Document Text Contents
Page 1
CORPORATE GOVERNANCE PROJECT
AXIS BANK
1. Board Structure (Size, Percentage of Non-Executives Directors &
Independent Directors)
The composition of the Board of Directors of the Bank (“Board”) is governed by the
provisions of the Companies Act, 1956, the BankingRegulation Act, 1949 and Clause
49 of the Listing Agreement.
The Board has fourteen (14) Directors as on March 31, 2014.
There are 7 Independent Directors constituting one-half ofthe Board‟s membership
with Shri S. B. Mathur designated as the Lead Independent Director.The composition
of the Bank‟s Board includes the representatives of the Administrator of the Specified
Undertaking ofthe Unit Trust of India (SUUTI) and the Life Insurance Corporation of
India (LIC), the Bank‟s promoters. The followingmembers constitute the Board:
SanjivMisra Chairman
Promoter – Nominee of SUUTI
Shikha Sharma Managing Director & CEO
K. N. Prithviraj Promoter – Nominee of SUUTI
V. R. Kaundinya Independent
S. B. Mathur Independent
Prasad R. Menon Independent
R. N. Bhattacharyya Promoter – Nominee of SUUTI
Samir K. Barua Independent
Som Mittal Independent
IreenaVittal Independent
RohitBhagat Independent
UshaSangwan Promoter - Nominee of LIC
SomnathSengupta Executive Director and Head (Corporate Centre)
V. Srinivasan Executive Director and Head (Corporate Banking)
2. Board Power &Functioning
The Board is responsiblefor the management of the Bank‟s business. The functions,
responsibilities, role and accountability of the Board are welldefined. In addition to
monitoring corporate performance, the Board also carries out functions such as taking
care of allthe statutory agenda, approving the Business Plan and all major policies,
reviewing and approving the annual budgets,borrowing limits and fixing exposure
limits. It ensures that the Bank keeps shareholders informed about plans,
strategiesand performance. The detailed reports of the Bank‟s performance are
periodically placed before the Board.
Page 2
3.Audit Committee (Composition & powers, no. of meetings etc)
The Audit Committee of the Board of Directors functions with the following main
objectives:
To provide direction and to oversee the operation of the audit function.
To review the internal audit system with special emphasis on its quality and
effectiveness.
To review internal and concurrent audit reports of large branches with a focus on
all major areas of housekeeping, particularly inter-branch adjustment accounts,
arrears in the balancing of the books andun-reconciled entries in inter-bank and
Nostro accounts and frauds.
To discuss matters related to frauds.
To discuss and follow up for audit issues related to Long Form Audit Report.
To discuss and follow up for issues related to RBI Inspection Report(s).
To review the system of appointment and remuneration of concurrent auditors and
external auditors.
To oversee the Bank‟s financial reporting process and the disclosure of its
financial information, to ensurethat the financial statements are correct, sufficient
and credible.
To recommend to the Board, the appointment, re-appointment, and if required, the
replacement or removalof the Statutory Auditor and to fix their audit fees.
To approve payments to Statutory Auditors for any other services rendered by
them.
To review, with the management, the annual financial statements before
submission to the Board for itsapproval with particular reference to:
- Matters required being included in the Director‟s Responsibility Statement in the
Board‟s report interms of Clause (2AA) of Section 217 of the Companies Act,
1956.
- Changes, if any, in accounting policies & practices and reasons for the same.
- Major accounting entries involving estimates based on the exercise of judgment
by the management.
- Significant adjustments made in the financial statements arising out of audit
findings.
- Compliance with listing and other legal requirements relating to financial
statements.
- Disclosure of any related party transactions.
- Qualifications in the draft audit report.
To review, with the management, the quarterly financial statements before
submission to the Board for itsapproval.
To review, with the management, the statement of uses/application of funds raised
through an issue (publicissue, rights issue, preferential issue etc.), the statement of
funds utilized for purposes other than thosestated in the offer
document/prospectus/notice and the report submitted by the agency monitoring
theutilization of proceeds of a public or rights issue and making appropriate
recommendations to the Board fortaking steps in the matter.
Page 4
employment practice. TheAudit Committee of the Board reviews, on a quarterly basis, a synopsis
of the complaints received and theresolution thereof.
6. Report on Management's Discussion and Analysis
Macroeconomic and Industry Developments :
Fiscal 2014 saw a combination of various external and internal events that kept markets
turbulent, interest rates high andinvestor confidence low, resulting in shrinking investment and
GDP growth. Due to apprehensions of an impending „taper‟ ofthe US Federal Reserve‟s
Quantitative Easing programme, emerging markets, including India, experienced foreign
investmentoutflows and currency volatility. India‟s macroeconomic imbalances at the beginning
of the year exposed it to this volatility aswell, forcing stringent policy responses. However,
improving fundamentals have gradually restored some stability in the markets.
Indian economic growth had slowed rapidly from 8.9% in 2010-11 to an officially estimated
4.9% in fiscal 2014, caused in largepart by structural factors impeding investment activity.
Decline in financial savings, sluggish growth in fixed capital formation oversuccessive quarters,
persistence of high inflation and low business confidence contributed to the decline in potential
growth,particularly in the absence of adequate structural policy measures.
Inflation had emerged as the central concern during the year and in combination with the current
account and fiscal deficits,had forced Reserve Bank of India (RBI) to raise its policy Repo rate
by 75 basis points. While most of the slowdown was due to asteep drop in investment, a cut in
the Government‟s spending in order to contain the fiscal deficit at less than the budgeted 4.8%of
GDP also contributed to a slowdown in consumption. For fiscal 2014, fiscal deficit has been
revised down to 4.6% of GDP.
The biggest turnaround was in the Current Account Deficit, which had shrunk from $88 billion
in fiscal 2013 to $31 billion inthe first 3 quarters of fiscal 2014. For fiscal 2014, the current
account deficit is expected to be ~2% of GDP. With large capitalinflows via Foreign Currency
Non-Resident (FCNR-B) deposits and bank capital, the Rupee has stabilised at around 60-
62/USDand has been one of the best performing emerging market currencies over the past few
months.
The Repo rate increases have pushed up the floor for rates and despite liquidity infusion by RBI,
short term interest rates haveremained high. One of the consequences of the slowdown and high
inflation has been a contraction of financial savings ofhouseholds, with a preference for
investment in assets like gold and real estate. This has, in turn, affected deposit accretionwith
banks. The exceptional liquidity tightening measures of RBI leading to higher rates had resulted
in a temporary spike incredit growth in favour of banks compared to credit substitutes in the
money market, but this had gradually normalised. Onthe resources front, strong NRI inflows
Page 5
through the FCNR(B) deposits route have helped improve deposit growth. For the fiscal2014,
deposit growth in the system was 14.6%, while credit growth was 14.3%.
Financial Performance :
During 2013-14, the operating environment for the banking system continued to be challenging
with persistent high inflation,muted growth, slowdown in credit off-take, concerns regarding
growing non-performing assets and a high incidence of assetsbeing restructured. Despite these
challenges, the Bank‟s strategy to build its business upon strong customer franchises,
whileadopting a prudent approach, had resulted in delivering strong results. The underlying
performance of the business remainedstrong with revenue growth remaining well ahead of cost
growth. The Bank reported a net profit of `6,217.67 crores for the yearended 31st March 2014,
registering a growth of 20.05% over the net profit of `5,179.43 crores last year. The healthy
growth inearnings was driven by contribution from all segments. The Bank continued to focus on
the quality of growth and displayed strong growth in key balance sheet parameters for the
yearended 31st March 2014. The total assets increased by12.53% to `383,245 crores, total
deposits increasedby 11.22% to `280,945 crores while total advancesincreased by 16.81% to
`230,067 crores.During the year, the Bank continued to expand itsnetwork, with increased focus
on the semi-urbanand rural areas. Both the Retail and SME segmentscontinued to benefit from
this network expansion andhave justifiably remained the key growth drivers forthe Bank during
the year. The Bank remains committedto a customer-centric approach in dealing with itsclientele
aided by dependable technology and simplegrowth in key balance sheet parameters for the
yearended 31st March 2014. The total assets increased by12.53% to `383,245 crores, total
deposits increasedby 11.22% to `280,945 crores while total advancesincreased by 16.81% to
`230,067 crores.During the year, the Bank continued to expand itsnetwork, with increased focus
on the semi-urbanand rural areas. Both the Retail and SME segmentscontinued to benefit from
this network expansion andhave justifiably remained the key growth drivers forthe Bank during
the year. The Bank remains committedto a customer-centric approach in dealing with itsclientele
aided by dependable technology and simpleprocesses. A well distributed branch banking
channelcomplemented by a robust alternate distributionchannel have helped the Bank to deliver a
wide rangeof products and services to its customers across the country and overseas processes. A
well distributed branch banking channelcomplemented by a robust alternate distributionchannel
have helped the Bank to deliver a wide rangeof products and services to its customers across the
country and overseas.
Business Segments' Update :
Axis Bank has achieved healthy growth across various operating and financial parameters in the
last financial year.
Retail Banking:
The Retail Banking segment is one of the key drivers of the Bank‟s growth
strategy,encompassing a wide range of products delivered through multiple channels toits
customers. The Bank today offers a complete suite of products across deposits,loans, investment
solutions, payments and cards to its customers. The Bank iscommitted to developing long-term
CORPORATE GOVERNANCE PROJECT
AXIS BANK
1. Board Structure (Size, Percentage of Non-Executives Directors &
Independent Directors)
The composition of the Board of Directors of the Bank (“Board”) is governed by the
provisions of the Companies Act, 1956, the BankingRegulation Act, 1949 and Clause
49 of the Listing Agreement.
The Board has fourteen (14) Directors as on March 31, 2014.
There are 7 Independent Directors constituting one-half ofthe Board‟s membership
with Shri S. B. Mathur designated as the Lead Independent Director.The composition
of the Bank‟s Board includes the representatives of the Administrator of the Specified
Undertaking ofthe Unit Trust of India (SUUTI) and the Life Insurance Corporation of
India (LIC), the Bank‟s promoters. The followingmembers constitute the Board:
SanjivMisra Chairman
Promoter – Nominee of SUUTI
Shikha Sharma Managing Director & CEO
K. N. Prithviraj Promoter – Nominee of SUUTI
V. R. Kaundinya Independent
S. B. Mathur Independent
Prasad R. Menon Independent
R. N. Bhattacharyya Promoter – Nominee of SUUTI
Samir K. Barua Independent
Som Mittal Independent
IreenaVittal Independent
RohitBhagat Independent
UshaSangwan Promoter - Nominee of LIC
SomnathSengupta Executive Director and Head (Corporate Centre)
V. Srinivasan Executive Director and Head (Corporate Banking)
2. Board Power &Functioning
The Board is responsiblefor the management of the Bank‟s business. The functions,
responsibilities, role and accountability of the Board are welldefined. In addition to
monitoring corporate performance, the Board also carries out functions such as taking
care of allthe statutory agenda, approving the Business Plan and all major policies,
reviewing and approving the annual budgets,borrowing limits and fixing exposure
limits. It ensures that the Bank keeps shareholders informed about plans,
strategiesand performance. The detailed reports of the Bank‟s performance are
periodically placed before the Board.
Page 2
3.Audit Committee (Composition & powers, no. of meetings etc)
The Audit Committee of the Board of Directors functions with the following main
objectives:
To provide direction and to oversee the operation of the audit function.
To review the internal audit system with special emphasis on its quality and
effectiveness.
To review internal and concurrent audit reports of large branches with a focus on
all major areas of housekeeping, particularly inter-branch adjustment accounts,
arrears in the balancing of the books andun-reconciled entries in inter-bank and
Nostro accounts and frauds.
To discuss matters related to frauds.
To discuss and follow up for audit issues related to Long Form Audit Report.
To discuss and follow up for issues related to RBI Inspection Report(s).
To review the system of appointment and remuneration of concurrent auditors and
external auditors.
To oversee the Bank‟s financial reporting process and the disclosure of its
financial information, to ensurethat the financial statements are correct, sufficient
and credible.
To recommend to the Board, the appointment, re-appointment, and if required, the
replacement or removalof the Statutory Auditor and to fix their audit fees.
To approve payments to Statutory Auditors for any other services rendered by
them.
To review, with the management, the annual financial statements before
submission to the Board for itsapproval with particular reference to:
- Matters required being included in the Director‟s Responsibility Statement in the
Board‟s report interms of Clause (2AA) of Section 217 of the Companies Act,
1956.
- Changes, if any, in accounting policies & practices and reasons for the same.
- Major accounting entries involving estimates based on the exercise of judgment
by the management.
- Significant adjustments made in the financial statements arising out of audit
findings.
- Compliance with listing and other legal requirements relating to financial
statements.
- Disclosure of any related party transactions.
- Qualifications in the draft audit report.
To review, with the management, the quarterly financial statements before
submission to the Board for itsapproval.
To review, with the management, the statement of uses/application of funds raised
through an issue (publicissue, rights issue, preferential issue etc.), the statement of
funds utilized for purposes other than thosestated in the offer
document/prospectus/notice and the report submitted by the agency monitoring
theutilization of proceeds of a public or rights issue and making appropriate
recommendations to the Board fortaking steps in the matter.
Page 4
employment practice. TheAudit Committee of the Board reviews, on a quarterly basis, a synopsis
of the complaints received and theresolution thereof.
6. Report on Management's Discussion and Analysis
Macroeconomic and Industry Developments :
Fiscal 2014 saw a combination of various external and internal events that kept markets
turbulent, interest rates high andinvestor confidence low, resulting in shrinking investment and
GDP growth. Due to apprehensions of an impending „taper‟ ofthe US Federal Reserve‟s
Quantitative Easing programme, emerging markets, including India, experienced foreign
investmentoutflows and currency volatility. India‟s macroeconomic imbalances at the beginning
of the year exposed it to this volatility aswell, forcing stringent policy responses. However,
improving fundamentals have gradually restored some stability in the markets.
Indian economic growth had slowed rapidly from 8.9% in 2010-11 to an officially estimated
4.9% in fiscal 2014, caused in largepart by structural factors impeding investment activity.
Decline in financial savings, sluggish growth in fixed capital formation oversuccessive quarters,
persistence of high inflation and low business confidence contributed to the decline in potential
growth,particularly in the absence of adequate structural policy measures.
Inflation had emerged as the central concern during the year and in combination with the current
account and fiscal deficits,had forced Reserve Bank of India (RBI) to raise its policy Repo rate
by 75 basis points. While most of the slowdown was due to asteep drop in investment, a cut in
the Government‟s spending in order to contain the fiscal deficit at less than the budgeted 4.8%of
GDP also contributed to a slowdown in consumption. For fiscal 2014, fiscal deficit has been
revised down to 4.6% of GDP.
The biggest turnaround was in the Current Account Deficit, which had shrunk from $88 billion
in fiscal 2013 to $31 billion inthe first 3 quarters of fiscal 2014. For fiscal 2014, the current
account deficit is expected to be ~2% of GDP. With large capitalinflows via Foreign Currency
Non-Resident (FCNR-B) deposits and bank capital, the Rupee has stabilised at around 60-
62/USDand has been one of the best performing emerging market currencies over the past few
months.
The Repo rate increases have pushed up the floor for rates and despite liquidity infusion by RBI,
short term interest rates haveremained high. One of the consequences of the slowdown and high
inflation has been a contraction of financial savings ofhouseholds, with a preference for
investment in assets like gold and real estate. This has, in turn, affected deposit accretionwith
banks. The exceptional liquidity tightening measures of RBI leading to higher rates had resulted
in a temporary spike incredit growth in favour of banks compared to credit substitutes in the
money market, but this had gradually normalised. Onthe resources front, strong NRI inflows
Page 5
through the FCNR(B) deposits route have helped improve deposit growth. For the fiscal2014,
deposit growth in the system was 14.6%, while credit growth was 14.3%.
Financial Performance :
During 2013-14, the operating environment for the banking system continued to be challenging
with persistent high inflation,muted growth, slowdown in credit off-take, concerns regarding
growing non-performing assets and a high incidence of assetsbeing restructured. Despite these
challenges, the Bank‟s strategy to build its business upon strong customer franchises,
whileadopting a prudent approach, had resulted in delivering strong results. The underlying
performance of the business remainedstrong with revenue growth remaining well ahead of cost
growth. The Bank reported a net profit of `6,217.67 crores for the yearended 31st March 2014,
registering a growth of 20.05% over the net profit of `5,179.43 crores last year. The healthy
growth inearnings was driven by contribution from all segments. The Bank continued to focus on
the quality of growth and displayed strong growth in key balance sheet parameters for the
yearended 31st March 2014. The total assets increased by12.53% to `383,245 crores, total
deposits increasedby 11.22% to `280,945 crores while total advancesincreased by 16.81% to
`230,067 crores.During the year, the Bank continued to expand itsnetwork, with increased focus
on the semi-urbanand rural areas. Both the Retail and SME segmentscontinued to benefit from
this network expansion andhave justifiably remained the key growth drivers forthe Bank during
the year. The Bank remains committedto a customer-centric approach in dealing with itsclientele
aided by dependable technology and simplegrowth in key balance sheet parameters for the
yearended 31st March 2014. The total assets increased by12.53% to `383,245 crores, total
deposits increasedby 11.22% to `280,945 crores while total advancesincreased by 16.81% to
`230,067 crores.During the year, the Bank continued to expand itsnetwork, with increased focus
on the semi-urbanand rural areas. Both the Retail and SME segmentscontinued to benefit from
this network expansion andhave justifiably remained the key growth drivers forthe Bank during
the year. The Bank remains committedto a customer-centric approach in dealing with itsclientele
aided by dependable technology and simpleprocesses. A well distributed branch banking
channelcomplemented by a robust alternate distributionchannel have helped the Bank to deliver a
wide rangeof products and services to its customers across the country and overseas processes. A
well distributed branch banking channelcomplemented by a robust alternate distributionchannel
have helped the Bank to deliver a wide rangeof products and services to its customers across the
country and overseas.
Business Segments' Update :
Axis Bank has achieved healthy growth across various operating and financial parameters in the
last financial year.
Retail Banking:
The Retail Banking segment is one of the key drivers of the Bank‟s growth
strategy,encompassing a wide range of products delivered through multiple channels toits
customers. The Bank today offers a complete suite of products across deposits,loans, investment
solutions, payments and cards to its customers. The Bank iscommitted to developing long-term
