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HDFC Bank Ltd Management Discussions

Jul 12, 2024|03:32:18 PM

HDFC Bank Ltd Share Price Management Discussions

Dear Stakeholders,

Your Directors take great pleasure in presenting the 29th Annual Report on the business and financial operations of your Bank, together with the audited accounts for the year ended March 31, 2023.

The year gone by has been the first normal/near normal one in the last three years as the world largely shook off the effects of the pandemic and spread cheer.

On the economic front, Indias GDP grew by 7.2 per cent in Financial Year 2022-23 compared to 9.1 per cent in the preceding year as per the Central Statistical Organisation. The higher growth last year in Financial Year 2021-2022 was largely due to the negative impact of the pandemic in Financial Year 2020-21.

Growth was supported by pent up consumption demand and easing of supply - side constraints as the economy recovered from pandemic induced disruptions. Increased Government spending improved investment momentum and in turn supported the recovery of private sector capital expenditure

Overall systemic liquidity remained in surplus for much of the last financial year. However, RBI started raising rates from May 2022 onwards, cumulatively increasing by 250 basis points. Global headwinds resulted in slowing export momentum in the second half of financial year 2022-23 and 2023-24 GDP growth forecast being revised by 200 basis points. Although, Indian banks remain relatively immune to the effects of US regional banking turmoil, ripple effects of the global turmoil are likely to be felt on domestic markets due to high inflation, geopolitical tensions and persistent but continuing localised disruptions of the COVID-19 pandemic.

In the long run however, we see resilience in the domestic market against future headwinds as India remains one of the fastest growing economies globally. External stability indicators continue to remain healthy. Internal consumption demand is being supported by the rationalisation of income tax slabs as well as 37.4 per cent increase in capital expenditure to Rs 10 lakh crore in the Union Budget for 2023-24.

For more details, please refer to the Macroeconomic and Industry section on page no. 173.

Your Bank continued to grow in this environment by conducting its business responsibly and reinforcing its commitment to the environment and community at large.

Financial Parameters

The Banks key financial parameters showed an improvement, primarily attributable to its robust credit evaluation of targeted customers and a well-diversified loan book across customer segments, sectors and products. The Banks performance is also an outcome of its disciplined approach to managing risk and returns.

Based on Standalone Financial Statements

The income statement reflected a growth in revenue comprising net interest income and non-interest income. While the former grew by 20.6 per cent, the latter grew by 5.8 per cent year-on- year. On an overall basis, total net revenue for the year ended March 31,2023, reached Rs 1,18,057 crore, reflecting increase by 16.3 per cent over prior year.

¦ FY 2021-22

¦ FY 2022-23

Net Profit increased by 19.30 per cent to Rs 44,108.70 crore from Rs 36,961.30 crore. Return on Average Net Worth was 17.39 per cent while Basic Earnings Per Share was Rs 79.25 up from Rs 66.80.

Total Advances grew by 16.93 per cent and Total Deposits grew by 20.80 per cent year-on-year. Net Interest Margin (NIM) remained stable at 4.10 per cent.

Update on the Merger with HDFC Limited

On April 4, 2022, HDFC Bank and HDFC Limited announced an intention to merge. We are happy to state that this has come into effect from July 01,2023. Details are shared in the relevant sections of the Annual Report.


Parivartan is HDFC Banks CSR initiative that aims at mainstreaming economically and socially disadvantaged groups by ushering growth, development and empowerment. Committed to developing sustainable ecosystems, it identifies and supports programmes that develop and advance communities

It focuses on five areas: Rural Development, Education, Skill Development and Livelihood Enhancement, Healthcare and Hygiene, and Financial Literacy and Inclusion.

In addition, it has been at the forefront of responding to natural crises - successfully restoring infrastructure and rehabilitating communities. Since the onset of the pandemic, the Bank has been consistently working towards containing its impact on vulnerable communities through various initiatives.

Till date, through various interventions the Bank has benefitted over 9.93 crore people.

Your Directors are also pleased to report that the Bank met its CSR obligation for the financial year 2022-23.

For further details on Parivartan please refer to page no 118.


Going forward we expect global headwinds to weigh on domestic economic outlook. The International Monetary Fund (IMF) in its latest projections has pared Indias growth forecast for 2023-24 to 5.9 per cent from 6.1 per cent earlier citing upward revision in base and tightening monetary conditions. However, India remains one of the fastest growing economies in the world.

Despite the presence of inflationary pressures and geopolitical uncertainties, the country has the capacity to absorb these challenges. The market continues to be underpentrated providing growth avenues for banking services in the country. Your Bank is well-positioned to capitalize on these opportunities, leveraging the strength of its franchise. With its Future Ready Strategy consisting of 10 strategic pillars supported by key enablers, the Bank is prepared for the future and aims to catalyze, create, and capture the next wave of growth. For more details, please refer to page 38.

Your Bank is committed to furthering rural prosperity through both its business and social initiatives.

The future of your Bank, of course, will be driven by the efforts of the ever growing family of 1.73 lakh employees across India. We are committed to hiring and retaining the best talent and being among the industrys leading employers. For this, we focus on promoting a collaborative, transparent and participative organization culture, and rewarding merit and sustained high performance.

Mission and Strategic Focus

Your Banks mission is to be a ‘World-Class Indian Bank. Its business philosophy is based on five core values: Customer Focus, Operational Excellence, Product Leadership, People and Sustainability. Sustainability should be viewed in unison with Environmental, Social and Governance performance. As a part of this, your Bank, through its umbrella CSR brand Parivartan, seeks to bring about change in the lives of communities mainly in rural India.

During the year under review, the Bank did not lose its human touch but continued building sound customer franchises across distinct businesses to achieve healthy growth in profitability consistent with your Banks risk appetite.

In line with the above objective, the Bank aims to take digitalisation to the next level to:

• Deliver superior experience and greater convenience to customers

• Increase market share in Indias growing banking and financial services industry

• Expand geographical reach

• Cross-sell the broad financial product portfolio

• Sustain strong asset quality through disciplined credit risk management

• Maintain low cost of funds

Your Bank remains committed to the highest levels of ethical standards, professional integrity, corporate governance, and regulatory compliance, which is articulated in its Code of Conduct. Every employee affirms to abide by the Code annually.

Summary of Financial Performance

(Rs crore)


For the year ended / As on March 31, 2023 For the year ended / As on March 31, 2022

Deposits and Borrowings

2,090,160.2 1,744,034.6


1,600,585.9 1,368,820.9

Total Income

192,800.4 157,263.0

Profit Before Depreciation and Tax

60,727.8 50,615.3

Profit After Tax

44,108.7 36,961.3

Profit Brought Forward

93,185.7 73,652.8

Total Profit Available for Appropriation

137,294.4 110,614.1


Transfer to Statutory Reserve

11,027.2 9,240.3

Transfer to General Reserve

4,410.9 3,696.1

Transfer to Capital Reserve

4.6 666.5

Transfer to / (from) Investment Reserve

(294.8) 233.1

Transfer to / (from) Investment Fluctuation Reserve

82.0 --

Transfer to Special Reserve

500.0 --

Dividend pertaining to previous year paid during the year

8,604.5 3,592.4

Balance carried over to Balance Sheet

112,960.0 93,185.7


The Board of Directors of the Bank, at its meeting held on April 15, 2023, has recommended a dividend of Rs 19.0 (Nineteen Rupees only) per equity share of Rs 1/- (Rupee One only) each, for the financial year ended March 31, 2023. This translates to a Dividend Payout Ratio of 24.07 per cent of the profits for the financial year ended March 31, 2023.

In general, your Banks dividend policy, among other things, balances the objectives of rewarding shareholders and retaining capital to fund future growth. It has a consistent track record of dividend distribution, with the Dividend Payout Ratio ranging between 20 per cent and 25 per cent, which the Board endeavours to maintain. The dividend policy of your Bank is available on the Banks website.





Rating Agency


Fixed Deposit Programme


CARE Ratings

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.


India Ratings

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.

Certificate of Deposits Programme


CARE Ratings

Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry the lowest credit risk.

IND A1 +

India Ratings

Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry the lowest credit risk.

Infrastructure Bonds


CARE Ratings

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.



Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.


India Ratings

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk.



Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk.

Additional Tier I Bonds (Under Basel III)


CARE Ratings

Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.



Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.


India Ratings

Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

Tier II Bonds (Under Basel III)


CARE Ratings

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.



Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.


India Ratings

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk.



Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk.

Issuance of Equity Shares and Employee Stock Option Scheme (ESOP)

As on March 31, 2023, the issued, subscribed and paid-up capital of your Bank stood at Rs 5,579,742,786/- comprising 5,579,742,786 equity shares of Rs 1/- each. Further, 34,201,810 equity shares of face value of Rs 1/- each were issued by your Bank pursuant to the exercise of Employee Stock Options (ESOPs). (For information pertaining to ESOPs, please refer Annexure 1 of the Directors Report).

Capital Adequacy Ratio (CAR)

As on March 31, 2023, your Banks total CAR, calculated as per Basel III Regulations, stood at 19.3 per cent, well above the regulatory minimum requirement of 11.7 per cent, including a Capital Conservation Buffer of 2.5 per cent and an additional requirement of 0.2 per cent on account of the Bank being identified as a Domestic Systemically Important Bank. Tier I Capital was at 17.1 per cent as of March 31, 2023


19.3 per cent


Management Discussion and Analysis

Macroeconomic and Industry Developments

Indias GDP registered a growth of 7.2 per cent in Financial Year 2022-23 as per latest estimates by the Central Statistical Organisation. This is a moderation from 9.1 per cent growth in Financial Year 2021-22, largely due to the base effect for Financial Year 2021-22 owing to the negative economic impact of pandemic in Financial Year 2020-21. Growth was supported by pent up consumption demand and easing of supply - side constraints as the economy looked to shake off pandemic induced disruptions.

Private consumption continued to improve, registering a healthy growth of 7.5 per cent on strong discretionary spending. Urban demand showed resilience while rural demand began to show early signs of recovery. Investment momentum remained strong as private capex recovery began supported by rising Government capital expenditure. Exports expanded at a healthy rate of 13.6 per cent in Financial Year 2022-23 crossing the $400 billion mark for the second year in a row. However, exports seemed to have lost some momentum towards the latter half of 2022-23 as global growth headwinds rose.

On the supply side, services growth strengthened further with improvement in contact-based services, led by trade, transport and hospitality. Construction too experienced healthy growth as it continued the strong momentum from the previous year. Financial services and agriculture remained steady while manufacturing growth remained low, growing by 1.3 per cent in 2022-23. However, capacity utilisation in manufacturing has improved, signalling that built up inventories have cleared, and we might see an improvement in manufacturing activity going forward.

Strong and continued support by the Government including extension of the credit guarantee scheme and Garib Kalyan Anna Yojana (Free food programme, till December 2022) and the rural job guarantee programme helped in sustaining the recovery. The near universal administering of COVID-19 vaccine (over 220 crore doses with more than 102 crore individuals administered at least one dose) has provided cover from the continuous threat of new virus variants.

Overall systemic liquidity remained in surplus for much of 202223. However, RBI started raising rates from May 2022 onwards, cumulatively increasing the rates by 250 basis points through the year. This was necessitated mostly due to external factors. Geopolitical tensions and sanctions, elevated prices of crude oil and other commodities and lingering COVID-19 related supply chain bottlenecks exacerbated global uncertainties. However, supply disruptions have now normalised, and domestic inflationary pressures are showing signs of moderation as well.

Going forward we expect global headwinds to weigh on domestic economic outlook. The International Monetary Fund (IMF) in its latest projections has pared Indias growth forecast for 2023-24 to 5.9 per cent from 6.1 per cent earlier citing upward revision in base and tightening monetary conditions. However, India remains one of the fastest growing economies in the world.

Global economic activity continues to experience a slowdown due to a combination of factors. These include high inflation, geopolitical tensions in Europe and elsewhere, and persistent but localised disruptions due to COVID-19 pandemic. Further, the US regional banking turmoil has led to volatility in the financial markets, accentuating downside risks to global economic prospects. This was cited as a major reason for downward revision of global growth forecasts by the IMF in its economic outlook. Though India and Indian banks remain relatively insulated from the banking turmoil, materialisation of adverse outcomes in the global markets is likely to have ripple effects on domestic markets as well. Moreover, India is relatively better positioned to respond to any adverse global shocks with external stability related indicators (Short-term debt, Forex reserves, FDI flows) remaining healthy.

On the positive side, there are supports for domestic growth as well. The Union Budget 2023-24 increased Governments allocation on capital expenditure by 37.4 per cent to over 10 lakh crore. Further, the rationalisation of income tax slabs announced in the Budget is likely to aid consumption demand by putting more money in the hands of people in the lower income brackets. Manufacturing and private capital expenditure may see improvement as inflation moderates supported by the pause in RBIs rate hike cycle. Finally, the normal monsoon forecast by IMD augurs well for the agriculture sector. However, risk of El-Nino negatively affecting temporal and spatial rainfall distribution remains.

On balance, we expect Indias GDP growth at 6.0 per cent in 2023-24. Headline inflation has moderated from its peak of 7.8 per cent year-on-year in April 2022, with a cool off in commodity prices and food inflation as well as an improvement in supply chains. Headline inflation stood at 4.8 per cent year-on-year in June 2023. However, there are several risks on horizon. Uneven nature of monsoons, El-Nino risk and weak progress in Kharif sowing are some of major risks to inflation outlook. In 2023-2024, we estimate headline inflation to average at 5.1 per cent year-on- year. We expect the RBI to keep the policy rate unchanged at 6.5 per cent throughout 2023-2024 and see possibility of rate cuts only in early 2024-2025.

Overall, the Indian economy remained a bright spot even as geopolitical tensions, banking and financial sector volatility, historic inflationary highs and COVID-19 related disturbances affected much of the large economies. The global headwinds could cloud the economic outlook, but Indias domestic resilience as reflected over 2022-23 is likely to withstand future headwinds.

Financial Performance

The financial performance of your Bank during the year ended March 31, 2023, remained healthy with Total Net Revenue (Net Interest Income plus Other Income) rising 16.3 per cent to Rs 118,057.1 crore from Rs 101,519.5 crore in the previous year. Revenue growth was driven by an increase in both Net Interest Income and Other Income. Net Interest Income grew by 20.6 per cent to Rs 86,842.2 crore. Net Interest Margin (NIM) stood at 4.1 per cent. Gross Advances grew by 16.9 per cent and Deposits grew by 20.8 per cent.


16.3 per cent growth

Other Income grew by 5.8 per cent to Rs 31,214.8 crore. The largest component was Fees and Commissions at Rs 23,844.1 crore. Within fees approximately 94 per cent pertains to Retail. The increase in fees is largely explained by increase in the Retail exposures. Loss on Revaluation and Sale of Investments was Rs 1,131.2 crore. Foreign Exchange and Derivatives Revenue was Rs 4,081.9 crore, and recoveries from written-off accounts were Rs 3,382.4 crore.

Operating (Non-Interest) Expenses rose to Rs 47,652.1 crore from Rs 37,442.2 crore. This is explained by setting up of 1,479 new branches and 1,597 ATMs / Cash Deposit and Withdrawal Machines (CDMs). This, along with higher spend on IT, resulted in higher infrastructure and staffing expenses. Staff expenses also went up due to employee additions and annual wage revisions. Further, Deposit Insurance and Credit Guarantee Corporation (DICGC) premium cost increased due to deposit growth and rate increase. The Cost to Income Ratio was 40.4 per cent as compared to 36.9 per cent during the previous year owing to higher staff and infrastructure expenses



IN FY 2022-23

Total Provisions and Contingencies were Rs 11,919.7 crore as compared to Rs 15,061.8 crore in the preceding year. Your Banks provisioning policies remain more stringent than regulatory requirements.

The Coverage Ratio based on specific provisions alone excluding write-offs was 75.8 per cent and including general, floating and contingent provisions was 176.3 per cent. Your Bank made General Provisions of Rs 422.7 crore during the year. Gross Non-Performing Assets (GNPAs) were at 1.12 per cent of Gross Advances, as against 1.17 per cent in the previous year. Net NPA ratio stood at 0.27 per cent as against 0.32 per cent in the previous year.


1.12 per cent

AS ON MARCH 31, 2023

Profit Before Tax grew by 19.3 per cent to Rs 58,485.3 crore. After providing for Income Tax of Rs 14,376.6 crore, Net Profit increased by 19.3 per cent to Rs 44,108.7 crore from Rs 36,961.3 crore. Return on Average Net Worth was 17.39 per cent while Basic Earnings Per Share was Rs 79.25 up from Rs 66.80.


19.3 per cent increase

IN FY 2022-23

As on March 31,2023, your Banks Total Balance Sheet stood at Rs 2,466,081 crore, an increase of 19.2 per cent over Rs 2,068,535 crore on March 31, 2022.

Total Deposits rose by 20.8 per cent to Rs 1,883,395 crore from Rs 1,559,217 crore. Savings Account Deposits grew by 9.9 per cent to Rs 562,493 crore while Current Account Deposits rose by 14.3 per cent to Rs 273,496 crore. Time Deposits stood at Rs 1,047,406 crore, representing an increase of 29.6 percent. CASA Deposits accounted for 44.4 per cent of Total Deposits. Advances stood at Rs 1,600,586 crore, representing an increase of 16.9 per cent. Domestic Loan Portfolio of Rs 1,572,454 crore grew by 17.6 per cent over March 31,2022.

Business Review

Your Banks operations are split into Domestic and International.

A) Domestic Business comprises the following:

Retail Banking

Your Banks Retail Assets are built on three key principles: Industry First Digital Offering, Optimal Pricing for Risk, and Pristine Portfolio Quality. By adhering to these principles, your Bank has achieved an impressive 22 per cent year-on-year growth in Domestic Retail Advances.

The Personal Loans segment has experienced strong growth, with the overall portfolio touching Rs 171,676 crore by the end of the year. The Banks increased focus on the Government segment and top corporates has contributed to improved portfolio quality.

The launch of Xpress car loans, offering seamless end-to-end digital disbursement, has driven a 17 per cent year-on-year growth in the Auto Loan portfolio.

Your Bank has exhibited significant growth in gold loans, surpassing other gold financiers, thanks to an expanded branch network.

Home Loan portfolio has exhibited significant growth, surpassing industry growth rates and capturing a larger market share.

Continued emphasis is placed on digitising processes and enhancing customer touchpoints to expand the Banks reach. Building on the success of initiatives like Personal Loan in 10 Seconds, Digital Loan Against Shares, and Digital Loan Against Mutual Funds, your Bank introduced in the year under review an industry-first, completely digital, contactless, and paperless car loan process. New customers can receive disbursement within 30 minutes, including the Video KYC process, while existing pre-approved customers can obtain loan disbursement in just 10 seconds. These loans are credited to the account of the dealer.

The payments business continues to play a pivotal role in driving balance sheet growth and is one of the stated strategic growth pillars for the Bank.

With over 85 million cards issued (credit, debit and pre-paid) and a widely spread acceptance network across online and offline merchant ecosystem, the Bank continues to maintain a leadership position across multiple product offerings in the payments landscape.

In Financial Year 2022-23, HDFC Bank introduced many new products across the payments business.

Smart Hub Vyapar, an integrated holistic banking and business solution that caters to daily needs of merchants and helps drive business growth, was formally launched in October 2022. The platform has witnessed widespread adoption and has onboarded one million users across the country as of March 31, 2023.

The Credit Cards business continued to enhance its product offerings and launched a slew of co-branded credit cards covering Retail and Wholesale business segments. Overall, the cards business (credit, debit and pre-paid) continued to see robust volume growth, with customer spends crossing Rs 5 lakh crore in Financial Year 2022-23.

Further, the Bank launched PayZapp 2.0, a comprehensive mobile payment commerce app in March 2023. The app already has more than one million registrations.

Lastly, in tune with the evolving payments landscape, the business continues to transform itself with significant investments across cloud computing, analytics, Artificial Intelligence and Machine Learning, open APIs and cyber security. The objective is to manage large scale and continuously grow volumes while processing transactions in a safe and secure manner.

Virtual Relationship Banking is an integrated customer centric approach covering three pillars - Virtual Relationship, Virtual Sales and Virtual Care. This channel is a crucial component of its sales and customer engagement strategy. It involves the use of technology to reach out to customers, build relationships, and promote banking products and services. This is an effective way for the Bank to expand the managed customer base, generate leads, and drive revenue growth.

Employees and customers are the capital for this business, and the Bank has invested heavily in training and development of its relationship managers. Training covers product knowledge, sales techniques, communication skills, compliance and regulatory requirements, and customer relationship management skills.

A banking experience with digital ease and personalised conversations is at the core of our VRM strategy. Digital or contactless banking became a necessity during the pandemic.

This programme gained further traction in the year under review. Under VRM, relationship managers reach out to customers through remote and digital platforms resulting in deeper and cost-effective engagement. As digital literacy and exposure increases exponentially, VRMs are gaining wider acceptance through deeper engagement and relationships backed by a strong product offering and are an important component of the Banks customer engagement strategy.

With proper training, technology support, and compliance adherence, this channel is a highly effective tool for the Bank to drive revenue growth, expand its customer base, and provide excellent customer service.

Meanwhile, your Bank also added 1,479 branches during the year, taking the total to 7,821. As of March 31, 2023, the Banks distribution network was at 7,821 branches and 19,727 ATMs / Cash Deposit and Withdrawal Machines (CDMs) across 3,811 cities/ towns as against 6,342 branches and 18,130 ATMs / CDMs across 3,188 cities / towns as of March 31,2022. Fifty-two per cent of our branches are in semi-urban and rural areas. In addition, the Bank has 15,921 business correspondents, which are primarily manned by Common Service Centres (CSCs). The total number of customers your Bank catered to as on March 31, 2023 was over 8.28 crore, up from over 7.10 crore in the previous year.

Retail Banking - Home Loan Business

As you are aware, your Bank operates in the Home Loan Business in conjunction with HDFC Limited. As per this arrangement, your Bank sources HDFC home loans while HDFC Limited approves and disburses them. Your Bank receives sourcing fee for these loans and as per the arrangement, has the option to purchase loans for a value up to 70 per cent of the loans sourced by the Bank either through the issuance of mortgage-backed PassThrough Certificates (PTCs) or a direct assignment of loans. The balance is retained by HDFC Limited. Your Bank originated, on an average Rs 4,501 crore of home loans every month in the year under review and purchased Rs 36,910 crore as direct assignment of loans.

Third Party Products

Your Bank distributes Life, General and Health Insurance, as well as Mutual Funds (Third Party Products) to its customers. In Financial Year 2022-23, the income from this business increased by 23 per cent to Rs 5,455 crore from Rs 4,422 crore and accounted for 23 per cent of Banks total fee income.

Life Insurance

Your Bank has adopted an open architecture model for distribution of insurance products, aimed at providing customers with a wide choice by leveraging the product bouquet of the three insurance partners. For the year ended March 31, 2023,

the Bank mobilised premium of Rs 8,689 crore representing a year-on-year growth of 28 per cent. The extensive distribution network, includes branches, virtual channels, NRI services, and wealth management. The key focus would continue to be on staff training, robust quality and control processes uniformly implemented across all partners as well as offering integrated and seamless digital on-boarding journeys. Currently, the Banks NetBanking platform offers more than 60 insurance products across all partners, accounting for over 53 per cent of the total policies.

Non-Life Insurance

Your Bank, in collaboration with its three General Insurance and two Standalone Health and Insurance partners, has introduced innovative non-life insurance products to expand the range of offerings and provide a comprehensive coverage to customers. These products are accessible through both digital and physical platforms. Employees across channels have been trained in the new products and processes. To meet customer demands, additional manpower has been deployed across non-life insurers. As on March 31,2023, premium mobilisation in General and Health Insurance reached a total of Rs 2,405 crore.

Mutual Funds

Your Bank follows an open architecture approach in distribution of Mutual Funds and is currently associated with 34 Asset Management Companies (AMCs). The Banks Assets under Management (AUM) increased by 10 per cent to reach Rs 1,01,655 crore for the year ended March 31, 2023. During the same period, the Bank witnessed a significant growth of 40 per cent in Systematic Investment Plans (SIPs) mobilisation. Through its unique Investment Services Account (ISA) offering, the Bank offers a digital on-boarding platform to the customers for Mutual Funds investments - 74 per cent of ISAs were opened through digital mediums in Financial Year 2022-23.

Wealth Management

In financial year 2022-23, your Bank has focused on expansion and has reached 923 locations through the hub and spoke model. We now cater to over 62,000 households with a 51 per cent growth in customer base. Market share in mutual fund distribution now stands at 5 per cent. Your Banks endeavour is to continue this expansion into new geographies through a more granular approach.

Your Bank places a strong emphasis on a customer-centric approach. Our commitment to an open architecture and non-proprietary framework remains unwavering. The team of relationship managers, service relationship managers, and investment analysts work together to provide best-in-class service. They conduct in-depth research, follow asset allocation principles, and regularly review portfolios to add value to client investments. The objective is to be the go-to resource for all the financial needs of customers.

Our advanced WealthFy system aims to provide highly personalised analytics, portfolio assessment reports, sectoral / industry exposure analysis and performance monitoring against benchmarks to our HNI customers. This new system will enhance the experience extended by the Wealth Relationship Managers to this valued customer segment and will also help us expand our wealth consumer base.

We are also excited to introduce our advanced unassisted digital investment platform. This state-of-the-art mobile application brings in a new level of convenience and accessibility to our customers. It offers milestone-based investment recommendations, consolidated portfolio views, investment aggregation, and portfolio analytics on the go. The aim is to democratise wealth management across all retail customer segments and provide a highly personalised experience to everyone.

Our focus on growing recurring revenue has yielded positive results. In Financial Year 2022-23, the wealth teams trail income increased by 15 per cent. This growth reflects a commitment to provide sustainable value to clients while ensuring the long-term profitability of your Bank.

We remain focused on providing wealth management services by expanding our presence, and leveraging technology to enhance customer experience.

Wholesale Banking

The Wholesale Banking business was an important growth engine for your Bank in the year under review. This business focuses on institutional customers such as the Government, PSUs, large and emerging corporates, and SMEs. Your Banks strong offerings include working capital and term loans, as well as trade credit, cash management, supply chain financing, foreign exchange, and investment banking services.

The Wholesale Banking business recorded healthy growth, ending Financial Year 2022-23 with a domestic loan book size of Rs 823,254 crore, recording a growth of 11.6 per cent over the earlier year. This constituted about 52 per cent of your Banks domestic loans as per Basel II classification. Your Bank was able to expand its share of the customer wallet, primarily using sharper customization, cross-selling and expanding into more geographies.

Corporate Banking, which focuses on large, well-rated companies, continued to be the biggest contributor to Wholesale Banking in terms of asset size.

This business refocused on its engagement with MNCs. This business also continued to capitalise on the trend of large companies preferring to deal with fewer banks. Your Bank deepened its existing relationships as well as gained market share by leveraging its wide product offering. This business supported customer requirements under the Production Linked Incentive Scheme. The Emerging Corporates Group, which focuses on the mid- market segment, too witnessed significant growth. Your Bank leveraged its vast geographical reach, technology backbone, automated processes, suite of financial products and quick turnaround times to offer a differentiated service. The business continues to have a diversified portfolio in terms of both industry and geography.

In the year under review, the Bank continued its focus on the MSME sector. There has already been increased formalistion/ digitalisation of the MSME sector due to the adoption of the Goods and Service Tax (GST). The COVID-19 pandemic led to the sector experiencing substantial stress, prompting the Union Government to identify it for special support through various schemes like Moratorium, ECLGS, ECLGS Extension and COVID support loans. Your Bank supported its customers during this period by participating in the Government schemes and emerged as a star performer under the ECLGS scheme.

The Investment Banking business further cemented its prominent position in the Debt Capital Markets, Equity Capital Markets and INR Loan Syndication. Your Bank maintained its position amongst the top 3 in the Bloomberg rankings of Rupee Bond Book Runners for Financial Year 2022-23, with a market share of 16.54 per cent. Your Bank maintained its 2nd position in the Bloomberg rankings of Syndicated INR term loans for Financial Year 2022-23, with a market share of 6.38 per cent. Your Bank is actively assisting clients in equity fund raising and advisory services

In the Government business, your Bank sustained its focus on tax collections, collecting direct tax (CBDT) of Rs 4,99,099.29 crore and Indirect tax (CBIC+ GST) of over Rs 3,45,008.23 crore during Financial Year 2022-23. It continues to enjoy a pre-eminent position among the countrys major stock and commodity exchanges in both Cash Management Services and Cash Settlement Services.

The Bank has embarked on strategic digital transformation to enhance Customer Engagement and Employee Experience and create an ecosystem for seamless banking.

The Bank is leveraging analytics for deeper insights on Corporate ecosystems leading to better product structuring, cross sell opportunities, improved yields, thus improving Banks share of Revenue Pools from Corporates.

In addition to the Corporate Net Banking platform (e-Net and the new upgraded platform CBX) and Trade Platform - Trade on Net (TON), the Bank has also launched the new SCF transaction platform which allows digital contract bookings and disbursements automating the SCF transactions end to end for the Corporates. Multiple Corporates have already migrated to the platform. The Bank is also integrated with all the three TReDS platforms. We are also partnering with Fintechs to integrate with Corporate ERP and offer Embedded Banking in Corporate Ecosystems journeys.


The Treasury is the custodian of your Banks cash/liquid assets and handles its investments in securities, foreign exchange and cash instruments. It manages the liquidity and interest rate risks on the balance sheet and is also responsible for meeting reserve requirements. The vertical also helps manage the treasury needs of customers and earns a fee income generated from transactions customers undertake with your Bank while managing their foreign exchange and interest rate risks.

Revenue accrues from spreads on customer transactions based on trade and remittance flows and demonstrated hedging needs. Your Bank recorded revenue of 4,081.9 crore from foreign exchange and derivative transactions in the year under review. While plain vanilla forex products were in demand across all customer segments, demand for derivatives products increased with the RBI liberalizing regulations and allowing Indian banks to participate in Non-Deliverable Offshore markets.

As part of its prudent risk management, your Bank enters into foreign exchange and derivatives deals with counterparties after it has set up appropriate credit limits based on its evaluation of the ability of the counterparty to meet its obligations. Where your Bank enters into foreign currency derivatives contracts not involving the Indian Rupee with its customers, it typically lays them off in the inter-bank market on a matched basis. For such foreign currency derivatives, your Bank primarily carries the counterparty credit risk (where the customer has crystallised payables or mark-to-market losses) and may carry only residual market risk, if any. Your Bank also deals in derivatives on its own account, including for the purpose of its own Balance Sheet risk management.

Your bank is also a nominated agent for the bullion imports and has a significant market share in that business.

Your Bank maintains a portfolio of Government Securities in line with the regulatory norms governing the Statutory Liquidity Ratio (SLR). A significant portion of these SLR securities are in ‘Held-to- Maturity (HTM) category, while some are ‘Available for Sale (AFS). Your Bank is also a primary dealer for Government Securities. As a part of this business, your Bank holds fixed income securities as ‘Held for Trading (HFT).

In the year under review, your Bank continued to be a significant participant in the domestic exchange and interest rate markets. It also capitalised on falling bond yields to book profits and is now looking at tapping opportunities arising out of the liberalisation in the foreign exchange and interest rate markets.

B) International Business

During the year, your Bank stayed on course to cater to NRI clients and deepen its product and service proposition. Your Bank has global footprints by way of representative offices and branches in countries like Bahrain, Hong Kong, the UAE and Kenya. It also has a presence in International Financial Service Centre (IFSC) at GIFT City in Gandhinagar, Gujarat.

The Banks product strategy in International Markets is customer centric and it has products to cater to client needs across asset classes. Your Bank now has plans to extend the product offering from GIFT City Branch under Liberalized Remittance Scheme to Resident and Non-Resident clients.

As on March 31, 2023, the Balance Sheet size of International Business was US$ 7.68 billion. Advances constituted 2.6 per cent of the Banks Gross Advances. The Total Income contributed by Overseas Branches constituted 1.2 per cent of Banks Total Income for the year.


US $ 7.68 billion


C) Partnering with the Government

Government and Institutional Business

It has been another year of steady growth for the Government and Institutional business in your Bank. Some of the key highlights this year were:

1. Being awarded the highest number of mandates amongst the private sector banks for SNA (Single Nodal Agency) accounts as well as Centrally Sponsored Schemes including Jal Jeevan Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Prime Minister Awas Yojana (PMAY), Swachh Bharat Mission, National Water Mission and Waste to Wealth Mission, among others.

2. Processing about 36 per cent of the funds i.e. Rs 6.5 lakh crore which flowed from the Central Government to the states for development programs under the aegis of the Centrally Sponsored Schemes, Central Sector Schemes, and the 15th Finance Commission.

3. Being the leading agency bank with 34 per cent market share in direct tax collections, 14 per cent in GST and 13 per cent in customs duty.

4. Enabling the extension of bank offerings to Defence and Railways pensioners:

a. Integrating with the Railway CRIS system to enable digital onboarding of retiring Railway officials for disbursement of their pension.

b. Signing a Memorandum of Understanding (MoU) with the Ministry of Defence for enabling its branch network as a Pension Service Network for Defence Pensioners through SPARSH (System for Pension Administration) portal implemented by the Ministry for Pensioner Services.

5. Having signed an MOU with the Indian Army and Indian Navy in October 2022 for opening salary accounts for Agniveers which are benefits similar to the Defence Salary Package.

6. Empanelled with Government of India, e-National Agriculture Marketplace Platform of Platforms (PoP) to offer banking services to entities on e-NAM Portal other than traders and farmers.

7. The Virtual Institutional Relationship Manager (VIRM) grew exponentially as a sourcing channel for the Institutional business. Around 50 VIRMs contributed ~757 crore worth of liability growth to the business.

8. Business continues to flow in from premium institutions. This year we added institutions like IIM Bangalore, IIT Bhubaneshwar, IIT Kanpur. Our institutional tie-ups also help us serve religious entities - Tirupati, Akshardham, Guruvayoor, as well as Golden Temple and Kashi Vishwanath temple.

9. Launched two new digital products, CollectNow, an omnichannel collections solution, the first of its kind in the industry bringing offline and online payment modes together, and FarSight a digital dashboard to slice and dice transaction data and monitor account limits.

D) Semi-Urban and Rural

The Semi-Urban and Rural (SURU) markets have always been a focus of your Banks strategy. In the last few years, your Bank has made a renewed push into these markets as rising income levels and aspirations of rural customers are leading to demand for better quality financial products and services. The rural groups in every department of your Bank work together to tap these opportunities.

Apart from meeting its statutory obligations under PSL (Agri and Allied activities, Small and Marginal Farmers and weaker sections etc.), your Bank has been offering a wide range of products on the asset side, such as Auto, Two-Wheeler, Personal, Gold, Light Commercial Vehicle (LCV), and small shopkeeper loans in these markets. Now it plans to increase its coverage of villages and deepen relationships in existing ones. The semi-urban and rural push has been backed by the Banks digital strategy.

Your Banks operations in Semi-Urban and Rural locations are explained below:

Agriculture and Allied Activities

Your Banks assets in Agriculture and Allied activities stood at Rs 2,55,300.17 crore as on March 31, 2023.

In general, the key to your Banks success in the existing market is its ability to tap the opportunities through:

• Wide product range

• Faster turnaround time

• Digital solutions

HDFC Banks product range includes pre and post harvest Crop Loans, Farm Development/Investment Loans, TwoWheeler Loans, Auto Loans, Tractor Loans, Small Agri Business Loans, Loan Against Gold, among others. This has helped the Bank establish a strong footprint in the rural hinterland with its asset products.

Your Bank has also been a leading participant in the Agri Infrastructure Fund scheme and has been achieving the allocated targets of the last few campaigns run by the Government.

Apart from advising farmers on their financial needs, your Bank is increasingly focusing on facilitating various Government/ Regulatory schemes and non-crop segment covering agri allied and small agri business enterprises including rural MSMEs.

Your Bank has designed a range of crop and geography- specific products in line with the harvest cycles and the local needs of farmers across diverse Agro-climatic zones. It has transformed rural banking services from being product centric to customer centric.

Products such as post-harvest cash credit and warehouse receipt financing enable faster cash flows to farmers. Credit is also offered for allied agricultural activities such as dairy, pisciculture, and sericulture.

Participation in Government Schemes

As a part of Atmanirbhar Bharat Abhiyan, the Government of India has announced several schemes/enablers across several sectors, particularly in the agriculture sector. Your Bank is implementing almost all such initiatives/schemes targeting multiple stakeholders in the agri ecosystem.

Agriculture Infrastructure Fund (AIF) Scheme: Through this scheme the Bank is offering medium to long-term debt for investment in viable projects pertaining to post harvest management and infrastructure development like construction of warehouses/silos. As on March 31, 2023, your Bank has sanctioned Rs 1,881 crore covering 2,205 projects and disbursed Rs 1,136 crore covering 1,445 projects.

Your Bank has managed to secure the second position among scheduled commercial banks under the AIF scheme by actively participating in campaigns conducted by Project Monitoring Unit (PMU). Your Bank achieved 172 per cent of the assigned target under the NOBOL campaign (15th July to 18th September 2022) with Rs 431 crore worth of sanctions against a target of Rs 250 crore. Your Bank secured the first position in terms of percentage achievement.

Under the Bankers Enabling Sustainable Transformation (BEST) campaign (1st January to 15th March 2023), HDFC Bank secured the second position (among all participating banks) in terms of value i.e., Rs 649 crore worth of sanctions against a target of Rs 700 crore. Your Bank has been honoured by the Ministry of Agriculture for this.

Pradhan Mantri Formalization of Food and Micro Enterprises (PMFME)

Your Bank is actively implementing the scheme and passing the benefits to all eligible borrowers in the food processing sector. In the current financial year loans worth Rs 205 crore have been sanctioned for 1,091 projects and Rs 161 crore has been disbursed to 765 projects.

Other Agri schemes include Agri Marketing Infrastructure Fund, Animal Husbandry Infrastructure Fund, Agri Clinic and Agribusiness Centres, Mission for Integrated Development of Horticulture (MIDH), Stand up India, Credit Guarantee Fund for Micro Units as well as state specific Government schemes.

To address high volume and low value ticket loans in AgriBusiness with a digital optimization strategy, your Bank plans to onboard AgriTech-BCs with differentiated business models.

These AgriTechs will help source and service small and marginal farmers.

Funding Small and Marginal Farmers (SMFs)

Your Bank views lending to the agriculture sector, including to small and marginal farmers as a huge opportunity and not just a regulatory mandate to meet priority sector lending requirements. The Bank has leveraged its extensive knowledge of rural customers to create as well as deliver products and services at affordable price points and with quick turnaround time. This has enabled HDFC Bank to establish a strong footprint in the rural geographies, which it has now leveraged to increase its penetration of liability products.

In the last financial year, your Bank serviced customers in

165.000 villages. The rural banking teams have reached out to these villages with various suite of agriculture products. Your Bank is looking at growing the numbers in the coming year to 200.000 plus villages with a plethora of interventions.

Further, your Bank has put in place a strategy to engage closely with small and marginal farmers through customised agriculture loans. It has launched various secured/unsecured loan products, including loan against gold as security targeting small and marginal farmers in agri and allied segment while leveraging the Government schemes.

Farmer Producer Organisations (FPOs): For agriculture productivity and incomes to grow, aggregation of farm holdings in the form of FPOs is the key strategy in doubling farmers income. Leveraging the Government scheme for formation and promotion of 10,000 new FPOs (Credit guarantee is available from NABARD/CGTMSE), your Bank is funding eligible FPOs for working capital and term loan requirements. As on March 31, 2023, your Bank was able to reach 118 FPOs covering 74,000 small and marginal farmers.


Dairy is the largest segment in the agriculture economy and keeping this in mind, your Bank has created a separate team of agriculture specialists to cater to this segment. In Financial Year 2022-23 the Bank has disbursed an amount of Rs 895.89 crore to 66,000 small and marginal farmers for Cattle finance.

Digital Interventions

Digitising Milk Procurement: This initiative brings transparency in the milk procurement and payment process, which benefits both farmers and dairy societies. Multi-function Terminals (MFTs), popularly known as Milk-to- Money ATMs, are deployed in dairy societies. The MFTs link the milk procurement system of the dairy society to the farmers account to enable faster payments. MFTs have cash dispensers that function as standard ATMs. Payments are credited without the hassles of cash distribution. Further, this process creates a credit history which can then be used for accessing bank credit. Apart from dairy and cattle loans, customers gain access to all the Banks products including digital offerings such as 10 Second Personal Loans, Kisan Credit Card, Bill Pay, and Missed Call Mobile Recharge. So far, your Bank has digitised payments at over 1,700 milk cooperatives across 21 states, benefiting more than 5.9 lakh dairy farmers. The Dairy business witnessed 86 per cent year-on-year growth in disbursements and 78 per cent in the book.

Substituting Moneylenders:

The Bank is strategically expanding its presence in a market that was previously dominated by unorganized sectors such as moneylenders and pawn brokers. A major goal of the Bank is to make the gold loan facility accessible across the entire country. In Financial Year 2022-23, the Bank successfully expanded its gold loan services to 2,827 additional branches, bringing the total number of branches offering this service to 4,189. At the end of the year, the Banks gold loan portfolio amounted to Rs 11,026 crore.

The bank is implementing its blueprint for making gold loans available in most of its branches and thereby taking gold loan product to otherwise untapped customer segments.

Social initiatives in Farm Sector

Farm yield and income are subject to the vagaries of the weather. In addition, factors like soil health, input quality (seeds and fertilizers), water availability, and Government policy have significant impact, along with price realisations and storage facilities. Your Bank has launched a variety of initiatives to ease the stress on farm income and rural households.

Over the last few years, several parts of the country have been severely impacted by natural calamities such as drought, unseasonal rains, hailstorms, floods and the pandemic. Within regulatory guidelines, your Bank has been providing relief to the impacted farmers. It also has put in place systems designed to enable direct benefit transfers in a time-bound manner.

Lending to the agriculture sector, including to small and marginal farmers, is a regulatory mandate as part of priority sector lending requirements. The Bank has leveraged its extensive knowledge of rural customers to create as well as deliver products and services at affordable price points and with quick turnaround time. This has enabled the Bank to establish a strong footprint in the rural geographies, which it has now leveraged to increase its penetration of liability products. Further, your Bank is building a segment-specific approach like funding to horticulture clusters, supply chain finance, agri business, MSMEs and dairy farmers. It also continues to engage closely with farmers to mitigate risks and protect portfolio quality.

Micro, Small and Medium Enterprises (MSME)

The MSME sector serves as an important engine for economic growth and is one of the largest employers in the economy. As on March 31, 2023, your Banks assets in the MSME segment stood at Rs 363,618 crore. The Micro Enterprises assets alone stood at Rs 139,115 crore.

The Union Government and the Reserve Bank of India (RBI) provided special support to the MSME sector during the pandemic through various schemes, such as Interest Moratorium, ECLGS, ECLGS extension, and COVID support loans. The Government has also launched a revamped CGTMSE scheme with increased limit threshold for guarantee cover and reduction of guarantee fee.

Your bank emerged as the largest contributor to CGTMSE this year, supporting the MSME sector with guarantee-covered credit facilities. This has further supported the growth of MSME loans, which have shown a year-on-year growth of 22.5 per cent. The Bank also supported its customers through the ECLGS and ECLGS extension schemes this year and provided ad hoc enhancements as needed. HDFC Bank continued to be a star performer under the ECLGS 1.0, 2.0, 3.0, and ECLGS extension schemes. It disbursed loans amounting to Rs 44,823 crore to over 1.25 lakh customers under these schemes. The Bank continued to provide swift support to existing customers after the Government announced the extension of the ECLGS scheme.

The pace of digitalisation among MSMEs has accelerated, which has helped to speed up the pace of disbursement and increase transparency in the sector. Customers can now apply online and submit required documents digitally, and they can also execute post-sanction agreements digitally to avail of facilities quickly with straight-through disbursement. The Governments digitalisation push, the adoption of GST, and reforms in return filings, such as income tax, have made it easier to access customer cash flow and financial data, which can be used to support decisionmaking and portfolio monitoring.

The SME portal continues to offer ad hoc approvals and preapproved Temporary Overdrafts (TODs) on a Straight Through Processing (STP) basis to existing customers. They can request a top-up of loans and submit the required documents online. The SME portal also allows customers to access your Banks services related to sanctioned credit facilities 24/7 from anywhere. We have also enabled customers to download various certificates and statements as needed on an ongoing basis.

On the trade side, your Bank focuses on customer engagement to increase the penetration of Trade on Net applications. Trade on Net is a complete enterprise trade solution for customers engaged in domestic and foreign trade. It enables them to initiate and track requests online seamlessly, reducing time and costs.

Taking Banking to the Unbanked

As a responsible banker, one of our commitments is to take banking solutions to the farthest and remote areas of the country and enable under-banked sections of the population to access formal financial channels. Our extensive physical network and robust digital suite of products and services enables our vast reach across India. About half our branches are in in rural and semi-urban areas. Our banking solutions provide last mile access through mobile applications such as BHIM, UPI, USSD, Scan and Pay, and Aadhaar and RuPay enabled Micro-ATMs.

To bring more under-banked sections of the population into formal financial channels, your Bank has opened over 29.18 lakh accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and enrolled 41.73 lakh customers in social security schemes since inception Your Bank has also conducted Financial Literacy camps through Rural Branches and designated Financial Literacy Centres.

In the year under review, loans to the tune of Rs 14,551 crore to 18.82 lakh beneficiaries were extended under the Pradhan Mantri Mudra Yojana (PMMY) and nearly Rs 344 crore to 1,502 beneficiaries under the ‘Stand up India scheme to Scheduled Caste, Scheduled Tribe and women borrowers.

Your Bank has also actively supported PM Street Vendors AtmaNirbhar Nidhi (PMSVANIDHI) a special scheme under microcredit facility for street vendors with a collateral free affordable term loan of Rs 10,000 for 1 year. Your Bank has disbursed Rs 10,000 each to 29,984 street vendors to support them and has also educated the street vendors in using the digital mode for making financial transactions. In compliance with regulatory guidelines, your Bank offers Aadhaar enrolment and updation services in branches that are designated as Aadhaar Seva Kendras. To date, these Kendras have successfully processed more than 5.3 million enrolments and updations.

Sustainable livelihood initiative

This is primarily a social initiative with elements of business. It entails skill training, livelihood financing, and creating market linkages.

E) Environmental Sustainability

Sustainability is one of the core values of the Bank.

F) Business Enablers

1) People

People is one of the core values of the Bank.

2) Information Technology Summary

HDFC Bank has embarked on a transformative path. Adoption of state-of-the-art information technology and communication systems along with the use of new-age tech and automation in key areas has been empowering our transformation.

With our Digital 2.0 Program, HDFC Bank is fully geared to usher in the new era of banking with various tech and digital launches paving the way for us to further consolidate our market position and domain led expertise.

Efforts in fortifying our IT infrastructure and architecture by building a robust and secure ecosystem at scale along with our marquee tech initiatives such as Hybrid Cloud Landing Zone, DC Migration, TradeFlow and CBX have been pivotal to the Bank in moving from strength to strength in its transformation journey.

Technology Absorption

The Bank is accelerating the Technology and Digital Transformation agenda. We continue to stay invested in creating a seamless digital and customer experience across digital touchpoints. Our focused Factory approach proves as a catalyst in building our own capabilities to co-create Tech IP. Additionally, imbibing of Agile and DevSecOps principles and practices and Cloudification of our tech stack are pivotal enablers in the next leg of our Tech and Digital transformation journey.

Marching along our Tech and Digital Transformation agenda, we have taken significant strides in building robust IT capabilities. Our Factory approach has facilitated the co-creation of Tech IP while imbibing the Agile and DevSecOps principles and practices supported by cloudification.

With progressive modernisation of our Core Banking Applications and Technology Infrastructure, HDFC Bank has reinforced its technology and innovative prowess by undertaking key initiatives such as:

• PayZapp 2.0: We have launched the modernised PayZapp

2.0, a payments app with a seamless and intuitive user interface and enhanced security to provide a superior customer experience. PayZapp 2.0 also brings about several quality-of-life improvements over the previous app and provides new-age functionalities such as Limit management, Auto-linkage of HDFC Bank cards, enhanced onboarding experience and rich statements. PayZapp 2.0 was re-built from grounds up and launched in March, 2023.

The app has been well received by the customers growing to a user base of over 1.1 million in just 45 days of its launch. It is the first app enabled with Rupay credit card for UPI payments. Till date PayZapp has facilitated over 65 lakh transactions and has seen 1.5X increase in the average spend.

• SmartHub Vyapar: The one-stop business and banking solution designed and developed to serve the business needs of Micro and Small Enterprises (MSMEs) is being continuously enhanced with new use cases bundled as part of various rollouts. The latest rollout included on-boarding for select segments of Savings Account customers, a General Purpose Reloadable (GPR) prepaid card wherein, the merchant as a customer can apply and load money and other app linked enhancements. The continuous enhancements over time have aided in scaling up to reach 1.5 million merchants. The app handles over 18 lakh transactions daily and has earned a 4.9 average rating on Play Store and 4.6 on App Store. Besides, SmartHub has facilitated the disbursement of over Rs 10,000 crore worth of loans.

• Onboarding and Servicing Journeys: We have accelerated our digitisation agenda after carrying ahead the momentum from the previous years in truly digitising our customer journeys. The Onboarding Journeys enable smoother and consistent customer experience by expanding the offerings on the Banks platforms. A few of the onboarding journeys added are New to Bank Credit Cards, Existing to Bank Credit Cards without offer, Gold Loan and SmartHub lead form and Sovereign Gold Bond. In addition to the above our Servicing Journeys such as Debit Card hot listing and re-issue, Nomination/Email updation, etc have also been rolled out. Journeys such as Individual Current Account, Business Loan for Existing and New to Bank customers without offer are in their final stages before launch.

• HDFC Bank One (Customer Experience Hub), the

AI/ML driven conversational bot which transformed our on-premises contact centre into a singular centralised platform is further being expanded. It has been rolled out pan-India covering contact centres including Inbound Phone Banking, Interactive Voice Response (IVR) selfservice, virtual relationship management teams and telesales. Over the past quarter we have made telesales available in five more locations, Inbound Phone Banking (IPBK) live in one more location, IVR live in two more locations. With the launch of HDFC Bank One, we have witnessed significant improvements in our customer engagements owing to the omni-channel experience being provided across WhatsApp chat banking, SMS banking, IVR and Agent assisted. HDFC Bank One has contributed to a 44 per cent reduction in case resolution time, 64 per cent reduction in turnaround time both for email as well as an average reduction of 324 seconds in handling time for voice care.

• Xpress Car Loans: XCL, the first of its kind end-to-end digital lending journey platform facilitating instant and hassle-free car loan disbursals to existing as well as new- to-bank customers has been witnessing a tremendous response. The average monthly disbursement has exceeded Rs 550 crore over the past 3 months. The platform will be further enhanced by engaging with leading car dealerships and manufacturers to offer seamless loan disbursals and purchase experiences across the country.

Some key highlights of this initiative:

1. Over 50,000 car loans disbursed digitally on the platform since its launch.

2. Total value of loans disbursed over Rs 3,900 crore.

3. 20 per cent of our total car loans are now being facilitated through XCL.

4. Disbursal takes less than 30 minutes.

• Our Digital Distribution Platform was launched in April, 2023. With this platform, we have digitally enabled our network of Corporate Business Correspondents and Business Facilitators by providing them an omnichannel experience for the digital journeys of products such as Gold Loan, Home Loans, Kisan Gold Card, Sales Accounts, Recurring Deposits, Fixed Deposits, etc. which are focusing specifically on rural locations. This portal has been made available for agents as well as partners.

• Cattle Finance: Dairy Cattle Finance app, our one- touch solution is developed to facilitate dairy farmers by providing them with a single platform for an end-to-end digital processing of their applications. Beginning with onboarding, the platform encompasses everything till disbursement leading to a significant reduction in the turnaround-time thus enhancing customer experience. Since its public launch in December, 2022, Cattle Finance has processed over 2,700 applications. This journey was conceptualised, documented, designed, developed, and launched all within a mere 30 days showcasing our Banks agility in new product development. The app was initially launched in eight districts of Gujarat with plans to rollout in Uttar Pradesh, Rajasthan and Punjab in place.

We have taken multiple steps to ensure that our robust, scalable, and secure technology setup is strengthened even further. We continue to rigorously monitor the progress against the commitments made to the regulator.

To this effect, significant strides were taken in the following Technology areas:

• Data Centre Migration: We have successfully migrated our primary data centre to state-of- the-art facilities in Mumbai and Bengaluru. Our comprehensive planning program spanning over 12 months helped achieve a seamless migration of all production and User Acceptance Testing (UAT) applications.

• Cloud Strategy: We have progressed on our Hybrid- Cloud strategy with the successful implementation of a common landing zone with leading cloud service providers. This enables the creation of a secure and streamlined environment for all cloud deployments in the future and furthers the banks agenda of imbibing agility and modern software development practices in our transformation journey.

• TradeFlow: TradeFlow has entirely transformed our Trade Finance solution by building a centralised state-of-the-art platform, providing improvement in reliability and usability for end-users. This application is entirely built on the cloud and employs various automations that abet its integration with over 15 applications. With revolutionary features such as a dynamic MIS, informative dashboard, single view of all dependencies as well as its ability to integrate with various trade finance peripheral applications, TradeFlow proves to be the one-stop application for all our Trade users. Currently the platform is live across all Trade processing branches, processing an average of over 6,000 transactions per day.

• Revamping Corporate Net Banking: Corporate Banking eXchange (CBX) is our unified corporate banking portal specifically designed to cater to the net-banking needs of corporates. Having the capability to transact and process via both mobile and the internet portal, this system now handles over 87,000 active domains. We have already migrated about 99 per cent of our customers to CBX and the remaining are planned to be inducted in the quarter starting Financial Year 2023-24. Further, this new portal offers superior customer convenience and experience with its added modern features such as customised narration, enhanced authorisation level and, a contextual Help dashboard.

• Loan Origination and Management

Transformation: Our next generation loan origination and management system designed for Commercial and Rural Banking is built on the cloud. Equipped with a future ready technology architecture and design, the platform consolidates a multitude of internal applications incorporating the robustness of our processes and workflows within it. With features such as proposal initiation, credit evaluation, operational checks, disbursement and post disbursement monitoring, the proposed solution will eventually span across the digital frontend, backend and surround systems.

• Branches: The IT team worked extensively in onboarding and making IT ready over 1500 branches reaching this record number within the span of a year.

• UPI: HDFC Banks UPI has continued to move from strength to strength with a substantial year-on-year growth both in value as well as volumes. Now, with the successful implementation of the Active-Active architecture of UPI we can process records from National Payments Corporation of India (NPCI) DR and its PR site simultaneously. This will play a significant role in laying the foundation for our HDFC Bank UPI Active-Active design. Efforts on UPI mandates at the launch time of the LIC IPO proved fruitful as HDFC Bank was selected for the main IPO among the top 5 banks. UPI will be enhanced further with the introduction of UPI Lite with its first issuer scheduled to go-live across the country.

• FynDNA Governor Solution: Governor Solution is our recently developed adaptive rate limiter deployed between the source and destination system (whether Cloud or On-premises), which plays the key role of intelligently managing and controlling the exchange of transactions basis the health of the destination system. This monitoring mechanism allows for detailed analysis of the performance of the destination system, enabling detection of any irregularities and avoiding performance deterioration.

• ATM Hard Disk Encryption: With the implementation of Full Hard Disk Encryption, the Bank has further fortified the security structures at our ATMs, mitigating the risk of an attack on the machine posed by system booting through a USB/ CD or DVD. Currently, over 12,000 ATMs have been encrypted with additional encryption plans for the remaining already in place.

• SDWAN: Software-Defined Wide Area Network has been rolled out across over 2,000 locations enabling the management of network devices through software as opposed to the traditional usage of hardware switches, routers, etc. It assists in creation of a centralised control centre thereby improving performance and reliability for users.

• Bank Tokenization: We are the only bank to implement "Bank Tokenization" in addition to "Network Tokenization" facilitating enablement of On-us transactions resulting in huge savings.

• ATM hard disk encryption - Our ATMs are being further secured by Hard Disk Encryption. It has already been carried out in over 9,000 ATMs with the remaining still in progress.

Cyber Security

Cyber security is at the heart of the technology transformation journey with substantial advancements being made to further fortify the Banks infrastructure and applications. Few initiatives in this regard are:

• Foundation of a next-gen Security Operations Centre (SOC) with advanced technologies for predictive security and incident management. To this effect, the Bank has provisioned the Securonix platform on AWS and configured more than 10,000 logging sources and devices for monitoring. The Bank has upgraded its monitoring and detection by deploying next generation security incident event management solution (SIEM) fueled by artificial intelligence (AI) and machine learning (ML) capabilities along with its strong UEBA (User Entity Behavioural Analysis) functionalities and inbuilt threat modelling. This initiative and approach to leverage AI and ML as an entire suite to proactively detect and respond to threats is seen as the first in the industry.

• Introduction of Security Orchestration, Automation and Response (SOAR) to reduce the incident response time by connecting security solutions with each other and automating the incident life cycle.

• Micro-segmentation is being enabled in the data centre network to allow higher visibility across network flows as well as stronger preparedness and management against ransomware related events / incidents.

• 24x7 defacement monitoring and vulnerability management of the Banks internet properties minimise the surface area for cyber security attacks.

Technology related challenges over the past few years have only made the Banks resolve stronger to consolidate and fortify its technology environment. Focused technology and digital investments and programs in technology are pivotal to the Bank to usher in the new age of digital banking and experiences for its customers.

Service Quality Initiatives and Grievance Redressal

Customer Focus is one of the five core values deeply ingrained in the ethos of your Bank. With a holistic approach, your

Bank continuously strives to enhance customer experience, recognising the significance of this in a highly competitive business environment, especially with diverse lines of businesses. Ensuring exceptional product quality and service delivery becomes paramount for sustained growth. Your Bank desires to achieve this by seeking customer feedback as well as benchmarking with best-in-class business entities and facilitating the implementation of customer-centric improvements. Your Bank has adopted a three-step strategy with regards to Customer Service - Define, Measure, and Improve.

Your Bank has adopted a multi-pronged approach to provide an omnichannel experience to its customers. On one side, your Bank has traditional touch points like Branch, Email Management team and PhoneBanking, and on the other side, it has state- of- the-art platforms like NetBanking, MobileBanking, the chatbot Eva and the banks exclusive social care handles which offer a wide range of channel choice to its customers. Your Bank has also improvised on the relationship-based banking programmes by introducing a Virtual Relationship Manager (VRM) programme to cater to various financial needs in a personalised manner. Customer service performance and grievance redressal are regularly assessed at different levels, including Branch Level Customer Service Committees (BLCSCs), Standing Committee on Customer Service (SCCS) and Customer Service Committee of the Board (CSCB). Your Bank has implemented robust processes to monitor and measure service quality levels across touchpoints, including at product and process level, through diligent work of the Quality Initiatives Group.

The Service Quality team conducts regular reviews across various products, processes and channels, focusing on improving the customer experience. A unique Service Quality Index (SQI) has been developed to measure the performance of key customer facing channels based on critical customer service parameters. This SQI enables continuous improvement initiatives to raise service standards. The effectiveness of the quality of service provided is also extensively reviewed, including at the Customer Service Committee of the Board.

One of the basic building blocks of providing acceptable level of customer service is to have an effective internal Grievance Redressal Mechanism / Framework. Your Bank has developed a comprehensive Grievance Redressal Policy, duly approved by the Board, which outlines a framework for resolving customer grievances. This policy is accessible to customers through the Banks website and branch network.

Your Bank actively participated in RBIs Nationwide Intensive Customer Awareness campaign, aiming to enhance customer awareness on their rights and responsibilities in context of the customer service standards and the Internal Grievance Redress (IGR) provided by the Regulated Entities and Alternate Grievance Redress (AGR) mechanism of RBI. The initiative emphasised to customers about the self-protection measures for safeguarding against the growing incidents of digital and electronic financial frauds, reaching even the farthest and remotest areas of the country.

Your Bank has created multiple channels for customers to provide feedback and register grievances, facilitating a transparent and accessible system. As a pioneer in innovative financial solutions and digital platforms, your Bank has witnessed an increased utilisation of its digital channels, resulting in improved customer loyalty. Keeping customer interest in focus, your Bank has formulated a Board approved Protection Policy, which limits the liability of customers in case of unauthorised electronic banking transactions.

Your Bank is on a journey to measure customer loyalty through a high velocity, closed loop customer feedback system. This customer experience transformation programme will help employees empathise better with customers and improve turnaround times. Branded as ‘Infinite Smiles, the programme would help establish behaviours and practices that result in customer-centric actions through continuous improvements in product, services, process, and policies.

Your Bank remains committed to placing the customer at the centre of its operations. By consistently improving customer experience, adopting an omnichannel approach, and implementing robust service quality and grievance redressal mechanisms, your Bank aims to exceed customer expectations and build lasting relationships.

Risk Management and Portfolio Quality

Your Banks historical focus on Pillar 1 risks, including Credit Risk, Market Risk, and Operational Risk, has been expanded in response to the evolving banking landscape. Liquidity Risk, Information Technology Risk, and Information Security Risk have also emerged as critical considerations. These risks not only impact your Banks financial strength and operations but also its reputation. To address these concerns, your Bank has established Board-approved risk strategy and policies overseen by the Risk Policy and Monitoring Committee (RPMC). The Committee ensures that frameworks are established for assessing and managing various risks faced by your Bank, systems are developed to relate risk to the Banks capital level and methods are in place for monitoring compliance with internal risk management policies and processes. The Committee guides the development of policies, procedures and systems for managing risks. It ensures that these are adequate and appropriate to changing business conditions, the structure and needs of your Bank and its risk appetite.

The hallmark of your Banks risk management function is that it is independent of the business sourcing unit with convergence only at the CEO level.

The gamut of key risks faced by the Bank which are dimensioned and managed include:

• Credit Risk, including Residual Risks

• Market Risk

• Operational Risk

• Interest Rate Risk in the Banking Book

• Liquidity Risk

• Intraday Liquidity Risk

• Intraday Credit Risk

• Credit Concentration Risk

• Counterparty Credit Risk

• Model Risk

• Outsourcing Risk

• People Risk

• Business Risk

• Strategic Risk

• Compliance Risk

• Reputation Risk

• Technology Risk

• Group Risk Credit Risk

Credit Risk is the possibility of losses associated with diminution in the credit quality of borrowers or counterparties. Losses stem from outright default or reduction in portfolio value. Your Bank has a comprehensive credit risk architecture, policies, procedures, and systems for managing credit risk in its retail and wholesale businesses. Wholesale lending is managed on an individual as well as portfolio basis. In contrast, given the granularity of individual exposures, retail lending is managed largely on a portfolio basis across various products and customer segments. Robust front-end and back-end systems are in place to ensure credit quality and minimise default losses. The factors considered while sanctioning retail loans include income, demographics, credit history, loan tenure, and banking behavior. In addition, multiple credit risk models are developed and used to assess different segments of customers based on portfolio behavior. In wholesale loans, credit risk is managed by capping exposures based on borrower group, industry, credit rating grades, and country, among others. This is backed by portfolio diversification, stringent credit approval processes, periodic post-disbursement monitoring, and remedial measures. Your Bank has ensured strong asset quality through volatile times in the lending environment by stringently adhering to prudent norms and institutionalised processes. Your Bank also has a robust framework for assessing Counterparty Banks, which are reviewed periodically to ensure interbank exposures are within approved appetite.

As on March 31,2023, your Banks ratio of Gross Non-Performing Assets (GNPAs) to Gross Advances was 1.12 per cent. Net NonPerforming Assets (Gross Non-Performing Assets Less Specific Loan Loss provisions) was 0.27 per cent of Net Advances.

Your Bank has a conservative and prudent policy for specific provisions on NPAs. Its provision for NPAs is higher than the minimum regulatory requirements and adheres to the regulatory norms for Standard Assets.

Digital and Credit Risk

Driven by rapid technological advancements, the banking sector is witnessing the increasing importance of digitalisation as a critical differentiator for customer retention and service delivery. Digital lending has emerged as a convenient and quick method for customers to secure loans with just a few clicks, often in minutes, if not seconds. However, addressing the risks associated with digital lending is crucial, and your Bank has implemented appropriate measures to manage these risks effectively. Digital loans are sanctioned primarily to your Banks existing customers. Often, they are customers across multiple products, thus enabling the Bank ready access to their credit history and risk profile. This accessibility facilitates the evaluation of their loan eligibility. Moreover, the credit checks and scores used by your Bank in process based underwriting are replicated for digital loans. This ensures consistency in the evaluation process. To further enhance risk management, your Bank has established an independent model validation unit responsible for assessing the credit scoring models utilised in generating credit scores for digital loans. These models are subject to ongoing monitoring, periodic reviews, back-testing, and corrective actions are implemented whenever necessary.

By implementing these measures, your Bank aims to balance the convenience and speed of digital lending with associated risks.

Market Risk

Market Risk arises primarily from your Banks statutory reserve management and trading activity in interest rates, equity, and currency market. These risks are managed through a well-defined Board approved Market Risk Policy, Investment Policy, Foreign Exchange Trading Policy, and Derivatives Policy that caps risk in different trading desks or various securities through trading risk limits/triggers. The risk measures include position limits, tenor restrictions, sensitivity limits, namely, PV01, Modified Duration of Hold to Maturity Portfolio and Option Greeks, Value-at-Risk (VaR) Limit, Stop Loss Trigger Level (SLTL), Scenario-based P&L Triggers, Potential Loss Trigger Level (PLTL), and are monitored on an end-of-day basis. In addition, forex open positions, currency option delta, and interest rate sensitivity limits are computed and monitored on an intraday basis. This is supplemented by a Board-approved stress testing policy and framework that simulates various market risk scenarios to measure losses and initiate remedial measures. Your Banks Market Risk capital charge is computed daily using the Standardised Measurement Method applying the regulatory factors.

Liquidity Risk

Liquidity risk is the risk that the Bank may not be able to meet its financial obligations as they fall due without incurring unacceptable losses. Your Banks liquidity and interest rate risk management framework is spelled out through a well-defined Board approved Asset Liability Management Policy. As part of this process, your Bank has established various Board-approved limits for liquidity and interest rate risks in the banking book. The Asset Liability Committee (ALCO) is a decision-making unit responsible for implementing the liquidity and interest rate risk management strategy of the Bank in line with its risk management objectives and ensures adherence to the risk tolerance/limits set by the Board. ALCO reviews the policys implementation and monitoring of limits. While the maturity gap, Basel III ratios, and stock ratio limits help manage liquidity risk, Net Interest Income and market value impacts help mitigate interest rate risk in the banking book. This is reinforced by a comprehensive Board- approved stress testing programme covering both liquidity and interest rate risk.

Your Bank conducts various studies to assess the behavioural pattern of non-contractual assets and liabilities and embedded options available to customers, which are used while managing maturity gaps and repricing risk. Further, your Bank has the necessary framework to manage intraday liquidity risk.

The Liquidity Coverage Ratio (LCR) is one of the Basel Committees key reforms to develop a more resilient banking sector. The LCR, a global standard, is also used to measure your Banks liquidity position. LCR seeks to ensure that the Bank has an adequate stock of unencumbered High-Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs under a 30-day calendar liquidity stress scenario. The LCR helps in improving the banking sectors ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spill over from the financial sector to the real economy. Based on Basel III norms, your Banks average LCR stood at 115.51 per cent on a consolidated basis for financial year 2022-23 as against the regulatory threshold at 100 per cent.


115.51 per cent


The Net Stable Funding Ratio (NSFR), a key liquidity risk measure under BCBS liquidity standards, is also used to measure your Banks liquidity position. The NSFR seeks to ensure that your Bank maintains a stable funding profile in relation to the composition of its assets and off-balance sheet activities. The NSFR promotes resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding on an ongoing basis. The RBI guidelines stipulated a minimum NSFR requirement of 100 per cent at a consolidated level and your Bank has maintained the NSFR well above 100 per cent since its implementation. Based on guidelines issued by RBI, your Banks NSFR stood at 119.13 per cent on a consolidated basis at March 31, 2023.

Operational Risk

This is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. It also includes risk of loss due to legal risk.

Given below is a detailed explanation under four different heads: Framework and Process, Internal Control, Information Technology and Information Security Practices and Fraud Monitoring and Control.

A. Framework and Process

To manage Operational Risks, your Bank has in place a comprehensive Operational Risk Management Framework, whose implementation is supervised by the Operational Risk Management Committee (ORMC) and reviewed by the RPMC of the Board. An independent Operational Risk Management Department (ORMD) implements the framework. Under the framework, the Bank has three lines of defence. The first line of defence is the business line (including support and operations).

The first line is primarily responsible for developing risk mitigation strategies in managing operational risk for their respective units.

The second line of defence is the ORMD, which is responsible for implementing the operational risk management framework across the Bank. It designs and develops tools required for implementing the framework including policies and processes, guidelines towards implementation and maintenance of the framework. In order to achieve the aforesaid objective pertaining to operational risk management framework, the ORMC guides and oversees the functioning, implementation, and maintenance of operational risk management activities of Bank, with special focus on:

• Identification and assessment of risks across the Bank through the Risk and Control Self-Assessment (RCSA) and Scenario analysis

• Measurement of Operational Risk based on the actual loss data

• Monitoring of risk through Key Risk Indicators (KRI)

• Management and reporting through KRI, RCSA and loss data of the Bank

Internal Audit is the third line of defence. The team reviews the effectiveness of governance, risk management and internal controls within your Bank.

B. Internal Control

Your Bank has implemented sound internal control practices across all processes, units and functions. It has well laid down policies and processes for the management of its day-today activities. Your Bank follows established, well-designed controls, which include traditional four eye principles, effective segregation of business and support functions, segregation of duties, call back processes, reconciliation, exception reporting and periodic MIS. Specialised risk control units function in risk- prone products/ functions to minimise operational risk. Controls are tested as part of the SOX control testing framework.

C. Information Technology and Information Security Practices

Your Bank operates in a highly automated environment and makes use of the latest technologies available on cloud or on Premises Data centres to support various business segments. With advent of new technology tools and increased sophistication, Bank has improved its efficiency, reduced operational complexities, aided decision making and enhanced the accessibility of products and services. This results in various risks such as those associated with the use, ownership, operation, redundancy, involvement, influence, and adoption of IT within an enterprise, as well as business disruption due to technological failures. Additionally, it can lead to risks related to information assets, data security, integrity, reliability and availability, among others. Your Bank has put in place a governance framework, information security practices, business continuity plan, Disaster Recovery (DR) resiliency, Security Enhancements, Public Cloud and Cloud native services adoption and Enhanced Automated Monitoring mechanisms to mitigate Information Technology and Information Security-related risks.

The three lines of defence approach is adopted for enterprisewide Technology Risk management. The first line of defence holds primary responsibility of managing the risk and ensuring proper controls are in place.

The second line of defence defines policies, frameworks and controls. Information Technology Risk function and Information Security Group addresses technology and information security related risks. A well-documented Board-approved information security policy and cyber security policy are in place.

Your Bank has a robust Business Continuity and Disaster Recovery plan that is periodically tested to ensure that it can meet any operational contingencies. Further, there is a well- documented crisis management plan in place to address the strategic issues of a crisis impacting the Bank and to direct and communicate the corporate response to the crisis including cyber crisis. In addition, employees periodically undergo mandatory business continuity awareness training and sensitisation exercises on a periodic basis.

For details on business continuity and crisis management measures, please refer page no. 64.

For details on robust cyber security measures, please refer page no. 62.

An independent assurance team within Internal Audit acts as a third line of defence that provides assurance on the management of IT-related risks.

D. Fraud Monitoring and Control

Your Bank has put in place a Whistle Blower and Vigilance Policy and a central vigilance team that oversees the implementation of fraud prevention measures. Frauds are investigated to identify the root cause and relevant corrective steps are recommended to prevent recurrence.

Fraud Monitoring committees at the senior management and Board level also deliberate on high value fraud events and advise preventive actions. Periodic reports are submitted to the Board and senior management committees.

Compliance Risk

Compliance Risk is defined as the risk of impairment of your Banks integrity, leading to damage to its reputation, legal or regulatory sanctions, or financial loss, as a result of a failure (or perceived failure) to comply with applicable laws, regulations, and standards. Your Bank has a Compliance Policy to ensure the highest standards of compliance. A dedicated team of subject matter experts in the Compliance Department works with business, support and operations teams to ensure active Compliance Risk management and monitoring. The team also provides advisory services on regulatory matters. The focus is on identifying and reducing risk by rigorously testing products and also putting in place robust internal policies. Products that adhere to regulatory norms are tested after rollout and shortcomings,

if any, are fully addressed till the product stabilises. Internal policies are reviewed and updated periodically as per agreed frequency or based on market actions or regulatory guidelines/ actions. The compliance team also seeks regular feedback on regulatory compliance from product, business and operation teams through self-certifications and monitoring.


Your Bank has a structured management framework in the Internal Capital Adequacy Assessment Process (ICAAP) to identify, assess and manage all risks that may have a material adverse impact on its business/financial position/capital adequacy. The ICAAP framework is guided by the Board approved ICAAP Policy.

Stress Testing Framework

Your Bank has implemented a Board approved Stress Testing Policy and Framework which forms an integral part of the Banks ICAAP. Stress testing involves the use of various techniques to assess your Banks potential vulnerability to extreme but plausible stressed business conditions. The changes in the levels of Pillar I risks and select Pillar II risks, along with the changes in the on and off-Balance Sheet positions of your Bank are assessed under assumed ‘stress scenarios and sensitivity factors. The suite of stress scenarios include topical themes as well as historically observed geopolitical / macroeconomic / sectoral and other trends. The stress testing outcome may be analysed through capital impact and/or identification of vulnerable borrowers depending on the scenario.

Group Risk

Your Bank has two subsidiaries, HDB Financial Services Limited and HDFC Securities Limited. The Board of each subsidiary is responsible for managing their respective material risks (Credit Risk, Concentration Risk, Market Risk, Operational Risk, Liquidity Risk, Interest Rate Risk on Banking Book, Technology Risk, Reputation Risk, Compliance Risk, Business Risk and others). The Group Risk Management Committee (GRMC) was instituted in your Bank under the ICAAP framework to establish a formal and dedicated structure to periodically assess the nature/ quantum of material risks of the subsidiaries and adequacy of its risk management processes. Stress testing for the group as a whole is carried out by integrating the stress tests of the subsidiaries. Similarly, capital adequacy projections are formulated for the group after incorporating the business/ capital plans of the subsidiaries.

Business Continuity Planning (BCP)

Your Bank has a robust BCP program in place that enabled it to continue to operate and deliver quality services during COVID and beyond. Our ISO22301:2019 certified Business Continuity Program enables us to minimize service disruptions and potential impact on our employees, customers and business during any unforeseen adverse events or circumstances. This program is designed in accordance with the guidelines issued by regulatory bodies and is subject to regular internal, external, and regulatory reviews. The central Business Continuity Office works towards strengthening the Banks continuity preparedness. The implementation of the program is overseen by the Business Continuity Steering Committee which is chaired by the Chief Risk Officer. The Business Continuity Procedure has well defined roles and responsibilities for teams involved in Crisis Management, Business Recovery, Emergency Response, and IT Disaster Recovery.

Some of the key roles in this program are as follows:

• Steering Committee for centralized monitoring of your Banks Business Continuity program implementation

• Crisis Management teams for effective management of recovery operations during disruptive events

• Dedicated DR site for recovery of critical core and customer facing applications

• Functional recovery plans for structured and speedy recovery of operations

• Periodic drills are done for testing the effectiveness of these recovery plans.

As a responsible Bank, these robust practices have enabled us to continue delivering services seamlessly to customers through the disruptive events and beyond.

Internal Controls, Audit and Compliance

Your Bank has put in place extensive internal controls and processes to mitigate Operational Risks, including centralised operations and ‘segregation of duty between the front office and back office. The front-office units usually act as customer touchpoints and sales and service outlets while the back-office carries out the entire processing, accounting and settlement of transactions in the Banks core banking system. The policy framework, definition and monitoring of limits is carried out by various mid-office and risk management functions. The credit sanctioning and debt management units are also segregated and do not have any sales and operations responsibilities.

Your Bank has set up various executive-level committees, with participation from various business and control functions, that are designed to review and oversee matters pertaining to capital, assets and liabilities, business practices and customer service, operational risk, information security, business continuity planning and internal risk-based supervision among others. The second line of defence functions set standards and lay down policies and procedures by which the business functions manage risks, including compliance with applicable laws, compliance with regulatory guidelines, adherence to operational controls and relevant standards of conduct. At the ground level, your Bank has a mix of preventive and detective controls implemented through systems and processes, ensuring a robust framework in your Bank to enable correct and complete accounting, identification of outliers (if any) by the Management on a timely basis for corrective action and mitigating operational risks.

Your Bank has put in place various preventive controls:

a. Limited and need-based access to systems by users

b. Dual custody over cash and near-cash items

c. Segregation of duty in processing of transactions vis-a-vis creation of user IDs

d. Segregation of duty in processing of transactions vis-a-vis monitoring and review of transactions/ reconciliation

e. Four eye principle (maker-checker control) for processing of transactions

f. Stringent password policy

g. Booking of transactions in core banking system mandates the earmarking of line/limit (fund as well as non-fund based) assigned to the customer

h. STP processes between core banking system and payment interface systems for transmission of messages

i. Additional authorisation leg in payment interface systems in applicable cases

j. Audit logs directly extracted from systems

k. Empowerment grid

Your Bank also has detective controls in place:

(a) Periodic review of user IDs

(b) Post-transaction monitoring at the back-end by way of call back process (through daily log reports) by an independent person, i.e., to ascertain that entries in the core banking system/messages in payment interface systems are based on valid/authorised transactions and customer requests

(i) Daily tally of cash and near-cash items at end of day

(ii) Reconciliation of Nostro accounts (by an independent team) to ascertain and match-off the Nostro credits and debits (External or Internal) regularly to avoid / identify any unreconciled/ unmatched entries passing through the system

(c) Reconciliation of all Suspense Accounts and establishment of responsibility in case of outstanding

(d) Independent and surprise checks periodically by supervisors.

Your Bank has an Internal Audit Department which is responsible for independently evaluating the adequacy and effectiveness of all internal controls, risk management, governance systems and processes and is manned by appropriately qualified personnel.

This department adopts a risk-based audit approach and carries out audits across various businesses i.e., Retail, Wholesale and Treasury (for India and Overseas books), audit of Operations units, Management and Thematic audits, Information Security audit, Revenue audit and Concurrent audit in order to independently evaluate the adequacy and effectiveness of internal controls on an ongoing basis and proactively recommending enhancements thereof. The Internal Audit Department, during the course of audit, also ascertains the extent of adherence to regulatory guidelines, legal requirements and operational processes and provides timely feedback to the Management for corrective actions. A strong oversight on the operations is also kept through off-site monitoring by use of data analytics to study trends/patterns to detect outliers (if any) and alert the Management.

The Internal Audit Department also independently reviews your Banks implementation of Internal Rating Based (I RB)- approach for calculation of capital charge for Credit Risk, the appropriateness of your Banks ICAAP, as well as evaluates the quality and comprehensiveness of your Banks disaster recovery and business continuity plans and also carries out management self-assessment of adequacy of the Banks internal financial controls and operating effectiveness of such controls in terms of Sarbanes Oxley (SOX) Act and Companies Act, 2013. The Internal Audit Department plays an important role in strengthening of the Control functions by periodically reviewing their practices and processes as well as recommending enhancements thereof. Additionally, oversight is also kept on the functioning of the subsidiaries, related party transactions and extent of adherence to the licensing conditions of the RBI.

Any new product/process introduced in your Bank is reviewed by Compliance function in order to ensure adherence to regulatory guidelines and also by Internal Audit from the perspective of existence of internal controls. The Audit function also proactively recommends improvements in operational processes and service quality, wherever deemed fit.

To ensure independence, the Internal Audit Function has a reporting line to the Audit Committee of the Board and a dotted line reporting to the Managing Director for administrative purposes.

The Compliance function independently tracks, reviews and ensures compliance with regulatory guidelines and promotes a compliance culture in the Bank.

Your Bank has a comprehensive Know Your Customer, Anti Money Laundering (AML) and Combating Financing of Terrorism (CFT) policy (based on the RBI guidelines/provisions of the Prevention of Money Laundering Act, 2002) incorporating the key elements of Customer Acceptance Policy, Customer Identification Procedures, Risk Management and Monitoring of Transactions. The policy is subjected to an annual review and is duly approved by the Board.

Your Bank besides having robust controls in place to ensure adherence to the KYC guidelines at the time of account opening also has monitoring process at various stages of the customer lifecycle including a continuous review process in the form of transaction monitoring carried out by a dedicated AML CFT monitoring team, which carries out transaction reviews for identification of suspicious patterns/trends that enables your Bank to further carry out enhanced due diligence (wherever required) and appropriate actions thereafter.

The Audit team and the Compliance team undergo regular training both in-house and external to equip them with the necessary knowhow and expertise to carry out the function.

The Audit Committee of the Board reviews the effectiveness of controls, compliance with regulatory guidelines as also the performance of the Audit and Compliance functions in your Bank and provides direction, wherever deemed fit. Your Bank has always adhered to the highest standards of compliance and has put in place appropriate controls and risk measurement and risk management tools to ensure a robust compliance and governance structure.

Performance of Subsidiary Companies

Your Bank has two subsidiaries, HDB Financial Services Limited (HDBFSL) and HDFC Securities Limited (HSL). HDBFSL is a leading NBFC that caters primarily to segments not covered by the Bank while HSL is among Indias leading retail broking firm. The financial results of the subsidiaries are prepared in accordance with notified Indian Accounting Standards (‘Ind-AS).

The detailed financial performance of the companies is given below.


11.93 lakh

HDFC Securities Limited (HSL)

HSLs Total Income under Indian Accounting Standards was Rs 1,891.6 crore as against Rs 1,990.3 crore in the previous year and Net Profit was Rs 777.2 crore as against Rs 984.3 crore in the previous year. The company has a customer base of 44.87 lakh to whom it offers an exhaustive range of investment and protection products. In the year under review, HSL had 11.93 lakh transacting customers. The focus on digitalisation continued. Notably, 92 per cent of its customers accessed its services digitally, against 91 per cent in the previous year.

In a conscious effort to rationalise the distribution network with greater emphasis on digital offerings, HSL consolidated its existing branches to end with 209 branches across 147 cities / towns at the end of the year. It created digital boarding journeys which led to more than 50 per cent customers being onboarded digitally.

In the case of Margin Trade Funding (MTF), the average book size during the year was Rs 3,190 crore, against the average book size of Rs 2,992 crore in the last financial year. The book size at the year-end stands at Rs 2,752 crore.

Nifty started Financial Year 2023 on a weak note and touched a low in June 2022 as the US Fed stepped up monetary tightening following a surprise inflation number in the US. Nifty rose later as crude prices began to fall and softer economic data from the US raised hopes that the US Fed may not opt for aggressive rate hikes. Nifty touched a new high in December 2022. This was driven by improving economic numbers in India and persistent buying by FPIs and locals. A bout of correction followed and the fiscal year ended with Nifty closing marginally in the negative. In Financial Year 2023, Nifty outperformed the US markets but ended being behind the European and Japanese markets. Nifty Midcap 100 index ended 1.1 per cent higher while the Nifty Smallcap 100 index ended 13.8 per cent lower. Within sectors, Capital Goods, Banks, FMCG and Auto indices rose smartly, while IT, Metals, Realty and Healthcare indices ended in the negative. As on March 31, 2023, your Bank held 95.6 per cent stake in HSL.

HDB Financial Services Limited (HDBFSL)

HDB Financial Services Limited (HDBFSL) is a subsidiary of the Bank and is a Non-Banking Finance Company (NBFC). It specialises in providing credit solutions to fulfil the varied needs of its customers which include first-time borrowers and the underserved segments.

HDBFSL has continued to focus on diversifying its products and expanding its distribution while augmenting its digital infrastructure and offerings to effectively deliver credit solutions. It has a strong network of over 1,492 branches spread across 1,054 cities. As on March 31, 2023, your Bank held 94.8 per cent stake in HDBFSL.

Synopsis of its performance across key parameters is as below:

Key Parameters

FY 23

(Rs crore)

FY 22

(Rs crore)

% Increase

Net Interest Income

5,416 5,037 7.9

Profit afer Tax

1,959 1,011 93.7

Loan Disbursements

44,802 29,033 64.8

Assets under

70,084 61,444 14

Management (AUM) as at year end

A deeper insight into its business and products and services is as below:


HDBFSL offers a diverse range of product offerings (secured and unsecured) to various customer segments. These include Consumer Loans, Enterprise Loans, Asset Finance and MicroLending.

Consumer Loans

Consumer loans are provided to individuals for personal or household purposes to meet their short to medium term requirements. It comprises loans for consumer durables, lifestyle products and digital products, Personal Loans, Auto Loans for new and used cars, Two-Wheeler Loan and Gold Loan.

Enterprise Loans

HDBFSL offers secured and unsecured loans designed to meet the needs of Small and Micro Enterprises including working capital and term loans. Various types of loans are offered to meet the diverse financial needs of the enterprises. The loans offered include Unsecured Business Loan, Enterprise Business Loan, Loan Against Property, Loan Against Securities and autorefinance. These loans cater to the financial requirements of enterprises for the purchase of new machinery, inventory, or revamping the business, among others.

Loan Against Property is offered for the purpose of business expansion or as working capital. HDBFSL also provides loan against rental income receivable on leased property, and accepts securities like insurance policy, debt instruments, depending on the customers financial profile and ability. Loan Against Securities ensures that customers can meet their immediate cash requirements by pledging their investments or securities like insurance policy, debt instruments and bonds with HDBFSL without having to liquidate them. Auto Refinance is working capital loans offered to customers, which can be availed on hypothecation of vehicles.

Asset Finance

HDBFSL provides loans for the purchase of new and used commercial vehicles and construction equipment that generate income for borrowers. It also offers working capital loans through refinancing of existing vehicles. The customer base includes fleet owners, first-time users, first-time borrowers, and captive use buyers. HDBFSL also facilitates loans for procurement, refinancing, or repurchase of construction equipment, as well as customised tractor loans to meet agricultural or commercial needs.

Micro Lending

HDBFSL offers micro-loans to borrowers through the Joint Liability Groups (JLG) framework to empower and promote financial inclusion for sustainable development.

These loans were initiated in 2019 and are currently available in seven states including Maharashtra, Bihar, Rajasthan, Gujarat, Madhya Pradesh and Odisha, covering 67 districts.

Fee-Based Products/Insurance Services

HDBFSL has a licence from the Insurance Regulatory and Development Authority of India (IRDAI) and is a registered Corporate Insurance Agent certified to sell both Life and General (Non-Life) insurance products. HDBFSL has tie-ups with HDFC Life Insurance Co. Ltd. and Aditya Birla Sun Life Insurance for life insurance products. HDBFSL has partnered with HDFC Ergo General Insurance Co. Ltd. and Tata AIG General Insurance Co. Ltd. for general insurance products.

BPO Services

HDBFSL runs a Collections BPO business, offering end-to end specialised collection services with domain expertise in collections tele-calling, recovery management, collections analytics and cash reconciliation management. HDBFSL also delivers back-office services such as forms processing, document verification, finance and accounting services, correspondence management and front office services such as contact centre management / outbound marketing.

The Enablers

HDBFSLs presence across digital channels enables it to offer a wide variety of financial solutions to its customers. They can access and manage their loan account 24/7 through its new, upgraded version of Mobile Banking Application with enhanced features - ‘HDB-On-the-Go, Customer Service Portal to manage the loan account, Missed Call Service, WhatsApp Account Management and the Chatbot #AskPriya.

Other Statutory disclosures

Number of Meetings of the Board, attendance, meetings and constitution of various Committees

Fifteen (15) meetings of the Board were held during the year under review. The details of Board meetings held during the year, attendance of Directors at the meetings and constitution of various Committees of the Board are included separately in the Corporate Governance Report.

Annual Return

In accordance with the provisions of Companies Act, 2013, the draft of Annual Return of the Bank in the prescribed Form MGT-7 is available on the website of the Bank at the link https://www. hdfcbank.com/personal/about-us/investor-relations/annual- reports.

Requirement for maintenance of cost records:

The cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013, are not required to be maintained by the Bank.

Details in respect of frauds reported by auditors under section 143 (12)

During the year under review, no instances of fraud committed against the Bank by its officers or employees were reported by the Statutory Auditors and Secretarial Auditors under Section 143(12) of the Companies Act, 2013 to the Audit Committee or the Board of Directors of the Bank.

Directors Responsibility Statement

Pursuant to Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, the Board of Directors hereby confirm that:

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

• 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 state of affairs of the Bank as on March 31,2023 and of the profit of the Bank for the year ended on that date.

• We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

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

• We have laid down internal financial controls to be followed by the Bank and have ensured that such internal financial controls were adequate and operating effectively.

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

Compliance with Secretarial Standards

The Bank is in compliance with all applicable Secretarial Standards as notified from time to time.

Statutory Auditors

M. M. Nissim & Co LLP, Chartered Accountants and Price Waterhouse LLP, Chartered Accountants, have conducted the joint statutory audit of the Bank for FY. 2022-23, pursuant to the approval of the RBI and the shareholders of the Bank.

The Audit Committee at its meeting held in June 30, 2023 has approved the audit fees to be paid to M.M. Nissim & Co. LLP, Chartered Accountants (MMN) and M/s. Price Waterhouse LLP, Chartered Accountants (PW) subject to approval of the shareholders at the ensuing Annual General Meeting (AGM).

Appropriate resolution in this regard is also being proposed at the ensuing AGM. During the year ended March 31,2023, fees paid to the statutory auditors and their respective network firms on aggregated basis are as follows:

(Rs crore)

Fees (excluding taxes)

HDFC Bank to Statutory Auditors HDFC Bank to network firms of Statutory Auditors Subsidiaries of HDFC Bank to Statutory Auditors and its network firms

Statutory Audit*

3.85 - -

Certification & other audit/ attestation services


Non-audit services

- - -


0.19 - -


7.29 - -

* Includes fees to MSKA & Associates, Chartered Accountants, who completed their tenure as joint statutory auditors during the year.

Disclosure under Foreign Exchange Management Act, 1999

As far as FEMA compliances in relation to strategic downstream investments in the Banks subsidiaries is concerned, during the year under review, there have been no strategic downstream investments made by Bank in its subsidiaries. Accordingly, the Bank has obtained a certificate from M. M. Nissim & Co. LLP., Chartered Accountants, to this effect.

Corporate Social Responsibility

The composition of Corporate Social Responsibility & ESG Committee, brief outline of the CSR policy of the Bank and the initiatives undertaken by the Bank on CSR activities during the year are set out in Annexure 2 of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. This Policy is available on the Banks website at https://v.hdfcbank.com/csr/our-commitment.html.

Related Party Transactions

Particulars of contracts or arrangements with related parties referred to in Section 188 (1), as prescribed in Form AOC-2 under Rule 8 (2) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure 3.

Particulars of Loans, Guarantees or Investments

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of the Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided or any investment made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in note number 9 of Schedule 18 of the Financial Statements as per the applicable provisions of the Banking Regulation Act, 1949.

Financial Statements of Subsidiaries and Associates

In terms of Section 134 of the Companies Act, 2013 and read with Rule 8 (1) of the Companies (Accounts) Rules, 2014 the performance and financial position of the Banks subsidiaries and associates are enclosed as Annexure 4 to this report.

There were no entities which became or ceased to be the Banks subsidiaries, associates or joint ventures during the year.

Whistle Blower Policy / Vigil Mechanism

The Bank encourages an open and transparent system of working and dealing amongst its stakeholders. While the Banks "Code of Conduct & Ethics Policy" directs employees to uphold Bank values and conduct business worldwide with integrity and highest ethical standards, the Bank has also adopted a "Whistle Blower Policy" to encourage and empower the Employees/ Stakeholders to make or report any Protected Disclosures under the Policy, without any fear of reprisal, retaliation, discrimination or harassment of any kind.

This Policy has also been put in place to provide a mechanism through which adequate safeguards can be provided against victimization of employees who avail of this mechanism. The policy would cover and will be applicable to the Protected Disclosures related to violation/ suspected violation of the Code of Conduct including (a) breach of applicable law; (b) fraud or corruption; (c) leakage/suspected leakage of unpublished price sensitive information which are in violation to SEBI (Prohibition of Insider Trading) Regulations, 2015 and related internal policy of the Bank, i.e. Share Dealing Code of the Bank, (d) wilful data breach and/ or unauthorized disclosure of Banks proprietary data including customer data.

All Protected Disclosures made under the policy shall be made to the Whistle Blower Committee through the following modes; (a) By letter in a closed / sealed envelope addressed to Whistle Blower committee, (b) by submission of the same on the information portal of the Bank, (c) by way of an email addressed to whistleblower@hdfcbank.com. In exceptional circumstances, the Whistle Blower may make such Protected Disclosures directly to the Chairperson of the Audit Committee of the Bank.

All Protected Disclosures received under this Policy would be examined by the Whistle Blower Committee and the investigation is furthered assigned to an appropriate Investigation Officer(s) depending on the nature of the subject matter of the Protected Disclosure.

Details of Whistle blower complaints received and subsequent action taken and the functioning of the Whistle Blower mechanism are reviewed periodically by the Audit Committee of the Board. During the financial year 2022-23, a total of 177 such complaints were received and taken up for investigation which has resulted in certain staff actions in 57 cases post investigation. The broad categories of whistle blower complaints were in the areas of misappropriation of bank / customer funds, forgery related cases, improper business practices, behavioural issues and corruption.

The Policy is available on the website of the Bank at the link https://www.hdfcbank.com/personal/about-us/corporate- governance/codes-and-policies.

Securities Class Action Suit

On September 3, 2020, a securities class action lawsuit was filed against the Bank and certain of its current and former officers in the United States District Court for the Eastern District of New York. The complaint was amended on February 8, 2021. The amended complaint alleges that the Bank, its former Managing Director, Mr. Aditya Puri, and the present Managing Director & CEO, Mr. Sashidhar Jagdishan made materially false and misleading statements regarding certain aspects of the Banks business and compliance policies, which resulted in the Banks American Depository Share price declining on July 13, 2020 thereby allegedly causing damage to the Banks investors. On April 9, 2021, the Bank, Mr. Puri, and Mr. Jagdishan served their motion to dismiss the amended complaint, and on July 23, 2021, they served their reply brief in support of the motion and filed all of the motion papers. The Court held oral argument on the motion to dismiss on January 14, 2022.

The Court vide its Order dated May 1, 2023 granted the Banks motion to dismiss the securities class action complaint filed against HDFC Bank, Mr. Aditya Puri and Mr. Sashidhar Jagdishan. The Court had provided 30 days time to the Plaintiff to seek leave to file further amended complaint. The Plaintiff has not filed amended complaint within the stipulated time frame and thus the Court vide its further order dated 8th June has dismissed the Plaintiffs claim and closed the case.

Material Developments: Scheme of Amalgamation

The Board of Directors (the "Board") of the Bank in its meeting held on April 04, 2022, had approved a composite scheme of amalgamation (the "Scheme") for the amalgamation of: (i) HDFC Investments Limited and HDFC Holdings Limited, each a subsidiary of HDFC Limited, with and into HDFC Limited, and (ii) HDFC Limited with and into HDFC Bank (the "Amalgamation"). Based on the valuation provided by the Independent Registered valuers the share exchange ratio arrived and approved by the Board was 42 equity shares of HDFC Bank (each having a face value of Rs 1) credited as fully paid for every 25 equity shares of HDFC Limited (each having a face value of Rs 2).

The parties to the Scheme inter alia filed a Joint Company Scheme Application with the National Company Law Tribunal, Mumbai Bench ("NCLT"). Pursuant to the order dated October 14, 2022 passed by NCLT, shareholders meetings of HDFC Bank and HDFC Limited, respectively, were convened and held to approve the Scheme. The Scheme was approved by the requisite majority of shareholders on November 25, 2022. Post receipt of the said shareholders approval, the parties to the Scheme filed a Joint Company Scheme Petition before the NCLT seeking sanction of the Scheme. The NCLT, after hearing the parties to the Scheme, sanctioned the Scheme vide its order dated March 17, 2023.

The relevant parties to the Scheme also obtained no-objection/ approval letters from the Reserve Bank of India, the Securities and Exchange Board of India, the stock exchanges, the Competition Commission of India, the Insurance Regulatory and Development Authority of India, the Pension Fund Regulatory and Development Authority and other statutory / regulatory authorities.

Considering the aforesaid, the Board of Directors of the Bank, at its meeting held on June 30, 2023, approved July 01, 2023 to be Effective Date of the Scheme and the Appointed Date (relevant appointed date being the Appointed Date-2 for Part D of the Scheme being the amalgamation of HDFC Limited into HDFC Bank), and fixed record dates for allotment / transfer / continuation of equity shares, warrants, non-convertible debentures and commercial papers issued by HDFC Limited to HDFC Bank Limited.

Statement on Declaration by Independent Directors

Mr. Atanu Chakraborty, Mr. Umesh Chandra Sarangi, Mr. M. D. Ranganath, Mr. Sanjiv Sachar, Mr. Sandeep Parekh, Dr. (Mrs.) Sunita Maheshwari and Mrs. Lily Vadera are the Independent Directors on the Board of the Bank as on March 31,2023.

Mr. Malay Patel ceased to be Independent Director on the Board of the Bank with effect from the close of business hours on March 30, 2023, upon completion of a continuous period of eight years from the date of his initial appointment as Director of the Bank.

Pursuant to the provisions of Section 149 of the Act, the Independent Directors have submitted declarations that each of them meets the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. There has been no change in the circumstances affecting their status as Independent Directors of the Bank. In the opinion of the Board, the Independent Directors possess the requisite integrity, experience, expertise and proficiency required under all applicable laws and the policies of the Bank.

Board Performance Evaluation

The performance evaluation of the Board, Committees of the Board and the individual members of the Board (including the Chairman) for Financial Year 2022-23, was carried out internally pursuant to the framework laid down by the Nomination and Remuneration Committee (NRC). A questionnaire for the evaluation of the Board, its Committees and the individual members of the Board (including the Chairman), designed in accordance with the said framework and covering various aspects of the performance of the Board and its Committees, including composition, roles and responsibilities, Board processes, Boardroom culture, adherence to Code of Conduct and Ethics, quality and flow of information, as well as measurement of performance in the areas of strength and areas of focus, as identified in the previous years evaluation, was sent out to the Directors. The Committees were evaluated inter alia on parameters such as composition, terms of reference, quality of discussions, contribution to Board decisions and balance of agenda between the Committee and the Board. The responses received to the questionnaires on evaluation of the Board and its Committees were placed before the meeting of the Independent Directors for consideration. The assessment of performance of Non-Independent Directors on key personal and professional attributes was also carried out at the meeting of Independent Directors. The assessment of performance of the Independent Directors on the Board (including Chairman) was subsequently discussed by the Board. In addition to the above parameters, the Board also evaluated fulfillment of the independence criteria as specified in SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 by the Independent Directors of the Bank and their independence from the management.

The evaluation brought out the cohesiveness of the Board, a Boardroom culture of trust and cooperation, and Boardroom discussions which are open, transparent and encourage diverse viewpoints. Other areas of strength included effective discharge of Boards roles and responsibilities. Some of the areas of focus for the Board going forward included continue to adhere to the best governance practices, increasing time dedicated to strategy- competitive positioning and benchmark, long term succession planning and talent management, improvement in Board processes and quality of information. The Board also noted that while there has been positive development in the areas of focus identified in the previous years evaluation, efforts need to continue in that direction. The appropriate feedback was conveyed to the Board members and other concerned stakeholders, for suitable action.

Policy on Appointment and Remuneration of Directors and Key Managerial Personnel

Your Bank has in place a Policy for appointment and fit and proper criteria for Directors of the Bank. The Policy lays down the criteria for identification of persons who are qualified an ‘fit and proper to become Directors on the Board- such as academic qualifications, competence, track record, integrity, etc. which shall be considered by the NRC while recommending appointment of Directors. The Policy is available on the website of the Bank at the link https://www.hdfcbank.com/personal/ about-us/corporate-governance/codes-and-policies.

The remuneration of all employees of the Bank, including Whole Time Directors, Material Risk Takers, Key Managerial Personnel, Senior Management and other employees is governed by the Compensation Policy of the Bank. The same is available at the web-link https://www.hdfcbank.com/personal/about-us/ corporate-governance/codes-and-policies. The Compensation Policy of the Bank, duly reviewed and recommended by the NRC has been articulated in line with the relevant Reserve Bank of India guidelines.

Your Banks Compensation Policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long term success. The Compensation Policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective is to provide a fair and transparent structure that helps the Bank to retain and acquire the talent pool critical to building competitive advantage and brand equity.

Your Banks approach is to have a "pay for performance" culture based on the belief that the Performance Management System provides a sound basis for assessing performance holistically. The compensation system should also take into account factors such as roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the Compensation Policy are also included in Note No. 24 of Schedule 18 forming part of the Accounts.

Non-Executive Directors including Independent Directors are paid remuneration by way of sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory prescriptions.

Further, expenses incurred by them, if any, for attending meetings of the Board and Committees in person are reimbursed at actuals. Pursuant to the relevant RBI guidelines and approval of the shareholders, the Non-Executive Directors, other than the Chairperson, are paid fixed remuneration of Rs 20,00,000 (Rupees Twenty Lakh Only) per annum for each Non-Executive Director on proportionate basis.

Mr. Atanu Chakraborty, Part-time Chairman & Independent Director was paid remuneration of Rs 35,00,000 per annum during FY 2022-23 as approved by the RBI, in addition to sitting fees and provision of car for official and personal use.

Mr. Malay Patel ceased to be Independent Director on the Board of the Bank with effect from the close of business hours on March 30, 2023, upon completion of a continuous period of eight years from the date of his initial appointment as Director of the Bank. Mr. Malay Patel is also an Independent Director on the Board of HDFC Securities Limited, subsidiary of the Bank. Mr. Patel receives sitting fees and reimbursement of expenses at actuals incurred for attending Board/ Committee meetings from the said subsidiary.

None of the Directors of your Bank is a director of the Banks subsidiaries as on March 31, 2023.

Succession Planning

The Nomination and Remuneration Committee (NRC) and the Board of Directors ("the Board"), review succession planning and transitions at the Board and Senior Management levels. The Board composition and the desired skill sets/ areas of expertise at the Board level are continuously reviewed and vacancies, if any, are reviewed in advance through a systematic due diligence process.

Succession planning at Senior Management levels, including business and assurance functions, is continuously reviewed to ensure continuity and depth of leadership at two levels below the Managing Director. Successors are identified prior to the Senior Management positions falling vacant, to ensure a smooth and seamless transition.

Succession planning is a continuous process which is periodically reviewed by the NRC and the Board.

Significant and Material Orders Passed by Regulators

1) Reserve Bank of India (RBI) by an order dated May 27, 2021, levied a penalty of Rs 10 crore (Rupees ten crores only) for marketing and sale of third-party non-financial products to the Banks auto loan customers, arising from a whistle blower complaint, which revealed, inter alia, contravention of Section 6(2) and Section 8 of the Banking Regulation Act, 1949. The Bank has discontinued the sale of said third-party non-financial product since October 2019. The penalty was paid by the Bank.

2) SEBI issued final order on January 21,2021, levying a penalty of Rs 1 crore on the Bank, in the matter of invocation of securities pledged by BMA Wealth Creators (BRH Wealth Kreators) for availing credit facilities. SEBI also directed the Bank to transfer sale proceeds of Rs 158.68 crores on invocation of securities, along with interest to escrow account with a nationalised bank by marking lien in favour of SEBI. The Bank challenged SEBIs order before SAT and SAT, vide its interim order, stayed operation of SEBIs order. SAT, vide its final order dated February 18, 2022, allowed the Banks appeal and quashed SEBIs Order.

3) RBI issued an Order dated December 02, 2020 ("Order") to HDFC Bank Limited (the "Bank") with regard to certain incidents of outages in the internet banking/mobile banking/ payment utilities of the Bank over the past 2 years, including the outages in the Banks internet banking and payment system on November 21, 2020 due to a power failure in the primary data centre. RBI, vide above order, advised the Bank (a) to stop all digital business generating activities planned under its ‘Digital 2.0 and proposed Business generating applications digital also imposed restrictions and (b) to stop sourcing of new credit card customers. The Bank initiated remedial activities including fixing of staff accountability and the same were communicated to the RBI. Basis the Banks submission, RBI vide its letter dated August 17, 2021, relaxed the restriction placed on sourcing of new credit cards customers and further vide its letter dated March 11,2022 lifted the restrictions on the business generating activities planned under the Banks Digital 2.0 program

Directors and Key Managerial Personnel

In compliance with Section 152 of the Companies Act, 2013, Mr. Kaizad Bharucha will retire by rotation at the ensuing Annual General Meeting and is eligible for re-appointment. A resolution seeking shareholders approval for his re-appointment forms a part of the Notice of this AGM. A brief resume is furnished in the report on Corporate Governance for the information of shareholders.

Mr. Malay Patel ceased to be Independent Director on the Board of the Bank with effect from the close of business hours on March 30, 2023, upon completion of a continuous period of eight years from the date of his initial appointment as Director of the Bank. Your Board places on record its sincere appreciation for the contribution made by Mr. Malay Patel during his tenure with the Bank and wishes him well in future endeavours.

Further, at the meeting of the Board of Directors held on March 04, 2023, the Board has recommended the re-appointment of Mr. Sashidhar Jagdishan as the Managing Director and Chief Executive Officer of the Bank for a period of three (3) years with effect from October 27, 2023, subject to the approval of the Reserve Bank of India and shareholders of the Bank.

During the financial year 2022-23, there have been no change in the Directors and Key Managerial Personnel of the Bank other than the above.

The Reserve Bank of India (RBI) has granted its approval for the appointment of Mr. Kaizad Bharucha and Mr. Bhavesh Zaveri as Deputy Managing Director and Executive Director respectively, for a period of 3 (three) years commencing from April 19, 2023 upto April 18, 2026 (both days inclusive). The same was approved by the the Nomination and Remuneration Committee ("NRC") and Board at its respective meetings held on April 27, 2023. The above appointments were subsequently approved by the shareholders through Postal Ballot via remote e-voting on June 11, 2023.

Basis the recommendation of NRC, the Board of Directors of the Bank at its meeting dated June 30, 2023:

• Appointed Mr. Keki M. Mistry (DIN: 00008886) as an Additional and Non-Executive (Non-Independent) Director of the Bank, with effect from June 30, 2023, liable to retire by rotation. His appointment shall be subject to the approval of the shareholders of the Bank in the ensuing Annual General Meeting.

• Appointed Mrs. Renu Karnad (DIN: 00008064) as an Additional and Non-Executive (Non-Independent) Director of the Bank, liable to retire by rotation, with effect from July 1, 2023 i.e. the effective date of the composite scheme of amalgamation inter alia of Housing Development Finance Corporation Limited into and with the Bank. Her appointment shall be subject to the approval of the shareholders of the Bank in the ensuing Annual General Meeting.

• Recommended to the Reserve Bank of India ("RBI"), the candidature of Mr. V. Srinivasa Rangan (DIN: 00030248) for appointment as an Executive Director (i.e., Whole-time Director) of the Bank for a period of three (3) years from such date or such other period as may be approved by RBI and subsequently by the shareholders of the Bank.

Resolutions seeking shareholders approval for appointment of Mr. Keki M. Mistry and Mrs. Renu Karnad forms a part of the Notice of this AGM. A brief resume is furnished in the report on Corporate Governance for the information of shareholders.

Particulars of Employees

The information in terms of Section 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure 5. Further, the statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in an Annexure and forms part of this report. In terms of Section 136(1) of the Companies Act, 2013, the annual report and the financial statements are being sent to the Members excluding the aforesaid Annexure. The Annexure is available for inspection and any Member interested in obtaining a copy of the Annexure may write to the Company Secretary of the Bank.

Conservation of Energy and Technology Absorption

Please refer to page nos. 75 to 78 for information on Conservation of Energy and page no. 182 for information on Technology Absorption.

Foreign Exchange Earnings and Outgo

During the year, the total foreign exchange earned by the Bank was Rs 4,081.9 crore (on account of net gains arising on all exchange / derivative transactions) and the total foreign exchange outgo was Rs 3,243.53 crore towards the operating and capital expenditure requirements.

Secretarial Audit

In terms of Section 204 of the Companies Act, 2013 and the Rules made thereunder, M/s. Alwyn Jay & Co., Company Secretaries were appointed as Secretarial Auditors of the Bank for the financial year 2022-23. The report of the Secretarial Auditors is enclosed as Annexure 6 to this Report. There are no observations/ qualifications/ comments in the Report of the Secretarial Auditor.

Corporate Governance

In compliance with Regulation 34 and other applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate report on Corporate Governance along with a certificate of compliance from the Secretarial Auditors, forms an integral part of this Report.

Business Responsibility and Sustainability Report

The Banks Business Responsibility and Sustainability Report in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard forms an integral part of this report.

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

The relevant information is included in the Corporate Governance Report.

Customer complaints and grievance redressal

Details of customer complaints and grievance redressal is enclosed as Annexure 7 to this Report.


Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India, Securities Exchange Board of India, Competition Commission of India, National Company Law Tribunal, Stock Exchanges, Insurance Regulatory Development Authority, Pension Fund Regulatory and Development Authority and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Banks employees and look forward to their continued contribution in building a ‘World Class Indian Bank.


The last financial year was when the world began living again as it largely came out of the COVID 19 induced disruptions. The Indian economy demonstrated considerable resilience and is expected to be the fastest growing major economy in the world despite global headwinds and geopolitical tensions.

Your Bank has a huge opportunity thanks to the under penetration of banking services in India. It has a strong balance sheet in terms of both size and asset quality. Its consistent performance and customer focus has helped it build a franchise that can capitalise on the opportunity. The merger with HDFC Limited is a positive for its long term growth story with the addition of the home loan product to its portfolio opening up a significant runway. It will continue focusing on its five core values: Customer Focus, Operational Excellence, Product Leadership, People and Sustainability and adhering to high levels of corporate governance.

On behalf of the Board of Directors

Atanu Chakraborty

Sashidhar Jagdishan

Part-time Chairman and Independent Director

Managing Director and Chief Executive Officer

Mumbai, June 30, 2023


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