AU Small Finance Bank Ltd Directors Report.


The Members,


Your Board of Directors has immense pleasure in presenting the 24th Annual Report of AU Small Finance Bank Limited covering the business and key operational highlights of your Bank together with Audited Financial Statements for the year ended on 31st March 2019.


Particulars y-o-y

For the year ended

Growth (%) 31st March 2019 31st March 2018
Total Income 58.26 t 3,410.86 2,155.25
Interest Income 2,948.84 1,767.19
Other Income 462.02 388.06
Interest Expenditure 1,606.35 826.73
Operating Expenses (excluding depreciation) 1,020.85 699.36
Profit before Depreciation, Provisions and Tax 24.56 t 783.66 629.16
Depreciation 61.75 53. 25
Provision for Income Tax 198.32 153.08
Other Provisions and Write-offs 141.78 130.79
Net Profit 30.74 t 381.81 292.04
Transfer to Statutory Reserve 95.45 73.01
Transfer to Special Reserve u/s 36(1)(viii) of Income Tax Act, 1961 37.80 20.50
Transfer to Capital Reserve 2.76 0.00
Transfer to Investment Fluctuation Reserve 22.12 0.00
Dividend (including tax/cess thereon) pertaining to previous year paid during the year 17.48 0.00
Dividend (in ) (Per Equity Share) 0.75* 0.50
Surplus carried over to Balance Sheet 1,572.03 1,365.84
(After excluding Exceptional Items not annualised)
Basic 13.16 10.26
Diluted 12.90 10.00

*Proposed Dividend as recommended by the Board of Directors.

i. Key Highlights on Profitability

• Total Profit before Tax was 580.13 crore for FY 2018-19 vis-a-vis 443.35 crore for FY 2017-18 and Earnings Per Share (EPS) was 13.16 compared to 10.26 last year

• Net Profit stood at 381.81 crore for FY 2018-19 vis-a-vis 292.04 crore for FY 2017-18, with y-o-y growth of 30.74%

• Net Interest Income grew by 402.02 crore from 940.46 crore during FY 2017-18 to 1342.48 crore during FY 2018-19, with a y-o-y growth of 42.75%

ii. Key Highlights on Balance Sheet

• Balance sheet size grew to 32,623 crore as on 31st March 19 vis-a-vis 18,833 crore as on 31st March 18 with y-o-y growth of 73%

• CASA increased by 1456.61 crore to 3590.09 crore during FY 2018-19 from 2,133.49 crore during FY 2017-18, registering a growth of 68.27%

• Capital Adequacy Ratio stood at same level, i.e. 19.31% as on 31st March 2019 vis-a-vis 19.31 % as on 31st March 2018

iii. Key Highlights on Asset Quality

• The Return on Equity (RoE) stood at 14% and the Return on Asset (RoA) stood at 1.5%

• Gross NPA and Net NPA remained stable at 2.0% and 1.3%, respectively, as on 31st March 2019 as compared to 2.0% and 1.3 %, respectively, as on 31st March 2018

iv. Key Operational Highlights

• During FY 2018-19, your Banks disbursement rose to 16,077 crore vis-a-vis 10,825 crore in FY 2017-18, registering an increase of 49%.

• As on 31st March 2019, your Banks distribution network stood at 322 Branches, 83 Asset Centres, 86 Banking Outlets (BOs) and 67 Business Correspondents (BCs), 14 Offices and 543 ATMs spread across 11 States and Union Territory

• Keeping an objective of making Digital Bank as good as Traditional Bank, in its second year of operation, your Bank focussed on enriching the Customer Phygital Experience by creating a robust technology platform to create a new age Digital Banking

Management Discussion & Analysis section covers the industry overview, financial and operating performance of the Bank and forms part of this Annual Report.

Change in the Nature of Business

There is no change in the nature of business of the Bank for the year under review.


Your Board of Directors is pleased to recommend dividend for 2nd consecutive year to reward its shareholders with 7.5% i.e., 0.75/- per equity share on face value of Rupee 10/- each for the year 2018-19 (previous year 5% i.e. 0.50/- per equity share) subject to the approval of the members in the 24th Annual General Meeting (AGM). There was no interim dividend declared during the reporting period.

The total outgo on account of dividend inclusive of taxes, for FY 2018-19 is 26.43 crore which represents a pay-out of 6.92% of the Banks profit.

In terms of Regulation 43A of the Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank adopted Dividend Distribution Policy and the dividend proposed is

in line with the Dividend Distribution Policy of the Bank. The Policy is hosted on the website of the Bank and can be viewed at

Closure of Share Transfer Books and Record Date for Dividend

The Register of Members and the Share Transfer Books of the Bank will remain closed from 20th July 2019 to 26th July 2019 (both days inclusive) for the purpose of the 24th AGM of the shareholders of the Bank to be held on 26th July 2019 and for determining the names of the members who would be entitled to the dividend, if any, declared by the Bank for the financial year ended 31st March 2019. The said dividend shall be paid to those members whose names appear on the Register of Members of the Bank as on 19th July 2019.

Transfer to the Investor Education and Protection Fund

In terms of Sections 124 and 125 of the Companies Act, 2013 (the Act) read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules 2016, dividend that remain unpaid or unclaimed for a period of seven years from the date of transfer are required to be transferred to the Investors Education and Protection Fund. There is no unclaimed/unpaid dividend liable for transfer to the Investors Education and Protection Fund for the year under review. The Bank has uploaded the details of unclaimed dividend amounts lying with the Bank on its website and can be viewed at https://www.aubank. in/unpaidunclaimed-dividend-details

Branch Banking and Liability Products

In line with the Government of Indias focus, your Bank is committed to increase the reach of formal banking services across the country and extend banking services to the belly of the nation.

The Branch Banking and Liabilities product suite caters to the financial needs of all set of customers, including self-employed, salaried individuals, children, women entrepreneurs, senior citizens, companies, societies, trusts, educational institutions, hospitals, governmentcorporations and local bodies among others. Our wide-ranging product suite includes Savings Account, Current Account, Term Deposit, Locker, Bank Guarantee, Gold Loan among others. Through our empanelled partners, we also provide Point of Sale (POS) for business needs, Life and Health Insurance, along with Mutual Fund investment solutions for customers.

Your Bank is steadily building a granular deposits book based on simple and clear value proposition, competitive interest rate on deposits, superior customer service and achieved strong traction in CASA. During the FY 2018-19, Bank expanded its presence to 543 ATMs as on 31st March, 2019 vis-a-vis 292 ATMs as on previous year end.

Financial Inclusion

Small Finance Banks were set up with the objective of enhancing financial inclusion and offer banking services in India by providing a saving vehicle and supplying credit to small business units, small and marginal farmers, micro and small industries and other unorganised entities through high-end technology and low-cost operations.

In the FY 2018-19, your Bank exceeded the benchmark targets prescribed under the licensing conditions and further contributed to Financial Inclusion through several initiatives.

With around 62% of the total branches in Semi-Urban, Rural and Unbanked Rural areas your Bank expanded reach to the hitherto excluded population and even in Metropolitan and Urban Area. Your Bank opened 4,03,000 deposit accounts and mobilised deposit of around 2200 crore from these areas. Your Bank added 16 new Unbanked Rural Branches in its reach, taking the total Unbanked Rural branch count to 30. Your Bank also has 86 Banking Outlets (BOs) in Unbanked Rural Areas of Rajasthan, Madhya Pradesh, Gujarat, Punjab, Haryana and Maharashtra, which is a low cost alternative for providing banking services to take banking to the last mile. Banking Outlets not just offer Savings Accounts and remittances services but also encourages these outlets to mobilise Term Deposits, Loans, Loan Repayments and other services. Together the BOs and the Unbanked Rural Branches have opened 47,218 accounts in the Unbanked Rural areas with a total deposit of 45.80 crore. In addition to this, the Unbanked Rural Branches and BOs have disbursed loans to the tune of 39.38 crore through 1,123 cases.

The BO Model at AU Small Finance Bank encourages the following:

Entrepreneurship: AU Bank has hand-picked dynamic individuals to take up the crucial responsibility of BOs at a village level. Many of these are either engaged in small-time employments like retail shops, juice shops, or were homemakers etc. These individuals are from nearby villages, the local area trusts them and they understand these customers better and are able to persuade them to use banking. AU Bank identified their entrepreneurial spirit and encouraged them to become BOs and act responsibly. Your Bank organised regular training programmes for them to gain a better understanding of the banking business and customers needs.

Unbanked rural area empowerment: Areas that had no access to any form of banking, started banking

transactions such as cash withdrawal and cash deposit. AU Bank offered a wide range of services through BOs. Besides opening bank accounts, BOs are also disbursing loans in rural areas. The BOs can open accounts, conduct Aadhar-based and card-based deposit and withdrawal transactions, non-financial transactions like balance inquiry, mini-statement, etc. and can share leads of all other AU products via the AU Business App. We encouraged them and conducted 300 plus literacy camps at these locations to provide comprehensive education regarding the benefits of formal banking to over 23,000 people. The camps were oraganised via Nukkad Natak to engage rural population to understand benefits of banking in their local language.

In the FY 2018-19, the unbanked rural BOs have opened 33,619 accounts in these scantily populated areas. We focussed not just on account opening in these areas, but also disbursed loans of 20.24 crore. Over 1,12,264 financial transactions, including cash deposit and cash withdrawal took place through these BOs.

Apart from the above, your Bank also contributed towards the governments novel MUDRA Yojana and opened 33,658 BSBD accounts with a deposit of around 12 crore, issued around 2,61,000 RuPay Cards and disbursed MUDRA Loans to the tune of 3,482 crore in FY 2018-19. The Bank also launched Pradhan Mantri Jevan Jyoti Bima Yojana in FY 2018-19 and went live on an online module and issued 650 policies under this scheme. The Bank also launched Pradhan Mantri Suraksha Bima Yojana and shall soon go live with the Atal Pension Yojana.

Retail Assets

Your Bank provides a wide range of retail asset products, including Vehicle Loans, Secured Business Loan to Micro, Small and Medium Enterprises (MSMEs) and Small & Medium-sized Enterprises (SMEs), Gold Loan, Agri-SME Loan, Consumer Durable Loan, Home Loan and Education Loan to cater to the entire financial lifecycle needs of customers. Vehicle Loans and Secured Business Loans constituted the bulk of the retail loan book and revenues.

The Bank would remain focussed on core retail segments with emphasis on contiguous deeper expansion in existing geographies and enter new geographies gradually. The Bank would continue to focus on customer delight by building strong and personalised relationships with retail clients and serving their needs with the use of emerging technologies. We customise our product offerings and features according to customers business needs after assessing the business model of clients. This leads to deeper customer engagement in a cost-effective manner. Your Banks operating model is lean, credit processes are robust, technology driven and cost efficient.

During the year, your Bank enriched its bouquet of product offerings to its customers through digital empowerment by offering financial products and services via an online platform against a new set of multiple collaterals. The Bank would continue to offer and introduce new tailor-made products to service the financial needs of customers.

Small and Mid-corporate Assets

The Banks Small and Mid-corporate business caters to the diverse needs of a wide range of corporate customer segments, including SMEs, Agri-SMEs, Indian corporates, financial institutions, mid-market companies and real estate businesses. This vertical offers a comprehensive set of products and services to these customers, including term loan, working capital finance, trade finance, lease rental discounting and other services including finance to Non-banking Financial Companies (NBFCs), microfinance companies, Housing Finance Companies (HFCs) and for construction finance.

The disbursements in this segment were 3,764 crore against 2,877 crore in the previous year, registering a growth of 31% and Assets under Management stood at 4,129 crore, against 2,739 crore in previous year, registering a growth of 51%.

Under Business Banking, your Bank caters to all segments of the businesses, including wholesalers, retailers, traders, manufacturers, service providers, contractors, distributors, educational institutes, healthcare institutes, etc. for fulfilling working capital needs, including day-to-day operations, setting up of new units and business expansion.


The Treasury Department of the Bank manages asset liability gaps, fund planning, regulatory liquidity requirements viz Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR) and Liquidity Coverage Ratio (LCR) and investments portfolio both SLR and Non-SLR of the Bank. The asset-liability mismatches and interest rate sensitivities of the Bank are efficiently tracked through Structural Liquidity Statements & Interest Rate Sensitivity and judiciously managed with various market investments and money market products. On the other hand, the treasury is also responsible for managing and optimising the cost of funds for the Bank through efficient planning and mix of available resources.

The Bank meets its regulatory requirements on CRR and SLR through efficient liquidity management and investment in GOI securities, SDLs and T-Bills across varying maturities. The portfolio durations were efficiently managed in line with interest rate view and within the overall risk framework provided in Investment Policy and under the oversight of the Banks Investment Committee. The treasury also successfully maintained appropriate liquidity buffers

in compliance to regulatory requirement of the LCR guidelines, while keeping the business requirements under consideration.

The Bank during the year continued to grow its relationship with both public and private sector banks, by setting up inter-bank limits and transacting in money market instruments. At the same time, the treasury endeavoured to optimise cost of funds by encouraging branches to mobilise deposits at competitive rate of interest in line with prevailing interest rates scenario.

On the treasury systems front, the Bank has well-established systems and platforms, including the RBI platform e-Kuber, Treasury Management System by Credence Analytics, Structured Financial Messaging Systems (SFMS), National Electronic Fund Transfer (NEFT), Real Time Gross Settlement System (RTGS) and Clearing Corporation of India Limited (CCIL) systems, which include money market and sovereign bond dealing platforms. The Banks Treasury also has in place a robust primary and secondary Data Centre and Disaster Recovery Centre, in partnership with external vendors, to secure the live systems, which are vital to the Banks business continuity and Business Continuity Plan (BCP) for any contingency. All systems and platforms are working seamlessly as per the Treasury requirements. The Treasury has also successfully implemented its BCP for any contingency.

The Treasury department is responsible for managing surplus funds by investing in SLR and high-quality Non-SLR instruments as per the approved regulatory frameworks and internal policies to get optimum risk adjusted returns. The Treasury has initiated and maintained a Debt Capital Market (DCM) book in FY 2018-19 for short- and medium-term investments in bonds and debentures, thus enhancing return on excess funds as well as create High Quality Liquid Assets (HQLA) to aid in regulatory LCR. The Treasury has also initiated active trading in Government securities to generate trading profit by capturing market movements.

Financial Institutions Group (FIG)

Financial Institutions Group (FIG) managed the relationship with financial market participants covering Banks, Mutual Funds, Insurance Companies, Development Finance Institutions (DFIs) and Multilaterals, as well as with associates and intermediaries like credit rating agencies, legal firms, and stock exchanges. The Bank enhanced its relationship with domestic DFIs and availed long-term, low-cost refinance facilities of substantial amount under various schemes for improvement in liquidity position. During the year, FIG facilitated medium and long-term liability for the Bank as per requirement and arranged for the setup of fund based and non-fund based limits with various counter parties and market participants.

To provide cushion in extreme liquidity scenarios, the Bank has been able to secure contingency lines from public and private sector banks. The Bank has also tied up with various banks to ensure availability of trade and remittance products for its clients and has successfully facilitated inward and outward foreign currency transactions, including issuance of trade instruments (Letter of Credit and Bank Guarantees) and processing of trade payments within the capacity of AD-II category bank.

The Bank empanelled with all the leading Stock Exchanges of India (i.e., NSE, BSE, MCX and NCDEX) for acceptance of the deposits to be placed by members of the exchange as margin collateral. This led to new business avenues for the Bank in terms of deposit mobilisation.


The Treasury maintained SLR investments in the form of Central and State Government Securities as per regulatory requirements of 19% of Net Demand and Time Liability (NDTL) within approved policy criteria in terms of duration and risk profile.

Transaction Banking

With innovative thinking and increased ownership, the Bank remained committed to provide customers with the ease of banking and achieved greater convenience through following measures:

• No deposit slips

• Simpler customer instruction forms

• Extended banking hours

• Seeding of AU Bank account to receive Direct Benefit Transfer (DBT) benefit

• Continuous enhancement in Personal Net Banking and Mobile Banking

• Corporate Net Banking

• Payment Gateway Integration

• Technology Support for Business Correspondents

• Aadhaar-enabled Payment Services (AEPS) extended to BCs where AU customers can perform activities such as Cash Withdrawal, Cash Deposit, Fund Transfer via Aadhaar, Balance Enquiry and Mini Statement.

• Card-based Transactions went live for providing services to AU customers as well as other bank customers to withdraw cash from BOs/BCs points.

The Banks strategy is to become digital bank of choice and focus has been to offer the easy & convenient tech solution to our customers. For this, your Bank started AU Sewadwaar for collection of EMI/Insurance premium at AU branches for third party tie-ups, Nodal Account for aggregator and payment partners and Mangalam Vishesh Account for letting customers sweepout to FD from their existing current account.

Technology and Digital Banking

Your Banks continued its endeavour to become a digital bank by creating best-in-class customer-centric solutions and deliver superior customer experience. Leveraging an omni-channel approach with a multi-product suite, the focus has been to create a trusted and recognised Digital Brand in the banking space.

Digital Brand

The purpose of your Bank has been to simplify banking for all users. With this core principle for building the Digital Brand and in order to create a sustainable long-term business model, we have been targeting to use 360 communication plans across multiple digital and social media channels, the objective is to uplift the brand awareness and consideration scores for your Bank, resulting in positive spill-over effects in traditional businesses too.

Digital Properties

During the year, focus of the Bank remained to deliver a seamless omni-channel integrated solution that ensured consistent high-level customer experience across all channels (website, internet banking, mobile applications and chat bots). The Bank has been working on state-of-the-art Digital Contact Centre that will be used for higher customer acquisition and better customer engagement through innovative models including virtual Relationship Manager.

Digital Products

• Digital Assets

Digital Asset is being designed with focus to deliver a seamless straight-through-disbursal process across the various digital modes. Strategic and business partnerships and social media campaigns is being leveraged for customer acquisition. Existing and new-to- bank customers shall apply and get loans through a well-defined credit and risk evaluation process.

• Digital Liabilities

AU Abhi App (mobile and web version) are being deployed by the Bank for Customer acquisition and faster account opening. Customers can open a Direct Benefit Account (DBT) with Bank and this is an important technology enabler for increasing the liability base customers.

• Digital Partnerships

Leveraging partnerships for optimal customer experience and increasing customer acquisition will be the focus for a fully operational Digital Bank. The various partnerships being looked at are strategic, business and technology with the objective of offering and facilitating the latest and most competitive products to the customers of the Bank.

The Bank is using issuer ratings and short-term and long-term instruments/bank facilities ratings that are assigned by the accredited rating agencies (i.e., India Ratings, CARE, CRISIL and ICRA) for its debt instruments. The credit rating of the Bank was upgraded by CRISIL from A+/Positive to AA-/ Stable and by ICRA Ratings from A+/Stable to AA-/Stable, covering debt instruments of the Bank in view of strong consistent performance quarter to quarter.

Ratings of Debt Instruments

Nature of the Debt Instrument Nature of Term India Ratings CRISIL ICRA CARE
Non-convertible Debentures Long Term AA-/Stable AA-/Stable AA-/Stable -
Subordinated Debt/Tier II Bonds Long Term AA-/Stable AA-/Stable AA-/Stable -
Bank Loans Long Term AA-/Stable - AA-/Stable AA-/Stable
Certificate of Deposits Short Term A1 + A1 + - -

Transfer to Reserve

In terms of applicable RBI regulations, the Bank has transferred the following amounts to various reserves for the financial year ended 31st March 2019.

Transfer to Reserves

Amount transferred to Amount ( in crore)
Statutory Reserve 95.45
Transfer to Special Reserve U/s 36 (1) (Viii) 37.80
Transfer to Capital Reserve 2.76
Transfer to Investment Fluctuation Reserve 22.12

Securities Capital

During FY 2018-19, there was no change in the authorised share capital of the Bank and it stood at 35,00,000,000 (Rupees Three Hundred and Fifty Crore only). The paid-up capital of the Bank as on 31st March 2019 stood at 2,92,35,74,860 (Rupees Two Hundred and Ninety-Two Crore Thirty-Five Lakh Seventy-Four Thousand Eight Hundred and Sixty only) consisting of 29,23,57,486 equity shares at face value of 10 (Rupees Ten) each.

During FY 2018-19, your Bank issued 43,30,441 equity shares at a face value of 10 (Rupees Ten) each, fully paid-up for cash at an issue price of 692.77 (Rupees Six Hundred and Ninety Two and Seventy Seven paisa including premium of 682.77) per equity share, aggregating to an amount of 2,99,99,99,612 (Rupees Two Hundred and Ninety-Nine Crore Ninety-Nine Lakh Ninety-Nine Thousand Six Hundred and Twelve only) to Camas Investments Pte. Ltd. through preferential allotment.

Further, the Bank issued 1,01,04,364 convertible warrants to Camas Investments Pte. Ltd. to apply for, get issued and allotted 1 (one) equity share of the Bank at a face value of 10 (Rupees Ten) each (for every Convertible Warrant), for cash, in one or more tranches, at a price of 692.77 (Rupees Six Hundred and Ninety Two and Seventy Seven paisa including a premium of 682.77), aggregating to an amount of 700,00,00,249 (Rupees Seven Hundred Crore and Two Hundred and Forty-Nine) (Warrants Subscription Consideration) within a period of 18 months from the date of allotment of convertible warrants. The Bank received partial amount of 175,00,00,063 (Rupees One Hundred and Seventy-Five Crore and Sixty-Three only) in respect to the above convertible warrants.

Your Bank also raised Tier-II capital by issuing 5,000 (Five Thousand) fully paid-up, unsecured, subordinated, rated, listed, redeemable, non-convertible bonds with face value of 10,00,000 (Rupees Ten Lakh Each) aggregating to 500,00,00,000 (Rupees Five Hundred Crore only) being classified as subordinated debt and categorised as Tier-II capital Bonds under the Basel II framework. The said Bonds were allotted to leading financial institutions and Banks.

The Bank added 2,32,34,250 (Rupees Two Crore Thirty Two Lakh Thirty Four Thousand Two Hundred Fifty) to the paid-up equity share capital by allotting 23,23,425 equity shares of face value of 10 (Rupees Ten) each to employees on exercise of options under Employee Stock Option Plan 2015 (Plan A and Plan B) and ESOP Scheme 2016 as per details mentioned below:

Equity Shares allotted on Exercise of ESOPs

Sr. No. Date of Allotment ESOP Plan - 2015 A ESOP Plan - 2015 B ESOP Scheme 2016 Total
1 14th August 2018 2,87,476 1,85,985 53,220 5,26,681
2 27th September 2018 7,16,465 8,32,353 3,960 1,552,778
3 11th December 2018 56,752 57,077 1,800 1,15,629
4 7th March 2019 2,048 15,299 1,10,990 1,28,337
Total No. of Shares 10,62,741 10,90,714 1,69,970 23,23,425

Employees Stock Option Plan (ESOP)

Employee Stock Option Schemes, duly approved by the shareholders of the Bank enabled the employees to participate in the future growth and financial success of the Bank. The Bank provides its employees a platform to perform and display their long-term commitment towards future growth of the Bank by way of rewarding them through Stock Options. The Employee Stock Option Schemes have been devised in accordance with SEBI (Share

Based Employee Benefits) Regulations 2014 as amended from time to time. In terms of compensation policy of the Bank, employees are granted options as part of Annual Performance Review of their performance and to hire best talent at senior management positions. Several factors including scale, designation, performance, grades, period of service, the Banks performance, criticality of role & their contribution is taken consideration for decision on nos. of ESOPs to be granted to the employees.

The Banks shareholders had approved the following Employee Stock Option Schemes:





The details of vesting of various schemes are as follows:

ESOP Schemes Vesting Period
Vesting Period % of Vesting of Options
1 year from the date of grant or at the time of IPO, whichever is later 20%
Expiry of 1 year from 1st vesting 30%
Expiry of 2 years from 1st vesting 50%
Total 100%
ESOP 2015 - Plan B Vesting Period % of Vesting of Options
1 year from the date of grant or at the time of IPO whichever is later 20%
Expiry of 1 year from 1st vesting 30%
Expiry of 2 years from 1st vesting 50%
Total 100%
ESOP 2016 Vesting Period % of Vesting of Options
Options granted under this scheme would vest after one year but not later than six years from the date of 1st vesting of options 100%
ESOP 2018 Vesting Period
Options granted under this scheme would vest after one year but not later than six years from the date of 1st vesting of options 100%

Details of Existing ESOP Schemes as on 31st March 2019

Particulars ESOP Plan A 2015 ESOP Plan B 2015 ESOP Scheme 2016 ESOP Scheme 2018
Date of Shareholders Approval 31st August 2015 31st August 2015 10th October 2016 07th August 2018
Total No. of Options Approved 38,36,058 49,33,194 21,00,000 49,33,200
Total No. of Options Outstanding at the Beginning of the Period 31,08,020 30,56,541 13,87,321 -
Total No. of Options Granted (during FY 2018-19) - 1,146 86,864 20,13,928*
The Pricing Formula/Price in 10.11 33.37 140 Market Price Linked
Options Vested (during FY 2018-19) 11,00,018 11,29,510 2,53,538 Nil
Options Exercised (during FY 2018-19) 10,62,741 10,90,714 1,69,970 Nil
Total No. of Shares Arising as a Result of Exercise of Options 10,62,741 10,90,714 1,69,970 Nil
Options Lapsed/Forfeited (during FY 2018-19) (Available for Re-issue) 30,032 43,672 1,99,255 46,980
Total No. of Options Exercisable at the End of the Year 33,865 37,230 78,142 -
Total No. of Options Outstanding at the End of the Year 2,015,247 19,23,301 11,04,960 19,66,948*
Variation in Terms of Options No No No No
Money Realised by Exercise of Options (during FY 2018-19) (in ) 1,07,44,311.43 3,63,97,126.18 2,37,95,800 Nil
Total No. of Options Granted to Senior Management Personnel (SMPs) Please refer Note 1 Please refer Note 1 Please refer Note 1 Nil
Any other employee who received a grant in any one year of options amounting to 5% or more of options granted during that year Please refer Note 2 Please refer Note 2 Please refer Note 2 Nil
Identified employees who are granted options, during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant Nil Nil Nil Nil
Diluted EPS of the Company after considering the effect of potential equity shares on account of exercise of Options Refer Note 4 -
Impact of the Difference between the Intrinsic Value of the Options and the Fair Value of the Options on Profits and on EPS Refer Note 4 -
Weighted Average Share/Exercise 10.11 33.37 140 No shares were
Price of the Shares Exercised during exercised under this
the Year (in ) scheme during the year
Weighted Average Fair Values of the Outstanding Options (in )

Please refer Schedule 18 (7) to Notes to accounts to Audited Financial Results for FY 2018-19


*10,00,000 ESOPs under ESOP Scheme 2018 were granted to Mr. Uttam Tibrewal, Whole Time Director during the year and the same are subject to RBI approval.

Note 1

Following are the total no. of stock options that have been granted to the SMPs during the financial year ended 31st March 2019

Name Designation No. of ESOPs Granted in ESOP Plan-A 2015 No. of ESOPs Granted in ESOP Plan-B 2015 No. of ESOPs Granted in ESOP Scheme 2016 No. of ESOPs Granted in ESOP Scheme 2018
1 Deepak Jain Chief Financial Officer 5,00,000
2 Manoj Tibrewal Group Head HR, Marketing & Distribution - - - 5,00,000
3 Ashok Khandelwal Chief Compliance Officer - - - 4,000
4 Sumit Madan Chief of Branch Banking - - - 15,000
5 Mayank Markanday Chief Risk Officer - - - 10,000
6 Rishi Dhariwal Chief of Secured Business Loan - - - 7,500
7 Vijendra Singh Shekhawat Chief of Operations - Assets 5,000
8 Yogesh Jain Group Head Strategy - Treasury, FIG, DCM, Wholesale Liability and Investor Relation 20,000
9 Vinay Vaish Chief of Credit Risk - - - 4,000
10 Nitin Gupta Chief Audit Officer - - - 3,000
11 Manmohan Parnami Company Secretary - - - 3,000
12 Amiya Dikshit* Chief Technology Officer - - - 0

*Amiya Dikshit resigned and was relieved during FY 2018-19 and no ESOPs were exercisable during the tenure of his employment.

Note 2

Following are the details of Employees who received a grant in any one year of ESOPs amounting to 5% or more of ESOPs granted during that year

S. No. Name Designation No. of ESOPs Granted in ESOP Plan-A 2015 No. of ESOPs Granted in ESOP Plan-B 2015 No. of ESOPs Granted in ESOP 2016 No. of ESOPs Granted in ESOP Scheme 2018
1 Uttam Tibrewal Whole Time Director* - - - 10,00,000
2 Manoj Tibrewal Group Head HR, Marketing & Distribution - - - 5,00,000
3 Deepak Jain Chief Financial Officer - - - 5,00,000

* 10,00,000 ESOPs under ESOP Scheme 2018 were granted to Mr. Uttam Tibrewal, Whole Time Director during the year and the same are subject to RBI approval.

Note 3

The SEBI has prescribed two methods to account for stock grants: (i) the intrinsic value method and (ii) the fair value method. The Bank adopts the intrinsic value method to account for the stock options it grants to the employees. The Bank also calculates the fair value of options at the time of grant, using the Black-Scholes pricing model with the following assumptions:

Particulars 31st March 2019
Risk-free Interest Rate (%) 7.30% - 8.03%
Expected Life (years) 3 years - 5.5 Years
Expected Volatility (%) 37.28% - 38.39%
Expected Dividend Rate (%) 0%

Note 4

The Bank measures the cost of ESOP using the intrinsic value method. Had the Bank used the fair value model to determine compensation, its Profit after Tax and EPS as reported would have changed to the amounts indicated below:

Particulars Year Ended 31st March 2019 Year Ended 31st March 2018
Profit after Tax as Reported 381.81 292.04
Add: ESOP Cost Using Intrinsic Value Method (Net of Tax) 25.11 9.24
Less: ESOP Cost Using Fair Value Method (Net of Tax) 36.38 12.51
Profit after Tax (Adjusted) 370.54 288.77
- As Reported 13.16 10.26
- Adjusted for ESOP Cost Using Fair Value Method 12.77 10.14
- As Reported 12.90 10.00
- Adjusted for ESOP Cost Using Fair Value Method 12.52 9.89


Particulars As on 31st March 2019 As on 31st March 2018
Stock Options Outstanding (Gross) 103.75 94.04
Deferred Compensation Cost Outstanding 44.87 73.76
Stock Options Outstanding (Net) 58.88 20.28

The Bank has granted 10,00,000 stock options on 30th August 2018 under Plan D1 and 38,702 and 10,18,758 stock options on 27th October 2017 under Plan A3 and Plan B5, respectively, to Whole time Director which are pending for RBI Approval. Accordingly, these options have not been considered for the purpose of computing the impact of ESOP fair value on profit before tax.

Re-classification of Certain Persons from the Promoter Group to Public Category

In pursuance to the Regulation 31A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Bank re-classified some of its promoter group i.e., Mr. Niranjan Lal Aggarwal, Mr. AjayAgarwal, Mr. Ashok Kumar Agarwal, Mr. Baldev Agarwal, Mr. Dinesh Kumar Agarwal, Mr. Mahender Kumar Agarwal, Mr. Manoj Kumar Agarwal, Mr. Srikant Kedia, Mr. Suresh Chand Kedia, Ms. Anita Aggarwal, Ms. Bina Agarwal, Ms. Chanda Devi Kedia, Ms. Dropathy Jaipuria, Ms. Pinki Agarwal, Ms. Sunita Gupta and M/s Natural Fab, who were not directly or indirectly exercising control over the affairs of the Bank, to public category. They were neither holding any key managerial positions or representations of the Board of Directors in the Bank, nor engaged in any management or day-to-day affairs and also do not have any right either to appoint any Director or an ability to control the management or policy decisions of the Bank in any manner.

Your Bank duly received approvals from Stock Exchanges and the same were disclosed in compliance of Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.


Being a banking company, the disclosures required as per Rule 8 (5) (v) & (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 to 76 of the Companies Act, 2013 are not applicable.

Particulars of Loans, Guarantees and Investments

Pursuant to Section 186 (11) of Companies Act, 2013, loans made, guarantees given or securities provided or acquisition of securities by a Banking company are carried out in its ordinary course of business and are exempted from disclosure requirement in the Annual Report. Hence, there is no disclosure being made herein in this regard.


The Report on Corporate Governance for FY 2018-19, along with the certificate issued by Practicing Company Secretary, CS Mr. Manoj Maheshwari, confirming the compliance to applicable requirements related to corporate governance as stipulated under Chapter IV of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this Annual Report as Annexure I.

Board and Board Committees

The Board of Directors holds fiduciary position and is entrusted with the responsibility to act in the best interests of the Bank. The Board at its meetings deliberate and decide on strategic issues including review of business policies, financial matters, discuss on business performance and other critical matters for the Bank. Committees constituted by the Board focus on specific areas and take informed decisions within the framework of the delegated authority and responsibility and make specific recommendations to the Board on matters under its purview. Decisions and recommendations of the committees are placed before the Board for consideration and approval as required.

Board Meetings

During FY 2018-19, seven (7) Board meetings were convened and held, the details of which are given in the Corporate Governance Report, forms part of this report as Annexure I. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013, Secretarial Standard I and as per SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015.

Committees of the Board

The Board places significant reliance on its committees by delegating responsibilities to assist it in carrying out its function under its supervision and stewardship. It therefore remains crucial that effective linkages are in place between the committees and the Board as a whole.

The Board Committees constitution is in acquiescence of provisions of the Companies Act, 2013, the relevant rules made thereunder, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Banking Regulation Act, 1949, other guidelines issued by RBI from time to time and the Articles of Association of the Bank. The details of the Board Committees of the Bank are disclosed in the Corporate Governance Report, which forms part of this report.

Meetings of Independent Directors

Your Bank conducted a separate meeting of Independent Directors consisting of Mr. Mannil Venugopalan, Mr. Krishan Kant Rathi, Mr. Raj Vikash Verma and Ms. Jyoti Narang as prescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of Companies Act, 2013.

During the year under review, the Independent Directors of the Bank met on 26th April 2018 without the presence of the Non-independent Directors and Members of the Senior Management of the Bank.

At the said meeting, the Independent Directors of the Bank inter alia reviewed the performance of the Non-independent Directors, the Board as a whole and reviewed the performance of the Chairman of the Bank taking into account the views of the Executive and Non-executive Directors and assessed the quality, quantity and timeliness of flow of information between the Management and the Board for effective discharge of their duties.

No sitting fees was paid to the Independent Directors of the Bank for participating in the said meeting.

Independent Woman Director

In terms of the provisions of Section 149 of the Companies Act, 2013 and Regulation 17 (1) (a) of SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015, your Bank continues to comply with the requirement and has one Independent Woman Director on its Board.

Board of Directors and Key Managerial Personnel

The composition of the Board of Directors of the Bank is in accordance with the Banking Regulation Act, 1949, the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. As on 31st March 2019, the Board of Directors comprises seven (7) Directors, out of which five (5) are Non-executive Directors. The Chairman of the Board and three (3) other Directors are Independent (Non-executive Directors) including one (1) Woman Independent Director. All the Directors have rich experience and specialised knowledge in sectors covering banking, economics, law, finance, accountancy and other relevant areas.

Your Banks Board consists of professionals who have the knowledge and experience required in the banking industry. The responsibilities of the Board inter alia include formulation of policies, taking new initiatives, performance review, monitoring of plans and pursuing of policies and procedures and ensuring that the Bank operates under the regulatory framework laid down by the RBI for Banks.

The remuneration/sitting fees paid to the Directors during the year has been disclosed in the Corporate Governance Report as Annexure I.

The following appointment on the Board was made during the year.

Appointment of Mr. Narendra Ostawal as Additional Director (Non-executive)

The Board of the Bank, in its meeting held on 17th January 2019, appointed Mr. Narendra Ostawal as Additional Director (Non-executive) (DIN: 06530414) of the Bank. Prior to this, he was appointed as a Nominee Director on behalf of Redwood Investments Ltd., fund advised by Warburg Pincus. Further, no remuneration was paid to Mr. Narendra Ostawal during the period under review.

The details of the brief profile of Mr. Narendra Ostawal is available on the website of the Bank at about-us/board-directors

Declaration of Independence

The Bank has received necessary declarations from each Independent Director under Section 149(6) and 149(7) of the Companies Act, 2013 and Regulation 16(1) (b) and Regulation 25(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), that they meet the criteria of independence laid down thereunder.

Retirement by Rotation

In terms of Section 1 52 of the Companies Act, 201 3, Mr. Uttam Tibrewal, Whole Time Director, shall retire at the ensuing AGM and being eligible for reappointment, offers himself for re-appointment. The Board recommends his re-appointment at the ensuing AGM and requisite information required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and under Secretarial Standard - II has been provided with the notice of the AGM.

Key Managerial Personnel

Mr. Sanjay Agarwal, Managing Director & CEO, Mr. Uttam Tibrewal, Whole Time Director, Mr. Deepak Jain, Chief Financial Officer and Mr. Manmohan Parnami, Company Secretary are Key Managerial Personnel of your Bank as defined under section 2 (51) of Companies Act, 2013. There was no change in composition of Key Managerial Personnel of the Bank.

Evaluation of the Directors, the Board and Its Committees

Pursuant to the provisions of the Companies Act, 2013, Regulation 17 (10) and other applicable Regulations of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and in consonance with Guidance Note on Board Evaluation issued by the SEBI, the Board on the recommendation of the Nomination and Remuneration Committee of the Bank carried out an annual performance evaluation of the Board as a whole and directors individually. The Board also carried evaluation of the working of its various Committees for the year under consideration.

The performance evaluation of the Directors was carried out by the entire Board, other than the Director being evaluated. The performance evaluation of the Chairman and the Non-independent Directors were carried out by the Independent Directors. The Nomination and Remuneration Committee carried out the performance evaluation of all the Directors of the Bank. The Directors expressed their satisfaction over the evaluation process.

The Evaluation process covers a structured questionnaire for evaluation by Board members and format has been designed after taking inputs received from the Directors and process of evaluation has been detailed below:

Familiarisation Programme for Directors

The Bank conducted orientation programme for the induction of Directors and during the year, programme organised by reputed institutes were attended by the Directors covering their roles and responsibility, IT Risks, cyber security, compliance and other governance aspects in the Bank. The Corporate Governance Report for FY 2018-19 contains the requisite information and the details of the familiarisation programmes imparted

to Directors. These programmes are also hosted on the website of the Bank and can be accessed at

Corporate Social Responsibility

In compliance with the provision of Section 135 of the Companies Act, 2013 read with the Companies (Corporate

Social Responsibility Policy) Rules, 2014, the Bank has set up a Corporate Social Responsibility (CSR) Committee.

Your Bank thoughtfully spent its CSR funds and selected few projects post assessment of their sustainable impact on the society. The primary focus areas were covering the field of livelihood enhancement, financial & digital literacy and development of sports. The contribution under CSR was carried out by AU Foundation through its AU Skill Academy, AU Sports Village and in collaboration with specialised implementing agencies. The Bank has devised long term strategy to take up sustainable projects that have widespread and long-lasting impact on the society. An overview of the CSR programmes undertaken by the Bank during FY 2018-19 is detailed in the Corporate Social Responsibility Report as Annexure II.

The CSR Policy, as recommended by the CSR Committee and approved by the Board, is available on the website of the Bank at

Social Environmental and Management System

The Social Environmental and Management System (SEMS) is a set of policies, procedures, tools and internal capacity to identify and manage a financial institutions exposure to the environmental and social risks of its customers. The Bank endeavours to benchmark itself with the best of corporates in India and continued its focus to implement Environmental, Social and Governance (ESG) practices. The procedures and decision-making process of the SEMS are systematically incorporated at each stage of transaction appraisal and monitoring.

Awareness is also created among vendors and customers to comply with applicable social and environmental laws.

Human Capital

Your Bank endeavours to provide a conducive workplace with best-in-class standards and believes that employees are the most important assets. To ensure that an effective and the right resource is acquired, your Bank continuously strengthens and updates its hiring mechanism.

During FY 2018-19, your Bank expanded its workforce to 12,623 employees as on 31st March 2019 vis-a-vis 11,151 employees as on 31st March 2018.

Your Bank, through its Human Resource Department, nurtures its employees through robust learning and development programme. A knowledge-driven approach is followed for designing & organising relevant training programmes to make employees ready for challenges and drive success in their functional roles.

In todays disruptive digital environment, it is critical to build a high-quality, robust talent pool with adaptability skills for the changing needs of the workplace for a sustained competitive advantage and to achieve accelerated growth. The Bank has always emphasised on a knowledge-driven approach for visualising the future and bringing that future to the present. The Bank focussed on developing the capacity and capability to nurture the brightest and best quality talent.

Anti-bribery and Anti-corruption Policy

The Bank adopts a zero-tolerance approach to bribery and corruption and is committed to act professionally, fairly and with integrity in its dealings wherever it operates. The Bank has an Anti-bribery and Anti-Corruption Policy laying down the principles for carrying out banking business in an honest and ethical manner.

The Anti-bribery and Anti-corruption Policy as approved by the Board is available on the website of the Bank at

Disclosure under Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The primary objective of the Policy on Prevention and Redressal Against Sexual Harassment is to protect the women employees from sexual harassment at the place of work. Your Bank constituted an Internal Complaints Committee in compliance with the provisions of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 to review, investigate and take suitable actions on complaints and there is a Board-level Disciplinary Committee that reviews the decisions taken by the Internal Complaints Committee.

The complaints received and the details relating thereto were as follows for the period under review:

Heading Nos.
No. of Complaints Pending at the Beginning of the Year 1
No. of Complaints Received and Resolved during the year 1
No. of Complaints Pending at the End of the Year 0

Extract of Annual Return

Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return as on 31st March 2019, in the prescribed form MGT-9 forms part of this report under Annexure VI and is available on the website of the Bank at

Compensation Policy

The objective of the Compensation Policy is to regulate the appointment and remuneration of Directors (including Independent Directors), KMP, SMP and other employees of the Bank according to the criteria formulated by the Nomination and Remuneration Committee of the Board under the requirement of the Companies Act, 2013 read with applicable Rules and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and guidelines issued by RBI in this regard.

The key objectives of the Compensation Policy are as follows:

• To institutionalise a mechanism for the appointment/removal/dismissal of Directors, lay down selection criteria for appointment of a Director, formulate the criteria for determining qualifications, positive attributes and independence of a Director and recommend to the Board

• To formulate the criteria for evaluation of performance of the Directors on the Board

• To establish standards on compensation/remuneration, including fixed and variable, which are in alignment with the applicable rules and regulations and are based on the trends, practices of remuneration prevailing in the industry

• To define internal guidelines for the payment of perquisites to the Directors, Key Managerial Personnels (KMPs), Senior Management Personnels (SMPs) and other employees of the Bank

The Compensation Policy is available on the website of the Bank at

Disclosure on Remuneration

The ratio of the remuneration of each Director to the median employees remuneration and other details in terms of sub section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, form part of this Report and is annexed as Annexure III to this Report.

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this Report and is annexed as Annexure IV to this Report.

Whistle Blower Policy and Vigil Mechanism

Whistle Blower Policy has been devised with a view to provide a mechanism to employees, customer and stakeholders of the Bank to approach the Chief Vigilance Officer and thereafter Disciplinary Committee of the Bank in case they observe any unethical and improper practices or any other alleged wrongful conduct in the Bank. The policy aims at establishing an efficient vigil mechanism in the Bank to quickly spot aberrations and deal with them at the earliest.

The policy devised is aligned to the recommendations of Protected Disclosure Scheme for Private Sector and Foreign Banks, instituted by RBI and in view of amendments in SEBI (Prohibition of Insider Trading) Regulations, 2015, the said policy has been amended by insertion of clause to report instances of leak of Unpublished Price Sensitive Information.

The Vigil Mechanism provides a channel to the employees, Directors and other stakeholders to report to the management about unethical behaviour, actual or suspected fraud or violation of the Codes of Conduct, regulatory requirements, incorrect or misrepresentation of any financial statements and such other matters. The Chief Vigilance Officer of the Bank act as a Special Assistant/ Advisor to the Managing Director (MD & CEO) of the Bank in the discharge of the vigilance functions. He is responsible for ensuring and promoting a culture of speaking up/raising red flags on matters relating to breaches/violations of the Banks Code of Conduct or any fraudulent transactions and provides a non-threatening environment to employees to discuss matters relating to the Banks Code of Conduct, suspected unethical behaviour, malpractices, wrongful conduct, frauds, violations of law and questionable accounting or auditing matters, which build trust and transparency in the Bank. During the year, no person was denied access to the Audit Committee or its Chairman to raise his/her concern under the Vigil Mechanism.

The Whistle Blower Policy and Vigil Mechanism as approved by Board are available on the website of the Bank at

Related Party Transactions

The Board approved Related Party Transactions and Materiality Policy as per the provisions of the Companies Act, 2013 read with the rules made thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, described the related party transactions requiring requisite approvals and requirements of appropriate reporting and disclosure of transactions between the Bank and its related parties.

During FY 2018-19, the Bank has not entered any materially significant transactions with its Promoters, Directors, management or relative of the Directors, which could lead to potential conflict of interest between the Bank and these parties, other than the transaction entered in the ordinary course of business and the transactions entered into by the Bank are on arms length basis. On quarterly basis, the Audit Committee of the Bank is apprised of all specified details of related party transactions. Hence, pursuant to Section 134 (3) (h) of the Companies Act, 2013 read with Rule 8 (2) of the Companies (Accounts) Rules, 2014, there are no related party transactions to be reported under Section 188 (1) of the Companies Act, 2013, in form AOC-2. The requisite disclosure has been made under Schedule 18 of the notes forming part of audited financial statements for the year ended 31st March 2019.

The Related Party Transactions and Materiality Policy as approved by the Board is available on the website of the Bank at

Code of Conduct for Directors and SMPs

The Board of Directors of the Bank adopted the Code of Conduct for the Directors and Senior Management Personnel of the Bank in compliance with Regulation 17(5) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which sets forth the guiding principles on which Banks Board and Senior Management Personnel shall operate and conduct themselves with stakeholders, including government and regulatory agencies, media, etc.

In respect of FY 2018-19, all Board members and Senior Management personnel of the Bank have affirmed the compliance with the code as applicable to them and a declaration to this effect signed by the Managing Director & CEO and forms part of the Corporate Governance Report as Annexure I.

The Banks Code of Conduct for Directors and Senior Management is available on the website of the Bank at

Code for Prevention of Insider Trading

In compliance with the SEBI (Prohibition of Insider Trading) Regulations 2015, the Bank has approved code for prohibition of insider trading in the shares of the Bank, which inter alia, prohibits trading in shares of the Bank by insiders while in possession of unpublished price sensitive information in relation to the Bank and in view of amendments in SEBI (Prohibition of Insider Trading) Regulations, 2015, requisite amendments were carried out in the code and effective from 1st April 2019.

Code of Conduct for Employees

Code of Conduct is a comprehensive written code which is applicable to all employees and lays down the Principles and standards that govern the activities of the Bank and its employees to ensure and promote ethical behaviour within the governance framework and attempts to set forth the guiding principles and values on which the Banks employees shall operate and conduct its business with its all stakeholders including government, regulatory agencies, media and others with whom they are connected or interact with.

Material Orders Passed by Regulators or Courts or Tribunals, and Penalties and Punishment

There are no material orders passed by the regulators/ courts/tribunals during FY 2018-19, which would impact the going concern status of the Bank and its future operations.

The Bank has complied with the applicable requirements and no strictures or penalties were imposed on the Bank by the RBI, Stock Exchanges and SEBI during the year under review.

Material Changes and Commitments, if any, Affecting the Financial Position of the Bank

There are no material changes affecting the financial position of Bank that have occurred between the end of FY 2018-19 of the Bank to which the financial statements relate and the date of this Boards Report.

Maintenance of Cost Records

Being a banking company, the Bank is not required to maintain cost records as per sub-section (1) of Section 148 of the Companies Act, 2013.

Risk Management Framework

Robust risk management structure has been devised that proactively identifies the risks faced by the Bank and helps in mitigating them. Risk Management Committee (RMCB) of the Board supervises the risk management functions and advises on risk mitigation strategies, thereby bringing a top-down focus to risk management.

The Risk Management Department headed by the Chief Risk Officer administers the risk management functions in the Bank through dedicated divisions i.e., Credit Risk, Market Risk, Operational Risk, Fraud Risk and Information Security Risk under the aegis of Board approved risk management policies and approval & responsibility delegation matrix.

The detailed note on Risk Management is covered under Management Discussion and Analysis section, which forms part of this Annual Report.

The Enterprise Risk Management framework is a layered structure and broadly consists of the following components for effective risk management across the Bank.

(a) Credit Risk Management

There is Credit Risk and NPA Management Committee (CRANPAC) which reports to Risk Management Committee of the Board. The CRANPAC overseas and reviews the credit risk and ensures that Banks operations are run as per the credit risk framework laid down by the RMCB & Board of the Bank. The CRANPAC is responsible for formulation of standards for presentation of credit proposals, financial

covenants, rating standards and benchmarks, delegation of credit approving powers, prudential limits on large credit exposures, asset concentration, standards for loan collateral, portfolio management, loan review mechanism, risk concentration, risk monitoring and evaluation, provisioning, regulatory and other issues around it.

(b) Operational Risk Management

Your Bank has in place a Board delegated committee for Operational Risk Management (ORMC) which reports to (RMCB) for review and advise for implementation of measures for risk mitigation. The Bank follows an integrated risk approach where operational risks & its monitoring folds into CRO and ORMC. The Bank has business continuity framework to ensure the continuity of services in the event of any catastrophic event. Your Banks operational risk management framework is designed with a clear understanding of various operational risks faced by the Bank and for its continuous monitoring disciplined risk assessment & mitigation measures were operating effectively during the year.

(c) Fraud Risk Management

Your Bank has effective fraud risk management framework and Risk Containment Unit (RCU) that is guided by a Board approved Fraud Risk Management Policy. Fraud reported in the Bank are apprised to the Audit Committee and Board and fraud in excess of 1 crore or more are specifically reported and dealt by the SFMC Committee of the Board. Frauds in banks occur when the safeguards are inadequate or the procedural checks are not adhered to, leaving the system/bank vulnerable to internal or external perpetrators. The only effective defence the Bank can have against frauds is to continuously strengthen its systems, operational practices, procedures, controls and review mechanism so that fraud-prone areas are sanitised against internal and external breaches and these control measures operate effectively.

(d) Market Risk, Liquidity and Asset Liability Management

Your Bank has a well-developed market risk framework comprising Board-approved policies and established practices. The Bank has in place an integrated risk measurement framework that captures all components of market risks. The Asset Liability Management Committee (ALCO) of the Bank oversees the framework for identification, measurement and management of market risk, interest rate risk and liquidity risk in the Bank and ensures compliance with established internal and regulatory prudential limits.

(e) IT Risk Management

Your Bank has established robust information and cyber security framework for securing its IT infrastructure and systems. There is a dedicated IT Steering and Information Security Committee which reports to Board-level IT Strategy & Information Systems Security Committee. This committee reviews and monitors IT security infrastructure and vigilance over IT related vulnerabilities against emerging cyber security risks. The Chief Information Security Officer (CISO) is responsible for monitoring the information security risk covering all aspects of data security for the Bank who reports to Chief Risk Officer (CRO). Cyber Security Operation Center (CSOC) with qualified professionals report into CISO for monitoring of real-time cyber security incidents.

(f) Business Continuity Plan

Your Bank has put in place a comprehensive Business Continuity Management (BCM) plan, policy and procedures to ensure continuity of critical operations of the Bank in the event of any disaster/incident affecting business continuity. The Banks business continuity programme is developed considering the criticality of the functions performed and the systems used to minimise the operational, financial, legal and other material consequences arising from such a disaster and focus is on ensuring faster recovery of/ minimizing impact on the IT systems of the Bank.

(g) Cyber Security Management

Technology has drastically changed the banking services, products, methods of operation and the way banks function. Your Bank has been able to offer more products to increase customers delight and operational efficiency and reduce operational expenses of banking services. However, it is equally true that the advent of technology has also made banks vulnerable to cyber-attacks. Cyber security is the combination of technologies, processes and practices designed to protect networks, computers, programmes and data from cyber-attacks, damage or unauthorised access. Cyber space is a complex environment consisting of interactions between people, software and services, supported by worldwide distribution of Information and Communication Technology (ICT) devices and networks.

To combat growing cyber threats and enhance the resilience of the banking system to address cyber risks, your Bank has set up a framework for cyber security in compliance with the guidelines issued by the RBI. During the year, the Directors and Senior Management attended the training & certification programme organised by IDRBT for awareness about current IT and cyber security issues.

Statutory Auditors & their report

M/s. S.R. Batliboi & Associates LLP (Firm Registration No. 101049W/E300004) were appointed as the Statutory Auditors for a period of four (4) years by the Members of the Bank at the (22nd) Twenty Second Annual General Meeting held on 27th September 2017, to hold office from the conclusion of the 22nd Annual General Meeting till the conclusion of the 26th Annual General Meeting of the Bank, in accordance with the provisions of the Companies Act, 2013.

The Statutory Auditors have confirmed their eligibility under Section 141 of the Companies Act, 2013. Further, as required under the relevant provisions of SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, the Statutory Auditors had also confirmed that they had subjected themselves to the peer review process of the Institute of Chartered Accountants of India (ICAI) and they hold a valid certificate issued by the Peer Review Board of ICAI and the Board has upon recommendation of the Audit Committee proposed the ratification of their appointment as Statutory Auditors for the FY 2019-20, subject to approval of shareholders at the ensuing AGM and the RBI.

There are no qualifications, reservations or adverse remarks made by M/s. S.R. Batliboi & Associates LLP, Chartered Accountants, Statutory Auditors of the Bank, in their report. Further, pursuant to Section 143(12) of the Companies Act, 2013, the Statutory Auditors of the Bank have not reported any instances of frauds committed in the Bank by its officers or employees.

Secretarial Auditors & their report

In compliance with the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board in its meeting dated 26th April 2018 upon recommendation of the Audit Committee appointed M/s. V.M. & Associates, Practicing Company Secretaries (Registration No. P1984RJ039200) to undertake the Secretarial Audit of the Bank during the financial year ended 31st March 2019. The Secretarial Audit Report for FY 2018-19 is annexed herewith as Annexure V.

There were no observations or qualifications made by the Secretarial Auditor in its Report (except expense on CSR activities below the prescribed limit); justification of observation covering reasons for not being able to carry out CSR expenditure has been provided in the report on CSR attached as Annexure II to this Boards Report.

Internal Financial Controls System and their Adequacy

Your Bank has an effective internal control system calibrated to the risk appetite of the Bank and aligned to the scale, size and complexity of its operations. The scope and authority of the risk-based internal audit function is defined in the Internal Audit Policy of the Bank duly approved by the Board.

The audit function essentially validates the compliances of Banks processes and operations with regulatory guidelines, accounting procedures and the Banks own internal rules and guidelines.

The Internal Audit function provides independent assurance to the Board of Directors, Audit Committee and Senior Management on the quality and effectiveness of the Banks internal control, risk management and governance systems and processes.

Proper internal financial controls were in place and were operating effectively during the year. Further, the statutory auditors have, in compliance with the requirements of the Companies Act, 2013, issued an opinion with respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operating effectiveness of such controls details of which may be referred to in the Auditors Report attached to the Audited Financial Statements of FY 2018-19.


Strong compliance & governance culture has been established with the objective to build trust & transparency among all stakeholders and a dedicated Compliance Department headed by the Chief Compliance Officer for ensuring regulatory compliance across all businesses and operations has been setup.

The Board, Audit Committee & Risk Management Committee of the Bank oversee the implementation of the entire compliance framework and risk management system across the Bank.


Pursuant to Regulation 34 (2) (f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Business Responsibility Report (BRR) is required to be published by the Top 500 listed companies based on market capitalisation. The BRR describes the initiatives taken by the Bank from environmental, social and governance perspective in the format prescribed under SEBI Circular No. CIR/CFD/CMD/10/2015 and the same is attached herewith as Annexure VII and placed on the website of the Bank at


The Management Discussion and Analysis Report for FY 2018-19 is presented in a separate section forming part of this Annual Report.


Conservation of energy and technology absorption

Your Bank as a responsible organisation established and implemented the required systems and processes to conserve energy aligned to its nature of the business. The Bank is using energy efficient cooling systems for its operations. The distributed cooling system has been designed in such a way that if a particular area/room is not

in use, the air-conditioning for that particular area is auto switched off to conserve energy. In similar ways, energy efficient lighting systems like LEDs have been widely used in offices of the Bank. Your Bank used wide glass windows to utilise maximum natural lights to conserve electricity used by the lighting system.

Your Bank as part of its digital strategy is focussed on building an IT architecture in a manner to achieve internal natural resource consumption efficiencies and simultaneously minimising the carbon footprint.

Efforts made by the Bank for conservation of energy and absorption of technology have been detailed below:

Energy-efficient IT hardware

IT hardware assets used by your Bank comply with the Environmental Protection Agencys (EPAs) Energy Star guidelines for lower power consumption. These IT assets include workstation, notebooks, servers, etc. Further, your Bank is using multicore processors in servers, which increases processing output without substantially increasing energy usage.

Digital Solutions

Your Bank is leading the digital banking revolution by operating Paperless Account Origination through a TAB-based system, which has significantly reduced paper consumptions in the Bank. Under the Go Green Programme all printers of the Bank are being configured with both side printing and the size of e-receipts have been reduced to print two slips on a single page. These initiatives by the Bank have significantly reduced the overall paper consumption within the Bank.

Using power management technology and best practices

Your Bank is a pioneer in adopting the latest operating systems running on Advanced Configuration and Power Interface (ACPI) enabled systems that incorporate power saving features that automatically goes on power-saving mode in case the system is idle for a specific time interval.

Using Cloud-based and virtualised data centre

The virtual and Cloud technology based servers are one of the most energy efficient servers in the current technology era and the Bank invested on virtualisation and Cloud-based technology to reduce the number of physical servers.

Recycling systems and supplies

The Bank is following an efficient way of managing aging IT systems to scale down the load on already overtaxed landfills and to avoid sending hazardous materials to those landfills where they can seep into the environment and cause harm.

The Bank has an efficient way of re-furbishing the slightly old IT systems that can be used by staff who do not require heavy data processing. Hence, the Bank reduces the demand for new laptops/desktops despite the increase in manpower. In many cases, when an IT engineer needs a new high end workstation to run resource hungry programmes, the old computer is perfectly adequate for use by someone doing Word processing, spreadsheets or other less intensive tasks. This hand-me-down method allows two employees to get better systems than they had, while requiring the purchase of only one new machine (thus saving money and avoiding unnecessary e-waste).

Foreign exchange earnings and outgo

During the year ended 31st March 2019, there were no foreign exchange earnings and the foreign exchange outgo was of 0.46 crore.

MD & CEO and CFO Certification

The MD & CEO and the CFO of the Bank have issued certificate certifying that the financial statements do not contain any materially untrue statements and these statements represent a true and fair view of the Banks affairs. They also certify that no transactions entered into during the year were fraudulent, illegal or violative of the Code of Conduct of the Bank. The certificate of MD & CEO and CFO forms part of Annual Report.

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

During the period under review, the Bank has complied with all the mandatory requirements of Regulation 17 to 27 of SEBI (Listing Obligations and Disclosure Requirements) and other applicable Regulations except for Regulation 24, which is not applicable to the Bank.

Accounting Treatment

The Bank has adopted accounting policies that are in line with the accounting standards and financial statements are prepared in adherence to the accounting policies, accounting standards and applicable provisions of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and RBI Guidelines in this regard.

Subsidiary and Associate Companies

During the period under review, the Bank does not have any subsidiary or associate companies. Hence, Form AOC 1 as specified under the Companies Act, 2013 is not applicable to the Bank for FY 2018-19.

Compliance of Secretarial Standards issued by the ICSI

The Bank has complied with applicable Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).


Pursuant to the applicable compliance of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the financial results of the Bank on a quarterly basis are published to the Stock Exchanges. The same were also published on the website of the Bank and in leading national and vernacular newspapers. The Managing Director & CEO, Whole Time Director, CFO and Chief of Investor Relations at regular intervals connect with the analysts/ shareholders and respond to the queries from investors on a quarterly basis.

For share transfers, dividend payments and all other investor-related activities are attended to and processed at the office of our Registrars and Share Transfer Agents, i.e., Link Intime India Private Limited, contact details of which are provided in the Corporate Governance Report of the Annual Report.

Board-approved Investor Grievance Redressal Policy lays down the simplified procedure for shareholders to submit their queries, concerns and grievances for timely resolution. Shareholders can email at for any query and can also visit the Banks website for more information at All the investor complaints received during the year were resolved and there was no investor complaint that was unresolved as on 31st March 2019.


Your Directors would like to inform that the audited financial statements for the financial year ended 31st March 2019 are in conformity with the requirements of Clause (c) of Sub-section (3) of Section 134 of the Companies Act, 2013 and hereby confirm:

(a) That in the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures

(b) That the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the

Bank at the end of the financial year and of the profit and loss of the Bank for that period

(c) That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the Banks assets and for preventing and detecting fraud and other irregularities;

(d) That the Directors had prepared the annual accounts on a going concern basis

(e) That the Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively

(f) That the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively


The Board of Directors wish to place on record their gratitude to the RBI, SEBI, Ministry of Corporate Affairs, Indian Banks Association (IBA), Unique Identification Authority of India (UIDAI), the Banks customers, bankers, shareholders debenture holders, trustees and others for their continued support and faith reposed in the Bank. The Directors would also like to thank the BSE Limited, the National Stock Exchange of India Limited, National Securities Depository Limited, Central Depository Services (India) Limited and the Credit Rating Agencies for their continued co-operation.

The Board also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, teamwork, commitment and self-driven approach as key enablers for achieving consistent growth.

For and on behalf of the Board of Directors
Sanjay Agarwal Uttam Tibrewal
Managing Director & CEO Whole Time Director
DIN:00009526 DIN:01024940
Date: 22nd April 2019
Place: Jaipur
CIN: L36911RJ1996PLC011381



The Members,

AU Small Finance Bank Limited

1. We have examined the compliance of conditions of Corporate Governance of AU Small Finance Bank Limited ("the Bank") for the year ended on 31st March 2019 as stipulated in Regulations 17 to 27 and clauses (b) to (i) of Regulation 46 (2) and other applicable regulations of Chapter IV pertaining to Corporate Governance and paragraphs C, D and E of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 collectively referred as (SEBI Listing Regulations).

Managements Responsibility for compliance with the conditions of SEBI Listing Regulations

2. The compliance with the conditions of Corporate Governance is the responsibility of the management of Bank, including the preparation and maintenance of all relevant supporting records and documents. This responsibility includes the design, implementation and maintenance of internal control and procedures to ensure the compliance with the conditions of the Corporate Governance stipulated in SEBI Listing Regulations.

Auditors Responsibility

3. Our responsibility is limited to examining the procedures and implementation thereof, adopted by the Bank for ensuring the compliance with the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Bank.

4. We have examined the relevant records and documents maintained by the Bank for the purposes of providing reasonable assurance on the compliance with the Corporate Governance requirements by the Bank.

5. We conducted our examination in accordance with the Guidance Note on Corporate Governance Certificate and the Guidance Manual on Quality of Audit & Attestation Services issued by the Institute of Company Secretaries of India ("ICSI").


6. In our opinion and to the best of our information and according to the explanations given to us and the representation made by the Directors and the management, we certify that the Bank has complied with the conditions of Corporate Governance as stipulated in the above mentioned SEBI Listing Regulations.

7. We further state that such compliance is neither an assurance as to the future viability of the Bank nor the efficiency or effectiveness with which the management has conducted the affairs of the Bank.

Restriction on use

8. The certificate is addressed and provided to the members of the Bank solely for the purpose to enable the Bank to comply with the requirement of the SEBI Listing Regulations and it should not be used by any other person or for any other purpose. Accordingly, we do not accept or assume any liability or any duty of care for any other purpose or to any other person to whom this certificate is shown or into whose hands it may come without our prior consent in writing.

For V. M. & Associates
Company Secretaries
(ICSI Unique Code P1984RJ039200)
CS Manoj Maheshwari
Date: April 22, 2019 FCS3355
Place: Jaipur C P No.: 1971