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AU Small Finance Bank Ltd.

BSE: 540611 Sector: Financials
BSE 00:00 | 24 Apr 2020 AU Small Finance Bank Ltd
NSE 05:30 | 01 Jan 1970 AU Small Finance Bank Ltd

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OPEN 500.00
VOLUME 15981
52-Week high 1217.70
52-Week low 444.10
P/E 23.61
Mkt Cap.(Rs cr) 15,832
Buy Price 515.00
Buy Qty 52.00
Sell Price 520.60
Sell Qty 191.00
OPEN 500.00
CLOSE 505.85
VOLUME 15981
52-Week high 1217.70
52-Week low 444.10
P/E 23.61
Mkt Cap.(Rs cr) 15,832
Buy Price 515.00
Buy Qty 52.00
Sell Price 520.60
Sell Qty 191.00

AU Small Finance Bank Ltd. (AUBANK) - Director Report

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Company director report


The Members


Your Board of Directors has immense pleasure in presenting the 24th Annual Report of AUSmall Finance Bank Limited covering the business and key operational highlights of yourBank together with Audited Financial Statements for the year ended on 31st March 2019.


Particulars y-o-y

For the year ended

Growth (%) 31st March 2019 31st March 2018
Total Income 58.26 t 3410.86 2155.25
Interest Income 2948.84 1767.19
Other Income 462.02 388.06
Interest Expenditure 1606.35 826.73
Operating Expenses (excluding depreciation) 1020.85 699.36
Profit before Depreciation Provisions and Tax 24.56 t 783.66 629.16
Depreciation 61.75 53. 25
Provision for Income Tax 198.32 153.08
Other Provisions and Write-offs 141.78 130.79
Net Profit 30.74 t 381.81 292.04
Transfer to Statutory Reserve 95.45 73.01
Transfer to Special Reserve u/s 36(1)(viii) of Income Tax Act 1961 37.80 20.50
Transfer to Capital Reserve 2.76 0.00
Transfer to Investment Fluctuation Reserve 22.12 0.00
Dividend (including tax/cess thereon) pertaining to previous year paid during the year 17.48 0.00
Dividend (in ') (Per Equity Share) 0.75* 0.50
Surplus carried over to Balance Sheet 1572.03 1365.84
(After excluding Exceptional Items not annualised)
Basic 13.16 10.26
Diluted 12.90 10.00

*Proposed Dividend as recommended by the Board of Directors.

i. Key Highlights on Profitability

• Total Profit before Tax was '580.13 crore for FY 2018-19 vis-a-vis '443.35 crorefor FY 2017-18 and Earnings Per Share (EPS) was '13.16 compared to '10.26 last year

• Net Profit stood at '381.81 crore for FY 2018-19 vis-a-vis '292.04 crore for FY2017-18 with y-o-y growth of 30.74%

• Net Interest Income grew by '402.02 crore from '940.46 crore during FY 2017-18to '1342.48 crore during FY 2018-19 with a y-o-y growth of 42.75%

ii. Key Highlights on Balance Sheet

• Balance sheet size grew to '32623 crore as on 31st March 19 vis-a-vis '18833crore as on 31st March 18 with y-o-y growth of 73%

• CASA increased by '1456.61 crore to '3590.09 crore during FY 2018-19 from'2133.49 crore during FY 2017-18 registering a growth of 68.27%

• Capital Adequacy Ratio stood at same level i.e. 19.31% as on 31st March 2019vis-a-vis 19.31 % as on 31st March 2018

iii. Key Highlights on Asset Quality

• The Return on Equity (RoE) stood at 14% and the Return on Asset (RoA) stood at1.5%

• Gross NPA and Net NPA remained stable at 2.0% and 1.3% respectively as on 31stMarch 2019 as compared to 2.0% and 1.3 % respectively as on 31st March 2018

iv. Key Operational Highlights

• During FY 2018-19 your Bank's disbursement rose to '16077 crore vis-a-vis'10825 crore in FY 2017-18 registering an increase of 49%.

• As on 31st March 2019 your Bank's distribution network stood at 322 Branches83 Asset Centres 86 Banking Outlets (BOs) and 67 Business Correspondents (BCs) 14Offices and 543 ATMs spread across 11 States and Union Territory

• Keeping an objective of making 'Digital Bank as good as Traditional Bank' inits second year of operation your Bank focussed on enriching the 'Customer PhygitalExperience' by creating a robust technology platform to create a new age Digital Banking

Management Discussion & Analysis section covers the industry overview financialand operating performance of the Bank and forms part of this Annual Report.

Change in the Nature of Business

There is no change in the nature of business of the Bank for the year under review.


Your Board of Directors is pleased to recommend dividend for 2nd consecutive year toreward its shareholders with 7.5% i.e. '0.75/- per equity share on face value of Rupee10/- each for the year 2018-19 (previous year 5% i.e. '0.50/- per equity share) subject tothe approval of the members in the 24th Annual General Meeting (AGM). There was no interimdividend declared during the reporting period.

The total outgo on account of dividend inclusive of taxes for FY 2018-19 is '26.43crore which represents a pay-out of 6.92% of the Bank's profit.

In terms of Regulation 43A of the Securities and Exchange Board of India (SEBI)(Listing Obligations and Disclosure Requirements) Regulations 2015 the Bank adoptedDividend Distribution Policy and the dividend proposed is

in line with the Dividend Distribution Policy of the Bank. The Policy is hosted on thewebsite of the Bank and can be viewed at

Closure of Share Transfer Books and Record Date for Dividend

The Register of Members and the Share Transfer Books of the Bank will remain closedfrom 20th July 2019 to 26th July 2019 (both days inclusive) for the purpose of the 24thAGM of the shareholders of the Bank to be held on 26th July 2019 and for determining thenames of the members who would be entitled to the dividend if any declared by the Bankfor the financial year ended 31st March 2019. The said dividend shall be paid to thosemembers whose names appear on the Register of Members of the Bank as on 19th July 2019.

Transfer to the Investor Education and Protection Fund

In terms of Sections 124 and 125 of the Companies Act 2013 (the Act) read with theInvestor Education and Protection Fund Authority (Accounting Audit Transfer and Refund)Rules 2016 dividend that remain unpaid or unclaimed for a period of seven years from thedate of transfer are required to be transferred to the Investors Education and ProtectionFund. There is no unclaimed/unpaid dividend liable for transfer to the Investors Educationand Protection Fund for the year under review. The Bank has uploaded the details ofunclaimed dividend amounts lying with the Bank on its website and can be viewed at

Branch Banking and Liability Products

In line with the Government of India's focus your Bank is committed to increase thereach of formal banking services across the country and extend banking services to the'belly of the nation'.

The Branch Banking and Liabilities product suite caters to the financial needs of allset of customers including self-employed salaried individuals children womenentrepreneurs senior citizens companies societies trusts educational institutionshospitals governmentcorporations and local bodies among others. Our wide-ranging productsuite includes Savings Account Current Account Term Deposit Locker Bank GuaranteeGold Loan among others. Through our empanelled partners we also provide Point of Sale(POS) for business needs Life and Health Insurance along with Mutual Fund investmentsolutions for customers.

Your Bank is steadily building a granular deposits book based on simple and clear valueproposition competitive interest rate on deposits superior customer service and achievedstrong traction in CASA. During the FY 2018-19 Bank expanded its presence to 543 ATMs ason 31st March 2019 vis-a-vis 292 ATMs as on previous year end.

Financial Inclusion

Small Finance Banks were set up with the objective of enhancing financial inclusion andoffer banking services in India by providing a saving vehicle and supplying credit tosmall business units small and marginal farmers micro and small industries and otherunorganised entities through high-end technology and low-cost operations.

In the FY 2018-19 your Bank exceeded the benchmark targets prescribed under thelicensing conditions and further contributed to Financial Inclusion through severalinitiatives.

With around 62% of the total branches in Semi-Urban Rural and Unbanked Rural areasyour Bank expanded reach to the hitherto excluded population and even in Metropolitan andUrban Area. Your Bank opened 403000 deposit accounts and mobilised deposit of around'2200 crore from these areas. Your Bank added 16 new Unbanked Rural Branches in its reachtaking the total Unbanked Rural branch count to 30. Your Bank also has 86 Banking Outlets(BOs) in Unbanked Rural Areas of Rajasthan Madhya Pradesh Gujarat Punjab Haryana andMaharashtra which is a low cost alternative for providing banking services to takebanking to the last mile. Banking Outlets not just offer Savings Accounts and remittancesservices but also encourages these outlets to mobilise Term Deposits Loans LoanRepayments and other services. Together the BOs and the Unbanked Rural Branches haveopened 47218 accounts in the Unbanked Rural areas with a total deposit of '45.80 crore.In addition to this the Unbanked Rural Branches and BOs have disbursed loans to the tuneof '39.38 crore through 1123 cases.

The BO Model at AU Small Finance Bank encourages the following:

Entrepreneurship: AU Bank has hand-picked dynamic individuals to take up thecrucial responsibility of BOs at a village level. Many of these are either engaged insmall-time employments like retail shops juice shops or were homemakers etc. Theseindividuals are from nearby villages the local area trusts them and they understand thesecustomers better and are able to persuade them to use banking. AU Bank identified theirentrepreneurial spirit and encouraged them to become BOs and act responsibly. Your Bankorganised regular training programmes for them to gain a better understanding of thebanking business and customers' needs.

Unbanked rural area empowerment: Areas that had no access to any form of bankingstarted banking

transactions such as cash withdrawal and cash deposit. AU Bank offered a wide range ofservices through BOs. Besides opening bank accounts BOs are also disbursing loans inrural areas. The BOs can open accounts conduct Aadhar-based and card-based deposit andwithdrawal transactions non-financial transactions like balance inquiry mini-statementetc. and can share leads of all other AU products via the AU Business App. We encouragedthem and conducted 300 plus literacy camps at these locations to provide comprehensiveeducation regarding the benefits of formal banking to over 23000 people. The camps wereoraganised via Nukkad Natak to engage rural population to understand benefits ofbanking in their local language.

In the FY 2018-19 the unbanked rural BOs have opened 33619 accounts in these scantilypopulated areas. We focussed not just on account opening in these areas but alsodisbursed loans of '20.24 crore. Over 112264 financial transactions including cashdeposit and cash withdrawal took place through these BOs.

Apart from the above your Bank also contributed towards the government's novel MUDRAYojana and opened 33658 BSBD accounts with a deposit of around '12 crore issued around261000 RuPay Cards and disbursed MUDRA Loans to the tune of '3482 crore in FY 2018-19.The Bank also launched Pradhan Mantri Jevan Jyoti Bima Yojana in FY 2018-19 and went liveon an online module and issued 650 policies under this scheme. The Bank also launchedPradhan Mantri Suraksha Bima Yojana and shall soon go live with the Atal Pension Yojana.

Retail Assets

Your Bank provides a wide range of retail asset products including Vehicle LoansSecured Business Loan to Micro Small and Medium Enterprises (MSMEs) and Small &Medium-sized Enterprises (SMEs) Gold Loan Agri-SME Loan Consumer Durable Loan HomeLoan and Education Loan to cater to the entire financial lifecycle needs of customers.Vehicle Loans and Secured Business Loans constituted the bulk of the retail loan book andrevenues.

The Bank would remain focussed on core retail segments with emphasis on contiguousdeeper expansion in existing geographies and enter new geographies gradually. The Bankwould continue to focus on 'customer delight' by building strong and personalisedrelationships with retail clients and serving their needs with the use of emergingtechnologies. We customise our product offerings and features according to customer'sbusiness needs after assessing the business model of clients. This leads to deepercustomer engagement in a cost-effective manner. Your Bank's operating model is leancredit processes are robust technology driven and cost efficient.

During the year your Bank enriched its bouquet of product offerings to its customersthrough 'digital empowerment' by offering financial products and services via an onlineplatform against a new set of multiple collaterals. The Bank would continue to offer andintroduce new tailor-made products to service the financial needs of customers.

Small and Mid-corporate Assets

The Bank's Small and Mid-corporate business caters to the diverse needs of a wide rangeof corporate customer segments including SMEs Agri-SMEs Indian corporates financialinstitutions mid-market companies and real estate businesses. This vertical offers acomprehensive set of products and services to these customers including term loanworking capital finance trade finance lease rental discounting and other servicesincluding finance to Non-banking Financial Companies (NBFCs) microfinance companiesHousing Finance Companies (HFCs) and for construction finance.

The disbursements in this segment were '3764 crore against '2877 crore in theprevious year registering a growth of 31% and Assets under Management stood at '4129crore against '2739 crore in previous year registering a growth of 51%.

Under Business Banking your Bank caters to all segments of the businesses includingwholesalers retailers traders manufacturers service providers contractorsdistributors educational institutes healthcare institutes etc. for fulfilling workingcapital needs including day-to-day operations setting up of new units and businessexpansion.


The Treasury Department of the Bank manages asset liability gaps fund planningregulatory liquidity requirements viz Cash Reserve Ratio (CRR) Statutory Liquidity Ratio(SLR) and Liquidity Coverage Ratio (LCR) and investments portfolio both SLR and Non-SLR ofthe Bank. The asset-liability mismatches and interest rate sensitivities of the Bank areefficiently tracked through Structural Liquidity Statements & Interest RateSensitivity and judiciously managed with various market investments and money marketproducts. On the other hand the treasury is also responsible for managing and optimisingthe cost of funds for the Bank through efficient planning and mix of available resources.

The Bank meets its regulatory requirements on CRR and SLR through efficient liquiditymanagement and investment in GOI securities SDLs and T-Bills across varying maturities.The portfolio durations were efficiently managed in line with interest rate view andwithin the overall risk framework provided in Investment Policy and under the oversight ofthe Bank's Investment Committee. The treasury also successfully maintained appropriateliquidity buffers

in compliance to regulatory requirement of the LCR guidelines while keeping thebusiness requirements under consideration.

The Bank during the year continued to grow its relationship with both public andprivate sector banks by setting up inter-bank limits and transacting in money marketinstruments. At the same time the treasury endeavoured to optimise cost of funds byencouraging branches to mobilise deposits at competitive rate of interest in line withprevailing interest rates scenario.

On the treasury systems front the Bank has well-established systems and platformsincluding the RBI platform e-Kuber Treasury Management System by Credence AnalyticsStructured Financial Messaging Systems (SFMS) National Electronic Fund Transfer (NEFT)Real Time Gross Settlement System (RTGS) and Clearing Corporation of India Limited (CCIL)systems which include money market and sovereign bond dealing platforms. The Bank'sTreasury also has in place a robust primary and secondary Data Centre and DisasterRecovery Centre in partnership with external vendors to secure the live systems whichare vital to the Bank's business continuity and Business Continuity Plan (BCP) for anycontingency. All systems and platforms are working seamlessly as per the Treasuryrequirements. The Treasury has also successfully implemented its BCP for any contingency.

The Treasury department is responsible for managing surplus funds by investing in SLRand high-quality Non-SLR instruments as per the approved regulatory frameworks andinternal policies to get optimum risk adjusted returns. The Treasury has initiated andmaintained a Debt Capital Market (DCM) book in FY 2018-19 for short- and medium-terminvestments in bonds and debentures thus enhancing return on excess funds as well ascreate High Quality Liquid Assets (HQLA) to aid in regulatory LCR. The Treasury has alsoinitiated active trading in Government securities to generate trading profit by capturingmarket movements.

Financial Institutions Group (FIG)

Financial Institutions Group (FIG) managed the relationship with financial marketparticipants covering Banks Mutual Funds Insurance Companies Development FinanceInstitutions (DFIs) and Multilaterals as well as with associates and intermediaries likecredit rating agencies legal firms and stock exchanges. The Bank enhanced itsrelationship with domestic DFIs and availed long-term low-cost refinance facilities ofsubstantial amount under various schemes for improvement in liquidity position. During theyear FIG facilitated medium and long-term liability for the Bank as per requirement andarranged for the setup of fund based and non-fund based limits with various counterparties and market participants.

To provide cushion in extreme liquidity scenarios the Bank has been able to securecontingency lines from public and private sector banks. The Bank has also tied up withvarious banks to ensure availability of trade and remittance products for its clients andhas successfully facilitated inward and outward foreign currency transactions includingissuance of trade instruments (Letter of Credit and Bank Guarantees) and processing oftrade payments within the capacity of AD-II category bank.

The Bank empanelled with all the leading Stock Exchanges of India (i.e. NSE BSE MCXand NCDEX) for acceptance of the deposits to be placed by members of the exchange asmargin collateral. This led to new business avenues for the Bank in terms of depositmobilisation.


The Treasury maintained SLR investments in the form of Central and State GovernmentSecurities as per regulatory requirements of 19% of Net Demand and Time Liability (NDTL)within approved policy criteria in terms of duration and risk profile.

Transaction Banking

With innovative thinking and increased ownership the Bank remained committed toprovide customers with the ease of banking and achieved greater convenience throughfollowing measures:

• No deposit slips

• Simpler customer instruction forms

• Extended banking hours

• Seeding of AU Bank account to receive Direct Benefit Transfer (DBT) benefit

• Continuous enhancement in Personal Net Banking and Mobile Banking

• Corporate Net Banking

• Payment Gateway Integration

• Technology Support for Business Correspondents

• Aadhaar-enabled Payment Services (AEPS) extended to BCs where AU customers canperform activities such as Cash Withdrawal Cash Deposit Fund Transfer via AadhaarBalance Enquiry and Mini Statement.

• Card-based Transactions went live for providing services to AU customers as wellas other bank customers to withdraw cash from BOs/BCs points.

The Bank's strategy is to become digital bank of choice and focus has been to offer theeasy & convenient tech solution to our customers. For this your Bank started 'AUSewadwaar' for collection of EMI/Insurance premium at AU branches for third party tie-ups'Nodal Account' for aggregator and payment partners and 'Mangalam Vishesh Account' forletting customers sweepout to FD from their existing current account.

Technology and Digital Banking

Your Bank's continued its endeavour to become a digital bank by creating best-in-classcustomer-centric solutions and deliver superior customer experience. Leveraging anomni-channel approach with a multi-product suite the focus has been to create a trustedand recognised Digital Brand in the banking space.

Digital Brand

The purpose of your Bank has been to simplify banking for all users. With this coreprinciple for building the Digital Brand and in order to create a sustainable long-termbusiness model we have been targeting to use 360 communication plans across multipledigital and social media channels the objective is to uplift the brand awareness andconsideration scores for your Bank resulting in positive spill-over effects intraditional businesses too.

Digital Properties

During the year focus of the Bank remained to deliver a seamless omni-channelintegrated solution that ensured consistent high-level customer experience across allchannels (website internet banking mobile applications and chat bots). The Bank has beenworking on state-of-the-art Digital Contact Centre that will be used for higher customeracquisition and better customer engagement through innovative models including virtualRelationship Manager.

Digital Products

• Digital Assets

Digital Asset is being designed with focus to deliver a seamlessstraight-through-disbursal process across the various digital modes. Strategic andbusiness partnerships and social media campaigns is being leveraged for customeracquisition. Existing and new-to- bank customers shall apply and get loans through awell-defined credit and risk evaluation process.

• Digital Liabilities

AU Abhi App (mobile and web version) are being deployed by the Bank for Customeracquisition and faster account opening. Customers can open a Direct Benefit Account (DBT)with Bank and this is an important technology enabler for increasing the liability basecustomers.

• Digital Partnerships

Leveraging partnerships for optimal customer experience and increasing customeracquisition will be the focus for a fully operational Digital Bank. The variouspartnerships being looked at are strategic business and technology with the objective ofoffering and facilitating the latest and most competitive products to the customers of theBank.

The Bank is using issuer ratings and short-term and long-term instruments/bankfacilities' ratings that are assigned by the accredited rating agencies (i.e. IndiaRatings CARE CRISIL and ICRA) for its debt instruments. The credit rating of the Bankwas upgraded by CRISIL from 'A+/Positive' to 'AA-/ Stable' and by ICRA Ratings from'A+/Stable' to 'AA-/Stable' covering debt instruments of the Bank in view of strongconsistent performance quarter to quarter.

Ratings of Debt Instruments

Nature of the Debt Instrument Nature of Term India Ratings CRISIL ICRA CARE
Non-convertible Debentures Long Term AA-/Stable AA-/Stable AA-/Stable -
Subordinated Debt/Tier II Bonds Long Term AA-/Stable AA-/Stable AA-/Stable -
Bank Loans Long Term AA-/Stable - AA-/Stable AA-/Stable
Certificate of Deposits Short Term A1 + A1 + - -

Transfer to Reserve

In terms of applicable RBI regulations the Bank has transferred the following amountsto various reserves for the financial year ended 31st March 2019.

Transfer to Reserves

Amount transferred to Amount (' in crore)
Statutory Reserve 95.45
Transfer to Special Reserve U/s 36 (1) (Viii) 37.80
Transfer to Capital Reserve 2.76
Transfer to Investment Fluctuation Reserve 22.12

Securities Capital

During FY 2018-19 there was no change in the authorised share capital of the Bank andit stood at '3500000000 (Rupees Three Hundred and Fifty Crore only). The paid-upcapital of the Bank as on 31st March 2019 stood at '2923574860 (Rupees Two Hundred andNinety-Two Crore Thirty-Five Lakh Seventy-Four Thousand Eight Hundred and Sixty only)consisting of 292357486 equity shares at face value of '10 (Rupees Ten) each.

During FY 2018-19 your Bank issued 4330441 equity shares at a face value of '10(Rupees Ten) each fully paid-up for cash at an issue price of '692.77 (Rupees Six Hundredand Ninety Two and Seventy Seven paisa including premium of '682.77) per equity shareaggregating to an amount of '2999999612 (Rupees Two Hundred and Ninety-Nine CroreNinety-Nine Lakh Ninety-Nine Thousand Six Hundred and Twelve only) to Camas InvestmentsPte. Ltd. through preferential allotment.

Further the Bank issued 10104364 convertible warrants to Camas Investments Pte.Ltd. to apply for get issued and allotted 1 (one) equity share of the Bank at a facevalue of '10 (Rupees Ten) each (for every Convertible Warrant) for cash in one or moretranches at a price of '692.77 (Rupees Six Hundred and Ninety Two and Seventy Seven paisaincluding a premium of '682.77) aggregating to an amount of '7000000249 (Rupees SevenHundred Crore and Two Hundred and Forty-Nine) (Warrants Subscription Consideration) withina period of 18 months from the date of allotment of convertible warrants. The Bankreceived partial amount of '1750000063 (Rupees One Hundred and Seventy-Five Crore andSixty-Three only) in respect to the above convertible warrants.

Your Bank also raised Tier-II capital by issuing 5000 (Five Thousand) fully paid-upunsecured subordinated rated listed redeemable non-convertible bonds with face valueof '1000000 (Rupees Ten Lakh Each) aggregating to '5000000000 (Rupees Five HundredCrore only) being classified as subordinated debt and categorised as Tier-II capital Bondsunder the Basel II framework. The said Bonds were allotted to leading financialinstitutions and Banks.

The Bank added '23234250 (Rupees Two Crore Thirty Two Lakh Thirty Four Thousand TwoHundred Fifty) to the paid-up equity share capital by allotting 2323425 equity shares offace value of '10 (Rupees Ten) each to employees on exercise of options under EmployeeStock Option Plan 2015 (Plan A and Plan B) and ESOP Scheme 2016 as per details mentionedbelow:

Equity Shares allotted on Exercise of ESOPs

Sr. No. Date of Allotment ESOP Plan - 2015 A ESOP Plan - 2015 B ESOP Scheme 2016 Total
1 14th August 2018 287476 185985 53220 526681
2 27th September 2018 716465 832353 3960 1552778
3 11th December 2018 56752 57077 1800 115629
4 7th March 2019 2048 15299 110990 128337
Total No. of Shares 1062741 1090714 169970 2323425

Employees Stock Option Plan (ESOP)

Employee Stock Option Schemes duly approved by the shareholders of the Bank enabledthe employees to participate in the future growth and financial success of the Bank. TheBank provides its employees a platform to perform and display their long-term commitmenttowards future growth of the Bank by way of rewarding them through Stock Options. TheEmployee Stock Option Schemes have been devised in accordance with SEBI (Share

Based Employee Benefits) Regulations 2014 as amended from time to time. In terms ofcompensation policy of the Bank employees are granted options as part of AnnualPerformance Review of their performance and to hire best talent at senior managementpositions. Several factors including scale designation performance grades period ofservice the Bank's performance criticality of role & their contribution is takenconsideration for decision on nos. of ESOPs to be granted to the employees.

The Bank's shareholders had approved the following Employee Stock Option Schemes:





The details of vesting of various schemes are as follows:

ESOP Schemes Vesting Period
Vesting Period % of Vesting of Options
1 year from the date of grant or at the time of IPO whichever is later 20%
Expiry of 1 year from 1st vesting 30%
Expiry of 2 years from 1st vesting 50%
Total 100%
ESOP 2015 - Plan B Vesting Period % of Vesting of Options
1 year from the date of grant or at the time of IPO whichever is later 20%
Expiry of 1 year from 1st vesting 30%
Expiry of 2 years from 1st vesting 50%
Total 100%
ESOP 2016 Vesting Period % of Vesting of Options
Options granted under this scheme would vest after one year but not later than six years from the date of 1st vesting of options 100%
ESOP 2018 Vesting Period
Options granted under this scheme would vest after one year but not later than six years from the date of 1st vesting of options 100%

Details of Existing ESOP Schemes as on 31st March 2019

Particulars ESOP Plan A 2015 ESOP Plan B 2015 ESOP Scheme 2016 ESOP Scheme 2018
Date of Shareholders Approval 31st August 2015 31st August 2015 10th October 2016 07th August 2018
Total No. of Options Approved 3836058 4933194 2100000 4933200
Total No. of Options Outstanding at the Beginning of the Period 3108020 3056541 1387321 -
Total No. of Options Granted (during FY 2018-19) - 1146 86864 2013928*
The Pricing Formula/Price in ' 10.11 33.37 140 Market Price Linked
Options Vested (during FY 2018-19) 1100018 1129510 253538 Nil
Options Exercised (during FY 2018-19) 1062741 1090714 169970 Nil
Total No. of Shares Arising as a Result of Exercise of Options 1062741 1090714 169970 Nil
Options Lapsed/Forfeited (during FY 2018-19) (Available for Re-issue) 30032 43672 199255 46980
Total No. of Options Exercisable at the End of the Year 33865 37230 78142 -
Total No. of Options Outstanding at the End of the Year 2015247 1923301 1104960 1966948*
Variation in Terms of Options No No No No
Money Realised by Exercise of Options (during FY 2018-19) (in ') 10744311.43 36397126.18 23795800 Nil
Total No. of Options Granted to Senior Management Personnel (SMPs) Please refer Note 1 Please refer Note 1 Please refer Note 1 Nil
Any other employee who received a grant in any one year of options amounting to 5% or more of options granted during that year Please refer Note 2 Please refer Note 2 Please refer Note 2 Nil
Identified employees who are granted options during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant Nil Nil Nil Nil
Diluted EPS of the Company after considering the effect of potential equity shares on account of exercise of Options Refer Note 4 -
Impact of the Difference between the Intrinsic Value of the Options and the Fair Value of the Options on Profits and on EPS Refer Note 4 -
Weighted Average Share/Exercise 10.11 33.37 140 No shares were
Price of the Shares Exercised during exercised under this
the Year (in ') scheme during the year
Weighted Average Fair Values of the Outstanding Options (in ')

Please refer Schedule 18 (7) to Notes to accounts to Audited Financial Results for FY 2018-19


*1000000 ESOPs under ESOP Scheme 2018 were granted to Mr. Uttam Tibrewal Whole TimeDirector during the year and the same are subject to RBI approval.

Note 1

Following are the total no. of stock options that have been granted to the SMPs duringthe financial year ended 31st March 2019

Name Designation No. of ESOPs Granted in ESOP Plan-A 2015 No. of ESOPs Granted in ESOP Plan-B 2015 No. of ESOPs Granted in ESOP Scheme 2016 No. of ESOPs Granted in ESOP Scheme 2018
1 Deepak Jain Chief Financial Officer 500000
2 Manoj Tibrewal Group Head HR Marketing & Distribution - - - 500000
3 Ashok Khandelwal Chief Compliance Officer - - - 4000
4 Sumit Madan Chief of Branch Banking - - - 15000
5 Mayank Markanday Chief Risk Officer - - - 10000
6 Rishi Dhariwal Chief of Secured Business Loan - - - 7500
7 Vijendra Singh Shekhawat Chief of Operations - Assets 5000
8 Yogesh Jain Group Head Strategy - Treasury FIG DCM Wholesale Liability and Investor Relation 20000
9 Vinay Vaish Chief of Credit Risk - - - 4000
10 Nitin Gupta Chief Audit Officer - - - 3000
11 Manmohan Parnami Company Secretary - - - 3000
12 Amiya Dikshit* Chief Technology Officer - - - 0

*Amiya Dikshit resigned and was relieved during FY 2018-19 and no ESOPs wereexercisable during the tenure of his employment.

Note 2

Following are the details of Employees who received a grant in any one year of ESOPsamounting to 5% or more of ESOPs granted during that year

S. No. Name Designation No. of ESOPs Granted in ESOP Plan-A 2015 No. of ESOPs Granted in ESOP Plan-B 2015 No. of ESOPs Granted in ESOP 2016 No. of ESOPs Granted in ESOP Scheme 2018
1 Uttam Tibrewal Whole Time Director* - - - 1000000
2 Manoj Tibrewal Group Head HR Marketing & Distribution - - - 500000
3 Deepak Jain Chief Financial Officer - - - 500000

* 1000000 ESOPs under ESOP Scheme 2018 were granted to Mr. Uttam Tibrewal Whole TimeDirector during the year and the same are subject to RBI approval.

Note 3

The SEBI has prescribed two methods to account for stock grants: (i) the intrinsicvalue method and (ii) the fair value method. The Bank adopts the intrinsic value method toaccount for the stock options it grants to the employees. The Bank also calculates thefair value of options at the time of grant using the Black-Scholes pricing model with thefollowing assumptions:

Particulars 31st March 2019
Risk-free Interest Rate (%) 7.30% - 8.03%
Expected Life (years) 3 years - 5.5 Years
Expected Volatility (%) 37.28% - 38.39%
Expected Dividend Rate (%) 0%

Note 4

The Bank measures the cost of ESOP using the intrinsic value method. Had the Bank usedthe fair value model to determine compensation its Profit after Tax and EPS as reportedwould have changed to the amounts indicated below:

Particulars Year Ended 31st March 2019 Year Ended 31st March 2018
Profit after Tax as Reported 381.81 292.04
Add: ESOP Cost Using Intrinsic Value Method (Net of Tax) 25.11 9.24
Less: ESOP Cost Using Fair Value Method (Net of Tax) 36.38 12.51
Profit after Tax (Adjusted) 370.54 288.77
- As Reported 13.16 10.26
- Adjusted for ESOP Cost Using Fair Value Method 12.77 10.14
- As Reported 12.90 10.00
- Adjusted for ESOP Cost Using Fair Value Method 12.52 9.89


Particulars As on 31st March 2019 As on 31st March 2018
Stock Options Outstanding (Gross) 103.75 94.04
Deferred Compensation Cost Outstanding 44.87 73.76
Stock Options Outstanding (Net) 58.88 20.28

The Bank has granted 1000000 stock options on 30th August 2018 under Plan D1 and38702 and 1018758 stock options on 27th October 2017 under Plan A3 and Plan B5respectively to Whole time Director which are pending for RBI Approval. Accordinglythese options have not been considered for the purpose of computing the impact of ESOPfair value on profit before tax.

Re-classification of Certain Persons from the Promoter Group to Public Category

In pursuance to the Regulation 31A of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 your Bank re-classified some of its promoter group i.e.Mr. Niranjan Lal Aggarwal Mr. AjayAgarwal Mr. Ashok Kumar Agarwal Mr. Baldev AgarwalMr. Dinesh Kumar Agarwal Mr. Mahender Kumar Agarwal Mr. Manoj Kumar Agarwal Mr. SrikantKedia Mr. Suresh Chand Kedia Ms. Anita Aggarwal Ms. Bina Agarwal Ms. Chanda DeviKedia Ms. Dropathy Jaipuria Ms. Pinki Agarwal Ms. Sunita Gupta and M/s Natural Fab whowere not directly or indirectly exercising control over the affairs of the Bank to publiccategory. They were neither holding any key managerial positions or representations of theBoard of Directors in the Bank nor engaged in any management or day-to-day affairs andalso do not have any right either to appoint any Director or an ability to control themanagement or policy decisions of the Bank in any manner.

Your Bank duly received approvals from Stock Exchanges and the same were disclosed incompliance of Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.


Being a banking company the disclosures required as per Rule 8 (5) (v) & (vi) ofthe Companies (Accounts) Rules 2014 read with Sections 73 to 76 of the Companies Act2013 are not applicable.

Particulars of Loans Guarantees and Investments

Pursuant to Section 186 (11) of Companies Act 2013 loans made guarantees given orsecurities provided or acquisition of securities by a Banking company are carried out inits ordinary course of business and are exempted from disclosure requirement in the AnnualReport. Hence there is no disclosure being made herein in this regard.


The Report on Corporate Governance for FY 2018-19 along with the certificate issued byPracticing Company Secretary CS Mr. Manoj Maheshwari confirming the compliance toapplicable requirements related to corporate governance as stipulated under Chapter IV ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 forms part ofthis Annual Report as Annexure I.

Board and Board Committees

The Board of Directors holds fiduciary position and is entrusted with theresponsibility to act in the best interests of the Bank. The Board at its meetingsdeliberate and decide on strategic issues including review of business policies financialmatters discuss on business performance and other critical matters for the Bank.Committees constituted by the Board focus on specific areas and take informed decisionswithin the framework of the delegated authority and responsibility and make specificrecommendations to the Board on matters under its purview. Decisions and recommendationsof the committees are placed before the Board for consideration and approval as required.

Board Meetings

During FY 2018-19 seven (7) Board meetings were convened and held the details ofwhich are given in the Corporate Governance Report forms part of this report as AnnexureI. The intervening gap between the meetings was within the period prescribed under theCompanies Act 2013 Secretarial Standard I and as per SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015.

Committees of the Board

The Board places significant reliance on its committees by delegating responsibilitiesto assist it in carrying out its function under its supervision and stewardship. Ittherefore remains crucial that effective linkages are in place between the committees andthe Board as a whole.

The Board Committees constitution is in acquiescence of provisions of the CompaniesAct 2013 the relevant rules made thereunder SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 Banking Regulation Act 1949 other guidelines issued byRBI from time to time and the Articles of Association of the Bank. The details of theBoard Committees of the Bank are disclosed in the Corporate Governance Report which formspart of this report.

Meetings of Independent Directors

Your Bank conducted a separate meeting of Independent Directors consisting of Mr.Mannil Venugopalan Mr. Krishan Kant Rathi Mr. Raj Vikash Verma and Ms. Jyoti Narang asprescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015and Section 149(6) of Companies Act 2013.

During the year under review the Independent Directors of the Bank met on 26th April2018 without the presence of the Non-independent Directors and Members of the SeniorManagement of the Bank.

At the said meeting the Independent Directors of the Bank inter alia reviewed theperformance of the Non-independent Directors the Board as a whole and reviewed theperformance of the Chairman of the Bank taking into account the views of the Executive andNon-executive Directors and assessed the quality quantity and timeliness of flow ofinformation between the Management and the Board for effective discharge of their duties.

No sitting fees was paid to the Independent Directors of the Bank for participating inthe said meeting.

Independent Woman Director

In terms of the provisions of Section 149 of the Companies Act 2013 and Regulation 17(1) (a) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 yourBank continues to comply with the requirement and has one Independent Woman Director onits Board.

Board of Directors and Key Managerial Personnel

The composition of the Board of Directors of the Bank is in accordance with the BankingRegulation Act 1949 the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. As on 31st March 2019 the Board of Directors comprisesseven (7) Directors out of which five (5) are Non-executive Directors. The Chairman ofthe Board and three (3) other Directors are Independent (Non-executive Directors)including one (1) Woman Independent Director. All the Directors have rich experience andspecialised knowledge in sectors covering banking economics law finance accountancyand other relevant areas.

Your Bank's Board consists of professionals who have the knowledge and experiencerequired in the banking industry. The responsibilities of the Board inter alia includeformulation of policies taking new initiatives performance review monitoring of plansand pursuing of policies and procedures and ensuring that the Bank operates under theregulatory framework laid down by the RBI for Banks.

The remuneration/sitting fees paid to the Directors during the year has been disclosedin the Corporate Governance Report as Annexure I.

The following appointment on the Board was made during the year.

Appointment of Mr. Narendra Ostawal as Additional Director (Non-executive)

The Board of the Bank in its meeting held on 17th January 2019 appointed Mr. NarendraOstawal as Additional Director (Non-executive) (DIN: 06530414) of the Bank. Prior to thishe was appointed as a Nominee Director on behalf of Redwood Investments Ltd. fund advisedby Warburg Pincus. Further no remuneration was paid to Mr. Narendra Ostawal during theperiod under review.

The details of the brief profile of Mr. Narendra Ostawal is available on the website ofthe Bank at about-us/board-directors

Declaration of Independence

The Bank has received necessary declarations from each Independent Director underSection 149(6) and 149(7) of the Companies Act 2013 and Regulation 16(1) (b) andRegulation 25(8) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (Listing Regulations) that they meet the criteria of independence laiddown thereunder.

Retirement by Rotation

In terms of Section 1 52 of the Companies Act 201 3 Mr. Uttam Tibrewal Whole TimeDirector shall retire at the ensuing AGM and being eligible for reappointment offershimself for re-appointment. The Board recommends his re-appointment at the ensuing AGM andrequisite information required under SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and under Secretarial Standard - II has been provided withthe notice of the AGM.

Key Managerial Personnel

Mr. Sanjay Agarwal Managing Director & CEO Mr. Uttam Tibrewal Whole TimeDirector Mr. Deepak Jain Chief Financial Officer and Mr. Manmohan Parnami CompanySecretary are Key Managerial Personnel of your Bank as defined under section 2 (51) ofCompanies Act 2013. There was no change in composition of Key Managerial Personnel of theBank.

Evaluation of the Directors the Board and Its Committees

Pursuant to the provisions of the Companies Act 2013 Regulation 17 (10) and otherapplicable Regulations of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and in consonance with Guidance Note on Board Evaluation issued by theSEBI the Board on the recommendation of the Nomination and Remuneration Committee of theBank carried out an annual performance evaluation of the Board as a whole and directorsindividually. The Board also carried evaluation of the working of its various Committeesfor the year under consideration.

The performance evaluation of the Directors was carried out by the entire Board otherthan the Director being evaluated. The performance evaluation of the Chairman and theNon-independent Directors were carried out by the Independent Directors. The Nominationand Remuneration Committee carried out the performance evaluation of all the Directors ofthe Bank. The Directors expressed their satisfaction over the evaluation process.

The Evaluation process covers a structured questionnaire for evaluation by Boardmembers and format has been designed after taking inputs received from the Directors andprocess of evaluation has been detailed below:

Familiarisation Programme for Directors

The Bank conducted orientation programme for the induction of Directors and during theyear programme organised by reputed institutes were attended by the Directors coveringtheir roles and responsibility IT Risks cyber security compliance and other governanceaspects in the Bank. The Corporate Governance Report for FY 2018-19 contains the requisiteinformation and the details of the familiarisation programmes imparted

to Directors. These programmes are also hosted on the website of the Bank and can beaccessed at

Corporate Social Responsibility

In compliance with the provision of Section 135 of the Companies Act 2013 read withthe Companies (Corporate

Social Responsibility Policy) Rules 2014 the Bank has set up a Corporate SocialResponsibility (CSR) Committee.

Your Bank thoughtfully spent its CSR funds and selected few projects post assessment oftheir sustainable impact on the society. The primary focus areas were covering the fieldof livelihood enhancement financial & digital literacy and development of sports. Thecontribution under CSR was carried out by AU Foundation through its AU Skill Academy AUSports Village and in collaboration with specialised implementing agencies. The Bank hasdevised long term strategy to take up sustainable projects that have widespread andlong-lasting impact on the society. An overview of the CSR programmes undertaken by theBank during FY 2018-19 is detailed in the Corporate Social Responsibility Report asAnnexure II.

The CSR Policy as recommended by the CSR Committee and approved by the Board isavailable on the website of the Bank at

Social Environmental and Management System

The Social Environmental and Management System (SEMS) is a set of policies procedurestools and internal capacity to identify and manage a financial institution's exposure tothe environmental and social risks of its customers. The Bank endeavours to benchmarkitself with the best of corporates in India and continued its focus to implementEnvironmental Social and Governance (ESG) practices. The procedures and decision-makingprocess of the SEMS are systematically incorporated at each stage of transaction appraisaland monitoring.

Awareness is also created among vendors and customers to comply with applicable socialand environmental laws.

Human Capital

Your Bank endeavours to provide a conducive workplace with best-in-class standards andbelieves that employees are the most important assets. To ensure that an effective and theright resource is acquired your Bank continuously strengthens and updates its hiringmechanism.

During FY 2018-19 your Bank expanded its workforce to 12623 employees as on 31stMarch 2019 vis-a-vis 11151 employees as on 31st March 2018.

Your Bank through its Human Resource Department nurtures its employees through robustlearning and development programme. A knowledge-driven approach is followed for designing& organising relevant training programmes to make employees ready for challenges anddrive success in their functional roles.

In today's disruptive digital environment it is critical to build a high-qualityrobust talent pool with adaptability skills for the changing needs of the workplace for asustained competitive advantage and to achieve accelerated growth. The Bank has alwaysemphasised on a knowledge-driven approach for visualising the future and bringing thatfuture to the present. The Bank focussed on developing the capacity and capability tonurture the brightest and best quality talent.

Anti-bribery and Anti-corruption Policy

The Bank adopts a 'zero-tolerance approach' to bribery and corruption and is committedto act professionally fairly and with integrity in its dealings wherever it operates. TheBank has an Anti-bribery and Anti-Corruption Policy laying down the principles forcarrying out banking business in an honest and ethical manner.

The Anti-bribery and Anti-corruption Policy as approved by the Board is available onthe website of the Bank at

Disclosure under Section 22 of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013

The primary objective of the Policy on Prevention and Redressal Against SexualHarassment is to protect the women employees from sexual harassment at the place of work.Your Bank constituted an Internal Complaints Committee in compliance with the provisionsof The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013 to review investigate and take suitable actions on complaints and there is aBoard-level Disciplinary Committee that reviews the decisions taken by the InternalComplaints Committee.

The complaints received and the details relating thereto were as follows for the periodunder review:

Heading Nos.
No. of Complaints Pending at the Beginning of the Year 1
No. of Complaints Received and Resolved during the year 1
No. of Complaints Pending at the End of the Year 0

Extract of Annual Return

Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act 2013 read withRule 12 of the Companies (Management and Administration) Rules 2014 the extract of theAnnual Return as on 31st March 2019 in the prescribed form MGT-9 forms part of thisreport under Annexure VI and is available on the website of the Bank at

Compensation Policy

The objective of the Compensation Policy is to regulate the appointment andremuneration of Directors (including Independent Directors) KMP SMP and other employeesof the Bank according to the criteria formulated by the Nomination and RemunerationCommittee of the Board under the requirement of the Companies Act 2013 read withapplicable Rules and the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and guidelines issued by RBI in this regard.

The key objectives of the Compensation Policy are as follows:

• To institutionalise a mechanism for the appointment/removal/dismissal ofDirectors lay down selection criteria for appointment of a Director formulate thecriteria for determining qualifications positive attributes and independence of aDirector and recommend to the Board

• To formulate the criteria for evaluation of performance of the Directors on theBoard

• To establish standards on compensation/remuneration including fixed andvariable which are in alignment with the applicable rules and regulations and are basedon the trends practices of remuneration prevailing in the industry

• To define internal guidelines for the payment of perquisites to the DirectorsKey Managerial Personnels (KMPs) Senior Management Personnels (SMPs) and other employeesof the Bank

The Compensation Policy is available on the website of the Bank

Disclosure on Remuneration

The ratio of the remuneration of each Director to the median employee's remunerationand other details in terms of sub section 12 of Section 197 of the Companies Act 2013read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 form part of this Report and is annexed as Annexure III to thisReport.

The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with Rule 5(2) and Rule 5(3) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 forms part of this Report and isannexed as Annexure IV to this Report.

Whistle Blower Policy and Vigil Mechanism

Whistle Blower Policy has been devised with a view to provide a mechanism to employeescustomer and stakeholders of the Bank to approach the Chief Vigilance Officer andthereafter Disciplinary Committee of the Bank in case they observe any unethical andimproper practices or any other alleged wrongful conduct in the Bank. The policy aims atestablishing an efficient vigil mechanism in the Bank to quickly spot aberrations and dealwith them at the earliest.

The policy devised is aligned to the recommendations of Protected Disclosure Scheme forPrivate Sector and Foreign Banks instituted by RBI and in view of amendments in SEBI(Prohibition of Insider Trading) Regulations 2015 the said policy has been amended byinsertion of clause to report instances of leak of Unpublished Price SensitiveInformation.

The Vigil Mechanism provides a channel to the employees Directors and otherstakeholders to report to the management about unethical behaviour actual or suspectedfraud or violation of the Codes of Conduct regulatory requirements incorrect ormisrepresentation of any financial statements and such other matters. The Chief VigilanceOfficer of the Bank act as a Special Assistant/ Advisor to the Managing Director (MD &CEO) of the Bank in the discharge of the vigilance functions. He is responsible forensuring and promoting a culture of speaking up/raising red flags on matters relating tobreaches/violations of the Bank's Code of Conduct or any fraudulent transactions andprovides a non-threatening environment to employees to discuss matters relating to theBank's Code of Conduct suspected unethical behaviour malpractices wrongful conductfrauds violations of law and questionable accounting or auditing matters which buildtrust and transparency in the Bank. During the year no person was denied access to theAudit Committee or its Chairman to raise his/her concern under the Vigil Mechanism.

The Whistle Blower Policy and Vigil Mechanism as approved by Board are available on thewebsite of the Bank at

Related Party Transactions

The Board approved Related Party Transactions and Materiality Policy as per theprovisions of the Companies Act 2013 read with the rules made thereunder and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 described the relatedparty transactions requiring requisite approvals and requirements of appropriate reportingand disclosure of transactions between the Bank and its related parties.

During FY 2018-19 the Bank has not entered any materially significant transactionswith its Promoters Directors management or relative of the Directors which could leadto potential conflict of interest between the Bank and these parties other than thetransaction entered in the ordinary course of business and the transactions entered intoby the Bank are on 'arm's length basis'. On quarterly basis the Audit Committee of theBank is apprised of all specified details of related party transactions. Hence pursuantto Section 134 (3) (h) of the Companies Act 2013 read with Rule 8 (2) of the Companies(Accounts) Rules 2014 there are no related party transactions to be reported underSection 188 (1) of the Companies Act 2013 in form AOC-2. The requisite disclosure hasbeen made under Schedule 18 of the notes forming part of audited financial statements forthe year ended 31st March 2019.

The Related Party Transactions and Materiality Policy as approved by the Board isavailable on the website of the Bank at

Code of Conduct for Directors and SMPs

The Board of Directors of the Bank adopted the Code of Conduct for the Directors andSenior Management Personnel of the Bank in compliance with Regulation 17(5) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 which sets forth theguiding principles on which Bank's Board and Senior Management Personnel shall operate andconduct themselves with stakeholders including government and regulatory agencies mediaetc.

In respect of FY 2018-19 all Board members and Senior Management personnel of the Bankhave affirmed the compliance with the code as applicable to them and a declaration to thiseffect signed by the Managing Director & CEO and forms part of the CorporateGovernance Report as Annexure I.

The Bank's Code of Conduct for Directors and Senior Management is available on thewebsite of the Bank at

Code for Prevention of Insider Trading

In compliance with the SEBI (Prohibition of Insider Trading) Regulations 2015 the Bankhas approved code for prohibition of insider trading in the shares of the Bank whichinter alia prohibits trading in shares of the Bank by insiders while in possession ofunpublished price sensitive information in relation to the Bank and in view of amendmentsin SEBI (Prohibition of Insider Trading) Regulations 2015 requisite amendments werecarried out in the code and effective from 1st April 2019.

Code of Conduct for Employees

Code of Conduct is a comprehensive written code which is applicable to all employeesand lays down the Principles and standards that govern the activities of the Bank and itsemployees to ensure and promote ethical behaviour within the governance framework andattempts to set forth the guiding principles and values on which the Bank's employeesshall operate and conduct its business with its all stakeholders including governmentregulatory agencies media and others with whom they are connected or interact with.

Material Orders Passed by Regulators or Courts or Tribunals and Penalties andPunishment

There are no material orders passed by the regulators/ courts/tribunals during FY2018-19 which would impact the going concern status of the Bank and its futureoperations.

The Bank has complied with the applicable requirements and no strictures or penaltieswere imposed on the Bank by the RBI Stock Exchanges and SEBI during the year underreview.

Material Changes and Commitments if any Affecting the Financial Position of the Bank

There are no material changes affecting the financial position of Bank that haveoccurred between the end of FY 2018-19 of the Bank to which the financial statementsrelate and the date of this Board's Report.

Maintenance of Cost Records

Being a banking company the Bank is not required to maintain cost records as persub-section (1) of Section 148 of the Companies Act 2013.

Risk Management Framework

Robust risk management structure has been devised that proactively identifies the risksfaced by the Bank and helps in mitigating them. Risk Management Committee (RMCB) of theBoard supervises the risk management functions and advises on risk mitigation strategiesthereby bringing a top-down focus to risk management.

The Risk Management Department headed by the Chief Risk Officer administers the riskmanagement functions in the Bank through dedicated divisions i.e. Credit Risk MarketRisk Operational Risk Fraud Risk and Information Security Risk under the aegis of Boardapproved risk management policies and approval & responsibility delegation matrix.

The detailed note on Risk Management is covered under Management Discussion andAnalysis section which forms part of this Annual Report.

The Enterprise Risk Management framework is a layered structure and broadly consists ofthe following components for effective risk management across the Bank.

(a) Credit Risk Management

There is Credit Risk and NPA Management Committee (CRANPAC) which reports to RiskManagement Committee of the Board. The CRANPAC overseas and reviews the credit risk andensures that Bank's operations are run as per the credit risk framework laid down by theRMCB & Board of the Bank. The CRANPAC is responsible for formulation of standards forpresentation of credit proposals financial

covenants rating standards and benchmarks delegation of credit approving powersprudential limits on large credit exposures asset concentration standards for loancollateral portfolio management loan review mechanism risk concentration riskmonitoring and evaluation provisioning regulatory and other issues around it.

(b) Operational Risk Management

Your Bank has in place a Board delegated committee for Operational Risk Management(ORMC) which reports to (RMCB) for review and advise for implementation of measures forrisk mitigation. The Bank follows an integrated risk approach where operational risks& its monitoring folds into CRO and ORMC. The Bank has business continuity frameworkto ensure the continuity of services in the event of any catastrophic event. Your Bank'soperational risk management framework is designed with a clear understanding of variousoperational risks faced by the Bank and for its continuous monitoring disciplined riskassessment & mitigation measures were operating effectively during the year.

(c) Fraud Risk Management

Your Bank has effective fraud risk management framework and Risk Containment Unit (RCU)that is guided by a Board approved Fraud Risk Management Policy. Fraud reported in theBank are apprised to the Audit Committee and Board and fraud in excess of '1 crore or moreare specifically reported and dealt by the SFMC Committee of the Board. Frauds in banksoccur when the safeguards are inadequate or the procedural checks are not adhered toleaving the system/bank vulnerable to internal or external perpetrators. The onlyeffective defence the Bank can have against frauds is to continuously strengthen itssystems operational practices procedures controls and review mechanism so thatfraud-prone areas are sanitised against internal and external breaches and these controlmeasures operate effectively.

(d) Market Risk Liquidity and Asset Liability Management

Your Bank has a well-developed market risk framework comprising Board-approved policiesand established practices. The Bank has in place an integrated risk measurement frameworkthat captures all components of market risks. The Asset Liability Management Committee(ALCO) of the Bank oversees the framework for identification measurement and managementof market risk interest rate risk and liquidity risk in the Bank and ensures compliancewith established internal and regulatory prudential limits.

(e) IT Risk Management

Your Bank has established robust information and cyber security framework for securingits IT infrastructure and systems. There is a dedicated IT Steering and InformationSecurity Committee which reports to Board-level IT Strategy & Information SystemsSecurity Committee. This committee reviews and monitors IT security infrastructure andvigilance over IT related vulnerabilities against emerging cyber security risks. The ChiefInformation Security Officer (CISO) is responsible for monitoring the information securityrisk covering all aspects of data security for the Bank who reports to Chief Risk Officer(CRO). Cyber Security Operation Center (CSOC) with qualified professionals report intoCISO for monitoring of real-time cyber security incidents.

(f) Business Continuity Plan

Your Bank has put in place a comprehensive Business Continuity Management (BCM) planpolicy and procedures to ensure continuity of critical operations of the Bank in the eventof any disaster/incident affecting business continuity. The Bank's business continuityprogramme is developed considering the criticality of the functions performed and thesystems used to minimise the operational financial legal and other material consequencesarising from such a disaster and focus is on ensuring faster recovery of/ minimizingimpact on the IT systems of the Bank.

(g) Cyber Security Management

Technology has drastically changed the banking services products methods of operationand the way banks function. Your Bank has been able to offer more products to increasecustomer's delight and operational efficiency and reduce operational expenses of bankingservices. However it is equally true that the advent of technology has also made banksvulnerable to cyber-attacks. Cyber security is the combination of technologies processesand practices designed to protect networks computers programmes and data fromcyber-attacks damage or unauthorised access. Cyber space is a complex environmentconsisting of interactions between people software and services supported by worldwidedistribution of Information and Communication Technology (ICT) devices and networks.

To combat growing cyber threats and enhance the resilience of the banking system toaddress cyber risks your Bank has set up a framework for cyber security in compliancewith the guidelines issued by the RBI. During the year the Directors and SeniorManagement attended the training & certification programme organised by IDRBT forawareness about current IT and cyber security issues.

Statutory Auditors & their report

M/s. S.R. Batliboi & Associates LLP (Firm Registration No. 101049W/E300004) wereappointed as the Statutory Auditors for a period of four (4) years by the Members of theBank at the (22nd) Twenty Second Annual General Meeting held on 27th September 2017 tohold office from the conclusion of the 22nd Annual General Meeting till the conclusion ofthe 26th Annual General Meeting of the Bank in accordance with the provisions of theCompanies Act 2013.

The Statutory Auditors have confirmed their eligibility under Section 141 of theCompanies Act 2013. Further as required under the relevant provisions of SEBI (ListingObligations & Disclosure Requirements) Regulations 2015 the Statutory Auditors hadalso confirmed that they had subjected themselves to the peer review process of theInstitute of Chartered Accountants of India (ICAI) and they hold a valid certificateissued by the Peer Review Board of ICAI and the Board has upon recommendation of the AuditCommittee proposed the ratification of their appointment as Statutory Auditors for the FY2019-20 subject to approval of shareholders at the ensuing AGM and the RBI.

There are no qualifications reservations or adverse remarks made by M/s. S.R. Batliboi& Associates LLP Chartered Accountants Statutory Auditors of the Bank in theirreport. Further pursuant to Section 143(12) of the Companies Act 2013 the StatutoryAuditors of the Bank have not reported any instances of frauds committed in the Bank byits officers or employees.

Secretarial Auditors & their report

In compliance with the provisions of Section 204 of the Companies Act 2013 and theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board inits meeting dated 26th April 2018 upon recommendation of the Audit Committee appointedM/s. V.M. & Associates Practicing Company Secretaries (Registration No.P1984RJ039200) to undertake the Secretarial Audit of the Bank during the financial yearended 31st March 2019. The Secretarial Audit Report for FY 2018-19 is annexed herewith asAnnexure V.

There were no observations or qualifications made by the Secretarial Auditor in itsReport (except expense on CSR activities below the prescribed limit); justification ofobservation covering reasons for not being able to carry out CSR expenditure has beenprovided in the report on CSR attached as Annexure II to this Board's Report.

Internal Financial Controls System and their Adequacy

Your Bank has an effective internal control system calibrated to the risk appetite ofthe Bank and aligned to the scale size and complexity of its operations. The scope andauthority of the risk-based internal audit function is defined in the Internal AuditPolicy of the Bank duly approved by the Board.

The audit function essentially validates the compliances of Bank's processes andoperations with regulatory guidelines accounting procedures and the Bank's own internalrules and guidelines.

The Internal Audit function provides independent assurance to the Board of DirectorsAudit Committee and Senior Management on the quality and effectiveness of the Bank'sinternal control risk management and governance systems and processes.

Proper internal financial controls were in place and were operating effectively duringthe year. Further the statutory auditors have in compliance with the requirements of theCompanies Act 2013 issued an opinion with respect to the adequacy of the internalfinancial controls over financial reporting of the Bank and the operating effectiveness ofsuch controls details of which may be referred to in the Auditor's Report attached to theAudited Financial Statements of FY 2018-19.


Strong compliance & governance culture has been established with the objective tobuild trust & transparency among all stakeholders and a dedicated ComplianceDepartment headed by the Chief Compliance Officer for ensuring regulatory complianceacross all businesses and operations has been setup.

The Board Audit Committee & Risk Management Committee of the Bank oversee theimplementation of the entire compliance framework and risk management system across theBank.


Pursuant to Regulation 34 (2) (f) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 a Business Responsibility Report (BRR) is required to bepublished by the Top 500 listed companies based on market capitalisation. The BRRdescribes the initiatives taken by the Bank from environmental social and governanceperspective in the format prescribed under SEBI Circular No. CIR/CFD/CMD/10/2015 and thesame is attached herewith as Annexure VII and placed on the website of the Bank at


The Management Discussion and Analysis Report for FY 2018-19 is presented in a separatesection forming part of this Annual Report.


Conservation of energy and technology absorption

Your Bank as a responsible organisation established and implemented the requiredsystems and processes to conserve energy aligned to its nature of the business. The Bankis using energy efficient cooling systems for its operations. The distributed coolingsystem has been designed in such a way that if a particular area/room is not

in use the air-conditioning for that particular area is auto switched off to conserveenergy. In similar ways energy efficient lighting systems like LEDs have been widely usedin offices of the Bank. Your Bank used wide glass windows to utilise maximum naturallights to conserve electricity used by the lighting system.

Your Bank as part of its digital strategy is focussed on building an IT architecture ina manner to achieve internal natural resource consumption efficiencies and simultaneouslyminimising the carbon footprint.

Efforts made by the Bank for conservation of energy and absorption of technology havebeen detailed below:

Energy-efficient IT hardware

IT hardware assets used by your Bank comply with the Environmental Protection Agency's(EPA's) Energy Star guidelines for lower power consumption. These IT assets includeworkstation notebooks servers etc. Further your Bank is using multicore processors inservers which increases processing output without substantially increasing energy usage.

Digital Solutions

Your Bank is leading the digital banking revolution by operating 'Paperless AccountOrigination' through a TAB-based system which has significantly reduced paperconsumptions in the Bank. Under the 'Go Green Programme' all printers of the Bank arebeing configured with both side printing and the size of e-receipts have been reduced toprint two slips on a single page. These initiatives by the Bank have significantly reducedthe overall paper consumption within the Bank.

Using power management technology and best practices

Your Bank is a pioneer in adopting the latest operating systems running on AdvancedConfiguration and Power Interface (ACPI) enabled systems that incorporate power savingfeatures that automatically goes on power-saving mode in case the system is idle for aspecific time interval.

Using Cloud-based and virtualised data centre

The virtual and Cloud technology based servers are one of the most energy efficientservers in the current technology era and the Bank invested on virtualisation andCloud-based technology to reduce the number of physical servers.

Recycling systems and supplies

The Bank is following an efficient way of managing aging IT systems to scale down theload on already overtaxed landfills and to avoid sending hazardous materials to thoselandfills where they can seep into the environment and cause harm.

The Bank has an efficient way of re-furbishing the slightly old IT systems that can beused by staff who do not require heavy data processing. Hence the Bank reduces the demandfor new laptops/desktops despite the increase in manpower. In many cases when an ITengineer needs a new high end workstation to run resource hungry programmes the oldcomputer is perfectly adequate for use by someone doing Word processing spreadsheets orother less intensive tasks. This hand-me-down method allows two employees to get bettersystems than they had while requiring the purchase of only one new machine (thus savingmoney and avoiding unnecessary e-waste).

Foreign exchange earnings and outgo

During the year ended 31st March 2019 there were no foreign exchange earnings and theforeign exchange outgo was of '0.46 crore.

MD & CEO and CFO Certification

The MD & CEO and the CFO of the Bank have issued certificate certifying that thefinancial statements do not contain any materially untrue statements and these statementsrepresent a true and fair view of the Bank's affairs. They also certify that notransactions entered into during the year were fraudulent illegal or violative of theCode of Conduct of the Bank. The certificate of MD & CEO and CFO forms part of AnnualReport.

SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015

During the period under review the Bank has complied with all the mandatoryrequirements of Regulation 17 to 27 of SEBI (Listing Obligations and DisclosureRequirements) and other applicable Regulations except for Regulation 24 which is notapplicable to the Bank.

Accounting Treatment

The Bank has adopted accounting policies that are in line with the accounting standardsand financial statements are prepared in adherence to the accounting policies accountingstandards and applicable provisions of the Companies Act 2013 SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and RBI Guidelines in this regard.

Subsidiary and Associate Companies

During the period under review the Bank does not have any subsidiary or associatecompanies. Hence Form AOC 1 as specified under the Companies Act 2013 is not applicableto the Bank for FY 2018-19.

Compliance of Secretarial Standards issued by the ICSI

The Bank has complied with applicable Secretarial Standards issued by the Institute ofCompany Secretaries of India (ICSI).


Pursuant to the applicable compliance of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the financial results of the Bank on a quarterly basisare published to the Stock Exchanges. The same were also published on the website of theBank and in leading national and vernacular newspapers. The Managing Director & CEOWhole Time Director CFO and Chief of Investor Relations at regular intervals connect withthe analysts/ shareholders and respond to the queries from investors on a quarterly basis.

For share transfers dividend payments and all other investor-related activities areattended to and processed at the office of our Registrars and Share Transfer Agents i.e.Link Intime India Private Limited contact details of which are provided in the CorporateGovernance Report of the Annual Report.

Board-approved Investor Grievance Redressal Policy lays down the simplified procedurefor shareholders to submit their queries concerns and grievances for timely resolution.Shareholders can email at for any query and can alsovisit the Bank's website for more information at All the investorcomplaints received during the year were resolved and there was no investor complaint thatwas unresolved as on 31st March 2019.


Your Directors would like to inform that the audited financial statements for thefinancial year ended 31st March 2019 are in conformity with the requirements of Clause (c)of Sub-section (3) of Section 134 of the Companies Act 2013 and hereby confirm:

(a) That in the preparation of the annual accounts the applicable Accounting Standardshave been followed along with proper explanation relating to material departures

(b) That the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the

Bank at the end of the financial year and of the profit and loss of the Bank for thatperiod

(c) That the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the Bank's assets and for preventing and detecting fraud and otherirregularities;

(d) That the Directors had prepared the annual accounts on a going concern basis

(e) That the Directors had laid down internal financial controls to be followed by theBank and that such internal financial controls are adequate and were operating effectively

(f) That the Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively


The Board of Directors wish to place on record their gratitude to the RBI SEBIMinistry of Corporate Affairs Indian Banks' Association (IBA) Unique IdentificationAuthority of India (UIDAI) the Bank's customers bankers shareholders debenture holderstrustees and others for their continued support and faith reposed in the Bank. TheDirectors would also like to thank the BSE Limited the National Stock Exchange of IndiaLimited National Securities Depository Limited Central Depository Services (India)Limited and the Credit Rating Agencies for their continued co-operation.

The Board also expresses its deep sense of appreciation to all employees of the Bankfor their strong work ethic excellent performance professionalism teamwork commitmentand self-driven approach as key enablers for achieving consistent growth.

For and on behalf of the Board of Directors
Sanjay Agarwal Uttam Tibrewal
Managing Director & CEO Whole Time Director
DIN:00009526 DIN:01024940
Date: 22nd April 2019
Place: Jaipur
CIN: L36911RJ1996PLC011381



The Members

AU Small Finance Bank Limited

1. We have examined the compliance of conditions of Corporate Governance of AU SmallFinance Bank Limited ("the Bank") for the year ended on 31st March 2019 asstipulated in Regulations 17 to 27 and clauses (b) to (i) of Regulation 46 (2) and otherapplicable regulations of Chapter IV pertaining to Corporate Governance and paragraphs CD and E of Schedule V of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 collectively referred as (SEBI ListingRegulations).

Management's Responsibility for compliance with the conditions of SEBI ListingRegulations

2. The compliance with the conditions of Corporate Governance is the responsibility ofthe management of Bank including the preparation and maintenance of all relevantsupporting records and documents. This responsibility includes the design implementationand maintenance of internal control and procedures to ensure the compliance with theconditions of the Corporate Governance stipulated in SEBI Listing Regulations.

Auditor's Responsibility

3. Our responsibility is limited to examining the procedures and implementationthereof adopted by the Bank for ensuring the compliance with the conditions of theCorporate Governance. It is neither an audit nor an expression of opinion on the financialstatements of the Bank.

4. We have examined the relevant records and documents maintained by the Bank for thepurposes of providing reasonable assurance on the compliance with the Corporate Governancerequirements by the Bank.

5. We conducted our examination in accordance with the Guidance Note on CorporateGovernance Certificate and the Guidance Manual on Quality of Audit & AttestationServices issued by the Institute of Company Secretaries of India ("ICSI").


6. In our opinion and to the best of our information and according to the explanationsgiven to us and the representation made by the Directors and the management we certifythat the Bank has complied with the conditions of Corporate Governance as stipulated inthe above mentioned SEBI Listing Regulations.

7. We further state that such compliance is neither an assurance as to the futureviability of the Bank nor the efficiency or effectiveness with which the management hasconducted the affairs of the Bank.

Restriction on use

8. The certificate is addressed and provided to the members of the Bank solely for thepurpose to enable the Bank to comply with the requirement of the SEBI Listing Regulationsand it should not be used by any other person or for any other purpose. Accordingly we donot accept or assume any liability or any duty of care for any other purpose or to anyother person to whom this certificate is shown or into whose hands it may come without ourprior consent in writing.

For V. M. & Associates
Company Secretaries
(ICSI Unique Code P1984RJ039200)
CS Manoj Maheshwari
Date: April 22 2019 FCS3355
Place: Jaipur C P No.: 1971

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