13 Accounting for provisions, contingent liabilities and contingent assets
The Bank has assessed its obligations arising in the normal course of business, including pending litigations, proceedings pending with tax authorities
and other contracts including derivative and long term contracts. In accordance with Accounting Standard - 29 on 'Provisions, Contingent Liabilities
and Contingent Assets', the Bank recognises a provision for material foreseeable losses when it has a present obligation as a result of a past event
and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions
are not discounted to its present value and are measured based on best estimate of the expenditure required to settle the obligation at the Balance
Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably
estimated, a disclosure to this effect is made as contingent liabilities in the financial statements. The Bank does not expect the outcome of these
contingencies to have a materially adverse effect on its financial results. Contingent assets are neither recognised nor disclosed in the financial
statements.
14 Impairment
The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors.
Impairment loss, if any, is provided in the Profit and Loss Account to the extent carrying amount of assets exceeds their estimated recoverable
amount.
15 Taxes on income
The Income Tax expense comprises current tax and deferred tax. Current tax is measured at the amount expected to be paid in respect of taxable
income for the year in accordance with the Income Tax Act, 1961. Deferred tax assets and liabilities are recognised for the future tax consequences
of timing differences being the difference between the taxable income and the accounting income that originate in one period and are capable of
reversal in one or more subsequent period.
Deferred tax assets on account of timing differences are recognised only to the extent there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be realised. In case of carry forward losses and unabsorbed depreciation, under
tax laws, all the deferred tax assets are recognised only to the extent there is virtual certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets can be realised.
Deferred tax assets are reassessed at each reporting date, based upon the Management's judgement as to whether realisation is considered as
reasonably certain.
Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the Balance Sheet
date. Changes in deferred tax assets / liabilities on account of changes in enacted tax rates are given effect to in the Profit and Loss Account in the
period of the change.
Current tax assets and liabilities and deferred tax assets and liabilities are off-set when they relate to income taxes levied by the same taxation
authority, when the Bank has a legal right to off-set and when the Bank intends to settle on a net basis.
16 Accounting for Dividend
As per AS 4 (Revised), with effect from April 2016, the Bank is not required to provide for dividend proposed / declared after the Balance Sheet date.
The same shall be appropriated from next year amount available for appropriation.
17 Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable
taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding
during the year is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, and share split.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted
average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. Diluted earnings per share
reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year.
18 Share issue expenses
Share issue expenses are adjusted from Securities Premium Account as permitted by Section 52 of the Companies Act, 2013.
19 Credit cards reward points
The Bank estimates the liability for credit card reward points and cost per point using actuarial valuation conducted by an independent actuary, which
includes assumptions such as mortality, redemption and spends.
20 Segment reporting
In accordance with guidelines issued by RBI and Accounting Standard 17 (AS-17) on “Segment Reporting", the Banks' business has been segregated
into the following segments whose principal activities were as under:
A transfer pricing mechanism has been established by Asset Liability Committee (ALCO) for allocation of interest cost to the above segments based
on borrowing costs, maturity profile of assets / liabilities etc. and which is disclosed as part of segment revenue.
Segment revenues consist of earnings from external customers and inter-segment revenues based on a transfer pricing mechanism. Segment
expenses consist of interest expenses including allocated operating expenses and provisions.
Segment results are net of segment revenues and segment expenses including interdivisional items.
Segment assets include assets related to segments and exclude tax related assets. Segment liabilities include liabilities related to the segment
excluding net worth and employees' stock option (grants outstanding).
Since the business operations of the Bank are primarily concentrated in India, the Bank is considered to operate only in the domestic segment.
C. Disclosures on risk exposures in derivatives:
Qualitative disclosures:
a) Structure and organization for management of risk in derivatives trading:
The Board of Directors, the Risk Management Committee (RMC), Board Committee for Derivatives products, the Asset Liability Management
Committee (ALCO), the Senior Management Committee for Derivatives (SMC) and the Risk Management Department are entrusted with the
management of risks in derivatives.
The philosophy and framework for the derivative business is laid out in the Board approved Investment and Derivative policies. The ALCO of the
Bank is empowered to set the limit-framework for derivatives. It also reviews the market risk exposures of derivatives against the limits. The
Risk Management Committee reviews all risks on a consolidated basis and also defines the risk appetite.
The Board Committee for Derivatives products and the Senior Management Committee for Derivatives (SMC) oversee the client derivatives
business. These committees are responsible for reviewing and approving the derivative products that can be offered to clients (within the
regulatory framework provided by the RBI). The Board approved 'Customer Suitability and Appropriateness Policy for Derivatives' lays down the
risk management & governance framework for offering derivatives.
The Bank has Operations and Risk Management functions - independent of the dealing function. The Market Risk Management & Counterparty
Risk Management Departments are responsible for assessment, monitoring, measurement & reporting of market & counterparty risks in
derivatives.
b) Scope and nature of risk measurement, risk reporting and risk monitoring systems:
All significant risks of the derivative portfolio are monitored, measured & reported to the senior management. The Treasury Middle Office,
on a daily basis, measures & reports risk-metrics like Value-at-Risk (VaR), PV01, Option Greeks like Delta, Gamma, Vega, Theta, Rho etc.
Counterparty Risk exposure of the derivatives portfolio is also monitored & reported daily. The Treasury Middle Office independently reports
profitability on a daily basis. Rate reasonability tests are performed on the Derivative portfolio to ensure that all trades are entered into at market
rates. Stress testing is performed to measure the impact of extreme market shifts on the Bank's portfolio (including derivatives). Suitability and
Appropriateness assessment is performed before offering derivatives to clients. The Bank continuously invests in technology to enhance the
Risk Management architecture.
c) Policies for hedging and / or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges
/ mitigants:
The Board Approved 'Hedging Policy' details the hedging strategies, hedging processes, accounting treatment, documentation requirements
and effectiveness testing for hedges.
Hedges are monitored for effectiveness periodically, in accordance with the Board Approved Policy.
d) Accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation
of outstanding contracts; provisioning, collateral and credit risk mitigation:
Derivative transactions are segregated into trading or hedge transactions. Trading transactions outstanding as at the Balance Sheet dates are
marked to market and the resulting profits or losses, are recorded in the Profit and Loss Account.
Derivative transactions designated as "Hedges" are accounted in accordance with hedging instruments on an accrual basis over the life of the
underlying instrument.
Option premium paid / received is accounted for in the Profit and Loss Account on expiry of the option.
Pursuant to the RBI guidelines, any receivables as well positive Mark to Market (MTM) in respect of future receivable under derivative contracts
comprising of crystallised receivables which remain overdue for more than 90 days are reversed through the Profit and Loss Account. Full
provision is made for the entire amount of overdue and future receivables relating to positive marked to market value of non-performing
derivative contracts. Limits for counterparty exposure (arising from derivative trades) to Corporates are approved by the Credit Committee
and for Banks by the ALCO. These limits are renewable annually and are duly supported by ISDA agreements. MTM breaches are monitored
daily and are cash collateralised wherever necessary. Further, to mitigate the current exposure in noncentrally cleared forex and derivative
transactions, Bank has entered into Credit Support Annex ('CSA') agreements with some of the major international counterparty banks and few
Indian financial institutions.
35. DISCLOSURES ON REMUNERATION
A. Qualitative Disclosures:
a) Information relating to the composition and mandate of the Remuneration Committee:
The Nomination & Remuneration committee comprises of independent directors of the Bank. Key mandate of the Nomination &
Remuneration committee is to oversee the overall design and operation of the compensation policy of the Bank and work in coordination
with the Risk Management Committee to achieve alignment between risks and remuneration.
The Nomination and Remuneration Committee (NRC) will be, inter alia, reviewing and tracking the implementation of the Compensation
Policy of the Bank. The NRC will comprises of at least 3 Non-executive Directors, out of which at least two third of the members should
be independent directors and should include at least one member from the Bank's Risk Management Committee of the Board. (RMC).
b) Information relating to the design and structure of remuneration processes and the key features and objectives of
remuneration policy:2
Objective of Banks' Compensation Policy is:
• To maintain fair, consistent and equitable compensation practices in alignment with Bank's core values and strategic business
goals;
• To ensure effective governance of compensation and alignment of compensation practices with prudent risk taking;
• To have mechanisms in place for effective supervisory oversight and Board engagement in compensation;
• To ensure that the Compensation practices are within the regulatory framework stipulated from time to time by RBI.
The remuneration process is aligned to the Bank's Compensation Policy objectives.
c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should
include the nature and type of the key measures used to take account of these risks:
In order to manage current and future risk and allow a fair amount of time to measure and review both quality and quantity of the
delivered outcomes, a significant portion of senior and middle management compensation is variable. Further reasonable portion
variable compensation is non- cash and deferred, over a period of 3 years or longer.
In case the employee is retiring within next 2 years, cash to non-cash ratio may change in favor of more cash (including deferred cash)
and the vesting schedule may be shorter.
In addition, remuneration process provides for 'malus' and 'clawback' option to take care of any disciplinary issue or future drop in
performance of individual/ business/ company.
d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels
of remuneration:3
Individual performances are assessed in line with business/ individual delivery of the Key Result Areas (KRAs), top priorities of business,
budgets etc. KRAs of Line roles are linked to financials, people, service and process (Quality) and compliance parameters and KRAs of
non-Line Roles have linkage to functional deliveries needed to achieve the top business priorities.
Further remuneration process is also linked to market salaries / job levels, business budgets and achievement of individual KRAs.
e) A discussion of the banks' policy on deferral and vesting of variable remuneration and a discussion of the bank's policy
and criteria for adjusting deferred remuneration before vesting and after vesting:
A discussion on Policy on Deferral of Remuneration basis last amendment effective 22nd July, 2023
Employees have been broadly classified into following categories:
• Category I - Comprising MD & CEO and Whole Time Directors (WTDs).
• Category II - Material Risk Takers (MRTs). These include employees whose actions may have material impact on the risk exposures
of the bank and who satisfy both - qualitative and quantitative criteria, as given below:
Ý Qualitative Criteria: Employees in the grade M10 and above
Ý Quantitative Criteria: Fixed Cost to Company (FCTC) is above ' 1.25 Crore p.a.
This excludes employees under Category III.
• Category III - Risk control and compliance employees - comprising staff in grade M9 and above in the following Control functions;
Ý Risk & Policy function
Ý Financial Control including group consolidation;
Ý Compliance;
Ý Internal Audit;
Ý Back-office Operations
Ý Vigilance
Ý Legal
Ý Secretarial
Ý HR
Ý Investor Relations
Ý CSR
• Category IV: Other employees - This includes all employees, not explicitly covered in the first three categories.
Following principles are applied for deferral / vesting of variable remuneration in accordance with RBI guidelines and Bank's compensation
policy:
Category I & II
• At least 50% of Total Pay, should be variable for arriving at the total compensation for the year.
• The Cash component of the Variable Pay will not exceed 50% of the Fixed Pay.
• The total variable payout shall be limited to a maximum of 300% of the fixed pay.
• In case variable pay is up to 200% of the fixed pay, a minimum of 50% of the variable pay; and in case variable pay is above 200%,
a minimum of 67% of the variable pay should be via non-cash instruments.
• Regardless of the quantum of pay, a minimum of 60% of the total variable pay must invariably be under deferral arrangements.
Further, if cash component is part of variable pay, at least 50% of the cash bonus should also be deferred.
• However, in cases where the cash component of variable pay is under ' 25 lakh for a year, deferral requirements would not be
necessary.
• The deferral period should be a minimum of three years. This would be applicable to both, the cash and non-cash components of
the variable pay.
The compensation will be approved by the Nomination and Remuneration committee. Additionally, for Category I, the same will be further
approved by RBI.
Category III
• The total variable payout shall be limited to a maximum of 300% of the fixed pay.
• However, in cases where the cash component of variable pay is under ' 25 lakh for a year, deferral requirements would not be
necessary.
• The deferral period should be a minimum of three years. This would be applicable to both, the cash and non-cash components of
the variable pay.
Approval authority: MD & CEO or as delegated by MD & CEO, will approve the variable pay.
For adjusting deferred remuneration before & after vesting:
Malus: Payment of all or part of amount of deferred variable pay can be prevented.
Clawback: Previously paid or already vested deferred variable pay can also be recovered under this clause.
Malus and clawback may be applied for following circumstances:
• Fraud, misfeasance, breach of trust, dishonesty, or wrongful disclosure by the employee of any confidential information pertaining
to the bank or any of its affiliates;
• Willful misinterpretation / misreporting of financial performance of the bank;
• Material failure in risk management controls or material losses due to negligent risk-taking which are attributable to the employee,
whether directly or indirectly;
• Any misconduct pertaining to moral turpitude, theft, misappropriation, corruption, forgery, embezzlement or an act of a felonious
or criminal nature;
• Non-disclosure of material conflict of interest by the employee or any misuse of official powers;
• An act of willful, reckless or grossly negligent conduct which is detrimental to the interest or reputation of the bank or any of its
affiliates, monetarily or otherwise;
• Material breach of Code of Conduct, any Non-Disclosure Agreement, regulatory procedures, internal rules and regulations or any
other such instance for which the NRC, in its discretion, deems it necessary to apply malus or / and clawback provisions;
Besides the above there can be other circumstances when malus may be applied. In deciding the application of malus / clawback to any
part or all of variable pay or incentives (whether paid, vested or unvested), the NRC will follow due process and adhere to the principles
of natural justice and proportionality.
f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes
and the rationale for using these different forms:
Depending on the nature of the business/function/ role, the risk involved, the time horizon for review, various forms of Variable Pay may
be applicable.
The components of such variable pay will include:
• Cash - this may be paid at intervals ranging from Monthly, Quarterly, Half-Yearly and Annual. The Monthly/ Quarterly / Half Yearly
Variable Pay will be under the role and preapproved business specific incentive schemes. This may be payable within one year of
grant.
• Long Term Incentive Pay (LTIP): This shall be granted to employees, in the form of Employee Stock Options (ESOPs) and / or Stock
Appreciation Rights (SARs) and / or Deferred Cash. This shall be granted on a discretionary and reasonable basis, to motivate
employees, create shareholder value by aligning interest of employees with the long-term interests of the Bank. LTIP may also be
granted from time to time with the objective of retaining employees.
Ý ESOPs/ SARs will be linked to Kotak Mahindra Bank Stock price and will vest over a period of time.
Ý Black Scholes Model will generally be applied for arriving at the value of the units to be granted. However, Bank may choose
any other model with the approval of NRC within the regulatory framework.
Ý ESOPs / SARs will be approved by the NRC. The quantum of ESOPs / SARs will be reasonable and the formulation of the
ESOP series, the coverage, the vesting period and their pricing schedule, etc. will also be decided by the NRC as per SEBI
guidelines.
Ý Deferred Cash may paid over a period of 3 to 5 years.
B. Quantitative Disclosures:
a) Number of meetings of the Nomination and Remuneration Committee held during the financial year and remuneration
(sitting fees) paid to its members during the financial year.
During the financial year ended 31st March, 2024, 14 meetings (previous year 8 meetings) of the Nomination and Remuneration
Committee were held. Members of the Nomination and Remuneration Committee were paid, for attending the meetings held during the
financial year, a sitting fee of ' 75,000 per meeting [previous year ' 50,000 per meeting (for the meetings held before 22nd October, 2022)
and ' 60,000 per meeting (for the meetings held on or after 22nd October, 2022)].
b) Number of employees having received a variable remuneration award during the financial year.
As per FY24 policy for the year ended 31st March 2024 (“FY2024 policy”):
Quantitative disclosure restricted to one CEO* & two Whole Time Directors as Category I employees and Seventy Seven Category II
employees as Material Risk Takers. For employees who have moved to a group company or retired or separated as well as new joiner
awards up to the date in the Bank are included.
*Plus 2 CEOs during the year.
As per FY23 policy for the year ended 31st March 2023 (“FY2023 policy”):
Quantitative disclosure restricted to CEO & four Whole Time Directors as Category I employees and Fifty Nine Category II employees as
Material Risk Takers. For employees who have moved to a group company or retired or separated as well as new joiner awards up to the
date in the Bank are included.
All quantitative disclosures are as per FY2024 policy which is applicable from 22nd July, 2023.
38. UNHEDGED FOREIGN CURRENCY EXPOSURE OF BORROWERS
The Bank recognises the importance of the risk of adverse fluctuation of foreign exchange rates on the profitability and financial position of borrowers
who are exposed to currency risk. Currency induced credit risk refers to the risk of inability of borrowers to service their debt obligations due to adverse
movement in the exchange rates and corresponding increase / decrease in their book values of trade payables, loan payables, trade receivables, etc.
thereby exposing the Bank to risk of default by the borrower. In this regard, the Bank had put in place requisite policies & processes for monitoring and
mitigation of currency induced credit risk of borrowers. These include the following:
a) Currency risk of borrowers on account of un-hedged foreign currency exposures ("UFCE") is duly considered and analysed in credit appraisal
notes.
b) Quarterly monitoring of un-hedged foreign currency exposures of borrowers.
c) Risk classification of borrowers having un-hedged foreign currency exposures, into Low / Medium / High, as per internal norms, based on
potential loss / EBID ratio. Potential loss means the loss which may be arise over a one year horizon by adverse movement of exchange rates;
this is computed as UFCE amount multiplied by the annual volatility factor.
d) Incremental provisioning (over and above provision applicable for standard assets) is made in Bank's Profit and Loss Account, on borrower
counterparties having UFCE, depending on the potential loss / EBID ratio, in line with stipulations by RBI. Incremental capital is maintained in
respect of borrower counterparties in the highest risk category, in line with stipulations by RBI. These requirements are given below:
e) In case of borrowers exposed to currency risk where declarations for foreign currency payables / receivables (UFCE declarations) are not
submitted, provision for currency induced credit risk is made as per RBI stipulated rates mentioned below:
• 10 bps in cases where limits with banking system are ' 50 crore or less;
• 80 bps in cases where limits with banking system are more than ' 50 crore.
f) Further, where annual certification from statutory auditors of UFCE data is not submitted, such borrowers are treated as UFCE declaration not
submitted cases and provision is computed as per point (e) above.
g) Exemption allowed by RBI are excluded from UFCE provision computation, including specified all India financial institutions, multilateral
agencies, domestic & foreign sovereigns, and other exemptions. Further, 100% FD backed exposure is not reckoned as exposure as per RBI
definition and thus not reckoned by the Bank for UFCE provision computation. Similarly, LCBD and BG/LC backed exposures are considered as
exposure to LC/ SBLC issuing banks and not to borrower entity.
h) Management of foreign exchange risk is considered as a parameter for internal risk rating of borrowers.
Provision held for currency induced credit risk as at 31st March, 2024 is ' 73.55 crore. (previous year ' 62.85 crore). Incremental Risk weighted
Assets value considered for the purpose of CRAR calculation in respect of currency induced credit risk as at 31st March, 2024 is ' crore 3,154.68
crore (previous year ' 1,393.73 crore).
b) Qualitative disclosure around LCR
The Reserve Bank of India has prescribed monitoring of sufficiency of Bank's liquid assets using Basel III - Liquidity Coverage Ratio (LCR). The LCR is
aimed at measuring and promoting short-term resilience of Banks to potential liquidity disruptions by ensuring maintenance of sufficient high quality
liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days.
The ratio comprises of high quality liquid assets (HQLAs) as numerator and net cash outflows in 30 days as denominator. HQLA has been divided
into two parts i.e. Level 1 HQLA which comprises of primarily cash, excess CRR, SLR securities in excess of minimum SLR requirement and a portion
of mandatory SLR as permitted by RBI (under MSF and FALLCR) and Level 2 HQLA which comprises of investments in highly rated non-financial
corporate bonds and listed equity investments considered at prescribed haircuts. Cash outflows are calculated by multiplying the outstanding
balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding
balances of various categories of contractual receivables by the rates at which they are expected to flow in.
The Bank has implemented the LCR framework and has consistently maintained LCR well above the regulatory threshold. The average LCR for the
quarter ended 31st March, 2024 was 124.92% which is above the regulatory requirement of 100%. For the quarter ended 31st March, 2024 average
Level 1 HQLA stood at 95.10% (' 113,839 crore.) of the total HQLA.
Apart from LCR, Bank uses various stock liquidity indicators to measure and monitor the liquidity risk in terms of funding stability, concentration risk,
dependence on market borrowings, liquidity transformation, etc. The Bank maintains a diversified source of funding in terms of depositors, lenders
and various funding instruments. This is evident through low depositor and lender concentration with top 20 depositors contributing 9.19% of Bank's
total deposits and top 10 lenders contributing 3.52% of Bank's total liabilities.
Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management supported by Balance Sheet Management
Unit (BMU), Risk Management Department (RMD), Finance and ALCO Support Group. BMU is the central repository of funds within the Bank and is
vested with the responsibility of managing liquidity risk within the risk appetite of the Bank. Bank has incorporated Basel III Liquidity Standards - LCR
and NSFR as part of its risk appetite statement for liquidity risk.
40 FRAUDS
The Bank has reported 896 (previous year 706 cases) fraud cases involving fraud amount of one lakh and above during the financial year ended 31st
March 2024 amounting to ' 97.91 crore (previous year ' 72.40 crore). The Bank has recovered / expensed off / provided the entire amount where
necessary.
43. IMPLEMENTATION OF IFRS CONVERGED INDIAN ACCOUNTING STANDARDS (IND AS)
The Ministry of Finance, Government of India, had vide its press release dated 18th January, 2016 outlined the roadmap for implementation of
International Financial Reporting Standards ("IFRS") converged Indian Accounting Standards ("Ind AS") for Scheduled Commercial Bank (excluding
RRBs), Non-Banking Financial Companies and Insurance companies. The Reserve Bank of India ("RBI") vide its circular dated 22nd March, 2019,
deferred the implementation of Ind AS for Scheduled Commercial Banks ("SCB") till further notice pending the consideration of some recommended
legislative amendments by the Government of India. The RBI has not issued any further notification on implementation of Ind AS for SCBs.
The Bank has so far taken following steps for Ind AS implementation:
I. Formed Steering Committee for Ind AS implementation. The Steering Committee headed by the Joint Managing Director ('JMD') comprises
representatives from Finance, Risk, Information Technology and Treasury. The Committee closely reviews progress of Ind AS implementation
in the Bank and provides guidance on critical aspects of the implementation.
II. The Bank is currently in the process of implementing an IT Solution for IndAS reporting. Further, there may be new regulatory guidelines and
clarifications for Ind AS application, which the Bank will need to suitably incorporate in its implementation.
17. The Bank, as part of its normal banking business that is conducted ensuring adherence to all regulatory requirements, grants loans and advances,
makes investment, provides guarantees to and accept deposits and borrowings from its customers, other entities and persons.
Other than the transactions described above which are carried out in the normal course of business, no funds have been advanced or loaned or
invested (either from borrowed funds or share premium or deposits or any other sources or kinds of funds) by the Bank to or in any other persons or
entities, including foreign entities ("intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend
or invest in party identified by or on behalf of the Bank ("Ultimate Beneficiaries"). The Bank has also not received any funds from any parties (Funding
Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of
the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
18. The Bank has acquired 100% of the issued and paid up capital of Sonata Finance Private Limited, a Non-Banking Finance Company - Micro Finance
Institution registered with the RBI for a total consideration of ' 537.12 crore. With this acquisition, Sonata has become a wholly owned subsidiary of
the Bank w.e.f. 28th March, 2024.
19. The Bank and Kotak Mahindra General Insurance Company Limited ("KGI") have entered into definitive agreements for a transaction with Zurich
Insurance Company Limited ("Zurich"), whereby Zurich will acquire 70% stake in KGI by way of a combination of primary and secondary acquisitions
in a single tranche, for a total consideration of approximately ' 5,560 Crore ("Transaction"). Transaction would be subject to fulfilment of customary
conditions precedent, including the receipt of regulatory approvals from the Reserve Bank of India and the Insurance Regulatory and Development
Authority of India. Upon completion of the Transaction (subsequent to receipt of all requisite approvals), KGI will cease to be a Wholly Owned
Subsidiary of the Bank.
20. As per the requirements of rule 3(1) of the Companies (Accounts) Rules 2014 the Bank has used accounting software for maintaining its books
of account that have a feature of recording audit trail (edit log) facility and the audit trail feature has operated throughout the year for all relevant
transactions recorded in the software except for six of the accounting software where audit trail has not been enabled at the database level to log any
direct data changes. Also in respect of one cloud based accounting software, the Service Organization Control Report does not cover whether audit
trial was enabled or not for direct data changes at the database level.
21. The Bank has received an order from the Reserve Bank of India dated 24th April 2024, directing the Bank to cease and desist, with immediate effect
from (i) onboarding new customers through the Bank's online and mobile banking channels and (ii) issuing fresh credit cards. The order was based,
inter alia, on the deficiencies observed by the RBI in their IT Examination of the Bank.
These directions shall be reviewed by RBI upon satisfactory remediation of the observations. The Bank has taken concrete steps to adopt new
technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest. The Bank believes that
these directions will not materially impact its overall business. The Bank has evaluated the order and assessed no material impact on its financial
statements and internal financial controls over financial reporting for the year ended 31st March 2024.
22. Figures for the previous year have been regrouped / reclassified wherever necessary to conform to current years' presentation.
As per our report of even date attached. For and on behalf of the Board of Directors
For KKC & Associates LLP C S Rajan Ashok Vaswani
Chartered Accountants Chairman Managing Director and
(formerly Khimji Kunverji & Co LLP) DIN: 00126063 Chief Executive Officer
Firm Registration No. 105146W/W100621 DIN: 10227550
Gautam Shah Shanti Ekambaram Uday Khanna
Partner Deputy Managing Director Director
Membership No. 117348 DIN: 00004889 DIN: 00079129
For Price Waterhouse LLP Devang Gheewalla Avan Doomasia
Chartered Accountants President and Senior Executive Vice President and
Firm Registration No. 301112E/E300264 Group Chief Financial Officer Company Secretary
Membership No. 045993 FCS. No. 3430
Russell I Parera
Partner
Membership No. 042190
Mumbai
4th May, 2024
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