Axis Bank Ltd Management Discussions.

Macro-Economic Environment

The year 2017 was marked by heightened global political uncertainty, with unexpected outcomes - the UKs Brexit referendum, the US Presidential election. However, global growth prospects have actually improved and fears of deflation have receded helped by rising commodity prices and hopes of fiscal stimulus in the US. Higher commodity prices augur well for our domestic commodity producers, as well as many commodity exporting emerging economies. This has led to a change in stance in the monetary policy of many countries, with the US Fed raising rates at its March Rs 17 meeting and indicating the possibility of more action in 2017.

Indias macro fundamentals have remained stable, reinforced by concerted policy efforts by the government. Measures to control food prices and judicious use of monetary policy levers by RBI have kept inflation low throughout FY17, permitting RBI to cut rates by 50 basis points (to 6.25%) during the first half of the year. Even though rates have not been cut thereafter, the shift in RBIs liquidity stance from deficit to neutral early in FY17 and then the massive infusion of deposits into banks post extraction of high denomination currency notes, have brought money market interest rates sharply lower and facilitated deep cuts in banks MCLR.

After 2 years of drought, the monsoon was good in 2017, significantly improving agricultural prospects. Food prices, particularly pulses, came off and helped bring headline CPI inflation down to average 4.5% in FY17. This along with the implementation of 7th Pay Commission, helped in reviving rural and urban domestic demand. There was a transient shock for a couple of months in Q3 FY17, but economic activity has resumed to normalcy towards the end of Q4FY17. Indias FY17 GDP growth stood at 7.1%.

The primary concern is the slowdown in capex activity, which has caused corporate credit demand to remain subdued, and post-demonetisation, non-food YOY credit growth dropped furtherto sub-5% levels.

The Union budget continued to strive towards fiscal consolidation, fixing a fiscal deficit target of 3.2% in FY18, down from the 3.5% in FY17. However, State Government borrowings grew in FY17, leading to a vitiation in consolidated Government fiscal rectitude. However, capital expenditures have increased in the Union Budget, both in actual terms in FY17 and projected FY18, which will partially offset the drop in private capex.

Prospects for fiscal 2018

Global growth prospects are expected to improve further in FY18, with improved demand resulting in commodity prices remaining at currently high levels, reinforced by capacity closures, especially in China.

Although our base projections indicate that CPI inflation in India is likely to average ~3.3% over FY18 supported by favourable base effect, there are many upside risks, including a sub-normal monsoon, diffusion of 7th Pay Commission awards to State Government employees and the GST rollout. It might be difficult for RBI to cut the repo rate more than 25-50 bps, given its medium term CPI target of 4%. However, given the extent of current liquidity and with foreign currency flows adding to durable funds, market interest rates are likely to remain low. RBI outlined a strategy for liquidity management in its April Rs 17 policy review to use various liquidity tools with specific purpose.

As per our base projections, Indias growth is expected to improve to 7.5% in FY18, with much of the increase likely from higher consumption. Investment is likely to remain modest, particularly in HI, but capex spend might gradually revive with spends on affordable housing, renewable energy, urban infrastructure and road and rail projects. Bank credit growth, however, will revive only gradually, since most of the initial capex will be public sector led.

With India reforms momentum likely to continue and continuing stable macro fundamentals, the Rupee is likely to remain largely stable, but the direction will be determined by the relative movements of the US Dollar and other major currencies.

Overview Of Financial Performance Operating performance

(Rs in crores)
Particulars 2016-17 2015-16 % change
Net interest income 18,093.12 16,832.97 7.49
Non-interest income 11,691.31 9,371.46 24.75
Operative revenue 29,784.43 26,204.43 13.66
Operating expenses 12,199.91 10,100.82 20.78
Operating profit 17,584.52 16,103.61 9.20
Provisions and contingencies 12,116.96 3,709.86 226.62
Profit before tax 5,467.56 12,393.75 (55.88)
Provision for tax 1,788.28 4,170.09 (57.12)
Net profit 3,679.28 8,223.66 (55.26)

Net profit for the year ended 31 March, 2017 contracted by 55.26% and stood at Rs ,679.28 crores, as compared to the net profit of Rs ,223.66 crores last year, primarily on account of higher provision for non-performing assets (NPAs). Operating profit reported a steady growth of 9.20% at Rs 17,584.52 crores over the previous year with healthy operating revenue growth of 13.66%.

Operating revenue rose from Rs 6,204.43 crores in fiscal 2016 to Rs 9,784.43 crores in fiscal 2017. Net interest income (Nil) rose 7.49% from Rs 16,832.97 crores in fiscal 2016 to Rs 18,093.12 crores in fiscal 2017. Non-interest income consisting of fee, trading and other income grew strongly by 24.75% from Rs ,371.46 crores in fiscal 2016 to Rs 11,691.31 crores in fiscal 2017. Fee income increased by 5.07% from Rs ,501.97 crores in fiscal 2016 to Rs ,882.01 crores in fiscal 2017. Trading profit grew strongly by 172.70% and stood at Rs ,400.34 crores in fiscal 2017.

Operating expenses rose 20.78% from Rs 10,100.82 crores in fiscal 2016 to Rs 12,199.91crores in fiscal 2017 as the Bank continued to invest in branch infrastructure, technology and human capital to support its business growth. Steady growth in operating revenues despite higher operating expenses this fiscal enabled the Banks operating profit to grow by 9.20% to Rs 17,584.52 crores from Rs 16,103.61 crores reported last year. Provisions and contingencies jumped 226.62% from Rs ,709.86 crores in fiscal 2016 to Rs 12,116.96 crores in fiscal 2017. Consequently, profit before taxes and net profit both contracted by 55.88% and 55.26%, from Rs 12,393.75 crores and Rs ,223.66 crores in fiscal 2016 to Rs ,467.56 crores and Rs ,679.28 crores in fiscal 2017 respectively.

Net interest income

(Rs in crores)
Particulars 2016-17 2015-16 % change
Interest on loans 33,124.96 30,040.56 10.27
Interest on investments 9,622.82 9,377.59 2.62
Other interest income 1,794.38 1,569.89 14.30
Interest income 44,542.16 40,988.04 8.67
Interest on deposits 19,639.63 18,540.21 5.93
Other interest expense 6,809.41 5,614.86 21.27
Interest expense 26,449.04 24,155.07 9.50
Net interest income 18,093.12 16,832.97 7.49
Average interest earning assets 492,868 431,873 14.12
Average CASA1 151,678 122,989 23.33
Net interest margin 3.67% 3.90% -
Yield on assets 8.97% 9.37% -
Yield on advances 9.77% 10.10% -
Yield on investments 7.49% 8.22% -
Cost of funds 5.60% 5.94% -
Cost of deposits 5.54% 6.01% -
1 computed on daily average basis

Nil constituted 60.75% of the operating revenue, and increased by 7.49% from Rs 16,832.97 crores in fiscal 2016 to Rs 18,093.12 crores in fiscal 2017. The increase is primarily due to an increase in average interest earning assets on a daily average basis by 14.12%, even as net interest margin (NIM) during the fiscal year 2017 contracted by 23 bps to 3.67%. The decline in NIM was mainly on account of higher fall in yield on interest earning assets of 40 basis points (bps) as compared to 34 bps decline in cost of funds.

During this period, the yield on interest earning assets decreased from 9.37% last year to 8.97%. The yield on advances declined by 33 bps from 10.10% in fiscal 2016 to 9.77% in fiscal 2017 primarily due to higher interest reversals on NPAs and assets under the Strategic Debt Restructuring (SDR)/Scheme for Sustainable Structuring of Stressed Assets (S4A), and reduction in base rate and marginal cost of funds based lending rate (MCLR) by 25 bps and 125 bps, respectively during the fiscal 2017. The yield on investments contracted by 73 bps as the interest rates corrected sharply during the year post demonetisation. Cost of funds also moderated by 34 bps from 5.94% in fiscal 2016 to 5.60% in fiscal 2017 led by moderation in the cost of deposits and further aided by the Banks continued focus on CASA. During the year, the cost of deposits decreased to 5.54% from 6.01% last year, primarily due to a decrease in cost of term deposits by 57 bps to 7.64% from 8.21% last year. CASA deposits, on a daily average basis, reported a healthy increase of 23.33% to Rs 151,678 crores from Rs 122,989 crores last year.

Non-interest income

(Rs in crores)
Particulars 2016-17 2015-16 % change
Fee income 7,882.01 7,501.97 5.07
Trading profit 3,400.34 1,246.91 172.70
Miscellaneous income 408.96 622.58 (34.31)
Non-interest income 11,691.31 9,371.46 24.75

Non-interest income comprising fees, trading profit and miscellaneous income increased by a healthy 24.75% to Rs 11,691.31 crores in fiscal 2017 from Rs ,371.46 crores last year and constituted 39.25% of the operating revenue of the Bank.

Fee income increased moderately by 5.07% to Rs ,882.01 crores from Rs ,501.97 crores last year and continued to remain a significant part of the Banks non-interest income. It constituted 67% of non-interest income and contributed 26% to the operating revenue. The share of granular fees comprising of Retail and Transaction Banking fees witnessed improvement during the year, and stood at 70% compared to 65% last year. Retail card fees, Retail non-card fees and Transaction Banking fees constituted 1 6%, 28% and 26%, respectively of the total fee income in fiscal 2017. However the Corporate Banking fee momentum remained weak during the year due to lack of fresh investment proposals and the Banks continued focus on better rated corporate clients where fee opportunities are relatively lower; its share in the overall fee profile stood at 23%. The rest 7% was contributed by Treasury, and SME segments.

During the year, proprietary trading profits increased by 172.70% to Rs ,400.34 crores from Rs 1,246.91 crores last year led by conducive interest rate environment that saw yields on 10 year government bonds declining by nearly 80 bps during fiscal 2017.

The Banks miscellaneous income was lower at Rs 08.96 crores compared to Rs 22.58 crores.

Operating revenue

The operating revenue of the Bank increased by 13.66% to Rs 9,784.43 crores from Rs 6,204.43 crores last year. The core income streams (Nil and fees) constituted 87% ofthe operating revenue, reflecting the stability ofthe Banks earnings.

Operating expenses

(Rs in crores)
PARTICULARS 2016-17 2015-16 % change
Staff cost 3,891.86 3,376.01 15.28
Depreciation 508.80 443.91 14.62
Other operating expenses 7,799.25 6,280.90 24.17
Operating expenses 12,199.91 10,100.82 20.78
Cost : Income Ratio 40.96% 38.55% -

The Bank continued to focus on making investments in expanding branch network and other infrastructure required for supporting the existing and new businesses, as a result of which the operating expenses increased by 20.78% to Rs 12,199.91 crores from Rs 10,100.82 crores last year. The Operating expenses to Assets ratio stood at 2.03% compared to 1.87% last year.

Staff cost increased by 15.28%, from Rs ,376.01 crores in fiscal 2016 to Rs ,891.86 crores in fiscal 2017, primarily on account of 13% increase in employee strength from 50,135 as at end of fiscal 2016 to 56,617 as at the end of fiscal 2017.

Other operating expenses increased by 24.17%, from Rs ,280.90 crores in fiscal 2016 to Rs ,799.25 crores in fiscal 2017. The increase is primarily due to investments in branch infrastructure and technology to support business growth. The Bank added 400 branches during fiscal 2017.

Operating profit

During the year, the operating profit of the Bank grew by 9.20% to Rs 17,584.52 crores from Rs 16,103.61 crores last year. Provisions and contingencies

(Rs in crores)
Particulars 2016-17 2015-16 % change
Provision for non-performing assets 11,157.06 3,800.46 193.57
Provision for restructured assets/SDR/S4A 290.53 (61.78) -
Provision forstandard assets including unhedged foreign currency exposure 334.57 388.62 (13.91)
Provision for depreciation in value of investments 238.70 84.01 184.13
Provision for country risk 19.94 - -
Provision for other contingencies 76.16 (501.45) (115.19)
Provisions and contingencies 12,116.96 3,709.86 226.62

During fiscal 2017, the Bank created significantly higher total provisions (excluding provisions for tax) of Rs 12,116.96 crores compared to Rs ,709.86 crores last year mainly on account of elevated slippages during the year. The Bank provided Rs 11,157.06 crores towards non-performing assets compared to Rs ,800.46 crores last year and Rs 34.57 crores towards provision for standard assets including unhedged foreign currency exposure compared to Rs 88.62 crores last year. During the year, there was provision against restructured assets/SDR/S4A of Rs 90.53 crores compared to a write-back of Rs 1.78 crores last year. As on 31 March 2017, the Bank had outstanding contingent provision balance of Rs 60.00 crores. The credit costs for fiscal 2017 stood higher at 282 bps.

Asset Quality Parameters

At the start of fiscal 2017, the Bank published a Watch List of accounts that the Management assessed to be the key source of stress in Corporate Lending book over the next 2 years. To begin with, almost half of the Watch List accounts comprised of stressed sectors like power and iron and steel with fund based outstanding of Rs 2,628 crores and non-fund based outstanding of Rs ,626 crores. During the year the Bank added Rs 19,106 crores of corporate slippages of which Rs 16,112 crores came from the Watch List. Resultantly the size

of the Watch List reduced to 42% with fund based outstanding of Rs ,436 crores and non-fund based outstanding of Rs 1,796 crores as on 31 March, 2017.

Watch List as proportion of customer assets reduced from 6.20% as on 31 March, 2016 to 2.20% as on 31 March, 2017. Higher slippages from the Watch List led to material rise in asset quality metrics. During the year the Bank added Rs 1,782 crores as fresh addition to Gross NPAs with the Banks ratio of Gross NPAs to gross customer assets increasing to 5.04%, at the end of March 2017 from 1.67% as at end of March 2016. The Bank added Rs 17,415 crores to Net NPAs after adjusting for recoveries and upgradations of Rs ,001 crores and Rs ,366 crores respectively and the Banks Net NPA ratio (Net NPAs as percentage of net customer assets) increased to 2.11% from 0.70%. The Banks provision coverage stood at 65% after considering prudential write-offs.

The net restructured book stood at Rs ,379 crores and net restructured assets ratio (net restructured assets as percentage of net customer assets) was 1.31%. During the year slippages from the standard restructured book stood at Rs ,213 crores. The cumulative outstanding value of the underlying standard loans subjected to SDRs, S4A and 5:25 as on 31 March, 2017 stood at Rs ,173 crores, Rs 23 crores and Rs ,329 crores, respectively.

The book value of the assets sold by the Bank to ARCs during fiscal 2017 was Rs ,960 crores (net of provisions). The realisation consideration (excluding accounts already written-off) was settled in security receipts (SRs) worth Rs ,083 crores and cash realised worth Rs 93 crores.

Key ratios

Particulars 2016-17 2015-16
Basic earnings per share (Rs) 15.40 34.59
Diluted earnings per share (Rs) 15.34 34.40
Book value per share (Rs) 232.83 223.12
Return on equity (%) 7.22% 17.49%
Return on assets (%) 0.65% 1.72%
Net interest margin (%) 3.67% 3.90%
Profit per employee ( lakh) 6.68 17.83
Business per employee ( crores) 14.00 14.84
Credit/deposit ratio (Domestic) 79.07% 81.71%
Credit/deposit ratio (Global) 90.03% 94.64%

Basic Earnings Per Share (EPS) was Rs 15.40 compared to Rs 4.59 last year, while the Diluted Earnings Per Share was Rs 15.34 compared to Rs 4.40 last year. Return on Equity (RoE) and Return on Assets (RoA) stood at 7.22% and 0.65% respectively. Book Value Per Share was Rs 32.83 compared to Rs 23.12 last year. Profit per Employee stood at6.68 lakh and Business per Employee stood at Rs 14.00 crores.

Credit Deposit (CD) ratio of the Bank as on 31 March, 2017 was at 90.03% with a domestic CD ratio of 79.07%. Considering Infrastructure Bonds, that are more cost effective and asset liability management friendly than deposits of same maturity, as a part of the Banks Deposits base, the domestic CD ratio stood at 76.52%.

Balance Sheet parameters

Assets

Total assets increased by 11.42% to Rs 01,468 crores from Rs 39,821 crores on 31 March, 2016.

(Rs in crores)
Particulars 2016-17 2015-16 % change
Cash and bank balances 50,256 33,326 50.80
Government securities 93,008 96,538 (3.66)
Other securities 35,786 34,986 2.28
Total investments 128,794 131,524 (2.08)
Corporate advances 155,904 155,384 0.33
SME advances 49,172 44,869 9.59
Retail advances 167,993 138,521 21.28
Total advances 373,069 338,774 10.12
Fixed assets 3,747 3,523 6.36
Other assets1 45,602 32,674 39.57
Total assets 601,468 539,821 11.42

1 includes Priority Sector Lending deposits of Rs 17,107 crores (previous year Rs 16,659 crores)

Advances

Total advances of the Bank as on 31 March, 2017 increased by 10.12% to Rs 73,069 crores from Rs 38,774 crores as on 31 March 2016, largely driven by healthy growth in the Retail segment. Corporate advances comprised 42% of total loans and grew marginally by 0.33% to Rs 155,904 crores, Retail loans comprised 45% of total loans and increased by 21.28% to Rs 167,993 crores, SME loans grew by 9.59% to Rs 9,172 crores and constituted 13% of total loans.

The retail lending growth was led by auto loans, personal loans, and credit cards. Mortgages continue to grow faster than the industry growth. The demonetisation of large denomination currency notes in November 2016 however led to some moderation in retail loan disbursements in segments like loan against property, retail agricultural loans and home loans during Q3FY17. However, the growth trends normalised during Q4FY17. The Bank continued to focus on secured loan products that accounted for 85% of retail loans. Home loans remain the largest retail segment and accounted for 44% of retail loans, retail agricultural loans accounted for 16%, loans against property 8%, personal loans and credit cards were 12% and auto loans 10%, while non-schematic loans comprising loan against deposits and other loans accounted for 10%.

Investments

The investment book of the Bank decreased by 2.08% to Rs 128,794 crores, of which investments in Government and approved securities, held mainly for SLR requirement, decreased by 3.66% to Rs 3,008 crores. Other investments, including corporate debt securities, increased by 2.28% to Rs 5,786 crores. 86% of the government securities have been classified in the HTM category, while 96% of the bonds and debentures portfolio has been classified in the AFS category. The modified duration as on 31 March, 2017 for the HTM, AFS and HFT portfolio stood at 6.23 years, 3.79 years and 3.53 years respectively.

Liabilities and shareholders funds

(Rs in crores)
Particulars 2016-17 2015-16 % change
Capital 479 477 0.42
Reserves and Surplus 55,284 52,688 4.93
Total shareholders funds 55,763 53,165 4.89
Deposits 414,379 357,968 15.76
- Currentaccountdeposits 87,002 63,652 36.68
- Savingsbankdeposits 126,048 105,793 19.15
- CASA 213,050 169,445 25.73
- Retail term deposits 123,925 121,955 1.62
- Non-retail term deposits 77,404 66,568 16.28
- Total term deposits 201,329 188,523 6.79
Borrowings 105,031 108,580 (3.27)
- In India 51,082 47,262 8.08
- Infra bonds 13,705 8,705 57.44
- Outside India 53,949 61,318 (12.02)
Other liabilities and provision 26,295 20,108 30.77
Total liabilities and shareholders funds 601,468 539,821 11.42

Deposits

The total deposits of the Bank increased by 15.76% to Rs 14,379 crores against Rs 57,968 crores last year. Savings Bank deposits reported a strong growth of 19.15% to Rs 126,048 crores, while Current Account deposits reported a healthy increase of 36.68% to Rs 7,002 crores. As on 31 March, 2017, low-cost CASA deposits increased by 25.73% to Rs 13,050 crores from Rs 169,445 crores last year, and constituted 51.41% of total deposits as compared to 47.34% last year. Demonetisation of large currency notes in November 2016 also aided inflows into the banking system, which in turn led to strong growth in Savings Bank deposits. Savings Bank deposits on a daily average basis, increased by 24.18% to Rs 102,879 crores, while Current Account deposits reported a growth of 21.57% to Rs 8,800 crores. The percentage share of CASA in total deposits, on a daily average basis, was at 42.75% compared to 39.87% last year.

The Bank continued to maintain its focus on retail term deposits. As on 31 March, 2017, the retail term deposits grew 1.62% and stood at Rs 123,925 crores, constituting 61.55% of the total term deposits compared to 64.69% last year, despite the redemption of FCNR-B deposits worth USD 1.8 billion during the fiscal. Excluding FCNR-B deposits, the growth in retail term deposits stood at 12.03%. As on 31 March, 2017, CASA and retail term deposits constituted 81.32% of total deposits.

Borrowings

The total borrowings of the Bank decreased 3.27% from Rs 108,580 crores in fiscal 2016 to Rs 105,031 crores in fiscal 2017. During the fiscal, the Bank successfully listed Asias first certified Green Bond on London Stock Exchange apart from raising other senior notes under its various Medium Term Note (MTN) programmes in the international markets. Domestically, the Bank raised Rs ,230 crores through Subordinated Debt and Rs ,500 crores through Additional Tier I bonds during the fiscal. Further, in accordance with RBIs guidelines on issuance of long term bonds for financing of infrastructure and affordable housing, the Bank successfully raised Rs ,000 crores of long term infrastructure bonds during the year. The outstanding balance in long term infrastructure bonds as on 31 March, 2017 was Rs 13,705 crores.

Capital Management

The Bank continues its endeavour for greater capital efficiency and shoring up its capital adequacy to enhance shareholder value. In order to achieve this objective, the Bank has been focusing to increase the proportion of lower risk weighted assets. The Banks capital management framework ensures proper allocation and utilisation of capital for an optimal mix of businesses.

The Bank has implemented the Basel III capital regulation from 1 April, 2013 in a phased manner and is to be fully implemented as on 31 March, 2019. This will also align full implementation of Basel III in India closerto the internationally agreed date of 1 January, 2019.

During the year, the Bank raised Additional Tier I capital in the form of perpetual debt instruments, amounting to Rs ,500 crores that led to improvement in Tier 1 CAR by 68 bps. During the year, amendments made by RBI in the risk weights on unrated claims led to consumption of 11 bps of Tier 1 CAR. Further, growth consumed 170 bps of Tier 1 CAR, profit contributed 48 bps and the gross accretion to reserves was 1 bps, making for a net consumption of 64 bps ofTier 1 CARforthe year.

As on 31 March, 2017, the Banks CAR under Basel III was 14.95% against the minimum regulatory requirement of 10.25%. Of this, the Common Equity Tier I (CET I) CAR was 11.13% (against minimum regulatory requirement of 6.75%) and Tier I CAR was 11.87% (against minimum regulatory requirement of 7.00%). As on 31 March, 2017, the Banks Tier II CAR under Basel III stood at 3.08% as the Bank raised total subordinated debt of Rs ,230 crores.

The following table sets forth the capital, risk-weighted assets and capital adequacy ratios computed as on 31 March, 2017 and 31 March, 2016 in accordance with the applicable RBI guidelines under Basel III.

(Rs in crores)
Particulars 2016-17 2015-16
Tier 1 capital 56,039.32 50,517.51
Tier II capital 14,565.85 11,231.79
Out of which
- Tier II capital instruments 12,366.01 9,293.21
- Other eligible for Tier II capital 2199.84 1,938.58
Total capital qualifying for computation of capital adequacy ratio 70,605.17 61,749.30
Total risk-weighted assets and contingencies 472,313.18 403,949.18
Total capital adequacy ratio 14.95% 15.29%
Out of above
- Common equity tier 1 capital ratio 11.13% 12.48%
- Tier 1 capital ratio 11.87% 12.51%
- Tier 1 capital ratio 3.08% 2.78%

Business Overview

An overview of the Banks various business segments along with their performance during financial year 2016-17 and future strategies is presented below.

Retail Banking

Retail Banking has been the mainstay of the Banks overall growth strategy in the last few years. It encompasses a wide array of products and services across deposits, loans, investments and payment solutions that are delivered through multiple channels to the Banks customers. The Bank has over the years developed long-term relationships with its customers by being their preferred financial solutions partner on account of its excellent customer delivery through insights and superior services. The Bank continues to focus on leveraging technology to innovate for next generation banking products and services. Customer Centricity is one of the organisational values and a core pillar of the Banks vision and all the senior leaders of the Bank continuously mentor and motivate the teams. By pursuing this customer centric approach, the Bank aims to meet life cycle financial needs of customers through innovative products and services backed by world-class service and delivery models. At an overall level, the Banks aim is to simplify banking for its customers by offering simple products, secured payments and improved processes through effective use of technology.

Retail Deposits

The Bank pursues an effective customer segmentation strategy and has over the years built a sustainable retail deposit franchise. During the year, the Bank continued to focus on increasing its retail deposits base, particularly demand deposits. Savings Bank deposits grew by 19% in the current year and have grown at a Compounded Annual Growth Rate (CAGR) of 20% over the last five years. As on 31 March, 2017, the Bank had over 202 lakh savings account customers, registering a growth of 17%.

In line with the objective to constantly improve the existing suite of products, the Bank has introduced a revitalized Trust Savings proposition, whereby four new trust savings account variants were launched with benefits like discounts on Cash Management solutions, relationship pricing for other banking products, extension of premium programs to trustees/members of trust account.

Recurring Deposit is a suitable hook to gain a higher wallet share from the customer and also has a positive impact on the savings balances deepening. Considering the advantages which an RD product brings to overall stickiness, the Bank has recently launched a new and improved version of the Recurring Deposit.

NRI & Affluent Segments

NRI Banking and Burgundy are two strong propositions for the Banks esteemed clients. The Bank offers a complete suite of banking and investment products under its NRI Services for Indians living and working overseas. During the year, the Bank introduced the first of its kind Enhanced Set-Off facility at portfolio level for Portfolio Investment Scheme (PIS) Accounts applicable for short term equity transactions only. This facility provides NRI customers the benefit of setting off losses against future profits and such loss can be carried forward for set off either till it is completely set-off against future profits or till the last day of the financial year, whichever is earlier.

The Bank also launched the Online Appointment Booking Module with a customized work-flow that allows NRI customers to book an appointment with the mapped RM/Branch as per their preferred date and time, during their visit to India.

The Bank introduced an enhanced Online NRI Account Opening Module which allows NRI customers to apply for a NRI account online, using document scan and upload facility. For select geographies, the Bank will enable "Paperless" account opening that negates the need for physical documents for account opening.

Burgundy, the Banks proposition for affluent customers continued to scale up with AUM crossing Rs 9,488 crores from more than 76,000 customers across 1,300+ branches. The proposition was further strengthened this year with some be-spoke products exclusively for Burgundy customers - Succession & Estate planning by Axis Trustee Services Ltd., Real Estate fund offering from Jones Lang LaSalle (JLL), the Select Credit Card, the best Term Life Insurance and Health Insurance solutions, the Brand Equity Discretionary PMS portfolio from Axis AMC and more. We also enabled our Relationship Managers with tablets to ensure improved customer service.

Retail Lending & Payments

The three main elements of the Banks strategy on the retail lending and payments businesses for the fiscal 2017 continued to be cross-selling to internal customers, growth in the rural lending and retail payments franchises. The Banks cross-sell metrics have been steadily improving, which is substantiated by strong retail asset growth, retail fee income growth and distribution income from investment and insurance products. Product penetration into the Banks strong savings account customer base continues to be a major driver for growth. Big data analytics led targeting of the known retail customer base for sales of unsecured lending, cards or other payment products continues to be core to the Banks franchise building in this space. Overall, about 50% of incremental retail loans were sourced through branches. Existing deposit customers contributed about two-third of the incremental retail loans. The credit quality of retail loans has remained steady.

Retail Loans

The Retail Assets portfolio has grown at a CAGR of 28% over the last five years. Total retail loans increased to Rs 167,993 crores as on 31 March, 2017 from Rs 138,521 crores last year, registering a growth of 21%. The Bank continued to increase its share of retail loans to total advances which stood at 45% compared to 29% in March 2012.

The retail loans portfolio continues to be focused on secured products, predominantly mortgages. Secured loan products accounted for 85% of retail loans, of which Home loans accounted for 44%, retail agricultural loans accounted for 16%, auto loans 10%, loans against property 8%, personal loans and credit cards were 12%, while non-schematic loans comprising loan against deposits and other loans accounted for 10%.

Being an emerging vertical within the Bank, Small Business Banking (SBB) has continued to sustain its growth trajectory in line with previous years. While there was slowdown in the market owing to demonetisation, the SBB book grew by 76%. The key to the success has been the re-engineering of the sales process, score-based decision making and strong engagement at the branch level. Additionally, we have built state-of-the-art digital platforms for disbursing OD facilities to the banks existing customer base. SBB is also collaborating with leading Fintech companies to reach out to untapped market segments. Government initiatives like Stand up India and Pradhan Mantri Mudra Yojana (PMMY) were launched to bridge the finance requirements in focus segments as envisioned by the Honble Prime Minister.

Technology remains an important enabler for the Banks loan products. During the year, Stand up India Scheme (a GOI initiative) was launched to facilitate bank loans between Rs 10 lakh to Rs 1 crores to at least one SC or ST borrower and at least one woman borrower per bank branch for setting up a green field enterprise. The Bank also launched a pre-approved Auto Loan. Rural agricultural lending was another focus area for the Bank. As on 31 March, 2017, the Banks outstanding loans in the agricultural sector grew at a healthy 15% to Rs 6,742 crores from Rs 3,218 crores last year. Increasing urbanization and demographic pressure that the country witnessed over past decades have made housing a major issue for discussion, especially in the low income group (LIG) and economically weaker segments (EWS). Challenge is to provide housing to these people who have very limited financial options at their disposal. Hence as a part of financial inclusion, the Bank has launched a product called Asha Home loan especially to cater this segment. With Government of India launching its Housing for All by 2022 mission, Asha Home loans will help this particular segment aspire to own their dream house. Asha Home loans increased by 66% from Rs 1,891 crores as on 31 March, 2016 to Rs ,131 crores as on 31 March, 2017.

Technology & Digital Banking

The year 2016-17 was a busy and a happening year for the Bank in terms of digital launches. With customers increasingly leading the charge as eager adopters of technology, digital initiatives continue to be the cornerstone of the Banks effort in enhancing the banking experience for its customers. The Bank ensures that it is at the top of the digital innovation curve through exhaustive user research, rigorous analysis of customer complaints & requests and scanning the environment for latest digital solutions.

Continuing its pioneering status in electronic payments, the Bank was among the first to launch Axis Pay, the Unified Payment Interface (UPI) App that allows customers of any bank to transfer money to any other bank by just creating a unique Virtual payment address much like an email ID. The app has got over 2 million downloads since its launch. The Bank also integrated its Lime Wallet and UPI functionality within Axis Mobile during the year. Existing customers thus have access to the payment convenience of a wallet and have an added option of transferring funds to previously created beneficiaries through the UPI feature within their downloaded Axis Mobile app. Potential customers with no banking relationships can also download the Axis Mobile app for our Wallet and UPI services and post opening an account seamlessly use the same app for their banking needs.

During the year, an improved version of Axis Mobile App was launched with several new and useful features for the customers. The Bank in association with Magicbricks also launched the Property Search feature, exclusively on the Axis Mobile app.

The Bank launched an improved and responsive version of its website www.axisbank.com that allows desktop webpages to be viewed optimally on different browsing devices. The Bank also launched mobile version of internet banking, that offers the same features as the mobile app, it is useful for customers who have multiple devices. We have received a very strong response on this platform.

With an objective of promoting the ever growing health consciousness amongst our customers the Bank launched Axis Active in partnership with GoQii that not only acts as fitness band, but also serves as a NFC based payment device allowing payments across 50,000+ NFC enabled outlets across India. The Bank also launched Insta services on both Internet Banking and Mobile Banking platforms wherein eligible customers can change their personal details by just uploading supporting documents online, thus avoiding the hassles of visiting the branch.

To tap into the potential offered by a majority of Indians using feature phones, the Bank launched Axis OK, a mobile app based on SMS and Missed Call Banking. Available in 6 languages, Axis OK allows user to perform almost all the internet banking functions without the need for an internet connection.

Unimagined is Undone, the philosophy with which the Bank launched its innovation lab Thought Factory in Bangalore in June 2016 has been taking huge strides in bridging the gap between cutting edge innovation and various business teams of the Bank. This platform has helped in presenting and seeking solutions for real business problems from the start up community. The Bank assembled a diverse team of multifaceted and dedicated experts with years of experience in the start-up arena and BFSI domain within and outside the Bank. This team devotes considerable time each quarter with the designated start-ups offering more than just feedback in getting these ideas to life.

This collaborative approach was the cornerstone of the Best Digital Bank award that the Bank earned from Business Today, a leading Indian business magazine.

Payments

The retail payments franchise remains central to the Banks overall retail strategy, as it is mutually beneficial for the customer and the Bank. The customer benefits from the cutting edge processes and services offered and in turn prefer to transact more as the trust and convenience factor builds up leading to more business opportunities for the Bank. The Bank is one of the largest debit card issuers in the country, with a base of over 202 lakh. The Bank had over 33 lakh credit cards in force as of 31 March, 2017, making it the 4th largest credit card issuer in the country. The credit cards portfolio saw a substantial increase in spends by 47%, to Rs 8,585 crores from Rs 19,432 crores last year. The Bank is also one of the largest acquirers of point-of-sale terminals in the country with an installed base of around 4.33 lakh terminals. In addition to introducing contactless Debit, Credit and Multi Currency Forex cards, the Bank also enabled almost 2.57 lakh merchant terminals for Near Field Communication (NFC) based card acceptance during the year. During the year, the Bank launched the Vistara range of co-branded cards. E-commerce continues to be on a strong growth trajectory. The spend volumes from E-commerce merchants ended at Rs 19,767 crores in fiscal 2017.

Investment Products

The Bank distributes investment products such as mutual funds, bancassurance products (Life, Health and General Insurance) and online trading products through its branches.

The Bank is one of the leading banking distributors of mutual funds in India and distributes mutual fund products of all major asset management companies. The fee income from this segment contributed around 9% to the total Retail Banking fees. These investment products are sold through the Banks branch distribution network based on thorough analysis of customers life-cycle and lifestyle requirements.

For the Life Insurance distribution, the Bank distributes products of Max Life Insurance Company Ltd. Since the Banks strategic bancassurance tie-up with Max Life Insurance Company Ltd. in 2010, the Bank has successfully helped insure over 8 lakh lives through its distribution channels. During the year, the Bank has tied up with Life Insurance Corporation of India, to broadbase insurance coverage of its customers. In General Insurance, the Bank has a tie-up with Tata AIG General Insurance Company Ltd. (American International Group). The Bank has entered into a Bancassurance partnership for health insurance with Apollo Munich Health Insurance Company Ltd. last year, which will help the Bank further expand its existing bouquet of offerings and put forth a compelling proposition to the clients in terms of medical and health insurance. The Bank remains committed to bring the best of insurance products that best suit the needs of its customers and is constantly looking at more and better avenues. During the year the Bank sold over 3.9 Lakh general insurance and health insurance policies amounting to Rs 02 crores, at a growth of 38%.

The Bank offers online trading services to its customers in collaboration with Axis Securities Ltd. (a 100% subsidiary of the Bank) under the name Axis Direct - an enhanced and simplified online trading platform. During the year, the Bank opened more than 3.75 lakh online trading accounts, and in the process crossed 1.35 million total customers count.

The bank distributes a broad range of Alternate Investment products such as Discretionary Portfolio Management Services, Private Equity & Real Estate Funds & Structured Products. These products are specially designed to cater to the niche segment of customers having different risk reward appetite. There is an increasing trend of HNIs investing in these alternative assets.

Branch & ATM Network

The Banks organically built branch network over the last twenty three years has helped it to strategically lay down one of the best pan India branch networks. In todays digital world, we continue to adopt a model which blends best of both the worlds, digital and physical branch presence which remains imperative for liability acquisition. During the year, the Bank added 400 branches and its geographical reach extends to 29 states and 6 Union Territories, covering 1,946 centres and 631 districts. As on 31 March, 2017, the Bank had a network of 3,304 branches/ECs as compared to 2,904 last year. Around 16% of the Banks branches are in rural areas and 13% of the Banks rural branches are in unbanked locations. As on 31 March, 2017, the Bank had 14,163 ATMs. The Bank was the first private sector Bank to introduce recyclers which can accept and dispense cash. As on 31 March, 2017, the Bank had deployed 1,349 recyclers. Besides the branch and ATM network, internet banking, mobile banking and phone banking platforms have also evolved as an important electronic channel for the Bank.

Financial Inclusion

The Bank regards Financial Inclusion (FI) as an integral component of its rural strategy to further extend its reach in the rural market. During the fiscal 2017, Bank focused on not only mainstreaming the unbanked and under-banked people through opening basic savings account but also deploying business correspondents for last mile connectivity. Further, both the branches and business correspondents in rural areas have been equipped for Aadhaar enabled payments in view of promoting digital transactions.

As of 31 March 2017, the Bank is reaching out to customers in the unbanked and under-banked locations through 538 branches along with 1,738 business correspondents. During fiscal 2017, 4.60 lakh basic savings accounts were opened and 8.40 Lakh Aadhaar authenticated payments were done. Along with the rural presence, 14,833 business correspondents have been deployed in non-rural areas to enable people working there to conveniently make domestic remittances to their family. Overall, Rs ,550 crores were remitted through the business correspondents.

Consolidating on the Banks efforts on providing basic banking services, the Bank through Government of Indias social security schemes provides for a security net to a large cross section of the countrys population. Overall, the Bank has issued 8.07 Lakh Pradhan Mantri Suraksha Bima Yojana (PMSBY) and 2.02 Lakh Pradhan Mantri Jeevan Jyoti Beema Yojana (PMJJBY) policies of which, as of 31 March, 17, the Bank has registered 277 claims under PMJJBY and 21 claims under PMSBY. Further, the Bank has actively promoted Atal Pension Yojana (APY) wherein the Bank is ranked 2nd amongst all major banks in sourcing of APY in fiscal 2017. Overall, 1.19 Lakh customers have been enrolled underAPY.

Customer Experience & Service Quality

In a crowded banking market, just having good branch locations with high level of service delivery and competitive rates are not going to break the ice with new age customers. Today banks must find ways to remain relevant in future in the financial services industry by embracing Customer Experience as a key element of a sustainable competitive business model. Keeping this view in mind, the Bank has recently created a central Customer Experience division along with the existing CustomerService team empowered to workwith all business units to improve the way we serve and deal with customers. The Bank is amongst the leading banks in India to set up a division like this and is evidence of the serious focus and commitment to Customer Centricity. The team is commissioned to periodically review internal processes, customer service and sales practices, policies, etc. keeping customer interest uppermost in mind.

Creating a knowledge pool helps customers to self-serve themselves and reach a resolution faster. With this intent, the Bank launched a support section on its website, thereby providing customers with ready repository of guidelines and instructions with which they can help themselves at their convenience. The section is hosted on https://www.axisbank.com/support and covers over 380 most common queries which are arrived at basis the service requests received by the banks across multiple delivery and service channels. This section witnessed over 15 lakh page-views for the month of March 2017. The bank has plans to further keep bolstering and adding customer centric functionalities to this section like Search, Chat, etc. in the next fiscal year.

Corporate Banking

During the fiscal 2017, the industry segment within non-food credit growth remained weak, and declined by 1.9%. The major sectors like power, metals and engineering that are key contributors to any countrys infrastructure and capacity build up, reported weak credit demand. The problems of past few years like excess capacities, lower utilisations due to lower industrial activity and high leverage continued to impact the demand for bank credit in these key sectors. Resurgence in alternative funding sources in the form of credit substitutes due to sharp correction in market interest rates have also impacted overall bank credit growth.

The Banks gross corporate advances portfolio grew by 5% during the fiscal year 2017, even as net corporate advances grew by 0.33%. The growth has been on account of cost efficient re-financing provided to better rated corporates with strong group financials.

During the year, the Bank renewed its focus on faster delivery of products and services to better rated corporates. Approximately 85% of new sanctions in the corporate book were to companies rated A and above. Presently, 66% of outstanding corporate loans are to companies rated A and above.

The corporate client relationship model introduced a few years ago too has been beneficial for the bank. It has helped the Bank create multiple touch points with the corporate leading to an increased share of wallet for the Bank. The Bank along with its subsidiaries addresses most of financial services requirements of a corporate be it borrowing, trade finance, cash management, remittances, investment banking, security services etc. The holistic approach has moved the Bank away from just sales based approach of offering corporate credit to providing an entire bouquet of products and services.

The Banks strategy of Portfolio diversification through sectoral approach to credit continued where the focus was on identifying sector- specific opportunities and risks. Industry, group and company specific exposure limits have been defined by the Bank and continuous monitoring is undertaken with a view to identify risk and take proactive decisions to mitigate them. The concentration risk has seen a consistent decline in the last few years with exposure to top 20 single borrowers as percentage of tier 1 capital at 124% as on end March 2017, as compared to 283% at the end of fiscal 2010.

During the year the Bank has been cautious in its lending practices and has avoided sectors with imminent stress or unviable business models. Especially in case of project loans, the bank is aggressively focusing on the risks posed by contractual structures, regulations and sponsor strength. The lending in sectors has been very selective to higher rated corporates with a significant margin of safety. The percentage share of sanctions made during a year to challenged sectors like power, iron and steel, and infrastructure construction (excluding airports, roads and ports) stood at 13% for fiscal 2017, compared to 24% for fiscal 2012. During the year, the Bank continued to focus on the government business and increased its footprint in PSUs. the Bank also maintained its leadership position in the loan syndication market and syndicated an aggregate amount of Rs 4,160 crores (22,613 crores in fiscal 2016) by way of rupee loans and USD 1.12 billion (USD 1.93 billion in fiscal 2016) of foreign currency loans.

Structured Finance Group (SFG)

The Banks SFG is a specialized group focusing on resolution of non-retail impairments of the Bank. The team is based out of the Central Office in Mumbai, and oversees rectification and restructuring as well as recovery for the Western zone of the country. The central team is supported bythree Regional Recovery Cells at Delhi, Kolkata and Chennai.

The slowdown in the corporate growth along with the large corporate debt burden has led to considerable stress on the balance sheets of most of the Indian financial institutions. Entities with project finance and term lending expertise which have financed the infrastructure growth have been impacted much more than other financiers. During the fiscal 2017, the challenged sectors like power, steel and infrastructure construction continued to weigh on the banking sectors asset quality. Though the steel sector saw some improvement in operating metrics on back of government intervention and recovery in global demand during the last year, the stress still continues to remain high. In the power sector, although the coal availability factor has now improved, concerns related to lack of power purchase agreements leading to lower plant load factors and operating performance continues to remain an overhang.

The Government and the Regulator have shown keen interest to alleviate and resolve the asset quality issues and get the economy back to a sustainable growth path. The policy initiatives of the Government like imposing import duties in certain segments like steel, focused approach in removing policy and regulatory constraints to revive the stalled projects and getting the Goods and Services Tax (GST) bill passed, with renewed focus on infrastructure, renewable and railways have helped improve the corporate sentiment.

Reserve Bank of India that had earlier introduced guidelines like 5/25 scheme and SDR during fiscal 2015 and fiscal 2016, came out with Scheme for Sustainable Structuring of Stressed Assets or S4A in June 2016 to enable banks to resolve stress in project loans. The SFG group is skilled to handle the changing regulatory landscape, and has been using the resolution mechanisms available to address the stressed portfolio.

Treasury

The Banks Treasury function comprises Asset Liability Management (ALM), Proprietary trading business in Interest rates & Equity, Foreign Exchange & Derivatives and Arrangership business.

The ALM group manages the regulatory requirements of Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR) and Liquidity Coverage Ratio (LCR). The group also manages the liquidity, interest rate and currency risks in the Banks portfolio, under the guidance of the Asset Liability Committee (ALCO) of the Bank. ALM group is responsible for overall liquidity management of the domestic book and longer term liquidity management of the overseas branches across geographies.

The proprietary trading group in Government securities within Treasury plays an important role of market making, participating in primary auctions of RBI etc. The Bank also holds one of the largest Corporate bond investment portfolio with 92% of them have rating of atleast A, and runs limited trading book in Equity, Commercial papers and Certificate of deposits.

Forex Trading Group is a major participant in the Foreign Exchange & Derivatives market. The group provides risk management and hedging solutions to a wide range of corporate customers and financial institutions. The Bank has been awarded the First Rank by Euromoney in their FX Survey 2016 in eight categories amongst Asian Corporate Respondents and in eleven categories amongst Indian Corporate Respondents.

The Bank continues to remain a dominant player in the Debt Capital Market (DCM) Segment. During the year, the Bank arranged Rs 199,620 crores of bonds and debentures for various PSUs and corporates. The Bank has been ranked number one in the Bloomberg Official League Table for domestic bonds in India for the 10th Consecutive year, for calendar year 2016 and for the quarter ended March 2017. Bank has also been ranked number one arranger as per Prime Database for the nine months ended December 2016.

The Bank has started the International Debt Capital Markets business and has been a leader in this segment covering USD/EUR bonds,

Masala bonds, Green bonds etc. The Bank became the first Indian entity to issue internationally listed certified dollar denominated Green bonds in June 2016. The Bank was also the Lead Manager in the very first Masala Bond issued by one of the leading housing finance companies and the first Green Masala Bond issued by one of the major public sector utility companies.

During the year, the Bank was awarded "India Bond House" by IFRAsia , "Best DCM House - India" by Finance Asia, "Best Domestic Debt House - India" by Asiamoney and "Best Domestic Bond House in India" for 20th Anniversary - Platinum award - by Finance Asia. The Bank was also named as "Top Bank in Corporate Bonds, India, Rank 1" and "Investors Choice for Primary issues in Corporate Bonds, India" by The Asset Benchmark Research.

Transaction Banking

Transaction Banking unit focuses on the flow businesses, i.e. current accounts, collection & payments solutions, trade services, forex remittances and capital market solutions. It caters to corporates, SMEs, financial institutions, Government segment and also to retail customers for their forex requirements such as forex cards and wire transfers.

The key financial deliverables of the business are current account float balances and fee income. Current account balances grew from Rs 3,652 crores as on 31 March, 2016 to Rs 7,002 crores as on 31 March, 2017, a year on year growth of 37%. Daily average balances in current accounts grew 22%, from Rs 0,140 crores in fiscal 2016 to Rs 8,800 crores in fiscal 2017. The business generated a fee income of Rs ,022 crores in fiscal 2017, a growth of 11% year on year.

The key themes that the business has been focusing on are deepening share of wallet for existing clients, offering digital solutions to customers and enhancing customer service. The relationship managers and branches are continuously equipped with analytical tools and learning interventions to help cross-sell the large suite of transaction banking products to customers. Over the last two years, the Bank has expanded the footprint of B Category branches (branches authorized to handle forex business) significantly. As on 31 March, 2017, the Bank had 488 B Category branches.

Current Accounts

The Bank has over 1.7 million current accounts across its branch network served with a wide range of segmented and value-based offerings. The Bank has also significantly invested in complementing the branch network with digital channels such as internet banking and mobile banking, and also self-service solutions such as cash deposit machines. The Bank also enables customers to tailor the product features to suit their individual requirements. The Bank has taken several initiatives to deepen the current account relationships by cross-selling other products such as tax payments, cash management solutions, loans, forex and trade products, etc.

Cash Management Solutions

The Bank provides end-to-end cash management solutions by combining efficient collections and disbursements products, backed by state-of-the-art systems to ensure customized delivery. By leveraging on the Banks extensive network and robust technology, these solutions provide for faster fund movement thereby reducing interest rates and improving customers liquidity position. Cash management products include digital collection and payment solutions, offerings for collection of cheques and cash as well as bulk payment solutions for vendor, salary, interest and dividend payments. The Bank is also focusing on host-to-host integrations for both collections and payments, which involves IT integration with the clients server for seamless transactions and information flow. The Bank provides comprehensive structured MIS reports on a daily or monthly basis or as required by clients for better accounting and reporting.

Government Business

The Bank has been authorised by Reserve Bank of India and Government of India to handle all Government Banking transactions which includes the following:

• Collection of Direct and Indirect Taxes

• Disbursement of Central Civil as well as Non-Civil (Railways, Defence, Telecommunication and Posts) Pensions

• Expenditure-related Payments on behalf ofvarious Ministries/ Departments of Govt, of India

• State Government related transactions such as collection of Sales Tax, Pension Payments, etc.

The Bank is a participating entity in the Governments Public Financial Management System (PFMS). PFMS is a financial management system of the Planning Commission of India that is being implemented by the Office of the Controller General of Accounts, Ministry of Finance, in partnership with National Informatics Centre (NIC). PFMS monitors different social sector programmes in India and tracks the disbursement of funds in relation to such programmes, using an online management information system and decision support system. The Bank also is associated with the e-Governance initiatives of five states and union territories, namely Andhra Pradesh (e-Seva), Karnataka (Bangalore One and Hubli-Dharwad One), Chandigarh UT (Sampark), Chhattisgarh (CHOICE), Uttar Pradesh (e-Suvidha) aimed at providing better services to the citizens.

Trade, Forex and risk management Services

The Bank offers a complete suite of Trade finance and foreign exchange business solutions through Forex "B" category branches spread across the country. The Bank also offers a variety of hedging solutions such as exchange and interest rate derivative structures, including options and swaps in accordance with the derivative policy of the Bank. In addition to having dedicated resources at the branches, the Bank has also stationed experts at various locations to provide advice on regulations governing trade and forex business and suitably customize offerings to meet specific needs of its customers. In addition to the services offered through Branch network spread across India, the Bank also leverages its tie-ups with reputed correspondent banks across the world.

International Retail

The Bank offers a range of forex and remittances products to its retail customers, which include forex cards, inward and outward wire transfers, travellers cheques and foreign currency notes, remittance facilities through online portal as well as through collaboration with correspondent banks and exchange houses. The Bank offers remittances facility to NRI customers through the Banks Sri Lanka Branch and Axis Bank UK Ltd., for remittances to India. Additionally, the Bank offers remittances from Gulf Co-operation Council (GCC) region to Sri Lanka through tie-up with four exchange houses.

The Bank continued to have a market leadership position in forex cards with 16 currency options other than INR being offered. Additionally, the Bank offers Miles & More Multi-Currency Forex Card in association with Lufthansa airline aimed at frequent flyers, an industry first in this segment. The aggregate load value on forex cards crossed USD 8 billion during the year.

The Bank has also introduced Commercial Forex Card to address foreign currency payment needs of Corporates and Tour Operators. This serves as a substitute to traditional payment mechanisms like wire transfers, foreign currency demand draft and brings in efficiency in entire payment processing along with convenience of paying online instantly.

The Bank was the first in India to connect with Earthports global payment network, which spans over 60 countries. This tie-up enables the Bank to offer faster outward remittances with value added features - transparency in charges and lower time taken to transfer. The volumes of retail remittances also rose by 49% during the year and the Bank processed outward remittances of USD 4.84 billion and inward remittances of USD 7.43 billion.

Custodial and Capital Market Services

Under the custodial business segment, the Bank offers a full range of custodial and fund accounting services for primary and secondary market operations involving debt, equity and money market instruments.

Lending to Small and Medium Enterprises

Small and Medium Enterprises (SME) remain an integral part of the Indian Economy. The Bank partners to provide the right impetus for growth in this sector. Currently the Bank operates from 54 SME Centres and 15 SME Cells across the country to service customers effectively covering more than 2,000 branches. In order to serve our customers effectively, SME Business within the bank is divided into 3 Business verticals: Medium Enterprises Group (MEG), Small Enterprises Group (SEG) and Supply Chain Finance (SCF). Bank extends Working Capital, Term Loan, Trade Finance, Project Finance and Bill / Invoice Discounting to SMEs for their various Finance needs.

Fiscal 2017 was challenging on many fronts including the demonetization period. SME advances grew by 10% to Rs 9,172 crores from Rs 4,869 crores last year. The SME portfolio of the Bank constituted 13% of the Banks total advances as on 31 March, 2017. The SME Business in the Bank continues to focus towards lending to the Priority sector (PSL) and is a significant contributor to the Banks overall PSL portfolio. Special drives were undertaken during fiscal 201 7 to promote lending to the Priority Sector which included product and marketing initiatives. As part of the strategy to focus on select important industrial clusters, the Bank launched a new product catering to the Education sector.

The Bank has a wide range of customized and fast track products for SME customers and has robust processes in place ensuring that the customer gets the best financial solution and consistent quality of service which suits his requirements. Building on the same platform, the Bank streamlined various internal processes on the digital platform leading to seamless services offered to the customer.

With a commitment to support the SME growth and be part of Indias growth story, bank continued to spread "Evolve" series (Road Show series) to a new level. During the fiscal 2017, Evolve was organised in 35 cities where more than 5,000 SMEs participated. As during the last two years, the series was much appreciated by all the participants and is a unique initiative in building the SME capacity. The Bank also acknowledged the best performers in SME segment by hosting the SME Awards "SME 100" held in Delhi. These initiatives were aligned to relevant government initiatives/national priority programs such as Make in India, Skill India, and Digital India.

Despite the challenging environment where the economic growth remained slower and demonetisation too had an impact on SME sector, the asset quality remained relatively stable as the Bank focused on controlling the quality of the existing portfolio and continued its emphasis on acquiring better rated SME customers. However, the Bank remains watchful from lagged effects of demonetisation and ensuing changes post the implementation of GST. The Bank uses the augmented business analytical tools like Early Warning Signals, which helps the Bank to identify unfavourable sectoral trends early in the cycle and take corrective action if necessary. Around 84% of the SME portfolio lies in SME 1 to SME 3 category and around 94% of the new customers are rated SME 1 to SME 3.

International Banking

The International Banking strategy of the Bank continues to revolve around leveraging its relationships with corporates in India and non-resident Indians, by providing banking solutions at overseas centres. The Bank, through its international operations, leverages the skills and strengths built in its domestic operations. It also widens the horizon of the product offerings covering a varied spectrum of corporate and retail banking solutions across client segments in various geographies. The Bank has established its presence at strategic international financial hubs. The Bank has a small but strategic international network that consists of five branches at Singapore, Hong Kong, Dubai International Financial Centre (DIFC) - UAE, Colombo (Sri Lanka) and Shanghai (China); three representative offices at Dubai, Abu Dhabi (both in UAE) and Dhaka (Bangladesh); and an overseas banking subsidiary in the United Kingdom.

The Bank continues to offer corporate banking, trade finance, treasury and risk management solutions through the branches at Singapore, Hong Kong, DIFC, Shanghai and Colombo, and retail liability products from its branches at Hong Kong and Colombo. Further, the Banks Gulf Co-operation Council (GCC) initiatives in the form of representative offices in Dubai and Abu Dhabi and alliances with banks and exchange houses in the Middle East provide supportfor leveraging the business opportunities emanating from the large NRI diaspora present in these countries. The Representative Office at Dhaka promotes trade finance business arising between Bangladesh and India & other Asian financial markets where Bank has a presence.

Given the uncertainties in global economies coupled with weak Indian international trade, the Bank focussed on consolidating the operations at overseas branches and managing the risks in international operations. Emphasis continued towards trade finance business and value added services. As on 31 March, 2017, the total assets at overseas branches stood at USD 8.37 billion as compared to USD 8.06 billion last year. Axis Bank UK Limited, the Banks overseas banking subsidiary, completed its fourth year of operations during the year under review and its total assets stood at USD 823 million as against USD 662 million as on 31 March, 2016.

Business Intelligence Unit

From self driven car to chat BOTs, Al and Machine Learning are revolutionizing customer experience and decision making across industries globally. Being a bank for millions of aspiring Indians, Business Intelligence Unit of the Bank is also on the forefront for building & implementing Al and machine learning solutions in areas such as identification of customer base for pre-approved loans, creation of personalised product recommendations, branch and ATM location planning, identifying fraudulent transactions and to prioritise investigation on complex money laundering transactions. Set up in 2009, Axis Bank BIU started with providing analytical solutions to Retail Lending Business. Over these years, BIU, with 200+ in-house data scientists, is now developing solutions across Retail Banking, Wealth Management, Payments and Corporate Banking. In 2016, we have also set up "Thought Factory", an innovation lab of Axis Bank, in Bangalore to build scalable capabilities in Al and Machine learning to make customer banking experience intelligent, intuitive and instant.

Risk Management

The risk management objective of the Bank is to balance the trade-off between risk and return, and ensure that the Bank operates within the Board approved risk appetite statement. An independent risk management function ensures that the risk is managed through a risk management architecture as well as through policies and processes approved by the Board of Directors encompassing independent identification, measurement and management of risks across the various businesses of the Bank. The risk management function in the Bank strives to proactively anticipate vulnerabilities at the transaction as well as at the portfolio level, through quantitative or qualitative examination of the embedded risks. The Bank continues to focus on refining and improving its risk measurement systems including automation of processes wherever feasible not only to ensure compliance with regulatory requirements, but also to ensure better risk- adjusted return and optimal capital utilisation, keeping in view its business objectives. Pursuant to review of the risk profile of the Bank, the Board has not come across any element of risk which would threaten the existence of the Bank.

The overall risk appetite and philosophy of the Bank is defined by its Board of Directors. The Risk Appetite framework provides guidance to the management on the desired level of risk for various types of risks in the long term and helps steer critical portfolio decisions. Further, the Internal Capital Adequacy Assessment Process (ICAAP) of the Bank assesses all the significant risks associated with various businesses. The independent risk management structure within the Bank is responsible for managing the credit risk, market risk, liquidity risk, operational risk, other Pillar II risks like reputational risk and strategic risk and exercising oversight on risks associated with subsidiaries. The risk management processes are guided by well-defined policies appropriate for the various risk categories viz. credit risk, market risk, operational risk, liquidity risk, counterparty risk, country risk, reputational risk, strategic risk and subsidiaries risk, supplemented by periodic validations of the methods used and monitoring through the sub-committees of the Board. The Risk Management Committee (RMC), a committee constituted bythe Board, approves policies related to risk and reviews various aspects of risk arising from the businesses undertaken by the Bank. The Committee of Directors (COD) and the Audit Committee of the Board (ACB) supervises certain functions and operations of the Bank, which ultimately enhances the risk and control governance framework within the Bank. Various senior management credit and investment committees, Credit Risk Management Committee (CRMC), Asset-Liability Committee (ALCO), Operational Risk Management Committee (ORMC), Subsidiaries Governance Committee (SGC), Reputation Risk Management Committee (RRMC), Information Security Committee (ISC) and Business Continuity Planning Management Committee (BCPMC) operate within the broad policy framework of the Bank.

Credit Risk

Credit risk is the risk of financial loss if a client, issuer of securities that the Bank holds or any other counterparty fails to meet its contractual obligations. Credit risk arises from all transactions that give rise to actual, contingent or potential claims against any counterparty, borrower or obligor. The goal of credit risk management focuses on maintaining asset quality and concentrations at individual exposures as well as at the portfolio level.

Internal rating forms the core of the risk management process for wholesale business with internal ratings determining the acceptability of risk, maximum exposure ceiling, sanctioning authority, pricing decisions, review frequency. For the retail portfolio including small businesses and small agriculture borrowers, the Bank uses different product-specific scorecards. Large, risky or complex exposures require to be independently vetted by the risk department for each incremental transaction whereas small, templated exposures are extended within the approved product policies. Both credit and market risk expertise are combined to manage risks arising out of traded credit products such as bonds and market related off-balance sheettransactions.

Credit models used for risk estimation are assessed for its discriminatory power, calibration accuracy and stability independently by a validation committee.

During the year the Bank has brought greater alignment in bank level appetite and the operational limits. The key risk metrics are monitored regularly and deviations are discussed with business to decide on the course of remedial action. The governance around deviation from internal limits has also been considerably strengthened. Asset quality target on incremental business have been considerably tightened over the past few year. While parts of corporate portfolio remain under stress, we are beginning to see an improvement in the asset quality at the portfolio level. Concentration limits have also been tightened over the past few years. The Bank is comfortably on track to meet the standards of the large exposure framework that has been brought in by RBI.

Market Risk

Market risk is the risk of losses in on and off-balance sheet positions arising from the movements in market price as well as the volatilities of those changes, which may impact the Banks earnings and capital. The risk may pertain to interest rate related instruments (interest rate risk), equities (equity price risk) and foreign exchange rate risk (currency risk). Market Risk for the Bank emanates from its trading and investment activities, which are undertaken both for the customers and on a proprietary basis. The Bank adopts a comprehensive approach to market risk management for its banking book as well as its trading book for both its domestic and overseas operations. The market risk management framework of the Bank provides necessary inputs regarding the extent of market risk exposures, the performance of portfolios vis-a-vis the market risk limits and comparable benchmarks which provides guidance to the business in optimizing the risk-adjusted rate of return ofthe Bankstrading and investment portfolio.

Market risk management is guided by well laid down policies, guidelines, processes and systems for the identification, measurement, monitoring and reporting of exposures against various risk limits set in accordance with the risk appetite ofthe Bank. Treasury Mid-Office independently monitors the Banks investment and trading portfolio in terms of risk limits stipulated in the Market Risk Management Policy and reports deviations, if any, to the appropriate authorities as laid down in the policy. The Bank utilises both statistical as well as non-statistical measures for the market risk management of its trading and investment portfolios. The statistical measures include Value at Risk (VaR), stress tests, back tests and scenario analysis while position limits, marked-to-market (MTM), stop-loss limits, trigger limits, gaps and sensitivities (duration, PVBIf option greeks) are used as non-statistical measures of market risk management.

Historical data calculated at a 99% confidence level for a one-day holding period over a simulation and its variants are used to compute VaRforthe trading portfolio time horizon of250 days. VaR models for different portfolios are back-tested on an ongoing basis and the results are used to maintain and improve the efficacy of the model. VaR measurements are supplemented with a series of stress tests and sensitivity analyses as per a well laid out stress testing framework.

Liquidity Risk

Liquidity is a banks capacity to fund increase in assets and meet both expected and unexpected cash and collateral obligations at reasonable cost and without incurring unacceptable losses. Liquidity risk is the inability of a bank to meet such obligations as they become due, without adversely affecting the banks financial condition. The Asset Liability Management Policy of the Bank stipulates a broad framework for liquidity risk management to ensure that the Bank is in a position to meet its liquidity obligations as well as to withstand a period of liquidity stress from bank-level factors, market-wide factors or a combination of both.

The liquidity profile of the Bank is monitored for both domestic as well as overseas operations on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios and conduct of liquidity stress tests periodically. The Bank has laid down liquidity risk policies for its overseas branches in line with host country regulations and the asset-liability management framework as stipulated for domestic operations. Periodical liquidity positions and liquidity stress results of overseas branches are reviewed bythe Banks ALCO.

The Bank has integrated into the asset liability management framework the liquidity risk management guidelines issued by RBI pursuant to the Basel III framework on liquidity standards. These include the intraday liquidity management and the Liquidity Coverage Ratio (LCR). The Bank maintains the regulatory mandated LCR as per the transitional arrangement laid down by RBI and also ensures adherence to RBI guidelines on monitoring and management of liquidity including liquidity ratios.

Operational Risk

Operational risks may emanate from inadequate and/or missing controls in internal processes, people and systems or from external events or a combination of all the four. The Bank has in place an Operational Risk Management (ORM) Policy to manage the operational risk in an effective, efficient and proactive manner. The policy aims at assessing and measuring the magnitude of risks, monitoring and mitigating them through well-defined framework and governance structure.

The RMC at the apex level is the policy making body and is supported by the Operational Risk Management Committee (ORMC), responsible for the implementation of the Operational Risk framework of the Bank and the management of operational risks across the Bank.

All new products and processes, as well as changes in existing products and processes are subjected to risk evaluation by the Operational Risk team. The overall responsibility of new products is vested with the Banks Product Management Committee and Change Management Committee. Outsourcing arrangements are examined and approved by the Banks Outsourcing Committee after due recommendations from the Operational Risk team. The IT Security Committee of the Bank provides directions for mitigating operational risk in the information systems. The Bank has set up a comprehensive Operational Risk Measurement System (ORMS) for documenting, assessing, and periodic monitoring of various risks and controls linked to various processes across all business lines. Over the year, the Bank has focused on strengthening the operational and information security risk frameworks by implementing several initiatives.

The Business Continuity Planning Management Committee (BCPMC) exercises oversight on the implementation of the approved Business Continuity Plan (BCP) framework which has been put in place to ensure continuity of service to its large customer base. The effectiveness of the approved Business Continuity Plan (BCP) framework is tested for all identified critical internal activities to ensure readiness to meet various contingency scenarios. The learning from the BCP exercises are used as inputs to further refine the framework.

Information Technology

The Bank has undertaken various technology enabled business initiatives to realize the vision of customer centricity and to respond to customer demand in real time by knowing its customers and their behaviour, and to offer a single view across all the banks products and services.

A new version of Axis Mobile app was launched for customers with the functionalities such as Buy/Sell Mutual Funds, Augmented Reality in Near Me to find out nearest ATM, branch or best Dining delight offers at various nearby restaurants, Property Search, Set /Reset your Debit card PIN and Insta Service for updating customer details. "Happy Holiday" feature on Axis Mobile enables easy onboarding of customers to avail Travel Insurance & Forex card. During the year, the Bank also launched an Active fitness band in partnership with GoQii using which customers can make payments at NFC-enabled outlets, track their fitness and earn reward points from the bank.

The Bank has focused on creating a constantly learning sales organization and driving sales force efficiency. The Bank is among the leading banks in India to launch image based disbursement of Tractor loans that has led to improvement in turnaround time by 2 days. Contact Centre capabilities are augmented to facilitate integrated and consistent interactions across all channels. The state of the art digital contact centre consists of speech analytics for better service. The Bank has also implemented an online chat module for its premium customers.

Delivering on the vision of an instantaneous, intelligent and interconnected payment ecosystem, the Bank has undertaken major initiatives in the payment space in fiscal 2017. Axis Pay App was launched by the Bank using UPI allowing customers to send or receive money, pay bills, recharge and shop with a single Virtual Payment Address (VPA). The Bank has built a customizable online payment gateway platform for corporate customers to process invoices seamlessly. The Bank has launched Bharat Bill Payment System (BBPS) based billing for select utility payouts. The Bank in association with Bengaluru Metropolitan Transport Corporation (BMTC) has launched Axis Bank BMTC Smart card, Indias first ever open loop EMV contactless smart card that can be used for hassle free transit and retail purchases. The Bank is the first bank to launch NPCI (National Payments Corporation of India) integrated interoperable RFID (Radio Frequency Identification) tag for providing Electronic Toll Collection service for customers.

The Bank has set up Thought Factory, its Innovation Lab in Bengaluru to drive technology focused innovation across various business areas. Key programs include an in-house innovation team building new products and solutions, a Fintech Accelerator Program for mentoring high potential startups, and a co-working space in partnership with Amazon Web Services.

The Bank has also set up an in-house Development Center of around 100 people in fiscal 2017 to build front end and middleware systems in-house and achieve greater business agility.

Compliance

The Compliance function is reckoned as a key element in Banks corporate governance structure. The Compliance function assists the Board and Top Management in managing the compliance risk which is the risk of legal or regulatory sanctions, financial loss or reputational loss that the Bank may suffer as a result of its failure to comply with the applicable laws, regulations or code of conduct applicable to banking activities.

The Bank is committed to adhere to the highest standards of compliance vis-a-vis regulatory prescriptions and internal guidelines. The Compliance function plays a crucial role in ensuring that the overall business of the Bank is conducted in accordance with regulatory prescriptions. The Compliance function aims to improve compliance culture within the Bank through various enablers like dissemination of regulatory changes, percolation of compliance knowledge through training, newsletters, e-learning initiatives and other means of communication apart from direct interaction. To ensure that all the businesses of the Bank are operating within the ambit of Compliance Framework, the Compliance Department is involved in vetting all new products and processes. It evaluates the adequacy of internal controls and examines the systemic correction required, based on its analysis and interpretation of the regulatory doctrine and the deviations observed during compliance monitoring and testing programme. It also ensures that internal policies address the regulatory requirements comprehensively. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory guidelines on a periodic basis.

As the focal point of contact with RBI and other regulatory entities, the Compliance Department periodically apprises both the Banks management as well as the Board of Directors on the status of compliance in the Bank and the changes in regulatory environment. The Bank has put in place an Enterprise-wide Governance Risk and Compliance Framework, an online tool, which is pivotal in addressing operational, compliance and financial reporting risk, bringing efficiency in processes and improvement in compliance levels besides facilitating annual assessment of said risks. The Compliance Department also propagates and monitors a Group Compliance approach encompassing the Bank and its subsidiaries.

Internal Audit

The Banks Internal Audit function provides to its Board of Directors and Senior Management an independent validation on the quality and effectiveness ofthe internal controls in place, risk management systems, governance systems and processes on an on-going basis. This is provided to primarily ensure that the audited units comply with both, internal and regulatory guidelines. In line with the RBIs guidelines on Risk Based Internal Audit (RBIA), the Bank has adopted a robust audit policy. The RBIA has been designed taking into account regulatory guidelines and also international best practices. The policy has a well-defined architecture for conducting RBIA across all audit entities. The audit policy defines the audit strategy in terms of a concerted focus on strategic and emerging business risks. These inputs form a key step in the identification of the audit universe for the audit planning exercise. The audit frequencies are in sync with the risk profile of each unit to be audited. This is in alignment with guidelines relating to RBIA. The scope of RBIA includes examining the adequacy and effectiveness of internal control systems, external compliances and also evaluating the risk residing at the audit entities. Further to augment the internal audit function, concurrent audit, thematic audit and integrated audit reviews have been integrated into the internal audit process in order to make the function more robust.

The Internal Audit functions independently under the supervision of Audit Committee of the Board, thereby ensuring its independence. The Board reviews the efficacy of the internal audit function, effectiveness of controls laid down by the Bank and compliance with internal as also regulatory guidelines. This is in alignment with the best global practices on corporate governance.

Corporate Social Responsibility (CSR)

The primary purpose of the Banks CSR philosophy is to make a meaningful and measurable impact in the lives of economically, physically and socially challenged communities of the country through an integrated approach of development which focuses on creating sustainable livelihood, promoting education and skills development, creating awareness amongst public at large on public interest topics including financial literacy, facilitating and providing access to formal banking channels for excluded sections, promoting environmental sustainability, and supporting health and sanitation initiatives.

The Bank has put in place a Policy on Corporate Social Responsibility to strategically guide its efforts in the area of CSR and the same is hosted on the Banks website www.axisbank.com . The CSR activities are pursued through various initiatives undertaken by the Bank or through Axis Bank Foundation (ABF) or through any other Trust or agencies and entities as deemed suitable. The Bank leverages its geographical spread to undertake such initiatives.

The Bank has adopted multi-pronged approach for its CSR agenda, which is integrated with the Banks sustainability objectives aimed towards creating enduring value for all stakeholders. Through Axis Bank Foundation, the Bank focuses on creating sustainable livelihoods, especially in rural and remote areas through interventions in agriculture productivity, watershed management, livelihood assets, and vocational training and skill development including for differently-abled people. During the year, the country witnessed a massive shift towards becoming less-cash society through extensive promotion of digital and non-cash transactions. Addressing the need of the hour, the Bank has stepped up its financial inclusion and financial digital literacy measures to help people make transition to digital and non-cash transactions. These measures in alignment with Governments JAM (Jan Dhan - Aadhar - Mobile) vision have immense potential to help people, especially those currently excluded from formal banking channels to access financial solutions, increase savings, improve livelihood earnings through access to micro-credit, gain access to Government schemes, and thus contribute to reduction of economic and social inequalities. The Bank has initiated projects across 24 villages to enable them completely move to digital and non-cash transactions through Digiprayas program. Extensive financial literacy camps were conducted across the country. The Bank recognises that MSME sector is a vital component of economic growth and job creation which is also a priority focus area of the Government under programs such as Make in India, Skill India, Startup India etc.. Through knowledge sharing programs, the Bank provides a platform for MSMEs to gain knowledge on topics related to the sector growth and future opportunities. The Bank also supports programs to contribute to entrepreneurial skill development by providing a platform for promising start-ups to be mentored by industry leaders. Environmental sustainability is another key focus area for the Bank. It undertakes various initiatives through promotion of renewable energy and energy efficiency to reduce carbon emissions and through ABF activities helps farmers adopt sustainable agriculture practices which contribute to environmental sustainability.

The prescribed CSR expenditure for the Bank for fiscal 2017 in terms of the Section 135 of the Companies Act, 2013 and Rules framed thereunder was Rs 196.44 crores, against which the Bank has spent Rs 135.39 crores towards various CSR initiatives. The details of initiatives taken by the Bank on CSR during the year as per annexure attached to the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given as an annexure to the Directors Report.

Set up as a Public Charitable Trust in 2006, Axis Bank Foundation (ABF) is the Corporate Social Responsibility (CSR) arm of the Bank. It complements the activities being carried out by the Bank under CSR with sharper focus on areas responsible for creating sustainable livelihood. Partnering with close to 100 NGOs across the length and breadth of the country, ABF has impacted over 10.81 lakh beneficiaries till 31 March, 2017. ABFs programs are currently spread across 21 states and 221 districts of India. The Bank has made cumulative of Rs 12 crores to ABF and its partner NGOs.

In the area of Livelihoods, ABF has partnered with NGOs that primarily work in the areas of Watershed Management and Agriculture Productivity, Livestock Enhancement, Vocational Training, and Livelihood for the Disabled. These initiatives help in enhancing the agricultural output through improved farm practices leading to increased income, watershed management activities ensure the availability of water by adopting irrigation facilities for multiple cropping, encouraging involvement into non-farm handicraft activities like embroidery work, bamboo work, etc. that further supplements the farm income and improves the overall income.

Financial Inclusion activities are conducted to help the beneficiaries gain access to banking facilities. 29,796 Self Help Groups (SHGs) have been formed with a membership of 368,454 women. The SHGs have recorded a savings of over Rs 106.44 crores and a borrowing of Rs 180.01 crores from several banks.

The Livelihood programs also seek to train unemployed youth both abled and disabled which lead to their employability. 116,563 youth have been trained of which 65% have been placed.

ABF has a mission to create one million sustainable livelihoods by December 2017. A 50%increase in income is expected to be achieved through these livelihood enhancement programs. Till March 2017, over 9.12 lakh beneficiaries (63% are women) have been impacted by this program.

The Foundation provides Axis Bank staff, opportunities to volunteer and participate in its various initiatives and also runs a payroll program to collect contributions from the employees.

During the year, the Bank was rewarded by the Cll Sustainability Domain (Corporate Social Responsibility) Excellence Award in recognition of its CSR efforts and impacts created. The Bank also was recognised as Socially Aware Corporate of the Year at Business Standards Corporate Social Responsibility Awards, 2016 for the impacts created by ABFs livelihood programs over the past decade.

Additional details of the Banks community development efforts can be accessed through the Banks CSR & Sustainability web-section on www.axisbank.com and ABFs website www.axisbankfoundation.org.

Human Resources

Axis Bank believes that nurturing our people capability is the core of driving business excellence and achieving Vision 2020. The Bank has made concerted efforts to ensure that the employees capabilities are developed so that employees can handle challenges of future. The Bank ended the year with a workforce strength of 56,617 employees. Some key focus areas of the Bank were:

Reinforcing the culture and capability: Banking is all about trust. As Bankers, we are responsible for establishing, and maintaining trust during and beyond our association with the customers. The Banks constant endeavour is to ensure that all employees embody this trust at all times, and it continues to drive this behaviour through various interventions.

The Bank takes significant efforts on an ongoing basis to examine how it can more rigorously and consistently adhere to compliance and governance norms. Towards this end, the Bank introduced Banking on Compliance - a training intervention to reinforce the status of compliance standards as an important element of how we do our business. 44,872 employees of the Bank were certified through this program over a 3 month period. The Banks leaders across levels personally delivered this training, further driving the message that the compliance and governance agenda is critical. The Bank has constantly re-emphasised on its compliance standards so that employees can internalize the same, and show the ethical behaviours that are expected.

The Bank believes in broad-based capability development. The Bank introduced a learning platform, the Axis Competency Profiler, to manage employee careers. The platform will be leveraged for conducting Knowledge and Application Based profiling for employees working in five areas. With a view to promote self-paced, contextualised learning, Axis Bank launched a tie-up with Coursera, becoming the first organization in India to do so. With this partnership, high performing employees gained access to three specially curated and customized courses from Ivy League universities for their professional and personal growth.

The Bank launched the Million stories initiative with a view to capturing the rich legacy that lays the foundation of our culture. These stories celebrate the Axis Bank culture and motivate the employees. Axis Champions, the banks premier awards, is an initiative to drive alignment of culture across the organization and recognize champions for their role model behaviours. This year the platform became bigger with 12,500 nominations pouring in from across the country.

Efforts have been made to enhance employee experience through personalized human connect as well as technology enabled connect. The best-in-class technology was deployed to automate HR processes & the internal employee portal, My Connect, was revamped to provide employees with a seamless and digitally enhanced HR experience. The experience was extended to prospective employees with Axis Bank becoming one of the first few organizations in the country to introduce faceless Interviewing.

Reinforcing Meritocracy: The Banks integrated Performance Management & Capability Development system - ACEIerate - helps in fostering high performance as well as building capability. Capability development interventions are provided to high performing employees to hone their skills further and help them perform at the next level. More than 28,000 employees underwent a 2-day behavioural training program customized to their grade and their role challenges. Enhancement Program was offered to poor performers as a lever to opt for stretch targets and have a chance at upgrading their rating retrospectively. The Banks promotion process allows for the best performers to shine through, regardless of their age, gender, past performance & background. A young and engaged workforce with an average age of 30 years and the Banks policy on being an equal opportunity employer continue to significantly contribute towards the Axis Bank brand.

Leadership development across levels has been the Banks continued focus. The Bank follows an institutionalized approach of providing differentiated learning opportunities to the Top Talent. The Bank has partnerships with corporate education arms of elite institutes to custom design offerings for senior executives. This year, the content of the programs was re-designed to reinforce the new leadership imperatives that were recently articulated. Additionally, developmental interventions in the form of executive coaching, mentoring and feedback tools were introduced and extended to a wider audience to facilitate their leadership journey.

Partnering with external stakeholders: Axis Bank strives to serve its customers and the communities it operates in by including several pioneering interventions within the Bank and the broader community. Axis Bank Foundation has partnered with various organizations across the country for the overall development of the society. Leaders of the Bank engage with communities at the grass root level through the Social Impact Program.

The Bank spearheaded one of the largest crowdsourcing initiatives - Future of Jobs in India, a competition for all individuals in the age group of 18 - 30 years. 21,800 youngsters participated in across 453 cities to come up with innovative ideas that may create jobs of tomorrow. The winning ideas offered innovative solutions across the areas of waste management to transport sector.

Through the fulfillment of its HR agenda, the Bank continues to strive towards its pledge of serving its customers, shareholders, employees & communities.

Subsidiary Performance

During fiscal 2017, the Banks subsidiaries reported healthy growth in revenue and earnings of 33% and 26% respectively. Axis Capital, the Banks institutional equities and investment banking franchise contributed 25% to the total earnings of the subsidiaries. Axis AMC, Axis Finance and Axis Direct continued to contribute towards the Banks Retail Franchise building strategy and strengthen the bond with its customers. Axis Finance Limiteds net profit increased by 49% and contributed 36% to total subsidiaries earnings. The other major contributors to the total earnings of the subsidiaries were Axis Securities, Axis Asset Management Company and Axis Bank UK, with share of 11%, 13% and 11% respectively.

Axis Finance reported 38% YoY growth in total loans with 58% growth in retail loans. Axis AMC reported 53% YoY growth in average AUM with 26% growth in total number of folios. Axis Long Term Equity Fund continues to be the largest ELSS fund in the industry with AUM of ?12,396 crores and also among the top 10 equity funds in the industry. Axis Capital, the Institutional Equities and Investment Banking franchise successfully co-managed and participated in most of the IPOs undertaken during fiscal 2017.

Safe Harbor

Except for the historical information contained herein, statements in this Annual Report which contain words or phrases such as "will", "aim", "will likely result", "would", "believe", "may", "expect", "will continue", "anticipate", "estimate", "intend", "plan", "contemplate", "seekto", "future", "objective", "goal", "strategy", "philosophy", "project", "should", "will pursue" and similar expressions orvariations of such expressions may constitute "forward-looking statements". These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to our ability to successfully implement our strategy, future levels of non-performing loans, our growth and expansion, the adequacy of our allowance for credit losses, our provisioning policies, technological changes, investment income, cash flow projections, our exposure to market risks as well as other risks. Axis Bank Limited undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof.