Directors Report of HDFC Bank Ltd.

Mar 31, 2025

Your Directors take great pleasure in presenting the 31^st Annual
Report on the business and financial operations of HDFC Bank
Limited (“HDFC Bank” or “Bank”), together with the audited
accounts for the year ended March 31, 2025.

The Bank's key financial parameters continued to be healthy,
due to its robust credit evaluation of targeted customers and a
well-diversified loan book across sectors, customer segments
and products. Its performance is an outcome of its disciplined
approach to managing risk and return.

The Indian economy is expected to remain one of the fastest
growing economies in 2025-26. RBI has forecast GDP growth
of 6.5 per cent. Rural demand is expected to be healthy on
account of robust agricultural output, lower food inflation and
easing input costs. Urban consumption is also likely to benefit
from tax cuts announced in the Budget, reduction in interest
rates by the RBI and moderating inflation.

Global growth stood at 3.3 per cent in 2024, which was below
the historical average. The growth in countries like the US
remained strong at 2.8 per cent, while the growth contracted
or remained muted in the Eurozone, Japan and UK.

For more details, please refer to the Macroeconomic and
Industry section on page no. 214.

In this changing environment, your Bank continued to
prioritise growth while strengthening its focus on governance,
sustainability and inclusive development.

I Financial Parameters

The results for the year ended March 31, 2025 include the
operations of Housing Development Finance Corporation
Limited (“HDFC Limited”) and its subsidiaries (which became
subsidiaries of the Bank on amalgamation) effective from July
01, 2023 and hence are not comparable with results for the
year ended March 31, 2024.

I Based on Standalone Financial Statements

The income statement reflected a growth in revenue comprising
Net Interest Income and Non-Interest Income. While the former
grew by 13.0 per cent, the latter fell by 7.33 per cent year-
on-year. On an overall basis, Total Net Revenue for the year
ended March 31, 2025, reached ' 1,68,302.4 crore, reflecting
an increase of 6.7 per cent over the previous year.

Net Revenue Distribution

(6.7% 1,80,000			Â	Â
1,60,000	Â	Â	45,632	Â
1,40,000	49,241	--^33^,
1,20,000	Â	¦	Â	Â
	Â	Â	Â	Â
1,00,000 80,000 60,000 40.000 20.000 0 ¦ Ne in ' crore	108,532	13.0%	122,670	Â
	Â	Â	Â
	FY 2023-24 FY 2024-25 4 Interest Income ¦ Non-Interest Income

Net Profit increased by 10.7 per cent to ' 67,347.4 crore from
' 60,812.3 crore. Return on Average Net Worth was 14.56
per cent while Basic Earnings Per Share was ' 88.29 up from
' 85.83.

Net Profit

80,000 70,000 60,000	Â	(10.7%	67,347.4	Â
	60,812.3	Â	Â	Â
50.000 40.000 30.000 20.000 10,000 0	Â	Â	Â	Â
	FY 2023-24		FY 2024-25
in ' crore	Â	Â	Â	Â

Total Advances grew by 5.4 per cent and Total Deposits grew
by 14.1 per cent year-on-year. Net Interest Margin (NIM) was
at 3.48 per cent.

Growth in Advances and Deposits

28,00,000	Â		26,19,609	Â			27,14,715	Â
24,84,862			Â	Â			Â	Â
24,00,000	Â	Â	Â	23,79,786			Â	Â
20,00,000	Â	Â	Â	Â	Â	Â	Â	Â
16,00,000	Â	Â	Â	Â	Â	Â	Â	Â
12,00,000	Â	Â	Â	Â	Â	Â	Â	Â
8,00,000	Â	Â	Â	Â	Â	Â	Â	Â
4,00,000	Â	Â	Â	Â	Â	Â	Â	Â
Â	Advances			Deposits
in ' crore	¦	FY 2023-24		¦	FY 2024-25

Gross Non-Performing Assets (GNPAs) stood at 1.33 per
cent as against 1.24 per cent. This is amongst the lowest in
the industry.

I Merger

Two years into the merger, the integration of HDFC Limited's
home loan expertise with HDFC Bank's scale and reach has
solidified our position as a leading financial institution. Our
enhanced capacity to support large-scale and infrastructure
financing underscores our continued commitment to nation¬
building and job creation. As our role expands, so does our
emphasis on strong governance across the HDFC Bank
Group. We remain steadfast in upholding ethical practices,
transparency, and strong risk management-ensuring we
retain the trust that defines our legacy.

I Parivartan

Parivartan, HDFC Bank's CSR initiative, is dedicated to
supporting the inclusion of economically and socially
disadvantaged groups by fostering growth, development and
empowerment. With a commitment to creating sustainable
ecosystems, it identifies and supports programmes that
nurture and uplift communities.

Parivartan concentrates on six key areas:

1.    Rural Development

2.    Promotion of Education

3.    Skill Development & Livelihood Enhancement

4.    Healthcare & Hygiene

5.    Financial Literacy & Inclusion

6.    Natural Resource Management.

Each of these pillars is designed to foster holistic growth and
empower communities, ensuring sustainable and inclusive
development. Through Parivartan, your Bank has reached out
to underserved communities in the tribal belt, border villages
and locations with limited access. The Bank through its Holistic
Rural Development Programme (HRDP), has worked towards
creating self-reliant villages.

Your Directors are pleased to announce that the Bank
successfully fulfilled its CSR obligation for the Financial Year
2024-25.

For further details on Parivartan please refer to
pages 168 to 191.

I Summary

Indian GDP grew at 6.5 per cent in 2024-25. It had registered a
healthy average growth of 8.8 per cent over the previous three
years. This was due to moderation in urban demand as inflation
and elevated interest rates weighed on discretionary spending.

According to RBI, India is expected to grow at 6.5 per cent in
2025-26. Consumption demand in the rural areas is expected
to be supported on account of healthy agricultural output,
lower food inflation and moderating input costs. Urban
consumption demand will be supported by tax cuts, reduction
in interest rates by RBI and moderating inflation. The RBI has
reduced its policy rate by 100 basis points since February
2025, bringing it to 5.50 per cent. This along with liquidity
infusion is likely to help reduce borrowing costs and spur credit
demand in the economy.

In the year under review, the Bank focused on expanding
customer reach, maintaining balance sheet strength, and
advancing post-merger integration across business lines and
systems. As the scale and complexity of operations increased,
a formal Group Oversight Framework was introduced
to ensure alignment of governance and risk practices
across subsidiaries.

The Bank continued to contribute to national development by
enhancing access to financial services in underserved regions
and supporting rural prosperity through both commercial
and social initiatives. We remain committed to responsible
corporate citizenship by contributing to the development of
society and promoting sustainability.

These efforts are made possible by the resilience and
dedication of over 2,14,000 employees whose contribution
remains integral to the Bank's progress. We continue to focus
on attracting and retaining top talent, striving to be one of the
industry's premier employers.

I Mission and Strategic Focus

Your Bank's mission is to be a ‘World-Class Indian Bank'. Its
business philosophy is based on five core values:

•    Customer Focus

•    Operational Excellence

•    Product Leadership

•    People

•    Sustainability

Sustainability should be viewed in unison with Environmental,
Social and Governance performance. As a part of this your
Bank, through its CSR initiative Parivartan, seeks to bring
about change in the lives of communities mainly in rural India.

During the year under review, HDFC Bank continued building
a sound customer franchise across distinct businesses to
achieve healthy growth in profitability consistent with its
risk appetite.

The Bank is focusing on:

•    Delivering a better experience and greater
convenience to customers

•    Increasing market share in India's growing banking
and financial services industry

•    Expanding geographical reach

•    Cross-selling the broad financial product portfolio

•    Sustaining strong asset quality through disciplined
credit risk management

•    Maintaining low cost of funds

Your Bank remains committed to the highest levels of ethical
standards, professional integrity, corporate governance and
regulatory compliance. Every employee affirms to abide by the
Code of Conduct annually.

I Summary of Financial Performance

 

Particulars	For the year ended / As on March 31, 2025	For the year ended / As on March 31,2024
Deposits and Borrowings	3,262,645.8	3,041,939.4
Advances	2,619,608.6	2,484,861.5
Total Income	346,149.3	307,581.6
Profit Before Depreciation and Tax	91,857.5	73,705.4
Profit After Tax	67,347.4	60,812.3
Profit Brought Forward	139,579.9	112,960.0
Additions on Amalgamation (net)	-	3,570.1
Total Profit Available for Appropriation	206,927.3	177,342.4
Appropriations	Â
Transfer to Statutory Reserve	16,836.8	15,203.1
Transfer to General Reserve	6,734.7	6,081.2
Transfer to Capital Reserve	507.0	4,166.4
Transfer to / (from) Investment Reserve	-	529.4
Transfer to / (from) Investment Fluctuation Reserve	-	378.0
Transfer to Special Reserve	3,200.0	3,000.0
Dividend pertaining to previous year paid during the year	14,826.2	8,404.4
Balance carried over to Balance Sheet	164,822.4	139,579.9

 

I Dividend

The Board of Directors of the Bank, at its meeting held on April
19, 2025, has recommended a dividend of ' 22.00 (Rupees
Twenty-two only) per equity share of ' 1/- (Rupee One only),
for the Financial Year ended March 31, 2025. This translates
to a Dividend Payout Ratio of 25.00 per cent of the profits for
the Financial Year ended March 31, 2025.

In general, your Bank's dividend policy, among other things,
balances the objectives of rewarding shareholders and
retaining capital to fund future growth. It has a consistent track
record of dividend distribution, with the Dividend Payout Ratio
ranging between 20 per cent and 25 per cent, which the Board
endeavours to maintain. The dividend policy of your Bank is
available on the Bank's website.

httDs://www.hdfcbank.com/content/bbD/reDositories/723fb80a-2dde-42a3-9793-7ae1be57c87f/?Dath=/Footer/About%20Us/

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I Ratings

 

Instrument	Rating	Rating Agency	Comments
Fixed Deposit Programme	CARE AAA (FD)	CARE Ratings	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
Â	IND AAA	India Ratings	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
Fixed Deposit Programme (Transferred from	CRISIL AAA	CRISIL	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
HDFC Limited)*	ICRA AAA	ICRA	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
Certificate of Deposits Programme	CARE A1 +	CARE Ratings	Securities with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such securities carry the lowest credit risk.
Â	IND A1 +	India Ratings	Securities with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such securities carry the lowest credit risk.
Infrastructure Bonds	CARE AAA	CARE Ratings	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
Â	CRISIL AAA	CRISIL	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
Â	IND AAA	India Ratings	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk.
Â	ICRA AAA	ICRA	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk.
Additional Tier I Bonds (Under Basel III)	CARE AA+	CARE Ratings	Securities with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such securities carry very low credit risk.
Â	CRISIL AA+	CRISIL	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
Â	IND AA+	India Ratings	Securities with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such securities carry very low credit risk.

 

Instrument	Rating	Rating Agency	Comments
Tier II Bonds (Under Basel III)	CARE AAA	CARE Ratings	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
Â	CRISIL AAA	CRISIL	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry the lowest credit risk.
Â	IND AAA	India Ratings	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk.
Â	ICRA AAA	ICRA	Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk.
Commercial Paper (Transferred from HDFC Limited)*	CRISIL A1 +	CRISIL	Securities with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk.
Bank Loans (Transferred from HDFC Limited)*	CARE AAA	CARE Ratings	Securities with this rating are considered to have the highest degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk.
Â	ICRA AAA	ICRA	Securities with this rating are considered to have the highest degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk.
Unsecured NCD (Transferred from HDFC Limited)*	CRISIL AAA	CRISIL	Securities with this rating are considered to have the highest degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk.
Â	ICRA AAA	ICRA	Securities with this rating are considered to have the highest degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk.
Subordinated Debt (Transferred from HDFC Limited)*	CRISIL AAA	CRISIL	Securities with this rating are considered to have the highest degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk.
Â	ICRA AAA	ICRA	Securities with this rating are considered to have the highest degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk.

* The instruments / bank facilities have been transferred from Housing Development Finance Corporation Limited (HDFC Limited) on account
of amalgamation of HDFC Limited into HDFC Bank Limited with effect from July 01, 2023.

 

Issuance of Equity Shares and Employee Stock
Option Scheme (ESOP)

As on March 31, 2025, the issued, subscribed and paid-up
capital of your Bank stood at ' 7,65,22,21,674.00 /- comprising
7,65,22,21,674 equity shares of ' 1/- each. Further, 5,53,11,012
equity shares of face value of ' 1/- each were issued by your
Bank pursuant to the exercise of Employee Stock Options
(ESOPs) and Restricted Stock Units (RSUs).

For information pertaining to ESOPs, please refer Annexure 1
of the Directors' Report.

I Capital Adequacy Ratio (CAR)

As on March 31, 2025, your Bank's total CAR, calculated as
per Basel III Regulations, stood at 19.6 per cent, well above the

regulatory minimum requirement of 11.7 per cent, including a
Capital Conservation Buffer of 2.5 per cent and an additional
requirement of 0.2 per cent on account of the Bank being
identified as a Domestic Systemically Important Bank. Tier I
Capital was at 17.7 per cent as of March 31, 2025.

Management Discussion and Analysis

Macroeconomic and Industry Developments

India's GDP growth moderated to 6.5 per cent in 2024-25,
after registering a healthy average growth of 8.8 per cent over
the preceding three years. This was driven by a moderation in
urban demand as inflation and elevated interest rates weighed
on discretionary spending, growth in fixed investments
remained muted and government spending was off to a slow
start due to union and state elections in the first half of 2024¬
25. Further, Foreign Direct Investment (FDI) flows remained
weak as rising global uncertainty related to US tariff threats
led to outflow of capital in second half of Financial Year 2024¬
25. On the other hand, domestic growth was supported by
an improvement in rural demand conditions on the back of
healthy agriculture output. In addition, exports also added
positively to growth increasing by 6.3 per cent. Export growth
was led by strong momentum in net services exports, driven
by the continued expansion of global capability centers and
strong demand from large trading partners like the US.

From the supply side, manufacturing growth slowed in 2024¬
25 with a rise in input costs and slower volume growth while
service sector growth broadly held up above 7 per cent.
Elsewhere, growth in the construction sector remained healthy
at 9.4 per cent. The biggest support to growth came from
above trend growth in the agriculture sector, as favourable
monsoon conditions supported kharif output while healthy
reservoir levels and soil moisture conditions supported
rabi crops.

On the external front, global growth stood at 3.3 per cent in
2024 - below the historical average. While growth in countries
like the US remained strong at 2.8 per cent, growth contracted
or remained muted in the Eurozone, Japan, and UK.

Looking ahead, India is widely expected to remain one of the
fastest growing economies in Financial Year 2025-26, with the
RBI forecasting GDP growth at 6.5 per cent. Consumption
demand in the rural areas is expected to be supported by
healthy agricultural output, lower food inflation and moderating
input costs. Tax cuts, reduction in interest rates by RBI and
moderating inflation are likely to support urban consumption
demand. The RBI has reduced its policy rate by 100 basis
points since February 2025 bringing it down to 5.5 per
cent. This along with liquidity infusion is likely to help reduce
borrowing costs and spur credit demand in the economy.

The government is expected to continue supporting growth
through capital spending which is budgeted at '11 lakh crore
for 2025-26. In addition, with an improvement in demand

conditions, private capex is expected to also see some
recovery. At the same time accommodative monetary policy,
lower inflation and healthy balance sheets of financial institutions
and corporates are likely to support private investments.

Inflationary pressures started to ease towards the end of
Financial Year 2024-25, with headline Consumer Price Index
(CPI) averaging at 4.6 per cent from 5.4 per cent in Financial
Year 2023-24. Though inflation increased to a high of 6.2 per
cent in October 2024, it has continuously moderated since
then, reaching 3.3 per cent in March 2025. The moderation
in headline inflation was led by moderating food price inflation
in H2-2024-25. Core inflation (which excludes the volatile
food and fuel prices) continued to remain below 4 per cent
for most part of the fiscal year. Going forward, we expect
headline inflation to moderate further to 3.7 per cent in 2025¬
26, with a continued easing in food inflation, assuming a
normal monsoon. The risk to inflation stems from weather-
related disruptions reigniting food inflation.

Tariff threats and related disruptions in global trade flows pose
the biggest risks to global and India's growth prospects. The
US had imposed reciprocal tariffs across all countries with
India attracting a tariff of 26 per cent in early April, 2025. Higher
tariffs were later put on pause for a 90-day period and replaced
with a blanket tariff of 10 per cent on all countries except
China which attracts a 30 per cent tariff for now. The final tariff
imposed will depend on country specific trade agreements
including between India and the US. The diversification and
derisking of supply chains could open an opportunity for India
to expand its exports to the US in sectors like electronics
and textiles amongst others. Moreover, India could benefit
from closer trade ties with the US depending on the final
negotiations under the Bilateral Trade Agreement. That said,
the risk of a sharp global growth slowdown, recession in the
US and supply chain disruptions due to US tariffs and any
retaliation by other countries poses a risk for India's overall
exports in Financial Year 2025-26.

Geopolitical tensions in the Middle East, Russia and Ukraine
or closer home with neighbours could impact domestic
growth. The geopolitical tensions between India and Pakistan
have currently subsided but need to be closely monitored.
Similarly, a further escalation in Ukraine - Russia tensions
could disrupt global trade and energy flows and negatively
impact the domestic economy. Furthermore, financial market
volatility and climate induced uncertainties continue to pose
risks to growth.

Domestically, a slower than expected improvement in
consumption demand due to weather related disruptions,

inflation spikes and any sharp corrections in the domestic
equity market could also weigh on growth prospects.

That said, India's domestic economy remains resilient and
its financial system sound to navigate global headwinds.
Moreover, proactive monetary and fiscal support are likely to
provide further support to growth in Financial Year 2025-26.

I Financial Performance

The financial performance of your Bank during the year ended
March 31, 2025 remained healthy with Total Net Revenue
(Net Interest Income plus Other Income) rising 6.7 per cent
to ' 1,68,302.4 crore from ' 1,57,773.5 crore in the previous
year. Revenue growth was driven by an increase in Net
Interest Income. Net Interest Income grew by 13.0 per cent
to ' 1,22,670.1 crore. Net Interest Margin (NIM) stood 3.48
per cent.

Total Provisions and Contingencies were ' 11,649.4 crore
as compared to ' 23,492.2 crore in the preceding year. The
decrease is mainly on account of floating provision created in
the previous year of ' 10,900.0 crore. Your Bank's provisioning
policies remain more stringent than regulatory requirements.

The Coverage Ratio based on specific provisions alone
excluding write-offs was 67.9 per cent and including general,
floating and contingent provisions was 172.1 per cent. Your
Bank made General Provisions of ' 198.4 crore during the
year. Gross Non-Performing Assets (GNPAs) were at 1.33
per cent of Gross Advances, as against 1.24 per cent in the
previous year. Net NPA ratio stood at 0.43 per cent as against
0.33 per cent in the previous year.

Profit Before Tax grew by 24.8 per cent to ' 88,478.1 crore.
After providing for Income Tax of ' 21,130.7 crore, Net Profit
increased by 10.7 per cent to ' 67,347.4 crore from ' 60,812.3
crore. Return on Average Net Worth was 14.56 per cent while
Basic Earnings Per Share (EPS) was ' 88.29 up from ' 85.83.

Other Income fell by 7.33 per cent to ' 45,632.3 crore.
Excluding prior year transaction gains of ' 7,341.42 crore
from stake sale in subsidiary HDFC Credila Financial Services
Ltd, Other Income grew by 8.91 per cent. The largest
component was Fees and Commissions at ' 31,898.6 crore.
Profit on Revaluation and Sale of Investments was ' 1,754.3
crore. Foreign Exchange and Derivatives Revenue was
' 4,919.04 crore and recoveries from written-off accounts
were ' 3,785.0 crore.

Operating (Non-Interest) Expenses rose to ' 68,174.9 crore
from ' 63,386.0 crore. During the year, your Bank set up
719 new branches and 201 ATMs / Cash Recycler Machines
(CRMs). The addition in expenses includes HDFC Limited
operating cost post-merger. This, along with higher spend
on IT resulted in higher infrastructure and staffing expenses.
Staff expenses also went up due to employee additions and
annual wage revisions. Further, Deposit Insurance and Credit
Guarantee Corporation (DICGC) premium cost increased due
to deposit growth. Despite higher Staff and Infrastructure
Expenses, the Cost to Income Ratio was 40.5 per cent as
compared to 40.2 per cent during the previous year.

As on March 31, 2025, your Bank's Total Balance Sheet
stood at ' 39,10,199 crore, an increase of 8.1 per cent over
' 36,17,623 crore on March 31, 2024. Total Deposits rose by
14.1 per cent to ' 27,14,715 crore from ' 23,79,786 crore.
Savings Account Deposits grew by 5.3 per cent to ' 6,30,467
crore while Current Account Deposits rose by 1.3 per cent to
' 3,14,094 crore. Time Deposits stood at ' 17,70,155 crore,
representing an increase of 20.3 per cent. CASA Deposits
accounted for 34.8 per cent of Total Deposits. Advances stood
at ' 26,19,609 crore representing an increase of 5.4 per cent.
The Domestic Loan Portfolio at ' 25,73,450 crore grew by 5.2
per cent over March 31, 2024.

The Bank's Debt Equity Ratio for the year ended March 31,
2025 stood at 0.74 as compared to 1.21 in the previous year.

HDFC Limited’s Borrowing Maturity Schedule

Of the HDFC Limited's borrowings of ' 2,87,923 crore as at
March 31,2025, approximately 15 per cent is due for repayment
in each of the two years up to FY27 and the balance 70 per
cent is due thereafter.

I Business Review

Your Bank's operations are split into Domestic and International.

A. Domestic Business comprises the following:
Retail Banking

Your Bank's Retail Assets are built on three key
principles: Strong Digital Offering, Optimal Risk Pricing
and Maintaining Pristine Portfolio Quality. Adherence to
these principles combined with the strength of merger
boosted your Bank's Retail Advances to ' 13,75,769
crore witnessing a growth of about 9 per cent year-on-
year.

Brief on segment performance:

The Bank's increased focus on top corporates and
good credit score customers contributed to the overall
pristine portfolio quality. Personal Loans segment has
experienced strong growth with the overall portfolio
touching ' 1,99,334 crore towards the end of the year.
Nearly all applications (99.6 per cent) of this segment are
originated digitally and 87 per cent of these applications
are disbursed digitally.

The Xpress car loans, offering seamless end-to-end
digital disbursement, has increased the digital origination
to 36 per cent of the total New Car Loan business.

Two-Wheeler advances are close to ' 12,359 crore with
nearly 100 per cent digital acquisition.

Your Bank has exhibited significant year-on-year growth
of 28 per cent in Gold Loans capitalising on an expanded
branch network.

Post the merger, your Bank, has emerged as an
institution with one of the largest mortgage loan portfolios
in the country. The retail mortgage advances stood at
' 8,35,656 crore compared to the previous year's
' 7,74,406 crore representing a growth of 8 per cent year
on year.

The payments business is one of the stated strategic
pillars for the Bank.

With over 7.5 crore cards issued (credit, debit and pre¬
paid) and a widely distributed acceptance network
across the online and offline merchant ecosystem, HDFC
Bank continues to maintain a leadership position across
multiple product offerings in the payments landscape.

I n the Financial Year 2024-25, HDFC Bank scaled up
with a slew of new products launched across UPI, TATA,
Swiggy in the Payments Business.

The year ended March 31, 2025 saw 62 lakh new
credit cards being issued covering retail and business
segments. Of total cards in force in market, HDFC Bank
crossed 2.38 crore cards in force which is the highest
amongst all issuers. To provide better service to all card
holders, the recently launched Mycards, emerged as a
robust and comprehensive card servicing platform and
currently has 3.45 crore registered customers availing
several card related services.

Further, the Bank launched PayZapp 2.0 a comprehensive
mobile payment commerce app in March 2023. PayZapp
not only supports a complete range of payments from
credit cards, debit cards, wallet and UPI with customers
getting the choice of form factor to make payments
at merchant stores using Scan or Tap or at Online
merchants with a Swipe action. The app has reached
the milestone of 1.6 crore registrations in FY 2025 and
over 50 lakh (on an average) active users per month.

To enhance and strengthen offerings to merchants,
SmartHub Vyapar- an integrated payment, banking
and business solution that caters to the daily needs of
merchants and helps them drive business growth was
formally launched in October 2022. The platform has
witnessed widespread adoption ever since and has
onboarded close to 19.3 lakh users across the country
as on March 31, 2025.

SmartHub Payment Gateway, a unified payment platform
for online merchants was launched in February 2024 in
line with the Bank's endeavour to provide merchants a
comprehensive platform to cater to their payments and
banking needs and help drive their growth. This platform
enables merchants to collect payments through 150
plus methods and assists them in maximising sales
with best-in-class success rate. SmartHub Payment
Gateway provides an insightful dashboard powered by

smart analytics and empowers merchants to provide a
frictionless check out experience for their customers.
The platform has onboarded over 1,600 Merchants
with projected March exit volume of approximately
1,000 crore.

Lastly, in tune with the evolving payments landscape
the business continues to transform itself with significant
investments across Cloud Computing, Analytics,
Artificial Intelligence and Machine Learning, Open APIs
and Cyber Security. The objective is to manage large
scale and continuously grow volumes while processing
transactions in a safe and secure manner.

Key digital initiatives in the Retail segment in
FY 2024-25:

I n the Financial Year 2024-25, the Bank continued to
expand and deepen its digital footprint across the retail
segment, with a strong emphasis on simplifying customer
journeys, scaling digital fulfilment, and embedding
services across channels and platforms.

Driven by the Bank's broader Shift Right strategy, the
focus this year was on developing end-to-end journeys
that minimise friction, reduce paperwork and enhance
speed-to-fulfilment—while ensuring security, regulatory
alignment and accessibility.

Digital Origination and Fulfilment at Scale

Retail customer acquisition through digital channels
reached new milestones during the year. 86 per cent
of all new retail products—including savings accounts,
loans, credit cards and deposits—were sourced digitally,
up from 82 per cent in the previous year. The bank now
enables 97 per cent of all financial transactions through
digital channels, highlighting the shift towards a self¬
service ecosystem. Additionally, 79 per cent of servicing
requests were fulfilled digitally, compared to 73 per
cent in FY 2024. The Bank's self-service and assisted
journeys now support onboarding across a diverse
customer base, from digitally native users to first-time
users in semi-urban and rural markets.

The Bank's Xpress Car Loan (XCL) platform continued
to scale as India's largest end-to-end digital auto loan
journey. The platform processed over 1.3 lakh units,
disbursing ' 13,110 crore digitally in FY 2025. This zero-
paper, zero-touch model is now the preferred channel

for auto loans and extends full-service capabilities even
to new-to-bank customers.

Other digitally enabled loan products—such as personal
loans, gold loans and business loans—saw increased
adoption, supported by features like:

•    Pre-qualified offer journeys

•    Bank statement analytics

•    Automated underwriting

•    Real-time KYC and biometric authentication

Digital journeys were also introduced for Group
Health and Group Term insurance, embedded within
account and loan offerings for existing-to-bank (ETB)
customers—reflecting a growing focus on integrated
protection products.

Expanded Digital Journeys Across Liabilities
and Cards

In deposits and liabilities, the Bank launched new
journeys for:

•    Assisted and unassisted savings account onboarding

•    Minor-to-major conversions and salary
family accounts

•    Fixed deposits with external funding

•    Standalone card and asset customer servicing

Digital issuance and activation journeys for credit cards,
including DSA-assisted and corporate card variants,
were expanded during the year. These journeys were
integrated with real-time bureau checks and document
validations, reducing manual touchpoints and enabling
faster disbursals.

Enhanced Customer Service and Post-Sale
Fulfilment

Customer servicing continued to see strong digital
adoption. The Bank now offers 89 per cent digital
coverage across common retail service interactions—up
from 73 per cent in FY 2024.

Key services journeys rolled out during the year included:

•    Address update (cards and assets)

•    Re-KYC for standalone asset customers

•    SmartHub and WhatsApp-based service ticketing

Over 55 per cent of support interactions were resolved
through self-service channels, powered by intelligent
routing, contextual nudges and fallback to live assistance
where required.

Embedded Retail Journeys and Ecosystem
Integration

Retail journeys were also extended beyond the Bank's
direct platforms through embedded finance partnerships
with e-commerce, fintech and mobility platforms.
Strategic tie-ups with platforms like Tata Neu, Swiggy
and PhonePe enabled real-time, near 100 per cent
digital fulfilment of savings accounts, personal loans and
credit cards.

Behind the scenes, these embedded journeys were
powered by the Bank's growing library of secure,
reusable APIs and an orchestration framework that
enabled straight-through processing (STP), verification,
and activation at the point of need.

Inclusive and Assisted Digital Journeys

The Bank continued to prioritise accessibility through
assisted digital journeys, especially in semi-urban and
rural markets. These journeys leverage field agents,
business correspondents and biometric-ready apps to
support onboarding and fulfilment.

Key features included:

•    Aadhaar and biometric-based KYC

•    Geo-tagged documentation

•    Offline-ready functionality for low-connectivity areas

Products such as gold loans, microcredit, and deposits
were offered through assisted apps, ensuring financial
inclusion while maintaining the speed and simplicity of
digital fulfilment.

Our Distribution Channel:

The virtual channels of the Bank were set up to enhance
coverage across customer segments and to ensure a
holistic service experience to all customers. This is one
of the key engagement channels in the Bank.

Virtual Relationship Banking is an integrated customer
centric approach covering three pillars - Virtual
Relationship, Virtual Sales and Virtual Care serving as
a crucial component of the Bank's sales and customer
engagement strategy. This approach harnesses

technology to connect with customers, build relationships
and promote banking products and services. This helps
the Bank to expand the managed customer base,
generate leads and drive revenue growth.

Recognising employees and customers as the
capitals for this business, your Bank has invested
heavily in training and development of its relationship
managers. Training covers product knowledge, sales
techniques, communication skills, compliance and
regulatory requirements and customer relationship
management skills.

As we transition into the digital age, a banking experience
characterised by digital ease and personalised
conversations remains at the core of our Virtual
Relationship Management (VRM) strategy.

As a part of this strategy, relationship managers reach
out to customers through remote and digital platforms
resulting in deeper and cost-effective engagement. As
digital literacy and exposure increases exponentially,
VRMs are gaining wider acceptance through deeper
engagement and relationships backed by a strong
product offering thereby constituting an important
component of the Bank's customer engagement strategy.

With proper training, technology support, and adherence
to compliance, this channel is a highly effective tool for
the Bank to drive revenue growth, expand its customer
base and provide excellent customer service.

Retail Banking - Mortgage Business

Post the merger, HDFC Bank, has emerged as an
institution with one of the largest mortgage loan portfolios
in the country. This brings together HDFC Limited's
segment expertise of over four and a half decades and
in person customer connect with HDFC Bank's extensive
branch network and an ability to leverage technology
platforms. The home loan business has opened a
fresh pathway for future growth for the Bank due to a
large customer base. This increases its ability to serve
customers better due to a longer tenure engagement and
enhances its ability to tap into opportunities for cross¬
sell. The retail mortgage advances stood at ' 8,35,656
crore compared to ' 7,74,406 crore in FY 2024.

Cross-sell remains a primary focus for both existing and
new customers. The Bank leverages its digital channels
to minimise acquisition costs. Post the merger, over 95
per cent of the newly acquired home loan customers
hold a liability account with the Bank. The home loan

customers also enjoy the benefit of a strong suite of
financial products and solutions that the Bank offers, like
credit cards, consumer durable loans, wealth products
and insurance. This culminates in strengthening customer
relationships and enables HDFC Bank to emerge as the
primary banker for these customers.

Third Party Products

Your Bank distributes Life, General and Health Insurance
as well as Mutual Funds (Third Party Products) to its
customers. In the Financial Year 2024-25, the income
from this business accounted for 24.7 per cent of the
Bank's Total Fee Income.

Life Insurance

Your Bank has adopted an open architecture model
for distributing insurance products from three trusted
partners with a focus on offering customers a diverse
array of options. For the year ended March 31, 2025, the
Bank mobilised premium of ' 10,331 crore representing
a year-on-year growth of 16 per cent. HDFC Bank's
extensive distribution network includes branches, virtual
channels, NRI services and wealth management. The
key focus would continue to be on staff training, robust
quality and control processes uniformly implemented
across all partners as well as offering integrated and
seamless digital on-boarding journeys. Currently, the
Bank's NetBanking platform offers 66 insurance products
across all partners accounting for over 49 per cent of the
total policies.

Premium Earned

12,000	Â	|16%	10,331
10,000 8,000	8,940	Â	Â
	Â	Â	Â
6,000 4.000 2.000 0
	Â	Â	Â
in ' crore	FY 2023-24		FY 2024-25

Non-Life Insurance

Your Bank, in collaboration with its four General Insurance
and two Standalone Health and Insurance partners, has
introduced innovative non-life insurance products to
expand the range of offerings and provide comprehensive
coverage to customers. These products are accessible
through both digital and physical platforms. Employees
across channels have been trained in the new products

and processes. To meet customer demands, additional
manpower has been deployed across non-life insurers.
As on March 31, 2025, premium mobilisation in General
and Health Insurance reached a total of ' 4,381.6 crore
representing a growth of 4 per cent over the previous year.

Premium Earned

5,000	Â	Â	Â	Â
4,500	4,208.4	^4%	4,381.6	Â
4,000			Â	Â
3.500 3,000 2.500 2,000 1.500 1,000 500 0	Â	Â	Â	Â
	Â	Â	Â	Â
in ' crore	FY 2023-24		FY 2024-25

Mutual Funds

Your Bank follows an open architecture approach in
distribution of Mutual Funds and is currently associated
with 37 Asset Management Companies (AMCs).

The Bank's Assets Under Management (AUM) grew by
14 per cent to reach ' 1,56,321 crore for the year ended
March 31, 2025. The Bank offers digital on-boarding
platform to customers for Mutual Fund investments
through Investment Services Account (ISA) and
SmartWealth (app based).

During the same period, HDFC Bank and HSL
(InvestNow) witnessed a significant growth of 40 per cent
in Systematic Investment Plans (SIPs) mobilisation.

Assets Under Management (AUM)

1,80,000 1,60,000	1,37,343	^14%	1,56,321
1,40,000		Â	Â
1,20,000 1,00,000 80,000 60,000 40.000 20.000 0 in ' crore	Â	Â	Â
	FY 2023-24		FY 2024-25

Wealth Management

I n the Financial Year 2024-25, our team of over 1000
Sales and Service experts have focused on extending
Wealth services to clients ranging from Ultra-HNW to
Mass Affluent client segments.

HDFC Bank was adjudged as “India's Best for HNW”
in the Euromoney Private Banking Awards 2025. In
the Global Private Banking Awards 2024 organised by
Professional Wealth Management (PWM), published by
the Financial Times, HDFC Bank was adjudged the Best
Private Bank in India.

Your Bank made continuous and incremental efforts to
generate as well as quantify the alpha delivered in each
client's portfolio. In 2025, 87 per cent of our clients had
generated a positive alpha with the median client alpha
at 2.6 per cent. Our aim is to incorporate alpha in all client
reports and portfolio reviews.

With a sales force of over 850 team members supported
by 150+ service staff and over 100 Investment Analysts,
we have the largest Wealth bankers in the country. With
an increase in manpower, we've put in consistent efforts
in providing the best education and training to our private
bankers. By conducting intensive training sessions in
collaboration with top-ranked business schools such
as Indian Institute of Management at Ahmedabad and
Bangalore, we have groomed our in-house talent.

Service First culture is the central pillar for our business
as we focus on service led sales by prioritising client
delight and relationship banking. Service Quality is an
essential part of RM scorecards and Supervisor KPIs.
Client engagement, portfolio servicing and Net Promoter
Score are key business performance assessment
measures. Our Service First Culture has led to an NPS
score of 87 in the Financial Year 2024-25 which is one of
the highest in the industry.

With this segment specific focus, we have been
consistent in growing our market share and proving to be
one of the largest Wealth Managers in the country. With
the help of over 100 Investor Education Initiatives having
fund managers as expert guest speakers, your Bank has
been able to reach across the length and breath of the
country, covering Tier II and III cities as well.

Your Bank has endeavoured to become the market
leader across all investor segments through curated

offerings in each segment. For Ultra-HNW clients, we
have more than doubled the number of products referred
on our platform. Keeping our Super-Affluent clients in
mind, we've introduced State-of-the-art Wealthfy reports
that provide detailed portfolio diagnostics and analysis.

We have developed an advanced unassisted digital
investment platform - SmartWealth that enables our clients
to track their portfolios and make investments along with
access to goal-based investment recommendations.
With highly intuitive client experience and gamification of
client journeys, this mobile first platform aims to provide
access of our research to all mass affluent clients. It has
more than six lakh downloads and nearly four lakh clients
onboarded on SmartWealth.

HDFC Bank's wide range of investment offerings
successfully adapt to the changing economic landscape
to manage and create wealth for our clients, with “Protect,
Manage, Grow.” being our brand identity.

Wholesale Banking

The Wholesale Banking business focuses on institutional
customers such as the Government, PSUs, Large and
Emerging Corporates and SMEs. Your Bank offers a
range of products and services encompassing working
capital and term loans, trade credit, cash management,
supply chain financing, foreign exchange and investment
banking services.

Wholesale Banking business constituted about 42 per
cent of your Bank's Gross domestic advances as per
Basel II classification, with a book size of ' 10,82,413 crore.

The Bank has continued making significant inroads into
the banking consortia of a number of leading corporates.
Corporate Banking, focusing on large, well-rated
companies continued to be the biggest contributor to
Wholesale Banking in terms of asset size.

This business continued its attention towards engaging
with Multi-National Corporations (MNCs) and capitalised
on the increasing trend among large companies to
consolidate their banking relationships. Your Bank
strengthened its existing relationships and expanded its
market share by leveraging its extensive array of product
offerings. The Emerging Corporates Group focuses on
the mid- market segment. Your Bank leveraged its vast
geographical reach, technology backbone, automated
processes, suite of financial products and quick

turnaround times to offer a differentiated service. The
business continues to have a diversified portfolio in terms
of both industry and geography.

I n the year under review, the Bank continued its focus
on the MSME sector. There has already been increased
formalistion and digitalisation of the MSME sector owing
to the implementation of the Goods and Service Tax
(GST). Through MyBusiness, which offers comprehensive
financial solutions like Business Banking, Easy Loans,
Trade Services and Digital Solutions, MSMEs can
conveniently access a suite of product / services tailored
to meet the business requirements.

Post the merger of HDFC Limited with HDFC Bank, the
Bank inherited the realty finance business. During the
year, the bank increased its focus to provide construction
finance in the residential and commercial space as well
as lease rental discounting to leading developers in the
country. The Bank increased its market share in existing
relationships and added new customers. it plans to
increase its geographical presence in the coming year to
cater to new customers in key growing markets. The Bank
focuses on providing a gamut of banking services and
customised solutions to its customers in this segment.

The Investment Banking business further cemented its
prominent position in the Debt Capital Markets, Equity
Capital Markets and INR Loan Syndication. Your Bank is
among the top three in the Bloomberg rankings of Rupee
Bond Book Runners for the Financial Year 2024-25 with a
market share of 11.61 per cent. Your Bank is amongst the
top five in the Bloomberg rankings of Syndicated INR term
loans for Financial Year 2024-25. The Bank has provided
advisory services and actively assisted clients in equity
fund raising through five Initial Public Offerings (IPOs)
amounting to ' 17,250 crore (including one InvIT IPO) and
one Institutional Placement of units of InvIT amounting to
' 8,400 crore, aggregating to about ' 25,650 crore for
the Financial Year 2024-25. Additionally, the Bank also
assisted in a government. disinvestment through an Offer
for Sale amounting to about ' 3,450 crore.

I n the Government Business, your Bank sustained its
focus on tax collections, collecting direct tax (CBDT) of
' 6,08,278.22 crore and Indirect tax - CBIC (Custom duty
+ GST) of over ' 5,15,558.20 crore during Financial Year
2024-25. It continues to enjoy a pre-eminent position
among the country's major stock and commodity
exchanges in both Cash Management Services and
Cash Settlement Services.

Your Bank has embarked on strategic digital
transformation to enhance Customer Engagement and
Employee Experience and create an ecosystem for
seamless banking.

It also leverages analytics to delve deeper into corporate
ecosystems resulting in better product structuring, cross
sell opportunities, improved yields thus improving the
Bank's share of Revenue Pools from Corporates.

HDFC Bank provides a comprehensive suite of cutting-
edge platforms tailored to meet the diverse needs of
corporate clients. Among these, our Corporate E-Net
Banking platform stands out, offering both the reliable
e-Net service and the more recently upgraded CBX
platform. These platforms provide intuitive interfaces
and robust functionalities empowering businesses
with seamless control over their financial operations.
Additionally, our Trade Platform - Trade on Net (TON)
serves as a cornerstone for facilitating efficient trade
transactions. Also, our Supply Chain Finance (SCF)
transaction platform enables digital contract bookings
and automated disbursements, streamlining end-to-
end SCF transactions for the corporates. Your Bank
has integrated with all the three TReDS platforms.
We are also collaborating with Fintechs to integrate
with Corporate ERP and offer Embedded Banking in
Corporate Ecosystems journeys.

Treasury

The Treasury Department is the custodian of your
Bank's cash / liquid assets and handles its investments
in securities, foreign exchange and cash instruments.
It manages the liquidity and interest rate risks on the
balance sheet and is also responsible for meeting
reserve requirements. The vertical also helps manage
the hedging needs of customers and earns a fee income
generated from transactions customers undertake with
your Bank while managing their foreign exchange and
interest rate risks.

Revenue accrues from spreads on customer transactions
based on trade and remittance flows and demonstrated
hedging needs. Your Bank recorded a revenue of
' 4,919.04 crore from foreign exchange and derivative
transactions in the year under review.

As a part of its prudent risk management, your Bank
enters into foreign exchange and derivatives deals with
counterparties after it has set up appropriate credit limits
based on its evaluation of the ability of the counterparty

to meet its obligations. Where your Bank enters into
foreign currency derivatives contracts not involving the
Indian Rupee with its customers, it typically lays them off
in the inter-bank market on a matched basis. For such
foreign currency derivatives, your Bank primarily carries
the counterparty credit risk (where the customer has
crystallised payables or ‘mark-to-market' losses) and
may carry only residual market risk, if any. Your Bank
also deals in derivatives on its own account including for
the purpose of its own balance sheet risk management.

HDFC Bank is also a nominated agent for the
bullion imports and has a significant market share in
that business.

Your Bank maintains a portfolio of Government securities
in line with the regulatory norms governing the Statutory
Liquidity Ratio (SLR). A significant portion of these SLR
securities are in ‘Held-to-Maturity' (HTM) category, while
some are ‘Available for Sale' (AFS). The Bank is also a
primary dealer for Government Securities. As a part of
this business, your Bank holds fixed income securities
as ‘Held for Trading' (HFT).

I n the year under review, your Bank continued to be a
significant participant in the domestic exchange and
interest rate markets. It also capitalised on falling bond
yields to book profits and is now looking at tapping
opportunities arising out of the liberalisation in the foreign
exchange and interest rate markets.

B. International Business

During the year, your Bank stayed on course to cater
to NRI clients and deepen its product and service
proposition. HDFC Bank's international operations
comprise five branches, located in Hong Kong, Bahrain,
Dubai International Financial Centre (DIFC), Singapore
and an IFSC Banking Unit in Gujarat International Finance
Tec-City. Additionally, it has four representative offices
in Kenya, Abu Dhabi, Dubai and London respectively,
catering to Non-Resident Indians and Persons of
Indian Origin.

The Bank's product strategy in International Markets is
customer centric and it has products to cater to client
needs across asset classes. GIFT City branch offers
products such as trade credits and foreign currency
term loans (including external commercial borrowings).
It is gradually widening the product offerings to cater
to the needs of Resident and Non-Resident clients and
capitalise on the growth in the financial centre.

As on March 31, 2025, the Balance Sheet size of
International Business was US $ 10.83 billion. Advances
constituted 1.75 per cent of the Bank's advances.
The Total Income contributed by Overseas Branches
constituted 1.44 per cent of the Bank's Total Income for
the year.

C. Partnering with Government, Institutions and
Start-Ups

It has been another year of steady progress for
Government, Institutional Business and Start-Ups
within your Bank. Some of the key highlights and new
initiatives include:

1.    Increased focus on the retail Government deposits
resulted in your Bank acquiring over 10 per cent of
the market share in 201 districts.

2.    Your Bank continues to rank among the top three
leading Government Agency Banks for collecting
Central Government taxes. Substantial market
shares were acquired in collections of Direct Tax,
GST and Custom Duty as per tax collection data
reported through PIB & CGA, Government of India.
Your Bank has now started sourcing accounts
under the Senior Citizens Savings Scheme on
behalf of the Central Government.

HDFC Bank’s Market Share:

3. Your Bank facilitated the transfer of funds flowing
from the Central Government to various beneficiaries
under the aegis of the Centrally Sponsored
Schemes, Central Sector Schemes, and the 15^th
Finance Commission. The total flows processed
grew by 11 per cent year on year.

4.    Your Bank continues its initiatives on digitalisation
of financial operations of government entities.
For example, it has enabled online collection of
revenues from wayside amenities for National
Highway Logistics Management Limited.

5.    On disbursements, your Bank has helped digitalise
payments to beneficiaries against land acquisition
activities undertaken by various authorities for
development of national infrastructure.

6.    Your Bank is now integrated with National
e-Governance Services Limited (NeSL) enabling
online access and validation of electronic Bank
Guarantees (eBGs) to serve customers better.

7.    Your Bank is now integrated with treasury
systems across six states to enable beneficiary
account validation, payments, transaction and
balance reporting.

8.    Your Bank has successfully harnessed the granular
business opportunity at District-level, Block-level
and Gram Panchayat-level. It has introduced a new
bundled offering called “Panchayat Kavach” where
complimentary non-life insurance of ' 5 lakh and
several exclusive benefits are provided to secure
the Gram Panchayats from various calamities.

9.    Your Bank has also driven digitalisation at district
level through solutions that enable expenditure
reporting and associated payments through
integration with the Bank's payment channels.

10.    Your Bank has intensified its efforts to engage with
pensioners implementing the following measures:

a.    Enhancing pension product for defence
pensioners, with personal accidental death
coverage of ' 50 lakh till the age of 80.

b.    In the Financial Year 2024-25, we ensured that
99 per cent of pensioners (our customers)
successfully submitted their digital life
certificates in the Pension Processing System
of the Bank through a hassle-free experience.

c.    Further, your Bank has extended its pension
disbursement services to non-HDFC
Bank accounts thus servicing a wider
pensioner population.

11.    Your Bank continues to expand its presence in
the education sector and has successfully on-
boarded approximately 42 per cent of universities
nationwide. Some of the marquee additions during
the year include IIM Kozhikode, IIM Visakhapatnam,
AIIMS Jammu, Mahadevappa Rampure (MR)
Medical College, Shekhawati University and
Central Sanskrit University. Additionally, your Bank
onboarded notable religious organisations, including
Dwarkadhishji Mandir, Thakur Shri Bankey Bihari
Ji Maharaj Vrindavan, Shri Digamber Jain Atishay
Teerth Kshetra Chandragiri Dongargarh, Sri Rajapur
Jagannath Mandir, Catholic diocese of Kottayam,
Shri Bhimakali Temple, Haryana Wakf Board and
the chain of ISKCON temples.

12.    Your Bank has received positive customer feedback
for its recent digital products and solutions:

a.    FarSight Dashboard: Building on the
existing solution, your Bank has further
enhanced the FARSight Dashboard to provide
visibility across accounts and offer cashflow
forecasting capabilities for customers to plan
their finances.

b.    GIGA: Your bank launched GIGA - an industry
first banking programme tailored specifically
for gig/platform workers. GIGA addresses an
underserved demographic, by understanding
the unique challenges faced by them such as
irregular income, lack of financial security and
limited access to traditional banking services.

GIGA Program includes a specialised savings
account with relaxed quarterly balance requirements,
debit and credit cards with value added offers,
affordable health insurance for themselves and their
family, unique flexible investment products which
enables them to ‘invest when they can and how
much they can' instead of a traditional systematic
investment plan. Additionally, a range of loans to
meet their borrowing needs are also offered.

13.    Your Bank is committed to enabling smooth
cross-border transactions for Indian merchants,
freelancers, MSMEs and exporters. In line with
RBI's regulations on online payment gateway
service providers/ payment aggregators - cross
border, your Bank is collaborating with fintech
partners for providing authorised dealer services
to enable secure and hassle free cross-border
trade settlements.

14.    Start-up Banking: Your Bank provides a
comprehensive range of banking products specially
curated for the start-up ecosystem. In furtherance
of its objective to support the banking and financial
needs of start-ups, your Bank signed MoUs with
prominent start-up ecosystem partners. Most
of them are government nodal agencies and
incubators located at educational institutions. Some
of the partners are:

a.    Department for Promotion of Industry and
Internal Trade (DPIIT), Government of India

b.    Society for Innovation and Entrepreneurship
(SINE), IIT Bombay

c.    Kerala Startup Mission (KSUM)

d.    Startup Odisha

e.    Startup Assam

f.    Hyderabad University

g.    Manipal University, Jaipur-Technological
Incubation Centre

h.    Chitkara University

15.    HDFC Tech Innovators 2024: Your Bank along
with HDFC Capital Advisors spearheaded HDFC
Tech Innovators 2024, a joint initiative of HDFC
Bank group companies - HDFC AMC, HDFC Ergo,
HDB Financial Services, HDFC Life, and HDFC
Securities to promote innovations and opportunities
for technology related start-up ventures. Over 2,000
applications were received across five categories -
Fintech, Proptech, Sustainability Tech, Consumer
Tech and New Age Tech. The top 10 winners
were selected by a grand jury comprising HDFC
Bank Group leadership, venture capitalists, senior
industry executives and unicorn founders.

16.    Parivartan Start-Up grants: Your Bank
supported 20 incubators associated with reputed
academic institutions and 87 start-ups through the
eighth edition of the Parivartan Start-Up Grants.
This year, your Bank partnered with three nodal
government agencies, each contributing to specific
thematic areas:

a.    Reserve Bank Innovation Hub: Identifying/
developing a product/process/policy to make
banking inclusive for women

b.    Startup India: Strategic partnership for
access to startup ecosystem

c.    MeitY India AI Mission: Strategic partnership
towards nurturing AI solutions for large scale
socio-economic impact.

d. Semi-Urban and Rural

Your Bank has traditionally focused on the Semi-Urban
and Rural (SURU) markets. As rural incomes and
aspirations rise, your Bank's focus on this market has
only increased as it caters to the demand for better
quality financial products and services. The Bank has
been increasing its presence in Semi-Urban and Rural
markets through various groups in the Bank with the
objective of increasing lending.

Apart from meeting its statutory obligations under PSL
(Agri and Allied activities, Small and Marginal Farmers and
Weaker Sections), your Bank has been offering a wide
range of products on the asset side, such as Auto, Two¬
Wheeler, Personal, Gold, Light Commercial Vehicle (LCV)
and Small Shopkeeper Loans in these markets. Having
expanded the rural footprint to more than 2.35 lakh
villages, HDFC Bank now plans to increase its coverage
in existing villages and deepen the relationships. The
Semi-Urban and Rural push has been backed by the
Bank's digital strategy. Your Bank's operations in Semi¬
Urban and Rural locations are explained below:

Agriculture and Allied Activities

Your Bank's assets in Agriculture and Allied activities
(PSL + Non PSL) stood at ' 3,73,863.65 crore as on
March 31, 2025.

The Key to HDFC Bank's success in the existing market has
been its ability to leverage various opportunities through:

1. A diverse product range

2.    Faster turnaround time

3.    Distribution strength

4.    Innovative digital solutions

HDFC Bank's extensive product portfolio encompasses
pre and post-harvest Crop Loans, Farm Development
/ Investment Loans, Two-Wheeler Loans, Auto Loans,
Tractor Loans, Small Agri Business Loans, Loan Against
Gold, Loan to landless labourers and more. This
comprehensive offering has enabled the Bank to establish
a robust presence in rural areas with its asset products.
Additionally, it has been a prominent participant in the
Agri Infrastructure Fund Scheme consistently achieving
allocated targets set by the Government.

HDFC Bank is increasingly involved in facilitating various
Government / Regulatory Schemes to other Non-crop
Segments, including Agri-allied and Small Agri-Business
Enterprises, as well as Rural MSMEs. A unique business
model encompassing a wide variety of products and
services driven by a relationship management approach
ensures suitable solutions as well as financial literacy
to farmers. The Bank has tailored a range of crop and
geography-specific products to align with harvest cycles
and address the specific needs of farmers across diverse
Agro-climatic zones. This customer-centric approach
has transformed the rural banking services, enabling the
delivery of personalised offerings to meet the evolving
needs of rural customers effectively.

Products such as post-harvest cash credit and
warehouse receipt financing facilitate faster cash flows to
farmers, while credit is also extended for Allied Agricultural
Activities such as Dairy, Pisciculture, and Sericulture.
Moreover, HDFC Bank's targeted branch expansion in
SURU regions coupled with digital interventions aims to
create a superior customer experience and position it as
a future-ready institution.

Participation in Government Schemes

As a part of Atmanirbhar Bharat Abhiyan, the Government
of India has announced several schemes/enablers across
several sectors, particularly in the Agriculture sector. Your
Bank is implementing almost all such initiatives / schemes
targeting multiple stakeholders in the Agri ecosystem.

Agriculture Infrastructure Fund (AIF) Scheme:

Through this scheme, the Bank is offering medium to
long-term debt for investment in viable projects pertaining
to post-harvest management and infrastructure
development like construction of warehouses/silos. As
of March 31,2025, under the AIF scheme, your Bank has
sanctioned ' 6,359 crore covering 8,859 projects and
disbursed ' 4,642 crore covering 7,494 projects. During
the year under review, your Bank has sanctioned ' 1,991

crore for 3,529 projects and disbursed ' 1,843 crore for
3,363 projects.

•    The Project Monitoring Unit, AIF, Ministry of
Agriculture and Farmer Welfare has set specific
targets through various campaigns. Your Bank
achieved 106 per cent of assigned target by
approving ' 688 crore against target of ' 650 crore
in AIF PRAGATI Campaign conducted between
January 1 and February 15, 2025.

•    In the ARISE Campaign conducted between
June 18 and July 31, 2024, your Bank has secured
second position amongst all Scheduled Commercial
Banks (SCBs) by approving 1,421 applications.

Pradhan Mantri Formalisation of Food and
Micro Enterprises (PMFME):

Your Bank is actively implementing the scheme and
passing the benefits to all eligible borrowers in the food
processing sector.

I n the year under review, loans worth ' 549 crore were
sanctioned for 2,929 projects and ' 567 crore has been
disbursed for 3,319 projects.

Other Agri schemes, where your Bank has significantly
contributed include Agri Marketing Infrastructure Fund
(AMIF), Animal Husbandry Infrastructure Fund (AHIDF),
Credit Guarantee Fund for Micro Units, National
Livestock Mission (NLM) as well as state-specific
Government schemes.

To address high volume and low-value ticket loans in
Agri-Business with a digital optimisation strategy, your
Bank plans to onboard AgriTech-BCs with differentiated
business models. These BCs will help source and service
small and marginal farmers.

Funding Small and Marginal Farmers (SMFs):

Your Bank views lending to the agriculture sector,
including to small and marginal farmers, as a huge
opportunity and not just a regulatory mandate to meet
priority sector lending requirements. The Bank has
leveraged its extensive knowledge of rural customers
to create as well as deliver products and services at
affordable price points with a quick turnaround time. This
has enabled HDFC Bank to establish a strong footprint
in the rural geographies which it has now leveraged to
increase its penetration of liability products.

I n the Financial Year 2023-24, your Bank serviced
customers in about 2.25 lakh villages. Through a plethora
of interventions, the number of villages grew to over 2.35
lakh in the Financial Year 2024-25. Your Bank has put in
place a strategy to further penetrate these villages and
add more customers through a variety of products for
farmer financing.

HDFC Bank has financed and supported 35 lakh Small
and Marginal Farmers. This was achieved through a
strategy to engage closely with small and marginal farmers
through customised agriculture loans. Leveraging the
government schemes it has launched various secured/
unsecured loan products including Loan Against Gold as
security, targeting small and marginal farmers in Agri and
Allied segments.

Farmer Producer Organisations (FPOs):

For agriculture productivity and incomes to grow,
aggregation of farm holdings in the form of FPOs is the
key strategy to double farmers' income. Leveraging the
government scheme for formation and promotion of
10,000 new FPOs (Credit guarantee is available from
NABARD / CGTMSE), your Bank has funded eligible
FPOs for working capital and term loan requirements. As
of March 31,2025, your Bank was able to reach 249 FPOs
covering about one lakh small and marginal farmers.

Digital Interventions

Some of the digital interventions made by your
bank include:

Digitalising Milk Procurement:

This initiative brings transparency in the milk procurement
and payment process which benefits both farmers and
dairy societies. Multi-function Terminals (MFTs), popularly
known as Milk-to-Money ATMs, are deployed in dairy
societies. The MFTs link the milk procurement system of
the dairy society to the farmer's account to enable faster
payments. MFTs have cash dispensers that function
as standard ATMs. Payments are credited without the
hassles of cash distribution. Further, this process creates
a credit history which can then be used for accessing
bank credit. So far, the Bank has digitalised payments
at various milk cooperatives across two states also
279 milk cooperatives actively serving and benefiting
more than 1.66 lakh dairy farmers and facilitated 41.72
lakhs transactions. Apart from dairy and cattle loans,
customers gain access to the Bank's products including
digital offerings such as 10 Second Personal Loan, Kisan

Credit Card and Bill Pay

Gold Loans:

Your Bank is making inroads into a market dominated
by the unorganised sector, moneylenders and pawn
brokers. The Bank is keen on making the gold loan
facility available across the length and breadth of the
country. As on March 31, 2025, the Bank is offering gold
loans through 4,617 branches, with 46 per cent of these
branches in Semi-Urban and Rural location. HDFC Bank
ended the year with a Gold Loan Portfolio of ' 18,716
crore with growth of 28 per cent over the previous year.

Your Bank is implementing its blueprint of making gold
loans available in most of its branches and thereby taking
this product within the reach of otherwise untapped
customer segments

Social Initiatives in Farm Sector

The farm sector faces threats arising out of climate
change as evident from the growing number of extreme
weather events. In addition, factors like soil health, input
quality (seeds and fertilisers), water availability and
Government policy have significant impact, along with
price realisations and storage facilities. All this has an
impact on farm yield and income.

Given the vulnerabilities, it is critical to strengthen climate
resilience and adaptability of the agri-food sector. In this
context, your Bank has launched a variety of initiatives
such as Holistic Rural Development Programme
(HRDP), Crop Residue Management Project amongst
others. Within regulatory guidelines, your Bank has also
been providing relief to impacted farmers. It also has
put in place systems designed to enable Direct Benefit
Transfers in a time-bound manner.

Lending to the agriculture sector, including to small
and marginal farmers, is a regulatory mandate as part
of priority sector lending requirements. The Bank has
leveraged its extensive knowledge of rural customers
to create as well as deliver products and services at
affordable price points and with a quick turnaround
time. This has enabled it to establish a strong footprint
in the rural geographies which has now been leveraged
to increase penetration of liability products. Further,
your Bank has been working with a segment-specific
approach like funding to horticulture clusters, supply
chain finance, agri business, MSMEs and dairy farmers. It
also continues to engage closely with farmers to mitigate
risks and protect portfolio quality.

Micro, Small and Medium Enterprises (MSME)

The MSME sector serves as an important engine for
economic growth and is one of the largest employers in
the economy.

As on March 31,2025, your Bank's assets in the MSME
segment stood at ' 5,24,101.10 crore.

The Micro Enterprises assets alone stood at
' 1,54,028.51 crore.

The Union Government and the Reserve Bank of India
(RBI) have been providing support for lending to MSME
segment on an ongoing basis. Apart from various
schemes to support MSMEs during the pandemic, the
Government has also launched a revamped CGTMSE
scheme with an increased limit threshold for guarantee
cover and reduction of guarantee fee. Many other
schemes like Credit Guarantee to Start Ups (CGSS),
eNWR guarantee scheme have been rolled out.

Your bank emerged as one of the leading contributors to
CGTMSE in the Financial Year 2024-25 also, supporting
the MSME sector with guarantee-covered credit facilities.
This has further supported the growth of MSME loans
which have shown a year-on-year growth of 4.07 per cent.

The pace of digitalisation among MSMEs has accelerated,
which has helped to speed up the pace of disbursement
and increase transparency in the sector. Customers can
now apply online and submit required documents digitally
and they can also execute post-sanction agreements
digitally to avail of facilities quickly with straight-through
disbursement. The Government's digitalisation push,
the adoption of GST and reforms in return filings, such
as income tax have made it easier to access customer
cash flow and financial data, which can be used to
support decision making and portfolio monitoring. Your
Bank's SME portal continues to offer ad hoc approvals
and pre-approved Temporary Overdrafts (TODs) on a
simplified and faster basis to existing customers. They
can request a top-up of loans and submit the required
documents online. The SME portal also allows customers
to access your Bank's services related to sanctioned
credit facilities 24/7 from anywhere. Customers can
download various certificates and statements as needed
on an ongoing basis.

On the trade side, your Bank focuses on customer
engagement to increase the penetration of Trade on Net
applications. Trade on Net is a complete enterprise trade
solution for customers engaged in domestic and foreign

trade. It enables them to initiate and track requests online
seamlessly, reducing time and costs.

Financial Inclusion and Financial Literacy to
educate and empower the under-banked

The philosophy of financial inclusion is about seamless
delivery of financial services. This includes opening of
savings bank accounts to inculcate the savings habit/
transactions, extending credit for productive, personal
and other purposes and offering value added services
such as micro-insurance, pension products among
others. The Bank, through its wide network of branches
and business correspondents coupled with enhanced
digital offerings such as BHIM UPI as well as Aadhaar and
RuPay-enabled Micro-ATMs ensures a wide coverage
pan-India.

HDFC Bank is committed to extending banking services
to deeper geographies in the country to educate,
empower and enable citizens to be a part of the formal
financial system. The bank believes that financial literacy
is an important tool for promoting financial inclusion and
has adopted an integrated approach, wherein its efforts
towards Financial Inclusion and Financial Literacy go
hand in hand.

Through Financial literacy and education, the Bank
disseminates information on the general banking
concepts to diverse target groups, including students,
women, rural and urban poor, pensioners and senior
citizens to enable them to make informed financial
decisions as well as to make people understand the
benefits of linking with the banking system.

Your Bank has been actively committed to offering a
multitude of Government schemes across diverse
geographies. Below are key highlights:

•    Pradhan Mantri Jan Dhan Yojana and Social
Security Schemes (PMJJBY, PMSBY and
APY): To enhance financial inclusion coverage.

Support: Opened more than 50 lakh PMJDY
accounts and enrolled 90.97 lakh customers in
Social Security Schemes (PMJJBY, PMSBY and
APY) since inception.

•    Financial Literacy Camps (FLCs): To educate
and empower citizens to understand the benefits
of joining the formal financial system.

Support: The Bank has cumulatively covered
over 1.84 crore customers through its FLCs.
During the Financial Year 2024-25, the bank has
conducted 4.97 lakh FLC camps covering 30.65
lakh participants.

•    Pradhan Mantri Mudra Yojana (PMMY): To

enable small borrowers to borrow upto ' 20 lakh
for non-farm income generating activities.

Support: Since the launch of the scheme, the Bank
has extended loans amounting to ' 88,664 crore to
1.32 crore beneficiaries.

•    Stand Up India (SUPI): To empower Scheduled
Caste, Scheduled Tribe and Women borrowers.

Support: Your Bank has extended loans amounting
to ' 3,720 crore to 16,115 beneficiaries since
inception of the scheme.

•    Prime Minister’s Employment Generation
Programme (PMEGP): A special scheme aimed
at generating employment opportunities in rural
and urban areas through establishment of new
self-employment ventures, projects and micro¬
enterprises.

Support: The Bank has disbursed funding of ' 390
crore since inception to micro-enterprise units in
manufacturing and service sectors.

•    PM-Street Vendors AtmaNirbhar Nidhi (PM-
SVANidhi): Special scheme under micro-credit
facility for street vendors providing collateral-free,
affordable term loans of ' 10,000 for one year in the
1^st tranche.

Support: Your Bank has provided loans to 40,302
Street Vendors since inception and educated and
encouraged them to adopt digital transactions
through the “Main Bhi Digital” campaign.

•    Aadhaar Seva Kendras (Aadhaar enrolment
and updation service): Your Bank provides
Aadhaar enrolment and update services at branches
that are designated as Aadhaar Seva Kendras.

Support: More than 65.8 lakh enrolments and
updates undertaken since inception basis explicit
customer request.

Sustainable Livelihood Initiative

Our Sustainable Livelihood Initiative (SLI) is a holistic approach
that aims to deliver financial support to that section of the
population who lack access to formal banking services.

For details click on https://www.hdfcbank.com/personal/
borrow/other-loans/sustainable-livelihood-initiative

E.    Environmental Sustainability

Sustainability is one of the core values of the Bank. The
details are covered in pages 112 to 135.

F.    Business Enablers

1.    People

People is one of the core values of the Bank. Through
continuous reinforcement and alignment with our
strategic objectives, the HDFC Bank Culture Framework
ensures that over 2.14 lakh employees are equipped to
succeed in an ever-evolving landscape. Our supervisory
behaviour framework - Nurture, Care, Collaborate
(NCC) - empowers our workforce with the knowledge
and guidance needed to lead transformation. We focus
on acquiring diverse talent and prioritise their well¬
being, safety and development, fostering an inclusive
environment where they can thrive and grow.

For details please refer to pages 150 to 167.

2.    Leveraging Technology for Growth and
Technology Absorption

I n the Financial Year 2024-25 HDFC Bank advanced
its long-term technology strategy with an integrated
approach to digital, data, and risk transformation. Our
ambition to build a future-ready, inclusive financial
institution continued to gain ground-guided by the belief
that technology must serve the customer, not complexity.

The year saw the convergence of three key forces:

•    A pivot towards platform-led architecture,

•    A sharp focus on digitalising every meaningful
journey, and

•    A proactive stance on resilience and responsible
AI exploration.

 

Our “Shift Right” strategy, launched in FY 2024., served
as the compass-anchoring transformation around five
pillars: Journeys, Channels, Core, Data, and Security.

Reimagining the Banking Experience

Across customer segments —retail, SME, and
enterprise—we reengineered critical touchpoints to be
more responsive, inclusive and insight-led.

•    86 per cent of new account acquisitions and 79
per cent service requests were fulfilled digitally,
supported by simplified onboarding, real-time
validations, and assisted journeys where needed.

•    High-volume lending products like Xpress Car
Loans, Business Loans and Gold Loans saw scale
through straight-through processing and biometric
KYC flows.

•    I n rural and semi-urban India, digitally assisted
journeys enabled credit and deposit access via local
business correspondents—reducing onboarding
time and improving branch capacities.

Our customer-first design philosophy enabled us to deliver
outcome-based journeys, not just digital workflows—
focused on speed, intuitiveness and self-resolution.

Scaling Digital Interfaces with Intelligence

Our newly upgraded Mobile and NetBanking platforms—
rolled out in phases—have ushered in a cutting-edge
experience, featuring unified views, smart navigation and
enhanced security protocols that elevate every interaction.

Conversational interfaces through HDFC BankOne
handled over 3.7 crore customer engagements monthly,
while WhatsApp Banking emerged as the preferred
channel of our customers. Over half of all service
requests now flow through digital self-service channels,
with fallback to agents only when required.

The launch of Pixel, a fully digital, app-native
credit card, saw strong traction. It is built on the
principles of configurability, real-time servicing and
contextual engagement.

Deepening Ecosystem Play: Embedded and API
Banking

Our embedded banking model evolved into an
anchoring capability:

•    We scaled integrations with partners like Tata Neu,
PhonePe and Swiggy enabling seamless API-led
journeys for retail lending and cards.

•    Over one lakh products were sourced monthly
through these ecosystems.

•    Our co-branded cards portfolio expanded
with curated benefits, contextual offers and
intelligent onboarding.

We also enhanced our cross-border offering:

•    HDFC Bank now handles over 20 per cent of India's
inbound remittances through tie-ups with Lulu
Exchange, Flywire and PayMyTuition, supported by
over 115 correspondent arrangements.

A robust API-first orchestration layer continues to
drive plug-and-play capability for partners, enabling
secure, real-time access to banking infrastructure
across platforms.

Modernising the Core for Real-Time, Resilient
Scale

Financial Year 2024-25 marked a major milestone with
the migration of our Core Banking System to a next-gen
engineered platform—making HDFC Bank one of the
largest banks in the country to host its core ecosystem
on a modern, scalable architecture.

This was complemented by:

•    The first deployment under our “Lighten the Core”
strategy-Payments Hub-which modularised IMPS
processing with reduced latency.

•    Active-active data center configurations and
infrastructure upgrades across payments,
origination and loan management platforms.

These foundational shifts allow us to handle
exponential digital growth while preserving availability
and performance.

Harnessing Data for Insight-Led Decisions

The Bank initiated a Data Lake House programme to
centralise data from across systems, enabling scalable
analytics, improving accuracy and regulatory compliance.

Built on modern open-stack technologies, the platform
supports better decision-making, standardises master
data, and strengthens governance through unified
controls, lineage tracking and reduced duplication.

Cybersecurity and Digital Risk: A Measured
Approach

As the Bank expands its digital footprint, safeguarding
customer data and ensuring system integrity remain
paramount. In FY 2025, HDFC Bank strengthened its
cybersecurity architecture with a comprehensive suite of
tools and governance frameworks designed to manage
evolving risks, ensure regulatory alignment and preserve
operational continuity.

The Bank continued to enhance its Zero Trust
Architecture, reducing reliance on perimeter defences
and embedding verification at every access point—
across users, systems and APIs. These principles now
underpin access controls, policy enforcement and cloud
governance across business-critical environments.

The Bank protects its customer data and digital services
through a range of advanced security measures. By
deploying PRISMA Cloud Infrastructure Entitlement
Management (CIEM), the Bank effectively manages and
restricts cloud permissions based on least-privilege
principles. The integration of Accops Secure Gateway
provides MFA-protected access to crucial internet¬
facing applications while Zscaler Private Access (ZPA)
ensures secure, policy-driven remote connectivity in
line with the Bank's Zero Trust roadmap. Additionally,
the Cloud Web Application Firewall (WAF) safeguards
against application-layer threats across digital channels.
Continuous monitoring, detection and remediation of
cloud misconfigurations and vulnerabilities are achieved
through the Cloud Security Posture Management (CSPM)
and Cloud Workload Protection Platform (CWPP). The
Bank also employs Cloud Access Security Broker
(CASB), Browser Isolation and CI/CD Security Controls
to secure SaaS usage and development pipelines. Lastly,
Attack Surface Monitoring (ASM) continuously scans and
secures exposed digital assets throughout the enterprise.

Collectively, these investments reinforce the Bank's
commitment to secure-by-design architecture ensuring
that innovation, scale and resilience go hand in hand with
responsible risk management.

Serving Enterprises and SMEs with Speed and
Simplicity

Our Corporate and Wholesale Banking business saw
strong digital adoption through:

•    Rollout of fully digital onboarding journeys for
working capital and trade finance.

•    Enhancements to CBX (Corporate Banking
Exchange), which now processes large volume of
transactions monthly, with API share steadily rising.

I n parallel, our SmartHub suite scaled across SME and
merchant communities with embedded finance, payments
and loan origination stitched into a single interface.

Building at Scale: Agile Tech Delivery

The Factory model continues to be the nucleus of
digital execution at HDFC Bank—with dedicated units
focused on:

•    Experience design

•    Mobile and cloud engineering

•    APIs and orchestration

•    Data and GenAI

•    Secure-by-design architecture

Various high-impact programmes were executed
in FY 2025 using this construct—ranging from core
modernisation to next-gen servicing platforms.

The Next Chapter: Responsible GenAI and
Platform-Led Innovation

Financial Year 2024-25 served as the foundation year for
AI-readiness. A structured platform approach is being
developed with focus on:

•    Secure, reusable models and components
for scalability

•    Built-in observability and compliance

The Bank is exploring a Class of Problems
methodology—prioritising high-impact, enterprise¬
wide opportunities over isolated use cases. This
approach ensures scalability, consistency and
measurable business outcomes.

Early pilots in documentation, support, underwriting
and productivity workflows have validated the potential
for GenAI to augment decision-making and reduce
operational friction.

What Lies Ahead

Financial Year 2024-25 was a year of bold action,
modernisation and simplification. In FY 2026, our focus
sharpens towards:

•    Scaling digital platforms with embedded capabilities

•    Operationalising responsible GenAI

•    Delivering contextual experiences at the edge

•    Sustaining resilience while enabling agility

HDFC Bank's technology and digital strategy remains
focused not just on keeping pace with change—but on
shaping the future of customer-centric, inclusive and
intelligent banking in India.

Cybersecurity

Cybersecurity is at the heart of the technology transformation
journey and the Bank is deeply committed to ensuring robust
cyber security with substantial advancements being made to
further fortify its infrastructure and applications. Key initiatives
in this regard include:

•    Significant advancements to consolidate cyber security
through initiatives such as the foundation of a next-
generation Cybersecurity Operations Center (CSOC)
for predictive security and incident management,
introduction of Security Orchestration, Automation and
Response (SOAR) to reduce incident response times and
network micro-segmentation for better control, visibility
and preparedness against ransomware.

•    The initiative and approach to leverage AI and ML as an
entire suite to proactively detect and respond to threats
is managed through the deployment of next generation
Security Incident Event Management (SIEM) solution
augmented by Artificial Intelligence (AI) and Machine
Learning (ML) capabilities along with strong User Entity
Behavioral Analysis (UEBA) functionalities and built-in
threat modelling.

•    24/7 defacement monitoring and vulnerability
management of the bank's internet properties, antivirus
/ malware program, patch management, penetration

testing, etc. for minimising the surface area for cyber
security attacks and fortifying the Bank's assets like
infrastructure and applications.

•    Dedicated program for attack surface management
(ASM) that includes continuous attack surface discovery
and probing for weaknesses on the discovered assets.
There has been a continuous effort to ensure that
all significant weaknesses are remediated within a
reasonable timeframe.

•    Adopting a zero-trust architecture approach to ensure
protection against cyber-attacks.

•    I mplementation of Anti-Advanced Persistence Threat
(Anti-APT) system agent on all endpoints in the Bank
to protect from zero-day malware attacks. All network
elements such as email, web as well as endpoint
computers are protected by the anti-APT system.

•    Enterprise solutions such as Data Loss Prevention (DLP)
to monitor sensitive data stored, transmitted and shared
by users, and to prevent and detect data breaches. All
endpoints have proxy agent configured to ensure that
only authorised websites are accessed. All outgoing
e-mails are monitored through DLP solution.

•    Laptop Encryption: Data encryption ensures that
business-critical and sensitive data is not misplaced,
thereby preventing any reputational damage and
curtailing monetary losses. Hard disk encryption is
implemented on all laptops.

•    Implementation of Domain-based Message
Authentication, Reporting and Conformance (DMARC)
system for protecting the Bank's domain from
unauthorized use, commonly known as ‘email spoofing'.

Technology related challenges over the past few years have
only made the Bank's resolve stronger to consolidate and
fortify its technology environment. Focused technology /
digital investments and programs in technology are pivotal to
the Bank in the new age of digital banking and experiences
for its customers.

Service Quality Initiatives and Grievance Redressal

Customer Focus is one of the five core values of the Bank.
Given a highly competitive business environment, especially
with diverse lines of businesses, we continuously strive to
enhance customer experience. Delivering exceptional product

quality and customer service is a prerequisite for sustained
growth. The Bank strives to achieve this by seeking customer
feedback, benchmarking with best-in-class business entities
and implementing customer-centric improvements. We have
adopted a well-defined three-step strategy towards Customer
Service - Define, Measure and Improve. Towards improving
customer experience, the Bank has adopted industry best
practices and continuously acts on customer feedback
secured across multiple channels.

HDFC Bank has adopted a multi-pronged approach to
provide an omnichannel experience to its customers. On
the one hand, it has traditional touchpoints like branches,
email care and PhoneBanking. On the other hand, it has
state-of-the-art platforms like NetBanking, MobileBanking,
WhatsApp Banking, the chatbot Eva and the Bank's exclusive
social care handles. The Bank also has a Virtual Relationship
Management programme to cater to various financial needs
in a personalised manner.

One of the key strategies adopted by your bank is to leverage
the benefits of Artificial Intelligence (AI) and Automation in
providing better customer service - which entails (a) Speed
of Response (b) Accuracy of Response (c) Response being In
line with regulatory prescriptions and (d) in-depth root cause
analysis to reduce/eliminate recurrence of customer grievances.

Customer service performance and grievance redressal are
regularly assessed at various levels, including Branch Level
Customer Service Committees, Virtual Level Customer
Service Committees, Standing Committee on Customer
Service and Customer Service Committee of the Board. HDFC
Bank has implemented robust processes to monitor and
measure service quality levels across touchpoints, including
at product and process level through the efforts of the Quality
Initiatives Group.

The service quality team conducts regular reviews across
various products, processes and channels, focusing on
improving the customer experience. A unique Service Quality
Index (SQI) has been developed to measure the performance
of key customer facing channels based on critical customer
service parameters. This SQI enables customer facing
channels to identify improvement areas, thereby raising
service standards.

One of the basic building blocks of providing acceptable
level of customer service is to have an effective Internal
Grievance Redressal Mechanism / Framework. HDFC Bank
has developed a comprehensive Grievance Redressal Policy,
Customer Rights Policy, Customer Protection Policy and a

Customer Compensation Policy duly approved by the Board
which outline a framework for resolving customer grievances
in an effective manner. These policies are accessible to
customers through the Bank's website and branch network.

HDFC Bank has created multiple channels for customers
to provide feedback and register grievances facilitating
a transparent and accessible system. As a pioneer in
innovative financial solutions and digital platforms, the
Bank has witnessed an increased utilisation of its digital
channels. Keeping customer interest in focus, the Bank has
formulated a Board approved Protection Policy which limits
the liability of customers in case of unauthorised electronic
banking transactions.

This Bank is compliant with the RBI Internal Ombudsman
Scheme of RBI Guidelines. At the apex level, as a part of
the Internal Grievance Redressal mechanism, the Bank has
appointed seasoned-retired bankers as Internal Ombudsmen
to independently review any customer grievance which is
partly/wholly rejected by the Bank before the final decision is
communicated to the customer.

HDFC Bank is on a journey to measure customer loyalty
through a high velocity, closed loop customer feedback
system. This customer experience transformation programme
helps employees to empathise better with customers and
improve turnaround times. Branded as ‘Infinite Smiles',
the programme helps establish behaviours and practices
that result in customer-centric actions through continuous
improvement in products, services, processes and policies.

The Bank remains committed to placing the customer at the
centre of its operations. By consistently improving customer
experience, adopting an omnichannel approach and
implementing robust service quality and grievance redressal
mechanisms, it aims to build and nurture lasting relationships.

Risk Management and Portfolio Quality

Your Bank's historical focus on Pillar 1 risks, including Credit
Risk, Market Risk and Operational Risk has been expanded
in response to the evolving banking landscape. Liquidity
Risk, Information Technology Risk, Information Security Risk,
Group Risk and Model Risk have also emerged as critical
considerations. These risks not only impact your Bank's
financial strength and operations but also its reputation. To
address these concerns, your Bank has established Board-
approved risk strategy and policies overseen by the Risk Policy
and Monitoring Committee (RPMC). RPMC is a Board level
committee, which supports the Board by supervising the

implementation of the risk strategy. It guides the development
of policies, procedures and systems for managing risk. It
ensures that these are adequate and appropriate to changing
business conditions, the structure and needs of the Bank and
the risk appetite of the Bank. It ensures that frameworks are
established for assessing and managing various risks faced
by the Bank, systems are developed to relate risk to the
Bank's capital level and methods are in place for monitoring
compliance with internal risk management policies and
processes.

The hallmark of your Bank's risk management function is that it
is independent of the business sourcing unit with convergence
only at the CEO level.

The gamut of key risks faced by the Bank which are
dimensioned and managed include:

•    Financial Risks:

•    Credit Risk,

•    Market Risk

•    Interest Rate Risk in the Banking Book

•    Liquidity Risk

•    Intraday Liquidity Risk

•    Intraday Credit Risk

•    Credit Concentration    Risk

•    Non-Financial Risks

•    Operational Risk

•    I nformation Technology and Information
Security Practices

•    Technology Risk

•    Third Party Products    Risk

•    Outsourcing Risk

•    Group Risk (various risks pertaining to subsidiaries)

•    Model Risk

•    People Risk

•    Business Risk

•    Strategic Risk

•    Compliance Risk

•    Reputation Risk

Financial Risks:

Credit Risk

Credit Risk is the possibility of losses associated with
diminution in the credit quality of borrowers or counterparties.
Losses stem from outright default or reduction in portfolio
value. Your Bank has a comprehensive credit risk architecture,
policies, procedures and systems for managing credit risk
in its retail and wholesale businesses. Wholesale lending
is managed on an individual as well as portfolio basis. In
contrast, given the granularity of individual exposures, retail
lending is managed largely on a portfolio basis across
various products and customer segments. Robust front-end
and back-end systems are in place to ensure credit quality
and minimise default losses. The factors considered while
sanctioning retail loans include income, demographics,
credit history, loan tenure and banking behavior. In addition,
multiple credit risk models are developed and used to assess
different segments of customers based on portfolio behavior.
In wholesale loans, credit risk is managed by capping
exposures based on borrower group, industry, credit rating
grades and country, among others. This is backed by portfolio
diversification, stringent credit approval processes, periodic
post-disbursement monitoring and remedial measures. Your
Bank has ensured strong asset quality through volatile times
in the lending environment by stringently adhering to prudent
norms and institutionalised processes. Your Bank also has a
robust framework for assessing Counterparty Banks, which
are reviewed periodically to ensure interbank exposures are
within approved appetite.

As on March 31, 2025, your Bank's ratio of Gross Non¬
Performing Assets (GNPAs) to Gross Advances was 1.33 per
cent. Net Non- Performing Assets (Gross Non-Performing
Assets Less Specific Loan Loss provisions) was 0.43 per cent
of Net Advances.

Your Bank has a conservative and prudent policy for specific
provisions on NPAs. Its provision for NPAs is higher than
the minimum regulatory requirements and adheres to the
regulatory norms for Standard Assets.

Credit Risk emanating from digital lending

Driven by rapid technological advancements, the banking
sector is witnessing the increasing importance of digitalisation
as a critical differentiator for customer retention and service
delivery. Digital lending has emerged as a convenient and
quick method for customers to secure loans with just a
few clicks, often in minutes. However, addressing the risks
associated with digital lending is crucial, and your Bank has
implemented appropriate measures to manage these risks
effectively. Digital loans are sanctioned primarily to your Bank's
existing customers. Often, they are customers across multiple
products, thus enabling the Bank ready access to their
credit history and risk profile. This accessibility facilitates the
evaluation of their loan eligibility. Moreover, the credit checks
and scores used by your Bank in process-based underwriting
are replicated for digital loans. This ensures consistency in the
evaluation process.

Market Risk

Market Risk arises primarily from your Bank's statutory reserve
management and trading activity in interest rates, equity
and currency market. These risks are managed through a
well-defined Board approved Market Risk Policy, Investment
Policy, Foreign Exchange Trading Policy and Derivatives Policy
that caps risk in different trading desks or various securities
through trading risk limits/triggers. The risk measures include
position limits, tenor restrictions, sensitivity limits, namely,
PV01, Modified Duration of Hold to Maturity Portfolio and
Option Greeks, Value-at-Risk (VaR) Limit, Stop Loss Trigger
Level (SLTL), Scenario-based P&L Triggers, Potential Loss
Trigger Level (PLTL), YTD Trigger for AFS book. These limits
are monitored on an end-of-day basis by treasury mid office.
In addition, forex open positions, currency option delta and
interest rate sensitivity limits are computed and monitored
on an intraday basis. This is supplemented by a Board-
approved stress testing policy and framework that simulates
various market risk scenarios to measure losses and initiate
remedial measures. Your Bank's Market Risk capital charge is
computed daily using the Standardised Measurement Method
applying the regulatory factors.

Liquidity Risk

Liquidity risk is the risk that the Bank may not be able to
meet its financial obligations as they fall due without incurring
unacceptable losses. Your Bank's liquidity and interest rate
risk management framework is spelt out through a well-
defined Board approved Asset Liability Management Policy.
As part of this process, your Bank has established various
Board-approved limits for liquidity and interest rate risks in

the banking book. The Asset Liability Committee (ALCO) is a
decision-making unit responsible for implementing the liquidity
and interest rate risk management strategy of the Bank in line
with its risk management objectives and ensures adherence
to the risk tolerance/limits set by the Board. ALCO reviews
the policy's implementation and monitoring of limits. While
the maturity gap, Basel III ratios, and stock ratio limits help
manage liquidity risk, Net Interest Income impact and Market
Value of Equity (MVE) impact help mitigate interest rate risk
in the banking book. This is reinforced by a comprehensive
Board-approved stress testing programme covering both
liquidity and interest rate risk.

Your Bank conducts various studies to assess the behavioural
pattern of non-contractual assets and liabilities and
embedded options available to customers, which are used
while managing maturity gaps and repricing risk respectively.
Further, your Bank has the necessary framework to manage
intraday liquidity risk.

The Liquidity Coverage Ratio (LCR) is one of the Basel
Committee's key reforms to develop a more resilient banking
sector. The LCR, a global standard, is also used to measure
your Bank's liquidity position. LCR seeks to ensure that the
Bank has an adequate stock of unencumbered High-Quality
Liquid Assets (HQLA) that can be converted into cash easily
and immediately to meet its liquidity needs under a 30-day
calendar liquidity stress scenario. The LCR helps in improving
the banking sector's ability to absorb shocks arising from
financial and economic stress, whatever the source, thus
reducing the risk of spillover from the financial sector to the
real economy.

The Net Stable Funding Ratio (NSFR), a key liquidity risk
measure under BCBS liquidity standards, is also used to
measure your Bank's liquidity position. The NSFR seeks to
ensure that your Bank maintains a stable funding profile in
relation to the composition of its assets and off-balance sheet
activities. The NSFR promotes resilience over a longer-term
time horizon by requiring banks to fund their activities with
more stable sources of funding on an ongoing basis. The RBI

guidelines stipulated a minimum NSFR requirement of 100 per
cent at a consolidated level and your Bank has maintained
the NSFR well above 100 per cent since its implementation.
Based on guidelines issued by RBI, your Bank's NSFR stood
at 119.80 per cent on a consolidated basis at March 31,2025.

Non-financial Risks:

Operational Risk

This is the risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events. It also
includes risk of loss due to legal risk but excludes strategic
and reputational risk.

Given below is a detailed explanation under four different
heads: Framework and Process, Internal Control, Information
Technology and Information Security Practices and Fraud
Monitoring and Control.

A. Framework and Process

To manage Operational Risks, your Bank has established
a comprehensive Operational Risk Management
Framework, whose implementation is supervised by the
Operational Risk Management Committee (ORMC) and
reviewed by the RPMC of the Board. An independent
Operational Risk Management Department (ORMD)
is responsible for implementing the framework. The
framework incorporates, three lines of defence to
ensure implementation.

Three Lines of Defense model for Operational
Risk Management

•    In order to achieve the aforesaid objective pertaining
to operational risk management framework, the ORMC
guides and oversees the functioning, implementation, and
maintenance of operational risk management activities of
Bank, with special focus on:

•    I dentification and assessment of risks across the Bank
through the Risk and Control Self-Assessment (RCSA)
and Scenario analysis

•    Measurement of Operational Risk based on the actual
loss data

•    Monitoring of risk through Key Risk Indicators (KRI)

•    Management and reporting through KRI, RCSA and
operational risk losses of the Bank

B. Internal Control

Your Bank has implemented sound internal control
practices across all processes, units and functions. It has
well laid down policies and processes for the management
of its day-to-day activities. Your Bank follows established,
well-designed controls, which include traditional four eye
principles, effective segregation of business and support
functions, segregation of duties, call back processes,
reconciliation, exception reporting and periodic MIS.
Specialised risk control units function in risk- prone
products/ functions to minimise operational risk. Controls
are tested as part of the SOX control testing framework.

C. Information Technology and Information
Security Practices

Your Bank operates in a highly automated environment
and makes use of the latest technologies available on
cloud or on-premises Data Centres to support various
business segments. With the advent of new technology
tools and increased sophistication, your Bank has
improved its efficiency, reduced operational complexities,
aided decision making and enhanced the accessibility of
products and services. This results in various risks such
as those associated with the use, ownership, operation,
redundancy, involvement, influence, and adoption of IT
within an enterprise, as well as business disruption due
to technological failures. Additionally, it can lead to risks
related to information assets, data security, integrity,
reliability, and availability, among others. Your Bank
has put in place a governance framework, Information
Security Practices, Business Continuity Plan, Disaster
Recovery (DR) resiliency, Public Cloud and Cloud Native
Services Adoption and Enhanced Automated Monitoring
mechanisms to mitigate Information Technology and
Information Security-related risks. Our Bank continues
to enhance its information security posture through a
range of strategic and technology-driven initiatives aimed
at strengthening its information security and resilience
against evolving cyber threats.

a.    The Next-generation Cybersecurity Operations
Center (CSOC) has brought in significant
advancements to improve overall cyber security
posture of the Bank by deploying a predictive
/ proactive security monitoring of Bank IT
Infrastructure and Applications. We have deployed
next generation Security Incident Event Management
(SIEM) solution augmented by Artificial Intelligence
(AI) and Machine Learning (ML) capabilities along
with strong User Entity Behavioral Analysis (UEBA)
functionalities and built-in threat modelling.

b.    The Bank's dedicated Attack Surface Management
(ASM) program is aimed at continuously identifying
and addressing vulnerabilities across its assets,
thereby ensuring a secure environment for the Bank
and its customers.

c.    Additionally, vulnerability management of the Bank's
internet properties, penetration testing, antivirus /
anti-malware program etc. minimize the surface
area for cyber security attacks.

d.    Our centralized patch management tool automates
the discovery, management, and remediation of
endpoints and servers across various operating
systems and environments for the available patches.
It further facilitates patching, software deployment,
and compliance with security standards, thus
reducing the risk of the introduction of vulnerability
due to lack of timely patching.

e.    With the growing use of cloud infrastructure,
tools such as Cloud Posture and Access Security
Tools (CSPM & CASB) have been implemented
to detect misconfigurations, enforce compliance
requirements, and proactively reduce cloud-related
risks.

f.    Our Red Team proactively assesses our cyber
assets for vulnerabilities through various periodic
tests which also include red team assessments.
Any issues identified during the assessments are
remediated in a timely manner to ensure that the
banking services remain resilient and stay protected
against the evolving threats.

g.    Our Bank has also adopted zero-trust architecture
approach to ensure protection against cyber¬
attacks.

h.    Bank's comprehensive e-learning module, iSecurity
Ambassador (iSA), a mandatory assessment-based
course on information and cyber security, helps in
promoting security awareness culture in the Bank.

Overall, the bank's cybersecurity measures are focused
on ensuring the highest level of protection against cyber
threats, with proactive monitoring and automated incident
response capabilities, enhanced network visibility and a
zero-trust approach to security.

The Bank has defined various policies and frameworks
for managing the IT and Information Security risks
including risks emanating from third party engagements
and it follows the three lines of defence principle in
managing these risks. With the evolving changes in the
technology landscape, the Bank has been reviewing and
enhancing the scope for monitoring and mitigating the
risks through revision of frameworks and policies, tools,
and governance.

Your Bank has a well-defined Business Continuity and
Disaster Recovery plan that is periodically tested to
ensure that it can meet any operational contingencies.
Further, there is a well-documented crisis management
plan in place to address the strategic issues of a crisis
impacting the Bank and to direct and communicate the
corporate response to the crisis including cyber crisis.
In addition, employees periodically undergo mandatory
business continuity awareness training and sensitisation
exercises on a periodic basis.

For details on Business Continuity Management,
Information and Cyber Security Practices and Data
Privacy Measures, please refer page 106 to 111 and
231 & 239.

An independent assurance team within Internal Audit
acts as a third line of defence that provides assurance
on the management of IT-related risks.

D. Fraud Monitoring and Control

Your Bank has defined a comprehensive Fraud Risk
Management Policy encompassing the life cycle, i.e.
prevention, detection, investigation, accountability,
monitoring, recovery, analysis and reporting. Further, the
Bank has Whistle Blower and Vigilance Policies and there
are designated functions responsible for implementation
of fraud prevention measures. Frauds are investigated to
identify the root cause and relevant corrective steps are
recommended to prevent recurrence.

Fraud Monitoring committees at the senior management
and Board level also deliberate on high value fraud
events and advise preventive actions. Periodic
reports are submitted to the Board and senior
management committees.

Compliance Risk

Compliance Risk is defined as the risk of impairment of your
Bank's integrity, leading to damage to its reputation, legal or
regulatory sanctions, or financial loss, as a result of a failure (or
perceived failure) to comply with applicable laws, regulations
and standards. Your Bank has a Compliance Policy to ensure
the highest standards of compliance. A dedicated team of
subject matter experts in the Compliance Department works
with business, support and operations teams to ensure active
Compliance Risk management and monitoring. The team
also provides advisory services on regulatory matters. The

focus is on identifying and reducing risk by rigorously testing
products and also putting in place robust internal policies.
Products that adhere to regulatory norms are tested after
rollout and shortcomings, if any, are fully addressed till the
product stabilises. Internal policies are reviewed and updated
periodically as per agreed frequency or based on market
actions or regulatory guidelines/ actions. The compliance
team also seeks regular feedback on regulatory compliance
from product, business and operation teams through self¬
certifications and monitoring.

Group Risk

Your Bank has diverse set of subsidiaries including NBFC,
AMC, Life Insurance, General Insurance, Venture Capital
entities, amongst others. In order to manage the risk arising
from subsidiaries with regard to potential uncertainties or
adverse events that can impact the operations, financial
stability, reputation of the Group, your Bank has established
Group Risk Management function within the Risk Management
Group. Your Bank shall have a reasonable oversight on the
Risk Management Framework of the group entities on an
ongoing basis through Group Risk Management Committee
(GRMC) and Group Risk Council (GRC). The Board / Risk
Management committees of respective subsidiary shall be
driving the day to day risk management in accordance with
the requirements of the respective regulator. Stress testing
for the group is carried out by integrating the stress tests of
the subsidiaries. Similarly, capital adequacy projections are
formulated for the group after incorporating the business/
capital plans of the subsidiaries. The Group Risk Management
Committee reports to the Bank's Risk Policy & Monitoring
Committee (RPMC).

Group Oversight Framework:

As HDFC Bank continues to grow in scale and complexity as the
parent of a diversified financial group, the need for coordinated
oversight across group entities has become increasingly
important. In April 2024, the Bank formally introduced a
Group Oversight Framework to reinforce governance across
subsidiaries. This initiative aligns with regulatory expectations
set out in the inter-regulatory forum reports by the Reserve
Bank of India (RBI), Securities and Exchange Board of India
(SEBI) and Insurance Regulatory and Development Authority
of India (IRDAI) on the monitoring of systemically important
financial intermediaries.

The Framework applies to H DFC Bank and its group companies
that are consolidated in the Bank's financial statements, with
the exception of entities where the Bank neither exercises

significant control nor qualifies as a significant beneficial
owner-such as HDFC Mutual Fund, Alternative Investment
Funds and Separately Managed Accounts managed or
advised by HDFC Asset Management Company Limited and
its international subsidiary.

The Framework establishes a defined structure for oversight,
reporting and escalation across the Group. The Board of HDFC
Bank exercises overall oversight through periodic information
reported by various stakeholders. The Group Oversight
Department reports critical matters to the Board, including
critical overdue action items, material risks, exceptions in intra¬
group transactions, material related-party transactions and
significant governance concerns (if any).

Enabling and control functions of the Bank report Group-level
key metrics and any observed exceptions through designated
channels. Oversight responsibilities and escalation protocols
are set out in the framework and is illustrated as below.

Model Risk

The use of models invariably presents model risk, which is the
potential for adverse consequences from decisions based on
incorrect or misused model outputs and reports. The Model
Risk Management (MRM) under Risk Management Group
is responsible for testing and verifying the accuracy and
reliability of models used within the Bank. By establishing a
dedicated MRM team, your Bank ensures that its models are
independently evaluated before implementation and on an
ongoing basis.

There is an established Model Risk Management Policy
(MRM Policy) which is a centralized, overarching policy whose
objective is to provide comprehensive guidance on model
risk management across the Bank. The policy defines the
roles and responsibilities across stakeholders i.e., Model

Owners, Model Users, Model Developers, and the Model Risk
Management (MRM).

There is Model Risk Management Committee (MRMC)
which is an executive committee to govern the Model Risk
Management Framework as defined in the MRM policy. It also
oversees the development and implementation of MRM policy,
governance structure and ensure that necessary processes
and systems are put in place. The Committee reviews the
results of the model validation/monitoring on a periodic basis.
The MRMC shall report to the Bank's Risk Policy & Monitoring
Committee (RPMC).

ICAAP

Your Bank has a structured management framework in the
Internal Capital Adequacy Assessment Process (ICAAP) for
the identification and evaluation of all material risks that the
Bank is exposed to, which may have an adverse material
impact on its financial position. Your Bank has identified
material risks which include, in addition to Pillar 1, several
Pillar 2 risks for which capital is primarily quantified using
stress testing approach. The ICAAP framework is guided by
the Board approved ICAAP Policy. The ICAAP encompasses
assessment of capital adequacy for the base period and for
the projected plan years.

Climate Risk

The risks from climate change are divided into (i) Physical risk
(acute and chronic) which captures economic losses from
acute impacts on account of extreme weather events or long¬
term chronic impact on environment and (ii) Transition risks
which captures financial asset level losses due to the possible
process of adjustment to a low carbon economy.

The CSR and ESG committee of the Board oversees your
Bank's sustainability and climate change initiatives. This
Committee monitors the ESG framework, the Environmental
Policy framework, actionables and initiatives strategised and
executed by the management level ESG Apex Council and
the ESG Working Groups.

The Committee also maintains an oversight over your Bank's
ESG disclosures, highlighting your Bank's ESG performance
and prioritisation of material topics. A dedicated ESG vertical
works in conjunction with several internal and external
stakeholders, to drive your Bank's ESG agenda including
managing, mitigating and reporting on climate metrics. The
Deputy Managing Director of the Bank has direct oversight on
the ESG function and reports to the Board on such matters.
Further, your Bank has formulated its ESG policy framework

and ESG Risk Management (ESGRM) Framework, which are
integrated into the Bank's wholesale credit appraisal process.
Specifically, your Bank's ESGRM Framework addresses
climate transition and mitigation plan and includes a prohibition
list criterion and ‘Category-A' tagging of climate risk-related
vulnerable sectors. Your Bank's commitment to enhance its
portfolio from a climate and ESG perspective is reflected in the
development of the Board approved Sustainable Financing
Criteria Framework, which aligns with the overall sustainability
strategy of the Bank.

Your Bank is in the process of evaluating appropriate
methodology and frameworks to assess climate transition risk
for the wholesale borrowers. Your Bank also estimates financed
emissions in its lending portfolio and is firming up an internal
strategy on tracking its portfolio-based financed emissions.
Additionally, your Bank has taken initiatives to engage in
capacity building programmes to familiarise the Board and
its staff members on the key developments in climate risk
assessment, considering this risk is continuously evolving.

Additionally, your Bank is continuously striving to align itself
to make increased climate risk related disclosures in line with
domestic and global regulations. Your Bank endeavours to
align with climate risk related disclosures as per Task Force on
Climate-Related Financial Disclosures (TCFD) framework and
has been reporting on ESG KPIs in alignment with the Global
Reporting Initiative (GRI) since FY2014, along with reporting
in line with the SEBI-mandated Business Responsibility
and Sustainability Reporting (BRSR) framework in its
annual disclosures.

Stress Testing Framework

Your Bank has implemented a Board approved Stress
Testing Policy and Framework which forms an integral part of
the Bank's ICAAP. Stress testing involves the use of various
techniques to assess your Bank's potential vulnerability
to extreme but plausible stressed business conditions.
The changes in the levels of Pillar I risks and select Pillar
II risks, along with the changes in the on and off-Balance
Sheet positions of your Bank are assessed under assumed
‘stress' scenarios and sensitivity factors. The suite of stress
scenarios includes topical themes depending on prevailing
geopolitical / macroeconomic / sectoral and other trends.
The stress testing outcome may be analysed through
capital impact and/or identification of vulnerable borrowers
depending on the scenario.

Business Continuity Planning (BCP)

Your Bank has a strong BCP programme in place that
enables operational resilience and continuity in delivering
quality services across various business cycles. With our ISO
22301:2019 certified Business Continuity Programme, we
prioritise minimising service disruptions and safeguarding our
employees, customers and business during any unforeseen
adverse events or circumstances. The Programme is designed
in accordance with the guidelines issued by regulatory bodies.
Further, our programme undergoes regular internal, external
and regulatory reviews.

The Business Continuity Management function focusses
on strengthening the Bank's preparedness for continuity.
Oversight over programme is provided by the Business
Continuity Steering Committee (BCSC), chaired by the Group
Chief Risk Officer and Risk & Policy Monitoring Committee
(RPMC), a Board-level committee.

The programme is guided by an enterprise-wide Board
approved BCM Policy, supported by comprehensive processes
and procedures. These enable the Bank to effectively respond
to, recover from, resume and restore critical business functions
following disruptions caused by internal or external risk events.
The framework clearly defines roles and responsibilities for
teams involved in Crisis Management, Business Recovery,
Emergency Response and IT Disaster Recovery, ensuring a
coordinated approach.

So e of the key roles in this programme are as follows:

Â	Steering Committee It ensures centralised monitoring of your Bank's Business Continuity program implementation
<£>	Crisis Management teams These work on effective management of recovery operations during disruptive events
Â	Disaster Recovery (DR) Site A dedicated DR site for recovery of critical core and customer facing applications
&	Functional recovery plans Functional recovery plans ensure structured and expedited restoration of operations
Â	Periodic drills Periodic drills are conducted for testing the effectiveness of recovery plans.

As a responsible Bank, these steadfast practices have enabled
us to continue seamless service delivery to our customers
through disruptiveeventsand beyond.

Internal Controls, Audit and Compliance

Your Bank has put in place extensive internal controls and
processes that are commensurate with the size and scale
of the Bank to mitigate Operational and other allied risks,
including centralised operations and ‘segregation of duty'
between the front and back-office. The front-office units
usually act as customer touchpoints and sales and service
outlets while the back-office carries out the entire processing,
accounting and settlement of transactions in the Bank's
core banking system. The policy framework, definition and
monitoring of limits is carried out by various mid-office and
risk management functions. The credit sanctioning and debt
management units are also segregated and do not have any
sales and operations responsibilities.

Your Bank has set up various executive-level committees,
with participation from various business and control functions,
that are designed to review and oversee matters pertaining to
capital, assets and liabilities, business practices and customer
service, operational risk, information security, business
continuity planning and internal risk-based supervision among
others. The second line of defence functions set standards

and lay down policies and procedures by which the business
functions manage risks, including compliance with applicable
laws, compliance with regulatory guidelines, adherence to
operational controls and relevant standards of conduct. At the
ground level, your Bank has a mix of preventive and detective
controls implemented through systems and processes,
ensuring a robust framework in your Bank to enable correct
and complete accounting, identification of outliers (if any) by
the management on a timely basis for corrective action and
mitigating operational risks.

Your Bank has put in place various preventive controls, including:

a)    Limited and need-based access to systems by users

b)    Dual custody over cash and near-cash items

c)    Segregation of duty in processing of transactions vis-a¬
vis creation of user IDs

d)    Segregation of duty in processing of transactions
vis-a-vis monitoring and review of transactions
/ reconciliation

e)    Four eye principle (maker-checker control) for processing
of transactions

f)    Stringent password policy

g)    Booking of transactions in core banking system
mandates the earmarking of line/limit (fund as well as
non-fund based) assigned to the customer

h)    STP processes between core banking system and
payment interface systems for transmission of messages

i)    Additional authorisation leg in payment interface systems
in applicable cases

j)    Audit logs directly extracted from systems

k)    Empowerment grid

Your Bank also has detective controls in place:

l)    Periodic review of user IDs and its usage logs

m)    Post-transaction monitoring at the back-end by way
of call back process (through daily log reports) by an
independent person, i.e., to ascertain that entries in the
core banking system / messages in payment interface
systems are based on valid/authorised transactions and
customer requests

n)    Daily tally of cash and near-cash items at end of day

o)    Reconciliation of Nostro accounts (by an independent
team) to ascertain and match-off the Nostro credits and
debits (external or internal) regularly to avoid / identify
any unreconciled/ unmatched entries passing through
the system

p)    Reconciliation of all internal/transitory accounts and
establishment of responsibility in case of outstanding

q)    I ndependent and surprise checks periodically
by supervisors.

Your Bank has an Internal Audit Department which is
responsible for independently evaluating the adequacy
and effectiveness of internal controls, risk management,
compliance with extant regulations, governance systems
and processes and is manned by appropriately qualified and
experienced personnel.

This department adopts a risk-based audit approach and carries
out audits across various businesses i.e., Retail, Wholesale and
Treasury (for India and Overseas books), Audit of Operations
units, Audit of Control functions, Management and Thematic
audits, Information Security audit, Revenue audit, Spot checks
and Concurrent audit in order to independently evaluate the
adequacy and effectiveness of internal controls on an ongoing
basis and proactively recommending enhancements thereof.

The Internal Audit Department, during the course of audit, also
ascertains the extent of adherence to regulatory guidelines,
legal requirements and operational processes and provides
timely feedback to the management for corrective actions. A
strong oversight on the operations is also kept through off-site
monitoring by use of data analytics and automation tools to
study trends/patterns to detect outliers (if any) and alert the
management for due corrective action, wherever warranted.

The Internal Audit Department also independently reviews
your Bank's implementation of Internal Rating Based (IRB) -
approach for calculation of capital charge for Credit Risk, the
appropriateness of your Bank's ICAAP, as well as evaluates
the quality and comprehensiveness of your Bank's disaster
recovery and business continuity plans and also carries out
management self-assessment of adequacy of the Bank's
internal financial controls and operating effectiveness of
such controls in terms of Sarbanes Oxley (SOX) Act and
Companies Act, 2013. The Internal Audit Department plays
an important role in strengthening of the control functions by
periodically reviewing their practices and processes as well as
recommending enhancements thereof. Additionally, oversight
is also kept on the functioning of the subsidiaries, related
party transactions and extent of adherence to the licensing
conditions of the RBI.

Any new product / process introduced in your Bank is
reviewed by Compliance function in order to ensure adherence
to regulatory guidelines. The Audit function may, if deemed
necessary also proactively recommend improvements
in operational processes and service quality for such new
products / processes.

To ensure independence, the Internal Audit Function has a
direct reporting line to the Audit Committee of the Board and
an administrative line reporting to the Managing Director for
administrative purposes.

The Compliance function independently tracks, reviews and
ensures compliance with regulatory guidelines and promotes
a compliance culture in the Bank.

Your Bank has a comprehensive Know Your Customer (KYC),
Anti Money Laundering (AML) and Combating Financing of
Terrorism (CFT) policy (based on the RBI guidelines/provisions
of the Prevention of Money Laundering Act, 2002) incorporating
the key elements of Customer Acceptance Policy, Customer
Identification Procedures, Risk Management and Monitoring
of Transactions. The policy is subject to an annual review and
is duly approved by the Board.

Your Bank besides having robust controls in place to ensure
adherence to the KYC guidelines at the time of account
opening also has monitoring processes at various stages of
the customer lifecycle including a continuous review process in
the form of transaction monitoring carried out by a dedicated
AML CFT monitoring team, which carries out transaction
reviews for identification of suspicious patterns/trends that
enables your Bank to further carry out enhanced due diligence
(wherever required) and appropriate actions thereafter.

The Audit team and the Compliance team undergo regular
training and certifications, both in-house and external to equip
them with the necessary know-how and expertise to carry out
the function.

The Audit Committee of the Board reviews the effectiveness
of controls, compliance with regulatory guidelines as also the
performance of the Audit and Compliance functions in your
Bank and provides direction, wherever deemed fit. The Audit
function is also subject to periodic external assurance reviews.
Your Bank has always adhered to the highest standards of
compliance and has put in place appropriate controls and risk
measurement and risk management tools to ensure a robust
compliance and governance structure.

Performance of Subsidiary Companies

Your Bank has five key subsidiaries, HDFC Life Insurance
Company Limited (HDFC Life), HDB Financial Services Limited
(HDBFSL), HDFC ERGO General Insurance Company Limited
(HDFC ERGO), HDFC Asset Management Company Limited
(HDFC AMC) and HDFC Securities Limited (HSL). HDFC Life
is a leading, listed, long-term life insurance solutions provider
in India. HDBFSL is a leading NBFC that caters primarily to
segments not covered by the Bank. HDFC ERGO offers a
complete range of general insurance products. HDFC AMC is
Investment Manager to HDFC Mutual Fund, one of the largest
mutual funds in the country while HSL is among India's leading
retail broking firms.

Amongst the Bank's key subsidiaries, HDFC Life Insurance
Company Limited and HDFC ERGO General Insurance
Company Limited prepare their financial results in accordance
with Indian GAAP and other subsidiaries do so in accordance
with the notified Indian Accounting Standards (‘Ind-AS').

The detailed financial performance of the companies is
given below.

HDFC Life Insurance Company Limited (HDFC Life)

Established in 2000, HDFC Life Insurance Company Limited
(‘HDFC Life' or the ‘Company') is a leading provider of long¬
term life insurance solutions in India. It offers a broad range
of individual and group plans across the Protection, Pension,
Savings, Investment, Annuity, and Health categories, with
a portfolio comprising over 70 products and optional riders
designed to meet the diverse needs of its customers.

The Financial Year 2024-25 was a year in which HDFC
Life deepened its reach, continued sharpening its value
propositions and demonstrated the resilience of its business
model. The Company reported 18 per cent growth in Individual
APE (Annualised Premium Equivalent) for FY2025, in line with
the stated growth aspirations for the year. This growth was
broad-based, driven in equal measure by an increase of 9
per cent in policies written and an increase of 9 per cent in
average ticket size.

Based on FY2025 industry data, HDFC Life outperformed
both the private peers and the overall sector. HDFC Life's
overall industry market share expanded by about 70 bps to
11.1 per cent and about 30 bps to 15.7 per cent in the private
sector. Notably, the Company's policy count grew faster than
the overall industry and private sector. Almost 75 per cent of
the Company's new customers on-boarded in FY2025 were
first-time buyers from HDFC Life, reflecting its expanding reach
across Tier I, II and III markets.

In FY2025, HDFC Life known for its innovative products and
customer-centric approach has secured about 5 crore lives
with an overall claim settlement ratio of 99.8 per cent. The
company has over 650 branches across India.

For FY2025, HDFC Life reported New Business Margin of
25.6 per cent, Value of New Business of ' 3,962 crore, an
Embedded Value of ' 55,423 crore and delivered Profit After
Tax of ' 1,802 crore. As of March 31 2025, HDFC Life had an
AUM of ' 3,36,282 crore.

HDFC Life has consistently delivered positive and range-bound
operating variance over the past nine years (excluding Covid),
underscoring prudent risk management, disciplined execution
and strong fundamentals. Moreover, aligning with the stated
aspirations, the Company has nearly doubled all significant
metrics between FY21 and FY2025. The Company was also
recognised as a Great Place to Work and amongst the top 50
companies in India for building a culture of innovation.

As the Company steps into its 25^th year of operations, the focus
remains clear - to build a future-ready life insurer that grows
sustainably, serves responsibly and innovates purposefully.

HDB Financial Services Limited (HDBFSL) is a subsidiary of
HDFC Bank and is a Non-Banking Finance Company (NBFC).
HDBFSL has a comprehensive bouquet of products and
service offerings that are tailor-made to suit its customers'
requirements including first-time borrowers and the
underserved segments.

HDBFSL is engaged in the business of lending, fee-based
products and BPO services.

The company's Profit After Tax stood at ' 2,176 crore as on
March 31, 2025 compared to ' 2,461 crore as on March 31,
2024. The Total Loan Book stood at ' 1,06,878 crore as on
March 31, 2025 compared to ' 90,218 crore as on March 31,
2024, a growth of 18.47 per cent. The asset quality remained
robust, with Gross Non Performing Asset (GNPA) ratio at 2.26
per cent and Net Non Performing Asset (NNPA) ratio at 0.99
per cent as on March 31, 2025. GNPA stood at 1.90 per cent
and NNPA at 0.63 per cent for the year ended March 31,
2024. Capital Adequacy Ratio stood at 19.22 per cent as on
March 31, 2025.

HDBFSL has continued to focus on diversifying its products
and expanding its distribution while augmenting its digital
infrastructure and offerings to effectively deliver credit
solutions. The company has a strong network of over 1,771
branches spread across 1,170 cities. As on March 31, 2025,
your Bank held 94.32 per cent stake in HDBFSL.

HDBFSL has a diverse range of product offerings (secured
and unsecured) to various customer segments. Given below
are the key product as well as service offerings to various
customer segments.

On October 19, 2024, the Board of Directors of HDFC Bank
approved sale of such number of shares of HDBFSL equivalent
to up to ' 10,000 crore in the Initial Public Offering (“IPO”) of
HDBFSL, by way of Offer for Sale. The IPO also consists of a
fresh issue of such number of shares of HDBFSL equivalent
to up to ' 2,500 crore, and accordingly the IPO would be
for an aggregate amount of ' 12,500 crore. The Red Herring
Prospectus in relation to the IPO was filed on June 19, 2025
and the price band for the issue has been fixed at ' 700 to
' 740 per share. The anchor bidding date would be June 24,
2025 and the public issue would open on June 25, 2025 and
close on June 27, 2025.

Consumer Loans

Consumer Loans are provided to individuals for personal
or household purposes to meet their short to medium term

requirements. It comprises loans for consumer durables,
lifestyle products and digital products, personal loans,
auto loans for new and used cars, two-wheeler loans and
gold loans.

Enterprise Loans

HDBFSL offers loans to businesses for their growth and
working capital requirements. Various loans offered to
enterprises include: Unsecured Business Loan, Enterprise
Business Loan, Loan Against Property, Loan Against
Securities. These loans cater to the financial requirements of
enterprises for the purchase of new machinery, inventory or
revamping the business.

Asset Finance

HDBFSL provides loans for the purchase of new and used
commercial vehicles and provides refinance against existing
vehicles for business working capital. It extends these
offerings to fleet owners, first-time users, first-time buyers
and captive use buyers. Construction equipment loans are
offered for the procurement of new and used construction
equipment. The company also facilitates refinancing on
existing equipment. HDBFSL also offers customised tractor
loans for the purchase of tractors or tractor-related implements
to meet both agricultural and commercial needs.

Micro Lending

HDBFSL offers micro-loans to borrowers through the Joint
Liability Group (JLG) framework to empower and promote
financial inclusion for sustainable development.

These loans were initiated in 2019 and are currently available in
seven states including Maharashtra, Bihar, Rajasthan, Gujarat,
Madhya Pradesh, Uttar Pradesh, Odisha and Tamil Nadu
covering 144 districts with more than 269 operational branches.

Fee-Based Products / Insurance Services

HDBFSL has a licence from the Insurance Regulatory and
Development Authority of India (IRDAI) and is a registered
Corporate Insurance Agent certified to sell both life and
general (non-life) insurance products. The company has tie-
ups with HDFC Life Insurance Company Limited and Aditya
Birla Sun Life Insurance for life insurance products. HDBFSL
has partnered with HDFC ERGO General Insurance Company
Ltd, Tata AIG General Insurance Company Ltd and Go Digit
General Insurance for general insurance products.

The BPO service offerings include running collection call
centres, sales support services, back office operations and
processing support services. Under collection services,
HDBFSL has a contract to run collection call centres for
HDFC Bank. These centres provide collection services for
the entire range of HDFC Bank's retail lending products
offering comprehensive end-to-end collection services. Under
back office and sales support, HDBFSL offers sales support
and back-office services like forms processing, document
verification, finance and accounting operations and processing
support for HDFC Bank.

Digital Presence

HDBFSL’s presence across digital channels enables it to offer
a wide range of financial solutions to its customers. They can
access and manage their loan account 24/7 through its new,
upgraded version of Mobile Banking Application HDB-On-
the-Go with enhanced features, customer Service Portal to
manage the loan account, missed call service, WhatsApp
Account Management and the Chatbot #AskPriya.

HDFC ERGO General Insurance Company Limited
(HDFC ERGO)

HDFC ERGO General Insurance Company Limited (HDFC
ERGO), is a subsidiary of HDFC Bank. It offers a comprehensive
bouquet of general insurance products - such as Health,
Motor, Travel, Home, Personal Accident and Cyber Insurance
to its retail customers. It also offers products like Property,
Engineering, Marine and Liability Insurance to its SME &
Corporate Customers. For Rural Customers it offers Crop and
Cattle Insurance.

HDFC ERGO has a track record of consistent profitable
growth. Over the past 17 years, it has grown faster than the
industry - with a 28 per cent CAGR vis-a-vis 15 per cent CAGR
for the General Insurance industry. As a result, HDFC ERGO
has improved its market share from 0.8 per cent in FY08 to
5.1 per cent in FY2025.

Profit After Tax for the year ended March 31, 2025 stood at
' 500 crore as compared to ' 438 crore for the year ended
March 31, 2024.

Distribution Network

HDFC ERGO has a pan-India presence and a multi-channel
distribution network. This enables it to provide its customers
flexibility while availing its products and services.

Riding on the motto of ‘Customer First', HDFC ERGO has
a comprehensive distribution network of over 1,20,000
individual agents including Point of Sales Personnel (POSPs),
177 Banks / Corporate Agents and over 600 brokers with 299
offices and over 600 digital offices spread across the country,
enabling it to ‘Insure More, Serve More, Reach More'.

Product Segments

Accident & Health Insurance: As an important stakeholder in
building a ‘Healthy India', HDFC ERGO offers various products
under Accident & Health Insurance - retail health insurance
to those seeking individual or family floater health insurance
plans, group health insurance to insured groups, top-up health
insurance to those who seek to protect themselves from high
medical expenses, mass health insurance to those interested
in participating in Government schemes. The Company is the
fourth largest retail health insurer in the industry as of March
31,2025.

Commercial Business: HDFC ERGO has a track record
of providing customised insurance solutions to its corporate
clients. Be it property, engineering insurance, marine insurance
or liability insurance, the Company follows an advisory
approach to its clients based on a thorough understanding of
their requirement. It is the fourth largest insurer in the private
sector in the Commercial segment in the Financial Year 2024¬
25.

Motor Insurance: HDFC ERGO offers motor insurance for
various segments - private cars, two wheelers, passenger
vehicles, commercial vehicles, electronic vehicles as well as
new and old vehicles.

Rural and Agri Business: HDFC ERGO's rural market
development activities are spearheaded by crop insurance
covering a large agrarian population which is frequently
affected by crop losses attributable to an irregular climatic
pattern. It is the second largest insurer in the private sector
in the crop insurance segment in FY2025. HDFC ERGO also
supports deepening insurance penetration in rural India via its
Common Service Centre (CSC) channel.

Servicing

The Company continues to invest in developing robust digital
capabilities supported by Artificial Intelligence. Be it unique
insurance products, integrated customer service models, top
in-class claim processes or a host of technologically innovative
solutions, the Company strives to consistently enhance the
customer / partner experience. It has ISO certified processes
for Claims, Operations, Customer Services, Business
Continuity Management System and Information Security
Management System.

HDFC ERGO has a fair and robust claims management
practice. The Company provides prompt response and quick
claim settlement and equity of treatment to all its stakeholders,
through its wide network of motor workshops and empanelled
hospitals across the country. Customers are able to view and
track claims status and provide feedback through HDFC
ERGO's website and mobile application thus bringing in
transparency. Over 47 per cent of motor insurance claim
surveys were conducted digitally in FY2025. About 92 per
cent of motor insurance claims and about 69 per cent of health
insurance claims were settled in cashless mode in FY2025.

HDFC ERGO issued more than 3.4 crore policies in FY2025, of
which about 92 per cent were issued digitally. The Company
has enabled multilingual support across digital platforms to
service the customers in their preferred language. It Introduced
“1UP”, an AI-driven application that provides advisors with AI-
powered contextual prompts for sales, retention, and daily
planning, optimising their workflow. It also embedded an
AI-enabled inspection technology on its WhatsApp chatbot,
which allows the customers instant motor claim settlement
feature for minor damages like dents, scratches among others.
In line with its customer centric philosophy, the Company's
grievance resolution TAT is lower than industry average by
about 5 days.

HDFC ERGO's Here app is a one-of-a-kind ecosystem which
aims to address consumers' anxiety and provide convenience
towards healthcare & mobility needs and helps them save
cost on their daily healthcare and vehicles expenses. The app
is free for use by all, irrespective of whether or not one is an
HDFC ERGO policyholder, and has been well received, as
evident by over 70 lakh downloads since launch. The app also
includes features to help people manage their cyber and pets
related requirements.

The Company continues to invest in developing robust
digital capabilities to ensure long-term success in the digital
landscape. Its transition of the policy administration system
to Duck Creek marks a significant stride towards future
readiness and unlocking growth. The new core system
facilitates dynamic product configuration, expediting product

launches and enabling swift deployment of niche offerings and
embedded insurance journeys.

HDFC ERGO continues to be future-ready by innovating and
focusing on new-age technologies like AI, VR, Robotics, etc.
to continue to provide superior customer experience.

ESG

HDFC ERGO believes in building a sustainable ecosystem
to ensure it can continue providing value to its customers
and society at large. It has developed an ESG policy and
framework, and has been undertaking a number of initiatives
across Environmental and Social aspects and further
strengthening its Governance related processes.

As an example, Diversity, Equity and Inclusion (DEI) is a key
part of the Company's culture and embedded in various
processes. The share of women in overall workforce has
improved from 19 per cent in FY22 to 27 per cent in FY2025.

HDFC Asset Management Company Limited (HDFC
AMC)

Established in 1999, HDFC AMC offers a comprehensive
suite of mutual fund and alternative investments across asset
classes, including equity, fixed income, hybrid and multi-asset
solutions. These offerings are available on both active and
passive platforms, catering to a broad and diverse customer
base. As of March 31,2025, HDFC Bank held a 52.47 per cent
stake in HDFC AMC.

As the investment manager to HDFC Mutual Fund - one of
India's leading mutual funds - HDFC AMC reported a closing
AUM of over ' 7,54,453 crore, representing a market share
of 11.5 per cent as on March 31, 2025. It serves over 1.32
crore unique investors through 2.33 crore live accounts. With a
strong nationwide presence across 280 offices and a network
of over 95,000 distribution partners, HDFC AMC is further
enabled by modern digital platforms, ensuring broad and
efficient access for clients across India.

HDCF AMC extends Portfolio Management, Segregated Account Services, along with Alternative Investment Funds to high net-
worth individuals, family offices, domestic corporates, trusts, provident funds and domestic cum global institutions.

 

Financial highlights (' in crore)	FY 2024-25	FY 2023-24	Y-o-Y growth %
Total Income	4,058.3	3,162.4	28
Profit After Tax	2,461.1	1,945.9	26
Closing AUM	7,54,453	6,07,342	24

 

Additionally, the company has a wholly owned subsidiary
company - HDFC AMC International (IFSC) Limited in Gujarat
International Finance Tec-City (GIFT City) offering investment
management, advisory and related services.

HDFC Securities Limited (HSL)

HDFC Securities Limited surpassed a key milestone of 25 years
of existence in April 2025. The company has demonstrated a
strong financial performance over the years underscored by
a 31 per cent CAGR in total income and a 24 per cent CAGR
in profit after tax, both over the last five years. As one of the
long-standing bank-based stockbrokers and a key subsidiary
of HDFC Bank, HDFC Securities Ltd. (HSL) leverages real¬
time, data-driven insights and research-backed information to
empower investors. HSL serves 68 lakh customers, offering a
comprehensive range of investment and protection products.
HSL's distribution footprint stood at 134 branches across 106
cities/towns as of March 31,2025. Approximately, 96 per cent
of its customers accessed its services digitally. HSL's ranking
in NSE active clients has improved to the 6^th position with
15.25 lakh customers from the 7^th position last year.

HDFC Bank held a 94.5 per cent stake in HDFC Securities
Ltd. (HSL) as of March 31, 2025. Total equity raised, pursuant
to the rights issue in fiscal 2025 aggregated to ' 996 crore.

In FY 2024-25, HSL achieved a total income of ' 3,265 crore,
reflecting a 23 per cent increase from ' 2,661 crore in the
previous financial year. Net revenue (total income less finance
costs) aggregated to ' 2,479 crore in the year ended March
31, 2025, a 20 per cent year-on-year increase. Operating
expenses were ' 983 crore, resulting in a cost-to-revenue ratio
of 39.7 per cent. PAT for fiscal 2025 was ' 1,125 crore marking
an 18 per cent rise year-on-year, and registering an earnings
per share of ' 638. The average margin trading funding (MTF)
portfolio increased significantly by 50 per cent year-on-year to
' 8,343 crore, while equity trade volumes grew by 24 per cent
year-on-year to ' 8 lakh crore.

HSL launched its wealth advisory platform viz., HDFC TRU,
in fiscal 2025. It has an aggregate of ' 10,000 crore assets
under management. During the year under review, HSL has
incorporated a Wholly Owned Subsidiary namely HDFC
Securities IFSC Limited (HSIL) in the GIFT City-Gujrat.

India's financial markets in FY2025 reflected a clear duality-
marked by strong domestic investor participation in the
first half, followed by a more subdued second half due to
weaker corporate earnings, rupee depreciation, and global
risk aversion. Foreign capital outflows also added to market

volatility during this period. This economic environment created
a stark contrast in market performance, with the strong gains
achieved in the first half of the fiscal year largely erased in the
second half, though a late recovery helped the Nifty 50 close
with a modest 5 per cent annual gain.

I Other Statutory Disclosures

Number of Meetings of the Board, attendance and
constitution of various Committees

During FY 2024-25 the Board met 14 (Fourteen) times. The
details of Board Meetings held during the year, attendance
of Directors at the Meetings and constitution of various
Committees of the Board are included separately in the Report
on Corporate Governance.

Annual Return

In accordance with the provisions of Companies Act, 2013
(“Act”), the Annual Return of the Bank in the prescribed Form
MGT-7 for FY 2024-25 is available on the website of the Bank
at https://www.hdfcbank.com/personal/about-us/investor-
relations/annual-report.

Requirement for maintenance of cost records

The cost records as specified by the Central Government
under Section 148(1) of the Act, are not required to be
maintained by the Bank.

Details in respect of frauds reported by auditors
under Section 143(12)

Pursuant to Section 143(12) of the Act and circular issued
by National Financial Reporting Authority on Statutory
Auditors' Responsibilities in relation to fraud in a company dated
June 26, 2023, there were 2 (Two) instances of fraud
committed during FY 2024-25, by the employees of the Bank
and reported by the Statutory Auditors to the Audit Committee.
Details of the frauds are as under:

Sr. No.	Nature of fraud with description	Approximate amount involved (Rs. in Lakh)	Remedial action taken
1	Cheating & Forgery Case pertains to fraud perpetrated by borrowers in connivance with staff and third parties by processing gold loan in the name of dummy customers by pledging spurious gold.	265.17	At the time of sanction: Various checks at the time of sanction of loan is conducted by evaluation of gold by a designated assayer and further dual valuation is carried out by an alternate independent assayer for higher value loans crossing certain threshold limits. Post sanction of loan: Increase in proactive sample checks of gold jewellery packets by an independent team, which will help in identification of suspected fraud cases.
2	Misappropriation of funds and criminal breach of trust	385.55	For mitigating such frauds, a revised process has been shared with Retail Branches.
Â	Pursuant to customer complaints received, a fraud was detected which involved a relationship manager in misappropriation of customer funds.	Â	1.    Process of Issuance Confirmation with the account holder by the Relationship Manager has been stopped and has been assigned to the staff processing the transaction. Issuance Confirmation details are annotated on the reverse of cheque. 2.    At the end of day, this is re-verified through a Callback Report by an independent staff. In event of miss-out, the staff will seek issuance confirmation from the account holder and annotate on reverse of the cheque.

 

Directors’ Responsibility Statement

Pursuant to Section 134(3)(c) and Section 134(5) of the Act,

and based on the information provided by the Management,

the Board of Directors hereby confirm that:

•    In the preparation of the annual accounts, the applicable
accounting standards have been followed along with
proper explanation relating to material departures;

•    Accounting policies have been selected and applied
consistently. Reasonable and prudent judgments
and estimates have been made so as to give a true
and fair view of the state of affairs of the Bank as at
March 31, 2025 and of the profit of the Bank for the year
ended on that date;

•    Proper and sufficient care has been taken for the
maintenance of adequate accounting records
in accordance with the provisions of the Act, for
safeguarding the assets of the Bank and for preventing
and detecting fraud and other irregularities;

•    The annual accounts have been prepared on a going
concern basis;

•    I nternal financial controls have been laid down to be
followed by the Bank and such internal financial controls
are adequate and operating effectively; and

•    Systems to ensure compliance with the provisions of
all applicable laws are in place and such systems are
adequate and operating effectively.

Compliance with Secretarial Standards

The Bank has complied with Secretarial Standards on Meetings
of the Board of Directors (SS-1) and General Meetings (SS-2)
issued by the Institute of Company Secretaries of India.

Statutory Auditors

The Members of the Bank at the 28^th Annual General Meeting
held on July 16, 2022 had approved the appointment of
M/s. Price Waterhouse LLP, Chartered Accountants (ICAI
Firm Registration No. 301112E/E300264) [“PW”], as the Joint
Statutory Auditors of the Bank for a period of 3 (Three) years
from FY 2022-23 till (and including) FY 2024-25. Further, the
Members of the Bank at the 30^th Annual General Meeting
held on August 9, 2024 had approved the appointment of
M/s. Batliboi & Purohit, Chartered Accountants (ICAI Firm
Registration No. 101048W) [“B&P”] as the Joint Statutory
Auditors of the Bank for a period of 3 (Three) years from
FY 2024-25 till (and including) FY 2026-27.

In view of the completion of term of PW, the Board of Directors
based on the recommendation of the Audit Committee has
vide its resolution dated June 20, 2025 recommended the
appointment of M/s. B S R & Co. LLP (ICAI Firm Registration
No. 101248W/W-100022) [“BSR”] as the Joint Statutory
Auditors of the Bank for a period of 3 (Three) years from
FY 2025-26 till (and including) FY 2027-28, subject to approval
of the Members at the ensuing Annual General Meeting
(“AGM”).

The said appointment shall also be subject to approval of
Reserve Bank of India (“RBI”) every year. Accordingly, RBI vide
its letter dated May 16, 2025 has approved the appointment
of BSR as the Joint Statutory Auditors of the Bank along with
B&P for FY 2025-26.

The resolution in this regard is being proposed at the ensuing
AGM for approval of the Members.

During the year ended March 31, 2025, the fees paid to
PW and B&P (“Joint Statutory Auditors”) as well as their
respective network firms, on aggregated basis, are as follows:

Fees (excluding taxes)*	HDFC Bank to Joint Statutory Auditor(s)	Subsidiaries of HDFC Bank to Joint Statutory Auditors and its network firms
Statutory Audit	9.90	0.36
Certification & Other Audit / Attestation Services	1.76	0.02
Non-Audit Services	-	-
Outlays	1.28	0.01
Total	12.94	0.39

*No fees were paid to network firms of Joint Statutory Auditor(s)
by the Bank.

The aggregate fees paid to Joint Statutory Auditors were
within the limits approved by the Audit Committee.

Corporate Social Responsibility

The composition of CSR & ESG Committee, brief outline of
the CSR policy of the Bank and the initiatives undertaken by
the Bank on CSR activities during FY 2024-25 are set out in
Annexure 2 to this report in the format prescribed in Companies
(Corporate Social Responsibility Policy) Rules, 2014.

The CSR & ESG Committee confirms that the implementation
and monitoring of the CSR Policy was done in compliance with
the CSR objectives and policy of the Bank.

The Bank's CSR Policy & Environmental Social & Governance
(ESG) Policy Framework are available on the Bank's website
at https://www.hdfcbank.com/personal/about-us/corporate-
governance/codes-and-policies.

Particulars of Contracts or Arrangements with
Related Parties

There were no contracts or arrangements entered into with
related parties referred to in Section 188(1) of the Act during
FY 2024-25 and hence Form AOC-2 as required under
Rule 8(2) of the Companies (Accounts) Rules, 2014, is
not enclosed.

Further, the Policy on Related Party Transactions of the Bank
(“RPT Policy”) ensures that the related party transactions are
based on principles of transparency and arm's length pricing.
RPT Policy outlines the basis on which the materiality of related
party transactions will be determined and the manner of dealing
with the related party transactions by the Bank. Pursuant to
SEBI (Listing Obligations and Disclosure Requirements) (Third
Amendment) Regulations, 2024, the RPT policy was amended
to align it with all the applicable amendments.

RPT Policy is available at https://www.hdfcbank.com/personal/
about-us/corporate-governance/codes-and-policies.

Further, the Directors / Key Managerial Personnel who are
interested in the related party transaction(s) do not participate
in the discussion / abstain from voting on the said matter at
Board / Audit Committee meetings. The Bank has engaged
M/s. Vinod Kothari & Company as external consultant
to advise the Bank on related party transactions and
related compliances.

Particulars of Loans, Guarantees or Investments

Pursuant to applicable provisions of Section 186 of the Act,
the particulars of investments made by the Bank are disclosed
in Note no. 9 of Schedule 18 of the standalone financial
statements as per the applicable provisions of the Banking
Regulation Act, 1949.

Material Development

There were no material developments / changes / commitments
affecting the financial position of the Bank which occurred
after March 31, 2025 till the date of this Report.

Financial Statements of Subsidiaries and Associates

In terms of Section 134 of the Act read with Rule 8(1) of
the Companies (Accounts) Rules, 2014, the highlights of
the performance of the Bank's subsidiaries & entity over
which control is exercised and their contribution to overall
performance of the Bank during FY 2024-25 are enclosed

as Annexure 3 to this Report. The Bank does not have any
associate companies or other joint venture companies.

Pursuant to amalgamation of HDFC Limited with and into
the Bank and conditions as stipulated by RBI, on October
18, 2024, the Bank sold 18,20,00,000 equity shares of face
value of ' 10 each of Edu Voyage Education Private Limited
(formerly known as HDFC Education and Development
Services Private Limited) (“Edu Voyage”), corresponding to
91% of its paid-up share capital, to Vama Sundari Investments
(Delhi) Private Limited (“Vama Sundari”). Accordingly, Edu
Voyage ceased to be a subsidiary of the Bank with effect from
October 18, 2024. Further, on December 20, 2024, the Bank
completed the sale of balance 1,80,00,000 equity shares of
face value of ' 10 each of Edu Voyage, corresponding to 9% of
paid-up share capital of Edu Voyage to Vama Sundari.
Accordingly, as on March 31, 2025, the Bank does not have
any shareholding in Edu Voyage.

HDFC Securities Limited (“HSL”), a subsidiary of the Bank,
incorporated a wholly owned subsidiary, namely “HDFC
Securities IFSC Limited” on October 1, 2024. Accordingly,
HDFC Securities IFSC Limited has become a step down
subsidiary of the Bank with effect from October 1, 2024.

Further, during FY 2024-25, the Bank made the following
investments in its subsidiaries:

•    I n April 2024, pursuant to the rights issue of HSL, the
Bank was allotted 16,13,176 equity shares amounting to
' 9,53,22,56,984. The Bank held 94.55% shareholding
in HSL as on March 31, 2025.

•    I n August 2024, pursuant to the rights issue of HDFC
ERGO General Insurance Company Limited (“HDFC
ERGO”), the Bank was allotted 44,20,598 equity shares
amounting to ' 2,89,10,71,092. The Bank held 50.33%
shareholding in HDFC ERGO as on March 31, 2025.

•    I n accordance with the Employee Stock Option Plan
2021 of HDFC Capital Advisors Limited (“HCAL”), the
Bank acquired 69,330 equity shares of HCAL amounting
to ' 67,47,19,560 from the employees of HCAL. The
Bank held 89.34% shareholding in HCAL as on March
31, 2025.

In accordance with the provisions of Section 136 of the Act,
the Integrated Annual report of the Bank including the annual
financial statements and related documents of the Bank's
subsidiary companies are placed on the website of the Bank.

Disclosure under Foreign Exchange Management
Act, 1999 (“FEMA”)

During FY 2024-25 the Bank has complied with the applicable
provisions of FEMA with respect to downstream investments
made by it. Further, as required under the Foreign Exchange
Management (Non-Debt Instruments) Rules, 2019, the
Bank has obtained a certificate from M/s. Batliboi & Purohit,
Chartered Accountants, one of the Joint Statutory Auditors of
the Bank, to this effect.

Whistle Blower Policy / Vigil Mechanism

The Bank encourages an open and transparent system of
working and dealing amongst its stakeholders.

While the Bank's “Code of Conduct & Ethics Policy” directs
employees to uphold Bank values and conduct business
worldwide with integrity and highest ethical standards,
the Bank has also adopted a “Whistle Blower Policy”
(“WB Policy”) to encourage and empower the employees /
stakeholders to make or report any Protected Disclosures
as defined under WB Policy, without any fear of reprisal,
retaliation, discrimination or harassment of any kind.

WB Policy has also been put in place to provide a mechanism
through which adequate safeguards can be provided against
victimization of employees who avail this mechanism.
WB Policy covers and is applicable to the Protected
Disclosures related to violation / suspected violation of the
Code of Conduct including:

(a)    breach of applicable law;

(b)    f raud / criminal offence or corruption / misuse of office
to obtain personal benefit / pecuniary advantage for self
or any other person;

(c)    leakage / suspected leakage of unpublished price sensitive
information which are in violation of SEBI (Prohibition of
Insider Trading) Regulations, 2015 and internal code of
the Bank i.e. Share Dealing Code of the Bank;

(d)    wilful data breach and / or unauthorized disclosure of
Bank's proprietary data including customer data.

WB Policy does not cover the following types of complaints
which if made, is not considered as Protected Disclosure
under WB Policy:

(a)    Matters relating to personal grievances on issues such as
appraisals, compensation, promotions, rating, behavioral
issues / concerns of the manager(s) / supervisor(s) /
other colleague(s), complaint of sexual harassment at
workplace, etc. for which alternate internal redressal
mechanisms in the Bank are in place.

(b)    Matters which are pending before a court of law, tribunal,
other quasi- judicial bodies or any governmental authority.

(c)    Anonymous / pseudonymous complaints will not be
considered as Protected Disclosures under this Policy.

All Protected Disclosures made under WB Policy are made to
the Whistle Blower Committee through the following modes:

(a)    By letter in a closed / sealed envelope addressed to the
Whistle Blower Committee, or

(b)    by submission of the same on the information portal of
the Bank, or

(c)    by way of an email addressed to whistleblower@
hdfcbank.com. In exceptional circumstances, the Whistle
Blower may make such Protected Disclosures directly to
the Chairperson of the Audit Committee of the Board.

All Protected Disclosures received under WB Policy are
examined by the Whistle Blower Committee and the
investigation is further assigned to an appropriate investigating
Officer(s) depending on the nature of the subject matter of the
Protected Disclosure.

Details of whistle blower complaints received and subsequent
action taken and the functioning of the whistle blower
mechanism are reviewed periodically by the Audit Committee.
During FY 2024-25, a total of 97 such complaints were
received and taken up for investigation which has resulted in
certain staff actions in 41 cases, post investigation. The broad
categories of whistle blower complaints were in the areas of
misappropriation of Bank / customer funds, forgery related
cases, improper business practices and corruption.

WB Policy is available on the website of the Bank at
https://www. hdfcbank.com/personal/about-us/corporate-
governance/codes-and-Dolicies.

Statement on Declaration by Independent Directors

Mr. Atanu Chakraborty, Mr. M. D. Ranganath, Mr. Sandeep
Parekh, Dr. (Mrs.) Sunita Maheshwari, Mrs. Lily Vadera,

Dr. (Mr.) Harsh Kumar Bhanwala and Mr. Santhosh Keshavan
are the Independent Directors on the Board of the Bank as
on March 31, 2025.

The Independent Directors have submitted declarations
that each of them meets the criteria of independence as
provided in Section 149(6) of the Act, along with the Rules
framed thereunder and Regulation 16(1)(b) of the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015.

During FY 2024-25 there has been no change in the
circumstances affecting their status as Independent Directors
of the Bank. In the opinion of the Board, the Independent
Directors possess the requisite integrity, experience, expertise,
skills, and proficiency required under all applicable laws and
the policies of the Bank.

Evaluation of Board of Directors

The performance evaluation of the Board, its Committees
and the individual members of the Board (including the
Part-Time Chairman) for FY 2024-25, was carried out internally
pursuant to the framework laid down by the Nomination and
Remuneration Committee (“NRC”). A questionnaire for the
evaluation of the Board, its Committees and the individual
members of the Board (including the Part-Time Chairman),
covering various aspects of the performance of the Board and its
Committees, including composition, roles and responsibilities,
board processes, boardroom culture, adherence to Code of
Conduct and Ethics, quality and flow of information, as well
as measurement of performance in the areas of strength as
identified in the previous board evaluation, was sent out to
the Directors. The Committees were evaluated inter-alia on
parameters such as composition, terms of reference, quality
of discussions, contribution to Board decisions and balance
of agenda between the Committees and the Board.

The responses received to the questionnaires on evaluation
of the Board, its Committees and Non-Independent Directors
were then placed before the meeting of the Independent
Directors for consideration. The assessment of performance
of Non-Independent Directors on personal and professional
attributes was also carried out at the meeting of Independent
Directors. The assessment of performance of the Independent
Directors on the Board (including Chairman) was subsequently
discussed at the Board meeting. In addition to the above
parameters, the Board evaluated and was satisfied that the
Independent Directors of the Bank fulfill the independence
criteria as specified in SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 and was independent from
the management.

The Board of Directors complimented the improved effective
oversight on the group entities. Other areas such as code of
conduct, board processes, board composition and boardroom
culture demonstrated the best corporate governance
practices adopted by the Bank. The Board appreciated the
independent and transparent discussion at the meetings.
The Board noted that it has been dedicating significant time
in Strategic planning, Competitive positioning, Benchmark,
talent management & Succession planning and the same will
continue. The Board further realised the need to focus more on
Gen AI and Cyber Security aspect considering that the same
has become increasingly important. The Board also noted that
while there has been positive development in the areas of focus
identified in the previous evaluation, efforts need to continue in
that direction. The appropriate feedback was conveyed to the
Board members on their respective evaluation.

Policy on Appointment and Remuneration of
Directors and Key Managerial Personnel

The Bank has in place a Policy for appointment and fit and
proper criteria for Directors of the Bank. This Policy lays down
the criteria for identification of persons who are qualified as
‘fit and proper' to become Directors such as academic
qualifications, competence, track record, integrity, relevant
skills, etc. which shall be considered by the Nomination and
Remuneration Committee (“NRC”) while recommending the
appointment of proposed candidate as a Director of the Bank.

This Policy also deals with the process for re-appointment of
directors, annual affirmations, familiarization programme for
Non-Executive Directors (“NEDs”), etc. and is available on the
website of the Bank at https://www.hdfcbank.com/personal/
about-us/corporate-governance/codes-and-policies.

The remuneration of all employees of the Bank, including
Whole Time Directors, Material Risk Takers, Key Managerial
Personnel, Senior Management and other employees is
governed by the Compensation Policy of the Bank. The same
is available at the https://www.hdfcbank.com/personal/about-
us/corporate-governance/codes-and-policies.

The Compensation Policy of the Bank, duly reviewed and
recommended by the NRC has been articulated in line with
the relevant Reserve Bank of India guidelines.

The Bank's Compensation Policy is aimed to attract, retain,
reward and motivate talented individuals critical for achieving
strategic goals and long-term success. The Compensation
Policy is aligned to business strategy, market dynamics,
internal characteristics and complexities within the Bank. The

ultimate objective is to provide a fair and transparent structure
that helps the Bank to retain and acquire the talent pool critical
to build competitive advantage and brand equity.

The Bank's approach is to have a “pay for performance”
culture based on the belief that the performance management
system provides a sound basis for assessing performance
holistically. The compensation system also takes into account
factors such as roles, skills / competencies, experience and
grade / seniority to differentiate pay appropriately on the basis
of contribution, expertise and availability of talent on account
of competitive market forces. The details of the Compensation
Policy are also included in Note No. 18 of Schedule 18 forming
part of the standalone financial statements.

During FY 2024-25 based on the recommendation of the
NRC, the Compensation Policy of Bank was reviewed by the
Board of Directors and necessary changes were made to
the policy with respect to addition of clauses pertaining to
‘Special Payouts' and inclusion of ‘Guidelines to grant LTI to
New Joiners'.

The NEDs including Independent Directors are paid
remuneration by way of sitting fees for attending meetings of
the Board and its Committees, which are determined by the
Board based on applicable regulatory guidelines / circulars.

Further, expenses incurred by them, if any, for attending
meetings of the Board and Committees in person are
reimbursed at actuals. Pursuant to the relevant RBI guidelines
and approval of the Members, the NEDs including Independent
Directors, are paid fixed remuneration as detailed in the Report
on Corporate Governance.

The following Directors of the Bank are also the director(s) of
the Bank's subsidiaries / step down subsidiaries as on the
date of this report:

Name of Directors	Name of Subsidiary / Step down Subsidiary Company	Designation
Mr. M D Ranganath	HDFC Pension Fund Management Limited (Subsidiary of HDFC Life Insurance Company Limited)	Non-Executive Independent Director
Mr. Keki Mistry	HDFC ERGO General Insurance Company Limited	Non-Executive Director (Chairman)
Â	HDFC Life Insurance Company Limited	Non-Executive Director (Chairman)
Â	HDFC Capital Advisors Limited	Non-Executive Director
Mrs. Renu Karnad	HDFC Asset Management Company Limited	Non-Executive Director
Â	HDFC ERGO General Insurance Company Limited	Non-Executive Nominee Director (HDFC Bank)
Â	HDFC Capital Advisors Limited	Non-Executive Director
Mr. Kaizad Bharucha	HDFC Life Insurance Company Limited	Non-Executive Nominee Director (HDFC Bank)
Â	HDFC Capital Advisors Limited	Non-Executive Nominee Director (HDFC Bank)
Â	HDFC Securities IFSC Limited (Subsidiary of HDFC Securities Limited)	Non-Executive Nominee Director (HDFC Bank)
Mr. Bhavesh Zaveri	HDFC Trustee Company Limited	Non-Executive Nominee Director (HDFC Bank)
Â	HDFC Sales Private Limited	Non-Executive Nominee Director (HDFC Bank) [Chairman]
Â	HDFC Securities Limited	Non-Executive Nominee Director (HDFC Bank)
Mr. V Srinivasa Rangan	HDFC Asset Management Company Limited	Non-Executive Nominee Director (HDFC Bank)

Note: As per the Bank’s Policy, no sitting fees were paid to the Executive
Director(s) of the Bank nominated on the board of its subsidiary/ step
down subsidiary.

Succession Planning

The NRC and Board reviews succession planning and
transitions at the Board and Senior Management level. The

Board composition and the desired skill sets / areas of expertise
at the Board level are continuously reviewed and vacancies,
if any, are reviewed in advance through a systematic process.

Succession planning at Senior Management level, including
business and assurance functions, is continuously reviewed
to ensure continuity and depth of leadership at two levels
below the Managing Director. Successors are identified prior
to the Senior Management positions falling vacant, to ensure
a smooth and seamless transition.

Succession planning is a continuous process which is
periodically reviewed by NRC and the Board.

Significant and Material orders passed by Regulators

There are no significant and material orders passed by the
regulators or courts or tribunals impacting the going concern
status and operations of the Bank in the future.

Directors and Key Managerial Personnel

In compliance with Section 152 of the Act and the Articles of
Association of the Bank, Mr. Kaizad Bharucha and Mrs. Renu
Karnad will retire by rotation at the ensuing AGM and are eligible
for re-appointment. The resolutions for their re-appointment
are being proposed at the ensuing AGM for the approval of
the Members. A brief profile of Mr. Bharucha and Mrs. Karnad
is furnished elsewhere in the Integrated Annual Report and
Notice of the AGM for the information of the Members.

During FY 2024-25 following were the changes in composition
of the Board of Directors and Key Managerial Personnel of
the Bank:

1.    Re-appointment of Mr. Atanu Chakraborty
(DIN: 01469375) as the Part-Time Chairman and
Independent Director of the Bank for a period of 3 (Three)
years with effect from May 5, 2024 to May 4, 2027 (both
days inclusive), not liable to retire by rotation, as approved
by RBI and the Members through Postal Ballot on May
3, 2024;

2.    Appointment of Mr. Santhosh Keshavan
(DIN: 08466631) as an Independent Director of the
Bank for a period of 3 (Three) years with effect from
November 18, 2024 to November 17, 2027 (both days
inclusive), not liable to retire by rotation, as approved by the
Members through Postal Ballot on January 11,2025;

3.    Resignation of Mr. Santosh Haldankar (ICSI Membership
No.: A19201) as the Company Secretary and Compliance
Officer of the Bank effective from July 20, 2024 (close of
business hours); and

4. Appointment of Mr. Ajay Agarwal (ICSI Membership
No.: F9023) as the Company Secretary and Compliance
Officer of the Bank with effect from July 21,2024.

All the Directors of the Bank have confirmed that they satisfy
the fit and proper criteria as prescribed under the applicable
regulations and that they are not disqualified from being
appointed as Directors in terms of Section 164(2) of the Act.

Particulars of Employees

In accordance with the provisions of Section 197(12) of the
Act read with Rule 5(1) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, the
requisite details are set out in Annexure 4 to this Report.

Further, the statement containing particulars of employees as
required under Section 197(12) of the Act read with Rule 5(2) and
Rule 5(3) of the Companies (Appointment and Remuneration
of Managerial Personnel) Rules, 2014, is given in an Annexure
and forms part of this Report. In terms of Section 136(1) of
the Act, the Integrated Annual Report including the financial
statements are being sent to the Members excluding the
aforesaid Annexure. The Annexure is available for inspection
and any Member interested in obtaining a copy of the Annexure
may write to the Company Secretary of the Bank.

Compliance on Maternity Benefit Act, 1961

The Bank has complied with the applicable provisions of
Maternity Benefit Act, 1961 for female employees of the Bank
with respect to leaves and maternity benefits thereunder.

Conservation of Energy and Technology Absorption

Please refer to page nos. 119 to 120 and 125 of this Integrated
Annual Report for information on Conservation of Energy and
page no. 228 of this Integrated Annual Report for information
on Technology Absorption.

Foreign Exchange Earnings and outgo

During the year, the total foreign exchange earned by the
Bank was ' 4,919.04 crore (on account of net gains arising
on all exchange / derivative transactions) and the total foreign
exchange outgo was ' 4,092.04 crore towards the operating
and capital expenditure requirements.

Secretarial Audit

In terms of Section 204 of the Act and the Rules made
thereunder, M/s. BNP & Associates, Company Secretaries,
(ICSI Firm Registration No. P2014MH037400), were appointed

as Secretarial Auditors of the Bank for FY 2024-25. The report
of Secretarial Auditors is enclosed as Annexure 5 to this
Report. There are no qualifications, reservations or adverse
remarks in the report of the Secretarial Auditors.

Further, the Audit Committee and the Board of Directors of
the Bank at their respective meetings held on April 12, 2025
and April 19, 2025 have recommended the appointment of
M/s. Bhandari & Associates, Practicing Company Secretaries
(ICSI Firm Registration No. P1981MH043700), as Secretarial
Auditors of the Bank at an overall audit fees of Rs. 15,00,000
(Rupees Fifteen Lakh Only) per annum in addition to out of
pocket expenses, outlays and taxes as applicable, to conduct
secretarial audit of the Bank for a period of 5 (Five) years i.e.
from FY 2025-26 till (and including) FY 2029-30.

The resolution in this regard is being proposed at ensuing
AGM for approval of the Members.

Corporate Governance

In compliance with applicable provisions of SEBI Listing
Regulations, a separate report on Corporate Governance
along with a certificate of compliance from the Secretarial
Auditors, forms an integral part of this Annual Report.

Business Responsibility and Sustainability Report

The Bank's Business Responsibility and Sustainability Report
forms an integral part of this Report.

Prevention, Prohibition and Redressal of Sexual
Harassment of Women at the Workplace

The relevant information is included in the Report on
Corporate Governance.

Customer complaints and grievance redressal

Details of customer complaints and grievance redressal is
enclosed as Annexure 6 to this Report.

Unclaimed Deposits of HDFC Limited

The Bank is a private sector bank registered with RBI and in
terms of applicable RBI norms, deposits remaining unclaimed /
unpaid for a period of 10 (Ten) years, need to be transferred by
the Bank to Depositor Education and Awareness (DEA) Fund
maintained by RBI.

In accordance with applicable provisions of the Act read with
Investor Education and Protection Fund Authority (Accounting,
Audit, Transfer and Refund) Rules, 2016, as amended, HDFC
Limited, has transferred deposits remaining unclaimed for a
period of 7 (Seven) years upto June 30, 2023, to the Investor
Education and Protection Fund (IEPF) established by the
Central Government. The deposit holders of HDFC Limited
can claim their respective unclaimed deposits from IEPF. The
process of claiming the deposits from IEPF is uploaded on
the website of the Bank. Post merger of HDFC Limited with
and into the Bank i.e. effective July 1, 2023, the Bank has
been transferring all the unclaimed deposits of HDFC Limited
(remaining unclaimed for more than 10 years) to the DEA Fund.

Acknowledgement

The Directors of the Bank would like to place on record their
gratitude towards the guidance and co-operation received
from the Reserve Bank of India, Securities and Exchange
Board of India, Stock exchanges, Ministry of Corporate
Affairs and other Government and Regulatory Agencies. The
Directors of the Bank would like to take this opportunity to
express their appreciation for the hard work and dedicated
efforts put in by the Bank's employees and look forward to
their continued contribution.

Conclusion

After two years of the merger, the integration of HDFC
Limited's home loan expertise with HDFC Bank's extensive
scale and reach has strengthened our position as a
leading financial institution. The merger has resulted in
a much stronger Bank that is now poised to capitalise
further on the growth opportunities in the market.
In FY 2024-25, the Bank reported healthy growth while
maintaining pristine asset quality. There is immense
opportunity for offering banking services in India as the
economy grows. HDFC Bank is well positioned to capitalise
on this due to its strong balance sheet as well as established
brand name. While pursuing growth, the Bank will not
compromise on high corporate governance standards and
will continue focusing on its five core values: Customer
Focus, Operational Excellence, Product Leadership, People
and Sustainability.

On behalf of the Board of Directors

Atanu Chakraborty    Sashidhar Jagdishan

Part-Time Chairman    Managing Director

and Independent Director and Chief Executive Officer

Place : Mumbai
Date : June 20, 2025

---

Mar 31, 2024

Your Directors take great pleasure in presenting the 30^th Annual Report on the business and financial operations of your Bank, together with the audited accounts for the year ended March 31, 2024.

The Financial Year 2023-24 was a historic one as the merger of parent HDFC Limited with and into HDFC Bank was completed. This merger strengthened our position as a leading financial conglomerate with marquee financial services institutions like HDFC Life Insurance Company Limited, HDFC Asset Management Company Limited and HDFC ERGO General Insurance Company Limited becoming subsidiaries in addition to the existing ones, HDFC Securities Limited and HDB Financial Services Limited.

Coming to the macroeconomic environment, India is expected to be one of the fastest growing major economies in the world in the Financial Year 2024-25 with the RBI expecting GDP growth at 7.2 per cent.

Over the past three years, the Indian economy grew on an average by 8.3 per cent and at 8.2 per cent in FY24. GDP growth has been supported by an increase in capital expenditure with the Government doing the heavy lifting. Inflationary pressures have moderated over the last fiscal year with retail inflation averaging at 5.4 per cent in FY24 from 6.7 per cent in FY23.

On the global front, geopolitical tensions could act as a headwind for India's growth and inflation outlook. However, while these challenges may pose some risks the resilience and momentum shown by the domestic economy in recent years suggests that it is well-equipped to navigate any potential headwinds.

For more details, please refer to the Macroeconomic and Industry section on page no. 220.

Your Bank continued to grow in this environment by conducting its business responsibly and reinforcing its commitment to the environment and community at large.

I Financial Parameters

The Bank's key financial parameters continued to be healthy, primarily attributable to its robust credit evaluation of targeted customers and a well-diversified loan book across sectors, customer segments and products. Its performance is an outcome of its disciplined approach to managing risk and return.

The figures for the period ended March 31, 2024 include the operations of erstwhile HDFC Limited which amalgamated with and into HDFC Bank on July 01, 2023 and hence the comparisons with the previous periods have to be looked at in light of the same.

Based on Standalone Financial Statements

The income statement reflected a growth in revenue comprising Net Interest Income and Non Interest Income. While the former grew by 25.0 per cent, the latter grew by 57.7 per cent year-on-year. On an overall basis, Total Net Revenue for the year ended March 31, 2024, reached ' 1,57,773.5 crore, reflecting an increase of 33.6 per cent over the previous year.

Net Profit increased by 37.9 per cent to ' 60,812.3 crore from ' 44,108.7 crore. Return on Average Net Worth was 16.09 per cent while Basic Earnings Per Share was ' 85.83 up from ' 79.25.

Total Advances grew by 55.2 per cent and Total Deposits grew by 26.4 per cent year-on-year. Core Net Interest Margin (NIM) was at 3.53 per cent.

Gross Non-Performing Assets (GNPAs) stood at 1.24 per cent as against 1.12 per cent. This is amongst the lowest in the industry.

I Stepping into a new Era

The merger strengthens our position as a leading financial conglomerate with an unwavering commitment to enhancing customer service. The fusion of erstwhile HDFC Limited's strong position in the mortgage business and HDFC Bank's operational efficiencies and wider reach, brings significant benefits for customers, employees and shareholders, amplifying scale and product offerings.

The Integration Committee, formed in October 2022, played a vital role in overseeing the seamless post-merger integration of HDFC Bank and erstwhile HDFC Limited. Strategically

planning and coordinating 32 key workstreams, the committee ensured effective implementation and synergy, prioritising the minimisation of customer grievances and regulatory compliance. Looking ahead, the Bank's focus remains on profitable growth. By leveraging HDFC Limited's extensive home loan customer base, the Bank will strategically implement cross selling initiatives, offering need-based products through digital journeys without incurring additional acquisition costs. We aim to transform our branches into experiential hubs, integrating digital innovation with personalised service to elevate customer engagement.

I Parivartan

Parivartan is HDFC Bank's CSR initiative that aims at mainstreaming economically and socially disadvantaged groups by ushering growth, development and empowerment. Committed to developing sustainable ecosystems, it identifies and supports programmes that develop and advance communities.

It focuses on five areas: Rural Development, Education, Skill Development & Livelihood Enhancement, Healthcare & Hygiene, and Financial Literacy and Inclusion.

In addition, it has been at the forefront of responding to natural crises - successfully restoring infrastructure and rehabilitating communities.

Till date, through various interventions HDFC Bank has benefitted over 10.19 crore people.

Your Directors are also pleased to report that the Bank met its CSR obligation for the Financial Year 2023-24.

I Summary

The Indian economy registered an average growth rate of 8.3 per cent over the last three years, with growth standing at 8.2 per cent in the Financial Year 2023-24. Going forward, India is expected to remain one of the fastest growing major economies in the world in FY25, with the RBI projecting GDP growth at 7.2 per cent.

This is expected to be aided by some recovery in consumer spending particularly in rural areas. The other positive factors that support demand are a normal monsoon, stable inflation and expected reduction in interest rates. Your Bank is well-positioned to make the most of these opportunities by leveraging the strength of its balance sheet and the trust enjoyed by its brand.

It is also committed to supporting nation building particularly furthering rural prosperity through both its business and social initiatives. We will continue to be a responsible corporate citizen contributing to the development of society and promoting sustainability. This journey will of course not be possible without the continuing support of our ever-growing family of over 2.13 lakh employees.

We are committed to hiring and retaining the best talent and being among the industry's leading employers.

I Mission and Strategic Focus

Your Bank's mission is to be a ‘World-Class Indian Bank'. Its business philosophy is based on five core values: Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Sustainability should be viewed in unison with Environmental, Social and Governance performance. As a part of this your Bank, through its CSR initiative Parivartan, seeks to bring about change in the lives of communities mainly in rural India.

During the year under review, HDFC Bank did not lose the human touch and continued building a sound customer franchise across distinct businesses to achieve healthy growth in profitability consistent with its risk appetite.

In line with the above objective, the Bank aims to take digitalisation to the next level. The objective is to:

•    Deliver superior experience and greater convenience to customers

•    Increase market share in India's growing banking and financial services industry

•    Expand geographical reach

•    Cross-sell the broad financial product portfolio

•    Sustain strong asset quality through disciplined credit risk management

• Maintain low cost of funds

Your Bank remains committed to the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance which is articulated in its Code of Conduct. Every employee affirms to abide by the Code annually.

I Summary of Financial Performance	Â	C crore)
Particulars	For the year ended / As on March 31, 2024	For the year ended / As on March 31,2023
Deposits and Borrowings	3,041,939.4	2,090,160.2
Advances	2,484,861.5	1,600,585.9
Total Income	307,581.6	192,800.4
Profit Before Depreciation and Tax	73,705.4	60,727.8
Profit After Tax	60,812.3	44,108.7
Profit Brought Forward	112,960.0	93,185.7
Additions on Amalgamation (net)	3,570.1	-
Total Profit Available for Appropriation	177,342.4	137,294.4
Appropriations	Â
Transfer to Statutory Reserve	15,203.1	11,027.2
Transfer to General Reserve	6,081.2	4,410.9
Transfer to Capital Reserve	4,166.4	4.6
Transfer to / (from) Investment Reserve	529.4	(294.8)
Transfer to / (from) Investment Fluctuation Reserve	378.0	82.0
Transfer to Special Reserve	3,000.0	500.0
Dividend pertaining to previous year paid during the year	8,404.4	8,604.5
Balance carried over to Balance Sheet	139,579.9	112,960.0

I Dividend

The Board of Directors of the Bank, at its meeting held on April 20, 2024, has recommended a dividend of ' 19.50 (Nineteen Rupees Fifty Paisa only) per equity share of ' 1/- (Rupee One only) each, for the Financial Year ended March 31, 2024. This translates to a Dividend Payout Ratio of 24.38 per cent of the profits for the Financial Year ended March 31, 2024.

In general, your Bank's dividend policy, among other things, balances the objectives of rewarding shareholders and retaining capital to fund future growth. It has a consistent track

record of dividend distribution, with the Dividend Payout Ratio ranging between 20 per cent and 25 per cent, which the Board endeavours to maintain. The dividend policy of your Bank is available on the Bank's website.

https://www.hdfcbank.com/content/bbp/

repositories/723fb80a-2dde-42a3-9793-

7ae1be57c87f/?path=/Footer/About%20Us/Corporate%20

Governance/Codes%20and%20Policie/pdf/Dividend-

Distribution-Policy.pdf

Issuance of Equity Shares and Employee Stock Option Scheme (ESOP)

As on March 31, 2024, the issued, subscribed and paid-up capital of your Bank stood at ' 7,59,69,10,662.00/- comprising 7,59,69,10,662 equity shares of ' 1/- each. Further, 4,66,21,586 equity shares of face value of ' 1/- each were issued by your Bank pursuant to the exercise of Employee Stock Options (ESOPs). (For information pertaining to ESOPs, please refer Annexure 1 of the Directors' Report).

Pursuant to the merger of erstwhile HDFC Limited (e-HDFC) with and into the Bank, the Allotment and Transfer Committee of HDFC Bank at its meeting held on July 14, 2023, approved the continuation of warrants in the name of HDFC Bank for the Warrants of e-HDFC held as on the record date in the same ratio i.e. one (1) HDFC Bank Warrant for one (1) HDFC Limited Warrant. Consequently, as of July 14, 2023, the 1,47,57,600 warrants previously issued by e-HDFC Limited were retained in the name of HDFC Bank.

Furthermore, the Bank has subsequently allocated 2,47,75,632 equity shares following the exercise of 1,47,47,400 warrants by

warrant holders until the last conversion date of warrants which was August 10, 2023. Additionally, 10,200 warrants lapsed due to non-exercise.

Capital Adequacy Ratio (CAR)

As on March 31, 2024, your Bank's total CAR, calculated as per Basel III Regulations, stood at 18.8 per cent, well above the regulatory minimum requirement of 11.7 per cent, including a Capital Conservation Buffer of 2.5 per cent and an additional requirement of 0.2 per cent on account of the Bank being identified as a Domestic Systemically Important Bank. Tier I Capital was at 16.79 per cent as of March 31,2024.

Management Discussion and AnalysisMacroeconomic and Industry Development

Over the past three years, the Indian economy registered an average growth rate of 8.3 per cent. India's real GDP growth has been pegged at 8.2 per cent for FY24 as per the provisional estimates released by the National Statistical Office (NSO). The GDP growth has been supported by a boost in capital expenditure particularly in infrastructure development including roads, highways, railways and housing with the Government doing the heavy lifting. Additionally, private sector investment also showed some signs of resurgence in sectors such as cement, steel, oil and gas.

On the other hand, private consumption growth slowed to 4.0 per cent in FY24 from 6.8 per cent in FY23 and 11.7 per cent in FY22. To recall, post the pandemic, consumption had been driven by services along with high demand for premium products. However, as this pent-up demand effect waned and interest rates started rising consumer demand slowed down in FY24. Moreover, high food inflation and an uneven monsoon weighed on rural demand recovery.

As for the supply side, rise in manufacturing and construction activity has largely aided growth. The manufacturing sector has benefitted from improved profit margins due to lower input costs, while Government support schemes such as the ECLGS aided MSMEs. Further, favourable infrastructure and policy measures like Production Linked Incentive (PLI) and FAME 2 Schemes finally paid off for some critical sectors like automobiles, electronics (largely mobile handsets) and metals. Moreover, the construction sector has maintained an average growth rate of 13.1 per cent over the past three years supported by Government infrastructure investments and an increased housing market demand.

On the external front, slowdown in global growth significantly impacted India's exports of goods and services in FY24. However, expansion of professional and business services exports combined with diversification to new markets such as Central Asia and Latin America helped cushion the impact of the slowdown elsewhere in the global economy.

Going forward, India is expected to remain one of the fastest growing economies in the World in FY25 with the RBI forecasting a GDP growth rate of 7.2 per cent. Economic activity is expected to be supported by a further surge in private capital expenditure and continued Government capital spending. Moreover, a higher allocation for Production Linked Incentive (PLI) sectors in the Budget for FY25 is likely to bolster manufacturing activity and attract FDI flows. In addition, a continued diversification

of supply chains out of China and to other emerging markets is likely to channel investment flows into India. Furthermore, the International Monetary Fund upgraded its global growth forecast by 10 bps to 3.2 per cent for FY24 which bodes well for India's economic growth. In addition, domestic consumer spending is expected to see some recovery particularly in rural areas as a normal monsoon, stable inflation and a reduction in interest rates support demand.

Inflationary pressures have moderated over the last fiscal year, with retail inflation averaging at 5.4 per cent in FY24 from 6.7 per cent in FY23. Although, retail headline inflation rose to a high of 7.4 per cent in July 2023 it has since moderated reaching 4.83 per cent in April 2024. Encouragingly, core inflation (retail inflation excluding food and fuel) has also dipped below 4 per cent signalling a disinflationary trend. Going forward, we expect retail inflation to average at 4.6 per cent in FY25 assuming normal monsoon. Additionally, a favourable economic base and controlled core inflation is expected to offer support. That said, weather related disturbances such as heatwaves, uneven distribution of monsoons along with a resurgence in global commodity prices remain a risk to the inflation trajectory.

Emerging risks on the global front could pose challenges to India's growth trajectory and inflation outlook. Higher crude oil prices as a result of any escalation in Middle East tensions and tighter global oil supply pose a risk for domestic growth and inflation. Moreover, the impact of geopolitical tensions on global supply chains could hurt India's exports to major trading partners and escalate costs. However, while global challenges may pose some risks, the resilience and momentum shown by the domestic economy in recent years suggests it is well-equipped to navigate any potential headwinds.

Financial Performance

The financial performance of your Bank during the year ended March 31, 2024 remained healthy with Total Net Revenue (Net Interest Income plus Other Income) rising 33.6 per cent to ' 1,57,773.5 crore from ' 1,18,057.1 crore in the previous year. Revenue growth was driven by an increase in both Net Interest Income and Other Income. Net Interest Income grew by 25.0 per cent to ' 1,08,532.5 crore. Core Net Interest Margin was at 3.53 per cent.

Other Income grew by 57.7 per cent to ' 49,241.0 crore. The largest component was Fees and Commissions at ' 28,160.7 crore. Profit on Revaluation and Sale of Investments was ' 11,526.1 crore. Foreign Exchange and Derivatives Revenue was ' 4,001.1 crore and recoveries from written-off accounts were ' 3,441.3 crore.

Operating (Non-Interest) Expenses rose to ' 63,386.0 crore from ' 47,652.1 crore. During the year, your Bank set up 925 new branches and 1,211 ATMs / Cash Recycler Machines (CRMs). The addition in expenses includes erstwhile HDFC Limited operating cost post-merger. This, along with higher spend on IT resulted in higher infrastructure and staffing expenses. Staff expenses also went up due to employee additions and annual wage revisions. Further, Deposit Insurance and Credit Guarantee Corporation (DICGC) premium cost increased due to deposit growth. Despite higher Staff and Infrastructure Expenses, the Cost to Income Ratio was 40.2 per cent as compared to 40.4 per cent during the previous year.

Total Provisions and Contingencies were ' 23,492.2 crore as compared to ' 11,919.7 crore in the preceding year. The increase is mainly on account of floating provision created during the year of ' 10,900.0 crore. Your Bank's provisioning policies remain more stringent than regulatory requirements.

The Coverage Ratio based on specific provisions alone excluding write-offs was 74.0 per cent and including general, floating and contingent provisions was 195.3 per cent. Your Bank made General Provisions of ' 1,146.1 crore during the year. Gross Non-Performing Assets (GNPAs) were at 1.24 per cent of Gross Advances, as against 1.12 per cent in the previous year. Net NPA ratio stood at 0.33 per cent as against 0.27 per cent in the previous year.

Profit Before Tax grew by 21.2 per cent to ' 70,895.3 crore. After providing for Income Tax of ' 10,083.0 crore, Net Profit increased by 37.9 per cent to ' 60,812.3 crore from ' 44,108.7 crore. Return on Average Net Worth was 16.09 per cent while Basic Earnings Per Share (EPS) was ' 85.83 up from ' 79.25.

As on March 31, 2024, your Bank's Total Balance Sheet stood at ' 36,17,623 crore, an increase of 46.7 per cent over ' 24,66,081 crore on March 31, 2023. Total Deposits rose by 26.4 per cent to ' 23,79,786 crore from ' 18,83,395 crore. Savings Account Deposits grew by 6.4 per cent to ' 5,98,747 crore while Current Account Deposits rose by 13.4 per cent to ' 3,10,016 crore. Time Deposits stood at ' 14,71,023 crore, representing an increase of 40.4 per cent. CASA Deposits accounted for 38.2 per cent of Total Deposits. Advances stood at ' 24,84,862 crore, representing an increase of 55.2 per cent.

The Domestic Loan Portfolio at ' 24,46,212 crore grew by 56.9 per cent over March 31, 2023.

The Bank's Debt Equity Ratio for the year ended March 31, 2024 stood at 1.21 as compared to 0.39 in the previous year.

Erstwhile HDFC Limited Borrowing Maturity Schedule

Of the erstwhile HDFC Ltd's borrowings of ' 4,01,140 crore as at March 31, 2024, approximately 15 per cent is due for repayment in each of the three years up to FY27 and the balance 55 per cent is due thereafter.

Business Review

Your Bank's operations are split into Domestic and International.

A. Domestic Business comprises the following:

Retail Banking

Your Bank's Retail Assets are built on three key principles: Strong Digital Offering, Optimal Risk Pricing and Maintaining Pristine Portfolio Quality. Adherence to these principles combined with the strength of merger boosted your Bank's Retail Advances which witnessed a 104.33 per cent year-on-year growth.

Brief on segment performance:

The Bank's increased focus on top corporates and good credit score customers contributed to the overall pristine portfolio quality. Personal Loans segment has experienced strong growth with the overall portfolio touching '1,84,581 crore towards the end of the year. An overwhelming majority of applications (99 per cent) of this segment are originated digitally and 86 per cent of these applications are disbursed digitally. The Xpress car loans, offering seamless end-to-end digital disbursement, has increased the digital origination to 30 per cent of the total New Car Loan business. Two-Wheeler Advances has grown by 15 per cent to '11,776 crore of Advances and has 98 per cent of digital acquisition.

Your Bank has exhibited significant year-on-year growth of 27.78 per cent in Gold Loans capitalising on an expanded branch network.

With the incoming Home Loan portfolio from erstwhile HDFC Limited. post-merger, your Bank's Home Loan portfolio has increased by 332.11 per cent, surpassing industry growth rates. The figures for the period ended March 31, 2024 include the operations of erstwhile HDFC Limited which amalgamated with and into HDFC Bank on July 01,2023 and hence comparisons with the previous periods have to be looked at in light of the same.

The payments business is one of the stated strategic growth pillars for the Bank.

With over 7 crore cards issued (credit, debit and pre-paid) and a widely spread acceptance network across the online and offline merchant ecosystem, HDFC Bank continues to maintain a leadership position across multiple product offerings in the payments landscape.

In the Financial Year 2023-24, HDFC Bank introduced many new products across the Payments Business.

The Credit Cards Business continued to enhance its product offerings and launched a slew of co-branded, business and consumer credit cards. For the year ended March 31,2024, 63 lakh new credit cards were issued covering retail and business segments. Of total cards in force in market, HDFC Bank also crossed a milestone of 2 crore cards in force which is an industry first amongst all issuers.

Further, the Bank launched PayZapp 2.0 a comprehensive mobile payment commerce app in March 2023. PayZapp supports a complete range of payments from credit cards, debit cards to UPI with customers getting the choice of form factor to make payments. The app has reached the milestone of 75 lakh registrations in FY24.

To enhance and strengthen offerings to merchants, SmartHub Vyapar- an integrated payment, banking and business solution that caters to the daily needs of merchants and helps them drive business growth was formally launched in October 2022. The platform has witnessed widespread adoption ever since and has onboarded over 16 lakh users across the country as on March 31, 2024.

SmartHub Payment Gateway, a unified payment platform for online merchants was launched in February 2024 in line with the Bank's endeavour to provide merchants a comprehensive

platform to cater to their payments and banking needs and help drive their growth. This platform enables merchants to collect payments through 150 plus methods and assists them in maximising sales with best-in-class success rate. SmartHub Payment Gateway provides an insightful dashboard powered by smart analytics and empowers merchants to provide a frictionless check out experience for their customers.

Lastly, in tune with the evolving payments landscape the business continues to transform itself with significant investments across Cloud Computing, Analytics, Artificial Intelligence and Machine Learning, Open APIs and Cyber Security. The objective is to manage large scale and continuously grow volumes while processing transactions in a safe and secure manner.

Digital Initiatives in the Retail Segment in FY24:

With the newly launched digital platform HDFC Bank XpressWay the Bank offers over 30+ banking products, including loans, credit cards, account opening and investments along with value-added services such as form filling and details modification as well as pre-approved banking products. This comprehensive Do-It-Yourself (DIY) platform provides a wider range of offerings reducing the need for human assistance during the application process and increasing speed for customers.

The Bank has been a pioneer in digitalisation with initiatives like Personal Loan in 10 Seconds, Digital Loan Against Shares, Digital Loan Against Mutual Funds and Xpress Car Loans. Continued emphasis is placed on digitalising processes and enhancing customer touchpoints to expand the Bank's reach.

Our Distribution Channel:

The virtual channels of the Bank were set up to enhance coverage across customer segments and to ensure a holistic service experience to all customers. This is one of the key engagement channels in the Bank.

Virtual Relationship Banking is an integrated customer centric approach covering three pillars - Virtual Relationship, Virtual Sales and Virtual Care serving as a crucial component of the Bank's sales and customer engagement strategy. This approach harnesses technology to connect with customers, build relationships and promote banking products and services. This helps the Bank to expand the managed customer base, generate leads and drive revenue growth.

Recognising employees and customers as the capitals for this business, your Bank has invested heavily in training and development of its relationship managers. Training covers

product knowledge, sales techniques, communication skills, compliance and regulatory requirements and customer relationship management skills.

As we transition into the digital age, a banking experience characterised by digital ease and personalised conversations remains at the core of our Virtual Relationship Management (VRM) strategy.

As a part of this strategy, Relationship Managers reach out to customers through remote and digital platforms resulting in deeper and cost-effective engagement. As digital literacy and exposure increases exponentially, VRMs are gaining wider acceptance through deeper engagement and relationships backed by a strong product offering thereby constituting an important component of the Bank's customer engagement strategy.

With proper training, technology support, and adherence to compliance, this channel is a highly effective tool for the Bank to drive revenue growth, expand its customer base and provide excellent customer service.

As of March 31, 2024, the Bank's distribution network was at 8,738 branches and 20,938 ATMs / CRMs across 4,065 cities / towns as against 7,821 branches and 19,727 ATMs across 3,811 cities / towns as of March 31, 2023. 52 per cent of our branches are in semi-urban and rural areas. In addition, we have 15,182 business correspondents, which are primarily manned by Common Service Centres (CSC). The total number of customers your Bank catered to as on March 31, 2024 was over 9.32 crore, up from over 8.28 crore in the previous year.

Retail Banking - Home Loan Business

Post-merger integration of the erstwhile HDFC Limited's home loan portfolio with the Bank has resulted in scale in terms of customer base and book size. This also brings together erstwhile HDFC Limited's segment expertise and in person customer connect with HDFC Bank's extensive branch network, ability to leverage technology platforms and a wide bouquet of banking products. The Gross Retail Mortgage Advances stood at ' 7,72,786 crore compared to the previous year's ' 1,78,840 crore. The figures for the period ended March 31, 2024 include the operations of erstwhile HDFC Limited which amalgamated with and into HDFC Bank on July 01,2023 and hence comparisons with the previous periods have to be looked at in light of the same.

As you are aware prior to the merger, your Bank operated in the Home Loan Business in conjunction with HDFC Limited. As

per this arrangement, your Bank sourced HDFC home loans while HDFC Limited approved and disbursed them. HDFC Bank received a sourcing fee for these loans and as per the arrangement had the option to purchase loans for a value up to 70 per cent of the loans sourced by the Bank either through the issuance of mortgage-backed Pass-Through Certificates (PTCs) or a direct assignment of loans. The balance was retained by HDFC Limited.

The Bank is gradually converting erstwhile HDFC Limited's service centres to branches and has a well-defined approach for this. Cross-selling remains a primary focus for both existing and new customers, leveraging the Bank's digital channels to minimise acquisition costs effectively. Post the merger, approximately 85 per cent of the newly acquired home loan customers hold a liability account with your bank. Your Bank's market share growth on incremental disbursals is in double digits post - merger.

Third Party Products

Your Bank distributes Life, General and Health Insurance as well as Mutual Funds (Third Party Products) to its customers. In the Financial Year 2023-24, the income from this business accounted for 22 per cent of Bank's Total Fee Income.

Life Insurance

Your Bank has adopted an open architecture model fo distributing insurance products from our three trusted partners with a focus on offering customers a diverse array of options. Foi the year ended March 31, 2024, the Bank mobilised premium of ' 8,940 crore representing a year-on-year growth of three per cent. Our extensive distribution network includes branches virtual channels, NRI services and wealth management. The key focus would continue to be on staff training, robust quality and control processes uniformly implemented across al partners as well as offering integrated and seamless digital on-boarding journeys. Currently, the Bank's NetBanking platform offers 57 insurance products across all partners accounting fo over 46 per cent of the total policies.

Wealth Management

In the Financial Year 2023-24, with expansion being at the centre of our decisions, Wealth Business has seen a growth in the client base by 34 per cent over the previous year. This business now manages over 83,000 households. With an increase in client base, your Bank has also seen an increase in the strength of our wealth bankers. HDFC Bank now has a team of 1,000+ wealth bankers working across 923 locations through a hub and spoke model. Your Bank's Assets Under Management (AUM) grew by 43 per cent in FY24 to ' 6.34 lakh crore.

 

Non-Life Insurance

Your Bank, in collaboration with its three General Insurance and two Standalone Health and Insurance partners, has introduced innovative non-life insurance products to expand the range of offerings and provide a comprehensive coverage to customers. These products are accessible through both digital and physical platforms. Employees across channels have been trained in the new products and processes. To meet customer demands, additional manpower has been deployed across non-life insurers. As on March 31, 2024, premium mobilisation in General and Health Insurance reached a total of ' 4,208.4 crore representing a growth of 75 per cent over the previous year.

Mutual Funds

Your Bank follows an open architecture approach in distribution of Mutual Funds and is currently associated with 35 Asset Management Companies (AMCs).

The Bank's Asset Under Management (AUM) grew by 35 per cent to reach ' 1,37,343 crore for the year ended March 31, 2024. The Bank offers digital on-boarding platform to the customers for Mutual Fund investments through Investment Services Account (ISA) and SmartWealth (app based).

During the same period, HDFC Bank and HSL (InvestNow) witnessed a significant growth of 44 per cent in Systematic

The Bank's focus is to develop wealth management across the country by focusing on super affluent and mass affluent clients. It has focused on growth of market share through 150+ client events in FY24.

A Service First culture, enables us to deliver best-in-class experience to clients. Wealth Business has achieved higher growth through better product selection and enhanced service experience with engaged and trusted wealth bankers. A strong brand as well as experience of over two and a half decades resonates well with customers and creates trust. This trust has been strengthened through robust processes, diligent research methodology and bespoke recommendation model for Portfolio Management Services (PMS) and Alternate Investment Funds (AIF). This is in addition to the Fama model for selection of mutual funds.

Your Bank has provided wealth bankers with a state-of-the-art investment platform that uses advanced analytics to provide consolidated portfolio overview. It continues to invest in training talent by providing best in class programmes from IIMs and other leading institutions to enhance the knowledge levels and skills of our wealth bankers. This helps them to engage better with clients in a dynamic market environment.

Wealth Business has developed an advanced unassisted digital investment platform, SmartWealth, that provides -

0 Model portfolio basket recommendations 0 Consolidated portfolio view 0 Account aggregation across banks 0 Portfolio analytics on-the-go 0 Nudges to rebalance portfolio 0 SIP calendar and ability to pause and restart SIPs

This new state-of-the-art mobile application provides a highly personalized experience and will democratise wealth management across customer segments. It has more than 1.1 lakh downloads and 70 per cent active users.

In an endeavour to align with the client's long term interest, your Bank has focused on growing recurring revenue which has yielded positive results. In Financial Year 2023-24, the wealth teams' recurring (trail) income has grown by 25 per cent and ranges between 40-50 per cent. This growth reflects a commitment to provide sustainable value to clients while ensuring the long-term profitability of your Bank.

HDFC Bank remains focused on providing an asset allocation-based wealth management offering that is designed to Protect, Manage and Grow its clients' wealth.

Wholesale Banking

The Wholesale Banking business was an important growth engine for your Bank in the year under review. This business focuses on institutional customers such as the Government, PSUs, Large and Emerging Corporates and SMEs. Your Bank offers a range of products and services encompassing working capital and term loans, trade credit, cash management, supply chain financing, foreign exchange and investment banking services.

The Wholesale Banking business recorded healthy growth, ending Financial Year 2023-24 with a domestic loan book size of ' 10,87,084 crore, recording a growth of 32 per cent over the earlier year. This constituted about 44 per cent of your Bank's domestic loans as per Basel II classification. Your Bank was able to expand its share of the customer wallet primarily using sharper customization, cross-selling and expanding into more geographies.

Based on its superior product delivery, service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading corporates. Corporate Banking, focusing on large, well-rated companies continued to be the biggest contributor to Wholesale Banking in terms of asset size.

This business continued its attention towards engaging with Multi-National Corporations (MNCs) and capitalised on the increasing trend among large companies to consolidate their banking relationships. Your Bank strengthened its existing relationships and expanded its market share by leveraging its extensive array of product offerings. This business provided support to customer requirements under the Production Linked Incentive (PLI) Scheme. The Emerging Corporates Group which focuses on the mid- market segment too witnessed significant growth. Your Bank leveraged its vast geographical reach, technology backbone, automated processes, suite of financial products and quick turnaround times to offer a differentiated service. The business continues to have a diversified portfolio in terms of both industry and geography.

In the year under review, the Bank continued its focus on the MSME sector. There has already been increased formalistion and digitalisation of the MSME sector owing to the implementation of the Goods and Service Tax (GST). Through MyBusiness, which offers comprehensive financial solutions

like Business Banking, Easy Loans, Trade Services and Digital Solutions, MSMEs can conveniently access a suite of product / services tailored to meet the business requirements.

Post the merger of HDFC Limited with HDFC Bank, the Bank inherited the realty finance business. This business largely covers the rental discounting business as well as construction finance. The size of the book was at ' 80,736 crore as on March 31, 2024.

The Investment Banking business further cemented its prominent position in the Debt Capital Markets, Equity Capital Markets and INR Loan Syndication. Your Bank improved its position to 2^nd in the Bloomberg rankings of Rupee Bond Book Runners for the Financial Year 2023-24 with a market share of 14.95 per cent. Your Bank maintained its position amongst the top 3 in the Bloomberg rankings of Syndicated INR term loans for Financial Year 2023-24, with a market share of 13.47 per cent. The Bank has provided advisory services and actively assisted clients in equity fund raising through 3 Initial Public Offerings amounting to ' 4,245 crore and 3 Qualified Institutional Placements amounting to ' 4,750 crore, aggregating to ' 8,995 crore for the Financial Year 2023-24.

In the Government business, your Bank sustained its focus on tax collections, collecting direct tax (CBDT) of ' 5,25,157.51 crore and Indirect tax (CBIC+ GST) of over ' 3,77,112.41 crore during Financial Year 2023-24. It continues to enjoy a pre-eminent position among the country's major stock and commodity exchanges in both Cash Management Services and Cash Settlement Services.

Your Bank has embarked on strategic digital transformation to enhance Customer Engagement and Employee Experience and create an ecosystem for seamless banking.

It also leverages analytics to delve deeper into corporate ecosystems resulting in better product structuring, cross sell opportunities, improved yields thus improving the Bank's share of Revenue Pools from Corporates.

HDFC Bank provides a comprehensive suite of cutting-edge platforms tailored to meet the diverse needs of corporate clients. Among these, our Corporate Net Banking platform stands out, offering both the reliable e-Net service and the more recently upgraded CBX platform. These platforms provide intuitive interfaces and robust functionalities empowering businesses with seamless control over their financial operations. Additionally, our Trade Platform - Trade on Net (TON) serves as a cornerstone for facilitating efficient trade transactions. Also, our Supply Chain Finance (SCF) transaction

platform enables digital contract bookings and automated disbursements streamlining end-to-end SCF transactions for the corporates. Your Bank has also integrated with all the three TReDS platforms. We are also collaborating with Fintechs to integrate with Corporate ERP and offer Embedded Banking in Corporate Ecosystems journeys.

Treasury

The Treasury Department is the custodian of your Bank's cash/ liquid assets and handles its investments in securities, foreign exchange and cash instruments. It manages the liquidity and interest rate risks on the balance sheet and is also responsible for meeting reserve requirements. The vertical also helps manage the hedging needs of customers and earns a fee income generated from transactions customers undertake with your Bank while managing their foreign exchange and interest rate risks.

Revenue accrues from spreads on customer transactions based on trade and remittance flows and demonstrated hedging needs. Your Bank recorded a revenue of ' 4,001.10 crore from foreign exchange and derivative transactions in the year under review.

As a part of its prudent risk management, your Bank enters into foreign exchange and derivatives deals with counterparties after it has set up appropriate credit limits based on its evaluation of the ability of the counterparty to meet its obligations. Where your Bank enters into foreign currency derivatives contracts not involving the Indian Rupee with its customers, it typically lays them off in the inter-bank market on a matched basis. For such foreign currency derivatives, your Bank primarily carries the counterparty credit risk (where the customer has crystallised payables or ‘mark-to-market' losses) and may carry only residual market risk, if any. Your Bank also deals in derivatives on its own account including for the purpose of its own balance sheet risk management.

HDFC Bank is also a nominated agent for the bullion imports and has a significant market share in that business.

Your Bank maintains a portfolio of Government securities in line with the regulatory norms governing the Statutory Liquidity Ratio (SLR). A significant portion of these SLR securities are in ‘Held-to- Maturity' (HTM) category, while some are ‘Available for Sale' (AFS). The Bank is also a primary dealer for Government Securities. As a part of this business, your Bank holds fixed income securities as ‘Held for Trading' (HFT).

In the year under review, your Bank continued to be a significant participant in the domestic exchange and interest rate markets. It also capitalised on falling bond yields to book profits and is now looking at tapping opportunities arising out of the liberalisation in the foreign exchange and interest rate markets.

B. International Business

During the year, your Bank stayed on course to cater to NRI clients and deepen its product and service proposition. Your Bank has global footprints by way of representative offices and branches in countries like Bahrain, Hong Kong, the UAE and Kenya. It also has a presence in International Financial Service Centre (IFSC) at GIFT City in Gandhinagar, Gujarat. In addition, two existing representative offices of erstwhile HDFC Limited in London and Singapore have become representative offices of the Bank as per the composite scheme of amalgamation between HDFC Bank Limited and HDFC Limited. These offices are for providing loans-related services for availing housing loans in India and for the purchase of properties in India.

The Bank's product strategy in International Markets is customer centric and it has products to cater to client needs across asset classes. GIFT City branch offers products such as trade credits, foreign currency term loans (including external commercial borrowings). It has gradually widening the product offerings to cater to the needs of Resident and Non-Resident clients and capitalise on the growth in the financial centre.

As on March 31, 2024, the Balance Sheet size of International Business was US $ 9.06 billion. Advances constituted 1.55% of the Bank's advances. The Total Income contributed by Overseas Branches constituted 1.51% of the Bank's Total Income for the year.

C. Government, Institutional Business and StartUps

It has been another year of steady progress for Government, Institutional Business and Start-Ups within your Bank. Some of the key highlights include:

1.    Increased focus on the retail Government deposits resulted in your Bank acquiring over 15 per cent of the market share in 159 districts.

2.    Your Bank continues to lead in generating Agency Business, ranking among the top three leading Government Agency Banks for collecting Central Government taxes. Substantial market shares were acquired in collections of Direct Tax, GST and Custom Duty as per tax collection data reported through PIB & CGA, GoI.

HDFC Bank's Market Share (approx):

Custom Duty Collections	8%
Goods and Services Tax Collections	16%
Direct Tax Collections	24%

3.    Your Bank facilitated the transfer of funds flowing from the Central Government to various beneficiaries under the aegis of the Centrally Sponsored Schemes, Central Sector Schemes, and the 15^th Finance Commission. The total flows processed grew by 39 per cent YoY.

4.    Your Bank has intensified its efforts to engage with pensioners implementing the following measures:

a.    Enhancing our pension product by introducing new features such as health and cyber insurance coverage for pensioners up to 75 years of age along with providing discounted rates from HDFC ERGO.

b.    In the Financial Year 2023-24, we ensured that 99 per cent of pensioners (our customers) successfully submitted their digital life certificates in the Pension Processing System of the Bank through a hassle-free experience.

5.    This fiscal year, your Bank has expanded its presence in the education sector by successfully onboarding approximately 40 per cent of universities nationwide. Some of the marquee additions include IIM Indore, IIM Nagpur, IIM Amritsar, NIT Mizoram and Assam University. Additionally, we have onboarded notable religious organisations, including Shrinathji Temple -Nathdwara, Shri Badrinath Kedarnath Mandir Samiti, Catholic Mission of Western Bengal, Ramakrishna Mission, Sree Ayyappan Temple Trust, S D B J

Masjid A/C Burhani Qardan Hasana, Punjab Wakf Board and the chain of ISKCON.

6.    Your Bank has received positive customer feedback for its recently launched digital products:

a.    HDFC Bank CollectNow: This omnichannel collection solution seamlessly integrates online and offline payments, setting a new industry standard.

b. FARSight Dashboard: A visualisation tool that provides customers an easy understanding of balances and fund movements across accounts in a multi-level parent child set-up.

7.    Start-Ups: Your Bank has revamped its offering for start-ups under its flagship program StartUp|BuildUp. New offerings introduced in the current financial year include:

a.    A Credit Guarantee Scheme for Start-Ups providing lending opportunities upon meeting specific criteria.

b.    Specialised group health insurance coverage plans designed for Start-Ups with a minimum of 7 employees.

c.    Commercial cards for both personal and professional expenses of founders backed by fixed deposits.

d.    To help Start-Ups be compliant with regulations, your Bank renders value-added services such as provision of legal handbooks and compliance calendars for its customers.

8.    Your Bank signed MoUs with prominent Start-Up ecosystem partners. Most of them are incubators located at educational institutions. Some of the partners are:

a.    Indian Institute of Management, Kozhikode Laboratory for Venturing, Innovation and Entrepreneurship

b.    AIC Jawaharlal Nehru University Foundation for Innovation

c.    AIC Anna University, Chennai

d.    Indian Institute of Technology, Guwahati Technology Incubation Centre

e.    AIC Guru Gobind Singh, Indraprastha University

f.    iNEST Dr. Moopen Medical College

9. Parivartan Startup grants

Your Bank supported 41 incubators associated with reputed academic institutions and 170 StartUps through the 7^th edition of the Parivartan StartUp Grants.

In addition to this, your Bank ran a new track this year of high-touch programmes with five Nodal Government Partnerships, contributing to specific thematic areas:

a.    Reserve Bank Innovation Hub: Identifying/ Developing a Product/Process/Policy to make banking inclusive for People with Disabilities (PWD)

b.    National Skill Development Corporation:

Enhancing the Skill India Digital platform by engaging StartUps in skilling and livelihood sector

c.    Ministry of Food Processing Industries:

Promoting food innovations with specific focus on Millets

d.    Goa Startup Mission: Identifying StartUps that can contribute to sustainability goals of the State of Goa

e.    Niti Aayog (Atal Innovation Mission):

Strategic partnership for access to incubator network

D. Semi-Urban and Rural

The Semi-Urban and Rural (SURU) markets have always been a focus of your Bank's strategy. In the last few years, your Bank has made a renewed push into these markets as rising income levels and aspirations of rural customers are leading to demand for better quality financial products and services. The Bank has been increasing its presence in Semi-Urban and Rural markets to cater to these demands.

Apart from meeting its statutory obligations under PSL (Agri and Allied activities, Small and Marginal Farmers and Weaker Sections), your Bank has been offering a wide range of products on the asset side, such as Auto, Two-Wheeler, Personal, Gold, Light Commercial Vehicle (LCV) and Small Shopkeeper Loans in these markets. Having expanded the rural footprint to more than 2.25 lakh villages, HDFC Bank now plans to increase its coverage in existing villages and deepen the relationships. The Semi-Urban and Rural push has been backed by the Bank's digital strategy. Your Bank's operations in Semi-Urban and Rural locations are explained below:

Agriculture and Allied Activities

Your Bank's assets in Agriculture and Allied activities stood at ' 2,97,609.26 crore as on March 31, 2024.

The Key to HDFC Bank's success in the existing market has been its ability to leverage various opportunities through:

1.    A diverse product range

2.    Faster turnaround time

3.    Distribution strength

4.    Innovative digital solutions

HDFC Bank's extensive product portfolio encompasses pre and post-harvest Crop Loans, Farm Development/Investment Loans, Two-Wheeler Loans, Auto Loans, Tractor Loans, Small Agri Business Loans, Loan Against Gold and more. This comprehensive offering has enabled the Bank to establish a robust presence in rural areas with its asset products. Additionally, it has been a prominent participant in the Agri Infrastructure Fund Scheme, consistently achieving allocated targets set by the Government in recent campaigns.

HDFC Bank is increasingly involved in facilitating various Government/Regulatory Schemes to other Non-crop Segments, including Agri-allied and Small Agri-Business Enterprises, as well as Rural MSMEs. A unique business model encompassing a wide variety of products and services driven by a relationship management approach ensures suitable solutions as well as financial literacy to farmers. The Bank has tailored a range of crop and geography-specific products to align with harvest cycles and address the specific needs of farmers across diverse Agro-climatic zones. This customercentric approach has transformed the rural banking services, enabling the delivery of personalised offerings to meet the evolving needs of rural customers effectively.

 

Pradhan Mantri Formalisation of Food and Micro Enterprises (PMFME):

Your Bank is actively implementing the scheme and passing the benefits to all eligible borrowers in the food processing sector.

In the year under review, loans worth ' 893 crore were sanctioned for 5,109 projects and ' 762 crore has been disbursed for 4,517 projects.

Considering the significant performance under the scheme, your Bank has been adjudged as ‘Outstanding Performer’ under PMFME and felicitated by the Honourable President of India. Overall, your Bank secured the second position in terms of total loans sanctioned under the scheme.

Other Agri schemes, where your Bank has significantly contributed include Agri Marketing Infrastructure Fund (AMIF), Animal Husbandry Infrastructure Fund (AHIDF), Credit Guarantee Fund for Micro Units, National Livestock Mission (NLM) as well as state-specific Government schemes.

To address high volume and low-value ticket loans in AgriBusiness with a digital optimisation strategy, your Bank plans to onboard AgriTech-BCs with differentiated business models. These BCs will help source and service small and marginal farmers.

Funding Small and Marginal Farmers (SMFs):

Your Bank views lending to the agriculture sector, including to small and marginal farmers, as a huge opportunity and not just a regulatory mandate to meet priority sector lending requirements. The Bank has leveraged its extensive knowledge of rural customers to create as well as deliver products and services at affordable price points and with a quick turnaround time. This has enabled HDFC Bank to establish a strong footprint in the rural geographies which it has now leveraged to increase its penetration of liability products.

In the Financial Year 2022-23, your Bank serviced customers in 1,65,000 villages. It reached out to the villages through a bouquet of agriculture products. Through a plethora of interventions, the number of villages grew to over 2,25,000 in the Financial Year 2023-24. Your Bank has put in place a strategy to further penetrate these villages and add more customers through variety of products for farmer financing.

 

Products such as post-harvest cash credit and warehouse receipt financing facilitate faster cash flows to farmers, while credit is also extended for Allied Agricultural Activities such as Dairy, Pisciculture, and Sericulture. Moreover, HDFC Bank's Commercial and Rural Banking Group (CRB) plays a pivotal role in product development, planning, and monitoring strategies for growth. The Bank's targeted branch expansion in SURU regions coupled with digital interventions aims to create a superior customer experience and position HDFC Bank as a future-ready institution.

Participation in Government Schemes

As a part of Atmanirbhar Bharat Abhiyan, the Government of India has announced several schemes / enablers across several sectors, particularly in the Agriculture sector. Your Bank is implementing almost all such initiatives / schemes targeting multiple stakeholders in the Agri ecosystem.

Agriculture Infrastructure Fund (AIF) Scheme: Through this scheme, the Bank is offering medium to long-term debt for investment in viable projects pertaining to post-harvest management and infrastructure development like construction of warehouses/silos. As of March 31, 2024, under the AIF scheme, your Bank has sanctioned ' 4,368 crore covering 5,330 projects and disbursed ' 2,800 crore covering 4,130 projects. During the year under review, your Bank has sanctioned ' 2,200 crore for 3,125 projects and disbursed '1,664 crore for 2,685 projects.

•    The Project Monitoring Unit, AIF, Ministry of Agriculture and Farmer Welfare has set specific targets through various campaigns. Your Bank secured second position by approving ' 442 crore for 744 projects in AIF BHARAT Campaign conducted between 15^th July and 31^st August 2023.

•    In the AIF Backlog Blasters Campaign conducted between 1^st November to 18^th November 2023 with a focus on clearing pending applications, your Bank has secured top position amongst all Scheduled Commercial Banks (SCBs) by clearing 806 applications.

•    HDFC Bank has secured third position by approving ' 757 crore for 863 projects during AIF RAPID Campaign conducted between 15^th January and 29^th February 2024.

HDFC Bank has financed and supported 35 lakh Small and Marginal Farmers. This was achieved through a strategy to engage closely with small and marginal farmers through customised agriculture loans. Leveraging the Government schemes, it has launched various secured / unsecured loan products including Loan Against Gold as security targeting small and marginal farmers in Agri and Allied segments.

Farmer Producer Organisations (FPOs):

For agriculture productivity and incomes to grow, aggregation of farm holdings in the form of FPOs is the key strategy in doubling farmers' income. Leveraging the Government scheme for formation and promotion of 10,000 new FPOs (Credit guarantee is available from NABARD/CGTMSE), your Bank has funded eligible FPOs for working capital and term loan requirements. As of March 31, 2024, your Bank was able to reach 206 FPOs covering about one lakh small and marginal farmers.

Dairy:

Dairy is the largest segment in the agriculture economy, and keeping this in mind, your Bank has created a separate team of agriculture specialists to cater to this segment. India, boasts of a substantial cattle population of over 30 crore, that offers a promising landscape for Cattle Finance as well as securing liabilities. The country's agriculture sector, particularly the Small and Marginal Farmers (SMF) segment, stands to benefit significantly in this scenario, with over 90 per cent of them falling within this category. Recognizing the potential for growth and financial inclusion, your Bank has initiated a strategic programme named 'Dairy Ki Pheri'. This initiative is designed to empower milkmen by facilitating their evolution from mere milk vendors to dairy entrepreneurs - transforming them from Doodh Walas to Doodh Lalas.

During the reporting period, HDFC Bank disbursed a total equivalent to ' 1,531 crore to 43,243 cases. Additionally, 19,000 cases were under active processing. This surge in disbursement is noteworthy as it marks a significant increase from the average of 1,500 cases per month over the past 8 months, nearly tripling the previous rate. The disbursement primarily focused on small and marginal farmer loans.

In Financial Year 2023-24, the Bank has disbursed an amount of ' 8,786 crore to 2,47,533 farmers as Cattle finance.

Digital Interventions

Some of the digital interventions made by your bank include: Digitising Milk Procurement:

This initiative brings transparency in the milk procurement and payment process, which benefits both farmers and dairy societies. Multi-function Terminals (MFTs), popularly known as Milk-to-Money ATMs, are deployed in dairy societies. The MFTs link the milk procurement system of the dairy society to the farmer's account to enable faster payments. MFTs have cash dispensers that function as standard ATMs. Payments are credited without the hassles of cash distribution. Further, this process creates a credit history which can then be used for accessing bank credit. Apart from dairy and cattle loans, customers gain access to the Bank's products including digital offerings such as 10 Second Personal Loan, Kisan Credit Card and Bill Pay. So far, the Bank has digitised payments at over 357 milk cooperatives across two states, benefiting more than 2.6 lakh dairy farmers. The Dairy business witnessed 142 per cent year-on-year growth in disbursements and 121 per cent in the book.

Gold Loans:

Your Bank is making inroads into a market dominated by the unorganized sector, moneylenders and pawn brokers. The Bank is keen on making the gold loan facility available across the length and breadth of the country. As on March 31, 2024, the Bank is offering gold loans through 4,604 branches, with 45 per cent of these branches in Semi-Urban and Rural locations.

Your Bank is implementing its blueprint of making gold loans available in most of its branches and thereby taking this product within the reach of otherwise untapped customer segments.

Social Initiatives in Farm Sector

The farm sector faces threats arising out of climate change as evident from the growing number of extreme weather events. In addition, factors like soil health, input quality (seeds and fertilizers), water availability, and Government policy have significant impact, along with price realisations and storage facilities. All this has an impact on farm yield and income.

Given the vulnerabilities, it is critical to strengthen climate resilience and adaptability of the agri-food sector. In this context, your Bank has launched a variety of initiatives such as Holistic Rural Development Programme (HRDP), Crop Residue

Management Project and many others. Within regulatory guidelines, your Bank has also been providing relief to the impacted farmers. It also has put in place systems designed to enable Direct Benefit Transfers in a time-bound manner.

Lending to the agriculture sector, including to small and marginal farmers, is a regulatory mandate as part of priority sector lending requirements. The Bank has leveraged its extensive knowledge of rural customers to create as well as deliver products and services at affordable price points and with a quick turnaround time. This has enabled the Bank to establish a strong footprint in the rural geographies, which it has now leveraged to increase its penetration of liability products. Further, your Bank has been working with a segment-specific approach like funding to horticulture clusters, supply chain finance, agri business, MSMEs and dairy farmers. It also continues to engage closely with farmers to mitigate risks and protect portfolio quality.

Micro, Small and Medium Enterprises (MSME)

The MSME sector serves as an important engine for economic growth and is one of the largest employers in the economy. As on March 31, 2024, your Bank's assets in the MSME segment stood at ' 5,03,598.23 crore. The Micro Enterprises assets alone stood at ' 1,69,448 crore.

The Union Government and the Reserve Bank of India (RBI) have been providing support for lending to MSME segment on an ongoing basis. They had provided special support to the MSME sector during the pandemic through various schemes, such as Interest Moratorium, ECLGS, ECLGS extension and COVID support loans. The Government has also launched a revamped CGTMSE scheme with increased limit threshold for guarantee cover and reduction of guarantee fee. Many other schemes like Credit Guarantee to Start Ups (CGSS) and Extension of interest subvention have been rolled out.

Your bank emerged as the largest contributor to CGTMSE in FY24, supporting the MSME sector with guarantee-covered credit facilities. This has further supported the growth of MSME loans which have shown a year-on-year growth of 21.4 per cent.

The pace of digitalisation among MSMEs has accelerated, which has helped to speed up the pace of disbursement and increase transparency in the sector. Customers can now apply online and submit required documents digitally and they can also execute post-sanction agreements digitally to avail of facilities quickly with straight-through disbursement. The Government's digitalisation push, the adoption of GST and reforms in return filings, such as income tax, have made it easier to access customer cash flow and financial data, which can be used to support decision making and portfolio monitoring. Your Bank's SME portal continues to offer ad hoc approvals and pre-approved Temporary Overdrafts (TODs) on a Straight Through Processing (STP) basis to existing customers. They can request a top-up of loans and submit the required documents online. The SME portal also allows customers to access your Bank's services related to sanctioned credit facilities 24/7 from anywhere. Customers can download various certificates and statements as needed on an ongoing basis.

On the trade side, your Bank focuses on customer engagement to increase the penetration of Trade on Net applications. Trade on Net is a complete enterprise trade solution for customers engaged in domestic and foreign trade. It enables them to initiate and track requests online seamlessly, reducing time and costs.

Taking Banking to the Unbanked

As a responsible banker, one of our commitments is extending banking solutions to the most remote and farthest regions of the country empowering under-banked communities with access to formal financial channels. Our widespread physical network and a comprehensive suite of digital banking solutions ensure broad coverage across India. 52 per cent of our branches are situated in semi-urban and rural areas. Our banking solutions offer convenient last-mile access through mobile applications like BHIM, UPI, USSD, Scan and Pay, as well as Aadhaar and RuPay-enabled Micro-ATMs.

 

Sustainable Livelihood Initiative

Our Sustainable Livelihood Initiative (SLI) is a holistic approach that aims to deliver financial support to that section of the population who lack access to formal banking services.

For details click on https://www.hdfcbank.com/personal/ borrow/other-loans/sustainable-livelihood-initiative

E.    Environmental Sustainability

Sustainability is one of the core values of the Bank.

The details are covered in pages 88 to 119.

F.    Business Enablers 1. People

People is one of the core values of the Bank. Through continuous reinforcement and alignment with our strategic objectives, the HDFC Bank Culture Framework ensures that over 2,13,000 employees are equipped to succeed

 

in an ever-evolving landscape. Our supervisory behaviour framework-Nurture, Care, Collaborate (NCC) -empowers our workforce with the knowledge and guidance needed to lead transformation. We focus on acquiring diverse talent and prioritise their well-being, safety, and development, fostering an inclusive environment where they can succeed and grow.

For details please refer to pages: 138 to 157.

2. Transforming Banking for the Future and Technology Absorption

In the ever-evolving landscape of banking, HDFC Bank remains steadfast in its commitment to take forward its customer-centric approach. Given below are the five pillars.

1.    Journeys: Our quest for excellence begins with prioritising seamless and intuitive interactions. By harmonising digital and physical channels, we craft journeys that go beyond mere transactions, fostering lasting relationships with customers.

2.    Channels: Recognizing the unique preferences and needs of our diverse clientele, we are offering a spectrum of banking channels, ensuring accessibility and convenience for all.

3.    Core: Our core banking infrastructure has undergone a major transformation, instilling it with the agility and scalability necessary to navigate the winds of change.

4.    Data: We are leveraging advanced analytics to cater to the intricate needs of our diverse customers. This is allowing us to anticipate and fulfill their needs with bespoke solutions.

5.    Security: Upholding the highest standards of security, we fortify our defences to safeguard the sanctity of customer trust, brick by digital brick.

These strategic pillars serve as beacons, guiding our journey towards sustainable growth and value creation for our esteemed shareholders. With continued focus towards providing tailored digital banking solutions, HDFC Bank has reinforced its technology and innovative prowess by undertaking key initiatives such as:

PayZapp 2.0: Building upon the success of its impactful launch, PayZapp 2.0 has continued its growth to become one of the fastest growing payments app providing customers with a seamless and intuitive user experience while ensuring enhanced security features. Other highlights include:

1.    It has reached the milestone of 75 lakh registrations

in FY24

2.    65 per cent monthly active users

3.    Average daily volume of 4.5 lakh transactions

SmartHub Vyapar: This is a vital part of our offering, designed to empower merchants. It offers seamless digital solutions for their everyday needs, including instant onboarding for customers, interoperable payments, and remote transactions. Additionally, its marketing tool helps merchants amplify their offers on social media reaching both existing and potential

customers. As on March 31, 2024, SmartHub Vyapar is a 16 lakh merchant community with over 70,000 new merchants being added every month. It has processed transaction volumes totaling ' 2.28 lakh crore in FY24.

HDFC Bank One (Customer Experience Hub): Our AI /

ML driven platform and conversational bot, has transformed our contact centre operations by centralising and streamlining customer interactions. Its expansion across India covers various services like PhoneBanking, IVR self-service, virtual relationship management teams, and tele-sales. With an omnichannel approach, including WhatsApp chat banking, SMS banking, IVR, and agent assisted service, it ensures a seamless customer experience. HDFC Bank One has powered over 3.2 crore customer engagements with monthly interactions touching 1.9 crore unique customers. Notably, it has reduced resolution time for email channels by 50 per cent.

Xpress Car Loan (XCL): Xpress Car Loan continues to excel in seamless digital loan disbursals processing over 32 per cent of car loans. Offering zero paper, zero-touch processing in just 30 minutes, it leads as India's largest digital car loan platform. In the fourth quarter of the Financial Year 2023-24, over 40 per cent of all car loans were digital, averaging monthly disbursements of over ' 1,020 crore.

SmartWealth: Introduced in January 2024, SmartWealth is a user-centric Do-It-Yourself (DIY) investment mobile application, targeting the Emerging Affluent and Affluent segments, with a strategic focus on Tier 2 & 3 markets. It offers users the capability to aggregate and view their external and HDFC Bank account balances, along with a spend analyzer feature via the Account Aggregator platform. The SmartWealth App has been downloaded 1,14,921 times, with 68,249 registered customers and 27,530 active SIPs. As on March 31, 2024, it manages Mutual Funds Assets Under Management (AUM) worth ' 26.92 crore and has enabled customers to upload held-away mutual funds with AUM totalling ' 3,561 crore via the Consolidated Account Statement (CAS) feature.

Acquisition & Servicing Journeys: In our ongoing digitalising efforts, we have advanced significantly by introducing new customer journeys covering diverse offerings like joint accounts, pension accounts and hybrid salary accounts for corporates. We have also expanded our digital service offerings with 10 new service journeys now covering nearly 87 per cent of services. Looking ahead we plan to roll out unified acquisitions, embedded insurance, Gold Loan journeys, and bundled Personal Loan and Insurance with the Home Loan journey.

Tradeflow: TradeFlow, a cloud-based centralised platform continues to provide enhanced reliability and usability for end-users. The application integrates with a multitude of applications and employs various automations, including a dynamic MIS, an informative dashboard, a single view of all dependencies, and peripheral application integration. Between March 2023 and March 2024, the platform expanded to 280+ locations, processing 9,000+ transactions daily and saving 25 per cent time per transaction. It offers a single integrated platform for trade users, ensuring consistency and efficiency.

Corporate Banking exchange (CBX): CBX, our unified corporate banking portal, offers seamless NetBanking for corporates via mobile and web. It improves efficiency and user satisfaction with features like customised narration and enhanced authorisation levels. CBX serves a growing customer base processing over 1.15 crore transactions per month.

BizXpress: Rolled out to select customers, BizXpress stands as our digital portal platform designed for MSME / SME customers. It is a digital native integrated solution, offering a comprehensive suite of banking and value-added services for the SME segment, providing a seamless one-stop banking solution.

Dukandar Dhamaka: Dukandar Dhamaka offers affordable credit solutions for small businesses, helping them seize growth opportunities and manage cash flow challenges. The tailored overdraft (OD) facility allows shopkeepers to access up to ' 10 lakh without GST and up to ' 25 lakh with GST. This initiative sourced over ' 500 crore in business in the fourth quarter of FY24, empowering shopkeepers across India.

Commercial Loan Origination: HDFC Bank enabled digital sourcing for all working capital segments of Emerging Enterprises Group (EEG) and Business Banking Group (BBG) customers. Integrated with the state-of-the-art business rule engine, this initiative facilitates in-principle approvals for customers within just 30 minutes, streamlining the lending process and empowering businesses to seize opportunities swiftly and efficiently.

Smart Saathi: This is our digital distribution platform to connect Business Correspondents (BCs) and Business Facilitators (BFs) with the Bank. This initiative marks a significant milestone in the journey towards providing innovative solutions tailored to the evolving needs of customers. By leveraging this network of Business Correspondents and Facilitators, the Bank aims to enhance financial inclusion by extending banking products and services to the last mile.

New Branch Rollout and Other Initiatives: Technology played a crucial role in the successful rollout of over 900 branches in the Financial Year 2023-24 ensuring each site had the necessary infrastructure and systems through meticulous planning and execution. Internet breakout has been implemented for these branches, enhancing branch users' access to internet applications using SWAN and Zscaler Internet Access (ZIA).

Zero Trust Architecture: We leveraged a Secure Access Service Edge partner's advanced zero trust technology to seamlessly navigate through the merger, ensuring network harmony and eliminating conflicts. Leveraging their advanced technologies, we've reduced dependency on Multiprotocol Label Switching (MPLS) across branches, enhancing operational efficiency and agility. This has strengthened our security measures and boosted performance.

Safeguarding Data: The Bank is fully committed to enhancing its cyber security measures as part of its technological advancement strategy. Key endeavours include establishing a cutting-edge Cyber Security Operations Center (CSOC) to anticipate security threats and manage incidents proactively. Additionally, the implementation of Security Orchestration, Automation and Response (SOAR) aims to streamline incident response processes. Network micro-segmentation is being introduced to bolster protection against ransomware while next-generation Security Incident Event Management (SIEM) systems with AI and ML capabilities are being deployed for heightened security monitoring. The Bank also conducts round-the-clock defacement monitoring, vulnerability management, and Anti-DDoS measures. Furthermore, anti-Advanced Persistence Threat (Anti-APT) systems are being employed on all endpoints, alongside the adoption of a zero-trust architecture approach and the implementation of Data Loss Prevention (DLP) solutions. Lastly, data encryption on all laptops and the integration of Domain-based Message Authentication is being enforced to ensure robust email security.

Innovating for Tomorrow

Digital Rupee: Central Bank Digital Currency (CBDC), or Digital Rupee, is the secure, faster, and more inclusive version of the Indian Rupee, ensuring privacy in payments. It fosters financial inclusion, reduces operational costs, and enhances resilience and efficiency in payment systems. With upcoming programmability and offline features, CBDC could revolutionise the payments industry. Currently, HDFC Bank has over 5 lakh customers registered on the app and transacting ' 169 crore annually through Digital Rupee.

UPI Autopay: UPI Autopay enables users to automate recurring payments covering various needs like bill payments, school fees, OTT subscriptions, insurance premium, EMIs, and mutual funds. It results in timely and reliable payments, helping users avoid late fees and disruptions. This plays a crucial role in customer retention, benefiting merchants. HDFC Bank has onboarded top merchants across industries, collecting ' 2,100 crore in monthly recurring payments through this feature.

UPI Secondary ASBA: UPI Secondary ASBA, also known as Single Block Multiple Debit, enables investors to block funds in their bank accounts for a specific purchase of financial instruments. The amount is debited only upon successful settlement by the clearing corporation (both NCL and ICCL). This mechanism, operating on the UPI platform ensures simple, secure and convenient transactions for users. HDFC Bank is a pioneer in offering the UPI Secondary ASBA feature.

Generative AI: In our pursuit of innovation, HDFC Bank is leveraging Generative AI to enhance operations and deliver ground breaking solutions. Highlights include:

•    Internal BETA FAQ Bot: Provides efficient response to customer queries.

•    CAMs Covenant Extraction POC: Successfully extracts critical information from financial documents.

•    Branch Executive Co-Pilot Prototype: Empowers branch executives to provide better customer service by addressing queries and reducing dependencies on central units for improved efficiency.

Lastly in our digital transformation journey we have prioritised seamless experiences through our Factory approach, cocreating Tech IP with Agile principles and cloudification. Our API Factory is building scalable architectures for rapid integrations, enabling embedded banking for richer customer experiences.

In the current financial year, the Bank is gearing up for an array of ground-breaking initiatives set to redefine the banking landscape. From the establishment of a robust data lake to fuel data-driven insights, to the expansion of embedded banking solutions for seamless financial experiences, we are committed to pushing the boundaries of innovation. This is being done through launches like credit cards crafted to meet the needs of the dynamic young demographic plus initiatives such as modernised platforms and architectures for Gold Loan, Consumer Durable Loan, and Sustainable Livelihood Initiative. Our next-gen NetBanking and MobileBanking experiences, aim to reimagine enhanced digital experiences backed by cutting-edge technology and security solutions.

Cybersecurity

Cybersecurity is at the heart of the technology transformation journey and the Bank is deeply committed to ensuring robust cyber security with substantial advancements being made to further fortify its infrastructure and applications. Key initiatives in this regard include:

•    Significant advancements to consolidate cyber security through initiatives such as the foundation of a next-generation Cybersecurity Operations Center (CSOC) for predictive security and incident management, introduction of Security Orchestration, Automation and Response (SOAR) to reduce incident response times and network micro-segmentation for better control, visibility and preparedness against ransomware.

•    The initiative and approach to leverage AI and ML as an entire suite to proactively detect and respond to threats is managed through the deployment of next generation Security Incident Event Management (SIEM) solution augmented by Artificial Intelligence (AI) and Machine Learning (ML) capabilities along with strong User Entity Behavioral Analysis (UEBA) functionalities and built-in threat modelling.

•    24/7 defacement monitoring and vulnerability management of the bank's internet properties, antivirus / malware program, patch management, penetration testing, etc. for minimising the surface area for cyber security attacks and fortifying the Bank's assets like infrastructure and applications.

•    Dedicated program for Attack Surface Management (ASM) that includes continuous attack surface discovery and probing for weaknesses on the discovered assets. There has been a continuous effort to ensure that all significant weaknesses are remediated within a reasonable timeframe.

•    Adopting a zero-trust architecture approach to ensure protection against cyber-attacks.

•    Implementation of Anti-Advanced Persistence Threat (Anti-APT) system agent on all endpoints in the Bank to protect from zero-day malware attacks. All network elements such as email, web as well as endpoint computers are protected by the anti-APT system.

•    Enterprise solutions such as Data Loss Prevention (DLP) to monitor sensitive data stored, transmitted and shared by users, and to prevent and detect data breaches. All endpoints have proxy agent configured to ensure that only authorised websites are accessed. All outgoing e-mails are monitored through DLP solution.

•    Laptop Encryption: Data encryption ensures that business-critical and sensitive data is not misplaced, thereby preventing any reputational damage and curtailing monetary losses. Hard disk encryption is implemented on all laptops.

•    Implementation of Domain-based Message Authentication, Reporting and Conformance (DMARC) system for protecting the Bank's domain from unauthorized use, commonly known as ‘email spoofing'.

Technology related challenges over the past few years have only made the Bank's resolve stronger to consolidate and fortify its technology environment. Focused technology / digital investments and programs in technology are pivotal to the Bank in the new age of digital banking and experiences for its customers.

Service Quality Initiatives and Grievance Redressal

Customer Focus is one of the five core values of the Bank. Given a highly competitive business environment, especially with diverse lines of businesses, we continuously strive to enhance customer experience. Delivering exceptional product quality and customer service delivery is a prerequisite for sustained growth. The Bank strives to achieve this by seeking customer feedback, benchmarking with best-in-class business entities and implementing customer-centric improvements. We have adopted a three-step strategy regarding Customer Service -Define, Measure and Improve.

HDFC Bank has adopted a multi-pronged approach to provide an omnichannel experience to its customers. On the one hand, it has traditional touchpoints like Branches, Email Care and PhoneBanking. On the other hand, it has state-of-the-art platforms like NetBanking, MobileBanking, WhatsaApp Banking, the chatbot Eva and the bank's exclusive social care handles. The Bank also has a Virtual Relationship Manager (VRM) programme to cater to various financial needs in a personalised manner.

Customer service performance and grievance redressal are regularly assessed at various levels, including Branch Level Customer Service Committees, Standing Committee on Customer Service and Customer Service Committee of the Board. HDFC Bank has implemented robust processes to monitor and measure service quality levels across touchpoints, including at product and process level, through the efforts of the Quality Initiatives Group.

The Service Quality team conducts regular reviews across various products, processes and channels, focusing on improving the customer experience. A unique Service Quality Index (SQI) has been developed to measure the performance of key customer facing channels based on critical customer service parameters. This SQI enables continuous improvement of initiatives to raise service standards.

One of the basic building blocks of providing acceptable level of customer service is to have an effective Internal Grievance Redressal Mechanism / Framework. HDFC Bank has developed a comprehensive Grievance Redressal Policy, Customer Rights Policy, Customer Compensation Policy, duly approved by the Board, which outline a framework for resolving customer grievances. These policies are accessible to customers through the Bank's website and branch network.

HDFC Bank has created multiple channels for customers to provide feedback and register grievances, facilitating a transparent and accessible system. As a pioneer in innovative financial solutions and digital platforms, it has witnessed an increased utilisation of its digital channels. Keeping customer interest in focus, the Bank has formulated a Board approved Protection Policy which limits the liability of customers in case of unauthorised electronic banking transactions.

This Bank is compliant with the RBI Internal Ombudsman Guidelines. At the apex level, as a part of the Internal Grievance Redressal mechanism, the Bank has appointed seasoned-retired bankers as Internal Ombudsmen to independently review any customer grievance which is partly/wholly rejected by the Bank before the final decision is communicated to the customer.

HDFC Bank is on a journey to measure customer loyalty through a high velocity, closed loop customer feedback system. This customer experience transformation programme helps employees to empathise better with customers and improve turnaround times. Branded as ‘Infinite Smiles', the programme helps establish behaviours and practices that result in customer-centric actions through continuous improvement in products, services, processes and policies.

The Bank remains committed to placing the customer at the centre of its operations. By consistently improving customer experience, adopting an omnichannel approach and implementing robust service quality and grievance redressal mechanisms, it aims to build lasting relationships.

Risk Management and Portfolio Quality

Your Bank's historical focus on Pillar 1 risks including Credit Risk, Market Risk and Operational Risk has been expanded in response to the evolving banking landscape. Liquidity Risk, Climate Risk, Information Technology Risk and Information Security Risk have also emerged as critical considerations. These risks not only impact your Bank's financial strength and operations but also its reputation. To address these concerns, your Bank has established Board-approved risk strategy and policies overseen by the Risk Policy and Monitoring Committee (RPMC). The Committee ensures that frameworks are established for assessing and managing various risks faced by your Bank, systems are developed to relate risk to the Bank's capital level and methods are in place for monitoring compliance with internal risk management policies and processes. The Committee guides the development of policies, procedures and systems for managing risks. It ensures that these are adequate and appropriate to changing business conditions, the structure and needs of your Bank and its risk appetite.

The hallmark of your Bank's risk management function is that it is independent of the business sourcing unit with convergence only at the CEO level.

The gamut of key risks faced by the Bank which are dimensioned and managed include:

•    Credit Risk including Residual Risks

•    Market Risk

•    Operational Risk

•    Interest Rate Risk in the Banking Book

•    Liquidity Risk

•    Intraday Liquidity Risk

•    Intraday Credit Risk

•    Credit Concentration Risk

•    Counterparty Credit Risk

•    Model Risk

•    People Risk

•    Business Risk

•    Strategic Risk

•    Compliance Risk

•    Reputation Risk

•    Technology Risk

•    Third Party Products Risk

•    Group Risk

•    Climate Risk

Credit Risk

Credit Risk is the possibility of losses associated with diminution in the credit quality of borrowers or counterparties. Losses stem from outright default or reduction in portfolio value. Your Bank has a comprehensive credit risk architecture, policies, procedures, and systems for managing credit risk in its retail and wholesale businesses. Wholesale lending is managed on an individual as well as portfolio basis. In contrast, given the granularity of individual exposures, retail lending is managed largely on a portfolio basis across various products and customer segments. Robust front-end and back-end systems are in place to ensure credit quality and minimise default losses. The factors considered while sanctioning retail loans include income, demographics, credit history, loan tenure, and banking behaviour. In addition, multiple credit risk models are developed and used to assess different segments of customers based on portfolio behavior. In wholesale loans, credit risk is managed by capping exposures based on borrower group, industry, credit rating grades and country among others. This is backed by portfolio diversification, stringent credit approval processes, periodic post-disbursement monitoring and remedial measures. Your Bank has ensured strong asset quality through volatile times in the lending environment by stringently adhering to prudent norms and institutionalised processes. Your Bank also has a robust framework for assessing Counterparty Banks, which are reviewed periodically to ensure interbank exposures are within approved appetite.

As on March 31, 2024, your Bank's ratio of Gross NonPerforming Assets (GNPAs) to Gross Advances was 1.24 per cent. Net Non-Performing Assets (Gross Non-Performing Assets Less Specific Loan Loss provisions) was 0.33 per cent of Net Advances.

Your Bank has a conservative and prudent policy for specific provisions on NPAs. Its provision for NPAs is higher than the minimum regulatory requirements and adheres to the regulatory norms for Standard Assets.

 

Digital and Credit Risk

Driven by rapid technological advancements, the banking sector is witnessing the increasing importance of digitalisation as a critical differentiator for customer retention and service delivery. Digital lending has emerged as a convenient and quick method for customers to secure loans with just a few clicks often in minutes, if not seconds. However, addressing the risks associated with digital lending is crucial and your Bank has implemented appropriate measures to manage these risks effectively. Digital loans are sanctioned primarily to your Bank's existing customers. Often, they are customers across multiple products, thus enabling the Bank ready access to their credit history and risk profile. This accessibility facilitates the evaluation of their loan eligibility. Moreover, the credit checks and scores used by your Bank in process-based underwriting are replicated for digital loans. This ensures consistency in the evaluation process.

Market Risk

Market Risk arises primarily from your Bank's statutory reserve management and trading activity in interest rates, equity, and currency market. These risks are managed through a well-defined Board approved Market Risk Policy, Investment Policy, Foreign Exchange Trading Policy, and Derivatives Policy that caps risk in different trading desks or various securities through trading risk limits / triggers. The risk measures include position limits, tenor restrictions, sensitivity limits, namely, PV01, Modified Duration of Hold to Maturity Portfolio and Option Greeks, Value-at-Risk (VaR) Limit, Stop Loss Trigger Level (SLTL), Scenario-based P&L Triggers, Potential Loss Trigger Level (PLTL) and are monitored on an end-of-day basis. In addition, forex open positions, currency option delta, and interest rate sensitivity limits are computed and monitored on an intraday basis. This is supplemented by a Board-approved stress testing policy and framework that simulates various market risk scenarios to measure losses and initiate remedial measures. Your Bank's Market Risk capital charge is computed daily using the Standardised Measurement Method applying the regulatory factors.

Liquidity Risk

Liquidity risk is the risk that the Bank may not be able to meet its financial obligations as they fall due without incurring unacceptable losses. Your Bank's liquidity and interest rate risk management framework is spelt out through a well-defined Board approved Asset Liability Management Policy. As part of this process, your Bank has established various Board-approved limits for liquidity and interest rate risks in

the banking book. The Asset Liability Committee (ALCO) is a decision-making unit responsible for implementing the liquidity and interest rate risk management strategy of the Bank in line with its risk management objectives and ensures adherence to the risk tolerance / limits set by the Board. ALCO reviews the policy's implementation and monitoring of limits. While the maturity gap, Basel III ratios and stock ratio limits help manage liquidity risk, Net Interest Income impact and market value of equity (MVE) impact help mitigate interest rate risk in the banking book. This is reinforced by a comprehensive Board-approved stress testing programme covering both liquidity and interest rate risk.

Your Bank conducts various studies to assess the behavioural pattern of non-contractual assets and liabilities and embedded options available to customers, which are used while managing maturity gaps and repricing risk. Further, your Bank has the necessary framework to manage intraday liquidity risk.

The Liquidity Coverage Ratio (LCR) is one of the Basel Committee's key reforms to develop a more resilient banking sector. The LCR, a global standard, is also used to measure your Bank's liquidity position. LCR seeks to ensure that the Bank has an adequate stock of unencumbered High-Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs under a 30-day calendar liquidity stress scenario. The LCR helps in improving the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spill over from the financial sector to the real economy. Based on Basel III norms, your Bank's average LCR stood at 117.35 per cent on a consolidated basis for financial year 2023-24 as against the regulatory threshold at 100 per cent.

The Net Stable Funding Ratio (NSFR), a key liquidity risk measure under BCBS liquidity standards, is also used to measure your Bank's liquidity position. The NSFR seeks to ensure that your Bank maintains a stable funding profile in relation to the composition of its assets and off-balance sheet activities. The NSFR promotes resilience over a longer-term time horizon by requiring banks to fund their activities with

more stable sources of funding on an ongoing basis. The RBI guidelines stipulated a minimum NSFR requirement of 100 per cent at a consolidated level and your Bank has maintained the NSFR well above 100 per cent since its implementation. Based on guidelines issued by RBI, your Bank's NSFR stood at 120.81 per cent on a consolidated basis March 31,2024.

Operational Risk

This is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. It also includes risk of loss due to legal risk but excludes strategic and reputational risk.

Given below is a detailed explanation under four different heads: Framework and Process, Internal Control, Information Technology and Information Security Practices and Fraud Monitoring and Control.

A. Framework and Process

To manage Operational Risks, your Bank has in place a comprehensive Operational Risk Management Framework, whose implementation is supervised by the Operational Risk Management Committee (ORMC) and reviewed by the RPMC of the Board. An independent Operational Risk Management Department (ORMD) implements the framework. Under the framework, the Bank has three lines of defence. The first line of defence is the business line (including support and operations).

The first line is primarily responsible for developing risk mitigation strategies in managing operational risk for their respective units.

The second line of defence is the ORMD, which is responsible for implementing the operational risk management framework across the Bank. It designs and develops tools required for implementing the framework including policies and processes, guidelines towards implementation and maintenance of the framework. In order to achieve the aforesaid objective pertaining to operational risk management framework, the ORMC guides and oversees the functioning, implementation, and maintenance of operational risk management activities of Bank, with special focus on:

• Identification and assessment of risks across the Bank through the Risk and Control Self-Assessment (RCSA) and Scenario analysis

•    Measurement of Operational Risk based on the actual loss data

•    Monitoring of risk through Key Risk Indicators (KRI)

•    Management and reporting through KRI, RCSA and operational risk losses of the Bank

Internal Audit is the third line of defence. The team reviews the effectiveness of governance, risk management and internal controls within your Bank.

B.    Internal Control

Your Bank has implemented sound internal control practices across all processes, units and functions. It has well laid down policies and processes for the management of its day-to-day activities. Your Bank follows established, well-designed controls, which include traditional four eye principles, effective segregation of business and support functions, segregation of duties, call back processes, reconciliation, exception reporting and periodic MIS. Specialised risk control units function in risk- prone products/ functions to minimise operational risk. Controls are tested as part of the SOX control testing framework.

C.    Information Technology and Information Security Practices

Your Bank operates in a highly automated environment and makes use of the latest technologies available on cloud or on Premises Data Centres to support various business segments. With the advent of new technology tools and increased sophistication, your Bank has improved its efficiency, reduced operational complexities, aided decision making and enhanced the accessibility of products and services. This results in various risks such as those associated with the use, ownership, operation, redundancy, involvement, influence, and adoption of IT within an enterprise, as well as business disruption due to technological failures. Additionally, it can lead to risks related to information assets, data security, integrity, reliability and availability, among others. Your Bank has put in place a governance framework, Information Security Practices, Business Continuity Plan, Disaster Recovery (DR) resiliency, Security Enhancements, Public Cloud and Cloud Native Services Adoption and Enhanced Automated Monitoring mechanisms to mitigate Information Technology and Information Security-related risks.

The three lines of defence approach is adopted for enterprise-wide Technology Risk management. The first line of defence holds primary responsibility of managing the risk and ensuring proper controls are in place.

The second line of defence defines policies, frameworks and controls. Information Technology Risk function and Information Security Group addresses technology and information security related risks. A well-documented Board-approved information security policy and cyber security policy are in place.

Your Bank has a robust Business Continuity and Disaster Recovery plan that is periodically tested to ensure that it can meet any operational contingencies. Further, there is a well-documented crisis management plan in place to address the strategic issues of a crisis impacting the Bank and to direct and communicate the corporate response to the crisis including cyber crisis. In addition, employees periodically undergo mandatory business continuity awareness training and sensitisation exercises on a periodic basis.

For details on Business Continuity, Information and Cybersecurity Practices and Data Privacy Measures, please refer to pages 82 -87, 235 and 241.

An independent assurance team within Internal Audit acts as a third line of defence that provides assurance on the management of IT-related risks.

D. Fraud Monitoring and Control

Your Bank has put in place a Whistle Blower and Vigilance Policy and a central vigilance team that oversees the implementation of fraud prevention measures. Frauds are investigated to identify the root cause and relevant corrective steps are recommended to prevent recurrence.

Fraud Monitoring committees at the senior management and Board level also deliberate on high value fraud events and advise preventive actions. Periodic reports are submitted to the Board and senior management committees.

Compliance Risk

Compliance Risk is defined as the risk of impairment of your Bank's integrity, leading to damage to its reputation,

legal or regulatory sanctions, or financial loss, as a result of a failure (or perceived failure) to comply with applicable laws, regulations, and standards. Your Bank has a Compliance Policy to ensure the highest standards of compliance. A dedicated team of subject matter experts in the Compliance Department works with business, support and operations teams to ensure active Compliance Risk management and monitoring. The team also provides advisory services on regulatory matters. The focus is on identifying and reducing risk by rigorously testing products and also putting in place robust internal policies. Products that adhere to regulatory norms are tested after rollout and shortcomings, if any, are fully addressed till the product stabilises. Internal policies are reviewed and updated periodically as per agreed frequency or based on market actions or regulatory guidelines/ actions. The compliance team also seeks regular feedback on regulatory compliance from product, business and operation teams through self-certifications and monitoring.

ICAAP

Your Bank has a structured management framework in the Internal Capital Adequacy Assessment Process (ICAAP) for the identification and evaluation of the significance of the risks that the Bank faces, which may have a material adverse impact on its business and financial position. The ICAAP framework is guided by the Board approved ICAAP Policy.

Group Risk

Post merger, the subsidiaries of your Bank have increased manifold from existing two subsidiaries. In order to manage the risk arising from subsidiaries with regards to potential uncertainties or adverse events that can impact the operations, financial stability, reputation of the Group, your Bank has established Group Risk Management function within the Risk Management Group. Your Bank shall have a reasonable oversight on the Risk Management Framework of the group entities on an ongoing basis through Group Risk Management Committee and Council. The Board / Risk Management committees of respective subsidiary shall be driving the day to day risk management in accordance with the requirements of the respective regulator. Stress testing for the group is carried out by integrating the stress tests of the subsidiaries. Similarly, capital adequacy projections

are formulated for the group after incorporating the business / capital plans of the subsidiaries. The Group Risk Management Committee shall report to the Bank's Risk Policy & Monitoring Committee (RPMC).

Model Risk

The use of models invariably presents model risk, which is the potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. The Model Validation Unit (MVU) under Risk Management Group shall be responsible for testing and verifying the accuracy and reliability of models used within the Bank. By establishing a dedicated MVU, your Bank ensures that its models are independently evaluated before implementation and on an ongoing basis. There is an established Enterprise Model Validation Policy (EMVP) which is a centralized, overarching policy whose objective is to provide comprehensive guidance on model risk management across the Bank. The policy defines the roles and responsibilities across stakeholders i.e., Model Owners, Model Users, Model Developers, and the Model Validation Unit (MVU). There is Model Risk Management Committee (MRMC) which is an executive committee to govern the Model Risk Management Framework as defined in the EMV policy. It shall also oversee the development and implementation of EMV policy, governance structure, necessary processes and system are put in place and review the results of the model validation/monitoring on a periodic basis. The MRMC shall report to the Bank's Risk Policy & Monitoring Committee (RPMC).

Climate Risk

The risks from climate change are divided into (i) Physical risk which captures economic losses from acute impacts on account of extreme weather events or long-term chronic impact on environment; and (ii) Transition risks which captures financial asset level losses due to the possible process of adjustment to a low carbon economy.

Your Bank has partnered with an independent reputed global agency for developing a framework to assess climate transition risk at a borrower level for select industries. Additionally, your Bank has taken initiatives to engage in capacity building programs to familiarize the Board and its staff members on the key developments in climate risk assessment, considering this risk is continuously evolving.

Further your bank has formulated its ESG policy and ESG & Climate Change Assessment Framework which is integrated into bank's credit appraisal process.

Stress Testing Framework

Your Bank has implemented a Board approved Stress Testing Policy and Framework which forms an integral part of the Bank's ICAAP. Stress testing involves the use of various techniques to assess your Bank's potential vulnerability to extreme but plausible stressed business conditions. The changes in the levels of Pillar I risks and select Pillar II risks, along with the changes in the on and off-Balance Sheet positions of your Bank are assessed under assumed ‘stress' scenarios and sensitivity factors. The suite of stress scenarios includes topical themes depending on prevailing geopolitical / macroeconomic / sectoral and other trends. The stress testing outcome may be analysed through capital impact and/or identification of vulnerable borrowers depending on the scenario.

Business Continuity Planning (BCP)

Your Bank has a strong BCP programme in place that enables operational resilience and continuity in delivering quality services across various business cycles. With our ISO 22301:2019 certified Business Continuity Programme, we prioritise minimising service disruptions and safeguarding our employees, customers and business during any unforeseen adverse events or circumstances. The Programme is designed in accordance with the guidelines issued by regulatory bodies. Further our programme undergoes regular internal, external and regulatory reviews.

The central Business Continuity Office focuses on strengthening the Bank's preparedness for continuity. Oversight over programme is provided by the Business Continuity Steering Committee, chaired by the Chief Risk Officer. The Business Continuity Procedure outlines clear roles and responsibilities for teams involved in Crisis Management, Business Recovery, Emergency Response, and IT Disaster Recovery, ensuring a coordinated approach.

As a responsible Bank, these steadfast practices have enabled us to continue seamless service delivery to our customers through disruptive events and beyond.

Internal Controls, Audit and Compliance

Your Bank has put in place extensive internal controls and processes that are commensurate with the size and scale of the Bank to mitigate Operational and other allied risks, including centralised operations and ‘segregation of duty' between the front and back-office. The front-office units usually act as customer touchpoints and sales and service outlets while the back-office carries out the entire processing, accounting and settlement of transactions in the Bank's core banking system. The policy framework, definition and monitoring of limits is carried out by various mid-office and risk management functions. The credit sanctioning and debt management units are also segregated and do not have any sales and operations responsibilities.

Your Bank has set up various executive-level committees with participation from various business and control functions that are designed to review and oversee matters pertaining to capital, assets and liabilities, business practices and customer service, operational risk, information security, business continuity planning and internal risk-based supervision among others. The second line of defence functions set standards and lay down policies and procedures by which the business functions manage risks, including compliance with applicable laws, compliance with regulatory guidelines, adherence to operational controls and relevant standards of conduct. At the ground level, your Bank has a mix of

preventive and detective controls implemented through systems and processes, ensuring a robust framework in your Bank to enable correct and complete accounting, identification of outliers (if any) by the management on a timely basis for corrective action and mitigating operational risks.

Your Bank has put in place various preventive controls, including:

a)    Limited and need-based access to systems by users

b)    Dual custody over cash and near-cash items

c)    Segregation of duty in processing of transactions vis-a-vis creation of user IDs

d)    Segregation of duty in processing of transactions vis-a-vis monitoring and review of transactions/ reconciliation

e)    Four eye principle (maker-checker control) for processing of transactions

f)    Stringent password policy

g)    Booking of transactions in core banking system mandates the earmarking of line/limit (fund as well as non-fund based) assigned to the customer

h)    STP processes between core banking system and payment interface systems for transmission of messages

i)    Additional authorisation leg in payment interface systems in applicable cases

j)    Audit logs directly extracted from systems

k)    Empowerment grid

Your Bank also has detective controls in place:

a)    Periodic review of user IDs and its usage logs

b)    Post-transaction monitoring at the back-end by way of call back process (through daily log reports) by an independent person, i.e., to ascertain that entries in the core banking system/messages in payment interface systems are based on valid/authorised transactions and customer requests

i)    Daily tally of cash and near-cash items at end of day

ii)    Reconciliation of Nostro accounts (by an independent team) to ascertain and match-off the Nostro credits and debits (external or internal) regularly to avoid / identify any unreconciled / unmatched entries passing through the system

c)    Reconciliation of all internal / transitory accounts and establishment of responsibility in case of outstanding

d)    Independent and surprise checks periodically by supervisors.

Your Bank has an Internal Audit Department which is responsible for independently evaluating the adequacy and effectiveness of internal controls, risk management, governance systems and processes and is manned by appropriately qualified and experienced personnel.

This department adopts a risk-based audit approach and carries out audits across various businesses i.e., Retail, Wholesale and Treasury (for India and Overseas books), Audit of Operations units, Management and Thematic audits, Information Security audit, Revenue audit, Spot checks and Concurrent audit in order to independently evaluate the adequacy and effectiveness of internal controls on an ongoing basis and proactively recommending enhancements thereof. The Internal Audit Department, during the course of audit, also ascertains the extent of adherence to regulatory guidelines, legal requirements and operational processes and provides timely feedback to the management for corrective actions. A strong oversight on the operations is also kept through off-site monitoring by use of data analytics and automation tools to study trends/patterns to detect outliers (if any) and alert the management for due corrective action, wherever warranted.

The Internal Audit Department also independently reviews your Bank's implementation of Internal Rating Based (IRB)-approach for calculation of capital charge for Credit Risk, the appropriateness of your Bank's ICAAP, as well as evaluates the quality and comprehensiveness of your Bank's disaster recovery and business continuity plans and also carries out management self-assessment of adequacy of the Bank's internal financial controls and operating effectiveness of such controls in terms of Sarbanes Oxley (SOX) Act and Companies Act, 2013. The Internal Audit Department plays an important role in strengthening of the control functions by periodically reviewing their practices and processes as well as recommending enhancements thereof. Additionally, oversight is also kept on the functioning of the subsidiaries, related

 

party transactions and extent of adherence to the licensing conditions of the RBI.

Any new product/process introduced in your Bank is reviewed by Compliance function in order to ensure adherence to regulatory guidelines. The Audit function may, if deemed necessary also proactively recommend improvements in operational processes and service quality for such new products / processes.

To ensure independence, the Internal Audit Function has a reporting line to the Audit Committee of the Board and a dotted line reporting to the Managing Director for administrative purposes.

The Compliance function independently tracks, reviews and ensures compliance with regulatory guidelines and promotes a compliance culture in the Bank.

Your Bank has a comprehensive Know Your Customer (KYC), Anti Money Laundering (AML) and Combating Financing of Terrorism (CFT) policy (based on the RBI guidelines / provisions of the Prevention of Money Laundering Act, 2002) incorporating the key elements of Customer Acceptance Policy, Customer Identification Procedures, Risk Management and Monitoring of Transactions. The policy is subjected to an annual review and is duly approved by the Board.

Your Bank besides having robust controls in place to ensure adherence to the KYC guidelines at the time of account opening also has monitoring process at various stages of the customer lifecycle including a continuous review process in the form of transaction monitoring carried out by a dedicated AML and CFT monitoring team which carries out transaction reviews for identification of suspicious patterns/trends that enables your Bank to further carry out enhanced due diligence (wherever required) and appropriate actions thereafter.

The Audit team and the Compliance team undergo regular training both in-house and external to equip them with the necessary knowhow and expertise to carry out the function.

The Audit Committee of the Board reviews the effectiveness of controls, compliance with regulatory guidelines as also the performance of the Audit and Compliance functions in your Bank and provides direction, wherever deemed fit. The Audit function is also subject to periodic external assurance reviews. Your Bank has always adhered to the highest standards of compliance and has put in place appropriate controls and risk measurement and risk management tools to ensure a robust compliance and governance structure.

HSL's Total Income under Indian Accounting Standards for the year ended March 31, 2024 was ' 2,660.7 crore as against ' 1,891.6 crore in the previous financial year. Net Profit was ' 950.9 crore for the year ended March 31, 2024 as against ' 777.2 crore in the previous financial year. The company has a customer base of 53.82 lakh to whom it offers an exhaustive range of investment and protection products. In the year under review, HSL had 12.14 lakh transacting customers. The focus on digitalisation continued. Notably, 95 per cent of its customers accessed its services digitally, against 92 per cent in the previous year.

In a conscious effort to rationalise the distribution network with greater emphasis on digital offerings, HSL consolidated its existing branches to end with 184 branches across 139 cities / towns at the end of the year. It created digital boarding

 

Performance of Subsidiary Companies

Your Bank has five key subsidiaries, HDB Financial Services Limited (HDBFSL), HDFC Life Insurance Company Limited (HDFC Life), HDFC Asset Management Company Limited (HDFC AMC), HDFC ERGO General Insurance Company Limited (HDFC ERGO) and HDFC Securities Limited (HSL). HDBFSL is a leading NBFC that caters primarily to segments not covered by the Bank while HSL is among India's leading retail broking firms. HDFC Life is a leading, listed, long-term life insurance solutions provider in India. HDFC ERGO offers a complete range of general insurance products. HDFC AMC is Investment Manager to HDFC Mutual Fund, one of the largest mutual funds in the country.

Amongst the Bank's key subsidiaries, HDFC Life Insurance Company Limited and HDFC ERGO General Insurance Company Limited prepare their financial results in accordance with Indian GAAP and other subsidiaries do so in accordance with the notified Indian Accounting Standards (‘Ind-AS').

The detailed financial performance of the companies is given below.

HDFC Securities Limited (HSL)

journeys which led to more than 90 per cent of customers being onboarded digitally.

In the case of Margin Trade Funding (MTF), the Average Book Size during the year was ' 4,855 crore, against the average book size of ' 3,190 crore in the last financial year. The Book Size for the year ended March 31,2024 stands at ' 6,033 crore.

HSL launched its flat price broking app, HDFC SKY in September 2023. HDFC SKY has a one-price slab of ' 20 for both intraday and delivery across segments, MTF at 12 per cent and zero account opening and maintenance charges for the first year.

HDFC SKY is designed to support investors and traders across experience levels to participate seamlessly in the financial markets and achieve their financial goals. The app provides access to various investment and trading offerings, including Indian stocks, ETFs, Mutual Funds, Futures and Options, Currencies, Commodities, IPOs and global equities on a single Fintech platform. Its users are spread across Tier-1, 2 and 3 cities.

The platform is best placed to help its customers with investment and stock recommendations and proprietary research to enable better and informed decision-making.

The Indian stock market witnessed an exceptional rally in the Financial Year 2023-24 marking multiple record highs. It was one of the best performing major markets after Japan's Nikkei. In Financial Year 2023-24, Nifty50 rose 28.6 per cent, while the BSE Sensex was up 24.8 per cent. This remarkable performance can be attributed to robust retail participation and strong Foreign Portfolio Investor (FPI) inflows triggered by buoyant economic growth and healthy corporate earnings. An increase in foreign investments in the Indian stock market provided additional liquidity and drove up stock prices. Indian equities garnered ' 2.08 lakh crore from FIIs in the Financial Year 2023-24. Demat accounts surged to 15.1 crore in March 2024 as compared to 11.4 crore in March 2023.

Realty (up 133 per cent) and Power (up 86 per cent) indices gained the most during the Financial Year 2023-24 followed by Capital Goods and Auto, Energy Indices. FMCG and BANKEX Indices while ending with gains during the year, significantly underperformed compared to other indices. Broader markets outperformed in the Financial Year 2023-24 with the Nifty Midcap 50 up by 59.8 per cent and Nifty Smallcap 50 gaining 71.6 per cent.

As on March 31, 2024, your Bank held 95.1 per cent stake in HSL.

HDB Financial Services Limited (HDBFSL)

HDB Financial Services Limited (HDBFSL) is a subsidiary of HDFC Bank and is a Non-Banking Finance Company (NBFC). HDBFSL has a comprehensive bouquet of products and service offerings that are tailor-made to suit its customers' requirements including first-time borrowers and the underserved segments.

HDBFSL is engaged in the business of lending, fee-based products and BPO services.

The company's Profit After Tax rose by 25.59 percent to ' 2,461 crore as on March 31,2024 compared to ' 1,959 crore as on March 31, 2023. The Total Loan Book stood at ' 90,218 crore as on March 31, 2024 compared to ' 70,031 crore as on March 31, 2023, a growth of 28.8 per cent. The asset quality remained robust, with Gross Non Performing Asset (GNPA) ratio at 1.90 per cent and Net Non Performing Asset (NNPA) ratio at 0.63 per cent as on March 31, 2024. GNPA stood at 2.73 per cent and NNPA at 0.95 per cent for the year ended March 31, 2023. Capital Adequacy Ratio stood at 19.25 per cent as on March 31, 2024.

HDBFSL has continued to focus on diversifying its products and expanding its distribution while augmenting its digital infrastructure and offerings to effectively deliver credit solutions. The company has a strong network of over 1,680 branches spread across 1,144 cities. As on March 31, 2024, your Bank held 94.6 per cent stake in HDBFSL.

HDBFSL has a diverse range of product offerings (secured and unsecured) to various customer segments. Given below are the key product as well as service offerings to various customer segments.

Consumer Loans

Consumer Loans are provided to individuals for personal or household purposes to meet their short to medium term requirements. It comprises loans for consumer durables, lifestyle products and digital products, personal loans, auto loans for new and used cars, two-wheeler loans and gold loans.

Enterprise Loans

HDBFSL offers loans to businesses for their growth and working capital requirements. Various loans offered to enterprises include: Unsecured Business Loan, Enterprise Business

Loan, Loan Against Property, Loan Against Securities and Loan Against Lease Rental. These loans cater to the financial requirements of enterprises for the purchase of new machinery, inventory or revamping the business.

Asset Finance

HDBFSL provides loans for the purchase of new and used commercial vehicles and provides refinance against existing vehicles for business working capital. It extends these offerings to fleet owners, first-time users, first-time buyers and captive use buyers. Construction equipment loans are offered for the procurement of new and used construction equipment. The company also facilitates refinancing on existing equipment. HDBFSL also offers customised tractor loans for the purchase of tractors or tractor-related implements to meet both agricultural and commercial needs.

Micro Lending

HDBFSL offers micro-loans to borrowers through the Joint Liability Group (JLG) framework to empower and promote financial inclusion for sustainable development.

These loans were initiated in 2019 and are currently available in seven states including Maharashtra, Bihar, Rajasthan, Gujarat, Madhya Pradesh, Uttar Pradesh and Odisha covering 114 districts with more than 200 operational branches.

Fee-Based Products / Insurance Services

HDBFSL has a licence from the Insurance Regulatory and Development Authority of India (IRDAI) and is a registered Corporate Insurance Agent certified to sell both life and general (non-life) insurance products. The company has tie-ups with HDFC Life Insurance Company Limited and Aditya Birla Sun Life Insurance for life insurance products. HDBFSL has partnered with HDFC ERGO General Insurance Company Ltd and Tata AIG General Insurance Company Ltd for general insurance products.

BPO Services

The BPO services offerings include running collection call centres, sales support services, back office operations and processing support services. Under collection services, HDBFSL has a contract to run collection call centres for HDFC Bank. These centres provide collection services for the entire range of HDFC Bank's retail lending products offering comprehensive end-to-end collection services. Under back office and sales support, HDBFSL offers sales support

and back-office services like forms processing, document verification, finance and accounting operations and processing support for HDFC Bank.

Digital Presence

HDBFSL's presence across digital channels enables it to offer a wide variety of financial solutions to its customers. They can access and manage their loan account 24/7 through its new, upgraded version of Mobile Banking Application with enhanced features - ‘HDB-On-the-Go', Customer Service Portal to manage the loan account, missed call service, WhatsApp Account Management and the Chatbot #AskPriya.

HDFC Asset Management Company Limited (HDFC AMC)

Incorporated in 1999, HDFC AMC offers a comprehensive suite of mutual fund and alternative investments across asset classes, including equity, fixed income, hybrid and multi-asset solutions both on active as well as passive platforms. It caters to the needs of a large and diverse customer base. HDFC Bank became the holding company and promoter of HDFC AMC, in place of erstwhile HDFC Limited, with effect from July 1,2023. As on March 31,2024, HDFC Bank held a 52.55 per cent stake in HDFC AMC.

HDFC AMC is Investment Manager to HDFC Mutual Fund, one of the largest mutual funds in the country with closing AUM of over ' 6 lakh crore and market share of 11.4 per cent as on March 31, 2024. It serves a mutual fund customer base of 96 lakh unique investors, with a total of 1.66 crore live accounts. The company has a vast network of 254 branches, over 85,000 distribution partners and modern digital platforms, enabling it to serve clients across India.

HDCF AMC offers Portfolio Management and Segregated Account Services as well as Alternative Investment Funds to High Networth Individuals, family offices, domestic corporates, trusts, provident funds and domestic cum global institutions.

The company also has a wholly owned subsidiary company -HDFC AMC International (IFSC) Limited in Gujarat International Finance Tec-City (Gift City) for providing investment management, advisory and related services.

Total Income for the Financial Year 2023-24 recorded a year-on-year growth of 27 per cent to ' 3,162.5 crore. Profit After Tax grew by 37 per cent to ' 1,945.8 crore.

HDFC Life Insurance Company Limited (HDFC Life)

Established in 2000, HDFC Life Insurance Company Limited (‘HDFC Life'/ ‘Company') is a leading, listed, long-term life insurance solutions provider in India offering a range of individual and group insurance solutions that meet various customer needs such as protection, pension, savings, investment, annuity and health. The company has more than 80 products (including individual and group products) and Optional Riders in its portfolio, catering to a diverse range of customer needs.

In FY24, HDFC Life, known for its innovative products and customer-centric approach, has secured more than 6.6 crore lives with an overall claim settlement ratio of 99.7 per cent. The company with 535 branches across India delivered Profit After Tax of ' 1,569 crore in the Financial Year 2023-24.

HDFC Life was promoted by erstwhile Housing Development Finance Corporation Limited (HDFC Limited.), and Abrdn (Mauritius Holdings) 2006 Limited (abrdn) (formerly Standard Life (Mauritius Holdings) 2006 Limited), a global investment company. Consequent to implementation of the Scheme of Amalgamation of erstwhile HDFC Limited. with HDFC Bank, India's leading private sector bank (“Bank”), the Bank has become promoter of the company, in place of HDFC Limited., effective from July 1, 2023. Further, consequent to reclassification of abrdn from “Promoter” category to “Public” category in accordance with Regulation 31A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, HDFC Bank has become sole promoter of the Company, effective December 12, 2023. The name/letter ‘HDFC' in the name/logo of HDFC Life Insurance Company Limited (HDFC Life) belongs to HDFC Bank Limited.

HDFC Life has a nation-wide presence with its own branches and additional distribution touchpoints through several tie-ups and partnerships. The count of distribution partnerships is over 300, comprising banks, NBFCs, MFIs, SFBs, brokers and new ecosystem partners amongst others. The company has a strong base of financial consultants.

HDFC ERGO General Insurance Company Limited (HDFC ERGO)

HDFC ERGO General Insurance Company Limited (HDFC ERGO) is a subsidiary of the Bank and is a General Insurance company. It offers a comprehensive bouquet of general insurance products - ranging from Motor, Health, Travel, Home, Personal Accident and Cyber Insurance for its retail customers to products like Property, Marine and Liability Insurance to its

 

SME & Corporate Customers to Crop and Cattle Insurance for Rural Customers.

HDFC ERGO has a track record of consistent profitable growth. Over the past 16 years, it has grown faster than the industry - with a 31 per cent CAGR vis-a-vis 15 per cent CAGR for the General Insurance industry. As a result, HDFC ERGO has improved its market share from 0.8 per cent in the Financial Year 2007-08 to 6.4 per cent in the Financial Year 2023-24.

Profit After Tax for the year ended March 31,2024 was ' 437.67 crore compared to ' 652.66 crore for the year ended March 31, 2023.

Distribution Network

In order to provide its customers complete flexibility to avail its products and services, HDFC ERGO has a pan-India presence and a multi-channel distribution network. As of March 31,2024, the company has a strong network of 266 branches and 497 Digital Offices spread across 509 districts of the country.

Besides its own sales force, website and call centre, HDFC ERGO distributes its products via individual agents, corporate agents, bancassurance partners, brokers, motor insurance service providers, web aggregator and common service centre channels. As of March 31, 2024, HDFC ERGO has a large network of 1,09,279 individual agents including Point of Sales Personnel (POSPs) and has partnered with 149 Banks / Corporate Agents for distributing its products.

Product Segments

Accident & Health Insurance: HDFC ERGO offers various products under Accident & Health Insurance - retail health insurance to first-time health insurance buyers, group health insurance to insured groups, top-up health insurance to those who seek to protect themselves from high medical expenses, mass health insurance to those interested in participating in Government schemes as well as personal accident insurance and travel insurance. The company is the second largest retail health insurer in the industry as of March 31, 2024.

Motor Insurance: HDFC ERGO offers motor insurance for various segments - private cars, two wheelers, passenger vehicles, commercial vehicles, electronic vehicles as well as new and old vehicles. It is the fifth largest insurer in the private sector in the Motor Insurance segment in the Financial Year 2023-24.

Commercial Business: HDFC ERGO has a track record of providing customised insurance solutions to its corporate clients. Be it property, engineering insurance, marine insurance or liability insurance, the company follows an advisory approach to its clients based on a thorough understanding of their requirement. It is the fourth largest insurer in the private sector in the Commercial segment in the Financial Year 2023-24.

Rural and Agri Business: HDFC ERGO's rural market development activities are spearheaded by crop insurance covering a large agrarian population which is frequently affected by crop losses attributable to an irregular climatic pattern. It is the second largest insurer in the private sector in the crop insurance segment in FY24. HDFC ERGO also supports deepening insurance penetration in rural India via its Common Service Center (CSC) channel.

Servicing

The company has a robust digital service architecture supported by Artificial Intelligence. It reviews and re-engineers processes on a continuous basis to drive efficiencies and enhancing customer / channel experience. It has ISO certified processes of Claims, Operations, Customer Services, Business Continuity Management System and Information Security Management System.

HDFC ERGO has a fair and robust claims management practice. Following its core values, the company provides prompt response and quick claim settlement and equity of treatment to all its stakeholders, through its wide network of motor workshops and empanelled hospitals across the country. Customers are able to view and track claims status and provide feedback through HDFC ERGO's website and mobile application thus bringing in transparency. Over 80 per cent of motor insurance claim surveys were conducted digitally in FY 2023-24. About 90 per cent of motor insurance claims and about 65 per cent of health insurance claims were settled in cashless mode in FY24.

HDFC ERGO issued more than 1.1 crore policies in FY 202324, of which ~90 per cent were issued digitally. HDFC ERGO has enabled multilingual support across digital platforms to service the customers in their preferred language. For example, the AI-enabled WhatsApp bot ‘MyRA' currently offers services in 12 languages. AI-enabled processes have led to prompt assessment and detection of external damages to vehicles with the estimation of repair/replace of parts. It has also launched AI-enabled inspection for break-in insurance, enabling customers to receive the decision in about 5 minutes. In line with its customer centric philosophy, the company's grievance resolution TAT is lower than industry average by about 3 days.

In FY24, HDFC ERGO introduced “here” app. The app is a one-of-a-kind ecosystem which helps customers and noncustomers of the Company to take informed decisions about their everyday needs such as mobility, healthcare, travelamoungst others. It was launched in May 2023 and has been well received by the users, with over 50 lakh downloads.

Recently, HDFC ERGO has also partnered with Google Cloud to establish a Center of Excellence for Generative AI, aiming to offer hyper-personalised customer experiences and innovative insurance solutions.

HDFC ERGO continues to be future-ready by innovating and focusing on new-age technologies like AI, VR, Robotics to continue to provide superior customer experience.

ESG

HDFC ERGO believes in building a sustainable ecosystem to ensure it can continue providing value to its customers and society at large. It has developed an ESG policy and framework, and has been undertaking a number of initiatives across Environmental and Social aspects and further strengthening its Governance related processes.

As an example, diversity, equity and inclusion (DEI) is a key part of the company's culture and embedded in various processes. The share of women in overall workforce has improved from 19 per cent in FY22 to 25 per cent in FY24

Other Statutory DisclosuresNumber of Meetings of the Board, attendance, meetings and constitution of various Committees

Fourteen (14) meetings of the Board were held during the FY 2023-24. The details of Board meetings held during the year, attendance of Directors at the meetings and constitution of various Committees of the Board are included separately in the Corporate Governance Report.

Annual Return

In accordance with the provisions of Companies Act, 2013 (the “Act”), the Annual Return of HDFC Bank Limited (“Bank” or “HDFC Bank”) in the prescribed Form MGT-7 for FY 2023-24 is available on the website of the Bank at https:// www.hdfcbank.com/personal/about-us/investor-relations/ annual-report.

Requirement for maintenance of cost records

The cost records as specified by the Central Government under Section 148(1) of the Act, are not required to be maintained by the Bank.

Details in respect of frauds reported by auditors under section 143 (12)

Pursuant to Section 143(12) of the Act and circular issued by National Financial Reporting Authority circular dated June 23, 2023, there were 3 instances of fraud committed during FY 2023-24, by the officers or employees of the Bank and reported by the Statutory Auditors to the Audit Committee of the Board. Details of the frauds are as under:

Sr. No.	Nature of the fraud with description	Approximate amount involved	Remedial actions taken
1	Misappropriation & Criminal	' 616.32	1) Bank had investigated the case which had revealed that the Bank's process of
Â	Breach of Trust CDM was operated singly, and cash removed from machine was not deposited at branch; instead, pilfered by teller authoriser.	Lakhs	dual custody was not followed by the staff and the Cash Deposit Machine (“CDM”) was operated under single custody by Branch Staff and cash evacuated from machine was not deposited at branch, instead, pilfered by Branch Staff. However, with adherence of Bank process by the branch / other staff the fraud could have been averted / detected at an early stage. 2) Bank had taken necessary disciplinary action against the involved staff by terminating his services as well as other staff towards the identified lapses. Further, the said branch staff was arrested by the police authorities and is in judicial custody. Post completion of the internal investigation, to avoid such incident following were the enhancements:- a)    Tracking institutionalised to review Cash Recycler Machines (CRM) with high cash balances. Terminals with system balances beyond a threshold are being reviewed. b)    Branches without system entry for cash evacuation from CRM are identified centrally & highlighted along with ageing since the last entry posting. c)    Branch Managers periodic checks includes whether CDM is held and managed in Dual Custody, and Branch staff is aware of the process with regards to End of Day (“EOD”) of the CDM machine. d)    Cash extracted from CDM in dual custody and CDM general ledger (“GL”) is nullified by depositing the Cash extracted from the machine. e)    Cash is tallied with counter slips generated from the machine (including retraction slips) and necessary shortage / excess booked in case of any physical discrepancy on advice of the Automated Teller Machine (“ATM”) monitoring team.
2	Misappropriation & Criminal	' 305.05	Update on recommendations / remedial action made in the inquiry report.
Â	Breach of Trust Staff had misappropriated funds of multiple customers and had used these for online gaming/ betting and lost	Lakhs	a)    Disciplinary action specific to HDFC Bank & insurance partner staffs stands executed. b)    Matter was reported to RBI on November 8, 2023. Insurance claim has been initiated. Insurance company has appointed surveyor for the case. Surveyor had asked for certain details/documents which were provided by the bank. Bank is currently following up with insurance company for status. c)    Amount in question was refunded to customers. d)    Towards the breach of service level agreement identified for courier agency - M/s Agarwal Enterprises (Trackon Couriers Pvt. Ltd), show cause notice was issued to the courier company in consultation with legal. Response received against specified show cause notice was reviewed & Service Level Agreement / services of courier company were discontinued. e)    Customer is in ‘no debit' status. Since matter is Sub Judice, said account cannot be weeded out till final court order is received. f)    BOTC asserted that Loan Against Trust Receipt alerts are raised based on the threshold limits for a single transaction (' 20 Lakhs & above) & risk profile of the customer. In highlighted account, customer was flagged as low risk & there was only one transaction of ' 20 Lakhs for which alert was triggered to branch for further review / enhanced due diligence. g)    The Customer has changed his online banking credentials. Aside, branch has advised all highlighted customers to change their login credentials as a precautionary measure. h)    Further, the Customer was guided and advised to get all remaining cheques stopped. However, customer has confirmed custody of remaining cheques & had utilized few cheques post this incident. Customer has reportedly issued cheque/s to some third party to clear some of his obligations & will apply for a new cheque book once he is back from abroad. Customer has been suitably informed by the branch on this aspect. i)    Further, 16 specified transactions has been confirmed to be bonafied by respective branches. No anomalies noted.

Sr.	Nature of the fraud with	Approximate	Remedial actions taken
No.	description	amount involved	Â	Â
3	Cheating & Forgery	' 2971.86	Corrective Measures :
Â	Syndicate Fraud perpetrated	Lakhs	1)	Any change in the loan amount beyond ' 1 Lakh mandatorily requires Regional
Â	by borrowers in connivance	Â	Â	Credit manager (“RCM”) approval.
Â	with others by creating fake employment	Â	2)	' 10 Lakhs cap has been placed for personal loans being extended to any employee of manpower companies.
Â	Â	Â	3)	Customer Profile Validation (“CPV”) agents have now been mandated to meet the borrower at residence or office for cases where loan amount applied is more than ' 25 Lakhs.
Â	Â	Â	4)	Quarterly bureau checks of all employees in underwriting unit is being conducted by Risk team to derive their financial discipline.
Â	Â	Â	5)	Credit control unit (within underwriting) is being setup to identify the outliers and analyse the trends. The first set of observations has been received and being worked upon.

Directors’ Responsibility Statement

Pursuant to Section 134 of the Act, the Board of Directors

hereby confirm that:

•    In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.

•    We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2024 and of the profit of the Bank for the year ended on that date.

•    We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

•    We have prepared the annual accounts on a going concern basis.

•    We have laid down internal financial controls to be followed by the Bank and have ensured that such internal financial controls were adequate and operating effectively.

•    We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively.

Compliance with Secretarial Standards

The Bank has complied with Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India.

Statutory Auditors

The Members of the Bank at the 27^th Annual General Meeting (“AGM”) had approved the appointment of M/s. M.M. Nissim & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 107122W/W100672) [“MMN”] as the joint statutory auditor(s) of the Bank from FY 2021-22 till (and including) FY 2023-24. Further, the Members of the Bank at the 28^th AGM held on July 16, 2022 had approved the appointment of M/s. Price Waterhouse LLP, Chartered Accountants (ICAI Firm Registration No. 301112E/E300264) [“PW”], as the joint statutory auditor(s) of the Bank for a period of 3 (three) years from FY 2022-23 till (and including) FY 2024-25.

In view of the completion of term of MMN, the Board of Directors based on the recommendation of the Audit Committee has recommended the appointment of M/s. Batliboi & Purohit, Chartered Accountants (ICAI Firm Registration No. 101048W) [“B&P”] to act as Joint Statutory Auditors of the Bank in relation to the FY 2024-25, 2025-26 and 2026-27, subject to approval of the shareholders at the ensuing AGM and Reserve Bank of India (“RBI”) each year.

Further, RBI vide its letter dated May 30, 2024 has approved the appointment of B&P to act as Joint Statutory Auditors of the Bank along with PW for FY 2024-25.

The resolution in this regard is being proposed at the ensuing AGM for the approval of the Shareholders.

During the year ended March 31, 2024, the fees paid to the Joint Statutory Auditor(s) and their respective network firms on aggregated basis are as follows:

(' In crores)
Fees (excluding taxes)*	HDFC Bank to joint statutory auditor(s)	Subsidiaries of HDFC Bank to joint statutory auditor(s) and its network firms
Statutory Audit	9.00	1.05
Certification & other audit / attestation services	6.82	0.05
Non-audit services	-	-
Outlays	0.40	0.05
Total	16.22	1.15
*No fees were paid to network firms of joint statutory auditor(s) by HDFC Bank.

Corporate Social Responsibility

The composition of Corporate Social Responsibility & Environment, Social and Governance (“CSR & ESG”) Committee, brief outline of the CSR policy of the Bank and the initiatives undertaken by the Bank on CSR activities during the year are set out in Annexure 2 to this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. This Policy is available on the Bank's website at https://v.hdfcbank.com/csr/our-commitment.html.

The Bank's Environmental Social & Governance (ESG) Policy Framework is available at https://www.hdfcbank.com/ content/api/contentstream-id/723fb80a-2dde-42a3-9793-7ae1be57c87f/f0ac1d94-7b3f-4b7a-ad10-d84cd154eaed

Particulars of Contracts or Arrangements with Related Parties

Particulars of contracts or arrangements with related parties referred to in Section 188 (1) of the Act, as prescribed in Form AOC-2 under Rule 8 (2) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure 3 to this report.

Particulars of Loans, Guarantees or Investments

Pursuant to applicable provisions of Section 186 of the Act, the particulars of investments made by the Bank are disclosed in note no. 8 of Schedule 18 of the Financial Statements as per the applicable provisions of the Banking Regulation Act, 1949.

Material Development

Scheme of Amalgamation

The Board of Directors of the Bank at its meeting held on April 04, 2022, had approved a composite scheme of amalgamation (the “Scheme”) for the amalgamation of: (i) erstwhile HDFC

Investments Limited and erstwhile HDFC Holdings Limited, each a subsidiary of erstwhile Housing Development Finance Corporation Limited (“e-HDFC Limited”), with and into e-HDFC Limited, and (ii) e-HDFC Limited with and into HDFC Bank (the “Amalgamation”). Pursuant to the receipt of requisite approvals from Stock Exchanges, Securities and Exchange Board of India, Competition Commission of India, Reserve Bank of India, National Company Law Tribunal and all other regulatory / statutory authorities, the Amalgamation became effective from July 1, 2023 upon filing INC 28 with the Registrar of Companies, Mumbai.

Consequently, on July 14, 2023, the Bank allotted 3,11,03,96,492 equity shares of Re. 1 each to the shareholders of e-HDFC Limited in the ratio of 42:25 i.e. 42 equity shares of HDFC Bank (each having a face value of Re. 1) credited as fully paid for every 25 equity shares of e-HDFC Limited (each having a face value of Rs. 2). Also, non-convertible debentures and commercial papers issued and allotted by e-HDFC Limited were transferred in the name of the Bank. The Bank has done necessary corporate actions to give effect to above allotment / transfer of securities. Further, the warrants issued and allotted by e-HDFC Limited were matured on August 10, 2023 and out of total 1,47,57,600 warrants of e-HDFC Limited, 147,47,400 warrants were converted into 2,47,75,632 equity shares of Re. 1 each of the Bank, which were allotted and listed on the Stock Exchanges. Whereas the balance 10,200 warrants representing 17,136 equity shares were cancelled / lapsed.

In case of shareholders / warrant holder who were eligible for fractional entitlement, the securities were consolidated by a trust managed by Axis Trustee Services Limited, which was nominated by Board of Directors of the Bank. On October 9, 2023, the trust sold the consolidated securities in the market and the proceeds were distributed after deducting applicable cost and taxes to the eligible holders of such securities in the proportion of their entitlement ratio.

There were no material developments / changes / commitments affecting the financial position of the Bank which have occurred after March 31, 2024 till the date of this report.

Financial Statements of Subsidiaries and Associates

In terms of Section 134 of the Act read with Rule 8 (1) of the Companies (Accounts) Rules, 2014 the performance and financial position of the Bank's subsidiaries and associates are enclosed as Annexure 4 to this report.

The Board of Directors of the Bank at its meeting held on April 04, 2022, had approved a composite scheme of amalgamation sold 90.01% equity stake of HDFC Credila to the Acquirers and consequently HDFC Credila ceased to be the subsidiary of the Bank. As on March 31, 2024, HDFC Bank holds aggregating to 9.99% of total issued and paid-up share capital of HDFC Credila, which is in compliance with the conditions as stipulated by the RBI vide its letter dated April 20, 2023 read with the letter dated June 27, 2023.

²In furtherance of the RBI direction, the Bank has decided to undertake the sale of its 100% stake held in HDFC Education and Development Services Private Limited (the “Proposed Transaction”) using the Swiss challenge method. The Bank had on March 30, 2024, entered into a binding term sheet with an interested party and the offer contained in such term sheet shall serve as the anchor / base bid to seek counter offers from other parties interested in participating in the aforesaid Swiss challenge process. The Bank shall finalise the purchaser on the basis of the completion of the Swiss challenge process, subsequent to which such purchaser and the Bank will enter into definitive agreement for the purposes of the Proposed Transaction.

Apart from abovementioned companies, no other entities became or ceased to be the Bank's subsidiaries, associates or joint ventures during the year 2023-24.

Disclosure under Foreign Exchange Management Act, 1999 (“FEMA”)

Pursuant to the Amalgamation of e-HDFC Limited with and into the Bank effective July 1,2023, subsidiaries of e-HDFC Limited has became subsidiaries of the Bank. During the period under review, the Bank has complied with the applicable provisions of FEMA and has obtained a certificate from M/s. M. M. Nissim & Co. LLP, Chartered Accountants, Statutory Auditor of the Bank, to this effect.

Whistle Blower Policy / Vigil Mechanism

The Bank encourages an open and transparent system of working and dealing amongst its stakeholders. While the Bank's “Code of Conduct & Ethics Policy” directs employees to uphold Bank values and conduct business worldwide with integrity and highest ethical standards, the Bank has also adopted a “Whistle Blower Policy” (the “Policy”) to encourage and empower the employees/ stakeholders to make or report any Protected Disclosures under the Policy, without any fear of reprisal, retaliation, discrimination or harassment of any kind.

This Policy has also been put in place to provide a mechanism through which adequate safeguards can be provided against victimization of employees who avail of this mechanism. The Policy would cover and will be applicable to the Protected

Disclosures related to violation/ suspected violation of the Code of Conduct including (a) breach of applicable law; (b) fraud/criminal offence or corruption/misuse of office to obtain personal benefit / pecuniary advantage for self or any other person; (c) leakage/suspected leakage of unpublished price sensitive information which are in violation to SEBI (Prohibition of Insider Trading) Regulations, 2015 and related internal policy of the Bank, i.e. Share Dealing Code of the Bank, (d) wilful data breach and / or unauthorized disclosure of Bank's proprietary data including customer data.

The Policy will not cover the following types of complaints which if made, will not be considered Protected Disclosure under this Policy:

(a)    Matters relating to personal grievances on issues such as appraisals, compensation, promotions, rating, behavioral issues / concerns of the manager(s) / supervisor(s) / other colleague(s), complaint of sexual harassment at workplace etc. for which alternate internal redressal mechanisms in the Bank are in place.

(b)    Matters which are pending before a court of law, tribunal, other quasi- judicial bodies or any governmental authority.

(c)    Anonymous / pseudonymous complaints will not be considered as Protected Disclosures under this Policy.

All Protected Disclosures made under the Policy shall be made to the Whistle Blower Committee through the following modes;

(a)    By letter in a closed / sealed envelope addressed to the Whistle Blower Committee, or

(b)    by submission of the same on the information portal of the Bank, or

(c)    by way of an email addressed to whistleblower@hdfcbank. com. In exceptional circumstances, the Whistle Blower may make such Protected Disclosures directly to the Chairperson of the Audit Committee of the Board.

All Protected Disclosures received under this Policy would be examined by the Whistle Blower Committee and the investigation is further assigned to an appropriate Investigation Officer(s) depending on the nature of the subject matter of the Protected Disclosure.

Details of Whistle blower complaints received and subsequent action taken and the functioning of the Whistle Blower mechanism are reviewed periodically by the Audit Committee of the Board. During the FY 2023-24, a total of 156 such complaints were received and taken up for investigation which has resulted in certain staff actions in 55 cases post investigation. The broad categories of whistle blower complaints were in the areas of misappropriation of bank /

customer funds, forgery related cases, improper business practices, behavioural issues and corruption.

The Policy is available on the website of the Bank at the link https://www.hdfcbank.com/personal/about-us/corporate-governance/codes-and-policies.

Statement on Declaration by Independent Directors

Mr. Atanu Chakraborty, Mr. M. D. Ranganath, Mr. Sandeep Parekh, Dr. (Mrs.) Sunita Maheshwari, Mrs. Lily Vadera and Dr. (Mr.) Harsh Kumar Bhanwala are the Independent Directors on the Board of the Bank as on March 31,2024.

Pursuant to the provisions of Section 149 of the Act, the Independent Directors have submitted declarations that each of them meets the criteria of independence as provided in Section 149(6) of the Act, along with the Rules framed thereunder and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”). There has been no change in the circumstances affecting their status as Independent Directors of the Bank. In the opinion of the Board, the Independent Directors possess the requisite integrity, experience, expertise and proficiency required under all applicable laws and the policies of the Bank.

Evaluation of Board of Directors

The performance evaluation of the Board, Committees of the Board and the individual members of the Board (including the Chairman) for Financial Year 2023-24, was carried out internally pursuant to the framework laid down by the Nomination and Remuneration Committee (“NRC”). A questionnaire for the evaluation of the Board, its Committees and the individual members of the Board (including the Chairman), covering various aspects of the performance of the Board and its Committees, including composition, roles and responsibilities, Board processes, Boardroom culture, adherence to Code of Conduct and Ethics, quality and flow of information, as well as measurement of performance in the areas of strength as identified in the previous board evaluation, was sent out to the Directors. The Committees were evaluated inter-alia on parameters such as composition, terms of reference, quality of discussions, contribution to Board decisions and balance of agenda between the Committee and the Board. The responses received to the questionnaires on evaluation of the Board and, its Committees and Non-Independent Directors were then placed before the meeting of the Independent Directors for consideration. The assessment of performance of NonIndependent Directors on personal and professional attributes was also carried out at the meeting of Independent Directors. The assessment of performance of the Independent Directors on the Board (including Chairman) was subsequently discussed

by the Board. In addition to the above parameters, the Board evaluated and was satisfied that the Independent Directors of the Bank fulfill the independence criteria as specified in LODR and was independent from the management.

The evaluation brought out the cohesiveness of the Board, a Boardroom culture of trust and cooperation, and Boardroom discussions which are open, transparent and encourage diverse viewpoints. Other areas of strength included effective discharge of Board's roles and responsibilities. The Board would continue to adhere to best corporate governance practices and would dedicate more time in strategy planning, competitive positioning, benchmark and talent management. Considering the addition of subsidiaries post the merger, the Board has taken steps in right direction to have effective oversight on the subsidiaries. The Board also noted that while there has been positive development in the areas of focus identified in the previous evaluation, efforts need to continue in that direction. The appropriate feedback was conveyed to the respective Board members.

Policy on Appointment and Remuneration of Directors and Key Managerial Personnel

Your Bank has in place a Policy for appointment and fit and proper criteria for Directors of the of the Bank (the “Policy”). The Policy lays down the criteria for identification of persons who are qualified as ‘fit and proper' to become Directors on the Board- such as academic qualifications, competence, track record, integrity, etc. which shall be considered by the NRC while recommending the appointment of Directors. The Policy also deals with the process for appointment/re-appointment of directors, annual affirmations, familiarization programme for Non-Executive Directors of the Bank etc. The Policy is available on the website of the Bank at https://www.hdfcbank.com/ personal/about-us/corporate-governance/codes-and-policies.

The remuneration of all employees of the Bank, including Whole Time Directors, Material Risk Takers, Key Managerial Personnel, Senior Management and other employees is governed by the Compensation Policy of the Bank. The same is available at the https://www.hdfcbank.com/personal/about-us/corporate-governance/codes-and-policies. The Compensation Policy of the Bank, duly reviewed and recommended by the NRC has been articulated in line with the relevant Reserve Bank of India guidelines.

Your Bank's Compensation Policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long-term success. The Compensation Policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective is to provide a fair and transparent

structure that helps the Bank to retain and acquire the talent pool critical to building competitive advantage and brand equity.

Your Bank's approach is to have a “pay for performance” culture based on the belief that the Performance Management System provides a sound basis for assessing performance holistically. The compensation system should also take into account factors such as roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the Compensation Policy are also included in Note No. 17 of Schedule 18 forming part of the Accounts.

The Non-Executive Directors (“NEDs”) including Independent Directors are paid remuneration by way of sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory prescriptions.

Further, expenses incurred by them, if any, for attending meetings of the Board and Committees in person are reimbursed at actuals. Pursuant to the relevant RBI guidelines and approval of the shareholders, the Non-Executive Directors, other than the Part Time Chairman and Independent Director, are paid fixed remuneration as follows (being commensurate with the individual director's responsibilities and demands on time), to each of the NEDs of the Bank (other than the Part Time Chairman and Independent Director):

(i)    till February 15, 2024 (date inclusive)- ' 20,00,000 (Rupees Twenty Lakhs only) per annum (on a proportionate basis) to each of the NEDs, and

(ii)    from February 16, 2024 (date inclusive)- ' 30,00,000 (Rupees Thirty Lakhs only) per annum (on a proportionate basis) to each of the NEDs.

Mr. Atanu Chakraborty, Part Time Chairman and Independent Director was paid remuneration of ' 35,00,000 (Rupees Thirty Five Lakhs) per annum during FY 2023-24 as approved by the Board, Shareholders and RBI, in addition to sitting fees, reimbursement of expenses for attending the Board and Committee meetings and provision of car for official and personal use.

Further, pursuant to approval of Board, Shareholders and RBI, Mr. Atanu Chakraborty was re-appointed as the Part Time Chairman and Independent Director of the Bank for a period of 3 (three) years with effect from May 5, 2024 upto to May 4, 2027 (both days inclusive) and not liable to retire by rotation, at a remuneration of ' 50,00,000 (Rupees Fifty Lakhs Only) per annum on proportionate basis, in addition to sitting fees, reimbursement of expenses for attending the

 

Board and Committee meetings and provision of car for official and personal use.

The following Directors of the Bank are also the director(s) of the Bank's subsidiaries as on the date of this report:

 

Name of Directors	Name of Subsidiary Company	Designation
Mr. Kaizad Bharucha	HDFC Life Insurance Company Limited	Non-Executive Director (Nominee of HDFC Bank)
Â	HDFC Capital Advisors Limited	Additional Director (Non-Executive Director - Nominee of HDFC Bank)
Mrs. Renu Karnad	HDFC Asset Management Company Limited	Non-Executive Director (Nominee of HDFC Bank)
Â	HDFC ERGO General Insurance Company Limited	Non- Executive Director
Â	HDFC Capital Advisors Limited	Additional Director (Non- Executive Director)
Mr. Bhavesh Zaveri	HDFC Trustee Company Limited	Additional Director (Non-Executive Director - Nominee of HDFC Bank)
Â	HDFC Sales Private Limited	Non-Executive Director - (Nominee of HDFC Bank)
Â	HDFC Securities Limited	Non-Executive Director (Nominee of HDFC Bank)
Mr. Keki Mistry	HDFC ERGO General Insurance Company Limited	Non-Executive Director (Chairman)
Â	HDFC Capital Advisors Limited	Additional Director (Non-Executive Director)
Â	HDFC Life Insurance Company Limited	Non-Executive Director
Mr. V Srinivasa Rangan	HDFC Education and Development Services Private Limited	Non-Executive Director (Nominee of HDFC Bank)
Â	HDFC Asset Management Company Limited	Non-Executive Director (Nominee of HDFC Bank)
As per the Banks policy, no sitting fees were paid to the Executive Director(s) of the Bank nominated on the Board of its subsidiary companies.

Succession Planning

The NRC and the Board reviews succession planning and transitions at the Board and Senior Management level. The Board composition and the desired skill sets / areas of expertise at the Board level are continuously reviewed and

vacancies, if any, are reviewed in advance through a systematic due diligence process.

Succession planning at Senior Management level, including business and assurance functions, is continuously reviewed to ensure continuity and depth of leadership at two levels below the Managing Director. Successors are identified prior to the Senior Management positions falling vacant, to ensure a smooth and seamless transition.

Succession planning is a continuous process which is periodically reviewed by the NRC and the Board.

Significant and Material orders Passed by Regulators

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Bank's operations in future.

Further, details pertaining to penalties / strictures / prohibitions / restrictions on the Bank are included in the Corporate Governance Report.

Directors and Key Managerial Personnel

In compliance with Section 152 of the Act and the Articles of Association of the Bank, Mr. Bhavesh Zaveri and Mr. Keki Mistry will retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment. A resolution seeking shareholders' approval for their re-appointment forms part of the Notice of this AGM. A brief profile of both the retiring directors is furnished in the report on Corporate Governance for the information of shareholders.

Following were the changes in composition of the Board of Directors:

1.    Appointment of Mr. Kaizad Bharucha (DIN: 02490648) and Mr. Bhavesh Zaveri (DIN: 01550468) as Deputy Managing Director and Executive Director respectively, for a period of 3 (three) years with effect from April 19, 2023 upto April 18, 2026 (both days inclusive), liable to retire by rotation, as approved by RBI and the shareholders through Postal Ballot on June 11, 2023.

2.    Appointment of Mr. Keki Mistry (DIN: 00008886) and Mrs. Renu Karnad (DIN: 00008064) as Non-Executive (Non-Independent) Directors of the Bank, with effect from June 30, 2023 to November 6, 2029 (both days inclusive) and July 1, 2023 to September 2, 2027 (both days inclusive), respectively, liable to retire by rotation,

All the Directors of the Bank have confirmed that they satisfy the fit and proper criteria as prescribed under the applicable regulations and that they are not disqualified from being appointed as directors in terms of Section 164(2) of the Act.

Particulars of Employees

The information in terms of Section 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure 5 to this report. Further, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in an Annexure and forms part of this report. In terms of Section 136(1) of the Act, the annual report and the financial statements are being sent to the Members excluding the aforesaid Annexure. The Annexure is available for inspection and any Member interested in obtaining a copy of the Annexure may write to the Company Secretary of the Bank.

Conservation of Energy and Technology Absorption

Please refer to page nos. 98 to 100 and 102 to 105 for information on Conservation of Energy and page no. 232 for information on Technology Absorption.

Foreign Exchange Earnings and outgo

During the year, the total foreign exchange earned by the Bank was ' 4,001.1 crores (on account of net gains arising on all exchange / derivative transactions) and the total foreign exchange outgo was ' 4,000.47 crores towards the operating and capital expenditure requirements.

Secretarial Audit

In terms of Section 204 of the Act and the Rules made thereunder, M/s. Alwyn Jay & Co., Company Secretaries were appointed as Secretarial Auditors of the Bank for the FY 2023-24. The report of the Secretarial Auditors is enclosed as Annexure 6 to this report. There are no qualifications, reservation or adverse remarks in the Report of the Secretarial Auditor.

Further, the Board at its meeting held on June 20, 2024 has appointed M/s. BNP & Associates, Practising Company Secretaries, as secretarial auditor for FY 2024-25.

 

as approved by shareholders at the 29^th Annual General Meeting of the Bank held on August 11, 2023.

3.    Re-appointment of Mr. Sashidhar Jagdishan (DIN: 08614396) as Managing Director and Chief Executive Officer of the Bank for a period of 3 (three) years with effect from October 27, 2023 to October 26, 2026 (both days inclusive) and not liable to retire by rotation, as approved by RBI and the shareholders through Postal Ballot on January 9, 2024.

4.    Re-appointment of Mr. Sandeep Parekh (DIN: 03268043) and Mr. M. D. Ranganath (DIN: 07565125) as Independent Directors of the Bank for a period of 3 (three) years with effect from January 19, 2024 to January 18, 2027 (both days inclusive) and January 31,2024 to January 30, 2027 (both days inclusive), respectively and not liable to retire by rotation, as approved by the shareholders through Postal Ballot on January 9, 2024.

5.    Appointment of Mr. V. Srinivasa Rangan (DIN: 00030248) as an Executive Director of the Bank for a period of 3 (three) years with effect from November 23, 2023 to November 22, 2026 (both days inclusive) and liable to retire by rotation as approved by RBI and the shareholders through Postal Ballot on January 9, 2024.

6.    Appointment of Dr. (Mr.) Harsh Kumar Bhanwala (DIN: 06417704) as an Independent Director of the Bank for a period of 3 (three) years with effect from January 25, 2024 to January 24, 2027 (both days inclusive) and not liable to retire by rotation, as approved by the shareholders of the Bank through Postal Ballot on March 29, 2024.

7.    Re-appointment of Mr. Atanu Chakraborty (DIN: 01469375) as the Part Time Chairman and Independent Director of the Bank for a period of 3 (three) years with effect from May 5, 2024 to May 4, 2027 (both days inclusive) and not liable to retire by rotation, as approved by RBI and the shareholders through Postal Ballot on May 3, 2024.

8.    Mr. Sanjiv Sachar (DIN: 02013812) and Mr. Umesh Chandra Sarangi (DIN:02040436) ceased to be Independent Directors with effect from the close of business hours on July 20, 2023 and February 29, 2024 respectively, upon completion of their respective terms. Your Board places on record its sincere appreciation for the contribution made by them during their tenure with the Bank and wishes them well in future endeavors.

Corporate Governance

In compliance with Regulation 34 and other applicable provisions of LODR, a separate report on Corporate Governance along with a certificate of compliance from the Secretarial Auditors, forms an integral part of this report.

Business Responsibility and Sustainability Report

The Bank's Business Responsibility and Sustainability Report in the format adopted by companies in India as per the guidelines of SEBI in this regard forms an integral part of this report.

Prevention, Prohibition and Redressal of Sexual Harassment of Women at the Workplace

The relevant information is included in the Corporate Governance Report.

Customer complaints and grievance redressal

Details of customer complaints and grievance redressal is enclosed as Annexure 7 to this report.

Unclaimed Deposits of e-HDFC Limited

The Bank is a private sector bank registered with RBI and in terms of applicable RBI norms, deposits remaining unclaimed / unpaid for a period of 10 years, need to be transferred by the Bank to Depositor Education and Awareness (DEA) Fund maintained by RBI.

In accordance with applicable provisions of the Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended, (the Rules) erstwhile Housing Development Finance Corporation Limited (e-HDFC) till the effective date of the amalgamation i.e. July 1, 2023, has transferred deposits remaining unclaimed for a period of seven years from the date they became due for payment to the Investor Education and Protection Fund (IEPF) established by the Central Government. The deposit holders of e-HDFC can claim their respective unclaimed deposit from IEPF. The process of claiming the deposit from IEPF is uploaded on the website of the Bank. Henceforth, the Bank would be transferring all the unclaimed deposits of e-HDFC (remaining unclaimed for more than 10 years) to the said DEA Fund.

I Acknowledgement

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other Government and Regulatory Agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank's employees and look forward to their continued contribution.

I Conclusion

The year under review witnessed the amalgamation of erstwhile HDFC Limited with and into HDFC Bank. This has opened up immense opportunities through the fusion of e-HDFC Limited's home loan expertise with HDFC Bank's operational efficiencies and wider reach. The amalgamation also offers huge prospects for cross sell. All in all, it is going to be a key driver for future growth. The under penetration of banking services in India is an opportunity by itself. HDFC Bank is well placed to capitalise on this given its inherent balance sheet and brand strengths. While chasing growth, the Bank will not lose sight of adhering to corporate governance standards, serving customers in a transparent way and treating employees fairly.

(the “Scheme”) for the amalgamation of: (i) erstwhile HDFC Investments Limited and erstwhile HDFC Holdings Limited, each a subsidiary of erstwhile Housing Development Finance Corporation Limited (“e-HDFC Limited”), with and into e-HDFC Limited, and (ii) e-HDFC Limited with and into the Bank (the “Amalgamation”), which received all the required approvals and became effective from July 1, 2023.

Pursuant to the amalgamation, e-HDFC Limited was dissolved without being wound-up and consequently, the Bank has no promoter.

Pursuant to the amalgamation becoming effective from July 1, 2023, the following entities have also became subsidiaries / step-down subsidiaries of the Bank, in addition to HDB Financial Services Limited and HDFC Securities Limited:

 

Sr. No	Name	Relationship
1.	Griha Investments (Mauritius)	Direct Subsidiary
2.	Griha Pte Limited (Singapore)	Direct Subsidiary
3.	HDFC Asset Management Company Limited	Direct Subsidiary
4.	HDFC Credila Financial Services Limited (Ceased to be a Subsidiary w.e.f. March 19, 2024)1	Direct Subsidiary
5.	HDFC Capital Advisors Limited	Direct Subsidiary
6.	HDFC ERGO General Insurance Company Limited	Direct Subsidiary
7.	HDFC Education and Development Services Private Limited2	Direct Subsidiary
8.	HDFC Life Insurance Company Limited	Direct Subsidiary
9.	HDFC Sales Private Limited	Direct Subsidiary
10.	HDFC Trustee Company Limited	Direct Subsidiary
11.	HDFC AMC International (IFSC) Limited (Gift City) - a wholly-owned subsidiary of HDFC Asset Management Co. Limited	Step-Down Subsidiary
12.	HDFC International Life and Re Company Limited (Dubai) - a wholly- owned subsidiary of HDFC Life Insurance Co. Limited	Step-Down Subsidiary
13.	HDFC Pension Management Company Limited - a wholly- owned subsidiary of HDFC Life Insurance Co. Limited	Step-Down Subsidiary

 

1

Pursuant to the abovementioned Amalgamation and conditions as stipulated by the RBI, e-HDFC Limited (since amalgamated with and into HDFC Bank) and HDFC Bank

2

(being the successor entity of e-HDFC Limited) had executed definitive documents for sale of approximately 90% of total issued and paid-up share capital of HDFC Credila Financial Services Limited's (“HDFC Credila”) to (a) Kopvoorn B.V., (b) Moss Investments Limited, (c) Defati Investments Holding B.V., and (d) Infinity Partners ((a),(b),(c) and (d) are hereinafter collectively referred as “Acquirers”). Subsequently, HDFC Bank

---

Mar 31, 2021

TO THE MEMBERS

Your directors are pleased to present the forty-fourth annual report of your Corporation with the audited accounts for the year ended March 31, 2021.

Financial Results		For the Year Ended March 31, 2021		For the Year Ended March 31, 2020
		'' in crore		'' in crore
Profit Before Fair Value Gain, Sale of Investments, Dividend and Expected Credit Loss		15,631.43		12,639.78
Fair Value Gain consequent to merger of GRUH Finance Limited with Bandhan Bank Limited				9,019.81
Profit on Sale of Investments		1,397.69		3,523.75
Dividend		733.97		1,080.68
Impairment on Financial Instruments (Expected Credit Loss)		(2,948.00)		(5,913.10)
Profit Before Tax		14,815.09		20,350.92
Tax Expense		2,787.79		2,581.27
Net Profit After Tax		12,027.30		17,769.65
Other Comprehensive Income		1,734.22		(6,652.31)
Total Comprehensive Income		13,761.52		11,117.34
Retained Earnings
Opening Balance		14,137.67		11,635.24
Profit for the year		12,027.30		17,769.65
Re-measurement of Defined Benefit Plan		6.30		(31.99)
Amount Available for Appropriations		26,171.27		29,372.90
Appropriations:
Special Reserve No. II		2,000.00		3,400.00
General Reserve		2,700.00		8,034.60
Statutory Reserve (Under Section 29C of the National Housing Bank Act, 1987)		500.00		200.00
Final Dividend Paid		3,642.68		3,019.29
Tax on Final Dividend		-		581.34
Closing Balance Carried Forward		17,328.59		14,137.67

Impact of COVID-19

The financial year ended March 31, 2021 marked a full year since the World Health Organisation declared the outbreak of COVID-19 as a pandemic. Countries across the globe continued to face drastic economic and social disruptions along with tragic loss of lives and livelihoods. Eruptions of new waves and variants of the virus necessitated restrictions and lockdowns.

As regards the Corporation, a fortified balance sheet, continued demand for housing, leveraging technology for the convenience of customers, remote working and adhering to social distancing norms and hygiene protocols enabled full business continuity since the outbreak of the pandemic.

In April 2021, India witnessed a second wave of infections. Details of the impact of COVID-19 are elucidated in the Management Discussion and Analysis Report (MD&A).

Dividend

The board assessed the performance of the Corporation during the year under review in light of the on-going pandemic. The board recognised the need to strike a balance between being prudent and conserving capital in the Corporation, whilst also meeting expectations of shareholders. The board after assessing the capital buffers, liquidity levels and the impact of COVID-19 on the operations of the Corporation, recommended payment of dividend for the financial year ended March 31, 2021 of '' 23 per equity share of face value of '' 2 each compared to '' 21 per equity share in the previous year.

the warrants. As at March 31, 2021, no warrants had been converted into equity shares.

The maximum equity dilution on account of the aforesaid QIP issue, assuming full conversion of all the warrants into equity shares at the warrant exercise price is 4.23%, based on the enhanced share capital.

Non-Convertible Debentures (NCDs)

Further, the Corporation raised '' 3,693 crore through the issue and allotment of 36,930 secured, redeemable NCDs at par having a tenor of 3 years, carrying a coupon rate of 5.40% payable annually. The NCDs are rated by CRISIL Ratings Limited (CRISIL) and ICRA Limited (ICRA) and are assigned the highest ratings, ''CRISIL AAA Stable'' and ''ICRA AAA/Stable'' respectively.

The equity shares, warrants and NCDs are listed on BSE Limited (BSE) and National Stock Exchange of India Limited (NSE).

MD&A, Report of the Directors on Corporate Governance and Business Responsibility Report

In accordance with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) and directions issued by National Housing Bank (NHB) and Reserve Bank of India (RBI), the MD&A and the Report of the Directors on Corporate Governance form part of this report.

In accordance with the Listing Regulations, the Business Responsibility Report (BRR) has been placed on the Corporation''s website. The policy on Business Responsibility is placed on the Corporation''s website.

The dividend pay-out ratio for the year ended March 31, 2021 is 34.5%.

The dividend recommended is in accordance with the principles and criteria as set out in the Dividend Distribution Policy. The Dividend Distribution Policy is placed on the Corporation''s website.

Issue of Securities on Qualified Institutions Placement Basis

Pursuant to the approval of shareholders by way of a postal ballot on July 21, 2020, the Corporation completed its Qualified Institutions Placement (QIP) of equity shares and secured, redeemable non-convertible debentures simultaneously with warrants in August 2020. The QIP was in accordance with applicable provisions of the Companies Act, 2013, rules framed thereunder and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.

Equity and Warrants

Under the QIP, the Corporation raised '' 10,000 crore through the issue and allotment of 5,68,18,181 equity shares of face value of '' 2 each at an issue price of '' 1,760 per equity share (including a premium of '' 1,758 per equity share).

The Corporation also raised '' 307 crore through the issue and allotment of 1,70,57,400 warrants at an issue price of '' 180 per warrant which was paid upfront. The warrants carry a right exercisable by the warrant holder to exchange each warrant for one equity share of face value of '' 2 each of the Corporation at any time on or before August 10, 2023, at a warrant exercise price of '' 2,165 per equity share, to be paid by the warrant holder at the time of exchange of

Regulatory Guidelines

In August 2019, the central government conferred the powers of regulation of Housing Finance Companies (HFCs) to RBI from NHB. NHB continues to carry out the function of supervision of HFCs.

In October 2020, RBI issued the regulatory framework for HFCs in supersession of the corresponding regulations by NHB. The objective of the framework was to facilitate regulatory transition in a phased manner with least disruption.

During the year, RBI introduced certain regulatory changes for HFCs such as the principal business criteria for housing finance, definition of housing finance, minimum net owned fund requirements, guidelines on liquidity risk management framework and liquidity coverage ratio, amongst others.

Further, on February 17, 2021, RBI issued Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 (RBI HFC Directions). These directions came into force with immediate effect.

Key changes in the regulations are detailed in the MD&A.

The Corporation is in compliance with the applicable provisions of the RBI HFC Directions and other directions/ guidelines issued by RBI/NHB as applicable.

Lending Operations

The Corporation is a Non-Banking Financial Company - Housing Finance Company (NBFC-HFC) and is engaged in financing the purchase and construction of residential houses, real estate and certain other purposes in

loan disbursements reported a growth of 3% compared to the previous year.

During the year, due to the prevailing uncertainties, the risk averse environment continued for nonindividual loans and lending was restricted to select, high rated entities.

The Assets Under Management (AUM) as at March 31, 2021 amounted to '' 5,69,894 crore as compared to '' 5,16,773 crore in the previous year.

On an AUM basis, the growth in the individual loan book was 12%. The growth in the total loan book on an AUM basis was 10%.

The Corporation''s outstanding loan book stood at '' 4,98,298 crore as at March 31, 2021, compared to '' 4,50,903 crore in the previous year.

During the year, the Corporation assigned loans amounting to '' 18,980 crore compared to '' 24,127 crore in the previous year.

As at March 31, 2021, the outstanding amount in respect of individual loans sold was '' 71,421 crore. The Corporation continues to service these loans.

Further details of lending operations are provided in the MD&A.

Market Borrowings

The Corporation is in compliance with the provisions of the Housing Finance Companies Issuance of NonConvertible Debentures on private placement basis (NHB) Directions, 2014 and RBI HFC Directions as applicable and has been regular in payment of principal and interest on the NCDs.

Details of market borrowings are provided in the MD&A and notes to accounts.

India. All other activities of the Corporation revolve around the main business.

Despite the challenges posed by the pandemic, lending operations of the Corporation continued seamlessly during the year.

The individual loan business began to see normalcy return from the month of September 2020 onwards, which coincided with the gradual easing of strict lockdown restrictions imposed to contain the spread of COVID-19. In the second half of the financial year, the demand for housing remained robust, with growth trends exceeding expectations. Growth in home loans was aided by low interest rates, softer or stable property prices, continued fiscal benefits on home loans and concessional stamp duty rates offered in certain states. The demand for home loans was from both, affordable housing and higher end properties.

De-growth in individual disbursements owing to the lockdown and restrictions imposed in the first half of the financial year was offset by recovery in the second half of the year. For most parts of the first quarter of the financial year, there was a complete lockdown and the second quarter entailed partial restrictions. Thus, individual disbursements in the first half of the financial year was 35% lower compared to the corresponding period in the previous year. With restrictions gradually easing in the second half of the financial year, individual disbursements were 42% higher compared to the corresponding period in the previous year. Consequently, during the year ended March 31, 2021, individual

Deposits

Deposits outstanding as at March 31, 2021 amounted to '' 1,50,131 crore as compared to '' 1,32,324 crore in the previous year - a growth rate of 13%.

CRISIL and ICRA have for the twenty-sixth consecutive year, reaffirmed their ''CRISIL FAAA/Stable'' and ''ICRA MAAA/Stable'' ratings respectively for HDFC''s deposits. These ratings represent the highest degree of safety regarding timely servicing of financial obligations.

There has been no default in repayment of deposits or payment of interest during the year. All the deposits accepted by the Corporation are in compliance with the requirements of the regulations regarding deposit acceptance.

As at March 31, 2021, public deposits amounting to '' 890 crore had not been claimed by 43,680 depositors. Since then, 5,629 depositors have claimed or renewed deposits of '' 148 crore.

Depositors were intimated regarding the maturity of deposits with a request to either renew or claim their deposits. Where the deposit remains unclaimed, reminder letters are sent to depositors periodically and follow up action is initiated through the concerned agent or branch.

Deposits remaining unclaimed for a period of seven years from the date they became due for payment have to be transferred to the Investor Education and Protection Fund (IEPF) established by the central government. The concerned depositor can claim the deposit from the IEPF. During the year, an amount of '' 4 crore was transferred to the IEPF.

Subsidiary and Associate Companies

In accordance with the provisions of Section 136 of the Companies Act, 2013, the annual report of the Corporation, the annual financial statements and the related documents of the Corporation''s subsidiary companies are placed on the website of the Corporation.

Shareholders may download the annual financial statements and detailed information on the subsidiary companies from the Corporation''s website or may write to the Corporation for the same. Further, the documents shall also be available for inspection by the shareholders at the registered office of the Corporation.

The merger of the Corporation''s subsidiaries, HDFC ERGO Health Insurance Limited (formerly Apollo Munich Health Insurance Company Limited) with and into HDFC ERGO General Insurance Company Limited (HDFC ERGO) was approved by the National Company Law Tribunal (NCLT) on September 29, 2020. The final approval for the merger by the Insurance Regulatory and Development Authority of India (IRDAI) was received on November 11, 2020. The appointed date of the merger was March 1, 2020 and the effective date was November 13, 2020. Consequently, HDFC ERGO Health Insurance Limited was dissolved with effect from the said date.

RBI had directed the Corporation to reduce its shareholding in its insurance companies to below 50%. Shareholders'' approval for the same was obtained at the Annual General Meeting (AGM) of the Corporation held on July 30, 2020.

Capital Adequacy Ratio

As at March 31, 2021, the Corporation''s capital adequacy ratio (CAR) stood at 22.2%, of which Tier I capital was 21.5% and Tier II capital was 0.7%.

As per regulatory norms, the minimum stipulated capital adequacy ratio to be achieved on or before March 31, 2021 was 14% and the minimum Tier I capital was 10%. The minimum capital adequacy ratio for HFCs would increase to 15% on or before March 31, 2022.

Corporate Social Responsibility (CSR)

During the year, the Corporation''s CSR activities focused primarily on COVID-19 relief, education, healthcare, livelihoods and supporting persons with disabilities. Other interventions taken up during the year included support for senior citizen homes, support for Olympic athletes including para-athletes and environmental programmes supporting solid waste management, green energy and ecological restoration for urban and rural communities.

The Corporation prioritised key subthematic areas within each of these sectors to ensure that the CSR interventions were targeted most optimally. The Corporation contributed directly and through the H T Parekh Foundation to the identified social sectors.

Further details on the prescribed CSR spend under Section 135 of the Companies Act, 2013 and the amount spent during the year under review are provided in the Annual Report on CSR activities annexed to this report.

During the year, the Corporation sold 1.43% of its shareholding in HDFC Life Insurance Company Limited (HDFC Life). As at March 31, 2021, the Corporation''s shareholding in HDFC Life stood at 49.97%.

Accordingly, HDFC Life and its subsidiaries, HDFC Pension Management Company Limited and HDFC International Life & Re Company Limited ceased to be subsidiaries of the Corporation, under the Companies Act, 2013.

However, for the purpose of consolidated financial statements, the above-mentioned companies will continue to be accounted as subsidiary companies. As per Indian Accounting Standards, the Corporation consolidates a subsidiary when it controls the said company.

As per RBI''s directive, the Corporation has to reduce its shareholding in HDFC ERGO to below 50% by May 12, 2021.

HDFC Credila Financial Services Limited, a wholly owned subsidiary of the Corporation was converted into a public limited company (from a private limited company) with effect from October 8, 2020.

The Corporation has not made any loans or advances in the nature of loans to any of its subsidiary or associate company or companies in which its directors are deemed to be interested, other than in the ordinary course of business.

The Corporation is in compliance with the provisions of Foreign Exchange Management Act, 1999 with respect to downstream investments made by it/by its subsidiaries during the year. Further, as required by the

Prevention, Prohibition and Redressal of Sexual Harassment of Women at the Workplace

The Corporation has a policy on prevention, prohibition and redressal of sexual harassment of women at the workplace and has an Internal Complaints Committee (ICC) in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Corporation''s policy on the same is placed on the Corporation''s website. The ICC comprises majority of women members. Members of the Corporation''s ICC are responsible for conducting inquiries pertaining to such complaints.

The Corporation on a regular basis sensitises its employees, including outsourced employees on the prevention of sexual harassment at the workplace through workshops, group meetings, online training modules and awareness programmes which are held on a regular basis. The Corporation also conducted a special training programme for the members of the ICC. During the year, two complaints were received by the ICC. One case was reviewed and disposed of while the other case which was received in the month of March 2021 was being investigated by the ICC as at March 31, 2021.

Particulars of Loans, Guarantees or Investments

Since the Corporation is an NBFC-HFC, the disclosures regarding particulars of the loans given, guarantees given and securities provided is exempt under the provisions of Section 186 (11) of the Companies Act, 2013.

Foreign Exchange Management (Nondebt Instruments) Rules, 2019, the Corporation has obtained a certificate from statutory auditors on the same.

A review of the key subsidiary and associate companies of the Corporation form part of the MD&A which forms part of this report. Further, a statement containing salient features of financial statements of the subsidiaries and associates of the Corporation in the prescribed Form No. AOC-1 is provided elsewhere in this annual report.

Particulars of Employees

HDFC had 3,226 employees as of March 31, 2021. During the year, 15 employees employed throughout the year were in receipt of remuneration of '' 1.02 crore or more per annum and 1 employee employed for part of the year was in receipt of remuneration of '' 8.5 lac or more per month.

In accordance with the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and particulars of the top ten employees in terms of remuneration drawn and of the aforesaid employees are set out in the annex to the Directors'' Report. In terms of the provisions of Section 136(1) of the Companies Act, 2013 read with the rule, the Directors'' Report is being sent to all shareholders of the Corporation excluding the annex. Any shareholder interested in obtaining a copy of the annex may write to the Corporation.

Further disclosures on managerial remuneration are annexed to this report.

As regards investments made by the Corporation, the details of the same are provided in notes to the financial statements of the Corporation for the year ended March 31, 2021 (note 10).

Particulars of Contracts or Arrangements with Related Parties

The particulars of contracts or arrangements with related parties as prescribed in Form No. AOC-2 is annexed to this report. Details of related party transactions are given in the notes to the financial statements.

The policy on Related Party Transactions of the Corporation ensures proper approval and reporting of the concerned transactions between the Corporation and its related parties.

The policy on Related Party Transactions is published elsewhere in the annual report and is also placed on the Corporation''s website.

Particulars Regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

During the year ended March 31, 2021, earnings in foreign currency stood at '' 2 crore and expenditure in foreign currency stood at '' 782 crore (largely pertaining to interest on foreign currency borrowings).

The Corporation is in the business of housing finance and hence its operations are not energy intensive.

The Corporation is cognisant of the importance of imbibing measures towards optimum energy utilisation and conservation.

Auditors

At the 40^th AGM of the Corporation held on July 26, 2017, the members had appointed Messrs B S R & Co. LLP, Chartered Accountants, (firm registration number 101248W/W-100022) as the statutory auditors for a term of 5 consecutive years and to hold office until the conclusion of the 45^th AGM.

The details of remuneration paid by the Corporation to Messrs B S R & Co. LLP, chartered accountants are provided in note 34.1 of the financial statements. The non-audit fees paid to the statutory auditors by the Corporation does not exceed the audit/ limited review fees.

During the year, Messrs B S R & Co. LLP, chartered accountants and all entities in the network firm of which the statutory auditor is a part received a total remuneration of '' 9.02 crore from the Corporation and its certain subsidiaries. The remuneration pertains to fees for audit, internal financial control reporting, limited reviews, tax audits and taxation services, certifications and other matters.

In accordance with applicable laws, during the year, the audit partner was rotated.

The auditors'' report annexed to the financial statement for the year under review does not contain any qualifications.

As per the guidelines issued by RBI on April 27, 2021 for the appointment of statutory auditors, NBFC-HFCs with an asset size of ''15,000 crore and above are required to have a minimum of two audit firms. The guidelines have to be adopted from the second half of FY22 onwards.

The guidelines also require rotation of audit firm after a period of 3 years. Since B S R & Co. LLP, chartered accountants has completed the specified time period as the statutory auditors, the Corporation would have to appoint two new audit firms for conducting the audit for FY22. The Corporation is in the process of identifying suitable audit firms and the requisite approval of the members will be sought at a future date.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Messrs Parikh & Associates, practicing company secretaries undertook the secretarial audit of the Corporation for the FY21. The Secretarial Audit Report is annexed to this report and does not contain any qualifications.

The Secretarial Compliance Report as prescribed by SEBI is provided elsewhere in the annual report.

The Board of Directors of the Corporation at its meeting held on May 7, 2021, appointed Messrs BNP & Associates, practicing company secretaries as the secretarial auditors to undertake the secretarial audit of the Corporation for FY22.

Orders Passed by Regulators

During the year, there were no significant or material orders passed by the regulators or courts or tribunals against the Corporation.

In September 2020, NHB imposed a monetary penalty of '' 1,50,000 on the Corporation for non-compliance with two provisions of the Housing Finance Companies (NHB) Directions, 2010 pertaining to FY 2018-19.

The Corporation paid the penalty on October 8, 2020. The Corporation maintains that this is not significant or material in nature.

Directors’ Responsibility Statement

In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013 and based on the information provided by the management, your directors state that:

a) In the preparation of annual accounts, the applicable accounting standards have been followed;

b) Accounting policies selected have been applied consistently. Reasonable and prudent judgements and estimates have been made so as to give a true and fair view of the state of affairs of the Corporation as at March 31, 2021 and of the profit of the Corporation for the year ended on that date;

c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Corporation and for preventing and detecting frauds and other irregularities;

d) The annual accounts of the Corporation have been prepared on a going concern basis;

e) Internal financial controls have been laid down to be followed by the Corporation and such internal financial controls are adequate and operating effectively; and

Material changes and commitment, if any, affecting the financial position of the Corporation from the financial year end till the date of this report

There are no material changes and commitments affecting the financial position of the Corporation which have occurred after March 31, 2021 till the date of this report.

Acknowledgements

The directors place on record their gratitude for the support of various regulatory authorities including NHB, RBI, SEBI, IRDAI, Pension Fund Regulatory and Development Authority, Ministry of Housing and Urban Affairs, Ministry of Corporate Affairs, Registrar of Companies, Financial Intelligence Unit (India), the stock exchanges, National Securities Depository Limited and Central Depository Services (India) Limited.

The Corporation acknowledges the role of all its key stakeholders -

f) Systems to ensure compliance with the provisions of all applicable laws are in place and were adequate and operating effectively.

Internal Financial Control

The Corporation has put in place adequate policies and procedures to ensure that the system of internal financial controls is commensurate with the size and nature of the Corporation''s business. These systems provide a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes, safeguarding of assets of the Corporation, prevention and detection of frauds, accuracy and completeness of accounting records and ensuring compliance with corporate policies.

Annual Return

The Form No. MGT-7 for FY21 is uploaded on the Corporation''s website.

shareholders, borrowers, channel partners, depositors, deposit agents and lenders for their continued support to the Corporation.

Your directors place on record their appreciation for the hard work and dedication of all the employees and support services of the Corporation and the co-operation of all its subsidiary and associate companies, especially during the difficult times of the pandemic.

Last and most importantly, your directors remain extremely grateful to the medical fraternity, frontline workers and other first-hand responders who continue to work tirelessly in an endeavour to overcome the pandemic.

On behalf of the Board of Directors

MUMBAI DEEPAK S. PAREKH

May 7, 2021 Chairman

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Mar 31, 2019

Dear Stakeholders,

The Directors take great pleasure in presenting the 25th Annual Report on the business and operations of your Bank, together with the audited accounts for the year ended March 31, 2019. A journey of a thousand miles begins with a single step. Ours began a quarter of a century back with the launch of the first branch in Mumbai on February 18, 1995. On the same day in 2019, your Bank entered its silver jubilee year by opening its 5,000th branch again at Mumbai. Along the way it has metamorphosed from a wholesale bank into one with an equally strong retail presence and is well underway in its journey of offering an omni channel customer experience. In the semi urban and rural areas, where your Bank has over half its banking outlets, it is acting as a change agent not only through its banking services but social initiatives as well under the umbrella brand Parivartan. As it enters its silver jubilee year, your Bank has impacted the lives of about 10 crore Indians directly or indirectly ie over 4.9 crore customers, the 5 crore plus people through its social initiatives and families of its over 1.9 lakh employees (including that of its two subsidiaries).

In the year ended March 31, 2019 your Bank continued on this path. This came in an economic environment where the Indian economy stood out as an outlier despite facing various challenges both externally and internally. Externally, it was buffeted by volatile crude prices, rising interest rates in the developed world particularly in the US, heightened trade tensions and geopolitical uncertainties in some parts of the world. Internally, the economy was affected by serious concerns regarding the financial health of the NBFC sector, the continuing high NPA levels in the banking space, slowing consumption demand and some concerns on the fiscal side. Not to mention the uncertainty caused by the imminent general elections. The Indian economy however continued to be the fastest growing in the world thanks to the reforms of the past few years.

In the year under review, your Bank delivered a strong financial performance on the back of an improvement in a majority of its key parameters.

Financial Parameters

Your Bank recorded an improvement in a majority of its key financial parameters. At Rs. 48,243.2 crore, Net Interest Income rose by 20.3 per cent. Core Net Interest Margin remained stable at 4.3 per cent. Gross Non-Performing Assets (NPAs) at 1.36 per cent is among the lowest in the industry. This was largely due to the Bank’s prudent credit evaluation of the targeted customer profile and having a diversified loan book spread across customer segments, products, and sectors plus managing risk-return decisions with discipline. Your Bank’s Net Profit at Rs. 21,078.1 crore went up by 20.5 per cent.

In addition, the year stood out for one of the largest fund raising in your Bank’s history. It also continued to transform lives through Parivartan and securing recognition.

1) Fund Raising

Your Bank raised Rs. 23,715.9 crore in the year under review. This comprises a preferential allotment to Housing Development Finance Corporation Ltd of Rs. 8,500 crore, a Qualified Institutional Placement of Rs. 2,775.0 crore and an ADR offering of $ 1,820 million (Rs. 12,440.9 crore). Consequent to the above issuances, share capital increased by Rs. 20.89 crore and share premium increased by Rs. 23,568.7 crore. This is net of share issue expenses of Rs. 126.3 crore. The issuances were made pursuant to the shareholder and regulatory approvals. This has resulted in a strengthening of its capital structure, increasing solvency and shoring up of its Capital Adequacy Ratio.

2) Parivartan

The Bank in the year under review has continued its journey of social commitment through Parivartan which means change. Your Bank firmly believes that businesses cannot prosper if the communities in which they operate don’t. This is what has been inspiring its social initiatives. This change has been brought about principally by about 10 per cent of the Bank’s workforce which works on the Sustainable Livelihood Initiative (SLI) which helps people improve their lives by upgrading their skillsets and, thus, enabling them to break out of the cycle of poverty. And through its ‘Teaching-The-Teacher’ (3T) initiative which has potentially impacted 1.6 crore students as well as the Holistic Rural Development Programme which has already touched another possible 14.4 lakh people spread across more than 1,100 villages. We are also happy to report that in the year under review, your Bank has met the mandatory CSR expenditure through a spend of Rs. 443.8 crore.

3) Awards and Recognition

The Bank continued to win awards and laurels. Notably, it was named India’s most valuable brand for the fourth year in a row in the BrandZ survey of Top 50 Most Valuable Indian Brands. HDFC Bank was also ranked No 1 in India by customers in the first edition of the ‘World’s Best Banks’ survey by Forbes magazine. The publication partnered with market research firm Statista to measure the best banks in 23 countries and customers were asked to rate banks on overall recommendation and satisfaction, as well as on the 5 key attributes namely: Trust; Terms and Conditions; Customer Service; Digital Device; Financial Advice.

Summary

To sum up, your Bank is geared up for the next phase of growth given the looming market opportunities and its strong positioning in each of its major franchises. And also make a greater contribution to bridge the divide between India and Bharat be it through its business or social initiatives. This, of course, would not have been possible without the contribution of our over 98,000 employees.

Mission and Strategic Focus

Your Bank’s mission is to be a ‘World-Class Indian Bank.’ Its business philosophy is based on five core values: Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. The last value Sustainability should be viewed in consonance with Environmental, Social and Governance criteria. As a part of this, HDFC Bank through its umbrella brand Parivartan seeks to bring about change in the lives of communities mainly in Rural India.

The business objective has been to continue building sound customer franchises across distinct businesses so as to be a preferred banking services provider to achieve healthy growth in profitability consistent with the Bank’s risk appetite.

In line with the above, your Bank’s business strategy was to take digitisation to the next level to achieve the following:

- Deliver superior experience and greater convenience to customers

- Increase market share in India’s expanding banking and financial services industry

- Expand geographical reach

- Cross-sell the broad financial product portfolio

- Sustain strong asset quality through disciplined credit risk management

- Maintain low cost of funds

Your Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. This is articulated through a well-documented Code of Conduct that every employee has to affirm annually that he / she will abide by.

Summary of Financial Performance (Rs. crore)

Particulars	For the year ended / As on
	March 31, 2019	March 31, 2018
Deposits and Other Borrowings	1,040,226.1	911,875.6
Advances	819,401.2	658,333.1
Total Income	1,16,597.9	95,461.7
Profit Before Depreciation and Tax	33,339.8	27,603.6

Profit After Tax	21,078.1	17,486.8
Profit Brought Forward	40,453.4	32,668.9
Total Profit Available for Appropriation	61,531.5	50,155.7
Appropriations
Transfer to Statutory Reserve	5,269.5	4,371.7
Transfer to General Reserve	2,107.8	1,748.7
Transfer to Capital Reserve	105.3	235.5
Transfer to / (from) Investment Reserve	-	(44.2)
Transfer to / (from) Investment Fluctuation Reserve	773.0	-
Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits	4,052.6	3,390.6
Balance carried over to Balance Sheet	49,223.3	40,453.4

Dividend

Your Bank has a dividend policy that, inter alia, balances the objectives of appropriately rewarding shareholders and retaining capital in order to fund future growth. It has a consistent track record of steady increase in dividend distribution, with the Dividend Payout Ratio ranging between 20 per cent and 25 per cent - a range that the Board endeavours to maintain.

The dividend policy of your Bank is available on the Bank’s website at the following link: http://www.hdfcbank.com/htdocs/common/pdf/ corporate/Dividend-Distribution-Policy.pdf

Consistent with this policy and in recognition of the overall performance during the year under review, your Directors are pleased to recommend a dividend of Rs. 15 per equity share of Rs. 2 as against Rs. 13 per equity share in the previous year. As you are aware, this dividend will be subject to tax to be paid by the Bank. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance Sheet Date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend from Profit and Loss Account for the year ended March 31, 2019. However, the effect of the proposed dividend, including tax on dividend aggregating to Rs. 4,924.64 crore, has been reckoned in determining capital funds in the computation of capital adequacy ratio as at March 31, 2019.

Ratings

	Instrument	Rating	Rating Agency	Comments
	Fixed Deposit Programme	CARE AAA (FD)	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
		IND Taaa	India Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	Certificate of Deposits Programme	CARE A1 IND A1	CARE Ratings India Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk. Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.

Long Term Unsecured, Subordinated (Lower Tier 2) Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	IND AAA	India Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Upper Tier 2 Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Infrastructure Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Additional Tier I Bonds (Under Basel III)	CARE AA	CARE Ratings	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
	CRISIL AA	CRISIL	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
	IND AA	India Ratings	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
Tier II Bonds (Under Basel III)	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.

Issuance of Equity Shares and Employee Stock Options (ESOP)

As on March 31, 2019, the issued, subscribed and paid up capital of your Bank stood at Rs. 5,446,613,220 comprising 272,33,06,610 equity shares of Rs. 2 each. During the year under review, the Bank issued 3,90,96,817 equity shares to Housing Development Finance Corporation Limited on a preferential basis, 1,28,47,222 equity shares on a qualified institutions placement and 5,25,00,000 equity shares underlying 1,75,00,000 American Depository Receipts (ADRs). Further, 2,37,72,304 equity shares of face value of Rs. 2 each were issued pursuant to exercise of Employee Stock Option (ESOP) by the Bank. The information pertaining to ESOPs is given in ANNEXURE 1 to this report.

The Board of Directors at its meeting held on May 22, 2019 considered and approved the sub-division of one equity share of the Bank having face value of Rs. 2/- each into two equity shares of face value of Re. 1/- each and consequential alteration in the relevant clauses relating to capital of the Memorandum of Association of the Bank. The sub-division of equity shares as above is subject to the approval of the members at the ensuing Annual General Meeting of the Bank.

Further, the Bank had issued 1,14,30,383 underlying equity shares representing Global Depository Receipts (GDRs) of the Bank, which are listed on the Luxembourg Stock Exchange. The Depository for GDRs is represented in India by J.P Morgan Chase Bank N.A. Due to low trading / conversion volume in GDR, the Board of Directors of the Bank at its meeting held on April 20, 2019 has decided to terminate the GDR program. The requisite notice of termination is being issued to the custodian and the depository.

Capital Adequacy Ratio (CAR)

As on March 31, 2019 your Bank’s total CAR, calculated in line with Basel III capital regulations, stood at 17.1 per cent well above the regulatory minimum of 11.025 per cent including the Capital Conservation Buffer of 1.875 per cent. Of this, Tier I CAR was 15.8 per cent. The effect of the proposed dividend has been taken into account in computing these ratios.

Other Statutory Disclosures

Number of Meetings of the Board, attendance, meetings and constitution of various Committees

The details of Board meetings held during the year, attendance of Directors at the meetings and constitution of various Committees of the Board are included separately in the Corporate Governance Report.

Extract of Annual Return

Pursuant to Section 134 (2) (a) and Section 92 (3) of the Companies Act, 2013, the extract of the Annual Return in the prescribed format (MGT-9) is annexed as ANNEXURE 3 to this Report. Further, the Annual Return of the Bank in the prescribed Form MGT-7 is available on the website of the Bank at the link www.hdfcbank.com

Requirement for maintenance of cost records:

The Bank is not required to maintain cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013 Directors’ Responsibility Statement

Pursuant to Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, the Board of Directors hereby state that:

- In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any

- We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2019 and of the profit of the Bank for the year ended on that date

- We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities

- We have prepared the annual accounts on a going concern basis

- We have laid down internal financial controls to be followed by the Bank and ensure that such internal financial controls were adequate and operating effectively

- We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively.

Compliance with Secretarial Standards

The Bank is in compliance with all applicable Secretarial Standards as notified from time to time.

Auditors

The Bank’s current Statutory Auditors are S. R. Batliboi & Co. LLP, Chartered Accountants. S. R. Batliboi & Co. LLP were appointed as Statutory Auditor at the previous AGM of the Bank, to hold office till the conclusion of the ensuing AGM. It is now proposed to appoint S. R. Batliboi & Co. LLP, Chartered Accountants, as Statutory Auditor of the Bank for period of three years with effect from the conclusion of the ensuing AGM, such that their total appointment does not exceed 4 years, which is the maximum permissible term as per Reserve Bank of India, at such fees as detailed in the Notice of the 25th AGM of the Bank.

During the year ended March 31, 2019, fees paid to the Statutory Auditors (S.R. Batliboi & Co. LLP) and its network firms are as follows:

(Rs. in crores)

Fees (including taxes)	HDFC Bank to Statutory Auditors	HDFC Bank to network firms of Statutory Auditors	Subsidiaries of HDFC Bank to Statutory Auditors and its network firms
Statutory Audit	2.50	-	-
Certification & other attest services*	1.30	-	-
Non-audit services	-	-	-
Outlays and Taxes*	0.49	-	-
Total	4.29	-	-

*includes fees classified under share issue expenses, towards certification and other attest services in respect of capital raised during the year. Disclosure under Foreign Exchange Management Act, 1999

As far as FEMA compliances in relation to strategic downstream investments in the Bank’s subsidiaries is concerned, during the year under review, there have been no strategic downstream investments made by Bank in its subsidiaries. Accordingly, the Bank has obtained a certificate from its statutory auditors to this effect.

Related Party Transactions

Particulars of transactions with related parties referred to in Section 188 (1), as prescribed in Form AOC-2 under Rule 8 (2) of the Companies (Accounts) Rules, 2014 is enclosed as ANNEXURE 4.

Particulars of Loans, Guarantees or Investments

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided or any investment made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.

Financial Statements of Subsidiaries and Associates

In terms of Section 134 of the Companies Act, 2013 and read with Rule 8 (1) of the Companies (Accounts) Rules, 2014 the performance and financial position of the Bank’s subsidiaries and associates are enclosed as ANNEXURE 5 to this report. There were no entities which became or ceased to be the Bank’s subsidiaries, associates or joint ventures during the year.

Whistle Blower Policy / Vigil Mechanism

The Bank encourages an open and transparent system of working and dealing amongst its stakeholders. While the Bank’s “Code of Conduct & Ethics Policy” directs employees to uphold company values and conduct business with integrity and highest ethical standards, the Bank has also adopted a “Whistle Blower Policy” which encourages its employees and various stakeholders to bring to the notice of the Bank any issue involving compromise/ violation of ethical norms, legal or regulatory provisions, actual or suspected fraud etc., without any fear of reprisal, discrimination, harassment or victimization of any kind. All such concerns/ complaints are received by the Chief of Internal Vigilance of the Bank and/or by the Whistle Blower Committee through a dedicated email ID or by way of letters etc. All such complaints are enquired into by the appropriate authority within the Bank while ensuring confidentiality of the identity of such complainants. On the basis of their investigation, if the allegations are proved be correct, then the Competent Authority shall recommend to the appropriate Disciplinary Authority to take suitable action against the responsible official and required corrective measures in consultation with the concerned stakeholders. The decision of the Whistle Blower Committee is final and binding on all. Preventive measures or any other action considered necessary is also taken forward by the Competent Authority.

Details of Whistle Blower complaints received and subsequent action taken and the functioning of the Whistle Blower mechanism are reviewed periodically by the Audit Committee of the Board. During the Financial year 2018-19, a total of 56 such complaints were received and taken up for investigation which has resulted in certain staff actions in 15 cases post investigation.

Statement on Declaration by Independent Directors

Mrs. Shyamala Gopinath, Mr. Malay Patel, Mr. Umesh Chandra Sarangi are the Independent Directors whereas Mr. Sanjiv Sachar, Mr. M. D. Ranganath and Mr. Sandeep Parekh are the Additional Independent Directors on the Board of the Bank as on March 31, 2019. All the Independent Directors and Additional Independent Directors have given their respective declarations under Section 149 (6) and (7) of the Companies Act, 2013 and the Rules made thereunder. In the opinion of the Board, the Independent Directors fulfil the conditions relating to their status as Independent Directors as specified in Section 149 of the Companies Act, 2013 and the Rules made thereunder and are independent of the management.

Board Performance Evaluation

The Nomination and Remuneration Committee (NRC) has approved a framework / policy for evaluation of the Board, Committees of the Board and the individual members of the Board (including the Chairperson), which is reviewed annually by the NRC. A questionnaire for the evaluation of the Board, its Committees and the individual members of the Board (including the Chairperson), designed in accordance with the said framework and covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in Corporate Governance was sent out to the Directors. The responses received to the questionnaires on evaluation of the Board and its Committees were placed before the meeting of the Independent Directors for consideration. The assessment of the Independent Directors on the performance of the Board and its Committees was subsequently discussed by the Board at its meeting.

Your Bank has in place a process wherein declarations are obtained from the Directors regarding fulfilment of the ‘fit and proper’ criteria in accordance with RBI guidelines.

The declarations from the Directors other than members of the NRC are placed before the NRC and the declarations of the members of the NRC are placed before the Board. Assessment on whether the Directors fulfil the said criteria is made by the NRC and the Board on an annual basis. In addition, the framework / policy approved by the NRC provides for a performance evaluation of the Non-Independent Directors by the Independent Directors on key personal and professional attributes. In addition to the above parameters, the Board also evaluates fulfillment of the independence criteria as specified in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 by the Independent Directors of the Bank and their independence from the management. Such performance evaluation has been duly completed as above. As Mr. Sandeep Parekh and Mr. M. D. Ranganath were recently appointed as Additional Independent Directors on the Board of the Bank with effect from January 19, 2019 and January 31, 2019 respectively, they abstained from participating in the above Board Performance Evaluation process.

Policy on Appointment and Remuneration of Directors and Key Managerial Personnel

Your Bank has in place a Policy for appointment and ‘fit and proper’ criteria for Directors of the Bank. The Policy lays down the criteria for identification of persons who are qualified and ‘fit and proper’ to become Directors on the Board- such as academic qualifications, competence, track record, integrity, etc. which shall be considered by the NRC while recommending appointment of Directors. The Policy is available on the website of the Bank at the link https://www.hdfcbank.com/assets/pdf/Policy-for-appointment-and-fit-proper-criteria-for-directors.pdf

The remuneration of Whole Time Directors, Key Managerial Personnel and Senior Management is governed by the Compensation Policy of the Bank. The same is available at the web-link https://www.hdfcbank.com/assets/pdf/Compensation-Policy.pdf. The Compensation Policy of the Bank, duly reviewed and recommended by the NRC has been articulated in line with the relevant Reserve Bank of India guidelines.

Your Bank’s Compensation Policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long term success. The Compensation Policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective is to provide a fair and transparent structure that helps the Bank to retain and acquire the talent pool critical to building competitive advantage and brand equity.

Your Bank’s approach is to have a pay for performance culture based on the belief that the Performance Management System provides a sound basis for assessing performance holistically. The compensation system should also take into account factors such as roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the Compensation Policy are also included in Schedule 18 Notes forming part of the Accounts - Note no. 24. Non-Executive Directors are paid remuneration by way of sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory prescriptions.

Further, expenses incurred by them for attending meetings of the Board and Committees are reimbursed at actuals. Pursuant to the relevant RBI guidelines and approval of the shareholders, each of the Non-Executive Directors, other than the Chairperson, are paid profit-related commission of Rs. 1,000,000 (Rupees Ten Lakh Only) per annum.

Mr. Aditya Puri is the Non-Executive Chairman of HDB Financial Services Limited, subsidiary of the Bank. Mr. Puri does not receive any remuneration from the subsidiary. None of the Directors of your Bank other than Mr. Puri is a director of the Bank’s subsidiaries as on March 31, 2019.

Succession Planning

The Bank’s Nomination and Remuneration Committee (NRC) also oversees matters of succession planning of its Directors, Senior Management and Key executives of the Bank. With respect to the tenure of the current Managing Director ending in October 2020, the Board will identify a successor and work to ensure that this is done in a manner that will allow appropriate time for an effective transition of responsibilities. Towards this end, the Nomination & Remuneration Committee of the Board will constitute a Search Committee to undertake a global search of both internal and external candidates.

Significant and Material Orders Passed By Regulators

During the year under review, there were no significant and material Orders passed by any regulators or courts or tribunals against the Bank impacting the going-concern status and Bank’s operations in future.

Directors and Key Managerial Personnel

In compliance with Section 152 of the Companies Act, 2013, Mr. Srikanth Nadhamuni will retire by rotation at the ensuing Annual General Meeting and is eligible for re-appointment.

During the year, Mr. Partho Datta and Mr. Bobby Parikh ceased to be Directors of the Bank from close of business hours on September 29, 2018 and January 26, 2019 respectively, on completing the maximum permitted tenure of eight years as per Banking Regulation Act, 1949. Your Directors place on record their sincere appreciation for the contribution made by Mr. Partho Datta and Mr. Bobby Parikh during their tenure with the Bank and wishes them well in their future endeavors.

Mr. Paresh Sukthankar, Deputy Managing Director, tendered his resignation from the Board of the Bank on August 10, 2018 which came into effect from November 8, 2018. The Board places on record their sincere appreciation for the contribution made by Mr. Paresh Sukthankar during his tenure with the Bank and wishes him well in his future endeavors.

Mr. Sanjiv Sachar, Mr. Sandeep Parekh and Mr. M. D. Ranganath were appointed as Additional Independent Directors on the Board of the Bank with effect from July 21, 2018, January 19, 2019 and January 31, 2019 respectively, subject to the approval of the shareholders.

The brief resume / details regarding the Directors proposed to be appointed / re-appointed as above is furnished in the report on Corporate Governance. There have been no changes in the Directors and Key Managerial Personnel of the Bank other than the above.

Particulars of Employees

The information in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in ANNEXURE 6 and ANNEXURE 7 to this report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

(A) Conservation of Energy

Your Bank has undertaken several initiatives in this area such as:

- Installation of green locks and AC controllers in air conditioning machines in order to save energy and support go-green initiative

- Installation of energy capacitors at high consumption offices to control the power factor and to reduce energy consumption

- All main signboards in branches switched off post 10 p.m.

- Put controls on usage of lifts, ACs, common passage lights and other electrical equipment

- Reduction of contract demand at Kanjurmarg Hub,

- Replacement of CFL Lamps with LED fixtures at Kanjurmarg Hub / WBO / Fort Mumbai / Bank House Indore

- Provision of LED lamps at branches and offices

- Provision of solar panels for captive power generation at our offices in Pune and Bhubaneswar, Noida (Sector 4)

Monitoring and energy saving initiative for 100 branches resulting in power saving of over 10 per cent. The Bank won an award in National Energy Efficiency Circle Competition 2017 - Winner Best Energy Efficient Case study held by CII in May 2017. Considering the benefits accrued, it further extended the monitoring programme to an additional 500 branches across the country and the results have shown power savings over 10%.

(B) Technology Absorption

Your Bank has been at the forefront of using technology absorption and evaluates innovative technology with multiple fintech partners. It has launched a formal Consumer Durable Loans portfolio and product with on-line real-time Digital API based collaboration with third party and fintech application sourcing platforms. Your Bank is leveraging API based Service Oriented Architecture and Middleware for enabling digital initiatives and empowering relationship managers at branches with digital products and services platforms. Your Bank has also begun using robotics and artificial intelligence in digital commerce, corporate supply chain and payment settlement systems to reduce time to market and turnaround time.

(C) Foreign Exchange Earnings and Outgo

During the year, the total foreign exchange earned by the Bank was Rs. 1,720.4 crores (on account of net gains arising on all exchange / derivative transactions) and the total foreign exchange outgo was Rs. 2,130.5 crores towards the operating and capital expenditure requirements.

Secretarial Audit

In terms of Section 204 of the Companies Act, 2013 and the Rules made thereunder, M/s. BNP & Associates, Practicing Company Secretaries had been appointed as Secretarial Auditors of the Bank for the financial year 2018-19. The report of the Secretarial Auditors is enclosed as ANNEXURE 8 to this Report. There are no observations / qualifications / comments in the Report of the Secretarial Auditor.

Corporate Governance

In compliance with Regulation 34 and other applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate report on Corporate Governance along with a certificate of compliance from the Secretarial Auditors, forms an integral part of this Report.

Business Responsibility Report

The Bank’s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its web site www.hdfcbank.com

Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The relevant information is included in the Corporate Governance Report

Acknowledgement

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank’s employees and look forward to their continued contribution in building a ‘World Class Indian Bank.’ Conclusion

It has been a challenging year for the Indian economy externally as well as internally. The good news is that despite the challenges of volatile oil prices, trade wars, rising interest rates, and domestic uncertainties due to the impending general elections in India and slowing consumption demand, India remained the world’s fastest growing economy. Your Bank which grew faster than the system in the year under review is well poised to tap the opportunities of what is still an under penetrated market by leveraging its strong balance sheet and franchise.

As always, your Bank will continue to be judicious. It will continue to leverage its distribution strength and digital platforms to offer a similar experience to customers across urban, semi-urban and rural India.

Needless to say, the Bank will continue to focus on its five core values, namely, Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Its commitment to the highest possible standards of corporate governance remains unwavering even as it embarks on the next stage of its evolution to continue delivering sustainable growth to all its stakeholders.

On behalf of the Board of Directors

Mrs. Shyamala Gopinath

Chairperson

Mumbai, May 22, 2019

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Mar 31, 2018

Dividend

(Rs, crore)

Particulars	For the year ended / As on
	March 31, 2018	March 31, 2017
Deposits and Other Borrowings	9,11,875.6	7,17,668.5
Advances	6,58,333.1	5,54,568.2
Total Income	95,461.7	81,602.5
Profit Before Depreciation and Tax	27,603.6	22,972.2
Profit After Tax	17,486.8	14,549.7
Profit Brought Forward	32,668.9	23,527.7
Total Profit Available for Appropriation	50,155.7	38,077.3
Appropriations
Transfer to Statutory Reserve	4,371.7	3,637.4
Transfer to General Reserve	1,748.7	1,455.0
Transfer to Capital Reserve	235.5	313.4
Transfer to / (from) Investment Reserve	(44.2)	4.3
Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits *	3,390.6	(1.7)
Balance carried over to Balance Sheet	40,453.4	32,668.9

* In terms of revised Accounting Standard (AS) 4-Contingencies and Events Occurring after the Balance Sheet date as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank had not appropriated the proposed dividend from the Statement of Profit and Loss for the year ended March 31, 2017. Hence, the same has been appropriated basis actual payout.

The Bank’s Total Income rose to Rs, 95,461.7 crore for the year under review from Rs, 81,602.5 crore in the previous year. Net Profit increased by 20.2 per cent to Rs, 17,486.8 crore from Rs, 14,549.7 crore.

Appropriations from Net Profit have been effected as per the table given above.

Your Bank has a dividend policy that, inter alia, balances the objectives of appropriately rewarding shareholders and retaining capital in order to fund future growth. It has a consistent track record of steady increase in dividend distribution, with the Dividend Payout Ratio ranging between 20 per cent and 25 per cent - a range that the Board endeavours to maintain. The dividend policy of your Bank is available on the Bank''s website at the following link: http://www.hdfcbank.com/htdocs/common/ pdf/corporate/Dividend-Distribution-Policy.pdf

Consistent with this policy and in recognition of the overall performance during the year under review, your Directors are pleased to recommend a dividend of '' 13 per equity share of '' 2 as against Rs, 11 per equity share in the previous year. As you are aware, this dividend will be subject to tax to be paid by the Bank. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend from Statement of Profit and Loss for the year ended March 31, 2018. However, the effect of the proposed dividend, including tax on dividend aggregating to Rs, 4,067.07 crore, has been reckoned in determining capital funds in the computation of capital adequacy ratio as at March 31, 2018.

Instrument	Rating	Rating Agency	Comments
Fixed Deposit Programme	CARE AAA (FD)	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	IND Taaa	India Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Certificate of Deposits Programme	CARE A1	CARE Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	IND A1	India Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Long Term Unsecured, Subordinated (Lower Tier 2) Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	IND AAA	India Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Tier I Perpetual Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Upper Tier 2 Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Infrastructure Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
Additional Tier I Bonds (Under Basel III)	CARE AA	CARE Ratings	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
	CRISIL AA	CRISIL	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
	IND AA	India Ratings	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
Tier II Bonds (Under Basel III)	CARE AAA	CARE Ratings	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.

Issuance of Equity Shares and Employee Stock Options (ESOP)

As on March 31, 2018, the issued, subscribed and paid up capital of your Bank stood at Rs, 519,01,80,534 comprising 259,50,90,267 equity shares of Rs, 2 each. During the year under review, 3,25,44,550 equity shares were allotted to employees in respect of the equity stock options. The information pertaining to ESOPs is given in ANNEXURE 1 to this report.

Capital Adequacy Ratio (CAR)

As on March 31, 2018 your Bank''s total CAR, calculated in line with Basel III capital regulations, stood at 14.8 per cent, well above the regulatory minimum of 10.875 per cent including the Capital Conservation Buffer of 1.875 per cent. Of this, Tier I CAR was 13.2 per cent. The effect of the proposed dividend has been taken into account in computing these ratios.

MANAGEMENT DISCUSSION AND ANALYSIS

Macroeconomic and Industry Developments

Over the last two years, the Government has taken some key policy decisions including a recapitalization plan of Rs, 2,10,000 crore for public sector banks and introduction of the GST. As mentioned earlier, the growth pangs are only short-term and in the long run, GST is expected to give a fillip to the economy as a whole.

The slowdown in growth witnessed during 2016-17 (compared with 2015-16) intensified in the first quarter of 2017-18; GDP growth slowed to a 13-quarter low of 5.7 per cent, sharply lower than 7.9 per cent expansion in the same quarter of the preceding year. But, as the transitory impact of both GST and the demonetization shock is on the wane, the economy appears to be gradually regaining momentum. GDP growth rebounded to 6.5 per cent in the second quarter of 2017-18, and further to

7.2 per cent in the third quarter of 2017-18 after slowing down in the past five quarters. Going by the 2018 Union Budget, the focus of fiscal policy in the coming year will be on revival of the rural economy and infrastructure expenditure.

Notwithstanding some positive uptake in private investment growth in the second quarter, we believe incremental pick-up in private capital expenditure is likely to be sector and sub-sector specific and gradual. We expect a more formidable recovery in private capital expenditure cycle by the first half of the year ending March 31, 2019. Overall, on the back of the assumption of a pick-up in private consumption, gradual recovery in private capital expenditure and continued support from Government-led capital spending we expect the real GDP growth for 2018-19 to rise to 7.3 per cent from 6.6 per cent in 2017-18.

The moderation in inflation which was seen in 2016-17 continued in the early part of 2017-18 as well, with the CPI falling to a series low of 1.5 per cent in June 2017 driven by both lower food and core inflation. Having averaged 2.6 per cent in the first half of 2017-18, inflation inched up slightly in the second half (average close to 4.4 per cent in second half of 2017-18). Going ahead in FY19, CPI inflation could inch-up to 5.1 per cent on average in the first half of FY19 with much of the rise likely to be on account of an adverse base. Thereafter, in the second half of FY19, while the base effect could be favorable and lead to some moderation in inflation, a lot would depend on how other risks like rising oil prices, higher minimum support prices impact of housing rent allowance increase by several state governments pan out.

Given the recent softer inflation prints while the RBI can afford to wait longer and maintain status quo, eventually, we believe, that elevation of some of the upside risks along with the revival in rural demand could lead to a rate hike by the last quarter of 2018-19.

Going forward, a major risk to the economy could be a sharp increase in oil prices, which could adversely affect inflation, fiscal deficit and the current account deficit. Risks on the external front continue to loom on account of monetary policy uncertainty in the developed nations (particularly on rate hikes'' side), Brexit related uncertainty in the UK and rising protectionist tendencies, especially in the US.

Mission and Strategic Focus

Your Bank''s mission is to be a ‘World-Class Indian Bank.'' Its business philosophy is based on five core values: Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. This year, the objective has been to continue building sound customer franchises across distinct businesses so as to be a preferred banking services provider to achieve healthy growth in profitability consistent with the Bank''s risk appetite.

In line with the above, your Bank''s business strategy was to take digitization to the next level to achieve the following:

- Deliver superior experience and greater convenience to customers

- Increase market share in India''s expanding banking and financial services industry

- Expand geographical reach

- Cross-sell the broad financial product portfolio

- Sustain strong asset quality through disciplined credit risk management

- Maintain low cost of funds

Your Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. This is articulated through a well-documented Code of Conduct that every employee has to affirm annually that he / she will abide by.

The financial performance of your Bank during the year ended March 31, 2018, remained healthy with Total Net Revenue (Net Interest Income Plus Other Income) rising by 21.7 per cent to Rs, 55,315.2 crore from Rs, 45,435.7 crore in the previous year. Revenue growth was driven by an increase in both Net Interest Income and Other Income. Net Interest Income grew by 21 per cent to Rs, 40,094.9 crore due to acceleration in loan growth coupled with Core Net Interest Margin (CNIM) of 4.3 per cent.

Other Income grew by 23.8 per cent to Rs, 15,220.3 crore. The largest component was Fees and Commissions, which increased by 29.3 per cent to Rs, 11,393.9 crore. Foreign Exchange and Derivatives revenue was Rs, 1,523.5 crore, gain on revaluation and sale of investments was Rs, 924.7 crore and recoveries from written-off accounts was Rs, 1,093.8 crore.

Operating (Non-Interest) Expenses rose to Rs, 22,690.4 crore from Rs, 19,703.3 crore. During the year, your Bank has set up 72 new banking outlets and 375 ATMs. This, along with strong growth in retail asset and card products, resulted in higher infrastructure and staffing expenses. Staff expenses also went up due to annual wage revisions. Despite higher infrastructure expenses, the Cost to Income Ratio improved to 41 per cent from 43.4 per cent.

Total Provisions and Contingencies were Rs, 5,927.5 crore as compared to Rs, 3,593.3 crore the preceding year. Your Bank''s provisioning policies remain more stringent than regulatory requirements.

The Coverage Ratio based on specific provisions alone excluding Write-offs is 70 per cent; including General and Floating provisions, it is 121 per cent. Your Bank made General Provisions of Rs, 597.4 crore during the year.

Profit Before Tax grew by 20.6 per cent to Rs, 26,697.3 crore. After providing for Income Tax of Rs, 9,210.6 crore, Net Profit increased by 20.2 per cent to Rs, 17,486.8 crore from Rs, 14,549.7 crore. The Return on Average Net Worth was 18 per cent while the Basic Earnings Per Share was Rs, 67.8, up from Rs, 57.2.

As on March 31, 2018, your Bank''s Total Balance Sheet stood at Rs, 1,063,934 crore, an increase of 23.2 per cent over Rs, 8,63,840 crore on March 31, 2017. Total Deposits rose by 22.5 per cent to Rs, 7,88,771 crore from Rs, 6,43,640 crore. The Current Account and Savings Account (CASA) Deposit growth also increased.

Savings Account Deposits grew by 15.6 per cent to Rs, 2,23,810 crore while Current Account Deposits rose by 3.2 per cent to Rs, 1,19,283 crore. Time Deposits stood at Rs, 4,45,678 crore, representing an increase of 33.2 per cent. CASA Deposits accounted for 43.5 per cent of Total Deposits. Advances stood at Rs, 6,58,333 crore, an increase of 18.7 per cent. The Bank''s domestic loan portfolio of Rs, 6,43,794 crore grew by 19.5 per cent over March 31, 2017. The Bank had a share of approximately 6.7 per cent in Total Domestic Deposits and

7.4 per cent in Total Domestic Advances. Its Credit Deposit (CD) Ratio stood at 83 per cent on March 31, 2018.

BUSINESS OPERATIONS

Our Bank''s operations are split into domestic and international, albeit small.

DOMESTIC BUSINESS

Our domestic business comprises the following:

A) Retail Banking

Your Bank''s Retail Banking Business registered robust growth in the year under review. Total Retail Deposits grew by 14.4 per cent to Rs, 5,80,006 crore from Rs, 5,06,843 crore in the preceding year while Retail Advances rose by 27.4 per cent to Rs, 3,76,167 crore from Rs, 2,95,161 crore.

Growth in Retail Assets was led by Personal Loans, Auto Loans and, Credit Cards.

The Bank is a leader in the Auto Loans Segment with a strong presence in commercial vehicle and two-wheeler financing. Four-wheeler financing registered a strong

22.8 per cent growth.

In Two-Wheeler Financing, your Bank is the first in the country to cross the 10 lakh vehicles milestone. In the Commercial Vehicle Segment, your Bank was able to ward off intense competition and log robust profitable growth using its strong brand equity and service. It chose not to compete on price.

The Personal Loan Business also surged to Rs, 71,876 crore on the back of strong product offerings and speedy disbursals. The Bank is a pioneer in various digital loans. Your Bank''s 10 second Personal Loan and Digital Loan Against Shares were industry firsts.

In the credit card business, your Bank achieved yet another milestone during the fiscal by becoming the first bank in the country to issue one crore cards. Existing customers accounted for 82 per cent of the new cards issued.

In addition to this, the Bank operates in the Home Loan business in conjunction with HDFC Limited. As per this arrangement, the Bank sells HDFC Home Loans while HDFC Ltd approves and disburses them. The Bank receives sourcing fee for these loans and has the option to purchase up to 70 per cent of the fully disbursed loans either through the issue of mortgage backed Pass Through Certificates (PTCs) or by a direct assignment of loans. The balance is retained by HDFC Limited. Your Bank originated, on an average, Rs, 2,000 crore of Home Loans every month in the year under review.

The Bank also distributes Life Insurance, General Insurance and Mutual Funds, often referred to as Third-Party Products.

Income from this business grew by 51 percent from Rs, 1,381 crore to Rs, 2,091 crore and accounted for

18 per cent of total fee income in the year ended March 31, 2018 , compared with 16 per cent in the preceding year. This was primarily on account of distribution of mutual funds of the top asset management companies in the country. Mutual Fund industry saw an unprecedented flow of household savings into the mutual funds. In the system the AUM of the individual investors grew by 36.8 per cent to about Rs, 11.7 lakh crore* as of March 31, 2018.

Your bank has adopted an open architecture model by entering into multiple corporate agency agreements in life, general and health insurance distribution. During the year under review your Bank tied up with two life insurance, two general insurance and three health insurance service providers in addition to the existing tie-ups.

*Source for Industry numbers (AMFI India)

As regards physical distribution network the Bank also added 72 banking outlets during the year taking the total to 4,787 spread across 2,691 cities / towns. The share of semi-urban and rural outlets in the total network is 53 per cent, reflecting our continued focus on them. The number of ATMs also increased, to 12,635 from 12,260. The number of customers your Bank catered to as on March 31, 2018 was over 4.36 crore from 4.05 crore in the previous year.

The Payments Business where your Bank has a dominant presence merits a special mention. With 2.43 crore debit cards, 1.07 crore credit cards and 4.04 lakh POS terminals and m-PoS installations, it is among the largest facilitators of cashless payments using plastic in the country.

The Bank has made rapid strides in adopting other aspects of digitization as well. The Bank''s payments business has launched digital offerings such as Bharat QR Code, UPI, Aadhaar and SMS pay solutions. It has also pioneered path-breaking products such as the SmartHub app for small merchants and DigiPos, which enables traditional PoS machines to accept digital payments. Merchants and customers alike have found these solutions useful.

In the year under review, the Virtual Relationship Management (VRM) programmme gained substantial traction. Through this, relationship managers reach out to customers through remote and digital platforms, leading to deeper engagement in a cost-effective manner. These managers are a single point of contact for customers banking and financial needs. This programme which offers tailor-made solutions, using carefully drawn customer level plans has been well received in the 18 months since its launch. The number of customers has trebled during this period.

B) Wholesale Banking

This business focuses on institutional customers such as the Government, Large and Emerging Corporate, and SMEs. Your Bank''s offerings in this segment include Working Capital and Term Loans as well as Trade Credit, Cash Management, Supply Chain Financing, Foreign Exchange, and Investment Banking services. The Wholesale Banking business recorded healthy growth, ending the year with a loan book size of approximately '' 2,88,000 crore constituting about 43 per cent of the Bank''s total book.

This was an increase of about 9.5 per cent over approximately '' 2,63,000 crore recorded in the previous year. The performance in this segment must be seen in the wider context of an otherwise subdued credit environment and excess liquidity in the banking system, which exercised a downward pressure on interest rates for much of the year. The Bank was able to expand its share of the customer wallet, primarily using sharper customization and cross-selling.

Corporate Banking, which focuses on large, well-rated companies, continued to remain the biggest contributor to Wholesale Banking in terms of asset size. Despite a subdued credit environment, the Emerging Corporate Group, which focuses on the mid-market segment, too witnessed significant growth.

Your Bank leveraged its vast geographical reach, technology backbone, automated processes, suite of financial products and quick turnaround times to offer a differentiated service, which has resulted in new customer acquisition as well as a higher share of the wallet from existing customers. The business continues to have a diversified portfolio in terms of both industry and geography.

The year under review has been a challenging but defining one for Micro, Small and Medium Enterprises (MSMEs). The sector faced temporary challenges arising from clarity and compliance issues in the implementation of GST. Your Bank fine-tuned its strategy and capitalized on new opportunities to grow the business. The Bank''s advances to MSMEs amounted to Rs, 89,042.1 crore as on March 31, 2018.

The Investment Banking business cemented its already prominent position in the Debt Capital Markets. For three consecutive years now, your Bank has been ranked 2nd in the Bloomberg rankings of Rupee Bond book runners.

In the Government business, the Bank sustained its focus on tax collections, collecting direct tax of Rs, 2.61 lakh crore and indirect tax of Rs, 0.85 lakh crore during the year. In addition to the taxes / duties collected on behalf of several state governments, the Bank also collected Rs, 1.01 lakh crore in the form of GST. We continue to enjoy a pre-eminent position among the country''s major stock and commodity exchanges in both Cash Management Services and Cash Settlement Services.

The Bank has, as part of its digitization drive, ensured a larger conversion of cash payments into electronic ones. The ‘Trade-on-Net'' offering, which gives clients access to a host of services such as Remittances, Letters of Credit and Guarantees, has gained acceptance. SM@Bank, our online solution for SME customers, also continued to gather momentum.

Your Bank''s pre-eminent position in the Wholesale Business was recognized in a survey conducted by Greenwich Associates, a leading global provider of market and intelligence services. It rated your Bank as number one in India in the middle market segment in terms of market penetration and number two in the large corporate segment.

C) Treasury

The Treasury is the custodian of the Bank''s cash / liquid assets and handles its investments in securities, foreign exchange and cash instruments. It manages the liquidity and interest rate risks on the balance sheet and is also responsible for meeting reserve requirements. The vertical also helps manage the treasury needs of customers and earns a substantial part of its revenues through fee income generated from transactions customers undertake with the Bank while managing their foreign exchange and interest rate risks.

Revenue accrues from spreads on customer transactions based on trade and remittance flows and demonstrated hedging needs. The Bank recorded revenue of Rs, 1,523.5 crore from foreign exchange and derivative transactions in the year under review. While plain vanilla forex products were in demand across all customer segments, the demand for derivative products came mostly from large and emerging corporate.

As a part of prudent risk management, the Bank enters into foreign exchange and derivative deals with counterparties after it has set up appropriate credit limits based on its evaluation of the ability of the counterparty to meet its obligations. Where the Bank enters into foreign currency derivative contracts not involving the Indian Rupee with its customers, it typically lays them off in the inter-bank market on a matched basis. For such foreign currency derivatives, the Bank primarily carries the counterparty credit risk (where the customer has crystallised payables or mark-to-market losses) and may carry only residual market risk if any. The Bank also deals in derivatives on its own account, including for the purpose of its own balance sheet risk management.

The Bank maintains a portfolio of Government Securities, in line with regulatory norms governing the Statutory Liquidity Ratio (SLR). A significant portion of these SLR securities are held in the ‘Held-to-Maturity'' (HTM) category, while some are held in the ‘Available for Sale'' (AFS) category. The Bank is also a Primary Dealer for Government Securities. As a part of this business, as well as otherwise, the Bank holds fixed income securities in the ‘Held for Trading'' (HFT) category.

The Bank is in the process of implementing a new Treasury solution provided by Murex. The first phase of implementation went live this year and full implementation will be completed in the next 12-18 months. This will be an integrated solution for front-office, mid-office and back-office and will replace many existing software / systems.

D) Partnering with the Government

You will be happy to know that your Bank has been closely working with the Government both at the Central and State levels primarily in the following three areas:

1) Digitization and Digital India

a) Ministry of Electronics & Information Technology (MeitY) has ranked your Bank as the Number 1 Bank for supporting many of its initiatives. Your Bank is proud to be one of the few banks that was able to meet the targets in installing Point of Sale (PoS) units, Bharat QR and BHIM app following demonetization.

b) The Bank partnered with Thane city to launch the first one-city-one-card as part of the Smart City initiative. A similar solution has also been created for Panaji Smart City. In Kanpur, a customized mobile app has been created to further support the Smart City initiative. To further the government''s objective to improve urban mobility, your Bank has partnered with various states including Rajasthan and Uttar Pradesh to provide transit cards and payment solutions.

c) Your Bank is working to ensure that funds under a host of schemes including Direct Benefit Transfer (DBT) and Mahatma Gandhi National Rural Employee Guarantee Act reach the intended beneficiaries. Towards this end, it has partnered with various Panchayats across the country for the Public Fund Management System (PFMS). Dedicated teams from the Bank work closely with government authorities and play a critical role by providing real-time, on-ground feedback for refining project architectures. The Bank also enables automation and digitization in various government departments to help improve both time and cost efficiencies. For example, the Bank is developing a technology solution in partnership with a software company to manage the National Health Mission (Madhya Pradesh scheme) more efficiently. It has also been working on various on e-Governance initiatives such as MahaOnline (Maharashtra) and Mee Seva (Andhra Pradesh).

2) Customized Banking Solution for Government Employees

Your Bank has designed a banking package to suit the needs of government employees, at the state and central levels. The offering includes an overdraft secured by their salary account, complimentary insurance covers and fine pricing on loans.

3) Start-Up Fund and Smart Up Banking

Through its Smart Up Programme for Start-ups and Start-Up Fund, your Bank is working with various state governments and incubators / accelerators to promote entrepreneurship. Memoranda of Understanding have already been signed with three state governments to enable execution of varied aspects of their respective start-up policies. Your Bank also works with seven incubators certified by the Department of Science and Technology, including various Indian Institutes of Technology and Indian Institutes of Management, to identify Social Start-ups that require financial and advisory support.

E) Rural

1) Agriculture and Allied Activities

Your Bank''s credit to Agriculture and Allied activities stood at Rs, 1,13,160.6 crore on March 31, 2018, representing an increase of 45.2 per cent over Rs, 77,921.0 crore in the previous year.

Over half of India''s population depends on agriculture for livelihood. The key to the Bank''s success here has been its ability to tap the opportunities herein through the following:

- Wide product range

- Faster turnaround time

- Digital solutions

Our product range includes Pre and Post-Harvest Crop Loans, Two-Wheeler and Auto Loans and Loans against Gold Jewellery, Personal Loans and other mortgage loans. Consequently, the Bank has established a strong footprint in the rural hinterland with Crop Loans. Apart from advising the farmers on their financial needs, your Bank is increasingly focusing on facilitating them on benefits of various government / regulatory schemes such as crop insurance and interest subvention.

The Bank has also designed a range of crop and geography-specific products keeping in mind the harvest cycles and the local needs of farmers spread across diverse agro climatic zones.

Using technology, we are able to disburse some loans within three working days (in select geographies) and loan enhancements in a few seconds through ATMs and mobile phones. Our products such as Post-Harvest Cash Credit and Warehouse Receipt Financing enable faster cash flows to the farmer. Credit is also disbursed to allied agricultural activities such as Dairy, Pisciculture, and Sericulture.

Twelve farmer centres or Kisan Dhan Vikas Kendras have been rolled out in Punjab, Maharashtra, Uttar Pradesh and Madhya Pradesh. At these centres, farmers secure information on soil health, mandi prices, various government initiatives and expert advice. These services are also available on the Bank''s website in vernacular languages. The Bank also provides advisory on weather, cropping, and harvesting through SMS.

Digitizing Payments, Easing Cash Flow: This is our effort to facilitate transparency in the milk procurement and payment process. Under this initiative, Multi-function Terminals (MFTs), popularly known as Milk-to-Money ATMs, are deployed in dairy societies. The MFTs link the milk procurement system of the dairy society to the farmers'' account to enable faster payments. MFTs have cash dispensers that function as standard ATMs. The transparency in the milk collection process, including the quality of milk, benefits both farmers and society. Payments are credited without the difficulties associated with the cash distribution process. What is more, this creates a credit history that can then be used as the basis for accessing bank credit. Apart from Dairy and Cattle Loans, customers gain access to all bank products including digital offerings such as 10 Second Personal Loans, Kisan Credit Card, Bill Pay, and Missed Call Mobile Recharge.

Replacing the Moneylender: Loans against Gold Jewellery grew to over Rs, 5,500 crore from over Rs, 4,800 crore the preceding year. Your Bank is slowly making inroads into a market traditionally dominated by the unorganized sector and pawn brokers. The entry of organized players into the sector has increased both awareness and transparency. The Bank has been able to serve the section of people who would traditionally rely on the moneylender through faster turnaround times.

Helping Farmers: Farm yield and income are subject to the vagaries of the weather. Factors like soil health, input quality (seeds and fertilizers), availability of water and government policy also impact this. So do price realization and storage facilities. Your Bank has launched a variety of products to ease the stress on farm income and rural households.

Over the last few years, several parts of the country have been severely impacted by natural calamities such as drought, unseasonal rains, hailstorms, and floods. Within regulatory guidelines, the Bank has been providing relief to impacted farmers. It also has systems designed to enable Direct Benefit Transfers in a time-bound manner.

Lending to the agriculture sector, including to the small and marginal farmers is a regulatory mandate as part of priority sector lending requirements. This has inherent credit risks. Your Bank has built policies and product programmes and engages closely with farmers to mitigate risks and protect portfolio quality. The Bank is also exploring the use of remote sensing technologies and analytics to strengthen crop and farm level assessment.

2) Micro, Small and Medium Enterprises (MSME)

Advances to the MSME segment as on March 31, 2018 stood at Rs, 89,042.1 crore as against Rs, 85,166.6 crore a year ago. Its advances to the Micro Enterprises alone stood at Rs, 40,644.7 crore. The Emerging Enterprises and Business Banking Groups cater to the Micro Enterprises and SME segments respectively.

The MSME sector serves as an important engine for economic growth. It contributes 33 per cent to IndiaRs,s manufacturing output and 45 per cent to exports. With 12 crore people employed across five crore MSME units, it is the second largest employer after agriculture accounting for 40 per cent of the workforce. This is the fastest growing segment in the commercial lending space and constituted

23 per cent of credit outstanding in the year under review. Credit to Micro Enterprises grew at a faster clip of 20 per cent as against nine per cent for SMEs.

The year ended March 31, 2018 was a challenging one for the MSME business due to the introduction of GST in terms of clarity and compliance. It also led to temporary increase in working capital requirement for customers. GST implementation is seen as a positive in the long run as it is expected to lead to further formalization of the informal sector and thus open up new and safer opportunities for bank financing. Needless to say, in the case of existing firms too, greater transparency will lead to better credit quality.

Implementation of GST, demonetization, the Government push and the advent of the next-generation of entrepreneurs have all driven a steady shift towards digital transactions. In what could be a potential game changer for the business, Your Bank''s complete online solution the SM@Bank for SME customers, is seeing greater customer adoption across geographies. Through this, customers can access credit facility information, request temporary overdraft facilities, ask for new facilities and submit documents to the Bank for straight through processing on a 24*7 basis. This is now poised to gain further momentum. Like in every other business unit, increasing use of analytics is giving your Bank an edge.

3) Taking Banking to the Unbanked

Your Bank is fully committed to taking banking to the remotest parts of the country through the combination of an extensive physical network and a robust digital suite of products and services. Today, over 53 per cent of the Bank''s outlets are located in rural and semi-urban areas. The Bank also offers last mile access through mobile applications such as BHIM, UPI, USSD, Scan and Pay, Aadhaar, and RuPay enabled Micro-ATMs.

To bring more under-banked sections of the population into formal financial channels, your Bank has opened over 17.72 lakh accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and enrolled over 29.37 lakh customers in social security schemes since their inception. We now rank among the leading private sector banks in this regard. In the year under review, loans to the tune of Rs, 6,621.41 crore were extended under the Pradhan Mantri Mudra Yojana (PMMY) and nearly Rs, 134.24 crore under the ‘Stand Up India'' scheme to Scheduled Caste / Scheduled Tribe and women borrowers.

4) Sustainable Livelihood Initiative

This is primarily a social initiative with elements of business. It entails skill training, livelihood financing, and creating market linkages. Further details are provided in the section below on Parivartan.

INTERNATIONAL BUSINESS

As on March 31, 2018, the balance sheet size of this business was US $ 4.13 billion. Advances constituted close to 3.1 per cent of the Bank''s gross advances. The total income of the overseas branches constituted 0.86 per cent of the Bank''s total income for the year. Though the number is small, what is significant is that your Bank is able to cater to a large and growing Indian diaspora.

As you would know, your Bank has overseas branches in Bahrain, Hong Kong, and the Dubai International Finance Centre (DIFC). These branches cater to the needs of our overseas clients both corporate, and individual. They offer Banking, Trade Finance and Wealth Management (primarily for non-resident individual customers). In addition, the Bank has Representative Offices in Abu Dhabi, Dubai and Nairobi.

You will be happy to know that your Bank now has a presence in International Financial Service Centre (IFSC) at GIFT City in Gandhinagar, Gujarat. This unit, which opened in June 2017, is akin to a foreign branch. Customers can avail of products such as Trade Credits, Foreign Currency Term Loans including External Commercial Borrowings (ECB), and derivatives to hedge loans.

NON -BUSINESS OPERATIONS / SOCIAL COMMITMENT

Parivartan - A Step Towards Progress

Parivartan is your Bank''s umbrella brand for all its social initiatives. Parivartan or ‘Change'' as it means in English seeks to bring about change in the lives of people making them self-reliant and part of the national mainstream. Working largely through communities, Parivartan focuses on the following fundamental areas:

- Rural Development

- Skill Training and Livelihood Enhancement

- Promotion of Education

- Healthcare and Hygiene

- Financial Literacy and Inclusion

As noted before, Sustainability is one of your Bank''s core values. Your Bank''s belief is that businesses should support the communities in which they operate. We are happy to report that your Bank, through its several social initiatives (including SLI) has made a difference to the lives of over 3.5 crore Indians.

Rural Development

The Holistic Rural Development Programme (HRDP) is born out of the conviction that the nation will progress only when rural India grows. Over half the country''s population lives in rural areas and is primarily dependent on agriculture for their livelihood. Our efforts here are focused on areas of soil, water and natural resource management and sanitation, issues that rural India is often plagued by. These are often multi-pronged interventions. Soil conservation for instance will typically cover educating people about use of organic fertilizers. Water management will entail construction, renovation and maintenance of water harvesting structures for improving surface and ground water availability. Likewise educating people on renewable energy often forms part of our natural resource management efforts.

Spread over 16 states, the programme covers over 2.9 lakh households across 870 villages. Over 18,000 acres of arable land have been treated to enhance productivity. Umpathaw in Meghalaya, became the 750th village to be covered under the programme in the year under review.

Promoting Education

There is no better gift to humanity than education. Improving the quality of education is a focus area under Parivartan. Your Bank''s efforts in this area include teacher training, scholarships and career guidance. It also includes providing infrastructure support, such as building toilets in schools and improving classrooms. At the community level, this entails educating people on the importance of Water, Sanitation and Hygiene (WaSH) and creating awareness on issues related to road safety and healthy financial practices.

The flagship programme here is Zero Investment Innovations for Education Initiatives (ZIIEI). This ‘Teaching The Teacher'' programme (3T) seeks to transform education in government schools across India. This is a unique programme which is committed to improving the skills of teachers, which in turn benefits the pupils.

This3T programme was launched nationally at Jaipur in Rajasthan during the year under review, after the successful completion of a pilot project in Uttar Pradesh. The Bank is committed to train 15 lakh teachers in 6.2 lakh government schools across 12 states and 1 Union Territory. The project is being executed jointly with a leading non-governmental organization.

Skills Training and Livelihood Enhancement

Formal education remains a dream for lakhs of Indians. Your Bank under Skills Training and Livelihood Enhancement targets people in this section of society in rural India and imparts income generating skills, primarily in agriculture and allied areas such as dairy and poultry. The objective is to help these people And jobs locally, enhance their household income, and prevent migration.

The nationwide programme has benefitted over 51,000 individuals.

The programme also has another leg where placement-linked training is provided to youth and career counseling is provided to young school students. So far over 3,000 have received skill development training.

The flagship programme under Skills Training and Livelihood Enhancement is the Sustainable Livelihood Initiative (SLI).

Sustainable Livelihood Initiative

This initiative aims at ‘Creating Sustainable Communities''. It does so by empowering women and helping them break the vicious circle of poverty. Empowering women, we believe, means empowering families. Women form Self Help Groups (SHGs) or Joint Liability Groups (JLGs). The women under the programme are given occupational skills training, financial literacy, credit counselling and livelihood finance and market linkage. The Bank is mandated by its Board to cover 1 crore households and so far 81.8 lakh have been covered.

It''s a unique programme with perhaps no parallel globally. What makes it so are the following:

1) It''s an all-women programme

2) It covers womenfolk across the length and breadth of a country as vast as India. It is present in 27 states and over 400 districts

3) With 81 lakh women or households (81.8 X 4 = 3.27 crore individuals) impacted, this is one of the world''s largest such programmes

4) Over 9,000 dedicated, passionate Bank employees are running the programme

Healthcare and Hygiene

Your Bank''s initiatives in the area of Healthcare and Hygiene, focusing on both schools as well as the community, have made a substantial difference to the lives of students in rural India.

At the heart of these programmes are community-led sanitation campaigns that promote hygienic conditions in rural areas through appropriate wastewater disposal. These initiatives are supplemented by construction of toilets and provision of clean drinking water. Over 16,521 households and 924 schools in rural India have been covered under the toilet programme so far.

Your Bank also organizes health camps, nutrition programmes, and vaccination drives. The flagship programme under this pillar is the Annual Blood Donation Drive.

In the 11th edition in 2017, your Bank collected 2.2 lakh units of blood in a single day. This was almost 30 per cent higher than the previous year.

What started off as a small initiative in 2007 with the participation of just 4,000 volunteers has now grown into a movement where

2.5 lakh people from all walks of life participated. This included those from schools, colleges, employees of private and public sector, both State and Central Governments and the defence establishment.

While bank employees are central to this effort, of the 3,045 camps held across the country, a majority were held offsite. Almost 1,100 camps in colleges and 475 in companies.

Financial Literacy

Financial literacy is the first step towards real financial inclusion. Lakhs of people have learnt about the fundamentals of savings, investment and organised finance from financial literacy camps conducted by the Bank at its banking outlets as well as financial literacy centres across the country.

This is a multi-pronged programme where literacy is imparted at branches, through business units as well as through its NGO partners. Over 19 lakh participants have benefitted in the year under review.

The flagship scheme under this pillar is Digidhan.

Modelled on the Bank''s financial literacy-on-wheels programme

- Dhanchayat, Digidhan, criss-crosses the length and breadth of the country''s hinterland explaining the benefits of digital banking. The medium is through film and the location is often high-footfall pockets such as bazaars, mandis and bus-stands.

The Bank is fully compliant with the requirements of the Companies Act 2013, having spent '' 374 crore on CSR and emerging as one of the highest spenders in this space in India.

The disclosures pertaining to CSR as required under Rule 8 of the Companies (Accounts) Rules, 2014 have been given in ANNEXURE 2 to this report.

Environmental Sustainability

Maintaining a balance between natural capital and communities is now integral to our functioning.

Towards this end, our ATMs have gone paperless, enabling a reduction of the carbon footprint. The Bank has given this effort a further fillip by ensuring multi-channel delivery through Net

Banking, Phone Banking, and Mobile Banking. This results in lower carbon emission not just from operations but also from reduced customer travel. Another source for reducing the environmental footprint is solar ATMs, which use rechargeable lithium ion batteries that reduce power consumption.

BUSINESS ENABLERS

1) People, Culture, Integrity and Ethics

‘People'' is one of your Bank''s Core Values. It is extremely proud of them, the integrity and ethics that they demonstrate and, indeed, the culture that promotes these values. This culture ensures that the people with the right values are hired, groomed and encouraged. The Bank has an institutionalized, well-documented code of conduct, which every employee has to affirm annually.

The five pillars of our People strategy are as follows:

Recruitment: Recruiting the right talent isn''t enough anymore in an industry like banking. What is critical is recruiting and deploying them fast. Your Bank has an agile hiring mechanism that ensures this. This often entails leveraging online portals and new age channels like social media. Campus hiring and internship programs enable us to expand the hiring base further.

The Bank has also started scaling up on a digital job-ready model to attain scale and quality. The Bank also has a battery of assessment tools, like AMCAT, Assesshub and Talview to strengthen its selection process.

Career Management: Core to your Bank''s career philosophy is to create opportunities for employees to develop and grow. The systematic investment of time in career discussion with employees, competency assessment and intensive functional and behavioral training, through Gurukul our in-house programme, are also aimed at achieving that result. The Bank also facilitates inter-departmental job switches to employees to help them stay motivated, productive and happy.

Employee Engagement: Employee engagement has two planks, namely events and fun learning. The events are conducted at both local and national levels. While most of these events are open to employees, some are meant for families as well.

These are some of the popular events:

1. Josh Unlimited: Pan-India sports event conducted in 29 cities, covering a population of more than 60,000 employees

2. Stepathlon: An Employee wellness initiative which witnessed participation of more than 550 employees

3. Hunar: Pan-India in-house talent competition

4. HDFC Bank Voice Hunt Contest: Talent search in association with Shankar Mahadevan Academy

5. Corporate Photography Contest: An inter-corporate event.

6. Xpressions: Pan-India in-house drawing competition for the employees and their children

7. Corporate Online Library: A knowledge resource available to all employees for accessing nearly 1.5 lakh books

On the learning side, ‘Kwiz Kat'', is a Banking quiz competition open to all employees. ‘There is also the Learning Fest’, which focuses on sharpening employee skills on subjects such as Happy Parenting, Magical Marriages, Health and Fitness, Financial Planning and Team Building. Each of these work on the tenet that “If you manage your team at home, you can manage your team at the office.” This is, of course, backed up by formal training.

Training and Development: Training plans for businesses are developed based on needs identified in consultation with the business leaders. An extensive bouquet of training programmes are delivered, covering on-boarding, product and process training, advanced programmes and behavioral training. The on-boarding training ensures that new employees are trained comprehensively and equipped with necessary know-how, as well as functional and behavioral skills required for the role.

The product training and advanced programmes enable skill development, regular updates and build expertise. The training methodology has evolved to application based training including simulations, case studies, and games. Leveraging technology, many of the class room programmes are now being delivered online. The role-specific learning plan ensures effective use of blended learning method. The accent has now shifted to online training supplemented by offline support. In addition to this, to ensure that employees are assisted on the job, there is a help-line ‘Ask the Trainers'' which responds to any clarification on a banking query within

24 hours of its initiation.

Rewards and Recognition: The Rewards and Recognition programs of the Bank is based on a sound performance management system. Your Bank has a pay-for-performance culture based on meritocracy. There is equal emphasis on recognition as well. Extraordinary commitment towards work is rewarded. So is at times going beyond the call of duty. ICON Awards was launched this year to recognize employees for demonstrating individual, leadership and collaborative excellence in driving customer focus and operational excellence.

2) Digital Innovation

Innovation is the common thread that runs through the multiple businesses and functions in the Bank. Besides products, it manifests itself at levels of concepts and ideas. A testament to this is the fact that more than 85 per cent of the transactions in the year under review occurred over the Internet and Mobile. The Bank''s engagement with start-ups and fin techs moved to the next level through the ‘Industry Academia Initiative'', which helps in mentoring them. The annual Digital Innovation Summit, continues to generate interest among the start-up community and benefits the Bank through useful solutions.

The Bank''s focus on leveraging Artificial Intelligence (AI) and Machine Learning (ML) has started yielding results. Eva, the virtual assistant on the Bank''s website; and Bank on Chat, the bank''s Face book Messenger chat bot, have elicited encouraging response from customers. For instance, Eva handled over 30 lakh queries on the website with an accuracy ratio of over 85 per cent. In just 12 months, the Face book app garnered over three lakh users, who used it for making bill payments, movie / travel bookings and mobile recharges.

To encourage digital payments, your Bank has launched all-in-one DigiPoS machines that enable UPI, Bharat QR, SMS, and PayZapp transactions on a single machine.

Another innovative product the Bank has launched is the SmartHub, an umbrella digital platform for online payments to government departments, educational institutions and small merchants.

Your Bank also introduced an Instant credit card, which is issued electronically within an hour and can be used by the customer to make purchases online. Over three lakh Instant credit cards were issued during the year.

In the unsecured loan segment, the Bank''s digital acquisition solution, 10 seconds loans, continued to delight customers. To further enhance the customer experience and improve cost management, the Bank is now developing a platform for end-to-end digital acquisition of business.

Your Bank has the distinction of being the first bank in the country to introduce Digital Loan Against Shares (LAS). In the automobile segment customers continued to buy cars and two-wheelers through online services such as Zip Drive and Quick Money.

To sum up, the year under review has seen ample demonstration of ‘Go Digital, Bank Aapki Muththi Mein’ strategy. Innovation is now embedded in the DNA of your Bank with digital innovation emerging as the prime driver across businesses.

3) Information Technology

In the technology space, your Bank is considered a leader. Both in terms of being able to identify the right technology solutions for the business and deploying them in a timely manner to create customer experience. The 10-second Personal Loan is a case in point. Missed call banking is another. These products were not only industry firsts but have also gone on to become extremely popular with customers.

In the year under review, your Bank has gone further with the implementation of an Open API based Service Oriented Architecture Middleware platform. This enables different systems to talk to each other and thus ensures a seamless flow of information. In the Bank''s context it facilitates over 2.5 crore digital banking transactions from its mobility and online platforms such as PayZapp Wallet, Smart Buy market place, enhanced Mobile Banking App and a dedicated Retail Lending App named Loan Assist.

Another important development in the year under review has been the Digital Application (DAP) Platform which brings together process, digital technologies and lifecycle management efficiencies to deliver a better customer experience. This has seen a huge shift to digital channels be it applying for loans, credit cards or overdraft facilities. Over 95 per cent of the branch retail origination is now powered by DAP. Linkages for this have been established with search engines and fin techs.

This has been further supplemented with an assisted Savings Bank account opening App in the branch which relationship managers use to open digital savings accounts. The volumes have been doubling every month since the launch in the third quarter of the year under review.

The other important innovations in the year under review have been:

1) A four click process for ‘Do Your Own Loan Against Shares''

2) Creating a real time overdraft with Digital Loan Against Mutual Funds on a 24*7 basis through the bank''s website

3) Offering digital consumer loans

4) Tying up with social media platforms, e-commerce portals, and traditional retail stores to facilitate ordering products online.

5) Reducing turnaround time for first time borrowers

6) Lowering transaction costs in Trade On Net / Trade Finance through an API based application form filling process

7) Using Artificial Intelligence and Neural Networks based deep learning ability to give stronger teeth to its Card Payment Fraud Detection ability

8) Implementing a state-of-the-art Core Banking System for both Retail and Wholesale Banking to process 4.5 crore transactions daily in an accurate, speedy and secure manner.

4) Cyber Security

Your Bank has an effective framework in place to manage cyber security. This encompasses requisite manpower, machine and training. The Chief Information Security Officer (CISO) is the person who is overall responsible for this. There is also a committee of the Board which dedicatedly looks into cyber security issues and preparedness.

In the year under review, the Bank has enhanced its cyber security protocol by constituting a RED Team. The RED team is a designated group of individuals that test the security posture of the organization. The Bank also widened coverage of Security Incident and Event Management (SIEM), which provides a comprehensive and centralized view of the security scenario of IT infrastructure. Deception Technology Solution was deployed to detect, analyse and defend against advanced attacks often in real-time. In the case of your Bank, it also covers emails and endpoints, besides the network.

Firewalls have been upgraded to Next Generation with deep packet inspection (DPI) ability. DPI analyses ‘packets'' which are nothing but parcels of digital information transmitted across the web in a formatted piece of structured data. Protection against malware, ransom ware and denial of service attacks have been strengthened further.

Regular tests to assess the vulnerability of the IT infrastructure and applications and remedy where necessary are routine. As are anti-phishing services that help in shutting down phishing sites and protecting the customers from fraud. Risk engine and transaction monitoring systems monitor suspicious transactions on Internet Banking, ATM and e-commerce channels.

The Bank has PCI DSS 3.0 and ISO 27001 certifications. PCI DSS is a proprietary information security standard for organizations that handle credit card information and transactions. It is meant to increase controls around cardholder data to reduce fraud. In layman''s terms the certification is an assurance that your Bank''s card customers enjoy a very high level of safety while transacting with it. The ISO 27001 certification pertains to best practices with respect to information security.

On building awareness your bank has a regular programme for both employees and customers.

5) Service Quality Initiatives and Grievance Redressal

Your Bank has various lines of businesses. In a highly competitive environment, ensuring product quality, and service delivery is vital for business growth. The Bank seeks to achieve this by regularly reviewing service levels and capturing feedback from customers.

Moreover, in line with regulatory norms, the Bank has constituted three committees at different levels to monitor customer service - Branch Level Customer Service Committees, Standing Committee on Customer Service and Customer Service Committee of the Board.

Against the backdrop of increasing digital frauds, RBI issued a circular during the year on ‘Customer Protection

- Limiting Liability of Customers in Unauthorised Electronic Banking Transactions.'' In it, RBI defined customer liability clearly so that customers feel secure while conducting digital transactions. The regulator also mandated banks to formulate a Board Approved Customer Protection Policy. Accordingly, your Bank has fortified its existing processes. It is also augmenting its training and skill development mechanism to empower employees to boost service quality.

As a part of its efforts to enhance service quality, the Bank undertakes mystery shopping across branches and retail asset centres to continuously evaluate regulatory compliance, process adherence and quality of service delivery. The effectiveness is reviewed periodically at different levels including the Customer Service Committee of the Board. Lean and Six Sigma methodologies are used to improve processes.

In addition to the aforementioned measures, in compliance with regulatory guidelines, your Bank has appointed a senior retired banker as Internal Ombudsman. Our sustained efforts to improve service delivery have been noted and the Bank has received written appreciation from many Banking Ombudsmen appointed by RBI across locations such as Andhra Pradesh, Gujarat, Kerala and Lakshadweep, Punjab, Rajasthan, Tamil Nadu, Puducherry, West Bengal and Sikkim.

CHECKS, BALANCES AND REPORTING I. Risk Management and Portfolio Quality

The Bank is exposed to risk by the very nature of its business. The key risks are Credit Risk, Market Risk, Liquidity Risk and Operational Risk. These risks not only have a bearing on the Bank''s financial strength and operations but also its reputation. Keeping this in mind, your Bank has put in place a Board approved risk strategy and policy whose implementation is supervised by the Board''s Risk Policy and Monitoring Committee (RPMC). The committee periodically reviews risk levels and direction, portfolio composition, status of impaired credits and limits for treasury operations.

The hallmark of the Bank''s risk management process function is its independence, with credit decisions being made by a credit underwriting vertical.

The gamut of risks faced by the Bank which are dimensioned and managed include

- Credit Risk including Residual Risks

- Credit Concentration Risk

- Market Risk

- Business Risk

- Operational Risk

- Strategic Risk

- Interest Rate Risk in the Banking Book

- Compliance Risk

- Liquidity Risk

- Reputation Risk

- Intraday Risk

- Model Risk

- Technology Risk

- Counterparty Credit Risk

- Outsourcing Risk Credit Risk

This is the risk of loss arising from a default and is, therefore, also known as default risk. Your Bank has distinct policies and processes for managing credit risk in both its retail and wholesale businesses. Wholesale lending is managed on an individual as well as portfolio basis. By contrast, retail lending, given the granularity of individual exposures, is managed largely on a portfolio basis across various products and customer segments. For both categories there are robust front-end and back-end systems in place to ensure credit quality and minimize loss from default.

The factors considered while sanctioning retail loans include income, demographics, previous credit history of the borrower and the tenor of the loan. In wholesale loans, credit risk is managed by capping exposures on the basis of borrower group / industry / credit rating grades and country. This is backed by portfolio diversification, stringent credit approval processes and periodic post-disbursement monitoring / remedial measures.

Your Bank has been able to ensure strong asset quality even in an otherwise challenging business environment by stringently adhering to the aforementioned norms and institutionalizing processes.

As on March 31, 2018, your Bank''s ratio of Gross Non-Performing Assets (GNPAs) to gross advances was 1.30 per cent. Net Non-Performing Assets (Gross Non-Performing Assets Less Specific Loan Loss provisions) was 0.4 per cent of Net Advances. Total restructured assets (including applications under process for restructuring) was 0.24 per cent of gross advances.

The Bank has a conservative and prudent policy for specific provisions on NPAs. It provides more towards NPAs than the minimum regulatory requirements even while adhering to regulatory norms for the provision of Standard Assets.

Digital Lending and Credit Risk

Driven by rapid advances in technology, digitization is increasingly becoming a key differentiator of customer retention and service delivery in the banking sector. Digital lending enables customers to secure loans at the click of a button in a matter of minutes, if not seconds. However, there are also attendant risks associated with it and your Bank has put in place appropriate checks and balances to manage these risks. Such loans are sanctioned primarily to the Bank''s pre-existing customers. Often, these clients are customers across multiple products so their credit history and risk profile is already known. This makes it possible to evaluate and decide on their fresh requirements almost instantly. Besides, most of the credit checks and scores used by the Bank in traditional process underwriting are replicated in digital loans. Finally, the Bank has an independent model validation unit that minutely assesses the models used to generate the credit scores for such loans. These models are monitored, reviewed periodically and back-tested; and corrective action is taken whenever needed.

Market Risk

Market risk arises largely from the Bank''s statutory reserve management and trading activity and is managed through a well-defined Board-approved Investment Policy and Market Risk Policy that caps risk in different trading desks or various securities through trading risk limits / triggers. These include position limits, gap limits, tenor restrictions, sensitivity limits, namely, PV01, Modified Duration of Hold To Maturity Portfolio and Option Greeks, Value-at-Risk (VaR) Limit, Stop Loss Trigger Level (SLTL) and Potential Loss Trigger Level (PLTL). This is supplemented by a Board approved stress testing policy and framework that simulates various market risk scenarios to measure losses and initiate remedial measures.

Liquidity Risk

Liquidity Risk is the risk that a bank may not be able to meet its short term financial obligations due to an asset—liability mismatch or interest rate fluctuations.

Your Bank''s framework for liquidity and interest rate risk management is spelt out in its Asset Liquidity-Management policy that is implemented, monitored and periodically reviewed by the Asset Liability Committee (ALCO). As a part of this process, the

Bank has established various Board approved limits to mitigate both liquidity and interest risks. While the maturity gap and stock ratio limits help manage liquidity risk, the income and market value impacts help mitigate interest rate risk. This is reinforced by a comprehensive Board approved stress testing programme covering both liquidity and interest rate risk.

The Liquidity Coverage Ratio (LCR) is a global minimum standard used to measure a bank''s liquidity position. LCR seeks to ensure that the Bank has an adequate stock of unencumbered High-Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs under a 30-day calendar liquidity stress scenario. Based on Basel III norms, RBI has mandated a minimum LCR of 80 per cent on January 1, 2017; that limit progressively increases by 10 percentage points each year to 100 per cent on January 1, 2019. Your Bank''s LCR stood at 104.5 per cent on a consolidated basis for the year ended March 31, 2018.

Operational Risk

This is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Given below is a detailed explanation under four different heads: Framework and Process, Internal Control, Information Technology and Security Practices and Fraud Monitoring and Control.

1) Framework and Process

To manage operational risks, the Bank has in place a comprehensive and operational risk management framework, whose implementation is supervised by the Operational Risk Management Committee (ORMC) and reviewed by the RPMC of the Board. An independent Operational Risk Management Department (ORMD) implements the framework.

Under the framework, the Bank has three lines of defence. The first layer of protection is provided by the Business line (including support and operations) management. These managers are primarily responsible for not only managing operational risk on a daily basis, but also for maintaining strict internal controls, designing and implementing internal control-related policies and procedures.

The second line of defence is the ORMD, which develops and implements policies, procedures, tools and techniques to assess and monitor the adequacy and effectiveness of the Bank''s internal controls.

Internal Audit is the last line of defence. The team reviews the effectiveness of governance, risk management, and internal controls within the Bank.

2) Internal Control

Your Bank has implemented sound internal control practices across all processes, units and functions. The Bank has well laid down policies and processes for management of its day-to-day activities. The Bank follows established, well-designed controls, which include traditional four eye principles, effective separation of functions, segregation of duties, call back processes, reconciliation, exception reporting and periodic MIS. Specialized risk control units function in risk prone products / functions to minimize operational risk. Controls are tested as part of the SOX control testing framework.

3) Information Technology and Security Practices

The Bank operates in a highly automated environment and makes use of the latest technologies to support various operations. This throws up operational risks such as business disruption, risks related to information assets, data security, integrity, reliability and availability amongst others. The Bank has put in a governance framework, information security practices and business continuity plan to mitigate information technology related risks. An independent assurance team within Internal Audit provides assurance on the management of information technology related risks.

The Bank has a robust Business Continuity and Disaster Recovery plan that is periodically tested to ensure that it can meet any operational contingencies. There is an independent Information Security Group that addresses information security related risks. A well-documented Board approved information security policy is put in place. In addition, employees mandatorily periodically undergo information security training and sensitization exercises.

4) Fraud Monitoring and Control

The Bank has put in a whistle blower policy, and a central vigilance team oversees implementation of fraud prevention measures. Frauds are investigated to identify the root cause and relevant corrective steps are taken to prevent recurrence. Fraud prevention committees at the senior management and board level also deliberate on material fraud events and initiate preventive action. Periodic reports are submitted to the Board and senior management committees.

Compliance Risk

Compliance Risk is defined as the risk of impairment of your Bank''s integrity, leading to damage to its reputation, legal or regulatory sanctions, or financial loss, as a result of a failure (or perceived failure) to comply with applicable laws, regulations and standards. The Bank has a Compliance Policy to ensure highest standards of compliance. A dedicated team of subject matter experts in the Compliance department work with Business and Operations Teams to ensure active compliance risk management and monitoring. They also provide advisory services on regulatory matters. The focus is on identifying and reducing risk by rigorously testing products and also putting in place robust internal policies. Products that adhere to regulatory norms are tested after rollout, and shortcomings, if any, are fully addressed till the product stabilizes on its own. Internal policies are reviewed regularly and updated as and when regulators issue fresh instructions. The Compliance team also seeks regular feedback on regulatory compliance from Product, Business and Operation teams through self-certifications and monitoring.

ICAAP

The Bank has a structured management framework in the Internal Capital Adequacy Assessment Process (ICAAP) to identify, access and manage all risks that may have a material adverse impact on its business / financial position / capital adequacy. The ICAAP framework is guided by the Bank''s Board approved ICAAP Policy. Additionally, the Board approved Stress Testing Policy and Framework entails the use of various techniques to assess potential vulnerability to extreme but plausible stressed business conditions. Changes in the Bank''s risk levels and in the on / off balance sheet positions are assessed under such assumed scenarios using sensitivity factors that generally relate to their impact on profitability and capital adequacy.

Group Risk

Your Bank has two subsidiaries, HDB Financial Services Ltd and HDFC Securities Ltd. The Boards of each subsidiary is responsible for managing their respective risks (credit risk, market risk, operational risk, liquidity risk, reputation risk etc.) within the ICAAP framework. Stress testing for the group as a whole is carried out by integrating the stress tests of the subsidiaries. Similarly, capital adequacy projections are formulated for the group after incorporating the business / capital plans of the subsidiaries.

II. Implementation of Indian Accounting Standards (IND-AS)

The Ministry of Corporate Affairs, in its press release dated January 18, 2016, had issued a roadmap for implementation of Indian Accounting Standards (IND-AS) for scheduled commercial banks, insurers / insurance companies and non-banking financial companies. This roadmap required these institutions to prepare IND-AS based financial statements for the accounting periods beginning from April 1, 2018 onwards with comparatives for the periods beginning April 1, 2017 and thereafter. The Reserve Bank of India (RBI), vide its circular dated February 11, 2016 required all scheduled commercial banks to comply with the Indian Accounting Standards (IND-AS) for financial statements for the periods stated above. The RBI did not permit banks to adopt IND-AS earlier than the timelines stated above. The said guidelines also state that RBI shall issue necessary instructions / guidance / clarifications on the relevant aspects for implementation of IND-AS as and when required.

Your Bank formed a steering committee comprising members from cross-functional areas for the purpose of implementation oversight. Under the guidance of the steering committee, the Bank formed working groups, including external consultants, dedicated to specific functional areas. The objective of these working groups was to undertake a review of the diagnostic analysis of the differences between the current accounting framework and IND-AS, review the accounting policy options provided under IND-AS 101-First Time Adoption, determine the methodologies for each accounting treatment, finalist process and system changes, review and update policies and incorporate in business planning any specific action points over the transition period. In addition, the Audit Committee of the Board of Directors oversees the progress of the IND-AS implementation process.

The Bank has undertaken a diagnostic analysis of the differences between the current accounting framework and IND-AS, including the disclosure requirements. Your Bank has reviewed the accounting policy options provided under IND-AS including the preparation of draft accounting policies under IND-AS subject to any RBI guidelines in this regard. The Bank has evaluated the systems requiring significant changes and identified additional system and process requirements for implementation of IND-AS. The Bank is engaging with vendors for technology solutions for implementation of IND-AS. The Bank has also undertaken training programs for its personnel in business and support functions.

The implementation of IND-AS is expected to result in significant changes to the way the Bank prepares and presents its financial statements. The areas that are expected to have significant accounting impact on the application of IND-AS are summarized below:

1) Financial assets (which include advances and investments) shall be classified under amortized cost, fair value through other comprehensive income (a component of Reserves and Surplus) or fair value through profit / loss categories on the basis of the nature of the cash flows and the intention of holding the financial assets.

2) Interest will be recognized in the income statement using the effective interest method, whereby the coupon, fees net of transaction costs and all other premiums or discounts will be amortized over the life of the financial instrument.

3) Stock options will be required to be fair valued on the date of grant and be recognized as staff expense in the income statement over the vesting period of the stock options.

4) The impairment requirements of IND-AS 109, Financial Instruments, are based on an Expected Credit Loss (ECL) model that replaces the incurred loss model under the extant framework. The Bank will be generally required to recognize either a 12-Month or

Lifetime ECL, depending on whether there has been a significant increase in credit risk since initial recognition. IND-AS 109 will change the Bank''s current methodology for calculating the provision for standard assets and non-performing assets (NPAs). The Bank will be required to apply a three-stage approach to measure ECL on financial instruments accounted for at amortized cost or fair value through other comprehensive income. Financial assets will migrate through the following three stages based on the changes in credit quality since initial recognition:

Stage 1: 12 Months ECL

For exposures which have not been assessed as credit-impaired or where there has not been a significant increase in credit risk since initial recognition, the portion of the ECL associated with the probability of default events occurring within the next twelve months will need to be recognized.

Stage 2: Lifetime ECL - Not Credit Impaired

For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL will need to be recognized.

Stage 3: Lifetime ECL - Credit Impaired

Financial assets will be assessed as credit impaired when one or more events having a detrimental impact on the estimated future cash flows of that asset have occurred. For financial assets that have become credit impaired, a lifetime ECL will need to be recognized.

Interest revenue will be recognized at the original effective interest rate applied on the gross carrying amount for assets falling under stages 1 and 2 and on written down amount for the assets falling under stage 3.

5) Accounting impact on the application of IND-AS at the transition date shall be recognized in Equity (Reserves and Surplus).

The implementation of IND-AS by banks requires certain legislative changes in the format of financial statements to comply with disclosures required by IND-AS. The change in format requires an amendment to the third schedule of the Banking Regulation Act, 1949 to make it compatible with the presentation of financial statements under IND-AS. The RBI would issue necessary instructions / guidelines and clarifications to facilitate the implementation of the new accounting standards. Considering the amendments needed to the Banking Regulation Act, 1949, as well as the level of preparedness of several banks, the RBI vide its Statement on Developmental and Regulatory

Policies dated April 5, 2018 deferred the implementation of IND-AS by one year by when the necessary legislative amendments are expected. Scheduled commercial banks in India will now be required to prepare IND-AS based financial statements for the accounting periods beginning from April 1, 2019 onwards with comparatives for the periods beginning April 1, 2018.

III. Internal Controls, Audit and Compliance

The Bank has put in place extensive internal controls and processes to mitigate operational risks, including centralized operations and ‘segregation of duty'' between the front office, mid-office and back office. The front-office units usually act as customer touch-points and sales and service outlets. The entire processing, accounting and settlement of transactions is carried out by the back-office in the bank''s Core banking system. The policy framework, definition and monitoring of limits is carried out by various mid-office and risk management functions. The credit sanctioning and debt management units are also segregated and do not have any sales and operations responsibilities.

The Bank has set up various executive-level committees, having participation from various business and control functions, that are designed to review and oversee matters pertaining to capital, assets and liabilities, business practices and customer service, operational risk, information security, business continuity planning and internal risk-based supervision amongst others. The control functions set standards and lay down policies and procedures by which the business functions manage risks including compliance with applicable laws, compliance with regulatory guidelines, adherence to operational controls and relevant standards of conduct.

At the ground-level, the Bank has a mix of preventive and detective controls implemented through systems and processes ensuring a robust framework in the Bank to enable correct and complete accounting, identification of outliers (if any) by the Management on a timely basis for corrective action and mitigate operational risks.

The Bank has various Preventive controls viz, (a) Limited and need-based access to systems by users, (b) Dual custody over cash and near-cash items (c) Segregation of duty in processing of transactions vis-a-vis creation of user IDs

(d) Segregation of duty in processing of transactions vis-a-vis monitoring and review of transactions / reconciliation

(e) Four eye-principle (maker-checker control) for processing of transactions (f) Stringent password policy (g) Booking of transactions in Core Banking system mandates the earmarking of line / limit (fund as well as non-fund based) assigned to the customer (h) STP processes between Core Banking system and payment interface systems for transmission of messages (h) Additional authorization leg in payment interface systems in applicable cases (i) Audit logs directly extracted from systems (j) Empowerment grid.

The Bank also has detective controls in place viz,

(a) Periodic review of user IDs (b) Post transaction monitoring at the back-end by way of call back process (through daily log reports) by an independent person i.e.to ascertain that entries in the core-banking system / messages in payment interface systems are based on valid / authorized transactions and customer requests. (c) Daily tally of cash and near-cash items at End of day. (d) Reconciliation of Nostro accounts (by an independent team) to ascertain and match-off the Nostro credits and debits (External or Internal) regularly to avoid / identify any unreconciled / unmatched entries passing through the system (e) Reconciliation of all Suspense accounts and establishment of responsibility in case of out standings (f) Independent and surprise checks periodically by Supervisors.

Your Bank has an Internal Audit department which is responsible for independently evaluating the adequacy and effectiveness of all internal controls, risk management, governance systems and processes and is manned by appropriately qualified personnel.

This department adopts a risk based audit approach and carries out audits across various businesses that is Retail, Wholesale and Treasury (for India and Overseas books), audit of Operations units, Management Audits, Information Security Audit, Revenue Audit and Concurrent Audit in order to independently evaluate the adequacy and effectiveness of internal controls on an ongoing basis and pro-actively recommending enhancements thereof. The Internal Audit department during the course of audit also ascertains the extent of adherence to regulatory guidelines, legal requirements and operational processes and provides timely feedback to the Management for corrective action. A strong oversight on the operations is also kept through off-site monitoring.

The Internal Audit department also independently reviews the Bank''s implementation of Internal Rating Based (IRB) approach for calculation of capital charge for Credit Risk, the appropriateness of Bank''s Internal Capital Adequacy Assessment Process (ICAAP), as well as evaluates the quality and comprehensiveness of the Bank''s disaster recovery and business continuity plans and also carries out Management self-assessment of adequacy of the Bank''s internal financial controls and operating effectiveness of such controls in terms of Sarbanes Oxley (SOX) Act and Companies Act, 2013.

Any new product / process introduced in the Bank is reviewed by Compliance function in order to ensure adherence to regulatory guidelines and also by Internal Audit from the perspective of existence of internal controls. The Audit function also pro-actively recommends improvements in operational processes and service quality wherever deemed fit.

To ensure independence, the Internal Audit function has a reporting line to the Chairman of the Audit Committee of the Board and a dotted line reporting to the Managing Director.

The Compliance function independently tracks, reviews and ensures compliance to regulatory guidelines and promotes a compliance culture in the Bank.

The Bank has a comprehensive Know Your Customer, Anti Money Laundering (AML) and Combating Financing of Terrorism (CFT) policy (based on the RBI guidelines I provisions of the Prevention of Money Laundering Act, 2002) incorporating the key elements of Customer Acceptance policy, Risk Management, Customer Identification Procedures and Monitoring of Transactions. The policy, duly approved by the Board is subjected to review annually.

The Bank has taken significant measures in developing and enhancing an effective and sustainable KYC AML and CFT Compliance Programme. The adherence to the guidelines prescribed in the policy is monitored by the Bank at various stages of the customer life-cycle. Bank has robust controls in place to ensure adherence to the KYC guidelines at the time of account opening. The Bank also has a continuous review process in the form of transaction monitoring including a dedicated AML CFT monitoring team, which carries out extensive transaction reviews for identification of suspicious patterns / trends which acts as an early warning signal for the Bank to carry out enhanced due diligence and appropriate action thereafter. The status of adherence to the KYC, AML and CFT guidelines is also placed before the Audit Committee of the Board for their review at quarterly intervals.

The AML team undergoes regular training both in-house and external on a continuous basis in order to equip the team with the necessary know-how and expertise to carry out the function.

The Audit Committee of the Board reviews the effectiveness of controls, compliance to regulatory guidelines as also the performance of the Audit and Compliance functions in the Bank and provides direction wherever deemed fit.

Your Bank has always adhered to the highest standards of compliance and has put in place appropriate controls and risk measurement and risk management tools in order to ensure a robust compliance and governance structure.

IV. Responsible Financing

Your Bank is committed to Responsible Financing and refrains from funding projects that have an adverse impact on Environment, Health and Safety (EHS). EHS is an integral part of the bank''s overall credit risk assessment and monitorin

process. Every project funded has to pass the Bank''s muster in terms of the EHS risk it entails, potential impact and mitigation measures in place or proposed.

The key aspects of the assessment process are:

- For all loans exceeding Rs, 10 crore in amount and five years in tenure, borrowers have to submit a declaration of compliance with EHS norms.

- In select large-ticket projects, the Bank appoints a Lender''s Independent Engineer (LIE) who conducts due diligence across several parameters including EHS. The findings of the LIE''s assessment report are then discussed with the client to ensure compliance.

- The LIE regularly monitors such projects during the construction period through site visits and reports progress which includes status of approvals and relief and rehabilitation measures undertaken. Your Bank officials also conduct independent site inspections from time to time to ensure that the project is progressing to the Bank''s satisfaction.

- After the project becomes operational, the borrower has to submit an annual declaration of compliance with various national laws including those related to EHS. This is also followed up by onsite visits of bank executives.

The Bank deals with the client primarily through its Relationship Manager (RM). The RM has to report compliance with EHS norms in the Credit Assessment Memorandum (CAM) both at the time of initial sanction and during the monitoring process. Such certification is based on information / disclosures provided by the borrower at the time of initial appraisal and during periodic review of the facilities.

The RM records outstanding EHS issues if any and follows them up with the client for prompt resolution. The Bank levies penal interest in case of deviations and, thus, ensures compliance with the agreed EHS norms. If there are significant deviations that could affect the viability of the project, the Bank reserves the right to either reduce its exposure or recall the loan. Most significantly, your Bank, as part of its credit policy, requires all projects perceived as carrying high or unusual EHS risk to be approved by an authority no less than the Head - Wholesale Credit Risk or Chief Risk Officer or the Deputy Managing Director or the Managing Director as the case may be.

V. Integrated Reporting (IR)

Your Bank has been releasing Sustainability Reports in line with Global Reporting Initiative (GRI) framework. From the current year, your Bank has started work on Integrated Reporting (IR).

IR aims at providing investors a compact communication about how strategy, governance, performance and prospect create value over time. IR today is a growing trend globally providing investors and interested stakeholders relevant information that an investor will find useful in making his investment decision.

As a leading responsible Indian corporation, it was only appropriate that we took the lead in this regard. Towards this end, the Bank has identified its value created for its stakeholders. Aspects identified as relevant for the Bank, under the capital heads are discussed below.

Financial Capital: This capital refers to the pool of funds used by the Bank for providing its services. This also covers funds received through financing or generated through operations. Financial Capital covers Revenue, Profit After Tax, Earnings Per Share, Lending Portfolio and CSR Spend amongst others.

Manufactured Capital: This capital is an aggregation of all physical assets used by the Bank for delivering its products and services or are created by it. This includes Branch Network, IT Infrastructure, IT Security, Infrastructure Development through Portfolio and Infrastructure Development through CSR Projects.

Intellectual Capital: This capital covers the knowledge-based intangibles of the Bank, which help it gain competitive advantage. This capital also includes the initiatives of the Bank for improving financial inclusion. This capital can be substantiated by products for every section of the society, service orientation, risk management, innovation and digitization approach, skilling communities through CSR, financial inclusion initiatives, etc.

Human Capital: This capital refers to the motivation, commitment and competency of the Bank''s employees. This reflects in employee retention rates, employee diversity, training, appraisals and career guidance, compensation and benefits, grievance redressal, community skilling through CSR Projects. Also for the Bank, this capital covers the empowerment of communities.

Social and Relationship Capital: This capital covers the approach adopted by the Bank for developing and maintaining its relationship with multiple institutions and stakeholders. The Bank''s performance on this capital can be understood through the processes of stakeholder engagement, employee satisfaction, customer satisfaction, compliance, CSR engagements, etc.

Natural Capital: This capital refers to the environmental resources used by the Bank for delivering its products and services. The impact of this capital can be understood through energy consumption (fuel / electricity), energy efficiency / conservation, CO2 emissions, paper consumption, waste management, environmental impact of project portfolio.

The elaborate discussion on the process and outcomes of Integrated Reporting will be discussed in the upcoming Sustainability Report. In the coming years, the Bank will Endeavour to augment its integrated approach towards delivering value to stakeholders.

Subsidiary Companies

Your Bank has two subsidiaries, HDB Financial Services Limited (HDBFSL) and HDFC Securities Limited (HSL). HDBFSL is a major NBFC that caters primarily to segments not covered by the Bank while HSL is among India''s largest retail broking firms. The detailed financial performance of the companies is given below.

1) HDB Financial Services Limited - Reimagining Opportunities

HDBFSLs Net Interest Income grew by 36.9 per cent to Rs, 2,788.9 crore for the year ended March 31, 2018 from Rs, 2,037.2 crore in the previous year. Net Profit rose 39.1 per cent to Rs, 951.7 crore from Rs, 684.2 crore. Net NPA levels stood at about one per cent.

The company caters to the growing needs of an inspirational India, serving both retail and commercial clients through a network of 1,165 branches across 831 cities / towns. Using a convergence of physical and digital channels enabled by a digital backbone, it offers financial solutions to individuals, micro enterprises and emerging businesses across manufacturing, trading and services sectors.

With a robust risk management framework backed by technology, distribution and human capital, HDBFSL brings in simplicity and efficiency in delivering financial solutions to its customers.

The underwriting process at HDB is customized to the needs of the customer segment, ranging from instant workflow-based loan approvals for consumer loans to personalized credit appraisal for large business loans.

Additionally, the company provides Business Process Outsourcing (BPO) solutions to HDFC Bank. Its BPO services division delivers back office services such as forms processing, documents verification, finance and accounting services and correspondence management. HDB also delivers front office services such as contact centre management, outbound marketing and collection services.

HDBFSLs long-term debt is rated AAA by CARE and its short-term debt is rated A1 by CRISIL, indicating the highest degree of safety regarding timely servicing of financial obligations. As on March 31, 2018, your Bank held

95.9 per cent stake in the company.

2) HDFC Securities Limited

HSLs Total Income rose by 42.5 per cent to Rs, 788.3 crore from Rs, 553.2 crore in the previous year. Net Profit grew by 59.5 per cent to Rs, 344.4 crore from Rs, 215.9 crore.

The surge in capital markets (led by higher foreign institutional investor inflows and improved corporate performance) and focus on quality acquisition and activation boosted HSLs performance.

The company has a customer base of 19.35 lakh to whom it offers a large bouquet of financial services. In the year under review, HSL had 6.87 lakh transacting customers, the second highest number of active (transacting) customers among all broking houses.

In line with the thrust on digital channels within the bank, the percentage of customers accessing HSLs services digitally increased to 70 per cent from 63 per cent in the previous year. In particular the percentage accessing it through the mobile app jumped to 33 per cent from 20 per cent.

In a conscious effort to rationalize the distribution network with greater emphasis on digital offerings, HSL consolidated its existing branches to end with 259 branches at the end of the year.

It also secured many awards. It was adjudged Best Broker in the Assocham Capital Market Intermediaries Excellence Awards 2017 and was also a winner in the Best Retail Broker category, at the Outlook Money Awards 2017. Other notable awards include PFRDA Awards for National Pension Scheme (NPS) namely, Best Point of Presence (POP) All Citizen, Best POP NPS Corporate and Best POP NPS Private Sector. HSL has been consistently improving its IT infrastructure and platforms. This has resulted it in being, recognized in the Enterprise Mobility and Enterprise Applications categories at the BFSI Digital Innovation Awards, Express Computers 2017.

As on March 31, 2018, your Bank held 97.7 per cent stake in HSL.

During the year, pursuant to approval received from the Reserve Bank of India, the Bank made an offer to acquire the residual equity shares of HDBFSL and HSL held by their respective shareholders (“Offer”), at a price per share of Rs, 261/- and Rs, 4,818/- respectively, determined on the basis of the valuation report submitted by two independent valuers engaged for this purpose. Pursuant to the Offer, the Bank acquired 29,749 equity shares of HSL from the eligible shareholders who had tendered equity shares in the Offer. No equity shares were offered and acquired in HDBFSL pursuant to the Offer.

The annual reports of HDBFSL and HSL are available on the website of the Bank (www.hdfcbank.com). Shareholders who wish to have a copy of the annual accounts and detailed information may write to HDFC Bank. These documents will also be available for inspection by shareholders at the registered offices of the Bank and its two subsidiaries.

Other Statutory Disclosures Number of Meetings of the Board

The details of Board meetings held during the year, attendance of Directors at the meetings and constitution of various Committees of the Board are included separately in the Corporate Governance Report.

Extract of Annual Return

Pursuant to Section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return is annexed as ANNEXURE 3 to this report.

Directors’ Responsibility Statement

Pursuant to Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, the Board of Directors hereby state that:

- In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any

- We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2018 and of the profit of the Bank for the year ended on that date

- We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Bank and preventing and detecting fraud and other irregularities

- We have prepared the annual accounts on a going concern basis

- We have laid down internal financial controls to be followed by the Bank and ensure that such internal financial controls were adequate and operating effectively

- We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively

Auditors

The Auditors, M/s. Deloitte Haskins & Sells, Chartered Accountants, have been the Statutory Auditors of the Bank since the year ended March 31, 2015. As per regulations of the Reserve Bank of India (RBI), the same auditors cannot be re-appointed for a period beyond four years. It is proposed to appoint M/s. S. R. Batliboi & Co, LLP, Chartered Accountants (Firm Registration No.301003E/E300005) as the new Statutory Auditors of the Bank. Fee payable for the statutory audit is proposed at Rs, 1.9 crore plus applicable taxes and outlays, subject to the approval of the members and the RBI. Members are requested to consider the appointment of M/s. S. R. Batliboi & Co, LLP as the Statutory Auditors of the Bank for financial year 2018-19.

Your Directors place on record their sincere appreciation of the professional services rendered by M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Bank.

During the year under review, fees paid to the auditors viz. M/s. Deloitte Haskins & Sells were as follows:

Fees (including taxes)	(Rs,in crore)
Statutory audit	1.90
Certification & other attest services	0.41
Non-audit services	-
Outlays and Taxes	0.32
Total	2.63

Disclosure under Foreign Exchange Management Act, 1999

The Bank is in compliance with the Foreign Exchange Management Act, 1999 and the Regulation there under (“FEMA provisions”) with respect to downstream investments made in its subsidiaries. Further, the Bank has obtained a certificate from its statutory auditors certifying that the Bank is in compliance with the FEMA provisions with respect to downstream investments made in its subsidiary in the year under review.

Related Party Transactions

Particulars of transactions with related parties referred to in Section 188 (1), as prescribed in Form AOC-2 under Rule 8

(2) of the Companies (Accounts) Rules, 2014 is enclosed as ANNEXURE 4.

Particulars of Loans, Guarantees or Investments

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided or any investment made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.

Financial Statements of Subsidiaries and Associates

In terms of Section 134 of the Companies Act, 2013 and read with Rule 8 (1) of the Companies (Accounts) Rules, 2014 the performance and financial position of the Bank''s subsidiaries and associates are enclosed as ANNEXURE 5 to this report.

During the year, International Asset Reconstruction Company Private Limited (“IARC”) ceased to be an associate of the Bank since the percentage of paid-up equity capital held by the Bank in IARC has been diluted to less than 20 per cent due to further issue of equity shares made by IARC during the financial year, in which the Bank did not participate. As of March 31, 2018, the Bank held 19.22 per cent of the share capital of IARC.

Whistle Blower Policy / Vigil Mechanism

The Bank encourages an open and transparent system of working and dealing amongst its stake holders. While the Bank''s “Code of Conduct & Ethics Policy” directs employees to uphold company values and conduct business with integrity and highest ethical standards, the Bank has also adopted a “Whistle Blower Policy” which encourages its employees and various stake holders to bring to the notice of the Bank any issue involving compromise / violation of ethical norms, legal or regulatory provisions, actual or suspected fraud etc., without any fear of reprisal, discrimination, harassment or victimization of any kind. All such concerns / complaints are received by the Chief of Internal Vigilance of the Bank and / or by the Whistle Blower Committee through a dedicated email ID or by way of letters etc. All such complaints are enquired into by the appropriate authority within the Bank while ensuring confidentiality of the identity of such complainants. On the basis of their investigation, if the allegations are proved be correct, then the Competent Authority shall recommend to the appropriate Disciplinary Authority to take suitable action against the responsible official. The decision of the Whistle Blower Committee is final and binding on all. Preventive measures or any other action considered necessary is also taken by the Competent Authority.

Details of Whistle Blower complaints received and subsequent action taken and the functioning of the Whistle Blower mechanism are reviewed periodically by the Audit Committee of the Board. During the financial year 2017-18, a total of 46 such complaints were received and taken up for investigation.

Declaration by Independent Directors

Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh, Mr. Malay Patel and Mr. Umesh Chandra Sarangi are Independent Directors on the Board of the Bank as on March 31, 2018. All the Independent Directors have given their respective declarations under Section 149 (6) and (7) of the Companies Act, 2013 and the Rules made there under. In the opinion of the Board, the Independent Directors fulfill the conditions relating to their status as Independent Directors as specified in Section 149 of the Companies Act, 2013 and the Rules made there under.

Board Performance Evaluation

The Nomination and Remuneration Committee (NRC) has approved a framework / policy for evaluation of the Board, Committees of the Board and the individual members of the Board (including the Chairperson), which is reviewed annually by the NRC. A questionnaire for the evaluation of the Board, its Committees and the individual members of the Board (including the Chairperson), designed in accordance with the said framework and covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in Corporate Governance was sent out to the Directors. The responses received to the questionnaires on evaluation of the Board and its Committees were placed before the meeting of the Independent Directors for consideration. The assessment of the Independent Directors on the performance of the Board and its Committees was subsequently discussed by the Board at its meeting.

Your Bank has in place a process wherein declarations are obtained from the Directors regarding fulfillment of the ‘fit and proper'' criteria in accordance with RBI guidelines. The declarations from the Directors other than members of the NRC are placed before the NRC and the declarations of the members of the NRC are placed before the Board. Assessment on whether the Directors fulfill the said criteria is made by the NRC and the Board on an annual basis. In addition, the framework / policy approved by the NRC provides for a performance evaluation of the Non-Independent Directors by the Independent Directors on key personal and professional attributes and a similar performance evaluation of the Independent Directors by the Board, excluding the Director being evaluated. Such performance evaluation has been duly completed as above.

Policy on Appointment and Remuneration of Directors and Key Managerial Personnel

The NRC recommends the appointment of Directors to the Board.

It identifies persons who are qualified to become Directors on the Board and evaluates criteria such as academic qualifications, previous experience, track record and integrity of the persons identified before recommending their appointment to the Board.

The remuneration of whole time Directors is governed by the compensation policy of the Bank. The same is available at the we blink https://www.hdfcbank.com/aboutus/cg/codes-and-policies.htm. The compensation policy of the Bank, duly reviewed and recommended by the NRC has been articulated in line with the relevant Reserve Bank of India guidelines.

Your Bank''s compensation policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long term success. Compensation policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective is to provide a fair and transparent structure that helps the Bank to retain and acquire the talent pool critical to building competitive advantage and brand equity.

Your Bank''s approach is to have a pay for performance culture based on the belief that the Performance Management System provides a sound basis for assessing performance holistically. The compensation system should also take into account factors such as roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the compensation policy are also included in Schedule 18 Notes forming part of the Accounts - Note no. 24. Non-Executive Directors are paid remuneration by way of sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory prescriptions. Further expenses incurred by them for attending meetings of the Board and Committees are reimbursed at actuals. Pursuant to the relevant RBI guidelines and approval of the shareholders, the Non-Executive Directors, other than the Chairperson, are paid profit-related commission of Rs, 10,00,000 (Rupees Ten Lakh Only) per annum for each Non-Executive Director.

Mr. Aditya Puri is the Non-Executive Chairman of HDB Financial Services Limited, subsidiary of the Bank. Mr. Puri does not receive any remuneration from the subsidiary. None of the Directors of your Bank other than Mr. Puri is a director of the Bank''s subsidiaries as on March 31, 2018.

Succession Planning

The Bank''s Nomination and Remuneration Committee (NRC) also oversees matters of succession planning of its Directors, Senior Management and Key executives of the Bank. With respect to the tenure of the current Managing Director ending in October 2020, the Board will identify a successor and work to ensure that this is done in a manner that will allow appropriate time for an effective transition of responsibilities.

Significant and Material Orders Passed By Regulators

During the current financial year 2017-18, pursuant to the media reports, SEBI has issued directions to the Bank (“SEBI Directions”) in relation to leakage of unpublished price sensitive information (“UPSI”) pertaining to the financial results of the Bank for the quarter ended December 31, 2015 and the quarter ended June 30, 2017 in various private WhatsApp groups ahead of Bank''s official announcement to the relevant stock exchanges. SEBI has directed the Bank to observe the following: (i) to strengthen its processes / systems / controls forthwith to ensure that such instances of leakage of unpublished price sensitive information do not recur in future, (ii) to submit a report on: (a) the present systems and controls and how the present systems and controls have been strengthened,

(b) details of persons who are responsible for monitoring such systems and (c) the periodicity of monitoring. Further, SEBI has directed the Bank to conduct an internal inquiry into the leakage of UPSI relating to its financial figures including Non-Performing Assets (NPAs) results and take appropriate action against those responsible for the same, in accordance with the applicable law. The scope of such inquiry will need to include determination of the possible role of following persons in relation to the aforesaid leakage of UPSI: (i) persons / members of committees involved in generation of the original data for the purpose of determination of key figures pertaining to financial figures including gross NPAs, (ii) persons involved in the consolidation of the figures for the financial results, (iii) persons involved in the preparation of board notes and presentations, (iv) persons involved in dissemination of information relating to financial results in the public domain and (v) any other persons who had access to the information.

SEBI has directed the Bank to complete the inquiry within a period of three months from the date of the SEBI Directions and thereafter, file a report with SEBI in this regard within a further period of seven days.

Directors and Key Managerial Personnel

In compliance with Section 152 of the Companies Act, 2013, Mr. Keki Mistry will retire by rotation at the ensuing Annual General Meeting and is eligible for re-appointment.

During the year, after serving as Board members for close to seven years each, Mrs. Renu Karnad and Mr. A. N. Roy resigned from the Board of the Bank with effect from January 20, 2018 and January 31, 2018 respectively. Mrs. Karnad and Mr. Roy resigned due to other commitments and personal considerations respectively. The Board places on record its sincere appreciation of the contribution made by Mrs. Karnad and Mr. Roy during their tenure with the Bank and wishes them well in future endeavours.

The brief resume / details regarding the Director proposed to be re-appointed as above is furnished in the report on Corporate Governance. There have been no changes in the Directors and Key Managerial Personnel of the Bank other than the above.

Particulars of Employees

The information in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in ANNEXURE 6 and ANNEXURE 7 to this report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

(A) Conservation of Energy

Your Bank has undertaken several initiatives in this area such as:

- Installation of green locks and AC controllers in air conditioning machines in order to save energy and support go-green initiative

- Installation of energy capacitors at high consumption offices to control the power factor and to reduce energy consumption

- All main signboards in branches switched off post 10 p. m.

- Put controls on usage of lifts, ACs, common passage lights and other electrical equipment

- Reduction of contract demand at Kanjurmarg Hub, resulting in energy savings

- Replacement of CFL Lamps with LED fixtures at Kanjurmarg Hub

- Provision of LED lamps at branches and offices

- Provision of solar panels for captive power generation at our offices in Pune and Bhubaneswar

Monitoring and energy saving initiative for 100 branches resulting in power saving of over 10 per cent. The Bank won an award in National Energy Efficiency Circle Competition2017 - Winner Best Energy Efficient Case study held by CII in May 2017. Considering the benefits accrued, we have further extended the monitoring programme to an additional 500 branches

(B) Technology Absorption

Your Bank has been at the forefront of using technology absorption and evaluates innovative technology with multiple fintech partners. It has launched a formal Consumer Durable Loans portfolio and product with on-line real-time Digital API based collaboration with third party and fintech application sourcing platforms. Your Bank is leveraging API based Service Oriented Architecture and Middleware for enabling digital initiatives and empowering relationship managers at branches with digital products and services platforms. Your Bank has also begun using robotics and artificial intelligence in digital commerce, corporate supply chain and payment settlement systems to reduce time to market and turnaround time.

(C) Foreign Exchange Earnings and Outgo

During the year, the total foreign exchange earned by the Bank was Rs, 1,523.5 crore (on account of net gains arising on all exchange /derivative transactions) and the total foreign exchange outgo was Rs, 192.9 crore towards the operating and capital expenditure requirements.

Secretarial Audit

In terms of Section 204 of the Companies Act, 2013 and the Rules made there under, M/s. BNP & Associates, Practicing Company Secretaries have been appointed as Secretarial Auditors of the Bank for the financial year 2017-18. The report of the Secretarial Auditors is enclosed as ANNEXURE 8 to this Report. With regard to the observation made by the Secretarial Auditors in the Secretarial Audit Report in connection with the directions issued by SEBI to the Bank on February 23, 2018 to inter alia,

(a) strengthen the Bank''s processes / systems / controls forthwith to ensure that instances of leakage of unpublished price sensitive information (“UPSI”) does not recur in future, and submit a report to SEBI on inter alia, the present systems and controls and how they have been strengthened (“Report”); and (b) conduct an internal inquiry into the leakage of UPSI relating to its financial figures including non-performing assets during the quarter ended December 2015 and June 2017, and submit a report to SEBI (“Internal Inquiry Report”), the Bank has appointed:

1. Cyril Amarchand Mangaldas to assist the Bank in inter alia reviewing and conducting an assessment of the policies, systems and processes of the Bank in relation to storing, handling and communication of UPSI in terms of the SEBI (Prohibition of Insider Trading) Regulations, 2015, specifically, the information flow and process steps involved in preparation and finalization of financial results by the Bank, and in preparation of the Report; and

2. Haribhakti & Co., LLP for the purposes of preparing the Internal Inquiry Report.

The preparation of the aforementioned reports is underway and the same will be submitted to SEBI within the timelines specified in its directions.

Corporate Governance

In compliance with Regulation 34 and other applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate report on Corporate Governance along with a certificate of compliance from the Secretarial Auditors, forms an integral part of this Report.

Business Responsibility Report

The Bank''s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its web site www.hdfcbank.com

Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The relevant information is included in Section E-Principle 3 of the Business Responsibility Report for 2017-18.

Acknowledgement

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank''s employees and look forward to their continued contribution in building a ‘World Class Indian Bank.''

Conclusion

It has been a challenging year for the global as well as Indian economy. The global economy is facing risks from the increasing tide of protectionism, uncertainty regarding Brexit and the forthcoming elections in Italy. The US-North Korea relationship, notwithstanding recent signs of a rapprochement, will continue to cast a shadow on the geopolitical situation till it settles down one way or the other.

On the positive side, India continues to remain among the two fastest growing economies in the world. The transitory impact of the GST too appears to be over. Private capital expenditure is expected to pick up in the first half of the current financial year.

Your Bank has continued to grow faster than the system. It now plans to raise capital of '' 24,000 crore to fund growth for the next few years.

As always, your Bank will continue to be judicious. It will continue to leverage its distribution strength and digital platforms to offer a similar experience to customers across urban, semi-urban and rural India.

Needless to say, the Bank will continue to focus on its five core values, namely, Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Its commitment to the highest possible standards of corporate governance remains unwavering even as it embarks on the next stage of its evolution, increasingly leveraging artificial intelligence and analytics, to continue delivering sustainable growth to all stakeholders.

On behalf of the Board of Directors

Mrs. Shyamala Gopinath

Chairperson

Mumbai, May 22, 2018

---

Mar 31, 2017

To the Members,

Introduction:

The Directors take great pleasure in presenting the 23^rd Annual Report on the business and operations of your Bank, together with the audited accounts for the year ended March 31, 2017.

The year under review has been extremely satisfying with your Bank witnessing an increase in asset size, revenues and profitability. What is more, it was able to manage the bad loans much better than the industry. The metric that best captures performance is the domestic loan growth which stood at about 23.7 per cent against the overall banking system loan growth of around 5 per cent. The other key performance indicators are Balance Sheet size (up 16.6 per cent), Total Deposits (up 17.8 per cent), Net Profit (up 18.3 per cent) and Net Interest Income (up 20.1 per cent). Cost to Income Ratio improved to 43.4 per cent. This assumes even more significance as it came in the face of demonetisation which led to growth pangs in the third quarter.

The performance is a reflection of the following:

1) Leveraging digitization to improve customer experience, productivity and Cost to Income Ratio

2) Consolidation of its lead over peers as India’s top Digital Bank in metro, urban, semi urban and rural markets

3) Establishing itself as India’s leading rural focused bank with unmatched reach, product range and innovation

4) Unique use of artificial intelligence and data analytics to sharpen product offering

It is also an outcome of a strong brand built on the twin engines of customer and community centricity. As you are aware, your Bank has been ‘Creating Sustainable Communities’ through its social initiatives which help people break out of the vicious circle of poverty and enable them to lead a better life. In pursuance of the Board mandate to make 1 crore families economically self-reliant, we are happy to report that 68 lakh families at the bottom of the pyramid have already been covered. We are also proud to state that during the year, your Bank has crossed the mandatory 2 per cent CSR spend.

Last but not the least, words cannot be enough to thank our employees who made all this possible. Especially during demonetisation when they were faced with chaos and crises by the day and went beyond the call of duty.

Summary of Financial Performance

(Rs. crore)

Particulars	For the year ended / As on
	March 31, 2017	March 31, 2016
Deposits and Other Borrowings	7,17,668.5	6,31,393.2
Advances	5,54,568.2	4,64,594
Total Income	81,602.5	70,973.2
Profit Before Depreciation and Tax	22,972.2	19,343.8
Profit After Tax	14,549.6	12,296.2
Profit Brought Forward	23,527.7	18,627.8
Total Profit Available for Appropriation	38,077.3	30,924
Appropriations
Transfer to Statutory Reserve	3,637.4	3,074.1
Transfer to General Reserve	1,455	1,229.6
Transfer to Capital Reserve	313.4	222.2
Transfer to / (from) Investment Reserve	4.3	(8.5)
Proposed Dividend1	-	2,401.8
Tax (including cess) on Dividend*	-	488.9
Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits	(1.7)	(11.7)
Balance carried over to Balance Sheet	32,668.9	23,527.6

The Board of Directors, at the meeting held on April 21, 2017 has proposed a dividend of Rs.11.00 per equity share aggregating Rs.3,392.7 crore, inclusive of tax on dividend. The proposal is subject to the approval of shareholders at the Annual General Meeting. In terms of revised Accounting Standard (AS) 4-Contingencies and Events Occurring after the Balance Sheet date as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend from Statement of Profit and Loss for the year ended March 31, 2017. However, the effect of the proposed dividend has been reckoned in determining capital funds in the computation of the Capital Adequacy Ratio as on March 31, 2017.

The Bank’s Total Income rose to Rs.81,602.5 crore for the year under review from Rs.70,973.2 crore in the previous year. Its Net Profit increased by 18.3 per cent to Rs.14,549.7 crore from Rs.12,296.2 crore.

Appropriations from Net Profit have been effected as per the table given above.

Dividend

Your Bank has a dividend policy that, inter alia, balances the objectives of appropriately rewarding shareholders and retaining capital in order to maintain a healthy Capital Adequacy Ratio. It has had a consistent track record of steady increase in dividend distribution over its history with the Dividend Pay-Out Ratio ranging between 20 to 25 per cent. The dividend policy of your Bank is available on the Bank’s website at the following link: http://www.hdfcbank.com/htdocs/common/pdf/corporate/Dividend-Distribution-Policy.pdf Consistent with this policy and in recognition of the overall performance during the year under review, your Directors are pleased to recommend a dividend of Rs.11 per equity share of Rs.2 as against Rs.9.50 in the previous year. As you are aware, this dividend shall be subject to tax to be paid by the Bank.

Ratings

Instrument	Rating	Rating Agency	Comments
Fixed Deposit Programme	CARE AAA (FD)	CARE Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
	IND Taaa	India Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
Certificate of Deposits Programme	CARE A1	CARE Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
	IND A1	India Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
Long Term Unsecured, Subordinated (Lower Tier 2) Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
	IND AAA	India Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
Tier I Perpetual Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
Upper Tier 2 Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.

Infrastructure Bonds	CARE AAA	CARE Ratings	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
	CRISIL AAA	CRISIL	Instruments with this rating are considered to have very strong degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
Tier I Bonds (Under Basel III)	CARE AA	CARE Ratings	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
	CRISIL AA	CRISIL	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
	IND AA	India Ratings	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

Issuance of Equity Shares

During the year under review, 3,43,59,200 equity shares were allotted to the employees of your Bank in respect of the equity stock options exercised under the Employee Stock Option Schemes. As on March 31, 2017, the issued, paid up and authorised capital of your Bank stood at Rs.512,50,91,434 comprising 256,25,45,717 equity shares of Rs.2 each.

Employee Stock Options

The information pertaining to Employee Stock Options is given in ANNEXURE 1 to this report.

Capital Adequacy Ratio

Your Bank’s total Capital Adequacy Ratio (CAR) calculated in line with Basel III capital regulations stood at 14.6 per cent as on March 31, 2017, well above the regulatory minimum of 10.25 per cent including Capital Conservation Buffer of 1.25 per cent. Of this, Tier I CAR was 12.8 per cent. The effect of the proposed dividend has been taken into account in computing these ratios.

Subsidiary Companies

Your Bank has two subsidiaries, HDB Financial Services Limited (HDBFSL) and HDFC Securities Limited (HSL). The detailed financial performance of the companies is given below.

HDB Financial Services Limited

HDBFSL is a leading Non-Banking Financial Company that caters to segments not covered by the Bank through a network of 1,151 branches in 22 states and 3 Union Territories. Using both physical and digital channels, the company offers loan and asset finance products to individuals, emerging businesses, and micro enterprises across manufacturing, trading and services sectors. Additionally, the company provides Business Process Outsourcing (BPO) solutions to HDFC Bank.

In the year under review, HDBFSLs Net Interest Income grew by 41 per cent to Rs.2,037.2 crore from Rs.1,444.5 crore in the previous year. Net Profit rose 28 per cent to Rs.684.2 crore from Rs.534.4 crore.

HDBFSL is rated AAA for its long-term debt and A1 for its short-term debt facilities by CARE & CRISIL respectively indicating the highest degree of safety regarding timely servicing of financial obligations.

Under the scheme of amalgamation approved by the Bombay and Gujarat High Courts, two associate companies, Atlas Documentary Facilitators Company Private Limited (ADFC) and HBL Global Private Limited (HBL) have been amalgamated with HDBFSL with effect from December 1, 2016. The appointed date of the merger was April 1, 2014. The scheme has accordingly been given effect to in these financial statements. HBL provided marketing and promotion services while ADFC was in the BPO business.

In the year under review, HDBFSL raised Rs.1,099.4 crore through a rights issue. This resulted in a higher capital base and Capital Adequacy Ratio (CAR) of 20.8 per cent, well beyond the mandatory requirement of 15 per cent. The proceeds of this issue will be utilised for capital expenditure, working capital and business growth. As on March 31, 2017, your Bank held 96.2 per cent stake in the company.

HDFC Securities Limited

HDFC Securities Limited (HSL) is among India’s largest retail broking firms offering its 18 lakh customers a large bouquet of services. The company had the second highest number of active (transacting) customers among all broking houses.

In the year under review, the capital markets surged on the back of a good monsoon, higher FII inflows, improved corporate performance and the passing of the Goods and Services Tax Bill. This is reflected in the company’s performance.

HSLs Total Income grew by 37.7 per cent to Rs.553.2 crore from Rs.401.6 crore in the previous year. Net Profit grew by 61.9 per cent to Rs.215.9 crore from Rs.133.3 crore.

Digital channels remain a core focus with more than 20 per cent of customers transacting through the mobile app and overall 68 per cent of customers being serviced digitally. In line with its increased thrust on digitisation, HSL added 11 branches in the year under review as against 12 in the previous year. As on March 31, 2017, it had 273 branches.

During the year under review, HSL won three prestigious PFRDA Awards for National Pension Scheme (NPS), viz. Best Point of Presence (POP) All Citizen, Best POP NPS Corporate and Best POP NPS Private Sector. It was adjudged runner up in the Best e-Brokerage category at the Outlook Money Awards 2016.

As on March 31, 2017, your Bank held 97.9 per cent stake in HSL.

The annual reports of HDBFSL and HSL are available on the website of the Bank (www.hdfcbank.com). Shareholders who wish to have a copy of the annual accounts and detailed information may write to the Bank. These documents shall also be available for inspection by shareholders at the registered offices of the Bank and its two subsidiaries.

Other Statutory Disclosures Board and Board Committees

The details of Board meetings held during the year, attendance of Directors at the meetings and constitution of various Committees of the Board are included separately in the Corporate Governance Report.

Extract of Annual Return

Pursuant to section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return is annexed as ANNEXURE 3 to this report.

Directors’ Responsibility Statement

Pursuant to Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, the Board of Directors hereby state that:

- In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any

- We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2017 and of the profit of the Bank for the year ended on that date

- We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities

- We have prepared the annual accounts on a going concern basis

- We have laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively

- We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively

Auditors

The Auditors, M/s. Deloitte Haskins & Sells, Chartered Accountants, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. During the year under review, fees paid to the auditors were as follows:

Fees (including taxes)	Rs. lacs
Statutory Audit (Rs.1,90,00,000 plus taxes)	218.50
Certification & other services provided as statutory	39.08
auditors
Total	257.58

Members are requested to consider their re-appointment for financial year 2017-18.

Disclosure under Foreign Exchange Management Act, 1999

The Bank is in compliance with the Foreign Exchange Management Act, 1999 (FEMA) provisions with respect to downstream investments made in its subsidiaries. Further, the Bank has obtained a certificate from its statutory auditors certifying that the Bank is in compliance with the FEMA provisions with respect to downstream investments made in its subsidiaries in the year under review.

Related Party Transactions

Particulars of transactions with related parties referred to in Section 188 (1), as prescribed in Form AOC-2 under Rule 8 (2) of the Companies (Accounts) Rules, 2014 is enclosed as ANNEXURE 4.

Particulars of Loans, Guarantees or Investments

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business. Further, in terms of the Companies (Removal of Difficulties) Order, 2015, nothing in Section 186 except sub section (1) shall apply to any acquisition made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.

Financial Statements of Subsidiaries and Associates

In terms of Section 134 of the Companies Act, 2013 and read with Rule 8 (1) of the Companies (Accounts) Rules, 2014 the performance and financial position of the Bank’s subsidiaries and associates are enclosed as ANNEXURE 5 to this report. There were no entities which became or ceased to be the Bank’s subsidiaries, associates or joint ventures during the year, except Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited, associates of the Bank, which amalgamated with the Bank’s subsidiary HDB Financial Services Limited, pursuant to the approval of the Honourable High Court of Gujarat and Bombay with effect from December 1, 2016. The appointed date of the merger as per the scheme of amalgamation was April 1, 2014.

Whistle Blower Policy/Vigil Mechanism

The Bank has adopted a Whistle Blower Policy pursuant to which employees of the Bank can raise their concerns relating to fraud, malpractice or any other activity or event which is against the interest of the Bank or society as a whole. Details of complaints received and the action taken are reviewed by the Audit Committee. The functioning of the Whistle Blower mechanism is reviewed by the Audit Committee from time to time. None of the Bank’s personnel have been denied access to the Audit Committee.

Declaration by Independent Directors

Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh, Mr. A. N. Roy, Mr. Malay Patel and Mr. Umesh Chandra Sarangi are Independent Directors on the Board of the Bank as on March 31, 2017. All the Independent Directors have given their respective declarations under Section 149 (6) and (7) of the Companies Act, 2013 and the Rules made thereunder. In the opinion of the Board, the Independent Directors fulfil the conditions relating to their status as Independent Directors as specified in Section 149 of the Companies Act, 2013 and the Rules made thereunder.

Board Performance Evaluation

The Nomination and Remuneration Committee (NRC) has approved a framework/policy for evaluation of the Board, Committees of the Board and the individual members of the Board. The said framework/policy was duly reviewed during the year. A questionnaire for the evaluation of the Board and its Committees, designed in accordance with the said framework and covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in Corporate Governance was sent out to the Directors. The responses received to the questionnaires on evaluation of the Board and its Committees were placed before the meeting of the Independent Directors for consideration. The assessment of the Independent Directors on the performance of the Board and its Committees was subsequently discussed by the Board at its meeting.

Your Bank has in place a process wherein declarations are obtained from the directors regarding fulfilment of the ‘fit and proper’ criteria in accordance with the guidelines of the Reserve Bank of India. The declarations from the Directors other than members of the NRC are placed before the NRC and the declarations of the members of the NRC are placed before the Board. Assessment on whether the Directors fulfil the said criteria is made by the NRC and the Board on an annual basis. In addition, the framework/policy approved by the NRC provides for a performance evaluation of the Non-Independent Directors by the Independent Directors on key personal and professional attributes and a similar performance evaluation of the Independent Directors by the Board, excluding the Director being evaluated. Such performance evaluation has been duly completed as above.

Policy on Appointment and Remuneration of Directors and Key Managerial Personnel

The Nomination and Remuneration Committee (NRC) recommends the appointment of Directors to the Board. It identifies persons who are qualified to become Directors on the Board and evaluates criteria such as academic qualifications, previous experience, track record and integrity of the persons identified before recommending their appointment to the Board.

The remuneration of whole time Directors is governed by the compensation policy of the Bank. The compensation policy of the Bank, duly reviewed and recommended by the NRC has been articulated in line with the Reserve Bank of India guidelines.

Your Bank’s compensation policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long term success. Compensation policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective is to provide a fair and transparent structure that helps the Bank to retain and acquire the talent pool critical to building competitive advantage and brand equity.

Your Bank’s approach is to have a pay for performance culture based on the belief that the Performance Management System provides a sound basis for assessing performance holistically. The compensation system should also take into account factors like roles, skills/competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the compensation policy are also included in Schedule 18 Notes forming part of the Accounts - Note no. 25. Non-Executive Directors are paid remuneration by way of sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory prescriptions. Non-Executive Directors are also reimbursed expenses incurred by them for attending meetings of the Board and its Committees at actuals. The remuneration payable to the Non-Executive Directors and Independent Directors is governed by the provisions of the Banking Regulation Act, 1949, RBI guidelines issued from time to time and the provisions of the Companies Act, 2013 and related rules to the extent it is not inconsistent with the provisions of the Banking Regulation Act, 1949 and RBI guidelines. In terms of the guidelines issued by RBI for compensation of Non-Executive Directors of private sector banks dated June 1, 2015 and the approval of shareholders at the 22^nd Annual General Meeting, Non-Executive Directors of the Bank, other than the Chairperson, are paid profit-related commission of Rs.10,00,000/- (Rupees Ten Lakh only) per annum for each Non-Executive Director.

Mr. Aditya Puri is the Non-Executive Chairman of HDB Financial Services Limited, Bank’s subsidiary. Mr. Puri does not receive any remuneration from the subsidiary. None of the Directors of your Bank other than Mr. Puri is a director of the Bank’s subsidiaries as on March 31, 2017.

Significant and Material Orders Passed By Regulators

During the financial year 2016-17, further to the media reports in October 2015 about irregularities in advance import remittances in various banks, the Reserve Bank of India (RBI) had conducted a scrutiny of the transactions carried out by the Bank under Section 35 (1A) of the Banking Regulation Act, 1949. The RBI issued a Show Cause notice to which the Bank had submitted its detailed response. After considering the Bank’s submission, the RBI imposed a penalty of Rs.2 crore on the Bank vide its letter dated July 19, 2016 on account of pendency in receipt of bill of entry relating to advance import remittances made and lapses in adhering to KYC/AML guidelines in this respect. The penalty has since been paid. The Bank has implemented a comprehensive corrective action plan, to strengthen its internal control mechanisms so as to ensure that such incidents do not recur.

Directors and Key Managerial Personnel

The Bank proposes to re-appoint Mr. Paresh Sukthankar and Mr. Kaizad Bharucha as Deputy Managing Director and Executive Director of the Bank, respectively, for a period of three years each with effect from June 13, 2017, subject to the approval of the Reserve Bank of India and the shareholders at the ensuing Annual General Meeting. In compliance with Section 152 of the Companies Act, 2013, Mr. Sukthankar and Mr. Bharucha will also retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment. The Bank also proposes to re-appoint Mrs. Shyamala Gopinath at the ensuing Annual General Meeting as the Part Time Non-Executive Chairperson of the Bank for a period of three years commencing from January 2, 2018 till January 1, 2021 or till such other earlier or later date(s) as may be approved by Reserve Bank of India, and as subsequently extended by the Reserve Bank of India from time to time.

During the year, Mr. Srikanth Nadhamuni was appointed as an Additional Director of the Bank with effect from September 20, 2016 to hold office till the conclusion of the ensuing Annual General Meeting. Mr. Nadhamuni has been appointed as a director having expertise in the field of Information Technology. In terms of Section 152 of the Companies Act, 2013, it is proposed to appoint Mr. Nadhamuni as a Director of the Bank at the ensuing Annual General Meeting. The Bank has received a notice from a member proposing his candidature as Director of the Bank. Mr. Nadhamuni shall be liable to retire by rotation.

The brief resume/details regarding the Directors proposed to be appointed/re-appointed as above are furnished in the report on Corporate Governance. There have been no changes in the Directors and Key Managerial Personnel of the Bank other than the above.

Familiarisation Programme for Independent Directors

The various programmes undertaken for familiarising Independent Directors with the functions and procedures of the Bank are disclosed in the Corporate Governance Report.

Particulars of Employees

The information in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in ANNEXURE 6 and ANNEXURE 7 to this report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

(A) Conservation of Energy

Your Bank has undertaken several initiatives in this area such as

- Installation of green locks and AC controllers in air conditioning machines in order to save energy and support go-green initiative

- Installation of energy capacitors at high consumption offices to control the power factor and to reduce energy consumption

- All main signboards in branches switched off post 10 p.m.

- Put controls on usage of lifts, ACs, common passage lights and other electrical equipment

(B) Technology Absorption

Your Bank has been at the forefront of using technology absorption and evaluates innovative technology with multiple fintech partners. In the year under review, it organised its 2^nd ’Digital Innovation Summit’ and shortlisted several fintech startups to carry out multiple proof of concepts in both customer facing and internal processes.

Your Bank uses advanced analytics to create a 360 degree view of all 4.05 crore customers. The analytics engine uses machine learning to analyze structured and unstructured data which help in offering relevant product/ service recommendations using advanced algorithms. These are delivered via personalized campaigns through an omni-channel approach. Your Bank has also begun using robotics and artificial intelligence in digital commerce, corporate supply chain and payment settlement systems to reduce time to market and turnaround time.

(C) Foreign Exchange Earnings and Outgo

During the year, the total foreign exchange earned by the Bank was Rs.1,263.4 crore (on account of net gains arising on all exchange/derivative transactions) and the total foreign exchange outgo was about Rs.221 crore towards the operating and capital expenditure requirements.

Secretarial Audit

In terms of Section 204 of the Companies Act, 2013 and the Rules made thereunder, M/s. BNP & Associates, Practising Company Secretaries have been appointed as Secretarial Auditors of the Bank for the financial year 2016-17. The report of the Secretarial Auditors is enclosed as ANNEXURE 8 to this Report. The observations in the said report are self-explanatory and no further comments/explanations are called for.

Corporate Governance

In compliance with Regulation 34 and other applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate report on Corporate Governance along with a certificate of compliance from the Secretarial Auditors, forms an integral part of this Report.

Business Responsibility Report

The Bank’s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its web site www.hdfcbank.com

Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The relevant information is included in Section E-Principle 3 of the Business Responsibility Report for 2016-17.

Acknowledgement

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank’s employees and look forward to their continued contribution in building a ‘World Class Indian Bank.’

Conclusion

The global economy is facing risks emanating from policy uncertainty in the US, imminent elections in several European countries and rising protectionism. The Indian economy seems better placed. And so is your Bank which is on course to continue to outgrow the system, as it has in the year under review.

Like in the past, the Bank will continue to leverage its distribution strength and digital platforms especially in the rural and semi-urban parts of the country for sustainable growth.

Needless to say, the Bank will continue to focus on its 5 core values namely Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Its commitment to the highest possible standards of corporate governance remains unwavering. All of this will help the Bank on its onward growth journey and help create long-term shareholder value.

On behalf of the Board of Directors

Mrs. Shyamala Gopinath

Chairperson

Mumbai, May 29, 2017

---

Mar 31, 2015

To the Members,

The Directors take great pleasure in presenting the Twenty First Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2015.

SUMMARY OF FINANCIAL PERFORMANCE

(Rs. crore)

For the year ended March 31, 2015 March 31, 2014

Deposits and Other Borrowings 496,009.2 406,776.5

Advances 365,495.0 303,000.3

Total Income 57,466.3 49,055.2

Profit before Depreciation and Tax 15,985.0 13,443.7

Net Profit 10,215.9 8,478.4

Profit brought forward 14,654.2 11,132.2

Total Profit available for Appropriation 24,870.1 19,610.6

Appropriations:

Transfer to Statutory Reserve 2,554.0 2,119.6

Transfer to General Reserve 1,021.6 847.8

Transfer to Capital Reserve 224.9 58.3

Transfer to Investment Reserve 27.5 3.2

Proposed Dividend 2,005.2 1,643.4

Tax including Surcharge and Education cess on Dividend 408.2 279.3

Dividend (including tax / cess thereon) pertaining to previous year paid during the year 0.8 4.8

Balance carried over to Balance Sheet 18,627.9 14,654.2

The Bank posted total income and net profit of Rs. 57,466.3 crore and Rs. 10,215.9 crore respectively for the financial year ended March 31, 2015 as against Rs. 49,055.2 crore and Rs. 8,478.4 crore respectively in the previous year.

Appropriations from net profit have been effected as per the table given above.

DIVIDEND

Your Bank has had a dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital in order to maintain a healthy capital adequacy ratio to support future growth. It has had a consistent track record of moderate but steady increase in dividend declarations over its history with the dividend payout ratio ranging between 20% and 25%. Consistent with this policy and in recognition of the overall performance during this financial year, your directors are pleased to recommend a dividend of Rs. 8.00 per equity share of Rs. 2 for the year ended March 31, 2015 as against Rs. 6.85 per equity share of Rs. 2 for the previous year ended March 31, 2014. This dividend shall be subject to tax on dividend to be paid by the Bank.

AWARDS

As in the past years, awards and recognition were conferred upon your Bank by leading domestic and international organizations and publications during the financial year ended March 31, 2015.

Some of them are: Asiamoney

- Best of Best Domestic Banks - India Asiamoney FX Poll 2014

- Best Domestic Provider of FX options

- Best Domestic Provider of FX products & services

- Best Domestic Provider of FX research & market coverage

- Best Domestic Provider for FX services Barron''s List of World''s Best CEOs

- Mr Aditya Puri named in list of Top 30 Global CEOs

BrandZTM Top 50 Most Valuable Indian Brands study by Millward Brown

- India''s Most Valuable Brand Business Today - KPMG Study 2014

- Best Large Bank - Overall

- Best Large Bank - Growth

Businessworld - PwC India Best Banks Survey 2014

- Best Large Bank

- Fastest Growing Large Bank CNBC-TV18 CFO Awards

- Best performing CFO in the Banking Sector

Dun & Bradstreet - Manappuram Finance Limited Corporate Award 2014

- Best Corporate in Banking Sector

Dun & Bradstreet - Polaris Financial Technology Banking Awards 2014

- Best Bank - Managing IT Risk (Large Banks)

- Best Bank - Mobile Banking (Large Banks)

- Best Bank - Best IT Team (Private Sector Banks)

Euromoney Private Banking and Wealth Management Survey 2015

- Best Private Banking Services award for Net-worth- specific services category for super affluent clients (US$ 1 million to US$ 5 million)

- Best Private Banking Services award Asset Management.

FE Best Bank Awards

- Best Bank in the New Private sector

- Winner - Profitability

- Winner - Efficiency

Finance Asia Country Awards 2014

- Best Bank- India

Finance Asia''s poll on Asia''s best managed companies

- Best Managed Company in India

- Best CEO in India (Mr Aditya Puri) Forbes Asia

- Fab 50 Companies List for the 8th year

IDRBT Banking Technology Excellence Awards 2013-14

- Best Bank Award for Best IT team among Large Banks J. P. Morgan Quality Recognition Award

- Best in class straight Through Processing Rates Legal Era Magazine

- Best In - House Legal Team in Banking Sector

National Payment Corporation of India (NPCI) Excellence Awards

- Best Bank in Cheque Transaction System (CTS) - Large Bank Category

- Best Bank in National Automated Clearing House (NACH) - Large Bank Category

The Asset Triple A Awards 2014

- India - Best in Treasury and Working Capital - SME''s The Asian Banker

- Strongest Bank in India in the Asian Banker 500 (AB 500) Strongest Bank by Balance Sheet Ranking 2014

The Asian Banker Transaction Banking Awards 2014

- The Best Cash Management Bank in India Outlook Money 2014

- Best Bank Award

ISSUANCE OF EQUITY SHARES

Your Bank has issued 66,000,000 underlying equity shares pursuant an ADR offering in February 2015 and also allotted 18,744,142 equity shares pursuant to a Qualified Institutional Placement (QIP) offering. As a result of these issuances, the equity of your Bank increased by Rs. 9,722.8 crore, net of share issue expenses. The capital was raised for meeting capital requirements in accordance with the capital adequacy norms and to ensure adequate capital to support growth and expansion, including enhancing your Bank''s solvency and capital adequacy ratio and for general corporate purposes.

During the year under review, 22,700,740 equity shares were allotted to the employees of your Bank in respect of the equity stock options exercised under the Employee Stock Option schemes of the bank.

As at 31st March 2015, the issued, subscribed and paid- up capital of your bank stood at Rs. 501.30 crore comprising 2,506,495,317 equity shares of Rs. 21- each.

EMPLOYEE STOCK OPTIONS

The information pertaining to Employee Stock Options is given in as ANNEXURE 1 to this report.

CAPITAL ADEQUACY RATIO

Your Bank''s total Capital Adequacy Ratio (CAR) calculated in line with Basel III capital regulations stood at 16.8%, well above the regulatory minimum of 9.0%. Of this, Tier I CAR was 13.7%.

SUBSIDIARY COMPANIES

Your Bank has two subsidiaries, HDB Financial Services Limited (''HDBFS'') and HDFC Securities Limited (''HSL)

HDB FINANCIAL SERVICES LIMITED

HDBFS is a non-deposit taking non-bank finance company (''NBFC''). The customer segments being addressed by HDBFS are typically under serviced by larger commercial banks, and thus create a profitable niche for the company. Apart from lending to individuals, the company grants loans to micro, small and medium business enterprises. It also runs call centers for collection services to the Bank''s retail loan products.

As on March 31, 2015, HDBFS had 425 branches in 265 cities. During the financial year ended March 31, 2015, the company''s total income increased by 50% to Rs. 2,527.3 crore as compared to Rs. 1,688.3 crore in the previous year. During the same period the company''s net profit after tax grew 67% to reach Rs. 349.4 crore compared to Rs. 209.2 crore in the previous year.

During the year ended March 31, 2015, HDBFS issued 185,153,857 equity shares under the Rights Issue at a ratio of 9:25 (nine shares for every twenty five shares held). Your bank subscribed 180,000,000 shares under the Rights Issue at Rs. 65 per share (includes premium of Rs. 55 per share). As on 31 March 2015, your bank held 97.2 per cent stake in HDBFS. Further 565,800 equity shares were also issued under Employees Stock Options Scheme.

HDFC SECURITIES LIMITED

HDFC Securities Limited (HSL) continued to be a strong player in the financial services space offering complete financial services along with the core broking product. During the year under review, your Bank has further consolidated its stake in HSL by buying the shares from the other minority shareholders. Consequently, your Bank held 97.9 per cent stake in HSL as on March 31, 2015.

HSL increased its distribution network by a further fifty branches during the year, and by the end of the year had 250 branches across 186 cities in the country. During the year under review, HSLs total income has increased by over 58% to Rs. 417.0 crore as against Rs. 263.1 crore in the previous year. During the same period, the net profit after tax more than doubled to Rs. 165.0 crore compared to Rs. 78.4 crore in the previous year.

During the year under review, HSL received the following awards

- "Best e-Brokerage Award - 2014" in the Outlook Money Awards in the runner up category.

- "Best Market Analyst Award 2014" in the Equity Banking category by Zee Business and

- "Best Financial Markets Technology Implementation - 2014" during the eighth Asian Bankers Awards Program, 2014.

Shareholders who wish to have a copy of the annual accounts and detailed information on HDBFS and HSL may write to the Bank for the same. Further, the said documents shall also be available for inspection by shareholders at the registered offices of the Bank, HDBFS and HSL.

RELATED PARTY TRANSACTIONS

The details of transactions entered into with related parties are enclosed as ANNEXURE 4 to this report pursuant to Section 134 (3) (h) of the Companies Act, 2013 and Rule 8 of the Companies (Accounts) Rules, 2014.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business. As required by Section 186 (4) of Companies Act, 2013, the particulars of investments made by the Bank are disclosed in Schedule 8 of the financial statements as per the applicable provisions of Banking Regulation Act, 1949.

FINANCIAL STATEMENTS OF SUBSIDIARIES AND ASSOCIATES

In terms of Section 134 of the Companies Act, 2013 and read with Rule 8 (1) of the Companies (Accounts) Rules, 2014 the performance and financial position of the Bank''s subsidiaries and associates are enclosed as ANNEXURE 5 to this report. There were no entities which became or ceased to be the Bank''s subsidiaries, associates or joint ventures during the year.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Bank has adopted a Whistle Blower Policy pursuant to which employees of the Bank can raise their concerns relating to fraud, malpractice or any other activity or event which is against the interest of the Bank or society as a whole. Details of complaints received and the action taken are reviewed by the Audit Committee.

The functioning of the Whistle Blower mechanism is reviewed by the Audit Committee from time to time. None of the Bank''s personnel have been denied access to the Audit Committee.

DECLARATION BY INDEPENDENT DIRECTORS

Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh, Mr. Anami Roy and Dr. Pandit Palande are Independent Directors on the Board of the Bank. All the above named Independent Directors have given their respective declarations under Section 149 (6) and Section 149 (7) of Companies Act, 2013 and the Rules made thereunder. In the opinion of the Board, the Independent Directors fulfill the conditions relating to their status as Independent Directors as specified in Section 149 of the Companies Act, 2013 and rules made thereunder.

BOARD PERFORMANCE EVALUATION

The Nomination and Remuneration Committee (NRC) has approved a framework/policy for evaluation of the Board, Committees of the Board and the individual members of the Board. A questionnaire for the evaluation of the Board and its Committees, designed in accordance with the said framework and covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in Corporate Governance was sent out to the directors. The responses received to the questionnaire on evaluation of the Board and its Committees were placed before the meeting of the Independent Directors for consideration. The assessment of the Independent Directors on the performance of the Board and its

Committees was subsequently discussed by the Board at its meeting. The framework/policy for evaluation of the Board, Committees and the directors is subject to an annual review.

The Bank has in place a process wherein declarations are obtained from the Directors regarding fulfillment of "Fit and Proper" criteria in accordance with the guidelines of the Reserve Bank of India. The declarations from the Directors other than members of the NRC are placed before the NRC and the declarations of the members of the NRC are placed before the Board. Assessment on whether the directors fulfill the said criteria is made by the NRC and the Board on an annual basis. In addition, the framework/policy approved by the NRC provides for a performance evaluation of the non- independent directors by the Independent Directors on key personal and professional attributes and a similar performance evaluation of the independent directors by the Board, excluding the director being evaluated.

POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Nomination and Remuneration Committee (NRC) recommends the appointment of Directors to the Board. The NRC identifies persons who are qualified to become directors on the Board and evaluates criteria such as academic qualifications, previous experience, track record and integrity of the persons identified before recommending their appointment to the Board.

The remuneration policy for whole time Directors is governed by the compensation policy of the Bank. The compensation policy of the bank, duly reviewed and recommended by the Nomination and Remuneration committee has been articulated in line with the Reserve Bank of India guidelines.

Your Bank''s compensation policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long term success. Compensation policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective is to provide a fair and transparent structure that helps the Bank to retain and acquire the talent pool critical to building competitive advantage and brand equity.

Your Bank''s approach is to have a pay for performance culture based on the belief that the performance management system provides a sound basis for assessing performance holistically The compensation system should also take into account factors like roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the compensation policy are also included in Schedule 18 - Notes forming part of the Accounts-Note No.23.

Non-executive directors are paid remuneration by way of sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory prescriptions. Non-executive directors are also reimbursed expenses incurred by them for attending meetings of the Board and its Committees at actuals. The remuneration payable to the non-executive directors and Independent Directors is governed by the provisions of the Banking Regulation Act, 1949, RBI guidelines issued from time to time and the provisions of the Companies Act, 2013 and related rules to the extent it is not inconsistent with the provisions of the Banking Regulation Act, 1949 and RBI guidelines.

None of the Directors of your Bank other than Mr. Kaizad Bharucha is a Director of the Bank''s subsidiaries. During the year Mr. Bharucha has not received any commission from the subsidiary in which he is a Director.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS

During the year under review no significant or material Orders were passed by any regulators against the Bank other than those disclosed separately in the financial statements and in the Corporate Governance Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Paresh Sukthankar and Mr. Kaizad Bharucha will retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

Mr. CM. Vasudev ceased to be the Chairman of the Bank from the close of business hours on August 26, 2014 pursuant to his retirement. Mr. Vijay Merchant ceased to be a director of the Bank with effect from the close of business hours on October 4, 2014 on attaining the age of 70 years, the maximum age limit prescribed as per the guidelines of the Reserve Bank of India for non-executive directors. Your directors wish to place on record their sincere appreciation of the contributions made by Mr. Vasudev and Mr. Merchant during their tenures as Directors of the Bank.

Mrs. Shyamala Gopinath was appointed as the non-executive, part time Chairperson of the Bank for a period of three (3) years and she assumed office on January 2, 2015. Mrs. Gopinath has a rich and varied experience in various facets of banking and finance.

Mr. Malay Patel was appointed as an additional director with effect from March 31, 2015 to hold office till the conclusion of the ensuing Annual General Meeting. Mr.Patel has been appointed as a Director possessing specialized knowledge and experience in the "Small Scale Industries" sector as per the provisions of Section 10-A (2 a) of the Banking Regulation Act, 1949. In terms of the provisions of Section 149 of the Companies Act, 2013, it is proposed to appoint Mr. Malay Patel as an Independent Director for a tenure of five (5) years determined in accordance with the applicable provisions of the Banking Regulation Act, 1949 and the guidelines of the Reserve Bank of India in this regard. The Bank has received a notice from a member proposing the candidature of Mr. Malay Patel as Director of the Bank at the ensuing Annual General Meeting.

The brief resume/details relating to Directors who are to be appointed/re-appointed as above are furnished in the report on Corporate Governance.

There have been no changes in the Directors and Key Managerial Personnel of the Bank other than the above.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

The various programmes undertaken for familiarizing Independent Directors with the functions and procedures of the Bank are disclosed in the Corporate Governance Report.

PARTICULARS OF EMPLOYEES

The information in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in ANNEXURE 6 to this report.

The Bank had 76,286 employees as on March 31, 2015. 224 employees employed throughout the year were in receipt of remuneration of more than Rs. 60 lacs per annum and 20 employees employed for part of the year were in receipt of remuneration of more than Rs. 5 lacs per month. The details of such employees in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are appended separately and form part of this report. The Report and Accounts are being sent to the shareholders excluding these particulars and any shareholder interested in obtaining the said details may write to the Company Secretary at the Registered Office of the Bank.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

(A) Conservation of Energy

Your Bank has undertaken several initiatives in the conservation of energy, to name a few:

- Installed energy capacitors at its high consumption offices to control the power factor and to reduce energy consumption.

- Installed energy saving electrical devices for saving energy and supporting go-green initiative.(Device in ACs)

- Advocated switching off of lights and ACs when not required, turning off of PCs when not in use, (post 10 pm thru remote control) setting higher temperatures on air conditioners etc. to reduce consumption.

- All main Sign Boards in Branches switched off during the night post 10 pm

- Put Controls on usage of Lifts, Air Conditioners, Common Passage lights and other electrical equipments.

(B) Technology Absorption

(i) The efforts made towards technology absorption;

Your Bank continues to make substantial investments in its technology platforms and systems and spread its electronically linked branch network. Telecom infrastructure is skeletal and of lower capacity in semi-urban and rural areas. Besides using the conventional VSAT technology in such geographies, where data connectivity is weak, to offer state-of-art IT enabled core banking services, your Bank has implemented CDMA (mobile data) based networking options, to link your Bank branches to its data centers, besides using traditional Radio Frequency based network options, where available and feasible. Your Bank also implemented Desktop Virtualization, a Cloud Technology solution, which reduces the bandwidth consumption to one-third of what a conventional desktop requires to run core banking services, in semi-urban or rural branches. Over 10,000 such virtual desktops have been deployed in the past two years, to ensure that your Bank is serving you in semi-urban and rural India.

Your Bank''s direct banking platforms continue to be stable and robust, supporting ever increasing transaction volumes. Due to technology initiatives implemented, the availability of your Bank''s NetBanking platform has improved considerably. Besides having over 75 on-line real time transacting features in Mobile Banking App in both Hindi and English across cross-section of Mobile devices, your Bank has also implemented cutting edge innovative Person-to-Person Payment solution, in partnership with relevant industry players. This has made paying to your friends, domestic help people, taxi drivers, tuition teachers of your children and others easier, at the click of a button on your smart mobile phone!

Your Bank is also committed to bring you the best deals in the town and offer a higher value proposition on your HDFC Bank Credit and Debit Cards or while using Bank''s Mobile Apps. SmartBuy is one such initiative in partnership with respective industry and technology platform providers, where you can enjoy offers which have higher level of discounts vis-a-vis the popular on-line travel portals or e-commerce sites. Your bank has used CLOUD services to Host SmartBuy, so that, it can dynamically scale on demand.

Your Bank supported over 2 million payment transactions on the peak day last year. This was possible through 4X scalability implemented through innovative Performance Engineering techniques on our RTGS and NEFT platforms and numerous Middleware components in the path of such Payment Transactions. Numerous e-tailing brands, on-line travel portals, government''s very own and country''s largest e-commerce platform for railway tickets, to high volume on-line retailers, your bank successfully processed more than 50% of the entire Credit Cards, Debit Cards and Direct Debit Payment Modes linked volumes of such e-commerce portals on their peak season sales days. Your bank has already initiated measures to double such e-commerce processing capability in the coming fiscal, on many of its relevant Payment processing platforms. Your Bank also plans to implement electronic Wallet and technologies like Contactless Cards.

With a view to support the Digital initiatives and focusing squarely on customer-centricity your Bank has set up and augmented systems for data warehouse, analytics, campaign management and lead management. Your Bank has embarked on a program to equip its Core Banking System with more processing capacity to meet the scale and transaction volume requirements in the coming years.

Your Bank has implemented a Private Virtual Cloud in its data centers, to ensure that its IT infrastructure usage is highly optimized. Over 3,000 virtual machines now run over much smaller physical technology infrastructure footprint to power numerous IT enabled business services.

Live switch-over and switch-back drills of major IT applications have successfully been completed, as part of your Bank''s Business Continuity and Disaster Recovery management strategy, thereby enhancing your Bank''s readiness in responding to emergency situations. These switch-over and switch-back drills have also been successfully completed for your Bank''s Primary Data Centre.

RBI had issued guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds and provided recommendations for implementation. Your Bank had embarked on a program to implement these guidelines and is nearing full implementation of the requirements stated in the guidelines.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution

Technology has continued to provide business and customers with state of the art products and services. Through use of carefully evaluated and implemented technology solutions, business has been able to offer world class products and customer services at optimal costs. Your bank continues to achieve first mover advantage with introduction of products like Chillr and Smart Buy. While offering these products your bank is equally focused on security of our customers and mitigation of risks due to increasing cyber threats. Using superlative combination of Real time decisioning, self-learning model and on line tie back with host system, your Bank has restricted cyber frauds to minimum levels.

Technology initiatives in the areas of enterprise data warehousing and advanced analytics have further enabled your Bank with much more effective and targeted campaigns and acquisition as well as heightened cross sell opportunities and customer retentions.

In order to optimize costs and offer products and services at reasonably lower costs to customers, your Bank has evaluated and implemented cutting edge technologies like desktop virtualization and server virtualization, storage virtualization, data compression techniques and private cloud.

Apart from product improvisations & optimizing costs your Bank has focused on ensuring uninterrupted services are made available to its customers by strengthening its technology infrastructure so that there are no single points of failure. Towards this front, your Bank has also strengthened its DR BCP initiative and conducted regular mock drills so that DR BCP serves meaningfully when it is required.

(iv) the expenditure incurred on Research & Development.

Being in the Financial Services space, your Bank evaluates innovative technology solutions that are readily available or near-ready for deployment and broadly fit its business requirements. Solutions that are commercially viable are then tested in collaboration with the relevant technology partners. Once proven, the technology solutions are then procured and commissioned for active business use.

Research and Development expenses are not applicable to IT solutions absorption in the Bank given the above technology introduction process & strategy of your bank.

(C) Foreign Exchange Earnings and Outgo:

During the year the total foreign exchange earned by the Bank was Rs. 1,028.0 crore (on account of net gains arising on all exchange / derivative transactions) and the total foreign exchange outgo was about Rs. 196.1 crore towards the operating and capital expenditure requirements.

SECRETARIAL AUDIT

In terms of Section 204 of the Companies Act, 2013 and the rules made thereunder, M/s. BNP & Associates, practicing Company Secretaries have been appointed as Secretarial Auditors of the Bank for the financial year 2014-15. The Report of the Secretarial Auditors is enclosed as ANNEXURE 7 to this Report. The observations in the said report are self explanatory and no further comments/explanations are called for.

CORPORATE GOVERNANCE

In compliance with the provisions of Clause 49 of the Listing Agreement, a separate report on Corporate Governance along with a certificate from the Secretarial Auditors of its compliance, forms an integral part of this Report.

BUSINESS RESPONSIBILITY REPORT

The Bank''s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its web site www.hdfcbank.com.

INFORMATION UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The relevant information is included in Section E-Principle 3 of the Business Responsibility Report for 2014-15.

ACKNOWLEDGEMENT

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank''s employees and look forward to their continued contribution in building a World Class Indian Bank.

On behalf of the Board of Directors

Mrs. Shyamala Gopinath Chairperson

Mumbai, April 23, 2015

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Mar 31, 2014

The Directors take great pleasure in presenting the Twentieth Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2014.

FINANCIAL PERFORMANCE

(Rs. crore) For the year ended

March 31, 2014 March 31, 2013

Deposits and Other Borrowings 406,776.5 329,253.6

Advances 303,000.3 239,720.6

Total Income 49,055.2 41,917.5

Profit before Depreciation and Tax 13,443.7 10,402.3

Net Profit 8,478.4 6,726.3

Profit brought forward 11,132.2 8,399.6

Total Profit available for Appropriation 19,610.6 15,125.9

Appropriations:

Transfer to Statutory Reserve 2,119.6 1,681.6

Transfer to General Reserve 847.8 672.6

Transfer to Capital Reserve 58.3 85.8

Transfer to / (from) Investment Reserve 3.2 17.7

Proposed Dividend 1,643.4 1,309.1

Tax Including Surcharge and Education cess on Dividend 279.3 222.5

Dividend (including tax / cess thereon) pertaining to previous year paid during the year 4.8 4.5

Balance carried over to Balance Sheet 14,654.2 11,132.2

The Bank posted total income and net profit of Rs. 49,055.2 crore and Rs. 8,478.4 crore respectively for the financial year ended March 31, 2014 as against Rs. 41,917.5 crore and Rs. 6,726.3 crore respectively in the previous year.

Appropriations from net profit have been effected as per the table given above.

DIVIDEND

Your Bank has had a dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital in order to maintain a healthy capital adequacy ratio to support future growth. It has had a consistent track record of moderate but steady increase in dividend declarations over its history with the dividend payout ratio ranging between 20% and 25%. Consistent with this policy and in recognition of the overall performance during this financial year, your directors are pleased to recommend a dividend of Rs. 6.85 per equity share of Rs. 2 for the year ended March 31, 2014 as against Rs. 5.50 per equity share of Rs. 2 for the previous year ended March 31, 2013. This dividend shall be subject to tax on dividend to be paid by the Bank.

AWARDS

As in the past years, awards and recognition were conferred upon your Bank by leading domestic and international organizations and publications during the financial year ended March 31, 2014.

Some of them are :

Asiamoney

- Best Domestic Bank in India

- Best Local Cash Management Bank in India

- Aditya Puri - Best Executive in India

Business India

- Best Bank

Business Standard

- Aditya Puri - Banker of the Year

Business Today - KPMG Best Banks Survey

- Best Bank

Businessworld

- Best Bank in India (Large Banks)

Dun & Bradstreet Corporate Awards

- Best in Banking Sector

Dun & Bradstreet Polaris Financial Technology Banking Awards

- Best Private Sector Bank - Technology Adoption

- Best Private Sector Bank - Retail

- Overall Best Private Sector Bank

FE-EY Best Banks Survey

- Best Bank - New Private Sector

- Best in Strength and Soundness

- Best in Profitability

Finance Asia Country Awards for Achievement

- Best Bank- India Forbes Asia

- Fab 50 Companies List (for the 7th Year) Global Finance Survey -World''s Best Banks

- Best Bank in India

GUINNESS WORLD RECORDTM

- Largest Blood Donation Drive across multiple venues, in a single day

IBA Banking Technology Awards

- Best Technology Bank of the Year

- Best Internet Bank

- Best Customer Management Initiative

- Best Use of Mobility Technology in Banking

IBA Innovation Awards

- Most Innovative Use of Technology

Institute for Development and Research in Banking Technology Awards

- Best Bank - Managing IT Risk (Large Banks)

- Best Bank - Mobile Banking (Large Banks)

- Best Bank - Best IT Team (Private Sector Banks)

Institutional Investor

- Best Investor Relations Company (Banking Sector)

- Best CEO (Banking Sector)

- Best CFO (Banking Sector)

MACCIA Awards

- Best in Financial Services - Bank Category

NDTV Profit Business Leadership Awards

- Winner in the Banking Category

Outlook Money Awards

- Best Bank in Large Banks Category

Sunday Standard Best Banker Awards

- Best Private Sector Bank - Large

- Safest Bank - Large

- Aditya Puri - Top Achiever

The Asian Banker Achievement Awards

- International Transaction Banking

UTI Mutual Fund CNBC TV 18 Financial Advisory Awards

- Best Performing Bank - Private

RATINGS

Instrument Rating Rating Agency

Fixed Deposit Program CARE AAA (FD) CARE Ratings

tAAA (ind) India Ratings

Certificate of Deposits CARE A1 CARE Ratings Program

A1 (ind) India Ratings

Long term unsecured, CARE AAA CARE Ratings

subordinated

(Lower Tier 2) Bonds

AAA (ind) with a India Ratings Stable outlook

Tier 1 Perpetual Bonds CARE AAA CARE Ratings

AAA Stable CRISIL

Upper Tier 2 Bonds CARE AAA CARE Ratings

AAA stable CRISIL

Comments

Instruments with this rating are considered to have very strong

degree of safety regarding timely payment of financial obligations.

Such instruments carry lowest credit risk.

Instruments with this rating are considered to have very strong

degree of safety regarding timely payment of financial obligations.

Such instruments carry lowest credit risk.

Instruments with this rating are considered to have very strong

degree of safety regarding timely payment of financial obligations.

Such instruments carry lowest credit risk.

Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

ISSUANCE OF EQUITY SHARES

During the year under review, 196.3 lac shares were allotted to the employees of your Bank in respect of the stock options exercised. These include the shares allotted under the Employee Stock Option Schemes of the erstwhile Centurion Bank of Punjab.

EMPLOYEE STOCK OPTIONS

The information pertaining to Employee Stock Options is given in an annexure to this report.

CAPITAL ADEQUACY RATIO

The Reserve Bank of India issued the Basel III capital regulations which were effective from April 1, 2013. Accordingly Bank''s in India are now required to report Capital Adequacy ratios under Basel III guidelines. Your Bank''s total Capital Adequacy Ratio (CAR) calculated in line with Basel III capital regulations stood at 16.1%, well above the regulatory minimum of 9.0%. Of this, Tier I CAR was 11.8%.

SUBSIDIARY COMPANIES

Your Bank has two subsidiaries, HDB Financial Services Limited (''HDBFS'') and HDFC Securities Limited (''HSL)

HDB FINANCIAL SERVICES LIMITED

HDBFS is a non-deposit taking non-bank finance company (''NBFC''). The customer segments being addressed by HDBFS are typically underserviced by larger commercial banks, and thus create a profitable niche for the company. Apart from lending to individuals, the company grants loans to micro, small and medium business enterprises. It also runs call centers for collection services to the Bank''s retail loan products.

As on March 31, 2014, HDBFS had 275 branches in 202 cities. During the financial year ended March 31, 2014, the company''s total income increased by over 75% to Rs. 1,688.3 crore as compared to Rs. 963.2 crore in the previous year. During the same period the company''s net profit after tax grew 104% to reach Rs. 209.2 crore compared to Rs. 102.5 crore in the previous year.

During the year ended March 31, 2014, HDBFS issued 10,26,91,469 shares at Rs. 56 per share (includes premium of Rs. 46) on right basis at 1:4 ratio (one share for every four shares held). Your bank subscribed 10,00,00,000 shares in the issue at Rs. 56 per share .

HDFC SECURITIES LIMITED

HDFC Securities Limited has emerged as a strong player in the financial services space offering complete financial services along with the core broking product. The Company continued strengthening its distribution network and by the end of the year had 200 branches across 160 cities in the country. During the year under review, the Company''s total income amounted to Rs. 263.1 crore as against Rs. 232.1 crore in the previous year. The operations have resulted in a net profit after tax of Rs. 78.4 crore as against Rs. 66.8 crore in the previous year.

During the year under review, your Bank increased its stake in HSL by buying out the entire shareholding (27.82 per cent) of the minority partner Indocean e-Securities Holdings Ltd. Consequently, your Bank held 89.24 per cent stake in HSL as on March 31, 2014.

Shareholders who wish to have a copy of the annual accounts and detailed information on HDBFS and HSL may write to the Bank for the same. Further, the said documents shall also be available for inspection by shareholders at the registered offices of the Bank, HDBFS and HSL.

Financial Performance

The financial performance of your Bank during the financial year ended March 31, 2014 remained healthy with total net revenues (net interest income plus other income) increasing by 16.5% to Rs. 26,402.3 crore from Rs. 22,663.7 crore in the previous financial year. Revenue growth was driven by an increase in both, net interest income and other income. Net interest income grew by 16.9% due to acceleration in loan growth of 26.4% coupled with a net interest margin (NIM) of 4.4% for the year ending March 31, 2014.

Other income grew 15.6% over that in the previous year to Rs. 7,919.6 crore during the financial year ended March 31, 2014. The largest component of other income was fees and commissions, which increased by 11.0% to Rs. 5,734.9 crore with the primary drivers being commissions on debit and credit cards, transactional charges, fees on deposit accounts, processing fees on retail assets and commission on distribution of Insurance products. Foreign exchange and derivatives revenues were Rs. 1,401.1 crore, gain on revaluation / sale of investments were Rs. 110.5 crore and recoveries from written- off accounts were Rs. 622.6 crore in the financial year ended March 31, 2014.

Operating (non-interest) expenses increased from Rs. 11,236.1 crore in the previous financial year to Rs. 12,042.2 crore in the year under consideration. During the year, your Bank opened 341 new branches and 513 ATMs which resulted in higher infrastructure and staffing expenses. Staff expenses also increased on account of annual wage revisions. Cost to income ratio was at 45.6% for the year ended March 31, 2014, as against 49.6% for the previous year.

Total provisions and contingencies were Rs. 1,588.0 crore for the financial year ended March 31, 2014 as compared to Rs. 1,677.0 crore during the previous year. Your Bank''s provisioning policies for specific loan loss provisions remain higher than regulatory requirements. The coverage ratio based on specific provisions alone without including write-offs was 73%, and including general and floating provisions was 176% as on March 31, 2014. Your Bank made general provisions of Rs. 221.3 crore during the financial year ended March 31, 2014.

Your Bank''s profit before tax was Rs. 12,772.1 crore, an increase of 31.0% over the year ended March 31, 2013. With the effective tax rate for the year at 33.6% as against 31.0% for the previous year, the net profit for year ended March 31, 2014 was Rs. 8,478.4 crore, up 26.0%, over the year ended March 31, 2013. Return on average net worth was 20.9% while the basic earnings per share increased from Rs. 28.5 to Rs. 35.5 per equity share.

As at March 31, 2014, your Bank''s total balance sheet was at Rs. 491,600 crore, an increase of 22.8% over Rs. 400,332 crore as at March 31, 2013. Total deposits increased 24.0% from Rs. 296,247 crore as on March 31, 2013 to Rs. 367,337 crore as on March 31, 2014. These included US$ 3.4 billion deposits raised under the RBI window for attracting Foreign Currency Non-Resident (FCNR) deposits. Under this window the Bank could raise foreign currency denominated deposits and swap them into rupees with RBI at a concessional rate. Savings account deposits grew by 16.9% to Rs. 103,133 crore while current account deposits grew by 17.5% to Rs. 61,488 crore as on March 31, 2014. The proportion of current and savings deposits to total deposits was at 44.8% as on March 31, 2014.

During the financial year under review, net advances grew by 26.4% to Rs. 303,000 crore. Your Bank''s retail advances grew by 20.8% to reach Rs. 164,763 crore. Adjusted for the one time increase in FCNR deposits swapped with RBI under the special window and the related foreign currency loans, core deposits and advances growth for the year ended March 31, 2014 was 16.9% and 21.8% respectively. The Bank had a market share of approximately 4.4% and 4.7% in total domestic system deposits and advances respectively. Your Bank''s Credit Deposit (CD) Ratio was 82.5% as on March 31, 2014.

Business Segments'' Update

Consistent with its past performance, your Bank has achieved healthy growth across various operating and financial parameters in the last financial year. This performance reflected the strength and diversity of three primary business franchises -retail banking, wholesale banking and treasury and of its disciplined approach to risk-reward management.

Retail Banking

Your Bank caters to various customer segments with a wide range of products and services. Your Bank is a ''one stop shop'' financial services provider of various deposit products, of retail loans (auto loans, personal loans, commercial vehicle loans, mortgages, business banking, loan against gold jewellery etc.), credit cards, debit cards, depository (custody services), bill payments and several transactional services. Apart from its own products, your Bank distributes third party financial products such as mutual funds and life and general insurance.

The growth in your Bank''s retail banking business was robust during the financial year ended March 31, 2014. Your Bank''s total retail deposits grew by 29.4% to Rs. 287,157 crore in the financial year ended March 31, 2014, driven by retail term deposits which grew faster at 42.7% during the same period. Adjusted for US$ 3.4 billion deposits raised under the RBI window for attracting Foreign Currency Non-Resident (FCNR) deposits, core total retail deposits and retail term deposits growth was 20.0% and 22.8% respectively for the year ended March 31, 2014.

The Bank''s retail advances grew 20.8% to Rs. 164,763 crore during the financial year ended March 31, 2014 driven primarily by a growth in personal loans, home loans, mortgage loans and credit cards. Retail advances include loans which fulfill the criteria of orientation, nature of product, granularity and low value of individual exposures for retail exposures as laid down by the Basel Committee. The auto finance business grew at relatively lower pace and commercial transportation finance de- grew in line with the general market conditions.

During this year your Bank expanded its distribution network from 3,062 branches in 1,845 cities / towns as on March 31, 2013 to 3,403 branches in 2,171 cities / towns as on March 31, 2014. Number of ATMs increased from 10,743 to 11,256 during the same period. The Bank''s focus on semi-urban and under- banked markets continued, with over 80% of the Bank''s new branches in semi-urban and rural areas. The Bank''s customer base currently stands at 28.9 million customers.

In order to provide its customers greater choices, flexibility and convenience, your Bank continued to make significant headway in its multichannel servicing strategy, offering its customers the use of ATMs, internet, phone and Mobile Banking in addition to its expanded branch network to serve their banking needs. Phone Banking services are available even for Non Resident Indian (NRI) customers of your Bank across the globe.

Your Bank''s Mobile Banking product has been developed keeping in mind data connections which can be either 2G or 3G. Technology has played a key role in the push into rural hinterlands. For local customers there are Hindi Mobile App, Hindi SMS Banking and a Toll Free number to carry out basic banking activities. A great response was received on the toll-free service from our customers in Rural and Semi-Urban centers, since they could get instant updates on account balance, last 3 transactions etc through an instant SMS response from the Bank by simply giving a missed call on a toll-free number.

The Bank continued its focus on internal customers for its credit cards portfolio with over 70% of new cards issued to internal customers. During the year, the Bank launched three premium variants of credit cards as part of the Diners brand under an exclusive arrangement with Diners. This will enable the Bank to cater to the specific need of super-premium customers requiring global card benefits. As part of its strategy to drive usage of its credit cards the Bank also has a significant presence in the ''merchant acquiring'' business with the total number of point-of- sale (POS) terminals installed at over 215,000.

In addition to the aforementioned products the Bank does home loans in conjunction with HDFC Limited. Under this arrangement the Bank sells loans provided by HDFC Limited through its branches. HDFC Limited approves and disburses the loans, which are booked in their books, with the Bank receiving a sourcing fee for these loans. The Bank has the option but not an obligation to purchase up to 70% (or 55% in case all the loans purchased qualified for priority sector) of the fully disbursed home loans sourced under this arrangement either through the issue of mortgage backed pass through certificates (PTCs) or by a direct assignment of loans; the balance is retained by HDFC Limited. A fee is paid to HDFC Limited for the administration and servicing of the loans. As required by the current securitization guidelines, the loan assignments bought during the year are without credit enhancement. Your Bank originated an average Rs. 1,000 crore of home loans every month in the financial year ended March 31, 2014. During the year, the Bank purchased from HDFC Limited under the "loan assignment" route approximately Rs. 5,560 crore of home loans which also qualified as priority sector advances.

Your Bank also distributes life, general insurance and mutual fund products through its tie-ups with insurance companies and mutual fund houses. Changes in regulations and product mix have adversely impacted fees from these sources, though increase in volumes has offset to some extent the drop in commission rates. Third party distribution income contributes approximately 11% of total fee income for the year ended March 31, 2014, compared to 15% of the total fee income for the previous year.

The Bank''s data warehouse, Customer Relationship Management (CRM) and analytics solutions have helped it target existing and potential customers in a cost effective manner and offer them products appropriate to their profile and needs. Apart from reducing costs of acquisition, this has also helped in deepening of customer relationships and greater efficiency in fraud control and collections activities resulting in lower credit losses. The Bank is committed to investing in advanced technology in this area which will provide a cutting edge in the Bank''s product and service offerings.

Wholesale Banking

Your Bank provides its corporate and institutional clients a wide range of commercial and transactional banking products, backed by high quality service and relationship management. The Bank''s commercial banking business covers not only the top end of the corporate sector but also the emerging corporate segments and small and medium enterprises (SMEs). Your Bank has a number of business groups catering to various segments of its wholesale banking customers with a wide range of banking services covering their working capital, term finance, trade services, cash management, investment banking services, foreign exchange and electronic banking requirements.

Your Bank''s financial institutions and government business group (FIG) offers commercial and transaction banking products to financial institutions, mutual funds, public sector undertakings, central and state government departments. The main focus for this segment remained the offering of various deposit and transaction banking products to this segment besides deepening these relationships by offering funded, non- funded, treasury and foreign exchange products. Your Bank is authorised to collect Direct Taxes & made total collection of Rs. 139,433 crore during the year and was ranked No.2 in terms of total collections made by any bank. Your Bank is also authorised to collect Excise & Service Tax and collected Rs. 53,019 crore, during the year. Governments of 12 States have authorised your Bank to collect State Taxes / duties. These mandates enable a greater convenience to the customers and help the exchequer in mobilizing resources in a seamless manner.

Your Bank''s wholesale deposits grew around 7.8%, while wholesale advances showed a growth of 33.6%. Your Bank provides its customers access to both working capital and term financing. Although the Bank witnessed an increase in the proportion of its medium tenor term lending, working capital loans and short tenor term loans continued to account for a large share of its wholesale advances.

During the financial year ended March 31, 2014, growth in the wholesale banking business continued to be driven by new customer acquisition and higher cross-sell with a focus on optimizing yields and increasing product penetration. Your Bank''s cash management, vendor and distributor (supply chain) finance products continued to be an important contributor to growth in the corporate banking business. Your Bank further consolidated its position as a leading player in the cash management business (CMS) (covering all outstation collection, disbursement and electronic fund transfer products across the Bank''s various customer segments) with volumes of over Rs. 33 trillion. The Bank is one of the front runners in making significant progress in web-enabling its CMS business. The Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share by offering customised solutions. From customised ERP integrations to high end SAP certified solutions, the Bank has been a leading proponent of adopting innovative technology. The Bank continues to be the market leader in cash settlement services for major stock & commodity exchanges in the country.

Your Bank''s Investment Banking Group established itself as a leading player in debt capital markets and is now ranked amongst the top 5 book runners in Rupee corporate loans and bonds. The group arranged financing for client relationships across sectors including telecom, toll roads, steel, energy, LNG terminals, chemicals and cement. The group managed to close Rs. 120 billion worth of corporate bonds across public sector undertakings, financial institutions and corporate clients of the bank. In the advisory business, the Bank advised and closed transactions in capital goods, agrochemicals and BFSI sector. In the capital markets business, Bank advised clients on public offerings and buy-back of shares and is now well positioned to offer the entire gamut of investment banking services.

The Bank met the overall priority sector lending requirement of 40% of net bank credit and also strived for healthy growth in the sub-targets such as weaker sections, direct agriculture, and the micro and SME segments.

International Operations

Your Bank currently has two overseas branches: a wholesale banking branch in Bahrain and a branch in Hong Kong. Your Bank also has three representative offices in Dubai, Abu Dhabi and Kenya. The Bank also has RBI approval to open a branch at DIFC Dubai and the office is likely to be operational in the next year. The overseas branches offer multiple banking services including treasury products, trade finance and loans to customers. The representative offices are engaged in offering wealth management products, remittance facilities and marketing deposits to the non-resident Indian (NRI) community. As of March 31, 2014 the combined balance sheet size of both the overseas branches was over USD 5.0 billion. To capture the one time opportunity offered by RBI in September - November 2013 to commercial banks for raising FCY monies at concessional rupee swap cost, the Bank issued USD 500 million bonds for 3 years through a public deal. In addition, USD 880 million were raised through bilateral loans in international loan market. With the above fund raising along with funds sourced through tie up with other foreign banks and FCNR deposits received directly, the bank raised USD 325 million as tier 1 borrowing and USD 3.4 billion of FCNR deposits, which was approximately 13% of the total inflows into the country under the special RBI window.

Treasury

The treasury group is responsible for compliance with reserve requirements, and management of liquidity and interest rate risk on the Bank''s balance sheet. On the foreign exchange and derivatives front, revenues are driven primarily by spreads on customer transactions based on trade flows and customers'' demonstrated hedging needs. The financial year ended March 31, 2014 recorded Rs. 1,401.1 crore revenues from foreign exchange and derivative transactions. These revenues were distributed across large corporate, emerging corporate, business banking and retail customer segments for plain vanilla foreign exchange products and across primarily large corporate and emerging corporate segments for derivatives. The Bank offers Indian rupee and foreign exchange derivative products to its customers, who use them to hedge their market risks. The Bank enters into foreign exchange and derivative deals with counterparties after it has set up appropriate counterparty credit limits based on its evaluation of the ability of the counterparty to meet its obligations in the event of crystallization of the exposure. Appropriate credit covenants may be stipulated where required as trigger events to call for collaterals or terminate a transaction and contain the risk. Where the Bank enters into foreign currency derivative contracts, not involving the Indian Rupee, with its customers it lays them off in the inter- bank market on a matched basis. For such foreign currency derivatives, the Bank does not have any open positions or does not assume any market risks but carries only the counterparty credit risk (where the customer has crystallized payables or mark-to-market losses). The Bank also deals in derivatives on its own account; including for the purpose of its own balance sheet risk management. The Bank recognizes changes in the market value of all derivative instruments (other than those designated as hedges) in the profit and loss account in the period of change. Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market.

Given the regulatory requirement of holding government securities to meet the statutory liquidity ratio (SLR) requirement, your Bank maintains a portfolio of government securities. While a significant portion of these SLR securities are held in the ''Held-to-Maturity'' (HTM) category, some of these are held in the ''Available for Sale'' (AFS) category. The Bank is also a Primary Dealer for government securities. As part of this business, as well as otherwise, the Bank holds fixed income securities in the "Held for Trading" (HFT) category.

Information Technology

Your Bank had successfully completed the program to refresh its Retail Core Banking System to the latest technology platform. Continuing with the program from the previous financial year, your Bank migrated the remaining 60% of the Retail Accounts to this new technology platform during the financial year ended March 31, 2014. This new Retail Core Banking System is deployed on a more robust architecture, enabling your Bank to provide more features to its customers and respond faster to business and market needs.

Your Bank continues to make substantial investments in its technology platforms and systems and spread its electronically linked branch network. Your Bank''s direct banking platforms continue to be stable and robust, supporting ever increasing transaction volumes, as customers adopt newer self-service technologies.

Over 2,15,000 of your Bank''s Point-Of-Sale terminals have been made safer and more secure, following implementation of RBI''s security and encryption mandates. Also, Repay cards are now accepted on these terminals and at Internet merchants enlisted with your Bank.

Your bank had implemented state-of-the-art engineered systems technology for some of the important systems. The capacity of the EFT switch has been upgraded to cater to growing ATM and other payment transaction volumes and enhance scalability. Your Bank has doubled the capacity of its operational Customer Relationship Management system in a very innovative manner, by implementing the latest version of its database engine and has doubled the supported user concurrency.

Live switch-over and switch-back drills of major IT applications have successfully been completed, as part of your Bank''s Business Continuity and Disaster Recovery management strategy, thereby enhancing your Bank''s readiness in responding to emergency situations. These switch-over and switch-back drills have been successfully completed for the new Retail Core banking System also.

RBI had issued guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds and provided recommendations for implementation. Your Bank embarked on a program to implement these guidelines and has since implemented substantial portion of the requirements stated in the guidelines.

Service Quality Initiatives

Your Bank continued its drive towards improvements in service quality across all customer touch points namely branches, ATMs, Phone Banking, Net Banking and email channels. With a view to ensure comprehensive improvement, your Bank extended its service quality initiatives to the back office support functions. Your Bank regularly captures ''voice of customers'' and ''voice of employees'' and uses those towards simplification of processes to delight customers. Your Bank has also augmented the training and skill development mechanism to empower and equip employees to deliver improved quality of customer service.

Your Bank has taken various steps to improve the effectiveness of its grievance redressal mechanism across its delivery channels. The effectiveness of grievance handling in particular and overall customer service initiatives are periodically reviewed at different levels including by the Board of Directors of the Bank. All these initiatives have helped in consistent reduction in the total number of customer complaints. Your Bank has established a very strong and dispassionate review mechanism for complaint disposal in this year. Review is done by an independent cross functional team of senior staff ensuring unbiased resolution.

As a result of the continued focus on customer service, your Bank has not only received written appreciation from some of the Banking Ombudsmen appointed by the Reserve Bank of India, but has also received many accolades e.g. "Qualtech Award" in the Lean Sigma Project Competition for "Empowering Rural Livelihood: Re-engineering the Kisan Gold Card" (popularly known as 7 DAY KGC) and winner in Best Customer Management Initiative at the IBA Banking Technology Awards to name a few.

Risk Management and Portfolio Quality

Integral to its business, the Bank takes on various types of risk, the most important of which are credit risk, market risk and operational risk. The identification, measurement, monitoring and management of risks remain a key focus area for the Bank. Sound risk management and balancing risk-reward trade-offs are critical to the Bank''s success. Business and revenue growth are therefore to be weighed in the context of the risks implicit in the Bank''s business strategy. The Board of Directors of your Bank endorses the risk strategy and approves the risk policies. The Risk Policy & Monitoring Committee of the Board supervises implementation of the risk strategy. It guides the development of policies, procedures and systems for managing risk. The Committee periodically reviews risk level and direction, portfolio composition, status of impaired credits as well as limits for treasury operations.

The Bank has a comprehensive centralized risk management function, independent from the operations and business units of the Bank. For credit risk, distinct policies, processes and systems are in place for the retail and wholesale businesses. In the retail loan businesses, the credit cycle is managed through appropriate front-end credit, operational and collection processes. For each product, programs defining customer segments, underwriting standards, security structure etc., are specified to ensure consistency of credit buying patterns. Given the granularity of individual exposures, retail credit risk is monitored largely on a portfolio basis, across various products and customer segments. For wholesale credit exposures, management of credit risk is done through target market definition, appropriate credit approval processes, ongoing post-disbursement monitoring and remedial management procedures. Overall portfolio diversification and periodic as well as proactive reviews facilitate risk mitigation and management.

The banking industry in India continued to face a challenging environment, reflected in increased rating downgrades, debt restructuring and non-performing assets. Your Bank, however, has been able to maintain a high quality loan book and have relatively low delinquencies. The credit quality in the wholesale segment continued to be stable, supported by tighter credit standards, appropriate credit filters and robust monitoring systems as well as a balanced portfolio. The commercial vehicle and construction equipment segments continued to see some stress due to the ban on mining activity, low industrial growth and slowdown in investment activity. The credit quality of the other retail lending book of the Bank continued to be healthy in line with the expectations. As of March 31, 2014, your Bank''s ratio of gross non-performing assets (NPAs) to gross advances was 0.98%. Net non-performing assets (gross non- performing assets less specific loan loss provisions) were 0.3% of net advances as of March 31, 2014. Restructured assets including pipeline cases were 0.2% of gross advances as of March 31, 2014. The specific loan loss provisions that the Bank has made for its non-performing assets continue to be more conservative than the regulatory requirement. In addition, the Bank has made general provisions for standard assets which are as per regulatory prescription. The coverage ratio taking into account specific, general and floating provisions was 176% as of March 31, 2014.

A dedicated team within the risk management function is responsible for assessment, monitoring and reporting of operational risk exposures across the bank. Board approved Operational Risk Management Framework is put in place. A bottom up self-assessment process identifies high risk areas so that bank can initiate timely remedial measures. Key Operational Risk Indicators are employed to alert the bank on impending problems in a timely manner to ensure risk mitigation actions. Material operational risk losses are examined thoroughly to identify areas of risk exposures and gaps in controls basis which appropriate risk mitigating actions are initiated.

Market Risk in the trading portfolio of your Bank has been adequately managed through a well-defined Board approved market risk policy and stringent trading risk limits such as positions limits, gap limits, tenor restrictions; sensitivity limits viz. PV01, Modified Duration and Option Greeks, Value-at-Risk (VaR) limit and Stop Loss Trigger Level (SLTL). The Bank also has an approved investment policy which is adhered while investing or trading. Additionally, Bank has a Board approved stress test policy and framework which encompasses the market risk stress test scenarios and simulations so that stress losses can be measured and adequate control measures can be initiated.

Liquidity risk is the risk that the Bank may not be able to fund increases in assets or meet obligations as they fall due without incurring unacceptable losses. Interest rate risk is the risk where changes in market interest rates affect the Bank''s earnings through changes in its net interest income (NII) and the market value of equity through changes in the economic value of its interest rate sensitive assets, liabilities and off-balance sheet positions. The policy framework for liquidity and interest rate risk management is established in the Bank''s ALM policy which is guided by regulatory instructions. Your Bank has established various Board approved limits viz., maturity gap limits and limits on stock ratios for liquidity risk and limits on income impact and market value impact for interest rate risk. Your Bank''s Asset Liability Committee (ALCO) ensures that liquidity risk and interest rate risk are within the tolerance limits. Additionally, your Bank has a comprehensive Board approved stress testing programme covering liquidity and interest rate risk which is aligned with the regulatory guidelines.

In accordance with RBI''s guidelines, the Bank is currently on the Standardized Approach for Credit Risk, the Basic Indicator Approach for Operational Risk and the Standardized Approach for Market Risk. Parallely, the Bank is progressing with its initiatives for migrating to the advanced approaches for these risks. The framework of the advanced approaches is in harmony with the Bank''s objective of adopting best practices in risk management.

INTERNAL CONTROLS, AUDIT AND COMPLIANCE

Your Bank has Internal Audit and Compliance functions which are responsible for independently evaluating the adequacy of all internal controls and ensuring operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements. The audit function also proactively recommends improvements in operational processes and service quality. To mitigate operational risks, the Bank has put in place extensive internal controls including restricted access to the Bank''s computer systems with strong audit trails, appropriate segregation of front and back office operations, post transaction monitoring processes at the back end to ensure independent checks and balances, adherence to the laid down policies and procedures of the Bank and to all applicable regulatory guidelines. Your Bank has always adhered to the highest standards of compliance and governance and has put in place controls and an appropriate structure to ensure this. To ensure independence, the internal audit function has a reporting line to the Chairman of the Audit and Compliance Committee of the Board and only a dotted line reporting to the Managing Director. The Audit and Compliance Committee of the Board also reviews the performance of the audit and compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines.

CORPORATE SOCIAL RESPONSIBILITY

Your Bank continues its endeavors to build a sustainable business philosophy through three platforms namely governance, social responsibility and environmental responsibility.

Your Bank has undertaken several community interventions/ projects through the year to create a positive impact on society. These projects take shape in many ways from corporate philanthropy to employee driven projects. The Bank has partnered with over 18 NGOs and over 70,000 lives impacted through our initiatives.

In keeping with its mission for community interventions its projects/programs have largely focused in the areas as outlined below.

Education

Education is one of the building blocks of any nation, one of the core focuses of the CSR strategy is the promotion of education. Your Bank''s programs aim at mainstreaming out of school children and strengthening the quality of education. In order to meet these objectives we have initiated a multitude of programs reaching out to about 5,500 students.

1. Integration of out of school children: Integration of first time learners into mainstream education through pre-primaries within the community. In FY 13 -14 we were able to enroll over 1,000 children.

2. Improving the reading and learning ability of children: Through programs such as ''Grow with Books'' initiated in 7 Municipal Schools in Pune and the ''Library Projects'' in 10 schools in the Kharu block of Leh, your Bank aims to improve the reading and learning ability of the child. Another project aimed to stimulate the cognitive abilities of children exposes them to practical scientific experiences through a ''Mobile Science Lab'' The Mobile Lab travels to schools reaching out to over 22,000 children annually.

3. Rehabilitation of children with special needs: In continuation of our inclusive approach we support efforts of mainstreaming/rehabilitation differently abled children with special needs such as physiotherapy treatment, speech therapy etc. In addition to providing ongoing assistance we have also established an Audiology room for children with hearing impairments.

4. Educational assistance: In addition to initiatives that directly impact the learning ability of the child, your Bank also sponsors the educational expenses of disadvantaged or destitute children in institutional care, schools, colleges and professional courses. Currently close to 1,000 students receive educational assistance through direct or institutional support. In addition to these your Bank also differentiates positively in favor of the Girl Child through a special sponsorship for education of the girl child.

5. Special educational sponsorships: Your Bank launched the Educational Crisis Scholarship Support (ECSS) in 2011. ECSS aims to provide assistance to students to tide over difficult situation / personal/family crisis / without any adverse impact on their education. In the year 2013-14, 338 students in schools and colleges were supported for completing their education.

Financial Literacy

Your Bank supports Financial literacy projects in 600 schools across Andhra Pradesh and Odisha, inculcating social and financial habits among students aged 8 to 14. So far we have reached out to over 63,000 students studying in Government schools. In addition through our Sustainable Livelihood Initiative (SLI), Bank also offers non-financial services such as credit counseling and financial literacy training. The Bank also conducts rural financial literacy initiatives across the country to complement its efforts to support inclusive growth. Under its ''Power of Banking Program'' the Bank continues to train school children on basic concepts of Finance such as the origin of money, role of banks, importance of savings, etc. Driven by employee volunteers, the program covered over 3,300 children in 2013-14.

Training

Your Bank consistently strives to empower and provide occupational training to people at the bottom of the pyramid, which in turn will create employment opportunities for them. Bank''s livelihood initiatives are aimed at training and capacity development of youth and women from economically weaker sections of society and to empower them to gain access to opportunities and growth. Bank''s livelihood support programs are aimed at empowering competency-based, skill-oriented technical and vocational training.

In continuation of our initiative in Kolar district of Karnataka, the bank extended its support to another batch of 150 students, in the computer, life skill and retail management. 70% of the trainees were successfully placed through industry tie-ups.

In Jharkhand, Bank''s project trained 399 youth in Mobile Repairing, BSPA (Bedside Patient Attendant) and ITES (Information Technology). The project aims to train a second batch of 480 youth and introduce additional courses for Beauticians, Electrical repairing, Driving and Automobile Repairing. Trainees have been successfully placed through the project with salary ranging from Rs. 3,500 to Rs. 5,000 p.m.

In addition over 630 youth have been trained in various skills as part of our Capacity Building programs. We have since inception conducted over 6,088 programs covering 157,646 people.

Community Initiatives

Your Bank has supported a number of need-based projects within the community to make a difference to more than 4,900 lives. These have ranged from infrastructural support to community based campaigns. In response to the water crisis in Maharashtra, the Bank sponsored the constructing of rain water harvesting structures in three villages in Maharashtra. Another project implemented in Mangaon aimed at creating sanitation and water storage facilities for tribal children.

Traffic safety is another concern area we support. We have installed branded boards with messages on traffic safety such as ''Wear a helmet'', ''Wear a seatbelt'', ''Don''t use your mobile while driving'', etc. In addition to this, Your Bank has also identified villages across the country where it provides branded message boards for road identification, and social message boards.

One of Bank''s largest community based initiatives is organizing blood donation drives. In 2007, the Bank introduced the idea of a one-day nationwide blood donation drive and encouraged people to support a single social cause across the Bank''s vast network. Engaging the community as a team proved to be an important success factor in the years that followed. The seventh edition of the event was held from December 5, 2013 to December 8, 2013. 86,774 units of blood were collected during the campaign. The HDFC Bank Blood Donation Drive of 2013 set a GUINNESS WORLD RECORD™ as the organizer of the "Largest Blood Donation (across multiple venues) in a single day" in the world. The campaign involved 61,902 participants donating blood at 1,115 camps across 709 locations in India on December 6, 2013.

Response To Disasters:

Your Bank has always responded to the need of those affected by natural disasters such as flood, landslides, drought, etc. During times of crisis the bank has extended its support to provide relief to victims of such disasters and support the rehabilitation efforts of the state.

As a responsible Corporate Citizen Your Bank joined hands to support the victims.

During the landslide and flash floods in Uttarakhand and Orissa, Bank''s employees donated towards relief efforts and the amounts were matched by the Bank.

Bank''s employees joined relief teams in Uttarakhand to distribute Solar Lamps to 22 villages. Having identified lack of health facilities as a major need your Bank has tied-up with an NGO to set up and support the cost of running a primary Healthcare center at KedarGhati which will cater to the primary and the secondary healthcare needs of 50 villages.

Employee Volunteering:

Your Bank continues to encourage employees to participate and contribute to society through both time and funds. Through the employee payroll giving program employees continues to donate on a monthly basis. Currently 5,464 employees are active payroll donors. The Bank supports this gesture by donating a matching amount

Structures volunteering activities were created to encourage employees to engage in various acts of charity. The Banks annual volunteering day branded as the ''Make a Difference day'' saw an enthusiastic participation of more than 79 teams.

The ''BE-A-SANTA'' campaign initiated this year encouraged employees to bring in the New Year by sharing their fortunes. Employees contributed in fulfilling small wishes made by children and senior citizens. Wish Trees bearing wish cards were placed at different locations and employees could choose a wish card and fulfill the wishes.

Sustainable Livelihood Initiative:

Your Bank is committed to reaching out to the unbanked and under banked people at the bottom of the pyramid, particularly in rural India and bringing them into the banking fold. Your Bank''s Sustainable Livelihood Initiative has helped empower thousands of people, particularly women, in rural parts of India. Through this initiative, the Bank reaches out to the un-banked and under-banked segment of the population and in doing so, helps as many people as possible at the bottom of the pyramid by providing them with livelihood training and finance.

It involves a holistic approach - from offering training and enhancing occupation skills to providing credit counseling, financial literacy and market linkages - which financially empowers people and brings them into the banking fold. About 9 lac families were covered this year and about 27 lac families have so far benefitted from this initiative.

Environmental Responsibility

Your Bank regards climate change mitigation and environmental improvements as essential elements of a sustainable business. This belief embodies the Bank''s approach on reduction of carbon emissions. The Bank has taken various steps to manage GHG emissions, through Multi-channel delivery such as ATMs, Phone Banking, Net Banking and Mobile Banking which have cut down customers'' need to commute to our branches.

Your bank has ensured that many of its major locations have energy efficient lighting systems in place.

We have also adopted a ''Phase-out'' policy to replace inefficient lighting options and have also started incorporating the use of unconventional energy sources to power our ATMs in areas with fluctuating power supply. Promotion of video conference and video chatting on IP phone has also resulted in reducing travelling and fuel consumption; Bank has also introduced server and desktop Virtualization thereby reducing power consumption.

FINANCIAL INCLUSION

Over the last few years, your Bank has been working on a number of initiatives to promote Financial Inclusion across identified sections of rural and semi urban, under-banked and un-banked consumers. These initiatives target segments of the population that have limited or no access to the formal banking system by building a robust and sustainable model that provides relevant services and viable timely credit that ultimately results in economically uplifting its customers and substitutes borrowings at usurious rates.

Your Bank''s initiatives in the rural or deeper geography are dovetailed into its financial inclusion plans and also complements its Corporate Social Responsibility initiative where the endeavor has been to provide banking services which are viable both for the customer and the Bank. As of March 31, 2014 your bank had 318 unbanked branches. The Bank also had 4 one man and 201 two men branches to carry on business in deeper geographies.

Your Bank''s financial inclusion initiatives have been integrated across its various businesses, and product groups. As of March 31, 2014 your Bank had brought over 9.5 million households who were hitherto excluded from basic banking services, into the banking fold.

Rural Initiatives

Your Bank offers products and services such as savings, current, fixed and recurring deposits, loans, ATM facilities, investment products such as mutual funds and insurance, electronic funds transfers, drafts and remittances etc. in its branches located in rural and under banked locations. The Bank also leverages some of these branches as hubs for other inclusion initiatives such as direct linkages to self-help groups and to promote Joint Liability Group Loans, POS terminals and information technology enabled kiosks. The Bank covers over 14,000 villages in the country through various distribution set ups, which include branches, bank staff reaching out to the villages and business correspondents. Around 44% of the above mentioned villages have a population of less than 2,000 that have largely been financially excluded from the formal banking sector.

A number of retail credit products such as two-wheeler loans, car loans, mortgages etc. that are consumption products in urban centers happen to be means of income generation for rural consumers. Apart from loans directly linked to agriculture such as pre and post harvest credit, there are many other credit products that the Bank uses to aid financial betterment in rural locations. Your Bank has extended provision of its retail loans to large segments of the rural population where the end use of the products acquired (by availing Bank''s loans) is used for income generating activities. For example, loans for tractors, commercial vehicles, two wheelers etc. supplement the farmer''s income by improving productivity and reducing expenses.

Basic Banking Saving Deposit and Micro Deposits (BSBDA)

A savings account is the primary requirement for the provision of other banking services; the account promotes the habit of savings, provides security, and inculcates confidence among the target segment in the banking sector.

This product was launched by your Bank with a specific objective to provide customers a platform that enables them to inculcate the habit of savings.

Given the specific segment that is being targeted, namely customers who do not have any other Bank account, this product truly addresses the cause of Financial Inclusion. Additionally the Bank also periodically tracks the behavior in these accounts to ensure that the accounts opened maintain a balance and are active. From current financial year SLI has initiated Overdraft facility on these accounts.

The total number of Basic Banking Saving Deposit accounts was 27.5 lac as of March 31,2014 as against 15.8 lac as of March 31, 2013. Your bank has provided OD facility of Rs. 8.3 lac to 1,384 BSBDA accounts

Agriculture and Allied Activities

A large portion of India''s un-banked population relies on agriculture as the main source of livelihood. We believe provision of credit to farmers through various methods that your Bank has employed replaces the traditional money lending channel, while simultaneously providing income generating activities. Your Bank provides various loans to farmers through its suite of specifically designed products such as the Kisan Gold Card, tractor and cattle loans etc. In addition, the Bank offers post-harvest cash credit, warehouse receipt financing and bill discounting facilities to mandi (markets for grain and other agricultural produce) participants and farmers. These facilities enable the mandi participants to make timely payments to farmers. The Bank carries out this business through branches that are located in close proximity to mandis.

The Bank targets specific sectors to capture supply chain of certain crops from the production stage to the sales stage. On the basis of these cash flows, your Bank is able to finance specific needs of the farmers. This model has currently been implemented with dairy and sugarcane farmers. The initiative currently underway includes the appointment of dairy societies and sugarcane co-operatives as business correspondents, through whom the Bank opens accounts of individual farmers attached to these societies. The societies route all payments to the farmers through this account.

The use of appropriate technology is necessary to bring about efficiency in the agri value chain. One such technology initiative is the Milk to Money Terminal (MFT) used in Dairy supply chain. The technology captures milk quality and quantity data at a farmer level each time milk is poured by connecting to the fat tester and weighing machine. It converts this data into an accounting entry instantaneously and credits the farmer''s account. The MFT contains a cash dispenser that functions as standard ATM, thus the farmer can withdraw the amount from his account immediately if needed. The transparency in the milk collection process benefits both farmers and corporate as they get data at farmer level accurately and quickly, which enables the corporate to improve farmer productivity through their direct intervention.

Loans against Gold Jewellery

This offering allows customers a reliable source of credit in times of need. In the absence of this product, customers might be unable to access credit or alternatively might avail of credit at much higher rates in the form of unsecured loans from money lenders. Gold loans provide an alternate source of funds by monetising the household gold. It provides financial independence to small traders, small entrepreneurs and housewives. It also substitutes borrowing at usurious rates, particularly by small borrowers and weaker sections.

Small and Micro Enterprises

Your Bank offers complete banking solutions to micro, small and medium scale enterprises across industry segments including manufacturers, retailers, wholesalers / traders and services. The entire suite of financial products including cash credit, overdrafts, term loans, bills discounting, export packing credit, letter of credit, bank guarantees, cash management services and other structured products are made available to these customers. One of the means to financial inclusion is by supporting small and micro enterprises which in turn provide employment opportunities to the financially excluded. Though indirect, we believe this model may in many instances be more effective than providing subsidies that are often unsustainable, or never reach the intended beneficiary.

Promoting Financial Awareness

In addition to providing various products and services to the financially excluded, your Bank believes that imparting education and training to these target segments is equally essential to ensure transparency and create awareness. To this effect the Bank has put in place various training programs. These are conducted by Bank staff in local languages and cover not only the customers but also various intermediaries such as the Bank''s business correspondents. Through these programs your Bank provides credit counseling and information on parameters like savings habit, better utilization of savings, features of savings products, credit utilization, asset creation, insurance, income generation program etc. The Bank also facilitates need based capacity building and market place for the customers with the objective of sustaining their livelihood in holistic manner. During the financial year ended March 31, 2014, over 44,000 financial awareness programs covering over 6.5 lac households were conducted by Sustainable Livelihood Initiative, RIG and Branches. These camps are conducted using the RBI prescribed Financial Literacy Material (Posters, Financial Guide and Financial Diary).

HUMAN RESOURCES

Human Resources Development has been a key and constant focus area for your bank. The human resources agenda, that includes within its gamut the attraction and retention of talent, skills development, reward and recognition, performance management and employee engagement are realized through a number of key initiatives, systems and processes.

Employee Development

Performance Management is one of the most critical dimensions pertaining to the management of human resources and the organisation has a comprehensive Performance Management System (PMS) to assess performance. The PMS facilitates the differentiation between the various categories of performance. Higher rewards for higher levels of performance have been a fundamental philosophy of your bank. Apart from rewards, the PMS also allows for identification of training and development needs for employees. Employee development and growth is realized through an array of functional and behavioral programs that your bank conducts throughout the year as well as on the job training. Further your bank lays emphasis in rotating key talent for professional development and growth and building a leadership pipeline for the future.

Rewards and Recognition

Rewards and Recognition play a key role to attract, retain and engage employees. Your Bank is committed to ensure that employees are competitively positioned vis-a-vis market with respect to both fixed as well as variable pay. Your Bank also grants employee stock options to a certain segment of the employee population in order to align employee efforts to the creation of shareholder value. Apart from the standard compensation your Bank also has a well institutionalized recognition program called "Star Awards" to recognize the contribution of employees on an ongoing basis.

Employee Engagement

Fun at work is something your Bank feels should be an integral part of every HDFC Bank employee''s life. Your Bank believes in conducting activities that help individuals showcase their talent or pursue their interests other than work. Your Bank conducted comprehensive sports activities like ''Josh Unlimited'', a multi-city, multi-discipline sports event held across 15 cities. Stepathlon - a race around a Virtual World is a unique initiative which creates an ecosystem that promotes corporate health, fitness & productivity by increasing daily activities. Your Bank has been the largest participant and has bagged the ''Most Active Company'' and the ''Most Active Bank'' award for two consecutive years. The Voice Hunt contest in association with Shankar Mahadevan Academy, Sensations - the Bank''s ''ln-house musical band contest'' and the corporate photography contest were some of the other prominent engagement initiatives.

STATUTORY DISCLOSURES

The information required under Section 217(2A) of the Companies Act, 1956 and the rules made there under as amended, are given in the annexure appended hereto and forms part of this report. In terms of section 219(1)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Bank. The Bank had 68,165 employees as on March 31, 2014. 213 employees employed throughout the year were in receipt of remuneration of more than Rs. 60 lacs per annum and 8 employees employed for part of the year were in receipt of remuneration of more than Rs. 5 lacs per month.

The provisions of Section 217(1)(e) of the Act relating to conservation of energy and technology absorption do not apply to your Bank. The Bank has, however, used information technology extensively in its operations.

The report on Corporate Governance is annexed herewith and forms part of this report.

The Ministry of Corporate Affairs has issued "Corporate Governance Voluntary Guidelines" in December 2009. While these guidelines are recommendatory in nature, the Bank has adopted most of these guidelines as detailed in the Corporate Governance Report. The Bank will examine the possibilities of adopting the remaining guidelines in an appropriate manner.

BUSINESS RESPONSIBILITY REPORT

The Bank''s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its web site www.hdfcbank.com

RESPONSIBILITY STATEMENT

The Board of Directors hereby state that

i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2014 and of the profit of the Bank for the year ended on that date;

iii) We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

iv) We have prepared the annual accounts on a going concern basis.

DIRECTORS

Mr. Keki Mistry and Mrs. Renu Karnad will retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

Mr. Harish Engineer ceased to be a director from the closing hours of business on September 30, 2013 on his retirement from the services as an Executive Director in the whole-time employment of the Bank. Mr. Engineer served the Bank since its inception and played the lead role in setting up and developing the Wholesale Banking Business of the Bank over the years. As the Head of the Wholesale Banking Group, Mr. Engineer has contributed significantly in achieving the growth objectives of the Bank. Your directors wish to place on record their sincere appreciation of the contributions made by Mr. Engineer during his tenure with the Bank.

Mr. Paresh Sukthankar was elevated to the position of Deputy Managing Director by the Board with effect from 24th December 2013 subject to the approval of the shareholders and the Reserve Bank of India. The approval of the shareholders has since been obtained by means of a resolution passed by postal ballot, the results for which were announced on 12th March 2014. The approval of the Reserve Bank of India is awaited.

Mr. Kaizad Bharucha was appointed as an additional director by the Board and designated as an Executive Director in the whole-time employment of the Bank with effect from 24th December 2013 subject to the approval of the shareholders and the Reserve Bank of India. The approval of the shareholders has since been obtained by means of a resolution passed by postal ballot, the results for which were announced on 12th March 2014. The approval of the Reserve Bank of India is awaited.

In terms of the provisions of Section 149 of the Companies Act, 2013 it is proposed to appoint Mr.C.M.Vasudev, Dr. Pandit Palande, Mr.Partho Datta, Mr. Bobby Parikh, Mr. A.N.Roy and Mr.Vijay Merchant as Independent Directors for tenures determined in accordance with the applicable provisions of the Banking Regulation Act, 1949 and the guidelines of the Reserve Bank of India in this regard.

The brief resume/details relating to Directors who are to be appointed/re-appointed as above are furnished in the report on Corporate Governance.

AUDITORS

The Auditors, M/s. BSR & Co., Chartered Accountants have been the Statutory Auditors of the Bank since 2010. As per the regulations of the Reserve Bank of India the same auditors cannot be re-appointed for a period beyond four years. It is proposed to appoint Deloitte Haskins and Sells, LLP as the new Statutory Auditors of the Bank, on an annual remuneration (statutory audit fees) of Rs. 1,10,00,000, plus applicable taxes, subject to the approval of the members and the Reserve Bank of India. Your Directors place on record their sincere appreciation of the professional services rendered by BSR & Co., as Statutory Auditors of the Bank.

ACKNOWLEDGEMENT

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank''s employees and look forward to their continued contribution in building a World Class Indian Bank.



On behalf of the Board of Directors

Mr. C. M. Vasudev

Chairman

Mumbai, April 22, 2014

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Mar 31, 2011

The Directors have great pleasure in presenting the Seventeenth Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2011.

FINANCIAL PERFORMANCE

(Rs. in crore)

For the year ended March 31, 2011 March 31, 2010

Deposits and Other Borrowings 222,980.5 180,320.1

Advances 159,982.7 125,830.6

Total Income 24,263.4 20,155.8*

Profit before Depreciation and Tax 6,316.1 4,683.5

Net Profit 3,926.4 2,948.7

Profit brought forward 4,532.8 3,455.6

Total Profit available for Appropriation 8,459.2 6,404.3

Appropriations :

Transfer to Statutory Reserve 981.6 737.2

Transfer to General Reserve 392.6 294.9

Transfer to Capital Reserve 0.4 199.5

Transfer to / (from) Investment Fluctuation Reserve 15.6 (1.5)

Proposed Dividend 767.6 549.3

Tax Including Surcharge and Education Cess on Dividend 124.5 91.2

Dividend (including tax/cess thereon) pertaining to previous year paid during the year 2.7 0.9

Balance carried over to Balance Sheet 6,174.2 4,532.8

* Change pursuant to reclassification

The Bank posted total income and net profit of Rs. 24,263.4 crore and Rs. 3,926.4 crore respectively for the financial year ended March 31, 2011 as against Rs. 20,155.8 crore and Rs. 2,948.7 crore respectively in the previous year. Appropriations from net profit have been effected as per the table given above.

DIVIDEND

Your Bank has had a consistent dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital, in order to maintain a healthy capital adequacy ratio to support future growth. It has had a consistent track record of moderate but steady increases in dividend declarations over its history with the dividend payout ratio ranging between 20% and 25%. Consistent with this policy, and in recognition of the overall performance during this financial year, your directors are pleased to recommend a dividend of Rs. 16.50 per share for the financial year ended March 31, 2011, as against Rs. 12 per share for the year ended March 31, 2010. This dividend shall be subject to tax on dividend to be paid by the Bank.

AWARDS

As in the past years, awards and recognition were conferred on your Bank by leading domestic and international

HDFC Bank Limited Annual Report 2010-11 organizations during the fiscal year ended March 31, 2011. Some of them are :

- Asian Banker 2011

- Strongest Bank in the Asia Pacific region

- Bloomberg UTV’s Financial Leadership Awards 2011

- Best Bank

- Outlook Money 2010 Awards

- Best Bank

- Businessworld Best Bank Awards 2010

- Best Bank (Large)

- NDTV Business Leadership Awards 2010

- Best Private Sector Bank

- IDRBT Technology 2009 Awards

- Best IT Infrastructure

- Best use of IT within the Bank

- Dun & Bradstreet Banking Awards 2010

- Overall Best Bank

- Best Private Sector Bank

- Best Private Sector Bank in SME Financing

- Celent’s 2010 Banking Innovation Award

- Model Bank Award

- Global Finance Awards

- Best Trade Finance Provider in India for 2010

- The Asset Triple A Awards

- Best Cash Management Bank in India

- IDC FIIA Awards 2011

- Excellence in Customer Experience

- The Banker and PWM 2010 Global Private Banking Awards

- Best Private Bank in India

- IBA Banking Technology Awards 2010

- Technology Bank of the Year

- Best Online Bank

- Best Customer Initiative

- Best Use of Business Intelligence

- Best Risk Management System

- Forbes Asia

- Fab 50 Companies – 5th Year in a Row

- MIS Asia IT Excellence Award 2010

- Best Bottom-Line IT Category

- FE-EVI Green Business Leadership Award

- Best Performer in the Banking Category

- Avaya Global Connect 2010

- Customer Responsiveness Award – Banking and Financial Services Category

ISSUANCE OF EQUITY SHARES

During the year under review, 74.8 lac shares were allotted to the employees of your Bank pursuant to the exercise of options under the Employee Stock Option Schemes of the Bank. These include the shares allotted under the Employee Stock Option Schemes of the erstwhile Centurion Bank of Punjab.

The Board of Directors of your Bank considered and approved the sub-division (split) of one equity share of your Bank having a nominal value of Rs. 10 each into five equity shares of nominal value of Rs. 2 each. The record date for the same shall be determined subsequently. The sub- division of shares will be subject to approval of the shareholders and any other statutory and regulatory approvals, as applicable. The stock split has been recommended with a view to make the stock more affordable from the retail investors’ perspective and thereby encourage greater participation from the retail segment.

EMPLOYEE STOCK OPTIONS

The information pertaining to Employee Stock Options is given in an annexure to this report.

CAPITAL ADEQUACY RATIO

Your Banks total Capital Adequacy Ratio (CAR) calculated in line with the Basel II framework stood at 16.2%, well above the regulatory minimum of 9.0%. Of this, Tier I CAR was 12.2%.

SUBSIDIARY COMPANIES

Your Bank has two subsidiaries, HDFC Securities Limited (HSL) and HDB Financial Services Limited (HDBFS).

HSL is primarily in the business of providing brokerage services through the internet and other channels with a focus to emerge as a full-fledged financial services provider offering a bouquet of financial services along with the core broking product. The company continued to strengthen its distribution franchise and as on March 31, 2011 had a network of 150 branches across the country catering to the needs of its customers. During the year under review, the company’s total income amounted to Rs. 260.5 crore as against Rs. 235.3 crore in the previous year. The operations resulted in a net profit after tax of Rs. 77.2 crore.

HDBFS is a non-deposit taking non-bank finance company (NBFC), the customer segments being addressed by HDBFS are typically underserviced by the larger commercial banks, and thus create a profitable niche for the company to operate. Apart from lending to individuals, the company grants loans to small and medium business enterprises and micro small and medium enterprises. The principle businesses of HDBFS are as follows :

- Loans – The company offers a range of loans in the unsecured and secured loans space that fulfill the financial needs of its target segment.

- Insurance Services – HDBFS is a corporate agent for HDFC Standard Life Insurance Company and sells standalone insurance products as well as products such as Loan Cover and Asset Cover.

- Collections - BPO Services – The Company runs 6 call centers with a capacity of over 1,500 seats. These centers cover collection requirements at over 100 towns through its calling and field teams. Currently the company has a contract with your Bank for collection services.

As on March 31, 2011 HDBFS had 100 branches in 65 cities in order to distribute its products and services. During the financial year ended March 31, 2011 the company’s total income increased by over 80% to Rs. 179.4 crore as compared to Rs. 97.6 crore in the previous year. During the same period the company’s net profit was Rs. 16.1 crore as compared to Rs. 9.9 crore in the previous year. During the year under review the loan disbursements made by HDBFS increased to Rs. 1,208 crore as compared to Rs. 525 crore in the previous year.

In terms of the approval granted by the Government of India, the provisions contained under Section 212(1) of the Companies Act, 1956 shall not apply in respect of the Bank’s subsidiaries. Accordingly, a copy of the balance sheet, profit and loss account, report of the Board of Directors and the report of the auditors of HSL and HDBFS have not been attached to the accounts of the Bank for the year ended March 31, 2011.

Shareholders who wish to have a copy of the annual accounts and detailed information on HSL and HDBFS may write to the Bank for the same. Further, the said documents shall also be available for inspection by shareholders at the registered offices of the Bank, HSL and HDBFS.

MANAGEMENT’S DISCUSSIONS AND ANALYSIS

Macro-economic and Industry Developments

After a strong revival last year, the domestic growth cycle remained robust, extending and consolidating the recovery set forth in the fiscal year ended March 31, 2011. While emerging headwinds from tightening monetary conditions and a scale back in fiscal stimulus measures (put in place during the global credit crisis of the calendar year 2008) led to some moderation in industrial growth, service sector growth and agricultural performance were strong and picked up the slack from industry. This is likely to have pushed the headline GDP growth in the year ended March 31, 2011 to 8.6% from 8.0% in the previous year.

Stimulus driven government spending has dissipated as a major driver of growth and private demand has successfully taken over. Structural factors such as strong rural demand, low product penetration and favorable demographics have remained key supports for private consumption. While government consumption growth is likely to have eased substantially from 16.4% in the fiscal year ended March 31, 2010 to 2.6% in fiscal year ended March 31, 2011, private consumption has remained strong growing by 8.2% in the financial year ended March 31, 2011 as against 7.3% a year ago.

However, even as domestic consumption growth has remained robust, investment demand has somewhat disappointed with infrastructure project execution by the government remaining tardy and the corporate capital expenditure cycle remaining subdued. Investments are likely to have grown by 8.2% in the fiscal year ended March 31, 2011 against 12.2% a year ago and this has impinged on industrial performance. Growth in capital goods has fallen from 29.0% in the first half of the fiscal year ended March 31, 2011 to -1.3% in the second half pulling industrial growth lower from 10.3% in the first half of the financial year to 6.3% for the full year.

The service sector has however remained strong with services such as finance, insurance, trade, transportation and communication performing well and taking overall service sector growth to 9.6% against 10.0% a year ago, despite a visible slowdown in government related services such as community, personal and social services. Further, a good monsoon season has meant that agricultural production has recovered from last year’s drought. Total food grain production is expected to grow by a strong 8.3% while agricultural growth is likely to have been close to 5.4% against 0.4% a year ago. This, along with income support schemes by the government such as the Mahatma Gandhi National Rural Employment Scheme (MGNREGS) have meant that the rural economy has performed well and has been an active participant in domestic growth dynamics.

While the rural sector has added to the robustness of the domestic growth cycle it has also contributed to the stickiness in inflationary pressures. Strong agricultural growth has meant that food inflation has cooled from 21% in June, 2010 to 9.2% in March, 2011 but the pace of decline has been diluted by demand-supply mismatches in specific categories such as protein-based food items (milk, eggs, meat, fish) and fruits and vegetables - an indication of rising rural incomes and the change in dietary patterns this entails. This has been exacerbated by supply chain problems and an inefficient food distribution system. As a result, while WPI inflation has fallen from a peak of 11.0 % in April, 2010 it has been slower to ease than initially anticipated settling in the 8.5-9.0% range in the fourth quarter of the fiscal year ended March 31, 2011 and averaging a rate of 9.4% in the full fiscal year.

Domestic inflationary pressures however, are no longer driven by food prices alone and inflation has become more broad- based over the past year. Firm international commodity prices, especially items such as crude oil, as well as the return of pricing power amongst domestic manufacturing firms amidst firm demand have pushed manufactured goods inflation higher. Further, ‘core’ inflation or manufactured goods inflation net of food price effects has been rising steadily. While headline inflation eased from 9.0% in October, 2010 to 8.3% in February, 2011, core inflation has picked up from 5.0% to 6.0%.

Monetary policy has, as a result, become more restrictive over the past year with the RBI changing policy focus from calibrating the exit from an accommodative stance to tackling inflation more aggressively. Policy rates (repo and reverse repo rate) have been hiked by 225-275 basis points over the last year but the effective tightening in rates has been far higher. Structural pressures on banking system liquidity from subdued deposit growth such as leakages from the deposit base towards currency in circulation have meant that the monetary transmission mechanism has been quick. Additionally, frictional liquidity stress from tardy government spending has also kept liquidity under pressure swinging the system from a surplus of over Rs. 1,00,000 crore in March, 2010 ( as measured by the Liquidity Adjustment Facility (LAF) reverse repo window) to an average deficit of a similar magnitude in March, 2011 (as measured by the LAF repo window). A heavy government borrowing target of Rs. 4,37,000 crore has only exaggerated the pressure on the system.

As a result, the effective policy rate has shifted from the reverse repo rate (rate consistent with surplus liquidity) to the repo rate (rate consistent with deficit liquidity) involving incremental tightening of 100-150 basis points over and above the policy rate hikes over the year. While short-term interest rates such as the overnight MIBOR has moved higher by close to 300 basis points, the yield on the benchmark 10-yr G-sec has increased by 15-20 basis points. Liquidity pressure has meant that the yield curve has flattened with the spread between the 10-yr G-sec and the 1-yr G-sec yields moving from 280 basis points to 50 basis points.

Lending rates have moved higher by an average of 100-150 basis points as funding conditions have come under strain. However, credit growth has been robust despite interest rate increases and has gathered pace over the year moving from 16.0% in March, 2010 to 23.0% in March, 2011. While infrastructure has continued to dominate credit growth in the past year, credit off-take has been relatively more broad-based with retail credit disbursements such as vehicle loans and housing loans as well as funding to services such as trade and Non Banking Financial Companies gathering ground. Credit growth towards infrastructure continued to grow at last year’s level of around 40%, growth in personal loans accelerated sharply from 4% to 16% while the growth in service sector credit picked up from 15% to 24%.

Deposit rates have also been hiked by an average of 150-200 basis points and while this has helped deposit growth move higher from a low of 14.0% in June, 2010 to 16.9% in March, 2011, deposit mobilization has been weak in the last year. Net foreign inflows into the country have been subdued and have been a major factor constraining money supply and deposit growth. Capital inflows into the country have been strong in the past year and are likely to have been USD 66 billion against USD 54 billion a year ago on the back of strong portfolio flows (both debt and equity), heavy external commercial borrowings and strong trade credit. However, the bulk of these inflows have been absorbed in financing a large current account deficit. The current account gap over the last financial year is likely to be close to 2.5-2.8% of GDP or USD 48 billion leaving net foreign inflows into the country at close to USD 16.4 billion - just slightly higher than net inflows of USD 13.4 billion in the previous year.

That said, there have been some offsets in recent months. A recovery in export growth and a turn in invisibles (private transfers and service exports) as well as a normalization in import growth in line with moderating industrial momentum in the third quarter of the last fiscal year has meant that the current account gap has reduced from 4.3% of GDP in the second quarter of the last year to 2% in the third quarter. While the drag on foreign inflows during the last year is still expected to be a long term concern, the pressure on external balances has relatively eased in the near term.

Reflecting the improvement in global growth conditions driven by fiscal and monetary stimulus measures, export growth in the last quarter of the fiscal year ended March 31, 2011 was a strong 42.0%. Growth was driven by categories such as engineering goods, chemicals, gems and jewellery and electronic goods, this has been a vital support to the domestic industry amidst flagging investment momentum. Import growth slowed down from 32.8% in the first half of the last financial year to 10.0% in the second half, inflows from invisibles picked up pace in the third quarter of the fiscal year ended March 31, 2011 growing by 17.0% on the year against a decline of 2.6% Y-o-Y in the first half of the same year. The risk however is that firm global commodity prices could push import growth higher going ahead and the likelihood of further improvement in external balances is somewhat limited.

(Sources : Ministry of Finance, RBI, CSO, Ministry of Commerce)

Macroeconomic Risks and Concerns

While the balance of risks in the last financial year were largely

external, rising domestic interest rates as well as firm inflationary pressures have meant that domestic factors have now emerged as points of concern for growth in the current fiscal year. Further, the withdrawal of monetary and fiscal stimulus measures last year has meant that the domestic growth cycle is likely to be far more vulnerable to external shocks going ahead.

Even as food inflation is likely to stabilize, firm international commodity prices are likely to keep manufactured goods inflation strong. Rising global oil prices remain a foremost risk to inflation and India’s fiscal and current account deficits this year. With uncertainty surrounding the political crisis in the Middle East and North Africa (MENA) region oil prices are unlikely to move to lower levels in a hurry. The price of crude (as measured by the India crude oil basket) has already spiked up by 40% on the year to USD 108 per barrel and the expectation is that the average price of crude oil is unlikely to fall below the USD 95-100 per barrel mark. It is anticipated that inflation is likely to average close to 8.5% in the fiscal year ended March 31, 2012 just slightly lower than the average inflation rate of 9.4% in the past year, this is likely to see the Reserve Bank of India (RBI) hike its repo and reverse repo rate by a total of 100-125 basis points this year. The risk however is that further escalation in oil prices and a faster than expected build up of inflation could push the central bank to tighten interest rates to a level that could impinge on private investment and leveraged consumer spending and constrain future growth.

The government has indicated its resolve to tame its imbalances and is targeting a fiscal deficit of 4.6% of GDP in the current year against 5.1% last year. It will be a challenge to achieve this target should key outlays such as oil, fertilizer and food subsidy payments turn out to be higher than budgeted. There is an additional risk that moderating industrial growth could dampen government revenues below budgeted levels. This could entail a larger government draft on the market and the banking system posing an upside risk to interest rates.

While the fundamentals of the Indian economy remain strong, the domestic equity markets and for that matter fund flows into the domestic financial system on the whole are dependent on the developments in the global economy and general risk appetite to a large extent. Any adverse changes therefore in the global economic or financial environment could have a negative impact on the domestic markets and the availability of foreign funds. In this regard, we see a few risks on the global front that could adversely impact the domestic markets.

The single largest external risk that could impact inflows into the country stems from the normalization in global liquidity and monetary conditions. The great wall of liquidity provided by accommodative monetary conditions in major developed economies like the United States of America, Japan, United Kingdom and the Euro-area have been crucial in driving yield seeking flows to risky assets and emerging markets such as India. Inflation concerns however are gradually building up and with global commodity prices likely to remain firm it is unlikely that the magnitude of liquidity pumped into the global financial system over the last two years will continue.

However the risks to external balances are not only limited to capital inflows. The likelihood of firm commodity prices as well as escalating oil prices means that the current account deficit could come under stress. With foreign exchange reserves of USD 305 billion in March, 2011 pressure on external liquidity and solvency in this event is unlikely to pose a serious threat to external stability in the near-term. However, there are implications for both exchange rate volatility as well as domestic liquidity. A large current account deficit is likely to trim net foreign inflows into the country placing undue depreciation pressure on the rupee and impacting domestic liquidity.

Stress on domestic funding conditions is likely to get exacerbated by an oil price shock and this is likely to make for a challenging operating environment for the banking system. Offsets could come from open market operations by the RBI which bought back government securities of nearly Rs. 70,000 crore in the last fiscal year but the strain on system liquidity could sustain.

While adequate capital provisioning and stringent prudential regulations largely shielded the domestic banking system from the global crisis, some cyclical deterioration in asset quality remains a concern. There is some evidence, both formal and anecdotal that credit quality in both the retail and wholesale portfolios of banks has deteriorated. There is also some concern that a portion of the loans that banks were allowed to restructure given the sharp cyclical deterioration in the economy may remain impaired and will add to the stock of non- performing loans. Recent stress tests have revealed however that the banking system as a whole remains robust enough to withstand a sharp increase in asset quality slippages.

Outlook

Further withdrawal of stimulus measures-both fiscal and monetary, are likely to moderate headline GDP growth in the year ahead and the expectation is that growth is likely to soften slightly from 8.6% in the last year to 8.0%. Additional monetary tightening in the current fiscal year could curtail private investment and leveraged consumer spending from entirely picking up the slack from fiscal compression and a cut back in government spending. However, this is unlikely to detract from structural positives and the premium attached to India as a rapidly growing economy. World output is likely to grow by 3.5% in 2011 and despite the configuration of external and domestic risks looming over the horizon, India is likely to continue to outperform the global economy by a large margin. Pressures are likely to be cyclical and key structural supports from a growing rural economy, favorable demographics and low product penetration are likely to continue to keep private consumption strong. Structural positives are likely to therefore offset downside risks to growth and keep India an attractive investment destination next year.

Mission and Business Strategy

Your Bank’s mission is to be ‘a World Class Indian Bank’, benchmarking itself against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit and compliance. The objective is to continue building sound customer franchises across distinct businesses so as to be a preferred provider of banking services for its target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank’s risk appetite. Your Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance.

The Bank’s business strategy emphasizes the following :

- Develop innovative products and services that attract its targeted customers and address inefficiencies in the Indian financial sector;

- Increase its market share in India’s expanding banking and financial services industry by following a disciplined growth strategy focusing on balancing quality and volume growth while delivering high quality customer service;

- Leverage its technology platform and open scaleable systems to deliver more products to more customers and to control operating costs;

- Maintain high standards for asset quality through disciplined credit risk management;

- Continue to develop products and services that reduce its cost of funds; and

- Focus on healthy earnings growth with low volatility.

Financial Performance :

The financial performance of your Bank during the fiscal year ended March 31, 2011 remained healthy with total net revenues (net interest income plus other income) increasing by 20.3% to Rs. 14,878.3 crore from Rs. 12,369.5 crore in the previous financial year. Revenue growth was driven both by an increase in net interest income and other income. Net interest income grew by 25.7% primarily due to acceleration in loan growth to 27.1% coupled with a stable net interest margin (NIM) of 4.3% for the year ending March 31, 2011.

From April 01, 2010 the RBI mandated that interest payable on savings deposits be calculated on daily average balances, this resulted in an increase in savings deposit costs by approximately 70-80 basis points. Further, due to tight liquidity conditions that were prevalent in the monetary system during the second half of the fiscal year ended March 31 2011, your Bank witnessed an increase of over 200 basis points in its retail term deposit rates during this period. Your Bank has however maintained steady NIMs which are amongst the highest within its peer group by managing the yields across its various customer and product segments in line with its cost of funds.

Other income grew 8.8% over that in the previous year to Rs. 4,335.2 crore during the financial year ended March 31, 2011. This growth was driven primarily by an increase in fees and commissions earned and income from foreign exchange and derivatives, offset in part by a loss on sale / revaluation of investments of Rs. 52.6 crore as compared to a gain of Rs. 345.1 crore in the previous financial year. In the fiscal year ended March 31, 2011, commission income increased by 19.7% to Rs. 3,596.7 crore with the primary drivers being commissions from the distribution of third party insurance and mutual funds, fees on debit and credit cards, transactional charges and fees on deposit accounts and processing fees on retail assets. The banking industry witnessed regulatory changes that resulted in the capping of earnings from the distribution of insurance products, however the increase in your Bank’s sales volumes partly made up for the reduction in unit commissions, as a result the growth in income from the distribution of third party products remained a healthy 28.0%. Foreign exchange and derivatives revenues grew by 26.2% from Rs. 623.2 crore in the previous financial year to Rs. 786.3 crore in the fiscal year ended March 31, 2011.

Operating (non-interest) expenses grew in line with net revenues and increased from Rs. 5,939.8 crore in the previous financial year to Rs. 7,152.9 crore in the year under consideration. During the year your Bank opened 261 new branches and over 1,200 ATMs which resulted in higher infrastructure and staffing expenses. In spite of that, the ratio of operating cost to net revenues (excluding bonds gains) for your Bank improved to 47.9% during the fiscal year ended March 31, 2011, from 49.4% in the previous year.

Total loan loss provisions including specific provisions for non-performing assets and floating provisions decreased from Rs. 1,988.9 crore to Rs. 1,433.0 crore for the financial year ended March 31, 2011, on account of healthy asset quality across customer and product segments. Your Bank’s provisioning policies for specific loan loss provisions remain higher than regulatory requirements, the coverage ratio based on specific provisions alone without including write- offs technical or otherwise was 82.5% and that including general and floating provisions was well over 100% as on March 31, 2011. Your Bank has made contingent provisions on account of contingencies towards the loans that it has extended to micro finance institutions, in view of the credit concerns arising out of the disruptions in that sector. The Reserve Bank of India had reduced the general provisioning requirements for certain asset classes in May 2008, this reduced the requirements for general provisions for the Bank’s loan book. Your Bank however, continued to maintain the general provisions that were already created. As a result of the above, the requirement for general asset provisions was lower than what the Bank held on its books as on March 31, 2011 and the Bank did not have to make any additional general asset provisions on account of the increase in its loan book.

Your Bank’s profit after tax increased by 33.2% from Rs. 2,948.5 crore in the previous financial year to Rs. 3,926.4 crore in the year ended March 31, 2011. Return on average net worth was 16.5% while the basic earnings per share increased from Rs. 67.56 to Rs. 85.02 per equity share.

As at March 31, 2011, your Bank’s total balance sheet size was Rs. 277,353 crore an increase of 24.7% over Rs. 222,458 crore as at March 31, 2010. Total Deposits increased 24.6% from Rs. 167,404 crore as on March 31, 2010 to Rs. 208,586 crore as on March 31, 2011. Savings account deposits grew by 27.2% to Rs. 63,448 crore while current account deposits at Rs. 46,460 crore witnessed an increase of 24.8% as compared to those on March 31, 2010. Adjusting current account deposits for one offs at year end amounting to Rs. 3,700 crore the growth was 14.9%. The proportion of core current and savings deposits (CASA) to total deposits continued to be healthy at 51% as on March 31, 2011. During the financial year under review, gross advances grew by 26.8% to Rs. 161,359 crore, while system loan growth was approximately 21%. Your Bank’s loan growth was driven by an increase of 26.8% in retail advances to Rs. 80,113 crore, and an increase of 26.7% in wholesale advances to Rs. 81,246 crore. The Bank had a market share of 3.7% in total system deposits and 4.2% in total system advances. The Bank’s Credit Deposit (CD) Ratio was 76.7% as on March 31, 2011. Adjusted for overseas funding by its international operations, primarily funded from term borrowings, the CD Ratio was lower at 74.5%.

Business Segments’ Update :

Consistent with its performance in the past, in the last financial year, your Bank has achieved healthy growth across various operating and financial parameters. This performance reflected the strength and diversity of the Bank’s three primary business franchises - retail banking, wholesale banking and treasury, and of its disciplined approach to risk - reward management.

Retail Banking

Your Bank caters to various customer segments with a wide range of products and services. The Bank is a ‘one stop shop’ financial services provider of various deposit products, of retail loans (auto loans, personal loans, commercial vehicle loans, mortgages, business banking, loan against gold jewellery etc.), credit cards, debit cards, depository (custody services), investment advisory, bill payments and several transactional services. Apart from its own products, the Bank distributes third party financial products such as mutual funds and life and general insurance.

The growth in your Bank’s retail banking business was robust during the financial year ended March 31, 2011. The Bank’s total retail deposits grew by over 23.3% to - 139,961 crore in the financial year ended March 31, 2011, driven by retail savings balances which grew much faster at 28.0% during the same period. The Bank’s retail assets grew by 26.8% to - 80,113 crore during the financial year ended March 31, 2011 driven primarily by a growth in mortgages, business banking, commercial vehicle loans and auto loans.

Branch Banking

This year your Bank expanded its distribution network from 1,725 branches in 779 cities as on March 31, 2010 to 1,986 branches in 996 Indian cities on March 31, 2011. The Bank’s ATMs increased from 4,232 to 5,471 during the same period. Your Bank’s branch network is deeply entrenched across the country with significant density in areas conducive to the growth of its businesses. The Bank’s focus on semi-urban and under-banked markets continued, with over 70% of the Bank’s branches now outside the top nine Indian cities. The Bank’s customer base grew in line with the growth in its network and increased product penetration initiatives, this currently stands at 21.9 million customers. The average savings balance per account which is a good indicator of the strength of the Bank’s retail liability franchise grew over 17%. The Bank continues to provide unique products and services with customer centricity a key objective.

In order to provide its customers increased choices, flexibility and convenience the Bank continued to make significant headway in its multi channel servicing strategy. Your Bank offered its customers the use of ATMs, internet, phone and mobile banking in addition to its expanded branch network to serve their banking needs.

The increase in the Bank’s debit card base this year coupled with a growth in its ATM network translated to an increase in ATM transactions by 14%. The Bank also made strong inroads in its internet banking channel with around 60% of its registered customers now using net banking facilities for their banking requirements. Your bank now offers phone banking in 996 locations in addition to giving its customers the convenience of accessing their bank accounts over their mobile phones. The success of the Bank’s multi-channel strategy is evidenced in the fact that over 80% of customer initiated transactions are serviced through the non-branch channels.

Retail Assets

Your Bank continued to grow at a healthy pace in almost all the retail loan products that it offers and further consolidated its position amongst the top retail lenders in India. The Bank grew its retail asset portfolio in a well balanced manner focusing on both returns as well as risk. While the Bank’s auto finance business remained a key business driver for its retail asset portfolio, other retail loan products exhibited robust growth rates and good asset quality.

The Bank continued its focus on internal customers for its credit cards portfolio. Overall credit cards remained a profitable business for your Bank with over 5 million cards in force as at March 2011. As part of its strategy to drive usage of its credit cards the Bank also has a significant presence in the ‘merchant acquiring’ business with the total number of point-of-sale (POS) terminals installed at over 120,000.

In addition to the above products the Bank does home loans in conjunction with HDFC Limited. Under this arrangement the Bank sells loans provided by HDFC Limited through its branches. HDFC Limited approves and disburses the loans, which are booked in their books, with the Bank receiving a sourcing fee for these loans. HDFC Limited offers the Bank an option to purchase up to 70% of the fully disbursed home loans sourced under this arrangement through either the issue of mortgage backed pass through certificates (PTCs) or by a direct assignment of loans; the balance is retained by HDFC Limited. Both the PTCs and the loans thus assigned are credit enhanced by HDFC Limited upto a AAA level. The Bank purchases these loans at the underlying home loan yields less a fee paid to HDFC Limited for the administration and servicing of the loans. Your Bank originated approximately an average Rs. 700 crore of mortgages every month in the financial year ended March 31, 2011, an increase from the Rs. 550 crore per month that it originated in the previous year. During the year the Bank also purchased from HDFC Ltd. under the “loan assignment” route approximately Rs. 4,300 crores of AAA credit enhanced home loans most of which qualified as priority sector advances.

Your Bank also distributes life, general insurance and mutual fund products through its tie-ups with insurance companies and mutual fund houses. The income from these businesses continued to demonstrate robust growth largely due to an expanded branch network and the increased penetration of the Bank’s managed portfolio despite the fact that during the year there were regulatory changes which in some cases impacted the commission paid by the manufacturers of these products to the Bank. The success in the distribution of the above products has been demonstrated with the growth in the Bank’s fee income. Third party distribution income contributes approximately 25% of total fee income.

The Bank’s data warehouse, Customer Relationship Management (CRM) and analytics solutions have helped it target existing and potential customers in a cost effective manner and offer them products appropriate to their profile and needs. Apart from reducing costs of acquisition, this has also led to deepening of customer relationships and greater efficiency in fraud control and collections resulting in lower credit losses. The Bank is committed to investing in advanced technology in this area which will provide cutting edge in the Bank’s product and service offerings.

Wholesale Banking

The Bank provides its corporate and institutional clients a wide range of commercial and transactional banking products, backed by high quality service and relationship management. The Bank’s commercial banking business covers not only the top end of the corporate sector but also the emerging corporate segments and some small and medium enterprises (SMEs). The Bank has a number of business groups catering to various segments of its wholesale banking customers with a wide range of banking services covering their working capital, term finance, trade services, cash management, foreign exchange and electronic banking requirements.

The business from this segment registered a healthy growth in the financial year ended March 31, 2011. The Bank’s wholesale deposits grew by around 27.4%, while wholesale advances showed a growth of over 26.7% both of which were significantly faster than the growth in the system during the same period. Your Bank provides its customers both working capital and term financing. The Bank witnessed an increase in the proportion of its medium tenor term lending, however working capital loans and short tenor term loans retained a large share of its wholesale advances. While the duration of the Bank’s term loans largely remained small to medium term, the Bank did witness an increase in its longer duration term loans, and project lending including loans to the infrastructure segment.

During the financial year ended March 31, 2011, growth in the wholesale banking business continued to be driven by new customer acquisition and higher cross-sell with a focus on optimizing yields and increasing product penetration. Your Bank’s cash management and vendor & distributor (supply chain) finance products continued to be an important contributor to growth in the corporate banking business. Your Bank further consolidated its position as a leading player in the cash management business (covering all outstation collection, disbursement and electronic fund transfer products across the Bank’s various customer segments) with volumes growing to over Rs. 30 trillion. The Bank also strengthened its market leadership in cash settlement services for major stock exchanges and commodity exchanges in the country. The Bank met the overall priority sector lending requirement of 40% of net bank credit and also strived for healthy growth in the sub-targets such as weaker sections, direct agriculture and the micro and SME segments.

The Bank’s financial institutions and government business group (FIG) offers commercial and transaction banking products to financial institutions, mutual funds, public sector undertakings, central and state government departments. The main focus for this segment remained offering various deposit and transaction banking products to this segment besides deepening these relationships by offering funded, non-funded treasury and foreign exchange products.

International Operations

The Bank has a wholesale banking branch in Bahrain, a branch in Hong Kong and two representative offices in UAE and Kenya. The branches offer the Bank’s suite of banking services including treasury and trade finance products to its corporate clients. Your Bank has built up an asset book over USD 1 billion through its overseas branches. The Bank offers wealth management products, remittance facilities and markets deposits to the non-resident Indian community from its representative offices.

Treasury

The treasury group is responsible for compliance with reserve requirements and management of liquidity and interest rate risk on the Bank’s balance sheet. On the foreign exchange and derivatives front, revenues are driven primarily by spreads on customer transactions based on trade flows and customers’ demonstrated hedging needs. During the financial year ended March 31, 2011, revenues from foreign exchange and derivative transactions grew by 26.2% to Rs. 786.3 crore. These revenues were distributed across large corporate, emerging corporate, business banking and retail customer segments for plain vanilla foreign exchange products and across primarily large corporate and emerging corporate segments for derivatives. The Bank offers Indian rupee and foreign exchange derivative products to its customers, who use them to hedge their market risks. The Bank enters into foreign exchange and derivative deals with counterparties after it has set up appropriate counterparty credit limits based on its evaluation of the ability of the counterparty to meet its obligations in the event of crystallization of the exposure. Appropriate credit covenants may be stipulated where required as trigger events to call for collaterals or terminate a transaction and contain the risk. Where the Bank enters into foreign currency derivative contracts with its customers it lays them off in the inter-bank market on a matched basis. For such foreign currency derivatives, the Bank does not have any open positions or assume any market risks but carries only the counterparty credit risk (where the customer has crystallized payables or mark-to-market losses). The Bank also deals in Indian rupee derivatives on its own account including for the purpose of its own balance sheet risk management. The Bank recognizes changes in the market value of all rupee derivative instruments (other than those designated as hedges) in the profit and loss account in the period of change. Rupee derivative contracts classified as hedge are recorded on an accrual basis.

Given the regulatory requirement of holding government securities to meet the statutory liquidity ratio (SLR) requirement, your Bank maintains a portfolio of government securities. While a significant portion of these SLR securities are held in the ‘Held-to-Maturity’ (HTM) category, some of these are held in the ‘Available for Sale’ (AFS) category.

Information Technology

Since its inception, your Bank has made substantial investments in its technology platform and systems, built multiple distribution channels, including an electronically linked branch network, automated telephone banking, internet banking and banking through mobile phones, to offer its customers convenient access to various products.

The Bank has templatized credit underwriting through automated customer data de-duplication and real-time scoring in its loan origination process. Having enhanced its cross selling and up-selling capabilities through data mining and analytical customer relationship management solutions, the Bank’s technology enables it to have a 360 0 view of its customers. Your Bank employs event detection technology based customer messaging and has deployed an enterprise wide data warehousing solution as a back bone to its business intelligence system.

Implementation of a risk management engine for internet transactions has reduced the phishing and man in the middle attacks significantly. The bank has also implemented a digital certificates based security engine for corporate internet banking customers. Credit and debit cards usage of the Bank’s customers is secured by powerful proactive risk manager technology solutions which does rules based SMS alerts as well as prompts customer service representatives to call the customer on detecting abnormal usage behavior. This prevents frauds and minimizes losses to customers, if the card has been stolen and yet to be hot listed.

Sophisticated automated switch-over and switch-back solutions power the Bank’s disaster recovery management strategy for key core banking solutions in its data center, improving availability of your Bank’s services to its customers.

With the various initiatives that your Bank has taken using technology, it has been successful in driving the development of innovative product features, reducing operating costs, enhancing customer service delivery and minimizing inherent risks.

Service Quality Initiatives

Your Bank was one of the few banks in the country to have put in place a team dedicated to improve service quality through the Lean and Six Sigma methodologies with a focus on right origination, cost effective and error free operations and effective complaint resolution. The Bank continued driving improvements in Service Quality (SQ) initiatives encompassing all customer touch points namely branches, ATMs, phone banking, net banking, e-mail service as well as back office support functions impacting customer service through a dedicated Quality Initiatives Group (QIG) team. Some of the key elements covered by the QIG team are workplace management, etiquette and courtesy, lobby management, complaints management, management of turn-around times, overall customer service and compliance with the Bank’s internal processes as well as regulatory compliance. The group also runs programs such as ‘voice of the customer’ and ‘voice of the employee’ for effective complaint resolution and process improvement. Various departments of the Bank are empowered to deliver superior customer experience through improvements in products, processes and people skills. To this effect, your Bank has designed and implemented customized Lean Sigma Project Management (LSPM) methodology that incorporates the Lean philosophy into the Six Sigma framework to deliver faster and sustainable results clubbed with customer delight and improved profitability. The Bank also takes advantage of various information technology platforms to improve products, processes and services. Your Bank does not believe in designing a product and fitting it into the customers’ needs rather it designs products to meet customer needs. The Bank has always ensured that its products and services are delivered through processes which are in line with the prevalent regulatory framework and has adequate controls to safe-guard against possible misuse.

Your Bank has taken various steps to improve the effectiveness of its grievance re-dressal mechanism across its delivery channels. Some key measures taken up by the Bank include a three layered grievance re-dressal mechanism, bank-wide online complaint resolution system, root cause remediation, customer service committees at the branch level and at the corporate headquarters level with representation from customers. The levels of customer service are periodically reviewed by the board of directors of the Bank.

Apart from the above, your Bank continued with the ongoing service quality initiatives which include the audit of services as well as mystery shopping at various customer touch points to capture and improve customer experiences. Your Bank has also set up a robust training mechanism; both on the online platform as well as using conventional class room sessions, to enable its employees improve the quality of customer service.

Risk Management and Portfolio Quality

Taking on various types of risk is integral to the banking business. Sound risk management and balancing risk-reward trade-offs are critical to a bank’s success. Business and revenue growth have therefore to be weighed in the context of the risks implicit in the Bank’s business strategy. Of the various types of risks your Bank is exposed to, the most important are credit risk, market risk (which includes liquidity risk and price risk) and operational risk. The identification, measurement, monitoring and management of risks accordingly remain a key focus area for the Bank. For credit risk, distinct policies and processes are in place for the retail and wholesale businesses. In the retail loan businesses, the credit cycle is managed through appropriate front-end credit, operational and collection processes. For each product, programs defining customer segments, underwriting standards, security structure etc., are specified to ensure consistency of credit buying patterns. Given the granularity of individual exposures, retail credit risk is monitored largely on a portfolio basis, across various products and customer segments. During the financial year ended March 31, 2008 the Bank obtained an ISO 9001:2008 certification of its retail asset underwriting. Last year, the second surveillance audit was conducted successfully at key locations and the certification was confirmed with no instances of non-conformity. For wholesale credit exposures, management of credit risk is done through target market definition, appropriate credit approval processes, ongoing post-disbursement monitoring and remedial management procedures. Overall portfolio diversification and reviews also facilitate mitigation and management.

The Risk Policy and Monitoring Committee of the Board monitors the Bank’s risk management policies and procedures, vets treasury risk limits before they are considered by the Board, and reviews portfolio composition and impaired credits.

As of March 31, 2011, the Bank’s ratio of gross non-performing assets (NPAs) to gross advances was 1.05%. Net non- performing assets (gross non-performing assets less specific loan loss provisions, Export Credit Guarantee Corporation (ECGC) claims received and provision in lieu of diminution in the fair value of restructured assets) were 0.2% of customer assets as of March 31, 2011. The specific loan loss provisions that the Bank has made for its non-performing assets continue to be more conservative than the regulatory requirement.

In accordance with the guidelines issued by the Reserve Bank of India on Basel II, your Bank migrated to the standardized approach for Credit Risk and the Basic Indicator approach for operational risk in the financial year ended March 31, 2009. Through the year, your Bank has been continuing work on various initiatives which would enable it to comply with the standards laid out for the more advanced capital approaches under Basel II. While the core systems which support such initiatives are more or less in place, the Bank has been working towards testing the results and fine-tuning such systems and plugging the gaps to meet the operational requirements for the advanced approaches. This is a long process, which requires not only having the quantitative inputs in place, but also a strong culture of risk management and awareness in the Bank, which rely on these inputs for decision making. The Bank has made reasonable progress in this regard. The implementation of the Basel II framework is in harmony with the Bank’s objective of adopting best practices in risk management.

INTERNAL AUDIT AND COMPLIANCE

The Bank has Internal Audit and Compliance functions which are responsible for independently evaluating the adequacy of all internal controls and ensuring operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements. The audit function also pro- actively recommends improvements in operational processes and service quality. To ensure independence, the audit department has a reporting line to the Chairman of the Board of Directors and the Audit and Compliance Committee of the Board and only a dotted line to the Managing Director. To mitigate operational risks, the Bank has put in place extensive internal controls including restricted access to the Bank’s computer systems, appropriate segregation of front and back office operations and strong audit trails. The Audit and Compliance Committee of the Board also reviews the performance of the audit and compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines.

CORPORATE SOCIAL RESPONSIBILITY

Your Bank views Corporate Social responsibility as its commitment to operate ethically and contributing to economic development while improving the quality of life of its employees as well as that of the local communities and society at large. Pursuing a vision towards the socio-economic empowerment of underprivileged and marginalized sections of society, the Bank reiterates its commitment to support social initiatives with a special focus on education and livelihood support.

The major initiatives that your Bank has taken in this direction over the last few years cover the following areas :

- Education

- Livelihood training and support

- Environmental sustainability

- Employee welfare, health and well being

- Employee engagement

Education Initiatives

School adoption project

This is a public private partnership to ensure that children in municipal schools have access to quality education; the program provides direct learning inputs to slow learners through academic support centers. These centers provide children with access to concept based, child friendly focused teaching methods. Teachers are also assisted with innovative teaching methods and learning material. Your Bank is presently supporting seven schools in Mumbai covering 1,850 children; in addition the Bank is working with 10 schools in Pune on a reading program that covers over 5,000 children.

Special educational sponsorships for the girl child

Girls who are at the risk of dropping out of school on account of affordability and poor academic performance are identified and supported under a special sponsorship program. This program covers their material needs with regard to their education as well as provides them with academic support. Presently, this program covers 1,500 girls in Mumbai, Sheopur and Chattisgarh.

Educational assistance

Under this program your Bank provides education support to children who have dropped out of school with an aim to reintegrate them into the mainstream education channels. Simultaneously, support classes are also conducted in high risk areas to reduce dropouts and increase the level of learning. Over 1,000 children in Mumbai, Bangalore, Hyderabad and Kolkata are being covered through this educational assistance program.

Pre-schools

The Bank has initiated partnerships to operate pre-schools in areas where there is a high concentration of out of school children. These are focused predominantly towards first generation learners, the pre-primaries prepare children for schooling while at the same time counseling their parents on the importance of education. On completion of the pre-school module children are enrolled into school. Your Bank currently reaches out to over 9,000 children in Mumbai, Delhi and Hyderabad under this program.

Financial Literacy

We believe that by inculcating sound economic practices in rural children, we can tangibly demonstrate the power of the savings habit. This financial education program aims to inculcate practices in children that would over time empower them with the right decision making skills in terms of saving money, making financial decisions based on real needs, and differentiate between good and bad spending. Your Bank has tied up with 464 schools in Maharashtra covering over 69,000 children through this program.

Livelihood Training and Support

With the economic upliftment of the underprivileged in mind, the Bank provides support for vocational training to individuals in order to enable them to have regular and sustainable income. Under this program your Bank supports non formal vocational and technical education programs in trades such as welding, plumbing, electrical maintenance, mobile repair, tailoring etc. We also support training courses in making of paper bags, gel candles, wax candles, chef caps and courses on physiotherapy for visually challenged candidates. Further through onsite skills up-gradation courses in basic trades related to the construction industry, we are reaching out to the unorganized sector and have provided training to over 2,650 youth and women.

Your bank has an active lending program wherein it focusses on lending to customers typically below the poverty line for income generation purposes through the formation of self- help groups. The bank believes that this lending should be supported with training programs that nurture the appropriate skill sets as well as the provision of market linkages to the primary markets in order to ensure that the livelihood activities are sustainable.

To this effect your bank conducts capacity building and training sessions that focus on enhancing the skills of the borrowers, some of these in the past have included basket weaving, agarbatti rolling etc. The bank also has in place a program that assists in providing market linkages to the self help groups so that they can sell the products produced at a fair price and in a hassle free manner. In addition to the above the bank provides counselling to all the self help groups that it works with on the benefits of the savings habit, wise investing habits etc.

Environmental Sustainability

Your Bank believes in taking responsibility for the effects of its operations in society and on the environment and this belief embodies its approach to the reduction of carbon emissions. Taking forward this commitment the Bank has undertaken the following projects :

Annual Foot-printing / Calculation of its carbon emissions

The Bank has developed and put in place a template to collate and calculate its carbon emissions on an annual basis. This provides us with our emissions regarding travel, electricity, paper and other utilities, which then enables us to take efforts in specific areas in order for the Bank to reduce the impact of its operations on the environment.

Carbon Disclosure Project

The Bank has been associated with the carbon disclosure project since 2007, adhering to their disclosure practices, each year we have strived to improve the quality of reporting and the number of parameters that go into the disclosure. In the year 2010, your Bank registered as a signatory to the carbon disclosure project.

Carbon Management Awareness

Employees are made aware of the importance of conservation of natural resources and smart resource management techniques through various e-mailers and other communications sent out periodically.

Sustainability Reporting

We have engaged consultants to create an in-house capability for triple bottom line / sustainability reporting, based on the Global Reporting Initiative guidelines. This is a disclosure tool used to communicate important information regarding the organization and its performance across social, environmental, and economic parameters to stakeholders.

Green Initiative

In line with its commitment to green and sustainable development your bank has followed green principles in the construction of its back office premises located in Mumbai. The building core and shell has been designed and implemented in lines with a LEED rating of gold. All materials used in the construction of the interiors of the building conform to green norms for commercial premises. The operations of the premises consume less than one watt per square foot of space. Indoor air quality is monitored through Co2 control and sewage for the building is treated and recycled.

Employee Health, Welfare and Well Being

Your Bank has its people as one of its stated values. Keeping in line with this we ensure equal opportunities, living wages, social security and well being of our employees. Employee development is integral to the bank, which is achieved through a range of training and developmental program and activities.

Employee Participation

The Bank encourages employee participation at all levels to strengthen its corporate social responsibility initiatives as well as inculcate a stronger sense of ownership amongst its employees of each of these initiatives.

Employee Payroll Giving

Employees are provided with an easy and convenient system to donate through the employee payroll giving. The donor enjoys the flexibility of choice with regards to the amount that they wish to donate and the cause that they wish to support. The Bank adds a matching amount to the contribution to endorse its support to the cause chosen by the employees.

Employee Volunteering

Employees are an integral part of the Bank’s social initiatives, they are encouraged to participate in philanthropy work involving their time and skills in many possible ways. Employees can choose NGO partners they would like to work with and the manner in which they would like to dedicate their time and skill. Your Bank’s employees have increasingly participated in summer camps; conducted english-speaking classes; collected paper waste, assisted in academic support programs, donated blood and so on.

With its focus on creating self-reliance and promoting education in the interiors of the country, your Bank has been able to make meaningful differences a small group of individuals through its many programs. Going forward we would like to look at CSR not as a stand-alone function but as an ideology that is interwoven into every aspect of your Bank’s operations.

FINANCIAL INCLUSION

Over the last few years, your Bank has been working on a number of initiatives to promote Financial Inclusion across identified sections of rural, under-banked and un-banked consumers. These initiatives target segments of the population that have limited or no access to the formal banking system for their basic banking and credit requirements, by building a robust and sustainable model that provides relevant services and viable and timely credit that ultimately results in economically uplifting its customers. The Banks financial inclusion initiatives have been integrated across its various businesses, across product groups. By March 31, 2014 your Bank will endeavor to bring 10 million households currently excluded from basic banking services under the fold of this program.

Rural Initiative

The Bank has a number of its branches in rural and under- banked locations. In these branches the Bank offers products and services such as savings, current, fixed & recurring deposits, loans, ATM facilities, investment products such as mutual funds and insurance, electronic funds transfers, drafts and remittances etc. The Bank also leverages some of these branches as hubs for other inclusion initiatives such as direct linkages to self help groups and to promote mutual guarantee micro-loans, POS terminals and information technology enabled kiosks, as well as other ICT initiatives such as mobile ba

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Mar 31, 2010

The Directors have great pleasure in presenting the Sixteenth Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2010.

FINANCIAL PERFORMANCE

(Rs. in crores)

For the year ended

March 31, 2010 March 31, 2009

Deposits and Other Borrowings 180,320.1 151,975.2*

Advances 125,830.6 98,883.0

Total Income 19,980.5 19,622.9

Profit before Depreciation and Income Tax 4,683.5 3,659.2

Net Profit 2,948.7 2,245.0

Profit brought forward 3,455.6 2,574.6

Total Profit available for Appropriation 6,404.3 4,819.6

Appropriations

Transfer to Statutory Reserve 737.2 561.2

Transfer to General Reserve 294.9 224.5

Transfer to Capital Reserve 199.5 93.9

Transfer from Investment Fluctuation Reserve (1.5) (13.9)

Proposed Dividend 549.3 425.4

Tax Including Surcharge and Education Cess on Dividend 91.2 72.3

Dividend (including tax/cess thereon) pertaining to previous year paid during the year 0.9 0.6

Balance carried over to Balance Sheet 4,532.8 3,455.6

* Change pursuant to reclassification

The Bank posted total income and net profit of Rs. 19,980.5 crores and Rs. 2,948.7 crores respectively for the financial year ended March 31, 2010 as against Rs. 19,622.9 crores and Rs. 2,245.0 crores respectively in the previous year. Appropriations from net profit have been effected as per the table given above.

DIVIDEND

Your Bank has had a consistent dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital, in order to maintain a healthy capital adequacy ratio to support future growth. It has had a consistent track record of moderate but steady increases in dividend declarations over its history with the dividend payout ratio ranging between 20% and 25%. Consistent with this policy, and in recognition of the Banks overall performance during this financial year, your directors are pleased to recommend a dividend of Rs. 12 per share for the financial year ended March 31, 2010, as against Rs. 10 per share for the year ended March 31, 2009. This dividend shall be subject to tax on dividend to be paid by the Bank.

AWARDS

As in the past years, awards and recognition were conferred on your Bank by leading domestic and international organizations during the fiscal year ended March 31, 2010. Some of them are:

• Asian Banker Excellence Awards 2009

- Best retail bank in India (4th year in a row)

- Excellence in automobile lending

• The Asset Triple A Awards

- Best cash management bank in India

• Euromoney Private Banking and Wealth Management poll 2010

- Best local bank in India (2nd year in a row)

- Best private banking services overall

• Financial Insights Innovation Awards 2010

- Innovation in branch operations

• Global Finance Award

- Best trade finance provider in India (2010)

• Business Today Best Employer Survey

- Listed in the top 10 best employers in the country

• Business World Best Bank Awards 2009

- Most tech-savvy bank

• Outlook Money NDTV Profit Awards 2009

- Best bank

• Forbes Asia

- Fab 50 companies in Asia-Pacific

• UTI MF-CNBC TV18 Financial Advisor Awards 2009

- Best performing bank

• Wall Street Journal survey of Asia’s best 200 companies 2009

- Rated amongst India’s 10 most admired companies

- Rated 3rd in terms of Financial Reputation

• FE Best Bank Awards 2009

- Best in strength and soundness award

• Asia Money 2009 awards

- Best domestic bank in India

RATINGS

Instrument Rating Rating Agency

Fixed Deposit Program CARE AAA (FD) CARE1

tAAA (ind) with a FITCH2 stable outlook

Certificate of Deposit PR 1+ CARE

Long term unsecured, CARE AAA CARE subordinated (Tier II) bonds

AAA (ind) with a FITCH stable outlook

Tier I perpetual Bonds CARE AAA CARE

AAA / Stable CRISIL3

Upper Tier II Bonds CARE AAA CARE

AAA / Stable CRISIL













Instrument Comments

Fixed Deposit Program Represents instruments considered to be ‘of the best quality, carrying negligible investment risk’.

Certificate of Deposit Indicates the strongest capacity for timely payment of financial commitments relative to other issuers or issues in the country.

Long term unsecured, subordinated (Tier II) bonds Representing superior capacity for repayment of short term promissory obligations

Represents instruments considered to be of the best quality, carrying negligible investment risk’.

Represents the best credit risk relative to all other issuers or issues in the country.

Tier I perpetual Bonds Represents instruments considered to be ‘of the best quality, carrying negligible investment risk’.

Judged to offer the highest degree of safety with regard to timely payment of financial obligations. Any adverse changes in circumstances are most unlikely to affect the payments of the instrument.

Upper Tier II Bonds Represents instruments considered to be ‘of the best quality, carrying negligible investment risk’.

Judged to offer the highest degree of safety with regard to timely payment of financial obligations. Any adverse changes in circumstances are most unlikely to affect the payments of the instrument.

1 - CARE – Credit Analysis & Research Limited

2 - FITCH – Fitch Ratings India Private Limited (100% subsidiary of Fitch Inc.)

3 - CRISIL – CRISIL Ltd. (A Standard & Poor’s company)

ISSUANCE OF EQUITY SHARES AND WARRANTS

Post merger of the erstwhile Centurion Bank of Punjab with your Bank, 26,200,220 warrants convertible into an equivalent number of equity shares were issued to HDFC Limited on a preferential basis at a rate of Rs. 1,530.13 each. This was done in order to enable the promoter group to restore its shareholding percentage in the Bank to the pre-merger level in line with shareholder and regulatory approvals. On November 30, 2009 the said warrants were converted by HDFC Limited and consequently the Bank issued them 26,200,220 equity shares.

During the year under review, 61.59 lac shares were allotted to the employees of your Bank pursuant to the exercise of options under the employee stock option scheme of the Bank. These include the shares allotted under the employee stock option scheme of the erstwhile Centurion Bank of Punjab.

EMPLOYEE STOCK OPTIONS

The information pertaining to Employee Stock Options is given in an annexure to this report.

CAPITAL ADEQUACY RATIO

Your Bank’s total Capital Adequacy Ratio (CAR) calculated in line with the Basel II framework stood at 17.4%, well above the regulatory minimum of 9.0%. Of this, Tier I CAR was 13.3%.

SUBSIDIARY COMPANIES

Your Bank has two subsidiaries, HDFC Securities Limited (“HSL”) and HDB Financial Services Limited (“HDBFS”). HSL is primarily in the business of providing brokerage services through the internet and other channels. HDBFS is a non-deposit taking non-bank finance company (“NBFC”), for the establishment of which the Bank received Reserve Bank of India (“RBI”) approval during the fiscal year ended March 31, 2008.

In terms of the approval granted by the Government of India, the provisions contained under Section 212(1) of the Companies Act, 1956 shall not apply in respect of the Bank’s subsidiaries. Accordingly, a copy of the balance sheet, profit and loss account, report of the Board of Directors and the report of the Auditors of HSL and HDBFS have not been attached to the accounts of the Bank for the year ended March 31, 2010.

Shareholders who wish to have a copy of the annual accounts and detailed information on HSL and HDBFS may write to the Bank for the same. Further, the said documents shall also be available for inspection by shareholders at the registered offices of the Bank, HSL and HDBFS.



CORPORATE SOCIAL RESPONSIBILITY

Your Bank is a socially responsible corporate citizen committed to deliver a positive impact across social, economic and environmental parameters. The Bank acknowledges its responsibility on the manner that its activities influence its consumers, employees, and stake holders, as well as the environment. Your Bank strives to proactively encourage community growth and development thereby contributing in building a sustainaible future.

Your Bank’s CSR initiatives range across the spectrum of purely operational and financial parameters at one end to social and altruistic at the other. Together, these elements go towards fulfilling its CSR objectives.

The Bank seeks to achieve its corporate and social objectives by focusing on the following strategic areas

• Environmental Responsibility

• Employee Engagement

• Community Initiatives

Environmental Responsibility

Your Bank is aware of its role of an influencer towards the environment, which is embodied in its approach to Carbon Emission Reduction. The Bank demonstrates this commitment to contribute positively to the environment and sustainable development by calculating its carbon footprint and preparing a carbon management plan to reduce it. In addition, in order to create awareness amongst employees on climate change and the need to reduce and recycle, various drives to conserve the environment including tree plantation are organized on a regular basis.

Employee Engagement

The Bank’s employees are encouraged to volunteer time and skills through the ‘Corporate Volunteering Program’. This year your Bank’s employees have engaged in activities such as academic support classes, held English speaking courses and helped in organizing special events in order to celebrate festivals with the underprivileged. Additionally the Bank has facilitated employee donations to charities of their choice through ‘Give India’, a donation platform that enables individuals to support social causes by donating to over 200 charities that have been screened for transparency and credibility. The bank makes a donation matching the amounts donated by its employees on a monthly basis.

Community Initiatives

As a responsible Corporate Citizen your Bank strives for community empowerment through socio-economic development of underprivileged and marginalized sections of society. The Bank partners with NGOs across India to support educational initiatives and livelihood training programs.

In the year ended March 31, 2010 the Bank supported a variety of educational programs ranging from educational sponsorships for girls, adoption of state-run schools, running of academic support classes and reading classes. The Bank also supports projects that provide skills training to school dropouts, youth, women and other disadvantaged groups. The Bank’s social development programs have so far touched the lives of over 73,000 children and 700 women and youth.

FINANCIAL INCLUSION

Over the last few years, your Bank has been working on a number of initiatives to promote Financial Inclusion across identified sections of rural, under-banked and un-banked consumers. These initiatives target segments of the population that have limited or no access to the formal banking system for their basic banking and credit requirements, by building a robust and sustainable model that provides relevant services and viable and timely credit that ultimately result in the economic upliftment of its customers. The Banks financial inclusion initiatives have been integrated across its various businesses, across product groups. Over the next five years your Bank will endeavor to bring 10 million households currently excluded from basic banking services under the fold of this program.

Rural Initiative

The Bank has approximately 33% of its branches in rural and underbanked locations. In these branches the Bank offers products and services such as savings, current, fixed & recurring deposits, loans, ATM facilities, investment products such as mutual funds and insurance, electronic funds transfers, drafts & remittances, etc. The Bank also leverages these branches as hubs for other inclusion initiatives such as direct linkages to self help groups and joint liability groups, bank on wheels, point of sale (POS) terminals and information technology enabled kiosks, and other information & communication technology (ICT) backed initiatives in these locations.

A number of retail credit products such as two-wheeler loans, car loans, mortgages etc. are typically consumption products in urban centers. These however are means of income generation for of rural consumers. We believe that apart from agricultural loans, there are many other credit products that the Bank can use to aid financial betterment in rural locations. The Bank has extended provision of its retail loans to large segments of the rural population where the end use of the products acquired (by availing our loans) are used for income generating activities. For example, loans for tractors, commercial vehicles, etc. supplement the farmer’s income by improving productivity and reducing expenses.

No Frills Savings Accounts

A savings account is the opening requirement for the provision of other banking services; the account promotes the habit of saving, provides a security, and inculcates confidence among the target segment in the banking sector.

The Bank provides ‘No Frills’ savings accounts through all its branches as a stepping stone towards financial inclusion. These accounts are offered only to customers who do not have any other bank account (are un-banked) and who are either beneficiaries of a government welfare scheme or have annual incomes less than a defined threshold (constitute the bottom of the economic pyramid). Apart from the basic no frills savings account your Bank also offers these segments other accounts such as no frills salary accounts and limited KYC accounts.

Lending to self help groups and Microfinance Institutions

Your Bank has been working with various self help groups in order to cover a wider consumer base than through its own branch network. The groups that the Bank partners work with the objective of providing credit for income generation activities, (often by providing training, vocational guidance, and marketing support to their members). Leveraging their distribution, credit expertise and on-ground knowledge, the Bank funds these groups who in turn lend to the end consumer. Till date the Bank has lent to over 45,000 self help groups covering approximately

7 lakh households supporting their income generation activities. The Bank works with these groups either by appointing business correspondents or through its own branch network. To this effect the Bank has opened 27 branches catering exclusively to this target segment.

The Bank also extends loans to Microfinance Institutions for on-lending to financially excluded households or in many cases to them through self help groups. This program is currently spread across the country covering 18 states with tie-ups with 110 accredited microfinance institutions. The above institutions typically face challenges in the areas of funding, credit underwriting and scaling up of operations. The Bank brings in the necessary expertise related to these areas and enters into a symbiotic arrangement that benefits all parties involved. As on March 31, 2010 with a micro lending book of over Rs. 1,400 crores the Bank’s micro lending initiative has reached approximately 2 million households.

Agriculture and Allied Activities

A large portion of India’s un-banked population relies on agriculture as their main source of livelihood. We believe provision of credit to marginal farmers through various methods that your Bank has employed replaces the traditional money lending channel, while at the same time providing income generating activities. The Bank provides various loans to farmers through its suite of specifically designed products such as the Kisan Gold Card, tractor, cattle loans etc. In addition the Bank offers post-harvest cash credit, warehouse receipt financing and bill discounting facilities to mandi (markets for grain and other agricultural produce) participants and farmers. These facilities enable the mandi participants to make timely payments to farmers. The Bank carries out this business through approximately 200 branches that are located in close proximity to mandis.

The Bank targets specific sectors to capture supply chain of certain crops from the production stage to the sales stage. On the basis of these cashflows, your Bank is able to finance specific needs of the farmers. This is further supported by using business correspondents closer to their respective locations and helping them to create a savings and banking habit. This model has currently been implemented with dairy and sugarcane farmers.

The initiative currently underway includes the appointment of milk societies as BCs, through whom the Bank opens accounts of individual farmers attached to these societies. The societies route all payments to the farmers through this account.

Small and Micro Enterprises

One of the means to financial inclusion is by supporting small and micro enterprises which in turn provide employment opportunities to the financially excluded. Though indirect, we believe this model may in many instances be more effective than providing subsidies that are often unsustainable, or never reach the intended beneficiary.

The Bank offers complete banking solutions to micro, small and medium scale enterprises across industry segments including manufacturers, retailers, wholesalers / traders and services. The entire suite of financial products including cash credit, overdrafts, term loans, bills discounting, export packing credit, letter of credit, bank guarantees, cash management services and other structured products are made available to these customers.

Promoting Financial Awareness

In addition to providing various products and services to the financially excluded, that Bank believes that imparting education and training to these target segments is equally essential to ensure transparency and create awareness. To this effect the Bank has put in place various training programs, these are conducted by Bank staff in local languages and cover not only the customers but also various intermediaries such as the Bank’s business correspondents. Through these programs the Bank provides credit counseling and information on parameters like savings habit, better utilization of savings, features of savings products, credit utilization, asset creation, insurance, income generation program etc.

HUMAN RESOURCES

The total number of employees of your bank were 51,888 as of March 31, 2010. The Bank continued to focus on training its employees, both on-the-job as well as through training programs conducted by internal and external faculty. The Bank has consistently believed that broader employee ownership of its shares has a positive impact on its performance and employee motivation.

HDFC Bank lists ‘people’ as one of its stated core values. The Bank believes in empowering its employees and constantly takes various measures to achieve this.

STATUTORY DISCLOSURES

The information required under Section 217(2A) of the Companies Act, 1956 and the rules made there under, are given in the annexure appended hereto and forms part of this report. In terms of section 219(1)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Bank. The Bank had 51,888 employees as on March 31, 2010. 630 employees employed throughout the year were in receipt of remuneration of Rs. 24 lacs per annum and 35 employees employed for part of the year were in receipt of remuneration of more than Rs. 2 lacs per month.

The provisions of Section 217(1)(e) of the Act relating to conservation of energy and technology absorption do not apply to your Bank. The Bank has, however, used information technology extensively in its operations.

The report on the Corporate Governance is annexed herewith and forms part of this report.

The Ministry of Corporate Affairs has issued “Corporate Governance Voluntary Guidelines” in December 2009. While these guidelines are recommendatory in nature, the Bank has adopted most of these guidelines as detailed in the Corporate Governance Report. The Bank will examine the possibilities of adopting the remaining guidelines in an appropriate manner.

RESPONSIBILITY STATEMENT

The Board of Directors hereby state that

i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2010 and of the profit of the Bank for the year ended on that date;

iii) We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Bank and for preventing and detecting the fraud and other irregularities;

iv) We have prepared the annual accounts on a going concern basis.

DIRECTORS

Mr. C.M.Vasudev and Dr. Pandit Palande will retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

The Board at its meeting held on 15th January 2010 re-appointed Mr. Aditya Puri as Managing Director of the Bank for a period of 3 years from 1st April 2010 to 31st March 2013 subject to the approval of the shareholders at the ensuing Annual General Meeting and the Reserve Bank of India. The Reserve Bank of India has since approved the re-appointment of Mr. Puri as Managing Director and the terms of re-appointment are being placed before the shareholders for approval at the ensuing Annual General Meeting.

The Board at its meeting held on 24th April 2010 also approved the re-appointment of Mr. Harish Engineer and Mr. Paresh Sukthankar as Executive Directors for further periods from the expiry of their current terms subject to the approval of the shareholders at the ensuing Annual General Meeting and the Reserve Bank of India.

The brief resume/details relating to Directors who are to be appointed/re-appointed are furnished in the report on Corporate Governance.

AUDITORS

M/s. Haribhakti & Co., Chartered Accountants have been the Statutory Auditors of your Bank since 2006. As per the regulations of the Reserve Bank of India, the same auditors cannot be re-appointed for a period beyond four years. It is proposed to appoint M/s. BSR & Co., Chartered Accountants as the new Statutory Auditors of the Bank, subject to the approval of the members and the Reserve Bank of India. Your Directors place on record their sincere appreciation of the professional services rendered by M/s.Haribhakti & Co., as Statutory Auditors of the Bank.

ACKNOWLEDGEMENT

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank’s employees and look forward to their continued contribution in building a World Class Indian Bank.

On behalf of the Board of Directors

Jagdish Capoor Mumbai, April 24, 2010 Chairman