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Bandhan Bank Ltd Directors Report

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Jul 16, 2024|03:32:22 PM

Bandhan Bank Ltd Share Price directors Report

To

The Members,

Your Board of Directors present the Ninth Annual Report on the business and operations of your Bank, together with the Audited Financial Statement for the Financial Year (FY) ended March 31, 2023.

Financial Performance of the Bank

The financial highlights for the FY under review, are presented below:

Particulars For the FY ended
March 31, 2023 March 31, 2022
Deposits: 1,08,069.31 96,330.62
- Savings Bank Deposits 36,038.10 34,616.86
- Current Account Deposits 6,417.05 5,462.32
- Term Deposits 65,614.16 56,251.44
Advances (Net): 1,04,756.77 93,974.92
- Cash Credits, Overdrafts and Loans repayable on demand 22,048.64 17,154.78
- Term Loans 82,708.13 76,820.14
Total Assets/Liabilities 1,55,769.97 1,38,995.17
Net Interest Income 9,259.62 8,714.46
Non-Interest Income 2,468.55 2,822.50
Less: Operating Expenses (excluding Depreciation) 4,494.17 3,413.52
Profit before Depreciation, Provisions and Tax 7,234.00 8,123.44
Less: Depreciation 142.65 110.04
Less: Provisions 4,198.37 7,884.78
Profit Before Tax (PBT) 2,892.98 128.62
Less: Provision for Tax 698.35 2.83
Profit After Tax (PAT) 2,194.64 125.79
Balance in Profit & Loss Account brought forward from previous year 6,009.94 6,171.00
Appropriations:
Transfer to Statutory Reserves 548.66 31.45
Transfer to Statutory Reserve u/s 36(1)(viii) of the Income-tax Act, 1961 169.20 42.45
Transfer to Capital Reserve 1.74 16.00
Transfer to Investment Reserve - 25.24
Transfer to Investment Fluctuation Reserve 31.19 10.65
Dividend pertaining to previous year paid during the year - 161.07
Balance carried over to Balance Sheet 7,453.79 6,009.94
EPS (Basic) (in ^) 13.62 0.78
EPS (Diluted) (in ^) 13.62 0.78

State of Affairs of the Bank

While your Bank completed seven years of its operation during the FY under review, it has also achieved three significant milestones i.e. (i) achieved the total deposits as well as total advances of ?1 lakh crore each; (ii) crossed ?2 lakh crore of total business; and (iii) acquired three crore customers. The Balance Sheet size of your Bank has also crossed ?1.5 lakh crore. The Total Liabilities (including capital and reserves) of your Bank stood at ?1,55,770 crore and the Total Advances (Net) at ?1,04,757 crore.

During the FY under review, your Bank stayed on course with its strategic priorities of portfolio diversification. As on March 31, 2023, Group loans were at 35 per cent. of the total asset book, down from 47 per cent. as on March 31, 2022. The share of housing finance portfolio increased by 100 bps during FY 2022-23 to 25 per cent. of the total asset book as on March 31, 2023, whereas other retail assets have also grown to 5 per cent. of the total asset book during FY 2022-23 as compared to 2 per cent. as on March 31, 2022. Commercial Banking portfolio achieved a share of

35 per cent. of the total asset book during FY 2022-23 as compared to 27 per cent. during the previous year.

With regard to the strategic priority of geographical diversification, among the new banking outlets opened in the year under review, majority were outside of the core markets of East and North East India. In terms of business volume for the legacy micro loans business, while Assam was the second largest market for your Bank for many years, in the year under review, Uttar Pradesh and Bihar overtook Assam, hinting further at the desired geographical diversification agenda. During the FY under review, your Bank has added 360 new banking outlets taking the total count of banking outlets to 5,999 as on March 31, 2023. Out of the total 5,999 banking outlets, 35 per cent. are in rural, 37 per cent. in semiurban, 18 per cent. in urban and 10 per cent. in metro locations. The number of customers has increased from 2.63 crore as on March 31, 2022 to 3 crore as on March 31, 2023. With the expanding network of banking outlets and customers, the total deposits grew further from ?96,330.62 crore as on March 31, 2022 to ?1,08,069.31 crore as on March 31, 2023 registering a growth of 12.19 per cent. The Current Account and Savings Account (CASA) deposits have recorded an increase of 5.93 per cent. from ?40,079.18 crore as on March 31, 2022 to ?42,455.15 crore as on March 31, 2023.

During the FY under review, the total income (net) of your Bank has increased by 1.66 per cent. to ?11,728.17 crore as against the total income of ?11,536.84 crore for FY 2021-22. The profit after tax (PAT) stood at ?2,194.64 crore, an increase of 1,645 per cent. as compared to ?125.79 crore for FY 2021-22. Consequently, Return on Average Equity (ROAE) was 11.8 per cent. as against 0.76 per cent. for FY 2021-22 and Return on Average Asset (ROAA) was 1.60 per cent. as against 0.11 per cent. for FY 2021-22. Correspondingly, basic as well as diluted earnings per share (EPS) increased from ?0.78 to ?13.62 as at the end of FY 2022-23 in comparison to FY 2021-22.

Your Bank continues to focus on financial inclusion by providing various financial services to the underserved. The Reserve Bank of India (RBI) has mandated Priority Sector Lending (PSL) of a minimum 40 per cent. of advances for all banks. Your Banks PSL was ?54,176 crore as on March 31, 2023 as compared to Rs. 56,397 crore as on March 31, 2022. At the end of FY 2022-23, PSL as a proportion of the gross advances of ?1,08,827.12 crore was 50 per cent.

Highlights of various business segments of your Bank during the FY under review are mentioned below:

Banking Unit (BU) Business

The Banking Units vertical of your Bank has been serving borrowers at the bottom of the pyramid with affordable and convenient loans to help them develop into entrepreneurs and transform their lives. Your Banks Banking Units business strategy is guided by its long- held philosophy of financial inclusion and economic empowerment of the disadvantaged sections of the society. The endeavour of your Bank is to nurture these entrepreneurs and help them move

up the socio-economic hierarchy. In their movement upwards, your Bank is by them to support with whichever financial service they may require in the journey.

Your Bank offers a wide array of loans through Banking Unit (BU) outlets under Banking Units vertical to benefit small business owners in need of financial assistance. It also helps in the growth of additional income generation avenues and offers enhanced opportunities to small entrepreneurs to achieve their business goals. The Bank operates its Group Loans and Small Business & Agri Loans (SBAL) business channels from its BU outlets.

Each BU is linked to a bank branch for operational convenience. BUs are self-sufficient and empowered to open deposit accounts using TABs and also open loan accounts after necessary credit checks. The highlight of the BUs operations is the TABs that are connected to the Core Banking System (CBS) through cellular data. Relationship Officers (RO) carry these TABs to their group meetings, and the entire instalment reconciliation for the customer happens through these TABs on real time basis. To ensure timely and effective support to the BUs in their day-to-day functioning, your Bank has a structure comprising Circles, Territories, Divisions, Areas and Banking Unit Catchments. A central operation team maintains oversight of the quality of the operations and adherence to prevalent guidelines at all times. Your Bank lays significant emphasis on processes and controls to help maintain uniform and consistent standards in transaction processing and service delivery, as well as compliance with regulatory and statutory guidelines.

During the FY under review, your Bank opened 138 new BUs pan- India with a focus on financial inclusion and to enhance portfolio quality by limiting the number of customers served by a BU. Your Banks commitment towards financial inclusion is also reflected in the fact that it offered loans to 23,77,606 new borrowers during the FY 2022-23. The portfolio for Group Loans stood at Rs. 38,059 crore whereas SBAL portfolio stood at ?18,765 crore at the end of FY 2022-23 as your Bank worked towards bringing additional measures in credit control in order to improve the quality of portfolio.

Your Bank now has nine loans products under its Group Loans, SBAL and other categories, which are provided from Banking Unit outlets to cater better to the varied demands and needs of its customers:

Group loans

1. Srishti Loan: Timely funds to start a new business or grow an existing one. Loan size is from ?15,000 to ?1,00,000.

2. Subriddhi Loan: Loan amount is up to 50 per cent. of the disbursement amount of running primary loan. Sanctioned to help customers fulfil their extra business requirement during their ongoing loan.

3. Suraksha Loan: Loan size is up to ?15,000 and is sanctioned to help existing customers meet their emergency expenses, e.g.- medical, drinking water and sanitation.

4. Sushiksha Loan: Loan size is up to ?10,000 and is sanctioned to help customers meet expenses towards the education of their children.

Small Business and Agri Loans

1. Sahayata Loan: Loan to fund growing business needs of individuals involved in an array of income generation activities. Loan amount is from ?50,001 to ?3,00,000.

2. Suyog Loan: Loan amount is up to 50 per cent. of the disbursement amount of running Sahayata loan. Sanctioned to help customers fulfil their additional short-term business requirement during their ongoing loan.

3. Baazar Loan: With a loan size from ?26,000 to ?1,50,000, this product is for small entrepreneurs, who have an existing super-saver account with your Bank. This loan provides financial support to deposit customers for their working capital needs.

Other loans

1. Micro Home Loan: Your Bank offers Micro Home Loan ranging from ?1,00,000 to ?10,00,000 to existing Banking

Unit Borrowers for construction as well as renovation of their houses so that their dream of their own house does not remain unfulfilled.

2. Two-wheeler Loan: Your Bank offers two-wheeler loans ranging from ?30,000 to ?1,20,000 to existing Banking Unit Borrowers. It brings them a step closer to their aspirations.

During the FY under review, your Bank has taken various initiatives:

• During the pandemic and post pandemic restrictions, many of the customers of your Bank lost their livelihoods, which made them financially vulnerable. To strengthen the customers, your Bank came up with products specifically designed for these situations and ensured that the customers get the maximum financial assistance during the toughest time in their lives. In addition to lending to customers, your Bank is encouraging them to save in their savings bank accounts and to inculcate healthy financial habits, so that in any uncertain situation in the future, they remain financially stable.

• Awareness about using digital solutions, like smartphone- based transactions and use of credit/debit cards for online transactions are still persistent issues to the customers under the Banking Unit vertical. To overcome these challenges, your Bank is giving training to make the customers aware about the benefits of digital payments and various other aspects, such as seeding bank accounts with mobile number and Aadhaar. Your Bank has also taken initiative by informing the customers to pay through online transactions.

• Your Bank has been driving the transformation of customers at the ground level. Your Bank has already started migrating vintage and quality customers to Small Business and Agri loans from their existing group loans by laying out a strategy to increase the share of Small Business and Agri loans in overall portfolio of Banking Units vertical and extending new

product offerings, such as Sahayata Loan, Two-Wheeler Loan, and Micro Home Loan as per their changing requirements.

• Your Bank has always placed strong emphasis on training and development to upskill and reskill staff to ensure that they stay relevant to the fast-changing world across levels and locations. This includes online and classroom training sessions.

• Your Bank has taken several initiatives to strengthen the credit assessment process for Group loan and SBAL, and other loans in order to have a better portfolio. Your Bank has further started initiating deployment of separate Loan Sanctioning team to manage the end-to-end loan sanctioning process for SBAL loans.

With the advent of Microfinance master circular dated March 14, 2022 (updated on July 25, 2022) issued by the RBI, your Bank has revised its processes and guidelines in order to align its microfinance loans with the said guidelines to better cater its customers.

Commercial Banking Small Enterprise Loan (SEL)

In the current economic scenario, India is a country burgeoning with small businesses which are regularly in need of short to medium-term funding to maintain and grow their businesses. The Small Enterprise Loan vertical of your Bank empowers these businesses to expand their business by extending to them business loans tailored to suit their needs.

With the COVID pandemic now firmly behind us, the small- enterprise segment is now expected to grow at a much faster rate than in the recent past, thus making it all the more essential for your Bank to offer loans to these firms and aid them in their pursuit of growth and expansion, in turn contributing to the overall betterment of the country.

In an endeavor to understand its customers better, your Banks SEL vertical has constantly taken inputs from borrowers and with the help of these inputs, updated and added to the catalogue of offered products to remain at par with other leading banks of the country.

The following products are presently offered under SEL:

• SEL Term Loans (^1.01 lakh to ^10 lakh)

These are term loans with a tenure of one to three years, and they are aimed towards financing working capital or asset creation needs of small businesses or other short-term business requirements. These loans range from ?1.01 lakh to ?10 lakh.

• SEL Max Loans (^10.01 lakh to ^25 lakh)

This is similar to SEL Term Loans, but it is targeted towards slightly larger enterprises in terms of revenue, which might need loans of value higher than ?10 lakh. These loans range from ?10.01 lakh to ?25 lakh.

• SEL Secured Overdraft Loans (^10.01 lakh to ^25 lakh)

This overdraft product has been added to your Banks SEL product bouquet during FY 2022-23 with a vision to cater to the MSME borrowers who need working capital in form of an overdraft and are willing to pledge a security for the loan. The range for this product is ?10.01 lakh to ?25 lakh and the overdraft limits are subject to renewal on a yearly basis.

Business Banking Group

Business Banking Group (BBG) offers loan products at competitive rates of interest to SME borrowers for meeting their working capital or capital expenditure requirements, including non-fund- based facilities. The interest rate offered is correlated with the applicants profile and credit rating. These are secured loans generally between ?25 lakh to ?5 crore extended to businesses involved in manufacturing, trading, and services, extended in the form of secured credit facilities including term loan, cash credit, overdraft or lease rental discounting or as non-fund-based facilities like letter of credit or bank guarantee. To promote ease of process, your Bank is in the advanced stage of deploying the Loan Originating System that automates and manages the end- to-end steps in the loan process. Also, the cash management for commercial clients has been launched and implementation of trade services is in the advanced stage. The BBG fund based Book was at ?535 crore as on March 31, 2023 as against ?297 crore as on March 31, 2022, registering a growth of about 80 per cent. during FY 2022-23.

In line with various government initiatives and regulatory instructions, Board-approved Credit and related Policies are in place to continue extending support in the aftermath of the COVID-19 pandemic, in the form of Emergency Credit Line Guarantee Scheme, Resolution Framework, etc., to the deserving and eligible borrowers, based on requests.

Commercial - LAP

Your Bank caters to proprietorships, partnerships, private limited companies, public limited companies (not listed on exchange) and individual business for loans against property (LAP). This is in line with your Banks overall objective of increasing the secured lending portfolio. It is quite a competitive segment in the financial services industry. Your Bank will leverage its 1,400+ bank branches besides sourcing from the open market. Additionally, your Bank will have a higher level of engagement with customers by not only building the LAP book but also transitioning the entire customer relationship to your Bank. This product launched towards the end of FY under review, your Bank has laid an ambitious plan to scale up and build a quality book by end of FY 2023-24. As we move along, your Bank will use technology for better turnaround time which is essential for doing well in this space. Your Bank has a bouquet of programs to cater to most of the sectors in the market in the LAP space. With hiring of people underway, your Bank is set to make the most in the FY 2023-24. The focus would be on the top 30 cities for the LAP product which constitute 85 per cent. of the total LAP market. The book-size stood at ?53.14 crore, as on March 31, 2023.

Mid-Market Group

Mid-Market Group (MMG) offers loan products at competitive rates of interest to majorly medium enterprises and mid corporate

borrowers for meeting their working capital or capital expenditure requirements, including non-fund-based facilities. The interest rate offered is correlated with the applicants profile and credit rating. These are secured loans of generally more than ?5 crore extended to businesses involved in manufacturing, trading, and services, extended in the form of secured credit facilities including term loan, cash credit, overdraft or lease rental discounting or as non-fund-based facilities like letter of credit or bank guarantee. To promote ease of process, your Bank is in the advanced stage of deploying the Loan Originating System that automates and manages the end-to-end steps in the loan process. Also, the cash management for commercial clients have been launched and implementation of trade services is in the advanced stage. The MMG fund based Book was at ?3,605 crore as on March 31, 2023 as against ?1,871 crore as on March 31, 2022, registering a growth of about 93 per cent. during FY 2022-23.

In line with various government initiatives and regulatory instructions, Board-approved Credit and related Policies are in place to continue extending support in the aftermath of the COVID-19 pandemic, in the form of Emergency Credit Line Guarantee Scheme, Resolution Framework, etc., to the deserving and eligible borrowers, based on requests.

Financial Institution Group

Your Bank considers Institutional Lending to Non-Banking Financial Companies (NBFCs)/Housing Finance Companies (HFCs) and NBFC-Microfinance Institution (NBFC-MFI), primarily, for on- lending activities. The NBFC-MFI business includes lending to Microfinance Institutions (MFIs), Societies and Trusts engaged in microfinance activities. While most of these loans are extended as Term Loans, your Bank also has credit exposure through Direct Assignments and investment exposures through Pass Through Certificates (PTCs) and Non-Convertible Debentures (NCDs). The NBFC (including HFCs) business primarily includes Term Loan product for on-lending purpose, and is also foraying into working capital loan, Direct Assignments and co-lending activities. The book-size of this business was at ?5,519.34 crore as on March 31, 2022, which has grown to ?10,386.72 crore as on March 31, 2023. The Institutional book, comprising lending to NBFCs and MFIs, has grown by 88 per cent. Your Bank has expanded its reach while building Books through diversified asset class as well as geographies during the Financial Year under review.

Agribusiness Loans

Providing credit for agricultural activities not only helps increase production but also empowers farmers, and supports the backbone of the Indian economy- the agricultural sector. Your Bank recognizes the importance of this sector and offers a wide range of credit facilities to provide financial support to all participants in the Agri value-chain system. Currently, your Bank provides KCC loans to borrowers engaged in farming activities, including animal husbandry, pisciculture etc. with competitive interest rates and minimal documentation. By doing so, your Bank is making it easier for farmers to access credit and invest in their farms to increase productivity.

Moreover, your Bank is expanding its reach by offering both fund- based and non-fund-based facilities to entities involved in agri-ancillary services, such as food and agri processors, Agri input dealers, etc. Additionally, your Bank provides credit facilities to support development of agricultural infrastructure.

Housing Finance

Your Bank offers loans for purchase, construction, repair, renovation and extension of dwelling units to individuals. Loan against Property (LAP) on self-occupied residential property and loan against rent receivables on commercial property are also offered.

Loans are offered to Salaried as well as Self Employed individuals. In line with the objective to increase financial inclusion, your Bank also offers loans to New to Credit customers.

During the FY under review, the Housing loan services were extended from additional 33 Centers taking the presence to 389 Centers across 20 States and 2 Union Territories.

Your Bank continues to focus on housing finance and has disbursed ?6,129 crore during the FY clocking a growth in disbursement of 17 per cent. Consequently, the loan book has grown to ?26,577 crore indicating a growth of 12.8 per cent.

While your Bank continues to focus on Affordable Home Loans, a majority of loans are having a ticket size below ?20 lakh. A major portion of the housing book is meeting the criteria for Priority Sector lending as the focus area continues to be Affordable housing. During the FY, your Bank continued a special campaign for higher ticket loans that was launched last year offering attractive and competitive rates of interest. The campaign received a very good response.

Your Bank has also started a Direct Sales Agent (DSA) channel for sourcing of home loans. The DSA channel has picked up well and the contribution from the channel has been increasing. Your Bank is committed to the housing business and strives to increase the penetration in the Affordable as well as higher ticket size segments. With an objective to improve the servicing to the customers, your Bank is also strengthening the customer support and is in the process to launch digital journeys for customer onboarding and online support.

Your Bank offers loans at floating rates linked to an External Benchmark Rate (EBR). Your Bank has adopted the Repo rate announced by the RBI as the EBR rate. Your Bank also follows the principle of Risk based pricing and loans are offered based on the individual credit score arrived at based on multiple parameters. Existing customers who are serving floating rate loans linked to previous benchmark rates are also offered an option to convert their loans to EBR linked loans.

Retail Asset

With an objective to serve the financing needs of a larger population and to diversify the risk, your Bank has launched and strengthened several retail asset products during FY 2022-23. Customers can now avail various loans, like Gold Loans, Personal Loans, Two-Wheeler Loans, Car Loans and Commercial Vehicle &

Construction Equipment (CVCE) Loans from the Bank.

• Gold Loan: Gold loan aims at fulfilling urgent monetary needs of the customers instantly, through its simplified documentation process quick turnaround time and wide branch network. Gold loans are given for a ticket size ranging from ?10,000 to ?40,00,000 for a tenure up to 3 years with a competitive rate of interest.

• Personal Loan: Your Bank has revamped the personal loan product and revised the sourcing model. The sourcing is being done by a dedicated sales team, catering to existing customers and New to Bank customers as well. The Personal Loan product has started channel partner sourcing from the year 2021 to extend distribution network in major markets to diversify and expand the portfolio. Personal loans are given for ticket size from ?50,000 to ?25,00,000 for a tenure up to 5 years at a competitive rate of interest. Your Bank has been quickly ramping up this book during FY 2022-23. Total outstanding book stood at ?897 crore as on March 31, 2023.

• Two Wheeler Loans: Your Bank has achieved and maintained a consistent growth rate and has reached to a sizable customer base with more than 90 per cent. New to Bank customers. The Two Wheeler loan program was redesigned to provide financing to existing as well as New to Bank customers for purchase of new Two Wheelers. Your Bank leveraged on its digital capabilities and using digital means, approved two wheeler loans in just 5 minutes for more than 90 per cent. of cases. The two wheeler loan caters to the customers needs by giving loans starting from ?5,000 to ?5,00,000. Your Bank redesigned the product as per market standard with introduction of dealer/ channel based distribution model expanding its geographical footprint.

• Car Loan: Car Loan was launched by your Bank during the FY 2021-22, to meet the customers aspirations of owning a car. Your Bank designed various product schemes for loan amounts ranging from ?1,00,000 to ?1 crore, in order to cater to various customer profiles viz. salaried, self-employed as well as non-individual entities. With the help of its extensive manufacturer and dealer network, your Bank aims to provide the best deals to existing as well as new customers. Your Bank has built a sizable book of new car loans and has also launched new product used car Loan during the second half of FY 2022-23 to cater the larger strata of customers and to increase the profitability of overall auto loans business.

• CVCE Loan: Road transport plays an important role in freight and people movement owing to its end-to-end connectivity and flexibility. In light of increased pace of economic activity, increased focus on manufacturing growth and e-commerce, CVCE product was launched in this year for self-employed customers & non-individual entities, looking for a loan from ?1 lakh to ?15 crore. The Bank aims to provide the best deals to existing as well as new customers, through its existing branch channel, manufacturers & dealer network.

Branch Banking

Your Bank takes pride in offering a wide range of retail liability products that cater to its customers diverse financial needs. Your Bank has a strong focus on customer service and constantly strives to provide innovative and convenient banking solutions.

During the FY under review, your Banks deposit portfolio witnessed robust growth, with a total deposit base of ?1,08,069 crore as of March 31, 2023. This represents a growth of 12 per cent. in the overall deposit franchise as compared to previous FY. While the growth in deposits was primarily driven by an increase in savings and current account deposits, the contribution from the Affluent Savings business segment which consists of the flagship products like the Elite and Premium Savings remained unmatched. This segment alone contributed to an overall SA growth of 15 per cent. as compared to previous FY. Your Bank also witnessed a steady growth in Term deposits, which grew by 17 per cent. over previous FY.

Your Bank has implemented various initiatives to ensure that the retail deposit portfolio remains competitive and meets the evolving needs of customers, with extra attention to the Affluent segment. Your Bank has leveraged technology to enhance the customer experience and offer digital payment solutions that are secure and convenient.

Your Bank has also launched targeted marketing campaigns to educate customers about the benefits of its products and services. In addition, the customer onboarding process has been streamlined to ensure a seamless experience.

Your Banks strong network of branches is a key element of the success and enables it to serve customers effectively. A total of 222 Branches were added during the FY under review taking your Banks footmark to 1,411 branches, covering a wide range of locations across the country. This extensive network ensures that your Bank is able to reach out to a large number of customers and offer them a range of products and services that are tailored to their specific needs. The continued investment in expanding the footprint is a reflection of the commitment to providing high- quality financial services to customers across the length and breadth of the country.

The launch of "SMART-Android POS" is a testament to the commitment to providing innovative and customer-centric solutions to merchants. Your Bank is confident that this product will further strengthen the current account customer base as a leading player in the POS space and will help to continue delivering value to customers. Your Bank is confident that the merchants will be excited about the range of offerings and features that SMART- Android POS brings to the table.

Your Bank will keep leveraging technology to offer new and enhanced digital solutions that are secure, convenient, and user- friendly.

Your Bank remains committed to providing customers with best- in-class banking solutions and looks forward to serving them with the same zeal and commitment in the future.

Third Party Products

Your Bank currently distributes mutual funds, life insurance and general insurance, including health insurance products. The Financial Year under review has been a year of collaboration and resurgence. Your Bank continues to demonstrate a persistent focus on offering a robust and comprehensive product proposition to its customers. In the General Insurance business, your Bank continued to serve its customers in their quest towards healthy living by offering them a wide variety of health insurance solution based product proposition. In the life insurance business, your Bank continues in its quest of offering a wide bouquet of products to cater to different life cycles and life stages of its customers. Your Bank has also been working tirelessly to build an analytics and technology driven business franchisee to offer the best in class insurance solutions to its customer base. In mutual funds distribution, your Bank continues to focus on a research driven distribution strategy with a vision of providing its customers the ease and flexibility while planning for investments. This year your Bank has launched the distribution of Mutual Funds through its Retail Internet Banking (RIB) platform in its continuous efforts towards offering customers further convenience and benefits.

Your Bank continues to invest towards building a segment driven, analytics and research based and technology embedded, product distribution proposition, across all Third Party Products and continues to seek out opportunities to add new product suites to serve customers financial needs holistically.

The total mutual fund AUM managed under your Banks code during FY under review was ?582.79 crore, earning an income of ?5.14 crore. A total of ?207.21 crore and ?497.07 crore of general and retail life insurance business, respectively, were garnered through the retail network during FY 2022-23, earning a fee income of ?26.65 crore and ?153.52 crore, respectively. During FY under review, the life insurance business through the existing arrangement in all asset verticals amounted to ?1,146.29 crore, earning an income of ?58.10 crore. Your Bank has also earned ?0.11 crore as commission for distribution of Atal Pension Yojana, NPS Lite Swavalamban schemes of PFRDA and others during the FY 2022-23.

Corporate Social Responsibility

Your Banks core commitment to creating inclusive growth is reflected in its Corporate Social Responsibility ("CSR") initiatives, which focus on the empowerment of the marginalised sections of the societies residing in the vicinity of its operational area. The marginalised communities are confronted with multi-dimensional vulnerabilities, at the core of which is the challenge to secure sustained livelihoods. Accordingly, the interventions of your Banks CSR initiatives are appropriately designed to build their capabilities for securing sustainable livelihoods.

To address its societal commitments, your Bank has adopted a comprehensive CSR policy that outlines the CSR programmes of your Bank, which are in line with Schedule VII to the Companies Act, 2013 (the Companies Act). These programmes are being undertaken in the vicinity of your Banks operational areas.

For the seamless implementation and monitoring of the CSR programme, your Bank has constituted the Corporate Social Responsibility Committee of the Board of Directors (CSRCB), in accordance with the provisions of Section 135 of the Companies Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 (CSR Rules). During the FY under review, the scope of the CSR Committee has been broadened to oversee the implementation of the Business Responsibility and Sustainability Reporting (BRSR) related initiatives of the Bank and accordingly, the name of the Committee has been changed to the Corporate Social Responsibility and Sustainability Committee of the Board (CSR&SCB). The composition of the CSR&SCB is given in the Corporate Governance Report which forms part of this Report.

During the year under review, your Bank has contributed ?52.93 crore towards 19 CSR programmes implemented through a Project Implementing Agency (PIA). These CSR programmes were spread across 379 project locations in 63 districts of 8 states of India, reaching out to 4,08,789 individuals during the FY under review.

In terms of the provisions of Rule 8(3) of the CSR Rules, your Bank appointed KPMG Assurance and Consulting Services LLP (KPMG) to carry out an independent Impact Assessment of its CSR Programmes. Further, in terms of the General Circular No. 14 /2021 dated August 25, 2021, issued by the Ministry of Corporate Affairs, Government of India, the Impact Assessment Report is available at the Banks website https://www.bandhanbank.com/ beyond-banking, and the programme wise summary of the same is mentioned in the subsequent sections.

The details of CSR programmes undertaken pursuant to the provisions of the Companies Act and in accordance with the Annual Action Plan, during the FY under review are given as Annex - 1 and forms part of this Report. The CSR Policy as recommended by the CSR&SCB and approved by the Board is available on the Banks website: https://bandhanbank.com/sites/default/files/2023-01/ CSR-Policy-210123.pdf.

Some of the key programmes of your Banks CSR initiatives are:

Targeting the Hard-Core Poor Programme

During the year under review, your Bank has contributed Rs. 16.50 crore (?27.88 crore in FY 2021-22 and ?18.20 crore in FY 2020-21) towards the three projects of Targeting the Hard-Core Poor (THP) programme. The programme is designed for ultrapoor women-headed households, providing them with a range of gainful micro-enterprises in the form of farm, non-farm and mixed assets, along with handholding support and training on confidence building, enterprise skills, consumer interaction, marketing and financial skills. They are also provided with sustenance allowance to meet their daily needs until they generate substantial income from the provided assets. Within a period of 18-24 months, these ultra-poor women start graduating, uplifting themselves from extreme poverty1 and getting linked to mainstream society2.

During the year under review, 18,000 ultra-poor women were provided farm, non-farm and mixed assets to sustain their livelihoods. These women belonged to 11 districts of Assam, Jharkhand, Odisha, Uttar Pradesh and West Bengal.

The Impact Assessment Study carried out by KPMG indicated that between the period of 2017 and 2022, more than 29,000 women were alleviated from below the poverty line to above the national poverty line (?1,059.42 for rural and ?1,286 for urban areas) with a significant increase in their business assets and household income having a monthly income of at least ?4,000 and an average monthly income of ?7,000. Additionally, 29,487 women had improved savings habits and access to safe and secure shelter.

In addition to the above impact assessment study, an independent, long-term study conducted by the Nobel Laureate Dr Abhijit Banerjee et.al.3, based on Randomised Control Trials (RCT) method, found that seven years after the asset was first distributed, the average income from the farm, non-farm and daily wages of the treatment group was higher by 286 per cent., 100 per cent. and 25 per cent., respectively, as compared to the average income of the control group. The study further emphasises that this higher income was not because of more working hours, but because the income per hour went up and they diversified their businesses and invested part of the gains from livestock into other activities.

The study further states that the monthly consumption of those assigned to the treatment group increased by 25 per cent. as compared to the increase of 12 per cent. monthly consumption of those assigned to the control group. Further, the amount deposited in the savings account by the treatment group was more than double as compared to the control group and there was also an increase in institutional borrowings.

The study highlighted the positive effects across all categories of outcomes. Compared to non-beneficiaries, the beneficiaries households of the programme have more assets, food security is higher, earn more, and are financially better off. The results for the adult-level indexed variables of the study indicated that the individuals are healthier, happier, and less stressed. Furthermore, the effects (except for productive assets) almost always grows over time, suggesting that the programme may have put beneficiaries household on a different trajectory.

Bandhan Health Programme

During the FY under review, your Bank has contributed Rs. 12.02 crore (?18.49 crore in FY 2021-22 and ?15.67 crore in FY 2020-21) towards six health programmes covering 34 districts in five states of India. The health programmes covered 2,22,042

1 Poverty Line benchmarked according to the Suresh Tendulkar Committee Poverty Lines per capita monthly expenditure, 2011-12, Niti Aayog, Government of India

2 India SDG Index Score for Goal 1 - No Poverty; Goal 2 - Zero Hunger and SGD 5 - Gender Equality

3 Abhijit Banerjee, Esther Duflo, Raghabendra Chattopadhyay and Jeremy Shaprio. 2016. The Long Term Impacts of a "Graduation" Program: Evidence from West Bengal. Working Paper, September, 2016. J-PAL, MIT, Cambridge, Massachusetts. USA.

beneficiaries during the year.

The Impact Assessment study conducted by KPMG indicated that the programme contributed in the improvement of institutional deliveries increased by 10 per cent. in phase III project and 2 per cent. in phase IV project. The complete ante-natal care (ANC) increased by 4 per cent. in both phase III and phase IV projects whereas the complete immunisation increased by 10 per cent. in phase III and 21 per cent. in phase IV projects. The study further estimated that over 3.23 lakh children were covered under the nutrition initiative between 2017 and 2021. The study also highlights that there has been a reduction in malnutrition among children below five years of age from 14 per cent. to 4 per cent.

A study conducted by Grameen Foundation and Freedom from Hunger India Trust from 2015 to 20 184, concluded that there was an increase in the level of awareness on Mother and Child Health (MCH) from less than 10 per cent. to greater than 90 per cent. amongst the women who participated in the health awareness programme and the awareness amongst the adolescent girls on managing menstrual complications increased from 20 per cent. to 80 per cent.

Bandhan Education Programme

Your Banks education programme provides quality education to the children belonging to the marginalised section of society in your Banks catchment area. The education programme enables the children to improve their learning outcomes, especially in Science, Technology, Engineering and Mathematics (STEM) subjects and increase their retention and classroom engagement. The programme also provides training to the teachers belonging to the communities, government schools and schools run by the various charitable trust who are providing free education to transform their pedagogy and integrated various teaching and learning tools in their lesson plans and track the comprehensive continuous assessment of each child.

Your Bank contributed ?15.99 crore (?17.01 crore in FY 2021-22 and ?14.80 crore in FY 2020-21) towards the education programme benefiting 62,574 marginalised children across 43 districts of five states of India.

The Impact Assessment study conducted by KPMG indicated that over 85 per cent. of the parents across the states applauded the good quality of education provided at Bandhan Education Centre (BEC). The respondents highlighted that there had been an improvement in the academic performance in English and Mathematics of their wards in formal schools due to the support provided at the BECs. The parents and guardians shared that the staff at BEC provided them with hand-holding support during the enrolment of their children in formal schools.

Skill Development Programme

Your Banks skill development initiatives provide market-linked and job-ready employable skills to the youths from marginalised sections of the society in various domains. This initiative not only provides on-job training and job placement facilitation in the

organised sector but also a follow-up of the placements so that the youths are settled in their job post-training.

During the year, your Bank contributed ?3.69 crore (?4.79 crore in FY 2021-22 and ?4.89 crore in FY 2020-21) towards the skill development initiatives in 18 districts of five states of India. These PIAs operated 11 skill development centres in domains like Warehousing and Logistics, Retail and Customer Care, Sales and Marketing, ITeS and BPO, Refrigeration and Air Conditioning, Computer Accounting, Hardware and Networking, BFSI, etc.

Overall 22,220 youths have been trained under this programme till date, of which 75 per cent. were placed with net salaries ranging from ?8,000 to ?15,000 plus other performance-based allowances and social security benefits like Provident Fund (PF) and Employee State Insurance (ESI).

The study conducted by KPMG indicated that between 2016 and 2021, 11,191 youths were trained with a placement rate of over 68 per cent. These youths earned salaried income in the organised sector with an average salary of ?13,265 with an average increase in the monthly household income by 24 per cent.

Water Conservation

The water conservation initiative aims at water security and drought-proofing in some of the high moisture-stressed regions of India, thereby providing a safety net to agriculture and livestock- based livelihoods. These initiatives facilitate participatory watershed management by empowering the communities to participate in the planning and implementation of local water resource development. Measures such as building, reviving and maintaining water-harvesting structures, prioritisation and judicious use of water for every community member, crop planning and water- efficient farming, use of drought-resistant varieties, cultivation of high-value crop requiring less water, etc., create a multiplier effect in drought-proofing and climate change adaptation measures and higher income generation. The programme has supported the construction of 23 water harvesting structures with a storage capacity of over 1,20,000 kilolitres of water in two states, which not only provided drinking water to over 1,500 families but also supported participatory irrigation of various crops and helped in generating an income of more than ?123 lakh.

Afforestation

Your Banks afforestation initiatives have contributed towards the project of establishing a "Bio-shield" to save the mangroves in the Bharuch district of Gujarat. Mangrove plantation of 67,540 saplings was carried out on 20 Hectares in a stretch of 1 km of coastline along with plantation of other medical plant species and fodder species, sequestering over 4,400 tonnes of CO2 annually. The fodder bank was created to offset the biotic pressure from the mangrove area. The project created 4,629 person-days of employment and benefited 9,123 beneficiaries with additional income-generating avenues from fodder and medicinal plant harvesting.

4 Alison Burgon Bardsley, Bobbi Gray, Cassie Chandler, and Sabina Rogers (2018). Maa Aur Shishu Swasthya (MASS) Mother and Child Health Program, 20152018. Final Project Report. December 2018. Grameen Foundation and Freedom from Hunger India Trust. https://grameenfoundation.org/documents/ MASS Final Evaluation Report 2018 Final.pdf

Dividend

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR), the Board of Directors of your Bank has adopted a Dividend Distribution Policy that, inter-alia, balances the objectives of appropriately rewarding shareholders and retaining capital to maintain a healthy capital adequacy ratio. In addition to the Dividend Distribution Policy, the dividend payout ratio of the Bank is guided by the Circulars on dividend issued by RBI, from time to time. The Policy is available on the Banks website at https://bandhanbank.com/ sites/default/files/2022-09/Dividend-Distribution-Policy.pdf.

In line with this policy and in recognition of the financial performance during FY 2022-23, while retaining capital to maintain a healthy capital adequacy ratio to meet growth requirements, your Directors are pleased to recommend a dividend of Rs. 1.50 per equity share of ?10 each fully paid-up (15 %) for the financial year 2022-23, as against no dividend for the financial year 2021-22, for approval by the shareholders at the 9th Annual General Meeting (AGM) of the Bank.

Pursuant to the provisions of Income-tax Act, 1961 (IT Act), dividends paid or distributed by the Bank shall be taxable in the hands of the shareholders and the Bank shall be required to deduct tax at source (TDS) at the prescribed rates from the dividend to be paid to Members, subject to the approval of dividend by the shareholders in the ensuing AGM. Further details are available in the notice of the 9th AGM of the Bank.

Transfer to Reserves

In line with the RBI regulations, your Bank has transferred an amount of ?548.66 crore to the statutory reserve during the financial year ended March 31, 2023.

Issuance of Equity Shares & Capital Adequacy Ratio

During the FY under review, your Bank has allotted 70,613 equity shares of ?10 each fully paid-up pursuant to exercise of stock options by the eligible Employees of your Bank, aggregating to face value ?7,06,130.

Post allotment of aforesaid equity shares, the issued, subscribed and paid-up equity share capital of your Bank stood at ?16,10,83,64,800, comprising 1,61,08,36,480 equity shares of ?10 each fully paid-up as on March 31, 2023.

Your Bank has not issued any equity shares with differential voting rights during the FY under review.

The authorised share capital of the Bank was ?32,00,00,00,000, comprising 3,20,00,00,000 equity shares of ?10 each, as on March 31, 2023.

Your Banks capital adequacy ratio (CAR), calculated in line with the RBI Circular on Capital Adequacy Framework, stood at 19.76 per cent. as on March 31, 2023, well above the minimum regulatory requirements, out of which Tier 1 CAR was 18.70 per cent. and Tier 2 CAR was 1.06 per cent.

Performance and Financial Position of the Subsidiaries, Associates or Joint Venture

Your Bank did not have any subsidiary, associate or joint venture company during the FY 2022-23. Accordingly, no statement is required to be reported in Form AOC-1.

Awards and Recognitions

Your Bank has received several prestigious awards and recognitions from various revered institutions during the FY under review, which are as under: -

1. Your Bank was recognised as one of the worlds best banks by Forbes and Statista.

2. Your Bank received the 2023 Gallup Exceptional Workplace Award. The Bank was among the only 57 organizations worldwide that received this recognition.

3. Your Bank received the IBS Intelligence Global Fintech Award for its exceptional implementation of corporate internet banking.

4. Your Bank received The Pride of India Brands Award by Exchange for Media, in recognition of its innovative and excellent products, processes, and marketing practices.

Rating of Various Debt Instruments

Details of rating of various debt instruments of the Bank as on March 31, 2023 are as under:

Instruments Rating Rating

Agency

Amount (^ in Crore)
Term Loan from Banks [ICRA]AA(Negative) ICRA 80
Certificate of Deposit [ICRA]A1+ ICRA 6,000(1)
CRISIL A1+ CRISIL
Non-Convertible [ICRA]AA(Negative) ICRA 1,560 (2)
Debentures131 CRISIL AA/Negative CRISIL

1 rating of ICRA is for ?3,000 crore only

2 rating of ICRA is for ?110 crore only

3 transferred from erstwhile Gruh Finance Limited pursuant to the effectiveness of the Scheme of Amalgamation.

Board of Directors

The composition of the Board of Directors of your Bank (Board) is governed by the provisions of the Companies Act, the Banking Regulation Act, 1949 (the BR Act), the SEBI LODR, other applicable laws and its Articles of Association. At the end of March 31, 2023, the Board of your Bank had thirteen Directors, out of which nine were Independent Directors, two were Non-Executive Non-Independent Directors i.e. one Nominee each of Bandhan Financial Holdings Limited and Caladium Investment Pte. Ltd., and the Managing Director & CEO, and one Executive Director.

Appointments

Mr. Ratan Kumar Kesh (DIN: 10082714)

The Board of Directors of the Bank, at its meeting held on March 21, 2023, on the basis of the recommendation of the Nomination and Remuneration Committee of the Bank (NRC) and as per the approval granted by the RBI vide its letter dated March 20, 2023, had approved the appointment of Mr. Ratan Kumar Kesh

(DIN: 10082714) as the Whole-time Director [Category: Additional Director], designated as Executive Director (ED) and Key Managerial Personnel of the Bank, for a period of three years, liable to retire by rotation, with effect from March 31, 2023, subject to Shareholders approval. Accordingly, approval of the Shareholders of the Bank has been sought vide Postal Ballot Notice dated May 19, 2023 for appointment of Mr. Kesh as the Whole-time Director, designated as ED and Key Managerial Personnel, for a period of three years, with effect from March 31, 2023 up to March 30, 2026, as per the said approval granted by the RBI.

Mr. Ratan Kumar Kesh, a BE Mechanical from NIT, Durgapur, has more than 28 years of experience in multiple industries including Banking & Finance, Manufacturing and Service Industry. He is an Advanced Quality Engineer from Quality Council of Indiana, USA. He possesses a Post Graduate Diploma in Business Management from NMIMS, Mumbai. He has also completed a Business Leadership Course from IIM, Ahmedabad & a Strategic Agility Leadership Course from Harvard Business School.

With nearly three decades of stellar experience, Mr. Kesh has a track record of leading complex operations including transformation, automation, customer experience, quality improvement and other related functions. He is a hands-on leader who has helped scale and address operational challenges with ease consistently at reputed banking organisations in India namely ICICI Bank, HDFC Bank, Yes Bank and Axis Bank.

Re-appointments

Ms. Divya Krishnan (DIN: 09276201)

In terms of the provisions of Section 152 of the Companies Act, Ms. Divya Krishnan, Non-Executive Non-Independent Director (Nominee of Bandhan Financial Holdings Limited), being longest in office, shall retire at the ensuing AGM and being eligible, offers herself for re-appointment.

Mr. Subrata Dutta Gupta (DIN: 08767943) and Mr. Suhail Chander (DIN: 06941577)

Mr. Subrata Dutta Gupta and Mr. Suhail Chander were appointed as Independent Directors of the Bank, effective March 19, 2021, for a period of three years each and their respective current terms are expiring on March 18, 2024. Accordingly, considering the outcome of their performance evaluation, notices received under Section 160 of the Companies Act from member(s) proposing their candidature for the office of Directors and the recommendations of the NRC, the Board, at its meeting held on May 26, 2023, has approved their re-appointments as Independent Directors of the Bank, not liable to retire by rotation, for the second term of five years each, effective March 19, 2024, subject to the approval of Shareholders of the Bank, by way of special resolution(s), at the ensuing AGM.

The resolution(s) in respect of re-appointment(s) of the Directors, as aforesaid, have been included in the Notice convening the 9th AGM of the Bank. Brief profiles of these Directors, together with other requisite disclosures/details, have been annexed to the said Notice. None of the Directors proposed for re-appointment, will attain the age of 75 years during the continuation of their tenure

on the Board of the Bank.

Shareholders approved appointments/ re-appointments

During the FY under review, the following appointments/re- appointments were approved by the Shareholders at the 8th AGM of the Bank held on August 10, 2022:

• Appointment of Ms. Divya Krishnan (DIN: 09276201) as a Non-Executive Non-Independent Director of the Bank (Nominee of Bandhan Financial Holdings Limited), liable to retire by rotation, effective May 11, 2022.

• Appointment of Mr. Philip Mathew (DIN: 09638394) as an Independent Director of the Bank, not liable to retire by rotation, for a period of three years, effective June 15, 2022.

• Appointment of Dr. Aparajita Mitra (DIN: 09484337) as an Independent Director of the Bank, not liable to retire by rotation, for a period of three years, effective July 13, 2022.

• Re-appointment of Dr. Holger Dirk Michaelis (DIN: 07205838), Nominee Director of Caladium Investment Pte. Ltd., being longest in office and liable to retire by rotation, retired at the 8th AGM of the Bank, and who, being eligible, had offered himself for re-appointment.

• Re-appointment of Mr. Narayan Vasudeo Prabhutendulkar (DIN: 00869913) as an Independent Director of the Bank, not liable to retire by rotation, for the second term of five years, effective May 08, 2023.

• Re-appointment of Mr. Vijay Nautamlal Bhatt (DIN: 00751001) as an Independent Director of the Bank, not liable to retire by rotation, for the second term of five years, effective May 08, 2023.

Cessations

During the financial year under review, the following Directors ceased to hold office of Director:

• Mr. Ranodeb Roy (DIN: 00328764) ceased to be a Non-Executive Non-Independent Director with effect from May 11, 2022 pursuant to the withdrawal of his nomination by Bandhan Financial Holdings Limited from the Board of the Bank.

• Mr. Snehomoy Bhattacharya (DIN: 02422012), Independent Director, completed his second term of four years on the Board of the Bank on July 08, 2022. Accordingly, he ceased to be the Director of the Bank effective July 09, 2022.

• Ms. Raji Thekedathumadam Subramani Gain (DIN: 07256149), Independent Director, completed her second term of four years on the Board of the Bank on August 05, 2022. Accordingly, she ceased to be the Director of the Bank effective August 06, 2022.

Necessary disclosures in this regard have been made to the Stock Exchanges, the RBI and the Ministry of Corporate Affairs. The Board places on record its sincere appreciation for the contributions made by Mr. Roy, Mr. Bhattacharya and Ms. Gain during their tenure as Directors of the Bank.

Key Managerial Personnel

During the financial year under review, Mr. Ratan Kumar Kesh was appointed as Executive Director and Key Managerial Personnel for a period of three years effective March 31, 2023. Accordingly, Mr. Chandra Shekhar Ghosh, MD & CEO; Mr. Ratan Kumar Kesh, Executive Director; Mr. Sunil Samdani, Chief Financial Officer; and Mr. Indranil Banerjee, Company Secretary of the Bank are the Key Managerial Personnel of the Bank, as per the provisions of the Companies Act and rules made thereunder.

Meetings of the Board and Board Committees

The Board met fifteen times during the FY under review i.e., on May 11, 2022; May 13, 2022; June 15, 2022; July 13, 2022; July 22, 2022; September 14, 2022; October 26, 2022; October 28, 2022; December 29, 2022; January 18, 2023; January 20, 2023; February 23, 2023; February 24, 2023; March 21, 2023 and March 31, 2023. The details of the Board meetings held during the FY, attendance of Directors at the meetings, and other details have been provided separately in the Report on Corporate Governance forming part of this Report.

Your Bank currently has the following nine Board Committees:

1. Audit Committee;

2. Nomination & Remuneration Committee;

3. Stakeholders Relationship Committee;

4. Risk Management Committee;

5. IT Strategy Committee;

6. Customer Service Committee;

7. Corporate Social Responsibility and Sustainability Committee;

8. Committee of Directors;

9. Special Committee for Monitoring High Value Frauds.

Additionally, meeting(s) of Independent Directors, without the attendance of non-independent directors and members of management, were also held during the FY under review. The details of such meeting(s) have been provided separately in the Report on Corporate Governance forming part of this Report.

The details with respect to the composition, terms of reference, numbers of meetings held, attendance of members, etc., of these Board Committees are provided in the Report on Corporate Governance forming part of this Report, enclosed as Annex - 4.

Declaration from Independent Directors

The Bank has received necessary declarations from all the Independent Directors under Section 149(7) of the Companies Act and Regulation 25(8) of the SEBI LODR that they meet the criteria of independence laid down under Section 149(6) of the Companies Act read with allied Rules, and Regulation 16(1)(b) of the SEBI LODR, respectively. The Board has reviewed the disclosures of independence submitted by the Independent Directors and is of the opinion that the Independent Directors of the Bank fulfil the conditions specified in the Companies Act and the SEBI LODR, and are independent of the management. In the opinion of the

Board, all the Independent Directors possess requisite expertise, experience, integrity and proficiency as required under the applicable laws and policies of the Bank.

Familiarisation Programmes for Independent Directors

The details of the familiarisation programme(s) for the Independent Directors of the Bank have been provided separately in the Report on Corporate Governance forming part of this Report.

Board Evaluation

Pursuant to recommendation of the NRC, the Board has framed the Performance Evaluation Policy for the Board, Committees, NonIndependent / Whole Time Directors and Independent Directors (the Board PE Policy), in accordance with the relevant provisions of the Companies Act, the SEBI LODR and SEBI Guidance Note on Board Evaluation. In terms of the Board PE Policy, performance evaluation of the Board and its Committees, Chairman and individual Directors are done on various parameters. Parameters for the Board include various aspects, such as, structure, meetings, appointments, agenda, discussions, roles and responsibilities, evaluation of risks, strategy, governance and compliance, conflict of interest, etc.

Parameters for Board Committees include various aspects, such as, mandate and composition, effectiveness, meetings, agenda, minutes, discussion and dissent, independence, etc.

Parameters for the Directors include various aspects, such as, knowledge and competency, integrity, functioning, commitment, contribution, attendance, initiative, teamwork, communication, corporate governance, updates, etc., and in case of Independent Directors, additional parameters include fulfilment of the independence criteria and their independence from the management.

The evaluation process has been carried out electronically. The Board of Directors has done the evaluation of Independent Directors, excluding the Independent Director being evaluated. Similarly, Independent Directors have done the evaluation of the Board as a whole, Non-Executive Chairman and Non-Independent Directors, including the MD & CEO. The Chairmen of Board Committees have done performance evaluation of their respective Committees. Thereafter, the report on performance evaluation of Directors, excluding NRC members, and the Chairman was submitted to the NRC, whereas the report on performance evaluation of the Board as a whole, Board Committees and Directors who were NRC members was submitted to the Board for necessary action. The NRC, after considering the performance evaluation report of Directors, excluding NRC members, made its recommendations to the Board for continuation / reappointment of Directors. Thereafter, the Board considered the recommendations of the NRC, and report on the performance evaluation of the NRC members, the Board as a whole and the Board Committees. The Board evaluation has provided some valuable inputs for optimising the roles and responsibilities, quality, quantity and timeliness of flow of information between the Banks management and the Board.

The Board of Directors of the Bank is satisfied with the outcome of the performance evaluation process. They were of the view that the Directors have been discharging their roles and responsibilities as expected by the Board and as required under the applicable regulatory provisions. The Board continues to be duly constituted representing various expertise, skill sets, knowledge and qualification required for the banking business. There was no observation during the performance evaluation of the previous years; and so is the case with the current year.

Appointment of Directors

Appointment of Directors on the Board is guided by the provisions of the BR Act and the guidelines/ circulars issued by the RBI, from time to time, the Companies Act and the SEBI LODR. In view of these provisions, your Bank has adopted a Policy on Appointment and Fit & Proper Criteria for Directors. In terms of this Policy, while appointing directors, the NRC / Board considers fit and proper criteria, various skill sets, professional knowledge, practical experience, integrity, gender diversity and additionally, status of independence in case of Independent Directors. The details of the same have been included in the Report on Corporate Governance forming part of this Report. The Policy on Appointment and Fit & Proper Criteria for Directors is reviewed on annual basis and accordingly the Policy was reviewed by the Board on the recommendations of the NRC without any changes. The Policy is available on the Banks website at: https://bandhanbank.com/ sites/default/files/2022-09/Policy-on-Appointment-and%20Fit- and-Proper-Criteria-for-Directors.pdf.

Remuneration Policy

Your Bank has formulated and adopted a comprehensive Compensation Policy for its Directors, Key Managerial Personnel and Employees, in terms of Section 178 of the Companies Act, read with the relevant Rules made thereunder, Regulation 19 of the SEBI LODR and the guidelines /circulars issued by the RBI, in this regard, from time to time. The details of the same have been included in the Report on Corporate Governance forming part of this Report. The Compensation Policy is reviewed on annual basis and accordingly, the Policy was reviewed by the Board on the recommendation of the NRC to align with the regulatory requirements. The updated Compensation Policy of your Bank is available on the Banks website at: https://bandhanbank.com/ sites/default/files/2023-04/Compensation-Policy-050423.pdf.

Employees Remuneration

As on March 31, 2023, your Bank had 69,702 employees. The statement containing particulars of employees as required under Section 197(12) of the Companies Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is appended separately as Annex - 2(a) and forms part of this Report. The ratio of the remuneration of each Director to the median remuneration of the employees of your Bank and other details in terms of Section 197(12) of the Companies Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are also forming part of this Report as Annex - 2(b).

Employee Stock Options

Your Bank has instituted Employees Stock Option Scheme (ESOP), i.e., Bandhan Bank Employee Stock Option Plan Series 1 (ESOP Scheme) to enable its employees to participate in your Banks future growth and financial success. Your Bank provides its employees with a platform for participating in important decision making and instilling long-term commitment towards the future growth of the Bank by way of rewarding them through stock options. ESOP Scheme of your Bank is in compliance with the provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (SEBI SBEBSE) and no change has been made therein during the financial year under review. The ESOP Scheme is administrated by the NRC. In terms of the ESOP Scheme, the Options would vest not earlier than one year and not later than four years from the date of grant as decided by the NRC /Board. The Options granted shall be equally vested over four years. The exercise period shall be a maximum of five years from the date of the respective vesting of Options. Since your Bank has been allotting fresh equity shares upon exercise of Options, the source of the shares is of primary issuance.

In terms of the Compensation Policy of your Bank and the Shareholders approved ESOP Scheme, fresh grants have been made during the financial year under review to the eligible employees. Except the MD & CEO, none of the Directors was issued the stock options during the financial year under review. The information pertaining to the ESOP Scheme as prescribed under the SEBI SBEBSE are available on the website of the Bank at https://bandhanbank.com/annual-reports.

Further, as required under the SEBI SBEBSE, a certificate from the Secretarial Auditor of the Bank certifying that your Bank has implemented the ESOP Scheme in accordance with the applicable provisions of the SEBI SBEBSE and resolution(s) passed by Shareholders, will be made available electronically during the AGM.

Deposits

Being a banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, are not applicable to your Bank. The details of the deposits received and accepted by your Bank, as a banking company, are enumerated in the Financial Statement for the FY ended March 31, 2023, forming part of this Annual Report for FY 2022-23.

Internal Financial Controls, Audit and Compliance

Your Bank has an Internal Audit Department (IAD) and a Compliance Department (CD), which independently carry out evaluation of the adequacy of all internal controls. These departments ensure that operating and business units adhere to the laid down internal processes and procedures as well as to the regulatory/statutory and legal requirements.

The Compliance Function is one of the key elements in your Banks corporate governance structure. The compliance starts from the top, and the Board & the Senior Management play an important

role in driving the compliance culture. Your Bank remains committed to adhere to the highest standards of compliance vis-avis regulatory prescriptions and internal guidelines. Your Bank has a robust Compliance Policy, outlining the compliance philosophy, and roles and responsibilities of the CD.

The CD assists the Board and Top/Senior Management in managing the compliance risk of your Bank. The CD ensures that overall business of your Bank is conducted in strict adherence to the guidelines issued by the RBI and other regulators, various statutory provisions, standards and codes prescribed by FEDAI, FIMMDA, etc. by evaluating the products / processes, guiding business departments on the various regulatory guidelines with a special emphasis on better understanding of the perspective. It closely works with operational risk and internal audit functions and monitors various activities of your Bank with more emphasis on active risk management.

As the focal point of contact with the RBI and other regulatory entities, the CD evaluates the adequacy of internal controls and examines any systemic correction that is required, based on its analysis and interpretation of regulatory guidelines and deviations observed during monitoring and testing. Your Bank has a robust Anti Money Laundering (AML) framework and tools to manage the AML risk. It periodically apprises the Audit Committee of the Board (ACB), the Board and the Top/Senior Management on compliance levels, based on the changes in the external regulatory environment. The CD submits the compliance report to the ACB at regular intervals providing the compliance status with the laws/ rules and regulations applicable to the Bank.

The IAD independently carries out audit of various functions in the Bank, primarily to assess the effectiveness of internal control in critical systems and processes, and compliance with regulatory guidelines. The Bank has put in place appropriate preventive and detective controls including segregation of duty, dual controls, monitoring processes, checking of audit trails, supervisory reviews, etc., to mitigate the various risks emanating from banking business. IAD further ensures that independent checks and balances are in place, and that laid down policies and procedures are followed and also recommends improvements in operational processes and systems proactively.

To maintain the independence of these departments, the performance evaluation of the Chief Compliance Officer (CCO) and the Chief Audit Executive (CAE) is carried out by the ACB.

Considering the internal financial controls, audit and compliance systems of the Bank, and the work performed by the auditors, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management under the supervision of the ACB, the Board of Directors is of the opinion that the internal financial controls established and maintained by the Bank are adequate.

Related Party Transactions

During the year under review, there were no materially significant transactions with related parties, which could lead to a potential conflict of interest between the Bank and these parties. Prior- approval of the ACB is sought for all the related party transactions. Further, prior omnibus approval is also obtained from the ACB for the related party transactions, which are of repetitive nature as well as for the normal banking transactions which cannot be foreseen. The quarterly update on the details of transactions with the related parties, are placed before the ACB. The Related Party Transactions that were entered, during the FY under review, were on an arms length basis and were in the ordinary course of business, pursuant to the approval of the ACB. In terms of the amended definition of Related Party under the SEBI LODR, the promoter and member of promoter group are considered as Related Parties with effect from April 01, 2022. Accordingly, in terms of the provisions of Regulation 23 of the SEBI LODR, the approval of Shareholders were obtained at 8th AGM of the Bank for material related party transactions with the promoter entities i.e. Bandhan Financial Holdings Limited, Bandhan Financial Services Limited, Financial Inclusion Trust and North East Financial Inclusion Trust for the FY 2022-23 and upto 9th AGM of the Bank for banking transactions at arms length and in ordinary course of banking business of the Bank. The proposal for material related party transactions for FY 2023-24 and upto 10th AGM of the Bank is being submitted before the shareholders at 9th AGM for their approval.

There were no Related Party Transactions required to be reported in Form AOC-2. However, necessary disclosure as required under the Accounting Standards (AS 18) read with RBIs Master Direction No.: RBI/DOR/2021-22/83 DOR.ACC.REC.No.45/21.04.018/2021- 22 dated August 30, 2021, as may be updated from time to time, has been made in the note no. 18.11 to the Annual Financial Statement for the FY 2022-23. Your Bank has a Policy on dealing with Related Party Transactions, which is reviewed on annual basis and accordingly the Policy was reviewed by the Board on the recommendation of the ACB without any changes. The Policy is available on the Banks website: https://bandhanbank.com/ sites/default/files/2022-09/Policy-on-Dealing-with-Related-Party- Transactions.pdf.

Particulars of Loans, Guarantees or Investments

In terms of the provisions of Section 186(11) of the Companies Act, the provisions of Section 186 of the Companies Act, except sub-section (1) thereof, do not apply to any loan made, any guarantee given, security provided, or any investment made by a banking company in the ordinary course of its business. However, the particulars of investments made by the Bank are disclosed in the Financial Statement for the FY 2022-23, as per the applicable provisions of the BR Act.

Whistle Blower Policy/Vigil Mechanism

Your Bank has adopted the Board approved Policy on Vigilance and Whistle Blower Mechanism, as required under Section 177 of the Companies Act, Regulation 22 of the SEBI LODR and applicable circulars issued by the RBI. During the financial year under review, as part of annual review process, the Board on the basis of recommendation of the ACB, segregated the Policy into two Policies i.e. Vigilance Policy and Whistle Blower Policy. The Whistle Blower Policy aims at putting in place a Detailed Protected Mechanism based on the directions of RBI (Protected Disclosures Scheme for Private Sector and Foreign Banks) and also provide

an avenue to raise concerns on Ethical, Legal or Regulatory violations and promptly addressing them while assuring the confidentiality and protection of the Whistle Blower against any form of retaliation. The complaints / disclosures under the Scheme covers the areas such as corruption / malpractices, misuse of office, criminal offences, suspected / actual fraud, failure to comply with existing rules and regulations, where such acts result in financial loss / operational risk, loss of reputation, etc. which may be detrimental to the interest of the Bank, its depositors and the public.

Your Bank promotes and makes available at all times, a Clean, Open and Transparent workplace, wherein business transaction, professionalism and productivity are seen as hallmarks of business practice. Your Bank is also committed to conduct all its business operations and transactions by maintaining highest ethical, moral and legal standards.

Your Bank encourages its employees, all stakeholders and members of general public, who have concerns about suspected misconduct, to come forward and express these concerns without fear of retaliation or unfair treatment. The Whistle Blower Policy provides adequate safeguards against the victimisation of the Directors and employees who avail this mechanism and ensures that the personnel get direct access to the Chairman of the ACB. None of the Banks personnel has been denied access to the ACB. The said Policies are available on the Banks website at https://bandhanbank.com/pdfViewerJS/index.html#../sites/ default/files/2022-11/Whistle_Blower_Policy_291122.pdf and https://bandhanbank.com/sites/default/files/2022-11/Vigilance_ Policy_291122.pdf.

Significant and Material Orders passed by Regulators or Courts or Tribunals

During FY 2022-23, no significant or material orders were passed by any Regulators or Courts or Tribunals against your Bank impacting its going concern status and operations in future. For other details, please refer to note no. 18.8(A) to the annual financial statement for the FY 2022-23.

Statutory Auditors and their Report

In terms of the Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) dated April 27, 2021 (RBI Guidelines on Auditors) issued by the RBI, banks shall appoint the Statutory Auditors for a continuous period of three years, subject to the firms satisfying the eligibility norms each year and the approval of the RBI on an annual basis. Further, in terms of the RBI Guidelines on Auditors and the Banks Policy for Appointment of Statutory Auditors, your Bank is required to appoint two Statutory Auditors. Accordingly, the Members of the Bank at the 7th AGM held on August 06, 2021 had approved the appointment of M M Nissim & Co LLP, Chartered Accountants (ICAI Firm Registration No. 107122W/W100672), as the Joint Statutory Auditors of the Bank for a period of three years, to hold office from the conclusion of the 7th AGM until the conclusion of the 10th AGM of the Bank to be held in 2024. Further, the Members of the Bank at the 8th AGM held on August 10, 2022 had approved the appointment of M/s. Singhi & Co., Chartered Accountants (ICAI

Firm Registration No. 302049E), as the Joint Statutory Auditors of the Bank for a period of three years, to hold office from the conclusion of the 8th AGM until the conclusion of the 11th AGM of the Bank to be held in 2025.

The Independent Auditors Report, given by the Joint Statutory Auditors on the financial statement of the Bank for the financial year ended March 31, 2023, forms part of this Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report. Also, no offence of fraud was reported by the Joint Statutory Auditors of the Bank under Section 143(12) of the Companies Act.

Secretarial Auditor and its Report

Pursuant to the provisions of Section 204 of the Companies Act and Regulation 24A(1) of the SEBI LODR, the Board had appointed CS Hansraj Jaria, Practising Company Secretary (FCS No.: 7703, C.P. No.: 19394), as the Secretarial Auditor to conduct Secretarial Audit of the Bank for FY 2022-23. Accordingly, the Secretarial Audit Report for FY 2022-23 is enclosed to this Report as Annex - 3. There is no qualification, reservation, adverse remark or disclaimer in the Secretarial Audit Report. Further, no offence of fraud was reported by the Secretarial Auditor of the Bank under Section 143(12) of the Companies Act.

Cost Records

In terms of the provisions of Section 148(1) of the Companies Act read with Rule 3 of the Companies (Cost Records and Audit) Rules, 2014, your Bank is not required to maintain cost records and accordingly, is not required to undergo cost audit.

Corporate Governance

Corporate Governance is based on the principles of conducting business with integrity, fairness and being transparent in all transactions, making necessary disclosures. Decisions are made in compliance with the laws of the land, with full accountability and responsibility towards the stakeholders, and a commitment to conducting all business in an ethical manner. Your Bank is committed to achieving the highest standards of Corporate Governance and adhering to the Corporate Governance requirements set by the regulators. A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures, as stipulated under the SEBI LODR, the Companies Act and rules made thereunder, is enclosed to this Report as Annex - 4.

A Certificate from CS Anjan Kumar Roy, Practising Company Secretary (C.P. No. 4557), regarding compliance with the conditions of Corporate Governance, as stipulated in the SEBI LODR, is annexed to the Report on Corporate Governance, which forms part of this Report.

Annual Return

Pursuant to the provisions of Section 92(3) read with Section 134(3)(a) of the Companies Act, the draft Annual Return of the Bank, in Form No. MGT-7, as on March 31, 2023, is available on your Banks website at https://bandhanbank.com/annual-reports. Further, the final Annual Return of the Bank, as on March 31, 2023, will be available on your Banks website at the said link, upon filing of the same with the Registrar of Companies under Section 92(4) of the Companies Act.

Management Discussion & Analysis

The Management Discussion & Analysis Report for the FY 2022-23, as prescribed under the SEBI LODR, forms part of this Report, and is enclosed as Annex - 5.

Business Responsibility and Sustainability Report

In terms of the provisions of Regulation 34(2)(f) of the SEBI LODR read with the SEBIs circular dated May 10, 2021, the Business Responsibility and Sustainability Report (BRSR) of your Bank providing its performance against the nine principles of the National Guidelines on Responsible Business Conduct (NGBRCs) forms part of this Report, and is enclosed as Annex - 6.

Integrated Reporting

Your Bank has prepared an Integrated Report based on the principles enunciated by the International Integrated Reporting Council, which has been hosted on the website of your Bank and can be accessed at https://www.bandhanbank.com/annual- reports. The report provides information including financial and non-financial parameters, which would enable the members to make well informed decisions and have a better understanding of your Banks performance. It also deals with various aspects such as organisational strategy, governance framework, performance and prospects of value creation, based on the six forms of capital viz. financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital, and natural capital.

Compliance with Secretarial Standards

The Board of Directors affirms that your Bank has complied with the applicable provisions of the Secretarial Standards issued by the Institute of Company Secretaries of India, viz., SS-1 relating to Meetings of the Board and its Committees; and SS-2 relating to General Meetings.

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

Your Bank has adopted zero tolerance towards any action on the part of any of its employees, which may fall under the ambit of sexual harassment at workplace and is fully committed to uphold and maintain the dignity of every woman constituent associated with your Bank. It takes all necessary measures to ensure a harassment free workplace and has instituted an Internal Committee for redressal of complaints and to prevent/ prohibit sexual harassment, in compliance with the guidelines enumerated in the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. At the beginning of the FY under review, two complaints were pending and during the FY, thirteen complaints were received, out of which twelve complaints had been closed during the FY. Three complaints were pending at the end of the FY, which have since been closed.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

In our endeavour to achieve aggressive goals to reduce carbon footprints, the conservation of energy has been integrated with the vision of the organisation and its operations. Your Bank has made it mandatory to use BEE Standard Energy Efficient equipment and promote Energy Efficient Building Design in line with Energy

Conservation Building Code (ECBC) in the upcoming projects. Some of the steps undertaken by your Bank towards conservation of energy are as under:

• Smart building systems to achieve the highest level of efficiency;

• At banking outlets, the focus is on insulation on walls and roof, optimum window wall ratio, premises shape and orientation, and re-engineering and retrofit of equipment;

• Tracking of energy consumptions at all levels and comparing with the best international benchmarks;

• Incorporation of smart meters for energy use monitoring and engagement with key stakeholders, at regular intervals, to drive energy conservation in the organisation culture;

• Inclusion of the latest technologies in air-conditioning and inductive equipment in terms of variable drives and improved IKW (Consumption per Ton) in HVAC;

• Lighting: Incorporation of 100 per cent. LED for lighting, daylight harvesting, timed illumination of signage through central monitoring system. Natural daylight utilization is encouraged in your Bank premises;

• Daily operations and usage: Conservation through basic hygiene practices on energy usage through occupancy sensors, zoning of electrical circuits and master switches for premises. In the recent past, the Bank has put up three mega currency chests with five star energy ratings;

• Water Conservation: Ground water recharge facilities through rain water harvesting in upcoming projects, volume flow controls at each sink point, water recycling through STPs.

The details on the Information Technology used by your Bank in its operations have been provided under the section on Information Technology at the Bank in this Report.

The foreign exchange loss of the Bank was ?248.76 lakh {including the net gains/ (losses) arising in all exchanges/derivatives transactions} whereas the foreign exchange outgo was ?567.29 lakh during the Financial Year 2022-23.

Human Resource Management

Your Bank has rapidly adapted to the new norms post-COVID and started to build the business and gain momentum in its growth journey. Your Bank has continued its endeavor towards improving employee productivity, wellness, creating new genre-spanning learning modules, and providing a forum for employee feedback. Your Bank continued emphasizing the growth of branches and verticals in order to achieve better penetration and reach out to every potential consumer market. A strong, collaborative, and empathetic leadership model is at the heart of your Banks strategy. Your Bank values its people and the contributions they make, which have ensured its success.

Your Bank knows that employees need a sense of purpose and an environment that supports productivity, creativity, and empowerment. This is why engaging with employees and measuring that engagement is so important. Your Bank engaged a global

agency - Gallup, to conduct an employee survey and has given the opportunity to more than 40.000 employees to voice their opinion. Your Bank is intending to create a workplace of choice that offers a highly engaging working environment.

Your Bank has achieved below key milestones towards building a great workplace with human centric approach:

• Competency based grade promotion process to nurture talent and to elevate employee. 9,307 employees promoted during FY 2022-23;

• 5,690 employees were identified for role elevation during FY 2022-23 in the Bank to extend opportunity to internal talent;

• Continued adopting digitization for an enhanced employee experience by Introducing portals like Bandhan Express.

• Revamped the Retail Asset Model and on-boarding more than 1,229 manpower during FY 2022-23. Your Bank has opened 31 Retail Asset centers across the Country.

• Through the Campus Hiring program, your Bank created a young talent base. During FY 2022-23, your Bank covered 154 Campus across country hiring 1,102 Fresh talent from premier colleges.

Your Banks workforce has grown by 4.3X over the course of more than 7 years, creating a diverse mix of employee, building culture of values-driven growth, professionalism, and ethical governance. The essential cornerstone of the Bandhan Bank approach to resilience is a devoted and engaged team.

Our human resources management strategy is centred on creating a supportive, interesting, and collaborative workplace while continuing to be customer-centric, performance-driven, and future- ready. Your Bank has received the "Gallup Exceptional Workplace Award" in recognition of its efforts in the area of human resources. We rank among the most prestigious companies that are genuinely altering how people perceive work and life as an award winner.

Employees Learning and Development:

Both staff retention and performance improvement depend on employees growth and learning. Your Banks training programs have evolved to upskill and prepare all employees for the future. During FY 2022-23, more than 99 per cent. of the workforce received at least one training through 12 learning centers, Bandhan EDGE (the online platform), and external learning initiatives taken up by your Bank. More than 16 lakh hours of training were imparted last year to your Banks workforce at an average of 21.7 hours per employee.

Your Bank has a robust and comprehensive learning and development program consisting of various internal training modules and a comprehensive learning management system (LMS) platform used to deliver key e-learning programs to its employees. Some of the program initiatives are as below:

• The development programs for leadership teams are conducted by the Bank in alliance with several premier and reputable institutions.

• Promoting Culture of Ethics and Good Governance: By creating a culture that encourages employees to act ethically; A total of 83 senior management employees participated in the comprehensive Banking Ethics Program in FY2022-23.

• Programs on Regulatory Compliance: A number of learning measures are implemented to improve employees understanding of KYC and AML/CFT, and compliance. All new hires are required to complete mandatory training modules covering the Code of Conduct, Information Security, KYC-AML- CFT, and other important and sensitive compliance-related topics.

• Management Development Programs: Management development programs and leadership development programs are done internally and externally to build managerial and leadership skills.

Risk Management

Your Bank operates an Integrated Risk Management Framework to manage the risks inherent to the financial services industry as it aims to create maximum value for shareholders, clients, employees and communities. Your Banks view of risks is dynamic, reflecting the pace of change in the financial services industry.

The framework ensures that the tools and capability are in place to facilitate risk management and decision-making across the organisation. Risk appetite, supported by a robust set of principles, policies and practices, defines the levels of tolerance for a variety of risks and provides a structured approach to risk-taking within agreed boundaries.

All Bank colleagues share ownership of the way the risk is managed, working together to make sure business activities and policies are consistent with risk appetite.

Risk Appetite

Risk appetite defines the levels and types of risk that are acceptable, within risk capacity, in order to achieve strategic objectives and business plans. The Risk profile, as a part of Risk Appetite Framework, links the goals and priorities to risk management in a way that guides and empowers staff to serve customers well and achieve financial targets providing a holistic representation of all risks that it holds at a point in time, in the form of a dashboard.

Risk Culture

In your Bank, the target culture across is one in which risk is part of the way employees work and think. The desired risk culture behaviours are aligned to your Banks core values forming an effective basis for risk culture since these are used for performance management, recruitment and development.

The Board and Senior Management sets the "tone at the top" and has a trickle-down effect on all employees. Thus, it supports a strong culture, which is defined by your Banks expectations, thereby guiding how employees conduct themselves, work with colleagues, and make decisions. Your Bank has a well-defined Whistle Blower Policy in place.

Stress Testing

Your Banks Stress testing includes Scenario testing, which examines the impact of a hypothetical future state to define changes in risk factors as also Sensitivity testing, which examines the impact of an incremental change to one or more risk factors. Your Bank also carried out reverse stress testing, in order to identify circumstances that may lead to specific, defined outcomes.

Internal Capital Adequacy Assessment Process (ICAAP)

Your Bank carries out an internal assessment of material risks (ICAAP) annually to enable an evaluation of the amount, type and distribution of capital required to cover these risks. The ICAAP consists of a point-in-time assessment of exposures and risks at the end of the financial year, together with a forward-looking stress capital assessment. The examination of capital requirements under normal economic and adverse market conditions enables your Bank to determine whether its projected business performance meets internal and regulatory capital requirements.

Risk Management Framework

The Board of Directors has the overall responsibility for your Banks Risk Management, including culture and governance framework. The Risk Management Committee of the Board (RMCB) assists the Board in discharging these responsibilities effectively. The RMCB annually reviews and approves the risk management framework.

Your Bank continues to enhance its risk management programmes, including the non-financial risk management, in accordance with industrys best practices and regulatory guidelines.

Major Risks

Your Banks risk management approach is to ensure that major risks and emerging risks, as they evolve, are identified, managed, and incorporated into its existing risk management assessment, measurement, monitoring and escalation processes. These practices ensure that a forward-looking risk assessment is maintained by the management in the course of business development and as part of the execution of ongoing risk oversight responsibilities. Senior management and the Board discuss top and emerging risks on a regular basis.

Asset/Liability Management (ALM)

Your Bank actively assesses ALM Risk, which involves evaluating, monitoring and managing interest rate risk, market risk, liquidity and funding, which potentially can have a significant earnings impact.

Your Bank has always maintained healthy Liquidity ratios; Liquidity Coverage Ratio (LCR), much above the regulatory minimum LCR requirement by having significant HQLA (High Quality Liquid Assets) as also the Net Stable Funding Ratio (NSFR), which is measured as the proportion of long-term assets that are funded by stable sources.

Climate-related Financial Risks

Your Bank is presently having provision in its Credit Policy to support green financing and considering proposals from such segments to encourage green financing. Your Bank has further strengthened its Stress Testing Policy with the addition of various scenarios related to Climate risks.

Credit Risk

Your Bank balances the risk and return by setting certain objectives,

e.g., ensuring credit quality is not compromised for growth; mitigating credit risk in transactions, relationships and portfolios; using its credit risk rating and scoring systems or other approved credit risk assessment or rating methodologies, policies and tools; pricing appropriately for the credit risk taken; detecting and preventing inappropriate credit risk through effective systems and controls; applying consistent credit risk exposure measurements; ongoing credit risk monitoring and administration; and avoiding activities that are inconsistent with its values, code of conduct or policies.

Information Security and Cyber Risks

Cybersecurity risk is a priority for your Bank, and it continues to develop and enhance its controls, processes and systems in order to protect its networks, computers, software and data from attack, damage or unauthorized access. Your Bank is also proactively involved in industry cybersecurity efforts and working with other parties, including its third-party service providers and governmental agencies, to continue to enhance defenses and improve resiliency to cybersecurity threats.

Your Bank has not experienced any material loss relating to these or other types of cyber-attacks. Your Bank has its own independent 24x7 C-SOC (Cyber Security Operations Centre) for a state-of-art centralized and consolidated cybersecurity incident prevention, security event monitoring, detection, and response, capabilities take into account proactive monitoring and management capabilities with sophisticated tools for detection, quick response, and backed by data and tools for sound analytics. Your Bank is also ISO 27001:2013 certified, for its information security management.

Operational Risk

Your Bank actively manages the Operational risk, which is the risk resulting from inadequate or failed internal processes, people and systems, or external events.

Your Bank has also put in place robust Fraud Risk, Outsourcing Risk and Legal Risk Frameworks within its Operational Risk Management.

Market Risk

Your Bank actively manages Market risk, which is the risk of possible economic loss from adverse changes in market risk factors, such as, interest rates, credit spreads, foreign exchange rates, equity and commodity prices, and the risk of possible loss due to counterparty exposure. This applies to implied volatility risk, basis risk, and market liquidity risk.

Regulatory Risk

Your Bank recognizes the utmost importance of regulatory risk and keeps a close watch on the developments in the regulatory environment and analyses its expected impact on your Banks businesses and strategy.

Reputational Risk

Your Banks reputation is rooted in the perception of its stakeholders, and the trust and loyalty they place in it is core to its purpose as a financial services organization. Your Bank is fully aware of the importance of reputational risk, and has put reputation as one of the anchors (along with earning, capital and liquidity) for finalising its risk appetite and has a Reputation Risk Dashboard as part of Enterprise Risk Dashboard, which is reviewed by the Board at quarterly intervals. Your Banks Reputational Risk Management Framework consists of integrated parameters, which may influence various stakeholders. Your Bank is also measuring and tracking the idiosyncratic risks related to stock price movement, as also social as well as traditional media sentiments, complaints, regulatory action, etc. on a periodic basis.

Strategic & Business Risk

Your Bank is monitoring the Strategic Risk by tracking your Banks competitive environment as well as any emerging risks, which may derail the overall Strategic pursuit so that suitable risk mitigation measures are timely taken.

Your Bank has a robust Business Risk Management Framework in place, which involves monitoring actionable metrics, including various financial indicators, as well as your Banks competitive position in the industry.

Information Technology at the Bank

Information Technology has been one of the key driving factors for the growth journey of your Bank. In view of the same, your Bank has undertaken a technology transformation journey with an overall objective to leverage cutting edge technology as a differentiator in this rapidly changing competitive financial services landscape. Few major initiatives taken during the FY 2022-23 are mentioned below:

• Application transformation journey has been undertaken, led by implementation of Oracle FlexCube as CBS.

• Other important critical applications which are under the purview of transformation includes:

i. Treasury

ii. Loan Origination System (LOS)

iii. Retail Internet Banking (RIB) and Mobile Banking (MB)

iv. Corporate Internet Banking (CIB)

v. Debit Card Management System (DCMS)

vi. Third Party Products (TPP)

vii. Document Management System (DMS)

viii. Cash Management Services (CMS)

ix. Enterprise Data Lake (EDL) to cater to MIS reports

• The Housing Finance solution has been migrated to Oracle FlexCube.

Your Bank has taken the following initiatives on IT Infrastructure as a part of the transformation journey:

• Your Bank has already built its Data Center (DC), Disaster Recovery (DR) Center and Near DR (NDR) sites. These have been reviewed by one of the Big 4 Firms, appointed by your Bank.

• IT Infrastructure capacity has been adequately enhanced keeping in view of the business growth of your Bank for the next 2-3 years period.

• Your Bank has deployed its own Network Access Control (NAC) centre for a better monitoring, network management and to enhance the end-point security.

• Your Bank has entered into enterprise agreement with its principle vendors for use of its licenses at enterprise scale to ensure scalability and faster expansion of business.

• All Bank branches have been enabled with adequate capacity (primary & secondary) links for seamless customer experience.

• Your Bank has deployed high-end back-up and storage systems for ensuring high availability and security of data.

Material Changes and Commitment Affecting Financial Position of the Bank

There were no material changes and commitments, affecting the financial position of the Bank, which have occurred between the end of the Financial Year of the Bank, i.e., March 31, 2023, to which the financial statement relate, and the date of this Boards Report.

Directors Responsibility Statement

Pursuant to the provisions of Section 134(3)(c) read with Section 134(5) of the Companies Act, the Directors hereby confirm that:

i. In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

ii. We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the Banks state of affairs as on March 31, 2023, and of its profit for the FY ended on that date;

iii. We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

iv. We have prepared the annual accounts on a going concern basis;

v. We have laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and are operating effectively; and

vi. We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Acknowledgements and Appreciations

The Board of Directors of your Bank extends its gratitude for the invaluable support and guidance received from the Reserve Bank of India, other government and regulatory authorities, and financial institutions. The Board also thanks the correspondent banks for their cooperation and help. The Board acknowledges the support of its shareholders, and also places on record its sincere thanks to its valued clients and customers for their patronage.

The Board also expresses its deep sense of appreciation to all the employees for displaying their strong work ethics, excellence at

work, professionalism, teamwork, commitment and initiative, which has led to the Bank making good progress. Your Board will continue to strive for improvements as your Bank continues on its journey towards achieving its objectives.

For and on behalf of the Board of Directors
Bandhan Bank Limited
Anup Kumar Sinha
Place: Kolkata Non-Executive (Independent) Chairman
Date: May 26, 2023 (DIN: 08249893)

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