1. Board Structure (Size, Percentage of Non-Exe Directors & Independent Directors):
The Indian corporate sector has been largely dominated by family-owned businesses since a long time. However, in the recent years, this aspect has resulted in major criticism. Many argue that this might not lead to highest levels of transparency, disclosures and accountability. This is mainly due to the fact that family members who have been stakeholders in these companies have not found it important to maintain a certain level of disclosures. This has resulted in insufficient dissemination of information to all stakeholders. It has also highlighted the need for Independent directors to be on the boards of all companied and organisations.
The main rationale behind the appointment of independent directors is their capability of decision-making without any conflict of interest. This leads to a higher level of accountability in the organization. It also leads to an effective composition of the board.
The Securities Exchange Board of India had constituted a Committee on Corporate Governance under the Chairmanship of Shri N. R. Narayana Murthy to improve corporate governance standards in India. On 26th August 2003, the SEBI issued a circular introducing a major amendment to the Clause 49 of the Listing Agreement wherein the definition of an Independent Director was also amended. According to this circular, “Independent Director is one who:
• is not related to promoters or management at the board level or at one level below the board;
• has not been an executive of the company in the immediately preceding three financial years;
• Is not a partner or an executive of the statutory audit firm or the internal audit firm that is associated with the company, and has not been a partner or an executive of any such firm for the last three years. This will also apply to legal firm(s) and consulting firm(s) that have a material association with the entity.
• Is not a supplier, service provider or customer of the company This should include lessor-lessee type relationships also; and
• Is not a substantial shareholder of the company, i.e. owning two percent or more of the block of voting shares?”
In India, the Companies Act provides for extra compliances for whole time directors. It also requires disclosure by interested directors. All directors on the board are viewed in the same light and have the same authority, obligations and responsibilities. Each director to be seen as fully accountable to all shareholders. There should be full disclosure concerning each director, including any factors that might affect their independence in decision-making. This should be done with the aim of providing shareholders with all information to enable them to cast their vote correctly. The shareholders should be aware of the value each board member brings to the company/organization.
Bank Name Total number of directors Total number of independent/non-executive
Axis Bank 15
ICICI Bank 13 7
Kotak Bank 10 8
Yes Bank 9 4
HDFC Bank 10
Indusland Bank 8 5
2. Board Power & Functioning:
The board has ultimate responsibility for the bank’s business strategy and financial soundness, key personnel decisions, internal organisation and governance structure and practices, and risk management and compliance obligations. The board may delegate some of its functions, though not its responsibilities, to board committees where appropriate.
The board should establish and be satisfied with the bank’s organisational structure. This will enable the board and senior management to carry out their responsibilities and facilitate effective decision-making and good governance. This includes clearly laying out the key responsibilities and authorities of the board itself and of senior management and of those responsible for the risk management and control functions.
The members of the board should exercise their “duty of care” and “duty of loyalty” to the bank under applicable national laws and supervisory standards.
Accordingly, the board should
• actively engage in the affairs of the bank and keep up with material changes in the bank’s business and the external environment as well as act in a timely manner to protect the long- term interests of the bank;
• oversee the development of and approve the bank’s business objectives and strategy and monitor their implementation;
• play a lead role in establishing the bank’s corporate culture and values;
• oversee implementation of the bank’s governance framework and periodically review that it remains appropriate in the light of material changes to the bank’s size, complexity, geographical footprint, business strategy, markets and regulatory requirements;
• Establish, along with senior management and the CRO, the bank’s risk appetite, taking into account the competitive and regulatory landscape and the bank’s long-term interests, risk exposure and ability to manage risk effectively;
• oversee the bank’s adherence to the RAS, risk policy and risk limits;
• approve the approach and oversee the implementation of key policies pertaining to the bank’s capital adequacy assessment process, capital and liquidity plans, compliance policies and obligations, and the internal control system;
The board should ensure that transactions with related parties (including internal group transactions) are reviewed to assess risk and are subject to appropriate restrictions (eg by requiring that such transactions be conducted on arm’s length terms) and that corporate or business resources of the bank are not misappropriated or misapplied.
In discharging these responsibilities, the board should take into account the legitimate interests of depositors, shareholders and other relevant stakeholders. It should also ensure that the bank maintains an effective relationship with its supervisors.
3. Audit committee
An audit committee should:
• be required for systemically important banks and is strongly recommended for other banks based on an organisation’s size, risk profile or complexity;
• be distinct from other committees;
• have a chair who is independent and is not the chair of the board or of any other committee;
• be made up entirely of independent or non-executive board members; and
• include members who have experience in audit practices, financial reporting and accounting.
The audit committee is, in particular, responsible for:
• framing policy on internal audit and financial reporting, among other things;
• overseeing the financial reporting process;
• providing oversight of and interacting with the bank’s internal and external auditors;
• approving, or recommending to the board or shareholders for their approval, the appointment, remuneration and dismissal of external auditors;
• reviewing and approving the audit scope and frequency;
• The Audit Committee of the Board provides direction to and monitors the quality of the internal audit function and
• also monitors compliance with inspection and audit reports of RBI, other regulators and statutory auditors.
Kotak Mahindra Bank :
The Audit Committee presently consists of Mr. Prakash Apte (Chairman), Prof. S. Mahendra Dev and Mr. Uday Khanna. All the members of the Committee are Independent Non-Executive Directors.
The Company Secretary acts as the Secretary to the Committee. The Chairman of the Audit Committee Mr. Prakash Apte was present at the last Annual General Meeting to answer the queries of the shareholders. The members of the Audit Committee meet the statutory auditors
independently at least once a year.
During the year, seven meetings of the Committee were held. All the members attended all the seven meetings. The maximum time gap between any two meetings was not more than one hundred and twenty days.
The Bank has constituted a First Tier Audit Committee (FTAC) as per the guidelines issued by the Reserve Bank of India. The Committee was re-constituted w.e.f. 1st April, 2018 and currently consists of four members viz., Mr. Jaimin Bhatt (Chairman) – President & Group CFO,
Mr. T.V. Sudhakar, Head – Compliance, Mr. Devang Gheewalla, Head – Operations and Mr. Rajiv Gurnani, Head – Credit.
Where the internal audit report pertains to specific businesses, the specific Business Head also attends the meeting. The Committee screens the matters entrusted to the Audit Committee and also the routine matters such as overseeing the programme of inspections and compliance of inspection reports so as not to burden the Audit Committee with matters of detail. FTAC also reviews functioning of internal audit department closely to guide and enable independence as well as effectiveness. During the year, 14 meetings of the Committee were held. The Committee meets for approximately four hours.
The 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, mid-office and back office. The 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.
Any new product / process introduced in the Bank is reviewed by Compliance function in order to ensure adherence to regulatory guidelines and also by Internal Audit from the perspective of existence of internal controls. The Audit function also pro-actively recommends improvements in operational processes and service quality wherever deemed fit.
To ensure independence, the Internal Audit function has a reporting line to the Chairman of the Audit Committee of the Board and a dotted line reporting to the Managing Director. Total of 8 meetings were held in FY 17-18
The Audit Committee of the Bank under direction given by the Board of Directors has instituted an independent enquiry,headed by a former Supreme Court Judge, Hon’ble Mr. Justice B. N. Srikrishna (Retd.), to consider various allegation relating to the MD and CEO, Ms. Chanda Kochhar. The allegations have been levelled against Ms. Kochhar through media articles, a whistleblower complaint and complaints written by a private individual to senior government officials and regulators. The allegations include nepotism, quid pro quo and claims that Ms. Kochhar, by not disclosing conflicts of interest caused by certain transactions between certain borrowers of the Bank and entities controlled by Ms. Kochhar’s spouse, committed infractions under applicable regulations and the Bank’s Code of Conduct. The independent enquiry is supported by an independent law firm and
Six Audit Committee Meetings were held during FY 2017-18 i.e. on April 18, 2017, July 25, 2017, August 24, 2017, October 25, 2017, January 17, 2018 and February 27, 2018 and not more than one hundred and twenty days lapsed between two consecutive meetings of the Audit Committee. The Statutory Auditors and the Internal Auditors are permanent invitees to the meetings of the Audit Committee.
The Audit Committee of the Board of Directors of the Bank (Audit Committee) comprises of 4 members out of which 3are Independent Directors. In all, 15 meetings of the Audit Committee were held during the Financial Year 2017-18
The Committee met ten times during the financial year 2017-18. At a minimum, the audit committee as a whole should possess a collective balance of skills and expert knowledge – commensurate with the complexity of the banking organisation and the duties to be performed – and should have relevant experience in financial reporting, accounting and auditing. Where needed, the audit committee has access to external expert advice.
Bank Name Total number of meetings
Axis Bank 15
ICICI Bank 13
Yes Bank 6
HDFC Bank 8
Indusland Bank 10
Remuneration and nomination committees:
The Nomination ; Remuneration committee comprises of independent directors of the Bank. Key mandate of the Nomination ; Remuneration committee is to oversee the overall design and operation of the compensation policy of the Bank and work in coordination with the Risk Management Committee to achieve alignment between risks and remuneration
The Nomination and Remuneration Committee of the Bank’s Board has formulated the criteria for performance evaluation of the Directors and the Board as a whole which broadly covers the Board role, Board/Committee membership, practice & procedure and collaboration & style.
The Nomination and Remuneration Committee of the Bank’s Board further engaged an external professional services firm to facilitate the self-valuation process of the Board, its committees, Chairman and individual directors.
During year ended 31st March, 2018 4 meetings of Nomination and Remuneration committee was held. Each Member of the Nomination and Remuneration committee is paid a sitting fee of ` 40,000 per meeting.
The Nomination and Remuneration Committee (NRC) has approved a framework / policy for evaluation of the Board, Committees of the Board and the individual members of the Board (including the Chairperson), which is reviewed annually by the NRC. The NRC recommends the appointment of Directors to the Board. It identifies persons who are qualified to become Directors on the Board and evaluates criteria such as academic qualifications, previous experience, track record and integrity of the persons identified before recommending their appointment to the Board.
The NRC is comprised of three independent directors as of March 31, 2018
The NRC reviews the following critical principles enunciated in the policy and ensures that:
(a) the compensation is adjusted for all types of prudent risk taking;
(b) compensation outcomes are symmetric with risk outcomes;
(c) compensation payouts are sensitive to the time horizon of risk; and
(d) the mix of cash, equity and other forms of compensation are aligned with risk.
The functions of the Committee include recommending appointments of Directors to the Board, identifying persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down and recommending to the Board their appointment and removal, formulate a criteria for the evaluation of the performance of the wholetime/independent Directors and the Board and to extend or continue the term of appointment of independent Directors on the basis of the report of performance evaluation of independent Directors, recommending to the Board a policy relating to the remuneration for the Directors, key managerial personnel and other employees, recommending to the Board the remuneration (including performance bonus and perquisites) to wholetime Directors, commission and fee payable to non-executive Directors subject to applicable regulations, approving the policy for and quantum of bonus payable to the members of the staff including senior management and key managerial personnel, formulating the criteria for determining qualifications, positive attributes and independence of a Director, framing policy on Board diversity, framing guidelines for the Employees Stock Option Scheme (ESOS) and decide on the grant of stock options to employees and wholetime Directors of the Bank and its subsidiary companies.
At March 31, 2018, the Board Governance, Remuneration ; Nomination Committee consisted three independent Directors and was chaired by Tushaar Shah, an independent Director. There were seven Meetings of the Committee during the year.
The Board of Directors of the Bank through its Nomination and Remuneration Committee (N;RC) shall exercise oversight ; effective governance over the framing and implementing of the Compensation policy. The N;RC shall comprise a minimum of 3 non-executive Directors, majority being Independent Directors.
The roles and responsibilities of the N;RC are as under-
To review the current Board composition, its governance framework and determine future requirements and making recommendations to the Board for approval;
To examine the qualification, knowledge, skill sets and experience of each director vis-a-vis the Bank’s requirements and their effectiveness to the Board on a yearly basis and accordingly recommend to the Board for the induction of new Directors;
a. The composition of the existing Committees of the Board and to examine annually whether there is any need to have a special committee of directors to meet the business requirements of the Bank and accordingly recommend to the Board for formation of a special committee.
b. Review the Terms of Reference of the Board Level Committees and recommend the changes therein, if any, to the Board;
• To scrutinize nominations for Independent/ Non-Executive Directors with reference to their qualifications and experience and making recommendations to the Board for appointment/filling of vacancies;
• To identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal;
• To Formulate criteria for evaluation of performance of independent directors and the board of directors;
• To carry out evaluation of every director’s performance;
• Whether to extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors;
The Nomination and Remuneration Committee of the Board of Directors of the Bank (Nomination and Remuneration Committee) comprises of 4 members, all of them being Independent Directors.
For Nomination / Governance matters:
i) Review the structure, size, composition, diversity of the Board and make necessary recommendations to the Board with regard to any changes as necessary and formulation of policy thereon.
ii) Evaluate the skills that exist and those that are absent but needed at the Board level, based on the diversity policy of the Board and search for appropriate candidates who have the profile to provide such skill sets.
iii) To evaluate the succession planning process adopted by the Bank and suggest suitable course of action, if any, relating to vacancies that would be required to be filled at Board level on account of retirement / resignation / expiry of term of Directors, including Chairman.
iv) Advise criteria for evaluation of Individual and Independent Directors, Board as a whole as well as Committees thereof and shall carry out evaluation of performance of Individual and Independent Directors, Board as a whole and Committees thereof.
v) Undertake a process of due diligence to determine the suitability of any person for appointment / continuing to hold appointment as a director on the Board, based upon qualification, expertise, track record, integrity, ‘fit and proper’ criteria, positive attributes and independence (if applicable) and on the basis of the report of performance evaluation of directors including independent directors and formulate the criteria relating thereto.
vi) To recommend the appointment / re-appointment of Managing Director ; CEO and other Whole-Time Directors and also terms of their appointment including remuneration, for the approval of the Board.
vii) To identify persons who may be appointed in Senior Management position of the Bank, in accordance with the criteria laid down and recommend their appointment / removal for the approval of the Board.
viii) Formulate and review the Policy on Board Diversity.
For Remuneration / HR matters:
i) Review and recommend to the Board for approval, the overall remuneration framework and associated policy of the Bank (including remuneration policy for Directors, Key Managerial Personnel and other employees of the Bank).
ii) Review and recommend to the Board for approval of the level and structure of fixed pay, variable pay, perquisites, bonus pool and any other form of compensation as may be included from time to time to all the employees of the Bank including the Managing Director ; CEO, the Whole-time Directors and Senior Management and also annual revision in remuneration to be made thereof.
iii) Review and recommend to the Board for approval the total increase in manpower cost budget of the Bank as a whole, at an aggregate level, for the next year.
iv) Recommend to the Board the compensation payable to the Chairman of the Bank.
v) Review the Code of Conduct and HR strategy, policy and performance appraisal process within the Bank, as well as any fundamental changes in organization structure which could have wide ranging or high risk implications.
vi) Review and recommend to the Board for its approval, the talent management and succession policy and process in the Bank, for ensuring business continuity, especially at the levels of Managing Director ; CEO, Whole Time Directors and Senior Management and other key roles of the Bank and their progression to the Board.
vii) Review and recommend to the Board for approval the creation of new positions one level below the Managing Director ; CEO of the Bank.
viii) Set the goals, objectives and performance benchmarks for the Bank and for Managing Director ; CEO, the Whole Time Directors and Senior Management for the financial year and over the medium to long term.
ix) Review the performance of the Managing Director ; CEO, the Whole-Time Directors and Senior Management of the Bank, at the end of every financial year.
x) Review organization health through feedback from employee surveys conducted on a regular basis.
xi) Perform such other duties as may be required to be done under any law, statute, rules, regulations etc. enacted by Government of India, Reserve Bank of India or by any other regulatory or statutory body.
xii) Review and recommend to the Board for approval, the early retirement option scheme for the Whole-Time Directors and other employees of the Bank.
xiii) Consider and approve the Stock based compensation for all the employees of the Bank including the Managing Director ; CEO, the Whole-time Directors, Senior Management and other eligible employees of the Bank, in terms of the relevant provisions of the SEBI (Share Based Employee Benefits) Regulations, 2014, as amended, from time to time.
In all, 8 meetings of the Nomination and Remuneration Committee were held during the Financial Year 2017-18.
For ‘Nomination’ matters:
1. To identify persons who are qualified to be appointed as Directors;
2. To devise the Policy on Board Diversity;
3. To formulate criteria for evaluation of Independent Directors, the Board and its Committees;
4. To determine whether to extend the tenure of appointment of the Independent Directors, on the basis of the report of Performance Evaluation of Independent Directors;
5. To conduct due diligence as to the credentials of any Director before his / her appointment, and making appropriate recommendations to the Board, in consonance with the Dr. Ganguly Committee recommendations and the requirements of RBI.
For ‘Remuneration and HR’ matters:
1. To oversee the framing, review and implementation of the Compensation Policy of the Bank for Whole-time Directors / Chief Executive Officers / Key Managerial Personnel / Risk-Takers and Control Function Staff towards ensuring effective alignment between remuneration and risks;
2. To determine, on behalf of the Board, the Bank’s Policy on Remuneration packages for Executive Directors, including Pension, etc.;
3. To formulate the criteria for determining qualifications, positive attributes and independence of a Director and recommend to the Board the Policy relating to the remuneration of Directors, Key Managerial Personnel and other employees;
4. To review the Talent Management and Succession;
5. Policy of Top-level Executives, one level below the Managing Director and Chief Executive Officer (Member of the Core Executive Team), and the process for ensuring Business Continuity; and
6. To review the HR strategy, Performance Appraisal process, fundamental changes in the Organization Structure, Training and the overall HR function.
Meetings : The Committee met five times during the financial year 2017-18
4. Whistleblower policies:
A vigil mechanism has been implemented through the adoption of Whistleblower Policy with an objective to enable any employee or director or vendor, raise genuine concern or report evidence of activity by the Bank or its employee or director or vendor that may constitute: Instances of corporate fraud; unethical business conduct; a violation of Central or State laws, rules, regulations and/or any other regulatory or judicial directives; any unlawful act, whether criminal or civil; malpractice; serious irregularities; impropriety, abuse or wrong doing; deliberate breaches and non-compliance with the Bank’s policies; questionable accounting/audit matters/financial malpractice. The concerns can be reported on the website viz.
Currently an online mechanism enabling aforementioned reporting has been implemented over and above other modes of communication like e-mail, or a letter sent by mail, courier or fax to designated persons.
Safeguards to avoid discrimination, retaliation, or harassment, and confidentiality have been incorporated in the policy. All employees and directors have access to the Chairman of the Audit Committee. The website for reporting the above mentioned concerns is managed and hosted by an independent third party service provider who has proven expertise in this area, thereby ensuring absolute confidentiality.
The Bank encourages an open and transparent system ofworking and dealing amongst its stake holders. While the Bank’s “Code of Conduct & Ethics Policy” directs employees to uphold company values and conduct business with integrity and highest ethical standards, the Bank has also adopted a “Whistle Blower Policy” which encourages its employees and various stakeholders to bring to the notice of the Bank any issue involving compromise / violation of ethical norms, legal or regulatory provisions, actual or suspected fraud etc., without any fear of reprisal, discrimination, harassment or victimization of any kind. All such concerns / complaints are received by the Chief of Internal Vigilance of the Bank and / or by the Whistle Blower Committee through a dedicated email ID or by way of letters etc. All such complaints are enquired into by the appropriate authority within the Bank while ensuring confidentiality of the identity of such complainants. On the basis of their investigation, if the allegations are proved be correct, then the Competent Authority shall recommend to the appropriate Disciplinary Authority to take suitable action against the responsible official. The decision of the Whistle Blower Committee is final and binding on all. Preventive measures or any other action considered necessary is also taken by the Competent Authority. Details of Whistle Blower complaints received and subsequent action taken and the functioning of the Whistle Blower mechanism are reviewed periodically by the Audit Committee of the Board. During the financial year 2017-18, a total of 46 such complaints were received and taken up for investigation.
The Bank has formulated a Whistle Blower Policy. The policy comprehensively provides an opportunity for any employee/ Director of the Bank to raise any issue concerning breaches of law, accounting policies or any act resulting in financial or reputation loss and misuse of office or suspected or actual fraud. The policy provides for a mechanism to report such concerns to the Audit Committee through specified channels. The policy has been periodically communicated to the employees and also posted on the Bank’s intranet. The Whistle Blower Policy complies with the requirements of Vigil mechanism as stipulated under Section 177 of the Companies Act, 2013. The details of establishment of the Whistle Blower Policy/Vigil mechanism have been disclosed on the website of the Bank.
In compliance with the provisions of Listing Regulations, the Companies Act, 2013 and other applicable laws and in accordance with principles of good corporate governance, the Bank has devised and implemented a vigil mechanism, in the form of ‘Whistle Blower Policy’. The policy devised is also aligned to the recommendations of Protected Disclosure Scheme for Private Sector Banks and Foreign Banks, instituted by RBI.
This policy enables a Whistle Blower to raise concerns relating to reportable matters (as elucidated in the said policy) such as breach of Bank’s Code of Conduct, fraud, bribery, corruption, employee misconduct, illegality, health & safety, environmental issues and wastage/misappropriation of bank funds/assets, etc., without fear of reprisals and to provide for independent investigation. The framework of the policy endeavors to simplify and smoothen the process for Whistle Blower and foster responsible reporting, a Whistle Blower cannot resort to the Whistle Blower Policy to report his/ her personal grievances.
The policy has been implemented through a web-based ‘Corporate Whistle Blower Initiative’ (CWI) portal, which is an independent online reporting service aimed at facilitating secure and anonymous communication between the Bank and Whistle Blower.
The policy has provisions to safeguard Whistle Blower against victimization. As a responsible and vigilant organization, the Bank encourages responsible and fearless reporting of genuine concerns or grievances and also provides for direct access to the Chairman of the Audit Committee of the Board, in exceptional cases. The functioning of the Vigil Mechanism is reviewed by the Audit Committee of the Board regularly.
The Policy provides an opportunity to address serious concerns arising from irregularities, malpractices and other misdemeanours committed by the Bank’s personnel by approaching a Committee set-up for the purpose (known as the Whistleblower Committee). In case, Senior Management commits an offence, the Policy enables the Bank’s staff to report the concerns directly to the Chairman of the Audit Committee of the Board. The Policy is intended to encourage reporting of suspected or actual occurrence of illegal, unethical or inappropriate actions, behaviour or practices by staff without fear of retribution. This Policy can be used regularly as a tool to voice concerns on irregularities, malpractices and other misdemeanours.
To ensure smooth flow and management of complaints under Whistleblower Policy, a web-based application – ‘Corporate Whistleblower’ has been set up which also provides an option for anonymous reporting thereby enabling lodging of complaints online over a secure platform without fear of revelation of identity. This would create a business culture of honesty, integrity and compliance and would encourage speaking up so that preventive action is initiated.
The Policy is intended to help persons who have major concerns over any wrongdoing within the Bank to report unlawful conduct, misconduct, malpractices, violation of any legal or regulatory provisions, financial mismanagement, accounting irregularities, etc. It is impossible to give an exhaustive list of the activities that constitute such misconduct/ malpractice/ violations but, broadly speaking we would expect the following acts to be reported: (a) Criminal offence (e.g. fraud, corruption or theft) committed/ likely to be committed. (b) Failure to comply with legal/ regulatory obligations. (c) KYC/ AML related issues. (d) Breach of client promise by the Bank. (e) Miscarriage of justice occurred / likely to occur. (f) Bank funds used in an unauthorized manner. (g) Sexual or physical abuse of a member of staff, service recipient or service provider
Procedure for Reporting
The Head – Vigilance of the Bank is the Designated Authority to receive all reports/ complaints made under this Policy. A communication reporting any event/ information of concern may be addressed to the Head – Vigilance
Process of Handling Reports
The Designated Authority will personally open all the emails or postal/ courier mails pertaining to the matters reported under this Policy. S/he shall maintain a Corporate Register containing brief particulars of the Reports received under this Policy. S/he shall assign a Unique Reference Number (URN) to each Report. All communications pertaining to a Report will bear the URN. Within a reasonable period of receipt of a Report the Designated Authority shall provide an acknowledgement, followed by an initial response to the informant on a selective basis. Subject to any legal constraints, on completion of the disciplinary proceedings DA may send on selective basis a final feedback to the Informant informing him about the outcome of the inquiry proceedings. Any reference or complaint made to any Senior Management executive of the Bank of the nature covered under the ambit of this policy will be forwarded by the concerned executive to the Designated Authority and handled in the manner as described above. An annual review will be put up to the Audit Committee of the Board and the Board of Directors on the Reports received by the Bank under this Policy. The Designated Authority may institute a scrutiny (of the reported fraudulent activity in an account) through FMG (Fraud Monitoring Group) who may hear the concerned employee in order to obtain necessary clarifications
Retention of documents
All Reports received in writing or documented, along with the results of investigation relating thereto, shall be retained by the Bank for a minimum period of seven years.
Related Party Transaction:
“Related party” is defined under section 2(76) of the Act and clause (zb) of Chapter I of SEBI Regulations, 2015 as: i. director or his relative; ii. Key Managerial Personnel or his relative; iii. firm, in which a director, manager or his relative is a partner; iv. private company in which a director or manager or his relative is a member or director; v. public company in which a director or manager is a director and holds along with his relatives, more than 2% of its paid-up share capital; vi. any body corporate whose Board of Directors (BOD), managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager (except where provided in professional capacity); vii. any person under whose advice, directions or instructions a director or manager is accustomed to act (except where provided in professional capacity); viii. any body corporate which is – – a holding, subsidiary, joint venture or an associate of such company; or – a subsidiary of a holding company to which it is also a subsidiary; or – an investing company or the venturer of the company; Explanation — For the purpose of this clause, “the investing company or the venturer of a company” means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.
During the year the Bank has entered into transactions with the related parties in the ordinary course of business. The Bank has not entered into any materially significant transactions with the related parties including promoters, directors, the management, subsidiaries or relatives of the Directors, which could lead to a potential conflict of interest between the Bank and these parties. Transactions with related parties were placed before the Audit Committee/Board for approval. There were no material transactions with related parties, which were not in the normal course of business, nor were there any material transactions, which were not at an arm’s length basis.
All related party transactions must be reported to the Audit Committee and referred for approval by the Committee in accordance with this Policy. The Audit committee may grant general approval for repetitive related party transactions specifying details like name, nature, base price, maximum amount and the period of transaction. Such general approval will be valid for a period of one year and a fresh approval shall be taken for every financial year.
A. Audit Committee
All the transactions which are identified as related party transactions should be preapproved by the Audit Committee before entering into such transaction. The Audit Committee shall consider all relevant factors while deliberating the related party transactions for its approval. Any member of the Committee who has a potential interest in any related party transaction will recuse himself and abstain from discussion and voting on the approval of the related party transaction. A related party transaction which is (i) not in the ordinary course of business, or (ii) not at arm’s length price, would require approval of the Board of Directors or of shareholders as discussed subsequently. The Audit Committee may grant omnibus approval for related party transactions which are repetitive in nature and subject to certain criteria/conditions as required under Regulation 23 and Companies Rules, 2014 and such other conditions as it may consider necessary in line with this policy and in the interest of the Bank. Such omnibus approval shall be valid for one financial year. Audit Committee shall review, on a quarterly basis, the details of related party transactions entered into by the Bank pursuant to the omnibus approval. In connection with any review of a related party transaction, the Committee has authority to modify or waive any procedural requirements of this policy. A related party transaction entered into by the Bank, which is not under the omnibus approval or otherwise pre-approved by the Committee, will be placed before the Committee for ratification.
B. Board of Directors
In case any related party transactions are referred by the Bank to the Board for its approval due to the transaction being (i) not in the ordinary course of business, or (ii) not at an arm’s length price, the Board will consider such factors as, nature of the transaction, material terms, the manner of determining the pricing and the business rationale for entering into such transaction. On such consideration, the Board may approve the transaction or may require such modifications to transaction terms as it deems appropriate under the circumstances. Any member of the Board who has any interest in any related party transaction will rescue himself and abstain from discussion and voting on the approval of the related party transaction. C. Shareholders • If a related party transaction is a material transaction as per Regulation 23, it shall require shareholder’s approval through resolution and the related parties shall abstain from voting on such resolutions whether the entity is a related party to the particular transaction or not. • If a related party transactions is not in the ordinary course of business, or not at arm’s length price and exceeds certain thresholds prescribed under the Companies Act, 2013, it shall require shareholders’ approval by a resolution. In such a case, any member who is a related party having interest in the transaction for which resolution being proposed, shall not vote on such resolution passed for approving related party transaction. However the shareholders’ approval is not required for the transactions entered into between the Bank and its wholly owned subsidiaries whose accounts are consolidated with the Bank and placed before the shareholders at the general meeting. IV. Reporting of related party transactions Every contract or arrangement, which is required to be approved by the Board/shareholders under this Policy, shall be referred to in the Board’s report to the shareholders along with the justification for entering into such contract or arrangement. The details of material transactions with related parties will be included in the corporate governance reports which are required to be submitted to the stock exchanges on a quarterly basis.
I. Procedure for approval
The Audit Committee will be provided with all relevant material information of Related Party Transactions, including the terms of the transaction, the business purpose of the transaction, the benefits to the Bank and to the Related Party, and any other relevant matters as specified under the Act and SEBI Listing Regulations.
The Audit Committee may accordingly approve or modify such transactions, in accordance with this Policy and/or recommend the same to the Board for approval.
The Independent Directors shall pay sufficient attention and ensure that adequate deliberations are held before approving Related Party Transactions which are not in Ordinary Course of Business and not on arm’s length and Material Specific Transactions and assure themselves that the same are in the interest of the Bank and its shareholders.
In the case of Transactions which are frequent and regular in nature and are in the normal course of business of the Bank, the Audit Committee may fix up Limits within which the management may carry out such Transactions without any approval of the Audit Committee for the specific transactions as long as these are carried out on the principles approved by the Audit Committee. Further, it shall periodically review and assess such limits and revise the same as deemed proper and ensure that they are in compliance of this Policy and the guidelines herein.
II. Omnibus Approval
The Audit Committee may grant omnibus approval for Related Party Transactions proposed to be entered into by the Bank subject to the following conditions:
a) The Audit Committee shall, after obtaining approval of the Board of Directors, specify the criteria for making the omnibus approval which shall include the following, namely:-
(i) maximum value of the transactions, in aggregate, which can be allowed under the omnibus route in a year;
(ii) the maximum value per transaction which can be allowed;
(iii) extent and manner of disclosures to be made to the Audit Committee at the time of seeking omnibus approval;
(iv) review, at such intervals as the Audit Committee may deem fit,
(v) related party transaction entered into by the company pursuant to each of the omnibus approval made transactions which cannot be subject to the omnibus approval by the Audit Committee.
b) The Audit Committee shall lay down the criteria for granting the omnibus approval in line with the policy on Related Party Transactions of the company and such approval shall be applicable in respect of transactions which are repetitive in nature. Further, the Audit Committee shall consider the following factors while specifying the criteria for making omnibus approval, namely: –
(i) repetitiveness of the transactions (in past or in future);
(ii) justification for the need of omnibus approval.
c) The Audit Committee shall satisfy itself regarding the need for such omnibus approval and that such approval is in the interest of the Bank;
d) Such omnibus approval shall specify
? the name/s of the related party;
? nature and duration of the transaction;
? maximum amount of transaction that can be entered into;
? the indicative base price / current contracted price and the formula for variation in the price if any; and
? such other conditions as the Audit Committee may deem fit or information relevant or important for the Audit Committee to take decision on the proposed transaction;
Provided that where the need for Related Party Transaction cannot be foreseen and aforesaid details are not available, Audit Committee may grant omnibus approval for such transactions subject to their value not exceeding Rs.1 crore per transaction.
e) Audit Committee shall review, at least on a quarterly basis, the details of Related Party Transactions entered into by the Company pursuant to each of the omnibus approval given.
f) Such omnibus approvals shall be valid for a period not exceeding one financial year and shall require fresh approvals after the expiry of such financial year.
1. Prior approval of Board of Directors:
Transactions with the related parties which are either not in the Ordinary Course of Business or are not at Arms’ Length shall require prior approval of the Board
Where any director is interested in any contract or arrangement with a related party, such director shall not participate in the discussions on the subject matter of the resolution relating to such contract or arrangement.
The Board is required to approve the criteria for the omnibus approval as prescribed under point 6(III)(a) of this Policy.
2. Shareholders’ approval:
Shareholder’s approval shall be sought in the following cases:
? All the Material Related Party Transactions shall require approval of the shareholders through ordinary resolution and the Related Parties shall abstain from voting on such resolution whether the entity is a related party to the particular transaction or not.
? Transactions, other than the Material Related Party Transaction, with the related parties which are either not in the ‘Ordinary Course of Business’ or are not on an ‘arm’s Length Basis’ and exceeds the threshold prescribed under section 188 of the Companies Act 2013 and the rules thereunder, amended from time to time, shall also require the prior approval of the shareholders through ordinary resolution and the Related Parties shall abstain from voting on such resolution.
No member of the Bank shall vote on ordinary resolution, to approve any contract or arrangement which may be entered by the Bank, if such member is a related party to the contract or arrangement for which the ordinary resolution is being passed. However, in case of material related party transactions, all entities falling under the definition of related parties shall abstain from voting irrespective of whether the entity is a party to the particular transaction or not.
Provided that the transactions entered into between the Bank and its wholly-owned subsidiary (ies) whose accounts are consolidated with the Bank and placed before the shareholders at the general meeting for approval, shall not require the approval of either Board or the Shareholders.
3. Related party transactions not approved under this policy:
In the event the Bank becomes aware of a Transaction with a Related Party that has not been approved under this Policy prior to its consummation, the matter shall be reviewed
by the Audit Committee. The Audit Committee shall consider all of the relevant facts and circumstances regarding the Related Party Transaction, and shall evaluate all options available to the Bank, including ratification, revision of termination of the Related Party Transaction. The Committee shall also examine the facts and circumstances pertaining to the failure of reporting such Related Party Transaction to the Committee under this Policy and failure of the internal control systems, and shall take any such action it deems appropriate.
In any case, where the Audit Committee determines not to ratify a Related Party Transaction that has been commenced without approval, the Audit Committee, as appropriate, may direct additional actions including, but not limited to, discontinuation of the transaction or seeking the approval of the shareholders, payment of compensation for the loss suffered by the related party etc. In connection with any review of a Related Party Transaction, the Audit Committee has authority to modify or waive any procedural requirements of this Policy.
4. Disclosure of related party transactions and Policy:
This Policy will be communicated to all operational employees and other concerned persons of the Bank. The Bank shall disclose the policy on dealing with Related Party Transactions on its website and a web link thereto shall be provided in its Annual Report.
Further, details of all material transactions with related parties shall be disclosed along with the quarterly compliance report on corporate governance being submitted to the Stock Exchanges on which the equity shares of the Bank are listed. Furthermore, disclosures on materially significant related party transactions that may have potential conflict with the interests of Bank at large shall be made in the Annual Report.
Such further disclosure of the related party transactions shall be made as may be prescribed by the Act or the SEBI Listing Regulations or any other regulatory authority or statute from time to time in such format as may be prescribed.
All Related Party Transactions must be referred to the Audit Committee for approval in accordance with this Policy.
1. IDENTIFICATION OF POTENTIAL RELATED PARTY TRANSACTIONS The Company Secretary keeps a database of Related Parties containing the names of individuals and Companies identified based on the definition of Related Party and declaration provided by the Directors, including any revisions therein, and intimates to the Management as soon the Company Secretary has been intimated of such changes in Related Party. The list of Related Party shall be updated whenever necessary and reviewed on a timely basis and would be communicated to the functional departments. Each Director and Key Managerial Personnel is responsible for providing declaration to the Company Secretary of Related Party involving him or her or his or her Relative, including any additional information that the Company Secretary may reasonably request. The functional departments shall submit to the head of Finance ; Accounts and the Company Secretary, the details of proposed transaction (except those for which omnibus approval has been granted by the Audit Committee as explained subsequently) with draft agreement or other supporting documents justifying that the transactions are on arm’s length basis at prevailing market rate. Based on such information, the Company Secretary will facilitate for the necessary approval from the Audit Committee.
2. REVIEW AND APPROVAL OF RELATED PARTY TRANSACTIONS
All Material Related Party Transactions shall require approval of the shareholders through ordinary* resolution and the Related Parties shall abstain from voting on such resolutions. The approval policy framework is given below:
The Bank’s transactions with related parties can be classified into two broad categories: (a) The Bank providing any of its banking product or service to a related party; and (b) The Bank procuring any product or service from a related party.
Following transactions covering banking products / services excluding grant of loans and advances contemplated under section 20(1) of the Banking Regulation Act, 1949 and under the guidelines issued by RBI from time to time with ‘Related Party’ do not require the specific approval of ACB/ Board provided these transactions are entered in ordinary course of banking business, at ‘arm’s length’ price under the general or specific product programmes and /or policies approved by the Bank / its Board of Directors.
1 All transactions, other than extending a credit facility, can be undertaken with ‘related parties’ which are in the normal course of banking business such as remittances, extending safe deposit locker facilities, providing foreign exchange, depository / demat services, sale of wealth products etc.
2 General approval is given for accepting deposits from an associate or a subsidiary or a Director of the Bank, or his relative or an associate entity or from a KMP or his / her relative, up to Rs.100 crores provided these deposits are accepted at the prevalent interest rates that are applicable to all other constituents /customers and are subject to compliance of guidelines issued by RBI from time to time.
3. Apart from the matter relating to appointment and / or remuneration of a whole time director, all other related party transactions shall require the prior approval of the Audit Committee
While according their approval, the Audit Committee shall ensure that the transactions with related parties are strictly governed by the principle of commercial prudence; the pricing or other terms and conditions of transactions with a related party shall not be less favourable to the Bank than similar transactions that are / would be entered into with an unrelated party.
4. Any transaction which is not in the ordinary course of business of the Bank will be referred to the Board for a prior approval. Depending on the facts and circumstances of the specific transaction, and the pertinent legislative / regulatory framework, it may require the approval of the shareholders, or need regulatory or governmental clearances.
The Audit Committee may grant omnibus approval for an arrangement or contract for procurement of a product or a service from a Related Party proposed to be entered into by the Bank subject to the following conditions: (i) The Audit Committee will grant such approval in respect of transactions which are repetitive in nature and are incidental or conducive to the promotion or advancement of conduct of business of the Bank. ii) The Audit Committee shall satisfy itself the need for such omnibus approval and that such approval is in the interest of the Bank; (iii) Such omnibus approval shall specify (i) the name/s of the related party, nature of transaction, period of transaction, maximum amount of transaction that can be entered into, (ii) the indicative base price / current contracted price and the formula for variation in the price if any and (iii) such other conditions as the Audit Committee may deem fit; Provided that where the need for Related Party Transaction cannot be foreseen and aforesaid details are not available, Audit Committee may grant omnibus approval for such transactions subject to their value not exceeding Rs.1 crore per transaction. (iv) Audit Committee shall review, at least on a quarterly basis, the details of transactions entered into by the Bank pursuant to each of the omnibus approval given. (v) Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year.
Code of Conduct:
his Code of Ethics / Conduct intends to ensure adherence to highest business and ethical standards while conducting the business of the Bank and compliance with the legal and regulatory requirements, including compliance of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and regulations framed thereunder by the Securities and Exchange Commission of USA and other statutory and regulatory authorities in India and USA. The Bank values the ethical business standards very highly and intends adherence thereto in every segment of its business.
Code of Ethics/Conduct is applicable to the following persons.
? The Board Members
? Officials of the Bank one level below the Board
The Board Members:
The director(s) shall in carrying on his/her duties as director of the Bank:
a. use such degree of skill as may be reasonable to expect from a person with his/her knowledge or experience;
b. in the performance of his/her duties take such care as he/she might be reasonably expected to take on his/her own behalf and exercise any power vested in him/her in good faith and in the interests of the Bank;
c. shall undertake appropriate induction, refresh his/her skills and keep himself/herself informed about the business, activities and financial status of the Bank to the extent disclosed to him/her; d. strive to attend all meetings of the Board and Committees thereof (collectively for the sake of brevity hereinafter referred to as “Board”) with fair regularity and conscientiously fulfil his/her obligations as director of the Bank
e. shall not seek to influence any decision of the Board for any consideration other than in the interests of the Bank;
f. shall bring independent judgement to bear on all matters affecting the Bank brought before the Board including but not limited to statutory compliances, performance reviews, compliances with internal control systems and procedures, key executive appointments and standards of conduct; g. shall in exercise of his/her judgement in matters brought before the Board or entrusted to him/her by the Board be free from any business or other relationship which could materially interfere with the exercise of his/her independent judgement; and
h. shall express his/her views and opinions at Board meetings without any fear or favour and without any influence on exercise of his/her independent judgement and where they have concerns about the running of the bank or a proposed action, ensure that these are addressed by the Board and, to the extent that they are not resolved, insist that their concerns are recorded in the minutes of the Board meeting;
i. seek appropriate clarification or amplification of information and where necessary, take and follow appropriate professional advice and opinion of outside experts at the expense of the Bank; j. participate constructively and actively in the committees of the Board in which they are Chairpersons or Members;
k. strive to attend the general meetings of the Bank;
l. keep him/her well informed about the Bank and the external environment in which it operates; m. not to unfairly obstruct the functioning of an otherwise proper Board or Committee of the Board;
n. pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions and assure himself / herself that the same are in the interest of the Bank;
o. ascertain and ensure that the Bank has an adequate and functional vigil mechanism and to ensure that the interests of a person who uses such mechanism are not prejudicially affected on account of such use;
p. report concerns about unethical behaviour, actual or suspected fraud or violation of the Bank’s code of conduct or ethics policy;
q acting within his / her authority, assist in protecting the legitimate interests of the Bank, its shareholders and employees;
Dealings in shares/ Insider trading:
The Board Members shall not deal in securities of the Bank either on their own behalf or on behalf of any other person when in possession of any unpublished price sensitive information or communicate, counsel or procure, directly or indirectly any unpublished price sensitive information to any other person except as required in the ordinary course of business or under any law. The Board Members should comply with the Bank’s ‘EMPLOYEE SHARE DEALING CODE’, processes made there under and any amendments thereof to the extent applicable to them.
Ethical conduct/ Conduct at workplace
Every Officer including the Executive Directors shall act within the authority conferred upon him by the Company and under applicable law, keeping the best interests of the Company in view and shall: Act with professionalism, utmost care, skill, diligence, honesty, good faith and integrity as well as high moral and ethical standards. Act fairly and transparently and not participate in any decision?making process on a subject matter in which a conflict of interest exists or is likely to exist such that an independent judgment of the Company’s best interest cannot be exercised. Fulfill their fiduciary obligations without allowing their independence of judgment to be
compromised. Conduct oneself in the letter and spirit of the applicable laws, rules and regulations, comply with the procedures and policies laid down by the Bank and encourage other officers and employees to do the same. Provide and enhance equal opportunities for men and women, to prevent, stop, and redress sexual harassment at the workplace and to promote good employment practices. Demand, demonstrate and promote professional behaviour and encourage employees to acquire skills, knowledge and training to expand/enhance their skills and specialised knowledge. Not misuse, for personal gain or otherwise, the assets of the Bank, and shall employ them for the purpose of conducting the business for which they are duly authorized.
Not discriminate employees based on colour, race, religion, caste, creed or gender. The Bank is committed to providing a work environment that is fair and non?discriminatory. Not have any material association with a firm, company or body corporate engaged in a line of business similar to that of the Bank or any of its subsidiaries, without obtaining the prior consent of the Vice Chairman and Managing Director of the Bank. Not accept gifts or other benefits other than of nominal value from any individual or concern having official dealings with the Bank or from any junior officer so as to avoid any possibility of such gifts or benefits even appearing to compromise business or official relationships. Officers must use their discretion in being satisfied that the gifts are indeed of nominal value