BSE Prices delayed by 5 minutes... << Prices as on Mar 19, 2019 >>   ABB 1316.35 [ 0.67 ]ACC 1564.6 [ 0.90 ]AMBUJA CEM 229.8 [ 1.39 ]ASIAN PAINTS 1453.9 [ 0.56 ]AXIS BANK 761 [ 1.20 ]BAJAJ AUTO 2980.25 [ -0.80 ]BANKOFBARODA 124.3 [ 3.24 ]BHARTI AIRTE 336.65 [ 1.81 ]BHEL 68.1 [ 1.49 ]BPCL 407.65 [ 0.39 ]BRITANIAINDS 3124.15 [ 0.03 ]CAIRN INDIA 285.4 [ 0.90 ]CIPLA 533 [ -0.29 ]COAL INDIA 243.1 [ -0.47 ]COLGATEPALMO 1288.1 [ 0.32 ]DABUR INDIA 426.7 [ -0.51 ]DLF 194.25 [ -1.84 ]DRREDDYSLAB 2704.55 [ 1.31 ]GAIL 362.55 [ 0.75 ]GRASIM INDS 819.95 [ 0.22 ]HCLTECHNOLOG 1034.6 [ 2.18 ]HDFC 1967.85 [ 0.20 ]HDFC BANK 2267.7 [ 0.28 ]HEROMOTOCORP 2615.4 [ -2.10 ]HIND.UNILEV 1699.6 [ 0.13 ]HINDALCO 202.45 [ 1.45 ]ICICI BANK 398.15 [ 0.09 ]IDFC 44.7 [ 2.76 ]INDIANHOTELS 149.95 [ -0.30 ]INDUSINDBANK 1725.6 [ 0.14 ]INFOSYS 721.5 [ 1.66 ]ITC LTD 299.4 [ 2.45 ]JINDALSTLPOW 168.95 [ -0.44 ]KOTAK BANK 1348.2 [ 0.39 ]L&T 1356.75 [ -1.60 ]LUPIN 755.3 [ 0.11 ]MAH&MAH 689.5 [ 0.83 ]MARUTI SUZUK 6832.55 [ -1.13 ]MTNL 13.38 [ 1.83 ]NESTLE 10677 [ 2.03 ]NIIT 90.3 [ 0.73 ]NMDC 117.95 [ 1.94 ]NTPC 135.1 [ 2.16 ]ONGC 157 [ 1.49 ]PNB 90.5 [ 4.56 ]POWER GRID 198.7 [ 0.99 ]RIL 1375.25 [ 2.05 ]SBI 302.75 [ 1.44 ]SESA GOA 172.7 [ -0.32 ]SHIPPINGCORP 37.65 [ 1.62 ]SUNPHRMINDS 469.35 [ 0.66 ]TATA CHEM 591.9 [ 0.64 ]TATA GLOBAL 203.55 [ 1.47 ]TATA MOTORS 182.8 [ 0.27 ]TATA STEEL 526.25 [ 0.30 ]TATAPOWERCOM 73 [ 0.00 ]TCS 2024.7 [ 0.17 ]TECH MAHINDR 794.5 [ 0.73 ]ULTRATECHCEM 3981 [ 0.18 ]UNITED SPIRI 575.35 [ 0.38 ]WIPRO 257.6 [ -0.04 ]ZEETELEFILMS 466.55 [ 1.98 ] BSE NSE
You can view the entire text of Notes to accounts of the company for the latest year

BSE: 500247ISIN: INE237A01028INDUSTRY: Finance - Banks - Private Sector

BSE   ` 1348.20   Open: 1349.00   Today's Range 1338.50
1355.00
+5.30 (+ 0.39 %) Prev Close: 1342.90 52 Week Range 1002.30
1424.00
Year End :2018-03 

* The Bank on 18th May, 2017, concluded a Qualified Institutions Placement (QIP) of 62,000,000 equity shares at a price of Rs, 936 per equity share aggregating Rs, 5,803.20 crore. Accordingly, Share Capital increased by Rs, 31.00 crore and share premium increased by Rs, 5,733.67 crore, net of share issue expenses of Rs, 38.53 crore. The above expenses include Rs, 0.72 crore paid to the statutory auditors in connection with the issue.

Further the Bank has allotted during the year 2,750,629 equity shares consequent to exercise of ESOPs vested. Accordingly the share capital further increased by Rs, 1.37 crore and share premium increased by Rs, 149.87 crore, net of share issue expenses of Rs, 0.18 crore,

1. During the year ended 31st March, 2018 and year ended 31st March, 2017, the value of sale/transfer of securities to/from HTM category (excluding one-time transfer of securities and sales to RBI under OMO auctions) was within 5% of the book value of instruments in HTM category at the beginning of the year

The Senior Management Committee for Derivatives (SMC) performs the ongoing oversight and monitoring of the client derivatives business. This committee is responsible for reviewing and approving the derivative products that can be offered to clients (within the regulatory framework provided by the RBI). The Board approved 'Customer Suitability and Appropriateness Policy for Derivatives' lays down the risk management & governance framework for offering derivatives to clients,

The Market Risk Management Department is responsible for monitoring, measurement & reporting of risks in derivatives. The Market Risk Management Department is independent of the Treasury Front-Office & Back-Office and directly reports into the Group Chief Risk Officer

b) Scope and nature of risk measurement, risk reporting and risk monitoring systems:

All significant risks of the derivative portfolio are monitored, measured & reported to the senior management. The Market Risk Management Department, on a daily basis, measures & reports risk-metrics like Value-at-Risk (VaR), PV01, Option Greeks like Delta, Gamma, Vega, Theta, Rho etc. Credit Risk exposure from the derivatives portfolio is also reported daily. The Market Risk Management Department independently reports profitability on a daily basis. Rate reasonability tests are performed on the Derivative portfolio to ensure that all trades are entered into at market rates. Stress testing is performed to measure the impact of extreme market shifts on the Bank's portfolio (including derivatives). Suitability and Appropriateness assessment is performed before offering derivatives to clients. The Bank continuously invests in technology to enhance the Risk Management architecture.

c) Policies for hedging and/or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/mitigates:

The Board Approved 'Hedging Policy' details the hedging strategies, hedging processes, accounting treatment, documentation requirements and effectiveness testing for hedges.

Hedges are monitored for effectiveness periodically, in accordance with the Board Approved Policy,

d) Accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation:

Derivative transactions are segregated into trading or hedge transactions. Trading transactions outstanding as at the Balance Sheet dates are marked to market and the resulting profits or losses, are recorded in the Profit and Loss Account.

Derivative transactions designated as "Hedges" are accounted in accordance with hedging instruments on an accrual basis over the life of the underlying instrument.

Option premium paid/received is accounted for in the Profit and Loss Account on expiry of the option,

Pursuant to the RBI guidelines, any receivables as well positive Mark to Market (MTM) in respect of future receivable under derivative contracts comprising of crystallized receivables which remain overdue for more than 90 days are reversed through the Profit and Loss Account. Derivative exposures for Corporate are approved by the Credit Committee and for Banks by the ALCO. These exposures are renewable annually and are duly supported by ISDA agreements. MTM breaches are monitored daily and are cash collateralized wherever necessary.

11. The Provision Coverage Ratio (PCR) of the Bank after considering technical write-off is 65.68% as at 31st March, 2018 (previous year: 61.38%).

Above represents Gross NPA and NPI

2. RBI vide its circular dated 18th April 2017, has directed banks shall make suitable disclosures, wherever either (a) the additional provisioning requirements assessed by RBI exceed 15 percent of the published net profits after tax for the reference period or (b) the additional Gross NPAs identified by RBI exceed 15 percent of the published incremental Gross NPAs for the reference period, or both. There has been no divergence observed by RBI for the financial year 16-17 in respect of the Bank's asset classification and provisioning under the extant prudential norms on income recognition asset classification and provisioning (IRACP) which require such disclosures,

3. There are no unsecured advances for which intangible security such as charge over the rights, licenses, authority, etc. are accepted as collateral by the Bank.

Definitions:

(A) Working funds is the monthly average of total assets as reported by the Bank's Management to the RBI under Section 27 of the Banking Regulation Act, 1949.

(B) Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).

(C) Business is monthly average of net advances and deposits as reported to the RBI under section 27 of the Banking Regulation Act, 1949. Interbank deposits are excluded for the purposes of computation of this ratio,

(D) Productivity ratios are based on average number of employees,

* Listed equity investments in AFS have been considered at 50% '243.79 crore) haircut as per RBI directions In computing the above information, certain estimates and assumptions have been made by the Bank's Management.

36. DISCLOSURES ON REMUNERATION

A. Qualitative Disclosures:

a) Information relating to the composition and mandate of the Remuneration Committee:

The Nomination & Remuneration committee comprises of independent directors of the Bank. Key mandate of the Nomination

& Remuneration committee is to oversee the overall design and operation of the compensation policy of the Bank and work in coordination with the Risk Management Committee to achieve alignment between risks and remuneration,

b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

Objective of Banks' Compensation Policy is:

- To maintain fair, consistent and equitable compensation practices in alignment with Bank's core values and strategic business goals;

- To ensure effective governance of compensation and alignment of compensation practices with prudent risk taking;

- To have mechanisms in place for effective supervisory oversight and Board engagement in compensation The remuneration process is aligned to the Bank's Compensation Policy objectives,

c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:

In order to manage current and future risk and allow a fair amount of time to measure and review both quality and quantity of the delivered outcomes, a significant portion of senior and middle management compensation is variable. Further reasonable portion variable compensation is non- cash and deferred, over a period of 3 years or longer.

In addition, remuneration process provides for 'malus' and 'claw back' option to take care of any disciplinary issue or future drop in performance of individual/ business/ company,

d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:

Individual performances are assessed in line with business/individual delivery of the Key Result Areas (KRAs), top priorities of business, budgets etc. KRAs of Line roles are linked to financials, people, service and process (Quality) parameters and KRAs of non-Line Roles have linkage to functional deliveries needed to achieve the top business priorities.

Further remuneration process is also linked to market salaries/ Job levels, business budgets and achievement of individual KRAs.

e) A discussion of the banks' policy on deferral and vesting of variable remuneration and a discussion of the bank's policy and criteria for adjusting deferred remuneration before vesting and after vesting:

A discussion on Policy on Deferral of Remuneration

Employees are classified into following three categories for the purpose of remuneration:

Category I: Whole Time Directors (WTD)/Chief Executive Officer (CEO)

Category II: Risk Control and Compliance Staff Category III: Other Categories of Staff

Following principles are applied for deferral/vesting of variable remuneration in accordance with RBI guidelines and Bank's compensation policy:

Category I

a. Variable Pay will not exceed 70% of Fixed Pay,

b. The Cash component of the Variable Pay will not exceed 50% of the Fixed Pay,

c. If Variable Pay is higher than 50% of Fixed Pay, at least 40% of Variable Pay will be deferred over a period of 3 years, or longer, on a pro-rata basis.

The compensation will be approved by the Nomination and Remuneration committee and RBI

Category II

a. Variable Pay will not exceed 70% of Fixed Pay,

b. The Cash component of the Variable Pay will not exceed 50% of the Fixed Pay,

c. If Variable Pay is higher than 50% of Fixed Pay, at least 40% of Variable Pay will be deferred over a period of 3 years, or longer, on a pro-rata basis.

Category III

Variable Pay is payable as per approved schemes for incentive or Bonus:

i) The Cash component of the Variable Pay will not exceed 60% of the Fixed Pay,

ii) If Variable Pay is higher than 60% of Fixed Pay, at least 40% of Variable Pay will be deferred over a period of 3 years, or longer, on a pro-rata basis.

iii) However, if Variable Pay is less than or equal to ' 10 lakhs, management will have the discretion to pay the entire amount as cash,

For adjusting deferred remuneration before & after vesting:

Malus: Payment of all or part of amount of deferred variable pay can be prevented. This clause will be applicable in case of:

- Disciplinary Action (at the discretion of the Disciplinary Action Committee) and/or

- Significant drop in performance of Individual/ Business/Company (at the discretion of the Nomination & Remuneration Committee) and/ or

- Resignation of the staff prior to the payment date,

Claw back: Previously paid or already vested deferred variable pay can also be recovered under this clause.

This clause will be applicable in case of Disciplinary Action (at the discretion of the Disciplinary Action Committee and approval of the Nomination & Remuneration Committee).

f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:

The main forms of such variable remuneration include:

- Cash - this may be at intervals ranging from Monthly, Quarterly, Annual.

- Deferred Cash/Deferred Incentive Plan,

- Stock Appreciation Rights (SARs): These are structured, variable incentives, linked to Kotak Mahindra Bank Stock price, payable over a period of time

- ESOP as per SEBI guidelines,

The form of variable remuneration depends on the job level of individual, risk involved, the time horizon for review of quality and longevity of the assignments performed.

B. Quantitative Disclosures:

a) Number of meetings held by the Remuneration Committee during the financial year and remuneration paid to its members.

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,

b) Number of employees having received a variable remuneration award during the financial year.

Quantitative disclosure restricted to CEO, one Whole Time Director and Seven Executive Board members as risk takers,

c) Number and total amount of sign-on awards made during the financial year.

Not applicable

d) Details of guaranteed bonus, if any, paid as joining/sign on bonus.

Not applicable

e) Details of severance pay, in addition to accrued benefits, if any.

NIL (previous year Nil)

f) Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms

Cash - NIL (previous year Nil)

Outstanding SARs as at 31st March, 2018 - 156,428 rights (previous year 96,004 rights)

Outstanding ESOPs as at 31st March, 2018 - 1,218,277 equity shares (previous year 878,448 equity shares)

g) Total amount of deferred remuneration paid out in the financial year.

Payment towards SARs during year ended 31st March, 2018 Rs, 8.91 crore (previous year Rs, 5.29 crore)

h) Breakdown of amount of remuneration awards for the financial year to show fixed and variable, deferred and non-deferred.

Total fixed salary for the year ended 31st March, 2018 - Rs, 20.82 crore (previous year Rs, 16.28 crore)

Deferred Variable Pay*

SARs - 68,180 rights (previous year 54,220 rights)

ESOPs - 497,100 equity shares (previous year 494,060 equity shares)

Non Deferred variable pay* Rs, 4.68 crore (previous year Rs, 3.99 crore)

* Details relating to variable pay pertains to remuneration awards for the financial year 2016-17 awarded during current financial year. Remuneration award for the year ended 31s March, 2018 are yet to be reviewed and approved by the remuneration committee

i) Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and / or implicit adjustments. - Nil (Previous year Nil)

j) Total amount of reductions during the financial year due to ex- post explicit adjustments. - Nil (Previous year Nil)

k) Total amount of reductions during the financial year due to ex- post implicit adjustments. - Nil (Previous year Nil)

39. Unhedged Foreign Currency Exposure of borrowers:

The bank recognises the importance of the risk of adverse fluctuation of foreign exchange rates on the profitability and financial position of borrowers who are exposed to currency risk. Currency induced credit risk refers to the risk of inability of borrowers to service their debt obligations due to adverse movement in the exchange rates and corresponding increase/decrease in their book values of trade payables, loan payables, trade receivables, etc. thereby exposing the Bank to risk of default by the borrower. In this regard, the Bank had put in place requisite policies & processes for monitoring and mitigation of currency induced credit risk of borrowers. These include the following:

(a) Currency risk of borrowers on account of un-hedged foreign currency exposures ("UFCE") is duly considered and analysed in credit appraisal notes.

(b) Periodic monitoring of un-hedged foreign currency exposures of borrowers.

(c) Risk classification of borrowers having un-hedged foreign currency exposures, into Low/Medium/High, as per internal norms, based on likely loss/EBID ratio. Likely loss means the potential loss which can be caused over a one year horizon by adverse movement of exchange rates.

(e) In case of borrowers exposed to currency risk where declarations for foreign currency payables/receivables (UFCE declarations) are not submitted, provision for currency induced credit risk is made as per RBI stipulated rates mentioned below:

- 10 bps in cases where limits with banking system are less than Rs, 25 crore;

- 80 bps in cases where limits with banking system are Rs, 25 crore or more,

(f) Further, where annual certification from statutory auditors of UFCE data is not submitted, such borrowers are treated as UFCE declaration not submitted cases and provision is computed as per point (e) above,

(g) Borrowers where the credit exposure is only Letter of Credit Bills Discounting, Fixed Deposit backed, Bank Guarantee/Standby Letter of Credit backed are exempted from the above requirements. Exposures on other Banks and Public Financial Institutions like SIDBI, EXIM Bank, NABARD, NHB are also exempted from the above requirements,

(h) Management of foreign exchange risk is considered as a parameter for internal risk rating of borrowers,

Provision held for currency induced credit risk as at 31st March, 2018 is Rs, 50.24 crore. (Previous year Rs, 50.54 crore). Incremental Risk weighted Assets value considered for the purpose of CRAR calculation in respect of currency induced credit risk as at 31st March, 2018 is Rs, 1,293.22 crore (Previous year Rs, 2,156.04 crore.)

40. b) Qualitative disclosure around LCR

The Reserve Bank of India has prescribed monitoring of sufficiency of Bank's liquid assets using Basel III - Liquidity Coverage Ratio (LCR). The LCR is aimed at measuring and promoting short-term resilience of Banks to potential liquidity disruptions by ensuring maintenance of sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days,

The LCR requirement has been introduced in a phased manner with banks required to maintain minimum LCR of 60% till Dec 2015 and the 70% from Jan 2016 onwards. The requirement will be increasing by 10% annually to 100% by Jan 2019. LCR requirement is currently at 90% effective Jan 2018.

The ratio comprises of high quality liquid assets (HQLAs) as numerator and net cash outflows in 30 days as denominator. HQLA has been divided into two parts i.e. Level 1 HQLA which comprises of primarily cash, excess CRR, SLR securities in excess of minimum SLR requirement and a portion of mandatory SLR as permitted by RBI (under MSF and FALLCR) and Level 2 HQLA which comprises of investments in highly rated non-financial corporate bonds and listed equity investments considered at prescribed haircuts. Cash outflows are calculated by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.

The Bank has implemented the LCR framework and has consistently maintained LCR well above the regulatory threshold. The average LCR for the quarter ended 31st March, 2018 was 106.48% which is above the regulatory limit of 90%. For the quarter ended 31st March, 2018 Level 1 HQLA stood at 94.67% (41,366 crs.) of the total HQLA.

LCR is expected to bring in more funding stability due to severe run-off factors on wholesale funding but at the same time it has increased the liquidity cost due to maintenance of high quality liquid assets. Apart from LCR, Bank uses various stock liquidity indicators to measure and monitor the liquidity risk in terms of funding stability, concentration risk, dependence on market borrowings, liquidity transformation, etc. The Bank maintains a diversified source of funding in terms of depositor concentration, lender concentration as well as instrument concentration. This is evident through low depositor and lender concentration with top

4.depositors contributing 13.4% of Bank's total deposits and top 10 lenders contributing 5.7% of Bank's total liabilities,

Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management supported by Balance Sheet Management Unit (BMU), Risk Management Department (RMD), Finance and ALCO Support Group. BMU is the central repository of funds within the Bank and is vested with the responsibility of managing liquidity risk within the risk appetite of the Bank. Bank has incorporated Basel III Liquidity Standards - LCR and NSFR as part of its risk appetite statement for liquidity risk.

41. Frauds

The Bank has reported 268 (Previous year 126 cases) fraud cases involving fraud amount of one lakh and above during the financial year ended 31st March 2018 amounting to Rs, 56.73 crore (Previous year Rs, 111.54 crore). The Bank has recovered / expensed off / provided the entire amount where necessary.

Segmental Information is provided as per the MIS available for internal reporting purposes, which includes certain estimates and assumptions.

6. Lease Discloures:

a. The Bank has taken various premises and equipment under operating lease. The lease payments recognized in the Profit and Loss Account are Rs, 453.31 crore (previous year Rs, 430.81 crore). The sub-lease income recognized in the Profit and Loss Account is Rs, 5.56 crore (previous year Rs, 5.95 crore),

b. The future minimum lease payments under non-cancellable operating lease - not later than one year is Rs, 402.44 crore (previous year Rs, 366.42 crore), later than one year but not later than five years is Rs, 1,275.44 crore (previous year Rs, 1,160.15 crore) and later than five years Rs, 1,089.00 crore (previous year Rs, 1,003.01 crore).

The lease terms include renewal option after expiry of primary lease period. There are no restrictions imposed by lease arrangements. There are escalation clauses in the lease agreements.

7. Related Party Disclosures: A. Parties where control exists:

Nature of relationship Related Party

Subsidiary Companies Kotak Mahindra Prime Limited

Kotak Securities Limited

Kotak Mahindra Capital Company Limited

Kotak Mahindra Life Insurance Company Limited (formerly known as Kotak Mahindra Old Mutual Life Insurance Limited)

Kotak Mahindra Investments Limited

Kotak Mahindra Asset Management Company Limited

Kotak Mahindra Trustee Company Limited

Kotak Mahindra (International) Limited

Kotak Mahindra (UK) Limited

Kotak Mahindra Inc.

Kotak Investment Advisors Limited

Kotak Mahindra Trusteeship Services Limited

Kotak Infrastructure Debt Fund Limited

Kotak Mahindra Pension Fund Limited

Kotak Mahindra Financial Services Limited

Kotak Mahindra Asset Management (Singapore) Pte. Ltd.

Kotak Mahindra General Insurance Company Limited

IVY Product Intermediaries Limited

BSS Microfinance Limited (formerly known as BSS Microfinance Private Limited) (w.e.f 27 September 2017)

Nature of Relationship Related Party

Individual having significant Mr. Uday S. Kotak along with relatives and enterprises in which he has beneficial influence over the enterprise interest holds 30.04% of the equity share capital of Kotak Mahindra Bank Limited

as on 31 March 2018

Associates / Others ACE Derivatives and Commodity Exchange Limited,

Infina Finance Private Limited

Matrix Business Services India Private Limited

Phoenix ARC Private Limited

Kotak Education Foundation

ING Vysya Foundation

Key Management Personnel (KMP) Mr. Uday S. Kotak, Executive Vice Chairman and Managing Director

Mr. C. Jayaram, Joint Managing Director (upto 30 April 2016)

Mr. Dipak Gupta, Joint Managing Director

Enterprises over which KMP / Aero Agencies Limited

relatives of KMP have contr°l / Kotak and Company Private Limited significant influence

Komaf Financial Services Private Limited Asian Machinery & Equipment Private Limited,

Insurekot Sports Private Limited Kotak Trustee Company Private Limited Cumulus Trading Company Private Limited Palko Properties Private Limited Kotak Chemicals Limited

Kotak Ginning & Pressing Industries Private Limited

Kotak Commodities Services Private Limited

Harisiddha Trading and Finance Private Limited

Puma Properties Private Limited

Business Standard Private Limited

Business Standard Online Private Limited

Allied Auto Accessories Private Limited

Uday S Kotak HUF

Suresh A Kotak HUF

USK Benefit Trust II

Kotak Family Foundation (w.e.f. 2 May 2017)

Helena Realty Private Limited (w.e.f. 2 Feb 2018)

Doreen Realty Private Limited (w.e.f. 15 Feb 2018)

Renato Realty Private Limited (w.e.f. 15 Feb 2018)

Pine Tree Estates Private Limited (w.e.f. 20 Mar 2018)

Meluha Developers Private Limited (w.e.f. 20 Mar 2018)

Quantyco Realty Private Limited (w.e.f. 16 Mar 2018)

Xanadu Properties Private Limited (w.e.f. 20 Mar 2018)

Nature of Relationship Related Party

Relatives of KMP Ms. Pallavi Kotak

Mr. Suresh Kotak Ms. Indira Kotak Mr. Jay Kotak Mr. Dhawal Kotak Ms. Aarti Chandaria Ms. Anita Gupta Ms. Urmila Gupta Mr. Arnav Gupta Mr. Parthav Gupta Mr. Prabhat Gupta Ms. Jyoti Banga

Ms. Usha Jayaram (upto 30 April 2016)

Mr. K. Madhavan Kutty (upto 30 April 2016)

Mr. Vivek Menon (upto 30 April 2016)

Ms. Nayantara Menon Mehta (upto 30 April 2016)

Note:

1. Figures in brackets represent previous year's figures.

2. The above does not include any transactions in relation to listed securities done on recognized stock exchange during the year However above includes transactions done on NDS with known related parties.

3. # in the above table denotes amounts less than Rs, 50,000

Note;

1. Figures in brackets represent previous year's figures.

2. # in the above table denotes amounts less than Rs, 50,000

8. Employee Share Based Payments:

At the General Meetings, the shareholders of the Bank had unanimously passed Special Resolutions on 28th July, 2000, 26th July, 2004, 26th July, 2005, 5th July, 2007, 21st August, 2007 and 29th June, 2015, to grant options to the eligible employees of the Bank and its subsidiaries and associate companies. Pursuant to these resolutions, the following Employees Stock Option Schemes had been formulated and adopted:

(a) Kotak Mahindra Equity Option Scheme 2001-02;

(b) Kotak Mahindra Equity Option Scheme 2002-03;

(c) Kotak Mahindra Equity Option Scheme 2005;

(d) Kotak Mahindra Equity Option Scheme 2007; and

(e) Kotak Mahindra Equity Option Scheme 2015

Further, pursuant to the Scheme of Amalgamation of ING Vysya Bank Limited with the Bank, the Bank has renamed and adopted the ESOP Schemes of the eIVBL, as given below:

- Kotak Mahindra Bank Limited (IVBL) Employees Stock Option Scheme 2005;

- Kotak Mahindra Bank Limited (IVBL) Employees Stock Option Scheme 2007;

- Kotak Mahindra Bank Limited (IVBL) Employee Stock Option Scheme 2010; and

- Kotak Mahindra Bank Limited (IVBL) Employees Stock Option Scheme 2013

Consequent to the above, the Bank has granted stock options to the employees of the Group. The Bank under its various plan / schemes, has granted in aggregate 148,401,294 options (including options issued in exchange on amalgamation) as on 31st March, 2018 (Previous year 144,210,124).

In aggregate 9,475,005 options are outstanding as on 31st March, 2018 (Previous year 8,663,925) under the aforesaid schemes, Equity-settled options

The Bank has granted options to employees of the Group vide various employee stock option schemes. During the year ended 31st March, 2018, the following schemes were in operation:

Stock appreciation rights

At the General Meeting, the shareholders of the Bank had unanimously passed Special Resolution on 29th June, 2015 to grant SARs to the eligible employees of the Bank, its subsidiaries and associate companies. Pursuant to this resolution, Kotak Mahindra Stock Appreciation Rights Scheme 2015 has been formulated and adopted. Subsequently, the SARs have been granted under this scheme and the existing SARs will continue,

The SARs are settled in cash and vest on the respective due dates in a graded manner as per the terms and conditions of grant. The contractual life of the SARs outstanding range from 1.10 to 4.02 years,

Fair value of Employee stock options

The fair value of the equity-settled and cash-settled options is estimated on the date of grant using Black-Scholes options pricing model taking into account the terms and conditions upon which the options were granted. The fair value of the cash-settled options is remeasured at each Balance Sheet date. The following table lists the inputs to the model used for equity-settled and cash-settled options:

The expected volatility was determined based on historical volatility data and the Bank expects the volatility of its share price may reduce as it matures. The measure of volatility used in the Black-Scholes options pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time. For calculating volatility, the daily volatility of the stock prices on the National Stock Exchange, over a period prior to the date of grant, corresponding with the expected life of the options has been considered.

The above information has been prepared by Management,

Effect of the employee share-based payment plans on the Profit and Loss Account and on the financial position:

Had the Bank recorded the compensation cost computed on the basis of Fair Valuation method instead of intrinsic value method, employee compensation cost would have been higher by Rs, 42.26 crore (Previous year Rs, 33.21 crore) and the profit after tax would have been lower by Rs, 27.64 crore (Previous year Rs, 21.72 crore). Consequently the basic and diluted EPS would have been Rs, 21.40 (Previous year Rs, 18.45) and Rs, 21.37 (Previous year Rs, 18.43) respectively

In computing the above information, certain estimates and assumptions have been made by Management.

ii. Gratuity

The gratuity plan provides a lumpsum payment to vested employees at retirement or on termination of employment based on respective employee's salary and years of employment with the Bank subject to a maximum of Rs, 0.20 crore. There is no ceiling on gratuity payable to directors and certain categories of employees subject to service regulations and service awards,

# In the absence of detailed information regarding plan assets which is funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount for each category to the fair value of plan assets has not been disclosed.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled,

The Bank expects to contribute Rs, 39.82 crore to gratuity fund in financial year 2018-19. The above information is as certified by the actuary and relied upon by the auditors,

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled,

8. Provisions and Contingencies:

Breakup of "Provisions and Contingencies" (including write-offs; net of write-backs) shown under the head Expenditure in Profit and Loss Account:

9. Corporate Social Responsibility (CSR):

As per the provisions of the Section 135 of the Companies Act, 2013 the Bank is required to contribute Rs, 73.97 crore. The Bank has contributed Rs, 18.79 crore to the Kotak Education Foundation and Rs, 7.61 crore to other CSR initiatives in the current financial year, The Bank has also adopted a strong CSR policy, charting out its plan to invest in society and its own future. The Bank is building its CSR capabilities on a sustainable basis and is committed to gradually increase its CSR spend in the coming years,

10. Tier II Bonds:

a) Lower Tier II Bonds outstanding as at 31st March, 2018 Rs, 701.80 crore (previous year Rs, 858.80 crore),

During the current year and previous year the Bank had not issued lower Tier II bonds. In accordance with the RBI requirements lower Tier II bonds of Rs, 367.00 crore (previous year Rs, 383.64 crore) are not considered as Tier II capital for the purposes of capital adequacy computation under Basel III guidelines,

b) Upper Tier II Bonds outstanding as at 31st March, 2018 are Rs, 225.10 crore (previous year Rs, 348.28 crore) of which bonds issued outside India are Rs, 225.10 crore (previous year Rs, 212.28 crore),

During the current and previous year, the Bank did not issue upper Tier II bonds,

c) Interest Expended-Others (Schedule 15(III)) includes interest on subordinated debt (Lower and Upper Tier II) Rs, 81.68 crore (previous year Rs, 116.19 crore),

* Also refer Schedule 12 - Contingent Liability

11 The Bank has received few intimations from "suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and there is no outstanding against those suppliers as on 31st March, 2018, hence disclosures, if any, relating to amounts unpaid as at the yearend together with interest paid/payable as required under the said Act have not been given. The above is based on information available with the Bank and relied upon by the Auditors,

12. Figures for the previous year have been regrouped/reclassified wherever necessary to conform to current years' presentation.