Kotak Bank AR 2012

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ANNUAL REPORT 2011-12


The face of stability

02

04

The bottomline is stability

What's Inside

Message from Uday Kotak

08

41,079 FY12

33,664 FY11

26,003 FY10

21,664 FY08

9,781 FY09

Consistent value-creation, despite market vagaries

12

Chasing value with an eagle eye

20

value smart

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Bharat, a treasure trove of opportunities

16

Strengthening liability side acumen

18

21

Awards and accolades

22

Financial inclusion

25

Bank reports & statements

88

Paradox? Possible. Preserving value through future readiness

Financial Highlights

26

Consolidated Standalone

26 27

consolidated financial statements

28

Consolidation at a Glance Auditors’ Report Financial Statements Basel II (Pillar 3) Disclosures

28 29 30 73

Directors’ Report Management Discussion & Analysis Sustainability Report Report on Corporate Governance Auditors’ Report Financial Statements

88 96 108 110 125 126

Registered Office

Company Secretary

Auditors

Registrar and Transfer Agent

Kotak Mahindra Bank Limited 36-38A, Nariman Bhavan 227, Nariman Point, Mumbai 400 021. Tel.: +91 22 6658 1100 Fax.: +91 22 2285 5577 Website: www.kotak.com

Bina Chandarana, Company Secretary and Executive Vice President

Messrs. S.B. Billimoria & Co., Chartered Accountants, 12, Dr. Annie Besant Road, Opp. Shiv Sagar Estate, Worli, Mumbai 400 018.

Karvy Computershare Private Limited Plot No. 17-24, Vittal Rao Nagar, Madhapur, Hyderabad 500 081. 7, Andheri Industrial Estate, Off Veera Desai Road, Andheri West, Mumbai 400 058.


Making a stronger case for stability, amid economic volatility; Transforming possibilities into vibrant realities across rural, sub-urban and urban India; Strengthening financial competitiveness for decades on end; Looking closely at people capabilities to create a new performance paradigm; Inspired by a belief that value creation is a journey that never stops and criss-crosses people across the social pyramid.

That’s Kotak Mahindra Bank in a nutshell for you. Diverse stakeholder aspirations. One robust commitment for value. Not intermittently, but consistently. Call it a seasoned art or sensible science, our objective is cut out for us: deliver on stakeholder expectations with passion and set the bar a little higher each time.


The bottomline is stability (contd.)

Chart busters of fy2011-12

Advances (` CR)

39,079  33.2% Savings Account (` CR)

5,050  51.6% PAT (` CR)

1,085  32.6% Bank standalone figures

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Kotak Mahindra Bank Limited

Operational highlights FY2011-12 Bank • Offered Salary2Wealth Account to the Indian Army, Indian Railways, Indian Posts, private sector players and PSU companies, including some of the Navratna companies • Scaled up the financial inclusion programme • Launched Silk, a savings programme for women • Introduced Probationary Officer’s Course, providing young Indian graduates a career opportunity in the lucrative banking sector • Kotak Wealth with Crisil published the first-of-its-kind India-specific report ‘Top of the Pyramid’ on Ultra HNIs Other businesses • Kotak’s International Business raised close to US$457 million through debt funds including an infra debt fund of about US$ 223 million • Kotak Mahindra Old Mutual Life Insurance’s Group Insurance business has migrated to the Group Asia system, which will help it seamlessly process huge volumes of data through the year, significantly improving the company’s ability to serve over 3 million members of its Group clients • Kotak Investment Banking successfully closed several deals during the year including the first-ever Institutional Placement Programme (IPP) in the Indian Capital Markets


VALUE CREATION WITH STABILITY

CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL HIGHLIGHTS

BANK REPORTS & STATEMENTS

THE BOTTOMLINE IS STABILITY

top scores of fy2011-12

11,754 10,526

FY08

term deposits (` CR)

FY09

16,423

FY10

20,470

FY11

26,135

FY12

4,670 5,118

FY08

CASA (` CR)

FY09

7,463

FY10

8,791

FY11 FY12

12,402

FY08

5,301

KOTAK SECURITIES FY09 AVERAGE FY10 DAILY VOLUME FY11

(` CR)

insurance premium

(` CR) individual group renewal

3,293 3,925 4,648 4,034

FY12 FY08 FY09 FY10 FY11 FY12

Presence

across indian cities and towns

525+

975 1,195 1,113 965 810

group customer accounts

132 148 221 288 354

584 1,000 1,534 1,722 1,773

17.5%

29.0%

28.5%

Capital Adequacy Ratio

5-year CAGR of Advances

5-year CAGR of Deposits

10mn

Figures for term deposit, CASA, capital adequacy ratio, 5-year CAGR of advances and 5-year CAGR of deposits are bank standalone Annual Report 2011-12

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Bharat, a treasure trove of opportunities At Kotak Mahindra, our business model is more attuned to borrowing from urban India and lending it to Bharat. We have simultaneously met our targets on advances to the agricultural sector and also maintained a financially viable portfolio of agricultural loans with lowest delinquency across banks. Thanks to our collateralised lending approach and deep engagement across the entire value spectrum. 16

Kotak Mahindra Bank Limited


VALUE CREATION WITH STABILITY

FINANCIAL HIGHLIGHTS

CONSOLIDATED FINANCIAL STATEMENTS

BANK REPORTS & STATEMENTS

Bharat, a treasure trove of opportunities

We finance the entire value chain across industries. For example, in the cotton industry we finance farmers, ginners, aratiyas, traders, exporters, spinners and even mill owners. The benefits are two-fold: • Market intelligence through a detailed understanding of a particular business, commodity price movements, crop seasonality, nature of funding facilities and cross references of large players across geographies for a given output • Our customers further refer Kotak Mahindra Bank to their suppliers/clients to gain a benefit of at par and same-day credits

Giving wings to aspirations

“The Bank funded my first truck and since then I have successfully managed and scaled up my transportation business. I thank God and the bank that has given me the opportunity to successfully look after my family and uplift our social status.” Hardeep Singh

“To us, one of the trusted faces of modernity is Kotak Mahindra. They have started mobile banking services in our Gram Panchayat, enabling villagers to access their savings account from the village itself. The service has benefited us significantly.”

Hansaben B Hajipura, Sarpanch

We are also marking a significant presence in the tractor and vehicle financing, without risking profitability. Our latest technology-based solutions has widened our network of financial inclusion, deepening the emotional connect with the community.

Making considerable inroads into tractor financing 1 lakh+

103,794 No frill accounts

316 Number of villages penetrated

72,768 Biometric smart cards issued

30+ locations Agri-business team presence (other than metros and state capitals)

Customer base

230 districts Geographically covering 70% of the industry 11.5%

Market share in states where we are present

Annual Report 2011-12

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Preserving value through future readiness At Kotak Mahindra, we are future-ready. We are driving our ambitious growth plans through investments in processes and technologies. We undertook a project to replace our Core Banking System (CBS) with Finacle 10 – a functionally rich (yet scalable) technology backbone, without any business disruptions. This improved organisational flexibility and ensured that the new solution integrates seamlessly with other systems in the bank. Our enhanced delivery offerings through a centralised platform resulted in a significant improvement in services and customer experience.

Automation of manual processes leading to improved turnaround time Enhanced internet banking experience for customers Multi-tiered sweep facility, multi-currency and multicountry operations

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Kotak Mahindra Bank Limited

360 degree view of customer through CBS for a faster and efficient service

“Technology is playing an important role in building tomorrow’s banks and we are excited to collaborate with progressive banks like Kotak Mahindra Bank, to set new benchmarks for excellence in the banking industry. We are happy that Kotak Mahindra Bank has been able to derive significant benefits in terms of both growth and operational efficiencies.” Haragopal Mangipudi, Global Head - Finacle™, Infosys


Value smart People are at the forefront of our value creation enterprise.

Recognitions • Ranked 10th in APAC (Asia Pacific) Top Companies for Leaders (2011) (study was conducted by Aon Hewitt in partnership with Fortune and RBL Group)

They work closely at each level of the relationship edifice and help create an ecosystem of cooperation and trust. Our senior management have stayed on with us and is delivering outstanding performance year after year. We have managed to emerge as a people-focused organisation, willing to learn and grow with evolving times.

• Continued to be ranked amongst the Top 25 Best Employers in India since 2007 (study conducted every 18-24 months by Aon Hewitt)

We have also laid an equal emphasis on levels of employee engagement with a consistent focus on building stability and scalability across all levels of the organisation through talent management. Besides, we developed leadership platforms like KLT (Kotak Leadership Team), KIT (Kotak Initiatives Team) and Regional Forums (RF) to promote cross-functional reach of leadership across the organisation.

total number of people across the group

• Recognised amongst the Top 25 Best Companies to Work For (study conducted by Great Places to Work Institute, India, in partnership with The Economic Times)

1%

< 6%

Annual attrition rate of senior management

Annual attrition rate of middle management

22,092 Annual Report 2011-12

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