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Kotak Mahindra Bank Ltd.

BSE: 500247 Sector: Financials
BSE 00:00 | 24 Apr Kotak Mahindra Bank Ltd
NSE 05:30 | 01 Jan Kotak Mahindra Bank Ltd
OPEN 1224.70
VOLUME 167219
52-Week high 1739.95
52-Week low 1000.35
P/E 38.96
Mkt Cap.(Rs cr) 237,255
Buy Price 1240.20
Buy Qty 10.00
Sell Price 1242.00
Sell Qty 100.00
OPEN 1224.70
CLOSE 1249.85
VOLUME 167219
52-Week high 1739.95
52-Week low 1000.35
P/E 38.96
Mkt Cap.(Rs cr) 237,255
Buy Price 1240.20
Buy Qty 10.00
Sell Price 1242.00
Sell Qty 100.00

Kotak Mahindra Bank Ltd. (KOTAKBANK) - Director Report

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Company director report


The Directors present their Thirty-fourth Annual Report together withthe audited accounts of your Bank for the year ended 31st March 2019.


(A) Kotak Mahindra Bank Limited – Consolidated financialhighlights *:

31st March 2019 31st March 2018
in crore in crore
Total income 45979.11 38813.31
Total expenditure excluding provisions and contingencies 34358.03 28630.34
Operating Profit 11621.08 10182.97
Provisions and contingencies excluding provision for tax 1045.36 1024.74
Profit before tax 10575.72 9158.23
Provision for taxes 3456.02 3011.09
Profit after tax 7119.70 6147.14
Less: Share of minority interest - 56.68
Add: Share in profit of Associates 84.43 110.51
Consolidated profit for the Group 7204.13 6200.97
Earnings per Equity Share:
Basic (र) 37.78 32.70
Diluted (र) 37.74 32.66

(B) Kotak Mahindra Bank Limited – Standalone financial highlights:

31st March 2019 31st March 2018
in crore in crore
Total Income 28547.24 23800.70
Total expenditure excluding provisions and contingencies 20199.06 16642.53
Operating Profit 8348.18 7158.17
Provisions and contingencies excluding tax provisions 962.39 939.95
Profit before tax 7385.79 6218.22
Provision for taxes 2520.46 2133.92
Profit after tax 4865.33 4084.30
Add: Surplus brought forward from the previous year 13604.60 10756.29
Amount available for appropriation 18469.93 14840.59
Statutory Reserve under Section 17 of the Banking Regulation Act 1949 1216.34 1021.08
Transfer to Investment Reserve Account 31.06 -
Transfer to Capital Reserve 6.99 24.00
Transfer to Special Reserve 40.00 55.00
Transfer to Investment Fluctuation Reserve Account 70.89 114.21
Transfer to Fraud Provision 1.40 -
Dividend Paid ** 160.28 -
Corporate Dividend Tax 23.68 21.70
Surplus carried to Balance Sheet 16919.29 13604.60

* In accordance with the Companies (Indian Accounting Standards (INDAS)) Rules 2015 the financial statements of the subsidiaries are being prepared in linewith notified IND AS with effect from 1st April 2018. The financial statementsof the subsidiaries used for consolidation of the consolidated financial results arespecial purpose financial statements prepared in accordance with Generally AcceptedAccounting Principles in India (‘GAAP') specified under Section 133 of theCompanies Act 2013 read with relevant notifications.

** The Bank has paid a dividend at rate of र 0.70 per equityshare for the year ended 31st March 2018 (previous year: 0.60 per equity sharefor the year ended 31st March 2017) and has paid interim dividend at rate of8.10% (on pro-rata basis) on preference shares for year ended 31st March 2019(previous year: NIL) to all shareholders whose names appear on the Register of members /beneficial holders list on the book closure date. As per the requirements of revised AS 4– ‘Contingencies and Events Occurring After the Balance Sheet Date' thispayout (including dividend distribution tax) has been appropriated from amount availablefor appropriation in the year of pay-out.


Your Directors are pleased to recommend a dividend of र 0.80 perequity share (previous year र 0.70 per equity share) for the year ended 31stMarch 2019. This would entail a payout of र 184.10 crore including dividenddistribution tax based on the number of shares as at 30th April 2019. Thedividend would be paid to all the shareholders whose names appear on the Register ofmembers / beneficial holders list on the book closure date.

In March 2019 your Directors declared an interim dividend on PerpetualNon-Cumulative Preference Shares of face value of र5 each issued by the Bankcarrying a dividend rate of 8.10% on pro-rata basis in respect of the financial year2018-19 as per the terms of issuance. This entailed a payout of र32.37 crore(including dividend distribution tax).

Pursuant to Regulation 43A of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board ofDirectors of the Bank have adopted a Dividend Distribution Policy which is in line withthe parameters prescribed by SEBI for distribution of dividend. The Policy is available onthe Bank's website viz. URL:


During the year authorized share capital of the Bank was altered andincreased from र1500 crore consisting of 300 crore equity shares of र5 each toर1900 crore divided into 280 crore equity shares of र5 each and 100 crorepreference shares of र5 each.

In August 2018 your Bank has issued and allotted 100 crore 8.10%Perpetual Non-Cumulative Preference Shares (PNCPS) of र5 each amounting toर500 crore.

During the year your Bank allotted 3106321 equity shares arising outof the exercise of Employees Stock Options granted to the whole time director andemployees of your Bank and its subsidiaries.

Post allotment of equity shares as aforesaid the issued subscribedand paid-up share capital of the Bank as at 31st March 2019 stood atर14543774135 comprising of 1908754827 equity shares of र5 each and1000000000 preference shares of र5 each.

Your Bank has a Capital Adequacy Ratio (‘CAR') under BaselIII as at 31st March 2019 of 17.45% with Tier I being 16.93%.

During the year your Bank has not issued any capital under Tier II. Ason 31st March 2019 outstanding Unsecured Redeemable Non-ConvertibleSubordinated Debt Bonds were र456 crore. The outstanding Unsecured Non-ConvertibleRedeemable Debt Capital Instruments Upper Tier II have matured during the year.

Further in March 2019 your Bank has issued and allotted 1500 SeniorUnsecured Rated Listed Redeemable Long Term Bonds in the nature of Non-ConvertibleDebentures bearing a face value of र10 lakh each aggregating to र150 crore.


Consumer Banking

Your Bank services a customer base in excess of 16 million customerscovering a wide spectrum across domestic individual and households non-residents smalland medium business segments for a range of products from basic savings & currentaccounts to term deposits credit cards unsecured and secured loans working capital andinvestment advisory.

Your Bank continued its strategy of calibrated expansion of its branchnetwork. As of 31st March 2019 your Bank had 1500 branches and 2352 ATMscovering 744 locations. Of the 112 new branches commissioned this year 44 were in metro24 were in urban 15 semi urban & 29 rural branches. Aided partly by 811 your Banksaw fast paced customer acquisition across all core banking products including savings andcurrent accounts term deposits overdrafts and non-resident accounts. Bank has also setup 27 e-lobbies to enable convenience banking for customers. Your Bank also relocated 36branches across metro and semi urban locations to give easier access and higherconvenience to its customers.

Your Bank rolled out several initiatives aimed at offering a superiorand differentiated customer experience. Strengthened its customer relationship managementcapability by setting up a new channel for phone based remote engagement called VRM(Virtual Relationship Management) channel. This led to a wider coverage and enabled yourBank to reach out to more than 6 lakh customers and service them across deposit lendingand investment needs. In the Retail Institutional Business for segments like housingsocieties educational institutions etc. introduced a range of services like apartmentmanagement solution smart card solution closed loop payment solutions etc. This hashelped your Bank strengthen its relationship in this segment. Your Bank extended the Silkprogram for woman customers to cover salaried base and offers distinctive features likecash back on point of sale (POS) based transactions linked accounts for minors anddiscount on lockers. Proposition around Image debit cards was further strengthened withintroduction of images of Bank's brand ambassador Ranveer Singh and exclusive artworks of renowned artist Seema Kohli for the Silk program. A new current accountproposition was launched specifically for constituents of agriculture produce marketcommittee (APMC) markets and will be available across the 2400 markets in the country. Forthe Arthias segment in Punjab a customized solution via Arthia Rupay card was launchedwhich would help your Bank to build a significant market share in the state of Punjab.

Your Bank entered into a banking alliance with government procurementagency Haryana State Co-operative Supply and Marketing Federation Limited (HAFED) inHaryana and National Agency for Export Development (NAFED) at national level for mustardseed procurement. This would give a significant boost to the current account book linkedto this line of business. The merchant acquiring line of business which was started in2017-18 gained significant momentum in 2018-19 with the transaction thru put crossing 2crore figure. Value added features like EMI facility on point of sale transactions werealso offered. For customers desirous of investing in mutual funds a facility was madeavailable in the form of online investment account. This feature was also made availableon netbanking and mobile banking. For the internationally aligned customers ability tosubscribe to forex card online via net or mobile was made available. In line with theregulatory requirement all the ATMs of your Bank have been upgraded to become EuropayMastercard Visa (EMV) compliant. As per the Government mandate your Bank hassuccessfully set up aadhaar enrolment centers in 145 branches and also surpassed thetransaction volume mandate given by Unique Identification Authority of India (UIDAI). YourBank also participated in the Pradhan Mantri Gram Swaraj Abhiyan and achieved 100% of thetargets under this program. India's first bilingual voice bot in Banking – Keyathat responds to customer's queries in English and Hindi was launched by your Bank.Keya handled 17 lakh calls without human assistance.

Your Bank continued to ramp up 811 acquisition numbers this year aswell. In order to drive higher engagement with 811 customers your Bank this yearfocused on cross selling various bank products to the existing 811 customers.

In line with its commitment to enhance customer experience your Bankjoined Ripple's leading enterprise blockchain network (RippleNet) to provide impetusto its cross-border inward remittances. Ripple's settlement solution xCurrent isnow used to provide the customers with real-time cross-border transactions in a safe andsecure manner. FCNR deposits in Singapore Dollar (SGD) was re-introduced to provide NRIcustomers in Singapore the facility of placing deposit in India under the FCNR (B) scheme.Your Bank participated in a host of events ranging from business forums sports leagues& industry awards etc. to engage with the Mariner community in India.

The Corporate salary business scaled up significantly in 2018-19 and itnow services over 3.5 million customers across more than 25000 corporates. Acquisition andservicing capability has been further streamlined to enable inroads in Tier 2 & 3markets as well and will be the focus in 2019-20.

The year 2018-19 continued to be strong for your Bank's creditcard business. Spend volumes on credit card have grown by 56% driven heavily by e-commercetransactions and higher spends per transaction. Digital/Paperless acquisition of CreditCard customers through Sales App and other digital channels like Mobile and Net Bankingsaw a growth of 290% versus last year showcasing a superior on-boarding journey to thecustomers. The business also introduced a unique solution under its Commercial Cardsproduct line which enables a "Do-it-yourself" payment interface for corporatesto streamline their indirect expenses like statutory and other ad-hoc payments.

On the Salaried Personal loans segment loans on mail and SMS waslaunched to enhance the bouquet of instant loan offering. These along with other digitalchannels have enabled Salaried Personal Loans book to grow by 45% year on year.

With a view to enhance customer experience your Bank introducedmultiple self-serve features on Home Loan and Loan against Property on Mobile Banking.This helped the customers view their loan details on the Mobile App itself includingdetails like tax certificate disbursement and repayment details through a click of abutton. The service which went live in January 2019 has already seen over 1 lakh+ hits onthe Mobile Banking App Loan section.

Commercial Banking

Your Bank's Commercial Banking business focuses on meeting thebanking and financial needs of various customer segments with deeper coverage that goesbeyond metro and urban centers through an expanding network of branches and associates.The business has specialized units which offer financial solutions in the areas ofCommercial Vehicles Construction Equipment Tractor and Agriculture business. It servicesthe priority sector through providing finance for Tractor Crop loans Small Enterprisesand Allied agricultural activities thereby helping your Bank meet its financial inclusiongoal. In line with growing rural incomes our Bank's Commercial Bank branches haveexperienced robust growth across product lines on savings as well as lending side.

Your Bank's Construction Equipment (CE) and Tractor Financebusinesses reported significant growth and gained market share in their respectivebusinesses while Commercial Vehicle (CV) business witnessed a slight drop in market sharedue to margin pressures & change in load carrying norms. Tractor Finance businesseswitnessed double digit volume growth and continued to gain market share. The Governmentspending in the infrastructure sector has led to a strong demand in the CE and CVindustry.

Your Bank's Agriculture Financing business continued its focus onthe agriculture value chain funding for various agro processing activities. It hasregistered good growth despite volatility and uncertainty in the commodities market.Microfinance Institutions (MFI) segment growth remains robust and asset quality remainsgood.

Branches in semi-urban and rural area comes under the umbrella ofCommercial Bank. This network plays a crucial role in meeting the financial inclusiongoals and credit demand of ‘Bharat'. Branch network has expanded and theLiability book has grown at a healthy pace.

Wholesale Banking

Your Bank's Wholesale Banking business caters to a wide range ofcorporate customer segments including major Indian corporates conglomerates financialinstitutions public sector undertakings multinational companies mid-market companiessmall and medium enterprises and realty businesses. This segment offers a comprehensiveportfolio of products and services to these customers including working capital financemedium term finance trade finance foreign exchange services other transaction bankingservices custody services debt capital markets and treasury services.

The year has witnessed significant disruptions in the corporate bankingspace driven by high NPAs in the industry and stress in certain industry segments. Withmore capital from banks mutual funds and NBFCs chasing the high rated end of thecorporate space this space is witnessing high competition which in turn is pushing downyields for banks. The overall credit offtake in the economy has also been muted over thelast few years. Despite these challenges the Wholesale Banking business has been able toachieve growth in the large corporate space in a healthy and profitable manner. Over theyears the Wholesale Banking business has grown its market share through higher customeracquisition improved customer service and product innovations.

At the same time your Bank has remained cautious in its exposureespecially in certain segments which witnessed increased stress and uncertainty duringthe year. This year the Small and Medium Enterprise (SME) business was brought into theWholesale Banking fold. The last couple of years has witnessed disruptions in the SMEspace from demonetization and rollout of GST which manifested as stress in the Bank'sbooks as well. This year a number of initiatives were taken to stabilize the businesswhile integrating it with the rest of the Wholesale Bank. The SME business is well poisedto capture the growth opportunities in the market. However this year owing to the phaseof consolidation growth in this segment was muted. Your Bank has been cautious on thereal estate developer segment given the stress in the sector. Your Bank compensated forthis slowdown by ramping up exposure to lower risk businesses such as Lease RentalDiscounting; however the spreads were impacted by this mix change. Your Bank has also beencautious on its lending to Non-Banking Financial Institutions and therefore changed mixtowards higher rated NBFCs given the challenges that the NBFC sector went through duringthe year.

Your Bank has remained as focused on adding new customers in aprofitable manner as increasing wallet share with existing customers. The last few yearshave seen a healthy addition of New-to-Bank customers in the large corporate segmentwhich in turn sets a strong foundation for future growth in the business. Going forwardyour Bank will focus on increasing the momentum in New-to-Bank customer acquisition in theSME space too.

Your Bank has an integrated Corporate and Investment Banking (CIB)approach towards certain top conglomerates and large corporates. The CIB model has rampedup well and has helped it to deepen its presence with these clients and gain furthermarket share.

Robust risk management practices are in place and your Bank hasachieved growth over the years without compromising the health of the book. At a time whenmost corporate banks in the industry are facing huge NPAs your Bank has kept a tightcontrol on asset slippages. Other than SME the rest of the corporate segment haswitnessed minimal additions to the Gross NPA this year. In SME a number of initiativeshave been taken to stabilize the business. Across corporate segments your Bank has beenproactive in rebalancing the portfolios to reflect economic situations and reduction inexposure to situations with heightened risk. Your Bank's focus on risk management hashelped the business reduce its Risk Weighted Assets (RWA) as a percentage of assets overthe past few years. The use of Risk Adjusted Return on Capital (RaRoC) pricing models hasbecome ingrained in the way the Wholesale Banking division conducts its business and hashelped to optimize pricing better utilize capital and improve return on equity. EconomicValue Add (EVA) measurement tools have been implemented that help your Bank monitor thetrue risk adjusted value being derived from each client. These initiatives ensure greaterfocus on improving income mix in favour of non-capital intensive income streams.

The strong momentum in the Integrated Global Transaction BankingServices (GTS) continues across its large suite of products. Current Account & SavingsAccount balances saw significant growth through innovative solutions and focused marketingefforts. Through focused efforts your Bank has been successful in capturing a highermarket share in Cash Management Services (CMS) from identified flagship accounts. YourBank launched various receivable solutions across C2B and B2B clients which witnessed agrowth of more than 300% in flows through client accounts. Products like Smart CollectApplication Program Interface (API) based e-collection offerings customized value addedsolutions using National Automated Clearing House (NACH) as clearing system have helpedyour Bank to acquire as well as increase its wallet share among various key clients. Withfocus on product development and building new age platforms your Bank became primarybanker to major unicorn companies. Your Bank has also invested in product development forthe acquiring business and are now bankers to top aggregators in the e-commerce space.Your Bank was also the largest banking player for Bharat Bill Payment System (BBPS) as abiller onboarding participant during the year. Your Bank believes that in this dynamicenvironment bringing the best of solutions to clients will require engagement withsolution providers in the country and your Bank has partnered with flintechs to providevalue added solutions. These initiatives have helped increase Current Account balancessubstantially. On the trade side the funded and non-funded book continued a strong doubledigit growth momentum. Strong focus on fee income through trade flows led to a robustgrowth in fees earned through trade finance and services with the wholesale businessalmost doubling this fee income. The strong growth in GTS products has helped your Bank topartly compensate for the fall in spreads in its traditional lending business.

The Custody business continued to witness strong growth despite marketuncertainty seen during the second half of this year. Your Bank is today one ofIndia's largest domestic Custodians with Assets Under Custody (AUC) upwards of US$ 30Bn and is strongly positioned in the India focused offshore funds space. The Custodybusiness added a number of marquee Alternative Investment Funds (AIF) & PortfolioManagement Services (PMS) clients in the Domestic segment in addition to having a goodmarket share amongst India based Foreign Portfolio Investments (FPIs). Your Bank alsoobtained a Professional Clearing Member (PCM) License to offer clearing services on theINDIA INX Exchange in GIFT City becoming the first bank custodian to do so.

Your Bank's dedicated Service Solutions vertical has helped ensurefaster customer response and improve customer experience. This vertical is the singlepoint of contact for all service related and documentation issues with personnel presentacross the country. Your Bank has been successful in significantly reducingTurn-Around-Time (TAT) across various processes including account opening and disbursals.Initiatives such as digitization and workflow automation have helped reduce TAT further.

Strengthening its organizational platform your Bank continues totarget productivity and efficiency improvements. There is greater focus on measuring andimproving employee productivity including of its sales force through use of technology anddigital tools. Given high focus in this area costs have been kept well in control furtherimproving profitability of the business.

Your Bank has undertaken a series of digital initiatives primarilyfocused on improving customer experience. These digital initiatives encompass the entiregamut of transaction banking and include initiatives such as creation of a complete C2Bplatform for our corporate clients which includes one view for products like BBPS UnifiedPayment Interface (UPI) and E-Collections. Corporate mobility platform has been extendedfor all segments of your Bank and is witnessing good growth in adoption. A number of newproduct initiatives have been taken in e-commerce - acquiring issuances liquiditymanagement UPI BBPS API based solutions over the counter products Government basedinitiatives aadhaar based initiatives and structured receivable and payable solutions.Bank is investing on NACH and escrow platforms to make onboarding and transactionexperience seamless for clients. Furthermore a few long term initiatives are in variousstages of implementation which include an online trade portal an integrated corporateportal incorporation of the block chain based technology in foreign and domestic tradeproducts and multiple digital initiatives being undertaken for various Government Bodies.

Wealth Management

Wealth Management your Bank's private banking arm acts asadvisor to a number of distinguished Indian families and is of the oldest and the mostrespected Indian wealth management firms. Its customers range from entrepreneurs tobusiness families and professionals.

The business has a strong advisory capability for private clientsacross equities fixed income & alternates with complete alignment of interest whichmakes it the preferred advisor across HNI investors. In addition to comprehensivefinancial solutions the business goes beyond investments and includes value addedservices such as assistance with investment structuring banking and credit consolidatedreporting referral for philanthropy services and concierge services. With an in-depthunderstanding of client requirements and expertise across various asset classes thebusiness offers the widest range of financial solutions through transaction-basedinvestment approach and asset-advisory based approaches. It has built a formidable suiteof products and services for high net worth individuals and offers the same through itsAsset-Advisory model. As per the Reserve Bank of India guidelines advisory activitiesthat were being offered out of your Bank are now offered out of Kotak Investment AdvisorsLimited a subsidiary of your Bank with effect from 20th April 2019.

In addition your Bank has also built a large Priority Bankingbusiness assisting mass affluent customers with products and solutions developed to meettheir financial requirements. The total relationship value across your Bank's Wealth& Priority offerings is ~ र270000 crore.

The business has won several accolades & received recognition atvarious forums and recently it has been recognized as the Best Private Bank India twoyears in a row by Euromoney Private Banking & Wealth Management Survey 2018 & 2019& Best Private Bank India Domestic 2018 by Asian Private Banker among others.

International Business

The GIFT City Branch an International Financial Services CenterBanking Unit of your Bank has helped your Bank to participate in syndication of overseasloans lending to clients in international markets and providing External CommercialBorrowing to eligible Indian corporates. Client forex and derivative transactions werealso undertaken to help offshore clients with management of interest rate and currencyrisks in addition to routine investments in offshore bonds.

Asset Reconstruction

Insolvency and Bankruptcy Code (IBC) initiated to resolve bad andstressed loan is settling down and it may take few more years to see the major impact ofthis landmark legislation.

During FY 2018-19 resolutions of some large NPA's of the countryare seen at an advanced stage through the IBC process.

Your Bank which has been an active player in the business for severalyears has made significant progress in acquiring several NPA's in all the categorieslike SME Corporate and Retail Assets. The size of the book through acquisition from otherbanks largely by auctions have sizeably increased in the last financial year. Your Bankbelieves that the market will continue to be robust for acquiring bad loans and it shouldbe able to continue to acquire sizeable loans at a fair price in the coming year as well.


Your Bank's treasury actively contributes to your Bank by way of:

• Proprietary Trading: The various proprietary trading desksactively trade in products such as Fixed Income Money Markets Derivatives ForeignExchange and Equity. Primary Dealer Desk – part of the proprietary trading deskactively participates in the primary auctions of government securities makes market ingovernment securities and engages in retailing of government securities.

• Customer Transactions:

• Forex & Derivatives: Facilitating customer access to foreigncurrency markets through cash & derivatives products for remittances tradetransactions and for managing foreign exchange and interest rate risks.

• Bullion: Under License from Reserve Bank of India (RBI) Bankimports gold and silver to meet needs of customers. The bullion desk provides efficientworking capital solutions to domestic Jewellery manufacturers as per prescribed rules ofRBI.

• Balance Sheet Management: The Balance Sheet Management Unit(BMU) ensures maintenance of regulatory reserves and adequate liquidity buffers and alsomanages the Interest rate risk & Liquidity risk within the Risk appetite of the Bank.

Human Resources

FY 2018-19 has been a year of strengthening initiatives in the area ofdigital adoption employee engagement employee wellness and development.

With the talent base of the Bank reaching to over 41500 employeesmore and more millennials being on boarded the average age of the employee base has goneyounger by a year at 31 years now. Your Bank has taken various initiatives to engage usingdigital and technology platforms with employees. It has launched Mobile first app KLAPPfor managing onboarding journey of from pre joining to post joining stage to transitionfrom candidate to employee seamlessly. This has helped in engagement quick assimilationand personalization of the onboarding journey for the new joinee.

Your Bank has also enhanced the focus on future readiness of mid tosenior level employees through learning intervention of Digital Blurr Design Thinking andDigi-Talk. With the renewed rigor on platform launched for on demand learning and bytesize learning has enhanced the horizon for learning from behavioral and functionallearning to developing skills for future career needs of the employees.

The focus on performance discussion has been enhanced with more throughthe year focus on "Talk2Do" between managers and their teams for constructiveperformance discussions.

With the objective to identify build and nurture leaders across levelsto deliver superior business results and address individual career aspirations your Bankcontinues to invest in spans structures and assessment tools through variousinterventions of talent management succession planning and career management.

Technology & Digitization

Technologies this year were leveraged to deliver customer experiencebusiness efficiency business collaborations and cybersecurity.

Mobile banking app continues to be the highest rated iOS app with 4.8rating and Android app is at 4.5 rating. App was made more user friendly and saw improvedcustomer experience with home page revamp and payment section revamp. App also became morecomprehensive with new features like forex card section premature withdrawal offixed/recurring deposits loan section online investment account opening etc.

Newer channels Keya Chatbot and WhatsApp Banking were launched whichuse conversational banking approach and Natural Language Processing (NLP) to interact withcustomers. Keya Chatbot is enabled on all digital channels viz. Mobile App www.kotak.comwebsite and Net Banking. Keya Chatbot is able to handle queries about products like CreditCard Debit Card Accounts Fund Transfer Bill Payment and Personal Loan. Your Bank isthe first Indian bank to offer banking services on Whatsapp which allows customers to getservices on WhatsApp without installing any app or visiting any webpages. Search anddiscovery use cases have been enabled on Google Assistant thru voice based interaction.

Kotak Net Banking features were further enhanced with revamped paymentexperience online investment account opening forex card section buy insurance policiesonline refreshed Home page for notifications and revamped Apply Now section.

To make website pages lighter and mobile friendly which helps inimproving SEO (Search Engine Optimization) ranking 90+ Accelerated Mobile Pages (AMPs)made live on These AMP pages are 5 times faster than normal ones. Kotakwebsite has been acknowledged as "Best in class brand for mobile experience" inFinance category - Google ‘Masters of mobile' report.

Multiple digital payment methods were introduced for the Bank'scustomers including Visa Paywave Samsung Pay Bharat QR UPI BBPS (Bharat Bill PaymentSystem) for Consumers & for Billers AEPS (Aadhaar Enabled Payment System) AadhaarPayand FASTag – enabling more cashless payments for consumers merchants corporatesflintechs billers etc. and reinforcing Kotak's commitment to the country'sDigital India journey. M-store in the Mobile App has been re-branded to KayMall andencompasses multiple commerce categories like Travel (Train Bus Flights Hotels)Shopping (Flipkart Shopclues) and Subscriptions which the consumer can securely &seamlessly purchase from within the comfort of the Mobile App or Netbanking without havingto use a third-party application. Some of the new products launched like Aadhaar EnabledPayment System (AEPS) and AadhaarPay have enabled last-mile payments for BusinessCorrespondent Agents and have also allowed the Bank to service its customers for serviceslike cash withdrawal and payments. For the second consecutive year your Bank has beenranked amongst the Top 5 Banks in MeitY's ‘Digital Payments AchievementDashboard' (based on a point-scoring methodology) and has overachieved targets set byMeitY for FY 2018-19 on Digital Payments transaction @ ~110% of target achievement.

Your Bank started fulfilling the digitally originated leads for Homeloans and scaled up the Super-Fast Home Loan initiative.

There were certain digital initiatives of the Bank which were suspendedbasis the Supreme Court ruling on Aadhaar viz. credit card product as part of 811 Savingsaccount opening journey by using Aadhaar stack and credit bureau; Project Velocity whichaimed at servicing through biometric means was a hit with customers and branches with ahigh Net Promoter Score (NPS) of 77+ till September due to the immediate fulfilment oftheir service requests which had to be stopped post the ruling. But later different waysof automation were devised to keep the same experience of near realtime fulfilment; 811FullKYC biometric based onboarding was suspended through this platform(s) post the rulinglast year. However subsequently the non Aadhaar (scanned physical image based KYC withOTP authentication) full KYC platform for onboarding was made live.

Robotics Process Automation where more than 2 lakh transactions havebeen completed across multiple processes and Cognitive Machines Reading are the nextscaleup areas which are taking shape in India and are said to bring in a culture of basicroutine tasks being automated.

Ecosystem collaborations have been enabled thru the Bank's Openbanking platform. The Bank has onboarded lending and payment application program interface(API) products which have gone live with 57 partners availing those API products.

This year the Bank focussed on SMEs and launched some initiativesaround it. Your Bank is the first bank to take co-lending LIVE with Capital Float andparticipate in Market Place model of Digital processes have beenset up for disbursing Business Loan instantly for existing customers.

This year technologies were put in place to provide support forcustomer lending. Starting with a Lead Management System to accept loan enquires andtrack them to systems to support loan application evaluation and a "business ruleengine" that uses analytics to assist in disbursement decisions. The systems willprovide a base for processing of a wide spectrum of different types loans from simplepersonal loans to the more complex housing loans in the coming years.

The foundation for NLP laid down last year to launch ‘Keya'the first Artificial Intelligence (AI) powered Voicebot in the banking sector was furtherleveraged. The use of IVR was replaced by conversational banking so that thecustomer's experience on calling the Bank's contact center was simpli ed andenhanced. A "Virtual Relationship Manager" capability was also introduced toenable customers to telephonically connect to their personalized service manager.

With increased focus on digital solutions and heightened cybersecurityconcerns there is a need for constant innovation in the information security area. Newsolutions were implemented to mitigate the risk of APT (Advanced Persistent Threat)attacks. The solution detects and prevents custom malicious code being sent over thenetwork into the Bank's environment.


As at 31st March 2019 your Bank has nineteen (19)subsidiaries as listed below:

Domestic Subsidiaries
Kotak Mahindra Prime Limited
Kotak Mahindra Investments Limited
Kotak Securities Limited
Kotak Mahindra Capital Company Limited
Kotak Mahindra Life Insurance Company Limited
Kotak Mahindra General Insurance Company Limited
Kotak Mahindra Asset Management Company Limited
Kotak Mahindra Trustee Company Limited
Kotak Mahindra Pension Fund Limited
Kotak Investment Advisors Limited
Kotak Mahindra Trusteeship Services Limited
Kotak Infrastructure Debt Fund Limited
IVY Product Intermediaries Limited
BSS Microfinance Limited
International Subsidiaries
Kotak Mahindra (UK) Limited
Kotak Mahindra (International) Limited
Kotak Mahindra Inc.
Kotak Mahindra Financial Services Limited
Kotak Mahindra Asset Management (Singapore) Pte. Limited
The key business segments where the subsidiaries operate include investment banking stock broking vehicle finance advisory services asset management life insurance and general insurance.

Kotak Mahindra Life Insurance Company Limited (KLI) has recorded agrowth of 23.8% on the gross premium mainly coming from Individual renewal premium. KLIhas solvency ratio of 3.02 against requirement of 1.50.

Capital Markets witnessed a significant slowdown in primary marketactivity compared to previous fiscal; accordingly Kotak Securities Limited and KotakMahindra Capital Company Limited reported lower profits compared to the previous year.

The growth in the mutual funds industry continued albeit with arelatively modest pace in FY 2019. Kotak Mahindra Asset Management Company (KMAMC)continues to be the 7th largest Fund House in the country in terms of QuarterlyAverage Asset Under Management (QAAUM). Market share in QAAUM has grown to 6.14% from4.32% 3 years back. KMAMC has outperformed strong growth in the mutual funds industry.

The NBFC sector experienced liquidity problems in September 2018. Thisnot only resulted in increase in borrowing costs but also Kotak Mahindra Prime Limited andKotak Mahindra Investments Limited (KMIL) had to maintain surplus liquidity for sometimewhich had an impact on their bottomline. The liquidity concern in NBFC sector eased postJanuary 2019. International subsidiaries have performed well and continue to add to theshareholders value.

KMIL on 26th April 2019 sold off its entire equity stake of19.77% held in Matrix Business Services India Pvt. Ltd. (‘Matrix') an associatecompany of KMIL. Accordingly Matrix ceased to be an associate company of KMIL &consequently of the Bank from that date.

The various activities of the subsidiaries and the performance andfinancial position of the subsidiaries and associates are outlined in the ManagementDiscussion and Analysis section appended to this Report.

The Bank's Policy for determining material subsidiaries isavailable on the Bank's website viz. URL: governance/policies.html in line with theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. KLI is amaterial subsidiary of the Bank.

As at 31st March 2019 your Bank has following four (4)Associate companies: Infina Finance Private Limited Phoenix ARC Private Limited MatrixBusiness Services India Private Limited * ACE Derivatives & Commodity Exchange Limited

* Ceased to be an Associate Company w.e.f. 26th April 2019

The Annual Report which consists of the financial statements of yourBank on standalone basis as well as consolidated financial statements of the group for theyear ended 31st March 2019 is being sent to all the members of your Bank. Thefinancial statements of the subsidiaries used for consolidation of the Bank'sconsolidated financial results are special purpose financial statements prepared inaccordance with Generally Accepted Accounting Principles in India (‘GAAP')specified under Section 133 of the Companies Act 2013 read with relevant notifications.Web link of the Annual Report is sent to all members whose email IDs are registered withthe Bank/Depository Participant(s). For members who have not registered their email IDsphysical copies of the Annual Report are sent. It does not contain Annual Reports of yourBank's subsidiary companies. Your Bank will make available full Annual Report(including the Annual Reports of all subsidiaries) either a hard or soft copy dependingupon request by any member of your Bank. These Annual Reports will be available on yourBank's website viz. URL: and will also beavailable for inspection by any member at the Registered Office of your Bank duringworking hours.


The stock options and the stock appreciation rights granted to theemployees of the Bank and its subsidiaries currently operate under the following Schemes:

• Kotak Mahindra Equity Option Scheme 2007

• Kotak Mahindra Equity Option Scheme 2015

• Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme2007

• Kotak Mahindra Bank Ltd. (IVBL) Employee Stock Option Scheme2010

• Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme2013

• Kotak Mahindra Stock Appreciation Rights Scheme 2015

The disclosures requirements under the Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations 2014 for the aforesaid ESOP & SARsSchemes in respect of the year ended 31st March 2019 are disclosed on theBank's website viz. URL:


In August 2018 your Bank completed its issuance of PerpetualNon-Convertible Preference Shares (PNCPS) resulting in dilution of promoter stake to19.70% of the paid-up capital of the Bank. However the Reserve Bank of India (RBI)communicated to the Bank that the PNCPS issuance does not meet their promoter dilutionrequirement. The Bank has by way of abundant caution in December 2018 filed a writpetition with the Hon'ble Bombay High Court to validate its position. The writpetition is pending.


Pursuant to Regulation 27 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 (SEBI LODR Regulations) a separate sectionentitled ‘Report on Corporate Governance' has been included in this AnnualReport. The Report of Corporate Governance also contains certain disclosures requiredunder the Companies Act 2013. A Business Responsibility Report containing the requisitedetails under Regulation 34 of the SEBI LODR Regulations is disclosed on the Bank'swebsite viz. URL:


Directors retiring by rotation

Mr. C Jayaram (DIN 00012214) retires by rotation at the Thirty FourthAnnual General Meeting (AGM) of the Bank and is eligible for reappointment.

Appointment/Re-appointment of Directors

Dr. Shankar Acharya (DIN 00033242) who was Non-Executive Chairman ofthe Bank since July 2006 did not seek re-appointment as he completed 70 years of age andretired by rotation as a Director at the last Annual General Meeting of the Bank held on19th July 2018. Mr. Prakash Apte (DIN 00196106) who has been on theBoard of the Bank since March 2011 was appointed as part time Chairman of the Bank witheffect from 20th July 2018.

The Board of Directors of the Bank at its meeting held on 14th/15thMarch 2019 based on the recommendation of the Nomination and Remuneration Committee(NRC) and the results of the performance evaluation re-appointed Mr. Prakash Aptepart-time Chairman of the Bank as an Independent Director for a second term from 18thMarch 2019 to 17th March 2024 subject to necessary approvals. The Boardbased on the recommendation of the NRC also appointed Mr. Uday Shankar (DIN 01755963) asan Independent Director of the Bank with effect from 16th March 2019 for aperiod of five years subject to necessary approvals. Further the Board recommendedappointment of Mr. K.V.S. Manian (DIN 00031794) & Mr. Gaurang Shah (DIN00016660) initially as Additional Directors acting as Whole-time Directors of the Bank fora period of three years with effect from the date of approval of the Reserve Bank ofIndia and subject to necessary approval from the shareholders.

As per Section 10-A(2-A) of the Banking Regulation Act 1949 (B.R.Act) no director of a banking company other than its chairman or whole-time director bywhatever name called shall hold office continuously for a period exceeding eight years.In accordance with Section 10-A(2-A) of the B.R. Act and based on the recommendation ofthe NRC and the results of the performance evaluation the Board of Directors of the Bankat its meeting held on 30th April 2019 re-appointed Ms. Farida Khambata (DIN06954123) as an Independent Director of the Bank for a second term i.e. the remainingperiod of three years from 7th September 2019 to 6th September2022 subject to necessary approval from the shareholders.

Accordingly approval of the shareholders for re-appointment of Mr.Apte & Ms. Khambata through special resolutions and appointment of Mr. Shankar and theWhole-time directors through ordinary resolutions is being sought at the ensuing AGM ofthe Bank. The details of the Directors being appointed/re-appointed are set out in theNotice of the ensuing AGM of the Bank.

Resignation/Cessation of Directors

Mr. Mark Newman (DIN 03518417) Non-Executive Non-Independent Directorresigned from the Board of the Bank with effect from 22nd February 2019.

Mr. Amit Desai (DIN 00310510) ceased to be a director of the Bank witheffect from 17th March 2019 on completion of his eight years tenure pursuantto the provisions of Section 10-A(2-A)(i) of the Banking Regulation Act 1949.

Your Directors place on record their appreciation for the valuableadvice and guidance rendered by Mr. Mark Newman and Mr. Amit Desai during their tenure asDirectors of the Bank.

Declaration from Independent Directors

The Board has received declarations from the Independent Directors asper the requirement of Section 149(7) of the Companies Act 2013 and the Board issatisfied that the Independent Directors meet the criteria of independence and fulfill theconditions as mentioned in Section 149(6) of the Companies Act 2013 and are independentof the management.

Board Evaluation

The Nomination and Remuneration Committee (NRC) of the Bank'sBoard has formulated the criteria for performance evaluation of the Directors and theBoard as a whole which broadly covers the Board role Board/Committee membership practice& procedure and collaboration & style. The performance of the Committees of theBoard is evaluated on the criteria viz. composition & quality process & procedureand the terms of reference.

The NRC of the Bank's Board engaged an external professionalservices firm to facilitate the self-evaluation process of the Board its committeesChairman and individual directors.

A Board effectiveness assessment questionnaire designed for theperformance evaluation of the Board its Committees Chairman and individual directors(including Independent directors) in accordance with the criteria set and covering variousaspects of performance including structure of the board meetings of the board functionsof the board role and responsibilities of the board governance and complianceevaluation of risks grievance redressal for investors conflict of interest stakeholdervalue and responsibility relationship among directors director competency boardprocedures processes functioning and effectiveness was circulated to all the directorsof the Bank for the annual performance evaluation.

Based on the assessment of the responses received to the questionnairefrom the directors on the annual evaluation of the Board its Committees the Chairman andthe individual directors the Board Evaluation Report was placed before the meeting of theIndependent Directors for consideration. Similarly the Board at its meeting assessed theperformance of the Independent Directors. The Directors noted that the results of theperformance evaluation of the Board & its Committees Chairman and individualdirectors indicated a high degree of satisfaction amongst the directors. In line with thelast year's suggestions of the directors changing market dynamics & emergingdemographic status of the customers it was felt to actively consider bringing on theBoard a director with digital and/or IT expertise to guide the Bank to the next level.Accordingly the Board has appointed Mr. Uday Shankar Director who has been driving thedigital initiatives of Star India and has expertise in the field especially inunderstanding the customers' digital needs. Some of the suggestions this year forimproving the performance of the Board & Committees were viz. enhanced oversight andopportunities for improvement & functioning of some committees continuing educationof the Board on new developments from governance prospective and Independent directorsmeeting with the Chairman individually once a year. Accordingly it is proposed to conveneevery year a meeting of the Independent Directors with the Chairman individually and alsocontinue to educate the Board on new developments from governance prospective and enhancetheir understanding of relevant risks regulatory & industry issues. Further forimproving the functioning of some of the committees steps have been taken to enhancetheir scope.

Key Managerial Personnel (KMPs)

The following officials of the Bank continue to be the "KeyManagerial Personnel" pursuant to the provisions of Section 203 of the Companies Act2013:

• Mr. Uday Kotak Managing Director & CEO

• Mr. Dipak Gupta Joint Managing Director

• Mr. Jaimin Bhatt President & Group Chief Financial Officer

• Ms. Bina Chandarana Company Secretary

Appointment & Remuneration of Directors & KMPs

The appointment and remuneration of Directors of the Bank is governedby the provisions of Section 35B of the Banking Regulation Act 1949. The NRC of theBank's Board has formulated criteria for appointment of Senior Management personneland the Directors. Based on the criteria set it recommends to the Board the appointment ofDirectors and Senior Management personnel.

The NRC reviews the range of skills experience and expertise on theBoard and identify its needs. After a detailed search a master list of candidates isprepared. The NRC then shortlists the candidates from the master list based on theselection criteria viz. qualifications knowledge experience skills expertise fit& proper status positive attributes as per the suitability of the role independentstatus and various regulatory/ statutory requirements as may be required of the candidate.After detailed discussions and deliberations NRC recommends the candidate to the Board.Recognizing the skill set requirement at the Board NRC went through the aforesaid processfor selection of the new director on the Board this year and recommended the appointmentof Mr. Uday Shankar who has been driving the digital initiatives of Star India and hasexpertise in the field especially in understanding the customers' digital needs.

The Reserve Bank of India (‘RBI') vide its circularno.DBOD.No.BC.72/29.67.001/2011-12 dated 13th January 2012 has issued theGuidelines on Compensation of Whole Time Directors / Chief Executive Officers / Other RiskTakers of Private Sector Banks on Compensation Policy which inter alia cover thefollowing:

• Proper balance between fixed pay and variable pay;

• Variable pay not to exceed 70% (Seventy Per Cent) of the fixedpay in a year;

In accordance with the aforesaid RBI Circular the Board of the Bankhas adopted a Compensation Policy for its Whole-time Directors Chief Executive Officer ofthe Bank and other employees which includes issue of stock appreciation rights as a formof variable pay linked to the Bank's stock price payable over a period of time. Thesalient features of the Compensation Policy are as follows:

• Objective is to maintain fair consistent and equitablecompensation practices in alignment with Kotak's core values and strategic businessgoals.

• Applicable to all employees of the Bank. Employees classifiedinto 3 groups: o Whole-time Directors/Chief Executive Officer o Risk Control andCompliance Staff o Other categories of Staff

• Compensation structure broadly divided into Fixed Variable andESOPs o Fixed Pay – Total cost to the Company i.e. Salary Retirals and OtherBenefits o Variable Pay – Linked to assessment of performance and potential based onBalanced Key Result Areas (KRAs) Standards of Performance and achievement of targets withoverall linkage to Bank budgets and business objectives. The main form of incentivecompensation includes

– Cash Deferred Cash/Incentive Plan and Stock AppreciationRights. o ESOPs – Granted on a discretionary basis to employee based on theirperformance and potential with the objective of retaining the employee.

• Compensation Composition – The ratio of Variable Pay toFixed Pay and the ratio of Cash v/s Non Cash within Variable pay outlined for eachcategory of employee classification.

• Any variation in the Policy to be with approval of theNomination & Remuneration Committee.

• Malus and Clawback clauses applicable on Deferred Variable Pay.

• Ensuring no personal hedging strategies by employees whichundermine risk alignment effects as part of their remuneration.

The details of the remuneration paid to the Non-Executive ChairmanExecutive and Non-Executive Directors of the Bank for the year ended 31stMarch 2019 is provided in the Corporate Governance Report annexed to this Report.

The Non-Executive Chairman of the Bank receives a fixed amount ofremuneration as recommended by the Board and approved by the shareholders of the Bank andRBI from time to time. He also receives remuneration by way of sitting fees for attendingmeetings of the Board or Committees thereof.

RBI vide its circular no. DBR.No.BC.97/29.67.001/2014-15 dated June 12015 has issued guidelines on payment of compensation to the Non-Executive Directors(NEDs) of private sector banks which inter-alia specifies the following:

• The Board of Directors of the Bank (in consultation with theNomination & Remuneration Committee) needs to formulate and adopt a comprehensivecompensation policy for NEDs (other than part-time non-executive Chairman).

• Maximum amount of profit related commission not to exceedर 10 lakh per annum for each director of the Bank.

Accordingly in line with the aforesaid RBI circular and pursuant tothe relevant provisions of the Companies Act 2013 the Board of the Bank has adopted acompensation policy for the NEDs (excluding the part-time Non-Executive Chairman). Thesalient features of the Compensation Policy are as follows:

• Compensation structure broadly divided into: o Sitting fees oRe-imbursement of expenses o Commission (profit based)

• Amount of sitting fees and commission to be decided by the Boardfrom time to time subject to the regulatory limits.

• Overall cap on commission for each director र 10 lakh perannum.

• NEDs not eligible for any stock options of the Bank.

Remuneration paid to the KMPs is in line with the Compensation Policyof the Bank which is based on the RBI Guidelines.

Disclosures pursuant to Rule 5 of Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014

1. Ratio of the remuneration of each director to the medianremuneration of the employees for the financial year:

Directors Title Ratio
Mr. Uday Kotak Managing Director & CEO 54.53x
Mr. Dipak Gupta Joint Managing Director 54.36x
Dr. Shankar Acharya * Non-Executive Chairman -
Mr. Prakash Apte * Non-Executive Chairman -
* Refer Note 3

2. Percentage increase in remuneration of each director ChiefFinancial Officer Chief Executive Officer Company Secretary or Manager if any in thefinancial year:

Directors/KMP Title % increase in remuneration % increase in remuneration excluding SARs
Mr. Uday Kotak Managing Director & CEO 10.99 10.99
Mr. Dipak Gupta Joint Managing Director 12.85 12.85
Dr. Shankar Acharya * Non-Executive Chairman - -
Mr. Prakash Apte * Non-Executive Chairman - -
Mr. Jaimin Bhatt Group CFO 8.42 7.31
Ms. Bina Chandarana Company Secretary 1.24 2.90

* Refer Note 3

3. Percentage increase in the median remuneration of employeesin the financial year:

For employees who were in employment for the whole of FY 2017-18 and FY2018-19 increase in the median remuneration is 11.19%.

4. Number of permanent employees on the rolls of Bank at the endof the year: 41753

5. Average percentile increase already made in the salaries ofemployees other than the managerial personnel in the last financial year and itscomparison with the percentile increase in the managerial remuneration and justificationthereof and point out if there are any exceptional circumstances for increase in themanagerial remuneration:

For employees other than managerial personnel who were in employmentfor the whole of FY 2017-18 and FY 2018-19 the average increase is 11.16% and 10.61%excluding SARs.

Average increase for managerial personnel is 9.66% and 9.76% excludingSARs.

6. Affirmation that the remuneration is as per the remunerationpolicy of the Bank:

The Bank is in compliance with its Compensation Policy.


1) Remuneration includes Fixed pay + Variable paid during the year +perquisite value as calculated under the Income Tax Act 1961. Remuneration does notinclude value of Stock Options.

2) Stock Appreciation Rights (SARs) are awarded as variable pay. Theseare settled in cash and are linked to the average market price/closing market price of theBank's stock on specified value dates. Cash paid out during the year is included forthe purposes of remuneration.

3) Dr. Shankar Acharya retired as a Non-Executive Chairman of the Bankon 19th July 2018 & Mr. Prakash Apte a Non-Executive Independent Directorof the Bank was appointed as a Non-Executive Chairman of the Bank with effect from 20thJuly 2018. Accordingly disclosure with respect to their ratio of remuneration/percentageincrease in remuneration is not made.

4) The Non-Executive Directors of the Bank other than theNon-Executive Chairman receive remuneration in the form of sitting fees for attending theBoard/ Committee meetings and in the form of an annual profit based commission. TheNon-Executive Chairman gets sitting fees for attending meetings and gets a remunerationapproved by the shareholders and RBI.


Pursuant to Section 204 of the Companies Act 2013 (‘Act')your Bank has appointed Ms. Rupal D. Jhaveri a Company Secretary in Practice as itsSecretarial Auditor. The Secretarial Audit Report for the financial year ended 31stMarch 2019 as required under Section 204 of the Act and Regulation 24A of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is annexed to thisReport. Your Bank is in compliance with the applicable Secretarial Standards issued by TheInstitute of Company Secretaries of India and approved by the Central Government underSection 118(10) of the Companies Act 2013 for FY 2018-19.

Kotak Mahindra Life Insurance Company Limited ('KLI') the Bank'smaterial unlisted subsidiary has got its secretarial audit done and there are noreservations or adverse remarks or disclaimers made in the Secretarial Audit Report forthe financial year ended 31st March 2019. The Secretarial Audit Report of KLIis annexed to this Report.


Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act2013 read with Rule 12(1) of the Companies (Management and Administration) Rules 2014the Annual Return of the Bank as on 31st March 2019 once prepared shall bedisclosed on the Bank's website viz. URL:

An extract of the Annual Return as on 31st March 2019 inForm MGT-9 is annexed to this Report.


Being a banking company the disclosures required as per Rule 8(5)(v)& (vi) of the Companies (Accounts) Rules 2014 read with Section 73 and 74 of theCompanies Act 2013 are not applicable to your Bank.


Messrs S.R. Batliboi & Co. LLP Chartered Accountants statutoryauditors of your Bank retire on the conclusion of the Thirty fourth Annual GeneralMeeting of the Bank. They have been auditors of the Bank for last four financial years.Pursuant to the guidelines issued by the Reserve Bank of India (RBI) an audit firm isallowed to continue as the statutory auditor of a bank for a continuous period of fouryears only. Accordingly it is proposed to appoint subject to the regulatory approvalsMessrs Walker Chandiok & Co. LLP Chartered Accountants (Registration No.001076N/N500013) as the statutory auditors of the Bank in place of Messrs S.R. Batliboi& Co. LLP Chartered Accountants who have completed four years as the statutoryauditors. The necessary application has been made to RBI and approval is awaited. Theappointment of auditors along with the relevant details is proposed to the members in theNotice of the current i.e. the Thirty fourth Annual General Meeting for a period of twoyears from the conclusion of the Thirty fourth Annual General Meeting until the conclusionof the Thirty sixth Annual General Meeting of the Bank subject to the annual approval ofRBI.


The Board of Directors confirms that your Bank has laid down set ofstandards processes and structure which enables to implement internal financial controlsacross the organization with reference to financial statements and that such controls areadequate and are operating effectively. During the year under review no material orserious observation has been observed for inefficiency or inadequacy of such controls.


The Ministry of Finance Government of India has vide its press releasedated 18th January 2016 outlined the roadmap for implementation ofInternational Financial Reporting Standards (IFRS) converged Indian Accounting Standards(Ind AS) for Scheduled commercial bank (excluding RRBs) Non-banking Financial Companiesand Insurance companies. RBI has advised Banks vide circular no. RBI/2015-16/315DBR.BP.BC.No.76/21.07.001/2015-16 to follow the Ind AS from 1st April 2018 as notifiedunder the Companies (Indian Accounting Standards) Rules 2015 subject to anyguideline/direction issued in this regard. Subsequently RBI through its first monetarypolicy statement for FY 2018-19 on 5th April 2018 deferred Ind ASimplementation for the Scheduled commercial bank (excluding RRBs) by one year i.e. theimplementation of Ind AS will begin from 1st April 2019 onwards. Further RBIthrough vide circular no. DBR.BP.BC.No.29/21.07.001/2018-19 dated 22nd March2019 deferred the implementation of Ind AS for scheduled commercial banks till furthernotice.

As per Reserve Bank of India (RBI) directions your Bank has takenfollowing steps so far:

Submitted Standalone Proforma Ind AS financial statements to RBI ona quarterly basis effective FY 2018-19 as required.

Formed Steering Committee for Ind AS implementation. The SteeringCommittee comprises of representatives from Finance Risk Operations and Treasury. TheCommittee oversees the progress of Ind AS implementation in the Bank and providesguidance on critical aspects of the implementation such as Ind AS technical requirementssystems and processes business impact people and project management. The Committeeclosely review's progress of Ind AS implementation.

The Bank has identified gaps in IT Systems and the changes requiredto automate Ind AS. The Bank is in advanced stages for Ind AS implementation.

The Bank will continue to liaise with RBI and industry bodies onvarious aspects pertaining to Ind AS implementation.


All the Related Party Transactions that were entered into during thefinancial year were on arm's length basis and were in ordinary course of business.

Pursuant to Section 134(3)(h) 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.

All Related Party Transactions are placed before the Audit Committeefor its review and approved on a quarterly basis. An omnibus approval of the AuditCommittee is obtained for the Related Party Transactions which are repetitive in nature.Further all Related Party Transactions are reviewed by the statutory auditors of theBank. Also during the year the Bank had engaged the services of an external auditor forverification of the Related Party Transactions its disclosure and validation of theprocess followed by the Bank.

All Related Party Transactions as required under Accounting StandardsAS-18 are reported in Note 25 of Schedule 17 – Notes to Accounts of the Consolidatedfinancial statements and Note 7 of Schedule 18B – Notes to Accounts of the Standalonefinancial statements of your Bank.

The Bank's Policy on dealing with Related Party Transactions isavailable on the Bank's website viz. URL:


Pursuant to Section 186(11) of the Companies Act 2013 loans madeguarantees given securities provided or acquisition of securities by a banking company inthe ordinary course of its business are exempted from the disclosure requirement underSection 134(3)(g) of the Companies Act 2013.


Your Bank is committed to its "Vision Statement" of upholdingits Global Indian Financial Services Brand creating an ethos of trust across allconstituents developing a culture of empowerment and a spirit of enterprise therebybecoming the most preferred employer in the financial services sector.

Consistent with the Vision Statement your Bank is committed tomaintain and provide to all its employees and directors highest standards of transparencyprobity and accountability. The Kotak Group endeavours to develop a culture where it issafe and acceptable for all employees and directors to raise / voice genuine concerns ingood faith and in a responsible as well as effective manner.

A vigil mechanism has been implemented through the adoption ofWhistleblower Policy with an objective to enable any employee or director or vendor raisegenuine concern or report evidence of activity by the Bank or its employee or director orvendor that may constitute: Instances of corporate fraud; unethical business conduct; aviolation of Central or State laws rules regulations and/or any other regulatory orjudicial directives; any unlawful act whether criminal or civil; malpractice; seriousirregularities; impropriety abuse or wrong doing; deliberate breaches and non-compliancewith the Bank's policies; questionable accounting/audit matters/financialmalpractice. The concerns can be reported online on the website viz. URL: which is managed by independent third party.

Safeguards to avoid discrimination retaliation or harassment andconfidentiality have been incorporated in the policy. All employees and directors haveaccess to the Chairman of the Audit Committee in appropriate and exceptionalcircumstances. Further the Chairman of the Audit Committee has access rights to thewhistle blower portal.

The Policy has been uploaded on the Bank's intranet as well aswebsite viz. URL: policies.htmland regular communication is made for sustained awareness.


Your Bank has constituted a Board Corporate Social ResponsibilityCommittee (CSR Committee). The CSR Committee presently consists of Prof. S.Mahendra Dev Mr. C. Jayaram and Mr. Dipak Gupta.

Your Bank's CSR Committee drives the CSR programme of the Bank.Your Bank has a Board approved CSR policy charting out its CSR approach. This policyarticulates the Bank's aim to positively contribute towards economic environmentaland social well-being of communities through its CSR interventions. The core CSR focusareas outlined are:

• Education

• Vocational skills and livelihood

• Preventive healthcare and sanitation

• Reducing inequalities faced by socially and economicallybackward groups

• Sustainable development

• Relief and rehabilitation

• Clean India

• Sports

The Bank's CSR Policy is available on the Bank's website:

Pursuant to the provisions of Section 135 Schedule VII of theCompanies Act 2013 (the Act) read with the Companies (Corporate Social Responsibility)Rules 2014 the report of the expenditure on CSR by the Bank is as under:

The average net profit u/s 198 of the Bank for the last three financialyears preceding 31st March 2019 is र4813.64 crore.

The prescribed CSR expenditure required u/s 135 of the Act for FY2018-19 is र9627 lakh.

The CSR expenditure incurred from 1st April 2018 to 31stMarch 2019 u/s 135 of the Companies Act 2013 amounts to र3655 lakh as againstर2640 lakh CSR Expenditure incurred in FY 2017-18. The unspent CSR expenditureamount for FY 2018-19 is र 5972 lakh.

CSR expenditure of र3655 lakh as a percentage of average netprofit u/s 198 of the Bank at र4813.64 crore is 0.76%.

The Bank's CSR programmes and expenditures are approved by theBoard CSR Committee and the Board. The Bank's CSR programmes and expenditure areguided by the vision of creating long-term benefits for the society. The Bank has beenbuilding its CSR capabilities on a sustainable basis and is committed to graduallyincreasing its CSR spending in the coming year for its long-term projects. The Bankidentifies suitable NGO partners for carrying out its CSR programmes. It undertakes CSRprogrammes that are scalable sustainable and have the potential to be replicated acrosslocations and create a sustainable and measurable impact in communities.

Most of the CSR programmes undertaken are in the area of educationhealthcare livelihood vocational skill development sports and other areas such asrelief and rehabilitation and environmental sustainability etc. The Bank's CSRfootprint has been consistently increasing over the years. The Bank is committed tostepping-up its CSR programmes and expenditure in the years ahead.

The Bank's CSR expenditure in FY 2018-19 of र3655 lakhwhich is over 38% higher than the previous financial year. In FY 2016-17 the Bank'sCSR expenditure was र1733 lakh which increased to र2640 lakh in FY 2017-18– an increase of over 52% over the previous financial year.

One of the reasons for Bank CSR expenditure's underspend is theNGOs' inability to utilise large CSR expenditure allocated under the Bank's CSRProgrammes.

Your Bank does not consider "administrative overheads" aspart of its CSR Expenditure.

The details of CSR Programmes and Expenditure u/s 135 of the CompaniesAct 2013 for FY 2018-19 are annexed to this report.


Your Bank has a Group Enterprise wide Risk Management (ERM) frameworksupported by appropriate policies and processes for management of Credit Risk MarketRisk Liquidity Risk Operational Risk and various other Risks. Details of identificationassessment mitigations monitoring and the management of these Risks are mentioned in theManagement Discussion and Analysis section appended to this Report.


The provisions of Section 134(3)(m) of the Companies Act 2013 readwith Rule 8(3) of the Companies (Accounts) Rules 2014 are not applicable to your Bank.


The employee strength of your Bank standalone was over 41500 andalong with its subsidiaries was over 60000 as of 31st March 2019.

146 employees employed throughout the year were in receipt ofremuneration of र102 lakh or more per annum and 40 employees employed for part ofthe year were in receipt of remuneration of र8.5 lakh or more per month.

Culture and values drive have been enhanced through variousinteractions and employee communication platforms in the organization. Your Bank continuedto reiterate this through cross functional meets conducted by senior business leaders foremployees at mid management level under the "Meet 5" initiative. It has alsoenhanced the focus on mental and physical wellbeing of the employees through mobile firstplatform launched for managing tracking and facilitative on various health and wellnessrelated requirements of the employees.

Your Bank has continued on the Gender Diversity agenda.

• A differentiated talent acquisition strategy to increase womenemployee base across various suitable roles has helped us to continue adding 24% womenamongst all new hires in the Bank. While continuing with our philosophy of providing equalopportunities an aggressive push in this area will help us achieve a better balance ingender diversity.

• Prevention of Sexual Harassment (POSH): Bank continues with thebelief on zero tolerance towards sexual harassment at workplace and continues to upholdand maintain itself as a safe and non-discriminatory organization. To achieve the sameKotak reinforces the understanding and awareness of Prevention of Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013. Bank has formulatedInternal Complaints Committee (ICC) at three regions for reporting any untoward instance.Any complaints pertaining to sexual harassment are diligently reviewed and investigatedand treated with great sensitivity. The ICC members have been trained in handling andresolving complaints and have also designed an online e-learning POSH Awareness modulewhich covers the larger employee base.

Following is a summary of sexual harassment complaints received anddisposed off during the year 2018-19:

No. of complaints received 27
No. of complaints disposed off * 26

* In respect of one pending case enquiries were in progress at theclose of the year. All the cases pertaining to the previous year which were pending at thebeginning have been closed.

As Bank enters in its next phase of growth and expansion of footprintacross urban and rural India Bank and its subsidiaries continued to carry out severalinitiatives to attract and retain a pool of highly skilled and motivated employees who arealigned to the firm's vision of becoming the most trusted financial servicesprovider.

In accordance with the provisions of Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the names and otherparticulars of the employees are set out in the annexure to the Directors' Report. Interms of the proviso to Section 136(1) of the Companies Act 2013 the Directors'Report is being sent to all shareholders excluding the aforesaid annexure. The annexure isavailable for inspection at the Registered Office of your Bank. Any shareholder interestedin obtaining a copy of the said annexure may write to the Company Secretary at theRegistered Office of your Bank.


The Directors based on the representations received from theoperational management confirm in pursuance of Section 134(5) of the Companies Act 2013that:

(i) your Bank has in the preparation of the annual accounts for theyear ended 31st March 2019 followed the applicable accounting standards alongwith proper explanations relating to material departures if any;

(ii) they have selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of your Bank as at 31stMarch 2019 and of the profit of your Bank for the financial year ended 31stMarch 2019;

(iii) they have taken proper and sufficient care to the best of theirknowledge and ability for the maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding the assets of your Bank and for preventingand 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 bythe Bank and that such internal financial controls are adequate and are operatingeffectively; and

(vi) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.


Following statements/reports/certificates are set out as Annexures tothe Directors' Report:

• Extract of Annual Return under Section 134(3)(a) of theCompanies Act 2013 read with Rule 12 (1) of Companies (Management & Administration)Rules 2014.

• Secretarial Audit Report pursuant to Section 204 of theCompanies Act 2013 and Regulation 24A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

• Details of CSR activities and spends under Section 135 of theCompanies Act 2013.

• Certificate from the auditors regarding compliance of conditionsof corporate governance as stipulated in para E of Schedule V of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015.


Your Directors would like to place on record their gratitude for thevaluable guidance and support received from the Reserve Bank of India Securities andExchange Board of India Insurance Regulatory and Development Authority and otherGovernment and Regulatory agencies. Your Directors acknowledge the support of the membersand also wish to place on record their appreciation of employees for their commendableefforts teamwork and professionalism.

For and on behalf of the Board of Directors
Prakash Apte Place: Mumbai
Chairman Date: 31st May 2019