams including Forex, Cash
Management and other Transaction Banking products, also grew well. Your Bank has been
focussing on generating and growing such streams of non-risk income as part of its overall
growth strategy, and this philosophy has got ingrained in the core philosophy of the
Corporate Banking division.
Assets under custody experienced mixed trends, with major foreign
outflows counterbalanced by increased activity in domestic Portfolio Management Services
(PMS) and domestic Alternative Investment Funds (AIFs). Your Bank has invested in
technology and processes with an aim to offer better products and services to its clients.
In addition, your Bank is investing to offer good overall solutions to offshore vehicles
emerging in GIFT City.
In order to capitalise on market opportunities and offer holistic
solutions to its clients, your Bank has taken steps to improve the integration between its
different businesses, including Coverage, Products, Transaction Banking, Private Banking
and Investment Banking. These steps have resulted in an increase in cross-divisional
synergies and execution of complex solutions, such as syndication of structured debt to
Private Banking customers, referring of Investment Banking solutions to Wholesale Banking
clients and others. As part of this strategy, your Bank has an integrated Corporate and
Investment Banking ("CIB") approach towards certain top conglomerates and large
corporates. The CIB model has ramped up well over the years for your Bank.
Your Bank has always had robust risk management practices and it is a
testimony to these practices that your Bank has once again been able to end the year with
low credit costs, despite such a challenging environment. Across corporate segments, your
Bank has been proactive in rebalancing its portfolios to reflect economic situations and
reducing exposure to customers or segments with heightened risk. Your Bank's focus on Risk
management has helped the business to optimise its Risk Weighted Assets as a percentage of
Assets over the past few years. The use of Risk-Adjusted Return on the capital pricing
model has become ingrained in the way the Corporate Banking division conducts its business
and has helped to optimise pricing, better utilise capital, increase focus on non-capital
intensive income streams and improve return on equity. A focused approach to recoveries
has resulted in better than anticipated results and have given a positive impetus to the
Profit and Loss in FY 2022-23.
Your Bank continues to target improvements in productivity and
efficiency. There is a greater focus on measuring and improving employee productivity,
including its sales force, through the use of technology and digital tools. Investments in
technology and people, with a long-term view on productivity improvements, were one of the
focus areas for this year, and many initiatives have been implemented or are in advanced
stages of implementation. We expect these investments to yield results in the coming
years.
Digital Initiatives and robust Business Continuity Practices continue
to remain the focus of your Bank. Your Bank has made significant technological
advancements over the last year to provide its Corporate Banking clients with a
comprehensive product suite and holistic, sustainable growth solutions. In order to
enhance customer experience, digital signature facility and online platform solutions for
documentation have been introduced. Significant solutions in payments, custody, loans,
trade and supply chain have also been introduced. Your Bank's enterprise portal offering
'Kotak fyn' entered its next phase, with collections and liquidity available to all its
customers. Kotak fyn is a game changer with an integrated one-stop digital platform for
all business banking needs. Its innovative and intuitive user interface with several
industry first features will further provide superior banking experience.
As a result of this customer-focused approach and investments in
technology, the Corporate Banking team has already seen significant improvements in key
product usage metrics in FY 2022-23. Your Bank's vision is to go beyond normal and create
unique experiences by offering best-in-class product suite to its clients.
Focus on risk-return metrics, strong growth in liability and non-risk
fee income, controlled credit costs and investments in technology and product suites have
ensured that your Bank has been able to grow the Corporate Banking business book and
maintain a healthy Return on Equity.
Your Bank remains committed to building a high-quality differentiated
corporate franchise and continues to focus on maintaining the health and profitability of
the business.
Private Banking
Your Bank's private banking arm, caters to a number of distinguished
Indian families and is one of the oldest and the most respected Indian private banking
institution, managing wealth for more than half of India's top 100 families (Source:
Forbes India Rich List 2021), with clients ranging from entrepreneurs to business families
and professionals.
Your Bank provides an open architecture proposition to its customers,
offering a plethora of private banking products. This business has a strong distribution
capability for private clients through distribution/referral model across equities, fixed
income and alternates catering to Ultra High Net worth Individuals and High Net worth
Individual ("HNI") investors. In addition to comprehensive financial solutions
that go beyond investments, the division provides banking and credit, consolidated
reporting, referral for estate planning services, family office services, offshore
investments and other various products and services to its Private Banking clients. With
an in-depth understanding of client requirements and expertise across various asset
classes, this business offers the widest range of financial solutions. Your Bank has added
approximately 711 new families in FY 2022-23.
Digital and Technology are key pillars of future growth. Your Bank is
constantly innovating and adding Value Added Services through platform, proposition and
new age technology introductions across functions, to enhance customer experience across
his lifecycle. Using data analytics to predict customer trends and customer segregation
for customising their experience is also key to use of available resources in the most
optimal manner. Identifying, servicing and retaining clients at scale will require your
Bank to adopt best practices and help integrate the right technologies across various
functions viz., sales, products and service.
International Banking Units
Your Bank has two International Banking Units ("IBUs") based
at GIFT City, Gandhinagar, Gujarat and DIFC, Dubai, United Arab Emirates. The IBUs have
their respective treasuries which not only manage regulatory requirements and liquidity
buffers viz., Liquidity Coverage Ratio (LCR), etc., but also offer banking services
through products like term credit facilities for various purposes, trade finance, foreign
exchange solutions, etc.
The GIFT City Branch is regulated by the International Financial
Services Centre Authority (IFSCA), which facilitates your Bank's participation in
syndication of overseas loans, lending to clients in international markets and providing
External Commercial Borrowing to eligible Indian corporates. Your Bank also undertakes
offshore client's forex and derivative transactions to help them with the management of
interest rate and currency risks, in addition to investments in offshore bonds.
The DIFC Branch is your Bank's first overseas branch at Dubai,
regulated by the Dubai Financial Services Authority ("DFSA"). This branch
complements your Bank's ability to advise and arrange global investment products, provide
loans and accept deposits from its overseas private banking customers that qualify under
the Professional client criteria of the DFSA. Your Bank has developed capabilities to
advise and arrange global investments through this Branch. The Branch also has tie-ups
with some leading names in the international investments space and arranges access to
their services to eligible customers of the Branch.
Asset Reconstruction
Your Bank's Asset Reconstruction Division (ARD) looks at opportunities
and takes exposure in distressed/Non Performing Assets ("NPA") accounts through
Security Receipts ("SR") investments, Stressed/NPA portfolio buyout from other
banks, priority funding and working capital assistance with an aim to resolve and turn
them around. Your Bank has been active in the distressed asset buyouts and investments
space, for almost two decades.
The resolution of several accounts was seriously impacted on account of
lockdowns due to COVID pandemic and slowdown in the economy. Resolution Process gained
momentum in FY 2022-23 and functioning of various judicial forums like Debt Recovery
Tribunals (DRTs), Debt Recovery Appellate Tribunals (DRATs), High Courts and National
Company Law Tribunal (NCLT) proceedings under the Insolvency and Bankruptcy Code (IBC)
normalised, which resulted in announcement of awards/judgements for various distressed
accounts.
Now, the economy is exposed to global crises of war, with rise in
commodity prices and inflation. However, your Bank is monitoring the impact and will adopt
various measures thoughtfully and diligently to resolve the stressed and bad accounts with
compassion.
Your Bank did sizable investment, both in corporate and retail stressed
assets space in FY 2022-23, and expects a lot of opportunities in the acquisition side,
especially in retail stressed loans segment in the coming years. If the prices offered are
reasonable and attractive, your Bank shall be open to acquire several of them, post
critical analysis and evaluation.
Treasury
Your Bank's Treasury actively contributes by way of:
i. Balance Sheet Management: The Balance Sheet Management Unit
("BMU") ensures maintenance of regulatory reserves and adequate liquidity
buffers and requisite investments. The BMU also manages Interest Rate and Liquidity risk,
within the overall risk appetite of your Bank.
ii. Proprietary Trading: The Proprietary Trading Desk actively trades
in products such as Fixed Income Securities, Money Markets, Derivatives, Foreign Exchange
and Equity. The Proprietary Desk also helps in interbank access to teams servicing
customer requirements. The Primary Dealer Desk, which is a part of the Proprietary Trading
Desk, actively participates in primary auctions of Government securities, makes market in
Government securities and engages in retailing of Government securities.
iii. Customer Transactions: The customer facing desks at the Treasury
assist and manage customer transactions across Foreign Exchange, Derivatives and Bullion
products. The Forex and Derivatives Desk facilitates customer access to foreign currency
markets through cash and derivatives products for remittances, trade transactions and for
managing Foreign Exchange and Interest Rate risks.
iv. Bullion: The Bullion desk provides efficient working capital
solutions to domestic jewellery manufacturers as per the prescribed rules of the RBI. Your
Bank also imports gold and silver to meet the needs of customers, under a license received
from the RBI.
HUMAN RESOURCES
During FY 2022-23, your Bank prepared for re-opening offices and get
back to a normal way of working with receding third wave and decrease in COVID cases
across the country. The Human Resources ("HR") Department of your Bank
implemented various initiatives to transform the HR processes, policies and systems and
various employee touchpoints for smooth functioning and business continuity in the new
normal scenario. From making great strides in engaging with employees, numerous health and
wellness drives, to centralising various HR processes for aligning employee experience,
there have been quite a few measures taken to enhance the experience of employees.
Key HR Initiatives taken by your Bank were:
i. Health and Wellness: Your Bank launched Annual Health Screening
Policy for all Kotakites above the age of 40 years or above certain grades. Your Bank has
tied up with Metropolis, NM Medical and Apollo Hospital and Clinics for various tests
covered under the Annual Health Screening Program. Various health and wellness related
initiatives were launched through online and onsite interactions and online wellness
initiatives such as yoga, meditation, zumba and quiz sessions. Your Bank also has Doctor
Consultation, Nutritionist and Emotional Assistance Program, along with discounts on
pharmacy on its 'Health to the Power Infinity' site. Doctors and nutritionists are also
available on call and in house. Regular updates on the pandemic including COVID and post
COVID recovery tips, webinar on understanding the impact of Omicron, announcements and
guidelines on precautionary measures were sent to all Kotakites.
ii. Leadership and Manager Connect: Your Bank remains heavily invested
in regional initiatives such as Leadership Connect/Town Hall, Webcast, Meet forums for
building manager connect and Skip level and also strengthens the platform for top down
communication.
iii. Diversity and Inclusion: Building diverse and inclusive culture
has been a focus for your Bank over few years. Your Bank has tied-up with a leading day
care benefit management provider to provide creche facilities and launched Day Care Policy
from FY 2023-24, to set a reliable support system to take care of their children while the
parents are working. Your Bank also amended the travel policy to provide higher level
entitlements for women employees and bear travel expenses for a caregiver, if she is
travelling with an infant of up to one year of age.
iv. Foundation Day: Your Bank celebrated 37 years of Kotak Foundation
Day, virtually and physically, on 21st November, 2022. More than 10,000 Kotakites
participated online along with their family members. The physical event was celebrated
with the presence of entire Kotak Leadership Team ("KLT") and all the winners of
Kotak Infinity Awards and Kona Kona Kalakaar were felicitated during this event. Your Bank
also launched a 21 day challenge to encourage managers to initiate fun activities within
their teams, ahead of the 37th Kotak Foundation Day.
v. Employee Experience: Your Bank continues to focus on DigitAll and
Employee Experience and launched several new modules in line with the Mobile First
approach. On-boarding and joining journeys were digitised; Helpdesk chat services were
launched on WhatsApp; Emergency Loans, Mediclaim benefit requests were made accessible via
the Employee Mobile App; Goals and Performance and Mandatory Declarations were also
digitised and made available on Employee App. Your Bank is also working
on new initiatives to improve the New Joiner and Learning Experiences and actively
listening and engaging with employees using Artificial Intelligence conversational tools.
vi. Kotak Young Leaders Council: Your Bank actively engages with young
talent through this flagship initiative where young Kotakites become change makers and
thinkers. It is a valuable learning opportunity where a chosen few who become the council
get to interact with the leadership team and work as a cohort with them. Top 40 applicants
across the Bank were selected through a rigorous selection process and were being mentored
by KLT and go through specific Individual Development Plan.
vii. Eureka: 'Eureka' is an idea generation portal where employees can
submit open ideas or ideas for specific business problems. Your Bank has successfully
launched various themes during this financial year and got feedback in terms of ideas from
its employees.
viii. My Kotak My Say: Your Bank has been strengthening the platform
for top down communication. At the same time, your Bank has created a listening
opportunity for Kotakites to voice through 'My Kotak My Say', a bi-annual employee
engagement survey engaging with the 'Great Place to Work? Institute'. 'My Kotak My Say'
Survey was conducted for the third time in September 2022, with an overall 76% response
rate organisation wide. 79% of employees today believe that Kotak is a Great Place to Work
(increased from 77% in the previous year). It was indeed a proud moment for your Bank to
have been certified as 'One of India's Best Employers Among Nation-Builders' by the Great
Place to Work? Institute, second year in a row.
ix. Employee Development: Your Bank continues focus of learning and
development of employees and has External Learning Courses Policy in place to encourage
employees to take up relevant courses and training and upskill themselves. 'Kotak Learning
A-Fair', a one of its kind learning initiative, has also received the 'Brandon Hall
Technology Excellence Gold award' for Best Advance in Unique Learning Technology at a
global level in the month of December 2022. 'Drona', one of our flagship managerial
capability development programmes, has been launched this financial year. It aims to
address managerial capability in four different tracks viz., Manager as an assessor,
Manager as a trainer, Manager as a mentor and Manager as a Coach. We have also launched
'WePower', a leadership development programme for select women leaders in the organisation
to enhance their leadership capability and help bolster their executive presence in the
organisation.
x. Talent Acquisition: As an equal opportunity employer, your Bank has
ensured that there is significant women participation in the workforce. Your Bank ran
multiple campaigns across businesses to promote women membership and hired fresh women
graduates from campuses. Over 2,300 women were hired with Science, Technology, Engineering
and Math ("STEM") qualification. The average age of women new joiners was 26.6
years and around 59.7% of the total woman hired (including freshers) were from non-banking
industries.
xi. Your Bank has encouraged a culture of appreciation via monetary and
non-monetary reward programmes through 'K-Applaud', Kotak's Rewards and Recognition
platform. The platform is available to employees on Kotak Worklife Mobile App/Portal.
Employees can appreciate their peers and can also avail discounts on various brands on the
platform.
xii. Talent Management: Your Bank continues to review talent at a
leadership level. Various interventions have been rolled out for future leadership
capability building for key talent.
xiii. Kotakathon@Eureka: Your Bank launched a hackathon named
'Kotakathon@Eureka', with the single most critical objective of creating the highest
levels of customer obsession in the minds of the employees, which would help deliver real
value to customers. This was a challenge for the Branch Banking Business of Consumer Bank
in identifying problem areas and proposing solutions to issues faced by the customers of
your Bank. Phase 1 saw a participation from 96% of the branches. Top eight branches were
selected as final winners by the KLT panel.
xiv. Continuing the journey towards building an Engineering first
company, your Bank has undertaken many talent transformational initiatives, amplified
fresher intake from STEM campuses, off-campus hiring through Hire Train and Deploy
Programs, re-organisation of roles with deep focus on developing engineering capability,
increased lateral hiring from top tier technology organisations, introduced technical
assessments in the hiring process to strengthen the quality of developers. Your Bank also
launched a social media platform to engage with the technology enthusiasts and showcase
the technology transformation journey at Kotak.
xv. Digi Q [in partnership with Catallyst Executive Education Institute
(CEEI)]: Kotak DigiQ is a customised intervention for the senior leaders of your Bank,
designed to instil a sense and urgency to lead in the Indian banking sector through rapid
transformation and focused disruption pivoting on Digital initiatives. About 100 plus
leaders have been covered so far. After a successful first cohort of the Kotak DigiQ
programme, subsequent cohorts for Wholesale Business and Corporate were launched in FY
2022-23.
EMPLOYEES
As of 31st March, 2023, the full time employee strength of the Group
was over 1,03,000. The standalone Bank had over 73,000 employees as on 31st March, 2023.
The information required pursuant to Section 197(12) of the Act read
with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, as amended from time-to-time, is given as an Annexure to this
Report. Further, the statement containing particulars of employees as required above is
given as an Annexure and forms part of this report. In terms of Section 136(1) of the Act,
the annual report and the financial statements are being sent to the members, excluding
the aforesaid Annexure. The Annexure is available for inspection and any member interested
in obtaining a copy of the Annexure may send an email to the Company Secretary at
KotakBank.Secretarial@kotak.com
INFORMATION UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
(PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
Your Bank continues with the belief of zero tolerance towards sexual
harassment at workplace and continues to uphold and maintain itself as a safe and
non-discriminatory organisation. To achieve the same, your Bank reinforces the
understanding and awareness of The Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013 ("POSH"). Your Bank has formulated a
central Steering Board Committee and Internal Committee at three regions for reporting any
untoward instance of sexual harassment. Any complaint pertaining to sexual harassment is
diligently reviewed and investigated and treated with great sensitivity. The Internal
Committee members have been trained in handling and resolving complaints and have also
designed an online e-learning POSH Awareness module, which covers the larger employee
base.
As of 1st April, 2022, seven complaints were pending for disposal. All
these complaints were disposed off during FY 2022-23.
The following is a summary of sexual harassment complaints received and
disposed off during FY 2022-23:
Number of
complaints received during FY 2022-23 |
55 |
Number of
complaints disposed off as of 31st March, 2023 |
42 |
Number of
complaints pending as of 31st March, 2023 |
13 |
12 complaints pending as of 31st March, 2023, were disposed off as on
the date of this Report.
CODE FOR PROHIBITION OF INSIDER TRADING
Your Bank has adopted the Kotak Mahindra Bank Limited - Insider Trading
Code of Conduct ("Code") for prohibition of insider trading in the securities of
the Bank as well as in other listed and proposed to be listed companies and the Code of
Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information
("UPSI"). The Code, inter alia, prohibits dealing in securities by insiders
while in possession of UPSI. The said Code has been amended, from time to time, to give
effect to the various notifications/circulars of Securities and Exchange Board of India
("SEBI") with respect to the SEBI (Prohibition of Insider Trading) Regulations,
2015.
Your Bank has also formulated and adopted the Policy for Determination
of Materiality of Events or Information of the Bank, in terms of Regulation 30 of the SEBI
Listing Regulations. The Policy for Determination of Materiality of Events/Information and
the Code of Practices and Procedures for Fair Disclosure of UPSI of the Bank, is available
on the Bank's website viz., URL:
https://www.kotak.com/en/investor-relations/qovernance/policies.html in compliance with
the SEBI Listing Regulations.
WHISTLE BLOWER POLICY/VIGIL MECHANISM
Your Bank is committed to its 'Vision Statement' of upholding its
Global Indian Financial Services Brand, creating an ethos of trust across all
constituents, developing a culture of empowerment and a spirit of enterprise thereby
becoming the most preferred employer in the financial services sector.
Consistent with the Vision Statement, your Bank is committed to
maintain and provide to all its employees and directors, the highest standards of
transparency, probity and accountability. The Kotak Group endeavours to develop a culture
where it is safe and acceptable for all employees and directors to raise/voice genuine
concerns in good faith and in a responsible as well as effective manner.
A vigil mechanism has been implemented through the adoption of a
Whistle Blower Policy with an objective to enable employees/directors/suppliers/
vendors/service providers/all other applicable stakeholders, raise genuine concern or
report evidence of activity by the Bank or its employee or director or vendor that may
constitute instances of corporate fraud, unethical business conduct, a violation of
Central or State laws, rules, regulations and/or any other regulatory or judicial
directives, any unlawful act, whether criminal or civil, irregularities like alteration,
forgery or fabrication of documents, impropriety, abuse or wrong doing, misuse of
office/position, theft/embezzlement, misappropriation of asset, bribery/corruption,
collusion with vendor/customers, deliberate breaches and non-compliance with the Bank's
policies, processes, data leakage, questionable accounting/audit matters/financial
malpractice, ethics violation, conflict of interest, dual employment and unauthorised
disclosure of confidential information about the Bank or any of its customers. The
concerns can be reported online on the following websites viz., URL:
https://cwiportal.com/kotak and/or https://www.speakup.co.in/ which are managed by
independent third parties. Safeguards to avoid discrimination, retaliation or harassment
and confidentiality have been incorporated in the said policy.
All employees and Directors have access to the Chairperson of the Audit
Committee in appropriate and exceptional circumstances. Further, the Chairperson of the
Audit Committee has access rights to the whistle blower portals. The Audit Committee
reviews a synopsis of the complaints received and the resolution thereof, every quarter
under the said Policy.
Your Bank is taking several initiatives to encourage employees to blow
the whistle and report incidences of any fraud or unusual events. During the year under
review, your Bank has initiated periodic email campaigns for educating employees on the
process of whistle blowing, creating awareness and encouraging employees to blow the
whistle and report incidences of any concerns. In addition, the same has been reiterated
and made an integral part of your Bank's Code of Conduct and training.
The Policy is available on the Bank's intranet as well as website viz.,
URL: https://www.kotak.com/en/investor-relations/governance/policies.html
EMPLOYEE STOCK OPTIONS AND STOCK APPRECIATION RIGHTS SCHEMES
The Bank has formulated and adopted the Kotak Mahindra Share Based
Employee Benefit Scheme 2015 to:
• Provide means to enable the Bank, its subsidiaries and associate
companies, as applicable, to attract and retain appropriate human talent in the employment
of the Bank, its subsidiaries and associate companies, as applicable;
• Motivate the employees of the Bank, its subsidiaries and
associate companies, as applicable, with incentives and reward opportunities;
• Achieve sustained growth of the Bank, its subsidiaries and
associate companies, as applicable and to create shareholder value by aligning the
interests of the employees with the long term interests of the Bank; and
• Create a sense of ownership and participation among the
employees of the Bank, its subsidiaries and associate companies, as applicable.
The Employee Stock Options ("ESOPs") and Stock Appreciation
Rights ("SARs") granted to the employees of the Bank and its subsidiaries
currently operate under the following Schemes:
i. Kotak Mahindra Equity Option Scheme 2015 ("ESOP Scheme")
ii. Kotak Mahindra Stock Appreciation Rights Scheme 2015 ("SARs
Scheme").
During the year under review, the Bank granted ESOPs and SARs to the
eligible employees of the Bank and its subsidiaries, in accordance with the respective
Schemes, from time to time.
The provisions of the SEBI (Share Based Employee Benefits and Sweat
Equity) Regulations, 2021 ("SEBI (SBEB & SE) Regulations, 2021"), do not
apply to cash settled SARs Scheme. As the Bank's SARs Scheme provides only for cash
settlement on stock appreciation, the provisions of the SEBI (SBEB & SE) Regulations,
2021, are not applicable for SARs.
The aforesaid Schemes complied with the SEBI (SBEB & SE)
Regulations, 2021, to the extent applicable. During the year under review, no material
changes were made to the Schemes.
The relevant details of the aforesaid Schemes, as required under the
SEBI (SBEB & SE) Regulations 2021, are available on the Bank's website viz., URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html These
details, along with the certificates from the Secretarial Auditor, as required under the
SEBI (SBEB & SE) Regulations 2021, stating that the ESOP Scheme and the SARs Scheme
have been implemented in accordance with the SEBI (SBEB & SE) Regulations, 2021 and
the resolution passed by the members, would be placed and available for inspection by the
members during the AGM.
ENVIRONMENT, SOCIAL AND GOVERNANCE PRACTICES AND CORPORATE SOCIAL
RESPONSIBILITY
In accordance with the provisions of Section 135 of the Act read with
the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended from time
to time, your Bank has constituted a Board level Corporate Social Responsibility and
Environmental Social Governance Committee ("CSR & ESG Committee").
Your Bank's CSR & ESG Committee is responsible to:
i. Identify, execute and monitor Corporate Social Responsibility
("CSR") projects, to assist the Board in fulfilling its CSR objectives, to
ensure compliance of CSR regulations and to oversee reporting and disclosure of CSR
activity;
ii. Oversee the development and implementation of the Group's
Environmental Social and Governance ("ESG") framework, to assist the Board in
defining and fulfilling its ESG goals and objectives, to ensure compliance of ESG
regulations and to oversee the reporting and disclosure of the Group's ESG performance;
and
iii. Review/approve donations by the Bank, to not for profit
organisations, as per authorisation matrix approved by the Board from time to time.
Environment, Social and Governance Practices
In the financial and banking industry, ESG has become a critical area
of focus and your Bank endeavours to continually improve its ESG performance. There is a
robust ESG policy framework which articulates ESG focus areas and provides guidance for
ESG practices such as corporate governance, environmental and employee related
initiatives, policy revisions and other ESG related projects undertaken. There is an ESG
taskforce comprising representatives from relevant functions and subsidiaries for the
implementation of the framework. This taskforce plays a critical role in providing data on
various ESG parameters which is subsequently collated, analysed and reported to the Head
of Sustainability. The progress is also reported to the CSR & ESG Committee and the
Board periodically.
Your Bank adheres to the highest standards of corporate governance,
which includes disclosure, transparency, accountability and responsiveness. Details of
some existing policies aligned to ESG principles are annexed to this Report.
The coverage of ESG disclosures on the operational environmental
footprint and employee count has been extended to cover all locations where the Bank and
its subsidiaries operate. Your Bank's emphasis on integration of ESG in core business
practices, environmental management, employee diversity, well-being and development,
financial inclusion and community focused interventions, customer experience and data
privacy, are covered in detail in the ESG sections of the Integrated Annual Report. During
the reporting period, your Bank has undertaken risk assessments to understand impacts of
climate on its operations and its portfolio (where it covered exposure to one sector). For
details on the same, please refer ESG disclosures in the Integrated Annual Report.
Corporate Social Responsibility
Your Bank has undertaken socially impactful CSR Projects for welfare
and sustainable development of the population at large, in accordance with the guidelines
and robust mechanism laid out in the Kotak Mahindra Bank Limited's Corporate Social
Responsibility Policy ("CSR Policy·). Your Bank has collaborated with
implementing agencies across to implement projects in the CSR focus areas defined under
its CSR Policy viz., Education & Livelihood, Healthcare, Environment & Sustainable
Development and Sports.
Your Bank's CSR Policy is available on the Bank's website viz., URL :
https://www.kotak.com/en/about-us/sustainability/csr.html
Your Bank's CSR Projects and CSR Project Expenditure for FY 2022-23 are
compliant with the CSR mandate as specified under Sections 134 and 135 read with Schedule
VII of the Act, along with the Companies (Corporate Social Responsibility Policy) Rules,
2014, as amended from time to time and in line with notifications issued by the Ministry
of Corporate Affairs ("MCA") from time to time.
The CSR expenditure of the Bank for FY 2022-23 as per Section 135 of
the Act and the Companies (Corporate Social Responsibility Policy) Rules 2014, as amended
from time to time, was Rs. 187.41 crore. After setting-off Rs. 0.88 crore from the excess
CSR expenditure spend for FY 2021-22, your Bank's total CSR obligation for FY 2022-23 was
Rs. 186.53 crore.
For the period 1st April, 2022 to 31st March, 2023, your Bank's spend
on CSR Projects was Rs. 91.47 crore, amount spent as CSR Administrative Overheads was Rs.
3.06 crore and the amount spent on Impact assessment was Rs. 0.31 crore. In addition, an
amount of Rs. 93.11 crore which was on account of the unutilised CSR Project Expenditure
of Ongoing CSR Projects for FY 2022-23, has been transferred to the 'Kotak Mahindra Bank
Limited Unspent CSR Account FY 2022-23', in April 2023. Your Bank is committed to utilise
the unutilised CSR Project Expenditure of ongoing CSR Projects of FY 2022-23 of Rs. 93.11
crore within the stipulated period of three years i.e. from 1st April, 2023 to 31st March,
2026, which was towards completion of the Board approved Ongoing CSR Projects which have
been initiated in FY 2022-23 and continue to be under implementation as on 31st March,
2023.
Together with the CSR Project spend, Impact assessment and
administrative expenditure and amount transferred to Unspent CSR account, the total CSR
Expenditure for FY 2022-23 was Rs. 187.95 crore, which is in excess of Rs. 1.42 crore over
the total CSR obligation for FY 2022-23.
The excess CSR expenditure spend of Rs. 1.42 crore for FY 2022-23 is
being carried forward to three succeeding financial years and would be available for
set-off in those financial years. The details are more particularly described in the
section on Annual Report on CSR activities for FY 2022-23.
Your Bank also maintains the following Unspent CSR Bank accounts
pertaining to funds earmarked for its Ongoing CSR Projects for the previous financial
years:
(Rs. in crore)
Name of
the Unspent CSR account |
Financial
Year to which Unspent CSR account relates |
Amount
transferred to Unspent CSR account in respective financial years |
Amount
disbursed from unspent CSR account upto 31st March, 2023 |
Balance
as on 31st March, 2023 in the unspent CSR account |
Kotak
Mahindra Bank Limited Unspent CSR account FY 2020-21 |
FY 2020-21 |
63.59 |
59.22 |
4.37 |
Kotak
Mahindra Bank Limited Unspent CSR account FY 2021-22 |
FY 2021-22 |
96.06 |
25.20* |
70.86** |
• excludes unutilised balance of CSR expenditure amount with
implementation agency as on 31st March, 2023, which was subsequently refunded by them in
April 2023.
** includes unutilised balance of CSR expenditure amount with
implementation agency as on 31st March, 2023, which was subsequently refunded by them in
April 2023.
Your Bank is committed to utilise the amount available in Unspent CSR
accounts towards completion of the Board approved Ongoing CSR Projects within the
stipulated time limit specified under the Act. The details of the same are more
particularly described in the section on Annual Report on CSR activities for FY 2022-23,
annexed to this Report.
A brief outline of the CSR Policy, the composition of the CSR & ESG
Committee and the CSR Project spends during the year under review, have been provided in
detail in the Annual Report on CSR activities annexed to this report and also in the
Business Responsibility and Sustainability Report ("BRSR") section of the Annual
Report for FY 2022-23.
Business Responsibility and Sustainability Report
In May 2021, the SEBI made an amendment to Regulation 34(2)(f) of the
SEBI Listing Regulations, by introducing enhanced disclosure requirements regarding ESG
parameters through a revised format called the Business Responsibility and Sustainability
Report ("BRSR"). The Business Responsibility Report has been replaced by BRSR,
which is a more comprehensive disclosure that can showcase ESG performance with enhanced
transparency, shifting the focus to quantifiable metrics by providing essential and
voluntary indicators rather than qualitative and subjective metrics. Your Bank published a
BRSR for FY 2021-22, even as the SEBI mandated top 1,000 listed organisations to do so
from FY 2022-23 onwards, endeavouring to be at the forefront of sustainability reporting
by being an early adopter of BRSR since last year.
The Bank's disclosure on environmental performance covers aspects such
as resource usage (energy and water), Greenhouse Gas (GHG) emissions and waste generated.
Disclosure on social aspects covers the workforce diversity (by gender and differently
abled employees), turnover rates, median wages, occupational health and safety, trainings,
community development and customer centric approach, etc., while governance related
performance covers ethics, transparency and accountability, besides the Corporate
Governance Report and Directors' Report.
BRSR for FY 2022-23 is part of the Annual Report of the Bank and is
also available on the Bank's website viz., URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html
TECHNOLOGY AND DIGITISATION
This was a year of expanding capabilities and building on the
capacities built the year prior. Customer experience remains the prime focus and this
year, it was achieved through empowering customers by providing avenues of self-onboarding
and self-service. DIY journeys were launched for various products and services.
As an example, DIY on-boarding journeys were built for:
• New-to-Bank Current Account customers for opening a Current
Account digitally, either through DIY or assisted journey, end to end, with preferred
account number by Sole proprietor and Individual. Enabling of Video KYC has helped to
simplify KYC and real time backend verification, thereby reducing the time taken for
account opening from days to hours
• New-to-Bank Credit Card customers with real-time checks like
PAN, Aadhaar, 26AS , Video KYC, Instant card generation
• Existing and new-to-Bank customers for Personal Loans
• Home Loan available to new-to-Bank and existing customers
• 811 account opening on-boarding journey (DIY) has been fully
revamped and moved to cloud Following are some examples of self-service facilities built
for customers across digital channels:
• Customers can now raise complaints or service requests for loans
and track these requests on the mobile app. Over 40 service requests are available for
loans
• Interest Certificate, GST summary and tax invoice, PMJJBY and
PMSBY Insurance, NRI service requests, etc. were built on net banking
• Dispute raising through WhatsApp and Keya chatbot
• Track outward cheque on Mobile and Netbanking, NACH Cancellation
Service, etc.
On receiving the agency bank license in October 2021, your Bank
launched new tax collection systems for various taxes and non-tax revenue, which include
Central Board of Direct Taxes (Direct/Income tax), Customs, Goods and Services Tax Network
and Non Tax Revenue Portal. Further, the Pension system for disbursements of Civil Pension
(Central Pension Accounting Office) was launched.
The Kotak MB App continues to be an excellent one-stop shop for
customer banking needs. Not only were various other features launched, but your Bank also
has further strengthened the security aspects for fraud monitoring/prevention. On net
banking, enhancement of user experience and providing new services requests continued to
be key focus areas. The key focus of your Bank's website viz.,
https://www.kotak.com/en/home.html remained on acquiring new customers across a range of
products while supporting existing customers with services and self-help support.
Digitisation efforts were expanded, introducing three new service
requests viz., re-KYC, tracking of outward cheques and manage transaction alerts on
digital channel. Growing traction was observed for these services.
This year, your Bank has taken several initiatives for increasing the
adoption of Digital Payments and improving customer experience. Your Bank has ramped up
its technological capabilities to improve efficiencies and risk control measures. Your
Bank is one of the pilot banks working with the RBI to launch Central Bank Digital
Currency App and promoting customer and merchant adoption.
For business banking assets, the focus was on delivering supreme
digital experience through aggregated and innovative financial services. Your Bank's main
agenda is to address the demands on working-capital needs by streamlining the complexities
of running and growing a business while delivering timely intelligence for making more
informed financial decisions. Open Credit Enablement Network ("OCEN") is a
framework of APIs launched last year. It facilitated standardised interaction between
small borrowers, lenders, loan service providers and account aggregators. The capabilities
of OCEN were expanded this year. Ecosystem lending is where unsecured Purchase Order (PO)
financing/invoice will be financed to MSMEs (proprietors) from the lender (bank)
registered on GeM portal as sellers. Your Bank was the first one to on-board in Ecosystem
lending.
Your Bank has gone live on Account Aggregator ("AA")
ecosystem. The focus is to include AA in lending and Personal Finance Manager (PFM)
journey. On API Banking, the focus is to expand the bouquet of available APIs. More than
360 API (both public and private) are now live on the API platform.
SUBSIDIARIES AND ASSOCIATES
As of 31st March, 2023, your Bank had nineteen subsidiaries in various
businesses, as listed below:
Sr.
No. |
Name of
the subsidiary |
Business
activity |
1. |
Kotak
Mahindra Prime Limited |
Car
Finance and other Lending |
2. |
Kotak
Mahindra Investments Limited |
Investments,
Lending |
3. |
Kotak
Infrastructure Debt Fund Limited |
Infrastructure
Financing |
4. |
Kotak
Securities Limited |
Stock
Broking, Distribution |
5. |
Kotak
Mahindra Capital Company Limited |
Investment
Banking |
6. |
Kotak
Mahindra Life Insurance Company Limited |
Life
Insurance |
7. |
Kotak
Mahindra General Insurance Company Limited |
General
Insurance |
8. |
Kotak
Mahindra Asset Management Company Limited |
Mutual
Fund Management |
9. |
Kotak
Mahindra Trustee Company Limited |
Trustee
Company for Mutual Fund |
10. |
Kotak
Mahindra Pension Fund Limited |
Pension Fund |
11. |
Kotak
Investment Advisors Limited |
Alternate
Asset Management, Investment Advisory |
12. |
Kotak
Mahindra Trusteeship Services Limited |
Trusteeship
Services |
13. |
Kotak
Mahindra (UK) Limited |
Distribution
of financial products and dealing in securities |
14. |
Kotak
Mahindra (International) Limited |
Advisory
Services, Investments |
15. |
Kotak
Mahindra Inc. |
Broker/Dealer |
16. |
Kotak
Mahindra Asset Management (Singapore) Pte. Limited |
Asset
Management |
17. |
Kotak
Mahindra Financial Services Limited |
Advisory
services for Middle East |
18. |
IVY Product
Intermediaries Limited |
Marketing
and distribution of various financial products/services |
19. |
BSS
Microfinance Limited |
Banking
Correspondent |
During the year under review, your Bank has entered into share purchase
agreements with the current shareholders of Sonata Finance Private Limited
("Sonata"), a Non-Banking Finance Company - Microfinance Institution, registered
with the RBI, to acquire 100% of the issued and paid up capital of Sonata for a total
consideration of approximately Rs. 537 crore, on 10th February, 2023
("Transaction"). Sonata Provides a strong and vintage platform to enable the
Bank to become a significant player in the financial inclusion segment, catering to the
economically weaker and underserved households in a commercially viable manner. The
Transaction is subject to requisite approvals, including that of the RBI.
The various activities of the subsidiaries and the performance and
financial position of the subsidiaries are outlined in detail in the Management's
Discussion and Analysis section appended to this Report, some of the highlights of which
are given below:
Kotak Mahindra Prime Limited and Kotak Mahindra Investments Limited:
The Passenger Car market in India grew by 26.73% in FY 2022-23 compared
with 12.68% growth in FY 2021-22. Profits of Kotak Mahindra Prime Limited were lower
primarily due to brokerage hit on account of change in accounting policy. Further, there
was higher reversal of COVID provision in FY 2021-22. In FY 2022-23, the business of Kotak
Mahindra Investments Limited was marginally impacted by the slowdown in Initial Public
Offerings ("IPO") on account of challenging macro economic factors.
Kotak Securities Limited and Kotak Mahindra Capital Company Limited:
In FY 2022-23, the Indian Equity Capital Markets witnessed slowdown in
IPO activity on account of challenging macros at global and domestic levels. Deal activity
was dominated by secondary sell-downs through block deals, which more than doubled in FY
2022-23 compared with FY 2021-22, on account of lock-up expiries of record number of IPOs
being executed in FY 2021-22 and continued investor interest to back companies with
established track record. Domestic Institutional Investors continued to support the
markets with an inflow of USD 31.9 billion versus an FPI outflow of USD 6.6 billion during
FY 2022-23. A total of Rs. 82,677 crore (as against Rs. 200,630 crore in FY 2021-22, down
by 59% YoY) was raised in FY 2022-23 across deals other than blocks
i.e. IPOs , Qualified Institutional Placements (QIPs), Further Public
Offerings (FPO), Rights Issues and Offers for Sale (OFS). Consumer and Healthcare sectors
saw maximum number of capital market deals being executed on the back
of strong investor response. FY 2022-23 witnessed a volume growth in equity derivative,
currency and commodity segment and volume decline in cash market segment over FY 2021-22.
Market average daily volumes (excluding the proprietary segment) increased from Rs.
3,552,488 crore for FY 2021-22 to Rs. 7,223,485 crore for FY 2022-23. Consequently,
volumes of Kotak Securities Limited also had gone up in derivatives segment while they had
reduced in the cash segment. Accordingly, Kotak Securities Limited and Kotak Mahindra
Capital Company Limited reported lower profits compared to the previous year.
Kotak Mahindra Life Insurance Company Limited:
Kotak Mahindra Life Insurance Company Limited ("KLI") has
recorded a growth of 17.71% on the gross written premium, mainly coming from Individual
regular premium and Group premium. KLI has solvency ratio of 2.83 against a regulatory
requirement of 1.50. The Net worth of KLI increased by 21.38% from Rs. 4,389.20 crore as
of 31st March, 2022 to Rs. 5,327.70 crore as of 31st March, 2023. On Individual Adjusted
Premium Equivalent ("APE") Basis (Single 1/10), KLI was at rank 8 within the
private industry. KLI has registered a growth of 29.15% against insurance Industry growth
of 24.15% on Individual APE basis. KLI's market share for Individual New Business premium
(APE terms) was 3.99% for FY 2022-23 among private insurers. On group APE Basis (Single
1/10), KLI was at rank 4 within the private industry. KLI's market share for Group New
Business premium (APE terms) was 10.37% for FY 2022-23 among private insurers. KLI saw an
increase in its Assets Under Management ("AUM") (including shareholders) by
15.70% YoY to Rs. 64,284.83 crore in FY 2022-23.
Kotak Mahindra Asset Management Company Limited:
The mutual fund industry registered a growth of 8.33% YoY in FY 2022-23
over FY 2021-22, with the Annual Average Assets under Management ("AAUM") for FY
2022-23 at Rs. 39.95 lakh crore. During the same period, on the basis of AAUM, Kotak
Mahindra Asset Management Company Limited was ranked No. 5 in the industry. The AAUM of
Kotak Mahindra Mutual Fund which stood at Rs. 287,058 crore for FY 2022-23 saw growth of
around 5.2% in FY 2022-23 over FY 2021 -22, which was at Rs. 272,938 crore. The Market
Share on AAU M was 7.2% in FY 2022-23 (7.4% in FY 2021 -22).
BSS Microfinance Limited:
During the year ended 31st March 2023, the disbursements grew from Rs.
2,894 crore in FY 2021-22 to Rs. 6,597 crore in FY 2022-23. Further, the profit grew from
Rs. 82.81 crore in FY 2021-22 to Rs. 297.21 crore in FY 2022-23. It has 652 branches
spread across 11 states in India, providing Microfinance Loans to rural and semi-urban
poor women. Loans originated by BSS Microfinance Limited are eligible for Priority Sector
Lending of the Bank.
Material Subsidiary:
KLI is a material subsidiary of the Bank. The Bank's Policy for
determining material subsidiaries, in line with the SEBI Listing Regulations, is available
on the Bank's website viz., URL:
https://www.kotak.com/content/kotakcl/en/investor-relations/qovernance/policies.html
Associate Companies:
As at 31st March, 2023, your Bank had the following Associate
companies:
i. Infina Finance Private Limited
ii. Phoenix ARC Private Limited
Further, pursuant to the provisions of Section 136(1) of the Act, the
Annual Report of the Bank, containing the standalone and consolidated financial statements
and all other relevant documents required to be annexed thereto and the separate audited
financial statements in respect of each of the subsidiaries, are available on the Bank's
website viz., URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html Pursuant
to the provisions of Section 129(3) of the Act, the Statement containing the salient
features of the Financial Statements of the said subsidiaries and associates of the Bank,
in Form AOC-1, is annexed to this Annual Report.
The financial statements of the subsidiaries used for consolidation of
the Bank's consolidated financial statements are special purpose financial statements
prepared in accordance with GAAP specified under Section 133 of the Act read with relevant
notifications.
BOARD OF DIRECTORS
Board Composition
The composition of the Board of Directors of the Bank is governed by
the Act, the Banking Regulation Act, 1949 ("BR Act") and Regulation 17 of the
SEBI Listing Regulations and is in conformity with the same. As of 31st March, 2023, the
Board of Directors comprised a combination of twelve Directors viz., Mr. Prakash Apte,
Independent Non-Executive Part-time Chairperson, Mr. Uday Khanna, Mr. Uday Shankar, Dr.
Ashok Gulati, Ms. Ashu Suyash and Mr. C S Rajan, Independent Directors, Mr. C. Jayaram and
Mr. Amit Desai, both Non-Executive Directors, Mr. Uday Kotak, Managing Director & CEO,
Mr. Dipak Gupta, Joint Managing Director, Mr. KVS Manian and Ms. Shanti Ekambaram, both
Whole-time Directors. The size of the Board is commensurate with the size and business of
the Bank. The Board mix provides a combination of professionalism, knowledge and
experience required in the banking industry and also meets the criteria prescribed under
the policy on Board Diversity adopted by the Board.
Change in composition of the Board during the year
At the Thirty-Seven AGM of the Bank held on 27th August, 2022, the
members approved the appointment of Ms. Shanti Ekambaram and re-appointment of Mr. KVS
Manian as Whole-time Directors of the Bank for a period of three years, with effect from
1st November, 2022 or the date of approval of the RBI, whichever is later. Further, in
terms of Section 35B of the BR Act, the RBI had, vide its letter dated 19th October, 2022,
conveyed its approval for the aforesaid appointment of Ms. Shanti Ekambaram and
re-appointment of Mr. KVS Manian as Whole-time Directors of the Bank. These approvals were
for a period of three years, with effect from 1st November, 2022.
Ms. Farida Khambata retired from the Board of the Bank, with effect
from 7th September, 2022, upon completion of her term as an Independent Director. Mr.
Gaurang Shah retired and thus, ceased to be a Whole-time Director and Director of the
Bank, upon expiry of his term on 31st October, 2022. Your Directors place on record their
sincere appreciation for the contribution made by Ms. Farida Khambata and Mr. Gaurang Shah
during their tenure as Directors of the Bank.
At the meeting of the Board of Directors of the Bank held on 22nd
October, 2022, the Board had approved the appointment of Mr. C S Rajan as an Additional
Director, designated as an Independent Director, for a term of five years, with effect
from 22nd October, 2022 up to 21st October, 2027 (both days
inclusive), subject to the approval of the members of the Bank.
Further, the members of the Bank had granted their consent to the aforesaid appointment of
Mr. C S Rajan by way of Postal Ballot on 7th December, 2022.
As per the circular titled, 'Corporate Governance in Banks -
Appointment of Directors and Constitution of Committees of the Board', dated 26th April,
2021, issued by the RBI, Mr. Uday Kotak cannot continue as Whole-time Director post
completion of his current term on 31st December, 2023. In this connection, at the meeting
of the Board of Directors of the Bank held on 18th March, 2023, the Board had approved Mr.
Uday Kotak to become a Non-Executive Non-Independent Director of the Bank, designated and
appointed as a Non-Executive Director of the Bank, for a term of five years, not liable to
retire by rotation, upon his ceasing to be the Managing Director & CEO of the Bank,
subject to the approval of the members of the Bank. Further, the members of the Bank
granted their consent to the aforesaid appointment of Mr. Uday Kotak by way of Postal
Ballot and the same is deemed to be have been duly passed on 20th April, 2023.
Directors retiring by rotation
At the meeting of the Board of Directors held on 24th June, 2023, the
Board approved the proposal for re-appointment of Mr. C. Jayaram and Mr. Dipak Gupta, as
Directors of the Bank, liable to retire by rotation at the ensuing AGM, in terms of
Section 152 of the Act.
The details of the Directors along with the rationale for their
proposed re-appointment, as mentioned above, are included in the Notice convening the
Thirty-Eighth AGM of the Bank.
Declaration from Independent Directors
All the Independent Directors of the Bank have submitted the requisite
declarations stating that they meet the criteria of independence as prescribed under
Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI Listing Regulations. The
Board reviewed and assessed the veracity of the aforesaid declarations, as required under
Regulation 25(9) of the SEBI Listing Regulations. In the opinion of the Board, all the
Independent Directors fulfil the said conditions as mentioned in Section 149(6) of the Act
and the SEBI Listing Regulations and are independent of the Management. All the
Independent Directors of the Bank have complied with the provisions of sub rule (1) and
(2) of Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014
with respect to registration with the Indian Institute of Corporate Affairs for the
Independent Directors' Database. There has been no change in the circumstances affecting
their status as Independent Directors of the Bank. In the opinion of the Board, the
Independent Directors possess the requisite integrity, experience, expertise and
proficiency required under all applicable laws and the policies of the Bank.
Director e-KYC
MCA has vide amendments to the Companies (Appointment and Qualification
of Directors) Rules, 2014, mandated registration of KYC of all Directors. All the
Directors of the Bank have complied with said requirement in FY 2022-23.
Directors and Officers Liability Insurance Policy
The Bank has a Directors and Officers Liability Insurance Policy which
protects Directors and Officers of the Bank for any breach of fiduciary duty.
Board Evaluation
The Board conducted the performance evaluation of the Individual
Directors, Board Committees, Board as a whole and the Chairperson of the Board, in
accordance with the provisions of the Act and the SEBI Listing Regulations, including the
Guidance Note on Board Evaluation issued by the SEBI on 5th January, 2017.
The Nomination and Remuneration Committee ("NRC") of the
Board approves the criteria and the mechanism for carrying out the said performance
evaluation process. Accordingly, the NRC approved the assessment questionnaire designed
for the annual performance evaluation which broadly covered the following criteria:
i. Board - Competencies, composition and structure, board dynamics,
process and procedure, board functioning, oversight of committee composition and
functioning, ethics and compliance.
ii. Committees - Composition and quality, process and procedure, terms
of reference and certain committee specific questions.
iii. Chairperson - Key focus areas covering understanding of the role,
commitment, team work attributes, utilisation of domain expertise, effective
communication, etc. and certain other parameters such as efficient leadership,
open-minded, driver of innovation, courteous, professionalism, impartial conduct, devotion
of sufficient time, effective communication and facilitation of productive deliberation.
iv. Individual Directors - Function and duties, professional and
ethical conduct, management relations, understanding of role, commitment, effective
contribution, independent view to decision making, utilisation of domain expertise, etc.
The aforesaid questionnaire was circulated to all the Directors of the
Bank for the annual performance evaluation. The Board evaluated the effectiveness of its
functioning and that of the Committees and of individual Directors through the annual
Board Evaluation Process.
The Bank had engaged an independent external professional services firm
for issuing a report on the Board Evaluation for the Bank, based on the responses received
from the Directors. Based on the assessment of the responses received to the questionnaire
from the Directors on the annual evaluation of the Board, its Committees, the Chairperson
and the individual Directors, the Board Evaluation Report was placed before the meeting of
the Independent Directors held on 26th May, 2023, for consideration. Similarly, the Board
at its meeting held on 27th May, 2023, assessed the performance of the Independent
Directors and the outcome of the Board performance evaluation exercise.
The Directors noted that the results of the performance evaluation of
the Board and its Committees, Chairperson and individual directors indicated a high degree
of satisfaction among the directors. A few areas of improvement which were suggested
included continuing education, training and awareness programmes for the Board, etc. The
Bank has accepted the same and the status of compliance will be reviewed and reported to
the Board.
Further, the Bank has taken necessary steps to comply with the
suggestions which had arisen from the Board performance evaluation for FY 2021-22.
Implementation of various suggestions received from time to time, from the Directors of
the Bank during the Board Evaluation exercise, has helped the Bank to overall improve and
strengthen its governance processes.
KEY MANAGERIAL PERSONNEL
The following officials of the Bank are the Key Managerial Personnel
("KMP"), pursuant to the provisions of Section 203 of the Act and Rule 8 of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as on 31st
March, 2023:
i. Mr. Uday Kotak, Managing Director & CEO
ii. Mr. Dipak Gupta, Joint Managing Director
iii. Mr. KVS Manian, Whole-time Director
iv. Ms. Shanti Ekambaram, Whole-time Director (with effect from 1st
November, 2022)
v. Mr. Jaimin Bhatt, Group Chief Financial Officer
vi. Ms. Avan Doomasia, Company Secretary
Mr. Gaurang Shah, Whole-time Director, ceased to be a KMP of the Bank,
upon expiry of his term as a Whole-time Director and Director of the Bank, on 31st
October, 2022.
POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS AND KEY MANAGERIAL
PERSONNEL
The appointment and remuneration of Directors of the Bank is governed
by the provisions of Section 35B of the Banking Regulation Act. The NRC has formulated the
criteria for appointment of Directors and Senior Management personnel. Based on the
criteria set, the NRC recommends to the Board, the appointment of Directors and Senior
Management personnel.
The NRC reviews the range of skills, experience and expertise on the
Board and identifies its needs. After a detailed search, a master list of candidates is
prepared. The NRC then shortlists the candidates from the master list based on the
selection criteria viz., qualifications, knowledge, experience, skills, expertise, fit and
proper status, positive attributes as per the suitability of the role, independent status
and various regulatory/statutory requirements, as may be required of the candidate and
also keeping in view the Bank's Board Diversity Policy. After detailed discussions and
deliberations, the NRC recommends the candidate to the Board.
The Bank adheres to the process and methodology prescribed by the RBI
in respect of the 'Fit & Proper' criteria as applicable to Private Sector Banks,
signing of Deeds of Covenants which binds the Directors to discharge their
responsibilities to the best of their abilities, individually and collectively in order to
be eligible for being appointed/re-appointed as a Director of the Bank. The prescribed
declarations/undertakings given by the Directors, other than that of the members of the
NRC, are placed before the NRC and the declarations/undertakings given by the members of
the NRC are placed before the Board, for its review and noting.
The said declarations/undertakings are obtained from all the Directors
on an annual basis and also at the time of their appointment/re-appointment, in compliance
with the said laws. An assessment on whether the Directors fulfil the prescribed criteria
is carried out by the NRC and the Board, on an annual basis and also at the time of their
appointment/re-appointment.
The salient features of the Compensation Policy are, as follows:
Objective:
• To maintain fair, consistent and equitable compensation
practices in alignment with Kotak's core values and strategic business goals
• To ensure effective governance of compensation and alignment of
compensation practices with prudent risk taking
• To have mechanisms in place for effective supervisory oversight
and Board engagement in compensation
• To ensure that the compensation practices are within the
regulatory framework stipulated from time to time by the RBI Compensation structure
comprises total remuneration consisting of:
• Fixed Pay, which includes perquisite pay/benefits
• Variable Pay, which includes Performance Bonus/Incentive, Long
Term Incentive Pay in the form of cash bonuses, all share-linked instruments (e.g. ESOP,
SARS, etc.)
• Other payments, which includes Joining/Sign on Bonus, Severance
package, Deferred Incentive Plans, etc.
Further, the employees have been broadly classified into following
categories:
i. Category I - Comprising Managing Director & CEO and Whole-time
Directors ("WTDs")
ii. Category II - Material Risk Takers ("MRTs")
These include employees whose actions may have material impact on the
risk exposures of the Bank and who satisfy both qualitative and quantitative criteria, as
given below:
a) Qualitative Criteria: Employees in the Grade M10 and above
b) Quantitative Criteria: Fixed Cost To Company ("FTCTC") is
Rs. 1 crore p.a. and above This excludes employees under Category III.
iii. Category III - Risk control and compliance employees, comprising
staff in Grade M9 and above in the following Control functions:
• Risk & Policy function
• Financial Control including group consolidation
• Compliance
• Internal Audit
• Back-office Operations
• Vigilance
• Legal
• Secretarial
• Human Resources
• Corporate Social Responsibility
• Investor Relations
iv. Category IV: Other employees - This includes all employees, not
explicitly covered in the first three categories.
The limits on the ratio of total Variable Pay (including Cash or Non
Cash Pay) to Fixed Pay and the limits on the ratio of Cash v/s Non Cash within Variable
Pay, is outlined for each category of employee classification. Further, Malus and Clawback
clauses are applicable as per the Compensation Policy.
The NRC and the Board of the Bank have reviewed and approved all the
amendments to the said Compensation Policy.
The details of the remuneration paid to the Non-Executive Part-time
Chairperson, Executive and Non-Executive Directors of the Bank, for the year ended 31st
March, 2023 is provided in the Report on Corporate Governance annexed to this Report.
Mr. Prakash Apte, the Non-Executive Part-time Chairperson of the Bank,
receives a fixed amount of remuneration as recommended by the Board and approved by the
members of the Bank and the RBI, from time to time. Mr. Apte also receives remuneration by
way of sitting fees for attending meetings of the Board and Committees.
The Board of Directors of the Bank (in consultation with the NRC) has
formulated and adopted a comprehensive Compensation Policy for Non-Executive Directors
("NEDs") (other than Non-Executive Part-time Chairperson).
The remuneration payable to the NEDs, other than Part-time
Non-Executive Chairperson, is in accordance with the provisions of the Circular bearing
Ref. No. RBI/2021-22/24DOR.GOV.REC.8/29.67.001/2021-22 dated 26th April, 2021 which, inter
alia, provides for payment of compensation to NEDs, other than the Chair of the Board, in
the form of a fixed remuneration commensurate with an individual director's
responsibilities and demands on time and which are considered sufficient to attract
qualified competent individuals, for an amount not exceeding Rs. 20 lakh per annum,
including any statutory modification or amendment or re-enactment thereof for the time
being in force, and the provisions of the Act.
The aforesaid Compensation Policy for NEDs, other than Part-time
Non-Executive Chairperson was last amended on 22nd October, 2022.
The salient features of the Compensation Policy for NEDs are, as
follows:
i. Compensation structure is broadly divided into:
• Sitting fees
• Re-imbursement of expenses
• Compensation in the form of Fixed Remuneration
ii. Amount of sitting fees and remuneration to be decided by the Board
from time to time, subject to the regulatory limits.
iii. Overall cap on compensation in the form of fixed remuneration for
each NED (excluding the Non-Executive Part-time Chairperson) of Rs. 20 lakh per annum or
such other amount as may be prescribed by the RBI, from time to time.
iv. NEDs are not eligible for any stock options of the Bank.
The Remuneration paid to the KMPs is in line with the Compensation
Policy of the Bank which is based on the RBI Guidelines. The Compensation Policy is
available on the Bank's website viz., URL:
https://www.kotak.com/content/kotakcl/en/investor-relations/governance/policies.html
DISCLOSURES PURSUANT TO RULE 5 OF COMPANIES (APPOINTMENT AND
REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014
The disclosures pursuant to Rule 5 of Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, are annexed to this Report.
REPORT ON CORPORATE GOVERNANCE
The Bank is committed to achieving and adhering to the highest
standards of Corporate Governance and constantly benchmarks itself with best practices, in
this regard.
Pursuant to Regulation 34 of the SEBI Listing Regulations, a separate
section titled 'Report on Corporate Governance' has been included in this Annual Report
along with the certificate issued by the Secretarial Auditor of the Bank confirming
compliance with the mandatory requirements relating to Corporate Governance under the SEBI
Listing Regulations. The Report of Corporate Governance also contains certain disclosures
required under the Act, including the details of the Board meetings held during the
financial year ended 31st March, 2023.
The Bank also files with the Stock Exchanges, the quarterly Report on
Corporate Governance in terms of Regulation 27(2) of the SEBI Listing Regulations. The
said Reports are available on the Bank's website viz., URL:
https://www.kotak.com/content/kotakcl/en/investor-relations/qovernance/sebi-listinq-disclosures.html
SECRETARIAL STANDARDS
Your Bank is in compliance with the applicable Secretarial Standards
issued by The Institute of Company Secretaries of India and approved by the Central
Government under Section 118(10) of the Act for FY 2022-23.
SECRETARIAL AUDITOR
Pursuant to the provisions of Section 204 of the Act and the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors
of your Bank had appointed Parikh & Associates, Company Secretaries, Mumbai, a peer
reviewed firm, to act as the Secretarial Auditor of the Bank for FY 2022-23. The
Secretarial Audit Report for the financial year ended 31st March, 2023, as required under
Section 204 of the Act and Regulation 24A of the SEBI Listing Regulations, is annexed to
this Report. The Secretarial Auditor's Report does not contain any qualifications,
reservations, adverse remarks or disclaimers and is annexed to this Report.
Kotak Mahindra Life Insurance Company Limited (?LI·), the Bank's
material unlisted subsidiary, has completed its secretarial audit and there are no
reservations or adverse remarks or disclaimers made in the Secretarial Audit Report for
the financial year ended 31st March, 2023. The said Secretarial Audit Report of KLI is
annexed to this Report.
In terms of the SEBI circular dated 8th February, 2019, your Bank has
submitted the Annual Secretarial Compliance Report for FY 2022-23 to the Stock Exchanges
within the prescribed time and the same is available on websites of the Stock Exchanges
i.e. BSE Limited (www.bseindia.com'). National Stock Exchange of India Limited
(www.nseindia.com) and on the Bank's website viz., URL:
https://www.kotak.com/content/kotakcl/en/investor-relations/novernance/sebi-listinn-disclosures.html
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors, based on the representations received from the
operating management, confirm in pursuance of Sections 134(3) and 134(5) of the Act, that:
i. your Bank has, in the preparation of the annual accounts for the
financial year ended 31st March, 2023, followed the applicable accounting standards and
guidance provided by The Institute of Chartered Accountants of India along with proper
explanations relating to material departures, if any;
ii. they have selected such accounting policies and applied them
consistently and made judgements and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of your Bank as at 31st March, 2023 and
of the profit of your Bank for the financial year ended 31st March, 2023;
iii. they have taken proper and sufficient care to the best of their
knowledge and ability, for the maintenance of adequate accounting records in accordance
with the provisions of the Act for safeguarding the assets of your Bank and for preventing
and detecting fraud and other irregularities;
iv. the annual accounts have been prepared on a going concern basis;
v. they have laid down internal financial controls to be followed by
the Bank and that such internal financial controls are adequate and are operating
effectively; and
vi. they have devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems are adequate and operating
effectively.
ANNUAL RETURN
Pursuant to the provisions of Section 134(3)(a) and Section 92(3) of
the Act read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014,
the Annual Return of the Bank is available on the Bank's website viz., URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html
STATUTORY AUDITORS
Based on the recommendation of the Audit Committee and the Board, the
members of the Bank, at the Thirty-Seventh AGM held on 27th August, 2022, approved the
appointment of KKC & Associates LLP (formerly, Khimji Kunverji & Co LLP),
Chartered Accountants (Firm Registration Number: 105146W/W100621), as one of the Joint
Statutory Auditors of the Bank, to hold office from the conclusion of the Thirty-Seventh
AGM until the conclusion of the Fortieth AGM of the Bank.
Pursuant to the Bank's Policy on appointment of Statutory Auditors
("Policy") and the Circular No. DoS.CO.ARG/SEC.01/08.91.001/2021-22 dated 27th
April, 2021 issued by the RBI ("RBI Circular"/"Guidelines"),
prescribing the guidelines for Appointment of Statutory Central Auditors (SCAs)/ Statutory
Auditors (SAs) of Commercial Banks (excluding Regional Rural Banks ("RRBs")),
Urban Co-operative Bank ("UCBs") and Non-Banking Financial Companies
("NBFCs") (including Housing Financial Companies ("HFCs")) and in
accordance with the requirements of Section 139 of the Act, read with Rules made
thereunder, KKC & Associates LLP, Chartered Accountants and Price Waterhouse LLP,
Chartered Accountants (Firm Registration Number: 301112E/E300264), act as the Joint
Statutory Auditors of the Bank.
The term of Walker Chandiok & Co LLP as one of the Bank's Joint
Statutory Auditors expired at the conclusion of the Thirty-Seventh AGM of the Bank.
As per the applicable provisions of law, including RBI
Circular/Guidelines and the BR Act, the appointment of Joint Statutory Auditors would be
subject to the approval of the RBI every year.
At the Thirty-Seventh AGM of the Bank, the members approved an overall
audit remuneration/fee not exceeding Rs. 35,000,000/- (Rupees Three Crore Fifty Lakh
only), plus outlays and taxes, as applicable, for FY 2022-23, allocated by the Bank
between the Joint Statutory Auditors, depending upon their respective scope of work.
Further, based on the recommendation of the Audit Committee, the Board
at its meeting held on 24th June, 2023 , approved an overall audit remuneration/fee not
exceeding Rs. 37,500,000/- (Rupees Three Crore Seventy Five Lakh Only), plus outlays and
taxes, as applicable, for FY 2023-24, subject to the approval of the members, to be
allocated by the Bank between Price Waterhouse LLP, Chartered Accountants and KKC &
Associates LLP, depending on roles and responsibilities and the scope of work undertaken
by each of them during the course of audit.
The approval of members of the Bank is, accordingly, being sought
pursuant to the provisions of Section 142 and other applicable provisions, if any, of the
Act and the relevant Rules thereunder and pursuant to Section 30 of the BR Act and RBI
Circular for fixing the remuneration of the Joint Statutory Auditors for FY 2023-24.
As required under Regulation 33(1)(d) of the SEBI Listing Regulations,
the Joint Statutory Auditors have confirmed that they have subjected themselves to the
peer review process of the Institute of Chartered Accountants of India ("ICAI")
and that they hold a valid certificate issued by the Peer Review Board of ICAI.
There were no qualifications, reservations, adverse remarks or
disclaimers made by Price Waterhouse LLP and KKC & Associates LLP in the Statutory
Auditors Report for FY 2022-23.
INTERNAL FINANCIAL CONTROLS
The Board of Directors confirm that your Bank has laid down set of
standards, processes and structure which enables it to implement internal financial
controls across the organisation with reference to financial statements and that such
controls are adequate and are operating effectively. Controls are
reviewed/revisited/updated/deleted each year for change in processes/organisational
changes/product changes, etc. Testing is done for each of the controls with the help of an
independent firm of Chartered Accountants, on behalf of Management, who confirm to the
Audit Committee of the Bank, the existence and operating effectiveness of controls over
financial reporting. During the year under review, no material or serious observations
were observed for inefficiency or inadequacy of such controls.
IMPLEMENTATION OF IND AS
The Ministry of Finance, Government of India ("GOI"), had
vide its press release dated 18th January, 2016 outlined the roadmap for implementation of
International Financial Reporting Standards ("IFRS") converged Indian Accounting
Standards ("Ind AS") for Scheduled Commercial Bank (excluding RRBs), NBFC and
Insurance companies. The RBI vide its circular dated 22nd March, 2019, deferred the
implementation of Ind AS for Scheduled Commercial Banks ("SCB") till further
notice, pending the consideration of some recommended legislative amendments by GOI. The
RBI has not issued any further notification on implementation of Ind AS for SCBs.
The Bank has so far taken following steps for implementation of Ind AS:
i. Formed Steering Committee for Ind AS implementation. The Steering
Committee, headed by the Joint Managing Director, comprises representatives from Finance,
Risk, Information Technology and Treasury. The Committee closely reviews progress of Ind
AS implementation in the Bank and provides guidance on critical aspects of the
implementation.
ii. The Bank has identified changes required to its IT systems for
automation of Ind AS reporting. The Bank has identified an IT solution for Ind AS
reporting and is currently in the process of implementing the solution. Further, there may
be new regulatory guidelines and clarifications for Ind AS application, which the Bank
will need to suitably incorporate in its implementation.
RELATED PARTY TRANSACTIONS
During the year, your Bank has not entered into any materially
significant transaction with its related parties, which could lead to a potential conflict
of interest between the Bank and these parties. All the related party transactions that
were entered into during the year were on an arm's length basis and in ordinary course of
business. Hence, pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the
Companies (Accounts) Rules, 2014, there are no related party transactions to be reported
under Section 188(1) of the Act and Form AOC-2 is not applicable to the Bank.
For FY 2023-24, pursuant to the provisions of Regulation 23 of the SEBI
Listing Regulations, no potential Material Related Party Transaction with any related
party of the Bank (not being a wholly owned subsidiary) is currently anticipated, except
for transactions with Mr. Uday Kotak and Infina Finance Private Limited. The approval of
the members of the Bank was obtained for transactions with the above mentioned related
parties, at the AGM held on 27th August, 2022, with such approval being valid till the
next AGM. Further, the members of your Bank had, vide resolutions passed through postal
ballot on 20th April, 2023, approved the potential Material Related Party Transactions
with Mr. Uday Kotak and Infina Finance Private Limited for FY 2023-24. However, during FY
2022-23, none of the related party transactions of the Bank exceeded the applicable
materiality threshold, except for transactions with Mr. Uday Kotak for which the approval
of the members of the Bank had already been obtained.
The Bank has a Board approved 'Policy on dealing with Related Party
Transactions'. The same is available on the Bank's website viz., URL:
https://www.kotak.com/en/investor-relations/qovernance/policies.html
All related party transactions are placed before the Audit Committee
for its review and approval on a quarterly basis. An omnibus approval of the Audit
Committee is obtained for the related party transactions which are repetitive in nature.
Further, all related party transactions are reviewed by the Statutory Auditors of the
Bank. In addition, the Bank had engaged the services of an external professional firm for
verification of the related party transactions during the year as also their disclosure
and for validation of the process followed by the Bank.
Members may refer to Note 7 of Schedule 18 - Notes to Accounts of the
Standalone Financial Statement and Note 23 of Schedule 17 - Notes to Accounts of the
Consolidated Financial Statement of your Bank, which set out related party disclosures
pursuant to Accounting Standards AS-18.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
The provisions of Section 186 of the Act except sub-section (1), do not
apply to loans made, guarantees given and securities provided by a banking company in the
ordinary course of its business and are exempted from the disclosure requirement under
Section 134(3)(g) of the Act.
The particulars of investments made by the Bank are disclosed in
Schedule 8 of the Financial Statements as per the applicable provisions of the BR Act.
RISK MANAGEMENT POLICY
Pursuant to Regulation 21 of the SEBI Listing Regulations, your Bank
has a Risk Management Committee, details of which can be referred to in the Report on
Corporate Governance forming part of this Report. While Risk Management is the
responsibility of the Board of Directors, it has delegated its powers relating to
monitoring and reviewing risks associated with the Bank to the Risk Management Committee.
Your Bank has a robust Risk Management Framework and the Bank has also adopted a Group
Enterprise-wide Risk Management framework supported by appropriate policies and processes
for management of Credit Risk, Market Risk, Liquidity Risk, Operational Risk and various
other Risks. Details of identification, assessment, mitigations, monitoring and the
management of these risks are mentioned in the Management's Discussion and Analysis Report
appended to this Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
EARNINGS AND OUTGO
Your Bank has undertaken various initiatives for the conservation of
energy. Details of the same are available in the BRSR of the Bank which is part of the
Annual Report of the Bank and is also available on the Bank's website viz., URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html
The Bank has used information technology extensively in its operations
as detailed in the para on 'Technology and Digitisation'. Further, the provisions of
Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014
for Foreign Exchange Earnings are not applicable to your Bank.
REPORTING OF FRAUDS BY AUDITORS
During the year under review, no instances of fraud committed in the
Bank by its officers or employees were reported by the Joint Statutory Auditors and
Secretarial Auditor under Section 143(12) of the Act, to the Audit Committee or the Board
of Directors of the Bank.
MAINTENANCE OF COST RECORDS
Being a Banking company, your Bank is not required to maintain cost
records as specified by the Central Government under Section 148(1) of the Act.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR
TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND OPERATIONS IN FUTURE
During the year under review, no significant and/or material order was
passed by any regulatory authority or Court or Tribunal against the Bank, which could
impact the going concern status or its future operations.
MATERIAL CHANGES AND COMMITMENT AFFECTING THE FINANCIAL POSITION OF THE
BANK
There are no material changes and commitments which affected the
financial position of your Bank, which occurred between the end of the financial year to
which the financial statements relate and up to the date of this Report.
DESPATCH OF ANNUAL REPORT
The MCA has issued General Circular No. 20/2020 dated 5th May, 2020
read with other relevant circulars, including General Circular No. 10/2022 dated 28th
December, 2022 and the SEBI has issued Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/79 dated
12th May, 2020, read with other relevant circulars, including Circular No.
SEBI/HO/CFD/PoD-2/P/CIR/2023/4 dated 5th January, 2023, in relation to 'Relaxation from
compliance with certain provisions of the SEBI Listing Regulations relaxing the
requirement of dispatching physical copies of the Annual Report and the Notice convening
the AGM to Shareholders. Members who wish to have physical copy may write to the Company
Secretary of the Bank at KotakBank.Secretarial@kotak.com or submit a written request to
the Registered Office of the Bank. In accordance with the aforesaid circulars, the weblink
of the Annual Report and the Notice convening the AGM of the Bank is being sent in
electronic mode only to members whose e-mail address is registered with the Bank or the
Depository Participant(s). Those members, whose email address is not registered with the
Bank or with their respective Depository Participant(s) and who wish to receive the Notice
of the AGM and the Annual Report for the financial year ended 31st March, 2023, can get
their email address registered by following the steps as detailed in the Notice convening
the AGM. The Annual Report of your Bank and its subsidiaries are available on the Bank's
website viz., URL:
https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html
ANNEXURES
The following statements/reports/certificates are annexed to the
Directors' Report:
i. Annual Report on Corporate Social Responsibility Activities of the
Bank for the financial year ended 31st March, 2023.
ii. Disclosures pursuant to Rule 5 of Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014.
iii. Secretarial Audit Report pursuant to Section 204 of the Act and
Regulation 24A of the SEBI Listing Regulations.
iv. Report on Corporate Governance pursuant to Schedule V Part C of the
SEBI Listing Regulations along with Certificate from the Secretarial auditors regarding
compliance of conditions of Corporate Governance as stipulated in Schedule V Part E of the
SEBI Listing Regulations.
v. Management's Discussion and Analysis Report pursuant to Schedule V
Part B of the SEBI Listing Regulations.
ACKNOWLEDGEMENT
Your Directors would like to place on record their gratitude for the
valuable guidance and support received from the RBI, the SEBI, Stock Exchanges, Insurance
Regulatory and Development Authority of India and other Government and Regulatory
agencies.
Your Directors acknowledge the support of the members for their
continued support and also wish to place on record their appreciation for employees for
their commendable efforts, commitment, teamwork and professionalism.
For and on behalf of the Board of Directors
Prakash Apte
Chairperson
Date: 24th June, 2023 Place: Mumbai
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