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HDFC Bank Ltd
Industry :  Banks - Private Sector
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As on: May 19, 2022 01:28 PM

Dear Stakeholders,

Your Directors take great pleasure in presenting the 27th Annual Report on the business and operations of your Bank, together with the audited accounts for the year ended March 31,2021.

First of all, wishing all of you health and happiness on behalf of the HDFC Bank family.

As the virus casts a shadow over the entire world, the first thing that all of us must do is take every possible step to ensure our safety and that of our loved ones. And say a prayer for our collective well-being. Especially for all the frontline COVID warriors who served the nation, often at great risk to their own lives. Our heads bow in respect for those who lost their lives in this fight. This includes some of our colleagues too.

Needless to say, the pandemic affected the economy. If FY 2019-20 was one of the most challenging years for the Indian economy, then the challenges only multiplied in FY 202021. And this was accentuated further by geo-political tensions.

The year started with one of the most severe lockdowns in the world. Although it was eased in stages, the economy was bound to take a hit. For the first time in many years, India's GDP contracted by 7.3 per cent in FY 2020-21. This was an improvement after the first quarter low of -24.4 per cent. As the lockdown eased, the economy contracted by 7.4 per cent in the second quarter and touched positive territory in the third quarter, posting a growth of +0.5 per cent and 1.6 per cent in the fourth quarter.

The Government of India and the Reserve Bank of India (RBI) announced a host of measures to cushion the direct impact of the lockdown on the economy. The Government announced a stimulus package of Rs. 20 trillion in five different tranches in FY 2020-21 to provide support to 1) the MSMEs and the Non Banking Financial Companies via a credit guarantee scheme and liquidity support 2) Migrant labourers via direct spending, and generating employment via enhanced allocation to MNREGA, 3) Small traders, vendors and farmers via loan facilities and 4) Announced structural reforms across sectors like coal, power, agriculture, etc.

On the monetary policy side, the RBI also took a number of steps to provide liquidity and enhance credit flow in the system.

It delivered a total rate cut (repo) of 115 bps since February 2020, taking the repo rate down to 4.0 per cent. The central bank also took a slew of measures to address liquidity constraints such as the announcement of moratorium, liquidity infusion through TLTRO (Targeted Long Term Repo Operations) for NBFCs (Rs. 500 billion), liquidity facility of Rs. 500 billion for mutual funds, liquidity support of Rs. 500 billion for all India financial institutions and a cut in the Cash Reserve Ratio (CRR) by 100 bps to 3 per cent. These measures helped anchor borrowing costs in the economy, support credit growth and cushioned the impact of the disruptions in the financial market (Please refer to the Macroeconomic and Industry section on page 128 for more details).

The Budget announcements for FY 2021-22 too have given confidence to business with its focus on stimulating growth through expansionary fiscal policy at the centre and increasing capital expenditure at the central as well as state Government levels.

While all these have been clear positives, what has cast a shadow on the economy again has been the resurgence of the pandemic in many parts of the country, resulting in partial or complete lockdowns. The mitigating factor has been the arrival of the vaccine and the decision to step up the vaccination drive by making all those over 18 years eligible for taking the vaccine. The Government has invited more manufacturers from abroad to come to India to boost supply in the country.

In this uncertain environment, your Bank continued on its growth path by conducting its business responsibly and reinforcing its commitment to the environment and community at large.

Financial Parameters

Your Bank recorded an improvement in a majority of its key financial parameters, largely due to its prudent credit evaluation of targeted customers and diversified loan book across customer segments, products, and sectors. Managing risk- return decisions with discipline also contributed to the Bank's performance. Net Profit at Rs. 31,116.5 crore went up by 18.5 per cent. Net Interest Income at Rs. 64,879.6 crore rose 15.5 per cent. Net Interest Margin remained stable at 4.1 per cent. Gross Non-Performing Assets (NPAs) at 1.32 per cent were among the lowest in the industry.


1.32 per cent

Among the lowest in the industry


Your Bank continued to transform lives through its umbrella CSR brand, Parivartan, which denotes change.

The Bank believes that businesses can only prosper if the communities in which they operate prosper as well. This belief has inspired its social initiatives, which have potentially made a difference to the lives of over 8.5 crore people, predominantly in rural India. Driving this change is the Sustainable Livelihood Initiative (SLI) team, which employs about 10 per cent of the Bank's workforce and works exclusively on improving livelihood opportunities. The ‘Teaching-The-Teacher' initiative has impacted over 2 crore students since inception. The Holistic Rural Development Programme has touched another 20 lakh people across more than 1,970 villages. Having an umbrella brand enables the Bank to lend a sharper focus to these efforts. Your Directors are also happy to report that your Bank met the mandatory CSR expenditure through a spend of Rs. 634.91 crore. The Bank contributed Rs. 70 crore towards Prime Minister's CARES Fund to support the Government's fight against the COVID-19 pandemic.

CSR spend

Rs. 634.91 crore in FY 2020-21

For further details on Parivartan please refer to page 88.


In FY 2021-22, the pandemic and vaccination drive are critical factors for the pace of economic recovery. In the near-term, the resurgence of COVID-19 cases across the country does pose a risk to the pace of economic recovery but the absence of a national lockdown is a positive. This, of course, poses challenges for your Bank in the short run.

In the long run, the market in the post-pandemic recovery period presents tremendous opportunities, given the under-penetration of banking services in the country. Your Bank is well positioned to capitalise on these opportunities, given the strength of its major franchises. It is also poised to make a greater contribution to bridge the urban-rural divide - be it through its business or

social initiatives. This, of course, will not be possible without the contribution of the ever-growing family of over two lakh employees (including those of the subsidiaries) across the country, who remain at the forefront of taking your Bank forward every day.

Your Directors would like to especially thank those who went well beyond their call of duty during the COVID-19 pandemic to keep your Bank functioning. Many of them soldiered on despite the loss of loved ones. During the year, we also lost a few of our colleagues. While we have structured a compensaton package for the families of the deceased, no word or action can adequately convey our sorrow.

Your Directors would also like to place on record that we did not reduce salaries during this trying period. Your Bank paid bonuses and increments on time in the year under review and followed the normal promotion cycle. It is doing the same this year as well.

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 umbrella CSR brand Parivartan, seeks to bring about change in the lives of communities mainly in rural India.

During the year under review, the bank did not lose its human touch but continued building sound customer franchises across distinct businesses to achieve healthy growth in profitability consistent with your Bank's risk appetite.

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

Summary of Financial Performance


For the year ended / As on

March 31, 2021 March 31, 2020
Deposits and Other Borrowings 1,470,547.5 1,292,130.8
Advances 1,132,836.6 9,93,702.9
Total Income 146,063.1 1,38,073.5
Profit Before Depreciation and Tax 42,961.4 37,803.0
Profit After Tax 31,116.5 26,257.3
Profit Brought Forward 57,492.4 49,223.3
Total Profit Available for Appropriation 88,608.9 75,480.6
Transfer to Statutory Reserve 7,779.1 6,564.3
Transfer to General Reserve 3,111.6 2,625.7
Transfer to Capital Reserve 2,291.7 1,123.8
Transfer to / (from) Investment Reserve 61.7 -
Transfer to / (from) Investment Fluctuation Reserve 1,712.0 1,134.0
Dividend (including tax / cess thereon) pertaining to previous year paid during the year, net of dividend tax credits - 4,893.4
Special dividend (including tax/cess thereon) - 1,646.9
Balance carried over to Balance Sheet 73,652.8 57,492.5


The RBI, vide notification dated December 4, 2020, stated that in view of the ongoing stress and heightened uncertainty on account of COVID-19, banks should continue to conserve capital to support the economy and absorb losses. The notification also stated that in order to further strengthen the banks' balance sheets, while at the same time support lending to the real economy, banks shall not make any dividend payment on equity shares from the profits pertaining to the financial year ended March 31, 2020. Your Bank did not declare dividend for the financial year ended March 31, 2020.

Given that the current ‘second wave' has significantly increased the number of COVID-19 cases in India and uncertainty remains, the Board of Directors of the Bank, at its meeting held on April 17, 2021, had considered it prudent to not propose dividend for the financial year ended March 31, 2021, and decided to re-assess the position based on any further guidelines from the RBI in this regard. Subsequently, RBI has, on April 22, 2021 vide its Circular mentioned that banks may pay dividend on equity shares from the profits for the financial year ended March 31, 2021, subject to the quantum of dividend being not more than fifty per cent of the amount determined as per the dividend payout ratio prescribed in paragraph 4 of the May 4, 2005 circular of RBI. In view of this RBI Circular, the Board of Directors of the Bank, at its meeting held on June 18, 2021, has recommended a dividend of Rs. 6.50 per equity share of Rs. 1/- each, for the financial year ended March 31, 2021. This translates to a Dividend Payout Ratio of 11.5% of the profits for the financial year ended March 31, 2021.

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 your Bank's website: https://v1.hdfcbank.com/htdocs/common/pdf/corporate/ Dividend-Distribution-Policy.pdf


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 payment 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 payment 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.
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 Option Scheme (ESOP)

As on March 31,2021, the issued, subscribed and paid up capital of your Bank stood at Rs. 5,512,776,482/- comprising 5,512,776,482 equity shares of Rs. 1/- each. Further, 29,490,022 equity shares of face value of Rs. 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 to the Directors' Report).

Capital Adequacy Ratio (CAR)

As on March 31, 2021, your Bank's total CAR, calculated as per Basel III capital regulations, stood at 18.8 per cent, well above the regulatory minimum requirement of 11.075 per cent, including a Capital Conservation Buffer of 1.875 per cent and an additional requirement of 0.20 per cent on account of the Bank being identified as a Domestically Systemic Important Bank. Tier I Capital was at 17.6 per cent as of March 31, 2021.

Total CAR

18.8 per cent

well above regulatory minimum requirement of 11.075 per cent

Management Discussion and Analysis

Macroeconomic and Industry Developments

The Indian economy contracted sharply in FY 2020-21 in the wake of the global pandemic, with GDP contracting by 7.3 per cent in FY 2020-21 as compared to a 4.0 per cent growth in FY 2019-20. To recall, the World Health Organization declared on March 12, 2020 that the virus is a pandemic. On March 23, 2020, the Government of India ordered a nationwide lockdown for 21 days, which got further extended till May 31, 2020 with some relaxations. India enforced one of the strictest lockdowns at an early phase of rising cases to limit the spread of the virus. Daily COVID-19 cases peaked in September touching a high of ~98,000 and easing to ~8,600 in early February 2021, due to introduction of social distancing norms, localised lockdowns and containment measures.

The Government and the Reserve Bank of India (RBI) announced a host of measures to cushion the direct impact of the lockdown on the economy. This helped GDP growth come off its low of -24.4 per cent in Q1 and -7.4 per cent in Q2 to +0.5 per cent in Q3 and +1.6 per cent in Q4 2020-21. Looking at the internals, agriculture growth continued to remain positive (registering a growth of 3.6 per cent in 2020-21) due to the relative insulation of the rural sector from the virus. Manufacturing growth contracted by 7.2 per cent in 2020-21. However, the sector showed signs of recovery in H2 2020-21 - with a contraction of 18.7 per cent in H1 2020-21 but picked upto + 1.6 per cent in Q3 and + 6.9 per cent in Q4. Service sector remained a laggard with a contraction of 8.4 per cent in 2020-21. Domestic demand began to show green shoots in the second half of the year as activity

resumed. Private consumption indicators such as production of consumer durables and non-durables gathered pace in Q3 along with passenger vehicle (PV) sales that turned green in H2 FY21. Encouragingly, GST collections rose to Rs. 1.23 trillion in March 2021, averaging Rs. 1.13 trillion in H2 FY21 as compared to an average collection of ' 0.76 trillion in H1 FY21.

The Government announced a stimulus package of Rs. 20 trillion in five different tranches in FY 2020-21 to provide support to 1) the MSMEs and the NBFCs via a credit guarantee scheme and liquidity support 2) migrant labourers via direct spending and generating employment via enhanced allocation to MNREGA 3) small traders, vendors and farmers via loan facilities and 4) announced structural reforms across sectors like coal, power, agriculture, etc.

On the monetary policy side, the RBI also took a number of steps to provide liquidity and enhance credit flow in the system. The RBI delivered a total rate cut (repo) of 115 basis points (bps) since February 2020, taking the repo rate down to 4.0 per cent. The central bank also took a slew of measures to address liquidity constraints such as the announcement of the moratorium, liquidity infusion through TLTRO (Targeted Long Term Repo Operations) for NBFCs (Rs. 500 billion), liquidity facility of Rs. 500 billion for mutual funds, liquidity support of Rs. 500 billion for all India financial institutions and a cut in the CRR (Cash Reserve Ratio) by 100 bps to 3 per cent. These measures helped anchor borrowing costs in the economy, support credit growth and cushioned the impact of the disruptions in the financial market.

Looking at the inflation side, CPI inflation averaged 6.7 per cent in H1 FY21 mainly due to higher food prices on account of COVID- led supply disruptions. Inflation eased below RBI's upper band of 6.0 per cent from December 2020 to February 2021. In FY 2020-21, the headline inflation averaged 6.2 per cent, above the RBI's target range of 4 +/-2 per cent. In FY 2021-22, CPI inflation rose to 6.3 per cent in May-21 from 4.2 per cent in Apr-21, breaching the RBI's upper threshold of 6 per cent for the first time in six months. Apart from higher fuel and food inflation, a large part of this increase was driven by higher core inflation, possibly reflecting the impact of second wave related supply disruptions and a pass through of cost push pressures. Going forward, we expect inflation to remain above 6 per cent for the next 3 months. For FY 2021-22, we expect the headline inflation to average 6.1% led by higher commodity prices and sticky core inflation.

On the policy front, we expect the central bank to keep its rates unchanged in FY 2021-22 and maintain an accommodative stance. The RBI is likely to only gradually reduce the liquidity surplus in the system once it is confident about the prospects of growth recovery. The central bank is likely to continue managing the yield curve, especially the benchmark yield through open market operations (sterilised and unsterilsed) and the latest announced G-SAP bond buying programme in order to contain borrowing costs in the economy and improve transmission.

On the policy front, we expect the central bank to keep its rates unchanged in FY 202122 and maintain an accommodative stance.

In the financial sector, the onset of COVID-19 weighed down on credit growth while the deposit growth remained robust. In FY 2020-21, the credit growth averaged at 5.9 per cent as compared to 9.5 per cent y-o-y in FY 2019-20. A sharp slowdown in economic activity as reflected by a 7.3 per cent contraction in GDP weighed on credit demand. On the flip side, deposit growth improved to 10.9 per cent in FY 2020-21 from 9.9 per cent in FY 2019-20. The improvement in deposit growth could be reflecting pandemic related saving tendency among individuals. In Apr- 21, while credit growth came in at 5.7 per cent, deposit growth tracked at 10.3 per cent.

Looking at the credit sectoral level, the weakness was recorded in the industry sector (large industries) while credit deployment to personal loans and to services sector rose albeit at a slower pace. As per the RBI's January 2021 Financial Stability Report, the GNPA ratio of scheduled commercial banks eased to 7.5 per cent in September 2020 from 9.3 per cent in September 2019. That said, the central bank estimates the ratio to increase to 13.5 per cent by September 2021. The GNPA could escalate to 14.8 per cent if the macroeconomic environment worsens into a severe stress scenario. Heading into FY 2021-22, credit growth outlook is expected to improve amid improvement in GDP growth and as liquidity remains comfortable.

For the financial sector, the Government announced the Partial Credit Guarantee Scheme (PCGS) 2.0 to provide liquidity support for NBFCs. Under this scheme, the Government provides a sovereign guarantee for the first 20 per cent loss to the public sector banks buying AAA and below rated paper issued by the NBFCs/MFIs/HFCs.

To recall, the stimulus package worth Rs. 20 trillion (10 per cent of GDP) announced by the Government had a clear focus on the MSME sector, a key provider of employment in both the organised and unorganised segments and a critical component of the domestic industrial supply chain. The MSME sector that encompasses a wide range of industries had been under considerable stress for a prolonged period before the incidence of COVID-19. This made them particularly vulnerable to the lockdown and its aftermath. The NBFC sector, a major provider of funding to the MSMEs had also been going through a period of stress, particularly in its access to finances both from banks and the market. Thus, the stimulus package focused on the survival of both MSMEs and NBFCs through the COVID-19 crisis and also their revival. The critical element of the stimulus was its attempt to facilitate the flow of credit to both MSMEs directly and to NBFCs. The Government aimed to do this by reducing the risk taken by banks and other institutions in lending to them by providing explicit guarantees either on the entire loan or a fraction. The guarantees delivered were through Special Purpose

Vehicles (SPVs) in which the Government had initially taken an equity stake. Thus, for instance, the targeted credit flow of Rs. 300 billion in the form of collateral free loans to the smaller MSMEs was backed by a 100 per cent Government of India guarantee given through National Credit Guarantee Trustee Company (NCGTC). Other measures included creating a fund of funds for MSMEs, PCGS for NBFCs/MFIs and providing subordinate debt for stressed MSMEs through a Credit Guarantee Fund Trust.

The direct fiscal spending component (on MNREGA, EPF support for business and workers, foodgrain supply for migrant workers and enhancing micro food enterprises among other things) is relatively low and stands at Rs. 2 trillion or 1 per cent of GDP. Instead, the broad strategy of the stimulus is to remove bottlenecks on the supply side for the smaller and labourintensive firms to set off a ‘virtuous cycle' of more viable operations, increased production and employment, and higher incomes that would translate into enhanced demand.

The broad strategy of the Government's stimulus is to remove bottlenecks on the supply side for the smaller and labourintensive firms to set off a ‘virtuous cycle' of more viable operations, increased production and employment, and higher incomes that would translate into enhanced demand.

There are non-financial measures as well that aim to benefit MSMEs. The upward revision of turnover and investment limit (Micro: turnover increased to Rs. 5 crore, investment increased to Rs. 1 crore; Small: Turnover increased to Rs. 50 crore and investment increased to Rs. 10 crore; Medium: Turnover increased to Rs. 100 crore and investment increased to Rs. 20 crore) would help MSMEs expand operations considerably without fear of losing some of the fiscal and other benefits that the segment enjoys. In addition to the aforementioned measures, the Government of India announced measures to facilitate capex and help businesses. Measures announced included - guaranteed collateral free credit support for 26 stressed sectors, Rs. 1.46 lakh crore boost for Atmanirbhar manufacturing, Production Linked Incentive (PLI) scheme for sectors such as electronics, textile, telecom, etc. and additional outlay of Rs. 102 billion towards industrial expenditure, industrial incentives and development of defence equipment.

From the Government side, trend in capex has also been encouraging. In FY 2020-21, the Government has spent INR 4.3 trillion on capex, which is a 26.5 per cent y-o-y increase from FY 2019-20. For the ongoing fiscal year, the Government has budgeted capex at an 18 year high of 2.5 per cent of GDP. In INR terms, FY 2021-22 capex is budgeted at INR 5.3 trillion, which marks an increase of 30.5 per cent from the last year.

In fiscal 2020-21, while export demand dipped by 7.2 per cent, imports shrank 17.6 per cent, reflecting pandemic related disruptions. However, trend in services trade balance was encouraging. Services trade balance improved to USD 85.1 Billion from USD 80 Billion in FY 2019-20. Taking these factors into account, we expect current account to record a surplus of

1.0 per cent of GDP in FY 2020-21 vs a deficit of 0.9 per cent in FY 2019-20. However, on a quarterly basis, we expect current account to record a deficit of 0.7 per cent in Q4 FY20-21. Foreign flows remained strong in FY 2020-21 despite initial jitters in the market. While gross FDI flows improved to USD 81.7 Billlion in FY 2020-21 as compared to 74.4 Billlion in FY 2019-20, FII flows recorded a net inflow of USD 30.3 Billlion vs. a net outflow of USD 5.1 Billion in the previous year. With robust capital flows and a surplus in the capital account, we expect BoP surplus to improve to a record high of USD 100 Billlion in FY 2020-21. Going ahead, with improvement in domestic demand conditions and higher commodity prices, we expect current account to record a deficit of 1.8 per cent of GDP in FY 2021-22.

As India emerges from the impact of the pandemic in 2021, it is expected to be one of the fastest growing economies in the world in FY 2021-22 with GDP growth expected to rise by

9.1 per cent in real terms. We expect the economy to reach its pre-pandemic output level (2019) by the end of the current fiscal year. Growth is likely to be supported by higher capex spending by the Government, recovery in domestic demand and continued monetary policy support from the RBI. For the next fiscal year, the pandemic situation and vaccination drive are critical factors for the pace of economic recovery. In the near term, the second wave of COVID is likely to weigh on the pace of recovery in Q1 FY2021-22. However, as the economy begins to open up, we expect recovery to pick up pace in Q2 FY2021-22 with support from both fiscal spending and continued monetary accommodation.

We expect the economy to reach its prepandemic output level (2019) by the end of the current fiscal year. Growth is likely to be supported by higher capex spending by the Government

Financial Performance

The financial performance of your Bank during the year ended March 31, 2021, remained healthy with Total Net Revenue (Net Interest Income plus Other Income) rising 13.4 per cent to Rs. 90,084.5 crore from Rs. 79,447.1 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 15.5 per cent to Rs. 64,879.6 crore due to acceleration in loan growth coupled with a Net Interest Margin (NIM) of 4.1 per cent.

Bank's Net Interest Income

15.5 per cent growth

Due to acceleration in loan growth in FY 2020-21

Other Income grew by 8.4 per cent to Rs. 25,204.9 crore. The largest component was Fees and Commissions at Rs. 16,169.3 crore. Gain on Revaluation and Sale of Investments was Rs. 3,867.0 crore. Foreign Exchange and Derivatives Revenue was Rs. 2,438.4 crore, and recoveries from written-off accounts were Rs. 2,148.4 crore. Consequent to the outbreak of the COVID-19 pandemic, the Indian Government announced a lockdown in March 2020. Subsequently, the national lockdown was lifted by the Government, but regional lockdowns continue to be implemented in areas with a significant number of COVID-19 cases. The impact of COVID-19, including changes in customer behaviour and pandemic fears, as well as restrictions on business and individual activities, have led to significant volatility in global and Indian financial markets and a significant decrease in global and local economic activities. The slowdown during the year led to a decrease in loan originations, the sale of third party products, the use of credit and debit cards by customers and the efficiency in collection efforts. This may lead to a rise in the number of customer defaults and consequently, an increase in provisions there against. The extent to which the COVID-19 pandemic, including the current second wave that has significantly increased the number of cases in India, will continue to impact the Bank's results will depend on ongoing as well as future developments, which are highly uncertain, including, among other things, any new information concerning the severity of the COVID-19 pandemic and any action to contain its spread or mitigate its impact whether Government-mandated or elected by us.

Operating (Non-Interest) Expenses rose to Rs. 32,722.6 crore from Rs. 30,697.5 crore. During the year, your Bank set up 354 new branches and 1,186 ATMs / Cash Deposit and Withdrawal Machines (CDMs). 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 and rate increase. Despite higher staff and infrastructure expenses, the Cost to Income Ratio improved to 36.3 per cent from 38.6 per cent.

Cost to Income Ratio improved to 36.3 per cent in FY 2020-21


1,186 in FY 2020-21

Total Provisions and Contingencies were Rs. 15,702.8 crore as compared to Rs. 12,142.4 crore in the preceding year. Your Bank's provisioning policies remain more stringent than regulatory requirements. Total provisions for the fourth quarter of the financial year included credit reserves relating to the coronavirus pandemic in the form of contingent provisions of approximately Rs. 1,300.0 crore.

The Coverage Ratio based on specific provisions alone excluding write-offs was 69.8 per cent and including General and Floating provisions it was 115 per cent. Your Bank made General Provisions of Rs. 867.0 crore during the year. Gross Non Performing Assets (GNPAs) were at 1.32 per cent of Gross Advances, as against 1.26 per cent in the previous year. Net NPA ratio stood at 0.40 per cent as against 0.36 per cent in the previous year.

In accordance with the COVID-19 regulatory packages announced by the RBI on March 27, 2020, April 17, 2020 and May 23, 2020, your Bank, in accordance with its Board approved policy, offered a moratorium on the repayment of all instalments and / or interest, as applicable, due between March 1,2020 and August 31, 2020 to all eligible borrowers classified as standard, even if overdue, as on February 29, 2020. In respect of such accounts that were granted moratorium, the asset classification remained standstill during the moratorium period. Your Bank has made provisions above the RBI prescribed requirements against the potential impact of the coronavirus pandemic (based on the information available at this point in time).

Profit Before Tax grew by 13.8 per cent to Rs. 41,659.0 crore. After providing for Income Tax of Rs. 10,542.5 crore, Net Profit increased by 18.5 per cent to Rs. 31,116.5 crore from Rs. 26,257.3 crore. Return on Average Net Worth was 16.60 per cent while Basic Earnings Per Share was Rs. 56.58 up from Rs. 48.01.

As on March 31,2021, your Bank's Total Balance Sheet stood at Rs. 1,746,871 crore, an increase of 14.1 per cent over '1,530,511 crore on March 31, 2020. Total Deposits rose by 16.3 per cent to Rs. 1,335,060 crore from Rs. 1,147,502 crore. Savings Account Deposits grew by 30.0 per cent to Rs. 403,500 crore while Current Account Deposits rose by 21.8 per cent to Rs. 212,182 crore. Time Deposits stood at Rs. 719,378 crore, representing an increase of 8.5 per cent. CASA Deposits accounted for 46.1 per cent of Total deposits. Advances stood at Rs. 1,132,837 crore an increase of 14.0 per cent. Domestic Loan Portfolio of Rs. 1,111,510 crore grew by 14.1 per cent over March 31, 2020.

Net Profit

18.5 per cent

Increase in FY 2020-21

Business Review

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

A) Domestic Business comprises the following:

Retail Banking

The Retail Business operated under extremely challenging circumstances in the year under review. This business is directly linked to consumption, which slowed down during the lockdown. As the unlock gathered momentum, the business recovered and with domestic advances rising 6.7 per cent.

Domestic Retail Deposits grew by 21.1 per cent to Rs. 1,064,684 crore from Rs. 879,145 crore in the preceding year, while Retail Advances rose 6.7 per cent to Rs. 527,586 crore from Rs. 494,401 crore.

Your Bank continues to be a leader in the auto loans segment with strong presence in passenger, commercial vehicle and two-wheeler financing. The first two quarters were impacted by the lockdown but growth revived in the third quarter and the momentum continued in the fourth. This enabled your Bank to close the year at pre-pandemic levels. While there was a marginal uptick in ticket size in the fourth quarter, growth came largely on the back of improved distribution.

The Personal Loan Business is also surging back to pre-COVID levels, and ended the year at Rs. 118,000 crore. About 80 per cent of the incremental loans were to employees of top rated corporates with reasonably high disposable income. In the year under review, the portfolio further improved qualitatively, which is indicated by an increase in credit scores across segments.

Your Bank also continues to drive value through its digital platforms, increasing penetration in its internal customer base. Digitalisation also plays a key role for your Bank in pioneering various digital loans - 10 second Personal Loan, Digital Loan Against Shares and Loan Against Mutual Funds. There is also increased focus in digitisiting processes and customer touchpoints to better your Bank's reach to customers across products.

The Payments Business, where your Bank has a dominant presence not only acts as a catalyst for cashless transactions but also spurs consumption. With 3.67 crore debit cards, 1.49 crore credit cards and about 21.34 lakh acceptance points, it is among the largest facilitators of cashless payments in the country. Your Bank's payments business has launched digital offerings such as Bharat QR Code, UPI, and SMS pay solutions. It has also pioneered products such as the SmartHub app for small merchants and DigiPos, which enables traditional PoS machines to accept digital payments.

With 3.67 crore debit cards, 1.49 crore credit cards and about 21.34 lakh acceptance points, your Bank is among the largest facilitators of cashless payments in the country.

In the credit card business, the RBI, through its order dated December 2, 2020, advised your Bank against sourcing new credit card customers. Your Bank subsequently recalibrated its strategy and began selling more to existing customers of the Bank. Credit cards constitute about 6 per cent of the overall Bank book.

Credit cards in force

1.49 crore

The Virtual Relationship Management (VRM) programme gained traction during the year under review. Digital or conctacless banking has become a necessity in the pandemic. Under VRM, Relationship Managers reach out to customers through remote and digital platforms, leading to deeper engagement in a cost-effective manner. As digital literacy and exposure increases exponentially, VRM is gaining acceptance through wider engagement, deeper relationships and a complete suite of products to offer. A banking experience with digital ease and personalized conversations is at the core of our VRM strategy. The Virtual Relationship Management practice is an integrated customer centric approach covering three pillars -Virtual Relationships, Virtual Sales and Virtual Care.

Meanwhile, your Bank also added 354 branches during the year, taking the total to 5,608 across 2,902 cities / towns. The share of semi-urban and rural outlets in the network is 50 per cent, reflecting our continued focus on penetrating further into these markets. In addition, your Bank has 15,756 business correspondents primarily managed by the Common Service Centres. The number of ATMs / CDMs also increased to 16,087 from 14,901. The total number of customers your Bank catered to as on March 31, 2021 was over 6.18 crore, up from over 5.60 crore in the previous year.

As you are aware, your Bank operates in the Home Loan Business in conjunction with HDFC Limited. As per this arrangement, your Bank sells HDFC home loans while HDFC Limited approves and disburses them. Your Bank receives sourcing fee for these loans and, as per the arrangement, has the option to purchase up to 70 per cent of fully-disbursed loans either through the issuance of mortgage-backed Pass Through Certificates (PTCs) or a direct assignment of loans. The balance is retained by HDFC Limited. The year under review saw a 62 per cent rise over the previous year in home loans. The increase in demand coupled with the SOPs in Maharashtra aided the growth in Q4. Your Bank originated, on an average, Rs. 2,470 crore of home loans every month in the year under review and purchased Rs. 18,980 crore as direct assignment of loans.

Third Party Products

Your Bank distributes Life, General and Health Insurance, and Mutual Funds (third party products). Income from this business grew by 27 per cent to Rs. 3,573 crore from Rs. 2,817 crore and accounted for 22 per cent of Total Fee Income in the year ended March 31,2021 compared with 17 per cent in the preceding year.


The open architecture adopted by your Bank for insurance distribution with eight insurers was made more robust by leveraging more branches and expanding the product bouquet. Continuing with the digital focus, straight through process from prospecting to proposal stage was introduced with real time integration across all insurers. Premium mobilisation in life Insurance for the year ended March 31,2021 was Rs. 5,888 crore.

In the Non-Life insurance space, your Bank, along with its Insurance partners, introduced new and innovative products and increased customer offerings. All the products offered are enabled through Netbanking and telesales platforms. Employees across channels have been trained on the new products and processes. Manpower has been strengthened across Non-Life insurers to increase our business in the non-motor insurance space. Premium mobilisation in General and Health Insurance grew by 13 per cent over the year earlier to Rs. 2,230 crore.

Retail Advances

6.7 per cent

Growth in FY 2020-21 Wholesale Banking

The Wholesale Banking business was a key growth engine for your Bank in the year under review. This business focuses on institutional customers such as the Government, large and emerging corporates, and SMEs. Your Bank's strong offerings 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 FY 2020-21 with a domestic loan book size of over Rs. 583,925 crore, recording a growth of 21.7 per cent over the year earlier. This constituted about 53 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 customisation, cross-selling and expanding into greater geographies. And continuing to lend during the pandemic while being prudent.

Loan Book Wholesale Banking Business

21.7 per cent

Growth in FY 2020-21

Corporate Banking, which focuses on large, well-rated companies, continued to be the biggest contributor to Wholesale Banking in terms of asset size. This business ended FY 2020-21 with a domestic loan book size of Rs. 2.98 lakh crore, recording a rise of 23 per cent over the year earlier. This was thanks to your Bank's focused outreach to large corporates and well-rated/blue chip PSUs at the outset of the pandemic to offer them liquidity. It was able to do so as it was armed with sufficient cash due to its strong capital base and balance sheet. Also, post the TLTRO scheme under which banks could access long-term debt from the RBI at the repo rate, this only got reinforced. As per the guidelines of the TLTRO scheme, your Bank deployed this money in designated sectors like agriculture, agri-infrastructure, secured retail, MSMEs, and drugs, pharmaceuticals and healthcare.

This business also continued to capitalise on the trend of large companies preferring to deal with fewer banks. Your Bank deepened its existing relationships as well as gained market share by leveraging its wide product offering. The Emerging Corporates Group, which focuses on the midmarket 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 acquisitions 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.

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 acquisitions as well as a higher share of the wallet from existing customers.

In the year under review, the Bank continued its focus on the MSME sector. There has already been increased formalisation of the MSME sector due to the adoption of the Goods and Service Tax (GST). The COVID-19 pandemic led to the sector experiencing substantial stress, prompting the Union Government to announce the Emergency Credit Line Guaratee Scheme (ECLGS), under which your Bank emerged as a star performer in disbursing credit.

The Investment Banking business cemented its prominent position in the Debt and Equity Capital Markets. Your Bank jumped one position to be ranked 2nd in the Bloomberg rankings of Rupee Bond Book Runners for FY 2020-21, improving its market share to 17.46 per cent from 13.72 per cent. Your Bank is actively assisting clients in equity fund raising and was ranked 6th amongst domestic banks in the PRIME Database League Tables for IPOs, Rights Issues and QIPs for FY 2020-21 for private sector issues against 7th for FY 2019-20.

In the Government business, your Bank sustained its focus on tax collections, collecting direct tax of Rs. 302,823.78 crore and indirect tax of over Rs. 1,65,741.27 crore during FY 2020-21. 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 been a pioneer in providing Digital Banking Services to its wholesale banking customers. It was an early adopter of digital technology through the Corporate Net Banking Platform, ENet.

Your Bank offers the entire gamut of financial services, such as payments, collection, tax solutions, Government business, trade finance services, cash management solutions and corporate cards through its flagship platform, besides seamlessly connecting its customers through API, S2S (Server to Server) and Host-to-Host services.

Your Bank jumped one position to be ranked 2nd in the Bloomberg rankings of Rupee Bond Book Runners for FY 202021, improving its market share to 17.46% from 13.72%.


The Treasury 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 treasury 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 revenue of Rs. 2,438.4 crore from foreign exchange and derivative transactions in the year under review. While plain vanilla forex products were in demand across all customer segments, demand for derivatives products increased with RBI liberalising regulations and allowing Indian banks to participate in NonDeliverable Offshore markets.

As 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.

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 ‘Held-to-Maturity' (HTM) category, while some are ‘Available for Sale' (AFS). Your 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

To address the needs of NRI clients and Indian corporates, your Bank has opened branches and representative offices in Manama (Bahrain), Hong Kong, Dubai, DIFC, Abu Dhabi and Nairobi (Kenya). These offices increase awareness of your Bank's brand with existing and prospective clients. It also has a presence in International Financial Service Centre (IFSC) at GIFT City in Gandhinagar, Gujarat. This unit was opened four years ago. Your Bank offers products such as trade credits, foreign currency term loans including External Commercial Borrowings (ECBs) and derivatives to hedge loans. As on March 31,2021, the Balance Sheet size of the international business was US$ 6 billion. Advances constituted 2.78 per cent of your Bank's Gross Advances. The Total Income of the overseas branches constituted 0.64 per cent of the Bank's Total Income for the year. The numbers may appear small, but what is significant here is your Bank's ability to cater to a large and growing Indian diaspora and maintain its leadership position among the peer group.

International Business

US$ 6 billion

Balance Sheet

C) Partnering with the Government

1) CSC Partnership

Your Bank has been closely working with the Government both at the central and state levels. It has an equity investment of over 6.5 per cent in CSC e-Governance Services India Ltd. CSCs, operated by Village Level Entrepreneurs (VLEs), are the access points for the delivery of essential public utility services, social welfare schemes, healthcare, financial, education and agriculture services, apart from a host of B2C services to citizens in rural and remote areas of the country. It is a pan-India network facilitating the Government's mandate of a socially, financially and digitally inclusive society. The Government of India envisages at least one VLE per 2.54 gram panchayat. Your bank will use this network to offer retail products and banking services and further contribute to the Government's ‘Digital India' initiative.

During the year under review, your Bank considerably strengthened its relationship with CSCs by empanelling an additional 10,000 plus Business Correspondents taking the number of such correspondents to 15,756.

2) Start-Up Fund and SmartUp Banking

Under its SmartUp Banking Programme for Startups, your bank crossed the milestone of 16,000 such businesses. It is working with various state governments and incubators/accelerators to promote entrepreneurship. MoUs have already been signed with five state governments and Ministry of Electronics and Information Technology (MeitY) to enable execution of the varied aspects of their respective start-up policies. Your Bank also works with 20+ incubators certified by the Department of Science and Technology, including various Indian Institutes of Technology and Indian Institutes of Management. This year we extended financial and advisory support to 21 social impact start-ups in the Ed-tech and skill development sectors. We are also causing connects through initiatives like HNI meets along with our partners and mentoring sessions for our start-up customers with senior executives of your Bank.

D) Semi-Urban and Rural

The Semi Urban and Rural markets have always been a focus of your Bank's strategy. In the last few years, your Bank has made a renewed push into the semi-urban and rural markets as rising income levels and aspirations of rural customers are leading to demand for better quality financial products and services. The rural groups in every department of your Bank work together to tap these opportunities.

Apart from meeting its statutory obligations under PSL, 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), small shopkeeper loans in these markets. Now, it plans to increase its coverage of villages and deepen relationships in existing ones. 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

Yours Bank's advances to Agriculture & Allied activities rose by 10.92 per cent to Rs. 94,977.14 crore for the year ended March 31, 2021.

The importance of this segment can be understood from the fact that about 60 per cent of the population is dependent on agriculture for livelihood. In the year of the pandemic, the Bank disbursed about Rs. 2,000 crore in line with Government regulations which benefited over 1.42 lakh farmers.

1.42 lakh

Farmers benefited in the pandemic year

The rural economy which primarily depends on agriculture was largely insulated from the pandemic. Post July there was month on month growth in tractor sales thanks to a good monsoon and healthy cash flow. In FY 2020-21, the domestic tractor industry grew 25 per cent in terms of units sold on a YoY basis. HDFC Bank Tractor Loans registered a growth of 55% in FY 2020-21 in terms of no. of units financed. The size of the book has grown 30 per cent YoY crossing Rs. 5,000 crore.

In general the key to your Bank's success in this market has been its ability to tap the opportunities through:

- Wide product range

- Faster turnaround time

- Digital solutions

The Bank's product range includes pre-and post-harvest crop loans, two-wheeler loans, auto loans, tractor loans, small agri business loans, loan against gold, among others. This has helped the Bank establish a strong footprint in the rural hinterland with its asset products. Apart from advising farmers on their financial needs, your Bank is increasingly focusing on facilitating various Government/regulatory schemes such as crop insurance, Government subsidy / crore guarantee schemes, interest subvention etc.

The Bank has designed a range of crop and geography-specific products in line with the harvest cycles and the local needs of farmers across diverse agro-climatic zones. It has transformed rural banking services from being product centric to customer centric.

Products such as post-harvest cash credit and warehouse receipt financing enable faster cash flows to farmers. Credit is also offered for allied agricultural activities such as dairy, pisciculture, and sericulture.

Your Bank's focus in the rural markets has not just been on increasing credit offtake, but also on cementing relationships with customers by empowering them. As part of these efforts, farmer centers or Kisan Dhan Vikas Kendras have been rolled out in Punjab, Maharashtra, Uttar Pradesh and Madhya Pradesh. At these centers, farmers access information on soil health, mandi prices, and various Government initiatives and also receive expert advice. These services are also available on the Bank's website in vernacular languages. Kisan Dhan Vikas e-Kendra is one of its kind in the Banking Industry to reach out to the farmers as one stop solution for all their requirements viz. loan eligibility, online application facility, training though kiosks, call an expert facility, soil testing and much more. Your Bank also provides advisory on weather, cropping and harvesting through SMS.

In line with this, the Bank also launched the e-KISAN Dhan app, a unique digital app for the Rural/farming community. This is an exclusive mobile App for all rural banking and agriculture information needs from HDFC Bank.

This app aggregates crucial information required by the farmers. There have been about 97,000 downloads of the app.

Multiple needs of the farmers can be serviced such as shopping of seeds, agro products, information on best practices, weather alerts, mandi rates, expert advice, Agri news, information on Government schemes like debt waiver, interest subvention, crop insurance, godown and livestock centre amongst others. Another important initiative this year has been the launch of the ‘KGC-Shaurya for the Armed forces personnel/Ex-Servicemen engaged in farming.

This product program offers a hassle free transaction for the defence personnel, so that they can avail farming loans under Kisan Gold Card (based on the KCC guidelines of Government).

KGC Shaurya weaves a smooth process of addressing the farming requirements of defence personnel under various scenarios where loan processes are executed even if the concerned person is on deputation and is unable to be physically present for verification. The target customers are from the Army, Navy and Air Force, Personnel of Para Military Forces like BSF, ITBP, CRPF, Coastal Guards, CISF and Assam/J&K Rifles owning agricultural lands either in their own names or the names of their family members.

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 all the Bank's products including digital offerings such as 10 Second Personal Loans, Kisan Credit Card, Bill Pay, and Missed Call Mobile Recharge. So far, your Bank has digitized payments at over 1,315 milk co-operatives across 21 states, benefiting more than 5.08 lakh dairy farmers.

The Dairy business as a whole witnessed a 46 per cent year on year growth in disbursements and 54 per cent in the book.

Substituting Moneylenders: Your Bank is slowly making inroads into a market traditionally dominated by the unorganized sector, moneylenders and pawn brokers. Loans against gold jewellery grew by over 33 per cent to about Rs. 8,300 crore in FY 2020-21 from over 6,200 crore in FY 2019-20. The entry of organized players has increased awareness and transparency. The availability of the asset and the ease of securing a loan have made this a convenient and viable credit option.

In FY 2020-21, your Bank added 225 more branches, taking the total number to 1,000 through which gold loans are distributed.

Social initiatives in Farm Sector: Farm yield and income are subject to the vagaries of the weather. In addition, factors like soil health, input quality (seeds and fertilizers), water availability, and Government policy have significant impact, along with price realizations and storage facilities. Your Bank has launched a variety of initiatives 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, floods and the pandemic. Within regulatory guidelines, your Bank has 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. This segment has inherent credit risks. Your bank has taken various initiatives to navigate the changing agrilending trend. It has also taken steps pertaining to delinquency management like root-cause analysis of critical locations, close monitoring of delinquency, prioritisation-based recovery strategy, system automations. 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 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 is building a segment-specific approach like funding to horticulture clusters, supply chain finance, agribusiness, 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. Advances to the MSME and Trader and Wholesaler segment as on March 31, 2021 stood at Rs. 2,01,833 crore as against Rs. 1,59,107.93 crore a year ago. Your Bank's advances to the Micro Enterprises alone stood at Rs. 60,846.03 crore.

The MSME sector was one of the sectors identified for special support by the Government and the RBI during the pandemic through various schemes.

Your Bank has ensured support for its customers through these schemes. Be it helping them avail of the interest moratorium or the Funded Interest Term Loans. And above all, loans under ECLGS Scheme. On the interest and principal moratorium 1 and 2 schemes, your Bank ensured complete coverage of this scheme to its existing customers as per the terms and conditions announced by the Government. Digital applications were accepted through the Bank's website and straight through processing was done to smoothen the process and ensure faster delivery. Your Bank also emerged as a star performer under the ECLGS 1.0 and 2.0 schemes. It disbursed loans amounting to Rs. 29,622 crore to over 1.23 lakh customers. This swift support enabled existing customers to meet their operational liabilities and helped in the smooth functioning of their businesses.

ECLGS schemes - loan disbursements

Rs. 29,622 crore

Over 1.23 lakh customers

The silver lining has been that the pace of digitisation among MSMEs has gained further momentum. This will not only help the pace of disbursement but also increase transparency in the sector. The process started with Government's digitisation push and the adoption of GST, which resulted in easy availability of data for banks regarding cash flows of these companies.

The SME portal continues to offer ad hoc approvals, pre-approved TODs on an STP basis to existing customers. They can request top-up of loans and submit the required documents online. The SME portal also helps customers access your Bank's services related to sanctioned credit facilities 24/7 from anywhere.

On the trade side, your Bank's focus has been on customer engagement for increasing the penetration of Trade on Net applications. This is a complete enterprise trade solution for customers engaged in domestic as well as foreign trade, enabling them to initiate online requests and track them seamlessly, resulting in reduced time and costs.

Taking Banking to the Unbanked

Your Bank is fully committed to taking banking to the remotest parts of the country through a combination of an extensive physical network and a robust digital suite of products and services. Today, about half of your Bank's outlets are located in rural and semi-urban areas. Your Bank also offers last mile access through mobile applications such as BHIM, UPI, USSD, Scan and Pay, and RuPay enabled Micro-ATMs.

To bring more under-banked sections of the population into formal financial channels, your Bank has opened over 25.39 lakh accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and enrolled 35.67 lakh customers in social security schemes since inception. We now rank among the leading private sector banks in this regard. Under Pradhan Mantri Garib Kalyan Yojana package, an amount of Rs. 500 per month each for April 2020, May 2020 and June 2020 has been credited to 14.13 lakh women PMJDY account holders under direct benefit transfer during the COVID-19 pandemic. In the year under review, loans to the tune of Rs. 5,531.98 crore to 8.94 lakh beneficiaries were extended under the Pradhan Mantri Mudra Yojana (PMMY) and nearly Rs. 82.60 crore to 388 beneficiaries under the ‘Stand up India' scheme to Scheduled Caste, Scheduled Tribe and women borrowers. Your Bank also has actively supported PM Street Vendor's AtmaNirbhar Nidhi (PMSVANIDHI) a special scheme under micro-credit facility for street vendors with a collateral free affordable term loan of Rs. 10,000 for 1 year, where your bank has disbursed Rs. 10,000 each to 3,157 street vendors to support them during the pandemic and have also educated the street vendors for using digital mode for making financial transactions.

Sustainable Livelihood initiative

This is primarily a social initiative with elements of business. It entails skill training, livelihood financing, and creating market linkages. (Please refer to page 95 for details)

Rs. 10,000 disbursed to each person under PMSVANIDHI scheme


Street vendors benefitted

E) Environmental Sustainability

Banking by the very nature of its business, is environment- friendly. During the year under review, your Bank has gone a little further. The Bank has undertaken several initiatives to reduce its Scope I and Scope II emissions and energy consumption in line with its set targets. To encapsulate your Bank's philosophy, maintaining a balance between natural capital and communities is now integral to our functioning.

To this end, our ATMs have gone paperless, contributing to a reduction of the carbon footprint. Your Bank has given this effort a further fillip by ensuring multi-channel delivery through NetBanking, Phone Banking, and Mobile Banking. This results in lower carbon emission not just from operations, but also from reduced customer travel. We have installed rooftop solar panels in some of our large offices to supplement grid power with renewable energy.

(Please refer to Annexure 2 of this report for disclosures pertaining to CSR as required under the relevant Rules)

F) Business Enablers

1) People Transformation

In a year which has seen the worst humanitarian and health crisis of the century, your Bank has continued to show buoyant growth and resilience due to the commitment and tenacity of its people.

This year, your Bank, being in the essential services sector, had to strike a delicate balance between ensuring the health and safety of its employees while at the same time ensuring that banking operations continued unhindered. As an immediate response to the COVID-19 crisis, every effort was made to transition large sections of the employee base to ‘Work from home'. However, there were also several employees who had to continue to attend office physically as branches and ATMs continued to be functional during the lockdown. Hence a two-pronged approach was taken viz. a) Measures to ensure health and safety of employees who were physically required to attend office and b) Transition support to new ways of working to those who were working from home. The focus of the actions has been along three dimensions: a) Physical well-being, b) Psychological wellbeing and c) Social well-being.

The entire employee awareness and support campaign under the aegis of #HumHaarNahinMaanenge' and ‘HDFC Bank Cares'. which was initiated during the initial wave of the pandemic continues to run even now as we battle the second and more serious wave of the pandemic in India. The campaign also focused on building employee morale and resilience during this period of crisis. Your Bank's internal communication channel ‘Our World', which is accessible to all employees, was leveraged to ensure all relevant communication reached employees through a single channel. This was in addition to regular communication over emails.

Strengthening our Communication Channels: We strengthened the ‘structured' Employee Connect on the ground by our HR business partners to enable any urgent support to employees. A ‘We Care' survey was rolled out during April 2020 to assess employee well-being at the start of the pandemic. This enabled employees who were operating in far-flung locations across the length and breadth of the country to reach out and seek help for themselves and their family members. Employees who needed medical help were connected with doctors and guided further on medical assistance. This was basis the Bank's tie ups for medical insurance.

24*7 access to Doc on Call facility and Counselling facility was provided to employees and their families to seek immediate medical guidance over a quick phone call during a crisis. Mental health issues due to stress have also increased globally during the pandemic. The counselling facility enabled employees to seek help while being assured of confidentiality.

Resource Support: Several wellness related online videos were made available to employees to support their physical and mental well-being. Yoga sessions and online fitness challenges like Stepathalon etc. were conducted. An awareness campaign around building immunity practices and talks by psychologists to manage anxiety were also made available in the e-mode. We recognise the critical role played by managers in ensuring high engagement levels amongst employees during this transition. Hence, resources to enable managers realign themselves to managing their teams in a remote working environment have also been a key focus area.

Your Bank has also put in place several measures to support employees who have been required to attend office in person in branches or at Central offices.

This includes temperature screening and providing an adequate stock of sanitisers for those coming to work. Rostering enables people to follow social distancing norms. Detailed guidelines and advisory on ‘Do's and Don'ts' at the workplace - have been circulated. Timely sanitisation and fumigation measures and periodic deep cleaning are being ensured. Strict norms for quarantine procedures, in case self or family members are found positive, are being adhered to.

As the first wave receded and a larger set of employees started coming to office physically, a detailed ‘Return to Work' handbook ensured ready availability of guidelines to employees.

Social Wellness: We recognise that all through the harsh period of lockdown and social distancing, a key human need to bond and socialise with fellow colleagues has been left unfulfilled. This can result in considerable psychological

stress. So, several employee connect initiatives were recalibrated to a digital mode to bring in the much needed social bonding and recreational element at work. Your Bank's annual talent competition ‘Hunar' was run digitally and several new initiatives like Festive Webinars, a Digital Voice Hunt, online photography contests etc. were introduced. Effort was also made to bring in family members of the employees within the umbrella of these initiatives. Unique participants to each programme aggregated to more than 44,000 employees.

Policy and processes to support remote working and impacted employees have been put in place. Employees affected by the coronavirus can take special leave until they recover over and above the regular leaves available to them. Detailed guidelines on availing staff medical insurance have been circulated. We have also extended the medical insurance benefit for expenses incurred during home quarantine. Your Bank is also reimbursing the cost of vaccination for employees and their dependents. With the rising number of cases in the second wave, we are putting in place tie-ups through which employees can have ready access to quarantine and medical care facilities for themselves and their families.

All of the above have been designed to support employees and their families navigate through the crisis. We have also continued to pay regular salaries to all employees and also ensured annual increments, bonus and promotions in line with the usual cycle followed in your Bank. There have been no lay-offs and the sense of security instilled amongst employees has gone a long way in ensuring a high level of employee engagement.

During the initial phase of the lockdown, your Bank focused on utilising the available productive time of employees in skill building and learning certifications. To enable this, the entire learning architecture was made available in a digital mode on a war footing. Innovative ways of imparting learning to a remote workforce were explored and appropriate certifications based on business need were made available in a digital mode. As many as 33 lakh+ learning certifications were completed with more than one lakh employees completing at least one certification.

We recognise that an essential quality which has helped your Bank and its large employee base spread across geographies respond so well to the crisis is a culture which is highly resilient and deeply rooted in what we know as the ‘HDFC Bank way' of doing things.

We recognise that an essential quality which has helped your Bank and its large employee base spread across geographies respond so well to the crisis is a culture which is highly resilient and deeply rooted in what we know as the ‘HDFC Bank way' of doing things. To this end, your Bank has embarked on a conscious journey of a Culture Transformation which is enshrined along with the critical leadership tenets of ‘Nurture, Care and Collaborate'.

A large scale organisation transformation which is leader-led, with interventions designed to reach every supervisor in the Bank across every remote geographical location, is an ambitious goal which we have set for ourselves This is expected to result in an engaged workforce which in turn will be a source of competitive advantage. A blend of interventions based on the 70:20:10 principle ranging from fireside chats with leaders, video messages, on the job activities have been incorporated into this which will run well into the coming year as well. A culture based on the ethos of ‘Nurture, Care, Collaborate' pre-supposes the existence of an inclusive culture. A videobased campaign under the aegis of ‘Valuing Differences' was launched to create awareness on inclusion.

In addition, we have continued to focus on creating the building blocks of an institutionalised approach to talent management in the Bank. This year was witness to several initiatives aimed at strengthening the talent pipeline and putting in place clearly visible succession plans for 100+ senior leadership positions. Detailed talent review meetings in order to have a formal, unified, organisation-wide view of talent and chalking out focused development plans which started last year, have been now recalibrated to a virtual set-up. It is now being institutionalised. as a defined practice. Focus is now on creating technology enablers which will help deepen this process across your Bank. Likewise, the availability and identification of successors to senior leadership positions has been a key focus area. The emphasis will now be on ensuring required developmental inputs to ensure high level of readiness.

SPARK was a structured Leadership Development initiative for 100+ senior leaders which was delivered in conjunction with a globally acclaimed partner. It was developed basis detailed discovery workshops with the senior leadership and was delivered in a blended format, which included self-discovery through rigorous psychometrics and individualised coaching sessions, fireside chats and state-of-the-art courseware for self-paced learning. This is the first step towards building a structured approach to leadership development, catering to varying needs across different leadership levels.

The focus on building a talent pipeline at the entry level through the job-ready model termed ‘Future Bankers Program', created in partnership with the Manipal Global Academy of BFSI, has done well. There have been 1500+ enrolments into the programme pan-India and candidates from the initial batches have been successfully absorbed into full time roles after an internship with your Bank.

Your Bank was at the seventh place in the Business Today list of India's Coolest Workplaces.

2) Information Technology New Ways of Banking

In the last year, the global pandemic has changed the way India banks. Digital banking has become a way of life and your bank has been taking consistent steps to ensure a smooth and safe customer experience. In the new normal, your Bank has introduced new ways to bank, such as:

• Insta Account Opening: This allows instant account opening with just a mobile, Aadhaar and PAN numbers

• Video KYC: Automation of KYC process through video calling from the comfort and safety of a customer's home

Strengthening Technology Infrastructure

Digital Products are only as strong as the infrastructure supporting them. In the last 12 months, your Bank has taken multiple steps to ensure robust, scalable and secure technology.

Some key initiatives include:

• Capacity for UPI has been tripled: Your Bank has successfully managed over 23 lakh transactions in an hour. It is ranked among the top in the published NPCI dashboard of UPI Performance Metrics

• Technical declines are down with the average uptime for customers at 99.91 per cent in the year under review

• Net Banking and Mobile Banking capacity has been doubled to manage 90,000 users concurrently; a significant step as most of our customers now rely on our digital channels for banking needs

• Your bank has migrated core Data Centres in Bengaluru and Mumbai to state-of-the-art facilities

• Disaster Recovery drills have been completed for all critical payment systems. This has reinforced our capability to switchover in less than 45 minutes when needed

• Significant upgrades in Network and Security infrastructure to support our exponential growth in digital transactions

Transactions managed in an hour

23 lakh+

Technology Issues and Solutions

Your Bank faces technology challenges and humbly accepts It and is actively working towards resolving it.

Things however have to be seen in perspective. Your Bank could not have become a leading player in the space, grown its market share across business segments (y-o-y) and serviced millions of customers in real time without a strong technology backbone.

In the last 28 months, your Bank has experienced five instances of downtime. Every instance has hardened its resolve to do better. The country has embarked on a tremendous digitisation drive across all sectors of the economy. And your Bank is committed to rising to the occasion and delivering value for all stakeholders by implementing cutting-edge technology solutions. This transformation is an ongoing journey. Some of the technology transformation will be implemented with strategic long-term objectives such as adopting the latest best-in-class technology.

Your Bank also has ambitious growth plans. In this context, it has embarked on a scale changing technology adoption and transformation agenda. Our aim is to ‘Keep Systems ALWAYS ON. ALWAYS SECURE. AND PERFORM at SCALE'. Some of the specific initiatives that we have embarked on in our Technology Transformation Agenda include: Infrastructure scalability, Disaster Recovery (DR) resiliency, Security Enhancements and Enhanced Monitoring Mechanisms.

Your Bank continues to invest in IT products, infrastructure, services and tools to ensure a seamless banking experience. Key initiatives like a streamlined Customer Experience Hub and a modernised and significantly strengthened customer experience, allowing access to content across channels and devices, are on the anvil. Your Bank will continue to innovate and provide an enhanced digital experience so that your banking needs can be fulfilled in a safe, secure and convenient manner.

3) Service Quality Initiatives and Grievance Redressal

Customer Focus is one of the five core values of your Bank. Driven by this core value, your Bank has always endeavoured to improve customer experience and has adopted a holistic approach for the same across multiple channels. This is critical in a highly competitive business

environment, especially since it has various lines of businesses. Ensuring product quality and service delivery becomes vital for business growth. Your Bank desires to achieve this by seeking customer feedback as well as benchmarking with best-in-class business entities. Your Bank invites and reviews the performance on customer service as well as grievance redressal at different levels - Branch Level Customer Service Committees (BLCSCs), Standing Committee on Customer Service (SCCS) and Customer Service Committee of the Board (CSCB).

Your Bank has adopted a multi-pronged approach to provide an omnichannel experience to its customers. On one side, your Bank has traditional touch points like branch and phonebanking, and on the other side, it has state- of-the-art platforms like Net Banking, Mobile Banking, the chatbot Eva offering a wide range of channel choice to its customers. Your Bank has also improvised on the relationship based banking programmes. In addition to the branch based relationship managers, it now has a Virtual Relationship Manager (VRM) programme to cater to various financial needs in a personalised manner. Your Bank has put robust processes in place to regularly monitor and measure quality of service levels not only at various touch points but also at a product and process level by a specialised team called Quality Initiatives Group, which also works towards implementing strategic initiatives of your Bank through customer experience management.

As part of its continuous efforts to enhance quality of service, the Service Quality team carries out regular reviews, including mystery shopping across various products/processes/channels by following a structured calendar. Service Quality reviews span across all customer touch points like Retail Branches, ATM, PhoneBanking, NetBanking, MobileBanking, Email Services, Relationship based banking etc, and cover key service parameters like adherence of stipulated TAT, complaints reduction and transactions monitoring to ensure meeting the committed service levels along with process enhancements. The effectiveness of the quality of service is reviewed periodically at different levels, including the Customer Service Committee of the Board.

Your Bank has provided multiple channels to its customers to share feedback on its services as well as register their grievances. It has a Grievance Redressal Policy, duly approved by its Board, available in the public domain for ready reference of the customers. Your Bank is at the forefront of developing innovative financial solutions and digital platforms. This, coupled with concerted efforts at creating awareness among customers, has led to an increase in the use of its digital channels as well as customer loyalty. Keeping customer interest in focus, your Bank has formulated a Board approved Customer

Protection Policy, which limits the liability of customers in case of unauthorised electronic banking transactions.

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

Thanks to these initiatives, your Bank's customer complaints for FY 21 decreased by 14.8 per cent to 3,25,786 from 3,82,235 in the previous year.

4) Risk Management and Portfolio Quality

Traditionally, the key risks that your Bank is exposed to in the course of its business have been the Pillar 1 risks - Credit Risk, Market Risk and Operational Risk. Given the evolving banking landscape, Liquidity Risk and Cyber Security Risk are also vital. These risks not only have a bearing on your Bank's financial strength and operations but also on its reputation. Keeping this in mind, the Bank has put in place Board-approved risk strategy and policies, whose implementation is supervised by the Risk Policy and Monitoring Committee (RPMC). The Committee monitors the compliance of risk parameters / aggregate exposures with the appetite set by the Board. It 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. It 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 Risk

• Credit Concentration Risk

• Counterparty Credit Risk

• Market Risk

• Operational Risk

• Liquidity Risk

• Interest Rate Risk in the Banking Book

• Intraday Liquidity Risk and Intra Day Credit Risk

• Model Risk

• Technology Risk

• Outsourcing Risk

• Strategic Risk

• Business Risk

• Compliance Risk

• Reputation Risk

Credit Risk

Credit Risk is defined as 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 distinct credit risk architecture, policies, procedures and systems for managing credit risk in both its retail and wholesale businesses. Wholesale lending is managed on an individual as well as portfolio basis. In 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 to minimise loss from default. The factors considered while sanctioning retail loans include income, demographics, credit history, loan tenor and banking behaviour. In addition, there are multiple credit risk models developed and used to appraise and score different segments of customers on the basis of portfolio behaviour. In wholesale loans, credit risk is managed by capping exposures on the basis of borrower group, industry, credit rating grades and country, among others. This is backed by portfolio diversification, stringent credit approval processes and periodic post-disbursement monitoring and remedial measures. Your Bank has been able to ensure strong asset quality through volatile times in the lending environment by stringently adhering to prudent norms and institutionalised processes.

During the COVID-19 pandemic, your Bank followed RBI directions and granted moratorium, loans backed by Government guaranteed schemes and also carried out one-time restructuring of the accounts. Your Bank has been prudent and adaptive in ensuring higher risk standards and proactively reviewing risk thresholds keeping in mind the COVID-19 pandemic. Further, your Bank assessed the potential stress impact of the pandemic on the credit profile of the Bank basis the available information accompanied with assumptions and judgemental overlay. As on March 31, 2021, your Bank's ratio of Gross Non Performing Assets (GNPAs) to Gross Advances was 1.32 per cent. Net Nonperforming Assets (Gross Non-Performing Assets Less Specific Loan Loss provisions) was 0.40 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 Lending and Credit Risk

Driven by rapid advancements in technology, digitalisation is increasingly becoming a key differentiator for 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 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 facilitates evaluation on their loan eligibility. Besides, most of the credit checks and scores used by your Bank in process-based underwriting are replicated for digital loans. 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, back tested and corrective action is taken whenever needed.

Market Risk

Market Risk arises largely 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. The Market Risk capital charge of your Bank is computed on a daily basis using the Standardised Measurement Method applying the regulatory factors.

Further, owing to the COVID-19 pandemic, your Bank evaluated the plausible Mark to Market (MTM) impact on the trading portfolio, assuming judgemental scenario shocks, and undertook frequent reviews of trading portfolio for optimised deployment of surplus liquidity within the Bank. It is observed that at the onset of the pandemic, most of the asset classes became extremely volatile and the market witnessed significant correction in equities, weakening of domestic currency, surge in corporate spreads, etc under extreme risk aversion. Subsequently, both the global and Indian markets showed a sharp recovery.

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 Liability Management Policy that is implemented, monitored and periodically reviewed by the Asset Liability Committee (ALCO). As part of this process, your Bank has established various Board-approved limits, both for liquidity and interest rate risks. While the maturity gap and stock ratio limits help manage liquidity risk, net interest 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. Due to the moratorium on loans and advances announced by the RBI during the COVID-19 pandemic, your Bank has conducted liquidity stress under an additional stress scenario, assuming incremental moratorium availed by customers and the stress gaps were within the internal threshold defined.

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. Further, your Bank also has the necessary framework in place to manage intraday liquidity risk.

The Liquidity Coverage Ratio (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. While the RBI had provided dispensation to maintain the LCR at 80 per cent until September 30, 2020 and at 90 per cent until March 31, 2021 owing to COVID 19 pandemic, your Bank has consistently maintained the LCR well above 100 per cent. Based on Basel III norms, your Bank's LCR stood at 137.95 per cent on a consolidated basis for FY 2020-21.

Liquidity Coverage Ratio

137.95 per cent

on a consolidated basis for FY 2020-21

The RBI has also proposed a minimum Net Stable Funding Ratio (NSFR) of 100 per cent, which shall be effective from October 1,2021. 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. As a prudent risk management practice, your Bank has been monitoring this ratio, and is thus adequately prepared to meet the RBI mandated requirements.

The accommodative policy stance by the RBI during the pandemic has resulted in the system liquidity at elevated levels. Your Bank also had a comfortable liquidity surplus during the year.

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.

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 managing Operational Risk on a daily basis, in addition to implementing internal control-related policies and procedures.

The second line of defence is the ORMD, which develops policies, procedures, tools and techniques to assess and monitor the adequacy and effectiveness of your Bank's internal controls. In order to achieve the aforesaid objective pertaining to operational risk management framework, the ORMC oversees the ORMD 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)) and

• Management and reporting through KRI, RCSA and loss data 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 management of its day-today 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 Security Practices

Your 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, among others. Your Bank has put in place a governance framework, information security practices and business continuity plan to mitigate IT-related risks. An independent assurance team within Internal Audit provides assurance on the management of IT-related risks.

Your 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 and cyber security policy are in place. Your Bank also has 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 mandatorily and periodically undergo information security training and sensitisation exercises.

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 taken to prevent recurrence.

Fraud Monitoring committees at the senior management and Board level also deliberate on material 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 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 on its own. 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.

Cyber Security and Data Risk

Your Bank has robust cyber security measures in place. For details please refer page 53.


Your Bank has a structured management framework in the Internal Capital Adequacy Assessment Process (ICAAP) to identify, assess 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 Board- approved ICAAP Policy.

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. Typically, these relate, inter alia, to the impact on your Bank's profitability and capital adequacy.

In the backdrop of the COVID-19 pandemic, your Bank developed a topical stress scenario to assess the impact of COVID-19 stress on Credit Risk, Market Risk and Liquidity Risk. The COVID-19 pandemic crisis has been unprecedented, uncertain and continuously evolving. Thus the underlying assumptions and building blocks of the stress methodology get modified depending upon how the pandemic evolves domestically and globally. The stress results from this framework are deployed to ascertain the capital consumption under Pillar II risks as well as the overall impact on the capital adequacy of your Bank.

The COVID-19 pandemic crisis has been unprecedented, uncertain and continuously evolving. Thus the underlying assumptions and building blocks of the stress methodology get modified depending upon how the pandemic evolves domestically and globally.

Group Risk

Your Bank has two subsidiaries, HDB Financial Services Limited and HDFC Securities Limited. The Board of each subsidiary is responsible for managing their respective material risks (Credit Risk, Market Risk, Operational Risk, Liquidity Risk, Technology Risk, Reputation Risk, Compliance Risk and others). The Group Risk Management Committee (GRMC) was instituted in your Bank under the ICAAP framework to establish a formal and dedicated structure to periodically assess the nature/quantum of material risks of the subsidiaries and adequacy of its risk management processes. 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.

Business Continuity Planning (BCP)

Your Bank has an ISO 22301 certified Business Continuity Plan (BCP) in place to minimise service disruptions and potential impact on its business, employees and customers during any unforeseen adverse event or circumstances. The central Business Continuity Office works towards strengthening the continuity preparedness. The plan is designed in accordance with the regulatory guidelines and is reviewed regularly. The implementation is overseen by the Information Security Group and the Business Continuity Steering Committee which is chaired by the Chief Risk Officer (CRO). The Business Continuity Policy and Procedure defines roles for Crisis Management, Business Recovery, Emergency Response and IT Disaster Recovery Planning teams. Please refer to page 54 for more details.

Ensuring Business Continuity during COVID 19

Team HDFC Bank rose to the challenge of delivering banking services during the outbreak of the COVID-19 pandemic. Your Bank emerged successfully from the nationwide lockdown and adopted a hybrid approach of working from home, nearby location as well as base location in accordance with pandemic protocols that have been periodically released by the Government.

This has ensured that we continue to keep the safety of our employees as our first priority. It was realised that the pandemic situation was going to be a long haul. Therefore the teams adopted various continuity strategies like split operations, work transfer, people transfer and work from home to move from crisis mode to business mode and continue delivering services to customers.

5) 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 April 1, 2018 with comparatives for the periods beginning April 1, 2017. The RBI, through its circular dated February 11, 2016, required all scheduled commercial banks to comply with IND-AS for financial statements for the stated periods. The RBI did not permit banks to adopt IND-AS earlier than the stated timelines. The said guidelines also stated that the RBI shall issue necessary instructions/guidance/clarifications on the relevant aspects for implementation of IND-AS as and when required.

The implementation of IND-AS by banks requires certain legislative changes in the format of financial statements to

comply with the disclosures required under IND-AS. The change in the 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. Considering the amendments needed to the Banking Regulation Act, 1949, as well as the level of preparedness of several banks, the RBI, through its Statement on Developmental and Regulatory Policies dated April 5, 2018, had deferred the implementation of IND-AS by a year by when the necessary legislative amendments were expected. The legislative amendments recommended by the RBI are under consideration by the Government of India. Accordingly, the RBI, through its circular dated March 22, 2019, deferred the implementation of IND-AS until further notice.

The implementation of IND-AS is expected to result in significant changes to the way your Bank prepares and presents its financial statements. The areas that are expected to have significant accounting impact on the application of IND-AS are summarised below:

1) Financial assets (which include advances and investments) shall be classified under amortised 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 recognised in the income statement using the effective interest rate method, where the coupon, fees net of transaction costs and all other premiums or discounts will be amortised over the life of the financial instrument.

3) Stock options will be required to be fair valued on the date of grant and be recognised as staff expenses 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. Your Bank will generally be required to recognise either a 12-month or lifetime ECL, depending upon 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 NPAs. Your Bank will be required to apply a three-stage approach to measure ECL on financial instruments accounted for at amortised 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-Month 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 12 months will need to be recognised.

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 recognised.

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 recognised.

Interest revenue will be recognised 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 recognised in equity (reserves and surplus).

Your Bank, being an associate of Housing Development Finance Corporation Limited (the ‘Corporation'), is required to submit its consolidated financial information (‘fit-for-consolidation information'), prepared in accordance with the recognition and measurement principles of IND-AS as specified under Section 133 of the Companies Act, 2013, to the Corporation for the purposes of the consolidated financial statements/results of the Corporation. The results of the Bank upon its first-time adoption of and transition to IND-AS, based on the updated regulations and accounting standards/guidance and business strategy at the date of actual transition, could differ from those reported in the fit-for-consolidation information.

6) Internal Controls, Audit and Compliance

Your Bank has put in place extensive internal controls and processes to mitigate Operational Risks, including centralised operations and ‘segregation of duty' between the front office and back office. The front-office units usually act as customer touch-points 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 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, 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:

(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

(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

(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 outstanding

(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 i.e. 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 actions. A strong oversight on the operations is also kept through off-site monitoring.

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.

Any new product/process introduced in your 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 proactively 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 with regulatory guidelines and promotes a compliance culture in the Bank.

Your Bank has a comprehensive Know Your Customer, 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 has taken significant measures in developing and enhancing an effective and sustainable KYC AML and CFT Compliance Programme. Adherence to the guidelines prescribed in the policy is monitored by your Bank at various stages of the customer lifecycle. Your Bank has robust controls in place to ensure adherence to the KYC guidelines at the time of account opening.

Your Bank also has a continuous review process in the form of transaction monitoring, including a dedicated AML CFT monitoring team, which carries out transaction reviews for identification of suspicious patterns/trends that helps your Bank to further carry out enhanced due diligence and appropriate actions thereafter. The status of adherence to the KYC, AM L and CFT guidelines is also placed before the Audit Committee of the Board for their review at quarterly intervals.

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.

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.

G) Performance of Subsidiary Companies

Your Bank has two subsidiaries, HDB Financial Services Limited (HDBFSL) 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 largest retail broking firms. The financial results of the subsidiaries are prepared in accordance with notified Indian Accounting Standards (‘Ind-AS') with effect from April 1, 2018 (April 1, 2017 being the transition date). Accordingly, the financial results for the comparative reporting period have also been prepared in accordance therewith.

The detailed financial performance of the companies is given below.

Transacting customers of HSL

10.10 lakh

HDFC Securities Limited (HSL)

HSL's Total Income under Indian Accounting Standards was Rs. 1,399.43 crore as against Rs. 862.26 crore in the previous year and Net Profit was Rs. 703.23 crore as against Rs. 384.15 crore in the previous year. The company has a customer base of 27.26

lakh to whom it offers an exhaustive range of investment and protection products. In the year under review, HSL had 10.10 lakh (a little over a million) transacting customers. The focus on digitisation continued. Notably, 92 per cent of its customers accessed its services digitally, against 79 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 216 branches across 159 cities/ towns at the end of the year. It created Digital Boarding Journeys which led to more than 50% customers being onboarded digitally.

In the case of Margin Trade Funding (MTF), the average book size during the year was Rs. 932 crore, which is 71% higher than the average book size of Rs. 544 crore in the last financial year. The book size at the year end stands at Rs. 1,680 crore. The stock markets started FY 2020-21 with pessimism and ended with optimism. An important indicator of this has been the Nifty 50's sharp swing from 8,473 in March 2020 to 14,720 by the end of the year. This resulted in HSL's improved performance. The benchmark index Nifty rose 73% whereas the Sensex rose 68% over this year. Digitisation, along with the vaccination drive, the various stimulus packages and the FY 2021-22 Budget have added to investor confidence in the markets.

As on March 31, 2021, your Bank held 96.34% stake in HSL.


Rs. 61,560.7 crore

as of March 31, 2021

HDB Financial Services Limited

Incorporated in 2007, HDB Financial Services Limited (‘HDB') is a subsidiary company of HDFC Bank. It has a strong network of over 1,319 branches spread across 959 cities/towns. HDB's net interest income grew 6.8 per cent to Rs. 4,262.7 crore for the year ended March 31, 2021, from Rs. 3,991.0 crore in the year ended March 31, 2020. Profit for the year under review was Rs. 502.8 crore against Rs. 1,036.9 crore in the previous year. Its Assets Under Management for the year ended March 31, 2021 stood at Rs. 61,560.7 crore. HDB is a leading NBFC that caters to the evolving needs of its customers by re-imagining opportunities and fulfilling their aspirations. As a one-stop financial services provider, HDB offers a comprehensive suite of products and service offerings that are tailor-made to suit its customers' requirements, including first-time borrowers and the underserved segments.


HDB is engaged in the business of Loans, Fee based products and BPO services.

Loans: HDB offers a diversified range of product offerings (secured and unsecured) to various customer segments. These include Consumer Loans, Enterprise Loans, Asset Finance and Micro-Lending.

Consumer Loans

Consumer loans are offered to customers to buy household goods, appliances and personal devices. HDB also provides loans to individuals for personal, family or household purposes to meet their short or medium term requirements.

Enterprise Loans

HDB offers secured and unsecured loans designed to meet the needs of Small and Micro Enterprises including working capital and term loans.

Asset Finance

HDB offers loans for the purchase of new and used vehicles and equipment that generate income for the borrowers. The customer base includes fleet owners, first time users, first time borrowers and captive use buyers.

Micro Lending: HDB recently started providing micro-loans to borrowers through the Joint Liability Groups (JLGs) framework. With Micro-Lending, HDB endeavours to empower and promote financial inclusion within these sections, thus resulting in sustainable development of the nation.

Fee based products/Insurance Services

HDB is a registered Corporate Insurance Agent having licence from Insurance Regulatory & Development Authority of India (IRDAI). It sells Life and General insurance products.

BPO Services

HDB runs a Collections BPO business, offering end-to- end, specialised collection services with domain expertise in collections tele-calling, recovery management, collections analytics and cash reconciliation management. The division also delivers back-office services such as forms processing, documents verification, finance and accounting services and correspondence management. Front office services such as contact centre management, outbound marketing and collection services are also undertaken by HDB.

The Enablers

HDB has a strong understanding of customer needs, providing them with customised products and has a robust risk management framework, which enabled the company to grow even in a pandemic year. HDB's presence across diverse digital channels has enabled the company to offer a wide variety of financial solutions to its customers. HDB's customers can access their loan account 24*7 through its Mobile Banking Application * ‘HDB On The Go', Customer Service Portal, Missed Call Service, WhatsApp Account Management Service and the Chatbot #AskPriya.

As on March 31, 2021, your Bank held 95.1 per cent stake in HDB.

Other Statutory Disclosures

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

Seventeen (17) meetings of the Board were held during the year under review. 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 Annual Return of the Bank in the prescribed Form MGT-7 is available on the website of the Bank at the link https://www.hdfcbank.com/personal/about-us/investor- relations/annual-reports.

Requirement for maintenance of cost records

The cost records as specified by the Central Government under Section 148(1) of the Companies Act, 2013, are not required to be maintained by the Bank.

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

During the year under review, no instances of fraud committed against the Bank by its officers or employees were reported by the Statutory Auditors and Secretarial Auditor under Section 143(12) of the Companies Act, 2013 to the Audit Committee or the Board of Directors of the Bank.

Directors' Responsibility Statement

Pursuant to Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, 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, 2021 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 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 is in compliance with all applicable Secretarial Standards as notified from time to time.

Statutory Auditors

The Bank's current Statutory Auditors are MSKA & Associates, Chartered Accountants. MSKA & Associates were appointed as Statutory Auditor of the Bank, to hold office for a period of four consecutive years from the conclusion of the 25th AGM of the Bank held on July 12, 2019, till the conclusion of the 28th AGM to be held for the Financial Year 2022-23, subject to the approval of the Reserve Bank of India. Pursuant to the Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) dated April 27, 2021 issued by the Reserve Bank of India (‘RBI Guidelines'), banks may appoint the SCAs/SAs for a continuous period of three years. Since MSKA & Associates have already completed two years as Statutory Auditors of the Bank for FY 2019-20 and FY 2020-21, they may continue as Statutory Auditor for one more year, i.e. FY 2021-22, subject to the approval of the RBI. Accordingly, the Bank needs

to revise the tenure of appointment of MSKA & Associates as Statutory Auditor of the Bank, to be read as a period of three years w.e.f FY 2019-20 till FY 2021-22, instead of the original tenure of four years w.e.f FY 2019-20 till FY 2022-23 as earlier approved by the shareholders.

Further, the RBI Guidelines mandate that for banks with asset size of '15,000 crore and above as at the end of previous year, the statutory audit should be conducted under joint audit of a minimum of two audit firms. Accordingly, the Bank needs to appoint minimum of two joint statutory auditors as per RBI guidelines. Accordingly, the Board of Directors, on the recommendation of the Audit Committee, has finalized and recommended to RBI for approval, the name of M. M. Nissim & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 107122W/W100672) as the first preferred firm to act as joint Statutory Auditors of the Bank for a period of three years from FY 2021-22 till FY 2023-24, subject to approval of the shareholders at the ensuing AGM and subject to RBI approval for each year of their tenure. This firm shall act as the joint Statutory Auditors of the Bank along with MSKA & Associates for FY 2021 -22 and thereafter act as joint Statutory Auditors of the Bank with such other new joint Statutory Auditor(s) who will be appointed by the Bank subject to prior permission of RBI and approval of the Members of the Bank from FY 2022-23 onwards.

Appropriate resolutions in this regard are also being proposed at the ensuing AGM.

During the year ended March 31,2021, fees paid to Statutory Auditors (MSKA & Associates) and its network firms are as follows:

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 3.20 - -
Certification & assurance services 0.98 - -
Non-audit services - - -
Outlays and Taxes 0.45 - -
Total 4.63 - -

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 (MSKA & Associates) to this effect.

Related Party Transactions

Particulars of contracts or arrangements 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 3.

Particulars of Loans, Guarantees or Investments

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of the 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 note number 11 of Schedule 18 of the Financial Statements as per the applicable provisions of the 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 are enclosed as Annexure 4 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 Bank values and conduct business worldwide with integrity and highest ethical standards, the Bank has also adopted a ‘Whistle Blower Policy' which encompasses a comprehensive framework of managing complaints of every stakeholder. It encourages its employees and various stakeholders to raise concerns about illegal / unethical behaviour observed in the Bank, compromise/ violation of Bank's Code of Conduct and Ethics Policy or legal or regulatory provisions, corruption, misuse of office, criminal offences, actual or suspected fraud and other malpractices detrimental to the interest of the Bank without any fear of reprisal, discrimination, harassment or victimization of any kind.

The policy also covers reporting of instances of leakage/ suspected leakage of unpublished price sensitive information which are in violation to SEBI (Prohibition of Insider Trading) Regulations and the Share Dealing Code of the Bank.

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 mapped to the Whistle Blower Committee members or by way of letter addressed to the Chief of Internal Vigilance of the Bank. Such complaints can also be filed directly by the employee in the internal Information Portal of the Bank. In case the whistle blower wishes to raise a complaint directly to the members of the Audit Committee of the Board (ACB), and not through above mentioned normal channels, the complaint may be directly made to the Chairperson of the ACB.

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 to be correct, then the Competent Authority shall recommend to the appropriate Disciplinary Authority to take suitable action against the responsible official and corrective measures in consultation with the concerned stakeholders. The decision of the Whistle Blower Committee is final and binding on all. Other actions/measures considered necessary to prevent/ curb recurrence of events are 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 ACB. No person has been denied access to the ACB. During the financial year 2020-21, a total of 86 such complaints were received and taken up for investigation of which 56 whistle blower complaints were resolved as of March 31,2021. Further, 21 cases have resulted in certain staff actions post investigation. The broad categories of whistle blower complaints were in the areas of improper business practices, behavioural related issues and corruption related.

The Whistle Blower Policy is available on the website of the Bank at the link- https://www.hdfcbank.com/personal/about- us/corporate-governance/codes-and-policies

Securities Class Action Suit

On September 3, 2020, a securities class action lawsuit was filed against the Bank and certain of its current and former officers in the United States District Court for the Eastern District of New York. The complaint was amended on February 8, 2021. The amended complaint alleges that the Bank, its former Managing Director, Mr. Aditya Puri, and the present Managing Director & CEO, Mr. Sashidhar Jagdishan made materially false and misleading statements regarding certain aspects of the Bank's business and compliance policies, which resulted in the Bank's American Depository Share price declining on July 13, 2020 thereby allegedly causing damage to the Bank's investors. The Bank believes that the asserted claims are baseless and without merit and intends to vigorously defend against the allegations.

Statement on Declaration by Independent Directors

Mr. Malay Patel, Mr. Umesh Chandra Sarangi, Mr. Sanjiv Sachar, Mr. M. D. Ranganath and Mr. Sandeep Parekh are the Independent Directors whereas Dr. (Ms). Sunita Maheshwari is the Additional Independent Director on the Board of the Bank as on March 31, 2021. Further, the Bank has appointed Mr. Atanu Chakraborty as the Part Time Non-Executive Chairman and Additional Independent Director of the Bank with effect from May 5, 2021.

Pursuant to the provisions of Section 149 of the Act, the Independent Directors have submitted declarations that each of them meet the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. 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.

In compliance with Sections 149 and 152 of the Companies Act, 2013, Mr. Umesh Chandra Sarangi is proposed to be re-appointed as an Independent Director of the Bank at the ensuing Annual General Meeting. A resolution seeking shareholders' approval for his re-appointment forms a part of the Notice of this AGM. A brief resume is furnished in the report on Corporate Governance for the information of shareholders.

Board Performance Evaluation

The Bank's Board of Directors, led by the Nomination and Remuneration Committee (NRC), invited an independent third-party global leadership advisory firm to conduct a Board effectiveness review to monitor and enhance its performance, and reinforce a culture of high performance in the boardroom.

The review focused on two sides of the ‘governance' coin: processes and behaviors. In particular, the areas of review for the Board included Board structure and composition; relationships & dynamics on the Board; meetings, information flows and agenda; strategy and business performance; talent management and succession planning; risk management, regulatory compliance, governance practices and continuous development.

The Committees review focused on areas including overall effectiveness, Committee composition and succession planning, clarity of remit and delegated authority, balance of agenda items between the Committee and the Board and clarity and action items reported by the Committee to the Board.

At an individual Board member level, Independent and NonIndependent Board members were assessed in areas like overall engagement and alignment, quality of contribution, openness

in listening and receiving feedback, ability to challenge and take tough decisions etc.

The review made use of both an online structured questionnaire and follow-up 1-1 individual director interviews. Key executives from the management team also lent their perspective on their interactions and experience with the Board through additional conversations. The findings on the Board's current practices were benchmarked with global best-in-class organizations.

The review findings recognized the functional expertise of the Board members, functioning of the key Committees, Board's detail-oriented approach and effectiveness of Board's oversight on critical matters. The culture of cohesiveness, integrity, trust and transparent decision-making at the Board was also noted. Some areas of focus for Board going forward included increasing time dedicated to strategic topics, bringing a holistic enterprise wide approach to risk management and succession planning.

The findings of the exercise were reviewed by the NRC, Independent Directors and the Board. The appropriate feedback was conveyed to the Board members and other concerned stakeholders, for suitable action.

Since Dr. (Ms.) Sunita Maheshwari was appointed on the Board with effect from March 30, 2021, she had not attended any Board meeting held in FY 2020-21 and thus did not participate in the Board performance evaluation for FY 2020-21. Similarly, Mr. Atanu Chakraborty was appointed as the Part Time NonExecutive Chairman and Additional Independent Director of the Bank with effect from May 5, 2021 and thus did not participate in the Board performance evaluation for FY 2020-21.

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/ Policv-for-appointment-and-fit-proper-criteria-for-directors.pdf

The remuneration of Whole Time Directors, Material Risk Takers, Key Managerial Personnel and senior management is governed by the Compensation Policy of the Bank. The same is available at the 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 Note No. 26 of Schedule 18 forming part of the Financial Statements.

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 in person are reimbursed at actuals. Pursuant to the relevant RBI guidelines and approval of the shareholders, the Non-Executive Directors, other than the Chairman, are paid profit-related commission of Rs. 1,000,000 (Rupees Ten Lakh Only) per annum for each Non-Executive Director.

However, under RBI circular on Corporate Governance in Banks - Appointment of Directors and Constitution of Committees of the Board dated April 26, 2021, starting from FY 2021-22, the Bank may provide for payment of compensation to NonExecutive Directors in the form of a fixed remuneration. However, such fixed remuneration for a Non-Executive Director, other than the Chair of the Board, shall not exceed Rs. 2,000,000 per annum as per the said RBI circular. A resolution in this regard is also being proposed for approval of the shareholders at the ensuing Annual General Meeting.

Mr. Malay Patel, Independent Director of the Bank, is also an independent director on the Board of HDFC Securities Limited, subsidiary of the Bank. Mr. Patel receives sitting fees from the said subsidiary. None of the Directors of your Bank other than Mr. Patel is a director of the Bank's subsidiaries as on March 31, 2021.

Succession Planning

The Bank's Nomination and Remuneration Committee (NRC) oversees matters of succession planning of its Directors, Senior Management and Key Managerial Personnel of the Bank.

Considering the cessation of tenure of Mr. Aditya Puri as the Managing Director of the Bank in October 2020, the Board of Directors had constituted a Search Committee comprising of certain Board members with the mandate to identify potential candidates, both internal and external, to be the next Managing Director & CEO of the Bank. The Search Committee, as authorized by the Board, and with the assistance of a reputed international executive search firm, undertook an extensive global search process and looked at both internal and external candidates and Mr. Sashidhar Jagdishan was dentified as the successor to the erstwhile Managing Director. The appointment of Mr. Sashidhar Jagdishan has been approved by the Reserve Bank of India on August 3, 2020, and he took charge as the Managing Director & CEO of the Bank with effect from October 27, 2020. Mr. Sashidhar Jagdishan's appointment was also approved by the shareholders by way of postal ballot on December 1, 2020.

Further, the Bank has also appointed Mr. Atanu Chakraborty as Part Time Non-Executive Chairman and Additional Independent Director of the Bank with effect from May 5, 2021, pursuant to the cessation of tenure of the erstwhile Chairperson and Independent Director, Mrs. Shyamala Gopinath, with effect from close of business hours on January 1, 2021.

Significant and Material Orders Passed by Regulators

During the FY 2020-21, Reserve Bank of India and other regulatory / statutory authorities have imposed penalties / issued strictures / prohibitions / restrictions on the Bank:

A. Penalties

1. Reserve Bank of India (RBI) has vide its letter dated December 4, 2020 imposed a monetary penalty of '10 lacs on the Bank for bouncing of SGL, which led to shortage of balance in certain securities in the Bank's CSGL account on November 19, 2020. The Bank has since enhanced its review mechanism so as to ensure that such incidents do not recur.

2. Securities Exchange Board of India ("SEBI") issued final order on January 21,2021, levying a penalty of Rs. 1 crore on the Bank, in the matter of invocation of securities pledged by a corporate entity for availing credit facilities. SEBI has also directed the Bank to transfer sale proceeds of Rs. 158.68 crores on invocation of securities, along with interest to escrow account with a nationalised bank by marking lien in favour of SEBI. The Bank has challenged SEBI's order before SAT and the hearing in the matter is in progress.

B. Restrictions imposed

Reserve Bank of India (RBI) has issued an Order dated December 02, 2020 ("Order") to HDFC Bank Limited with regard to certain incidents of outages in the internet banking / mobile banking / payment utilities of the Bank over the past 2 years, including the outages in the Bank's internet banking and payment system on November 21, 2020 due to a power failure in the primary data centre. RBI, vide above order, advised the Bank (a) to stop all digital business generating activities planned under its ‘Digital 2.0' and proposed Business generating applications digital also imposed restrictions and (b) to stop sourcing of new credit card customers. The Bank has initiated remedial activities including fixing of staff accountability and the same were communicated to the RBI.

Further, the below penalty does not pertain to FY 2020-21, however is being disclosed:

The RBI, by an order dated May 27, 2021, levied a penalty of Rs. 10 cores (Rupees ten crores only) for marketing and sale of third-party non-financial products to the Bank's auto loan customers, arising from a whistle blower complaint, which revealed, inter alia, contravention of Section 6(2) and Section 8 of the Banking Regulation Act, 1949. The Bank has discontinued the sale of said third-party non-financial product since October 2019.

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.

A resolution seeking shareholders' approval for his reappointment forms a part of the Notice of this AGM. A brief resume is furnished in the report on Corporate Governance for the information of shareholders.

During the year, Mr. Aditya Puri has retired as the Managing Director of the Bank at the end of business hours on October 26, 2020, upon reaching 70 years of age, in accordance with the tenure approved by the Reserve Bank of India. As the Managing Director of the Bank since its inception in the year 1994, Mr. Puri has provided outstanding leadership and has contributed significantly to enable the Bank scale phenomenal heights. Mr. Puri's strategic vision was the driving force behind the Bank's foray into the world of "digital banking". In his pathbreaking journey of 26 years with the Bank, he has been conferred with numerous awards and accolades, including the recent Lifetime Achievement Award by Euromoney (Global) Awards for Excellence 2020. Mr. Puri leaves behind a legacy of strong cultural values, prudent risk management, sustainable growth and contribution to nation building through ‘Parivartan', the Bank's social initiatives brand which has contributed to improving the lives and livelihood of millions of Indians. The Board places on record its deep and sincere appreciation for the exceptional contribution made by Mr. Puri, and wishes him the very best for his future endeavours.

Further, during the year, Mrs. Shyamala Gopinath has ceased to be the Part-Time Non- Executive Chairperson and Independent Director of the Bank with effect from the close of business hours on January 1, 2021, in accordance with the tenure approved by the Reserve Bank of India. Your Directors place on record their sincere appreciation for the contribution made by Mrs. Shyamala Gopinath during her tenure with the Bank and wishes her well in future endeavours.

Further, your Bank has appointed Mr. Sashidhar Jagdishan as the Managing Director & CEO of the Bank with effect from October 27, 2020, which has been approved by shareholders by means of postal ballot on December 1, 2020.

Dr. (Ms). Sunita Maheshwari has been appointed as an Additional Independent Director subject to the approval of the shareholders with effect from March 30, 2021 on the Board of the Bank. Further, the Bank has appointed Mr. Atanu Chakraborty as the Part Time Non-Executive Chairman and Additional Independent Director of the Bank with effect from May 5, 2021, to hold office till the conclusion of the AGM.

During the Financial Year 2020-21, 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 5 and Annexure 6 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 7500 air conditioning machines in order to save energy and support go-green initiative

• Installation of energy capacitors at 74 high consumption offices to control the power factor and to reduce energy consumption

• All main signboards in branches switched off post 10 p. m. In 500 locations we already manage through Sensors with the help of Eco Energy System.

• Put controls on usage of lifts, ACs, common passage lights and other electrical equipment

• Provided LED lamps at branches and offices

• Provided solar panels for captive power generation at our offices in Pune and Bhubaneswar, Noida

It has also:

• Reduced contract demand at Kanjurmarg Hub in Mumbai, Hinjewadi, Palm Spring, and Bandra (East), Kalanagar in Maharashtra. This is reflected in the monthly billing.

• Replaced CFL lamps with LED fixtures at Kanjurmarg Hub/ WBO/Fort in Mumbai/Bank House Mumbai

(B) Technology Absorption

Your Bank has upgraded the Banking Platform (Weblogic & Kubernetes) and completed containerization of an additional 300+ services. This ensures scalability as successful migration of core banking accounting API for transactions originating from UPI has been completed and system is ready for increased load from NetBanking. The

Bank's IT infrastructure capacity for UPI transactions has been tripled. Your Bank has successfully managed over 23 Lakh transactions in an hour, and is ranked among the top, in the published NPCI dashboard of UPI Performance Metrics. Technical declines are down with the average uptime for customers at 99.91 per cent in the year under review.

(C) Foreign Exchange Earnings and Outgo

During the year, the total foreign exchange earned by the Bank was Rs. 2,438.4 crore (on account of net gains arising on all exchange / derivative transactions) and the total foreign exchange outgo was Rs. 1,660.52 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. Alwyn Jay & Co., Company Secretaries were appointed as Secretarial Auditors of the Bank for the financial year 2020-21. The report of the Secretarial Auditors is enclosed as Annexure 7 to this Report.

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 https://www.hdfcbank.com/personal/ about-us/investor-relations/annual-reports

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.


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.'


It has clearly been the year of the pandemic. While the country had barely come out of the first wave, the more dangerous second wave struck posing fresh challenges for the global and the Indian economy. The presence of the vaccine is a clear source of comfort but there are challenges around its supply. The proactive measures taken by the Union Government like allowing imports is expected to ease the situation. As is the decision to go in for a centralised vaccination procurement and free distribution of vaccines to everyone above the age of 18.

Notwithstanding these challenges the Indian economy is expected to be among the fastest growing ones in the world. Perhaps not as fast as projected earlier. The Union Government's decision to put growth ahead of fiscal consolidation is another positive.

Your Bank of course cannot remain entirely unaffected by these developments. It has certain factors in its favour : A strong balance sheet with among the lowest NPA levels in the industry, a franchise that inspires trust and capitalisation levels that exceed regulatory norms. This means it can continue lending as well as innovate. While there have challenges when it comes to technology, your Bank has initiated both short term as well as long term measures to overcome these.

The biggest opportunity is of course the under penetration of banking services in the country. Changing global dynamics means that countries are increasingly trying to diversify and do not want want to put all their eggs in the China basket. India is well positioned to capitalise on this opportunity. Your Bank is also expected to benefit from these developments.

It will however not abandon the core principles of its journey of over a quarter century. As always it will blend its quest for growth with caution so that there is no undue stress on the balance sheet. The five core values : Customer Focus, Operational Excellence, Product Leadership, People and Sustainability will continue to guide us in this story. As we continue to ‘Lead Responsibly'.

On behalf of the Board of Directors
Sashidhar Jagdishan Umesh Chandra Sarangi
Managing Director & CEO Independent Director
June 18, 2021